District Court Did Not Abuse Its Discretion in Finding Low Materiality of a Prior Art Reference and No Intent to Deceive
September 25, 2006
Last Month at the Federal Circuit - October 2006
Judges: Newman, Mayer, Bryson (author)
[Appealed from: S.D. Iowa, Judge Gritzner]
In Kemin Foods, L.C. v. Pigmentos Vegetales Del Centro S.A. de C.V., Nos. 05-1479, -1480 (Fed. Cir. Sept. 25, 2006), the Federal Circuit affirmed the district court’s ruling that U.S. Patent No. 5,382,714 (“the ’714 patent”) was nonobvious and enforceable, and affirmed the district court’s award of costs. The Federal Circuit also affirmed the district court’s ruling of noninfringement. Additionally, the Federal Circuit vacated the district court’s pretrial order striking a supplemental expert report, and remanded for consideration of that report.
Kemin Foods, L.C. (“Kemin”) is the assignee of U.S. Patent No. 5,648,564 (“the ’564 patent”), which relates to a process for producing purified lutein (a carotenoid, or naturally occurring pigment) that is extracted from plants and incorporated into health supplements. Kemin is also the exclusive licensee of the ’714 patent, which is directed to a product consisting essentially of pure lutein crystals “substantially free from other carotenoids and chemical impurities found in the natural form of lutein in the plant extract.” Kemin brought suit against Pigmentos Vegetales Del Centro S.A. de C.V. (“PIVEG”) for infringement of both the ’564 and ’714 patents. PIVEG raised several counterclaims. First, PIVEG sought a DJ that the two patents were invalid and unenforceable. In a separate case, PIVEG asserted unfair competition and antitrust counterclaims. A jury returned a verdict finding both patents not invalid. The jury also found the ’714 patent not infringed, but found claim 1 of the ’564 patent infringed under the DOE. The district court found both patents enforceable. As a result, the court declared Kemin the prevailing party, awarded all costs to Kemin, and imposed an injunction against PIVEG.
On appeal, the Federal Circuit first considered PIVEG’s argument that a single reference, a Poultry Science article, taught all limitations contained within claim 1 of the ’714 patent, with one exception. PIVEG acquiesced that the Poultry Science article did not teach the limitation requiring that the purified lutein product contain no traces of toxic chemicals. PIVEG contended, however, that one of ordinary skill in the art would have understood how to eliminate all traces of toxic chemicals. Despite its contention, the expert testimony presented by PIVEG established only that one of ordinary skill in the art would have known how to remove some, but not all, toluene from the product. Accordingly, the jury concluded that PIVEG failed to establish by clear and convincing evidence that the ’714 patent, requiring that the product contain no traces of toxic chemicals, was obvious in light of the prior art. The Federal Circuit affirmed the district court’s ruling that substantial evidence existed to support the jury’s verdict.
PIVEG next argued that the ’714 patent was unenforceable because the president of Kemin was aware of the Poultry Science article, and was sufficiently involved in prosecution, but failed to disclose the article to the PTO. Acting in an advisory capacity, the jury found that the Poultry Science article was material, and also found that the president of Kemin intended to deceive the PTO. The district did not necessarily reject the jury’s findings, but concluded that the levels of materiality and intent were not high enough to warrant a finding of inequitable conduct. Though material, the district court concluded that the Poultry Science article was not highly material because it did not render the patent invalid (as noted above), and the method disclosed may not have worked as intended without some modification. The district court acknowledged that a need for modification does not necessarily negate materiality, but properly concluded that the ability to duplicate disclosed information may serve as evidence of the level of materiality.
The Federal Circuit also found no error in the district court’s conclusion that the evidence of intent to deceive was not compelling. Whereas the president of Kemin had previously experimented with methods disclosed in the Poultry Science article, nearly two years had passed between that time and prosecution of the ’714 patent. Additionally, the president had only tangentially been involved in prosecution. Finally, the district court deemed plausible Kemin’s explanation that the Poultry Science article did not describe a method for lutein production for human consumption. Given the difficulties in removing toxic chemicals from lutein for human consumption, the district court found the failure to recognize the applicability of the Poultry Science article to the claimed invention reasonable. The Federal Circuit, citing the district court’s discretion in making such determinations, found no error in the denial of PIVEG’s claim of unenforceability.
The Federal Circuit next considered PIVEG’s assertion that the ’564 patent should be declared unenforceable because Kemin failed to inform the PTO that Kemin, as well as others within the industry, had previously used propylene glycol to produce poultry pigments. The district court accepted Kemin’s argument that, while it was undisputed that many within the industry had used propylene glycol to produce pigments, no one was aware that such a process produced lutein crystals. Whereas one of the inventors of the ’564 patent noted the presence of crystals during these processes, he remained unaware of the composition of the crystals, and had no reason to expect that the crystals produced were lutein. The Federal Circuit also considered the proffered explanation reasonable and found no error in the district court’s rejection of PIVEG’s inequitable conduct allegation.
Next, PIVEG argued that Kemin should not have been awarded full costs pursuant to Fed. R. Civ. P. 54(d) because Kemin only prevailed on one of two infringement claims. The Court quickly dismissed this argument, reasoning that the failure of a party to succeed on all claims does not divest that party of their status as a prevailing party. Moreover, Kemin had prevailed on at least one claim of infringement. PIVEG next argued that it had prevailed because its conduct was not affected by the entry of the injunction because it believed its modified process, which did not use propylene glycol, was not subject to the injunction. Additionally, PIVEG noted that the advisory jury verdict on inequitable conduct established that Kemin’s patent was unenforceable. The Federal Circuit rejected PIVEG’s argument, noting that PIVEG had, in fact, ultimately lost on each of those issues.
Alternatively, PIVEG argued that the district court should have apportioned costs based upon the “relative success” of the parties. Under the circumstances presented, the Court concluded that the district court had not abused its discretion in refusing to apportion costs. Rather, “[c]ost awards are committed to the discretion of the district courts, and there is no rule requiring courts to apportion costs according to the relative success of the parties.” Slip op. at 12.
On cross appeal, Kemin challenged the jury verdict of noninfringement of claims 1, 2, and 4 of the ’714 patent. Kemin did not challenge the construction of the asserted claims, but argued only that no reasonable juror could conclude that PIVEG’s products fell outside of the claim limitation requiring the lutein composition to be “substantially free from other carotenoids.” As the district court had construed this limitation to require “significantly less than 10% of other carotenoids,” Kemin cited a range of 6.14-9.86% of other carotenoids in PIVEG samples as evidence of direct infringement, or infringement under the DOE. Deferring to the district court’s opinion, the Federal Circuit rejected this challenge, holding “even if the jury accepted Kemin’s carotenoid measurements, it could reasonably conclude that although PIVEG’s products had less than 10% of other carotenoids, they did not have ‘significantly less than 10% of other carotenoids.’” Id. at 15.
Alternatively, the Federal Circuit held that a finding of noninfringement could properly have been based upon a limitation requiring that the product contain “no traces of toxic chemicals.” Although Kemin argued that the district court should have instructed the jury that this limitation required a level of toxic chemicals below the toxic thresholds established by the FDA, the Court held that the record did not support such a position. The Court therefore affirmed the finding of noninfringement because PIVEG’s products contain traces of toxic chemicals, even though the levels of those toxic chemicals was not high enough to cause illness or death in humans.
Kemin also challenged a decision by the magistrate judge to strike Kemin’s supplemental expert report regarding infringement of process claim 5 of the ’714 patent. The magistrate judge had excluded the report on grounds that Kemin had not previously alleged infringement of this claim, and essentially amended its complaint by adding an allegation of infringement of claim 5. Contrary to the magistrate judge’s findings, however, the Federal Circuit concluded that Kemin had reserved its rights to pursue infringement of additional claims. Additionally, Kemin had diligently pursued discovery to determine whether PIVEG infringed the process claim, but had experienced difficulty in obtaining information about PIVEG’s process. The Federal Circuit observed that “as soon as it obtained sufficient information about PIVEG’s process, Kemin provided a detailed analysis of its claim 5 infringement contentions,” id. at 19, and held that under such circumstances, the supplemental expert report should have been allowed. Accordingly, the Federal Circuit concluded that because the supplemental report essentially provided the sole evidentiary basis for Kemin’s allegations of infringement of the process claim, Kemin had, in effect, been precluded from pursuing its claim for infringement of claim 5 of the ’714 patent. Thus, the Federal Circuit vacated the order excluding the report and remanded for consideration of Kemin’s allegations of infringement of claim 5 of the ’714 patent.
Also on cross appeal, Kemin sought a modification of the permanent injunction barring PIVEG from practicing a process that infringes claims 1 and 2 of the ’564 patent. Kemin argued that PIVEG had evaded the scope of the permanent injunction by employing a modified, nonpropylene-glycol-based process.
Accordingly, Kemin argued that the injunction should be modified to cover all of PIVEG’s processes, including processes not using propylene glycol. Kemin contended that PIVEG’s modified processes could still infringe claim 5 of the ’714 patent, which does not require the use of propylene glycol. The Federal Circuit was unpersuaded by Kemin’s argument, given that the injunction was granted upon Kemin’s showing of a substantial likelihood that the processes used by PIVEG infringed claim 1 of the ’564 patent. As the question of infringement of claim 5 of the ’714 patent was to be considered on remand, the Federal Circuit refused to expand the injunction at that time, but left that question open for consideration by the district court on remand.