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District Court Improperly Denied Opportunity to Respond to Motion to Dismiss

May 10, 2005

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Last Month at the Federal Circuit - June 2005

Judges: Bryson (author), Mayer, and Lourie

In Arthrocare Corp. v. Smith & Nephew, Inc., No. 04-1323 (Fed. Cir. May 10, 2005), the Federal Circuit affirmed a district court's decision based on a jury verdict, finding that Defendant's electrosurgical devices indirectly infringe U.S. Patent No. 6,224,592 ("the '592 patent").

Arthrocare Corporation ("Arthrocare") sued Smith & Nephew, Inc. ("Smith & Nephew") for infringement of three patents. Smith & Nephew filed a counterclaim alleging that Arthrocare and Epicon, Inc. ("Epicon") had violated the antitrust laws because they had settled an earlier dispute in a manner designed to restrain other competitors from entering the market for electrosurgical devices, and because Arthrocare had brought this objectively baseless lawsuit. The district court bifurcated several of the issues. After the first trial, a jury determined that Smith & Nephewhad directly or indirectly infringed the three patents. The district court dismissed Smith & Nephew's antitrust counterclaim without giving it an opportunity to respond to a motion to dismiss.

The Federal Circuit vacated the district court's dismissal of the antitrust counterclaim because Smith & Nephew were denied their rightful opportunity to respond to the motion to dismiss. The Court also vacated the permanent injunction, pending the disposition of the antitrust counterclaim.

As to other patent issues, the Federal Circuit reversed the district court's denial of Smith & Nephew's motion for JMOL of invalidity of one patent, finding that Smith & Nephew had proven by clear and convincing evidence that the asserted claims of that patent were anticipated by a prior art patent and a prior art article. Concerning another patent, the Federal Circuit concluded that the evidence clearly indicated that changes made in a certificate of correction did not impermissibly broaden the claim in question and were obvious changes based on clear typographical errors.

Finally, as to the '592 patent, the Federal Circuit agreed that there was no evidence supporting a conclusion that Smith & Nephew's products were used in an infringing manner; therefore, it could not be liable for indirect infringement. However, the Court found substantial evidence to support a finding of indirect infringement. For example, sales literature accompanying the accused products instructed surgeons to perform one of the patented requirements.