“We see no indication in the statute that monetary investments made and recouped before reissue are the only investments that a court may deem sufficient to protect as an equitable remedy.” – CAFC
The U.S. Court of Appeals for the Federal Circuit (CAFC) on Friday upheld an Arkansas district court’s decision to grant Morris & Associate Inc.’s motion for summary judgment against John Bean Technologies Corporation’s infringement claims, based on the doctrine of equitable intervening rights. The opinion marked the first time the court has addressed the “boundaries of the phrase ‘protection of investments’ in [35 U.S.C.] § 252”, which outlines the effect of reissued patents.
A Fatal Delay
John Bean is the owner of U.S. Patent No. 6,397,622, titled “Water flow for auger type poultry chiller.” The invention helps to process poultry for human consumption. Morris is John Bean’s only domestic competition in this space. Morris wrote to John Bean in 2002 to explain that it believed the ‘622 patent to be invalid but received no response and proceeded to make and use products that infringed on the patent.
John Bean filed for ex parte reexamination of the ‘622 patent 11 years later, in December of 2013, and was issued a reexamination certificate in 2014. One month later, John Bean filed a complaint for patent infringement, and later for willful infringement, in the U.S. District Court for the Eastern District of Arkansas.
The district court initially granted Morris’ motion for summary judgment on laches and equitable estoppel, but on appeal, the CAFC reversed and remanded. On remand, Morris contended that John Bean’s infringement claims were barred by equitable intervening rights and prosecution laches, and the district court granted Morris’ motion on the ground of equitable intervening rights.
Examining 35 U.S.C. § 252
In its analysis of the doctrine of equitable intervening rights, the CAFC noted that an alleged infringer “may be protected from liability for infringement of substantively and substantially altered claims in a reissued patent” under 35 U.S.C. § 252, which also applies to reexamined patents. The court further explained:
Granting equitable intervening rights is a matter of judicial discretion. Once granted, they give the alleged infringer the continued right to manufacture, sell, or use the accused product after the reexamination certificate is issued “when the defendant made, purchased, or used identical products, or made substantial preparations to make, use, or sell identical products, before the reissue date.”… Under this section, an infringer may continue what would otherwise be infringing activity after a reissue or reexamination.
The district court considered six relevant factors in making its decision to grant summary judgment:
(1) whether substantial preparation was made by the infringer before the reissue;
(2) whether the infringer continued manufacturing before reissue on advice of its patent counsel;
(3) whether there were existing orders or contracts;
(4) whether non-infringing goods can be manufactured from the inventory used to manufacture the infringing product and the cost of conversion;
(5) whether there is a long period of sales and operations before the patent reissued from which no damages can be assessed; and
(6) whether the infringer made profits sufficient to recoup its investment.
It’s About More Than Recoupment
In its appeal, John Bean argued that the CAFC “should deem monetary recoupment of investments made prior to the grant of reissue as sufficient to protect investments and defeat the grant of the equitable remedy.” But the CAFC disagreed. While John Bean relied on Plastic Container Corp. v. Continental Plastics of Oklahoma, Inc., 607 F.2d 885 (10th Cir. 1979) to support its arguments, the CAFC noted that the plaintiff in that case did not delay legal proceedings, while John Bean “waited more than a decade.”
The CAFC further explained that, in examining the boundaries of the phrase “protection of investments” in § 252, “[w]e see no indication in the statute that monetary investments made and recouped before reissue are the only investments that a court may deem sufficient to protect as an equitable remedy.” While recoupment is a factor to consider, it is not the sole factor a district court must consider, nor should it be weighed more heavily than other factors. “Determining entitlement to equitable intervening rights is an analysis broader than simply determining whether a party claiming intervening rights has fully recouped its monetary investment,” said the court.
While John Bean also argued that genuine issues of material fact remained as to willful infringement, the CAFC said that “[i]f there is no infringement, there cannot be willful infringement,” and ultimately found the district court did not abuse its discretion. The court did not reach the district court’s decision to deny-in-part Morris’s motion for summary judgment on prosecution laches.