Appealing the Kitchen Sink

Innogenetics v. Abbott Labs (Fed. Cir. 2008).

Innogenetics holds a patent covering a method of detecting Hepatitis C Virus (HCV) using hybridizing probes complementary to the 5’ untranslated region of HCV. The patent was found infringed and not invalid.

On appeal, Abbott follows the currently favored “kitchen sink” approach:

On appeal, Abbott challenges a myriad of issues, including the district court’s claim construction [of the word “as”], summary judgment of literal infringement, evidentiary exclusions as to Abbott’s obviousness and anticipation defenses, judgment as a matter of law that the Resnick patent did not anticipate claim 1 of the ’704 patent, summary judgment of no inequitable conduct, award of attorney’s fees to Innogenetics for Abbott’s counterclaim of inequitable conduct due to its exceptionality, and grant of a permanent injunction.

The appellate panel patiently discussed each issue. Here, we only discuss a few:

Infringement by Later-Invented Technology: Abbott proposed that it could not infringe because its particular “Realtime PCR” method of detecting HCV had not yet been invented at the time of the patent application.  Although the CAFC held that Abbott had procedurally forfeited that argument, the appellate body also noted that the argument is “lacks merit.”

Essentially, Abbott argues that a patent can never be literally infringed by embodiments that did not exist at the time of filing. Our case law allows for after-arising technology to be captured within the literal scope of valid claims that are drafted broadly enough. See SuperGuide Corp. v. DirecTV Enters., Inc., 358 F.3d 870, 878-80 (Fed. Cir. 2004).

Late Disclosure: Abbott disclosed a prior art reference (the Cha patent) the day before discover closed (and after all depositions had been completed). Then, on the day before trial, Abbott requested that the jury instructions be amended to include the Cha patent as an anticipatory reference.  The district court denied Abbott’s motion as unduly late and prejudicial to Innogenetics. On appeal, the CAFC affirmed — taking Abbott to task for its hard litigation tactics.

This case aptly demonstrates the pitfalls of playing fast and loose with rules of discovery. Conclusory expert reports, eleventh hour disclosures, and attempts to proffer expert testimony without compliance with Rule 26 violate both the rules and principles of discovery, and the obligations lawyers have to the court. Exclusion and forfeiture are appropriate consequences to avoid repeated occurrences of such manipulation of the litigation process.

Anticipation: The kitchen sink tactic worked — The CAFC did agree with Abbott that its expert’s testimony on anticipation had been improperly disregarded. The district court had disregard the testimony – finding that the expert had based his conclusions on an incorrect understand of the claim term ‘genotyping.’  On appeal, the CAFC used its own knowledge of biotech law to find that the district court’s findings on this issue were ‘clearly erroneous.’ Consequently, Abbott gets a new trial on the issue of anticipation.

Injunctive Relief: The plaintiff agreed to jury instructions that would allow the jury to award both past and future damages. The award of $7 million appeared to include both past and future damages. In addition, the court issued an injunction to halt future infringement. On appeal, the CAFC held that the plaintiff was improperly double-dipping — a patentee may not collect a lump-sum for future damages and, at the same time, be awarded injunctive relief to stop future infringement.

The reasonable royalties awarded to Innogenetics include an upfront entry fee that contemplates or is based upon future sales by Abbott in a long term market. When a patentee requests and receives such compensation, it cannot be heard to complain that it will be irreparably harmed by future sales. . . . As a result, the district court’s grant of an injunction prohibiting future sales of Abbott’s genotyping assay kits was an abuse of discretion and must be vacated.

15 thoughts on “Appealing the Kitchen Sink

  1. The court is making two 1L mistakes: First the “hypothetical negotiation” is the recreation of what an actual negotiation would have been – when at law it should be understood for what it really is – information and testimony subject to challenge and cross examination for a jury to decide the issue of past damages. Second, the legal damages part of the 4 factor test is the same or can be mixed up with an equitable accounting for damages. It is not of course as recently affirmed in Pace v. Toyota, citing root v. rr.

  2. “I thought EBay was an effort by the Supreme Court to replace the then standing general rule with judicial judgment, and not to replace with another general rule.”

    No kidding. If the court is going to take plaintiff’s expert testimony — which assumes that money damages are sufficient for purposes of the hypothetical negotiation — as an admission that money damages are actually sufficient, the court might as well say they’ve amended the patent statute saying that the court may grant an injunction unless the plaintiff sought a reasonable royalty as damages.

  3. Anonymous,

    You make a good point. Awarding or denying injunctive relief requires a judicial balancing of 4 factors. In this case, the court seems to be assuming that if an irreparable harm has been suffered it can be remedied with money damages. Accordingly, this case may be used as precedent that the ability to calculate a reasonable royalty not only negates or makes moot a finding of irreparable harm, but also necessitates a denial of a permanent injunction.

    When granting or denying injunctive relief, the district courts in other cases since EBay have considered such factors as reputation / goodwill in the patent, relationship between the infringer and the patentee, and impact of infringement on the patentee’s ability to develop the technology, new technology, and their business.

    So, I am wondering if this case would have been decided differently if arguments and evidence to these effects had been presented in addition to the arguments and evidence as to the “hypothetical negotiation?”

    If such arguments would have had an impact on the outcome, then the take home message would be that when the patentee presents evidence only of a hypothetical negotiation and no evidence to support the existence of an irreparable harm, balance of hardships favoring the patentee, and public good, the court should find that the patentee has not satisfied his burden of proving entitlement to injunctive relief.

    If such arguments would not have had an impact on the outcome, then the courts seems to be putting forward a general rule to use in the place of judicial judgment.

    I thought EBay was an effort by the Supreme Court to replace the then standing general rule with judicial judgment, and not to replace with another general rule.

  4. “The permanent injunction was gone because the money damages discussions included future payments/royalties and as such, one cannot get both injunctive relief against future infringement but also money damages for future infringement.”

    I think the plaintiff asked for past damages only. However, they said that hypothetical negotiation would have contemplated an upfront payment tied to ongoing payments to a date beyond the current trial. The damage award did *not* include payments past trial. (That’s why the Feds are suggesting ongoing royalty.)

    The problem with this case is that the Feds are (in effect) relying on the plaintiff’s arguments as to the *hypothetical* negotiation — that by law necessarily assumes infringement can be repaired merely by a reasonable royalty — as evidence that *in reality* infringement can be repaired merely by a reasonable royalty.

    As I asked above, if this logic is followed, when will there ever be irreparable harm where there is a reasonable royalty analysis at trial? After all, your expert is not going to say that, in the hypothetical negotiation, it would be too uncertain as to what the reasonable royalty would be.

    Why should the *hypothetical negotiation* whatever its terms have any relevance to actual irreparable harm here? Or are we just going to tell the reasonable royalty folks that they aren’t going to get an injunction?

  5. what’s interesting here are:
    1. Innogetics argued for a broad claim construction to sweep up ABT’s infringing product; but that breadth now may mean its anticipated by prior art. There are a few recent CAFC cases on the “be careful what you wish for”
    as it might come true.
    2. The permanent injunction was gone because the money damages discussions included future payments/royalties and as such, one cannot get both injunctive relief against future infringement but also money damages for future infringement. Here, it looks like Innogetics should have limited its money argument to be for past damages only; if Innogetics thought it could make more knocking ABT off the market. But it appears that if the money damages include the future royalties, one might not earn the injunction either. The patentee will have to decide what’s worth more?

  6. In addition to the future damages, Innogenetics had also collected $5.8 mln in market-entry damages, and argued for such damages at trial. Irreparable harm largely includes such difficult-to-calculate damages. But Innogenetics had argued that they indeed could calculate such damages and offered testimony on the issue. But you can’t collect market-entry fees and then get an injunction that keeps the other guy off of the market. Had Innogenetics been willing to settle for a $1.2 mln judgment, then the injunction issue might come out differently.

    Also, regarding the after-arising technology issue, some Fed Cir cases have held that claims that sweep after-arising technology into their scope may fail the written description requirement. See the 2004 Genentech v. Chiron case. The panel here cited SuperGlide, which suggests something to the contrary.

    The lower court opinions seem to suggest that Abbott wanted to keep Dr. Cha off of the hot seat (in deposition and at trial). The judge’s Rule 26 decision was discretionary under Seventh Circuit law. But when it appears that a party is using the mechanism to shield a witness from cross-examination, then it seems reasonable that the court bar his testimony.

  7. Regarding the “as” interpretation, the Court noted: “The specification of the ’704 patent explicitly states that the detection of hybrids “may be determined by means of colorimetric, fluorescent, radiometric detection or any other method comprised in the state of the art.” ’704 Patent col.6 ll.36-43 (emphasis added).” The specification sentence could have been written a number of ways by the patent prosecutor that may have had significant impact at litigation: e.g., 1. “is determined by means of colorimetric, fluorescent, or radiometric detection. 2. “is determined by colorimetric, fluorescent, or radiometric detection. 3. “may be determined by any detection method comprised in the state of the art, such as colorimetric, fluorescent, and/or radiometric detection.” 4. “may be determined by colorimetric, fluorescent, and/or radiometric detection, for example.” Lessons that patent prosecutors should take away from this case include that 1. You never know what will be the focus at litigation (such as the word “as” in the patent claim) and 2. Every sentence in the detailed description (not some or most sentences) needs to be specific, general, broad, and non-committal as to the information it is conveying to give plaintiff litigators the flexibility to argue that the infringing product falls within the patent claims.

  8. My reading of the case: 1. Non-compliance with Rule 26 violates … the obligations Abbott’s lawyers have to the court. 2. Abbott gets a new trial on the issue of anticipation. 3. Abbott’s lawyers violated their obligations to the court for the success of their client. 4. Hire Abbott’s lawyers to maximize your chance of success.

  9. Traditionally, avoidance of multiple suits for legal damages was a core reason why a court of equity would grant an equitable accounting and injunction after the legal case had resolved title to the claim. The case would then be ‘over’ unless or until patent owner brought an new aciton at law over the same or colorably different product or moved for contempt of the injunction – which a court could then enforce typically through $ fines (typically infringers profits and maybe enhancement 3x infringers profits in an equitable accounting) westinghouse scotus circa 1800’s.

    CAFC has now created new jurisdiction for a court to depart from that paradigm in creating an anti-trust like conduct order over the case:

    “We remand to the district court to delineate the terms of the compulsory license, such as conditioning the future sales of the infringing products on payment of the running royalty, the 5-10 Euros per genotyping assay kit.9

    9 An injunction delineating the terms of the compulsory license would permit the court to retain jurisdiction to ensure the terms of the compulsory license are complied with.

    Hard to square this new remedy with the statutory authorization that ‘courts may grant injunctions to blah blah right to exclude.” Apparently this is a now a ceiling and courts can now? grant injunctions that condition the right to exclude based on timely royalty payments.

    Of course the practical effect of this for the the infringer to slightly modify the product and claim they have a ‘new’ product on the market and therefore are not covered by the injunction to pay royalties. In which case the patent owner can bring a new suit or contempt motion which i suppose a court can enforce with $ fines (3x the royalty?)

    So in the long run all cafc has accomplished is increased the incentive to infringe, massively increased the incentive to litigate till the last dog is dead, reduced the incentive to innovate, and engrafted a conduct and supervision like remedy into the patent act (judicial activism).

    Well after a couple of years of stagflation and technology export maybe the value of innovation and job creation will be recognized again.

  10. Also, add this to the ever-growing list of post-McKesson cases where the CAFC failed to find inequitable conduct even where there was, I believe, a faint and unpleasant scent in the air.

    The sky has not fallen.

  11. “On appeal, the CAFC used its own knowledge of biotech law to find that the district court’s findings on this issue were ‘clearly erroneous.’ Consequently, Abbott gets a new trial on the issue of anticipation.”

    As well they should. The claim was construed in a ridiculously narrow fashion, albeit not as ridiculously narrow as Abbott argued (their construction of the term “as” was pathetic).

  12. “What if the after-arising technology isn’t enabled at the time the claims are filed? Claim invalid under Liebel? ”

    Most likely no. Under Liebel, there would need to be an admission by the patentee during prosecution or in the specification that a particular embodiment or technology was either not enabled or not an aspect of the invention.

  13. Really, it is things like this & the case in Tidbits #3 that mess up the prosecution side of the business. Prosecuting lawyers needs to worry about the crap that will get thrown around in litigation, so they can not do a lot of things (like amend or make certain arguments or present prior art) because some ^&&^)U% litigator will take the file history and twist it 7 ways to Sunday to make things fit whatever story they want the judge/jury to buy. Has something to do why examiners jobs have gotten a lot harder over the last 20 years and why we have such a big backlog.

    This and a lot of other and and messy decisions is why we need complete (and REAL) reform and not just limiting things during prosecution (claims, CONs) or the examining process (ESD, etc.). We need to clean up the whole mess. It is ALL too tied together to just change part of it. Sometimes, I think the only way is to blow the whole thing up (figuratively, not literally) and start designing the whole patent system (prosecution, examination, litigation. licensing, etc.) all over from scratch.

    thanks,

    LL

  14. “Our case law allows for after-arising technology to be captured within the literal scope of valid claims that are drafted broadly enough”

    What if the after-arising technology isn’t enabled at the time the claims are filed? Claim invalid under Liebel? Yes, right? So isn’t the Court willing to implicitly say that Abbott’s after-arising technology was enabled by Innogenetics’ patent (and prior art at time of filing)?

  15. “The reasonable royalties awarded to Innogenetics include an upfront entry fee that contemplates or is based upon future sales by Abbott in a long term market. When a patentee requests and receives such compensation, it cannot be heard to complain that it will be irreparably harmed by future sales[.]”

    So when will there ever be irreparable harm where there is a reasonable royalty analysis at trial? Does this mean plaintiff’s expert has to testify, “It’s too uncertain as to what the reasonable royalty would be,” just to preserve the ability to allege the same at the injunction stage?

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