By Chris Holman
Roche Diagnostics Corp. v. Meso Scale Diagnostics, LLC, 2022 WL 1052320, — 4th — (Fed. Cir. Apr. 8, 2022)
Through its acquisition of BioVeris Corporation, Roche Diagnostics became the owner of various patents relating to immunoassays employing electrochemiluminescence (“ECL”). In spite of its ownership of the patents, however, a jury found that a predecessor of BioVeris (IGEN) had exclusively licensed the patents to Meso Scale Diagnostics, and that Roche was liable to Meso for directly infringing one of the patents, and for inducing infringement of two others. On appeal, a divided Federal Circuit affirmed the jury’s decision with respect to direct infringement, but reversed the judgment of induced infringement, remanding for a new trial on damages. Writing in dissent, Judge Newman would have found that Meso did not have an exclusive license in the patents, and therefore Roche was not liable for either direct or induced infringement. The decision raises interesting issues relating to induced patent infringement and the interpretation of a licensing provision.
Inducement: In 2003, prior to acquiring BioVeris (and its ECL patents), Roche obtained a nonexclusive license to the patented ECL technology from IGEN in the field of “human patient diagnostics.” This license required Roche to note this field restriction on its product packaging. Later, in 2007, a Roche affiliate acquired BioVeris (including over 100 patents) for approximately $600 million. Roche announced this acquisition in a press release stating it would now “own the complete patent estate of the [ECL] technology,” giving it “the opportunity to fully exploit the entire immunochemistry market” and ensuring its ability to “provide unrestricted access to all customers.” Roche also prepared a customer letter indicating that the field-restriction labels were “now obsolete” and would be “removed as soon as possible,” but that in the interim customers should “please ignore the restrictions.” Roche subsequently began selling the products without field restrictions. Meso argued that these actions induced customers to use the patented technology outside of the licensed field of use, i.e., “human patient diagnostics.”
Writing for the majority, Judge Prost explained that the decision to reverse the district court’s judgment with respect to induced infringement rested on two independent grounds: (A) absence of intent, and (B) absence of an inducing act that could support liability during the six-year statute of limitations on collecting back-damages, as set forth in 35 U.S.C. § 286. (In a 2019 post, Dennis explains why it is correct to refer to the Section 286 limitation on damages as a “statute of limitations.” For the record, Judge Newman uses the term in her Roche Diagnostics dissent.)
Regarding absence of intent, the court found that the district court had, in denying JMOL, “incorrectly applied a negligence standard rather than requiring specific intent for inducement.” Judge Prost explained that:
While it’s true that we previously applied a “knew or should have known” formulation, we’ve since made clear that, “to the extent our prior case law allowed the finding of induced infringement based on recklessness or negligence, such case law is inconsistent with Global-Tech and no longer good law.” … Under the proper standard, the jury’s inducement conclusion is unsupportable.
The majority went on to explain that a finding of induced infringement was fundamentally inconsistent with the district courts conclusion (made in the context of a JMOL of no willful infringement) that “at no time did Roche have a subjective intent to infringe (or induce infringement of) Meso’s patent rights.” In particular, the district court found that Roche had reasonably (albeit ultimately incorrectly) concluded that Meso did not have an exclusive license in the patents, and thus that Roche had no liability to Meso for patent infringement. Judge Prost explained that:
In some respects, the intent standard for inducement is akin to the one for willfulness, as both rest on the subjective intent of the accused infringer. … Here, the jury’s verdict of inducement couldn’t have survived JMOL under the proper intent standard because it contradicts the court’s express findings regarding Roche’s subjective belief that it wasn’t infringing or inducing infringement.
The majority further found that Meso had not proven that Roche had committed inducing acts within the Section 286 patent-damages limitations period, which began in April 2011. In particular, Roche’s allegedly inducing acts, i.e., its press release, customer letter, and decision to stop affixing field-restriction labels, occurred solely in 2007.
In sustaining the jury’s verdict of induced infringement, the district court had posited that acts occurring before the damages period could support a finding of inducement if they “continued to have an impact and caused third parties to use the products-at-issue outside of the licensed patient-diagnostics field after April 2011.” The majority rejected the district court’s “continuing-impact” standard, citing Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., 754 F.2d 345 (Fed. Cir. 1985), and finding that “Roche’s press release, customer letter, and removal of field restrictions cannot support the jury’s induced-infringement verdict because the evidence indicates—and Meso doesn’t dispute—that none of these acts occurred within the damages period.”
Meso argued that Roche had committed inducing acts during the damages period because Roche “sold the products without restrictive labels throughout the damages period.” But the majority found that “sales without restrictive labels are not acts of inducement where, as here, the products have both in-field (non-infringing) and out-of-field (infringing) applications.”
The court further found that:
Even if Standard Oil doesn’t foreclose the district court’s “continuing-impact” standard, we reach the same conclusion because Meso didn’t provide evidence of causation between the allegedly inducing acts (before the damages period) and the direct infringement (within the damages period). Specifically, Meso put forward no evidence that any customers purchasing Roche’s products during the damages period received the 2007 communication and, in reliance on it, used the products out-of-field. … For similar reasons, Meso’s argument that Roche induced infringement because it “never withdrew” its 2007 guidance also fails, at least because Meso didn’t show that this omission caused customers to infringe.
Readers might find it interesting to compare Judge Prost’s opinion in this case with her dissent in the Federal Circuit’s recent “skinny label” decision, Glaxosmithkline v. Teva, 7 F.4th 1320 (Fed. Cir. 2021) wherein she discusses induced infringement, and particularly her interpretation of the causation element of inducement.
License Scope: Meso’s exclusive license in the ECL patents arose out of a joint venture agreement between IGEN and Meso Scale Technologies, a company owned by Jacob Wohlstadter (son of IGEN CEO Samuel Wohlstadter). The agreement specified a “Research Program” for Meso to perform and included the following license provision:
2.1. IGEN Technology. IGEN hereby grants to [Meso] an exclusive, worldwide, royalty-free license to practice the IGEN Technology to make, use and sell products or processes (A) developed in the course of the Research Program, or (B) utilizing or related to the Research Technologies; provided that IGEN shall not be required to grant [Meso] a license to any technology that is subject to exclusive licenses to third parties granted prior to the date hereof. In the event any such exclusive license terminates, or IGEN is otherwise no longer restricted by such license from licensing such technology to [Meso], such technology shall be, and hereby is, licensed to [Meso] pursuant thereto.
With respect to the directly infringed patent, the majority affirmed the district court’s determination that the patent was “developed in the course of the Research Program,” and therefore, under “prong A” of the provision, Meso had exclusive rights in the asserted claim. The court noted that “the work that was done in this patent was part of the research program,” and that Roche had not provided any persuasive reason why the asserted claim wasn’t “developed in the course of the Research Program.” According to the majority:
The most Roche offers on this score is a footnote arguing generally that “the evidence at trial was insufficient for the jury to find that Meso held exclusive rights to the entirety of the ‘939 patent claim” and citing further course-of-conduct evidence. But this argument, “made in passing only in a footnote, is not sufficient under our precedents to preserve an argument for review.”
The majority found it unnecessary to decide whether Meso had an exclusive license in the patent claims that were only infringed indirectly, given that the district court’s finding of induced infringement had been reversed.
Writing in dissent, Judge Newman argued that Roche was not liable for infringement of any of the patents, since, under her interpretation of the license provision, Meso did not have an exclusive license to any of them. She found the jury’s verdict to be “contradicted by the activity of all parties at the time of the 1995 license and the ensuing twenty-two years (citing Old Colony Tr. Co. v. City of Omaha, 230 U.S. 100, 118 (1913) (The practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence)).”
Judge Newman also took issue with what she she saw as the majority’s decision to “disregard the undisputed evidence of [Meso]’s acceptance of Roche’s rights, because Roche mentioned that evidence in a footnote.” In her view:
Although presented in footnotes, these arguments were fully developed. The majority’s holding that Roche forfeited this issue defeats “the orderly administration of justice,” instead presenting a trap for the unwary. The judicial obligation is to seek truth and justice, even from footnotes.
Clearly, an attorney addressing the court should think twice before using a footnote to make a substantive point.