Preliminary Injunction and Patent License Disputes

by Dennis Crouch

Symbiont Nutrition, LLC v. BJM Feed Ingredients, LLC, 1 CA-CV 21-0218 (Ariz. App. 1st Div. May 19, 2022)

Symbiont’s US Patent No. 9,446,094 covers a method of extruding corn into a resulting “hydrophilic, low-vitreous, gelatinous feedstuff” that is fed to dairy cattle. Apparently this process leads to increased digestion of the starch content.  The inventor Mark Holt is also owner of Symbiont. Holt was part of forming two additional companies, BJM and Matrix and Symbiont licensed the technology (including the patent) to those companies.  The agreement included a number of provisions — primarily a license with royalties for feed sold using the process.

Things fell apart in 2019 with Matrix dissolving and BJM terminating its license.  BJM then began to work with another company (Garner) to manufacture feed products.  The resulting lawsuit in Arizona state court alleged: (1) breach of NDA; (2) conversion of “assets, monies, and intellectual property”; and (3) breach of fiduciary duty.

The district court issued a preliminary injunction prohibiting BJM from selling its feed product using the ‘094 patent or from soliciting other to do the same.  On appeal though, the Arizona Court of Appeals has vacated and remanded–holding that the district court erred by presuming irreparable harm due to patent infringement.  The appellate court noted the change in law under eBay, but also went on to explain that  Arizona Law “does not presume irreparable harm.”  On remand, the district court will need to decide whether the potential ongoing infringement causes any harm to the patentee that cannot be remedied by damages alone.

The appellate court also addressed the question of jurisdiction.  All cases “arising under” the U.S. patent laws are subject to exclusive jurisdiction of the Federal Court system. Here, however, the lawsuit asserts only state law claims of breach & conversion.  Applying Gunn v. Minton, 568 U.S. 251 (2013), the court concluded that the underlying patent law issues were not substantial enough to warrant Federal jurisdiction.

While issues of federal patent law may be embedded in Plaintiffs’ claims, the resolution of their claims rests ultimately on the application of Arizona law, not federal patent law. To succeed on counts one and two, Plaintiffs must prove the existence and validity of the licensing and nondisclosure agreements, that these agreements governed Defendants’ conduct, and that Defendants’ conduct violated the agreements. Similarly, Plaintiffs’ conversion claim turns on a showing of Plaintiffs’ ownership or right to possession of certain property and Defendants’ wrongful interference with that property. Finally, Plaintiffs’ fiduciary duty claim rests on Plaintiffs proving the existence of such a duty and Defendants’ breach of that duty. Arizona law, not federal patent law, is dispositive of each of these claims.

. . . Although the adjudication of Plaintiffs’ claims may require the court to determine whether Defendants used a feed-manufacturing process that infringed on Plaintiffs’ patented process, there is little to suggest that the state court’s analysis of this issue will affect uniformity in patent law.  Indeed, the embedded patent issues in this case are fact-bound and situation-specific and will have no precedential effect on federal courts or federal patent law generally. Nor do Plaintiffs’ claims raise novel patent issues. To the extent they raise patent issues, they are ones of basic infringement.

Slip Op. (internal citations eliminated).

21 thoughts on “Preliminary Injunction and Patent License Disputes

  1. 4

    Hello, ten foot pole.

  2. 3

    Even if this AZ Appellate court jurisdictional decision that the AZ court deciding patent infringement is correct, there was no consideration at all here of any possible patent invalidity defenses. Were they waived?

    1. 3.1

      IPR may still be available since its one year bar date runs from service of a complaint alleging patent infringement, and this one may not have?

      1. 3.1.1

        Paul, good points/questions. As I understand it—which is just minimally—under Holmes v. Vornado (SCOTUS), invalidity defenses could be raised as counterclaims directly in the state court case and it would be permissible for the state court to address them. The two law reviews linked below have more details for the curious (these are also the sources of my information)—

        link to scholarlycommons.law.hofstra.edu

        link to nyulawreview.org

        Maybe defendants could bring up invalidity separately in a federal court DJ action, but in that scenario I wonder about possible claim preclusion because the direct invalidity counterclaim was already available in the state court case.

        As for a potential IPR, yes, I agree, 35 U.S.C. § 315(b) would seem to be inapplicable because defendants were never “served with a complaint alleging infringement of the patent[s].”

        That all said, this case was first brought in Oct. 2019. So I think if defendants were contemplating any kind of invalidity challenge, they would have raised it in some form and/or forum by now. For example, a search on PTAB E2E shows no IPRs filed on this patent. And while this case has been on appeal, it was an interlocutory appeal of the preliminary injunction. So the trial court ordinarily would still have been free to proceed with other aspects of the case, such as an invalidity counterclaim. Or at least that’s how things would go under federal practice, but maybe AZ’s different.

        If this were a movie, it could be called “Raising Patent (Counter)claims in Arizona.”

        1. 3.1.1.1

          Thank you, and on a second read I found the decision did say, only in relation to “does not presume irreparable harm” that: “eBay abolishes our general rule that an injunction normally will issue when a patent is found to have been valid and infringed.” I.e., one word about “valid” but only in that context.

          1. 3.1.1.1.1

            eBay abolishes our general rule

            is even more L A Z Y than the prior following of that general rule.

            AND more damaging.

        2. 3.1.1.2

          READ MY PROFILE PICTURES I HOPE THE 1/6 COMMITTEE WILL CONTACT ME. MAYBE THIS IS WHAT THE THREE SHIRTED SCUM BAG MIGHT BE HINTING ABOUT. ALTHOUGH THEY REALLY DON’T MEASURE THE SAME, THE 1/6 DID SAY NO ONE IS ABOVE THE LAW. I THINK GETTING THIS STORY BEFORE ANY CHARGES DO OR DON’T APPLY WOULD BE PRUDENT.
          No matter how many times I tried to get this matter resolved I was refused because of everything this FBI AGENT did, I was met with nothing here. But we will try to finish you off.. Then the letters to the USPTO finally moved the needle. Again that should have been all I needed.
          I will help the vote, women, and blacks showing them there really can be justice if you expose it for the justice

    2. 3.2

      Read so many things about assignments. NOW I know that it is a Sale. Patrick Egan, New England Seal Coating Co was sold my IP. And of course the family are behind the controlling the Patent by claiming I abandoned it. Thanks for the counterfeit proof back. And most of all you will be bankrupted along with NESCCO. THE NDATHAT POISONS THE WELL WAS WHY YOU SIGNED IT. ANDTHAT SPATULA FROM A PERSON THAT STOLE MY REAL ESTATE IS GOING TO BE A THING TO WATCH. I DID NOT ABANDON MY IP. YOU STOLE IT. AND I WILL PROVE IT.
      PS WHITE COLLAR CRIME IS GOING TO HURT. MY SONS EMBEZZLEMENT AND THE RECEIPTS, AND EVIDENCE WILL BE OVERKILL. S416,453 WILL BE YOUR UNDOING.
      THE MELLONS LETTER SHOULD HAVE WARNED YOU THAT YOU WERE ALL THE SAME INDIANS FIGHTING FOR YOUR INNER CHIEF.

      1. 3.2.1

        Imagine an egg turner,aka paint scraper. EGG ON YOUR FACES WITH WHITE COLLAR CRIME TRACES.

  3. 2

    This technology is disturbing on so many levels. It’s no wonder we have health issues.

    1. 2.1

      The bugs and bugs protein thing re: this patent really grosses me out. Maybe time to go to almond milk instead of cow milk?

      1. 2.1.1

        Hate to be a killjoy but almond farming is very water-intensive. Not as water or other resource-intensive as dairy farming though, so maybe still an improvement compared with cow milk.

        1. 2.1.1.1

          If you really wanted to be a killjoy, you would have noted that there are NO viable solutions given how out of balance the human population is in view of a natural eco-system.

          ALL of the Green movement — even if wildly successful — is but a band-aid on the larger (Malthusian) problem.

          1. 2.1.1.1.1

            Well, it’s a summer Friday, so I’m trying to go a little easy!

            I’m just putting all my money on workable fusion being developed 🙂

            1. 2.1.1.1.1.1

              all of your Bitcoin money?

              😉

  4. 1

    The appellate court noted.. that Arizona Law “does not presume irreparable harm.”

    This is not my bailiwick, but the authority that the appeals court cited for this proposition (Fann v. State, 251 Ariz. 425, 432 (2021)) seems remarkably weak on this point. Fann only barely touches on the irreparable harm prong, and the issue of whether harm can be presumed or not is never adjudicated.

    1. 1.1

      Fann isn’t explicit about the lack of a presumption, but it is fairly strong on this point. Fann requires a showing of possible irreparable harm, which necessarily means there is no presumption of irreparable harm. If there were a presumption, you wouldn’t have to make a showing.

    2. 1.2

      I called the DA about the POA illegally holding me. If he does nothing I am moving and you will then be done with your illegal hold. I will then hire an atty in the state I move to and go from there. I know if I move you will go bankrupt after I show the receipts and my other evidence with my atty in court. Moving will be doable, and will cause you more problems than you would know.I owe no one.

      1. 1.2.1

        Sarah, are you a leap-year (Feb 29th . . . or perhaps Feb 30th) baby?

        p.s. Given all their own (eligibility) nonsense, is the CAFC part of your world?

        p.p.s. It occurs to me that . . . the best part of weekends is that SCOTUS and the CAFC can’t do any more damage than they’ve already done to America’s formally-world-leading-innovation patent system.

        1. 1.2.1.1

          Pro say: see my 10 foot pole comment. Stay away , stay far away.

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