Intervening Rights Only Arise During Re-examination When a Claim Has Been Amended or Added

The '245 patent discloses and claims a naturally occurring polysaccharide polymer. The patent discloses biocompatible polymers relating to their “biological reactivity or tendency to elicit deleterious reactions[,]” and four tests for assessing the biocompatibility. Id. at *1. All of the patent claims recite biocompatible polymers, while several of the dependent claims recite specific scores for one of the biocompatibility tests.

The district court construed “biocompatible” polymer, and on summary judgment found that HemCon had infringed all seven asserted claims. A jury trial was conducted on validity and damages, where the jury made factual findings on obviousness and found that the '245 patent was anticipated. The jury also found that “MPT was entitled to a reasonable royalty of $29,410.26.” Id. at *3. In September 2010, the district court entered a final judgment and a permanent injunction against HemCon.

While the action was pending in the district court, HemCon filed a request for ex parte re-examination of the '245 patent in the U.S. Patent and Trademark Office (“PTO”) citing 10 prior art references, which was granted. In April 2010, the PTO issued a non-final office action in which the examiner adopted a construction of “biocompatible” different from the district court's. The district court had construed “biocompatible” polymer to mean a polymer “with low variability, high purity, and no detectable biological reactivity as determined by biocompatibility tests.” Id. at *2. In contrast, the examiner construed “biocompatible” to mean “low variability, high purity, and little or no detectable reactivity.” Id. at *3.

The examiner noted that the district court's construction of “no detectable biological activity” conflicted with the dependent claims requiring elution test scores of one or two, which correspond with slight or mild reactivity. The examiner then rejected all of the claims as invalid under his construction, relying mostly on three prior art references. The examiner explained that any difference between “the claimed biocompatibility and that disclosed [in the three references] was 'minor' and would have been obvious to a person of ordinary skill in the art at the time of the invention.” Id.

In response to the examiner's rejection, MPT canceled all of the claims that recited elution test scores of one or two, and argued that because those claims had been canceled the PTO should adopt the district court's claim construction. The examiner agreed, and confirmed that in view of the narrower claim construction the remaining claims were patentable. On Nov. 3, 2010, the PTO provided notice of its intent to issue a re-examination certificate, which issued on March 29, 2011. In the meantime, HemCon filed a timely noticed of appeal, and on Nov. 18, 2010, the Federal Circuit stayed the damages award and preliminary injunction pending the appeal.

The District Court's Decision Is Affirmed

On appeal, HemCon argued that the district court's construction of “biocompatible” was erroneous and supported reversal of the judgment. In support of its argument, HemCon relied on the canceled claims of the patent that required elution scores of one or two. The Federal Circuit affirmed the district court's claim construction because it found that the construction was supported by intrinsic evidence. The Federal Circuit found that “[a]lthough several of the dependent claims specify that the 'biocompatible” [polymer] may exhibit mild reactivity in an elution test (i.e., 'an elution test score of 1 [or] 2'), the majority of the claims use the term 'biocompatible' generically, without any reference to a biocompatibility test score.” Id. at *5. Moreover, the specification provides “empirical test results showing that the [polymer] of the invention exhibited zero reactivity on each disclosed biocompatibility test.” Id.

While acknowledging HemCon's arguments highlighting the inconsistency between the district court's claim construction and the canceled claims' requirement of non-zero elution test scores, the Federal Circuit found that they amounted to a conflict between the specification and claim differentiation, which is “overcome by a contrary construction dictated” by the specification. Id. at *6. Thus, the Federal Circuit affirmed the district court's claim construction by an equally divided court.

On the issue of damages, HemCon argued that there was insufficient basis for the testimony of MPT's expert and that the jury improperly relied on the entire market value rule to award a reasonable royalty of 30% or $29,410,246. The Federal Circuit found that there was sufficient evidence to support the jury's verdict because both experts relied on the total sales of the accused products as the royalty base, and there was evidence to support that the biocompatible polymer was significant to the market demand for HemCon's products. Accordingly, the claim construction, infringement and damages award were affirmed by the equally divided court.

Intervening Rights

Under the doctrine of intervening rights, 1) accused products made or used before a reissued patent are not liable for infringing new or modified claims of the reissued patent; and 2) accused products for which the accused infringer made substantial preparations for prior to the reissue, are not liable for infringing the claims of the reissued patent as a matter of judicial discretion. This doctrine applies equally to re-examined patents. 35 U.S.C. ” 307(b) and 316(b).

HemCon argued that it acquired intervening rights in the asserted claims because the claims changed in scope during re-examination. First, HemCon argued that prior to re-examination “biocompatible” included “low, non zero levels of bioactivity” because it was disclosed in the specification and recited in the two dependent claims that required elution test scores of one or two. Marine Polymer, 2012 WL 858700, at *7. Second, HemCon argued that by “cancelling [claims], and persuading the examiner to adopt the district court's construction of 'biocompatible”, MPT effected a substantive change in the scope of each remaining claim ' essentially, from allowing some reactivity in the originally issued claims to permitting 'no detectable biological activity' after reexamination.” Id. HemCon claimed that the key to determining whether intervening rights exist is “whether the scope of the reexamined claims differs from the original claims.” Id. HemCon argued that the scope of the remaining claims was changed by canceling claims during re-examination. MPT argued that intervening rights cannot arise when the claims have not been amended or added during re-examination.

A majority of the Federal Circuit noted that the re-examination of the '245 patent was not properly before it because the re-examination, which concluded after the trial, was not considered by the district court. The Federal Circuit exercised its discretion to consider the issue on appeal because it was an event as to which judicial notice was appropriate. The Federal Circuit concluded, in what the dissent called dictum, that “even if the district court's claim construction was erroneous, HemCon's intervening rights argument must fail because it disregards the plain and unambiguous language of ' 307(b).” Id. at *9. Under ' 307(b), intervening rights only arise under ' 252 for a “proposed amended or new claim
' .” 35 U.S.C. ' 307(b). Thus, the Federal Circuit reasoned that:

the first question when assessing whether intervening rights arose from a reexamination is whether the asserted claim is 'amended or new'; if the answer is no, that ends the inquiry. Only if the claim at issue is new or has been amended may the court proceed to the second step in the analysis and assess the substantive effect of any such change pursuant to ' 252. Marine Polymer, 2012 WL 858700, at *9.

Because none of the claims after re-examination was new or had been amended, the initial hurdle to find intervening rights was not met.

The Federal Circuit noted that the effect of MPT's arguments and the cancellation of the claims during re-examination on the remaining claims' effective scope are irrelevant to whether intervening rights are available. The Federal Circuit concluded that the term “amended” as used in ' 307 is a term of art in patent prosecution and is not to be given a broader definition based on whether MPT's actions during re-examination effectively amended the claims.

The majority addressed the dissent's criticism of its discussion of intervening rights: “[B]ecause the original opinion dealt extensively with this issue, we must now decide the case as we find it and clarify the law.” Id. at *11. The majority discounted the dissent's analogies to other areas of law as trumped by the “[c]lear statutory language ' of practitioners in [the] field.” Id. The majority deemed Supreme Court precedent not controlling because the current case “[did] not deal with the introduction of new matter or the omission of important particulars so as to enlarge the scope of the invention as originally claimed.” Id. Finally, the majority recognized that arguments made during re-examination “can affect the proper interpretation and effective scope of [the] claims.” Id. However, the Federal Circuit noted that “in rejecting HemCon's request for intervening rights, [it was not] interpreting claims. Rather, [it was] interpreting a statute that provides for intervening rights following reexamination only as to 'amended or new' claims.” Id.

The Bottom Line

The Federal Circuit was equally divided on claim construction, but a 6-4 majority ruled on the standard for intervening rights to arise during a re-examination. Under that majority opinion, argument or the cancellation of claims during re-examination does not create intervening rights. Intervening rights may only arise if a claim has been amended or added.

Angie M. Hankins is a partner in the Intellectual Property department in the New York office of Stroock & Stroock & Lavan LLP. The opinions expressed herein are her own.

On reconsideration en banc, an equally divided Federal Circuit affirmed and reinstated the judgment of a district court finding that defendant-appellant HemCon, Inc. (“HemCon”) infringed plaintiff-appellee Marine Polymer Technologies, Inc. (“MPT”)'s U.S. Patent 6,864,245 (“the '245 patent”) and awarding damages of $29,410.26. Marine Polymer Tech., Inc. v. HemCon, Inc., No. 2010-1549, 2012 WL 858700 (Fed. Cir. March 15, 2012). Moreover, a majority found that intervening rights only arise as a result of re-examination when a claim has been amended or added during the re-examination, even though the issue was not considered below.

In a strongly worded dissent, Judge Alan D. Lourie reached the opposite conclusion and called the majority's decision on intervening rights dictum. In September 2011, a panel of the Federal Circuit had reversed the district court's decision because the panel found that HemCon had acquired intervening rights. MPT petitioned for en banc rehearing and, in January 2012, the Federal Circuit granted MPT's petition and vacated the panel's judgment.

Background

The '245 patent discloses and claims a naturally occurring polysaccharide polymer. The patent discloses biocompatible polymers relating to their “biological reactivity or tendency to elicit deleterious reactions[,]” and four tests for assessing the biocompatibility. Id. at *1. All of the patent claims recite biocompatible polymers, while several of the dependent claims recite specific scores for one of the biocompatibility tests.

The district court construed “biocompatible” polymer, and on summary judgment found that HemCon had infringed all seven asserted claims. A jury trial was conducted on validity and damages, where the jury made factual findings on obviousness and found that the '245 patent was anticipated. The jury also found that “MPT was entitled to a reasonable royalty of $29,410.26.” Id. at *3. In September 2010, the district court entered a final judgment and a permanent injunction against HemCon.

While the action was pending in the district court, HemCon filed a request for ex parte re-examination of the '245 patent in the U.S. Patent and Trademark Office (“PTO”) citing 10 prior art references, which was granted. In April 2010, the PTO issued a non-final office action in which the examiner adopted a construction of “biocompatible” different from the district court's. The district court had construed “biocompatible” polymer to mean a polymer “with low variability, high purity, and no detectable biological reactivity as determined by biocompatibility tests.” Id. at *2. In contrast, the examiner construed “biocompatible” to mean “low variability, high purity, and little or no detectable reactivity.” Id. at *3.

The examiner noted that the district court's construction of “no detectable biological activity” conflicted with the dependent claims requiring elution test scores of one or two, which correspond with slight or mild reactivity. The examiner then rejected all of the claims as invalid under his construction, relying mostly on three prior art references. The examiner explained that any difference between “the claimed biocompatibility and that disclosed [in the three references] was 'minor' and would have been obvious to a person of ordinary skill in the art at the time of the invention.” Id.

In response to the examiner's rejection, MPT canceled all of the claims that recited elution test scores of one or two, and argued that because those claims had been canceled the PTO should adopt the district court's claim construction. The examiner agreed, and confirmed that in view of the narrower claim construction the remaining claims were patentable. On Nov. 3, 2010, the PTO provided notice of its intent to issue a re-examination certificate, which issued on March 29, 2011. In the meantime, HemCon filed a timely noticed of appeal, and on Nov. 18, 2010, the Federal Circuit stayed the damages award and preliminary injunction pending the appeal.

The District Court's Decision Is Affirmed

On appeal, HemCon argued that the district court's construction of “biocompatible” was erroneous and supported reversal of the judgment. In support of its argument, HemCon relied on the canceled claims of the patent that required elution scores of one or two. The Federal Circuit affirmed the district court's claim construction because it found that the construction was supported by intrinsic evidence. The Federal Circuit found that “[a]lthough several of the dependent claims specify that the 'biocompatible” [polymer] may exhibit mild reactivity in an elution test (i.e., 'an elution test score of 1 [or] 2'), the majority of the claims use the term 'biocompatible' generically, without any reference to a biocompatibility test score.” Id. at *5. Moreover, the specification provides “empirical test results showing that the [polymer] of the invention exhibited zero reactivity on each disclosed biocompatibility test.” Id.

While acknowledging HemCon's arguments highlighting the inconsistency between the district court's claim construction and the canceled claims' requirement of non-zero elution test scores, the Federal Circuit found that they amounted to a conflict between the specification and claim differentiation, which is “overcome by a contrary construction dictated” by the specification. Id. at *6. Thus, the Federal Circuit affirmed the district court's claim construction by an equally divided court.

On the issue of damages, HemCon argued that there was insufficient basis for the testimony of MPT's expert and that the jury improperly relied on the entire market value rule to award a reasonable royalty of 30% or $29,410,246. The Federal Circuit found that there was sufficient evidence to support the jury's verdict because both experts relied on the total sales of the accused products as the royalty base, and there was evidence to support that the biocompatible polymer was significant to the market demand for HemCon's products. Accordingly, the claim construction, infringement and damages award were affirmed by the equally divided court.

Intervening Rights

Under the doctrine of intervening rights, 1) accused products made or used before a reissued patent are not liable for infringing new or modified claims of the reissued patent; and 2) accused products for which the accused infringer made substantial preparations for prior to the reissue, are not liable for infringing the claims of the reissued patent as a matter of judicial discretion. This doctrine applies equally to re-examined patents. 35 U.S.C. ” 307(b) and 316(b).

HemCon argued that it acquired intervening rights in the asserted claims because the claims changed in scope during re-examination. First, HemCon argued that prior to re-examination “biocompatible” included “low, non zero levels of bioactivity” because it was disclosed in the specification and recited in the two dependent claims that required elution test scores of one or two. Marine Polymer, 2012 WL 858700, at *7. Second, HemCon argued that by “cancelling [claims], and persuading the examiner to adopt the district court's construction of 'biocompatible”, MPT effected a substantive change in the scope of each remaining claim ' essentially, from allowing some reactivity in the originally issued claims to permitting 'no detectable biological activity' after reexamination.” Id. HemCon claimed that the key to determining whether intervening rights exist is “whether the scope of the reexamined claims differs from the original claims.” Id. HemCon argued that the scope of the remaining claims was changed by canceling claims during re-examination. MPT argued that intervening rights cannot arise when the claims have not been amended or added during re-examination.

A majority of the Federal Circuit noted that the re-examination of the '245 patent was not properly before it because the re-examination, which concluded after the trial, was not considered by the district court. The Federal Circuit exercised its discretion to consider the issue on appeal because it was an event as to which judicial notice was appropriate. The Federal Circuit concluded, in what the dissent called dictum, that “even if the district court's claim construction was erroneous, HemCon's intervening rights argument must fail because it disregards the plain and unambiguous language of ' 307(b).” Id. at *9. Under ' 307(b), intervening rights only arise under ' 252 for a “proposed amended or new claim
' .” 35 U.S.C. ' 307(b). Thus, the Federal Circuit reasoned that:

the first question when assessing whether intervening rights arose from a reexamination is whether the asserted claim is 'amended or new'; if the answer is no, that ends the inquiry. Only if the claim at issue is new or has been amended may the court proceed to the second step in the analysis and assess the substantive effect of any such change pursuant to ' 252. Marine Polymer, 2012 WL 858700, at *9.

Because none of the claims after re-examination was new or had been amended, the initial hurdle to find intervening rights was not met.

The Federal Circuit noted that the effect of MPT's arguments and the cancellation of the claims during re-examination on the remaining claims' effective scope are irrelevant to whether intervening rights are available. The Federal Circuit concluded that the term “amended” as used in ' 307 is a term of art in patent prosecution and is not to be given a broader definition based on whether MPT's actions during re-examination effectively amended the claims.

The majority addressed the dissent's criticism of its discussion of intervening rights: “[B]ecause the original opinion dealt extensively with this issue, we must now decide the case as we find it and clarify the law.” Id. at *11. The majority discounted the dissent's analogies to other areas of law as trumped by the “[c]lear statutory language ' of practitioners in [the] field.” Id. The majority deemed Supreme Court precedent not controlling because the current case “[did] not deal with the introduction of new matter or the omission of important particulars so as to enlarge the scope of the invention as originally claimed.” Id. Finally, the majority recognized that arguments made during re-examination “can affect the proper interpretation and effective scope of [the] claims.” Id. However, the Federal Circuit noted that “in rejecting HemCon's request for intervening rights, [it was not] interpreting claims. Rather, [it was] interpreting a statute that provides for intervening rights following reexamination only as to 'amended or new' claims.” Id.

The Bottom Line

The Federal Circuit was equally divided on claim construction, but a 6-4 majority ruled on the standard for intervening rights to arise during a re-examination. Under that majority opinion, argument or the cancellation of claims during re-examination does not create intervening rights. Intervening rights may only arise if a claim has been amended or added.

Angie M. Hankins is a partner in the Intellectual Property department in the New York office of Stroock & Stroock & Lavan LLP. The opinions expressed herein are her own.