The threshold to acquiring intervening rights by reexamination requires new or amended claim language

Bernadette McGann | March 21, 2012

Marine Polymer Technologies, Inc. v Hemcon, Inc. (en banc)

March 15, 2012

Panel: Rader, Newman, Lourie, Bryson, Gajarsa, Linn, Dyk, Prost, Reyna and Wallach (en banc)

Opinion for the court by Lourie. Rader, Newman, Bryson and Prost join in full and Linn joins in part II (Intervening Rights)

Opinion for the dissent by Dyk. Gajarsa, Reyna, and Wallach join in full and Linn joins in parts I-II (Claim construction, dismissing HemCon motion for JMOL and/or new trial)

Summary:

Based on statutory interpretation of 35 U.S.C. §307(b), the Majority held that the threshold requirement for acquiring intervening rights is that there must be amended or new claims that did not exist in the original patent but have been found to be patentable during reexamination.  The CAFC held that amended means to make formal changes to the actual language of a claim.  A claim is not amended merely because the scope of the claim has been altered by arguments presented during reexamination.

Details:

In March 2006, Marine Polymer, owner of U.S. Patent 6,864,245 (hereinafter the ‘245 patent), which discloses and claims preparation of poly-β-1à 4-N-acetylglucosamine (hereinafter p-GlcNAc), a naturally occurring polysaccharide polymer that has utility in various industrial, pharmaceutical and biomedical applications, sued HemCon for infringement.

Independent claim 6 is representative of the ‘245 patent:

A biocompatible poly-β-1→4-N-acetylglucosamine comprising up to about 150,000 N-acetylglucosamine monosaccharides covalently attached in a β-1→4 conformation and having a molecular weight of up to about 30 million daltons in which at least one N-acetylglucosamine monosaccharide has been deacetylated.

Several dependent claims recite specific scores on an elution test, such as zero, one or two.  A score of zero represents no biological activity, one represents slight reactivity, two represents mild reactivity and three or four represents moderate or severe reactivity.

The district court rejected both Marine Polymer and HemCon proposed interpretation during the Markman proceedings and held that “the ‘biocompatible’ p‑GlcNAc, of the ‘245 patent, means p-GlcNAc ‘with low variability, high purity, and no detectable biological reactivity as determined by biocompatibility tests.”

The district court granted Marine Polymer’s motion for summary judgment holding that HemCon literally infringed claims 6, 7, 10-12, 17 and 20 of the ‘245 patent.  Claims 6, 7, 10-12 and 17 generically recite “biocompatible” and claim 20 recites an elution test result of zero.  A jury held that the ‘245 patent was valid and Marine Polymer was entitled to a reasonable royalty of $29,410,246.

HemCon filed motions for JMOL on anticipation, on the jury’s factual findings relating to obviousness and challenging the damages award as not supported by substantial evidence.  The district court denied each of the motions.

On September 16, 2010, the district court entered a permanent injunction barring HemCon from further infringement.  HemCon timely appealed the judgment of the district court.

In August 2009, HemCon filed a request for ex parte reexamination of the ‘245 patent.  PTO granted the reexamination request and issued a non-final Office Action on April 1, 2010.  In the Office Action, the Examiner adopted an interpretation of “biocompatible” that differed from the district court.  According to the Examiner, “under the broadest reasonable interpretation, the term “biocompatible” meant ‘low variability, high purity and little or no detectable reactivity.”  Id. at 8.  Noting the dependent claims reciting an elution test score of one or two, the Examiner held that the “district court’s construction requiring ‘no detectable biological reactivity’ conflicted with those claims, while his interpretation avoided such inconsistency.”  Id. at 8.

In response, Marine Polymer cancelled the dependent claims reciting an elution test score of one or two.  Marine Polymer then argued that the [district court’s] interpretation of the term “biocompatibility” should be adopted in this reexamination.

The Examiner agreed.  On November 3, 2010, the PTO provided notice of its intent to issue a reexamination certificate.  On March 29, 2011, the PTO issued the final reexamination certificate, which cancelled dependent claims 4, 5, 13, 14, 21 and 22 and confirmed the patentability of claims 1-3, 6-12 and 15-20.

On November 18, 2010, a motions panel of the CAFC granted a stay of the damages award and permanent injunction pending appeal.  On September 26, 2011, the Federal Circuit Panel reversed the district court’s judgment on infringement and vacated the injunction and damages award on the grounds that HemCon had acquired intervening rights during reexamination of the ‘245 patent.

Marine Polymer petitioned for en banc rehearing.  On January 20, 2012, the full court granted Marine Polymer’s petition for rehearing and vacated the judgment of the panel.

Claim Construction

HemCon argued that the district court’s construction of “biocompatible” was erroneous.  HemCon relied on the presence of the six dependent claims of the original ‘245 patent that recited an elution test score of one or two as well as written description disclosing that biocompatibility tests are satisfied despite having detectable bioreactivity.  The CAFC disagreed and held that the interpretation of “biocompatible’ by the district court was supported by intrinsic evidence.

Claim construction analysis begins with the language of the claim itself, as it would have been understood by a person of ordinary skill in the art at the time of invention.  Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005)

The majority of the claims of the ‘245 patent use the term “biocompatible” generically, without any reference to a biocompatibility test score.  Since the term “biocompatible” does not recite a limitation based on the context of the claims, the district court properly looked to the specification to determine the meaning of the term “biocompatible.”  The specification discloses that “[I]t is demonstrated that the p-GlcNAc of the invention exhibits no detectable biological reactivity, as assayed by elution tests….”  ‘245 Patent Col. 41, l. 66-Col. 42, l. 3.  The CAFC held that the specification supports the district court’s claim construction.

The CAFC held that HemCon’s argument regarding the inconsistency between the district court’s construction and the dependent claims requiring non-zero elution test scores, “essentially amount to a conflict between teachings in the specification and the doctrine of claim differentiation.”  Id. at 13.  “Claim differentiation is ‘not a hard and fast rule and will be overcome by a contrary construction dictated by the written description or prosecution history.’ Seachange Int’l, Inc. v C-Cor, Inc., 413 F.3d 1361, 1369 (Fed. Cir. 2005); see also Laitram Corp. v Rexnord, Inc., 939 F.2d 1533, 1538 (Fed. Cir. 1991) (Claim differentiation is a guide, not a rigid rule.)”  Id. at 13.

The district court’s construction of “biocompatible” is affirmed by an equally divided court.

Infringement

As HemCon’s non-infringement challenged hinged entirely on the failed claim construction argument and the CAFC affirmed the claim construction of “biocompatible”, the district court’s judgment regarding infringement is affirmed by an equally divided court.

HemCon further argued that claims 12 and 20 are not literally infringed by HemCon because the products cannot undergo elution testing as required by those claims.  The CAFC held that HemCon waived this argument because HemCon did not raise this argument in opposing summary judgment.

Damages

HemCon argued that Marine Polymer’s expert lacked a sufficient basis for his testimony on what would constitute a reasonable royalty rate and that the jury improperly relied on the entire market value.

Marine Polymer’s expert tested that a reasonable royalty would range from 26-34% of HemCon’s infringing sales.  HemCon’s expert testified that 2-4% of all infringing sales represented the correct range.

“The use of the entire market value as the royalty basis is acceptable to the extent that the patent owner proves that ‘the patent-related feature is the basis for customer demand’. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009)”  Id. at 15.

CAFC held that the district court correctly found that the record contained substantial evidence to support a damages award based on the entire market value.  The jury is entitled to evaluate the conflicting evidence and credit the testimony of Marine Polymer’s expert over that of HemCon.  The damages award was affirmed by an equally divided court.

Intervening Rights

HemCon argued that the asserted claims of the ‘245 patent changed in scope during reexamination, whereby HemCon acquired intervening rights.  HemCon argued that “biocompatible”, as represented in the ‘245 patent before reexamination, must have encompassed low, non-zero levels of bioreactivity, so that the proper construction at that time was necessarily broader than the district court’s interpretation.  HemCon argued that by cancelling the inconsistent dependent claims during reexamination and persuading the Examiner to adopt the district court’s construction of “biocompatible”, Marine Polymer effected a substantive change in the scope of each remaining claim.  That is, the ‘245 patent originally allowed some reactivity and the reexamined ‘245 patent permitted no detectable biological reactivity.  HemCon argues that the key to intervening rights lies in determining “whether the scope of the reexamined claims differs from the original claims.”  Id. at 17.  HemCon argued that the “substantive change” to the surviving claims of the ‘245 patent during reexamination triggered intervening rights with respect to those claims.

Marine Polymer argued that intervening rights cannot apply with respect to claims that have not been amended or newly introduced in the reexamination proceeding.

The doctrine of intervening rights was first developed by the courts and codified by the Patent Act of 1952 with respect to reissued patents.  The statute provides for two types of intervening rights absolute intervening rights and equitable intervening rights.

Intervening rights do not accrue, however, where the accused product or activity infringes a claim that existed in the original patent and remains “without substantive change” after reissue. Seattle Box Co. v. Indus. Crating & Packing, Inc., 731 F.2d 818, 827–28 (Fed. Cir. 1984).

The doctrine of intervening rights was extended to patent reexamination and pursuant to 35 U.S.C. §307(b), both ex parte and inter partes reexamination can give rise to intervening rights.

Any proposed amended or new claim determined to be patentable and incorporated into a patent following a reexamination proceeding will have the same effect as that specified in section 252 of this title for reissued patents on the right of any person who made, purchased, or used within the United States, or imported into the United States, anything patented by such proposed amended or new claim, or who made substantial preparation for the same, prior to issuance of a certificate under the provisions of subsection (a) of this section.

35 U.S.C. § 307(b) (emphasis added).

The Majority held that “the statute makes available absolute and equitable intervening rights to the same extent provided in the reissue statute, but only with respect to ‘amended or new’ claims in the reexamined patent.”  Id. at 20.  Moreover, the Majority held 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).”  Section 307(b) specifies that only amended or new claims incorporated into a patent during reexamination will have the same effect as that specified in section 252.  The Majority held that HemCon ignores the threshold statutory requirement and proceeds directly to the subsidiary “substantive change” analysis.

“Under 307(b), 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.”  Id. at 21.

The Majority held that “[w]hether or not Marine Polymer’s arguments to the examiner and cancellation of claims during reexamination may have affected the remaining claims’ effective scope, they did not ‘amend’ those claims for intervening rights purposes or make them ‘new’, which is what the statutory language requires.”  Id. at 21-22.

HemCon’s asserted that arguments made during prosecution can affect the meaning of a claim term, and thus the scope of a claim, and therefore intervening rights should be determined by whether claim scope changes during reexamination.  The Majority disagreed and held that HemCon’s conclusion that the claims were “amended” by the change is scope of the claim is incorrect.  The Majority cited to the Dictionary and portions of §307 to support their position that amended requires an actual change in claim language.  There are three categories of claims identified in §307(a), 1) claims that existed in the original patent but have been cancelled as unpatentable, 2) claims that existed in the original patent and have been confirmed as patentable, and 3) amended or new claims that did not exist in the original patent but have been found to be patentable and will be incorporated into the patent by the PTO.  The Majority held that §307(b) is limited to the third category of claims.

“Any interpretation of ‘amended’ that includes disavowal or disclaimer by argument alone, as advocated by HemCon, would conflict with the rest of § 307, for it is difficult to envision how arguments about claim meaning could be “incorporated into a patent” by the Director of the PTO.”  Id. at 23.  The Majority also noted that “amended” is a term of art in patent prosecution that connotes formal changes to the actual language of a claim.  The Majority held that HemCon did not acquire intervening rights as the claims remaining in the patent are the same as originally claimed.

The final judgment of the district court is affirmed.

Dissent

The Dissent held that the “starting point for an intervening rights determination is the meaning of the original claim language.”  Id. at 2.  The Dissent held that the “reliance on the incorrect claim construction alone warrants a new trial on all issues related to the validity of the original patent claims, putting to one side the issue of intervening rights.”

Regarding intervening rights, the Dissent held that amendment by arguments could give rise to intervening rights, noting that “[l]egal instruments can often be constructively or effectively amended without changing literal text”, i.e. amendment by implication.  Id. at 18.  The Dissent cites to contract law and product liability law to support this position.  The Dissent also cites Supreme Court law that held that the scope of a patent may be changed by an amendment to the specification with no formal amendment to the claims.  See Russell v Dodge 93 U.S. 460, 463 (1876).  “[P]rior to Congress enacting the intervening rights provisions of section 252, courts understood that not having a change in claim language was not indispensible to creating intervening rights….”  Id. at 20.  It is the Dissent’s position that if a change in the language of the specification could result in an amended claim, then a change in claim scope, achieved by arguments only, should also result in an amended claim.

Comments/Tips

I agree with Scott Daniels that it seems unlikely that the Supreme Court will hear this case.  The statutory interpretation of §307(b) by the Majority appears to be consistent with the clear statutory language.  The Dissent looking to non-patent law did not seem convincing to overcome the statutory language of section 307.

It is interesting to note that had a majority been reached regarding the dissent’s view of claim construction, the issue of intervening rights may not have been dealt with at all.

Both the Majority and the Dissent worried about creating “loopholes” for avoiding intervening rights.  The Majority takes the position that the PTO will require amendment if needed to render a claim allowable.  That is, the PTO will not rely solely on arguments where amendment is necessary.  The Dissent takes the position that a Patentee will merely present arguments in order to avoid creating intervening rights.

Under the Dissent’s position, a Patentee would be unable to avoid creating intervening rights during reexamination.  That is, both amendments to a claim and arguments could give rise to intervening rights.  However, under the Majority’s position, only actual changes to claim language or new claims will give rise to intervening rights.

Given the two positions, the repercussions of each position, and the long standing practice of the patent prosecution community, I believe that the Majority’s position is correct.

Full Decision

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