What Does It Mean To Be Human?
Adele Critchley | November 26, 2020
Immunex Corp v. Sanofi-Aventis U.S. LLC
Prost, Reyna and Taranto.Opinion by Prost
October 13, 2020
Summary
This is a consolidated appeal from two Patent and Trademark Appeal Board (“Board”) decisions in Inter partes reviews (IPR) of US Patent No. 8,679,487 (‘487 patent) owned by Immunex. In the first IPR the Board invalidated all challenged claims. Immunex appealed the construction of the claim term “human antibodies.” In the other IPR, involving a subset of the same claims, the Board did not invalidate the patent for reason of inventorship. Sanofi appealed the Boards inventorship determination.
Briefly, the CAFC agreed with the Board’s claim construction and affirmed the invalidity decision. Since this left no claims valid, the CAFC dismissed Sanofi’s inventorship appeal.
The ’487 patent is directed to antibodies that bind to human interleukin-4 (IL-4) receptor. This appeal concerned what “human antibody” means in this patent. That is, in the context of this patent, must a human antibody be entirely human, or does it include partially human, for example humanized?
Amid infringement litigation, Sanofi filed three IPR’s against the ‘487 patent, two if which were instituted. In one final decision the Board concluded that the claims were unpatentable as obvious over two references, Hart and Schering-Plough. Hart describes a murine antibody that meet all the limitations of claim 1 except that it is fully murine, so not human at all. The Schering-Plough reference teaches humanizing murine antibodies.
In response, Immunex insisted that the Board had erred in construction of “human antibody” to include humanized antibodies.
After Appellate briefing was complete, Immunex filed with the PTO a terminal disclaimer of its patent. The PTO accepted it, and the patent expired May 26, 2020, just over two months prior to oral arguments. Immunex then filed a citation apprising the CAFC of (but not explaining the reason for) its terminal disclaimer and asking the court to change the applicable construction standard.
Specifically, in all newly filed IPRs, the Board now applies the Phillips district-court claim construction standard. However, when Sanofi filed its IPR, the Board applied this standard to expired patents only. To unexpired patents, it applied the Broadest Reasonable Interpretation (BRI) standard.
Immunex urged the CAFC to apply Phillips citing Wasica Finance GmbH v., Continental Automotive Systems, Inc., 853 F.3d 1272, 1279 (Fed. Cir. 2017) and In re CSB-System International 832 F. 3d 1335, as support. However, unlike here, the patents at issues in these cases had expired before the Board’s decision. The CAFC noted that it had applied the Phillips standard when a patent expired on appeal. Nonetheless, the CAFC clarified that in these cases the patent terms had expired as expected and not cut short by a litigant’s terminal disclaimer.
Accordingly, the CAFC affirmed it will review the Board’s claim construction under the BRI standard.
Initially, the CAFC turned to the intrinsic record, specifically, the claims, the specification, and the prosecution history.
The CAFC noted that the claims themselves were not helpful as the dependent claims provided no further guidance.
Next, the CAFC noted that while the specification gave no actually definition, the usage of “human” throughout the specification confirmed its breadth. Specifically, the specification contrasts “partially human’ with “fully human.” For instance, the specification states that “an antibody…include, but are not limited to, partially human…. fully human.” Thus, the specification makes it clear that “human antibody” is a broad category encompassing both “fully” and “partially.”
Immunex insisted that the Board undervalued the prosecution history. While the CAFC agreed, it concluded the prosecution history supported the Board’ construction.
First, they noted that Immunex had used the term “fully human” and “human” in the same claim of another of its patents in the same family. Next, claim 1 as originally presented merely stated “an isolated antibody” and “human” were added during prosecution.
As a result, a dependent claim which recited ‘a human, partially human, humanized or chimeric antibody’ was cancelled. Immunex suggested that the amendment “surrendered” the partially human embodiment. The CAFC disagreed.
The Board noted that “human” was not added to overcome an anticipating reference that disclosed ‘nonhuman.’ The CAFC also noted that the claim language does not require the exclusion of partially human embodiments. Thus, the CAFC held that nothing indicates that “human” was added to limit the scope to fully human.
The CAFC noted that in a post-amendment office action, the Examiner expressly wrote that the amended “human” antibodies encompassed “humanized” antibodies and that Immunex had made no effort to correct this understanding.
Next, the CAFC addressed the role of extrinsic evidence. Immunex argued that the Board had failed to establish how a person of ordinary skill in the art would have understood the term. Immunex had provided expert testimony to argue that “human antibody” would have been limited to “fully human.”
The CAFC held that while it is true that they seek the meaning of a claim term from the perspective of a person of ordinary skill in the art, the key is how that person would have understood the term in view of the specification. That, while extrinsic evidence may illuminate a well-understood technical meaning, that does not mean that litigants can introduce ambiguity in a way that disregards usage in the patent itself.
Here, the extrinsic evidence provided conflicts the intrinsic evidence. Priority is given to the intrinsic evidence.
Lastly, the CAFC discussed the Boards’ departure from an earlier court’s claim construction. That is, in the litigation that prompted this IPR, a district court construed “human” to mean “fully human” only, under the narrower Phillips-based construction. However, the CAFC reiterated that the Board “is not generally bound by a previous judicial construction of a claim term.”
Thus, to conclude, the CAFC affirmed the Board’s claim construction under the BRI standard, and thus its invalidity judgment based thereon.
Take-away
- Claim drafting – words matter
- The importance of dependent claims
- Be mindful of amendments made during prosecution that are not done for the purpose of overcoming prior art.
- In claim construction, intrinsic evidence has priority over extrinsic evidence when they conflict.
- Be mindful of comments made by the Examiner during prosecution in an action (office action, notice of allowance, etc.,) regarding interpretation of the claims.
CRITICALITY OF CLAIM CONSTRUCTION
Stephen G. Adrian | November 16, 2020
ST. JUDE MEDICAL, LLC, Appellant v. SNYDERS HEART VALVE LLC, Cross-Appellant UNITED STATES, Intervenor
October 15, 2020
Newman, O’Malley and Taranto (Opinion by Taranto)
This precedential decision illustrates the importance of claim construction, particularly in considering all terms of a proposed claim construction.
St. Jude filed two petitions for inter partes reviews of U.S Patent No. 6,540,782 owned by Snyders Heart Valve, LLC. The petitions were instituted as “IPR-105” and “IPR-106”. The ‘782 patent is directed to artificial heart valves. The key claim term in IPR-105 was a “band” whereas the key term in IPR-106 was a “manipulator.”
Standards of review are always important and worth noting. Anticipation is a question of fact in which the Board’s determination of what is taught in the prior art reviewed for substantial evidence. For obviousness, the ultimate determination is a legal one reviewed de novo, with underlying factual determinations reviewed for substantial evidence support. Claim construction under the broadest reasonable interpretation is a determination of law reviewed de novo where based on intrinsic evidence with any findings about facts based on extrinsic evidence reviewed for substantial evidence support.
IPR-105
The ‘782 patent describes an artificial heart valve that can be installed via catheter without invasive surgery. The artificial heart valve has three main components: a valve element, a frame, and a band. Independent claim 1 sets forth:
“a band attached to the frame limiting spacing between adjacent anchors of said plurality of peripheral anchors;”
IPR-105 was instituted on the basis that Leonhardt disclosed an artificial heart valve having three main components: a biological valve, a valve stent, and graft material. The graft material is made of low-porosity woven fabric which is arranged to surround the stent.
The Board had essentially adopted St. Jude’s proposed claim construction of the term “band” as “a structure generally in the shape of a closed strip or ring.” This construction was slightly broader than St. Jude’s originally proposed construction of “a structure generally in the shape of a circular strip or ring” to cover shapes including ovals for example. Nonetheless, the Board concluded that graft material of Leonhardt would not be considered a “band” under this claim construction since the graft material of Leonhardt covered the entire length of the stent like a sleeve, and therefore was not a “strip” or “ring.”
St. Jude argued that the Board had erred in not accepting that Leonhardt anticipated claims 1, 2, 4-8 and 28 on the basis that the graft material is a “band.” St. Jude argued that the Board failed to apply its own claim construction of “band” and instead applied a narrower construction. St. Jude argued that one of ordinary skill in the art would understand that there would be no width restriction on what is considered a “band” quoting a dictionary definition of “band” as a thin strip of flexible material used to encircle or bind one object or hold a number of objects.
The CAFC noted a fundamental problem with this argument in that it ignores the terms “strip” and “ring” which were accepted as part of the claim construction. If St. Jude wanted to argue that “band” should not have been limited to a “strip” or “ring’, it should have proposed a different claim construction.
IPR-106
In IPR-106, the Board concluded that St. Jude had proved that claims 1, 2, 6 and 8 were anticipated by Bessler, but that St. Jude failed to prove that Bessler disclosed a “manipulator” required by claim 28. Both St. Jude and Snyders challenged these conclusions.
Snyders challenged the finding of anticipation in regard to the Board’s claim construction of how the frame is “sized and shaped” as well as claim 1’s “attached” limitation. Snyders also challenged the finding that the cuff in Bessler satisfies the requirement of claim 1 that the band limits spacing between adjacent frame members. The CAFC agreed that the Board erred in construing the “sized and shaped” limitation and that Bessler would not anticipate.
Claim 1 requires a “frame sized and shaped for insertion between the upstream region and the downstream region.” The Board determined that “[t]he claim language does not require the frame be sized and shaped for insertion into a damaged heart valve,” but “only that the frame is sized and shaped for insertion in a position between the upstream region and the downstream region.” The Board did not dispute the express assertion by Snyders that Bessler requires removal of the native valve for installation of the replacement valve.
The CAFC pointed out that claim 1 requires “an artificial heart valve for repairing a damaged heart valve having a plurality of cusps, separating an upstream region from a downstream region … comprising …a flexibly resilient frame sized and shaped for insertion between the upstream region and downstream region” which provides support for Snyders’ assertion. The reference to “repairing” without removal suggests the native valve remains. The CAFC further highlighted the teachings of the specification for clarifying the broadest reasonable interpretation. The specification teaches:
“the frame is sized and shaped for insertion between the plurality of cusps C of the damaged heart valve in a position between an upstream region and a downstream region.”
This language indicates that “sized and shaped” is not meant to refer only to placement but also to fitting between cusps of the intact native heart. The CAFC concluded that the specification went beyond stating a general preference for leaving the native valve intact to make it unreasonable to read “sized and shaped for insertion” as covering an artificial valve fitted for space after removing the native valve.
St. Jude had relied on its claim construction that the claims cover the situation of a removed native valve and did not dispute the express assertion by Snyders that Bessler requires removal of the native heart valve. As such, the CAFC concluded that Bessler does not anticipate and therefore reverses the Board.
St. Jude challenged the finding that claim 28 was not anticipated in regard to the term “manipulator.” The CAFC concluded that it did not need to address this argument because claim 28 contains the “sized and shaped” limitation noted above.
St. Jude also challenged the finding that St. Jude failed to establish obviousness. Although the Board agreed that prior art advanced by St. Jude could be combined, the Board found that the particular combination proposed by St. Jude would not result. The Board found no adequate or persuasive explanation why one of ordinary skill in the art would keep the “integral” cuff portion while replacing the leaflet portion to which it is attached.
Takeaways
Claim construction is critical. Make sure to understand all terms of a proposed claim construction before accepting.
When challenging an obviousness determination based on a combination of art, remember that even if it would be reasonable to combine the art, the combination may not result in the particular arrangement as claimed.
The Patent Trial and Appeal Board has discretion in issuing sanctions and is not limited by the Sanctions Regulations under Rule 42.12
Andrew Melick | November 5, 2020
APPLE INC. v. VOIP-PAL.COM, INC.
September 25, 2020
Prost, Reyna and Hughes. Opinion by Reyna.
Summary:
After being sued by Voip-Pal, Apple filed separate IPR petitions against the two patents asserted against Apple. During the IPRs, Voip-Pal sent letters to PTAB judges and the USPTO, among others, criticizing the IPR process and requesting either dismissal of the IPRs or favorable judgment. These letters were not sent to Apple. The PTAB issued a final written decision upholding the validity of the claims. Apple then filed a motion for sanctions due to the ex parte communications. The PTAB held that the letters sent by Voip-Pal were sanctionable and the remedy was to provide a new PTAB panel to review Apple’s request for rehearing. On appeal at the CAFC, but before the oral arguments, a separate CAFC decision issued affirming the invalidity of some of the same claims from the same patents. The CAFC stated that for the same claims involved in the prior case, the claims are invalid, and thus, the appeal is moot. However, for the claims that do not overlap with the claims involved in the prior case, the appeal is not moot. Regarding sanctions, the CAFC stated that the PTAB did not abuse its discretion in the remedy provided to Apple. The CAFC also affirmed the PTAB’s determination of non-obviousness.
Details:
Voip-Pal sued Apple for infringement of U.S. Patent Nos. 8,542,815 and 9,179,005 to Producing Routing Messages for Voice Over IP Communications. The patents describe routing communications between two different types of networks. Apple filed two separate IPR petitions for the patents. Apple agued that the patents were obvious over the combination of U.S. Patent No. 7,486,684 (Chu ‘684) and U.S. Patent No. 8,036,366 (Chu ‘366). The original PTAB panel instituted the IPRs. Later the original PTAB panel was replaced with a second PTAB panel. No reason for the change in panels was provided in the record.
While the IPRs were proceeding, the CEO of Voip-Pal sent six letters to various parties copying members of Congress, the President, federal judges, and administrative patent judges at the PTAB. The letters were not sent to Apple. The letters criticized the IPR system and requested judgment in Voip-Pal’s favor or dismissal of Apple’s IPRs.
The second PTAB panel then issued its final written decision for both IPRs. The claims were found to be not invalid as obvious over Chu ‘684 and Chu ‘366. Specifically, the PTAB said that Apple did not provide evidentiary support for their argument on motivation to combine.
Apple moved for sanctions against Voip-Pal due to the CEO’s ex parte communications with the PTAB and the USPTO arguing that the communications violated the Administrative Procedure Act and violated Apple’s due process rights. Apple requested an adverse judgment against Voip-Pal or that the final written decision be vacated and assigned to a new panel with a new proceeding. Apple also appealed the final written decision by the second PTAB panel.
The CAFC stayed the appeal and remanded to the PTAB to consider Apple’s sanctions motions. A third and final PTAB panel replaced the second PTAB panel for the sanctions proceedings. The final PTAB panel found that Voip-Pal’s ex parte communications were sanctionable. But the final PTAB panel rejected Apple’s request for a directed judgment or a new proceeding with a new panel. The final PTAB panel provided their own sanctions remedy of presiding over Apple’s request for rehearing. The final PTAB panel stated that this “achieves the most appropriate balance when considering both parties’ conduct as a whole.”
After briefing for the rehearing, the final PTAB panel denied Apple’s petition for rehearing because Apple had “not met its burden to show that in the Final Written Decision, the [Interim] panel misapprehended or overlooked any matter.” The final PTAB panel also stated that “even if [the final PTAB panel] were to accept [Apple’s] view of Chu ‘684 … [the final PTAB panel] would not reach a different conclusion.” The CAFC then lifted the stay on the appeal.
Prior to oral argument at the CAFC, Apple filed a post-briefing document entitled “Suggestion of Mootness.” Apple raised the issue of mootness because in a separate proceeding involving the same patents (Voip-Pal.com, Inc. v. Twitter, Inc., 798 F. App’x 644 (Fed. Cir. 2020), the CAFC affirmed that some of the claims of the patents are invalid as ineligible subject matter.
At the oral argument, Apple argued that the appeals for the overlapping claims are moot. Voip-Pal did not dispute mootness of the appeals for the overlapping claims. Since these claims were rendered invalid as ineligible subject matter in the Twitter case, the CAFC stated that appeals for these claims are rendered moot. For the remaining, 15 non-overlapping claims, Apple argued that they are essentially the same as the claims held ineligible in the Twitter case and that “basic principles of claim preclusion (res judicata) preclude Voip-Pal from accusing Apple” of infringing the non-overlapping claims in future litigation.
The CAFC stated that:
Under the doctrine of claim preclusion, “a judgment on the merits in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action.” Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322, 326 (1955). The determination of the “precise effect of the judgment[] in th[e] [first] case will necessarily have to be decided in any such later actions that may be brought.” In re Katz Interactive Call Processing Pat. Litig., 639 F.3d 1303, 1310 n.5 (Fed. Cir. 2011).
Thus, any res judicata effect of a first proceeding is “an issue that only a future court can resolve” and any preclusive effect that the Twitter case could have against the same or other parties must be decided in any subsequent action brought by Voip-Pal. The CAFC concluded that the question of obviousness for the non-overlapping claims is not moot.
Regarding the sanctions order, the CAFC stated that the final PTAB panel’s sanction order was not an abuse of discretion. Apple argued that the final PTAB panel’s sanction order violated the administrative procedure act (“APA”) because the PTAB panel issued a sanction not explicitly provided by 37 C.F.R. § 42.12(b), and thus, the PTAB panel exceeded its authority. However, the CAFC pointed out that § 42.12 provides that:
(a) The Board may impose a sanction against a party for misconduct, . . . .
(b) Sanctions include entry of one or more of the following [eight enumerated sanctions]:
The CAFC stated that because of the term “include,” the list of sanctions is non-exhaustive. The use of “may” in the rule also indicates that the PTAB has discretion to impose sanctions in the first place. Therefore, the PTAB is not limited to the eight listed sanctions in § 42.12(b). The CAFC also stated that the PTAB’s decision to allow Apple to petition for rehearing before a new panel was a reasonable course of action that provided Apple with a meaningful opportunity to respond to Voip-Pal’s letters.
Regarding Apple’s due process argument, the CAFC stated that Apple failed to identify any property interests in the course of its due process arguments, and that property interests identified for the first time on appeal are waived. An argument of a due process violation requires identification of a property interest that has been deprived. The CAFC also stated that the PTAB introduced the six letters into the record and gave Apple an opportunity to respond during the panel rehearing stage, but Apple chose not to address the substance of the letters.
Apple also argued that the PTAB erred when it determined that Apple failed to establish a motivation to combine Chu ‘684 with Chu ‘366 stating that the PTAB improperly applied the old teaching, suggestion, motivation test rather than the flexible obviousness analysis required under KSR. However, the CAFC stated that Apple’s argument was that a skilled artisan would have viewed Chu ‘684’s interface as less intuitive and less user friendly than that of Chu ‘366, and thus, a skilled artisan would have a desire to improve Chu ‘684’s system. But the PTAB determined that Apple’s expert did not provide adequate support for the proposition that a skilled artisan would have regarded Chu ‘684’s teachings as deficient. Thus, Apple failed to “articulate reasoning with some rational underpinning.” The CAFC stated that the PTAB applied the proper evidentiary standard in determining non-obviousness of the claims.
Comments
This decision shows that the PTAB has discretion in issuing sanctions and they are not limited to the list enumerated in 37 C.F.R. § 42.12. Also, issue preclusion can only be applied to a future action. The effect of a judgment in a first case must be decided in any later actions that may be brought. For demonstrating obviousness, make sure you include evidentiary support for an argument of obviousness.
The Federal Circuit Holds that an “Agreement to Agree” to License Does Not Establish an Enforceable License Right
WHDA Blogging Team | October 26, 2020
Phytelligence v. Washington State University
August 27, 2020
PROST, REYNA, and STOLL, Precedential opinion by Reyna
Summary
Appellant, Phytelligence, Inc. (Phytelligence) is an agricultural biotechnology company that uses tissue culture to grow trees for sale to nurseries and growers. Phytelligence entered into a Propagation Agreement with Washington State University (WSU) regarding growing of “W38” apple trees developed and patented by WSU. The Propagation Agreement was focused on research and development, but included a clause indicating that Phytelligence is “granted an option to participate” as a seller in the future upon signing “a separate contract.” Phytelligence did not execute a later contract with WSU, but later brought a legal action against WSU asserting that the Propagation Agreement granted Phytelligence a right to license. The district court affirmed WSU’s motion for summary judgment dismissing Phytelligence’s claim on the basis that the contract was an unenforceable “agreement to agree.” On appeal, the Federal Circuit affirmed the district court’s decision.
Background
Appellant, Phytelligence, Inc. (Phytelligence) is an agricultural biotechnology company that uses tissue culture to grow trees for sale to nurseries and growers.
Phytelligence engaged in discussions with Washington State University (WSU) regarding growing of “W38” apple trees developed and patented by WSU.
The parties entered into a Propagation Agreement under which Phytelligence could propagate the W38 apple trees and experiment with propagation techniques for research and development purposes. However, the agreement did not provide a right for Phytelligence to sell the W38 trees. Under the agreement, Section 4 included the following clause:
If [Phytelligence] is an authorized provider in good standing . . . by signing this Agreement, [Phytelligence] is hereby granted an option to participate as a provider and/or seller of Plant Materials listed in Exhibit A, if the Cultivar is officially released by WSU and becomes available for licensing by [WSU] . . . . [Phytelligence] will need to sign a separate contract with [WSU], or an agent of [WSU], to exercise this option.
Phytelligence emailed WSU “to clarify” that to exercise its option under Section 4, WSU would need to “grant it a separate license for the purpose of selling,” and WSU emailed “yes” in reply. Phytelligence emailed again indicating that the agreement had a “wispy forward commitment,” but then emailed stating “since this agreement is a precursor to any other, we suppose there’s no harm in going ahead and executing it. Then at least we will have the pieces in place when we are all ready to go beyond R&D mode. With that context, the agreement is fine as it is.”
In March 2013, WSU issued request for proposals seeking an exclusive licensee to manage the commercialization of WA38 and awarded an exclusive license to Proprietary Variety Management (PVM). PVM provided nonexclusive sublicenses to companies provided that such companies become Northwest Nursery Improvement Institute (NNII) member nurseries.
On May 18, 2017, Phytelligence informed WSU that it desired to proceed under Section 4 of the agreement. WSU indicated that the Propagation Agreement required a separate contract with PVM. Phytelligence approached PVM, but refused to become such a member nursery, and rejected that requirement and did not enter an agreement with PVM.
On September 15, 2017, WSU presented Phytelligence with three other options for propagating and selling WA 38, including two options that did not require NNII membership. Phytelligence rejected the three options.
On January 16, 2018, WSU terminated the Propagation Agreement with Phytelligence on the basis that Phytelligence had sold and delivered WA 38 without a license.
On February 26, 2018, Phytelligence sued WSU in state court for breach of the Propagation Agreement. WSU then asserted patent and trademark infringement counterclaims and removed the case to federal district court. WSU moved for summary judgment, arguing that Section 4 was an unenforceable “agreement to agree” under Washington state law.
The district court granted the motion for summary judgment. And, Phytelligence appealed.
The Federal Circuit’s Decision
Legal Issue
The question on appeal is whether Section 4 of the Propagation Agreement granted Phytelligence a license right as being an enforceable agreement with open terms rather than an unenforceable “agreement to agree.”
Standard of Review
The Federal Circuit reviews a grant of summary judgment under the law of the regional circuit, and, thus, de novo in this case.
Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
Discussion
The Federal Circuit explained that this legal issue is a matter of contract interpretation, which is determined under state law. Under Washington state law, an “objective manifestation” standard is employed, wherein a court looks to the reasonable meaning of the contract language to determine the parties’ intent.
Agreement to Agree vs. Agreement with Open Terms
The Federal Circuit noted that an “agreement to agree” is unenforceable, explaining that “[a]n agreement to agree is an agreement to do something which requires a further meeting of the minds of the parties and without which it would not be complete.” The court explained that an “agreement with open terms” differs in that “the parties intend to be bound by … key points agreed upon with the remaining terms supplied by a court or another authoritative source, such as the Uniform Commercial Code” such that “[a]ny missing or open terms can therefore be ‘easily’ discerned by a court.” The court also explained that open terms can also be appropriate when they are based on an objective formula or method contained within the contract itself.
However, the Federal Circuit noted that Section 4 of the Propagation Agreement “provides the court with no objective method for determining the terms of the separate contract” between WSU or (or its agent).” Thus, the Federal Circuit affirmed that the Section 4 of the Propagation Agreement is merely an unenforceable agreement to agree.
Extrinsic Evidence
Phytelligence argued that the extrinsic evidence established that Section 4 was an enforceable contract with open terms. The Federal Circuit explained that under Washington law, to assist in determining the meaning of contract language, a “context rule” is also applied that includes “examination of the context surrounding a contract’s execution, including the consideration of extrinsic evidence.” However, the court explained that extrinsic evidence is to only be used “to determine the meaning of specific words and terms used and not to show an intention independent of the instrument …”
Moreover, the Federal Circuit explained that extrinsic evidence revealed that no agreement was reached and pointed out that in emails to WSU, Phytelligence actually acknowledged that Section 4 contained a “wispy forward commitment” and that there was “no harm” to sign the agreement because the agreement “is a precursor to any other.” The Federal Circuit noted that “[o]n these undisputed material facts, no reasonable fact finder could conclude that at the time of execution, Phytelligence and WSU agreed” that Section 4 would contain the terms of the later PVM form license, but rather that WSU did not commit to any definite terms of a future license.
Phytelligence also argued that a declaration of the CEO of Phytelligence supported that there was a material dispute because the CEO had declared “My understanding … was that … Phytelligence would have the option to acquire a license on the standard terms.” However, the court expressed that “mere allegation and speculation do not create a factual dispute for purposes of summary judgment.”
Phytelligence also argued that the parties’ conduct after the execution of the Propagation Agreement also created a factual dispute. However, the court rejected that argument and noted that WSU had offered Phytelligence three different licensing options, including two that didn’t require joining of NNII, which were all rejected by Phytelligence. The court explained that “[b]ased on this evidence, no reasonable fact finder could conclude that, at the time of execution, the parties understood that there was nothing left for future negotiation regarding the terms of Phytelligence’s separate contact under Section 4.”
Accordingly, the Federal Circuit affirmed the district court’s decision.
Takeaways
- In drafting agreements, it is important to keep in mind that an “agreement to agree” at some later date regarding any terms of the agreement is not enforceable. Accordingly, one should exercise care to avoid development of contract terms of this nature.
- In drafting agreements, it is also important to appreciate that some contract terms can be drafted as “open terms” that may still be enforceable, but that for such “open terms” to be enforceable, such “open terms” must be defined in the contract in a manner to be supplied by a court or another authoritative source or based on some objective formula or method set forth in the contract itself.
- In collaborative relationships, it is also important to carefully plan for future circumstances. In this case, Phytelligence’s emails prior to signing of the Propagation Agreement reflected a concern that there was no agreement for future sale of the product. However, rather than effectively addressing the issue at that time, Phytelligence moved forward with the relationship regarding research and development without sufficiently securing its future ability to engage in sale of the product.
Tags: Agreement to Agreement > contract > Intent of Parties > interpretation > license
