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September 10, 2010

Backbreaker Broken

Spine Solutions, Inc. (SSI) sued Medtronic for infringing 6,936,071, which claims a spinal implant, "used to replace discs between vertebrae in the spinal column that have degenerated or become diseased." Summary judgment of infringement for claims 1 and 2, and dismissal of "all of Medtronic's 35 U.S.C. § 112 defenses" led to stipulated capitulation by Medtronic, setting up a trial on damages and obviousness. SSI was going for lost profits even though it didn't sell or make any device covered by '071. But SSI's sister companies did. SSI was allowed to amend its complaint to include them. The jury found '071 not invalid, and willfully infringed, to the $5.7 million in lost profits, and an 18% reasonable royalty on $9.1 million in infringing sales. Whereupon the district court doubled the damages and awarded attorneys fees. Adding insult to injury, the court entered a permanent injunction. All that left Medtronic a lot to appeal. And some of it was appealing to the CAFC.

Spine Solutions, Inc. v. Medtronic (CAFC 2009-1538) precedential

The '071 patent discloses an intervertebral implant that includes an upper part and a lower part, each of which has a "support face" for an adjacent vertebra. '071 patent col.1 ll.3-5. Each of the upper and lower parts has a single anchor, or keel, that is centrally positioned on the support face. Id. figs.1-7 (nos. 6, 14). The anchors affix the upper and lower parts into the adjacent vertebrae. Id. col.5 ll.59-64.

Obviousness

Medtronic argues that the district court erred in denying its motion for JMOL that the asserted claims of the '071 patent would have been obvious to one of skill in the art. We review denials of JMOL under the law of the regional circuit, here the Sixth Circuit. Gemtron Corp. v. Saint-Gobain Corp., 572 F.3d 1371, 1379 (Fed. Cir. 2009). The Sixth Circuit reviews a denial of a motion for JMOL de novo. Imwalle v. Reliance Med. Prods., 515 F.3d 531, 543 (6th Cir. 2008). JMOL will be granted only where "a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue." Id. "The grant is appropriate only if, in viewing the evidence in the light most favorable to the nonmoving party, reasonable minds could come to but one conclusion, in favor of the moving party." Id. (citation omitted).

The novel claim element was the single anchor.

It is undisputed that U.S. Pat. No. 5,314,477 (the '477 patent) discloses every element of claim 1 except for the "single anchor" limitation... Medtronic asserts that several prior art references disclose the claimed "single anchor" limitation.

The CAFC agreed that a Japanese patent application by Nobuo met the single anchor limitation. The difficulty was in considering the combination obvious without hindsight reasoning.

The combination of the '477 patent and Nobuo plainly discloses every limitation of claim 1; the question remains whether the combination of those references would have been obvious to a person of skill in the art. We agree with the district court that the record contains substantial evidence to support the jury's fact finding, implicit in its verdict of nonobviousness, that it would not have been obvious to a person of skill in the art to use a single anchor with the implant of the '477 patent. In particular, the record contains substantial evidence showing that a person of skill in the art would not have viewed a single keel as being stable enough for a disc replacement device. The record contains evidence showing that the center of a vertebra--the location of the '071 patent's single anchor-- is typically the weakest part of a diseased or degenerated disc. J.A. 15306.

Expert and deposition evidence backed the courts.

Viewing this evidence most favorably to SSI, we cannot say that "reasonable minds could come to but one conclusion," in favor of Medtronic. See Imwalle, 515 F.3d at 543. Rather, the record contains substantial evidence to support the jury's implicit findings underlying its determination that it would not have been obvious to use a single keel, such as that disclosed by Nobuo, with the implant of the '477 patent. Therefore, substantial evidence exists to support the jury's verdict of nonobviousness, and we affirm the court's denial of Medtronic's motion for JMOL of obviousness.

A portion of the injunction was stayed pending appeal.

The court entered a permanent injunction that forbids Medtronic from, among other things, using, selling, or transferring any accused devices that are already outside the U.S. This extraterritorial portion of the injunction is stayed pending this appeal.

Written Description

Claim 1 recites that the "single anchor" is "adapted to enter a groove in the adjacent vertebrae." '071 patent col.7 ll.3-10 (emphasis added). Medtronic argued that the written description does not disclose the "adapted to enter a groove" limitation.

Medtronic asserts that the district court erred in granting summary judgment that the '071 patent contains adequate written description to support the limitation "single anchor . . . adapted to enter a groove." We review a grant of summary judgment de novo, reapplying the standard applicable at the district court. Young v. Lumenis, Inc., 492 F.3d 1336, 1345 (Fed. Cir. 2007). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). "Compliance with the written description requirement is a question of fact but is amenable to summary judgment in cases where no reasonable fact finder could return a verdict for the non-moving party." PowerOasis, Inc. v. T-Mobile USA, Inc., 522 F.3d 1299, 1307 (Fed. Cir. 2008).

The CAFC affirmed the district court: "the specification describes the claimed 'single anchor' as necessarily being 'adapted to enter a groove.'"

Claim Construction

The CAFC affirmed the district court on several contested limitations, including one where Medtronic had argued prosecution estoppel.

Medtronic contends that the '071 patent does not describe a two-piece implant because the '071 patent actively disparages the two-piece design of the '477 patent. In discussing the two-piece design of the '477 patent, the '071 patent notes that it is "particularly difficult" to achieve a minimum structural height for an implant if the pivot is embedded prior to insertion. Id. col.1 ll.11-19. However, this does not rise to the level of an express disclaimer sufficient to limit the scope of the claims; "[d]isavowal requires expressions of manifest exclusion or restriction, representing a clear disavowal of claim scope." Epistar Corp. v. ITC, 566 F.3d 1321, 1335 (Fed. Cir. 2009). Further, claim 1 is not directed to the height-minimizing embodiment.

Noninfringement

All that went before to SSI's favor was a prelude to a turnabout to Medtronic's good fortune.

Medtronic moved for summary judgment that O-Maverick does not infringe claims 1 and 2, arguing that O-Maverick has two anchors on each piece and therefore does not meet the "single anchor" limitation.

We agree with Medtronic that the court erred in determining that O-Maverick literally infringes claims 1 and 2. The court construed "single anchor" to mean, in relevant part, that "[t]he upper and lower surfaces of the implant each have one anchor having the characteristics recited in the last paragraph of [claim 1]." Claim Construction Order, 2008 U.S. Dist. LEXIS 116648, at *43 (emphasis added). A simple observation of O-Maverick confirms that the implant has two anchors on each of the upper and lower pieces, not one. The anchors are separated by a one-millimeter gap that extends all the way to the base of the implant; at no point are the two anchors joined or connected in any way. O-Maverick clearly has two anchors on each piece, not a "single anchor" as recited by claims 1 and 2. Therefore, we hold as a matter of law that O-Maverick does not literally infringe claims 1 and 2.

With respect to the doctrine of equivalents, Medtronic argues that applicants made a clear surrender of any designs containing more than one anchor during prosecution of the '071 patent. We agree. During prosecution, applicants expressly distinguished the claimed invention over the '477 patent by asserting that "a reference disclosing two anchors does not disclose a device affirmatively claiming a single anchor . . . reciting a negative limitation in the form of a single element is not disclosed by prior art which teaches more than one element." J.A. 17524. This is a clear disclaimer of claim scope, and prosecution history estoppel therefore bars SSI from arguing that a two-anchor device is equivalent to the claimed implant. Because we hold that O-Maverick is a two-anchor device, SSI cannot argue that O-Maverick infringes claims 1 and 2 under the doctrine of equivalents.

Remanded "to enter judgment of noninfringement with respect to O-Maverick."

Standing and Lost Profits

It is well-settled that "[o]nly a patent owner or an exclusive licensee can have constitutional standing to bring an infringement suit; a non-exclusive licensee does not." Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1367 (Fed. Cir. 2008). To be an exclusive licensee for standing purposes, "a party must have received, not only the right to practice the invention within a given territory, but also the patentee's express or implied promise that others shall be excluded from practicing the invention within that territory as well." Id. (citing Rite-Hite, 56 F.3d at 1552). "If the party has not received an express or implied promise of exclusivity under the patent, i.e., the right to exclude others from making, using, or selling the patented invention," the party has only a "bare license"-- and a "bare license to sell an invention in a specified territory, even if it is the only license granted by the patentee, does not provide standing without the grant of a right to exclude others." Rite-Hite, 56 F.3d at 1552, 1553.

SSI failed to show that one of its sister companies, Synthes, Inc., had standing. "Therefore, the district court abused its discretion in allowing SSI to amend its complaint to add Synthes, Inc. as a co-plaintiff."

On the question of Synthes Spine, the other sister, which SSI alleged an exclusive licensee under an organizational umbrella, "an understanding" without an agreement, oral or written, failed the test of establishing standing to sue for patent infringement.

If we were to find standing on these facts, this would mean that any company related to a patent owner could be treated as an exclusive licensee, so long as the patent owner allows only that company to practice the patent, regardless of any actual agreement as to exclusivity. This is plainly contrary to our case law, which specifies that a "bare license . . . even if it is the only license granted by the patentee, does not provide standing without the grant of a right to exclude others." Rite-Hite, 56 F.3d at 1553. Given that SSI fails to point to any evidence other than its current "organization" to show that Synthes Spine is an exclusive licensee, we conclude that SSI failed to meet its burden of establishing that Synthes Spine has standing to bring suit. Therefore, the district court abused its discretion in allowing SSI to amend its complaint to add Synthes Spine as a co-plaintiff.

Regardless of how SSI characterizes Medtronic's position, however, Medtronic is challenging the standing of Synthes, Inc. and Synthes Spine to bring suit on the '071 patent. Under Article III of the Constitution, "standing . . . is jurisdictional and not subject to waiver." Pandrol USA, LP v. Airboss Ry. Prods., 320 F.3d 1354, 1367 (Fed. Cir. 2003) (citation omitted).

Because we conclude that neither Synthes Spine nor Synthes, Inc. has standing to sue on the '071 patent, SSI is not entitled to recover for any lost profits suffered by Synthes Spine or Synthes, Inc. It is undisputed that SSI does not itself sell any products. Therefore, SSI is not entitled to any lost profits damages. See Poly-America, L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303, 1311 (Fed. Cir. 2004) ("the patentee needs to have been selling some item, the profits of which have been lost due to infringing sales, in order to claim damages consisting of lost profits").

Reversed and remanded to determine a "proper reasonable royalty" without lost profits.

Willfulness

A reasonable defense is all one needs to escape a finding of willfulness.

Willfulness is a question of fact, and our review on appeal is "limited to asking whether [the jury's] verdict is supported by substantial evidence." i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 859 (Fed. Cir. 2010).

To establish willful infringement, "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). This "objective" prong of Seagate tends not to be met where an accused infringer relies on a reasonable defense to a charge of infringement. E.g., Depuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1336-37 (Fed. Cir. 2009) (holding that the district court correctly granted JMOL of no willfulness where defendant "presented a substantial question" of noninfringement under the doctrine of equivalents, even though the jury found equivalence); cf. i4i, 598 F.3d at 860 (affirming the district court's denial of JMOL of no willfulness because "the jury was free to decide for itself whether Microsoft reasonably believed there were any substantial defenses to a claim of infringement"). If Seagate's objective prong is met, "the patentee must also demonstrate that this objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer." Id.

Medtronic raised a substantial question as to the obviousness of the '071 patent. The combination of the '477 patent and Nobuo plainly discloses all of the claimed limitations. Although we hold that the record contains substantial evidence to support the jury's implicit finding that one of skill in the art would not have found the combination obvious, Medtronic was not objectively reckless in relying on this defense. Seagate, 497 F.3d at 1371 ("proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness"). Indeed, the district court expressly noted in the context of its enhanced damages analysis that Medtronic's obviousness arguments were "reasonable." J.A. 198. We conclude that substantial evidence does not support the jury's finding that Medtronic acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Therefore, we reverse the district court's denial of Medtronic's motion for JMOL of no willfulness.

Because we reverse the denial of JMOL of no willfulness, we also vacate the award of enhanced damages. i4i, 598 F.3d at 858 ("A finding of willful infringement is a prerequisite to the award of enhanced damages."). Further, as the court's finding of exceptionality was based solely on "evidence of Medtronic's willful infringement," we also vacate the award of attorney fees under 35 U.S.C. § 285. J.A. 202.

Permanent Injunction

A district court "may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable." 35 U.S.C. § 283 (emphasis added). An injunction is only proper to prevent future infringement of a patent, not to remedy past infringement. See also Johns Hopkins Univ. v. Cellpro, Inc., 152 F.3d 1342, 1365 (Fed. Cir. 1998) ("[A]n injunction is only proper to the extent it is 'to prevent the violation of any right secured by pat- ent.'") (quoting 35 U.S.C. § 283). As we noted in CellPro, a patentee must seek compensation for past infringement under 35 U.S.C. § 284; the purpose of an injunction is to prevent future violations of the patent. Id. at 1367.

Medtronic's overseas sales of the Maverick products cannot infringe any U.S. patent, and there is little risk that the infringing devices will be imported. Thus, the extraterritorial portion of the injunction appears to be premised solely on Medtronic's past infringement, not on the prevention of future infringement. This is contrary to the plain language of 35 U.S.C. § 283. Therefore, the court abused its discretion in imposing the extraterritorial restraints on Medtronic. On remand, the court is directed to vacate the extraterritorial portion of the injunction.

Posted by Patent Hawk at September 10, 2010 11:32 PM | Case Law

Comments

Man, you'd have to have a huge set of prairie oysters on ya' to claim a single anchor and argue in prosecution that your single anchor avoids the art and then argue in litigation that single anchor and double anchor are equivalents.

Initially they roped in the judge. His construction was:

“[t]he upper and lower surfaces of the implant each have one anchor having the characteristics recited in the last paragraph of [claim 1].”

Normally, this would mean one and any number greater than one, since you can't have two without having one. But in this case the judge should have said "one and only one anchor" because SSI claimed "a single anchor" in order to avoid art.

That Tennessee USDC judge was really out to lunch on this call, but for the most part he did pretty well on this complex case. Not as good as the judge in Depuy maybe, but a solid job. I'll bet most of these USDC judges really moan when these patent cases hit their courts.

I also mark this up as another well written Moore opinion, not that there was anything particularly difficult or contentious in this case.

Medtronic needs to learn how to play fair, maybe save them some money in the long run.

Posted by: Babel Boy at September 11, 2010 9:20 AM