Creative Compounds v. Starmark Laboratories (CAFC 2010-1445) precedential; Judges Radar, Clevenger, and Linn (author)

Both the '373 and '273 Patents relate to innovations in dietary supplements and food products. These patents relate to creatine formulations that increase the bioavailability of creatine. Creatine is an amino acid derivative naturally present in muscle tissue. '373 patent col. 1, ll. 15-17. It serves as a central component of the metabolic system and provides energy for work and exercise performance. Id. col. 1, ll. 15-20. It assists in producing adenosine triphosphate ("ATP") during short bursts of high intensity exercise. The depletion of creatine has been associated with the onset of fatigue. Id. col. 1, ll. 20- 29.

Creatine is most commonly used by body builders looking for a steroid-free way of improving athletic performance. Id. col. 2, ll. 4-11. The prior art teaches oral creatine supplementation using creatine monohydrate. Id. col. 2, ll. 15-20. Creatine monohydrate is typically sold as a nutritional supplement in powder form. Id. Drawbacks of using creatine monohydrate include its low solubility in water and low bioavailability. Id. col. 2, ll. 40-65.

The appeals court gives no deference to district courts on issues of law, but do yield the benefit of a doubt to their brethren in black.

"We review a district court's grant of summary judgment de novo." Ethicon Endo-Surgery, Inc. v. U.S. Surgical Corp., 149 F.3d 1309, 1315 (Fed. Cir. 1998).

"This court reviews a grant or denial of a motion to dismiss for lack of subject matter jurisdiction de novo." Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1361 (Fed. Cir. 2009). "The usual standard for reviewing a district court's findings of jurisdictional facts is the clearly erroneous standard." Lawrence v. Dunbar, 919 F.2d 1525, 1530 (11th Cir. 1990).

Starmark's '373 claims a genus of a creatine salt. Creative's '273 is narrower, covering only dicreatine malate compounds. Yet Starmark's '373 patent remains valid, while Creative's '273 is effectively killed.

Invalidity (of '373)

Creative tried to lower the bar to invalidity from the clear-and-convincing standard, arguing common claimed subject matter. Like a child beaming from parental approval, the CAFC panel proudly displayed its recent seal of approval from the Supreme Court for the clear-and-convincing burden of proof.

This court has long held that because "[u]nder 35 U.S.C. § 282, each claim of a patent shall be presumed valid[,] an accused infringer must prove invalidity by clear and convincing evidence." Tokai Corp. v. Easton Enters., 632 F.3d 1358, 1367 (Fed. Cir. 2011) (citing Metabolite Labs., Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354, 1365 (Fed. Cir. 2004)); see also Microsoft Corp. v. i4i Ltd. P'Ship, 564 U.S. ___, slip op. at 19 (June 9, 2011) ("For nearly 30 years, the Federal Circuit has interpreted § 282 as we do today.").

"The correct standard of proof of priority of invention, as between co-pending interfering patents, is the preponderance of the evidence, the junior patentee bearing the burden of pleading and proving priority." Id. at 1266. The accompanying footnote explains that this holding "relates solely to that of priority of invention of common claimed subject matter in issued patents; this does not affect the standard of proof as to any other question that may be in dispute." Id. at 1266 n.4 (emphases added).

But "Creative did not file an action under § 291," which covers interference, so its argument for a preponderance-of-evidence validity standard was legally senseless in more than one way.

Creative was just as creative, and clueless, in its invalidity attack. One prong was its '273 patent as prior art to Starmark's '373.

Creative contends that the '373 Patent is invalid under § 102(g)(2) because of Creative's prior invention. Creative alleges that Cornelius, named inventor on the '273 Patent, conceived the subject matter of the '373 Patent prior to Boldt, named inventor of the '373 Patent. For support, Creative points to an email order for "dicreatine malate" placed with Creative's Chinese supplier as evidence of prior conception. This email, which also speculates that the method of making dicreatine malate should be the same as the method of making creatine citrate, predates the filing date of the provisional application that led to the '373 Patent. Creative further alleges that Cornelius was diligent through his constructive reduction to practice, when he and co-inventor Haynes filed the application leading to the '273 Patent.

To establish prior invention, Creative was required to prove prior conception. "Conception is the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention, as it is therefore to be applied in practice." Singh v. Brake, 317 F.3d 1334, 1340 (Fed. Cir. 2003). An idea is sufficiently definite for conception "when the inventor has a specific, settled idea, a particular solution to the problem at hand, not just a general goal or research plan he hopes to pursue." Burroughs Wellcome Co. v. Barr Labs., 40 F.3d 1223, 1228 (Fed. Cir. 1994). "Conception requires (1) the idea of the structure of the chemical compound, and (2) possession of an operative method of making it." Oka v. Youssefyeh, 849 F.2d 581, 583 (Fed. Cir. 1988). "When, as is often the case, a method of making a compound with conventional techniques is a matter of routine knowledge among those skilled in the art, a compound has been deemed to have been conceived when it was described, and the question of whether the conceiver was in possession of a method of making it is simply not raised." Id.

Here, Creative relied on the 2001 email order for "dicreatine malate" and simply concluded that this sufficiently demonstrated conception of that compound. In this email, Cornelius speculates that the method of making dicreatine malate "should" be like that of making creatine citrate. The district court concluded, and this court agrees, that this email is insufficient to establish prior conception of the subject matter of the '373 Patent. Creative failed to submit testimony explaining the significance of this email and whether this reference would constitute conception of subject matter within the scope of even a single claim in the '373 Patent. Moreover, the email fails to reveal knowledge of a process for making dicreatine malate and, to the contrary, merely speculates that the process "should" be like that for creatine citrate. The email far from establishes that Cornelius actually possessed an operative method of making dicreatine malate. In the absence of expert testimony, Creative has failed to show how this email raises a genuine issue of material fact that a method of making dicreatine malate would have been a matter of routine knowledge among those skilled in the art. Creative's evidentiary shortcomings are not overcome by its reliance on attorney argument. "It is well established that conclusory statements of counsel or a witness that a patent is invalid do not raise a genuine issue of material fact." Biotec Biologische Naturverpackungen GmBH v. Biocorp, Inc., 249 F.3d 1341, 1353 (Fed. Cir. 2001).

Invalidity prong two was derivation.

Creative next alleges that the '373 Patent is invalid under § 102(f) because Starmark derived the invention from Cornelius. In order to establish derivation, Creative was required to "prove both prior conception of the invention by another and communication of that conception to the patentee." Eaton Corp. v. Rockwell Int'l Corp., 323 F.3d 1332, 1334 (Fed. Cir. 2003). As stated above, Creative failed to raise a genuine issue of material fact concerning Cornelius's prior conception. Furthermore, as the district court found, Creative failed to present any record evidence supporting any communication or that the alleged communicator actually knew of the claimed subject matter. Creative's only evidence on this issue was the uncorroborated deposition testimony of Cornelius himself. "[T]he case law is unequivocal that an inventor's testimony respecting the facts surrounding a claim of derivation or priority of invention cannot, standing alone, rise to the level of clear and convincing proof." Price v. Symsek, 988 F.2d 1187, 1194 (Fed. Cir. 1993). "Such evidence is insufficient as a matter of law to establish invalidity of the patent." Finnigan Corp. v. Int'l Trade Comm'n, 180 F.3d 1354, 1370 (Fed. Cir. 1990). Thus, in the absence of any other factual bases for Creative's § 102(f) derivation defense, there were no genuine issues of material fact and Starmark was entitled to judgment as a matter of law.

The third and final prong was another prior art reference. Here's where irony, bias, and admission that judges need to be spoon fed, comes in. Under the Obzilla standard, the prior art reference Creative employed, 2004/0077902, could render the broad '373 claims invalid, but the litigation cards had to be played right by the party in favor. That didn't happen here, as the party out of favor played their cards pitiably.

Creative also alleges that the '373 Patent is invalid under § 102(e) in light of U.S. Patent App. Pub. No. 2004/0077902, a reference previously considered by the PTO and overcome by the applicant. Again, Creative failed to provide any testimony from one skilled in the art identifying each claim element and explaining how each claim element is disclosed in the prior art reference. See Schumer, 308 F.3d at 1315. "It is not the trial judge's burden to search through lengthy technologic documents for possible evidence." Id. at 1353. Conclusory statements simply mentioning the alleged prior art patent, relying on the same prior art considered by the PTO, and alleging invalidity fail to raise a genuine issue of material fact. See id. at 1354 (finding that merely mentioning an allegedly invalidating, yet otherwise unexplained, prior art reference is insufficient to survive a summary judgment of no invalidity); see also Tokai, 632 F.3d at 1367 ("[A]lthough the standard of proof does not depart from that of clear and convincing evidence, a party challenging validity shoulders an enhanced burden if the invalidity argument relies on the same prior art considered during examination by the [PTO]").

Creative failed to raise a single genuine issue of material fact as to even one of its three asserted invalidity theories. Thus, the district court properly granted Starmark's motion for summary judgment finding the '373 Patent not invalid. Optium Corp. v. Emcore Corp., 603 F.3d 1313, 1320 (Fed. Cir. 2010) ("When a party has failed to introduce evidence sufficient to establish the existence of an essential element of that party's case in accordance with the applicable standard of proof, summary judgment is properly granted against that party.").

Infringement (of '373 by Creative)

The fix was in, albeit handsomely helped by Creative's legal ineptitude, which is how the fix got fixed. Here's a bit of twisted case law about presumption of process infringement for imported products.

"The patentee bears the burden of proving infringement by a preponderance of the evidence." SRI Int'l v. Matsushita Elec. Corp., 775 F.2d 1107, 1123 (Fed. Cir. 1985). If the patentee fails to meet that burden, the patentee loses regardless of whether the accused comes forward with any evidence to the contrary. See Licensing Corp. v. Videotek, Inc., 545 F.3d 1316, 1327 (Fed. Cir. 2008). While the burden typically rests with the patentee to prove infringement, the law makes exceptions. In actions alleging infringement of a process claim under § 271(g), there is a rebuttable presumption that the imported product was made from the patented process if the court finds: "(1) that a substantial likelihood exists that the product was made by the patented process, and (2) that the plaintiff has made a reasonable effort to determine the process actually used in the production of the product and was unable to so determine." 35 U.S.C. § 295. If both conditions are met, "the product shall be presumed to have been so made, and the burden of establishing that the product was not made by the process shall be on the party asserting that it was not so made." Id. Because the accused infringer is in a far better position to determine the actual manufacturing process than the patentee, fairness dictates that the accused, likely the only party able to obtain this information, reveal this process or face the presumption of infringement. Jeffrey I.D. Lewis & Art C. Cody, Unscrambling the Egg: Pre-Suit Infringement Investigations of Process and Method Patents, 84 J. Pat. & Trademark Off. Soc'y 5, 22-23 (2002).

Creative concedes infringement of the compound claims and only contests infringement of the method claims, claims 7-10. Creative argues that Dr. Perlmutter's report was entirely devoid of analysis or testing and discusses no evidence of how Creative's product infringes the method claims. Creative asserts that "[i]t is nonsensical for Starmark to say that the 2CM product has every element of the method claims." Appellant Br. 28. Creative also takes a "head-in-the-sand" approach to avoid infringement liability, arguing that "Creative merely imports the 2CM product that is manufactured by another party located in China. Creative does not manufacture 2CM or even have any information on the precise manufacturing process used by its supplier." Id. Creative faults the district court for impermissibly shifting the burden to Creative to prove noninfringement. Summary Judgment Order at 32 (stating that Creative "has offered no argument as to why or how the process employed to create the product does not infringe the '373 Patent.").

Because Creative "offered no argument as to why or how the process employed to create the product does not infringe the '373 Patent," id., the district court properly granted Starmark's motion for summary judgment of infringement.

Subject Matter Jurisdiction (over the '273 Patent)

The district court denied Creative's motion to dismiss Starmark's declaratory judgment counterclaim of invalidity of the '273 Patent for lack of subject matter jurisdiction.

The district court did so because Creative crudely spewed bile about Starmark's '373 publicly, to taint Starmark in customers' view. This ended up biasing the district court against Creative. Ironies never cease.

Unscrupulous jingoist jockeying is a standard stratagem for competitive companies of every size, and not beyond employment by patent litigators. Capitalism is a formula for deceit and exploitation in every possible way, as is the American advocacy system of justice, where factual determinations are regularly rode over roughshod by legalities of convenience and biased interpretation. While not a clear example by the record, this case is illustrative, particularly '373 validity in light of KSR.

Because Creative had never accused Starmark of infringing the '273 Patent, it argues that there is no case or controversy between Creative and Starmark concerning the '273 Patent.

All Creative did was send letters to purchasers of Starmark's product, alleging that they were bulking up on patent infringement pills.

Subject matter jurisdiction in declaratory judgment actions exists when "the facts alleged, under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Id. at 127. A court's decision must "admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Id. "The purpose of the Declaratory Judgment Act . . . in patent cases is to provide the allegedly infringing party relief from uncertainty and delay regarding its legal rights." Micron Tech. Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 902 (Fed. Cir. 2008) (citations omitted).

The concept of adverse legal interests requires that there be a dispute as to a legal right, such as an underlying legal cause of action that the declaratory defendant could have brought or threatened to bring, if not for the fact that the declaratory plaintiff had preempted it. Arris Grp., Inc. v. British Telecomm. PLC, 639 F.3d 1368, 1374- 75 (Fed. Cir. 2011); Microchip Tech. Inc. v. Chamberlain Group, Inc., 441 F.3d 936, 943 (Fed. Cir. 2006). "Without an underlying legal cause of action, any adverse economic interest that the declaratory plaintiff may have against the declaratory defendant is not a legally cognizable interest sufficient to confer declaratory judgment jurisdiction." Microchip, 441 F.3d at 943.

Starmark contends that Creative could have brought two causes of action: (1) an infringement action alleging infringement of the '273 Patent, or (2) an action under § 291 alleging an interference between the '373 and '273 Patents.

But Creative did neither. So all that is revealed is the legal muddle-headedness of the district court judge, and his bias exposed.

In the absence of a substantial controversy between the parties concerning an adverse legal interest, the district court lacked declaratory judgment jurisdiction of the '273 Patent. Accordingly, the district court's determination of jurisdiction is reversed, and its grant of summary judgment of invalidity of the '273 Patent is vacated.

While vacated, that summary judgment of '273 invalidity remains writing on the wall, if not force of law. Creative got crushed.