In CoreBrace v. Star Seismic, 566 F.3d 1069 (Fed. Cir. 2009), CoreBrace owned U.S. Patent 7,188,452 (“452”) which claims a brace for use in the fabrication of earthquake-resistant steel-framed buildings. The inventor of the 452 patent and Star entered into a “Non-exclusive License Agreement” (“license”) through which Star received a license under the 452 patent. The inventor later transferred his interest to CoreBrace. The license to Star grants it a non-exclusive right to “make, use, and sell” licensed products. Star did not explicitly have the right to have the licensed product made by a third party. Further, the license explicitly stated that Star may not “assign, sublicense, or otherwise transfer” its rights to any party other than an affiliated, parent or subsidiary company. The license also reserved to CoreBrace “all rights not expressly granted to” Star. The license further provided that if a breach occurred, the license could be terminated after written notice of the breach and a thirty-day opportunity to cure.
Star used third party contractors to manufacture products under the license for its own use. On January 4, 2008, CoreBrace sent Star a letter terminating the license without any prior notice. That same day, CoreBrace also filed suit for breach of the license due to Star’s use of third party contractors and for patent infringement based on Star’s use of patented products under a terminated license. The U.S. District Court for the District of Utah granted Star’s motion to dismiss under Fed. R. Civ. P. 12(b)(6), holding that Star did not breach the license by having third party contractors make the licensed products and that CoreBrace did not properly terminate the license, making patent infringement impossible.
The District Court asserted that the right to “make” an article includes the right to engage others to do work connected with its production. Carey v. United States, 326 F.2d 975 (Ct. Cl. 1964). Further, “have made” rights, or rights to have a licensed product made by a third party contractor, are granted in a license unless expressly prohibited. Advanced Micro Devices v. Intel Corp., 885 P.2d 994 (Cal. 1994). The District Court distinguished this case from situations regarding the licensee’s rights to make a product and sell it under a third party’s name. Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d 821 (Fed. Cir. 1991). Thus, the Court stated that based upon the license, Star had the right to have a third party manufacture the licensed product for it. The District Court also found that CoreBrace failed to follow the license’s termination procedures, and rejected CoreBrace’s arguments that the breach was incurable. The District Court noted that the breach did not frustrate the purpose of the license. Thus, CoreBrace should have followed the termination procedures under the license. Because the license was not terminated, the District Court held Star could not have infringed the patent under which it was licensed. CoreBrace appealed the District Court’s dismissal.
The Federal Circuit first looked at the issue of breach of license. CoreBrace argued that “have made” rights are not inherent in the right to make, use and sell in a license. Further, CoreBrace asserted that the District Court improperly relied on Carey and Advanced Micro and improperly distinguished the Intel case. Finally, CoreBrace contends that the reservation of rights clause in the license precludes an interpretation that the license includes “have made” rights.
As contract law is a matter of state law as opposed to Federal Law. The Federal Circuit looked to the Utah law to determine whether the “have made” right is included in a license to make or use an invention. With regards to the “have made” rights, the Federal Circuit noted that the Utah Supreme Court had not yet addressed whether the scope of the right to “make, use, and sell” a product inherently include the right to have it made by a third party. The Federal Circuit looked to decisions affirming inherency from its predecessor court and the California Supreme Court to conclude that the Utah Supreme Court would likely rule the same way. Specifically, the Federal Circuit looked to Carey and Advanced Micro, which were also discussed by the District Court. The Court of Claims held in Carey that a license to “produce, use, and sell” a product inherently included the right to have it made by a third party. The Court of Claims stated that the license “is not restricted to production by the licensee personally…” but “permits him to employ others to assist him in the production… of the invention.” Carey, 326 F.2d at 979. Further, the California Supreme Court held in Advanced Micro that, unless expressly precluded, have-made rights were included in the contractual right to make and sell a licensed product. Advanced Micro, 885 P.2d 994 (Cal. 1994).
CoreBrace argued that Carey was distinguishable from its case, because the license in Carey was exclusive and included a right to sublicense. The Federal Circuit rejected CoreBrace’s argument, stating that the Court in Carey had based it decision on the right to “produce, use, and sell,” not on exclusivity or the right to sublicense. Although the licenses were not identical, the logic used by the Carey Court was dependent upon rights (to produce, use and sell) included in both the Carey license and the instant license. The Federal Circuit held that “have made” rights are included in the right to make, sell and use the product, regardless of whether the license is exclusive or sublicenses are allowed.
To bolster their argument, the Federal Circuit also pointed to Cyrix Corp., which held that expressly granted “have made” rights were not a sublicense. Cyrix Corp. v. Intel Corp., 77 F.3d 1381, 1387-88 (Fed. Cir. 1996). Thus, a third party contractor used by a licensee could not make or use the licensed product for anyone but the licensee or sell it to third parties.
CoreBrace also argued that the District Court improperly distinguished Intel, which CoreBrace interpreted as holding that “have made” rights were restricted by the reservation of rights clause in the license. Intel Corp. v. U.S. Int’l Trade Comm’n, 946 F.2d 821 (Fed. Cir. 1991). The Federal Circuit distinguished Intel because, in Intel, both parties agreed that Sanyo’s license did not provide “have made” rights, and only argued as to the source of the denial of that right. Further, the case was distinguished due to its subject matter (foundry rights, or rights for the licensee to manufacture the licensed product for a third party to sell under the third party’s name). The administrative law judge of the International Trade Commission held that the denial of “have made” rights was due to the reservation of rights clause. The Federal Circuit asserted that their holding of denial of “have made” rights was due to the entire contract, including the limitation to make, use and sell only “Sanyo” products in the contract. Due to their holding based upon a unique clause in the contract and the difference is subject matter, the Federal Circuit refused to find Intel persuasive or controlling in this case.
CoreBrace also claimed that the reservation of rights clause in the license precludes an interpretation that the license includes “have made” rights. The Federal Circuit rejected this argument based on its conclusion that “have made” rights were inherent in a license providing rights to “make, use, and sell” a product. The Federal Circuit held that there was no express language or intent shown in the contract to exclude the “have made” rights. Further, the Court found other provisions of the license that would reinforce the inclusion of “have made” rights. Specifically, the Federal Circuit pointed to a clause providing that Star would own any improvements to the technology “by a third party whose services have been contracted by” Star. Further, the license requires Star to allow an “audit of its books and records relating to manufacturing… [And] supply contracts.” Thus, the Court held that the parties must have contemplated that third parties might manufacture and supply the licensed products to Star.
Given its conclusion that Star did not breach the license by contracting with third parties for manufacture, the Federal Circuit held that the issue of CoreBrace failing to adequately terminate the license was moot. CoreBrace was not entitled to terminate the license, and thus Star could not have infringed CoreBrace’s patent under which it was licensed.
The Federal Circuit affirmed the District Court of Utah’s ruling that the right to “make, use and sell” includes inherently the right to have licensed products made by a third party, unless expressly precluded by the license.
Significance to Patent Licensors
CoreBrace confirms that licensees of patented products are allowed to use third parties and OEM contracts to build the patented product. Such a ruling is likely within the expectation of the parties given the prevalence of outsourcing manufacturing work. However, for patent owners who are concerned about such work, this ruling confirms what has always been a best practice for licensing: make clear any exceptions. Therefore, patent licensors who are concerned about particular third parties being allowed to use a patented product (even when used on behalf of a licensee) need to clarify that the power to make or use does not extend to specified parties.
Federal Circuit finds Lack of a Confidentiality Obligation When Distributing Documents is Insufficient to Make Documents Prior Art “Printed Publications.”
In Cordis Corp. v. Boston Scientific Corp. and Scimed Life Syss., Inc., 561 F3d 1319; 90 USPQ2d 1401 (Fed. Cir. 2009), the Appellant and Appellee both appealed from a final judgment rendering them liable for infringement of the other’s patent. The judgment was based on two separate jury verdicts of infringement: (1) infringement by Boston Scientific of claims 1 and 23 of U.S. Patent No. 4,739,762 (“the 762 patent”) and claim 2 of U.S. Patent No. 5,895,406 (“the 406 patent”), and (2) infringement by Cordis of claim 36 of U.S. Patent No. 5,922,021 (“the 021 patent”). The judgment also determined that those claims were not invalid. The Federal Circuit affirmed the lower court’s rulings in all respects except one.
Cordis and Boston Scientific both own patents relating to intravascular stents, which are cylindrical lattice-like scaffolds that are inserted into a blood vessel and expanded in order to hold the vessel open. Cordis owns the 762 and 406 patents, while Boston Scientific owns the 021 patent. The jury returned a verdict that Cordis’ stents did not literally infringe claim 36 of the 021 patent, but that certain stents infringed under the doctrine of equivalents by having an equivalent to the “corners” limitation of claim 36. The jury further found that Boston Scientific did literally infringe claim 23 of the 762 patent, induced literal infringement of claim 1 of the 762 patent, and literally infringed claim 2 of the 406 patent. Both Cordis and Boston Scientific appealed to the Federal Circuit, which affirmed the verdicts of infringement.
The jury found Cordis did not literally infringe claim 36. Further, there was no instruction of whether Cordis’s stents infringed claim 36 under the doctrine of equivalents. Rather, the jury determined whether Cordis’s stents infringed the “corners” limitation of claim 36. The Federal Circuit noted that the judgment must have rested on an agreement between the parties that Cordis’s stent literally infringed all other limitations of claim 36, and that the question of infringement turned solely on the “corners” limitation.
Same Wherein Clause in Different Claims Did Not Have the Same Meaning
The Federal Circuit first noted that the District Court properly construed the “wherein” clause of claim 36. The “wherein” clause of claim 36 describes how the struts within one expansion column or ring of a stent are connected to the struts of another column or ring. The Federal Circuit held that the District Court properly construed this clause to mean “the first expansion strut in the first column does not share a longitudinal axis with the second expansion strut in the second column,” and properly did not exclude “180 degrees out of phase” stent designs. Cordis asserted that the 180 degrees out of phase designs should have been excluded, meaning that Cordis’ stent would no longer be infringing. Specifically, Cordis argued that the wherein clause appears in both claim 1 and claim 23, that the clauses must have the same meaning, and that the prosecution history shows that the wherein clause excludes 180-degree out of phase designs. Since claim 36 depended from claim 23, such a finding would preclude a finding of infringement.
However, the Federal Circuit noted that claims 1 and 23 use different numbering systems for their expansion struts and expansion columns, making the meaning of the wherein clause distinct for each claim. Thus, the language of claim 1 could exclude 180-degree out of phase designs, while the language of claim 23 could include them. Further, the Federal Circuit stated that the prosecution history did not preclude such an interpretation. The Examiner allowed claims 1 and 23 after the wherein clause was included. However, the Examiner made no reference to 180 degree out of phase designs, and only utilized the numbering system of claim 1 when allowing both claims. The Federal Circuit refused to assume, without some further basis, that the Examiner’s utilization of claim 1’s numbering system when allowing both claims was based on an assumed identity of numbering systems.
The Federal Circuit also refuted Cordis’ attempts to show disclaimer by lack of a figure in the patent that uses 180 degree out of phase design and unclear language in the provisional application, asserting that unclear prosecution history may not be used to limit claims; rather, a disclaimer must be clear and unmistakable. Thus, there was no disclaimer as to the interpretation given claim 23 forcing an interpretation consistent with claim 1.
Application of the Doctrine of Equivalents did not Vitiate Claim Term
On the issue of doctrine of equivalents, the Federal Circuit first affirmed that the jury’s determination of infringement based on doctrine of equivalents analysis was supported by substantial evidence. The Court held that sufficient expert testimony existed that Cordis’s stent met the “corners” limitation of claim 36 under the function-way-result test. The Federal Circuit found that the function-way-result analysis under Graver Tank & Manufacturing Co. v. Linde Air Products Co., 339 U.S. 605, 608 (1950), “is still useful under Warner-Jenkinson Co. v. Hilton-Davis Chemical Co., 520 U.S. 17, 39-40 (1997), particularly for mechanical inventions.” Further, Boston Scientific’s expert testified that the “corners” of claim 36 and the circular arcs or rounded corners of Cordis’ stent “both function as actual and potential reference points for joining adjacent stent rings, fulfill this function through their similar locations, and can or do result in offset connections between stent rings.” Thus, the finding was sufficiently supported by evidence and satisfied the function-way-results test for finding equivalency.
Cordis argues that the doctrine of equivalents should not be applied because the jury’s finding of infringement vitiated the “corners” limitation. Cordis noted that such an equivalency meant that the “circular arcs of the BX Velocity stent cannot ‘form an angle’ as required by the district court’s claim construction.” The Federal Circuit affirmed the District Court’s holding that the circular arcs of Cordis’ stent were not antithetical to the “corners” limitation of claim 36, and thus could be held as equivalent. Specifically, the Federal Circuit, without supplying additional analysis, found that the “corners” limitation did not vitiate the angle limitation “because it does not ‘render[ ] the pertinent limitation meaningless,’ Freedman Seating Co. v. Am. Seating Co., 420 F.3d 1350, 1359 (Fed. Cir. 2005), or ‘effectively eliminate that element in its entirety,’ Warner-Jenkinson, 520U.S. at 29.” Thus, the Federal Circuit affirmed that claim 36 was found infringed under the doctrine of equivalents.
‘021 patent is valid and supported by provisional application
Cordis asserted that the ‘021 patent was invalid in light of a number of prior art patents. On review, the Federal Circuit quoted Johns Hopkins Univ. v. Datascope Corp., 543 F.3d 1342, 1345 (Fed. Cir. 2008) as to the standard of review for obviousness determinations: “We review ‘[the] jury’s conclusions on obviousness, a question of law, without deference, and the underlying findings of fact . . . for substantial evidence.’” (quoting LNP Eng’g Plastics, Inc. v. Miller Waste Mills, Inc., 275 F.3d 1347, 1353 (Fed. Cir. 2001)).
The Federal Circuit noted that the District Court cited uncontradicted testimony from Boston Scientific’s expert that the prior art patents cited by Cordis would be unlikely to be combined to create the connectors of claim 36 of the 021 patent. This uncontradicted testimony further established that these patents taught away from the bottom-to-top connectors of claim 36 by describing them as potentially harmful. Thus, the Federal Court asserted that the District Court properly concluded that substantial evidence existed to show these prior art patents did not render claim 36 obvious.
Cordis further argued that claim 36 of the ‘021 patent was not fully supported by the provisional application to which the ‘021 patent claimed priority. The Federal Circuit noted that the question of compliance with the written description requirement under 35 U.S.C. § 112 is a question of fact, and thus the review of the jury’s finding is whether the jury’s finding is supported by substantial evidence. PIN/NIP, Inc. v. Platte Chem. Co., 304 F.3d 1235, 1243 (Fed. Cir. 2002). The Federal Circuit affirmed the jury’s findings that the written description requirement was met, noting the District Court’s cite to uncontradicted testimony from Boston Scientific’s expert that the provisional application provided a sufficient written description of the limitations of claim 36.
Documents were Not Printed Publications Since Not Published
The Federal Circuit affirmed the District Court’s grant of summary judgment that the claims of the 762 patent were not invalidated by the 1980 and 1983 monographs of Dr. Palmaz, because the monographs were not prior art printed publications under 35 U.S.C. § 102(b). Dr. Palmaz created the monographs and distributed them to his colleagues. Under agreements that did not require confidentiality (one expressly disclaiming liability for confidentiality), Dr. Palmaz also distributed the monographs to two companies while attempting to commercialize the stent technology. Boston Scientific urged that, even if the distribution to colleagues did not make the monographs prior art printed publications, distributions to companies with no legal obligation of confidentiality certain would confer such status on the monographs.
Citing to In re Wyer, 655 F.2d 221, 226 (CCPA 1981) and Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560, 1569 (Fed. Cir. 1988), the Federal Circuit held that a document is publicly accessible for purposes of 35 U.S.C. § 102(b) if it has been made available to the extent that persons interested and ordinarily skilled in the subject matter could locate it and recognize and comprehend therefrom the essentials of the claimed invention. Also, while the widespread distribution of a document may be sufficient to make the document a publication for purposes of 35 U.S.C. §102(b), the Federal Circuit held that a limited distribution does not necessarily do so. Citing to In re Klopfenstein, 380 F.3d 1345, 1347 (Fed. Cir. 2004), the Federal Circuit held that courts have been reluctant to assert that dissemination of work to colleagues is public use, because professional and behavioral norms entitle the author to a reasonable expectation that the information will not be copied or further distributed. Moreover, there is no requirement that there be a confidentiality agreement to prevent distribution, although such an agreement is often in place. Thus, Dr. Palmaz’s distribution of the monographs to his colleagues with the expectation of limited distribution would be protected from the status of public use.
The Federal Circuit found the issue of distribution to interested companies to be murkier, given that confidentiality agreements were not in place and one company expressly disclaimed an obligation to keep the material confidential. However, because evidence existed to support a conclusion that an expectation of confidentiality existed between Dr. Palmaz and the two companies, the Federal Circuit held that the monographs were not prior art “printed publications” within the meaning of 35 U.S.C. § 102(b). Specifically, no evidence existed that the documents became available to the public as a result of disclosure by the companies. The Federal Circuit asserted that the lack of a legal obligation of confidentiality regarding documents did not make place them in the domain of “public use.”
Functional language can operate as a claim limitation to distinguish prior art.
Boston Scientific argued that the 762 patent anticipates claim 2 of the 406 patent. The parties agree that the 762 patent anticipates claim 2, except for the functional language in claim 1 of the 406 patent (upon which claim 2 depends). The functional language recites “such that the links and bands define an expandable structure having axial flexibility in an unexpanded configuration.” Boston Scientific asserted that the “such that” claim language is not a claim limitation that can distinguish the 406 patent over the 762 patent. The Federal Circuit disagreed, citing Microprocessor Enhancement Corp. v. Tex. Instruments Inc., 520 F.3d 1267, 1375, and held that sufficient evidence was presented to the jury to find that the 762 patent did not anticipate claim 2 of the 406 patent.
The Federal Circuit affirmed all of the District Court’s judgments regarding infringement, reversing only a dismissal of claims without prejudice. The Federal Circuit held, among other findings, that the use of the doctrine of equivalents was appropriate as long as it did not render the pertinent claim limitation meaningless, that the mere lack of a legal obligation of confidentiality, without more, when distributing documents is insufficient to place in the domain of “public use,” and functional language can operate as a claim limitation to distinguish prior art.
Significance to Patent Owners and Applicants
While it is always a best practice to ensure that an application is filed prior to any distribution of a product description, Cordis Corp. does confirm that certain distributions may be acceptable. While the descriptions in Cordis Corp. related to commercialization attempts with implied confidentiality, it is likely that this holding could be extended to other situations, such as distributions to potential publishers for articles or as proposals for conference presentations. Therefore, Cordis Corp. is a reminder that, while filing of an application prior to any distribution of a monograph is always preferable, such distributions will not always be invalidating events for purposes of 35 U.S.C. §102.