July 4, 2022

Volume XII, Number 185

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Acts Supporting Induced Infringement Allegations Must Occur During Damages Period

The US Court of Appeals for the Federal Circuit vacated a damages verdict because the acts supporting the induced infringement finding took place years before the statutory damages period and thus could not support a finding of specific intent to induce infringement. Roche Diagnostics Corporation v. Meso Scale Diagnostics, LLC, Case Nos. 21-1609; -1633 (Fed. Cir. Apr. 8, 2022) (Prost, Taranto, JJ.) (Newman, J., dissenting).

Meso Scale Diagnostics (Meso) was formed in 1995 pursuant to a joint venture agreement between IGEN and Meso Scale Technologies. As part of the agreement, IGEN granted Meso exclusive rights to certain patents. In 1998, Roche acquired Boehringer Mannheim GmbH, an entity that IGEN had previously licensed to develop, use, manufacture and sell ECL assays and instruments in a particular field. As a result of the acquisition, Roche acquired Boehringer’s license rights, including the field-of-use restrictions. In 2003, IGEN and Roche terminated the 1992 agreement and executed a new agreement granting Roche a non-exclusive license to IGEN’s ECL technology in the field of “human patient diagnostics.” As part of the transaction, IGEN transferred its ECL patents to a newly formed company, BioVeris. In 2007, Roche also acquired BioVeris, including the ECL patents. Roche believed the acquisition meant the elimination of the field-of-use restrictions (and hence no patent liability) and began selling its products without regard to those restrictions.

In 2017, Roche sued Meso seeking a declaratory judgment that it did not infringe Meso’s rights arising from the 1995 joint venture license agreement. Meso counterclaimed for infringement. At summary judgment, Roche argued that Meso’s 1995 license didn’t convey the rights Meso asserted. The district court denied Roche’s summary judgment motion, and the parties tried the case to a jury. The jury found that Meso held exclusive license rights to the asserted claims, that Roche directly infringed one patent and induced infringement of two others and that Roche’s infringement was willful. The district court denied Roche’s post-trial motions challenging the infringement verdict and damages award. The district court granted Roche’s motion for judgment as a matter of law (JMOL) on willfulness but denied Meso’s motion to enhance damages. The district court also rendered a non-infringement judgment on three additional patents on the ground that Meso waived compulsory counterclaims. Roche appealed the findings regarding the scope of Meso’s license rights, the induced infringement verdict and the damages award. Meso appealed the district court’s application of the compulsory counterclaim rule.

The Federal Circuit first addressed the scope of Meso’s rights under the 1995 license agreement, which was the only ground on which Roche challenged the direct infringement judgment. The Court found that there was clear testimony from the manager of the joint venture that the work involved in developing the patent that was found to be directly infringed was part of the joint venture. The Court dismissed Roche’s argument that Meso acted in a manner that demonstrated that it had accepted Roche’s rights to the asserted patents, finding that the argument was “made in passing only in a footnote,” which was insufficient to preserve the issue for review by the Court. As a result, the Court found that the patent was within the scope of the license agreement and therefore affirmed the district court’s denial of JMOL on direct infringement.

Turning to the issue of induced infringement, the Federal Circuit reversed the district court based on lack of intent and the absence of any act of inducement during the damages period. As to the issue of intent, the Court explained that an accused infringer is liable for inducement only if the accused infringer took affirmative acts to bring about infringement and had knowledge that the induced acts constituted patent infringement. In addition to actual knowledge, the “knowledge prong” could be met through “willful blindness,” which includes actions that avoid learning about the infringement. The Court concluded that the district court inappropriately applied a negligence standard by instructing the jury that the “specific intent required for induced infringement is that the alleged infringer knew or should have known his actions would induce actual infringement.” The Court noted the district court’s findings on willfulness and enhancement (that were inconsistent with inducement), finding that Roche could not have had an intent to infringe (or induce infringement of) Meso’s patent rights since Roche had a good-faith and reasonable interpretation of the contract provisions. The Court found that under the proper intent standard, “the jury’s verdict of inducement could not have survived JMOL because it contradicts the [district] court’s express findings regarding Roche’s subjective belief that it wasn’t infringing or inducing infringement.”

As to the timing issue, the Federal Circuit noted that the patent damages period begins six years before the complaint or counterclaim for infringement, which in this case would have been in 2011. In support of its inducement allegations, Meso alleged acts by Roche in 2007. The Court explained that since the acts that support induced infringement must occur during the damages period, “neither induced nor contributory infringement ‘can exist until there is a direct infringement.’” While Roche went on to sell products during the damages period without labels restricting their use, the Court concluded that these acts did not support inducement because the products had both in-field (non-infringing) and out-of-field (infringing) applications, and because “Meso didn’t provide evidence of causation between the allegedly inducing acts (before the damages period) and the direct infringement (within the damages period).” Based on these findings, the Court reversed the induced-infringement judgment and remanded for a new trial on damages. The Court cautioned the district court on remand to proceed “with careful attention to the apportionment requirement set forth in our caselaw” and to provide a critical analysis of the damages’ testimony presented at trial.

As to Meso’s cross-appeal, Roche’s complaint seeking declaratory judgment of non-infringement included three patents for which Meso did not counterclaim infringement. Meso objected to the district court’s application of the compulsory counterclaim rule to find that those three patents were not infringed. The Federal Circuit explained that the compulsory counterclaim rule “bars future claims but does not authorize rendering adverse judgment on such claims in the same action,” and vacated the district court’s non-infringement judgment based on the compulsory counterclaim rule.

Judge Newman dissented. In her view, “Roche cannot infringe patents that it owns.” She also cited the “powerful, contemporaneous evidence that [Meso] did not believe that any of the patents here at issue were among ‘all’ the patents to which [Meso] held an exclusive license.” Judge Newman disagreed with the majority’s treatment of Roche’s argument that Meso had accepted Roche’s rights to the asserted patents. She stated that while the majority dismissed that argument for being raised in a footnote, “[t]he judicial obligation is to seek truth and justice, even from footnotes.”

© 2022 McDermott Will & EmeryNational Law Review, Volume XII, Number 104
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About this Author

Associate

Katherine (Kathy) Pappas focuses her practice on intellectual property matters, particularly in patent litigation within the life sciences sector. Kathy handles matters involving a large variety of technologies, ranging from mechanical inventions (e.g., microfluidic devices; injector pens) to pharmaceutical litigation under the Hatch-Waxman Act.

Prior to her legal career, Kathy worked in psychology and neuroscience research and treatment, from which she brings a unique skillset.

949-989-6361
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