This is part of a series of articles discussing recent orders of interest issued in patent cases by the United States District Court for the District of Massachusetts.
In Chr. Hansen HMO GmbH v. Glycosyn LLC, No. 1:22-cv-11090-NMG, Judge Gorton accepted and adopted a Report and Recommendation of Chief Magistrate Judge Cabell and denied Counterclaim-Defendant Abbott Laboratories' motion for summary judgment of failure to join a necessary party in Glycosyn's patent infringement counterclaims against Abbott as Hansen's commercial distributor.
Abbott contended that Glycosyn cannot bring suit by itself because, while Glycosyn owns the asserted counterclaim patents, those patents have been exclusively licensed to Friedland Campina DOMO B.V. ("RFC") in a prior contract ("Agreement"). The Agreement gave RFC the exclusive right to sue for infringement for 120 days after notice of suspected infringement and to grant sublicenses (subject to approval by Glycosyn), after which the right to sue for infringement reverted to Glycosyn.
Abbott argued that:
(1) Glycosyn lacks Article III standing because it licensed its commercial rights in the patents to RFC and therefore did not suffer an injury-in-fact itself, because the Agreement transferred Glycosyn's exclusionary rights to its patents to RFC;
(2) 35 U.S.C. § 281 provides a federal remedy for patent infringement only to the "patentee" and Glycosyn is not the "patentee" because it gave all substantial rights to RFC under the Agreement; and
(3) In the alternative, RFC is necessary and indispensable under Federal Rule of Civil Procedure 19 and failure to join it as a party merits dismissal.
Magistrate Judge Cabell's Report and Recommendation rejected all three grounds. District Court Judge Gorton agreed.
As to Abbott's first argument, the Magistrate Judge found that Glycosyn retained an exclusionary right in its patents under the terms of the Agreement because it retained a right to sue suspected infringers and a sole right to license the patents. Because Glycosyn retained these exclusionary rights to its patents, it had standing to assert a claim for patent infringement.
As to Abbott's second argument, the Magistrate Judge explained that Abbott was correct in arguing that an exclusive licensee may become the patentee under 35 U.S.C. § 281 but only if the original patentee licensed all of its substantial rights to the exclusive licensee. As above, the Court found that Glycosyn retained substantial rights to its patents under the terms of the Agreement because it retained rights to sue suspected infringers, to settle infringement actions by granting licenses to infringers, to consent to or deny sublicenses to third parties by RFC, and to exploit the patents for non-commercial purposes. Accordingly, the Court found that Glycosyn is a patentee and has statutory standing to sue for infringement under 35 U.S.C. § 281.
The District Court adopted the Magistrate Judge's recommendation and dismissed the first two arguments but noted that Abbott's third argument of necessary joinder under Rule 19 presented "a slightly more challenging question which this Court chooses to address further."
As to the Rule 19 issue, the District Court observed that Abbott's motion relied heavily on case law from the Federal Circuit to support the assertion that exclusive licensees are necessary parties to infringement suits. However, the Court explained, Federal Circuit precedent is not dispositive, as the Federal Circuit has said that a District Court should rely on the precedent of the Circuit in which it sits. However, the Court went on to explain that there is no binding precedent on the question in the First Circuit and recent district court opinions merely point to Federal Circuit case law.
Unsatisfied, the Court then turned to textual analysis of Rule 19, explaining that a party is "necessary" when in the party's absence complete relief cannot be accorded to the existing parties. Thus, a party with no right to relief cannot be "necessary." Agreeing with the Magistrate Judge, the Court explained that RFC cannot be a necessary party because it allowed the clock to run out on its right to sue under the Agreement and thus ceded to Glycosyn the right to bring suit and enjoy or suffer the full impact of those proceedings. The District Court found that RFC is therefore not entitled to any relief from this suit.
The District Court thus adopted the Magistrate Judge's Report and Recommendation denying the Motion to Dismiss.
Also in Chr. Hansen HMO GmbH v. Glycosyn LLC, No. 1:22-cv-11090-NMG, Chief Magistrate Judge Cabell granted a motion to exclude the testimony of two of Glycosyn's expert witnesses: Mr. Roy Weinstein, Glycosyn's damages expert, and Dr. Raphaelle O'Connor, a food scientist.
The Court observed that where, as here, the patented feature is not shown to be what drives demand for the patented product (i.e., the "entire market value rule"), the correct royalty base is the smallest salable patent-practicing unit or SSPPU. The appropriate SSPPU was not disputed in this case.
Dr. O'Connor opined that because 95% of record sales implicate the accused formulation, "95% of the sales must be attributable to the addition of [that formulation] (as opposed to any other difference(s) between the two products)." The Court found no evidence that accused formulation was the deciding factor in consumers' selection of product containing that formulation and thus found Dr. O'Connor's opinion to be unreliable.
Rather than begin with the SSPPU, Mr. Weinstein purported to isolate the benefits of the asserted patents by subtracting the value of the non-patented features based on a conversation with Dr. O'Connor, and the Court found reliance on that conversation to be improper. In addition, the Court faulted Dr. Weinstein's determination that 100% of the value attributed to the patented compound derives from the asserted patents based only on another expert's description of those patents as "foundational." In particular, the Court found that "Mr. Weinstein had no articulable basis to extrapolate from Dr. Prather's statement that 'foundational' equals one hundred percent." The Court thus found Mr. Weinstein's testimony unreliable.
Having found both Dr. O'Connor's and Mr. Weinstein's proposed expert testimony to be unreliable, the Court granted the motion to exclude.
In Cozy, Inc, v. The Dorel Juvenile Group, Inc., No. 21-10134, Magistrate Judge Dein entered a default judgement in favor of Defendant on the inequitable conduct counterclaims it filed in response to Plaintiff's allegations of patent infringement and also granted a motion for joinder of Plaintiff's principal for purposes of sanctions.
As to default judgement, during the course of litigation Plaintiff's former counsel withdrew and, despite Plaintiff finding successor counsel after the time period set by the Court (which the Court allowed), successor counsel did not enter an appearance. As an incorporated party cannot appear pro se, Defendant filed a Motion for Entry of Default Judgment.
While the Court noted that it could enter a default judgment based solely on the failure to obtain successor counsel, it continued to find that "[t]he record amply supports Dorel's allegations as contained in its Counterclaims." In particular, the Court incorporated the recent sanctions decision (which as of the time of this writing is under seal) by reference, where it found this case exceptional under 35 U.S.C. § 285 due to the actions of Plaintiff and its principal both in connection with prosecuting its patents before the Patent Office and with respect to misconduct during the litigation. With respect to joinder, the Court noted that sanctions may be levied against a non-party due to their involvement in conduct rendering the case exceptional, and found that Plaintiff's principal has been involved in such conduct and was given—and took—the opportunity to defend against the claims of sanctions. The Court thus joined the principal for the purposes of sanctions.
Accordingly, the Court granted Defendant's motion for entry of default judgment as to its Counterclaims.
In Overjet, Inc. v. VideaHealth, Inc., 24-cv-10446-ADB, Judge Burroughs denied Videa's partial motion to dismiss Overjet's copyright infringement, unfair competition, and patent infringement claims involving the parties' competing artificial intelligence software in the dental imaging field and Videa's corresponding advertising claims.
First, Overjet's copyright claim alleges that Videa copied the copyright-protected "colors, shades, and shapes" of its dental X-ray software tool. Videa moved to dismiss arguing that the common colors and shapes serve only a functional purpose and could not be sufficiently original to warrant copyright protection. In denying Videa's motion, the Court found that while some aspects of Overjet's annotated X-ray software are functional, Overjet's arrangement and combination of colors, shades, and shapes to depict aspects of the image suggest at least "some minimal degree of creativity" and, as pled, were not merely functional.
Second, Videa moved to dismiss Overjet's unfair competition claim under the Lanham Act, alleging that it was duplicative of Overjet's copyright and patent infringement claims. The Court rejected these arguments, finding that Overjet's unfair competition claim pled allegations regarding Overjet's false and misleading statements in advertisements, in addition to the copyright and patent infringement-related activities.
Third, Videa moved to dismiss Overjet's unfair competition claims under Mass. Gen. Laws ch. 93A §11 and common law arguing that they were based on the same allegations as Overjet's patent and copyright claims and thus were preempted. Again, the Court held that Overjet's claims incorporated allegations regarding Videa's advertising statements and, as such, were sufficient to avoid preemption.
Finally, Videa argued that Overjet's asserted patent, directed to "a novel system and method for providing segmentation and measurements of dental radiographic images," was an unpatentable abstract idea. In evaluating the first prong of the Supreme Court's Alice test, the Court relied upon the Federal Circuit's analysis from Enfish v. Microsoft for computer-related technology to assess "whether the focus of [Overjet's] claims is on the specific asserted improvement in computer capabilities . . . or, instead, on a process that qualifies as an 'abstract idea' for which computers are invoked merely as a tool." Finding that Overjet satisfied this first prong of Alice, the Court determined that the asserted patent plainly qualified as an improvement in computers as tools because it used a patient's anatomical oral structures as calibration objects without requiring the external calibration objects required in prior processing technologies. The Court rejected Videa's characterization of Overjet's claims, holding that Videa improperly oversimplified the claims by highlighting a few high-level phrases, instead of assessing the claims as a whole.
Accordingly, the Court denied Videa's motion to dismiss in its entirety.
In Ecosens, S.A. v. E-Scopics S.A.S, No. 24-cv-11373 Judge Burroughs granted in part and denied in part Defendant's motion to dismiss Plaintiff's patent infringement claims.
Plaintiff pled that Defendant imported and demonstrated its "Hepatoscope" device at a U.S. medical conference and announced it would begin taking orders, activities allegedly infringing Plaintiff's two asserted patents (the '592 and'497 Patents) . Plaintiff further pled allegations of indirect and willful infringement, citing post-conference marketing and third-party promotional materials.
First, the Court declined to adopt Defendant's position that importation for a trade show cannot constitute infringement absent intent to sell. Citing a split in District Court authority and the plain language of 35 U.S.C. § 271(a), the Court held that Plaintiff's allegations that Defendant imported and marketed the accused product with commercial intent—specifically soliciting orders at a major conference—were sufficient to plausibly plead infringement of the '592 Patent. However, the same conduct could not support a claim under the '497 Patent, which issued after the alleged acts of importation. Accordingly, the Court dismissed the direct infringement claim for the '497 Patent.
Second, the Court addressed whether Plaintiff adequately pled Defendant's knowledge of the '497 Patent. The Court rejected Plaintiff's argument that awareness of the related '592 Patent was sufficient to establish pre-suit knowledge of the '497 Patent. However, it found that the filing of the complaint could provide the necessary post-suit knowledge to support claims for indirect and willful infringement of the '497 Patent. The Court adopted the majority approach, finding that post-suit knowledge satisfies the pleading requirement.
Third, the Court found that Plaintiff plausibly alleged indirect infringement of both patents. The complaint included specific references to user manuals, promotional videos, and online materials instructing users how to operate the accused product in a way that would allegedly satisfy the patent claims. These allegations were sufficient to support both induced and contributory infringement claims for the '592 and '497 Patents.
Fourth, the Court declined to dismiss Plaintiff's willful infringement claims. The Court held that Plaintiff plausibly alleged knowledge and infringement for the '592 Patent beginning in November 2023, and for the '497 Patent beginning as of the filing of the complaint.
The Court thus denied the motion to dismiss in full as to the '592 Patent, and partially granted it as to the '497 Patent, dismissing only the direct infringement claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
