Appeals Court Rules DuPont Didn't Engage in Fraud

Appeals Court Rules DuPont Didn't Engage in Fraud The Associated Press Monsanto

When E.I. du Pont de Nemours & Co. reached a $1.75 billion settlement on claims that it infringed a Monsanto Company patent, the two companies agreed that DuPont would be able to appeal an embarrassing ruling that it committed a “fraud on the court.” That appeal ended on Friday in a ruling that DuPont acted in bad faith but didn’t engage in fraud.

In a 20-page ruling, the U.S. Court of Appeals for the Federal Circuit refused to vacate a 2011 sanctions order that put DuPont on the hook for $1 million in attorney fees and barred it from raising certain defenses. The Federal Circuit agreed with U.S. District Judge E. Richard Webber in St. Louis that DuPont engaged in “vexatious” conduct by making arguments in the case that contradicted internal DuPont emails. However, the court ruled that Webber shouldn’t have thrown around the term “fraud on the court.” According to Federal Circuit, fraud on the court refers to more egregious conduct such as “bribery of a judge or jury or fabrication of evidence by counsel.”

The Federal Circuit ruling means that DuPont is still on the hook for $1 million in attorney fees. DuPont already paid the money as part of the costly settlement with Monsanto in 2013. Through a liquidated damages clause in the settlement, Monsanto would have returned the $1 million if DuPont had gotten the attorney fee award vacated.

In 1992, Monsanto secured a key patent on a genetically engineered “trait” that makes soybean plants resistant to the herbicide glyphosate. Monsanto sold the trait under the brand name RoundUp Ready. DuPont, a competitor in the market for genetically engineered crops, licensed Monsanto’s RoundUp Ready patent.

In 2006 DuPont announced it had developed its own glyphosate-tolerant trait, known as Optimum GAT (OGAT). To make OGAT more effective, DuPont combined, or “stacked,” it with Monsanto’s trait.

DuPont never commercialized the stacked technology, but Monsanto nonetheless brought suit in 2009 against DuPont and one of its subsidiaries. Monsanto alleged breach of contract, arguing that DuPont’s licensing agreement didn’t allow stacking. Monsanto also alleged infringement of the patent it licensed to DuPont.

In its defense, DuPont argued that its licensing agreement with Monsanto did in fact allow stacking. It was that argument that peeved Webber. In his December 2011 ruling, he wrote that DuPont’s argument was flatly contradicted by emails between DuPont employees that Monsanto’s trial lawyers at Winston & Strawn and Husch Blackwell unearthed during discovery. “Defendants made a mockery of this proceeding and delayed this litigation by their insistence that they believed they had the right to stack and commercialize RoundUp Ready and OGAT,” Webber wrote. (His decision was sealed until a jury trial in the case ended eight months later, a decision that angered transparency advocates like PatentlyO guest blogger Bernard Chou.)

In August 2012, a jury awarded Monsanto $1 billion in patent infringement damages. DuPont later reached a settlement with an estimated value of $1.75 billion. Winston & Strawn partner George Lombardi was Monsanto’s lead counsel at trial, squaring off against attorneys James Denvir III of Boies Schiller & Flexner and Leora Ben-Ami of Kirkland & Ellis.

In seeking an appeal of the sanctions, a DuPont executive told analysts in a conference call when the settlement was announced that the company was focused on its reputation, not the attorney fees, and “wanted to set the record straight.” DuPont brought on Thomas Hungar of Gibson Dunn & Crutcher to argue the Federal Circuit appeal. In the company’s opening appellate brief, it maintained that its arguments were based on a reasonable interpretation of the factual record. “DuPont’s arguments cannot be transformed into a fraud on the court simply because the court chose not to credit them,” DuPont’s lawyers wrote.

Seth Waxman of Wilmer Cutler Pickering Hale and Dorr argued the Federal Circuit appeal for Monsanto. He’s one of the company’s go-to appellate lawyers, and won a major patent case for Monsanto at the U.S. Supreme Court in March 2013.

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