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A divided panel of the U.S. Court of Appeals for the Federal Circuit has vacated a $29.4 million judgment and permanent injunction against HemCon Inc. in a case about the rights of an allegedly infringing party to sell a product when the patent claim at issue was changed in re-examination. The Sept. 26 panel majority’s ruling in Marine Polymer Technologies Inc. v. HemCon Inc. vacated an injunction and damages award for Marine Polymer issued by Judge Joseph A. DiClerico Jr. of the District of New Hampshire. The ruling involves the so-called doctrine of intervening rights — the rights of other parties to use the patent owners’ claims if the original claims are “substantively changed” during re-examination. It is important because defendants in infringement case are increasingly requesting re-examinations of patents at the U.S. Patent and Trademark Office (PTO) once they’re sued for infringement. The absolute intervening rights doctrine allows an accused infringer to use or sell products that use reissued or re-examined patent claims if the scope of the claims in question changed during that process and the accused product was made before the reissue or re-examination date. The equitable intervening rights doctrine disqualifies infringement claims for new products and new versions of existing products made based on patent claims that were changed through patent re-examination or reissue. Marine Polymer sued HemCon for patent infringement in March 2006. The patent at issue was for a polymer that speeds up hemostasis — the process that causes bleeding to stop. In August 2009, while the case was pending, HemCon launched a re-examination of the patent at the PTO. During the re-examination, Marine Polymer asked the examiner to adopt the district court’s claim construction that required the polymer to have “no detectable biological reactivity.” The patent examiner initially held that the disputed patent claim had a different claim construction from the one the district court adopted. The examiner also issued a preliminary rejection of all the claims of the patent as invalid due to prior art, which is published information about the subject matter of the claimed invention, including issued patents. Marine Polymer responded by canceling the six original dependent claims, and the patent examiner later ruled that the patent construction was now in line with the district court’s interpretation. In September 2010, DiClerico issued the permanent injunction barring HemCon from infringing Marine Polymer’s patent. The same month, DiClerico granted the money judgment, which was based on reasonable royalty damages for HemCon’s past infringement. The PTO issued its notice of intent to issue the re-examination certificate for Marine Polymer’s patent in November 2010 — after the district court’s final judgment. The PTO issued the re-examination certificate in March 2011, canceling the six dependent claims. Judge Timothy Dyk wrote the 1st Circuit opinion, joined by Senior Judge Arthur Gajarsa. Judge Alan Lourie authored a dissent. The majority ruled that HemCon has absolute intervening rights to products manufactured before the date of reissue. It remanded the case for the lower court to consider whether HemCon has equitable intervening rights for products manufactured after the reissue date. Marine Polymer had argued that HemCon does not have intervening rights because the actual language of the asserted claims of the patent was not amended on re-examination. Dyk wrote that the critical question is whether the claims’ scope has changed, not whether the words are different. The Federal Circuit has “consistently held that arguments made to the PTO on re-examination can create an estoppel or disavowal and thereby change the scope of claims even when the language of the claims did not change,” he said. “We see no reason why this rule, giving effect to disclaimer of claim scope during re-examination or reissue, should not also apply in the context of intervening rights,” Dyk wrote. “In fact, a contrary rule would allow patentees to abuse the re-examination process by changing claims through argument rather than changing the language of the claims to preserve otherwise invalid claims and, at the same time, avoid creating intervening rights as to those claims.” Dyk remanded review of whether HemCon has equitable intervening rights for consideration of several factual questions. He wrote that some factors include the following: whether noninfringing goods can be manufactured with inventory used to make infringing products; whether there are existing orders for the products; whether HemCon made “substantial preparation” to the products prior the re-examination or reissue; and whether HemCon used the original patent scope for these preparations. In his dissent, Lourie offered both a procedural and a substantive reason why he believes the majority erroneously relied on the re-examination proceeding. With regard to procedure, he noted that the district court did not have the re-examination results during the trial. “While the majority finds that it is appropriate to consider the re-examination proceeding, I consider it unwise,” Lourie wrote. “We should have the benefit of the district court’s view on the effect of the re-examination proceeding rather than review it ourselves in the first instance.” As a procedural matter, the re-examination proceeding could have been appealed to the Federal Circuit, Lourie wrote. The majority’s course of action “could have unfairly deprived the patentee of its right to have its infringement proceeding decided separately from a non-final PTO proceeding,” he added. Lourie’s substantive argument is that intervening rights apply only to “amended or new claims” according to the Patent Code: “An unchanged original claim should not be considered to be changed for intervening rights purposes based in part on the cancellation during a separate re-examination proceeding of other claims in the patent.” Brian Poissant, a New York partner who leads Jones Day’s intellectual property practice and who argued for Marine Polymer at the Federal Circuit, declined to comment. The company did not respond to requests for comment. Raymond Kurz, a Washington partner at Hogan Lovells and one of the firm’s intellectual property group leaders, argued for HemCon. Kurz was not available for comment, but in a written statement he said the company’s legal team is “very pleased to have obtained this important victory for our client. Our team navigated some very interesting and intricate legal issues in order to achieve this terrific result.” In a press release, HemCon Medical Technologies Inc. president Nick Hart stated that “this vindication of HemCon’s actions allows us to focus on continuing to supply our life-saving products to the marketplace.” Both ex parte and inter partes re-examinations are on the rise. Anyone can initiate an ex parte re-examination of an issued patent, but third-party requesters have only limited participation rights. Ex parte re-examinations increased in most years from fiscal year 2005 to fiscal year 2010. There were 780 filed in fiscal year 2010, which ended on Sept. 30, and 581 for the first nine months of the current fiscal year, or as of June 30. Anyone except the patent owner can initiate an inter partes re-examination for patents based on applications filed after Nov. 29, 1999. Inter partes re-examinations increased each year between fiscal year 2005 and fiscal year 2010, to 281 in fiscal year 2010 and 271 as of June 30, for the first nine months of the current fiscal year. The new patent reform law, the Leahy-Smith America Invents Act, which President Barack Obama signed on Sept. 16 after both houses cleared it, changes the inter partes re-examination process. The provision, which generally takes effect in one year, allows inter partes review either after the PTO grants a patent or after the post-grant review. Sheri Qualters can be contacted at [email protected].

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