JOHN W. LUNGSTRUM, District Judge.
Introduction.......................................................................1210 I. Motions Relating to Experts ..................................................1211 A. Plaintiffs' Motion to Exclude Troxel Testimony (Doc. # 426)..............1211 B. Plaintiffs' Motion to Exclude Sur-Rebuttal Reports (Doc. # 428)..........1211 C. Purolite's Motion to Exclude Clifford Testimony (Doc. # 430).............1212 D. Plaintiffs' Motion for Leave to File Declaration (Doc. # 542)............1212II. Summary Judgment Standard ....................................................1213III. Purolite's Counterclaims .....................................................1213 A. Consequential Damages....................................................1213 B. Breach of the Agreement — Specifications...................................1214 1. STATUTE OF LIMITATIONS...............................................1214 2. MERITS OF THE CLAIM..................................................1216 C. Breach of the Agreement — Pursuit of Suspected Infringer...................1218 D. Breach of the Agreement — Competitive Acts.................................1219 1. DAMAGES..............................................................1219 2. MERITS OF THE CLAIM..................................................1220 E. Breach of the Implied Covenant of Good Faith and Fair Dealing............1221 1. DAMAGES..............................................................1222 2. MERITS OF THE CLAIM..................................................1222 F. Unfair Competition.......................................................1223 G. Restraint of Trade.......................................................1223IV. Layne's Claims for Breach of Contract ........................................1226 A. Purolite's Defense of a Prior Material Breach............................1227 1. PROVISION OF SPECIFICATIONS..........................................1227 2. COMPETITIVE ACTS.....................................................1227 3. PURSUIT OF SUSPECTED INFRINGER.......................................1227 4. FAILURE TO PAY FOR PRODUCT...........................................1228 B. Claim, for Unpaid Royalties..............................................1229 C. Claim for Breach of Section 11.2.........................................1229 1. SURVIVAL OF TERMINATION..............................................1230 2. UNREASONABLE RESTRICTION ON COMPETITION..............................1231 3. MERITS OF THE CLAIM..................................................1234 D. Claim for Breach of Section 10.1.........................................1235 1. INCORPORATION OF THE OTHER AGREEMENT.................................1236 2. USE OF INTELLECTUAL PROPERTY.........................................1236V. Plaintiffs' Patent Claims ....................................................1237 A. Infringement.............................................................1237 1. MARKING ESTOPPEL.....................................................1237 2. EQUIVALENTS, INDIRECT INFRINGEMENT...................................1238 3. "DISPERSAL THROUGHOUT" (CLAIMS 1 AND 15).............................1239 4. "BY THE ACTION OF THE OXIDANT" (CLAIM 1).............................1241 5. "SALT OF SAID METAL" (CLAIM 1).......................................1242 6. SUMMARY OF INFRINGEMENT ISSUES.......................................1243 B. Invalidity...............................................................1244 1. LICENSE ESTOPPEL.....................................................1244 2. SCOPE OF INVALIDITY DEFENSES.........................................1244 3. INOPERABLE PROCESS (CLAIM 1).........................................1244 4. WRITTEN DESCRIPTION (CLAIM 1)........................................1246 5. ENABLEMENT (CLAIM 1).................................................1249 6. ANTICIPATION BY PRIOR ART (CLAIM 15).................................1252 7. OBVIOUSNESS (CLAIM 15)...............................................1256 8. SUMMARY OF INVALIDITY ISSUES.........................................1257 Summary of Orders..................................................................1257
This case arises from an agreement ("the Agreement") by which SolmeteX, Inc. ("SolmeteX") licensed certain technology for the removal of arsenic from water, to which it held rights under a patent, to defendant Bro-Tech Corporation, d/b/a The Purolite Company ("Purolite"). Plaintiff Layne Christensen Company ("Layne") acquired SolmeteX and asserts SolmeteX's rights under the patent and the Agreement. Layne terminated the Agreement. Layne now asserts claims against Purolite for patent infringement, and pursuant to a prior order of the Court, Arup SenGupta, the owner of the patent, was added as a required plaintiff. Layne also asserts claims against Purolite for breach of the Agreement. Purolite has asserted counterclaims against Layne for breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition, and restraint of trade.
This matter presently comes before the Court on various motions by the parties involving expert witnesses. As more fully set forth below, the Court rules on those motions as follows: Plaintiffs' motion to exclude testimony by Richard Troxel (Doc. # 426) is
This matter also comes before the Court on Layne's motion for summary judgment on certain of Purolite's counterclaims (Doc. # 404). That motion is
The matter is also before the Court on Layne's motion for partial summary judgment on its claims for breach of contract (Doc. # 406). That motion is
The matter is also before the Court on plaintiffs' motion for summary judgment on its claims of patent infringement (Doc. # 408). That motion is
The matter is also before the Court on Purolite's motion for summary judgment on certain of plaintiffs' claims (Doc. # 410). That motion is
Plaintiffs Layne and Dr. SenGupta move to exclude expert testimony by Purolite's damages expert, Richard Troxel. This motion is granted in part and denied in part.
First, the motion is granted with respect to Mr. Troxel's opinions concerning the amount of unpaid invoices for product sold to Layne on which Purolite seeks to recover. In his report, Mr. Troxel merely totaled up the balance due on three invoices to arrive at a total amount due. Purolite has not addressed this opinion in its response brief, and thus it has not disputed that at trial Mr. Troxel would be doing nothing more than simply adding three numbers. Because the Court agrees with plaintiffs that adding up the three invoices does not require expert testimony and because this argument is unopposed, the motion is granted as it relates to this opinion.
Second, by this opinion, the Court has granted Layne summary judgment on all other counterclaims asserted by Purolite. See infra Part III. Accordingly, the motion is denied as moot to the extent that it relates to Mr. Troxel's opinions concerning damages for those counterclaims.
Third, the motion is granted with respect to Mr. Troxel's opinions on plaintiffs' claims for damages for infringement of the patent. Plaintiffs object to this testimony on the basis that Mr. Troxel did not do any analysis himself, but merely relied on the opinion of a Purolite executive concerning an appropriate royalty percentage. Purolite has not responded to this argument. Based on the evidence submitted by plaintiffs, it does appear to the Court that Mr. Troxel has not articulated an independent opinion on that issue. See Ash Grove Cement Co. v. Employers Ins. of Wausau, 246 F.R.D. 656, 661 (D.Kan.2007) (Lungstrum, J.) (expert may not simply parrot or recite opinions and knowledge of other witnesses). For that reason and because the motion is unopposed with respect to these opinions, Mr. Troxel's opinions on this issue of plaintiffs' infringement damages will not be admitted.
Plaintiffs move to exclude expert reports by Mr. Troxel and by Daniel Stack, another Purolite expert, that were provided after the expiration of the Court's expert disclosure deadlines. Purolite concedes that these two reports were submitted in
First, given the Court's rulings, see supra Part I.A, Mr. Troxel will not be offering expert testimony at trial. Accordingly, the motion is moot with respect to Mr. Troxel's additional report.
Second, the Court agrees that the sur-rebuttal report by Dr. Stack was not authorized by the Court's scheduling order. Nevertheless, as long as he does not offer any new opinions separate from those offered in his authorized report, Dr. Stack will of course be permitted at trial to comment on criticisms by plaintiffs' expert of Dr. Stack's opinions. Moreover, Purolite could have submitted Dr. Stack's sur-rebuttal opinions in the form of a declaration to be considered at summary judgment. Thus, plaintiffs have suffered no prejudice from the fact that those sur-rebuttal opinions were formalized in a report, and in fact plaintiffs may be better able to prepare to cross-examine Dr. Stack at trial. In ruling on summary judgment, the Court will not consider any new opinion offered by Dr. Stack that is not fairly contained in his other report, and any such objection to a new opinion may be asserted at trial when appropriate. Accordingly, the Court denies the motion to exclude the sur-rebuttal report by Dr. Stack. Plaintiffs' request for sanctions is also denied.
The Court also denies Purolite's motion to exclude testimony by plaintiff's expert, Dennis Clifford. First, with respect to his opinions concerning infringement, the Court concludes that Dr. Clifford's opinions are sufficiently based on his experience and that Purolite's objections concerning his analysis and the lack of testing go to the weight of the opinions and not to their admissibility. Second, the Court will not exclude Dr. Clifford's invalidity opinions on the basis that they are too short, as Dr. Clifford addressed the issues at greater length in his rebuttal report. Of course, Dr. Clifford may not offer an opinion on a legal issue at trial, but the Court will defer consideration of any such objection in order to rule on it in the context of his testimony at trial as a whole. Third, the Court does not agree with Purolite that Dr. Clifford's opinions concerning contract issues constitute an improper attempt to construe terms in the Agreement.
In opposing Purolite's summary judgment motion, plaintiffs have cited to Dr. Clifford's expert reports. Purolite has objected to those citations, on the basis that the reports were not sworn or supported by an affidavit or declaration, as required by the local rule. See D. Kan. 56.1(d).
Because it concludes that an extension of time is warranted for plaintiffs' reliance on such a declaration, the Court grants this motion. See Bishop v. Corsentino, 371 F.3d 1203, 1206 (10th Cir.2004) (noting factors relevant to a determination of excusable neglect). Because Purolite addressed Dr. Clifford's evidence in its summary judgment briefs, Purolite will not
For these reasons, the Court finds that plaintiffs' failure to submit the declaration previously resulted from excusable neglect and that an extension of the deadline to submit the declaration is therefore warranted. Thus, the Court grants the present motion for leave, and the proposed declaration is deemed filed. The Court further overrules Purolite's objections to plaintiffs' citations to Dr. Clifford's reports in the summary judgment briefs.
Summary judgment is appropriate if the moving party demonstrates that there is "no genuine dispute as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(a). In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Burke v. Utah Transit Auth. & Local 382, 462 F.3d 1253, 1258 (10th Cir.2006). An issue of fact is "genuine" if "the evidence allows a reasonable jury to resolve the issue either way." Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1219 (10th Cir.2006). A fact is "material" when "it is essential to the proper disposition of the claim." Id.
The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Thom v. Bristol-Myers Squibb Co., 353 F.3d 848, 851 (10th Cir.2003) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim. Id. (citing Celotex, 477 U.S. at 325, 106 S.Ct. 2548). If the movant carries this initial burden, the nonmovant may not simply rest upon the pleadings but must "bring forward specific facts showing a genuine issue for trial as to those dispositive matters for which he or she carries the burden of proof." Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th Cir.2005).
Finally, the Court notes that summary judgment is not a "disfavored procedural shortcut;" rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 1).
Layne moves for summary judgment on various counterclaims asserted by Purolite (Doc. # 404).
Layne asserts that any claim by Purolite for consequential damages is barred by Section 9.4 of the Agreement, which precludes the recovery of such damages, including lost profits. Purolite does not dispute that the damage limitation applies in
Purolite claims that Layne's predecessor, SolmeteX, breached Section 1.2 of the Agreement by "providing a deficient and inoperable product specification." (See Pretrial Order ¶ 5.b.) Layne seeks summary judgment on that counterclaim based on both the statute of limitations and the merits of the claim.
The Court applies Kansas limitations law in this case. See Miller v. Armstrong World Indus., 949 F.2d 1088, 1089 n. 3 (10th Cir.1991) (for state-law claim, court applies substantive law, including statutes of limitation, that forum courts would apply); see also Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) (federal court sitting in diversity jurisdiction must apply forum state's choice of law rules to determine which state's substantive law applies). Kansas courts apply their own state's statutes of limitations. See Green v. Kensinger, 199 Kan. 220, 223, 429 P.2d 95 (1967). The Court also applies Kansas's borrowing statute, K.S.A. § 60-516, as necessary. See Garcia v. International Elevator Co., 358 F.3d 777, 779 (10th Cir.2004).
Layne asserts that SolmeteX provided the specifications to Purolite prior to November 2004, and that Purolite's claim therefore accrued at the latest on November 15, 2004, when SolmeteX and Purolite executed the Agreement, to which the specifications were attached. Purolite did not assert this counterclaim until January 2010 at the earliest. Therefore, Layne argues that Purolite's claim is barred by Kansas's five-year statute of limitations. See K.S.A. § 60-511(1) (five years for action on written agreement).
Purolite does not dispute that its claim accrued on November 15, 2004, or that it first asserted the claim more than five years later. Nevertheless, Purolite contends that, despite the running of the statute of limitations, it may assert the claim as a defense, to the extent of any recovery by Layne under the Agreement.
See id. § 60-213(d). Under this statute, a time-barred claim may nonetheless be used to obtain a setoff against the opposing party's recovery under the same contract if the two parties' claims were coexisting at any particular time. See Mynatt v. Collis, 274 Kan. 850, 866, 57 P.3d 513 (2002) (citing Lightcap v. Mobil Oil Corp., 221 Kan. 448, 464, 562 P.2d 1 (1977)). Purolite argues that Layne's claim for royalties under the Agreement, which Purolite allegedly failed to pay beginning in "late 2008" (see Pretrial Order ¶ 5.a), did coexist for a period with its own claim, which did not become time-barred under the Kansas statute until November 2009.
Layne argues that the claims did not coexist. Layne argues that Purolite's claim arose in Pennsylvania, the home of Purolite's manufacturing facilities where Purolite would have received the specifications from SolmeteX. Thus, Layne argues that Kansas would borrow Pennsylvania's four-year statute of limitations for a claim for breach of a written agreement, 42 Pa. Cons.Stat. § 5525(a)(8). See K.S.A. § 60-516 (borrowing statute). Finally, Layne argues that because its own claim did not accrue until after November 15, 2008, the parties' claims did not coexist and Purolite therefore cannot assert its claim even in defense. Purolite does not dispute that its claim arose in Pennsylvania or that a four-year statute of limitations would govern Purolite's assertion of an affirmative claim. Nevertheless, Purolite argues, without analysis or citation to authority, that the borrowing statute would not apply because it is asserting its claim only defensively.
The Court agrees with Layne that the Pennsylvania four-year statute of limitations applies through the Kansas borrowing statute for purposes of determining whether the two claims coexisted here at any point in time. The Kansas Supreme Court has described the coexistence requirement as follows:
J.A. Tobin Constr. Co. v. Holtzman, 207 Kan. 525, 534, 485 P.2d 1276 (1971); see also Lightcap, 221 Kan. at 464, 562 P.2d 1 (considering when claims were "alive" under applicable statutes of limitations in determining whether claims coexisted for purposes of K.S.A. § 60-213(d)). Thus, for Purolite to assert its claim as a defense, the claim must have been alive, and not time-barred as an affirmative cause of action, at the time Layne's own cause of action accrued. At any time after November 15, 2008, Layne could have relied on
The Pretrial Order is not helpful in resolving this issue of fact; that document notes Layne's contention that Purolite stopped paying royalties under the Agreement in "late 2008," and it contains a stipulation that "Purolite suspended payment of royalties to Layne at the end of 2008." (Pretrial Order ¶¶ 4.a(7), 5.a.) Layne has provided a copy of a letter that it sent to Purolite on November 19, 2008, in which it demanded unpaid royalties. First, this evidence was submitted only with Layne's reply brief, and the Court will not consider Layne's argument, made for the first time in that brief, that its claim accrued on that specific date. Second, Layne has not explained how the letter establishes that its claim did not accrue earlier. In fact, the letter stated that the demand was based on an audit performed in June 2008. Therefore, the Court concludes that an issue of fact remains concerning the accrual date of Layne's claim and whether the parties' claims coexisted for purposes of K.S.A. § 60-213(d).
Accordingly, the Court grants Layne's motion for summary judgment on the basis of the statute of limitations on Purolite's claim relating to the provision of specifications under Section 1.2 of the Agreement to the extent that that claim is asserted affirmatively. The Court denies the motion based on the statute of limitations to the extent that the claim is asserted defensively to the extent of any recovery by Layne on the Agreement.
Layne also argues that it is entitled to summary judgment on this claim because Purolite has failed to provide evidence that SolmeteX in fact breached the contract. The relevant contract provision, Section 1.2 of the Agreement, follows:
Purolite has stated its claim for breach of this provision as follows:
(Pretrial Order ¶ 5.b.)
In seeking summary judgment, Layne argues that SolmeteX did provide specifications before the Agreement was executed and that Purolite in fact manufactured and sold the product before the date of the Agreement. Layne disputes that the Agreement imposed any obligation to provide "operable" product specifications or specifications that would need no improvement, and it cites other portions of the Agreement that refer to anticipated improvements to the Media. Layne further argues that any obligation to provide a "marketable" product (although it disputes the existence of such an obligation) was satisfied because Purolite did sell the product. Finally, Layne notes that the Agreement imposed the obligation regarding the specification jointly on SolmeteX and Purolite, although it does not explain how that would relieve SolmeteX of any obligation under Section 1.2.
In response, Purolite argues that the requirement for the provision of "finished product specifications" (from the definition of "Manufacturing Specifications") demanded SolmeteX's provision of "finalized specifications for a finished product," from which "Purolite could manufacture non-defective, commercially marketable Media." In that regard, Purolite notes the introductory language to the Agreement stating that "SolmeteX has developed a resin primarily used in arsenic removal from aqueous streams ..., comprised of SolmeteX's chemistry applied to a Purolite base bead ... (the `Media')." Purolites cites to evidence that in late 2004 and early 2005, the product had problems (the product easily broke up, was fragile, had a bad odor, and left a precipitate); and that the product finally reached a "commercially ready point" in May 2005. Purolite argues that that evidence raises a question of fact concerning whether SolmeteX "initially provided finished product specifications that yielded a commercially viable product."
The Court rejects Purolite's arguments. First, contrary to Purolite's interpretation, Section 1.2 does not require the provision of specifications that yield a perfect product, a marketable product, or a product free of any problems. The only obligation is to provide "finished product specifications." Thus, applying the ordinary meaning of the word "finished", SolmeteX was required only to provide specifications in their completed form, and not from some initial or earlier stage. As noted by Layne, the contract clearly contemplated that improvements would be made to the initial specifications — indeed, Section 1.2 itself speaks to future changes by Purolite to the "initial Manufacturing Specifications." Although Purolite points to the introductory language, it has not provided any evidence that SolmeteX in fact had not developed an arsenic removal resin comprising its chemistry and Purolite's bead. Purolite's evidence that there were issues demanding improvement to the product and that the product was not "commercially ready" does not constitute evidence that SolmeteX did not provide its "finished product specifications." Purolite does not controvert the fact that it did sell the product, based on SolmeteX's specifications,
Purolite also claims that Layne breached Section 4.6.1 of the Agreement by failing to "pursue" parties suspected of infringing the patent. Layne argues that Purolite cannot produce evidence that it has suffered any damage from any such breach. In support of that argument, Layne notes that Purolite's damage expert could not identify any specific sales that Purolite lost because Layne did not pursue infringers, and he did not offer any opinion as to whether any such failure by Layne caused damage to Purolite. In response, Purolite concedes that it cannot establish the amount of its damages for this breach with the necessary certainty, but it argues that because it did suffer some damage from this breach, it may seek nominal damages. Purolite cites evidence that one suspected infringer, Resin Tech, did make some sales of an infringing product, and it argues that it was damaged because "those sales necessarily could have been made by Purolite."
The Court rejects this claim by Purolite for nominal damages for several reasons. First, Purolite has not explained why the Court should permit it essentially to seek a declaration of breach, in the guise of a claim for nominal damages, without pursuing any meaningful relief.
Purolite also claims a breach of Section 11.1 of the Agreement, which provides as follows:
Purolite claims that Layne breached this provision by engaging in the following "acts of competition" against Purolite:
(Pretrial Order ¶ 5.b.)
In seeking summary judgment on this claim, Layne argues that Purolite has not produced any evidence of damage attributable to this alleged breach.
With respect to the amount of its damages, Purolite points to its expert's opinion by which he calculated a specific amount of damages suffered by Purolite for all of the competitive acts alleged (based on Purolite's lost sales to SolmeteX directly and to one other customer). Thus, Purolite has submitted evidence of the amount of its damages for this alleged breach. The Court does not agree with Layne that the expert's inability to allocate his damage amount for this breach among the alleged anti-competitive acts precludes this claim at this stage.
The Court does agree with Layne, however, that Purolite has failed to provide any evidence of the fact of any damage
First, the citation to the expert report of Mr. Troxel (Purolite's damage expert) in Paragraph 92 of Purolite's Statement of Facts, as noted above, provides evidence of the amount of damage, but it does not provide any evidence of the fact of damage to Purolite. In his report, Mr. Troxel stated that in making his calculations, he assumed proof of the alleged breach,
Purolite's only other citation to the record in support of its argument that it suffered damages (the breakdown of the Agreement and the relationship, "intangible" damages) is to Paragraph 71 of its statement of facts. That paragraph, however, relates only to Purolite's ability to make sales made by Resin Tech (addressed above). Neither that paragraph nor any other paragraph in Purolite's Statement of Facts in its response to this motion cites to evidence that Purolite suffered actual harm from the alleged anti-competitive acts by Layne. Accordingly, Purolite has not provided evidence, as required in opposing summary judgment, that it suffered damages as a result of the alleged breach, and summary judgment is therefore appropriate on this claim.
Layne is also entitled to summary judgment for another reason. In arguing that it did not breach Section 11.1 of the Agreement, Layne notes that all of the restrictions in that section relate to activities involving "Media". That term is defined in the introduction the Agreement:
Layne has provided evidence that the alleged competitive acts involved products that did not use a Purolite bead, but instead used beads manufactured by others. Thus, Layne argues that any such acts did not involve "Media", which must by definition include a Purolite bead, and that it
Purolite does not dispute that the alleged acts of breach did not involve any product or resin using a Purolite bead. Rather, Purolite argues that the Court should not interpret "Media" to require the use of a Purolite bead, despite the plain language of the Agreement's definition. Purolite instead asks the Court to interpret "Media" to be a resin product with SolmeteX's chemistry on any substrate, which interpretation Purolite asserts would be in keeping with the parties' intent. Purolite argues that following the plain language of the definition would be absurd and unreasonable, although it does not explain that absurdity. In support of its interpretation, Purolite argues that the title of the Agreement ("Exclusive ... Agreement") and other terms in the Agreement show that the intent was for Purolite to be the exclusive manufacturer for the product (Purolite appointed as "exclusive manufacturer and supplier of the Media") and to prevent SolmeteX from competing with Purolite (Solmetex may not direct sell the Media to third party distributors, Purolite is lead distributor of the Media, Solmetex will use its best efforts to avoid competing directly at the same customers, and Purolite and SolmeteX will work together to penetrate the market).
The Court rejects Purolite's alternative definition. The Agreement's definition of "Media" to include a Purolite base bead is unambiguous. The Agreement as a whole does not show that definition to be unreasonable or absurd, as the parties quite reasonably could have intended to restrict competing acts only to the extent that they involve the unique combination of SolmeteX's chemistry and Purolite's base bead, with which the product was originally constructed. The other terms from the Agreement cited by Purolite also relate to the Media and do not contradict the definition's plain language or Section 11.1; nor do they suggest that the parties intended to restrict SolmeteX's activities involving the use of a different bead. The Court therefore interprets Section 11. 1, in conjunction with the Agreement's unambiguous definition of "Media", as prohibiting only certain activities by SolmeteX involving the use of product or resin that includes a Purolite base bead.
Purolite does not dispute that the alleged acts by Layne did not involve a product using a Purolite base bead, or provide evidence to the contrary. Accordingly, Purolite has not provided evidence that Layne breached Section 11.1 by those acts, and summary judgment is warranted on this claim for that reason as well.
Purolite also asserts a counterclaim for breach of the Agreement's implied covenant of good faith and fair dealing, based on the same anti-competitive acts by Layne that Purolite alleged with respect to the counterclaim under Section 11.1.
Layne again argues that Purolite has failed to provide evidence of damage, for the same reasons set forth above with respect to the claim under Section 11.1. In response, Purolite only incorporates its prior arguments concerning the claim under Section 11.1. As explained above, Purolite did not provide evidence of the fact of its damage from the alleged anti-competitive acts. Accordingly, summary judgment is also appropriate on Purolite's claim for breach of the implied covenant.
The Court concludes that summary judgment on this claim is warranted for another reason as well. Delaware courts have expounded on this cause of action as follows:
Fitzgerald v. Cantor, 1998 WL 842316, at *1 (Del.Ch. Nov. 10, 1998) (unpub.op.) (footnotes and internal quotations omitted).
Homan v. Turoczy, 2005 WL 2000756, at *18 (Del.Ch. Aug. 12, 2005) (unpub.op.) (footnotes omitted).
With respect to this claim, Purolite asks the Court to recognize an implied term prohibiting Layne from engaging in the alleged anti-competitive acts, even if those acts do not involve products using the Purolite base bead and thus do not involve the "Media". The Agreement, however, contains specific terms concerning prohibited anti-competitive acts by SolmeteX. Thus, SolmeteX's (and Layne's) restrictions are expressly stated, and under Delaware law, this Court may not inject other obligations relating to non-competition by SolmeteX into the contract under the guise of the implied covenant of good faith and fair dealing. Accordingly,
In the Pretrial Order, Purolite asserts a claim for "common law unfair competition." Layne seeks summary judgment on that claim on the basis that such a claim is not recognized under Kansas law. Purolite agrees that Kansas law applies and that Kansas does not recognize this claim. Purolite therefore states that it withdraws this claim. Based on Purolite's admission that the claim as asserted in the Pretrial Order cannot stand, however, the Court deems it appropriate to enter summary judgment in Layne's favor on this claim.
Finally, Purolite seeks an injunction prohibiting Layne's enforcement of one provision of Section 11.2 of the Agreement. The provision in question reads as follows:
Purolite claims that this provision should be deemed void as an unreasonable restraint of trade in violation of one of Kansas's antitrust statutes, K.S.A. § 50-112. The statute reads as follows:
Id. (emphasis added). Purolite argues that this provision in Section 11.2 of the Agreement unreasonably restricts its ability to compete with Layne because the restriction lacks any temporal or geographical limitation; the restriction goes beyond what is necessary to protect Layne's interest in its intellectual property, in light of protection under the patent laws and other terms in the Agreement; Purolite is restricted from using intellectual property jointly owned with Layne; a limited number of competitors operate in this market; and the product, which removes arsenic from water, benefits public health.
Layne seeks summary judgment on this claim, arguing as a matter of law that Purolite has not shown that this contractual provision is an unreasonable restraint of trade in violation of the Kansas antitrust statute. The Court concludes that the relevant caselaw indicates that the
In 1999, the Kansas Supreme Court noted that, although Section 50-112 is broad on its face, "there has been no meaningful interpretation" of the statute since its enactment more than one hundred years ago, as only a few cases involving the statute had come before the supreme court, and none since 1959. See Bergstrom v. Noah, 266 Kan. 829, 843-44, 974 P.2d 520 (1999). That 1959 case, however, is at least somewhat instructive. In Okerberg v. Crable, 185 Kan. 211, 341 P.2d 966 (1959), the court placed the burden of proof on the party challenging the contract and applied a presumption of validity, in accordance with its earlier cases, as follows:
Id. at 217, 341 P.2d 966 (quoting Morrison v. Bandt, 145 Kan. 942, 945, 67 P.2d 584 (1937), which quoted an earlier case). The court also confirmed that the governing test under the statute is one of reasonableness:
Id. (quoting Heckard v. Park, 164 Kan. 216, syl. ¶ 7, 188 P.2d 926 (1948)). The question of reasonableness depends "upon the fundamental elements of common fairness in view of the facts and circumstances of the parties." Id. (quoting Heckard, 164 Kan. at 224, 188 P.2d 926).
Applying these standards in Okerberg, the supreme court held that a restriction among milk haulers concerning routes was reasonable. See id. at 217-18, 341 P.2d 966. In so concluding, the court reviewed and distinguished several cases that involved either price-fixing or a monopolized market. See id. at 215-17, 341 P.2d 966.
At the time Okerberg was decided, the supreme court had last addressed Section 50-112 in Barton v. Hackney, 167 Kan. 754, 208 P.2d 590 (1949), which involved a contract for the sale of a restaurant that also prohibited the seller from competing in that city for a period of time. See id. In holding that that restraint was reasonable and did not violate Section 50-112, the court noted that the statute "was not passed with the intention of prohibiting such a contract as this made in connection with the sale of a business." See id. at 760-61, 208 P.2d 590.
Id. at 554, 125 P. 58. The court proceeded to make the distinction later affirmed in Barton:
Id.
The Kansas Supreme Court also upheld a contract against this statute in Heckard v. Park, 164 Kan. 216, 188 P.2d 926 (1948), in which the contract allegedly restrained competition by prohibiting the defendant from taking singing lessons from any instructor other than the plaintiff. See id. The court applied the same standards from Mills that it later applied in Barton and Okerberg:
Id. at 223-24, 188 P.2d 926 (citations omitted). In finding the contract before it to be reasonable, the court distinguished one case involving the furnishing of electricity for the public and another involving price-fixing. See id. at 224, 188 P.2d 926.
The Court also notes the supreme court's opinion in Gard v. Holmes' Estate, 132 Kan. 443, 295 P. 716 (1931), in which the supreme court invalidated under the Kansas antitrust statutes a secret agreement to hire away an undertaker in a particular city to control price and cost in that market. See id. The court noted in Gard, however, that if the plaintiffs had simply bought out the undertaker's business with an agreement for him not to compete there, the court would have had "little hesitation in upholding the contract." See id. at 446, 295 P. 716. Years later, in Okerberg, the supreme court relied on this distinction and reaffirmed that "relaxing" of the strict rule of earlier cases. See Okerberg, 185 Kan. at 216, 341 P.2d 966 (citing Gard, 132 Kan. at 446, 295 P. 716).
Finally, even though the case does not specifically refer to Section 50-112 in discussing the Kansas antitrust statutes generally, the Kansas Supreme Court's opinion in Sage v. Oil Country Specialties Mfg. Co., 134 Kan. 215, 5 P.2d 1091 (1931), supports the Court's decision here. Like the present case, Sage involved an agreement for the license of patented technology
Based on these cases from the Kansas Supreme Court, the Court concludes as a matter of law that Purolite has not met its burden to show that the provision in Section 11.2 of the Agreement is unreasonable in violation of K.S.A. § 50-112. Under Kansas law, the Agreement is presumed to be valid. As a part of the Agreement, Layne granted a license and disclosed its intellectual property to Purolite, and it was reasonable for the parties to agree to restrict Purolite's use of that intellectual property and any other intellectual property that resulted from activities under the Agreement to compete with Layne's own products. Purolite was not prohibited from competing with Layne altogether — it only had to forego competition using the intellectual property gained as a result of a contract that included benefits for Purolite and that Purolite willingly entered into. Nor did the Agreement stifle competition in the market generally, as Purolite has not shown that a monopoly existed here. Nor did the Agreement involve a public service corporation or the like. The fact that the restriction did not include temporal or geographic limitations is not especially pertinent, as the Kansas Supreme Court has made clear. This case does not involve a monopoly or price-fixing, as in the cases consistently distinguished by the supreme court. Moreover, if the right to compete could not be contracted away in this manner, companies would be discouraged from licensing their technology to other companies. Finally, Purolite has not cited any Kansas authority suggesting that Section 11.2 should be invalidated as a violation of K.S.A. § 50-112.
The Court is convinced that the Kansas Supreme Court would reject this challenge under Section 50-112 and uphold Section 11.2 of the Agreement. Accordingly, the Court also rejects this challenge, and it awards summary judgment in favor of Layne on Purolite's counterclaim for restraint of trade.
Layne asserts various claims against Purolite for breach of the Agreement, which are the subject of summary judgment motions by the parties. Layne seeks summary judgment on its claim for breach of Purolite's obligation to pay royalties for sales of the product, and on its claim for a permanent injunction prohibiting the further breach of Section 11.2 of the Agreement (Doc. # 406). Purolite seeks summary judgment on any claims by Layne under Sections 10.1 and 11.2 of the Agreement (Doc. # 410).
Purolite seeks to avoid summary judgment based on the defense that its own performance under the Agreement was excused by a prior material breach of the Agreement by SolmeteX or Layne. See, e.g., Eastern Elec. and Heating, Inc. v. Pike Creek Prof. Ctr., Inc., 1986 WL 9031, at *3 (Del. Aug. 5, 1986) (unpub.op.) (noting the general rule that "the party first guilty of a material breach of contract cannot complain if the other party subsequently refuses to perform"); DeMarie v. Neff, 2005 WL 89403, at *4 (Del.Ch. Jan. 12, 2005) (unpub.op.) (material breach may excuse other party's performance). The Court addresses in turn each prior breach alleged by Purolite.
Purolite contends that SolmeteX breached Section 1.2 of the Agreement by failing to provide sufficient specifications for the product, and in support, Purolite refers to the arguments that it made in opposition to summary judgment on its affirmative counterclaims. The Court has already concluded, however, that Purolite has not presented evidence to establish a breach of this provision. See supra Part III.B.2. Accordingly, Purolite may not rely on this alleged prior material breach in opposition to summary judgment on Layne's contract claims.
Purolite, again relying on its arguments in support of its affirmative counterclaim, also argues that Layne breached Section 11.1 of the Agreement and the implied covenant of good faith and fair dealing by engaging in certain competitive acts. Because the Court has already rejected this claim on its merits, see supra Parts III. D.2, III.E.2, Purolite may not rely on this alleged prior material breach.
Third, Purolite argues that Layne breached Section 4.6.1 of the Agreement by failing to pursue a party suspected of infringing the patent. The Court concludes, however, that this alleged breach by Layne was not in fact a material breach.
Delaware courts have recognized that a prior breach must be material to excuse later performance:
Id. at 752 n. 99 (quoting 14 Williston on Contracts § 43:5-6).
The Court concludes that even if Layne did commit a breach by failing to pursue a single suspected infringer, Resin Tech (an issue that the Court does not decide), such a breach would not have been a material breach. First, Purolite has not offered any argument why this breach meets this standard of materiality. Second, the Agreement reveals that its essential purpose was to grant Purolite a license to use SolmeteX's intellectual property to manufacture and distribute a product, and the alleged failure by Layne to pursue Resin Tech was not so substantial as to defeat that object. In opposing summary judgment on its counterclaim based on this alleged breach, Purolite could not provide evidence that it suffered any resulting damage. Nor did Purolite dispute Layne's evidence that the degree of suspected infringement and the quality of the infringing product did not justify an infringement lawsuit against Resin Tech. Nor did Purolite dispute Layne's contention that Purolite also elected not to pursue Resin Tech, although the Agreement gave it that right. These facts confirm that the alleged breach was minor and thus nonmaterial. Accordingly, Purolite may not rely on this alleged prior material breach in opposition to summary judgment on Layne's contract claims.
Finally, Purolite relies on its claim that Layne breached the Agreement by failing to pay Purolite for product in January and February 2009. First, any such breach by Layne occurred after — and therefore cannot have excused — Purolite's failure to pay royalties beginning in late 2008, and thus Purolite may not rely on this alleged breach by Layne as a defense to Layne's claim for royalties. Second, with respect to Layne's claim based on Purolite's breach of Section 11. 2, Purolite has not offered any argument as to why this alleged prior breach should be deemed material. The Court concludes that this alleged failure by Layne to pay for some product does not defeat the object of the Agreement and thus is not material, particularly because any such breach may be easily redressed by an award of damages. See 14 Williston on Contracts § 43:6 (Restatement's factors for materiality include the extent to which the party may otherwise be adequately compensated) (citing Restatement (Second) of Contracts § 241); see also, e.g., BioLife Solutions, Inc. v.
Layne seeks summary judgment on its claim against Purolite for $145,433.88 in unpaid royalties under the Agreement for sales of Purolite's product, ArseneXnp. Purolite has stipulated that it ceased paying such royalties to Layne at the end of 2008, even though it did not cease sales of that product until April 2009. In opposition to summary judgment on this claim, Purolite has only asserted the defense of a prior material breach by Layne, but the Court has now ruled that Purolite may not rely on that defense. Accordingly, Layne is entitled to summary judgment on this claim, at least with respect to the issue of Purolite's liability.
With respect to damages, the only evidence submitted by Layne to support the amount of royalties owed is a letter of June 5, 2009, from Purolite to Layne. In the letter, Purolite calculated a total of $145,433.88 in royalties due on sales of ArseneXnp. Purolite has objected to Layne's use of this document, on the basis that the letter is inadmissible under Fed. R.Evid. 408. That rule makes inadmissible any settlement offers or statements made in compromise negotiations "when offered to prove liability for, invalidity of, or amount of a claim that was disputed as to validity or amount." Fed.R.Evid. 408(a). In this letter, Purolite began by stating its desire to settle outstanding payments at issue between the parties, and it set forth Purolite's positions and calculated the royalties in the process of proposing a settlement on particular terms. Accordingly, Rule 408 bars Layne's use of this letter to prove the amount of its claim against Purolite.
Layne also seeks summary judgment on its claim for a permanent injunction based on Purolite's alleged breach of the following provision contained in Section 11.2 of the Agreement:
This provision essentially prohibits Purolite from using any "Intellectual Property" resulting from its acts under the Agreement to compete with Layne. Purolite does not dispute that an injunction would be appropriate if its breach of this provision is shown. Nevertheless, Purolite opposes summary judgment on this claim for three reasons, which the Court addresses in turn.
According to Section 11.2, this restriction applies "[d]uring the Term and thereafter." "Term" is defined in Section 8.1 of the Agreement as the initial ten-year term of the Agreement that is automatically renewed for another ten-year period if no contrary notice is given by either party. Purolite argues that, despite the language making the provision applicable during the Term "and thereafter," this provision should be deemed not to have survived Layne's termination of the Agreement.
Purolite first relies on the survival provision, Section 8.4, which reads as follows:
Purolite notes the absence of Section 11.2 from the list of the surviving provisions, and it argues that the parties would have included Section 11.2 in that list if they intended this provision to survive termination. The Court rejects this argument. The parties did not simply list all surviving provisions; rather, Section 8.4 clearly provides that all provisions survive termination "which by their nature should survive termination." The list of specific sections in Section 8.4 is not described therein as exhaustive. Therefore, the issue is whether the provision in Section 11.2 is one that should survive by its nature.
Purolite also argues that the word "thereafter" in Section 11.2 should be interpreted to refer only to the "supplemental term" (Purolite's words) described in Section 8.3.3. That section provided that if the Agreement did not renew after the initial ten-year term, Purolite could nonetheless, for a period of two years, continue to supply the Media to SolmeteX and existing customers. Purolite argues that the parties used "thereafter" in Section 11.2 only to restrict Purolite during such a two-year additional period and not to restrict Purolite forever. The Court rejects this argument as well, as there is no support in the Agreement for such a reading. Section 11.2 did not make its restriction applicable only during the Term of the Agreement and during the two-year period following termination; rather, the parties used "thereafter" without further limitation in describing the applicability of the provision.
Thus, the Court does not agree with Purolite that the Agreement is ambiguous with respect to the survivability of this provision of Section 11.2. Section 8.4 plainly provides that provisions survive termination if they should survive by their nature. Section 11.2 is such a provision, as it plainly makes the restriction applicable while the Agreement is in force "and thereafter." Moreover, the nature of the provision itself is such that one would expect it to survive. Accordingly, the Court concludes as a matter of law that this provision in Section 11.2 did survive the termination of the Agreement, and Layne may therefore assert a breach of this provision occurring after the termination, as it
Second, in opposition to Layne's motion for summary on this claim, Purolite argues that this restriction should be invalidated as an unreasonable restriction on competition under Delaware law. Purolite also seeks summary judgment on this claim for this reason.
In support of this argument, Purolite relies on Delaware cases involving non-compete provisions in employment contracts or contracts for the sale of businesses, in which the courts applied the rule that such provisions must be reasonable, including with respect to geographical and temporal limits. See, e.g., Tull v. Turek, 38 Del.Ch. 182, 147 A.2d 658, 661-64 (1958) (contract for sale of business); Faw, Casson & Co. v. Cranston, 375 A.2d 463, 465 (Del.Ch.1977) (employment contract). Purolite also cites to Section 188(1) of the Restatement, which provides as follows:
Restatement (Second) of Contracts § 188(1). Purolite argues that this provision of Section 11.2 is an unreasonable restraint on its ability to compete for the same reasons discussed above with respect to Purolite's claim under Kansas law-the restraint is not limited by geography or duration; the restraint goes beyond that necessary to protect Layne's interests, in light of the patent statutes and the fact that Purolite's license terminates with the termination of the Agreement; and competition is suppressed in a limited market.
The Court concludes that the restriction in Section 11.2 of the Agreement is not invalid. Under Delaware law, including the cases cited by Purolite, the ultimate inquiry is whether the restraint on competition is reasonable. See, e.g., Faw, 375 A.2d at 467 (modern rule is "that a restrictive covenant should be enforced only to the extent that it is reasonable so to do"). Similarly, the general rule from the Restatement is that "[a] promise is unenforceable on grounds of public policy if it is unreasonably in restraint of trade." Restatement (Second) of Contracts § 186(1). Purolite argues that the lack of any geographical or temporal limit makes the restriction in Section 11.2 unreasonable and unenforceable under Delaware law; that requirement is most often found in employment
Other courts have recognized that this interest in protecting intellectual property is more worthy of protection than in the case of the typical non-compete. For instance, in Harvey Barnett, Inc. v. Shidler, 338 F.3d 1125 (10th Cir.2003), the Tenth Circuit held that the district court had erred in determining that a confidentiality provision was a disguised restrictive covenant that was unenforceable under Colorado law. See id. at 1134. The Tenth Circuit reasoned that confidentiality and non-disclosure agreements should not be characterized as restrictive covenants because they "serve entirely different purposes than do agreements not to compete and must be analyzed on the basis of those distinct purposes alone." See id. (quoting MAI Basic Four, Inc. v. Basis, Inc., 880 F.2d 286, 288 (10th Cir.1989)).
IDX Systems Corp. v. Epic Systems Corp., 285 F.3d 581 (7th Cir.2002), is similarly instructive. In that case, the Seventh Circuit overturned the district court's conclusion that certain non-disclosure provisions were unenforceable under Wisconsin law because they were unlimited in temporal and geographical scope and thus unduly restrained trade. See id. at 584-85. The Seventh Circuit reasoned as follows:
Id. at 585-86 (citations and internal quotation omitted). This analysis applies equally in this case, which also involves both a relationship that is more vertical than horizontal in nature and a lack of governing caselaw invalidating contracts intended to protect intellectual property.
Purolite attempts to distinguish these cases from the Tenth Circuit and the Seventh Circuit as involving non-disclosure provisions, unlike the present case involving a non-competition provision. As the Court explained above, however, the restriction in Section 11.2 does not simply prohibit competition by Purolite, but instead prohibits Purolite's use of intellectual property gained as a result of its relationship with SolmeteX in order to compete with SolmeteX. Thus, as in the case of a non-disclosure provision, the intent of the restriction is to protect intellectual property from its ultimate use by the promisor (as in the present case) or by a third party (in the case of a non-disclosure provision). Thus, the Court finds the reasoning of the Tenth Circuit and, especially, the Seventh Circuit to be helpful and persuasive.
Purolite also argues that Layne's motion for summary judgment on this claim for breach of the restriction in Section 11.2 should be denied on the merits. Purolite first argues in this regard that the restriction should be interpreted not to apply to its use of intellectual property that is jointly-owned by the parties. Purolite contends that its interpretation is compelled by reading Section 11.2 in conjunction with Section 4.4 of the Agreement. Section 4.4, which required Purolite to use its best efforts to conduct research and development to improve the product, provides as follows:
Purolite argues that Section 4.4, which gives Purolite rights in improvements made during the course of the Agreement, would be defeated if Section 11.2 prohibited its own use of such improvements.
The Court rejects this interpretation by Purolite. "Intellectual Property" is defined in Section 4.1 of the Agreement to include all discoveries and improvements, whether patentable or not, as well as all patents, trade secrets, confidential information, copyrights, trademarks, and other similar rights relating to the Media. By its terms, Section 11.2 does not apply only to Purolite's use of SolmeteX's intellectual property; rather, it applies to Purolite's use of any "Intellectual Property," which would include improvements jointly owned by Purolite. Such an interpretation in accordance with the plain language of the Agreement would not defeat Rule 4.4, as the recognition or grant of a property right to Purolite is not inconsistent with a restriction, to which Purolite agreed in exchange for benefits under the Agreement, on Purolite's use of such property,
In support of its claim of a breach by Purolite, Layne has provided evidence of the following: Purolite impregnated a resin with iron only after beginning the relationship with SolmeteX; SolmeteX brought that process to Purolite; the provision of that intellectual property to Purolite by SolmeteX constituted the basis for the Agreement; the final product manufactured by Purolite under the Agreement, named ArseneXnp, was identical (only the name was changed) to FerrIX, the product manufactured and sold by Purolite after the termination of the Agreement; and Purolite continues to sell FerrIX, a product that is competitive with Layne's products. Purolite has not controverted any of these facts, and the Court agrees with Layne that these facts establish a breach by Purolite of Section 11.2. Purolite has provided evidence that it made changes and improvements to the product over the course of the Agreement, and that its present product is therefore different from the product first licensed to it by SolmeteX, and it further argues that there is a question of fact whether its product uses SolmeteX's intellectual property (SolmeteX's chemistry). As noted above, however, whether Purolite's product uses SolmeteX's intellectual property is not determinative, as Section 11.2 prohibits Purolite's use of any intellectual property (including jointly-owned property) resulting from the Agreement to compete with Layne. Similarly, the fact that Purolite made improvements is immaterial, as any such improvements made during the Agreement would constitute "Intellectual Property" for purposes of this restriction in Section 11.2. Purolite has not disputed that its product is at least based on improvements to the initial product supplied by SolmeteX (as its executives have admitted that FerrIX is identical to the most-improved version of ArseneX). Accordingly, Layne has established a breach of Section 11.2 as a matter of law.
As noted above, Purolite has not disputed that an injunction would be appropriate here if a breach is shown. Accordingly, the Court grants Layne summary judgment on its claim for a permanent injunction, and Purolite is hereby permanently enjoined from further breaching Section 11.2, including making, selling, or using the product FerrIX A33E or any substantially similar product that uses "Intellectual Property" (as defined in the Agreement) resulting from Purolite's activities under the Agreement.
Purolite seeks summary judgment on Layne's claim for breach of Section 10.1 of the Agreement. Layne has not sought summary judgment on this claim. Section 10.1 provides as follows:
In its motion, Purolite divides Section 10.1 into two potential breaches asserted by Layne: (1) breach of the first three sentences of Section 10.1 regarding NDAs, based on an alleged breach by Purolite of the underlying SolmeteX NDA; and (2) breach of the fourth and fifth sentences of Section 10.1, based on Purolite's alleged use of SolmeteX's intellectual property or confidential information. Purolite seeks summary judgment on each of these claims of breach.
Pursuant to explicit language in the contract by which Layne acquired the assets of SolmeteX, Layne assumed SolmeteX's rights under the Agreement, but it did not assume SolmeteX's rights under the SolmeteX NDA. Thus, although Layne has standing to assert SolmeteX's rights under the Agreement (as this Court has previously ruled), it would not have standing to bring a claim against Purolite for breach of the SolmeteX NDA. Layne does not dispute these facts. Layne argues, however, that Section 10.1 of the Agreement incorporates by reference the SolmeteX NDA. Thus, Layne argues that a breach of the SolmeteX NDA also constitutes a breach of the Agreement, which it has standing to enforce.
The Court agrees with Purolite, however, that Section 10.1 does not incorporate by reference the SolmeteX NDA. Section 10.1 does not contain language of incorporation or any other language evidencing an intent to include the terms of the SolmeteX NDA as terms of the Agreement. Instead, Section 10.1 merely recognizes the existence of the NDAs and states the parties' intent that the NDAs continue to have force. Thus, the parties provided that the Agreement did not supersede or otherwise invalidate the NDAs. The Court agrees with the following reasoning by a Delaware court:
Wolfson v. Supermarkets General Holdings Corp., 2001 WL 85679, at *5 (Del.Ch. Jan. 23, 2001) (unpub.op.). Section 10.1 does not contain any language indicating an intent to do more than simply recognize and reaffirm the ongoing validity of the NDAs; therefore, the Court concludes as a matter of law that Section 10.1 does not incorporate the SolmeteX NDA by reference.
Layne does not dispute that it lacks standing to enforce the SolmeteX NDA.
The fourth sentence of Section 10.1 of the Agreement provides:
Layne asserts a claim for breach of this provision based on Purolite's alleged use of its intellectual property. It does not allege that Purolite disclosed its intellectual property to a third party in breach of Section 10.1.
In seeking summary judgment on this claim, Purolite argues that this provision effectively prohibits only its disclosure of intellectual property ("IP") to third parties, and that it does not prohibit its own use of such property. Purolite parses the words "will not disclose to or use or facilitate or permit others to use" to mean that it will not do the following: "disclose to... others" the IP; "use ... others to use" the IP; "facilitate ... others to use" the IP; or "permit others to use" the IP. Thus, under its interpretation, Purolite is not forbidden to "use" the IP; it is only forbidden to "use ... others to use" the IP. Purolite argues that the parties would not have intended to prohibit Purolite's use of the IP in light of the Agreement's basic purpose to allow Purolite to use the IP to manufacture and supply the product based on SolmeteX's chemistry.
The Court concludes as a matter of law, however, that this provision in Section 10.1 of the Agreement does apply to and prohibit Purolite's own use of the IP. Purolite's interpretation depends on an intent by the parties to prohibit Purolite's "use of others to use" the IP. Such language is nonsensical, however. The only reasonable interpretation of the first "use" in the sentence is that it refers to use by Purolite of the IP, not use by Purolite of others. Although this sentence may not be a model of clarity and may have been inartfully drafted, the language unambiguously evidences an intent that Purolite be prohibited from using the IP. Moreover, such a prohibition does not conflict with the Agreement as a whole, as the parties could quite reasonably have intended to prohibit Purolite's use of SolmeteX's IP except for purposes explicitly permitted in the Agreement — a general prohibition that would be absent from the Agreement under Purolite's interpretation. Indeed, this prohibition complements the restriction in Section 11.2 against Purolite's use of any IP gained under the Agreement (not only SolmeteX's IP) for the specific purpose of competing with SolmeteX.
Accordingly, the Court rejects Purolite's interpretation of this provision in Section 10.1 of the Agreement, and the Court denies Purolite's motion for summary judgment on Layne's claim for breach of Section 10.1 based on Purolite's use of Layne's intellectual property.
Plaintiffs have moved for summary judgment on their claims for infringement of the patent, including with respect to Purolite's invalidity defenses (Doc. # 408). By cross-motion, Purolite also seeks summary judgment on plaintiffs' infringement claims and on various defenses to those claims.
Plaintiffs assert that Purolite is precluded from contesting the issue of infringement under the doctrine of marking estoppel. As adopted by some courts, this doctrine provides that, "under some circumstances, a party that marks its product with a patent number is estopped from asserting that the product is not covered by the patent." See SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 859 F.2d 878, 890 n. 9 (Fed.Cir.1988) (citations
The Court holds as a matter of law that plaintiffs may not rely on this doctrine in this case. First, the Federal Circuit has never adopted the doctrine, including in at least three instances when given the opportunity to do, and those opinions cast doubt on whether it would adopt and apply the doctrine in this case. See SmithKline, 859 F.2d at 890-91 (concluding that, "[w]hatever the validity of the `marking estoppel' line of cases," the doctrine would not apply in that case); High Frequency Prods., Inc. v. Wynn's Climate Sys., Inc., 1996 WL 217840, at *2 (Fed.Cir. Apr. 30, 1996) (unpub.op.) (where district court concluded that the marking estoppel doctrine was no longer viable, court deemed it unnecessary to decide that issue because the doctrine would be inapplicable in that case at any rate); Slip Track Sys., Inc. v. Metal Lite, Inc., 113 Fed.Appx. 930, 934 (Fed. Cir.2004) (refusing to address the continued viability of the marking estoppel doctrine because it would not apply in that case). For instance, in the most recent case, the Federal Circuit concluded that the doctrine would not apply there in part because there was no evidence that the marking party believed its product to fall outside the patent's claim but nonetheless deliberately mismarked the product. See Slip Track, 113 Fed.Appx. at 934. Similarly, in the present case, there is nothing to suggest that Purolite deliberately mismarked ArseneX with "patent pending" while believing that the product was not covered by the patent application that was the subject of its license agreement with SolmeteX.
Moreover, plaintiffs have not pointed to any authority (and the Court has found none) that would permit this doctrine to be extended beyond a reference to an actual patent to apply also to a "patent pending" reference. The Court does not agree that the rationale for the doctrine necessarily encompasses the "patent pending" situation. By referring to an actual patent, a manufacturer has represented to the public that the product falls with the scope of that patent; by saying "patent pending," however, the manufacturer cannot be telling the public that the product is covered by whatever patent issues, as there is no guarantee that the eventual patent (if issued) will not differ from the application. Without such supporting authority and in the absence of scienter, as discussed above, the Court cannot conclude that the Federal Circuit would both recognize the doctrine and allow the doctrine to be applied in this case. Accordingly, the Court denies plaintiffs' request for summary judgment on this issue, and it grants Purolite's motion for summary judgment on this theory asserted by plaintiffs.
Although Purolite expresses its uncertainty concerning whether plaintiffs are pursuing the theories (they are not mentioned in the Pretrial Order), Purolite moves for summary judgment on any claim by plaintiffs for infringement based on indirect infringement or the doctrine of equivalents, based on a lack of any evidence to support such theories. Plaintiffs have not opposed this request for summary judgment. Accordingly, the Court awards summary judgment in favor of Purolite on any claim for infringement asserted by plaintiffs based on a theory of
"Determining whether a patent claim has been infringed involves two steps: (1) claim construction to determine the scope of the claims, followed by (2) determination of whether the properly construed claim encompasses the accused structure." Bai v. L & L Wings, Inc., 160 F.3d 1350, 1353 (Fed.Cir.1998) (citation omitted). The first step involves a question of law for the court, while the second presents a question of fact, although "a literal infringement issue is properly decided on summary judgment when no genuine issue of material fact exists, in particular, when no reasonable jury could find that every limitation recited in the properly construed claim either is or is not found in the accused device." See id. (citations omitted).
In support of summary judgment, plaintiffs have provided evidence and argued that the accused product, FerrIX, meets all of the limitations in, and thus infringes, Claim 1 (and dependent Claims 7, 10, 11, 12, and 13) and Claim 15. In response, and in its own motion for summary judgment, Purolite points to only three claim limitations (two in Claim 1, one in both Claim 1 and Claim 15) that it argues FerrIX does not satisfy.
Purolite first argues that plaintiffs cannot satisfy the limitation in Claim 1 and Claim 15 of a dispersal "throughout the intermediate." Claim 1 of the patent states as follows:
(Emphasis added.) Claim 15 states as follows:
(Emphasis added.) Plaintiffs contend that the limitation underlined above in each claim is met here because the accused product contains iron oxide in every part of the resin beads that make up the adsorbent, including the core section, the shell section, and even the ring or "halo" between the core and shell. Purolite responds that the iron oxide has not been dispersed "throughout" the intermediate or resin because only a very small percentage of the iron oxide has penetrated to the core of the bead in the accused product.
At the claim construction stage of the litigation, the parties disputed the proper construction of the terms "dispersing"/"dispersed" and "throughout". In its claim construction order, the Court construed "dispersing" and "dispersed" to mean "distributing or spreading" and "distributed
In arguing that the iron oxide in the accused product is not dispersed "throughout" the beads, Purolite relies on the analysis of finished beads by its expert, Dr. Stack. Dr. Stack measured the iron content in each of two beads at 19 points extending from the center of the bead to the outside. Those measurements showed that the iron was concentrated primarily in the outer part of each bead. For instance, Dr. Stack states that the iron concentration near the periphery was more than ten times greater than in the core of the bead and more than 40 times greater than in the halo of the bead; and that the iron contained in the core and halo make up only 0.8 percent of the total iron in the bead. Plaintiffs argue from this evidence that the iron has not been distributed "throughout" the bead — in every part of it or everywhere in it — because there are relatively few iron particles in the core, which therefore contains relatively large areas without iron.
The Court concludes, however, that the accused product does contain iron distributed "throughout" the beads as a matter of law. Dr. Stack's measurements establish, and thus it is undisputed, that there is at least some measurable amount of iron at each radial point in the bead.
Purolite argues that, even if the Court did not require uniformity of concentration of the particles in construing "throughout", it should now construe the term to require at least a certain minimum concentration (such as one percent of the total amount in the bead) at each radial point in the bead (which standard the accused product would fail under Dr. Stack's measurements). The Court declines this invitation to alter its construction, however, as there is no basis in the claims or specification of the patent (or even in any extrinsic evidence) for construing "throughout" in that manner and thus adding a limitation to the claims (let alone any basis for choosing a standard of one percent at each of the points chosen by Dr. Stack).
Purolite also points out that, even if some species of iron has been dispersed "throughout" each bead, the claims require that the dispersed substance be a salt of a metal (Claim 1) or an oxygen-containing compound of iron (Claim 15). Plaintiffs contend that those requirements are met because the dispersed particles in the accused product are iron oxide. Purolite concedes that the iron concentrated so heavily in each bead's shell section is indeed iron oxide. Purolite argues, however, that a question of fact arises concerning whether the iron that has been dispersed to the core of each bead — and thus whether the iron that has been distributed "throughout" each bead — is iron oxide as alleged or some other species of iron.
The Court agrees that this issue presents a question of fact for trial. Plaintiffs rely on the testimony of certain employees of Purolite, who testified that the beads in the accused product are impregnated with iron oxide. Those witnesses did not testify, however, that iron oxide could be found in both the shell and the core of the beads, or that some other species of iron was not also contained in the beads. Although plaintiffs' expert, Dr. Clifford, opines that the iron in the core is iron oxide, Dr. Stack has challenged the bases for that opinion and has provided a reason why one may not presume that the iron in the core is iron oxide from the mere fact that the iron in the shell is iron oxide. Therefore, if the evidence is considered in the light most favorable to Purolite, plaintiffs cannot establish that the iron in the core is iron oxide and thus that iron oxide has been dispersed "throughout" the beads. Accordingly, an issue of fact remains, and neither side is entitled to summary judgment concerning this specific issue of whether iron oxide, and not merely iron or some other species of iron, has been dispersed "throughout" the intermediate or resin.
Purolite next argues that plaintiffs cannot satisfy the limitation in Claim 1 that the dispersal of the iron oxide be "by the action of the oxidant." The parties agree that in the case of the accused product, the oxidant is permanganate. In support of this argument, Purolite relies only on the evidence of a test conducted by Dr. Stack. In that test, when Dr. Stack loaded virgin beads with permanganate in the concentration used in the manufacture of the accused product, he discovered that the permanganate did not travel to the core section of the beads. Purolite argues that this test demonstrates that the iron in the core was not dispersed there "by action of" the permanganate — and thus must have been dispersed there in some other way — because otherwise permanganate would have been found in the core of the tested beads.
The Court rejects this argument by Purolite for a number of reasons. First, Dr. Stack's test involving permanganate was not intended to test whether the iron in the core arrived there by action of the oxidant. Instead, Dr. Stack's report indicates that he loaded the beads with permanganate to confirm the stratification of the iron concentration in the bead (heavily concentrated in the shell section). Thus, it is not surprising that Dr. Stack's report does not contain a statement by which he opines that the iron in the core section of the bead in the accused product is not dispersed there "by action of" the permanganate.
Therefore, Purolite has failed to create an issue of fact by providing evidence to controvert plaintiffs' evidence that the iron has been dispersed throughout the beads of the accused product by action of the permanganate, as required for infringement of Claim 1. Accordingly, this defense fails as a matter of law; plaintiff's summary judgment motion is granted, and Purolite's summary judgment motion is denied, to that extent.
Finally, Purolite argues that plaintiffs cannot satisfy the limitation in Claim 1 that the substance dispersed in the second step of the method in Claim 1 be a "salt of said metal." It is undisputed that in the accused product, the substance dispersed is ferric oxide. In support of this argument, Purolite relies solely on deposition testimony by Dr. SenGupta, the inventor, concerning the following excerpt from the patent's specification:
(Patent at 10:17-24.) In his deposition, Dr. SenGupta first confirmed that the "ferrous salts" listed in the excerpt are all "metal salts." Then Dr. SenGupta agreed that the four substances subsequently listed as exemplar forms of the "hydrated iron oxide particles" are all "metal oxides," different from "metal salts" such as the ferrous salts previously discussed. Based solely on that testimony, Purolite argues that because a metal oxide, such as iron (ferric) oxide, is different from a "metal salt," the accused product does not include a dispersed "salt of said metal," as required for infringement of Claim 1.
The Court also rejects this argument. The patent clearly contemplates that the substance dispersed may be an iron oxide. Thus, the Court construes "salt of said metal" as used in Claim 1 (an issue of law for the Court) to include iron oxides. The specification of the patent supports that construction, as the primary embodiments discussed by the patent's specification involve the dispersion of HFO ("Hydrated Fe Oxide"), an iron oxide. See Patent at 3:7-8 (summary of invention), 3:23-25 (summary), 3:36-37 (summary), 5:16-18, 6:62-64.
(Patent 2:47-53 (summary of invention) (emphasis added).) Dr. Clifford's report contains the opinion that the "salt of a metal" and the "salt of said metal" from Claim 1 are represented in the accused product by two different substances, ferrous sulfate heptahydrate and ferric oxide/hydroxide respectively. The language of Claim 1 supports this dichotomy — Claim 1 does not state that "said" salt of a metal (thus, the same "salt of a metal" that was reacted in solution) is dispersed; rather "a salt of said metal" (potentially, then, a different salt of the same metal) is dispersed.
For these reasons, Dr. SenGupta's testimony does not provide evidence, in contravention of plaintiffs' evidence that the accused product meets the limitations in Claim 1, that the ferric oxide dispersed in the accused product is not a "salt of said metal" as that term has now been interpreted by the Court. Accordingly, this defense fails as a matter of law; plaintiff's summary judgment motion is granted, and Purolite's summary judgment motion is denied, to that extent.
Thus, with respect to the issue of infringement, the only issue remaining for trial is whether the iron that is dispersed to the core section of the beads in the accused product is iron oxide, as required for infringement of Claim 1 (and thus dependent Claims 7, 10, 11, 12, and 13). In all other respects, plaintiffs have established infringement of Claim 1 as a matter of law, subject to Purolite's sole remaining invalidity defense, see infra Part V.B.5. Plaintiffs have established infringement of Claim 15 to the same extent, although, as discussed below, Purolite is entitled to summary judgment on its defense that Claim 15 is invalid, see infra Part V.B.6.
Purolite seeks summary judgment on plaintiffs' theory that license estoppel precludes Purolite's assertion of patent invalidity. Plaintiffs concede that this theory has been abolished. Accordingly, the Court grants Purolite summary judgment on plaintiffs' theory of license estoppel.
a. Purolite argues that plaintiffs have not substantively opposed its motion for summary judgment with respect to the issue of invalidity based on (i) 35 U.S.C. § 112 as applied to Claim 15; or (ii) 35 U.S.C. § 112 ¶ 2 as applied to all of the patent's claims. The Court agrees with plaintiffs, however, that Purolite did not preserve any such claims in the Pretrial Order. Purolite argues that it did cite to Section 112 in the Pretrial Order. In stating its contentions in that order, however, Purolite very specifically alleged three bases for invalidity: Claims 1-14 fail to meet the enablement requirement of Section 112 because Claim 1 describes an inoperable process; the specification does not meet the written description and enablement requirements of Section 112 with respect to Claims 1-14 (i.e., Claim 1 and its dependent claims); and Claim 15 is anticipated and rendered obvious by prior art, pursuant to 35 U.S.C. §§ 102, 103. (See Pretrial Order ¶ 5.b.) Purolite thus gave notice that it intended to pursue only those specific theories of invalidity as applied to those specific claims. Purolite has not moved to amend the Pretrial Order to include any additional claim. Accordingly, Purolite may not assert these invalidity theories, and Purolite's motion for summary judgment on these theories is therefore denied.
b. In opposing plaintiffs' motion for summary judgment, Purolite notes the statement in plaintiffs' statement of facts that performance of the reactions in Claims 1-14 is basic chemistry that has been practiced for decades. Purolite argues that by that statement plaintiffs have admitted that Claims 1-14 are invalid as anticipated under 35 U.S.C. § 102. Again, however, this specific theory of invalidity has not been preserved in the Pretrial Order, and therefore Purolite may not rely on the theory.
The patent in this case is presumed valid, and the burden of establishing invalidity rests on Purolite, the party asserting such invalidity. See 35 U.S.C. § 282. Purolite must establish invalidity by a heightened standard requiring clear and convincing evidence. See Microsoft Corp. v. i4i Ltd. Partnership, ___ U.S. ___, 131 S.Ct. 2238, 2244-49, 180 L.Ed.2d 131 (2011); see also Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1359 n. 5 (Fed.Cir.2007) ("The `clear and convincing' standard is an intermediate standard which lies somewhere in between the `beyond a reasonable doubt' and the `preponderance of the evidence' standards of proof."). The "clear and convincing evidence" standard applies in the summary judgment context. See Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1378 (Fed.Cir.2005).
Id. ¶ 1. Purolite first argues that Claim 1 does not comply with the "enablement" requirement of Section 112 because it recites an inoperable process. "A claimed invention having an inoperable or impossible claim limitation ... lacks an enabling disclosure under 35 U.S.C. § 112." EMI Group N. Am., Inc. v. Cypress Semiconductor Corp., 268 F.3d 1342, 1348 (Fed.Cir. 2001) (citation omitted).
Purolite argues that the process in Claim 1 is inoperable and impossible because, under the Court's constructions, an "anionic oxidant" cannot react as required in the first step of the claimed method. In the claims construction process, the Court adopted the parties' agreed construction of the term "anionic oxidant" to mean "any anionic compound, such as potassium permanganate." Purolite relies on the opinion of its expert, Dr. Stack, that a compound is technically neutral and does not carry a charge, and thus cannot react with another material. Purolite therefore argues that an "anionic oxidant," as construed by the Court cannot participate in the required reaction.
Purolite also points to dependent Claim 13, which claims the method from Claim 1 with a permanganate as the anionic oxidant. The Court previously adopted the parties' agreed construction of the term "permanganate" to mean "a salt containing the anion MnO
The Court concludes that the undisputed evidence demonstrates that Claim 1 is not inoperable as alleged by Purolite. Plaintiffs' expert, Dr. Clifford, has offered his opinion that the anionic oxidant, even though a compound or a salt, can react because the reaction may be done in a solution that dissociates the compound or salt into its charged constituent substances. Dr. Stack admitted in his deposition that compounds and salts may become charged (and thus able to react) after they are placed in a solution and undergo dissociation.
Purolite points to dependent Claim 2, which recites Claim 1's method with the first reaction "carried out by passing a
Because Dr. Stack has conceded that a compound or a salt may react if a solution is used, the process in Claim 1 would only be inoperable if the claim forbids the use of a solution for the first reaction. The Court does not construe Claim 1 in that manner. Accordingly, Purolite has not met its burden, as a matter of law, to show by clear and convincing evidence that Claim 1 is invalid under Section 112 as inoperable. Plaintiffs are awarded summary judgment on this invalidity defense, and Purolite's summary judgment motion is denied as it relates to this defense.
Purolite next argues that Claim 1 is invalid under 35 U.S.C. § 112 because the patent does not comply with the statute's requirement that "[t]he specification shall contain a written description of the invention." The Federal Circuit recently described this requirement as follows:
Atlantic Research Marketing Sys., Inc. v. Troy, 659 F.3d 1345, 1353-54 (Fed.Cir. 2011) (internal quotations omitted). "To overcome the presumption of the validity of patents, the accused must show that the claims lack a written description by clear and convincing evidence." Hynix Semiconductor, Inc. v. Rambus Inc., 645 F.3d 1336, 1351 (Fed.Cir.2011). "While compliance with the written description requirement is a question of fact, this issue is amenable to summary judgment in cases where no reasonable fact finder could return a verdict for the non-moving party." Atlantic Research, 659 F.3d at 1353 (internal quotations omitted).
The Federal Circuit has adopted the standard for this requirement set out in the guidelines promulgated by the United States Patent and Trademark Office (PTO), found at 66 Fed.Reg. 1099 (2001). See Invitrogen Corp. v. Clontech Labs., Inc., 429 F.3d 1052, 1072 & n. 19 (Fed.Cir. 2005). Those guidelines provide as follows:
PTO Guidelines, 66 Fed.Reg. at 1104 (footnotes omitted).
The Court concludes as a matter of law that the patent's specification satisfies this standard. The specification describes the invention in detail with respect to each limitation in Claim 1, and it contains numerous drawings, chemical formulas, and detailed descriptions of each step in the claimed method. Thus, the specification shows possession of the claimed invention. Moreover, each of the examples set forth in the guidelines is present here, as the specification describes actual reductions to practice, discloses drawings and formulas showing that the invention is complete and "ready for patenting," and describes in detail many identifying characteristics of the invention.
In arguing that the written description requirement is not met here, Purolite notes that although the specification focuses on the use of certain materials (specific polymeric anionic exchange resins, either potassium permanganate or sodium hypochlorite, and ferrous sulfate), Claim 1 is actually broader, claiming a method using "a material that exhibits anion exchange behavior" (not merely the specific resins), "an anionic oxidant" (not merely permanganate or hypochlorite), and "a salt of a metal" (not merely ferrous sulfate). Thus, Purolite argues that the specification does not describe the full scope of the claim, which covers the use of any such material and oxidant and salt of a metal. See Cooper Cameron Corp. v. Kvaerner Oilfield Prods., Inc., 291 F.3d 1317, 1323 (Fed.Cir. 2002) ("a broad claim is invalid when the entirety of the specification clearly indicates that the invention is of a much narrower scope") (citing Gentry Gallery, Inc. v. Berkline Corp., 134 F.3d 1473, 1479-80 (Fed.Cir.1998)).
The Court rejects this argument. The specification clearly encompasses a broader scope than the embodiments that use the specific resins, permanganate/hypochlorite, and ferrous sulfate. See Cordis Corp. v. Medtronic AVE, Inc., 339 F.3d 1352, 1365 (Fed.Cir.2003) ("A specification may, within the meaning of 35 U.S.C. § 112 para. 1, contain a written description of a broadly claimed invention without describing all species that the claim encompasses.") (quoting Utter v. Hiraga, 845 F.2d 993, 998 (Fed.Cir.1988)). The specification does not state that the invention is limited to those particular materials, but rather describes the invention in the broader terms found in Claim 1. See, e.g., Patent at 2:36-60. More specifically, the specification states that although certain resins are preferred, a wide variety of resins may be used, see id. at 2:61-3:2, 9:67-10:12 (listing several examples); that "any anionic oxidizing agent can be used in
Purolite relies on the opinion of its expert, Dr. Stack. In his report, however, Dr. Stack noted the specification's language indicating that materials other than those used in the embodiments may be used. Moreover, Dr. Stack's opinion that "the specification would not convey to a person of ordinary skill in the art that the inventors were in possession of the alleged invention encompassed by the full scope of claim 1" is not supported by any analysis of the specification and its broad language.
Purolite also cites Dr. SenGupta's denials of the following three requests for admission:
Purolite concedes that these denials do not have the conclusive effect given to admissions under Fed.R.Civ.P. 36, see, e.g., Audiotext Communications Network, Inc. v. U.S. Telecom, Inc., 1995 WL 625744, at *7 (D.Kan. Oct. 5, 1995); nevertheless, Purolite argues that the denials at least have evidentiary value and support its position that the patent does not satisfy the written description requirement. The Court, however, does not find Dr. SenGupta's bare denials, without further explanation, to be probative. The requests do not refer specifically to the written description requirement of 35 U.S.C. § 112, and Dr. SenGupta has not denied that the patent complies with the statute. Moreover, as previously stated, the fact that a patent does not describe every possible example (listing every possible combination of the possible materials) does not indicate non-compliance with the statute. Thus, the denials
For these reasons, the Court concludes as a matter of law that Purolite has failed to meet its burden to provide clear and convincing evidence to overcome the presumption that Claim 1 of the patent satisfies Section 112's written description requirement. Accordingly, the Court awards plaintiffs summary judgment on this invalidity defense asserted by Purolite, and it denies Purolite's motion for summary judgment as it relates to this defense.
Purolite next asserts that Claim 1 and its dependent claims fail to satisfy the "enablement" requirement of 35 U.S.C. § 112. As noted above, Section 112 contains the following requirement:
Id. ¶ 1. "The enablement requirement is satisfied when one skilled in the art, after reading the specification, could practice the claimed invention without undue experimentation." Sitrick v. Dreamworks, LLC, 516 F.3d 993, 999 (Fed.Cir.2008) (internal quotation omitted).
Whether a claim satisfies the enablement requirement of Section 112 is a question of law based on underlying facts. See id.; Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1305 (Fed.Cir.2010) (enablement "is a question of law with underlying questions of fact regarding undue experimentation"); AK Steel Corp. v. Sollac and Ugine, 344 F.3d 1234, 1245 (Fed.Cir.2003) ("whether a patent complies with the enablement requirement depends upon a factually intensive inquiry regarding the amount of experimentation required"); National Recovery Technologies, Inc. v. Magnetic Separation Sys., Inc., 166 F.3d 1190, 1197 (Fed.Cir.1999) ("Whether making and using the claimed invention would have required undue experimentation is a legal conclusion based upon underlying facts."). Because a patent is presumed valid, the party asserting invalidity must show that the enablement requirement is not satisfied to a standard requiring clear and convincing evidence. See Sitrick, 516 F.3d at 999.
Purolite again notes that Claim 1, which is not limited to any particular "material that exhibits anion exchange behavior," "anionic oxidant," or "salt of a metal," is broader than the specification's two examples that use specific materials. Purolite thus argues that Claim 1 and the dependent claims are not enabled because the specification teaches only how to practice the invention with those particular combinations of materials, and does not explain which other combinations of materials may be used to produce a selective adsorbent capable of exchanging anions, as required by the claim. See id. ("The full scope of the claimed invention must be enabled."); National Recovery, 166 F.3d at 1196 ("The scope of the claims must be less than or equal to the scope of the enablement.").
Plaintiffs argue that the specification's two detailed examples are sufficient for enablement here, based on the general principle that "the enablement requirement is met if the description enables any mode of making and using the invention." See Johns Hopkins Univ. v. CellPro, Inc., 152 F.3d 1342, 1361 (Fed.Cir.1998) (quoting Engel Indus., Inc. v. Lockformer Co.,
The Court does not agree the specification's inclusion of the two detailed examples entitles plaintiffs to summary judgment on this issue. As Purolite has pointed out, the scope of Claim 1 is much broader and covers various other materials under the claim's broad categories. Thus, the two examples do not show how a practitioner could practice the full scope of Claim 1 by using other materials covered by the claim. Moreover, although the specification lists alternative materials, the specification does not describe how any such alternative materials could be combined to allow the invention (as fully claimed) to be made and used. In cases in which the specification does not enable the full scope of a broad claim, the Federal Circuit has rejected similar arguments based on the "one mode" principle. See Automotive Technologies Int'l, Inc. v. BMW of N. Am., Inc., 501 F.3d 1274, 1285 (Fed.Cir.2007); Liebel-Flarsheim Co. v. Medrad, Inc., 481 F.3d 1371, 1379-80 (Fed.Cir.2007).
The other cases cited by plaintiffs, Angstadt and Atlas Powder, also suggest that further inquiry is needed. In Angstadt, the court stated that requiring disclosure of a test with every species covered by the claim would require the disclosure of information concerning thousands of catalysts and would force inventors to carry out a prohibitive number of actual experiments, thereby discouraging patent applications in unpredictable areas. See Angstadt, 537 F.2d at 502-03. The court proceeded, however, to examine whether the evidence showed that one skilled in the art could make and use other material without undue experimentation. See id. at 503-04. In Atlas Powder, the defendant essentially made the same argument made by Purolite in this case:
Atlas Powder, 750 F.2d at 1576. The court agreed with the district court's conclusion that listing all operable emulsions would have been impossible and was unnecessary. See id. Such detail was unnecessary, however, because the district court had found that a particular scientific principle allowed those skilled in the art to know how to select the particular ingredient substances. See id. The court noted, however, that "if the number of inoperative combinations becomes significant, and in effect forces one of ordinary skill in the art to experiment unduly in order to practice the claimed invention, the claims might indeed be invalid." See id. at 1576-77; see also Amgen Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1335-37 (Fed.Cir.2003) (affirming the district court's application of the "one mode" principle where the evidence showed that the claimed invention could be made and used "by experimentation falling short of undue").
Similarly in the present case, although the specification need not have listed every operable combination of materials covered by Claim 1, such combinations must be
AK Steel, 344 F.3d at 1244 (citations omitted).
Thus, the issue here becomes whether one skilled in the art could practice the full scope of Claim 1, using materials other than those disclosed in the specification's detailed embodiments, without undue experimentation.
In re Wands, 858 F.2d 731, 737 (Fed.Cir. 1988) (citation and footnote omitted); accord Elan Pharmaceuticals, Inc. v. Mayo Foundation for Med. Educ. and Research, 346 F.3d 1051, 1055 (Fed.Cir.2003) (quoting Wands). The following factors may be considered in determining whether a disclosure requires undue experimentation:
ALZA Corp. v. Andrx Pharmaceuticals, LLC, 603 F.3d 935, 940 (Fed.Cir.2010) (quoting Wands, 858 F.2d at 737).
The Court concludes that neither party is entitled to summary judgment on this defense on the present record before the Court. Purolite has presented evidence from its expert, Dr. Stack, who applied the factors set forth above and opined that undue experimentation would be required to practice the full scope of Claim 1 and its dependent claims. In particular, Dr. Stack cited the great number of possible combinations of materials, his opinion that the reason why some combinations would not work may not be apparent to one in the art, the lack of guidance and working examples in the specification, the patent's contention that the invention was pioneering, the unpredictable nature of the art, and the breadth of the claims. That evidence, viewed in the light most favorable to Purolite, precludes summary judgment in favor of plaintiffs. Plaintiffs rely on the opinions of their own expert, Dr. Clifford, who disagrees with Dr. Stack's conclusions. Plaintiffs also cite to Dr. Stack's deposition, in which he testified that various reactions and processes involved in practicing the invention are routine or constitute basic chemistry or are within the knowledge of one of ordinary skill in the art; that certain relevant data may be found in reference books or extrapolated by the practitioner; and that certain relevant results could be predicted by one in the art. This evidence, viewed in the light most favorable to plaintiffs, precludes summary
Thus, the Court cannot rule on this issue of undue experimentation as a matter of law on the record presently before it. Accordingly, an issue of fact remains for trial, and both parties' summary judgment motions are denied as they relate to this defense of invalidity based on non-enablement.
Purolite seeks summary judgment on its defense that Claim 15 of the patent is invalid as anticipated by prior art pursuant to 35 U.S.C. § 102. Claim 15 states as follows:
The Federal Circuit has described the anticipation defense as follows:
Brown v. 3M, 265 F.3d 1349, 1351 (Fed. Cir.2001) (citations omitted).
Because of the statutory presumption of the validity of the patent, Purolite must prove anticipation by clear and convincing evidence. See Tokai Corp. v. Easton Enters., Inc., 632 F.3d 1358, 1367 (Fed.Cir. 2011). Moreover, if the particular prior art was considered by the PTO during examination of the patent application, the challenger bears an enhanced burden of overcoming the deference that is due to the PTO's decision. See id.
As a preliminary matter, Purolite argues that the phrase in the preamble to Claim 15 that describes the claimed adsorbent as one "for the selective removal of ligands from fluids" does not constitute a limitation on the claim for purposes of the anticipation analysis.
Bicon, Inc. v. Straumann Co., 441 F.3d 945, 952 (Fed.Cir.2006) (citations and internal quotations omitted). The Federal Circuit has explained at some length the relevant considerations for construing a preamble:
Catalina Marketing Int'l, Inc. v. Coolsavings.com, Inc., 289 F.3d 801, 808-09 (Fed. Cir.2002) (citations and internal quotations omitted). Whether the preamble is a limitation of the claim presents a question of law for the Court. See Intirtool, Ltd. v. Texar Corp., 369 F.3d 1289, 1293-94 (Fed. Cir.2004).
Moreover, the patent's prosecution history confirms that the preamble was not added to overcome or to distinguish any prior art. Plaintiffs note that the PTO examiner first rejected the similar preamble to Claim 1 on the basis that "selective" was indefinite (before ultimately acknowledging a particular definition and withdrawing the objection). Plaintiffs have not cited any authority, however, that would indicate that an examiner would not have lodged an indefiniteness objection unless the preamble was deemed a claim limitation. Nor have plaintiffs cited any authority supporting the argument that the Court should consider the examiner's thoughts in construing a claim.
The other considerations cited by the Federal Circuit do not favor treatment of the preamble in Claim 15 as a limitation. The preamble is not essential to the structure described in the body of the claim, and the structure is complete without reference to the preamble. The body of the claim does not rely on the preamble as an antecedent to its terms, and the preamble is not essential to an understanding of the terms or limitations in the claim. The preamble does not recite an additional structure, and as noted above, the inventor did not rely on the preamble to distinguish prior art. Claim 15 is an apparatus or composition claim, and thus the patentability does not depend on the use of the invention. The Court concludes that this is not one of the "rare instances" in which a preamble to such a claim that states the invention's use should be deemed a limitation, and the Court construes Claim 15 in that manner as a matter of law.
As another preliminary matter, the Court addresses the proper construction
The Court declines to interpret "adsorbent" in the patent claims to exclude holding ions. This particular issue was not raised by the parties at the claim construction stage, and thus the Court did not consider the issue in originally construing "adsorbent". In its claim construction order, the Court intended to construe "adsorbent" in accordance with its ordinary meaning in the art as reflected in a scientific dictionary. See Memorandum and Order of July 22, 2011, at 8, 2011 WL 3022445 (Doc. # 344). The Court followed Purolite's proposed construction, which had been taken from the dictionary's definition of "adsorbent" as "[a] substance which has the ability to condense or hold molecules of other substances on its surface." See id. The same dictionary defines "adsorption", however, to mean "[a]dherence of the atoms, ions, or molecules of a gas or liquid to the surface of another substance, called the adsorbent." That definition indicates that "adsorbent" and "adsorption" are related in scope and are not limited to some technical definition of "molecules" that could exclude ions or particular kinds of atoms. Moreover, in its prior ruling, the Court stated that "this same definition was cited by the applicant in the application process for the Patent." See id. That statement was not quite accurate, as the applicant had cited this dictionary's definition of "adsorption," while the Court adopted the dictionary's definition of "adsorbent". The fact that the applicant relied on a definition including "atoms, ions, and molecules," however, supports the Court's conclusion that the patent was not intended to exclude a substance that hold ions on the surface in referring to an "adsorbent".
This revised construction is further supported by the fact that plaintiffs' proposed construction of "adsorbent" would have included "an anion exchange resin" as an example. Indeed, at the claim construction hearing, plaintiffs' counsel conceded that the starting material — the "material that exhibits anion exchange behavior" — may be an adsorbent. The Court also noted in its prior order that the starting "material that exhibits anion exchange behavior" may be an adsorbent. See id. at 11. Finally, plaintiffs' expert concedes that practitioners in the art often include the process of ion exchange within the scope of the definition of adsorption.
For these reasons, the Court revises its prior construction, and it construes "adsorbent" in the patent's claims as a matter of law to mean "a substance that has the ability to condense or hold atoms, ions, or molecules of other substances on its surface."
The Court then moves to the ten particular prior art references cited by Purolite and its expert, Dr. Stack, as invalidating Claim 15 as anticipated under 35 U.S.C. § 102. Five of the references are
As an initial matter, plaintiffs do not dispute that these MIEX references were not placed before the PTO examiner. Accordingly, as recognized by the Supreme Court, Purolite may more easily satisfy the clear-and-convincing evidence standard with respect to these references. See Microsoft Corp., 131 S.Ct. at 2251.
In evidence submitted by Purolite, Dr. Stack has shown how these references satisfy each of the limitations contained in Claim 15. In response, plaintiffs and their expert, Dr. Clifford, make two primary arguments. First, they argue that these references do not describe an adsorbent that is selective for ligands. As the Court ruled above, however, Claim 15 does not include as a limitation the preamble's reference to the selective removal of ligands. Thus, that argument fails as a matter of law. Second, they argue that the references do not describe an "adsorbent" because they instead describe ion exchangers. Again, however, the Court has rejected such an interpretation of "adsorbent" as a matter of law. Plaintiffs have not offered any other reasons why these references do not meet all of the limitations of Claim 15 as presently construed by the Court. In particular, plaintiffs do not dispute that these references, which are all described as containing an iron compound "throughout" the resin, satisfy the "dispersed throughout" limitation of claim 15.
Therefore, the Court concludes as a matter of law that Purolite has shown, by clear and convincing evidence, that Claim 15 is invalid under 35 U.S.C. § 102 as anticipated by four of the MIEX references — the Nguyen patent, the Ballard patent, the Ballard patent application, and the MIEX product itself.
Although the Court has ruled Claim 15 to be invalid, the Court nonetheless addresses Purolite's alternative defense of obviousness. In its motion for summary judgment, Purolite has not made any argument that Claim 15 is invalid as obvious pursuant to 35 U.S.C.
The Court concludes that Purolite has failed to provide evidence or even show by argument that Claim 15 is invalid as obvious in light of the prior art. The burden does not fall to plaintiffs to show that particular evidence is required. Purolite has not cited any expert opinion that Claim 15 is obvious, and in fact, Purolite's counsel represented at Dr. Stack's deposition that Purolite would not rely on any expert testimony for its assertion of obviousness. Purolite has not shown or even tried to explain how logic or common sense makes Claim 15 obvious in light of any particular prior art. Accordingly, Purolite has not met its burden in opposing summary judgment, including the heightened burden of proof on this issue, and summary judgment in plaintiffs' favor on this issue is therefore appropriate.
With respect to Claim 1 of the patent, only Purolite's defense based on the enablement requirement remains for trial, and plaintiffs are awarded summary judgment on Purolite's other theories of invalidity. The Court rules that Claim 15 is invalid as anticipated by prior art as a matter of law, and Purolite is awarded summary judgment on that defense and thus on plaintiffs' claim for infringement of Claim 15.
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiffs' motion to exclude expert testimony by Richard Troxel (Doc. #426) is
IT IS FURTHER ORDERED BY THE COURT THAT plaintiffs' motion to exclude certain expert sur-rebuttal reports (Doc # 428) is
IT IS FURTHER ORDERED BY THE COURT THAT defendant Purolite's motion to exclude expert testimony by Dennis Clifford (Doc. # 430) is
IT IS FURTHER ORDERED BY THE COURT THAT plaintiffs' motion for leave to file a declaration by Dr. Clifford (Doc. # 542) is
IT IS FURTHER ORDERED BY THE COURT THAT plaintiff Layne's motion for summary judgment on certain of Purolite's counterclaims (Doc. # 404) is
IT IS FURTHER ORDERED BY THE COURT THAT Layne's motion for partial summary judgment on its claims for breach of contract (Doc. # 406) is
IT IS FURTHER ORDERED BY THE COURT THAT plaintiffs' motion for summary judgment on its claims of patent infringement (Doc. # 408) is
IT IS FURTHER ORDERED BY THE COURT THAT Purolite's motion for summary judgment on certain of plaintiffs' claims (Doc. # 410) is
IT IS SO ORDERED.
The Court also rejects Layne's argument that this claim is barred by laches, waiver, or estoppel. Layne improperly raised this argument for the first time in its reply brief. See, e.g., U.S. Fire Ins. Co. v. Bunge N. Am., Inc., 2008 WL 3077074, at *9 n. 7 (D.Kan. Aug. 4, 2008) (court will not consider issues raised for first time in reply brief) (citing Minshall v. McGraw Hill Broadcasting Co., 323 F.3d 1273, 1288 (10th Cir.2003)). Moreover, Layne failed to analyze the elements of any of those doctrines, and thus has failed to establish those affirmative defenses as a matter of law.