Wednesday, February 10, 2016

3M loses in Transweb appeal at CAFC

In Transweb v. 3M, Seth Waxman argued for the appellant 3M, but the CAFC affirmed the judgment of Judge Faith
S. Hochberg of DNJ.

The beginning of the opinion shows the extent of 3M's loss:

3M sued TransWeb for infringement of several patents.
TransWeb sued for declaratory judgment of invalidity
and non-infringement of the patents. A jury found
the patents to be invalid based on TransWeb’s prior public
use of the patented method. In accordance with an advisory
verdict from the jury, the district court found the
patents unenforceable due to inequitable conduct. The
jury also found 3M to be liable for a Walker Process antitrust
violation and that attorney fees were an appropriate
antitrust remedy. The district court awarded approximately
$26 million to TransWeb, including trebled attorney
fees as antitrust damages. The primary issues are
whether sufficient corroborating evidence exists to support
the finding of prior public use by TransWeb, and
whether the attorney fees are an appropriate basis for
damages under the antitrust laws in this context. We
hold in the affirmative on both issues. For the latter
issue, we find that TransWeb’s attorney fees appropriately
flow from the unlawful aspect of 3M’s antitrust violation
and thus are an antitrust injury that can properly
serve as the basis for antitrust damages. For these reasons,
we affirm the district court’s judgment.

The decision outlines the technology:

TransWeb and 3M independently developed a technique
for imparting this electret characteristic by using
plasma fluorination. Fluorination involves introducing
fluorine atoms into the chemical structure of the filter
web. Previously known techniques involved mixing
fluorine compounds into the melted filter material, but
this proved disadvantageous. Instead, TransWeb and 3M
both discovered that it would be advantageous to first
form the fibrous web and then introduce the fluorine
atoms into the chemical structure. This technique involves
exposing a gaseous fluorine compound to the
surface of the filter web in the presence of plasma. The
intense heat and electromagnetic energy introduced by
the plasma cause some of the chemical bonds on the
surface of the filter web to break, and the fluorine atoms
fill in those bonds to form fluorine compounds on the
surface of the filter web.
Plasma-fluorinated filter media are particularly effective
in oily environments, where other types of filter
media might perform poorly or quickly degrade.

As background, wikipedia discusses what a "plasma" is:

A plasma can be created by heating a gas or subjecting it to a strong electromagnetic field applied with a laser or microwave generator. This decreases or increases the number of electrons, creating positive or negative charged particles called ions, and is accompanied by the dissociation of molecular bonds, if present.
The presence of a significant number of charge carriers makes plasma electrically conductive so that it responds strongly to electromagnetic fields.

A significant issue in this case:

The present appeal focuses largely on the events surrounding
a filtration industry exposition that occurred in
late April and early May of 1997. It is uncontested that
TransWeb’s founder, Kumar Ogale, attended the expo and
handed out samples of filter material. The filter material
included samples of TransWeb’s “T-Melt” products, an
identifier for the general class of melt-blown, i.e., nonwoven
fibrous web, media. The primary dispute is whether
Mr. Ogale handed out, more specifically, samples of the
“T-Melt P” products, which is the specific class of plasmafluorinated
T-Melt products. Mr. Ogale testified at trial
that he did in fact hand out T-Melt P samples at the expo,
though no independent documents or testimony evidence
this fact.
The parties do not contest that if Mr. Ogale
handed out T-Melt P samples at the expo, then they
would serve as prior art to the plasma fluorination technique
of the claimed methods. The expo occurred more
than one year prior to the priority date of the patents
asserted in this case, so any public disclosure of plasma
fluorination at the expo would be a statutory bar to patentability,
at least based on that feature

The actions at DNJ:

The district court in New Jersey ultimately presented
the following issues to a jury: infringement of claims 31
and 57 of the ’458 patent; invalidity for obviousness of
claims 31 and 57; unenforceability of the ’458 and ’551
patents due to inequitable conduct; Walker Process antitrust
violation based on fraudulent procurement and
subsequent assertion of the ’458 and ’551 patents; sham
litigation antitrust violation based on assertion of the ’458
and ’551 patents; entitlement to lost profits damages for
antitrust violations; and entitlement to attorney fees as
damages for antitrust violations. The jury delivered the
following verdicts: claims 31 and 57 are not infringed;
claims 31 and 57 are invalid; both patents are unenforceable;
3M committed a Walker Process violation but not a
sham litigation violation; and TransWeb is entitled to lost
profits and attorney fees as antitrust damages.
The district court entered judgment in accordance
with the jury verdicts. 3M moved for judgment as a
matter of law, which the district court denied.

The CAFC laid out some of the pertinent law:

Oral testimony by an interested party on its own will
generally not suffice as “clear and convincing” evidence of
invalidity. See Lazare Kaplan Int’l v. Photoscribe Techs.,
628 F.3d 1359, 1374 (Fed. Cir. 2010); Price v. Symsek, 988
F.2d 1187, 1194 (Fed. Cir. 1993). Rather, such oral testimony
must be corroborated by some other evidence. See
Woodland Tr. v. Flowertree Nursery, Inc., 148 F.3d 1368,
1371 (Fed. Cir. 1998). The corroborating evidence can
include documents and testimonial evidence. See Lazare
Kaplan, 628 F.3d at 1374–75, Adenta GmbH v. OrthoArm,
Inc., 501 F.3d 1364, 1371 (Fed. Cir. 2007), Sandt Tech. v.
Resco Metal & Plastics Corp., 264 F.3d 1344, 1350–51
(Fed. Cir. 2001). Circumstantial evidence can be sufficient.
See Sandt, 264 F.3d at 1351; Knorr v. Pearson, 671
F.2d 1368, 1373 (C.C.P.A. 1982). This corroboration
requirement for testimony by an interested party is based
on the sometimes unreliable nature of oral testimony, due
to the “forgetfulness of witnesses, their liability to mistakes,
their proneness to recollect things as the party
calling them would have them recollect, aside from the
temptation to actual perjury.” Lazare Kaplan, 628 F.3d at
1374 (quoting Washburn & Moen Mfg. Co. v. Beat ‘Em All
Barbed-Wire Co., 143 U.S. 275, 284 (1892)).


A “rule of reason” analysis is used to determine the
sufficiency of corroboration, under which “all pertinent
evidence is examined in order to determine whether the
inventor’s story is credible.” Sandt, 264 F.3d at 1350
(quoting Price, 988 F.2d at 1195) (internal quotation
marks omitted). Importantly, this analysis “does not
require that every detail of the testimony be independently
and conclusively supported” by the corroborating evidence.
Ohio Willow Wood Co. v. Alps South, 735 F.3d
1333, 1348 (Fed. Cir. 2013). Such a requirement would
indeed be “the antithesis of the rule of reason.” Cooper v.
Goldfarb, 154 F.3d 1321, 1331 (Fed. Cir. 1998). We have
generally been most skeptical of oral testimony that is
supported only by testimonial evidence of other interested
persons. Compare Allergan, Inc. v. Apotex Inc., 754 F.3d
952, 968 (Fed. Cir. 2014), and Lacks Indus. v. McKechnie
Vehicle Components USA, 322 F.3d 1335, 1350 (Fed. Cir.
2003), with Adenta, 501 F.3d at 1371–73, and Sandt, 264
F.3d at 1351–52. We have repeatedly noted that contemporaneous
documentary evidence provides greater corroborative
value. See Medichem, S.A. v. Rolabo, S.L., 437
F.3d 1157, 1169–70 (Fed. Cir. 2006); Sandt, 264 F.3d at
1350–51; Finnigan Corp. v. Int’l Trade Comm’n, 180 F.3d
1354, 1366 (Fed. Cir. 1999); Woodland Tr., 148 F.3d at
1373; Price, 988 F.2d at 1196. But there are no hard and
fast rules as to what constitutes sufficient corroboration,
and each case must be decided on its own facts. See
Sandt, 264 F.3d at 1350

The CAFC described 3M's argument as follows:

3M’s legal argument attempts to lead us to a legal
conclusion that this court has repeatedly rejected. 3M
asks us to focus on one particular detail of the oral testimony
and determine whether that detail is independently
evidenced. But we have repeatedly rejected an elementwise
attack on corroboration of oral testimony. See Fleming,
774 F.3d at 1377; Ohio Willow Wood, 735 F.3d at
1348 (characterizing as “misplaced” an argument that a
particular claim feature in oral testimony was not separately
evidenced, and finding the argument incompatible
with the rule of reason); Lazare Kaplan, 628 F.3d at
1373–75; Adenta, 501 F.3d at 1371–73.

Other evidence:

TransWeb’s own patent application, filed at the
same time as the expo, demonstrates that Mr. Ogale had
invented and was seeking patent protection for the plasma-fluorinated
material at least by the time of the expo.
The correspondence with Filtration Group demonstrates
that Mr. Ogale was sending out samples of the plasmafluorinated
T-Melt product shortly after the expo. The
numerous correspondences contemporaneous with the
Filtration Group correspondence, each accompanying
samples of filter material not specifically identified as TMelt,
show that Mr. Ogale was sending out other samples
of filter material that may have been plasma-fluorinated.
The correspondence with Gerson demonstrates that
TransWeb was offering for sale large quantities of the
plasma-fluorinated product within two months of the
expo. Considered in its totality, this body of evidence
provides abundant support for the credibility of
Mr. Ogale’s claim that he distributed the plasmafluorinated
material at the expo. As such, we find no
clear error in the district court’s determination that
Mr. Ogale’s testimony was sufficiently corroborated.

Of interest:

3M further contends that unexpected results and
commercial success demonstrate the non-obviousness of
the claims. For commercial success, 3M relies on a single,
confused exchange between its attorney and TransWeb’s
expert witness at trial, wherein the witness says that he
does not know about the commercial success of 3M’s
products, though maybe he said he did in the past. J.A.
2105–06. Similarly with unexpected results, 3M relies on
a single, self-serving annotation in the ’458 patent inventor’s
notebook and a corresponding statement at trial.
The jury heard and rejected this evidence in concluding
that the claims were obvious. None of these arguments
as to objective indicia demonstrate that the jury was
unreasonable in finding the claims obvious, so we will not
disturb that verdict

As to inequitable conduct under the "but - for" standard:

The expo samples present a definitional case of but for
materiality. During prosecution of the ’497 application,
the examiner initially allowed all claims. When 3M
notified the examiner of one of the TransWeb samples
that it had on hand, the examiner rejected all claims as
obvious over that disclosure and the Angadjivand patent.
Only when 3M clarified its dubious assertion that the
TransWeb samples were only received after signing of a
confidentiality agreement and thus were not prior art did
the examiner allow the claims. Because the examiner
would not have allowed the claims had the TransWeb
samples been properly disclosed as prior art, the
TransWeb samples are but-for material.

The CAFC went into detail on the inequitable conduct:

The district court concluded based on a detailed review
of the record that Marvin Jones, an inventor for the
asserted patents, and Karl Hanson, an in-house attorney
at 3M, both acted with specific intent to deceive the
patent office as to the TransWeb materials. The jury
unanimously reached the same conclusion. While it is not
necessary for us to recount the entire treatment of the
factual record performed so thoroughly by the district
court, see TransWeb, LLC v. 3M Innovative Properties Co.,
16 F. Supp. 3d 385, 398–407 (D.N.J. 2014), we note a few
particular details that demonstrate that the district court
did not clearly err in finding a specific intent to deceive on
the part of Mr. Jones and Mr. Hanson.
The record makes abundantly clear that 3M generally
and Mr. Jones particularly were very much aware of the
samples TransWeb was distributing at the expo. A week
prior to the expo, a group of six 3M employees was party
to a lengthy email coordinating 3M’s efforts to gather
information from TransWeb at the expo. The email
identified two employees as the “point people” in gathering
information from TransWeb. J.A. 6860. The other
parties to the email and their subordinates were to channel
any questions through the point people. One of the
point people had already met with TransWeb and received
“quite a bit of information and non-production
samples.” Id. The email also included an article from
Nonwovens Industry briefly mentioning TransWeb’s TMelt
products. One of the parties to the email was
Mr. Jones’s supervisor, and she forwarded the email to
Mr. Jones on the day that the expo began. Mr. Jones
attended the expo. While he professed at trial to have no
recollection of visiting the TransWeb booth, the district
court found his testimony “simply not credible” and noted
that “his demeanor was one of a witness trying to distance
himself from any knowledge of TransWeb’s presence and
activities at the Expo.” TransWeb, 16 F. Supp. 3d at 399.
Mr. Jones’s supervisor again sent him an email within a
month after the expo detailing the information and samples
received from TransWeb by the point people. This
email noted that TransWeb’s production operations were
up and running, that it was sending samples to potential
clients, that 3M already had a small sample, and that 3M
was expecting a larger sample soon thereafter.


The district court found that Mr. Hanson undertook
an intentional scheme to paper over the potentially prior
art nature of the Racal-received samples. The Racal
employees received the plasma-fluorinated samples from
TransWeb at latest one month after the expo. Therefore,
these samples were highly relevant to what TransWeb
distributed at the expo. The record casts great doubt on
whether Racal had received the samples before or after
execution of a confidentiality agreement, thereby potentially
rendering them public disclosures and prior art to
the ’497 application. At around the same time that 3M
was requesting further samples from TransWeb and
learning of the potential prior art nature of the Racal
samples, Mr. Hanson sent a confusing letter to Mr. Ogale
purporting to clarify some issues as to the confidentially
agreements between TransWeb and 3M and between
TransWeb and Racal. Mr. Hanson had never had any
communication with TransWeb, and the district court
concluded that the only possible purpose for the letter was
to get an admission from Mr. Ogale that the Racalreceived
samples were covered by a confidentiality
agreement, even though this point was itself dubious.
Mr. Hanson subsequently did submit this letter to the
patent office as definitive proof that the TransWeb samples
were not prior art to the ’497 application.
The district court noted other circumstantial evidence
suggesting a specific intent by 3M employees to hide the
prior art nature of the TransWeb products. The district
court noted that only after Mr. Hanson met with the
Racal employee did that employee type meeting notes
from his original meeting with Mr. Ogale after the expo.
Those typed notes contained additional information
regarding patents that had not been in the original handwritten
notes. The district court noted that Mr. Hanson
waited several years between learning of the potential
TransWeb prior art and informing the patent office. In
fact, Mr. Hanson did not disclose the TransWeb material
to the patent office until after negotiations for 3M to
purchase TransWeb had broken down. Further,
Mr. Hanson waited until the last possible moment, when
a notice of allowance had already been mailed, to submit
the TransWeb material in a request for continued prosecution.
The district court found Mr. Hanson’s testimony
at trial attempting to explain this delay wholly incredible.
Based on these factual findings, the district court concluded
that the only reasonable inference that explains
the actions of Mr. Hanson and Mr. Jones is that they
strategically delayed in disclosing the TransWeb prior art
and then intentionally made an inaccurate disclosure of
that material. We can find no clear error in this conclusion,
particularly as the district court’s findings are based
in large degree on its determinations that Mr. Jones and
Mr. Hanson were not credible during relevant parts of
their testimony. See In re Rosuvastatin Calcium Patent
Litig., 703 F.3d 511, 521 (Fed. Cir. 2012) (“‘This court may
not reassess, and indeed is incapable of reassessing,
witness credibility and motive issues on review.’” (quoting
LNP Eng’g Plastics, Inc. v. Miller Waste Mills, Inc., 274
F.3d 1347, 1361 (Fed. Cir. 2001)).

The case also involved antitrust violations:

The jury found that 3M committed a Walker Process
antitrust violation, and awarded TransWeb damages of
lost profits and attorney fees. The district court denied
3M’s motion for JMOL. 3M contests this judgment based
on several purported flaws in market definitions for the
antitrust claim and based on the theory that TransWeb’s
attorney fees are not appropriate antitrust damages for
the Walker Process violation.

Of the attorney fees matter:

No assertion of a patent known to be fraudulentlyobtained
can be a proper use of legal process. No successful
outcome of that litigation, regardless of how much the
patentee subjectively desires it, would save that suit from
being improper due to its tainted origin. Therefore, we
find the holdings of our sister circuits allowing attorney
fees as antitrust damages in contexts such as sham litigation
and lawsuits in furtherance of a broader anticompetitive
scheme to be persuasive arguments in favor of
allowing TransWeb to recover its attorney fees as § 4
damages in this case.

To conclude otherwise would be contrary to the purpose
of the antitrust laws. The antitrust laws exist to
protect competition. See Brown Shoe, 370 U.S. at 320
(1962). If we were to hold that TransWeb can seek antitrust
damages only under option one, forfeiture of competition,
but not option two, defending the anticompetitive
suit, then we would be incentivizing the former over the
latter. This would amount to incentivizing TransWeb to
forfeit competition rather than continue it. This is not in
accord with the purpose of those very same antitrust laws.
Furthermore, it furthers the purpose of the antitrust
laws to encourage TransWeb to bring its antitrust suit
under option two instead of waiting to be excluded from
the market under option one. If TransWeb proceeds only
after being excluded from the market under option one,
then the injury-in-fact will no longer be borne by
TransWeb alone, but rather would be shared by all consumers
in the relevant markets.



Post a Comment

<< Home