Exergen Corporation v. KAZ USA, Inc.

Filing 230

Judge Richard G. Stearns: ORDER entered granting 135 Motion for Summary Judgment; denying 142 Motion for Summary Judgment. "For the foregoing reasons, Kaz's motion for summary judgment on the license defense is DENIED. Exergen's cross-motion is ALLOWED." (RGS, int2)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 13-10628
EXERGEN CORPORATION
v.
KAZ USA, INC.
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR
SUMMARY JUDGMENT ON KAZ’S LICENSE DEFENSE
July 24, 2015
STEARNS, D.J.
In this intellectual property suit, plaintiff Exergen Corporation
accuses defendant Kaz USA, Inc., of infringing U.S. Patent Nos. 6,292,685
(the ’685 patent) and 7,787,938 (the ’938 patent). Kaz asserts as a defense,
inter alia, that it is a licensee for the two patents-in-suit as the result of a
1993 patent license agreement entered between Exergen and Thermoscan,
Inc.

Kaz claims to be the successor-in-interest to Thermoscan’s

temperature measuring business. The parties have filed cross-motions for
summary judgment on the license defense. 1

Kaz has also filed motions for summary judgment on noninfringement, lack of willful infringement, and invalidity because of
obviousness. Exergen has also filed a motion for summary judgment on the
issue of inequitable conduct.
1

BACKGROUND
The August 12, 1993, license agreement was part of a settlement of a
lawsuit brought by Exergen against Thermoscan, alleging infringement of
U.S. Patent No. 5,199,436. At the time of the agreement, Thermoscan
manufactured and sold ear thermometers that used pyroelectric infrared
sensors as transducers, while Exergen manufactured and sold ear
thermometers made with thermopile transducers. The agreement, which
is attached as exhibit D to the Scruggs declaration and exhibit HHH to the
Underwood declaration, “grant[ed] to Thermoscan a non-exclusive license
to make, use, sell and to have made all goods, and to practice all methods
covered by each and every Licensed Patent in the Licensed Field.”
Thermoscan Agreement Art. II. Licensed Patents included
(i) any United States or foreign patent now owned by Exergen or
which Exergen now has the power to license or under which
Exergen now has the ability to direct or compel license; (ii) any
patent which issues on an application which is now pending in
the United States Patent and Trademark Office or any foreign
patent office or which is filed on an invention made prior to the
date of this Agreement now owned by Exergen or which Exergen
now has the power to license or under which Exergen now has
the ability to direct or compel license; or (iii) which issues on any
continuation or division thereof or reissue or reexamination of
any such patent.
Id. Art. I.A. The Licensed Field was defined as “the field of electronic or
electromechanical

instruments

for
2

measuring

any

temperature

characterizing a living person or animal employing any transducer whatever,
except for instruments employing an Excepted Transducer.” Id. Art. I.C. The
parties agree that the Excepted Transducers are essentially thermopiles. See
id. Art. I.B. Kaz’s accused thermometers – the Vicks Forehead Thermometer
V977 and the Braun Forehead Thermometer FHT-1000 – both use
thermopiles as transducers.
Although the license agreement excluded thermometers that employed
thermopile transducers, these could be brought within the grant scope, “[i]f
the relative economic or technical attractiveness of Excepted Transducers
materially changes from circumstances existent at the time of execution of
this Agreement such that it is no longer practicable for Thermoscan to
market a product without an Excepted Transducer.” Id. Art. VII.H. Under
those circumstances,
the restriction in the license of Article II from using an
Ex[c]epted Transducer shall not apply to Exergen’s ambient
compensation invention, claimed in claims 1-5 of said U.S.
Letters Patent No. 5,199,436, claims 7-8 of U.S. Letters Patent
No. 5,012,813, and claim 23 of U.S. Letters Patent No 4,993,419,
and any claims of corresponding scope in any foreign
counterparts,
continuations,
divisions,
reissues,
or
reexaminations thereof.
Id.
The license agreement was not “assignable or transferable by
Thermoscan to a third party without the written consent of Exergen except
3

assignments . . . to the legal successor to Thermoscan’s entire temperature
measuring instruments business as a going concern.” Id. Art. VII.I. In
1995, Gillette Corporation purchased Thermoscan, which was merged into
a company called Gillette Thermometer, Inc. After the merger, Gillette
Thermometer assumed the name Thermoscan, Inc. In December of 2006,
Kaz acquired Thermoscan’s intellectual property as a part of a stock and
assets purchase from Braun GmbH, Gillette Home Diagnostics, Inc., and
Braun Oral-B Ireland Ltd. In 2008, Kaz purchased all outstanding stock
and merged with Thermoscan.
DISCUSSION
Summary judgment is appropriate when “the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A ‘genuine’ issue is one
that could be resolved in favor of either party, and a ‘material fact’ is one that
has the potential of affecting the outcome of the case.” Calero-Cerezo v. U.S.
Dep’t of Justice, 355 F.3d 6, 19 (1st Cir. 2004), citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248-250 (1986). The moving party bears the
burden of establishing that there is no genuine issue of material fact. See
Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986). “The evidence of the

4

non-movant is to be believed, and all justifiable inference are to be drawn in
his favor.” Anderson, 477 U.S. at 255.
A license, whether express or implied, is a defense to a claim of
patent infringement.

See Carborundum Co. v. Molten Metal Equip.

Innovations, Inc., 72 F.3d 872, 878 (Fed. Cir. 1995). The alleged infringer
has the burden of establishing this affirmative defense.

Id.

The

interpretation of a license agreement, like all other contracts, is a question
of the law for the court. See Eigerman v. Putnam Invs., Inc., 450 Mass.
281, 287 (2007). 2
To assert a valid defense of license to Exergen’s claims, Kaz must
clear three hurdles. First, Kaz must prove that it was assigned the license
as “the legal successor to Thermoscan’s entire temperature measuring
instruments business as a going concern.” Thermoscan Agreement Art.
VII.I. Second, Kaz must demonstrate that the two patents-in-suit fall
within the definition of a Licensed Patent because they cover “an invention
made prior to the date of th[e] Agreement [then] owned by Exergen” despite
having been issued from an original patent application filed five years after
the date of the Thermoscan agreement. Id. Art. I.A. Finally, Kaz must

The parties agree that to the extent that legal doctrines beyond
general contract law are required to interpret its terms, Massachusetts law
governs the Thermoscan license.
5
2

establish that its accused thermometers, which utilize thermopiles, fall
within the Licensed Field because “the relative economic or technical
attractiveness of Excepted Transducers [had] materially change[d] from
circumstances existent at the time of execution of th[e] Agreement such that
it [was] no longer practicable for Thermoscan to market a product without
an Excepted Transducer.” Id. Art. VII.H.
Exergen contends, and the court agrees, that Kaz’s evidence falters
at least with respect to the Licensed Field requirement. Kaz relies on three
documents to support its contention that economic and technical
conditions have materially changed since 1993, as required by Article
VII.H, thus bringing thermometers employing thermopiles within the
License Field. The first document is a letter dated April 30, 2007, from
Richard Katzman, then-CEO of Kaz, to Dr. Francesco Pompei, President
and CEO of Exergen and the named inventor on the Exergen patents. In
the April 30 letter, Katzman informed Dr. Pompei of Kaz’s acquisition of
the Braun/Gillette stock and assets, and noted that Kaz had become the
successor and licensee under the Thermoscan Agreement by virtue of the
acquisition. Katzman acknowledged the license’s limitations with respect
to thermopile devices, but asserted that the “restriction on ‘Excepted
Transducers’ no longer applie[d].” Dkt. # 84-2 at 2. “In view of the fact that
6

thermopile sensors have become the de rigueur standard for IR
thermometers, it is extremely impractical – perhaps virtually impossible –
to manufacture a non-thermopile sensor IR thermometer.” 3 Id.
The two additional documents are short declarations filed in support
of Kaz’s opposition to Exergen’s motion. James Gorsich, the Medical
Devices Engineering Technical Manager at Kaz, states in the relevant
paragraphs that:
4. For at least the last 20 years, all infrared sensors except
thermopiles have had significant technical and economic
disadvantages such that it is thermopile-based sensors which
have provided technically and economically feasible solutions for
infrared thermometer applications.
5. With respect to use in consumer goods, Golay cells are
especially brittle and require special calibration procedures that
make them impractical, pyroelectric sensors are particularly
susceptible to mechanical stress and vibration such that they are
impractical, bolometers and active far-infrared sensors are
economically impractical.
6. For at least the last 20 years in the consumer market,
thermopile technology has been the technically and economically
feasible method for measuring human body temperature via
infrared radiation.

It is worth noting that less than two weeks before, on April 18, 2007,
Dr. Pompei had written to Katzman that Exergen had become aware of Kaz’s
manufacture of forehead thermometers, and advised Kaz of the existence of
the ’685 patent and related applications. On May 10, 2007, Dr. Pompei
replied to Katzman that Exergen did not agree that Kaz met the requirements
of the Thermoscan Agreement.
3

7

Dkt. # 187. Wolfgan Schmidt, a Product Manager for Infrared Detection
at Excelitas Technologies Gmbh & Co. KG. (a supplier for Kaz), states in
the relevant paragraphs of his declaration that:
5. In the 1990s, pyroelectric sensors and thermopiles were
employed to measure IR radiation at that time.
6. However, use of pyroelectric sensors is difficult since
these sensors only react to a differential change in heat and not
to absolute heat flow, and therefore need a mechanical chopper
to alternately have the sensor view a reference target and then
the target of interest to thereby create a differential heat change.
7. When silicon-based thermopiles became available in the
1990s, they replaced pyroelectric sensors in industry because
thermopiles measure steady heat flow and can easily be made
using standard (CMOS) technology in existing wafer fabrication.
8. The main advantages of thermopiles over the other
available IR sensing technologies are operational stability over
extended environmental exposures (e.g., their calibration
remains valid over many years), delivery of the required accuracy
under real world conditions (e.g., thermopiles are stable against
environmental thermal surges), and ease of application (e.g.,
thermopiles are the most economical solution to date).
9. Since their introduction, IR sensing technologies have
been under constant evaluation for use in high volume
production for high accuracy body- or ear-thermometry. Only
thermopiles fulfill the necessary requirements for its
employment in this task.
10. As of today and at least for the last 15-20 years,
thermopile technology is the commercial and technically viable
technology for accurate and long-term stable body- or earthermometry.

8

Dkt. # 186.
The statements contained in these documents are not admissible for
their intended purpose. Under Fed. R. Evid. 701(c), a witness who is not
testifying as an expert may not give opinion evidence “based on scientific,
technical, or other specialized knowledge.” The condition of Article VII.H
– that “the relative economic or technical attractiveness of Excepted
Transducers [had] materially change[d] from circumstances existent at the
time of execution of th[e] Agreement such that it [was] no longer practicable
for Thermoscan to market a product without an Excepted Transducer” is “a
substantive matter[] beyond the ken of lay jurors,” In re Envtl. Careers Org.,
Inc., 597 Fed. App’x. 1, 2 (1st Cir. 2015) (quotation marks and citation
omitted). Deciding whether the threshold condition has been met requires
specialized knowledge to evaluate whether certain economic or technical
changes are “material” and whether these changes have rendered it
“impracticable” to use any transducer other than thermopiles in the
manufacture of thermometers.

None of the three Kaz witnesses were

disclosed as expert witnesses in this case, and none have submitted the
report required by Fed. R. Civ. P. 26. 4

Exergen notes that Kaz did not disclose Schmidt even as a fact
witness. While Gorsich was identified as a fact witness, it was on other
subject matter. Exergen further challenges the Katzman letter as
9
4

Kaz’s evidence, were it admissible, would still be deficient. None of
the three witnesses identify a crucial change in circumstances between
1993 and a later relevant period that would have triggered the operation
of Article VII.H. 5

Although Gorsich and Schmidt both describe

thermopiles as more technologically advantageous than other alternatives,
there is no indication that these advantages were not already apparent at
the time of the Thermoscan Agreement. Because Kaz has failed to satisfy
at least one of the three necessary conditions, 6,7 it cannot claim a license
for the Patents-in-Suit.

inadmissible hearsay, that is, as an out-of-court unsworn and uncrossexamined statement offered for the truth of the matter asserted. See Fed. R.
Evid. 801(c).
The parties further dispute whether the operation of Article VII.H
would extend to only the enumerated claims (Exergen’s position), or to any
then-existing or future claims covering the ambient compensation invention
(Kaz’s position).
5

Kaz asserts that it is entitled to the benefit of the Thermoscan
agreement because it merged with Thermoscan (via Gillette) and acquired
Thermoscan’s temperature measuring business as a “going concern.”
Exergen disputes this because the 2006 stock and assets purchase excluded
certain assets such as inventory at the time of closing, software, and physical
plants. Exergen further notes that although the sales included Thermoscan’s
intellectual property, the Exergen license was not identified as an assigned
agreement, whereas other third-party license agreements were expressly
assigned to Kaz.
6

Kaz contends that the two patents-in-suit are Licensed Patents
because they concern the same ambient compensation invention disclosed
10
7

ORDER
For the foregoing reasons, Kaz’s motion for summary judgment on
the license defense is DENIED. Exergen’s cross-motion is ALLOWED.
SO ORDERED.
/s/ Richard G. Stearns
_____________________
UNITED STATES DISTRICT JUDGE

by the earlier patents licensed under the Thermoscan Agreement. Kaz notes
that the patents-in-suit disclose nearly identical equations for computing
ambient compensation, and that Dr. Pompei had conceived of using the same
approach to measuring temperature at the forehead as early as 1991, as
evidenced by his lab notebooks. Kaz also makes much of the fact that
Exergen, in the Exergen v. Wal-mart litigation, see Exergen Corp. v. WalMart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009), asserted claim 7 of United
States Patent No. 5,012,813 (which was explicitly recited in Art. VII.H of the
Thermoscan Agreement) against forehead thermometers similar to the
accused products. Exergen counters these arguments by marshalling
evidence to show that although Dr. Pompei conceived of the idea, he did not
believe that the forehead would be an effective location for temperature
measurement until some years after the Thermoscan Agreement, when he
discovered that the relatively constant flow property of the temporal artery
made it a suitable site for reliable temperature measurement. Exergen also
makes the more general counterargument that the fact that a product may
be covered by an earlier and a later patent is not evidence that the patents
disclose the same invention. Rather, later inventions build upon the
foundation of earlier inventions, and a product may embody the innovations
of multiple patents.
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