Lifenet Health v. Lifecell Corporation
Filing
459
OPINION AND ORDER Denying 417 MOTION For a Finding of Laches Under Rule 52(c).. Signed by District Judge Henry C. Morgan, Jr and filed on 2/4/15. Copies distributed to all parties 2/5/15. (ldab, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Norfolk Division
LIFENET HEALTH,
Plaintiff,
v.
Civil Action No. 2:13cv486
LIFECELL CORPORATION,
Defendant.
OPINION AND ORDER
This matter is before the Court on Defendant LifeCell Corporation's ("Defendant" or
"LifeCell") Motion for a Finding of Laches under Rule 52(c). Doc. 417. A hearing was held on
January 28, 2015.
Ruling from the bench, the Court DENIED the Motion, and now issues this
Opinion and Order explaining its reasoning in further detail.
1.
PROCEDURAL HISTORY
On September 6,2013, Plaintiff LifeNet Health ("Plaintiff or "LifeNet") filed a one-count
Complaint, alleging that Defendant infringed U.S. Patent No. 6,569,200 ("the '200 Patent"). Doc.
1. An eleven-day jury trial commenced on November 3,2014. On November 18,2014, the jury
returned a verdict in favor of Plaintiff, finding that Defendant's Strattice, AlloDerm RTU, Conexa,
and GraftJacket RTU products infringed claims 1, 2, 3,4, 7, 8, and 10 of the '200 Patent, and that
said claims were not invalid as anticipated, obvious, or for lack of enablement. Doc. 369. The
jury found that Plaintiff was entitled to a lump sum royalty of $34,741,971. IdL On November
20,2014, judgment was entered in that amount, in addition to Plaintiffs costs ofaction. Doc. 395.
On December 18, 2014, Defendant moved for a finding of laches under Federal Rule of
Civil Procedure 52(c). Doc. 417. Plaintiff filed its opposition on January 2, 2015. Doc. 430.
Defendant filed its reply brief on January 8,2015. Doc. 435.
2.
LEGAL STANDARD
"If a party has been fully heard on an issue during a nonjury trial and the court finds against
the party on that issue, the court may enter judgment against the party on a claim or defense that,
under the controlling law, can be maintained or defeated only with a favorable finding on that
issue."
Fed. R. Civ. P. 52(c).
The judgment "must be supported by findings of fact and
conclusions of law as required by Rule 52(a)." Id. Although this was a jury trial, because laches
is an equitable remedy and cannot be considered by the jury, Rule 52(c) is the proper mechanism
by which the Court can make a finding of laches. I/P Engine, Inc. v. AOL Inc., 915 F. Supp. 2d
736, 740 (E.D. Va. 2012). "The application of the defense of laches is committed to the sound
discretion of the trial court." A.C. Aukerman Co. v. R.L. Chaides Const. Co.. 960 F.2d 1020,
1032 (Fed. Cir. 1992).
3.
FINDINGS OF FACT
In ruling on this Motion, the Court makes the following factual findings, which are
supported by the testimony heard and exhibits admitted during the course of this trial.
On June 13, 2007, Katrina Ruth e-mailed a press-release announcing a new product by
LifeCell to LifeNet employees JingSong Chen, Silvia Chen, Xiaofei Qin, and Dr. Lloyd
Wolfinbarger, Jr. The body of the release read in its entirety:
LifeCell Corp., a maker of tissue repair products, said Wednesday it received
marketing clearance from the Food and DrugAdministration for a tissue graft made
from pigs.
The news sent the shares up $6.96, or 31.2 percent, to $29.25 in premarket trading.
The agency cleared LifeCell's Strattice tissue matrix, a soft tissue repair product
that can be used in breast reconstruction and hernia repair. The product
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complements thecompany's AlloDerm tissue repair product, which is derived from
human skin.
"Commercialization of Strattice will allow us to expand our business into global
markets, which was extremely difficult with our human-derived products," said
Paul Thomas, LifeCell president and chief executive, in a statement.
The company plans to begin making Strattice available to surgeons on a limited
basis later in the year, with a full commercial launch planned in early 2008.
LifeCell shares closed as $22.29 on Tuesday.
DTX-041.
At the time, Dr. Xiaofei Qin was a scientist at LifeNet. Tr. at 211:2-3. Starting in 2005,
Dr. Qin was working on the DermACELL project, developing a decellularized human dermis
allograft. Id at 212:24-213:6. Dr. Qin knew that the DermACELL project was different from
Strattice, which was made from pigs. Id. at 266:11-12. While she did not know when it was
released, she recalled that Strattice was approved by the FDA; however, she had not personally
seen the Strattice product, nor tested it. Id at 268:8-19. During her work on the DermACELL
project, however, she did look at Defendant's AlloDerm RTM product ("original AlloDerm").1
Id. at 268:20-24.
Dr. Qin's lab notebook is filled with examples where she compared the
DermACELL product with original AlloDerm. See PTX-236. The lab notebook contains no
mention of the Strattice product. Dr. Qin visited Defendant's website to view sizes of original
AlloDerm, and the notebook contained a print-out from this webpage. Id at LNH0240529-32.
Original AlloDerm was a freeze-dried product. Tr. at 1336:6-9.
Dr. Lloyd Wolfinbarger, a listed inventor of the '200 patent, also was a recipient of that
e-mail. At the time of the press release, he did not think of LifeNet and LifeCell as competitors
1One of the accused products in this case, AlloDerm RTU, derived from anon-infringing product, AlloDerm RTM.
To minimize confusion, when necessary the Court will refer to AlloDerm RTM as "original AlloDerm."
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and understood LifeCell to be focusing on freeze-drying technology. Wolfinbarger Dep. at
134:2-15.
The first sales of Strattice were in January 2008, but only twenty-five units were sold.
PTX-026. Conexa, identical to Strattice, was first sold in October 2008. ]d Although sales
started slowly, by the end of the year, Defendant managed to sell 6,026 units of Strattice and
Conexa.
4.
CONCLUSIONS OF LAW
Defendant's argument in this Motion was that the jury's damages award should be remitted
to exclude damages for any pre-suit infringement because the doctrine of laches applies. Doc.
418 at 2.
"To prove laches, a defendant must show that 'the plaintiff delayed filing suit an
unreasonable and inexcusable length of time after the plaintiff knew or reasonably should have
known of its claim against the defendant; and ... the delay resulted in material prejudice or injury
to the defendant." Wanlass v. General Elec. Co.. 148 F.3d 1334, 1337 (Fed. Cir. 1998) (quoting
Gasser Chair Co. v. Infanti Chair Mfg. Corp.. 60 F.3d 770, 773 (Fed. Cir. 1995)). The period of
time is measured from "when the patentee has actual or constructive knowledge of the defendant's
potentially infringing activities."
Wanlass. 148 F.3d at 1337.
"A delay of more than six years raises a presumption that it is unreasonable, inexcusable,
and prejudicial." Id at 1337. If the presumption applies, the burden shifts to the plaintiff to
"show that either the patentee's delay was reasonable or excusable under the circumstances or the
defendant suffered neither economic nor evidentiary prejudice." Id.
Defendant's argument was solely based on the six year presumption, arguing that Plaintiff
knew or should have known about the potential infringement of Strattice when it learned of the
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FDA's approval of Strattice in June 2007. Doc. 418 at 3. Plaintiff argued that the press release
announcing the FDA approval of Strattice was insufficient to place it on notice of potential
infringement. Doc. 430 at 6-11.
The Court concluded that Plaintiff did not have actual notice of potentially infringing
activities more than six years prior to filing this suit. The only evidence to show that LifeNet had
knowledge of a potential claim regarding Strattice is the June 2007 press release, and the press
release was insufficient to place LifeNet on actual notice of potential infringement. The press
release does not contain any details about the features behind the Strattice product which were
found to infringe the '200 patent. Dr. Wolfinbarger testified that he understood LifeCell to be
working in a different area of technology than LifeNet was focusing on. Moreover, the press
release compares Strattice to original AlloDerm, a freeze-dried product, with which Plaintiff was
very familiar.
However, Plaintiff has never alleged that original AlloDerm infringed the '200
patent, which claimed a ready-to-use product stored at room temperature. Thus, by comparing
the product in the press release to a non-infringing product, the only inference from 2007 is that
Defendant was releasing a freeze-dried product similar to original AlloDerm which utilized pig
skin instead of human skin.
Defendant also argued that the press release, combined with publicly available
information, including Dr. Qin's use of Defendant's website while working on the DermACELL
project, provided constructive notice to Plaintiff. Doc. 418 at 4; Doc. 435 at 2-3.
"With respect to constructive knowledge, the Federal Circuit charges a patentee 'with
making the inquiry that a diligent and reasonably prudent patentee would make to determine
whether another device infringes his patent.'" I/P Engine. 915 F. Supp. 2d at 741 (quoting
Odetics. Inc. v. Storage Tech. Corp.. 919 F. Supp. 911, 917 (E.D. Va. 1996)).
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If a patentee knows of the existence of a product or device that (i) embodies
technology similar to that for which he holds a patent and (ii) uses that similar
technology to accomplish a similar objective, he has a duty to examine the product
or device more closely to ascertain whether it infringes his patent. If he shirks his
duty, he does so on peril of triggering the laches period and perhaps ultimately
losing his right to recover damages for the infringement.
I/P Engine. 915 F. Supp. 2d at 741 (quoting Odetics. 919 F. Supp. at 918). Circumstances that
trigger this duty to launch an inquiry include "pervasive, open, and notorious activities that a
reasonable patentee would suspect were infringing." I/P Engine. 915 F. Supp. 2d at 742 (quoting
Wanlass, 148 F.3d at 1338) (internal quotation marks omitted).
Examples of these "open and notorious activities" that trigger the duty to investigate
include '"sales, marketing, publication, or public use of a product similar to or embodying
technology similar to the patented invention, or published descriptions of the defendant's
potentially infringing activities[.]" I/P Engine. 915 F. Supp. 2d at 742 (quoting Wanlass. 148
F.3d at 1338). Constructive knowledge exists, even if the plaintiff is actually unaware of these
activities, '"if these activities are sufficiently prevalent in the inventor's field of endeavor.'" I/P
Engine. 915 F. Supp. 2d at 742 (quoting Wanlass. 148 F.3d at 1338).
In support of its argument that constructive knowledge does not apply in this case, Plaintiff
cited to a case from the Southern District ofNew York, U.S. Philips Corp. v. ATI Techs.. Inc.. No.
05 Civ. 8176,2008 WL 2073928 (S.D.N.Y. May 8,2008). In ATI, the defendant based its laches
argument for constructive notice on a press release announced on its website, which announced the
launch of a new product using an inter-integrated circuit, which was coveredby the patent-in-suit.
Id at *1. The ATI court found that the lone press release did "not amount to a conspicuous
activity of potential infringement."
Id. at *3.
As Defendant correctly argued, in ATI there was no evidence that the press release was
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actually seen by the plaintiff, as is the case here. Doc. 435 at 3 n.3. However, the Court still
concluded that no evidence of conspicuous activities existed in 2007 such that the Plaintiff was on
constructive notice of potentially infringing activities. In ATI, the press release announced that
the defendant was using patented technology, while the press release here does not put Plaintiff on
notice that its patent is implicated. Sales had not yet begun. While Defendant argued that
Plaintiff could have discovered more information about the product, the product was not publicly
available for Plaintiff to examine in 2007. See also Koninklijke Philips N.V. v. Zoll Medical
Corp., Civil Action No. 10-11041, 2014 WL 2047878, at *8 (D. Mass. May 16, 2014) (similarly
finding that press releases only generally describing a technology are not enough to establish
constructive knowledge of potential infringement).
While this Court has not addressed the issue of a press release, in I/P Engine. Inc..
defendant Google placed a description of its allegedly infringing technology on its Google Inside
AdWords Blog. I/P Engine. Inc.. 915 F. Supp. 2d at 744. The blog post described its ranking of
advertisements in words that were similar to the language the plaintiff used in drafting its
complaint. Id. at 744-45. Because the blog post described the technology, it was "the kind of
marketing document" to put the patentee on notice of potential infringement. Id. at 745. Even
though the plaintiff did not have actual notice of the blog post, the Court found constructive notice
existed because Google's "publication of information concerning new advances in their search and
ad serving technologies is the kind of 'prevalent' activity in the field of the [invention] that [the
patentee] should have been aware of in determining whether to enforce their patents." Id.
Unlike the blog post in I/P Engine. Inc.. the press release here simply does not have the kind of
information that would have placed Plaintiff on such notice that it should have undertaken an
investigation into the Strattice product; the press release compared Strattice to a non-infringing
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product. If the Court were to accept Defendant's position, then potentially any time a company
announced FDA approval of a product, with only a generic description of the product, that
company would be starting the laches clock.
Accordingly, the Court concluded that the presumption of laches does not apply in this
case.
Because Defendant advised the Court that it rested solely on the presumption of laches, the
Court did not address the issue of unreasonable delay within the six year time frame, an issue upon
which the defendant bears the burden of proof. Nor does the Court address the issue of prejudice.
5.
CONCLUSION
For the reasons set forth above, the Court DENIED the Motion grounded upon laches.
The Clerk is REQUESTED to deliver a copy of this Order to all counsel of record.
It is SO ORDERED.
/s/
Henry Coke Morgan, Jr.
Senior United States District Judge ,
HENRY COKE MORGAN. JR.
SENIOR UNITED STATES DISTRICT JUDGE
Norfolk, VA
• ,-/
Date: February V ,2015
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