On August 28, 2014, ALJ Dee Lord issued the public version of an Initial Determination ("ID") On Complainant's Motion for Temporary Relief inCertain Sulfentrazone, Sulfentrazone Compositions, and Processes For Making Sulfentrazone (Inv. No. 337-TA-914).
By way of background, the investigation is based on a complaint filed by FMC Corp. ("FMC") alleging the violation of Section 337 by Summit Agro USA, LLC, Summit Agro North America, Holding Corporation (collectively, "Summit"), Nutrichem Co., Ltd. ("Nutrichem"), and Jiangxi Heyi Chemicals Co., Ltd. ("Heyi") (collectively, "Respondents") in the importation into the U.S., sale for importation, or sale after importation of certain sulfentrazone, sulfentrazone compositions, and processes for making sulfentrazone that infringe one or more claims of U.S. Patent No. 7,169,952 (the '952 patent). See our March 6, 2014 and April 11, 2014 posts for more details on the complaint and Notice of Investigation, respectively. When filing the complaint, FMC moved for temporary relief under subsection (e) of Section 337.
ALJ Lord first addressed the issue of standing. According to the ID, Respondents (1) asserted that FMC lacked standing to pursue the investigation without the presence of an alleged co-owner of the '952 patent, (2) contended that FMC's argument regarding the need for more discovery on standing was unfounded and constituted an admission that FMC did not have enough information to establish ownership of the '952 patent and that the lack of evidence should foreclose temporary relief, (3) rejected FMC's contention that discovery on standing was outside the scope of the temporary relief phase and argued that standing is a requirement during all phases of the Investigation, and (4) disagreed with FMC's argument that the '952 patent's assignment was presumed valid noting that the issue was not whether FMC was an owner of the '952 patent, but whether FMC was the only owner.
FMC asserted that it has sole ownership rights to the '952 patent and contended that, as the assignee of the patent, it is the presumptive owner of the patent and that the burden of rebutting this presumption falls to the Respondent. Based on the evidence, ALJ Lord found that FMC was likely to succeed in proving that it has standing.
ALJ Lord then assessed whether FMC had demonstrated a likelihood of success in the merits.
First, ALJ Lord addressed who a person of ordinary skill in the art would be based upon Respondents' and The Commission Investigative Staff's ("OUII") submissions. ALJ Lord determined that "[a] person of ordinary skill in the art would have either a bachelor's or master's degree in chemistry or chemical engineering with a few years of work experience in the industry relating to organic chemical synthesis, process development, or process engineering, or a Ph.D. focusing on organic chemical synthesis, process development, or process engineering."
Then ALJ Lord turned to claim construction, assessing FMC's likelihood of success in construing the terms "in the presence of N,N-dimethylformamide," "a temperature in the range of about 120º C. to about 160º C," "about three to about seven hours," and "the substituents of said substituted aryl or heterocyclyl comprising one or more members selected from the group consisting of."
With respect to the term "in the presence of N,N-dimethylformamide," FMC argued that one of ordinary skill in the art would have understood it to mean "in the presence of DMF as a catalyst for the reaction between aniline and MSC." Respondents disagreed with FMC's position and argued that the claims only require that DMF be present, not that it be a catalyst. ALJ Lord found that FMC did not demonstrate that it was likely to prevail on its construction arguments for this claim term as the evidence suggested that "in the presence of N,N-dimethylformamide" just requires "that any amount of DMF be included in the reaction vessel."
Regarding the term "a temperature in the range of about 120º C. to about 160º C," FMC argued that the term should be construed to encompass the temperature range 110º C to 180ºC while Respondents argued that the term "about" should not allow for more than 2.5ºC of deviation. Based on the intrinsic evidence and the plain language of the claims, ALJ Lord found that the term "a temperature in the range of about 120º C. to about 160º C" was more likely to be construed to mean "at a temperature in the range of 120º C (+/- 2.5º C) to 160º C (+/- 2.5º C)."
With respect to the term "about three to seven hours," FMC argued that the term should not limit the reacting step to seven hours, while the Respondents argued that the term "about" should not allow for more than a thirty minute deviation. Based on the plain language of the claim and the evidence introduced at the hearing, ALJ Lord found that the term "about three to seven hours" was more likely to be construed to mean "three (+/- 30 minutes) to seven (+/- 30 minutes) hours."
Lastly, regarding the term "the substituents of said substituted aryl or heterocyclyl comprising one or more members selected from the group consisting of," FMC argued that the proper construction only required that the heterocyclyl have at least one substituent from the list of alternatives, but that it could also have additional substituents that are not selected from the group. Respondents did not propose construction for this term, but OUII asserted that the term does not allow for the inclusion of additional substituents for the heterocyclyl that are not expressly named in the Markush group. ALJ Lord found that FMC's argument that a nested Markush grouping in the form "comprising one or more members from the group consisting of" should be read with an open construction was likely to succeed.
ALJ Lord began the invalidity assessment by looking to the parties' arguments regarding anticipation. According to the ID, Respondents contended that claims 25-28 of the '952 patent were invalid under 35 U.S.C. §§ 102(f) and 102(g)(2). Respondents argued that the intended purpose of the '952 patent is to make a sulfonamide, but that there is no requirement that the sulfonamide be commercially effective or useful as an herbicide, or that it be registered with the EPA. OUII argued that Respondents had raised substantial questions regarding the validity of the '952 patent and that there was a substantial question that the '952 patent is anticipated by a patent that discloses an overlapping temperature range and time that fall within the time range claimed in claim 18 of the '952 patent.
ALJ Lord found that FMC was likely to prevail on the issue of anticipation based on the claim construction discussed in the ID.
ALJ Lord then addressed Respondents' argument that claims 25-28 of the '952 patent were obvious over prior art discussed in Dr. Gribble's witness statement and the pyridine process. Specifically, Respondents argued that increasing the temperature was obvious to one of ordinary skill because it is basic chemistry and because it was well known that doing so would speed up the reaction and increase the conversion to sulfentrazone. Additionally, Respondents explained that the pyridine process was known, published, and already commercialized and that the only difference between the prydine process and the claimed process is the use of DMF instead of pyridine and the increase in temperature to achieve a faster reaction time.
FMC argued that Respondents' argument should be rejected as untimely as it was not raised in response to the motion for temporary relief, FMC's experts had not had an opportunity to address the issue, and FMC was unable to cross examine Respondents' experts regarding this issue. Additionally, FMC noted that the pyridine process was before the examiner during the prosecution and the examiner allowed the claims.
ALJ Lord found that it was more likely than not that Respondents would be able to prove by clear and convincing evidence that claims 25-28 are invalid as obvious over the prior art discussed in Dr. Gribble's witness statement. However, ALJ Lord found that Respondents had not provided sufficient evidence to demonstrate that they would be able to prove at trial, by clear and convincing evidence, that claims 25-28 are invalid over the pyridine process.
Respondents also contended that claims 25-28 are invalid as indefinite. Respondents stated that the lack of reasonable certainty is demonstrated by the fact that FMC's two experts offered inconsistent opinions on the time and temperature limitations in the asserted claims. FMC argued that Respondents overstated the extent to which Nautilus changed the law of indefiniteness and that exactitude is not required in order to survive a challenge on indefiniteness, stating that only a reasonable certainty is required.
ALJ Lord found that FMC was likely to succeed on the issue of indefiniteness. ALJ Lord stated that Respondents' arguments hinged upon FMC's experts' allegedly inconsistent opinions on claim construction but noted that this argument presumed the adoption of FMC's proposed construction for the time and temperature limitations, which ALJ Lord previously explained were not likely to be adopted.
While most of the parties' arguments regarding infringement were redacted from the public version of the ID, it appears that FMC argued that the Heyi Process literally infringes the asserted claims of the '952 patent and that the burden should shift to Heyi to prove non-infringement as FMC made a reasonable effort to determine the actual process Heyi used but was unable to do so. FMC alternatively argued that the Heyi Process infringes the '952 patent under the doctrine of equivalents. FMC argued that the doctrine of equivalents applies to the word "about" and that the disclosure-dedication principle does not apply to the present case as the time and temperature ranges disclosed in the specification are exemplary ranges as opposed to alternatives to claimed ranges.
Respondents argued that FMC had not satisfied the requirements to justify shifting the burden of proving non-infringement to Respondents noting that FMC has the batch records for all sulfentrazone made by Heyi and imported into the U.S and that Heyi's conversion percentage at different times during the reaction is irrelevant as the asserted claims do not require any level of conversion. Respondents also argued that FMC could not assert the doctrine of equivalents for claim terms reciting the broadening word "about." that the disclosure-dedication doctrine precludes FMC from asserting the doctrine of equivalents, and that even if FMC could assert the doctrine of equivalents the Heyi Process does not infringe under the doctrine of equivalents.
ALJ Lord found that FMC had not shown that it is likely to prove either literal infringement or infringement under the doctrine of equivalents. ALJ Lord's analysis regarding literal infringement was redacted, but, with respect to the doctrine of equivalents, ALJ Lord found that FMC is likely precluded from asserting the doctrine of equivalents in the present case under the disclosure-dedication rule.
Domestic Industry – Economic Prong
FMC asserted that although its patented sulfentrazone process is carried out in China, it has significant and substantial domestic activities directed to the articles protected by the '952 patent. FMC argued that these activities are essential to making its sulfentrazone products saleable and add significant value to the sulfentrazone products sold in the U.S. FMC also argued that, in addition to formulating raw sulfentrazone for commercial use, FMC makes additional substantial domestic investments in the exploitation of the '952 patent. FMC further asserted that (1) its North American Product Development Group engages in research and development activities directed to developing new applications for and new formulations of sulfentrazone, (2) it maintains a North America Registration and Regulatory Affairs group in Philadelphia, PA, and (3) it invests in technical support activities in the U.S. related to sulfentrazone products. FMC's economic expert testified that FMC's domestic sulfentrazone formulation activities "are necessary and essential to the sale of sulfentrazone products" and that FMC's investments in regulatory compliance and technical support relating to the domestic industry products "are critical to FMC's ability to compete in the U.S. market and are substantial in the context of FMC's overall operations."
Respondents asserted that FMC's expert's calculations failed to apportion FMC's domestic industry investment as between activities related to sulfentrazone produced by the patented process and sulfentrazone not produced by the patented process. Respondents also criticized the methodology used to calculate the value added because the expert did not compare the domestic value added to the total value but instead to the total cost of the goods sold.
ALJ Lord found that FMC had not demonstrated how much of its imported sulfentrazone was produced using the process claimed in the '952 patent. ALJ Lord noted that FMC's expert's calculations could not be relied upon to determine whether FMC is likely to satisfy the economic prong at trial as they are based on "the assumption that all of the identified domestic industry products are protected by the patent" however, some of the domestic industry expenditures that were identified as significant were carried out on sulfentrazone produced by a process that FMC has not patented. ALJ Lord determined that before a decision can be made regarding FMC's ultimate success on the economic prong of the domestic industry requirement FMC needed to present a reasonably reliable estimate of the amount of sulfentrazone produced using the patented process and that Respondents would need to have an opportunity to challenge the new numbers. Accordingly, ALJ Lord found that further proceedings regarding the economic prong were required.
Domestic Industry – Technical Prong
FMC argued that its process to prepare sulfentrazone meets claims 25-28 of the '952 patent. Respondents argued that FMC cannot show that it practices the '952 patent. ALJ Lord found that FMC had not demonstrated that it is likely to prevail on the technical prong requirement of domestic industry because the reactions used to produce FMC's sulfentrazone do not meet the limitations of claims 25-28.
FMC asserts that before Respondents entered the market, FMC produced all of the sulfentrazone sold in the U.S. and that it has suffered harm, including "lost sales and market share, price erosion, loss of business opportunities, loss of goodwill and valuable business relationships, and damage to reputation" as a result of Respondents' introduction of an infringing competitive product. FMC also asserted that certain elements of the harm may not be quantifiable and that there are "serious doubts" that "FMC could ever collect from Respondents anything approaching the full magnitude of its damages." Specifically, FMC alleged that it has suffered irreparable harm in the sunflower and soybean markets. FMC further asserted that it did not have to demonstrate a causal relationship between Respondents' use of the patented process and the alleged irreparable harm.
Respondents argued that FMC's contention of irreparable harm was "speculative and exaggerated" and that a monetary remedy would be adequate for any cognizable harm suffered by FMC. Respondents also argued that there is no nexus between the alleged infringement and the alleged harm because "FMC cannot show that the patented feature 'drives consumer demand' for the accused product."
ALJ Lord stated that FMC's argument that the nexus requirement does not apply to relatively simple products is incorrect and was expressly rejected in Apple Inc. v. Samsung Elec. Co., Ltd. ("Apple III"), 735 F.3d 1352 (Fed. Cir. 2013). ALJ Lord noted that while the court in Apple III stated that in the case of simpler products there may not be a dispute about the nexus, that was not the case here as, in this case, it would be hard to establish that the process for making sulfentrazone was "a selling point" in the market where a product infringing the process could cause lost sales. ALJ Lord also stated that FMC had not presented any evidence that the sulfentrazone products' marketability is enhanced by the processes by which they are made. Accordingly, ALJ Lord found that FMC had failed to meet the burden necessary to establish the irreparable harm required for temporary relief to be granted due to the lack of evidence regarding causation. ALJ Lord also noted that the potential that any substantial loss could be recovered by monetary damages militated against a finding of irreparable harm.
Balancing the Hardships
ALJ Lord then balanced the hardships and found that the potential hardships to Respondents, and to the small company Summit Agro USA, LLC, in particular, were more serious than the hardships FMC, a multinational company, will suffer if Respondents are allowed to continue to compete until a final adjudication of the patent dispute.
FMC argued that the public interest factor weighed in favor of granting temporary relief because FMC "originated, expanded, and defined the domestic industry for sulfentrazone products," while Respondents "evaded the costs and risks of innovation, and have chosen to compete in the U.S. market by taking advantage of costs savings achieved through infringement." FMC also noted that it has an adequate capacity to meet the U.S. demand for sulfentrazone in its entirety. The Respondents argued that granting temporary relief threatened to disrupt farmers' plans.
ALJ Lord found that FMC had failed to show that its '952 patent for the process of making sulfentrazone confers any advantage beyond creating the sulfentrazone product, which is no longer patented, and that allowing FMC to maintain market share for a product that no longer has patent protection by asserting a process patent, without persuasive evidence of infringement, may compromise the public interest in a competitive marketplace. Accordingly, ALJ Lord found that granting temporary relief would pose a greater danger to the public interest.
Accordingly, based on the above, ALJ Lord denied Complainant's Motion for Temporary Relief.