Judges: Lourie (author), Dyk, Prost
[Appealed from C.D. Cal., Chief Judge Stotler]

In Ultimax Cement Manufacturing Corp. v. CTS Cement Manufacturing Corp., Nos. 08-1218, -1439 (Fed. Cir. Dec. 3, 2009), the Federal Circuit vacated and remanded the district court’s finding that CTS Cement Manufacturing Corporation (“CTS”) infringed the claims of Ultimax Cement Manufacturing Corporation’s (“Ultimax”) U.S. Patent No. 4,957,556 (“the ’556 patent”); reversed the SJ of unenforceability of the ’556 patent based on laches; reversed the SJ of indefiniteness of claim 17 of Ultimax’s U.S. Patent No. 6,113,684 (“the ’684 patent”); and dismissed Ultimax’s appeal of SJ that Ultimax’s U.S. Patent No. 6,405,534 (“the ’534 patent”) was invalid and not infringed. The Federal Circuit also affirmed the district court with respect to Ultimax’s motion to amend its complaint, SJ disposing of Ultimax’s trade secret claims, denying Ultimax’s motion to disqualify CTS’s counsel, and denying CTS’s motion to make the case exceptional and award attorney fees.

Hassan Kunbargi, the owner of Ultimax, and Edward K. Rice, the owner of CTS, have a long history of working together. Kunbargi was Rice’s graduate student, worked for Rice’s company CTS, and was an independent contractor with Rice for Fibermesh, Inc. (“Fibermesh”). In 1989, Kunbargi ceased working for Rice. After the split, the three patents at issue were granted to Kunbargi and are now owned by Ultimax. Each of the patents relates to rapid-hardening, high-strength cement. In 2002, Ultimax and Heartland Cement Sales Company (collectively “Plaintiffs”) sued CTS for infringement of the ’684 and ’534 patents, misappropriation of trade secrets, and several business torts. After amending their complaint twice, Plaintiffs further alleged infringement of the ’556 patent.

On appeal, the Federal Circuit divided the case into four patent-related and four nonpatent-related issues. First, the Federal Circuit considered the district court’s finding of noninfringement of the
’556 patent. All of the asserted claims of the ’556 patent recite “soluble CaSO4 anhydride.” In finding noninfringement, the district court construed the term “anhydride,” based primarily on one dictionary definition, to be “a compound formed from an acid by removal of water.” Because CTS’s cement did not contain an acid from which water had been removed, the district court granted SJ of noninfringement. On appeal, Ultimax argued that the district court erred in its construction because it used a stand-alone definition of “anhydride” without considering the context. Further, Ultimax argued that the district court’s definition was inconsistent with the specification and the art.

“In the case of a claim limitation whose presence is undetectable in a finished product, it is reasonable that Ultimax might not have known or been able to find out whether CTS infringed.” Slip op. at 15.

The Federal Circuit found that, in the context of the claim, “anhydride” modified the calcium sulfate compound. The Federal Circuit noted ambiguity in dictionary definitions, looking beyond the single dictionary relied on by the district court. The specification, where “anhydride” appears only as a modifier of calcium sulfate, further supported that position. Finally, the Federal Circuit stated that interpreting the claim element to mean “soluble anhydrous calcium sulfate” is not rewriting the claim or correcting a typographical error. The Court noted that the neutral expert admitted that, in the context of the specification, the claim drafter probably meant “anhydrite” (i.e., anhydrous calcium sulfate) rather than “anhydride.” Further, evidence showed that CTS itself used the words “anhydride” and “anhydrite” interchangeably. Accordingly, the Federal Circuit vacated the holding of noninfringement and remanded the issue to the district court.

The Federal Circuit then reviewed the district court’s grant of SJ that the ’556 patent was unenforceable due to laches. The district court found that the Plaintiffs should have known of their claim against CTS because of Kunbargi’s history of working with Rice, his prior affiliation with CTS, and the fact that Kunbargi had demonstrated his invention to Rice before the ’556 patent issued. Because Plaintiffs waited twelve years after the ’556 patent issued to sue, the district court presumed prejudice to CTS and found prejudice in loss of witnesses and records. Ultimax argued that there was no evidence that it knew or should have known of infringement because it had no way to test for soluble anhydrous calcium sulfate in CTS’s product and that Rice had assured Kunbargi that CTS was not using soluble anhydrite. Ultimax further argued that CTS was not prejudiced because alternative witnesses and documents remained available to CTS.

The Federal Circuit noted that, to prevail on a defense of laches, an accused infringer must prove two elements: (1) plaintiffs delayed filing of suit for an unreasonable and inexcusable length of time from the time they knew or reasonably should have known of their claim, and (2) the delay operated to the prejudice or injury of the accused infringer. In the instant case, the Court found a genuine issue of material fact as to whether Ultimax had a reasonable belief of infringement that precluded SJ. The Court noted that Kunbargi’s hiring of a private investigator led to no conclusive evidence of infringement and that CTS did not dispute that Ultimax could not test for soluble anhydrite in CTS’s products. Further, the Federal Court found a genuine issue as to whether Ultimax fulfilled its duty to investigate by hiring the private investigator, especially given Kunbargi’s allegation that Rice assured him that CTS was not infringing.

Next, the Court considered the grant of SJ that claim 17 of the ’684 patent was indefinite. The district court found indefiniteness based on the formula C9S3þ3Ca(f cl)2 and the formula (C,K,N,M)4(A,F,Mn,P,T,S)3(cl, þ), which the specification refers to as crystal X. The district court found that crystal X is a crystalline compound where each element in the formula could be substituted for another at a particular site on the crystal structure, leading to over 5,000 possible compounds. Declining to limit crystal X to a single compound, the district court found the claim indefinite as too broad. Additionally, the district court held the formula C9S3þ3Ca(f cl)2 to be indefinite because it lacked a comma between the “f” and “cl.”

The Federal Circuit held that the district court erred in holding crystal X to be indefinite solely because it encompassed a large number of compounds. The Court reasoned that a claim to a formula encompassing 5,000 different compounds is not ambiguous if the claim sufficiently notifies the public of its scope. Based on its reversal of SJ, the Court declined to consider Ultimax’s argument, made to overcome the finding of indefiniteness, that crystal X should be interpreted as a single compound.

With respect to formula C9S3þ3Ca(f cl)2, the Federal Circuit held that the district court erred in declining to view the notation in light of the knowledge of one of skill in the art. The Court explained that, although courts cannot rewrite claims to correct material errors, if the correction is not subject to reasonable debate to one of ordinary skill in the art, namely, through claim language and the specification, and the prosecution history does not suggest a different interpretation, then a court can correct an obvious typographical error. Slip op. at 21. The Federal Circuit noted that, in this case, the district court found that the formula C9S3þ3Ca(f cl)2 corresponds to no known material and that one of ordinary skill in the art would know that the formula should contain a comma. Thus, the Federal Circuit reversed the district court and entered SJ that the claim at issue was not indefinite based on either formula.

Finally, regarding the ’534 patent, the district court granted SJ that the patent was anticipated, obvious, lacked written description support, and was not infringed. On appeal, Ultimax requested reversal of the district court’s determination, especially with respect to the noninfringement determination. However, at oral argument, Ultimax stated that it was not concerned with the district court’s finding of invalidity. Consequently, the Federal Circuit dismissed the appeal, holding that Ultimax waived the argument that the ’534 patent was not invalid, thus rendering its infringement arguments moot.

The Court then considered the four nonpatent-related issues. First, the Federal Circuit reviewed the district court’s denial of Ultimax’s motion to file a third amended complaint after the deadline for amendments had passed. Following Ninth Circuit law, the Court found no abuse of discretion, explaining that the district court was within its discretion to deny the motion based on undue delay and a burdensome need to reopen prosecution. Further, the Court noted that the Plaintiffs had amended their complaint twice before. According to the Federal Circuit, Ultimax did not overcome its own failure to show good faith by showing lack of prejudice to CTS or by noting the district court’s allowance of CTS’s untimely SJ motions.

The Federal Circuit then considered the grant of SJ disposing of Plaintiffs’ trade secret claims. On appeal, CTS argued that Ultimax’s supposed secret was published in a Japanese patent and elsewhere, while Ultimax argued that CTS obtained the secret from Ultimax rather than any publication. Following California state and Ninth Circuit law, the Federal Circuit found no abuse of discretion given that Ultimax did not establish an essential element of its claim—that it had a secret. Accordingly, Ultimax’s arguments of how CTS obtained the information was irrelevant and the Court affirmed the grant of SJ.

Next, the Federal Circuit reviewed the district court’s denial of the Plaintiffs’ motion to disqualify CTS’s counsel, including attorney James W. Geriak, who had power of attorney in the prosecution of Rice and Kunbargi’s U.S. Patent No. 4,866,992 (“the ’992 patent”). Under the Ninth Circuit’s “sound basis” standard, the Federal Circuit found that the district court’s refusal to disqualify was supported by the district court’s finding that no working attorney-client relationship existed between Kunbargi and Geriak. The Court pointed to the district court’s finding that Kunbargi was obligated to assign his work to Fibermesh and that the power of attorney was executed for the company’s benefit, even though the ’992 patent was never actually assigned to Fibermesh.

Finally, the Federal Circuit vacated the district court’s denial of CTS’s motion to make the case exceptional and award attorney fees, explaining that, based on its reversal and vacatur of certain SJ decisions that had favored CTS, and because the prevailing party had not yet been determined, the exceptional case issue was moot.