Judges: Michel, Lourie (author), Robertson (District Judge sitting by designation)

[Appealed from E.D. Wisc., Judge Curran]

In Adenta GmbH v. OrthoArm, Inc., Nos. 06-1571, -1598 (Fed. Cir. Sept. 19, 2007), the Federal Circuit affirmed the district court’s denial of OrthoArm, Inc.’s (“OrthoArm”) motion to dismiss for lack of subject matter jurisdiction. The Federal Circuit also held that substantial evidence supported the jury’s verdict that the asserted claims of U.S. Patent No. 6,257,883 (“the ’883 patent”) were invalid based on a public use or sale under 35 U.S.C. § 102(b). Lastly, the Federal Circuit affirmed the district court’s decision that no inequitable conduct was shown.

Dr. John Voudouris was the president of OrthoArm and the inventor of the ’883 patent, which is directed to an orthodontic bracket. He assigned the ’883 patent to OrthoArm. OrthoArm subsequently sued American Orthodontics Corporation (“American”) for infringement of the ’883 patent based on American’s sale of brackets known as the “Time” bracket. American manufactured and distributed Time brackets for Adenta GmbH (“Adenta”). Under a settlement agreement, OrthoArm assigned the ’883 patent to American in exchange for a royalty for its bracket sales. Adenta agreed to pay a portion of American’s royalty obligation that it owed to OrthoArm for the sales of the Time bracket.

American agreed to pay OrthoArm under a royalty-sharing agreement. American also authorized Adenta to sell another orthodontic bracket known as the “Evolution” bracket in exchange for an additional royalty. Adenta later informed American and OrthoArm that it believed the ’883 patent to be invalid and that it would stop paying royalties on both the Time and Evolution brackets. American responded in a letter stating that failing to pay royalties would breach the license agreement and that American would “pursue its available legal remedies to protect its rights.” Adenta then filed suit seeking a DJ that the ’883 patent was invalid and unenforceable. OrthoArm moved to dismiss the suit for lack of subject matter jurisdiction on the ground that Adenta never had a reasonable apprehension that it would be sued by American, and that Adenta and American conspired to contest the validity of the ’883 patent. The district court denied the motion and the case proceeded to trial on the invalidity and unenforceability issues. A jury returned a verdict in favor of Adenta invalidating the ’883 patent by Adenta’s public use or sale of its Time bracket at a tradeshow more than one year before the filing of the ’883 patent. The jury also found that Voudouris did not commit inequitable conduct by withholding material information from the PTO. The district court denied OrthoArm’s motion for JMOL regarding the invalidity verdict. The district court also denied Adenta’s request for a DJ that the case was exceptional because there was insufficient evidence of intent to deceive the PTO.

On appeal, the Federal Circuit affirmed the district court’s conclusion that DJ jurisdiction existed in this case. Quoting MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764, 771 (2007), the Federal Circuit explained that DJ jurisdiction is proper when “the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Slip op. at 9. Relying on that standard, the Court concluded that a case or controversy arose from Adenta informing American that it believed the ’883 patent to be invalid and that it would stop paying royalties, from American indicating that it would assert its right in the ’883 patent if Adenta failed to pay royalties, and from Adenta actually stopping royalty payments on the Evolution bracket. Additionally, the Court held that American’s failure to file an infringement counterclaim did not deprive the district court of jurisdiction and that there was no reason to disturb the district court’s findings that American and Adenta did not contrive to invalidate the ’883 patent and had adverse interests. The Court also found that there was sufficient evidence to support the jury’s verdict that the Time bracket was publicly used or on sale at a tradeshow more than one year before the ’883 patent was filed. The Court acknowledged that “a patent cannot be invalidated based on one person’s testimony alone without corroborating evidence, particularly documentary evidence.” Id. at 13.

The Court noted, however, that “[h]ere there were a number of statements made by different witnesses, all corroborating each other, accompanied by various supportive and consistent documents.” Id. Of the five witnesses testifying that the Time bracket was publicly displayed at the tradeshow, three witnesses were uninterested, including Voudouris, the inventor of the ’883 patent and the president of OrthoArm. The Federal Circuit noted that the district court made credibility determinations as to each of the witnesses, and it had no basis to disturb those determinations. The Court thus concluded that “[c]onsidering all of the evidence presented, we agree with the district court that a reasonable fact finder could have concluded that clear and convincing evidence showed that a public use or sale of the Time bracket occurred at the 1994 Florida trade show.” Id. at 15.

Finally, the Court affirmed the district court’s decision finding that no inequitable conduct was shown and that the case was not exceptional. Specifically, the Court noted that the district court was entitled to believe Voudouris’s testimony and to assume that Vourdouris acted in good faith in believing that the Time bracket was cumulative to another patent that Voudouris did disclose during prosecution.