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$52 million patent verdict overturned, appeal planned

A $52 million federal jury verdict — the largest patent infringement award in the history of the Western District – has been overturned.

But the case isn’t over yet, said plaintiff’s attorney Jim Troupis, of Troupis Law Office LLC, Middleton, who is representing Promega, a Madison-based biotech company.

Promega plans to appeal Judge Barbara Crabb’s Sept. 13 decision overturning the verdict, he said.

“It was unexpected,” he said of the decision. “Accordingly, I think we all expect — and the most of commentators are talking about it — it’s likely to be addressed on appeal in a way that’s much more satisfactory to Promega.”

‘Vague testimony’

Crabb granted defendant Life Technologies’ motion for judgment as a matter of law overriding a jury’s finding from a two-week trial in February.

The case stemmed from a licensing agreement where Life Technologies, of Carlsbad, Calif., would sell Promega’s Short Tandem Repeat products within certain fields. Promega alleged the defendant sold products in fields not covered by the agreement.

In her 22-page decision, Crabb agreed with Life technologies that Promega didn’t adequately prove infringement at trial in violation of 35 U.S.C. sec. 271(f)(1) or 271(a).

Sec. 271(f)(1) states that liability for infringement attaches to suppliers in or from the U.S. of “a substantial portion of components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States …”

Life Technologies didn’t deny that some of the accused products were two U.S. components, but argued it wasn’t a “substantial portion.” Promega countered that even a single component may be “substantial.”

But Crabb, relying upon the use of the singular “any component” in sec. 271(f)(2), another similar provision of the statute, reasoned that the plural was intended in 271(f)(1). She cited the U.S. Supreme Court in Microsoft v. AT&T, a 2007 case where the justices held that “the two paragraphs differ, among other things, on the quantity of components that must be supplied from the United States.”

Alternatively, Promega argued that a reasonable jury could find that all of the accused products include two or more components from the U.S. It relied upon testimony from a pair of Life Technologies employees, both of which Crabb characterized as “vague.”

She additionally found that Life Technologies didn’t meet the “active inducement” requirement. It was undisputed that Life Technologies did the combining itself, so the issue was whether the statute requires the involvement of a third party.

“[I]t makes little sense in common parlance to say that someone ‘induced himself’ to perform a particular action. The more natural reading of the word is that it involves an action taken with respect to a third party, encouraging another to do something,” Crabb wrote.

Promega’s other theory of infringement, a violation of sec. 271(a), was similarly unpersuasive. That section provides: “Whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.”

Promega said testimony from a Life Technologies employee, proved infringement under the section. But Crabb pointed to the employee’s admission that she didn’t know where all the kits are made, nor did she know whether foreign orders came through the U.S.

Counsel’s comments

The decision is a setback for Promega, Troupis said, but he sees promise in the appeal.

“It (the decision) appears on its face to have left in place the findings of infringement that had already been made prior to trial,” he said, referring to Crabb’s November 2011 ruling on summary judgment that Promega’s patents are valid, which found direct infringement by Life Technologies.

“So on the basic questions of infringement and the like, it didn’t change that,” Troupis said.

“It really addresses the question of damages,” he explained, noting that the issue at trial was the quantification of sales within the U.S. and worldwide.

Attorneys for Life Technologies and its corporate communications department did not return calls seeking comment.

Troupis said the recent opinion suggests Crabb has changed her mind regarding how to read sec. 271(f).

“The decision is really an analysis of a statute that relates to products with components made in the United States, assembled abroad and then shipped back into the United States or shipped around the world,” he said. “So the legal question – when you actually produce substantial amounts of the components here in the States, can you avoid infringement just by assembling them abroad? If you think about it, that’s a very important legal question in this day and age. Very few cases have addressed it, and when you read the opinion, she acknowledges that.”

Troupis said he took issue with Crabb’s view of the proofs offered at trial, observing, “I fully expect that the award will be reinstated, and ultimately it will be increased substantially.”

Madison patent litigator Shane Brunner, of Merchant & Gould, Madison, said the decision raises two meaty issues for the Federal Court of Appeals.

The first is whether a single component can ever be a “substantial portion of the components,” he said.

“In this case, there’s very little law on the issue,” Brunner said. “Two district courts said no, and Judge Crabb went along with that because there’s no controlling precedent to tell her otherwise.”

The second issue, he said, is whether inducement requires a third party, versus whether a party can induce itself.

“The court said third-party involvement is required, and if this is a loophole, it’s up to Congress to close it,” Brunner said. “It’s hard to predict the outcome, because of the lack of case law. These will be some novel issues for the federal circuit to consider.”

Troupis suggested it’s possible the case might ultimately land in the U.S. Supreme Court, and Brunner agreed. Microsoft raised a similar issue, which the high court reviewed, and the justices sided with Microsoft, observing there was a loophole in the law but it was Congress’ job to close it.

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