Federal Circuit Finds Recoupment of Investment Does Not Bar Equitable Intervening Rights

The US Court of Appeals for the Federal Circuit has affirmed a district court’s grant of summary judgement of non-infringement in a case involving rival poultry chillers.

The case of John Bean Technologies Corp. v. Morris & Associates, Inc. involved a patent issued in 2002 to John Bean for an “auger-type poultry chiller used to help process poultry for human consumption.”

As the court noted, John Bean’s only domestic competition in the poultry chiller market is Morris & Associates.

Just weeks after the patent was issued, Morris wrote to John Bean explaining its belief that the patent was invalid and citing prior art to support its position. John Bean didn’t respond, and Morris proceeded to develop and sell its own poultry chillers.

Eleven years later, in 2013, John Bean filed a request for ex parte reexamination of the patent by the United States Patent and Trademark Office (USPTO).

After John Bean amended two claims of the original patent and added six additional claims, the USPTO issued a reexamination certificate in 2014.

Six weeks later, John Bean sued Morris for infringing the patent.

Morris sought summary judgment, asserting that John Bean’s patent infringement claims were barred by equitable intervening rights and prosecution laches.

As the court noted,

When a defendant is accused of infringing a reissued patent, she may raise the affirmative defense of equitable intervening rights. See 35 U.S.C. § 252. Under § 252, an alleged infringer may be protected from liability for infringement of substantively and substantially altered claims in a reissued patent. … The affirmative defense also applies to reexamined patents.

The court explained that

Granting equitable intervening rights is a matter of judicial discretion. Once granted, they give the alleged infringer the continued right to manufacture, sell, or use the accused product after the reexamination certificate is issued “when the defendant made, purchased, or used identical products, or made substantial preparations to make, use, or sell identical products, before the reissue date.”

The district court granted Morris’s motion for equitable intervening rights after weighing six factors including:

1. 1. whether substantial preparation was made by the infringer before the reissue;
   2. whether the infringer continued manufacturing before reissue on advice of its patent counsel;
   3. whether there were existing orders or contracts;
   4. whether non-infringing goods can be manufactured from the inventory used to manufacture the infringing product and the cost of conversion;
   5. whether there is a long period of sales and operations before the patent reissued from which no damages can be assessed; and
   6. whether the infringer made profits sufficient to recoup its investment.

As the Federal Circuit noted,

The district court found that while Morris had made profits sufficient to recoup its investment due to a long period of sales, requiring “a company to eliminate [two-thirds] of its business because a patent holder, after a decade, decided to seek reexamination and enforce the patent is inequitable.”

The lesson here is that a patent owner can’t snooze on enforcing its patent rights if it wants to protect them.