Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-01854/USCOURTS-ca13-15-01854-0/pdf.json

Parties Involved:
Bayer CropScience AG
Appellant
Bayer S.A.S.
Appellant
Dow AgroSciences LLC
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

BAYER CROPSCIENCE AG, BAYER S.A.S.,

Plaintiffs-Appellants

v.

DOW AGROSCIENCES LLC,

Defendant-Appellee

______________________ 

2015-1854

______________________ 

Appeal from the United States District Court for the 

District of Delaware in No. 1:12-cv-00256-RMB-JS, Judge 

Renée Marie Bumb.

______________________ 

Decided: March 17, 2017

______________________ 

ADAM MORTARA, Bartlit Beck Herman Palenchar & 

Scott LLP, Chicago, IL, argued for plaintiffs-appellants. 

Also represented by DANIEL CHARLES TAYLOR, Denver, 

CO; ROBERT J. KOCH, Milbank, Tweed, Hadley & McCloy, 

LLP, Washington, DC; CHRISTOPHER JAMES GASPAR, New 

York, NY. 

MARK S. DAVIES, Orrick, Herrington & Sutcliff LLP, 

Washington, DC, argued for defendant-appellee. Also 

represented by KATHERINE M. KOPP; PETER A. BICKS, ALEX 

V. CHACHKES, ANDREW D. SILVERMAN, AARON SCHERZER, 

New York, NY.

Case: 15-1854 Document: 74-2 Page: 1 Filed: 03/17/2017
2 BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC

______________________ 

Before NEWMAN, CHEN, and STOLL, Circuit Judges.

STOLL, Circuit Judge. 

Bayer appeals the district court’s award of attorney 

fees to Dow under 35 U.S.C. § 285. The district court 

awarded attorney fees to Dow upon finding that the case 

stood out from others and was thus exceptional. Because 

the district court did not abuse its discretion in finding 

the case exceptional and awarding fees, we affirm.

BACKGROUND

This is the second appeal to our court in this patent 

infringement lawsuit between plaintiffs-appellants Bayer 

CropScience AG and Bayer S.A.S. (collectively, “Bayer”) 

and defendant-appellee Dow AgroSciences LLC. The 

patents-in-suit relate to soybeans genetically engineered 

to tolerate herbicide, and, particularly, to the Bayerdeveloped dmmg gene. The first appeal centered on the 

merits of a contractual dispute. The parties disagreed 

over the scope of Bayer’s license of the patents-in-suit to a 

Dow business partner, M.S. Technologies, LLC 

(“MS Tech”), and, specifically, whether the license granted 

MS Tech a broad license to commercialize and sublicense 

the soybean technology. MS Tech sublicensed to Dow 

whatever patent rights it received from Bayer. When 

Bayer sued Dow for infringement of these patents, Dow 

raised the MS Tech sublicense as an affirmative defense. 

On summary judgment, Bayer argued that it had only 

licensed MS Tech rights to non-commercial exploitation of 

the dmmg patents, and thus, Dow’s activity with MS Tech 

in commercializing dmmg gene soybeans infringed the 

patents-in-suit. Dow countered that the Bayer–MS Tech 

agreement conveyed to MS Tech broad rights—including 

commercialization of the patents-in-suit—by its terms, 

but especially in view of the facts surrounding the agreeCase: 15-1854 Document: 74-2 Page: 2 Filed: 03/17/2017
BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC 3

ment negotiations. The parties agreed that English law 

governed the agreement, and under English law, the 

background or surrounding circumstances of contract

formation are considered when interpreting the agreement. The district court agreed with Dow’s interpretation 

of the Bayer–MS Tech agreement and entered summary 

judgment in its favor. Bayer CropScience AG v. Dow 

AgroSciences LLC, No. CV 12-256-RMB-JS, 2013 WL 

5539410 (D. Del. Oct. 7, 2013). Our court affirmed that

decision. Bayer CropScience AG v. Dow AgroSciences 

LLC, 580 F. App’x 909 (Fed. Cir. 2014) (Bayer I).

The case returned to the district court, where the 

court awarded Dow attorney fees pursuant to 35 U.S.C. 

§ 285. The magistrate judge who had managed the case, 

having been briefed on the § 285 issue by both parties and 

having conducted a two-day hearing on the matter, issued 

a thorough report and recommendation declaring a “firm 

conviction that this is an ‘exceptional case’” and recommending fee-shifting under § 285. Bayer CropScience AG 

v. Dow AgroSciences LLC, No. CV 12-256-RMB-JS, 2015 

WL 108415, at *1 (D. Del. Jan. 5, 2015). The district 

judge who entered summary judgment for Dow then 

reviewed the magistrate’s recommendation and adopted it 

in a thorough opinion of her own. The district judge 

examined the full duration of the litigation and concluded 

that, in her view, Bayer’s weak positions on the merits 

and litigation conduct supported a finding that this was 

an exceptional case.

Specifically, the district judge emphasized that 

“Bayer’s own witnesses as well as key documents contradicted Bayer’s contorted reading of the contract” and that 

“Bayer’s conduct in litigating this case in the face of 

evidence that contradicted its contorted reading of the 

Agreement was objectively unreasonable.” Bayer Cropscience AG v. Dow Agrosciences LLC, No. CV 12-256, 2015 

WL 1197436, at *4, *8 (D. Del. Mar. 13, 2015) (Fees Op.). 

Bayer had argued that it did not grant Dow’s business 

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4 BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC

partner, MS Tech, commercialization rights to the dmmg 

gene patents, relying in large part on the emphasized 

exception clause in the license grant: 

The SELLER [Bayer] hereby grants to the 

PURCHASER [MS Tech] . . . a worldwide, fully 

paid-up, exclusive license – with the right to grant 

sublicenses solely as set out in Article 3.1.3 and 

with the exception of the rights to increase, market, 

distribute for sale, sell and offer for sale, granted 

to STINE by separate agreement . . . . 

J.A. 339 (emphasis added). The referenced Stine agreement was a non-exclusive license Bayer gave to Stine 

Seed Farm, Inc.—an entity working closely with 

MS Tech—which specifically granted the enumerated 

commercialization rights listed in the MS Tech agreement 

(i.e., right to increase, market, distribute for sale, sell, and 

offer for sale). Bayer argued that this exception in the 

MS Tech agreement referencing the Stine agreement 

carved all commercialization rights completely out of the 

MS Tech license. Dow posited instead that the provision 

simply indicated that the MS Tech license was not exclusive with respect to the separate license rights Stine had 

been granted. The parties each presented textual arguments—citing other provisions in both the MS Tech and 

Stine agreements—to support their respective positions. 

In addition, the parties relied on expert testimony to 

interpret the agreements’ terms, as well as extrinsic 

evidence regarding the parties’ understanding of the 

agreement because such evidence is highly relevant under 

the governing English law. 

In its decision awarding attorney fees, the district 

judge found that Bayer’s arguments were “fallacious” 

because they were “implausible” and “made no business 

sense” in light of the facts surrounding the agreements

and their negotiation. Fees Op., 2015 WL 1197436, at *6–

7. For example, the district court noted that Bayer was 

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BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC 5

unable to adduce testimonial evidence from those involved 

in negotiating the agreement—including those working 

for Bayer—that anyone understood the agreement as 

carving out commercialization rights from the MS Tech 

agreement. To the contrary, the district court pointed to 

testimony of a Bayer executive at the time of the deal that 

“the value of these assets for [MS Tech/Stine] was in [the] 

ability to make full use of them” and further that “[i]t 

seems incongruous that we would sell an asset to somebody, receive remuneration for the sale, and then somehow prevent the acquirer from making use of the asset he 

just acquired.” Id. at *5 (alterations in original) (emphases omitted) (quoting Morgan Dep., J.A. 4481 p. 62 ll. 6–8; 

J.A. 4488 p. 91 ll. 16–19). The district court also found 

Bayer’s position in striking tension with remarks it made

upon the agreement’s execution in a congratulatory email 

sent to individuals concurrently serving as executives of 

both MS Tech and Stine: “[W]e are convinced that in your 

capable hands these ‘products’ will find their true worth 

in the market.” Id. (emphasis omitted) (quoting J.A. 

13654). 

The district court also expressed concern about the

logical import of Bayer’s argument. Under Bayer’s theory, it retained commercialization rights in the dmmg gene 

patents. The district court found this position to be in 

conflict with Bayer’s own evidence. A Bayer executive at 

the time of the deal testified that “it was relatively black 

and white certainly in my mind that we were divesting 

these assets.” Id. (quoting Morgan Dep., J.A. 4481 p. 62 

ll. 3–5) (emphasis omitted). Further, the congratulatory 

email that the Bayer executive sent had remarked: “We 

[Bayer] wish you every success in capturing the intrinsic 

value that these assets promise. We were disappointed 

that Bayer was unable to convert that potential given our 

(lack of) market presence . . . .” Id. (quoting J.A. 13654).

The district court identified other specific instances of 

Bayer’s litigation conduct as supporting its exceptional 

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6 BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC

case determination. Specifically, the district court criticized Bayer’s decision to add its dmmg gene patent allegations to an on-going Bayer–Dow lawsuit only a few days 

after MS Tech and Dow issued a joint press release, 

announcing the entities’ plans to pursue commercializing

dmmg-gene soybeans. The district court found Bayer’s 

pre-suit diligence lacking, observing: “The positions 

Bayer took to support their contract interpretation arguments were directly contradicted by the record evidence 

Bayer had obtained through early discovery and Bayer 

should have made every effort to discover before filing 

suit.” Id. at *9. In the district court’s judgment, “[h]ad 

Bayer done any due diligence, it would have learned that 

no witness supported Bayer’s construction of the Agreement and this case [] should never have been filed.” Id. 

at *8. 

The district court also found fault with Bayer’s decision to move for a preliminary injunction against Dow

amidst targeted discovery on the dispositive contract 

dispute. That discovery, including depositions of Bayer 

witnesses, would ultimately “debunk[] Bayer’s claims,” 

according to the district court. Id. at *9. Thus, the district court found that Bayer’s preliminary injunction 

motion “was frivolous and unnecessarily increased the 

costs of litigation.” Id. The district court lastly criticized 

Bayer for taking seemingly contradictory positions regarding ownership of a particular soybean—Enlist E3—in 

this case and an ongoing arbitration between the parties.

After identifying these aspects of Bayer’s case, the 

district court concluded that, relative to other cases, this 

was an exceptional case that entitled Dow to fees under 

§ 285. Bayer timely appealed, and we have jurisdiction 

under 28 U.S.C. § 1295(a)(1).

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BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC 7

DISCUSSION

I.

Section 285 of the Patent Act provides: “The court in 

exceptional cases may award reasonable attorney fees to 

the prevailing party.” 35 U.S.C. § 285. In Octane Fitness, 

the Supreme Court clarified what constitutes an exceptional case:

[A]n “exceptional” case is simply one that stands 

out from others with respect to the substantive 

strength of a party’s litigating position (considering both the governing law and the facts of the 

case) or the unreasonable manner in which the 

case was litigated. District courts may determine 

whether a case is “exceptional” in the case-by-case 

exercise of their discretion, considering the totality of the circumstances.

Octane Fitness, LLC v. ICON Health & Fitness, Inc., 

134 S. Ct. 1749, 1756 (2014). After Octane Fitness, a feeseeking party must show that it is entitled to § 285 fees 

by a “preponderance of evidence,” id. at 1758—a “change 

in the law lower[ing] considerably the standard for awarding fees,” Oplus Technologies, Ltd. v. Vizio, Inc., 782 F.3d 

1371, 1374 (Fed. Cir. 2015). 

The Supreme Court addressed our standard of review 

for § 285 cases in Highmark Inc. v. Allcare Health Management System, Inc., 134 S. Ct. 1744 (2014)—a case 

argued together with Octane Fitness and decided on the 

same day. The Supreme Court held “that an appellate 

court should review all aspects of a district court’s § 285 

determination for abuse of discretion.” Id. at 1747. The 

Court explained: 

“[A]s a matter of the sound administration of justice,” the district court “is better positioned” to decide whether a case is exceptional, because it lives 

with the case over a prolonged period of time. . . . 

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8 BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC

[T]he question is “multifarious and novel,” not 

susceptible to “useful generalization” of the sort 

that de novo review provides, and “likely to profit 

from the experience that an abuse-of-discretion 

rule will permit to develop.”

Id. at 1748–49 (citation omitted) (quoting Pierce v. Underwood, 487 U.S. 552, 559–60, 562 (1988)). 

Abuse of discretion is a highly deferential standard of 

appellate review. Indeed, “deference [to the trial 

court] . . . is the hallmark of abuse-of-discretion review.” 

Gen. Elec. Co. v. Joiner, 522 U.S. 136, 143 (1997). To 

meet the abuse-of-discretion standard, the moving party

must show that the district court has made “a clear error 

of judgment in weighing relevant factors or in basing its 

decision on an error of law or on clearly erroneous factual 

findings.” Mentor Graphics Corp. v. Quickturn Design 

Sys., Inc., 150 F.3d 1374, 1377 (Fed. Cir. 1998) (citing 

A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 

1020, 1039 (Fed. Cir. 1992) (en banc)); see also Highmark, 

134 S. Ct. at 1748 n.2. 

II.

We cannot say that the district court abused its discretion in this case. At the outset, we recognize that the 

district court applied the correct legal test under § 285. 

Indeed, it examined the totality of the circumstances to 

determine whether the case stood out from others. See 

Octane Fitness, 134 S. Ct. at 1756. The district court’s 

opinion thoroughly demonstrated the totality-of-thecircumstances approach, detailing the reasons why 

Bayer’s positions on the merits and litigation tactics 

coalesced in making this case, in its judgment, exceptional.

On appeal, Bayer first argues that the district court 

erred in finding the case exceptional because “Bayer had 

an objectively reasonable case on the merits.” Reply 

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BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC 9

Br. 1. The Supreme Court rejected such a rigid approach

in Octane Fitness, holding that whether a party’s merits 

position was objectively reasonable is not dispositive 

under § 285. Octane Fitness, 134 S. Ct. at 1756. Instead, 

the Supreme Court adopted a holistic and equitable 

approach in which a district court may base its discretionary decision on other factors, including the litigant’s 

unreasonableness in litigating the case, subjective bad 

faith, frivolousness, motivation, and “the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 1756–57, 1756 n.6. 

Here, the district court considered factors beyond the 

merits—including Bayer’s litigation conduct—and emphasized that “Bayer’s conduct in litigating this case in 

the face of evidence that contradicted its contorted reading of the Agreement was objectively unreasonable.” Fees 

Op., 2015 WL 1197436, at *8. The court explained that “if 

this were a case involving a colorable dispute regarding 

contract language, this would not be an exceptional case. 

But this case is not such case. Far from it.” Id. at *9. 

The district court further explained that, in its view, this 

case stood out from others because “[t]he positions Bayer 

took to support their contract interpretation arguments 

were directly contradicted by the record evidence Bayer 

had obtained through early discovery and Bayer should 

have made every effort to discover before filing suit.” Id. 

Summarizing, the court explained that “Bayer marched 

onward with a view of its case that was not supported by 

its witnesses.” Id. at *9.

The court did not abuse its discretion in so finding. 

One Bayer executive at the time of the deal testified that 

Bayer did not retain commercial rights because “it was 

relatively black and white certainly in my mind that we 

were divesting these assets.” Fees Op., 2015 WL 1197436,

at *5 (quoting Morgan Dep., J.A. 4481 p. 62 ll. 3–5). He 

further testified that “[i]t seems incongruous that we 

would sell an asset to somebody, receive remuneration for 

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10 BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC

the sale, and then somehow prevent the acquirer from 

making use of the asset he just acquired.” Id. (quoting 

Morgan Dep., J.A. 4488 p. 91 ll. 15–19). An email Bayer 

sent to executives for Stine and MS Tech remarked that 

“in your capable hands these ‘products’ will find their true 

worth in the market.” Id. (emphasis omitted) (quoting 

J.A. 13654). As the district court explained, the parties 

agreed that English law governed the Bayer–MS Tech 

contract. The parties further agreed that under English 

law, the background facts and circumstances surrounding 

the agreement—known in English law as the “factual 

matrix”—must be considered in construing the contract’s 

terms. Id. at *8. As such, the district court permissibly 

relied on the testimony of Bayer’s witnesses to discredit 

Bayer’s interpretation.

The district court likewise did not abuse its discretion 

in concluding that Bayer failed to perform a diligent presuit investigation of its claims against Dow. Bayer’s own 

witnesses testified against its contract interpretation. We 

cannot say that the district court erred in reasoning that 

had Bayer conducted a more searching pre-suit investigation—at least of its own easily-obtainable evidence—it 

would have not filed suit. Nor did the district court err in 

treating pre-suit diligence as a factor in the totality-ofthe-circumstance approach, as we have previously approved of this consideration in § 285 determinations. See 

Lumen View Tech. LLC v. Findthebest.com, Inc., 811 F.3d 

479, 481–83 (Fed. Cir. 2016).

Bayer also argues that the district court abused its 

discretion in awarding fees because Bayer’s expert, 

Lord Collins, a former Justice of the Supreme Court of the 

United Kingdom, “rendered his professional judgment 

that . . . Bayer’s interpretation of the MS Tech license was 

correct.” Appellant Br. 15. We reject Bayer’s argument. 

As the district court explained, Bayer’s English-contractlaw expert testified that he had only considered the text of 

the agreement itself in rendering his opinion. He admitCase: 15-1854 Document: 74-2 Page: 10 Filed: 03/17/2017
BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC 11

ted that he was completely unaware of the factual matrix 

in this case and that his opinion was incomplete because 

one must consider the factual matrix in construing a 

contract under English law.

On appeal, Bayer also asks us to reweigh evidence in 

a manner inconsistent with Highmark’s guidance that we 

review “all aspects of a district court’s § 285 determination for abuse of discretion.” Highmark, 134 S. Ct. at 

1747. For example, the district court found Bayer’s filing 

of its motion for a preliminary injunction nearly eighteen 

months after alleging infringement “frivolous.” Fees Op., 

2015 WL 1197436, at *9. The court explained that 

Bayer’s motion “unnecessarily increased the costs of 

litigation” and was a factor for deeming this case exceptional. Id. Bayer argues on appeal that it was not improper for it to move for a preliminary injunction eighteen 

months after alleging infringement. But the timing of 

Bayer’s motion relative to alleging infringement was not 

what drove the district court’s fees determination; in fact, 

the district court considered the motion “early” since 

Bayer sought the injunction before Dow sold any dmmg

gene products. Id. Rather, what concerned the district 

court was that Bayer moved for a preliminary injunction 

amidst targeted discovery on the very contract dispute 

that would prove fatal to its case. The court explained 

that Bayer sought the injunction while the parties were 

conducting depositions and learned of “deposition testimony of Bayer’s own witnesses that debunked Bayer’s 

claims.” Id. Against this backdrop, it was not an abuse of 

discretion for the district court to conclude that Bayer’s 

seeking of a preliminary injunction—a “drastic and extraordinary remedy” requiring a movant show, inter alia, 

likelihood of success on the merits and irreparable harm 

in its absence, Murata Machinery USA v. Daifuku Co., 

830 F.3d 1357, 1363 (Fed. Cir. 2016) (quoting National 

Steel Car, Ltd. v. Canadian Pacific Railway, 357 F.3d 

1319, 1324–25 (Fed. Cir. 2004))—was “frivolous and 

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12 BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC

unnecessarily increased the costs of litigation,” Fees Op., 

2015 WL 1197436, at *9. 

Bayer’s additional factual arguments do not convince 

us that the district court abused its discretion either. For 

example, Bayer continues to infer—as it did during the 

first appeal to this court—that Stine obtained commercial 

rights and MS Tech did not from the fact that Stine paid 

more for its license than did MS Tech. Dow, however, 

presented a plausible explanation for the price disparity. 

Specifically, Dow explained that MS Tech was undercapitalized because of costs it incurred seeking regulatory 

approval, and therefore had the closely-related Stine 

entity bear the brunt of the licensing cost. Furthermore, 

Bayer’s own witness testimony did not support its inference. Bayer’s corporate witness testified that “Stine paid 

more than, than MS Tech, but I don’t know why that was 

the case,” Schulte Dep., J.A. 3465 p. 115 ll. 23–25, and 

another Bayer witness involved in the deal further testified that “I don’t believe that [] we cared as between those 

companies how it was divided up,” Keating Dep., J.A. 

7454 p. 97 ll. 15–16. We cannot say, especially in an 

abuse-of-discretion review, that the district court erred in 

rejecting Bayer’s argument regarding price of the license

as a “manufactured inference.” Fees Op., 2015 WL 

1197436, at *7. 

Equally unavailing is Bayer’s argument that we 

should interpret the congratulatory email that it sent to 

individuals working for both Stine and MS Tech as only 

applying to their respective roles at Stine. The email 

remarked: “[W]e are convinced that in your capable hands 

these ‘products’ will find their true worth in the market.” 

J.A. 13654. While the email was sent to the individuals’ 

Stine email accounts, a Bayer news release announcing 

the deal identified one of those individuals as a Director of 

MS Tech and quoted him as saying that partnering with 

Bayer “will help us bring these novel products to market.” 

Fees Op., 2015 WL 1197436, at *9 (emphasis omitted). 

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BAYER CROPSCIENCE AG v. DOW AGROSCIENCES LLC 13

This evidence suggests that Bayer considered at least this 

individual as an executive of both Stine and MS Tech, and 

the district court did not abuse it discretion in inferring 

that the email was not limited to the executive’s role with 

Stine. 

We have considered Bayer’s remaining arguments 

and find them unpersuasive to show that the district 

court abused its discretion. 

CONCLUSION

For the foregoing reasons, we hold that the district 

court did not abuse its discretion in determining that, 

under the totality of the circumstances, this was an 

exceptional case, and we affirm the district court’s grant 

of § 285 fees.

AFFIRMED

COSTS

Costs to appellee. 

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