**Exhibit10.57**

 

UNITED STATESDISTRICT COURT

WESTERN DISTRICTOF WISCONSIN

 
| INFIGEN, INC.,                                    |        |
|---------------------------------------------------|-------------|
|                                              | Plaintiff,  |   |
|                                              | vs.         | Case No. 98 C 0431 C |
|                                              |        |
| ADVANCED CELL  TECHNOLOGY, INC.,  STEVEN L. STICE |        |
|                                              | Defendants. |   |
|                                                   |             |  |  |

 

FINAL SETTLEMENTAGREEMENT

 

THISFINAL SETTLEMENT AGREEMENT (the “Agreement”) is entered into this 6th day ofAugust, 1999, among INFIGEN, INC., a Delaware corporation, whose principal placeof business is 6908 River Road, DeForest, Wisconsin 53532 (“Infigen”), andADVANCED CELL TECHNOLOGY, INC. (“Advanced Cell”) a Delaware corporation, whoseprincipal place of business Is One Innovation Drive, Worcester, Massachusetts01605, and STEVEN L. STICE (“Dr. Stice”), an individual, whose business addressis University of Georgia, 125 Cedar Street, Athens, Georgia 30602.

 

1

----

 

I. CONSENTJUDGMENT AND INJUNCTION:

 

1.  Advanced Cell and Dr. Stice agree to aConsent Judgment that U.S. Patents 5,496,720 and 5,096,822 are valid. enforceableand infringed.  This Consent Judgment inthe form of Exhibit A hereto will be binding upon the parties to the action,their officers, agents, servants, and employees.

 

2.  Advanced Cell and Dr. Stice agree that theConsent Judgment will include a permanent injunction against Advanced Cell andDr. Stice, their officers, agents, servants, and employees with respect to theclaims of U.S. Patents 5,496,720 and 5,096,822, as interpreted by the Court’s opinionand order dated June 24th, 1999 as amended July 6, 1999.

 

II. CASH PAYMENTS

 

1.  Advanced Cell and Dr, Stice will pay within 90days of execution of this Agreement (the “Effective Date”) the amount of$250,000 in cash (by wire transfer).

 

III. NON-EXCLUSIVELICENSE GRANT

 

1.  Infigen will grant to Advanced Cell anon-exclusive, royalty-free, fully paid up license in and to Infigen’s now

 

2

----

 

pending and future patentapplications for seven-and-a half years from the Effective Date, and issuedpatents for use in the field for human cell therapy using nuclear-transfer-derivedcells.

 

2.  During the term of the license referred to inparagraph 1 above, Advanced Cell may, at its cost, take over prosecution ormaintenance of any licensed Infigen patent applications or issued patents thatInfigen determines not to further prosecute or maintain.

 

IV. FUTUREPAYMENTS

 

1.  Advanced Cell will pay Infigen $687,500 incash over a 3-year period from the Effective Date.  Payments totaling at least $208,333 must bemade within twelve months after the Effective Date.  Payments totaling $416,667 must be made within18 months after the Effective Date.  Payments totaling $625,000 must be paid within24 months after the Effective Date, and the entire $687,500 paid within 36months after the Effective Date.

 

2.  Notwithstanding the foregoing, the above$687,500 payment may be reduced to $550,000 if:

 

3

----

 

(a)  Advanced Cell pays such $550,000 in cash to Infigenwithin twelve (12) months after the Effective Date (resulting in a $137,500reduction in the amount otherwise due); or,

 

(b)  Advanced Cell provides notice of terminationof the non-exclusive license set forth above to Infigen within twelve (12)months of the Effective Date.  In suchevent payments totalling $166,666 by month 12, $333,333 by month 18, $500,000by month 24 and $550,000 by month 36, shall be made.

 

3.  It isthe desire of Infigen, and the intent of Advanced Cell, that by thisAgreement Advanced Cell shall provide security to Infigen with regard to thefuture payment of all outstanding settlement amounts as described herein.  Accordingly, as security for Advanced Cell’spayment obligations hereunder, Advanced Cell will grant Infigen a firstsecurity interest in all of its current and future equipment, including, butnot limited to, laboratory equipment, office equipment, and furniture (the “Equipment”).

 

AdvancedCell will provide Infigen with a complete list of such Equipment, within 30days after the Effective

 

4

----

 

Date, and willrepresent and warrant that the list constitutes all of its Equipment.  Advanced Cell further represents and warrantsthat the Equipment is****wholly owned by Advanced Cell andis or will not be pledged to any third party or otherwise encumbered. In thisregard, Infigen will have the right to make any and all UCC and other filingson such existing and future Equipment as may be appropriate in order to perfectits security interest in the Equipment.

 

AdvancedCell further agrees that the list of Equipment shall be amended from time totime, but not less than quarterly, to add any additional Equipment.  Advanced Cell also agrees that Infigen shallhave a security interest in any additional Equipment, whether or not suchEquipment is contained on an amended list of Equipment.

 

It isthe further desire of Infigen, and the intent of Advanced Cell, that AdvancedCell not take any action that would impair the ability of Advanced Cell to makethe settlement payment or payments described herein.  Accordingly, Advanced Cell agrees that itshall not sell, transfer, convey, license or otherwise encumber any AdvancedCell assets, including but not limited to patents, patent applications,confidential information, trade secrets, or Equipment that would materiallyadversely affect

 

5

----

 

Advanced Cell’s paymentobligations to Infigen.  Any attemptedsale, transfer, conveyance, license or other encumbrance of any Advanced Cellassets that would materially adversely affect Advanced Cell’s paymentobligations to Infigen shall be void.

 

In theevent of a payment default or an uncured default under this Agreement, Infigenshall have the right to immediately accelerate all amounts payable, toforeclose on its security interest and take possession of all listed andunlisted Equipment, and to take any other appropriate actions.

 

Jurisdictionand venue to enforce the provisions set forth above shall be in the WesternDistrict of Wisconsin.

 

V. DISMISSALS OFLITIGATION

 

1.  The lawsuit filed in the Superior CourtDepartment of the Trial Court Worcester Division of the Commonwealth ofMassachusetts by Advanced Cell against Infigen and Mr. Golueke (99-0218C) willbe dismissed with prejudice.  Infigenwill dismiss with prejudice its countersuit in that case.

 

6

----

 

2.  The lawsuit filed by Infigen against AdvancedCell and Dr. Stice, (98 C 0431-C) will be dismissed with prejudice, provided,however, that there will be a judgment entered on the verdict of the jury onthe trade secret misappropriation claim in favor of the Defendants and againstPlaintiff.

 

VI.   RELEASES

 

1.                                       INFIGEN’sRelease.  Infigen, for itself and its agents,successors and assignees, does hereby forever release and discharge AdvancedCell and Dr. Stice, and any of its past or present agents, employees, officers,directors and attorneys from causes of actions, losses, promises, damages,costs, expenses, liabilities and demands of whatsoever character, nature andkind, known or unknown, suspected or unsuspected, fixed or contingent, arisingout of or in any way related to the actions, conduct, omissions, or eventsalleged in the Wisconsin and Massachusetts Actions. This release expresslyincludes all claims relating to any animals produced or in utero as of theEffective Date.

 

2.                                       ADVANCEDCELL’s Release. Advanced Cell, for itself and its agents, successors andassigns, does hereby

 

7

----

 

forever release anddischarge Infigen, and any of its past or present agents, employees, officers,directors and attorneys from causes of actions, losses, promises, damages,costs, expenses, liabilities and demands of whatsoever character, nature andkind, known or unknown, suspected or unsuspected, fixed or contingent, arisingout of or in any way related to the actions, conduct, omissions, or eventsalleged in the Wisconsin and Massachusetts Actions. This release expresslyincludes all claims relating to any animals produced or in utero as of the EffectiveDate.

 

3.                                       DR.STICE’sRelease.  Dr.Stice, for himself andhis agents, successors and assigns, does hereby forever, release and dischargeInfigen, and any of its past or present agents, employees, officers, directorsand attorneys from causes of actions, losses, promises, damages, costs,expenses, liabilities and demands of whatsoever character, nature and kind,known or unknown, suspected or unsuspected, fixed or contingent, arising out ofor in any way related to the actions, conduct, omissions, or events alleged inthe Wisconsin Action.  This releaseexpressly includes all claims relating to any animals produced or in utero asof the Effective Date.

 

8

----

 

VII. MISCELLANEOUS

 

1.                                       Theterms of this settlement will remain confidential. The parties agree to issue ajoint press release regarding this settlement.  All parties must agree to the terms of thepress release before it is made public.  Itis agreed that Advanced Cell and Infigen shall have the right to makestatements to investors, or to others as required by law, about the terms of thissettlement.

 

2*.**                                      *Notwithstandingthe foregoing, Dr. Stice shall not be precluded from making any statement,written or verbal, incluing but not limited to an independent press release aboutthe fact that a jury found no misappropriation of trade secrets, and Dr. Sticeagrees that he will provide a copy of any press release to counsel for Infigenin advance of publication.

 

3.                                       Eachparty represents and warrants that it has the power to enter into thisAgreement and to consummate the transactions contemplated herein, and nothingherein conflicts with any obligation or right of such party or requires consentof any third party to effectuate.

 

9

----

 

4.                                       Theparties expressly agree that this Agreement shall be enforceable in**FederalCourt in Madison, Wisconsin, before Judge Crabb, who will retain jurisdictionfor purposes of enforcing this Agreement.

 

5.                                       Counterparts. This Agreement may be executed in one ormore counterparts, all of which, taken together, shall constitute one and thesame instrument when each party has signed at least one counterpart.

 

INWITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executedas of the date hereof by an authorized representative of each on their behalf,and each of these covenants that this instrument is a voluntary act of eachsaid Party and that the manner of execution by said Party is sufficient toconstitute a solid and binding irrevocable agreement on its behalf and on whichother may rely.

 

10

----

 

Understood and agreedthis 6th day of August, 1999.

 
| /s/ Dale Schwartz           |   | /s/ Michael West            |   | /s/ Steven Stice           |
|-----------------------------|--------|-----------------------------|--------|----------------------------|
| Infigen, Inc.               |   | Advanced Cell               |   | Dr. Steven Stice           |
| By Dale Schwartz            |   | Technology Inc.             |   |                       |
|                        |   | By Dr. Michael West         |   |                       |
|                        |   |                        |   |                       |
| Approved                    |   | Approved                    |   | Approved                   |
|                        |   |                        |   |                       |
|                        |   |                        |   |                       |
| /s/ Douglas E. Olson        |   | /s/ Robert H. Stier         |   | /s/ Michael P. Erhard      |
| Douglas E. Olson            |   | Robert H. Stier Jr.         |   | Michael P. Erhard          |
| Attorney for Infigen,  Inc. |   | Attorney for Advanced  Cell |   | Attorney for Steven  Stice |
|                        |   | Technology, Inc.            |   |                       |

 

11

----

 

IN THE UNITEDSTATES DISTRICT COURT

 

FOR THE WESTERNDISTRICT OF WISCONSIN

 
| INFIGEN, INC.,                                        |        | OPINION AND |
|-------------------------------------------------------|-------------|-------------|
|                                                  |        | ORDER       |
|                                                  | Plaintiff,  |        |
|                                                  | v.          |        | 98-C-0431-C |
|                                                  |        |
| ADVANCED CELL  TECHNOLOGY, INC.  and STEVEN L. STICE, |        |
|                                                  |        |
|                                                  | Defendants. |        |
|                                                       |             |             |  |  |

 

In this civil case,plaintiff Infigen, Inc. is suing defendants Advanced Cell Technology, Inc. andSteven L. Stice for infringement of two patents and for theft of trade secretsand common law misappropriation.  Thecase is before the court on plaintiff’s motion for partial summary judgment,defendants’ motion for partial summary judgment and for construction of certainclaims of plaintiffs U.S. Patent No 5,496,720. Jurisdiction is present 28 U.S.C.§ 1338.

 

Plaintiff’s ‘720patent is directed to a processfor activating bovine oocytes (unfertilized eggs) for use in cloning.  The activation process is an artificial meansof stimulating embryo development without the use of spermatozoa.  In the ‘720 patent,

 

 
|   |   | A copy of this document  has been mailed to the following |
|--------|--------|-----------------------------------------------------------|
|   |   | [ILLEGIBLE]                                               |   |
|   |   |                                                      |   |
|   |   | this 24th  day of June, 1999 by                           |

 

1

----

 

plaintiff lays claim to aspecific process that involves an increase in intracellular levels of divalentcations (ions such as calcium that are charged positively with the ability toaccept two free electrons), followed by a reduction in the phosphorylation of cellularproteins before placement of the cell in a culture medium such as the oneclaimed in plaintiffs U.S. Patent No. 5,096,822.  In plaintiffs view, its ‘720 patent coversthis activation process whether it takes place before or after the oocyte hasreceived a donor cell containing desirable DNA and it does not require that theintroduction of the divalent cations precede the administration of the chemicalthat reduces the phosphorylation of cellular proteins, so long as the actualchemical reactions occur in sequence.  Moreover,according to plaintiff, the activation process is parthenogenic because ittakes place without spermatozoa and does not lose its parthenogenic charactersimply because it is applied to an oocyte after fusion with a donor cell containinga blastomere that by definition contains genetic material from a male.

 

Defendants’position is that the, ‘720 patent was written to cover a process in which ascientist would remove the nucleus from the oocyte and activate the enucleated oocytebefore fusing the donor cell to the oocyte and that for two reasons, the patent’sclaims do not cover defendant Advanced Cell’s present practice of fusing adonor cell before activating the nuclear transfer product.  First, an oocyte that has received a donorcell is no longer referred to as an oocyte but as a nuclear transferred e*mbryo.  *Notonly does plaintiff use this term, itself in the patent, but persons ofordinary skill in the art would do the same.  Thus,

 

2

----

 

defendants argue, it is**clear that plaintiff’s process, which isdirected to the**activation of an*,**oocyte*, appliesonly to the activation of an unfertilized egg that has not been fused with adonor cell.

 

Second, plaintiffrefers in the patent to a parthenogenically-activated recipient oocyte anddefines the term parthenogenic activation as producing an embryonic cellwithout “any contribution from a male gamete. ‘720 patent, col. 2, In. 45-46.By definition, say defendants, this excludes activation of a fused product,because such a product would contain a blascomere containing genetic materialcontributed by a male gamete earlier in the process. Thus, by referring to parthenogenicactivation, the inventors limited the claims to cover only the process in whichactivation of the oocyte precedes its fusion with a donor cell.

 

The three terms indispute requiring construction are “oocyte,” “in sequence” (as referring to theincrease in divalent cations and the reduction in phosphorylation) and “parthenogenicactivation.” I conclude that, as used in 1 claims and 18 of the, ‘720 patent, “oocyte”refers to an unfertilized egg in either its natural state or one whose nucleushas been removed or replaced with a foreign nucleus; “in sequence” means theorder in which the chemical processes of increasing levels of divalent cationsand reducing phosphorylation take place and not to the order in which chemicalsare added to produce those reactions; and “parthenogenic activation” refers toany form stimulating embryo development without the use of spermatozoa, even ifcarried out on a nuclear fused oocyte.

 

3

----

 

From theevidentiary hearing held on claim construction, I make the following findingsof fact.

 

FACTS RELEVANT TOCLAIM CONSTRUCTION

 

Plaintiff Infigen,Inc. is a corporation doing research in animal cloning procedures.  Defendant Advanced Cell Technology, Inc. is acorporation engaged in the same kind of work.  Defendant Steven L. Stice has worked fordefendant and for plaintiff’s predecessor and has recently founded a thirdcompany in Georgia to work in the field of animal cloning.

 

The technology atissue involves the cloning of cattle, and transgenic cattle in particular. Atransgenic cow is one that has had DNA introduced artificially into one or moreof its cells. The value of such a cow is that it is capable of producing atransgene product, that is, one not naturally present in cattle, such as apharmaceutical drug.  Researchers hope tobe able to manipulate cattle genes so that transgenic cattle will produce a transgeneproduct in their milk that can be extracted from the milk or consumed with it.

 

Producing atransgene product begins with a cloning phase One method of cloning is to startwith an unfertilized egg, or oocyte, that has been isolated from a cow.  The nucleus is removed, producing anenucleated oocyte.  At this stage, theenucleated oocyte might be activated according to the method described inplaintiff’s ‘720 patent, after which a donor embryonic cell from a cowcontaining a desired nucleus that has been manipulated to

 

4

----

 

contain new DNA inside itwould be transferred to the activated oocyte and fused with it. Alternatively,the activation process would occur after the recipient oocyte has been fusedwith the donor cell.  Whatever thesequence, the next step is to transfer the fused and activated cell to aculture medium.  If and when the productdevelops into an embryo, it is transferred to the womb of a surrogate mothercow, to develop into a calf.  The twoprocesses are set out in chart form below:

 

 

5

----

 

l.  Claim language

 

The relevant claimsof plaintiff’s ‘720 patent read as follows:

 

1.  A process for the in vitro parthenogenicactivation of a bovine oocyte comprising the following steps in sequence:

a.  increasingintracellular levels of divalent cations in the oocyte; and

b.  reducingphosphorylation of cellular proteins in the oocyte.

 

8.  The process of claim 1 wherein theintracellular levels of divalent cation are increased by treatment with ethanol.

 

9.  The process of claim 1 wherein theintracellular levels of divalent cation are increased by treatment with caged chelators.

 

18.  A process for the in vitro parthenogenicactivation of a 10-52 hour bovine oocyte comprising the following steps insequence:

a.  increasing intracellularlevels of divalent cation in the oocyte by introducing a divalent cation intothe oocyte ctyoplasm; and

b.  reducing phosphorylation ofcellular proteins in the oocyte wherein phosphorylation of cellular proteins isreduced by adding a serine-threonine kinase inhibitor to the oocyte in anamount effective to inhibit phosphorylation.

 

2.  Specifications

 

In the Summary ofthe Invention, the inventors provide that the invention is directed to at leastthree ends: 1) a process for parthenogenically activating mammalian oocytescomprising increasing intracellular levels of divalent cations in the oocyteand reducing phosphorylation of cellular proteins in the oocyte; 2) a process forparthenogenically activating a *1**0-52 hour*mammalianoocyte in the same manner; and 3) a method for

 

6

----

 

transferring a nucleusfrom a donor embryonic cell to a parthenogenically-activated recipient oocyteand culturing the resulting nuclear transferred embryo in vitro or in vivo. ‘720patent, col. 3, In. 28-62.

 

In the sameparagraph, the inventors describe the last two steps of their method as “transferringthe nucleus to the enucleated recipient parthenogenically-activated oocyte toform a nuclear transferred oocyte; and forming a single cell embryo from thenuclear 

transferredoocyte.”  See col 3. In. 60-62. Atcol. 15, In. 6, they refer to a fused donor cell and parthenogenically-activatedoocyte as a fused nuclear transfer embryo.  At col. 16, In. 46, oocyte is used to refer toan electrofused nuclear transfer.

 

In col. 5, In.6-9, the inventors explain that they use the term oocyte to refer to the “recipientoocyte” (suggesting both the oocyte that is to receive a donor cell and onethat has received such a cell) and that they define it as an oocyte that “developsfrom an oogonium and, following meiosis, becomes a mature ovum.” (Webster’sThird International Dictionary of the English Language Unabridged,Merriam-Webster, Inc. p. 1578 (1993), defines oogonium as “one of thedescendants of a primordial germ cell that give rise to oocytes.” The samesource defines meiosis at p. 1405 as “the sequence of complex nuclear changesresulting in the production of cells (as gametes) with half the number ofchromosomes present in the original and typically involving an actual reductiondivision in which the chromosomes without undergoing prior splitting join inpairs with homologous chromosomes

 

7

----

 

of maternal and paternalorigin associated and then separate so that one member of each pair enters eachdaughter nucleus and a second division not involving reduction.”)

 

Describing the inventionas it relates to nuclear transfer, the inventors explain a process in whichenucleated oocytes are parthenogenically activated before a donor cell isinserted and fused with the recipient oocyte.  In the Detailed Description of the Invention,col. 4, they describe activation without reference to any sequence in the increasein calcium and a reduction in phosphorylation.  The inventors describe three experimentscarried out with parthenogenically activated aged, young and 24-hour oocytes innuclear transfer procedures.  Col. 14,In. 55 - col. 16, In. 52.  Before settingout the description of the experiments they carried out, the inventors notethat the experiments “art illustrative of the present invention and are not intendedto limit the invention in any way.” Col 9, line 44-46.

 

In col. 6, In.60-64, the inventors note that “it appears that the initial calcium transientappears to be an upstream event which activates a cascade of cellular changesnecessary for resumption of meiosis and the cell cycle.” At the end of thesection, they state that the invention is not confined to the particularconstruction and arrangements described within the patent.  Col. 16. In. 49-52.

 

8

----

 

3.  Prosecution history

 

The inventorsadded the phrase “in sequence” to claims 1 and 18 in response to a statement by the examiner that it was unclearwhether steps (a) and (b) occurred simultaneously or in sequence.  Trial Exh. #3, at Bates stamp 60258. Indistinguishing the invention from prior art, the Inventors told the examinerthat the prior art did not suggest parthenogenic activation as claimed in theirapplication, that is,**by increasing intracellular levelsof divalent cations in the oocyte, followed by reducing phosphorylation ofcellular proteins in the oocyte.  Id.at 60271.

 

4.  Extrinsic evidence

 

One of defendants’witnesses was James Robl, Professor of Veterinary and Animal Research at theUniversity of Massachusetts. Robl is a co-inventor on U.S. Patent No.4,994,384, which was applied for in 1987, The patent uses the term oocyte torefer to an oocyte that has received a donor cell. See, e.g., ‘384patent, col. 3, In. 46; col. 4, in 67-col. 5. In. 5. Robl was a co-author withdefendant Stice of a paper published in 1988 in which the term oocyte was usedto refer to an oocyte that had been fused with a donor cell. See Plt’sHtg. Exh. #27.

 

In three paperspublished in 1998, defendant Stice and other scientists used the term oocyte torefer to the product of fusion of a donor cell with a recipient oocyte.  See, e.g., Jose B. Cibelli,Steve L. Stice et al., Cloned Transgenic Calves Produced from Nonquiescent

 

9

----

 

Fetal Fibroblasts,280 Science 1256 (1998) (“When the donor cell is fused to the recipient oocyte,which is arrested in the second metaphase in meiosis, the nuclear envelopebreaks down and the chromosomes condense until the oocyte is activated.”) and1258 n.12 (“successfully enucleated oocytes were fused with actively dividingCL 1 fibroblasts. After 2 to 4 hours, oocytes were then chemically activated” withcalcium ionophore and DMAP); W. Michael Zawada, Steven L. Stice et al., Somaticcell cloned transgenic bovine neurons for transplantation in parkinsonian rats,42 Nature Medicine 572 (1998) (describing activation of oocytes followingfusion of recipient enucleated oocyte with individual donor fibroblasts); JoseB. Cibelli, Steve S. [sic] Stice et al., Transgenic Bovine Chimeric OffspringProduced from Somatic Cell-derived Stem-Like Cells (1998) (draft), Plt’sHrg. Exh. #8, A 001494-95 (describing activation of oocytes that had been fusedwith donor cells).

 

FACTS FOUND TO BEUNDISPUTED FOR PURPOSE OF SUMMARY JUDGMENT

 

From the findingsof fact proposed by the parties, I find the following facts to be undisputed.

 

Plaintiff Infigen,Inc is a Delaware corporation with its principal place of business in Madison,Wisconsin. Defendant Advanced Cell Technology, Inc. is a Delaware corporation withits principal place of business in Worcester, Massachusetts.  The defendant company 

 

10

----

 

was founded in 1994 todevelop and commercialize technologies related to the genetic modifications ofcells and the use of those cells to produce cloned transgenic animals foragricultural and biomedical applications.  Defendant Steven L. Stice is an individual anda named inventor on the ‘720 patent.

 

In a letter dated June 23,1997, counsel for plaintiff’s predecessor in interest wrote defendant AdvancedCell to alert it to the possibility that it was using a culture medium coveredby plaintiff’s ‘822 patent and might be infringing the ‘720 patent as well.(Defendants have stipulated that the CR1 and CR2 media they used are within thescope of claims 1-7 and 9-12 of the ‘822 patent; plaintiff has stipulated thatthe ACM medium defendant Advanced Cell uses does not infringe.) This was thefirst written notice either defendant had received of plaintiff’s claims ofpatent infringement.

 

On September 25,1997, defendant Advanced Cell executed a Development and CommercializationAgreement with Genzyme Transgenics. Both companies were interested indeveloping transgenic cattle that would produce recombinant human serum albuminin their milk and in commercializing such a product.  Commercialization would require approval ofthe United States Food and Drug Administration.

 

Plaintiff has neversold, leased or offered for sale any articles, products or things practicingthe inventions of the ‘822 patent.

 

Defendant AdvancedCell began infringement of plaintiff’s ‘720 patent in 1994. It

 

11

----

 

has been using CR1 andCR2 media since at least 1996.

 

Defendant Sticewas the chief scientific officer at defendant Advanced Cell, in charge ofresearch and developmental activities and responsible for all scientistsworking on this research and development.  He supervised the work of the technicians atthe company.

 

OPINION

 

A. ClaimConstruction

 

Claim constructionis the first step in analyzing an allegation of patent infringement and must bedecided by the court, because it is a question of law, SeeMarkman v.Westview Instruments. Inc., 517 U.S. 370, 372 (1996). Until the claim hasbeen construed, it is not possible to make the factual determination that isthe second step of the infringement analysis: whether the accused product ormethod infringes the claims of the patent.  It is black letter law that claim constructionbegins and usually ends with a consideration of “intrinsic evidence” only, thatis, the claims themselves, the written description portion of the patent specificationand the patent’s prosecution history. See, e.g., DigitalBiometrics, Inc. v. Identix, Inc., 149 F.3d 1335, 1343-44 (Fed. Cir. 1998).A court is to give claim terms their ordinary meaning, unless the inventor hasmade it clear in the patent or file history that the term has a specialmeaning. See, e.g., Vitronics Corp. v. Conceptronic, Inc.,90 F.3d 1576, 1582 (Fed. Cir. 1996). Further, the claims are to be read in viewof the specifications,

 

12

----

 

seeMarkman.,52 F.3d 967, 979 (Fed. Cir. 1995), aff'd, 517 U.S. 370, but the claimsmay not be interpreted by adding words or concepts from the specifications thatdo not appear in the claims, SeeElectro Medical Systems S A, v.Cooper Life Sciences, Inc., 34 F.3d 1048, 1054 (Fed. Cir. 1994). “Thewritten description part of the specification itself does not delimit the rightto exclude.  That is the function andpurpose of claims.” Markman, 52 F.3d at 980.

 

1.  Oocyte

 

Defendants assertthat the patent distinguishes between enucleated “oocytes” andnuclear-transferred “embryos,” both in its language and by the specifications’exclusive reference to the activation of enucleated oocytes, but a reading ofthe patent does not bear out defendants’ assertion.  The inventors do not use “oocyte” to referonly to a pre-fused cell and nothing in the patent suggests that the termshould be read in this restricted manner.  The inventors define oocyte in three ways: 1)as developed from an oogonium; 2) as a structure able to enter meiosis; and 3)a structure able to reach metaphase II of meiosis.  Throughout the patent, the inventors use theterm oocyte broadly to refer to cells that are enucleated and to cells that aretransferred and fused.  Because theinventors did not adopt the distinction between embryo and oocyte thatdefendants might wish they had and because nothing in the patent indicates thatthey intended to make such a distinction, it is

 

13

----

 

not possible to infer fromthe patent language that the patented method refers only to a cloning method inwhich activation precedes fusion.

 

Except when theinventor uses a special meaning for a word, a court must give the term itsordinary meaning.  If there were anydoubt that scientists such as the inventors of the ‘720 patent use the termoocyte as well as embryo to refer to the product of a recipient, enucleatedoocyte and a donor cell, it would be resolved by the evidence that otherscientists, including defendant Stice, used “oocyte” in this manner inscientific papers they wrote as recently as last year, as well as in othersthey wrote before the application for the ‘720 patent was filed in 1993.Although I do not believe that the interpretation is in doubt and am not relyingon the evidence in the scientific papers, it would be permissible to do so toresolve any remaining ambiguity in the use of the term.  For that reason, I am denying defendants’motion to strike all references to extrinsic evidence from plaintiff’s brief. SeeVitronicsCorp., 90 F.3d at 1583 (extrinsic evidence may beconsidered, if needed, to assist in determining meaning or scope of technicalterms after court has looked to language of claims, specification andprosecution history).

 

Defendants are correctthat the ‘720 patent specification describes a cloning process in whichactivation precedes fusion, but incorrect in arguing from this that the patentis limited to the activation of pre-fused, enucleated oocytes. It is blackletter law that claims are not limited to the embodiment described in thepatent specifications.  See, e.g.,Electro

 

14

----

 

Medical Systems, SA,34 F.3d at 1054. Moreover, a patent claim may encompass uses not anticipated bythe inventor and therefore not described in the patent. SeeSRI Int'lv. Matsushita Electric Corp., 775 F.2d 1107, 1121 (Fed. Cir. 1985) (patentapplicant is not required to describe in specification every conceivable futureembodiment of invention). Therefore, it is irrelevant that the ‘720 patentspecifications describe experiments in which activation precedes fusion,provided that the claim language is broad enough to include a process in whichfusion precedes activation.  The languageof claims 1 and 18 is not limited to either sequence; the claims cover themethod of activation without specifying when in the cloning process it mustoccur.

 

2.  In sequence

 

Defendants arguethat when the inventors spoke of steps “in sequence,” they meant that thatchemicals leading to the increase in divalent cations and then to the reductionin phosphorylation must be added in sequence.  They maintain that no other reading of theclaim language is logical, particularly, because in their view, scientists didnot understand the sequential reaction of these two processes in 1993.

 

Claim 1 claims aprocess for in vitro parthenogenic activation of an oocyte “comprising thefollowing steps in sequence”: the increase of intracellular levels of divalentcations in the oocyte and the reduction of phosphorylation of cellular proteinsin the oocyte.

 

15

----

 

Contrary to defendants’assertion, the plain meaning of the language is that the steps occur insequence; that is, step a occurs before step b. The claim recites a result.  The claim says nothing about theadministration of chemicals to achieve the reactions or the order in which suchchemicals might be administered. Therefore, it is**not limited to amethod in which the chemicals are *administered*in sequence, rather thansimultaneously, so long as the resulting reactions occur sequentially.  As to the argument that scientists would nothave understood the sequential nature of the reactions when the ‘720 patentapplication was filed, the patent specifications includes the inventors’observation that the initial calcium transient “appears to be an upstreamevent.” Col. 6, In. 61-62.

 

The language ofother claims in the patent does not demonstrate that the inventors intendedthat claim 1 refer to both treatments and results.  Claims 8 and 9**are claims thatdepend on claim 1. They recite specific processes to achieve the resultsclaimed in claim 1. Claim 18 is an independent claim. Like claims 8 and 9, itclaims specific ways of achieving the result claimed in claim 1. The legalpresumption is that the use of different words or phrases in separate claimsimplies a significant distinction between the claims.  SeeTandon Corp. v. United StatesInt’l Trade Comm’n, 831 F.2d 1017, 123 (Fed. Cir. 1987).

 

The specificationlanguage does not mandate a different meaning of “in sequence.” In describingone of the experiments, the inventors refer to sequential *treatment*and describe the time it takes for the sequential steps to occur afteradministration of particular chemicals,

 

16

----

 

‘720 pat., col. 10, In. 54-55,but they do so using very different language from the language they use inclaim 1. Instead of reciting the steps as they occur in sequence, as they do inclaim 1, they refer explicitly to the timing of the treatments administered.

 

The prosecutionhistory does not mandate a different understanding of the term “in sequence.”Although the term was added during the prosecution of the application, there isno indication that it was added to refer to the timing of the administration ofchemicals rather than to the order in which the steps described in (a) and (b)occur.  Rather, the evidence is that itwas added in response to a comment by the examiner that it was unclear whether “step(a) and step (b) occur simultaneously or in sequence.”

 

Defendants have afinal argument on this point that they raise for the first time in their replybrief and fail to develop, Relying on a concurring opinion in one case from theFederal Circuit, Seal-Flex, Inc. v. Athletic Track and Court Construction,172 F.3d 836 (Fed. Cir. 1999) (Rader, J., concurring), they argue that as claim1 is written, it is a “step-plus-function “within the scope of 35 U.S.C. § 112,¶6. Paragraph 6 provides that

 

An element in aclaim for a combination may be expressed as a means or step for performing aspecified function without the recital of structure, material, or acts insupport thereof, and such claims shall be construed to cover the correspondingstructure, material, or acts described in the specification and equivalentsthereof.

 

Defendants maintain thatunder this provision, claim 1 must be read as covering the corresponding actsdescribed in the specification because the claim is written to cover

 

17

----

 

functions withoutspecifying how the functions are to be achieved.  It may be that defendants are correct.  It is not possible to know from the scantfifteen lines in their brief or the twelve sentences of their argument at theevidentiary hearing exactly what their theory is on this complex question ofpatent construction.  The law in thiscircuit is that “[a]rguments that are not developed in any meaningful way arewaived.” Central States, Southeast and Southwest Areas Pension Fund v.Midwest Motor Express, Inc., 1999 WL 

371671, *7 (7th Cir.1999); see also Finance Investment Co. (Bermuda)  Ltd. v. Geberit AG, 165 F.3d 526, 528(7th Cir. 1998).

 

3.  Parthenogenic activation

 

The ‘720 patentclaims a process for “in vitro parthenogenic activation of a bovine oocyte.”The patent defines “parthenogenic” as “the ‘production’ of embryonic cells,with or without eventual development into an adult, from a female gamete in theabsence of any contribution from a male gamete (Kaufman 1981).” ‘720 pat., col.2, In. 43-46. Although this definition is included in the “Description of PriorArt,” it is the only definitiongiven in the patent specifications.  Defendants argue that this definition cannotbe read to cover the activation of a recipient oocyte containing a blastomerebecause by definition, a blastomere contains genetic material contributed byboth a female and a male gamete.

 

Oddly enough,despite having made this argument in their brief on claim

 

18

----

 

construction, defendantssay in their brief in opposition to plaintiff’s motion for partial summaryjudgment, that “defendants have activated only *nuclear transfer embryos*parthenogenically.”Br. at 7 (emphasis added). In making this statement and using “parthenogenically”to refer to the activation of a oocyte recipient that has had a blastomerefused to it, defendants seem to be conceding the very point they argue on claimconstruction.  At the least, defendants’statement is a strong indication that the term parthenogenic covers anyactivation that takes place without the use of sperm, whether the oocyte beingactivated has received a blastomere or is still waiting for one.  This conforms to the logical reading of thedefinition, in which it is clear that it is the *process*(i.e., activation) that takesplace *in the absence of any contributionfrom**a male**gamete.  *Even if ablastomere is fused with the oocyte before activation, the male chromosomes inthe blastomere do not play any role in the activation process.  I conclude that production of embryonic cellsis *parthenogenic*if the activation *process* doesnot involve spermatoza, regardless whether the *recipient*of activation contains male genetic material.

 

B. The Parties’Motions for Partial Summary Judgment

 

In its motion forpartial summary judgment, plaintiff asks for judgment on the following issuesof infringement:

 

1.  Defendants’ infringement of claims 1-7, 9-12of the ‘822 patent by their use of CR1

 

19

----

 

or CR2 media;

 

2.  Defendants’ infringement of claims 1-7, 9-12of the ‘822 patent by their use of CR1or CR2 media as control media;

 

3.  Defendants’ infringement of claims 1, 7, 10-12of the ‘822 patent by their use of CR2 media in the absence of bovine serumalbumin;

 

4.  Defendants’ infringement of claims 1-6, 10-13and 15-23 of the ‘720 patent by their use of methods of their alleged “sequential”activation of oocytes;

 

5.  Defendants’ infringement of claims 1-6, 10-13and 15-23 of the ‘720 patent by their use of methods of their alleged “simultaneous”activation of oocytes; and

 

6.  Defendants’ infringement of claims 1-6, 10-13and 15-23 of the ‘720 patent by their use of methods of their alleged “sequential”activation of oocytes used as a control activation method.

 

In their ownmotion for partial summary judgment, defendants are seeking a judgment thatplaintiff cannot prevail on its claims of infringement because it cannot provethat it has complied with the statutory notice requirements of 35 U.S.C. § 287and because any allegedly infringing activity undertaken by defendants after September 25,1997 is excused under the provisions of 35 U.S.C. 5 271(e)(l) (the “safe harbor”provision). When they filed their motion, defendants included an allegationthat they were entitled to partial summary judgment on plaintiff’s claim thatdefendants had infringed the ‘822 patent.  They

 

20

----

 

have since stipulated tothe fact that the CR1 and CR2 media that they used are within the scope ofclaims 1-7 and 9-12 of plaintiff’s ‘822 patent.  They also expanded their motion for partialsummary judgment.  In their briefs insupport of their own motion and in opposition to plaintiff’s motion, defendantsraised two new arguments for exempting them from liability for infringement:estoppel and a common law research or experimentation exception for infringingacts.

 

1.  Plaintiff’s entitlement to damages for pre-June 23, 1997 activity

 

Although admittingthat they used plaintiff’s patented culture media and oocyte activation methodbefore June 23, 1997, defendants argue that they are not liable toplaintiff for damages for these uses for two reasons. 1) Plaintiff failed to**mark its culture medium, as requiredunder 35 U.S.C. § 287, and 2) plaintiff is estopped from proving itsentitlement to damages.

 

a. Marking

 

35 U.S.C. § 287makes it a prerequisite to the recovery of damages for infringement thatpatented articles placed in commerce be marked with the word “patent” or its abbreviationand the patent number.  Section 287does not apply to patent owners who do not sell articles covered by the patentor authorize others to sell such articles.  Defendants

 

21

----

 

concede that the statutedoes not apply to alleged infringement of process or method claims, such asthose in the ‘720 patent, seeAmerican Medical Systems Inc. v.Medical Engineering Corp., 6 F.3d 1523, 1538 (Fed. Cir. 1993) (“ordinarily,where the patent claims are directed only to a method or process, there isnothing to mark”), but they continue to believe the statute applies to theculture media that are the subjects of the ‘822 patent, despite the undisputedfact that plaintiff never sold or leased the culture media or offered them forsale.  They try to avoid the force ofcases such as Loral Fairchild Corp. v. Victor Co. of Japan, Ltd., 906 F.Supp. 813, 816 (E.D. N.Y. 1995) (marking statute does not apply to patent ownerwho neither sells nor authorizes another to sell articles covered by patent)(citing Wine Railway Appliance Co. v. Enterprise Railway Equipment Co.,279 U.S. 387, 398 (1936)), by raising for the first time in their reply briefthe argument that the marking statute comes into play because a third-partyvendor, Specialty Media, sold culture media covered by the ‘822 patent.  Defendants concede that they do not know thearrangement under which Specialty Media made sales, but argue that if the saleswere authorized by plaintiff, the failure to mark the products deprivesplaintiff of the right to collect damages.

 

For two reasons, thisargument offers no help to defendants. First, the argument was not raised until the reply brief, thus givingplaintiff no opportunity to respond to it. See James v. Sheahan, 137 F.3d 1003, 1008 (7th Cir. 1998)(arguments raised for first time in reply brief are waived).  Second, as defendants admit, they do not knowhow Specialty

 

22

----

 

Media came to be sellingculture media covered by the ‘822 patent.  Defendants have not come forward withsufficient evidence to show that they would have a disputable issue of fact ontheir claim that Specialty Media’s sales make the remedies for violation of § 287unavailable to plaintiff. They have not adduced any facts**from which an inference could be drawnthat plaintiff knew of Specialty Media’s sales and approved them, or at leastacquiesced in them.

 

Defendants’ motionfor partial summary judgment will be denied with respect to defendants’ claimthat plaintiff's failure to comply with the marking statute prevents it fromrecovering damages for defendants’ infringing use of the ‘720 methods and the ‘822culture media.

 

b.  Estoppel

 

As a thresholdmatter, plaintiff objects to any reference to a defense of estoppel becausedefendants never pleaded it as an affirmative defense in their answer andplaintiff would be prejudiced if the court allowed defendants to raise thedefense at this late stage in the proceedings after discovery has closed.  Plaintiff is correct.  SeeBank Leumi Le-Israel., B.M, v.Lee, 928 F.2d 232, 235 (7th Cir. 1991) (failure to**plead an affirmative defense results inwaiver of that defense). See also LINC Finance Corp. v. Onwuteaka, 129 F.3d917 (7th Cir. 1997) (defendant who admitted in answer that plaintiff was suingin its capacity

 

23

----

 

as assignee could notassert for first time in opposition to plaintiff’s motion for summary judgmentthat plaintiff lacked standing to sue as an assignee). I conclude thatdefendants waived any defense of estoppel by failing to plead it as requiredunder Fed. R. Civ. P. 8(c).

 

Even if defendantshad not waived the defense, however, it would do them no good.  Although defendants mount a multi-facetedestoppel argument, they cannot sustain it.  The argument begins with their assertion that ifplaintiff did not authorize Specialty Media to sell the ‘822 culture media,plaintiff must have known that the selling was going on and therefore, musthave acquiesced in the sale of an unmarked product, leading defendants andothers to think that plaintiff did not intend to enforce it rights under the ‘822patent.  As a second instance ofmisleading conduct, defendants allege that lawyers working for a predecessor ofplaintiff told defendant Stice and his co-workers that the patent protectionprovided by the ‘822 patent was weak and that the patent could be designedaround easily.

 

Estoppel requiresreliance and material prejudice in addition to misleading conduct by the partyto be estopped.  For the relianceelement, defendants argue that they relied on plaintiff’s silence both in theface of publications in which defendants cited their use of the culture mediaand of the knowledge of Specialty Media’s sales.  As to prejudice, defendants say that they willbe hurt financially if plaintiff can proceed on its claim of infringement of the‘822 patent.

 

As I noted indiscussing the claim of noncompliance with the marking statute,

 

24

----

 

defendants have proposedno facts concerning the Specialty Media sales, including the critical onesinvolving plaintiff’s knowledge of the sales and the arrangements made betweenplaintiff and Specialty Media.  In theabsence of those facts, I can draw no inferences either of express or impliedauthorization or of misleading silence in the face of infringement.  As to the assertion that plaintiff is estoppedby statements made by a predecessor company’s attorneys, little need be said.  Defendants have not shown that the statementsare admissible in evidence.  They appearto be hearsay that is not covered by any exception to the rule prohibiting theadmission of hearsay into evidence.  (Whetherthey violate an attorney-client privilege is another, separate question,irrelevant to resolution of the pending motions.)  In addition to the hearsay problems,defendants have not shown that the statements were either made, adopted orauthorized by plaintiff or that if they were, they would demonstrate plaintiff’sintent not to enforce the ‘822 patent.  In short, even if I were to address defendants’estoppel argument, it is a non-starter, for a myriad of reasons.

 

Plaintiff hasmoved to strike defendant Stice’s affidavit in support of the proposition thathe gathered from the lawyers that the ‘822 patent protection was thin.  The motion is unnecessary because I am notgiving the affidavit any consideration.

 

2.  Plaintiff’s entitlement to damages forinfringement occurring after June 23,1997

 

Defendants concedethat they have used the methods in the ‘720 patent and the

 

25

----

 

culture media covered bythe ‘822 patent since receiving notice of infringement in June 1997, but theydeny liability for these post-notice activities on two grounds. 1) Their acts are a permitted exception to infringementunder 35 U.S.C. § 271(e)(l) and 2) their acts come within a researchexception to infringement.

 

a.  Section 271(e)(l)

 

In the 1984 DrugPrice Competition and Patent Term Restoration Act, Congress enacted legislationdesigned to advance the development of generic substitutes for patentedprescription drugs.  Recognizing boththat drug patent holders often were deprived of the value of as much as sevento twelve years of patent protection because of the time it took after thepatent issued to obtain the FDA approval required for marketing the drug andthat under the existing law companies could not begin the lengthy process ofdeveloping generic drug substitutes until after the prescription drug patenthad expired, Congress devised a scheme involving a trade-off between the twogroups.  SeeEll Lilly v.Medtronic, Inc., 496 U.S. 661, 670 (1990); Telectronics Pacing Systemsv. Ventritex. Inc.. 982 F.2d 1520, 1524 (Fed. Cir. 1992). Patents relatingto human drug products and to medical devices, food additives or coloradditives subject to regulation under the Federal Food, Drug, and Cosmetic Actcan be extended up to five years if the product “was subject to a regulatoryreview period before its commercial marketing or use,” and “the permission for**the commercial marketing

 

26

----

 

or use of the productafter such regulatory review period [was] the first permitted commercialmarketing or use of the product under the provision of law under which suchregulatory review period occurred.” SeeEli Lilly, 496 U.S. at670-71; 35 U.S.C. § 156(a). At the same time, Congress exempted from patentinfringement the acts of making, selling or using a patented invention “solelyfor uses reasonably related to the development and submission of informationunder a Federal law which regulates the manufacture, use, or sale of drugs.  SeeEli Lilly, 496 U.S. at 671; § 271(e)(l).Thus, holders of certain patents received an extended period of protectionunder the patent; in exchange, they were barred from collecting damages causedby otherwise infringing acts by persons engaging in such acts solely for usesreasonably related to complying with FDA requirements. SeeEli Lilly,496 U.S. at 671.

 

Defendants arguewith little support that their use of plaintiff’s patented products and methodcomes within the § 271(c)(l) exception because they were working on thepreliminary steps of a product that would need FDA approval when and if it wascommercially viable, They rest their argument on the language of § 271(c)(1),which provides in pertinent part as follows:

 

It shall not be anact of infringement to make, use, offer to sell or sell within the UnitedStates or import into the United States a patented invention :...  solely for uses reasonably related to thedevelopment and submission of information under a Federal law which regulatesthe manufacture, use, or sale of drugs or veterinary biological products.

 

27

----

 

At first reading,it appears that if defendants are correct about the purpose for which they areusing plaintiff’s patented products and method, their use is exempt from infringementunder this provision.  As Eli Lillyholds, however, § 271(e)(1) is to be read in conjunction with § 156. Id.at 671-72. When that is done, it becomes apparent that § 271(e)(l) applies onlyto those patents identified in § 156(a) (4) and (5) that, among otherthings, cover certain specified products (including drug products, see § 156(f))that were subject to a regulatory review period before their commercialmarketing or use.  Neither of plaintiff’spatents covers a drug product; neither patent would have been eligible under § 156for an extension in its term.  As Eli Lilly makes clear, the patentextension is the quid pro quo for the protection from infringement actions andvice versa.  A patent holder whose patentis ineligible for the five-year extension is not precluded from suing forinfringement damages (except in unusual circumstances not present here, such asthose involving patents pertaining to “follow-on” drug products rather thanpioneers.)  Seeid. at 672n.4.  Neither the ‘822 media nor the ‘720method is subject to the use and sale exemption from infringement actionsprovided under § 271(e)(1).

 

Defendants havecited no cases that support their reading of § 27l (e)(1) as applying toany kind of product or method, whether or not it is a product identified in § 156(f). My own research shows no cases grantingthe § 271(e)(1) exemption from the otherwise infringing use of any productother than those drugs, medical devices, food and color

 

28

----

 

additives definedspecified in § 156. See, e.g., Eli Lilly, 496 U.S.661 (implantable cardiac defibrillator); AbTox, Inc. v. Exitron Corp.,122 F.3d 1019 (Fed. Cir. 1997) (medical device for sterilizing plasma); Glaxo,Inc. v. Novopharm, Ltd., 110 F.3d 1562 (Fed. Cir. 1997) (active ingredientin anti-ulcer medication); Telectronics Pacing Systems, 982 F.2d 1520(implantable defibrillator); Ortho Pharmaceutical Corp. v. Smith, 959 F.2d936 (Fed. Cir. 1992) (oral contraceptive); Amgen, Inc. v. Hoechst MarionRoussel, Inc., 3 F. Supp.2d 104 (D. Mass. 1998) (hormone that stimulatedgrowth of red blood cells); Key Pharmaceuticals, Inc. v. Hercon LaboratoriesCorp., 981 F. Supp. 299 (D. Del. 1997) (transdermal patch); NeoRX Corp.v. Immunomedics, Inc., 877 F. Supp. 202 (D.N.J. 1994) (product for labelingproteins to detect and treat cancer); Infinitech, Inc. v. Vitrophage, Inc.,842 P. Supp. 332 (N.D. Ill. 1994) (perfluorocarbon used in retinal surgery); BaxterDiagnostics Inc. v. AVL Scientific Corp., 798 F. Supp. 612 (C.D. Cal. 1992)(medical devices).

 

Plaintiff hasproposed a number of facts about the nature of the work that defendant AdvancedCell is doing for Genzyme pursuant to the agreement between the two, but it isnot necessary to explore those proposals.  They are advanced to support plaintiff’scontention that even if § 271(e)(l) applied to the patents, Advanced Cellcould not claim its benefits because the work the company is doing is notreasonably related to the development and submission of information to the FDA. Because I agree with plaintiff that § 271is not applicable, I will not express any opinion whether the uses AdvancedCell is making of

 

29

----

 

plaintiff’s patentedmedia and method in the work it is doing for Genzyme is related reasonably tothe need to**support anapplication to the FDA.

 

b.  Research exception

 

Casting about foradditional reasons to deny plaintiff any damages for infringement, defendantssuggest that they are exempt from liability under a common law researchexception for their use of the ‘822 culture media.  Defendants do little to flesh out theirsuggestion, other than to assert that a jury should be permitted to decide “whetherscience — and mankind — benefits when researchers like Dr. Stice (and Dr.First) use otherwise patented technology as controls or otherwise in theiruniversity-based research laboratories.  A jury should decide whether a remote promiseof some commercial success should override the benefits of such university-basedresearch.” Defs’ Br. in Opp. to Infigen’s Br. for Partial Summ. Judgm., dkt.#145, at 6. The assertion is hardly persuasive.  In the first place, it is up to Congress todecide whether there should be an infringement exemption for university-basedresearch laboratories.  So far, Congresshas not seen fit to grant one.  See,e.g., Patent Competitiveness and Technological Innovation Act of 1990,H.R. 5598, 101st Cong. (1990), which was never passed but which, among otherthings, proposed exemptions from infringement liability for universityresearch.  Second, Dr. Stice is beingsued for work done in a commercial laboratory, not for work done in auniversity research setting.

 

30

----

 

There is**a common law experimental exception to infringement,but its scope has never been explored in detail.  Generally, it seems to be what Justice Storydescribed it as in Whittemore v. Cutter, 29 Fed. Cas. 1120, 1121 (C.C.D.Mass. 1813): an exemption from punishment for building “a machine merely forphilosophical experiments, or for the purpose of ascertaining the sufficiencyof the machine to produce its described effects.” See, e.g., RocheProducts v. Bolar Pharmaceutical Co., 733 F.2d 858, 862-63 (Fed. Cir. 1984)(finding experimental use exception to be “truly narrow” and refusing to expandit to cover use of patented drug for federally mandated premarketing testsprior to enactment of § 271 (e)(1)).

 

It is undisputed that defendants used plaintiff’s patentedactivation methods and culture media in their cloning experiments and that thepurpose of those experiments was to develop transgenic cattle that could beused for commercial purposes, including the production of transgene products.  These were not “philosophical” experiments orexperiments carried out merely to satisfy the curiosity of researchers; theywere done as part of the ongoing business activities of defendant Advanced Cell. No common law research orexperimentation exception is applicable.

 

C.  Sanctions

 

In its reply brief insupport of its motion for summary judgement, plaintiff asks that

 

31

----

 

sanctions be imposed ondefendants pursuant to Fed. R. Civ. P. 11 or 28 U.S.C. § 1927 for theirassertion of defenses that have no basis in law or fact.  The motion for Rule 11 sanctions must bedenied because Rule 11(c)(1)(A) requires both that such a motion “shall be madeseparately from other motions” and that it “not be filed with or presented tothe court unless, within 21 days after service of the motion, the challengedpaper... is not appropriately withdrawn or corrected.” Plaintiff neither filed itsmotion separately nor presented it to the court 21 days after serving it ondefendants.

 

Plaintiff iscorrect that defendants’ defenses of estoppel, the safe harbor of § 271(e)(1)and the common law research or experimentation exception to infringement arenot well thought through.  However, I donot find that they cross the line of objective unreasonableness and vexatiousnessthat this circuit requires for the imposition of a sanction under § 1927. See,e.g., Webster v. Methodist Occupational Health Centers, 141 F.31236, 1239 (7th Cir. 1998).  (In applyingsanctions, Federal Circuit follows law of pertinent regional circuit.  SeeSeal-Flex, Inc. v. AthleticTrack and Court Construction, 172 F.3d 836, 845 (Fed. Cir. 1999)).  I cannot say that counsel’s work has *multiplied the proceedings* vexatiously, although it did addto the effort required of plaintiff’s counsel in briefing and to the court’sworkload.  Cf.Fox ValleyConstruction Workers v. Pride of Fox Masonry, 140 F.3d 661 (7th Cir. 1998)(imposition of § 1927 sanctions upheld when lawyer evaded service ofprocess, gave untrue sworn testimony in affidavit regarding service of process,

 

32

----

 

failed to file anappearance, filed baseless appeals with intent to delay proceedings, incorporateda second corporation in effort to keep client from having to pay debts and triedto avoid contempt proceeding by having client file bankruptcy proceeding).  Seealso Laitram Corp. v. CambridgeWire Cloth Co., 919 F.2d 1579 (Fed. Cir. 1990) (court found that counselfor both sides had misled both district court and court of appeals in askingthe courts to decide issues of infringement with respect to non-existingproduct, had made statements of fact with no reference to the record, had citedarguments of counsel as “evidence,”had referred to materials as if they were before the district court when theywere not and generally abandoned professional obligations as officers ofcourt).

 

D.  Summary

 

Taking intoconsideration what I find to be the proper construction of the disputed claims,the undisputed facts and the arguments of the parties, I conclude thatplaintiff is entitled to a finding of infringement, as sought in its motion forpartial summary judgment.  Defendantshave not denied that they infringed the claims of the patent; they have arguedonly that various affirmative defenses relieve them of liability for what wouldotherwise be infringing acts.  Theaffirmative defenses are mostly wishful thinking.  They are not supported by the factualevidence or by the law.

 

33

----

 

ORDER

 

IT IS ORDERED thatthe disputed terms in plaintiff Infigen, Inc.’s U.S. Patent No. 5,496,720patent is construed as follows:

 

As used in claims 1 and 18 of the ‘720 patent, “oocyte” refersto an unfertilized egg in either its natural state or one whose nucleus hasbeen removed or replaced with a foreign nucleus; “in sequence” means the orderin which the chemical processes of increasing levels of divalent cations andreducing phosphorylation take place and to the order in which chemicals areadded to produce these reactions; and “parthenogenic activation” refers to anyform of stimulating embryo development without the use of spermatozoa, even ifcarried out on a nuclear fusedoocyte.

 

FURTHER, IT ISORDERED that plaintiff Infigen, Inc.’s motion for partial summary judgment isGRANTED as to its claims that

 

1.  Defendants Advanced Cell Technology, Inc. andSteven L. Stice infringed claims 1-7, 9-12 of the ‘822 patent by their use ofCR1 or CR2 media;

 

2.  Defendants infringed claims 1-7, 9-12 of the ‘822patent by their use of CR1 or CR2 media as control media;

 

3.  Defendants infringed claims 1, 7,10-12 of the ‘822 patent by theiruse of CR2 media in the absence of bovine serum albumin;

 

4.  Defendants infringed claims 1-6, 10-13 and15-23 of the ‘720 patent by their use

 

34

----

 

of methods of theiralleged “sequential” activation of oocytes;

 

5.  Defendants infringed claims 1-6, 10-13 and15-23 of the ‘720 patent by their use of the methods of their alleged “simultaneous”activation of oocytes; and

 

6.  Defendants infringed claims 1-6, 10-13 and15-23 of the ‘720 patent by their use of methods of their alleged “sequential”activation of oocytes used as a control activation method.

 

FURTHER, IT ISORDERED that the motion for partial summary judgment of defendants AdvancedCell Technology, Inc. and Steven L. Stice is DENIED; plaintiff’s motion tostrike the affidavit of Steven L. Stice is DENIED as unnecessary; anddefendants’ motion to strike references to extrinsic evidence from plaintiff’sbrief on claim construction is DENIED.

 

Entered this 24th**day of June, 1999.

 
|   | BY THE COURT:        |
|--------|----------------------|
|   |                 |
|   |                 |
|   | /s/ Barbara B. Crabb |   |
|   | BARBARA B. CRABB     |
|   | District Judge       |

 

35

----