Opinion ID: 715851
Heading Depth: 3
Heading Rank: 3

Heading: BTG's Defenses

Text: 33
34 BTG argues that the grandfather clause of the PPAA protects it from liability for infringement under § 271(g). BTG contends that, prior to the effective date of the PPAA, it constructed a plant in Israel for the purpose of manufacturing hGH, filed an IND with the FDA, and licensed ACC (later DuPont) to conduct human clinical studies in the United States. The district court found that these activities did not establish that BTG would likely be entitled to equitable protection under the grandfather clause. We find no error in that conclusion. 35 In section 9006 of the PPAA, Congress provided an exception to liability under the Act as follows: 36 (b) Exceptions.--The amendments made by this subtitle shall not abridge or affect the right of any person or any successor in business of such person to continue to use, sell, or import any specific product already in substantial and continuous sale or use by such person in the United States on January 1, 1988, or for which substantial preparation by such person for such sale or use was made before such date, to the extent equitable for the protection of commercial investments made or business commenced in the United States before such date. 37 Process Patent Amendments Act of 1988, Pub.L. No. 100-418, § 9006(b), 102 Stat. 1107, 1567 (1988). Thus, for the exception to apply, an accused infringer must establish either (1) that its product was already in substantial and continuous sale or use by the accused infringer in the United States on January 1, 1988, or (2) that it made substantial preparation for such sale or use before January 1, 1988. If either (1) or (2) is established, the accused infringer is entitled to continue to use, sell, or import the product to the extent equitable for the protection of its commercial investments made or business commenced in the United States before that date. 38 Here, the district court did not err in concluding that BTG did not show entitlement to protection under the substantial and continuous sale or use provision, since BTG made only sporadic sales of hGH to DuPont in 1986 and 1987 for human clinical studies. In addition, the court did not err in finding that BTG did not undertake substantial preparation to sell or use hGH before 1988, because, while BTG raised substantial sums of money from United States investors before 1988, raising money does not constitute substantial preparation under the statute. Substantial preparation must consist of activities closely associated with the practice of the claimed invention. One must, for example, invest the money to develop a product or build a plant to make the product in order to meet that test. Moreover, the funds BTG raised were used to support all of its products under development, not just hGH. 39 Furthermore, even assuming that BTG's construction of a plant in Israel, its filing of an IND, and its agreement with ACC collectively constituted substantial preparation to sell or use hGH, the grandfather clause would only entitle BTG to continue to use, sell, or import the product to the extent equitable for the protection of commercial investments made or business commenced in the United States before [January 1, 1988]. The district court found that most of the money BTG raised was invested outside the United States, not in the United States. The court also found that ACC and DuPont, not BTG, paid for and completed the clinical trials and filed an NDA in the United States, and that BTG did not reacquire rights in the NDA until after 1988. BTG has not shown that these findings are clearly erroneous. Thus, based on the present record, the district court did not err in holding that BTG is not entitled to equitable relief under the grandfather clause. 40
41 BTG next argues that the district court erred in not giving claim preclusive effect to a decision of the United States International Trade Commission (ITC), which dismissed with prejudice Genentech's complaint under 19 U.S.C. § 1337 (1994) as a sanction for Genentech's purported violation of the ITC's discovery orders. See In re Certain Recombinantly Produced Human Growth Hormones, Inv. No. 337-TA-358 (Int'l Trade Comm'n Jan. 17, 1995) (decision denying review of final initial determination), appeal docketed sub nom. Genentech, Inc. v. United States Int'l Trade Comm'n, No. 95-1244 (Fed.Cir. Mar. 17, 1995). BTG contends that Genentech is attempting to relitigate in district court the same claim it lost before the ITC. We cannot accept this contention. 42 The decision of an administrative agency potentially may be given preclusive effect when, as here, the agency acted in a judicial capacity. See University of Tenn. v. Elliott, 478 U.S. 788, 797-99, 106 S.Ct. 3220, 3225, 92 L.Ed.2d 635 (1986). That the ITC did not reach the substantive question of infringement does not prevent application of claim preclusion. See Angel v. Bullington, 330 U.S. 183, 190, 67 S.Ct. 657, 661, 91 L.Ed. 832 (1947) (It is a misconception of res judicata to assume that the doctrine does not come into operation if a court has not passed on the 'merits' in the sense of the ultimate substantive issues of a litigation.). 43 Under the principle of claim preclusion, a party must raise in a single lawsuit all the grounds of recovery arising from a single transaction or series of transactions that can be brought together. Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 58 F.3d 616, 619, 35 USPQ2d 1311, 1314 (Fed.Cir.1995); see Woods v. Dunlop Tire Corp., 972 F.2d 36, 38 (2d Cir.1992) (application of claim preclusion depends on whether the same transaction or series of transactions is at issue, whether the same evidence is needed to support both claims, and whether the facts essential to the second judgment were present in the first); Restatement (Second) of Judgments § 24 (1982) (all actions arising from the same transaction or series of transactions constitute a single claim for purposes of claim preclusion). 44 However, the bar against later claims based on the same transactional facts is subject to certain limitations, one of which is that it will not be applied if the initial forum did not have the power to award the full measure of relief sought in the later litigation. Davidson v. Capuano, 792 F.2d 275, 278 (2d Cir.1986). As stated by the Restatement: 45 The general rule [against relitigation of a claim] is largely predicated on the assumption that the jurisdiction in which the first judgment was rendered was one which put no formal barriers in the way of a litigant's presenting to the court in one action the entire claim including any theories of recovery or demands for relief that might have been available to him under applicable law. When such barriers in fact existed and were operative against a plaintiff in the first action, it is unfair to preclude him from a second action in which he can present those phases of the claim which he was disabled from presenting in the first. 46 Restatement § 26(1)(c) cmt. c. Thus, where a plaintiff was precluded from recovering damages in the initial action by formal jurisdictional or statutory barriers, not by plaintiff's choice, a subsequent action for damages will not normally be barred by res judicata even where it arises from the same factual circumstances as the initial action. Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.1994). 47 This limiting principle is applicable here. Under section 337 of the Tariff Act of 1930 as amended, 19 U.S.C. § 1337, the ITC has the authority to investigate unfair practices in import trade, including: 48 (B) [t]he importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that-- 49 (i) infringe a valid and enforceable United States patent ...; or(ii) are made, produced, processed, or mined under, or by means of, a process covered by the claims of a valid and enforceable United States patent. 50 19 U.S.C. § 1337(a)(1)(B) (1994). 51 When the ITC determines that a defendant has engaged in unfair practices in import trade, it may direct that the articles at issue be excluded from entry into the United States, 19 U.S.C. § 1337(d), issue a cease and desist order, 19 U.S.C. § 1337(f), and/or issue an order providing that the articles in violation be seized and forfeited to the United States, 19 U.S.C. § 1337(i). Importantly, however, the ITC does not have the power to award damages for patent infringement. This form of relief may only be provided by the United States District Courts, which have original and exclusive jurisdiction over patent infringement cases. See 28 U.S.C. § 1338(a) (1994). 52 The legislative history of the Trade Reform Act of 1974 supports the view that ITC decisions with respect to patent issues should have no claim preclusive effect in later district court litigation: 53 The Commission is not, of course, empowered under existing law to set aside a patent as being invalid or to render it unenforceable, and the extent of the Commission's authority under this bill is to take into consideration such defenses and to make findings thereon for the purposes of determining whether section 337 is being violated. 54 ... [I]n patent-based cases, the Commission considers, for its own purposes under section 337, the status of imports with respect to the claims of U.S. patents. The Commission's findings neither purport to be, nor can they be, regarded as binding interpretations of the U.S. patent laws in particular factual contexts. Therefore, it seems clear that any disposition of a Commission action by a Federal Court should not have a res judicata or collateral estoppel effect in cases before such courts. 55 S.Rep. No. 1298, 93d Cong., 2d Sess. 196 (1974) U.S.Code Cong. & Admin.News 1974, p. 7186. We note that the ITC takes the position that its decisions have no res judicata effect in [district court] litigation. Corning Glass Works v. United States Int'l Trade Comm'n, 799 F.2d 1559, 1570 n. 12, 230 USPQ 822, 830 n. 12 (Fed.Cir.1986). 56 Thus, in view of the jurisdictional limitations on the relief available in the ITC, we hold that the ITC's prior decision cannot have claim preclusive effect in the district court. See also Texas Instruments, Inc. v. United States Int'l Trade Comm'n, 851 F.2d 342, 344, 7 USPQ2d 1509, 1510 (Fed.Cir.1988) ([T]his court has stated that the ITC's determinations regarding patent issues should be given no res judicata or collateral estoppel effect.). 9 57
58 BTG also contends that laches bars Genentech's infringement counterclaim. BTG asserts that in 1985 and 1986, Genentech knew that BTG had developed an hGH product and imported it into the United States for use in clinical trials. BTG contends that Genentech should have brought suit against BTG soon after it learned of this information. We disagree. 59 Prior to 1988, when § 271(g) became effective, importation of a product made abroad by a process patented in the United States was not an act of infringement. Thus, Genentech had no infringement claim against BTG before 1988. With no legal right to enforce, it cannot be said that Genentech unreasonably delayed during that time period. 60 Furthermore, even after § 271(g) was enacted in 1988, BTG was only importing hGH into the United States for use in clinical trials in support of its application for FDA approval. The district court found that this was non-infringing activity, see 35 U.S.C. § 271(e)(1) (1988), 10 and that Genentech did not know before 1993 that BTG had imported hGH into the United States for purposes outside the scope of § 271(e)(1). BTG has not demonstrated error in these findings. Thus, we conclude that the court did not err in rejecting BTG's laches defense. BTG also argues, in conclusory fashion, that 61 Genentech, through misleading conduct, led BTG to infer that Genentech did not intend to enforce the patents against it. BTG relied on such conduct, and will be severely harmed if Genentech now is permitted to enforce its patents. Thus, Genentech's infringement suit is barred under the doctrine of equitable estoppel. 62 We disagree. BTG cites no evidence to support its assertion; thus, on the present record, there is no factual basis for an estoppel defense. 63
64 BTG does not contend that the '980 and '832 patents are invalid in view of the prior art or for failure to meet the enablement or other requirements of 35 U.S.C. § 112. Rather, BTG argues, first, that Genentech admitted that its patent position is weak. The district court did not err in rejecting this contention, because BTG relied on documents found inadmissible by the district court. On appeal, BTG has not demonstrated that the court's evidentiary ruling was in error; thus, we will not further consider this argument. 65 BTG also argues that the inventors named in the asserted patents did not actually conceive the inventions claimed therein. BTG again cites evidence that the district court found inadmissible, and BTG has not shown that the court's evidentiary ruling was erroneous. Thus, we reject this argument. 66 BTG further argues that Genentech misappropriated inventions, materials, people and information from the University of California (UC), and that the asserted patents are unenforceable because Genentech did not disclose its misappropriation to the United States Patent and Trademark Office during patent prosecution. We disagree. The district court found that BTG's witness on this issue, Dr. Goodman, gave testimony that was at best inconclusive and entitled to no weight and that he did not provide any probative testimony in support of the allegation that Genentech misappropriated the inventions, or indeed, anything at all, from UC. On appeal, BTG has not shown that the district court erred in evaluating the credibility of Goodman's testimony. BTG addresses the Administrative Law Judge's findings in the ITC case; however, these arguments do not show error in the district court's findings. 67 BTG also argues that the unclean hands doctrine bars Genentech's infringement counterclaim, because Genentech allegedly violated the ITC's discovery orders and misappropriated the '980 and '832 inventions from scientists at the University of California. Again, we must disagree. These assertions are largely without evidentiary support in the record. In addition, as the district court found, the purported misconduct did not occur in the context of the present lawsuit. Thus, the court did not err in rejecting BTG's unclean hands defense. See Warner Bros., Inc. v. Gay Toys, Inc., 724 F.2d 327, 334 (2d Cir.1983) ([T]he defense of unclean hands applies only with respect to the right in suit.). 68 We therefore conclude that BTG has not shown that the district court clearly erred in finding that Genentech established a reasonable likelihood of success on the merits of its infringement counterclaim.