Court Opinion

ID: 4661526
Source: CourtListenerOpinion
Date Created: 2021-02-19 16:00:46.2784+00
Date Added: 2024-06-11T08:02:14.018799
License: Public Domain

Case: 20-1090    Document: 51     Page: 1    Filed: 02/19/2021

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

   JOHN BEAN TECHNOLOGIES CORPORATION,
               Plaintiff-Appellant

                             v.

            MORRIS & ASSOCIATES, INC.,
              Defendant-Cross-Appellant
               ______________________

                   2020-1090, 2020-1148
                  ______________________

    Appeals from the United States District Court for the
 Eastern District of Arkansas in No. 4:14-cv-00368-BRW,
 Senior Judge Billy Roy Wilson.
                  ______________________

                Decided: February 19, 2021
                 ______________________

     GARY D. MARTS, JR., Wright, Lindsey & Jennings LLP,
 Little Rock, AR, argued for plaintiff-appellant. Also repre-
 sented by RICHARD BLAKELY GLASGOW.

     NORMAN ANDREW CRAIN, Thomas Horstemeyer LLP,
 Atlanta, GA, argued for defendant-cross-appellant. Also
 represented by DAN GRESHAM.
                 ______________________

   Before LOURIE, REYNA, and WALLACH, Circuit Judges.
 REYNA, Circuit Judge.
Case: 20-1090    Document: 51      Page: 2    Filed: 02/19/2021

 2                          JOHN BEAN TECHNOLOGIES CORP. v.
                                   MORRIS & ASSOCIATES, INC.

      This appeal is from a decision of the United States Dis-
 trict Court for the Eastern District of Arkansas that, on re-
 mand from this court, granted-in-part Morris & Associates,
 Inc.’s motion for summary judgment as to equitable inter-
 vening rights, denied-in-part its motion as to prosecution
 laches, and dismissed the case. John Bean appeals the dis-
 trict court decision as to equitable intervening rights and
 Morris cross-appeals the decision as to prosecution laches.
 For the following reasons, we affirm the district court’s de-
 cision.
                        BACKGROUND
      U.S. Patent No. 6,397,622 (“the ’622 patent”) was is-
 sued on June 4, 2002, to John Bean Technologies Corpora-
 tion (“John Bean”). The ’622 patent covers an auger-type
 poultry chiller used to help process poultry for human con-
 sumption. 1 John Bean’s only domestic competition in the
 poultry chiller market is Morris & Associates, Inc. (“Mor-
 ris”). John Bean Techs. Corp. v. Morris & Assocs., Inc., No.
 4:14-CV-00368, 2019 WL 7176779, at *3 (E.D. Ark. Sept.
 23, 2019) (“Decision”).
     On June 27, 2002, Morris wrote a demand letter to
 John Bean explaining its belief that the ’622 patent was
 invalid and citing prior art to support its position. J.A.
 263–66. Morris received no response from John Bean and
 proceeded to develop and sell chillers that included fea-
 tures described in the ’622 patent. J.A. 5.
     On December 18, 2013, approximately eleven years af-
 ter receiving the demand letter, John Bean filed a request
 for ex parte reexamination of the ’622 patent before the

     1    This court has previously issued a decision in John
 Bean Tech. Corp. v. Morris & Associates, Inc., 887
 F.3d 1322 (Fed. Cir. 2018) (“John Bean I”). We do not reit-
 erate all the details from that opinion and limit our review
 to the facts pertinent to this appeal.
Case: 20-1090    Document: 51        Page: 3   Filed: 02/19/2021

 JOHN BEAN TECHNOLOGIES CORP.   v.                           3
 MORRIS & ASSOCIATES, INC.

 United States Patent and Trademark Office (“USPTO”).
 J.A. 2. After John Bean amended claims 1 and 2 of the
 original ’622 patent and added six additional claims, the
 USPTO issued a reexamination certificate on May 9, 2014.
 J.A. 3.
     On June 19, 2014, six weeks after receiving the reex-
 amination certificate, John Bean filed a complaint in the
 United States District Court for the Eastern District of Ar-
 kansas, alleging that Morris infringed the ’622 patent once
 the reexamination certificate issued. John Bean later
 amended the complaint to include willful infringement.
     Morris moved for summary judgment, and on Decem-
 ber 14, 2016, the district court granted Morris’s motion for
 summary judgment with respect to the affirmative de-
 fenses of laches and equitable estoppel. J.A. 23. John Bean
 appealed, and this court reversed the grant of summary
 judgment and remanded to the district court. See generally
 John Bean I, 887 F.3d 1332.
      On remand, Morris filed another motion for summary
 judgment asserting that John Bean’s patent infringement
 claims were barred by equitable intervening rights and
 prosecution laches. The district court denied Morris’s mo-
 tion for summary judgment with respect to prosecution
 laches, reasoning that the laches doctrine applies to con-
 duct of a patent applicant before the patent’s issuance, but
 not to conduct of a patent owner after the patent’s issuance.
 Decision, 2019 WL 7176779, at *4 & n.26 (citing Reiffin v.
 Microsoft Corp., 270 F. Supp. 2d 1132, 1154 (N.D. Cal.
 2003)). We affirm the district court’s decision to grant-in-
 part Morris’s motion for summary judgment for equitable
 intervening rights, and we therefore do not reach the dis-
 trict court’s decision to deny-in-part the same motion for
 prosecution laches.
     When a defendant is accused of infringing a reissued
 patent, she may raise the affirmative defense of equitable
 intervening rights. See 35 U.S.C. § 252. Under § 252, an
Case: 20-1090     Document: 51      Page: 4    Filed: 02/19/2021

 4                           JOHN BEAN TECHNOLOGIES CORP. v.
                                    MORRIS & ASSOCIATES, INC.

 alleged infringer may be protected from liability for in-
 fringement of substantively and substantially altered
 claims in a reissued patent. 35 U.S.C. § 252. The affirma-
 tive defense also applies to reexamined patents. See
 35 U.S.C. § 307(b); see also Marine Polymer Techs., Inc. v.
 HemCon, Inc., 672 F.3d 1350, 1362 (Fed. Cir. 2012) (en
 banc) (“[A]fter a patent emerges from reexamination,
 [§ 307(b)] makes available absolute and equitable interven-
 ing rights . . . with respect to ‘amended or new’ claims in
 the reexamined patent.”).
     Granting equitable intervening rights is a matter of ju-
 dicial discretion. Once granted, they give the alleged in-
 fringer the continued right to manufacture, sell, or use the
 accused product after the reexamination certificate is is-
 sued “when the defendant made, purchased, or used iden-
 tical products, or made substantial preparations to make,
 use, or sell identical products, before the reissue date.” See
 BIC Leisure Prods., Inc. v. Windsurfing Inter., Inc., 1 F.3d
 1214, 1221 (Fed. Cir. 1993). Section 252 provides, in rele-
 vant part, the following:
     The court . . . may provide for the continued manu-
     facture, use, offer for sale, or sale of the thing made
     . . . of which substantial preparation was made be-
     fore the grant of the reissue . . . to the extent and
     under such terms as the court deems equitable for
     the protection of investments made or business com-
     menced before the grant of the reissue.
 35 U.S.C. § 252 (emphasis added). Under this section, an
 infringer may continue what would otherwise be infringing
 activity after a reissue or reexamination. See Seattle Box
 Co. v. Indus. Crating & Packing, Inc., 756 F.2d 1574, 1579
 (Fed. Cir. 1985) (“Seattle Box II”). The rationale underly-
 ing equitable intervening rights “is that the public has the
 right to use what is not specifically claimed in the original
 patent.” Id. (citing Sontag Chain Stores Co. v. Nat’l Nut
 Co., 310 U.S. 281, 290 (1940)). Thus, an infringer may
Case: 20-1090    Document: 51         Page: 5   Filed: 02/19/2021

 JOHN BEAN TECHNOLOGIES CORP.    v.                           5
 MORRIS & ASSOCIATES, INC.

 continue to infringe after reissue or reexamination “if the
 court decides that equity dictates such a result.” Id.
     The district court granted Morris’s motion for equitable
 intervening rights after weighing six factors including:
     (1) whether substantial preparation was made by
     the infringer before the reissue;
     (2) whether the infringer continued manufacturing
     before reissue on advice of its patent counsel;
     (3) whether there were existing orders or contracts;
     (4) whether non-infringing goods can be manufac-
     tured from the inventory used to manufacture the
     infringing product and the cost of conversion;
     (5) whether there is a long period of sales and oper-
     ations before the patent reissued from which no
     damages can be assessed; and
     (6) whether the infringer made profits sufficient to
     recoup its investment.
 Decision, 2019 WL 7176779, at *2 (citing Visto Corp. v.
 Sprogit Techs., Inc., 413 F. Supp. 2d 1073, 1090 (N.D. Cal.
 2006), and Seattle Box II, 756 F.2d at 1579).
      The district court found that Morris made “substantial
 preparation” before the USPTO issued the reexamination
 certificate based on Morris’s “years of research, develop-
 ments, investments, improvement, promotion, and good-
 will associated with the accused product” and Morris’s
 conversion of “nearly [two-thirds] of its business to selling
 the accused product.” Id. at *2. The district court found
 that while Morris had made profits sufficient to recoup its
 investment due to a long period of sales, requiring “a com-
 pany to eliminate [two-thirds] of its business because a pa-
 tent holder, after, a decade, decided to seek reexamination
 and enforce the patent is inequitable.” Id. at *3. The dis-
 trict court also considered the relative degrees of good or
Case: 20-1090    Document: 51      Page: 6    Filed: 02/19/2021

 6                          JOHN BEAN TECHNOLOGIES CORP. v.
                                   MORRIS & ASSOCIATES, INC.

 bad faith exercised by the parties and found that John
 Bean appeared to have acted in bad faith when it did not
 dispute Morris’s belief that the ’622 patent was invalid and
 thus allowed Morris to build its business based on the ac-
 cused product before requesting reexamination. Id. The
 district court weighed the remaining factors, all of which
 favored Morris. Id. at *4. Upon balancing the equities, the
 district court concluded that Morris was entitled to equita-
 ble intervening rights and granted Morris’s motion for
 summary judgment on equitable intervening rights. Id.
    John Bean appeals.        We have jurisdiction under
 28 U.S.C. § 1295(a).
                         DISCUSSION
      On appeal, John Bean argues that the district court
 erred by granting Morris’s motion for summary judgment
 on equitable intervening rights because the court abused
 its discretion by improperly weighing several equitable in-
 tervening rights factors. In particular, John Bean argues
 that the district court did not give sufficient weight to the
 fact that Morris had already recouped its investment and
 refused to quantify its profits, though John Bean admits it
 could estimate Morris’s profits from its discovery re-
 sponses. See Appellant’s Br. 8. John Bean also argues that
 the district court erred by granting Morris summary judg-
 ment in light of outstanding genuine issues of material fact
 concerning Morris’s willful infringement, which would
 make Morris a bad actor to whom equitable defenses are
 unavailable.
     We review a district court’s grant of summary judg-
 ment based on the law of the regional circuit, here the
 Eighth Circuit. See, e.g., Accenture Global Servs., GmbH v.
 Guidewire Software, Inc., 728 F.3d 1336, 1340 (Fed. Cir.
 2013). The Eighth Circuit reviews a district court’s grant
 of summary judgment de novo, construing evidence in the
 light most favorable to the non-moving party and drawing
 all reasonable inferences in its favor. See Schoelch v.
Case: 20-1090     Document: 51         Page: 7   Filed: 02/19/2021

 JOHN BEAN TECHNOLOGIES CORP.     v.                           7
 MORRIS & ASSOCIATES, INC.

 Mitchell, 625 F.3d 1041, 1045 (8th Cir. 2010). Summary
 judgment is proper if there are no genuine issues of mate-
 rial fact. See Green Plains Otter Tail, LLC v. Pro-Env’t,
 Inc., 953 F.3d 541, 545 (8th Cir. 2020). With respect to the
 district court’s application of equitable intervening rights,
 this court reviews the district court’s decision under an
 abuse of discretion standard. See Shockley v. Arcan, Inc.,
 248 F.3d 1349, 1358 (Fed. Cir. 2001).
     We turn to the question of whether the district court
 abused its discretion in its application of the equitable in-
 tervening rights doctrine. This court has previously deter-
 mined that “once the doctrine of intervening rights is
 properly raised, the court must consider whether to use its
 broad equity powers to fashion an appropriate remedy.”
 Seattle Box II, 756 F.2d at 1579. This court also held that
 “the second sentence of the second paragraph in 35 U.S.C.
 § 252 was to be applied in that case in accordance with eq-
 uity.” 2 Id.
     In cases involving equitable remedies and equitable de-
 fenses, the discretion of the court permits “decisions that
 are flexible, intuitive, and tailored to the particular case.” 3

     2      “The court before which such matter is in question
 may provide for the continued manufacture, use, offer for
 sale, or sale of the thing made, purchased, offered for sale,
 used, or imported as specified, or for the manufacture, use,
 offer for sale, or sale in the United States of which substan-
 tial preparation was made before the grant of the reissue
 . . . to the extent and under such terms as the court deems
 equitable for the protection of investments made or busi-
 ness commenced before the grant of the reissue.” 35 U.S.C.
 § 252.
       3    See also Michelle S. Marks, How Will the “Equita-
 ble Remuneration” Payment Within the New Patent Term
 Be Interpreted?, 5 Fed. Cir. B.J. 261, 281 (1995) (citing Dan
 B. Dobbs, Law of Remedies § 2.4(1), at 92 (2d ed. 1993)).
Case: 20-1090     Document: 51     Page: 8    Filed: 02/19/2021

 8                          JOHN BEAN TECHNOLOGIES CORP. v.
                                   MORRIS & ASSOCIATES, INC.

 See e.g., Mikohn Gaming Corp. v. Acres Gaming, Inc., 165
 F.3d 891, 895 (Fed. Cir. 1998), Monsanto Co. v. E.I. Du Pont
 de Nemours & Co., 784 F.3d 1189, 1197 (Fed. Cir. 2014). It
 permits a “judge’s discretion to see justice done in individ-
 ual cases, by remedying the imperfect fit between the rules
 of law and the facts of the world.” 4
     John Bean argues that this court should deem mone-
 tary recoupment of investments made prior to the grant of
 reissue as sufficient to protect investments and defeat the
 grant of the equitable remedy. We disagree.
     John Bean relies on Plastic Container Corp. v. Conti-
 nental Plastics of Oklahoma, Inc., 607 F.2d 885 (10th Cir.
 1979) in support of its position that investments only need
 to be protected up to the point of recoupment. See, e.g.,
 Oral       Arg.      at      1:56–2:32,      http://oralargu-
 ments.cafc.uscourts.gov/default.aspx?fl=20-
 1090_10062020.mp3. In Plastic Container, the court held
 that the defendant-appellee had not acquired intervening
 rights permitting it to continue the manufacture of the in-
 fringing goods without authorization. Still, the court con-
 cluded that equity required that the defendant-appellee be
 permitted to “recoup its investment and to offset, against
 any infringement damages, the reasonable cost of convert-
 ing or replacing its present equipment in order to produce
 noninfringing goods.” Plastic Container, 607 F.2d at 903.
 Notably, the plaintiff did not delay on commencing legal
 proceedings. Id. at 889; 889 n.3. In this case, John Bean
 waited more than a decade. In addition, the court correctly
 noted that “[u]nder 35 U.S.C. [§] 252, . . . the court may
 provide, to the extent it deems equitable, for either the con-
 ditional or unconditional continuation of the making, us-
 ing, and selling of the infringing goods or process.” Id. at
 901 n.35.

     4   Marks, supra note 3, at 280.
Case: 20-1090     Document: 51         Page: 9   Filed: 02/19/2021

 JOHN BEAN TECHNOLOGIES CORP.     v.                           9
 MORRIS & ASSOCIATES, INC.

     This court has not yet had the opportunity to examine
 the boundaries of the phrase “protection of investments” in
 § 252. The statute’s text does not specify when the protec-
 tion begins and ends or precisely which types of invest-
 ments are entitled to protection.
      But recoupment is not the sole objective of § 252’s pro-
 tection of “investments made or business commenced” be-
 fore the claims’ alteration. See also 35 U.S.C. § 252; Oral
 Arg. at 1:19–55. We see no indication in the statute that
 monetary investments made and recouped before reissue
 are the only investments that a court may deem sufficient
 to protect as an equitable remedy. To be clear, recoupment
 is a factor that a court may consider, as it did in this case,
 in weighing the equities before making a determination on
 entitlement to equitable intervening rights. But it is not
 the sole factor a district court must consider, nor is it a fac-
 tor that must be weighed more heavily, when the court bal-
 ances the equities. Determining entitlement to equitable
 intervening rights is an analysis broader than simply de-
 termining whether a party claiming intervening rights has
 fully recouped its monetary investment. 5
      Here, the district court considered seven different fac-
 tors in making its determination and decided the facts suf-
 ficiently demonstrated that Morris was entitled to an
 affirmative defense of equitable intervening rights. The
 court found that John Bean had engaged in bad faith and
 that Morris’s investment was more than just a financial

     5   See, e.g., Seattle Box II, 756 F.2d at 1579–80 (con-
 sidering whether “substantial preparation was made [by
 the infringer,]” “pre-reissue advice of counsel [was given]
 in building a non-infringing item,” and “non-infringing
 goods can be manufactured from the inventory used to
 manufacture the infringing product”); Shockley, 248 F.3d
 at 1361 (determining that an infringer’s “unclean hands”
 supported the denial of equitable intervening rights).
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 10                         JOHN BEAN TECHNOLOGIES CORP. v.
                                   MORRIS & ASSOCIATES, INC.

 investment. Given our standard of review in this appeal
 and the broad equity powers a trial court has to fashion an
 appropriate remedy, we do not conclude that the district
 court abused its discretion in its application of 35 U.S.C.
 § 252.
      John Bean also argues that genuine issues of material
 fact remain as to willful infringement. We disagree. If
 there is no infringement, there cannot be willful infringe-
 ment. See 35 U.S.C. § 284. Once the district court granted
 Morris’s motion for summary judgment on the affirmative
 defense of equitable intervening rights, it did not have to
 reach the question of willful infringement. To reach its de-
 cision the district court relied on findings of fact—e.g., the
 eleven-year delay before seeking reexamination and the re-
 structuring of Morris’s business to the accused product—to
 support its determination. See, e.g., Decision, 2019 WL
 7176779 at *3. Thus, once the district court granted Morris
 equitable intervening rights, John Bean was left with no
 basis to pursue a willful infringement claim.
                         CONCLUSION
     We have considered the remainder of the parties’ argu-
 ments, including the parties’ correspondences made pursu-
 ant to Fed. R. App. P. 28(j) concerning supplemental
 authority and find them unpersuasive. Accordingly, we de-
 termine that the district court did not abuse its discretion
 in granting-in-part Morris’s motion for summary judgment
 as to equitable intervening rights.
                         AFFIRMED
                            COSTS
 Costs awarded to Morris.