Court Opinion

ID: 4117627
Source: CourtListenerOpinion
Date Created: 2017-01-23 16:02:28.915482+00
Date Added: 2024-06-11T09:21:08.237324
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

ZHEJIANG MEDICINE CO., LTD., ZMC-USA L.L.C.,
            Plaintiffs-Appellees

                           v.

             KANEKA CORPORATION,
                Defendant-Appellant
               ______________________

                      2016-1390
                ______________________

    Appeal from the United States District Court for the
Southern District of Texas in No. 4:11-cv-01052, Magis-
trate Judge Mary Milloy.
                ______________________

              Decided: January 23, 2017
               ______________________

   BRIAN ROSENTHAL, Mayer Brown LLP, Washington,
DC, argued for plaintiffs-appellees. Also represented by
PAUL WHITFIELD HUGHES, GARY HNATH; CHARLES
STEPHEN KELLEY, TRENTON MENNING, Houston, TX.

    KEITH D. NOWAK, Carter Ledyard & Milburn LLP,
New York, NY, argued for defendant-appellant. Also
represented by WILLIAM F. SONDERICKER; ROBERT MCGEE
BOWICK, JR., Raley & Bowick, LLP, Houston, TX.
                 ______________________
2         ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION

    Before LOURIE, MOORE, and O’MALLEY, Circuit Judges.
MOORE, Circuit Judge.
    Kaneka Corporation (“Kaneka”) appeals from the
Southern District of Texas’ summary judgment of nonin-
fringement of all asserted claims of U.S. Patent
No. 7,910,340 (“the ’340 patent”). For the reasons dis-
cussed below, we vacate and remand.
                        BACKGROUND
    The ’340 patent is directed to an industrial process for
producing oxidized coenzyme Q10 (“CoQ10”), an antioxidant
used in health supplements. Kaneka brought suit against
Zhejiang Medicine Co., Ltd. and ZMC-USA LLC (collec-
tively, “ZMC”), asserting their manufacturing processes
infringe one or more claims of the ’340 patent. The dis-
pute centers on the claims’ requirement of “oxidizing”
reduced CoQ10, as recited in the two independent claims
at issue, 22 and 33. 1 The district court originally con-
strued the term “oxidizing” to have its ordinary and
customary meaning, rejecting Kaneka’s argument that
the “oxidizing” term requires “increasing the rate” of
oxidizing reduced CoQ10. Both parties submitted expert
reports opining on whether ZMC’s processes satisfy the
“oxidizing” limitation under the district court’s construc-
tion.
    Meanwhile, in a separate appeal concerning the same
patent, a panel of this court construed the term “oxidiz-
ing” to mean “some action resulting in oxidation.” Kaneka

     1 Claim 22 requires “oxidizing thus-obtained re-
duced coenzyme Q10 to oxidized coenzyme Q10” and
claim 33 requires “oxidizing the extracted reduced coen-
zyme Q10 to oxidized coenzyme Q10.”
ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION       3

Corp. v. Xiamen Kingdomway Grp. Co., 790 F.3d 1298,
1307 (Fed. Cir. 2015). Approximately two weeks after
Kingdomway issued, the district court held a status
conference to address the impact of the Kingdomway
construction on the proceedings. At the conference,
Kaneka stated that its expert, Dr. Sherman, “looked at
the Federal Circuit decision in detail and [ ] has no need
to file a revised report.” J.A. 14895:7–9. ZMC responded
that their expert would like to supplement his report, to
which Kaneka objected, arguing both its and ZMC’s
expert reports addressed the issue of active oxidation, as
required by Kingdomway. The district court determined
that ZMC could file a supplemental expert report by
July 16 and that Kaneka could respond to or depose
ZMC’s expert by August 1.
    July passed and ZMC did not submit a supplemental
expert report, and thus Kaneka did not respond to or
depose ZMC’s expert. Instead, on August 13, ZMC moved
for summary judgment of noninfringement based on the
“oxidizing” limitation. In its motion, ZMC argued that
Kaneka failed to show “what oxidation, if any, of coen-
zyme Q10 during ZMC’s process is attributable to active
oxidation above the level of passive oxidation that natural-
ly occurs throughout ZMC’s process.” J.A. 14821. ZMC
also argued that Dr. Sherman’s expert opinion of in-
fringement, based on the district court’s pre-Kingdomway
claim construction of “oxidizing,” was now irrelevant and
could not be relied on by the court.
    The district court agreed with ZMC’s interpretation of
the Kingdomway construction, determining that “oxidiz-
ing” required “some amount of oxidation, in excess of that
which occurs naturally from exposure to ambient air.”
J.A. 48. It interpreted ZMC’s criticism of Dr. Sherman’s
report on the “oxidizing” limitation as a motion to exclude
and granted it, agreeing his opinion was “irrelevant”
based on a “now incorrect” construction. J.A. 46–51. It
denied Kaneka’s alternative request to supplement
4       ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION

Dr. Sherman’s report. The district court held that, based
on the record before it, Kaneka failed to provide evidence
that the oxidation in ZMC’s manufacturing process was
the result of ZMC’s active processes to oxidize CoQ10, as
compared to passive oxidation, and granted summary
judgment of noninfringement. Kaneka timely appealed.
We have jurisdiction under 28 U.S.C. § 1295(a)(1).
                        DISCUSSION
     For issues not unique to patent law, we apply the law
of the regional circuit where this appeal would otherwise
lie, which in this case is the Fifth Circuit. LaserDynam-
ics, Inc. v. Quana Comput., Inc., 694 F.3d 51, 66 (Fed. Cir.
2012). We review evidentiary rulings for an abuse of
discretion. Id. We review decisions on motions for sum-
mary judgment de novo. Id. Summary judgment is
appropriate when, drawing all justifiable inferences in the
nonmovant’s favor, “the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986).
          A. Claim Construction of “Oxidizing”
    At the outset, Kaneka argues the district court “im-
properly changed” our construction of “oxidizing” in
Kingdomway from “some action resulting in oxidation” to
an action that increases the amount of oxidation above a
baseline of passive oxidation. It argues the district court’s
changed construction led it to erroneously exclude
Dr. Sherman’s expert report and grant summary judg-
ment of noninfringement. We agree in part.
    In Kingdomway, we held “oxidation requires an active
step.” 790 F.3d at 1305. We explained that “because the
claims affirmatively recite the step of ‘oxidizing,’ ‘oxidiz-
ing’ cannot be interpreted as doing nothing, or to simply
allow oxidation to occur on its own.” Id. This construc-
ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION        5

tion “requir[es] active oxidation during the oxidation step
. . . but does not exclude passive oxidation during other
steps.” Id. at 1306. 2
    The district court interpreted our construction to
mean “some amount of oxidation, in excess of that which
occurs naturally from exposure to ambient air, must be
caused by an ‘active step’ in the coenzyme Q10 manufac-
turing process.” J.A. 48 (emphasis added). This is not
precise. The only bounds provided by Kingdomway on
what constitutes an “active step” or “active oxidation” is
that it does not require use of an oxidizing agent. 790
F.3d at 1306. The opinion emphasizes that there must be
“some action resulting in oxidation”; the oxidizing step
“cannot be interpreted as doing nothing, or to simply
allow oxidation to occur on its own.” Id. at 1305–06
(emphasis added). But the opinion does not state that to
be an active step, the oxidation rate must be greater than
that of passive oxidation. And it is silent as to any degree
of oxidation that would be necessary to qualify as active
oxidation.    The opinion simply requires that there be
some action that results in oxidation. Id. at 1307.
    A review of the district court’s construction of “oxidiz-
ing” on appeal in Kingdomway frames the Kingdomway
construction. There, the district court held that “oxidiz-
ing” required, inter alia, “active conversion of the reduced
CoQ10 into oxidized CoQ10,” which was supported by the
specification’s examples using an oxidizing agent in the
oxidizing step. Kaneka Corp. v. Kingdomway Grp. Co.,
No. 2:11-cv-02389, 2013 WL 4647299, at *8 (C.D. Cal.
July 24, 2013), aff’d in part, vacated in part, 790 F.3d

    2   The question whether the term “oxidizing” re-
quires an oxidizing agent was before the prior panel of
this court, and we are bound by their decision that it does
not. See id. Thus, it is not a decision that we can review.
6        ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION

1298. In adopting its “active conversion” construction, the
district court rejected an alternative proposed construc-
tion that “oxidizing” means “‘increasing the rate’ of con-
version to oxidized CoQ10.” Id. at *7–8. The district court
reasoned that “[w]ithout a baseline reference for compari-
son, a person of skill in the art cannot know whether a
rate of conversion is increased,” making such a construc-
tion “too vague to adopt.” Id. at *8.
    On appeal, we “agree[d] that oxidation requires an ac-
tive step,” but held “it does not require the use of an
oxidizing agent.” Kingdomway, 790 F.3d at 1305–06. The
opinion does not place additional qualifications on what
must occur to be an “active step.” And although discussed
in briefing to this court, see Appellees’ Br. 46–47, King-
domway, No. 14-1373 (Fed. Cir. Aug. 6, 2014), the King-
domway court did not require “increased oxidation” “in
excess of that which occurs naturally from exposure to
ambient air.” See J.A. 48.
    Against this backdrop, we consider Kaneka’s argu-
ments that the district court (1) abused its discretion in
excluding Mr. Sherman’s expert report and (2) erred in
granting ZMC’s motion for summary judgment of nonin-
fringement. We affirm the district court’s exclusion of
portions of Mr. Sherman’s expert report and vacate the
district court’s grant of summary judgment of nonin-
fringement.
    B. Exclusion of Dr. Sherman’s Expert Report on In-
                        fringement
    Kaneka argues the district court abused its discretion
in excluding the portions of Dr. Sherman’s expert report
regarding the “oxidizing” limitation and denying its
ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION        7

alternative request to supplement its expert report. 3 It
argues Dr. Sherman’s report sufficiently embraces the
Kingdomway construction of “oxidizing” and “plainly
identifies and describes the action taken by ZMC during
its manufacturing process that results in oxidation.”
Appellant’s Br. 31.
    As discussed supra, we agree with Kaneka that the
district court misinterpreted the Kingdomway construc-
tion. The district court required Dr. Sherman’s report to
address more than was necessary under Kingdomway.
See J.A. 50 (criticizing Dr. Sherman’s report for not ad-
dressing whether ZMC’s processes “actually do cause any
amount of oxidation, beyond that which occurs naturally,
as a result of the microbial cells’ exposure to ambient air”)
(emphasis added). We, thus, need not decide whether it
would have been an abuse of discretion to exclude
Dr. Sherman’s opinions regarding the “oxidizing” limita-
tion under the district court’s initial interpretation of
Kingdomway.
      We also decline to assess Dr. Sherman’s report in the
first instance to determine the relevance of his opinions in
light of our claim construction conclusions. We leave that
question, as well as the question of whether to allow one
or both parties’ experts an opportunity to supplement
their reports in response to our opinion.

    3   Kaneka also appeals several of the district court’s
evidentiary rulings unrelated to the court’s grant of
summary judgment. Kaneka argues the district court
erred in (1) denying its motion to compel test results
relating to a different limitation; (2) excluding testimony
regarding that limitation; and (3) excluding testimony of
its damages expert. Because these issues do not affect the
summary judgment entered by the district court, we
decline to review them.
8        ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION

    C. Grant of Summary Judgment of Noninfringement
    Even without Dr. Sherman’s report, Kaneka argues
that ample evidence precluded the district court’s grant of
summary judgment of noninfringement. We agree.
    The district court determined, viewing the evidence in
the light most favorable to Kaneka, that “no reasonable
fact finder could conclude that the oxidation step in ZMC’s
process results from an ‘active step,’” as required by
Kingdomway. J.A. 53. It explained, “Kaneka has not
produced any evidence to show that the oxidation levels
would have been different, if . . . ZMC had taken no action
at all.” J.A. 54. Here, the district court’s misinterpreta-
tion of the Kingdomway construction marred its analysis.
To meet the “oxidizing” limitation, ZMC’s processes need
not produce a “different” rate of oxidation. There simply
must be “some action resulting in oxidation.” Kingdom-
way, 790 F.3d at 1307. The Kingdomway court simply
required that the oxidation occurred via an “active step.”
    Evidence showing that the oxidation achieved from
ZMC’s active steps is greater than passive oxidation is one
way in which Kaneka could support its infringement
theory—and possibly the most persuasive way—but this
level of evidence is not necessary to show infringement.
Particularly at the summary judgment stage, the court
must focus its inquiry on what a reasonable jury could
find, not what evidence may be the most compelling.
Portions of the district court’s analysis appear to heighten
Kaneka’s burden to defend ZMC’s motion for summary
judgment. See, e.g., J.A. 53 (criticizing Kaneka’s evidence
because “it does not show that that oxidation is, in fact, a
result of actions by ZMC”) (emphasis added). The district
court’s own concessions that the evidence “might suggest
that oxidation occurs” and “shows that oxidation could
result from ZMC’s actions” indicate that an issue of mate-
rial fact exists. See id. Our review of the evidence con-
firms our understanding.
ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION       9

    Evidence in the record details ZMC’s manufacturing
process for making oxidized CoQ10, which relevantly
involves washing steps, drying the wet mass with com-
pressed and pneumatic air, extracting the mass, and post-
extraction washing. Two studies conducted by ZMC show
that after the first washing step, the ratio of reduced
CoQ10 to oxidized CoQ10 went from 81.1% to 26.9% (first
study) and 88.5% to 55.6% (second study). After the
drying step, the same data shows the ratio of reduced
CoQ10 to oxidized CoQ10 went from 26.9% to 21.3% (first
study) and 55.6% to 18.2% (second study). Both of these
steps are active process steps. A ZMC witness testified
that the pneumatic drying step occurs in an enclosed
container. This evidence collectively raises an issue of
material fact concerning whether ZMC’s washing and
drying steps, during which 59.8–70.3% of the reduced
CoQ10 became oxidized, constitute “some action resulting
in oxidation” as required by claim 22. Kingdomway, 790
F.3d at 1307. The question is not whether these steps
would have caused more or less oxidation than passive
oxidation. The question is whether these are active steps
resulting in oxidation.
    Claim 33 requires the “oxidizing” step be performed
on extracted reduced CoQ10. The same ZMC data shows
that after the final post-extraction washing step, the ratio
of reduced CoQ10 to oxidized CoQ10 went from 16.7% (first
study) and 17.5% (second study) to 0%, meaning the
CoQ10 became fully oxidized. ZMC’s expert, in discussing
a separate limitation not at issue here requiring an oxi-
dizing agent, conceded that a “source of oxidation” that
occurs in ZMC’s steps is oxygen, including from “ambient
air dissolved in solutions.” J.A. 4539 ¶ 157. Evidence
that (1) ZMC washes extracted reduced CoQ10, (2) oxygen
dissolved in solutions used by ZMC is a “source of oxida-
tion,” and (3) ZMC’s CoQ10 is fully oxidized after this step
is complete, raises an issue of material fact of infringe-
ment.
10       ZHEJIANG MEDICINE CO., LTD.   v. KANEKA CORPORATION

    Under the proper construction, even without consid-
eration of Dr. Sherman’s opinions, we conclude there is a
dispute of material fact regarding whether ZMC’s pro-
cesses meet the “oxidizing” limitation in claims 22 and 33.
The district court erred in granting ZMC’s motion for
summary judgment of noninfringement.
                        CONCLUSION
    For the foregoing reasons, we vacate the district
court’s grant of summary judgment of noninfringement
and remand for further proceedings.
             VACATED AND REMANDED
                          COSTS
     Costs to Kaneka.