Docket No. 2016-1530, -1623
MOORE, TARANTO, CHEN
March 1, 2017
Update: SCOTUS denied review (12/4/17)
Brief Summary: DC confirmation of international arbitration tribunal’s award to Bayer of $455 million for breach of contract (under French law) and patent infringement (under US law) affirmed, but 8% post-award interest rate modified to the federal statutory rate.
Summary: Dow appealed DC confirmation of an international arbitration tribunal’s award to Bayer of $455 million for breach of contract (under French law) and patent infringement (under US law), and its setting of a rate for post-award interest (8%). The patents-at-issue (the “Leemans patent family”, co-owned by Bayer and Biogen) relate to “various technologies related to the pat gene, which confers resistance to the herbicide glufosinate”. Dow’s alleged infringing products (Enlist E3, Widestrike) contain the pat gene and some also contain the herbicide resistance aad-12 and dmmg genes. Bayer, as successor of Hoechst AG, also owns the “Strauch patent family” which is relevant here as Dow alleged double-patenting of the Leemans patent family in view of the Strauch patent family. Hoechst and Dow’s predecessor Lubrizol cross-licensed certain patents including the Strauch and Leemans patents (at the time exclusively licensed from Plant Genetic Systems NV) in “the 1992 Agreement” in which Article 4 restricted the parties’ use of the licensed technology (“No right or license is hereby granted…to use any other proprietary technology owned or available to the other in connection with the licenses granted hereunder.”) It also allowed each party to “grant sublicenses or distribution rights for their Transformants” and Hoechst to “grant sublicenses for gene promoter constructs containing a Promoter in conjunction with any gene of which Hoechst can dispose.” Between 2007-2008, Dow and MS Technologies, LLC (not a party here) entered into agreements regarding the pat and dmmg (which MS Tech had already licensed from Bayer) genes. In 2007, Bayer and MS Tech entered into a new dmmg-related agreement that also transferred ownership of “Event FG72” to MS Tech and required MS Tech to pay Bayer 50% of “net trait revenues associated with Event FG72 until 2030.” In 2008, Dow transferred aad-12/pat/dmmg soybean seeds to MS Tech resulting in the Enlist E3 products. In 2012, Bayer terminated the 1992 Agreement, accusing Dow of materially breaching Article 4 and sued Dow. The case was stayed pending arbitration. In the meantime, Bayer filed a reissue application and Dow filed six inter partes reexaminations requests which are still pending but the FC panel noted “do not alter…resolution of this appeal” (35 USC § 294; Fresenius, FC 2013). The arbitral tribunal concluded Dow breached the 1992 Agreement “by effectively sublicensing the pat gene to MS Tech” and that Dow’s Enlist and Widestrike products infringed the Leemans patents.
The FC panel first explained that it has jurisdication since “Bayer’s complaint arises under the patent laws” and “expressly alleges multiple counts of patent infringement” (Christianson, US 1988; Gunn, US 2013). It determined “[t]he tribunal’s rejection of Dow’s double-patenting defense…does not justify non-enforcement of the award” as its determination that the Leemans and Strauch patents were not commonly owned (Biogen is a co-owner) is not “contrary to public policy or reflects a manifest disregard of the law”. The FC panel also rejected Dow’s argument that the damages award is unenforceable for violating “U.S. patent-law limits on the recovery of post-expiration royalties” (“the portion of the award reaching past the 2023 expiration of the RE’962 reissue patent”, the last-to-expire Leemans patent; Brulotte, US 1964; Kimble, US 2015) because the tribunal calculated contract damages based on the revenues [Bayer] would have received under” the agreement with MS Tech “until it expired, in 2030” and the 1992 agreement’s restriction of “Dow’s use of the pat gene-namely, the restriction on sublicensing it to others-neither extends beyond the patent period nor violates any other identified law or policy.” The FC panel also rejected Dow’s other challenges regarding the propriety of the damages award but did find the DC abused its discretion in denying Dow’s motion to amend the judgment using the federal statutory rate for post-judgment interest beginning with the entry of the [DC’s] judgment” (that rate under 28 USC § 1961 being “equal to the weekly average 1-year constant maturity Treasury yield…for the calendar week preceding the date of the judgment”, which would apparently be less than 8%).