677 F.2d 1202 (7th Cir. 1982), 81-1869, Novo Industri A/S v. Travenol Laboratories, Inc.

Docket Nº:81-1869.
Citation:677 F.2d 1202
Party Name:215 U.S.P.Q. 412 NOVO INDUSTRI A/S, Plaintiff-Appellee, v. TRAVENOL LABORATORIES, INC., GB Fermentation Industries, Inc., and Gist-Brocades, N.V., Defendants-Appellants.
Case Date:May 07, 1982
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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677 F.2d 1202 (7th Cir. 1982)

215 U.S.P.Q. 412

NOVO INDUSTRI A/S, Plaintiff-Appellee,


TRAVENOL LABORATORIES, INC., GB Fermentation Industries,

Inc., and Gist-Brocades, N.V., Defendants-Appellants.

No. 81-1869.

United States Court of Appeals, Seventh Circuit

May 7, 1982

Argued Sept. 16, 1981.

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William A. Marshall, Merriam, Marshall & Bicknell, Chicago, Ill., for defendants-appellants.

Roy E. Hofer, Hume, Clement, Brinks, Willian & Olds, Ltd., Chicago, Ill., for plaintiff-appellee.

Before SWYGERT and SPRECHER, Circuit Judges, and CRABB, Chief District Judge. [*]

CRABB, Chief Judge, Sitting by Designation.

This case is before the court on appeal from a judgment and injunction entered by the district court upon its findings that a patent held by plaintiff-appellee Novo was valid, that it had been infringed by defendants-appellants, and that plaintiff-appellee Novo was entitled to increased damages and attorney's fees because the infringement was wilful, deliberate, and in bad faith.

On appeal, there are four issues:

1. Was the district court correct in its conclusion that the Novo invention was not obvious?

2. Was the district court correct in its conclusion that the Novo patent satisfied the "best mode" requirement of 35 U.S.C. § 112?

3. Was the district court correct in its conclusion that Novo had not misused its patent?

4. Did the district court act within its discretion in awarding Novo increased damages and attorney's fees?

For the reasons that follow, we answer these questions "yes" and accordingly affirm the district court in all respects.

The patent at issue, United States patent, No. 3,988,207, concerns the identification of a fungus species which, when cultivated by a previously known process, produces a milk-coagulating enzyme needed for the production of cheese. It is owned by plaintiff-appellee, Novo Industri, a Danish biochemical and pharmaceutical concern. Novo does not claim to have discovered the fungus species; rather it claims the discovery of the fungus' ability to produce a milk-coagulating enzyme in commercially profitable amounts.

Defendant-appellant, Travenol Laboratories, Inc., is a Delaware corporation; through its Wallerstein division, Travenol manufactured the milk-coagulating enzyme known as Fromase, which was found by the district court to infringe Novo's patent because the production of Fromase involves the use of the fungus species covered by Novo's patent.

Defendant-appellant GB Fermentation Industries, Inc. (GBFI) is a Delaware corporation and a United States subsidiary of defendant-appellant Gist-Brocades N.V., a Dutch corporation. In July, 1977, GBFI and Gist acquired Travenol's Wallerstein division and thereafter continued to make and sell Fromase in the United States; they

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have been added to this litigation pursuant to Rule 25(c), Federal Rules of Civil Procedure. For simplicity the defendants-appellants will be referred to collectively as Travenol throughout this opinion.

To place the parties' claims in context, we set forth the factual background against which the claims arise. 1

Factual Background

The process of cheesemaking begins with the coagulation of milk into curds and whey. Curds contain the casein protein from which the cheese is made; whey is the liquid by-product of the coagulation process that occurs when an enzyme acts on the milk to precipitate the casein.

Until the 1970's, the principal milk-coagulating enzyme was calf rennet, an enzyme found in the fourth stomach of unweaned calves. Because of the fluctuation in the supply and cost of calves' stomach rennet, cheesemakers have been searching for years for commercially viable substitutes. Many of them have focused their research efforts upon microbial rennets; that is, milk-coagulating enzymes produced by bacterial or fungal microorganisms. As of 1965, researchers had identified microbial substitutes for calf rennet produced by microorganisms from various genera, including Bacillus, Penicillum, Aspergillus, Endothia, and Mucor. At that time, however, no one had discovered a microorganism of any commercial value. Most of the microorganisms studied were found to be unsuitable for good milk-coagulation because their high proteolytic activity reduced cheese yield and produced decomposition products that resulted in bitter tasting cheese.

In 1964 and 1965, two Japanese researchers working together obtained two United States patents, Nos. 3,151,039 and 3,212,905, for milk-coagulating enzyme "microbial rennets" made from cultures of a species of fungus known as Mucor pusillus Lindt, used in combination with other fungus genera. These Japanese patents are referred to as the Arima patents. Although they claim several methods of fungus cultivation and microbial rennet recovery, their primary novel aspect is the identification of the properties of the species, Mucor pusillus Lindt, in milk-coagulation. 2

The Arima patents identified M. pusillus as producing an effective microbial rennet; the patents did not claim any strains of M. pusillus by name. 3 However, the patents

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described the M. pusillus culture used as one in which no zygospores are observable, thus indicating that it was "heterothallic." 4 The file history of the Arima '039 patent contains a reference to an article written by George Smith in which Smith discusses a homothallic strain of M. pusillus. From this reference, it can be inferred that Arima was aware of two different strains of M. pusillus and that his failure to refer to both in his patent evinced his intention to claim only the heterothallic strain of M. pusillus. 5

In 1964, the same year in which the first Arima patent was obtained, Donald Cooney and Ralph Emerson published a book on the taxonomy of certain types of fungi, in which they set forth their opinion that homothallic strains of M. pusillus, including the one identified by George Smith and known as the Smith strain, belonged to a separate species. In their book, Cooney and Emerson reclassified these homothallic strains as the species Mucor miehei. 6 By definition, members of the species M. pusillus would not be capable of interbreeding with members of the species M. miehei.

As of 1964, the catalog of at least one culture collection, the Commonwealth Mycological Institute (CMI), listed two homothallic strains, the Smith strain and another known as the Gregory strain, under the heading, M. pusillus. 7 The CMI is one of a small number of culture collections from which researchers from all over the world can obtain samples of fungi species or even separate strains of a certain species.

In 1965, Karl Aunstrup, an employee of Novo, discovered that an unidentified fungus produced an excellent milk-coagulating enzyme. Earlier, he had replicated Arima's work, using a strain of M. pusillus purchased from a culture collection. He had found the results "not interesting," and had turned to natural sources for microorganisms. It was while screening samples from hay, compost, and molds that Aunstrup discovered the species that proved to be so remarkable in coagulation. Aunstrup did not know the identity of the fungus; it was only after performing detailed studies that he determined that it belonged to the species to which Cooney and Emerson had referred, M. miehei.

In December, 1965, only a few months after Aunstrup's discovery, his employer, Novo, filed a provisional patent application in Great Britain. On November 21, 1966, Novo filed the United States patent application that matured into the patent at issue in this case. The novel aspect of the Novo patent was the use of M. miehei; the process in which it was used to produce enzymes was essentially that described in the Arima patent '039, which itself was primarily novel in its use of the heterothallic strain of M. pusillus.

Meanwhile, in the United States, Louis Feldman was making his own search for a calf rennet substitute on behalf of his employer, Travenol. In March, 1966, Feldman learned about a newly-identified Mucor species, M. miehei, from a Mucor specialist, C. W. Hesseltine, a United States Department of Agriculture employee associated with the Northern Regional Research Laboratory (NRRL), an American culture collection. In July, 1966, Feldman wrote to Hesseltine asking him for samples of any "candidate organism (Hesseltine) may deem likely for a rennin screen, particularly any Mucor mehie (sic) cultures that might be available."

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Two months later, Feldman wrote again to Hesseltine asking for all available cultures of homothallic M. pusillus.

In response to these requests, Feldman received from the NRRL some strains of M. miehei and the Smith strain of M. pusillus. This is exactly what he would have received had he ordered only "homothallic M. pusillus" from the culture collection of the Commonwealth Mycological Institute because he would have been sent the Smith strain of homothallic M. pusillus and the Gregory strain, which has now been identified as M. miehei. 8 The M. miehei strains produced unexpectedly good results, better than anything Feldman had tried before. He believed he had a patentable invention, and Travenol's patent counsel agreed with him. Feldman and Travenol filed a patent application in April, 1967. Six months later, Travenol learned of the Novo application and shortly thereafter, Travenol filed a second patent application claiming certain specific strains of M. miehei ; however, it did not abandon the first application until more than two years later. Travenol has filed patent applications on the invention in eighteen foreign countries.

In July, 1971, the Patent and Trademark Office (PTO) declared an interference between the Novo application...

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