ABS Global, Inc. v. Inguran, LLC

• Decision Date: 29 January 2019
• Docket Number: No. 17-1873,17-1873
• Citation: 914 F.3d 1054
• Parties: ABS GLOBAL, INC., Plaintiff/Counterclaim Defendant-Appellant, and Genus PLC, Counterclaim Defendant-Appellant, v. INGURAN, LLC, Doing Business as Sexing Technologies, Defendant/Counterclaim Plaintiff-Appellee, and XY, LLC, Intervening Defendant/Counterclaim Plaintiff-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

914 F.3d 1054

ABS GLOBAL, INC., Plaintiff/Counterclaim Defendant-Appellant,

and

Genus PLC, Counterclaim Defendant-Appellant,

v.INGURAN, LLC, Doing Business as Sexing Technologies, Defendant/Counterclaim Plaintiff-Appellee,andXY, LLC, Intervening Defendant/Counterclaim Plaintiff-Appellee.

No. 17-1873

United States Court of Appeals, Seventh Circuit.

Argued February 20, 2018

Decided January 29, 2019

Rehearing Denied February 28, 2019

Steven J. Horowitz, Constantine L. Trela, Jr., David T. Pritikin, Attorneys, Sidley Austin LLP, Chicago, IL, Michael J. Modl, Attorney, Axley Brynelson LLP, Madison, WI, for Plaintiff–Appellant and Defendant–Appellant.

Z. W. Julius Chen, Martine E. Cicconi, Pratik A. Shah, Attorneys, Akin, Gump, Strauss, Hauer & Feld LLP, Washington, DC, Kirt S. O'Neill, Attorney, Akin, Gump, Strauss, Hauer & Feld, LLC, San Antonio, TX, Sarah A. Zylstra, Attorney, Boardman & Clark LLP, Madison, WI, for Defendant–Appellee and Intervenor–Appellee.

Elizabeth Connell Mooney, Attorney, Wilmer Hale LLP, Boston, MA, for Intervenor

Before Wood, Chief Judge, and Easterbrook and Barrett, Circuit Judges.

Wood, Chief Judge.

This case is about the birds and the bees—in particular, about human efforts to control the reproductive outcomes otherwise determined by Mother Nature. Our specific interest is the cattle industry. People have been raising cattle since the early Neolithic Age, some 10,000 years ago, when members of the Bovidae family were first domesticated. See Mario Melletti, Cattle Domestication: from Aurochs to Cow , CAMBRIDGE UNIVERSITY PRESS : FIF TEENEIGHTYFOUR (Feb. 18, 2018), http://www.cambridgeblog.org/2016/02/cattle-domestication-from-aurochs-to-cow/. Not surprisingly, production techniques have evolved over the millennia. The innovation at the heart of the present controversy is the development of sperm-sorting technology. This process enables cattle breeders to determine the sex of calves by separating a sample of bull semen into X-chromosome bearing and Y-chromosome bearing sperm cells. The resulting product—"sexed semen"—is then used to inseminate cows artificially. With this technology, dairy farmers can be sure they will breed only milk-producing cows.

Until recently, Inguran, LLC, which does business as Sexing Technologies ("Sexing Tech"), held a monopoly on the market for sexed cattle semen in the United States. ABS Global, Inc., which runs a large bull-stud operation, hoped to change that. Believing that its efforts had been thwarted in ways that violated the antitrust laws, ABS sued Sexing Tech in the Western District of Wisconsin in 2014. It alleged, among other things, that Sexing Tech had unlawfully monopolized the domestic sexed-semen market in violation of section 2 of the Sherman Act by using its market power to impose coercive contract terms. ABS sought a declaratory judgment proclaiming those contracts invalid, hoping to clear the way for its own entry into that market. Sexing Tech, along with its subsidiary, XY, LLC, (we use "Sexing Tech" to describe them collectively unless the distinction matters) counterclaimed that ABS infringed its patents and breached the contract between them by misappropriating trade secrets in developing ABS’s competing technology. Both sides also added state-law theories to the mix.

In the end, only three claims went to trial: ABS’s antitrust claim and Sexing Tech’s patent infringement and breach of contract counterclaims. After a nearly two-week trial, the jury returned a mixed—and somewhat puzzling—verdict, which the court ratified in post-trial rulings. We conclude, as did the district court, that ABS violated a confidentiality agreement it had with Sexing Tech, and that Sexing Tech’s patent was not invalid on obviousness grounds. The jury’s assessments of two of the three patent claims still at issue, however, cannot be reconciled under the rules governing dependent claims and enablement, and so a new trial is necessary on them.

I. The '987 Patent

The basic processes at issue in this case are not hard to describe. They rely on cell sorters, which are devices that sort cells to select either for a desired characteristic or to weed out an undesirable characteristic. These sorters date back to the mid-1960s, but it was not until the early 1990s that the first person developed a device designed to sort sperm cells. Lawrence Johnson, then a scientist with the U.S. Department of Agriculture, was the inventor. His technique is best explained with the help of a diagram:

This technique is a variation on a standard cell sorting technique called flow cytometric sorting. Johnson’s process begins with a sample of stained sperm cells suspended in liquid. The stain allows the sorter to distinguish X-bearing cells from Y-bearing cells based on differences in their DNA content. The stained fluid is forced through a stream, spacing out the cells and orienting them single-file. Next, a laser identifies each cell as bearing either an X or Y chromosome. By this time, each sperm cell is contained in an individual droplet, and a different charge is applied to each droplet depending on whether it contains an X- or Y-bearing sperm cell. The individually charged cells are then passed through charged plates, which redirect the cells into three batches: X-bearing cells, Y-bearing cells, and waste. Because the cells are sorted while they are suspended in individual water droplets, this device is called a "droplet sorter." Johnson first patented this technology in 1992 and wrote an article discussing improvements to the technique in 1999.

Sexing Tech holds a patent— U.S. Patent Number 8,206,987 ("the '987 patent") —over an alternative technique, developed by Gary Durack, for sorting sperm cells. The Durack patent issued in 2012, with an effective filing date relating back to a provisional application filed on March 28, 2003. Although the full text of the patent runs nearly 250 pages, the critical part for our purposes is the final section, where the claims covered by the patent are set out. Three of those claims are at issue in this case: Claims 1, 2, and 7. Claim 1 is an independent claim, meaning (as we explain more fully below) that it stands on its own, while Claims 2 and 7 are dependent claims. Each of the dependent claims begins by specifying "a method of sorting a mixture of stained sperm cells according to claim 1." Each dependent claim then goes on to specify a limitation on the subject matter covered by Claim 1, as required by 35 U.S.C. § 112(d). We set forth the full text of the disputed claims in the Appendix to this opinion.

The invention described in Claim 1 follows the same basic structure as the Johnson invention, but it substitutes a different method for sorting the cells at the final step. The Johnson method uses magnets to redirect droplets depending on the cell they contain, while the '987 patent describes a photo-damage sorting method. Photo-damage sorting is straightforward: a "kill laser" destroys undesired cells identified by the detection laser, leaving only the desired cells alive. The end product of the two methods is thus different: the Johnson patent yields three separate outputs (characteristic A, characteristic B, and waste); the Durak patent (illustrated below) produces only one output, which is composed of living cells with the desired characteristic (A or B) and dead waste cells. Under ideal conditions, photo-damage sorters work faster than droplet sorters because their speed is not limited by the size of droplets.

Dependent Claims 2 and 7 impose additional limitations on Claim 1 of the '987 patent. Claim 7 specifies that in the final step of Claim 1, "Characteristic A" must be "a live X-chromosome bearing sperm cell" and "Characteristic B" must be "something other than a live X-chromosome bearing sperm cell." This means that a photo-damage sorter that sorts sperm cells for a characteristic other than sex (perhaps a set of genes on a different chromosome) would infringe Claim 1 of the patent, but not Claim 7. It also means that every violation of Claim 7 would necessarily violate the broader Claim 1.

Claim 2 restricts Claim 1 in a different way. Claim 2 covers a process "wherein the step of selecting stained sperm cells in the flow path to photo-damage further comprises the step of photo-damaging sperm cells based upon a sort strategy." Thus, the only difference between Claim 1 and Claim 2 is whether the "selection" of stained sperm cells that occurs at the selection point (step (e) of Claim 1), is based solely on their classification as having characteristic A or B (Claim 1) or based both on their classification as A or B and a sort strategy (Claim 2) that would further narrow the results obtained. A photo-damage sorter that sorts sperm without an additional sort strategy would infringe Claim 1 of the patent, but not Claim 2, while all sorters that followed all of the Claim 1 steps and then implemented a sort strategy would violate both Claim 2 and Claim 1.

Although Sexing Tech holds a patent for photo-damage sorting of sperm cells, it had not commercialized the technology before this suit began—its commercial sorters all used the droplet sorting technique pioneered by Johnson. ABS says that it created its own commercially usable photo-damage sorter but found itself blocked by Sexing Tech’s patents, bringing us to the present litigation.

II. The Issues on Appeal

As we noted earlier, the jury reached a mixed verdict. It found that Sexing Tech had violated section 2 of the Sherman Act, but that ABS suffered no antitrust injury from that violation and thus was entitled only to injunctive relief. On the other hand, the jury found ABS liable for infringing the '987 patent and a second patent held by Sexing Tech,¹ and it concluded that ABS had breached its confidentiality contract with Sexing Tech. It accordingly awarded damages to Sexing Tech on those claims. With respect to the '987 patent, ABS argued only invalidity; it did not contest infringement. The jury...