Bayer Cropscience AG v. Dow Agrosciences LLC, 031717 FEDFED, 2015-1854

Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
Attorney:Adam Mortara, Bartlit Beck Herman Palenchar & Scott LLP, Chicago, IL, argued for plaintiffs-appellants. Also represented by DANIEL CHARLES TAYLOR, Denver, CO; Robert J. Koch, Milbank, Tweed, Hadley & McCloy, LLP, Washington, DC; CHRISTOPHER JAMES Gaspar, New York, NY. MARK S. DAVIES, Orrick, Herr...
Judge Panel:Before NEWMAN, Chen, and Stoll, Circuit Judges.
Opinion Judge:Stoll, Circuit Judge.
Party Name:BAYER CROPSCIENCE AG, BAYER S.A.S., Plaintiffs-Appellants v. DOW AGROSCIENCES LLC, Defendant-Appellee
Case Date:March 17, 2017
Docket Nº:2015-1854
 
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BAYER CROPSCIENCE AG, BAYER S.A.S., Plaintiffs-Appellants

v.

DOW AGROSCIENCES LLC, Defendant-Appellee

No. 2015-1854

United States Court of Appeals, Federal Circuit

March 17, 2017

         Appeal from the United States District Court for the District of Delaware in No. l:12-cv-00256-RMB-JS, Judge Renee Marie Bumb.

          Adam Mortara, Bartlit Beck Herman Palenchar & Scott LLP, Chicago, IL, argued for plaintiffs-appellants. Also represented by DANIEL CHARLES TAYLOR, Denver, CO; Robert J. Koch, Milbank, Tweed, Hadley & McCloy, LLP, Washington, DC; CHRISTOPHER JAMES Gaspar, New York, NY.

          MARK S. DAVIES, Orrick, Herrington & Sutcliff LLP, Washington, DC, argued for defendant-appellee. Also represented by Katherine M. Kopp; Peter A. Bicks, Alex V. Chachkes, Andrew D. Silverman, Aaron Scherzer, New York, NY.

          Before NEWMAN, Chen, and Stoll, Circuit Judges.

          Stoll, Circuit Judge.

         Bayer appeals the district court's award of attorney fees to Dow under 35 U.S.C. § 285. The district court awarded attorney fees to Dow upon finding that the case stood out from others and was thus exceptional. Because the district court did not abuse its discretion in finding the case exceptional and awarding fees, we affirm.

         Background

         This is the second appeal to our court in this patent infringement lawsuit between plaintiffs-appellants Bayer CropScience AG and Bayer S.A.S. (collectively, "Bayer") and defendant-appellee Dow AgroSciences LLC. The patents-in-suit relate to soybeans genetically engineered to tolerate herbicide, and, particularly, to the Bayer-developed dmmg gene. The first appeal centered on the merits of a contractual dispute. The parties disagreed over the scope of Bayer's license of the patents-in-suit to a Dow business partner, M.S. Technologies, LLC ("MS Tech"), and, specifically, whether the license granted MS Tech a broad license to commercialize and sublicense the soybean technology. MS Tech sublicensed to Dow whatever patent rights it received from Bayer. When Bayer sued Dow for infringement of these patents, Dow raised the MS Tech sublicense as an affirmative defense.

         On summary judgment, Bayer argued that it had only licensed MS Tech rights to non-commercial exploitation of the dmmg patents, and thus, Dow's activity with MS Tech in commercializing dmmg gene soybeans infringed the patents-in-suit. Dow countered that the Bayer-MS Tech agreement conveyed to MS Tech broad rights—including commercialization of the patents-in-suit—by its terms, but especially in view of the facts surrounding the agreement negotiations. The parties agreed that English law governed the agreement, and under English law, the background or surrounding circumstances of contract formation are considered when interpreting the agreement. The district court agreed with Dow's interpretation of the Bayer-MS Tech agreement and entered summary judgment in its favor. Bayer CropScience AG v. Dow AgroSciences LLC, No. CV12-256-RMB-JS, 2013 WL 5539410 (D. Del. Oct. 7, 2013). Our court affirmed that decision. Bayer CropScience AG v. Dow AgroSciences LLC, 580 F.App'x 909 (Fed. Cir. 2014) (Bayer I).

         The case returned to the district court, where the court awarded Dow attorney fees pursuant to 35 U.S.C. § 285. The magistrate judge who had managed the case, having been briefed on the § 285 issue by both parties and having conducted a two-day hearing on the matter, issued a thorough report and recommendation declaring a "firm conviction that this is an 'exceptional case'" and recommending fee-shifting under § 285. Bayer CropScience AG v. Dow AgroSciences LLC, No. CV 12-256-RMB-JS, 2015 WL 108415, at *1 (D. Del. Jan. 5, 2015). The district judge who entered summary judgment for Dow then reviewed the magistrate's recommendation and adopted it in a thorough opinion of her own. The district judge examined the full duration of the litigation and concluded that, in her view, Bayer's weak positions on the merits and litigation conduct supported a finding that this was an exceptional case.

         Specifically, the district judge emphasized that "Bayer's own witnesses as well as key documents contradicted Bayer's contorted reading of the contract" and that "Bayer's conduct in litigating this case in the face of evidence that contradicted its contorted reading of the Agreement was objectively unreasonable." Bayer Crop-science AG v. Dow Agrosciences LLC, No. CV 12-256, 2015 WL 1197436, at *4, *8 (D. Del. Mar. 13, 2015) (Fees Op.). Bayer had argued that it did not grant Dow's business partner, MS Tech, commercialization rights to the dmmg gene patents, relying in large part on the emphasized exception clause in the license grant: The SELLER [Bayer] hereby grants to the PURCHASER [MS Tech] ... a worldwide, fully paid-up, exclusive license - with the right to grant sublicenses solely as set out in Article 3.1.3 and with the exception of the rights to increase, market, distribute for sale, sell and offer for sale, granted to STINE by separate agreement....

         J.A. 339 (emphasis added). The referenced Stine agreement was a non-exclusive license Bayer gave to Stine Seed Farm, Inc.-an entity working closely with MS Tech-which specifically granted the enumerated commercialization rights listed in the MS Tech agreement (i.e., right to increase, market, ...

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