Embrex v. Service Engineering Corp.

• Decision Date: 28 June 2000
• Citation: 216 F.3d 1343,55 USPQ2d 1161
• Parties: (Fed. Cir. 2000) EMBREX, INC., Plaintiff-Appellee, v. SERVICE ENGINEERING CORP. and EDWARD G. BOUNDS, JR., Defendants-Appellants. 99-1064 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1343

216 F.3d 1343 (Fed. Cir. 2000)

EMBREX, INC., Plaintiff-Appellee, v. SERVICE ENGINEERING CORP. and EDWARD G. BOUNDS, JR., Defendants-Appellants.

99-1064

United States Court of Appeals for the Federal Circuit

DECIDED: June 28, 2000

Appealed from: U.S. District Court for the Eastern District of North Carolina Senior Judge W. Earl Britt

[Copyrighted Material Omitted] James D. Myers, Myers, Bigel, Sibley & Sajovec, P.A., of Raleigh, North Carolina, argued for plaintiff-appellee. With him on the brief were Robert W. Glatz and D. Randal Ayers.

Harvey B. Jacobson, Jr. and Michael R. Slobasky, Jacobson, Price, Holman & Stern, PLLC, of Washington, DC, argued for defendants-appellants.

Before LOURIE, CLEVENGER, and RADER, Circuit Judges.

Opinion for the court filed PER CURIAM. Circuit Judge RADER concurs.

PER CURIAM.

The United States District Court for the Eastern District of North Carolina awarded Embrex, Inc. (Embrex) damages for Service Engineering Corporation's and Edward Bounds' (collectively, SEC's) infringement of U.S. Patent No. 4,458,630 ('630 patent), including direct damages treble damages for willfulness, and attorney fees under an exceptional case finding. The trial court also denied SEC's motions for Judgment as a Matter of Law (JMOL) and a new trial, which sought to overturn the jury verdicts. Because the district court did not err in construing the claims, in concluding that a reasonable jury could find infringement, in finding willfulness, and in awarding attorney fees, this court affirms-in-part. However, because the district court erroneously awarded direct damages without proper evidence to support the award, this court vacates that award and remands for further proceedings.

I.

Embrex is the exclusive licensee of the '630 patent from the United States Government under the Bayh-Dole Act. A scientist at the U.S. Department of Agriculture developed the patented technology. The '630 patent claims methods for inoculating birds against disease by injecting vaccines into a specified region of the egg before hatching. In its commercial application, the claimed invention immunizes chickens in ovo, i.e., while they are still in the egg. Thus, the claimed method reduces the risk that chickens will succumb to infections that often infect an entire flock. This method represents an advance over the prior art method, which inoculated several days after hatching, leaving the chicks unprotected. The '630 patent contains 13 claims, 12 of which the jury found SEC had infringed. Claim 1 of the patent is representative:

1.A method for controlling an immunizable disease of viral, bacterial, or microbial origin in an avian species comprising injecting a vaccine effective for inducing immunity against said disease into the egg embodying the embryo of said avian species, wherein said injection is made during the final quarter of the incubation period whereby the embryo has developed immunologic competence and wherein said vaccine is injected within the region defined by either the amnion or the yolk sac.

'630 patent, col. 9, ll. 26-34.

Upon obtaining its license to the '630 patent, Embrex began designing machines to perform the claimed method in large scale industrial chicken farms. After learning of Embrex's products, SEC attempted to interest Embrex in using its device for automatically transferring eggs from egg-supporting flats to hatching trays about three quarters of the way through the incubation period. SEC also expressed to Embrex its interest in manufacturing Embrex's in ovo injection machines. Embrex rebuffed SEC's advances. SEC then contacted two other companies about collaborating to design around the '630 patent. Embrex sued SEC and its collaborators for infringement of the '630 patent. That litigation resulted in a settlement agreement, and a dismissal of the infringement suit.

Despite this history, SEC continued its attempts to build an in ovo injection machine. SEC developed a prototype device, and engaged the services of two scientists to investigate the possibility of injecting chicken embryos outside the region covered by the '630 patent claims. Dr. Vergil Davis suggested that the embryos could be inoculated by injecting vaccine into the chorioallantoic sac (CAS), a part of the egg not mentioned in the '630 claims. Mr. Bounds and Dr. Davis experimented to determine whether they could target the CAS by injecting India ink into several eggs. To address the difficulty of injecting into the CAS, Mr. Bounds devised a test stand to reliably inject into predetermined depths beneath the shell of the egg.

SEC also retained Dr. Rosenberger, a professor at the University of Delaware. SEC gave Dr. Rosenberger the test stand, with which he performed several tests to determine the practicability of injection into the CAS. These tests injected India ink into some eggs and vaccine into others. The India ink tests sought to target the CAS, whereas the vaccine tests sought to evaluate the effectiveness of the inoculations. According to the trial record, the Rosenberger tests showed that the injected embryos received little immunity, and that most injections penetrated beyond the CAS and into the amnion/yolk sac -- areas covered by the '630 patent.

While preparing its prototype and performing tests, SEC began soliciting orders for its in ovo injection device. Specifically, Embrex alleges that SEC offered to sell its machines to Hudson Foods in the U.S. and Courvoir Dufo in Canada, effectively depriving Embrex of the sales.

Upon learning of SEC's testing and its attempts to market the nascent in ovo injection device, Embrex again sued SEC. Embrex's suit alleged willful infringement of the '630 patent, breach of the settlement agreement, and violation of section 43(a) of the Lanham Act. The district court held a jury trial on each issue. The jury returned a verdict favorable to Embrex on breach of contract, infringement, and willfulness. However, the jury returned a verdict in favor of SEC on the alleged Lanham Act violation. In response to post-trial motions, the district court denied SEC's motion for JMOL, and awarded Embrex treble damages and attorney fees under the terms of the settlement agreement as well as under 35 U.S.C. §§ 284 and 285 (1994). The district court also granted Embrex's summary judgment motion on SEC's defense that Embrex did not have standing to sue for infringement of the '630 patent because its license from the U.S. government violated the Bayh-Dole Act.

II.

This court reviews the district court's JMOL ruling after a jury verdict by reapplying the district court's standard. See Applied Med. Resources Corp. v. U.S. Surgical Corp., 147 F.3d 1374, 1376, 47 USPQ2d 1289, 1290 (Fed. Cir. 1998). Thus, to prevail on appeal, SEC must show that substantial evidence does not support the jury's factual findings or that the district court erred in applying the law. See id.

A district court may overturn a jury's verdict on a motion for JMOL only if, upon the trial record, a reasonable jury could not have reached that verdict. See Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888, 893, 221 USPQ 669, 673 (Fed. Cir. 1984). This court considers the record evidence in the light most favorable to Embrex, drawing all reasonable inferences in its favor. Accordingly, this court will not disturb the jury's credibility determinations or substitute its resolutions of conflicting evidence for those of the jury. See Applied Med., 147 F.3d at 1376-77.

A.

This court reviews the district court's claim construction of the '630 patent without deference. See Georgia-Pacific Corp. v. United States Gypsum Co., 195 F.3d 1322, 1330, 52 USPQ2d 1590, 1597 (Fed. Cir. 1999). "In claim construction the words of the claims are construed independent of the accused product, in light of the specification, the prosecution history, and the prior art. . . . [T]he construction of claims is simply a way of elaborating the normally terse claim language[] in order to understand and explain, but not to change, the scope of the claims." Scripps Clinic v. Genentech, Inc., 927 F.2d 1565, 1580, 18 USPQ2d 1001, 1013 (Fed. Cir. 1991) (internal quotations omitted).

The preamble to independent claim 1 recites a method "for controlling an immunizable disease . . . in an avian species comprising [several steps]." This language calls on this court to determine whether "controlling an immunizable disease" requires inoculation of an entire population of birds and effective immunization of a high percentage of treated birds. The district court read claim 1 to simply describe the purpose of the claimed method, namely to control a disease by preventing or managing the disease in individual birds.

The language of the claims supports the district court's interpretation. The claims describe the process of immunizing a single egg. For example, claim 1 calls for "injecting a vaccine . . . into the egg embodying the embryo . . . wherein said injection is made during the final quarter of the incubation period whereby the embryo has developed immunologic competence." '630 patent, col. 9, ll. 28-33. With this language, the claim calls for a process involving immunization of an individual egg, rather than a process for entire populations of birds.

The claims also speak of a "vaccine effective for inducing immunity." Id. at col. 9, ll. 28-29. This phrase does not require that the method be effective for all birds or any threshold percentage of birds. In context, the word "effective" modifies the word "vaccine," not the claimed method as a whole. The claim requires no more than a vaccine effective to inoculate an individual chick. Thus, the district court correctly construed this part of the claim to require only that the vaccine injected is known to be effective, but not that every inoculation into an egg actually confers immunity.

The written description accompanying the claims also supports the trial court's construction of the...