Exergen Corp. v. Wal-Mart Stores, Inc.

• Decision Date: 04 August 2009
• Docket Number: No. 2007-1180.,No. 2006-1491.,2006-1491.,2007-1180.
• Parties: EXERGEN CORPORATION, Plaintiff-Cross Appellant, v. WAL-MART STORES, INC. Hana Microelectronics Co., Ltd., and CVS Corporation, Defendants, and S.A.A.T. Systems Application of Advanced Technology, Ltd. and Daiwa Products, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

575 F.3d 1312

EXERGEN CORPORATION, Plaintiff-Cross Appellant, v. WAL-MART STORES, INC. Hana Microelectronics Co., Ltd., and CVS Corporation, Defendants, and S.A.A.T. Systems Application of Advanced Technology, Ltd. and Daiwa Products, Inc., Defendants-Appellants.

No. 2006-1491.

No. 2007-1180.

United States Court of Appeals, Federal Circuit.

August 4, 2009.

Heidi E. Harvey, Fish & Richardson P.C., of Boston, MA, argued for plaintiff-cross appellant. With her on the brief were Gregory A. Madera and Thomas A. Brown.

Peter M. Midgley, Jr., Zarian Midgley & Johnson PLLC, of Boise, ID, argued for defendants-appellants. With him on the brief was Dana M. Herberholz.

Before MICHEL, Chief Judge, LINN, Circuit Judge, and ST. EVE, District Judge.^*

LINN, Circuit Judge.

S.A.A.T. Systems Application of Advanced Technology, Ltd. and Daiwa Products, Inc. (collectively "SAAT") appeal the denial of their motion for judgment as a matter of law ("JMOL") after a jury found that SAAT willfully infringed U.S. Patents No. 5,012,813 ("the '813 patent"), No. 6,047,205 ("the '205 patent"), and No. 6,292,685 ("the '685 patent") and awarded lost profit damages to the patentee, Exergen Corporation ("Exergen"). Exergen Corp. v. Wal-Mart Stores, Inc., No. 01-CV-11306 (D.Mass. Aug. 4, 2005). SAAT further appeals the denial of its motion for leave to amend its answer to allege that the '813 and '685 patents are unenforceable due to inequitable conduct. Exergen cross-appeals the denial of its motion to alter or amend judgment for an award of enhanced damages and prejudgment interest.

We conclude that all claims of the '205 patent are anticipated and that no substantial evidence supports the jury's contrary finding. Furthermore, we conclude that Exergen failed to introduce substantial evidence to support the jury's finding that the '813 and '685 patents are infringed. Because our invalidity and non-infringement determinations require that we reverse the damages award, we need not address Exergen's cross-appeal regarding enhanced damages and prejudgment interest. Finally, we conclude that the district court did not abuse its discretion in denying SAAT's motion to amend its pleading because it correctly held that SAAT's proposed allegations of inequitable conduct failed to satisfy the heightened pleading requirement of Federal Rule of Civil Procedure 9(b). Thus, we affirm-in-part and reverse-in-part.

BACKGROUND

Exergen's patents relate to infrared thermometers for measuring human body temperature. The thermometers first detect infrared radiation emitted from a surface of the human body, such as the tympanic membrane (eardrum) or the skin of the forehead, to obtain the surface temperature. The surface temperature is a function of both the internal (core) temperature within the body and the ambient (air) temperature to which the surface is exposed. From the detected surface temperature, the thermometers calculate the internal temperature in accordance with equations provided in the patents and then display a digital readout thereof. For example, the '813 and '205 patents disclose a thermometer that detects radiation from the tympanic membrane, but the claims of those patents are directed more broadly to detecting radiation from "biological tissue." The '685 patent, by contrast, is directed to a thermometer that detects radiation from the skin that covers the temporal artery in the temple region near the side of the forehead.

SAAT manufactures thermometers that detect radiation from the skin that covers the temporal artery. After detecting this radiation, SAAT's thermometers convert the measured surface reading to the patient's oral temperature, which is the commonly used temperature measurement in the United States.

Exergen sued SAAT for infringement of the '813 and '205 patents on July 27, 2001. The '685 patent issued on September 18, 2001, and was added to the suit on October 2, 2001. SAAT answered by asserting affirmative defenses and counterclaims of both noninfringement and invalidity. On September 6, 2002, SAAT sought leave pursuant to Federal Rule of Civil Procedure 15(a) to add inequitable conduct as an affirmative defense and counterclaim against the '813 and '685 patents. Exergen Corp. v. Wal-Mart Stores, Inc., No. 01-CV-11306 (D.Mass. Sept. 6, 2002) (Dkt. No. 51) ("Answer"). The district court denied SAAT's motion, stating that the proposed pleading failed to allege inequitable conduct with particularity under Rule 9(b).

The court then conducted a hearing on claim construction and construed two terms in claim 7 of the '813 patent. First, the court construed "biological surface tissue" to mean "a living layer of external human tissue having a temperature that can be measured." Exergen Corp. v. Wal-Mart Stores, Inc., No. 01-CV-11306, slip op. at 10 (D.Mass. July 14, 2004) ("Claim Construction Order"). Second, the court construed "internal temperature" to mean "temperature of the region existing beneath the surface of the biological tissue targeted for measurement." Id. The parties agreed that these terms were the only terms at issue in the case. Moreover, before trial, Exergen waived any argument that SAAT infringed under the doctrine of equivalents.

The case then proceeded to a jury trial on a theory of literal infringement only. The jury found that SAAT directly infringed claim 7 of the '813 patent and claims 1 and 3-5 of the '205 patent, and that SAAT actively induced infringement of claims 1 and 27-30 of the '685 patent. Infringement of each patent was found to be willful. The jury also found in favor of Exergen on SAAT's invalidity defenses. Finally, the jury awarded lost profit damages totaling more than $2.5 million.

SAAT moved for JMOL on the grounds of noninfringement, invalidity, and absence of lost profits. These motions were denied on March 24, 2006. Exergen moved to alter or amend judgment for an award of enhanced damages and prejudgment interest. This motion was denied on January 12, 2007.

SAAT and Exergen appeal. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

DISCUSSION

I. Standard of Review

We review the denial of a motion for JMOL under the law of the regional circuit. See 800 Adept, Inc. v. Murex Sec., Ltd., 539 F.3d 1354, 1366 (Fed.Cir.2008). In the First Circuit, "[t]he district court's decision to grant or deny a motion for judgment as a matter of law is reviewed de novo." Soto-Lebron v. Fed. Express Corp., 538 F.3d 45, 56 (1st Cir.2008). JMOL is appropriate if "the presentation of the party's case reveals no `legally sufficient evidentiary basis' for a reasonable jury to find for that party." Mag Jewelry Co. v. Cherokee, Inc., 496 F.3d 108, 117 (1st Cir.2007) (quoting Fed.R.Civ.P. 50(a)(1)). Anticipation and infringement are both questions of fact, which, when found by a jury, are generally reviewed for substantial evidence. See Cordis Corp. v. Boston Scientific Corp., 561 F.3d 1319, 1330, 1335 (Fed.Cir.2009).

The denial of a motion to amend a pleading under Rule 15(a) is a procedural matter governed by the law of the regional circuit. See Cent. Admixture Pharmacy Servs., Inc. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347, 1357 (Fed.Cir. 2007). The First Circuit reviews the denial of a Rule 15(a) motion for an abuse of discretion. See Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F.3d 315, 326 (1st Cir.2008). Whether inequitable conduct has been pleaded with particularity under Rule 9(b) is a question governed by Federal Circuit law. See Cent. Admixture, 482 F.3d at 1356.

II. Anticipation

SAAT challenges the jury's finding that claims 1-5 of the '205 patent are not anticipated by U.S. Patent No. 4,602,642 ("O'Hara"). "To anticipate a claim, a single prior art reference must expressly or inherently disclose each claim limitation." Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1334 (Fed.Cir.2008).

Claim 1 is the sole independent claim of the '205 patent. It recites:

1. A method of detecting temperature of biological tissue comprising:

providing a radiation detector for sensing infrared radiation from an external target;

sensing radiation from multiple areas of the biological tissue with the radiation detector; and

electronically detecting the peak radiation from the multiple areas to obtain a peak temperature signal.

'205 patent col.20 ll.46-54.

O'Hara issued more than two years before the earliest priority date of the '205 patent. O'Hara discloses "a method and apparatus for measuring the internal temperature of a patient's body by sensing infrared emissions in the external ear canal." O'Hara col.3 ll.8-10. This apparatus includes a handheld "probe unit" containing "an infrared sensitive thermopile detector," id. col.3 ll.37-40, and a base or "chopper unit" that mates with and heats the probe unit to 98°F for calibration immediately prior to use, id. col.3 ll.32-36. When a user removes the probe unit from the chopper unit, the system begins taking radiation measurements at a rate of seven times per second and stores the maximum reading. Id. col.12 ll.37-47. From the time that the probe unit is removed from the chopper unit, the user has ten seconds to insert the probe into the external ear canal and press the SCAN key. Id. col.12 ll.61-65. When the SCAN key is pressed, "[t]he maximum reading from the beginning of the removal of the probe unit from the chopper unit is displayed as the tympanic temperature." Id. col.13 ll.7-9.

Exergen's expert, Dr. Pompei, admitted at trial that O'Hara discloses all limitations of claim 1 except the third step, namely, "electronically detecting the peak radiation from the multiple areas to obtain a peak temperature signal." J.A. 6502-03 (39:14-40:12). On appeal, Exergen also focuses only on this third step and presents two arguments for distinguishing O'Hara. First, Exergen argues that O'Hara heats the probe unit to 98°F and detects this radiation in addition to the radiation detected from the patient. Second, Exergen argues that...