Rhone Poulenc Agro, S.A. v. Dekalb Genetics Corp.

• Decision Date: 26 March 2002
• Docket Number: No. 00-1266.,No. 00-1352.,00-1266.,00-1352.
• Citation: 284 F.3d 1323
• Parties: RHONE-POULENC AGRO, S.A. (Now known as Aventis CropScience SA), Plaintiff-Appellant, v. DeKALB GENETICS CORPORATION, Defendant, v. Monsanto Company (now known as Pharmacia Corporation), Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

284 F.3d 1323

RHONE-POULENC AGRO, S.A. (Now known as Aventis CropScience SA), Plaintiff-Appellant, v. DeKALB GENETICS CORPORATION, Defendant, v. Monsanto Company (now known as Pharmacia Corporation), Defendant-Appellee.

No. 00-1266.

No. 00-1352.

United States Court of Appeals, Federal Circuit.

Decided March 26, 2002.

Corrected March 27, 2002.

Rehearing En Banc Denied May 8, 2002.^*

George Pazuniak, Connolly Bove Lodge & Hutz LLP, of Wilmington, DE, filed a petition for rehearing en banc on behalf of the plaintiff-appellant. With him on the rehearing brief was Francis DiGiovanni.

E. Edward Bruce, Covington & Burling, of Washington, DC, filed a response on behalf of the defendant-appellee. With him on the response were Elizabeth Stotland Weiswasser, and Paul W. Schmidt.

Before CLEVENGER, SCHALL, and DYK, Circuit Judges.

ON PETITION FOR REHEARING EN BANC.

DYK, Circuit Judge.

Rhône-Poulenc Agro, S.A. ("RPA") appeals from the decision of the United States District Court for the Middle District of North Carolina granting summary judgment of non-infringement on the ground that Monsanto Co. ("Monsanto") has a valid license to U.S. Patent No. 5,510,471, reissued on December 14, 1999 as RE 36,449 ("the '471 patent"). Rhône-Poulenc Agro, S.A. v. Monsanto Co., No. 1:97CV1138, (M.D.N.C. Feb. 8, 2000), 2000 U.S. Dist. LEXIS 21330. The issue here is whether a sublicensee (Monsanto) that acquired the sublicense from a licensee (DeKalb Genetics Corp. ("DeKalb")), that acquired the original license by fraud, may retain the sublicense by establishing that the sublicensee was a bona fide purchaser for value. On November 19, 2001, this court affirmed the district court's grant of summary judgment in favor of Monsanto Company ("Monsanto") on the basis of this court's earlier panel decision in Heidelberg Harris, Inc. v. Loebach, 145 F.3d 1454, 46 USQP.2d 1948 (Fed.Cir.1998).

RPA filed a combined petition for rehearing or rehearing en banc which the court en banc granted today. As a result of the en banc order, we are no longer bound by this court's earlier decision in Heidelberg Harris. We hold that the bona fide purchaser defense is governed by federal law and is not available to non-exclusive licensees in the circumstances of this case. Accordingly, we vacate the decision of the district court and remand for further proceedings consistent with this opinion.

BACKGROUND

The detailed history of this case is set forth in our opinion in the companion case of Rhône-Poulenc Agro, S.A. v. DeKalb Genetics Corp., 272 F.3d 1335, 60 USPQ2d 1769 (Fed.Cir.2001) ("Rhône-Poulenc I"). Briefly the facts are these. From 1991 through 1994, RPA and DeKalb collaborated on the development of biotechnology related to specific genetic materials. During this time, a scientist at RPA, Dr. DeRose, developed an optimized transit peptide ("OTP") with a particular maize gene, which proved useful in growing herbicide resistant corn plants. The OTP is covered by the claims of the '471 patent and is the subject of RPA's patent infringement claim against Monsanto.

In 1994, RPA, DeKalb, and non-party Calgene, Inc. ("Calgene") entered into an agreement (the "1994 Agreement") that provided:

RPA and CALGENE hereby grant to DEKALB the world-wide, paid-up right to use the RPA/CALGENE Technology and RPA/CALGENE Genetic Material in the field of use of corn. DEKALB shall have the right to grant sublicenses to the aforementioned right to use without further payment being made to RPA or CALGENE.

The RPA/CALGENE Technology and RPA/CALGENE Genetic Material included the invention claimed in the '471 patent. In 1996, DeKalb sublicensed its rights to the RPA/Calgene Technology and Genetic Material to Monsanto. At the same time Monsanto granted to DeKalb licenses to use certain intellectual property related to genetically-engineered corn. Monsanto also acquired a forty percent equity interest in DeKalb, and ten percent of DeKalb Class A (voting) stock.

On October 30, 1997, RPA filed suit against DeKalb and Monsanto, seeking, inter alia, to rescind the 1994 Agreement on the ground that DeKalb had procured the license (the "right to use") by fraud. RPA also alleged that DeKalb and Monsanto were infringing the '471 patent and had misappropriated RPA's trade secrets. Monsanto defended, inter alia, on the ground that it had a valid license to practice the invention of the patent and use the trade secrets, based on the rights owned under the 1994 Agreement that were transferred by DeKalb to Monsanto in 1996. At trial, a jury found, inter alia, that DeKalb had fraudulently induced RPA to enter into the 1994 Agreement. The district court ordered rescission of the 1994 Agreement. Nonetheless, Monsanto moved the district court for summary judgment that it had a valid license to the '471 patent and the right to use RPA's trade secrets because under the 1996 Agreement Monsanto was a bona fide purchaser for value of the sublicense to the patent and the trade secrets. The district court orally granted this motion and dismissed the infringement and misappropriation claims against Monsanto. RPA moved for reconsideration of the district court's dismissal, but the district court, relying on Heidelberg Harris, 145 F.3d 1454, 46 USPQ2d 1948, reaffirmed its grant of summary judgment in its February 8, 2000, opinion. Rhône-Poulenc, No. 1:97CV1138, slip op. at 56.

The district court found that, as a sublicensee of the '471 patent and the trade secrets, Monsanto was "entitled to be considered a bona fide purchaser, because it paid value for the right to use the technology without knowledge of any wrongdoing by DeKalb." Id. Because "Monsanto [was] a bona fide purchaser of the ... technology, [it] therefore [could not] be liable as a patent infringer or a trade secret misappropriater." Id. at 58-59. The district court explicitly did not reach the issues of whether Monsanto's bona fide purchaser defense would apply to any future licenses of RPA's technology or whether, in light of the 1994 RPA-DeKalb-Monsanto Agreement granting DeKalb the right to sublicense, the bona fide purchaser defense would benefit sublicensees of Monsanto.

RPA filed this timely appeal, which concerns only the validity of Monsanto's license to practice the '471 patent. On this appeal, RPA does not challenge the district court's dismissal of RPA's claim for trade secret misappropriation.

DISCUSSION

I

We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1295(a)(1). Summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 145 F.3d 1303, 1307, 46 USPQ2d 1752, 1755 (Fed.Cir.1998). We review a district court's grant of a motion for summary judgment without deference. Ethicon Endo-Surgery, Inc. v. United States Surgical Corp., 149 F.3d 1309, 1315, 47 USPQ2d 1272, 1275 (Fed.Cir.1998).

II

In Rhône-Poulenc I, we affirmed the judgment of the district court, rescinding the 1994 licensing agreement based on a jury verdict finding that DeKalb acquired its patent license by fraud. RPA asserts that it necessarily follows that the Monsanto sublicense to the '471 patent is void, and that Monsanto can be sued for patent infringement. We agree, since the court en banc has held that we are not bound by the decision in Heidelberg Harris, 145 F.3d 1454, 46 USPQ2d 1948.

III

Under some circumstances the bona fide purchaser defense in patent cases is governed by a federal statute, 35 U.S.C. § 261. The statute provides that "[a]n assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months from its date or prior to the date of such subsequent purchase or mortgage." 35 U.S.C. § 261.

But this case does not involve a situation covered by § 261. That statute is by its terms limited to situations in which the patent owner makes inconsistent assignments, grants, or conveyances to two entities, and the question is whether the later assignee should prevail. Section 261 provides that a later bona fide purchaser for value without notice (a later assignee) prevails if the earlier assignment was not timely recorded in the patent office. This case, however, involves a different situation — the circumstance in which the interest in the patent held by the grantor is voidable and the question is whether a grantee may retain its interest even if the grantor's interest is voided. Section 261 does not directly govern the resolution of this question.

Since section 261 does not apply directly, we must turn to other provisions of the Patent Act. Section 271 of the Act provides: "whoever without authority makes, uses, offers to sell, or sells any patented invention ... infringes the patent." 35 U.S.C. § 271(a). We are charged with the task of determining the meaning of the term "without authority." Under this provision, as under other provisions of the Patent Act, the courts have developed a federal rule, where appropriate, and have deferred to state law, where that is appropriate.¹ This issue of whether to apply state or federal law has particular importance in this case because North Carolina state law, the law of the forum state, does not recognize a bona fide purchaser defense unless there has been a title transfer.²

In general, the Supreme Court and this court have turned to state law to determine whether there is contractual "authority" to practice the invention of a patent. Thus, the interpretation of contracts for rights under patents is generally governed by state law. Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262, 99 S.Ct. 1096, 59 L.Ed.2d 296, 201 USPQ 1, 4 (1979); Lear, Inc. v. Adkins, 395 U.S. 653, 661-62, 89 S.Ct. 1902, 23 L.Ed.2d 610, 162 USPQ 1, 5 (1969); Sun Studs, Inc. v. Applied Theory...