Roche Diagnostics Corp. v. Meso Scale Diagnostics, LLC

• Decision Date: 08 April 2022
• Docket Number: 2021-1609, 2021-1633
• Parties: ROCHE DIAGNOSTICS CORPORATION, Plaintiff/Counterclaim Defendant-Appellant BioVeris Corporation, Counterclaim Defendant-Appellant v. MESO SCALE DIAGNOSTICS, LLC, Defendant/Counterclaimant-Cross-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

30 F.4th 1109

ROCHE DIAGNOSTICS CORPORATION, Plaintiff/Counterclaim Defendant-AppellantBioVeris Corporation, Counterclaim Defendant-Appellant

v.MESO SCALE DIAGNOSTICS, LLC, Defendant/Counterclaimant-Cross-Appellant

2021-1609, 2021-1633

United States Court of Appeals, Federal Circuit.

Decided: April 8, 2022

James McKeown, Foley & Lardner LLP, Milwaukee, WI, argued for plaintiff/counterclaim defendant-appellant and counterclaim defendant-appellant. Also represented by Jeffrey Costakos, Kimberly Kristin Dodd, Eric Maassen.

John Hughes, Bartlit Beck LLP, Denver, CO, argued for defendant/counterclaimant-cross-appellant. Also represented by Nosson Knobloch, Daniel Taylor ; Steven Derringer, Anastasiya Maione, Chicago, IL.

Before Newman, Prost, and Taranto, Circuit Judges.

Dissenting opinion filed by Circuit Judge Newman.

Prost, Circuit Judge.

Roche Diagnostics Corporation and BioVeris Corporation (collectively, "Roche") appeal a final judgment from the District of Delaware sustaining the jury's verdict that Roche violated exclusive license rights belonging to Meso Scale Diagnostics, LLC ("Meso") by directly infringing one patent claim and inducing infringement of three other patent claims. We affirm on direct infringement, reverse on induced infringement, vacate the damages award, and remand for a new trial on damages.¹ On Meso's cross-appeal, we vacate the district court's judgment of noninfringement with respect to three additional patents and remand.

BACKGROUND

The patents-in-suit concern immunoassays

that exploit a phenomenon called electrochemiluminescence ("ECL"). Meso doesn't own these patents. Indeed, appellant BioVeris (a Roche entity) does. But Meso maintains that a prior owner, IGEN International, Inc. ("IGEN"), granted it exclusive rights to the patent claims it now asserts against Roche (which sells instruments and reagent packs for performing ECL immunoassays ). We briefly recount the parties' relevant licensing and litigation histories below.

Meso was formed in 1995 pursuant to a joint venture agreement between IGEN and Meso Scale Technologies, a company owned by Jacob Wohlstadter (son of IGEN CEO Samuel Wohlstadter). Roche Diagnostics Corp. v. Meso Scale Diagnostics, LLC , 503 F. Supp. 3d 156, 163 (D. Del. 2020) ("Post-Trial Op. "). The agreement specified a "Research Program" for Meso to perform and included a license agreement—the scope of which is contested here. Id. at 163–64.

Roche, too, has a licensing history with IGEN. In 1998, not long after Meso embarked on its joint venture with IGEN, Roche acquired Boehringer Mannheim GmbH ("Boehringer"), which IGEN had previously licensed in 1992 to develop, use, manufacture, and sell ECL assays and instruments in a particular field.² In doing so, Roche inherited Boehringer's license rights, including that field restriction. Id. at 163.

In 2003, IGEN and Roche terminated the 1992 agreement and executed a new agreement granting Roche a nonexclusive license to IGEN's ECL technology in the field of "human patient diagnostics." Id. at 164 ; Roche Diagnostics Corp. v. Meso Scale Diagnostics, LLC , No. CV 17-189-LPS, 2019 WL 1332407, at *2 (D. Del. Mar. 21, 2019) ("Summary Judgment Op. "). Although this license required Roche to note this new field restriction on its product packaging, J.A. 5448–49, the license permitted sales that resulted in incidental out-of-field use and allowed such sales to continue (absent express prohibition from IGEN) so long as IGEN received 65% of the resulting revenues. J.A. 5438. As part of this transaction, Roche paid IGEN and its shareholders about $1.4 billion, IGEN transferred its ECL patents (including those asserted here) to the newly formed BioVeris, and IGEN shareholders received shares of BioVeris stock. Post-Trial Op. , 503 F. Supp. 3d at 164 ; J.A. 4230.

Later, in 2007, a Roche affiliate acquired BioVeris (including over 100 patents) for approximately $600 million. Post-Trial Op. , 503 F. Supp. 3d at 164. Roche announced this acquisition in a press release stating it would now "own the complete patent estate of the electrochemiluminescence (ECL) technology," giving it "the opportunity to fully exploit the entire immunochemistry market" and ensuring its ability to "provide unrestricted access to all customers." J.A. 6036. Roche also prepared a customer letter indicating that the field-restriction labels were "now obsolete" and would be "removed as soon as possible," but that in the interim customers should "please ignore the restrictions." J.A. 5898; see also J.A. 5901–06. Then Roche began selling the products without field restrictions, as it said it would. J.A. 4540.

Meso sued Roche in the Delaware Court of Chancery in 2010, alleging that Roche breached the 2003 license with IGEN by violating the field restriction. Post-Trial Op. , 503 F. Supp. 3d at 164. The chancery court determined that Meso was not a party to the 2003 license agreement, such that only BioVeris (as IGEN's successor-in-interest) could enforce the field restriction. Id. ; see Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH , No. CIV.A. 5589-VCP, 2014 WL 2919333 (Del. Ch. June 25, 2014), aff'd , 116 A.3d 1244 (Del. 2015).

And in 2017, Roche brought this suit seeking a declaratory judgment that it doesn't infringe Meso's rights arising from the 1995 joint venture license agreement. Summary Judgment Op. , 2019 WL 1332407, at *1. Meso counterclaimed for patent infringement. Id. At summary judgment, Roche argued that Meso's 1995 license didn't convey the rights Meso asserts. The district court denied Roche's summary judgment motion and the parties tried the case to a jury. Post-Trial Op. , 503 F. Supp. 3d at 166. The jury found that Meso holds an exclusive license to the asserted patent claims, that Roche directly infringed claim 33 of U.S. Patent No. 6,808,939 ("the '939 patent"), that Roche induced infringement of claim 1 of U.S. Patent No. 5,935,779 ("the '779 patent") and claims 38 and 44 of U.S. Patent No. 6,165,729 ("the '729 patent"), and that Roche's infringement was willful. J.A. 3718–24. It awarded Meso $137,250,000 in damages. Post-Trial Op. , 503 F. Supp. 3d at 163.

The district court denied Roche's post-trial motions challenging the infringement verdict and damages award. Id. at 169–70, 174. But it granted Roche's motion for judgment as a matter of law ("JMOL") on willfulness and denied Meso's motions to enhance damages. Id. at 172–74. Additionally, at Roche's request, the court rendered a noninfringement judgment with respect to three additional patents— U.S. Patent Nos. 6,451,225 ("the '225 patent"), 6,881,536 ("the '536 patent"), and 6,881,589 ("the '589 patent") —on the ground that Meso waived compulsory infringement counterclaims as to those patents. Id. at 170–71 ; Roche Diagnostics Corp. v. Meso Scale Diagnostics, LLC , No. CV 17-189-LPS-CJB, 2020 WL 8409662, at *2 (D. Del. Dec. 23, 2020). Roche appeals and Meso cross-appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

DISCUSSION

Roche challenges (I) the scope of Meso's license rights, (II) the induced-infringement verdict, and (III) the damages award. On cross-appeal, Meso challenges the district court's application of the compulsory-counterclaim rule. We review the denial of Roche's JMOL and new-trial motions under the law of the regional circuit. Leader Techs., Inc. v. Facebook, Inc. , 678 F.3d 1300, 1305 (Fed. Cir. 2012). The Third Circuit reviews the denial of JMOL de novo, "viewing the record in the light most favorable to the verdict winner and drawing all reasonable inferences in its favor." Id. (citing Eddy v. V.I. Water & Power Auth. , 369 F.3d 227, 230 (3d Cir. 2004) ). It reviews the denial of a new trial for abuse of discretion. Id. (citing Foster v. Nat'l Fuel Gas Co. , 316 F.3d 424, 429–30 (3d Cir. 2003) ).

I. LICENSE SCOPE

First, Roche disputes the scope of Meso's rights in "IGEN Technology"³ under the 1995 license agreement. This is the only ground on which Roche challenges the direct-infringement judgment, and it's one of multiple grounds on which Roche challenges the induced-infringement judgment. The pertinent license provision, Section 2.1., has two prongs—A and B:

2.1. IGEN Technology. IGEN hereby grants to [Meso] an exclusive, worldwide, royalty-free license to practice the IGEN Technology to make, use and sell products or processes (A) developed in the course of the Research Program, or (B) utilizing or related to the Research Technologies; provided that IGEN shall not be required to grant [Meso] a license to any technology that is subject to exclusive licenses to third parties granted prior to the date hereof. In the event any such exclusive license terminates, or IGEN is otherwise no longer restricted by such license from licensing such technology to [Meso], such technology shall be, and hereby is, licensed to [Meso] pursuant thereto.

J.A. 5209. Meso argues that prong A grants it rights in all the asserted patent claims—namely, '939 patent claim 33, '779 patent claim 1, and '729 patent claims 38 and 44. And it argues that prong B grants it rights in '729 patent claims 38 and 44. We assess the two prongs in turn below.

A

First we analyze prong A, Meso's right "to practice the IGEN technology to make, use and sell products or processes (A) developed in the course of the Research Program." J.A. 5209.

At summary judgment, Roche argued that this provision granted Meso "an exclusive license only to use ECL technology to make, use, or sell those specific products and processes that were advancements and improvements created in the Research Program." Summary Judgment Op. , 2019 WL 1332407, at *4 (quoting Roche's summary judgment brief). Meso, on the other hand, said this provision grants it "an exclusive right to practice [the] patent claims , a right which was triggered by the development during the Research Program of products and processes that are covered by those claims." Id. "Roche's interpretation would limit Meso's exclusive rights to the specific products...