United States Court of Appeals for the Federal Circuit
04-1475, -1512
UNION CARBIDE CHEMICALS & PLASTICS TECHNOLOGY CORPORATION
and UNION CARBIDE CORPORATION,
Plaintiffs-Cross Appellants,
v.
SHELL OIL COMPANY, SHELL CHEMICAL COMPANY,
and CRI CATALYST COMPANY,
Defendants-Appellants.
Harry J. Roper, Jenner & Block LLP, of Chicago, Illinois, argued for plaintiffs-
cross appellants. With him on the brief were David R. Bennett, Aaron A. Barlow, and
Raymond N. Nimrod; Paul M. Smith and Marc A. Goldman, of Washington, DC. Of
counsel on the brief was Bruce M. Kanuch, The Dow Chemical Company, of Midland,
Michigan.
William C. Slusser, Slusser Wilson & Partridge LLP, of Houston, Texas, argued
for defendants-appellants. With him on the brief were Jayme Partridge and Jayne
Piana. Of counsel on the brief were John D. Norris and Richard L. Stanley, Howrey
LLP, of Houston, Texas. Of counsel were Laura F. Jones, Keith Jaasma and Michael E.
Wilson, Slusser Wilson & Patridge LLP, of Houston, Texas.
Appealed from: United States District Court for the District of Delaware
Chief Judge Sue L. Robinson
United States Court of Appeals for the Federal Circuit
04-1475,-1512
UNION CARBIDE CHEMICALS & PLASTICS TECHNOLOGY CORPORATION
and UNION CARBIDE CORPORATION,
Plaintiffs-Cross Appellants,
v.
SHELL OIL COMPANY, SHELL CHEMICAL COMPANY,
and CRI CATALYST COMPANY,
Defendants-Appellants.
___________________________
DECIDED: October 3, 2005
___________________________
Before MAYER, RADER, and PROST, Circuit Judges.
RADER, Circuit Judge.
The United States District Court for the District of Delaware granted final
judgment to Union Carbide Chemicals & Plastics Technology Corporation and Union
Carbide Corporation (collectively Union Carbide) after a jury found that Shell Oil
Company, Shell Chemical Company, and CRI Catalyst Company (collectively Shell)
infringed claim 4 of Union Carbide’s U.S. Patent No. 4,916,243 (the ’243 patent). Union
Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co., No. Civ. 99-CV-274-SLR, Civ.
99-846-SLR, 2004 WL 1305849 (D. Del. June 9, 2004) (Union Carbide III). Because
substantial evidence supports the jury verdict, this court affirms that finding. However,
because the district court improperly excluded Shell’s exportation of catalysts in its
damages calculation, this court vacates the damage award and remands.
I.
In 1999, Shell filed a declaratory judgment action in the United States District
Court for the Southern District of Texas alleging that Union Carbide’s U.S. Patent No.
5,057,481 (the ’481 patent), U.S. Patent No. 4,908,343 (the ’343 patent), and the ’243
patent were invalid, unenforceable, and not infringed. One month later, Union Carbide
sued Shell in the United States District Court for the District of Delaware alleging that six
of Shell’s catalysts infringed those same patents. Union Carbide Chems. & Plastics
Tech. Corp. v. Shell Oil Co., 163 F. Supp. 2d 426, 430 (D. Del. 2001) (Union Carbide I).
The two cases were consolidated for trial in Delaware. After a twelve day trial, a jury
returned a verdict for Shell on issues of infringement and invalidity. Id. Upon appeal,
this court affirmed-in-part, reversed-in-part, and remanded. Union Carbide Chems. &
Plastics Tech. Corp. v. Shell Oil Co., 308 F.3d 1167 (Fed. Cir. 2002) (Union Carbide II).
In 2003, the district court held a second jury trial on the remanded issues
involving only the ’243 patent. Union Carbide III, 2004 WL 1305849, at *1. The jury
returned a verdict finding that Shell’s S-880 and S-882 catalysts directly infringed claim
4 in the production of ethylene oxide (EO). The jury also found that Shell contributorily
infringed claim 4 by selling its S-863, S-880 and S-882 catalysts to third parties. Id.
Accordingly, the jury awarded $112,198,893 in damages to Union Carbide. The trial
court first adjusted that award to $111,212,665 after correcting for a clerical error and
later to $153,615,774 for prejudgment interest. Id. at *1, *15 n.19, *20, *22. This
damages award, however, did not account for Shell’s exportation of catalysts because
the district court ruled in limine that 35 U.S.C. § 271(f) damages are not available for
process claims, such as claim 4 of the ’243 patent. After considering post-trial motions
04-1475, -1512 2
from both parties, the district court entered a final judgment for Union Carbide and a
permanent injunction against Shell, which it stayed pending Shell’s appeal to this court.
Id. at *22.
Shell appeals the district court’s denial of its Judgment as a Matter of Law
(JMOL) motions and the damages amount. Union Carbide cross-appeals the district
court’s holding that 35 U.S.C. § 271(f) does not apply to process claims and the jury
verdict finding that Shell’s infringement was not willful. This court has jurisdiction under
28 U.S.C. § 1295(a)(1) (2000).
II.
This court described the technology at issue in this case at length in Union
Carbide II. See Union Carbide II, 308 F.3d at 1171-73. The district court also explained
the technology very well in Union Carbide III. Union Carbide III, 2004 WL 1305849, at
*2. In brief, the ’243 patent claims improved silver catalysts for the commercial
production of EO. Union Carbide III, 2004 WL 1305849, at *2. EO gas is used primarily
in the industrial production of ethylene glycol, which is used, in turn, to produce
polyester fiber, resin and film. Id. Most of the EO produced each year is converted into
monoethylene glycol (MEG). Union Carbide and its parent corporation, Dow Chemical,
produce twenty-five percent of the MEG sold domestically. Id. at *2 n.3. Shell is a
direct competitor of Union Carbide and Dow Chemical in EO production and MEG sales.
Union Carbide’s proprietary process for EO production involves a highly
exothermic reaction between ethylene and oxygen occurring between 250 – 300 oC.
’243 patent, col. 12, l. 50-col. 13, l. 30. Before 1971, the ordinary artisan in this field
understood that a silver catalyst decreased the reaction temperature and increased
04-1475, -1512 3
reaction efficiency without consuming or altering the silver itself. Id. at *2. However, no
producer managed to increase the reaction efficiency beyond 65 percent. Id. In 1971,
scientists discovered that certain alkali metals in small amounts further promoted the
efficiency of silver-catalyzed reactions. Id. Union Carbide thus undertook considerable
research on catalysts with silver and other alkali metals. This research led to the
invention now claimed in the ’243 patent.
The ’243 patent claims a process for the production of EO with a greater
decrease in the reaction temperature than processes using pure silver catalysts. Thus,
this new process reduces the formation of oxygen and water byproducts and increases
the efficiency of the reaction. ’243 patent, col. 8, ll. 39-55. Claim 4, the sole claim at
issue in the present appeal, concerns a process involving a catalyst including silver,
cesium and lithium. Claim 4 of the ’243 patent reads:
4. The process of claim 1 wherein said alkali metal is lithium.
1. In the continuous process for the production of ethylene oxide by the
vapor phase oxidation of ethylene with molecular oxygen provided as an
oxygen-containing gas at a temperature of from about 200o C. to 300o C. in
the presence of at least about one mole percent of carbon dioxide and an
organic chloride in the gaseous feed stream and in the presence of a
supported, silver-containing catalyst in a fixed bed, tubular reactor used in
commercial operations to form ethylene oxide, wherein said supported,
silver-containing catalyst contains 2 to 20 weight percent silver deposited
on a support which is in a form and size for use in the reactor, wherein (i)
the specific reaction conditions of the ethylene oxide process; (ii) the
specific catalyst support characteristics and (iii) the specific silver
deposition method comprise an ethylene oxide production system, the
improvement in which the catalyst comprises silver deposited on an alpha-
alumina macroporous support in a first amount having a surface area less
than 10 m2/g and contains a combination of (a) cesium in a second
amount and (b) at least one other alkali metal selected from the group
consisting of lithium, sodium, potassium and rubidium in a third amount,
which combination comprises (a) and (b) in amounts in relation to the
amount of silver in the catalyst sufficient to provide an efficiency of
ethylene oxide manufacture that is greater than the efficiencies obtainable
in the same ethylene oxide production system, including the same
04-1475, -1512 4
conversions, than (i) a second catalyst containing silver in the first amount
and cesium in the second amount, and (ii) a third catalyst containing silver
in the first amount and the alkali metal in the third amount, wherein the
combination of silver, cesium and alkali metal in said catalyst is
characterizable by an efficiency equation:
efficiency % = b0 + b1(BG) + b2(BCS) +
4
∑1
b3j BAj + b4(BG)2 + b5(BCs)2 +
4
∑1
b6j BAj2 + b7 (BG • BCs) [sic] +
4 4
(BG) ∑
1
b8j BAj + (BCs) ∑
1
b9j BAj,
where
BA1 =BRb,
BA2 =BK,
BA3 =BNa,
BA4 =BLi[sic],and where the coefficient b0 through b9j and BG, BRb,
BK, BNa, BLi and BCs are determined from a composite design set of
experiments using the same ethylene oxide production system for the
independent variables silver, cesium and alkali metal, and wherein BG
is the difference of the average value of the silver content from the
silver content used in the design set, BCs is the difference of the
average value of the cesium content from the cesium content used in
the design set, BRb is the difference of the average value of the
rubidium content from the rubidium content used in the design set, BK
is the difference of the average value of the potassium content from
the potassium content used in the design set, BNa is the difference of
the average value of the sodium content from the sodium content used
in the design set and BLi is the difference of the average value of the
lithium content from the lithium content used in the design set.
’243 patent, col. 29, l. 53-col. 30, l. 61. (emphasis added). Claim 4, as construed by the
district court, contains four limitations:
(1) an EO process operated at specific reaction conditions; (2) the catalyst
used in the EO process comprises silver in a first amount, cesium in a
second amount, and lithium in a third amount; (3) the efficiency obtainable
from the EO process using the catalyst is greater than the efficiency of a
process using (a) a second catalyst containing silver in the first amount
and cesium in the second amount (but no lithium) and (b) a third catalyst
04-1475, -1512 5
containing silver in the first amount and lithium in the third amount (but no
cesium), when operated in the same EO production system (the
“comparison test”); and (4) the combination of silver, cesium and lithium is
characterizable by the efficiency equation set forth in claim 1 (the
“characterizable test”).
Union Carbide III, 2004 WL 1305849, at *3.
At trial, Union Carbide provided evidence showing that 58 samples of “Shell”
catalysts met the comparison and characterizable limitations of claim 4. Specifically,
Union Carbide’s expert witness, Professor Haller, tested samples sold by Shell
commercially and catalysts that he produced by following recipes detailed in Shell’s
internal documents. Shell now challenges the sufficiency of this evidence in proving
infringement of claim 4. Shell contends that, inter alia: (1) Union Carbide did not
conduct its tests of Shell’s catalysts at the “same conversions” of ethylene and oxygen
to EO gas as specified by the ’243 patent; (2) Union Carbide did not vary silver in the
desired set of experiments; and (3) Union Carbide did not conduct the “comparison test”
in the “same ethylene production system,” nor did they conduct the “characterizable
test” in the “same ethylene production system,” but instead conducted each test in an
EO production system different than Shell’s. Shell also contends that, if Union
Carbide’s tests are sufficient to prove infringement, the claims are invalid.
III.
“The grant or denial of a motion for judgment as a matter of law is a procedural
issue not unique to patent law, reviewed under the law of the regional circuit in which
the appeal from the district court would usually lie.” Summit Tech., Inc. v. Nidek Co.,
363 F.3d 1219, 1223 (Fed. Cir. 2004). Under the law of the United States Court of
Appeals for the Third Circuit, this court exercises plenary review over an order denying
04-1475, -1512 6
JMOL. Microvote v. Montgomery County, 320 F.3d 440, 446 (3d Cir. 2003). The Third
Circuit grants motions for JMOL only if, “viewing the evidence in the light most favorable
to the nonmovant and giving it the advantage of every fair and reasonable inference,
there is insufficient evidence from which a jury reasonably could find liability.” Id. (citing
Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993)).
While claim construction is a question of law, see Cybor Corp. v. FAS Techs.
Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc), infringement, whether literal or
under the doctrine of equivalents, is a question of fact which this court reviews for
substantial evidence, see Bai v. L & L Wings, Inc., 160 F.3d 1350, 1353 (Fed. Cir.
1998); Optical Disc. Corp. v. Del Mar Avionics, 208 F.3d 1324, 1333-34 (Fed. Cir.
2000).
A finding of willful infringement may qualify a case as exceptional under
35 U.S.C. § 285 (1952), thereby allowing a party to obtain enhanced damages. “This
court reviews a district court’s exceptional case finding for clear error.” Imonex Servs.,
Inc. v. W.H. Munzprufer Dietmar Trenner Gmbh, LLC, 408 F.3d 1374, 1378 (Fed. Cir.
2005) (citing Pharmacia & Upjohn Co. v. Mylan Pharms., Inc., 182 F.3d 1356, 1359
(Fed. Cir. 1999)). The trial judge has discretion to increase damages for exceptional
cases; hence, a district court’s refusal to award increased damages will not be
overturned absent an abuse of that discretion. Modine Mfg. v. Allen Group, Inc., 917
F.2d 538, 543 (Fed. Cir. 1990).
In reviewing a district court’s damages award, “the amount of a prevailing party’s
damages is a finding of fact on which the plaintiff bears the burden of proof by a
preponderance of the evidence. . . . However, certain subsidiary decisions underlying
04-1475, -1512 7
a damage theory are discretionary with the court, such as, the choice of an accounting
method of determining profit margin . . . or the methodology for arriving at a reasonable
royalty.” SmithKline Diagnostics, Inc. v. Helena Lab. Corp., 926 F.2d 1161, 1164 (Fed.
Cir. 1991). “A jury’s decision with respect to an award of damages ‘must be upheld
unless the amount is ‘grossly excessive or monstrous’, clearly not supported by the
evidence, or based only on speculation or guesswork.’” State Contracting & Eng’g Corp.
v. Condotte Am., Inc., 346 F.3d 1057, 1072 (Fed. Cir. 2003) (quoting Brooktree Corp. v.
Advanced Micro Devices, Inc., 977 F.2d 1555, 1580 (Fed. Cir. 1992)). Finally, “[t]his
court reviews questions of statutory interpretation without deference.” U.S. Steel Group
v. United States, 225 F.3d 1284, 1286 (Fed. Cir. 2000).
IV.
Shell challenges the sufficiency of the evidence supporting the jury verdict that
Shell directly and contributorily infringes claim 4 of the ’243 patent. Union Carbide III,
2004 WL 1305849, at *1. Shell initially challenged the sufficiency of the evidence below
in a motion for JMOL or, in the alternative, for a new trial, after the jury returned its
verdict against Shell. Id. at *5. The district court denied Shell’s motion.
As a threshold matter, this court must decide whether Shell waived this issue by
failing to timely object to the district court’s jury instruction under Fed. R. Civ. P. 51.
Union Carbide contends that Shell only objected after close of evidence and completion
of the jury instruction charge conference. Because Union Carbide construes Shell’s
non-infringement arguments as claim construction issues, Union Carbide considers
Shell to have waived these arguments. Union Carbide cites instances that this court
has found waiver of claim construction issues. See Eli Lilly & Co. v. Aradigm Corp., 376
04-1475, -1512 8
F.3d 1352, 1360 (Fed. Cir. 2004); Hewlett-Packard Co. v. Mustek Sys., Inc., 340 F.3d
1341, 1321 (Fed. Cir. 2003).
Although often difficult to distinguish claim construction and infringement, this
court’s case law requires the distinction. See Beckson Marine, Inc. v. NFM, Inc.,
292 F.3d 718, 724 (Fed. Cir. 2002) (commenting that “[a]fter claim construction, the
infringement inquiry shifts to a comparison of the claim with the allegedly infringing
device.”) (citing Kemco Sales, Inc. v. Control Papers Co., 208 F.3d 1352, 1359, 54
USPQ2d 1308, 1312 (Fed. Cir. 2000) (emphasis added)); KCJ Corp. v. Kinetic
Concepts, Inc., 223 F.3d 1351, 1358 (Fed. Cir. 2000) (“Literal infringement of a claim
occurs when every limitation recited in the claim appears in the accused device, i.e.,
when ‘the properly construed claim reads on the accused device exactly.’”) (quoting
Amhil Enters., Ltd. v. Wawa, Inc., 81 F.3d 1554, 1562 (Fed. Cir. 1996) (emphasis
added)); Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) (holding that
construing patent claims is a question of law for the judge, separate from determining
whether infringement occurred which is a question of fact to be submitted to the jury).
Contrary to Union Carbide’s assertions, this court construes Shell’s arguments as most
relevant to non-infringement, rather than claim construction. Shell, in essence,
challenges the sufficiency of the evidence supporting a finding of infringement.
Nonetheless, in at least one of Shell’s challenges to the infringement verdict, its
argument questions the meaning of words in the district court’s jury instructions.
Therefore, even with respect to this infringement issue (as opposed to claim
construction issues), this court assesses the timeliness of Shell’s objections under Rule
51.
04-1475, -1512 9
Rule 51 is not unique to patent cases and, thus, regional circuit law applies.
Ecolab Inc. v. Paraclipse, Inc., 285 F.3d 1362, 1369 (Fed. Cir. 2002). Under Third
Circuit law, a party need only lodge a sufficiently specific objection before jury
deliberations to preserve issues for appeal. See Alexander v. Riga, 208 F.3d 419, 426
(3d Cir. 2000); Waldorf v. Shuta, 896 F.2d 723, 739-40 (3d Cir. 1990).
The record shows that Shell requested clarifying instructions on the three claim
terms at issue on Monday morning, November 3, 2003, before the judge’s delivery of
instructions to the jury. During a conference between counsel from both parties and the
judge out of the jury’s presence, Mr. Norris, counsel for Shell, informed the district court
that he “would like to just read these [issues] into the record for purposes of preserving
issues for appeal.” After the district court allowed Mr. Norris to make his record, he
objected to the jury instructions by requesting insertion of the following language:
[1] [B]ecause the ’243 patent defines conversion as ethylene conversion,
the efficiency must be determined at the same ethylene conversion
achieved in the accused commercial ethylene oxide production system.
....
[2] Once the commercial ethylene oxide production system is defined,
thereby fixing the specific reaction conditions, the specific catalyst support
characteristics and the specific silver deposition method to precise values,
that same ethylene oxide production system must be duplicated in its
entirety by the laboratory or experimental conditions and parameters.
....
[3] In Claim 4, the limitation, quote, independent variable silver cesium
and alkali metal, close quote, requires testing and a design set of
experiments where the concentrations of silver, cesium and lithium are
varied across a range of values.
(Alterations added.) Thereafter, the district court acknowledged Shell’s arguments.
Jury deliberations occurred after the judge gave instructions to the jury and a
verdict was reached on the same day. Because Shell sufficiently raised specific
04-1475, -1512 10
objections before jury deliberations, Shell did not waive its objections to the sufficiency
of the evidence on appeal.
V.
Shell asserts that Union Carbide did not show that any of Shell’s catalysts
provide an efficiency of EO manufacture that is greater than the efficiencies obtainable
using (a) a second catalyst containing silver and cesium (but no lithium) and (b) a third
catalyst containing silver and lithium (but no cesium), in the same ethylene oxide
production system. Specifically, Shell notes that the “comparison test” in the claims
specifically calls for the efficiency comparison using the same ethylene oxide production
system, including the same conversions. Shell contends “conversion” equates to
“ethylene conversion” and thus incorporates a specific formula for ethylene conversion
from U.S. Patent No. 3,420,784 (the ’784 patent):
’784 patent, col. 3, ll. 25-27. Because Union Carbide’s expert witness did not use this
formula in his tests, Shell asserts that this testing does not prove infringement of the
comparison limitation of the claims. However, Shell’s argument mischaracterizes the
’243 patent’s disclosure of acceptable techniques for comparing catalyst efficiencies.
The ’243 specification teaches that one “convenient measure of activity, i.e., the
degree of conversion of reactant to product per unit time, is the temperature required to
obtain either a fixed ethylene oxide production or to achieve a chosen level of mole
percent ethylene (or oxygen) conversion.” ’243 patent, col. 11, ll. 16-22 (emphasis
added). Thus, Union Carbide’s expert, Professor Haller, applied a test expressly
approved by the patent specification. Professor Haller determined catalyst efficiency by
04-1475, -1512 11
monitoring the temperature required to obtain a fixed 1% EO output (a higher
temperature for a given output indicates a lower efficiency). This measure for catalyst
efficiency yielded results placing Shell’s catalysts squarely within this claim limitation.
The trial format gave Shell the opportunity to challenge the accuracy of Professor
Haller’s results by conducting other tests or by cross-examining Professor Haller. In
any event, as an evidentiary matter, Professor Haller’s tests followed the directions of
the patent specification. The record thus contains sufficient evidence to support the jury
verdict of infringement of the comparison limitation.
VI.
Shell asserts that the record does not show that Shell’s catalysts are
characterizable by the efficiency equation set forth in claim 1, i.e., the “characterizable
test.” Shell argues that the “characterizable test” requires variation of each independent
variable – silver, cesium and lithium – in the same ethylene oxide production system.
Because Union Carbide’s expert witness did not vary silver in his experiments, Shell
asserts that his testing cannot show infringement. These arguments, however, overlook
both the permissive meaning of the term “variable” and this court’s construction of the
efficiency equation in Union Carbide II.
The claim language does not require variation of all three of the components.
The claim uses the language “independent variables, silver, cesium, and alkali metal.”
The word “independent” means that each variable is free to operate without regard to
the others. In other words, the concentration of the silver component can be set at and
maintained at any value, including zero. Thus, the claims permit the variation of the
silver component, but do not mandate silver variation. Indeed, the specification makes
04-1475, -1512 12
this explicit: “The value of some of the coefficients of the equation may be zero” when
deriving the “synergistic binary alkali metal combinations of the invention.” ’243 patent,
col. 8, l. 56-col. 9, ll. 23-4.
Furthermore, this court in Union Carbide II clarified that “characterizable by an
efficiency equation” in claim 1 “covers those catalysts that are described by the
efficiency equation” or “capable of being described by an efficiency equation.”
Union Carbide II, 308 F.3d at 1178-79. In other words, the “characterizable test” is a
“descriptive tool that defines the scope of the invention.” Id. at 1178. The invention’s
improvement over the prior art is the addition of new synergistic concentrations of alkali
metals to known concentrations of silver. This claim captures this aspect of the
invention in the “characterizable test.” This important test, however, does not require
variation of what was already known (i.e., silver) in prior art catalysts or an accused
catalyst. Union Carbide II’s construction requires tests that vary at least the
concentrations of the alkali metals of cesium and lithium. Professor Haller’s
experiments made these variations. Thus, the record contains evidence sufficient to
meet the standards of the “characterizable test.”
In a related argument, Shell asserts that, if Professor Haller’s test conditions and
procedures do satisfy the “characterizable by an efficiency equation” limitation, then the
’243 patent is anticipated under 35 U.S.C. § 102(b) by U.S. Patent No. 4,212,772 (the
’772 patent). Notably, however, the ’772 patent does not disclose use of lithium-based
catalysts in the claimed continuous process for the production of EO with carbon-
dioxide in the feed. In addition, the admitted expert reports suggest that the ’772
patent’s catalyst does not meet the characterizable test as construed by the court.
04-1475, -1512 13
Thus, the ’772 patent does not clearly anticipate claim 4 as argued by Shell. See
Celeritas Tech., Ltd., v. Rockwell Int'l Corp., 150 F.3d 1354, 1361 (Fed. Cir. 1998) (“[A]
claim is anticipated if each and every limitation is found either expressly or inherently in
a single prior art reference.”).
VII.
In its final non-infringement argument, Shell asserts that Union Carbide did not
test Shell’s catalysts in the same ethylene production system as used by Shell, thus
lacking evidence of infringement of this claim limitation. Rather, Professor Haller
conducted his tests in one EO production system that was representative of all of
Shell’s 69 accused processes (i.e., an approximation of the entire set of processes that
does not match any one particular Shell process). Shell argues this “representative”
testing is inadequate because representative testing was disclaimed during prosecution
and does not “define” Shell’s system as required by the district court’s jury instructions.
This argument springs from the way Shell construes the term “define” in the
district court’s jury instruction. The relevant jury instruction reads:
“The same ethylene oxide production system.” The file wrapper and
patent describe an experimental procedure whereby, once “the conditions
and parameters” for a particular ethylene oxide production system are
defined, a composite design set of experiments are carried out from which
the synergistic combinations are determinable. . . . Therefore, the phrase
“same ethylene oxide production system” is construed to mean the
laboratory or experimental “conditions and parameters” which define the
ethylene oxide production system which ultimately will be used
commercially.
(Emphasis added.)
Shell advances the position that “define” means that the laboratory conditions
must match the parameters for each of the 69 accused commercial processes. In other
04-1475, -1512 14
words, Union Carbide must conduct 69 tests, each test matching the parameters in a
corresponding accused process. However, the claim language does not specify any
particular form of testing – either that contemplated by Shell or the representative
testing conducted by Professor Haller. The district court instead explicitly noted that the
claims did not require a test matching each of Shell’s commercial processes. Union
Carbide III, 2004 WL 1305849, at *6 (holding the claims “do not require that the specific
reaction conditions of each commercial process be tested, only that the laboratory
conditions and parameters define the process ultimately used.”) (emphasis added).
Because the claim does not require an exact match to the accused processes, Union
Carbide had only an obligation to show that its test parameters sufficiently covered the
range of conditions in each of the 69 accused commercial processes. As explained by
Professor Haller, his tests did precisely that:
We, obviously, can [not] test every batch of Shell catalyst that was ever
made, so I wanted to test it under conditions that would define the whole
range of commercial conditions. Not all of them, a specific, particular set
that represented commercial conditions and would be applicable. That is,
the relative testing, not the absolute, the relative testing would be
applicable.
Even Shell uses a single representative set of experimental conditions to test their
commercial catalysts’ efficiencies and warrant these catalysts based on those
laboratory tests, not based on individual tests for each of their 69 processes.
Because the claim language does not require a particular form of testing, this
inquiry is not a claim construction question, which this court reviews de novo. Rather,
this court reviews this inquiry as a question of fact. Does the record contain adequate
evidence to support the jury’s verdict that Professor Haller’s laboratory or experimental
conditions and parameters did, in fact, define the system ultimately used by Shell? Bai,
04-1475, -1512 15
160 F.3d 353. Because Professor Haller’s testimony supports the conclusion that his
tests represented each commercial system, substantial evidence supports the jury’s
determination of infringement.
VIII.
On the question of the royalty computation, the district court admitted evidence
regarding the impact of Shell’s infringing sales on Union Carbide Chemicals, the parent
of a holding company that holds the title to the ’243 patent. Union Carbide Corporation
is the parent corporation of the ’243 patent’s sole assignee, Union Carbide Chemicals &
Plastics Technology Corporation, a technology holding company that does not make,
use or sell EO. Therefore, Shell asserts that Union Carbide Corporation is merely a
non-exclusive licensee of the ’243 patent that “suffers no legal injury from infringement.”
Ortho Pharm. Corp. v. Genetics Institute, Inc., 52 F.3d 1026, 1031 (Fed. Cir. 1999).
Based on this assertion, Shell fears that evidence about the impact of Shell’s infringing
sales on Union Carbide Chemicals effectively allowed the holding company to seek
damages for Union Carbide Chemicals’ lost profit.
To the contrary, unlike the entities in Ortho Pharm., Union Carbide Corporation is
not merely a non-exclusive licensee of the ’243 patent. In Ortho Pharm., the non-
exclusive licensee was a pharmaceutical company given rights to sell a drug bio-
engineered by another pharmaceutical company. Id. at 1028-30. The licensing
transaction in that case was conducted at arm’s length and involved no ownership
relationship between the two companies. Id. In the present case, however, Union
Carbide Corporation wholly owns Union Carbide Chemicals & Plastics Technology
Corporation. Their relationship thus goes far beyond a licensor/licensee arrangement.
04-1475, -1512 16
Hence, Ortho’s holding does not apply in this setting where different business realities
stem from the partnership of these related entities.
Because of the genuine relationship between these companies, the district court
decision properly permitted consideration of these sales. Simply put, the holding
company would not enter any negotiation without considering the competitive position of
its corporate parent, Union Carbide Corporation. Shell is a direct competitor of Union
Carbide Corporation in EO production and MEG sales. Therefore any hypothetical
negotiation with the holding company must necessarily include the reality that the
economic impact on the Union Carbide Corporation would weigh heavily in all decisions.
The district court correctly recognized that the hypothetical negotiation model would
thus properly include these circumstances. Consequently, the district court did not
abuse its discretion in admitting this evidence for purposes of calculating a reasonable
royalty.
In addition, the district court properly permitted the jury to consider damages
evidence about Shell’s profits for MEG production. In this technology, increased EO
production directly increases MEG production. With this linkage, this court perceives no
error in permitting the jury to factor evidence of bundling and convoyed sales into a
determination of the scope of the royalty base. Deere & Co. v. Int’l Harvester Co., 710
F.2d 1551, 1559 (Fed. Cir. 1983) (authorizing such an approach as “eminently
reasonable”). In fact, the district court found that the most common and profitable form
of EO is MEG. Union Carbide III, 2004 WL 1305849, at *5 n.3. Thus, the district court
did not abuse its discretion in admitting evidence of convoyed MEG sales for calculating
a reasonable royalty. Accordingly this court affirms the district court’s damages award.
04-1475, -1512 17
IX.
On the cross appeal, Union Carbide asserts that the district court erred as a
matter of law by ruling in limine that 35 U.S.C. § 271(f) “is not directed to process
claims.” In doing so, the court prohibited Union Carbide from submitting evidence of
Shell’s foreign sales for the purpose of recovering additional damages under 35 U.S.C.
§ 271(f)(2). This prohibition was in error.
Section 271(f) of title 35 is generally directed at the exportation, from the United
States, of components of patented inventions. Specifically, § 271(f)(2) states:
(2) Whoever without authority supplies or causes to be supplied in or from
the United States any component of a patented invention that is especially
made or especially adapted for use in the invention and not a staple article
or commodity of commerce suitable for substantial non-infringing use,
where such component is uncombined in whole or in part, knowing that
such component is so made or adapted and intending that such
component will be combined outside of the United States in a manner that
would infringe the patent if such combination occurred within the United
States, shall be liable as an infringer.
35 U.S.C. § 271(f)(2) (2000) (emphasis added). This case again questions the meaning
of the phrase “any component of a patented invention” in the statute. In other words,
does this phrase apply to components used in the performance of patented
process/method inventions? Eolas Techs. v. Microsoft Corp., 399 F.3d 1325, 1339
(Fed. Cir. 2005) recently answered this question in the affirmative, holding that every
component of every form of invention deserves the protection of 35 U.S.C. § 271(f); i.e.,
that “components” and “patented inventions” under § 271(f) are not limited to physical
machines. In Eolas, this court stated:
Section 271(f) refers to “components of a patented invention.” This
statutory language uses the broad and inclusive term “patented invention.”
Title 35, in the definitions section, defines “invention” to mean “invention or
discovery” - again broad and inclusive terminology. 35 U.S.C. § 100(a)
04-1475, -1512 18
(2000). The next section in Title 35, section 101, explains that an
invention includes “any new and useful process, machine, manufacture or
composition of matter.”
Id. at 1338-39. Thus, as Eolas explained, the statute makes no distinction between
patentable method/process inventions and other forms of patentable inventions.
Moreover, Eolas and this case featured similar facts. In Eolas, Microsoft
exported a master computer disc with program code that caused a computer to perform
various method steps. See U.S. Patent No. 5,838,906, col. 17, ll. 58-col. 18, ll. 30.
Thus, both this case and Eolas feature the exportation of a component (i.e., a computer
disc with program code in Eolas and a catalyst in this case) used in the performance of
a patented process or method (i.e., the method steps executed by the computer in
response to the computer readable program code in Eolas and the commercial
production of EO in this case). In that setting, Eolas applied § 271(f) to Microsoft’s
exported component. Similarly, § 271(f) applies to Shell’s exportation of catalysts (i.e.,
a “component”) used in the commercial production of EO abroad (i.e., a “patented
invention”).
This court has recently interpreted § 271 in two other cases. See AT&T Corp. v.
Microsoft Corp., 414 F.3d 1366 (Fed. Cir. 2005); NTP, Inc. v. Research In Motion, Ltd.,
418 F.3d 1282 (Fed. Cir. 2005). Because AT&T concluded that § 271(f) applied to the
exportation of components ultimately used abroad, its reasoning supports application of
§ 271 to the facts of this case. See AT&T, 414 F.3d at 1368 (applying § 271(f) to the
exportation of a “master” computer readable disc that was further copied abroad, with
the copies installed as software on assembled computers). This case, however,
presents an even stronger basis for applying § 271(f) because Shell supplies all of its
04-1475, -1512 19
catalysts from the United States directly to foreign affiliates. Shell’s foreign affiliates do
not copy these catalysts and use the copies in a foreign process, but instead use the
catalysts supplied by Shell directly in their processes.
Unlike AT&T, NTP did not find that § 271(f) applied. However, NTP involved
facts that differ in important respects from the facts in this case. Specifically, NTP
involved the sale of wireless handheld devices and supporting software for a wireless
email network. NTP, 418 F.3d at 1289-90. Research In Motion (RIM) sold wireless
handheld devices in the United States. When the owners of those devices traveled
abroad, those devices were used outside of the United States; otherwise, those devices
were used in the United States. This court in NTP considered whether use of these
domestic devices with a system partially operating abroad constituted infringement
under § 271(f). Id. The NTP court answered this question in the negative:
While it is difficult to conceive of how one might supply or cause to be
supplied all or a substantial portion of the steps of a patented method in
the sense contemplated by the phrase “components of a patented
invention” in section 271(f), it is clear that RIM’s supply of the BlackBerry
handheld devices and Redirector products to its customers in the United
States is not the statutory “supply” of any “component” steps for
combination into NTP's patented methods.
Id. at 1322. Under the facts of NTP, this court declined to apply § 271(f) when RIM itself
did not supply any component to a foreign affiliate. This court in NTP also affirmed a
finding of infringement under § 271(a) for RIM’s domestic sales of devices
(BlackBerries) used in the process. Id. at 1316-17. Thus, this court in NTP declined to
authorize additional damages for NTP under § 271(f).
NTP is different from this case because Shell supplies catalysts from the
United States directly to foreign customers. Because Shell supplies these catalysts
directly to its foreign affiliates, this court does not face another situation involving the
04-1475, -1512 20
domestic sale of a component being used, in part, outside the United States. Shell’s
domestic sales are separately covered by the district court’s present damages
calculation. As such, Eolas, a case more factually analogous and earlier in time than
NTP, governs this case.
In brief, because § 271(f) governs method/process inventions, Shell’s exportation
of catalysts may result in liability under § 271(f). Accordingly, the district court abused
its discretion in excluding Shell’s exportation of catalysts as part of its damages award.
This court remands this case to the district court for additional findings on Shell’s
potential liability under 35 U.S.C. § 271(f).
X.
The cross appeal also questions the district court’s denial of Union Carbide’s
motion for JMOL that Shell willfully infringed the ’243 patent. Specifically,
Union Carbide contends that Shell became aware of the ’243 patent shortly after
issuance, but continued to produce EO in an infringing process without ever obtaining a
formal opinion of counsel. Thus, according to Union Carbide, the undisputed facts
demonstrate Shell willfully infringed the ’243 patent. This argument overstates the facts
in the record before the district court.
This court has already declined to draw a negative inference from a party’s
failure to obtain a formal opinion of counsel after it becomes aware of an issued patent.
See Imonex Serv., Inc. v. W.H. Munzprufer Dietmar Trenner GmbH, 408 F.3d 1374,
1378 (Fed. Cir. 2005) (citing Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v.
Dana Corp., 383 F.3d 1337, 1342 (Fed. Cir. 2004) (en banc)). Thus, Shell’s decision to
proceed without an opinion of counsel does not affect the jury verdict in this case.
04-1475, -1512 21
Moreover, the record shows that Shell was reasonable in its response to the
’243 patent. Shell first became aware of the ’243 patent when Dr. Clendenen, an in-
house patent attorney, discovered the patent as part of a routine monitoring of recently
issued patents in the EO catalyst field. The record shows that Dr. Clendenen, a Ph.D.
chemical engineer and licensed patent attorney, interpreted the claims as requiring a
specific efficiency equation for development of the catalyst in the claimed process.
Because Shell did not make catalysts with this specific efficiency equation, Dr.
Clendenen concluded that Shell had no reason to fear infringement. The district court
at first adopted Dr. Clendenen’s reading of the patent which was later rejected by this
court. Nonetheless this record suggests that Dr. Clendenen’s analysis was not entirely
implausible. Accordingly, Shell did not engage in the kind of egregious and reckless
conduct that warrants a willfulness finding. Imonex Servs., 408 F.3d at 1377
(“Willfulness requires a showing that the totality of the circumstances evince the
egregious conduct that constitutes willful infringement.”) (citations omitted). In sum,
substantial evidence supports the jury verdict.
XI.
In conclusion, because substantial evidence supports the jury verdicts of
infringement and no willfulness, this court affirms those verdicts. However, because the
district court erred in concluding § 271(f) does not apply to process claims, this court
finds it abused its discretion in excluding Shell’s exported catalysts as part of its
damages calculation. The case is remanded to the district court for a new
determination of damages.
04-1475, -1512 22
COSTS
Each party shall bear its own costs.
AFFIRMED-IN-PART, REVERSED-IN-PART, VACATED-IN-PART and REMANDED
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