The Dow Chemical Company v. Nova Chemicals Corporation (Canada), et al., C.A. 05-737-JJF (D. Del....

8/9/2019 The Dow Chemical Company v. Nova Chemicals Corporation (Canada), et al., C.A. 05-737-JJF (D. Del. July 30, 2010)

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF DELAWARE

THE DOW CHEMICAL COMPANY,P l a i n t i f f ,

v.NOVA CHEMICALS CORPORATION(CANADA), and NOVA CHEMICALSINC. (Delaware) ,

Defendants .

C i v i l Action No. 05-737-JJF

Harry J . Roper, Esquire ; Aaron A. Barlow, Esqui re and Paul D.Margol is Esquire o f JENNER & BLOCK LLP, Chicago, I l l i n o i s .Raymond Nimrod, Esquire and Gregory D. B o n i f i e l d , Esqui re ofQUINN EMANUEL URQUHART & SULLIVAN LLP, New York, New York.Rodger D. Smith I I , Esquire o f MORRIS, NICHOLS, ARSHT & TUNNELLLP, Wilmington, Delaware.Atto rneys f o r P l a i n t i f f The Dow Chemical Company.Ford F. Farabow, J r . , Esquire ; Ronald A. Bleeker , E s q u i r e ; JoannM. Neth, Esquire ; Mart in I . Fuchs, E s q u i r e ; Mark J . F e l d s t e i n ,E s q u i r e ; J e f f r e y W. Abraham, Esquire and Troy A. P e t e r s e n ,Esquire o f FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER,L . L . P . , Washington, D.C.H. Woodruff Turner , Esquire ; Thomas A. Donovan, E s q u i r e ; RobertD. Yeager, E s q u i r e ; Brian P. Anderson, Esquire and Thomas J .Smith of K&L GATES LLP, P i t t s b u r g h , PA.Richard L. Horwitz , Esquire and David E. Moore, Esquire of POTTERANDERSON & CORROON LLP, Wilmington, Delaware.Atto rneys f o r Defendants NOVA Chemicals Corpora t ion (Canada) andNOVA Chemicals I n c . (Delaware) .

MEMORANDUM OPINION

J u l y JO 2010Wilming ton, Del aware


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F a ~ ! t ~This pa ten t inf r ingement ac t ion was t r i ed before a j u ry , and

the ju ry re turned a v erd ic t in favor of P l a i n t i f f in the amountof $61,770,994.60 in lo s t p ro fi t s and roya l ty damages. Followingthe j u ry ' s verd ic t , th e Court conducted a bench t r i a l on th ei s sue of P l a i n t i f f ' s standing to br ing t h i s ac t ion . For thereasons discu sse d, the Court concludes t h a t P l a i n t i f f hads tand ing to br ing t h i s ac t ion and mainta ined s tand ing throughoutthe pendency of t h i s ac t ion .I . BACKGROUND

P la in t i f f in i t i a te d th is ac t ion aga ins t Defendants a l leg ingt h a t Defendants i n f r inged u.s. Patents No. 5,847,053 ( the " '053patent" ) and u.s. Patent No. 6,111,023 ( the " '023 patent )( co l lec t ive ly , th e "pa t en t s - i n - su i t " ) . The pa ten t s - in - su i tr e l a t e to polymer composi t ions , spec i f i c a l l y polye thy lene .

The i s sue of standing was f i r s t ra is ed in Defendants ' MotionTo Dismiss (D.I . 318) a f t e r Defendants l ea rned about an agreementbetween P l a i n t i f f and i t s subs id i a ry Dow Global Technologies Inc .("DGTI"), which f ina l i zed an agreemen t between the two companiesto t r ans f e r ce r t a i n pa ten t r igh t s from P l a i n t i f f to DGTI (the"Contr ibut ion Agreement") (DSTX 2.)In def in ing "Paten t R ig hts ," th e C on trib utio n Agreement s t a t edtha t th e Paten t Rights to be t rans fe r red a re pa ten t s t h a t can bet rans fe r red without the loss of r igh t s to P l a i n t i f f t h a t are

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inc luded on "Schedule A." (Id . 1 .07 . ) Addi t iona l ly , theCont r ibu t ion Agreement ca l led fo r the crea t ion of a "Schedule D"to list Excluded In t ang ib le Asse t s . (Id. 1 .03 . )

In producing a record o f Schedule A, P l a i n t i f f produced adocument t i t l ed "Schedule B Supplement - Paten t Righ t s . " (DSTX12.)1 The pa ra l ega l who crea ted t h i s document, Kate Maxwell ,t e s t i f i ed t h a t t h i s document i s Schedule A, and i s merely l i s t edas Schedule B due to a typographical e r ro r . (Bench Tr i a l Tr.98:3-99:7 . ) I t i s undisputed t h a t th e 424 page document does notinc lude th e pa ten t s - in - su i t as any of the l i s t ed P ate nt R ig hts .(DSTX 12.) Furthermore, the document represent ing Schedule D,t i t l ed "Excluded Patents" d id not list the p a te n ts -i n -s u it u n t il2009. (Warrick Depo. 46:14-47:11 .)I I . PARTIES' CONTENTIONS

The pa r t i e s do not dispu te th at p rio r to th e Co ntr ib utio nAgreement, P l a i n t i f f owned the pa ten t s - in - su i t and had s tand ingto br ing an infr ingement ac t ion . The r e levan t ques t ion , however,

1Prior to t r i a l , Defendants f i l ed a Motion In Limine ToExclude In t roduc t ion Of, And Test imony, Regarding Schedule A AndSupplemental Schedule B (D.I . 529) on the grounds t h a t suchevidence lacked th e n ec es sary au then t i c i ty . During th e bencht r i a l , th e Court a ll owed evi denc e and tes t imony concerningSchedule A and Supp lemen ta l Schedu le B, but reserved dec is ion onth e ul t imate ques tion of the admis s ib i l i t y of t h i s evidence.Because th e Cour t concludes tha t Defendants ' arguments go to th eweight of the evidence and not i t s admis s ib i l i ty , the Cour t wi l ldeny Defendants ' Motion In Limine. In add i t ion , the Cour t wi l lgran t Defendants ' Motion To Presen t Expert Testimony In StandingTr i a l (D. I . 523) .

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i s whether th e Co ntrib utio n Agreement t rans fe r red ownership ofthe pa ten t s - in - su i t to DGTI, such t ha t P l a i n t i f f no longermaintained standing to br ing t h i s ac t ion .

P l a i n t i f f contends t h a t under th e p la in language of theCont r ibu t ion Agreement, ownership of th e pa ten t s - in - su i t wasnever t rans fe r red . According to P l a i n t i f f , th e Co ntr ib utio nAgreement only t rans fe r red r igh t s to pa ten ts l i s t ed on Schedule Aof Paten t R igh ts . In support o f i t s argument, P l a i n t i f f d i r ec t sthe Court to th e Co ntrib utio n Agreement ' s prov i s ion ind ica t ingt h a t th e Co ntr ib utio n Agreement d id not t r ans f e r any pa t en t s t h a twould r e su l t in a lo s s of r igh t s fo r P l a i n t i f f . Because t r ans f e rof the pa ten t s - in - su i t would have re su lte d in a lo s s of r i gh t s toP l a i n t i f f in v io la t ion of th i s provis ion , P l a i n t i f f contends t h a tthe pa ten t s - in - su i t a re neces sa r i ly excluded from the t r ans f e ref fec tua ted by Schedule A of the Cont r ibu t ion Agreement.P l a i n t i f f a lso contends t h a t th e conduct of the con t rac t ingpa r t i e s evidences t h e i r be l i e f , in accordance with t h e i runders tand ing of the C ontr ibu tion Agreement, t h a t ownership ofthe pa ten t s - in - su i t was not be ing t rans fe r red .

Defendants contend t h a t P l a i n t i f f did not own the pa ten t s i n - s u i t when it i n i t i a t ed t h i s ac t ion because th e Cont r ibu t ionAgreement ef fec tua ted an automat ic and immediate t r ans f e r of thepa ten t s - in - su i t from P l a i n t i f f to DGTI. In support o f t h e i rargument, Defendants d i r ec t th e Court to emails conveying

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P l a i n t i f f ' s unders tanding of the C on tr ibu tion Agreement, thepayment of roya l t i e s from Pla in t i f f to DGTI r e l a t ed to El i t eFilms technology, th e t r an s fe r of th e Canadian coun te rpa r t s toth e pa ten t s - in - su i t , and DGTI's payment of maintenance fees onthe pa ten t s - in - su i t . (Id. a t 9-10.) Defendants also contendt h a t th e document t i t l ed "Schedule B Supplement - Paten t Rights"cannot c on fe r s ta nd in g because it was not prepared in accordancewith the r equ i s i t e t ime- l ine requi red by th e Co ntr ib utio nAgreement and because it l acks r e l i a b i l i t y based on i t s title andth e ind ica t ion tha t it was ed i t ed in 2005. (Id . a t 8-9. )Defendants f u r the r contend t ha t Pla in t i f f ac ted decep t ive ly inadding the pa ten t s - in - su i t to th e Schedule D of excluded pa ten t sin 2009, as opposed to when it was c rea ted in 2002.8 . )I I I . DISCUSSION

(Id . a t 6-

The par ty br ing ing an ac tion fo r pa ten t inf r ingement bearsthe burden of es tab l i sh ing t h a t it has s tand ing . Sicom Sys . ,Ltd. v . Agilent Techs . , Inc . , 427 F.3d 971, 976 (Fed. Cir . 2005) .For purposes o f d emons tr at in g standing under Art i c l e I I I of theCons t i tu t ion , th e p l a i n t i f f must show (1) an in ju ry in fac t , (2)with a f a i r l y t r aceab le connect ion to th e chal lenged ac t ion , and(3) th e re qu ested r e l i e f wil l red re s s the a l l eged in ju ry . Stee lCo. v. Cit izens fo r a Bet t e r Env ' t , 523 U.S. 83, 103 (1998) .Courts also recognize th ree pruden t i a l p rin cip le s th at must be

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considered in th e s ta nd in g ana lys i s : (1) a par ty genera l ly mustl i t i g a t e i t s own r igh t s and not the r i gh t s of a t h i rd par ty ; (2)th e ques t ion must not be an abs t rac t , genera l ized gr ievance ; and(3) th e harm must be in th e zone of i n t e r e s t s pro tec t ed by th es t a tu t e o r cons t i tu t iona l provis ion a t i s sue . Val ley ForgeChr i s t i an C ollege v. Americans United fo r Separa t ion of Church &Sta te , 454 U.S. 464, 474-475 (1982).

The Federa l Circu i t has recognized th ree po t en t i a lca tegor i e s of p l a i n t i f f s fo r purposes o f c on sid er in g th e ques t ionof s tand ing w ith in the con tex t o f pa ten t infr ingement : " thoset h a t can sue in t h e i r own name alone; those t h a t can sue as longas th e pa ten t owner i s jo ined in th e su i t ; and those who cannoteven pa r t i c ipa t e as a pa r ty to an infr ingement su i t . " Morrow v.M i cr os of t C or p., 499 F.3d 1332, 1339 (Fed. Cir . 2007). The f i r s tcategory of p l a i n t i f f s hold a l l l ega l r i gh t s to th e pa ten t as th epatentee o r ass ign ee of a l l pa ten t r i gh t s . rd . a t 1339-1340.The second category includes p l a i n t i f f s who hold exc lus ionaryr i gh t s and i n t e r e s t s , bu t not a l l subs tan t i a l r i gh t s to th epa ten t such as exc lus ive l i censees . rd . a t 1340. The t h i rdca te go ry o f p l a i n t i f f s are those who hold l e ss than a l lsubs tan t i a l r i gh t s to th e pa ten t , and l ack exc lus ionary r i gh t ssuch as non-exclus ive l i censees . rd . a t 1340-1341. P l a i n t i f f sin th e t h i rd category lack standing and cannot br ing su i t . rd .

Applying these p rin cip le s to th e c i rcumstances in t h i s case ,

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the Court concludes t h a t P l a i n t i f f has been th e l ega l owner ofthe pa ten t s - in - su i t both a t the i n i t i a t i on of t h i s ac t ion and a ta l l t im es th ro ug ho ut t h i s l i t i g a t i on . In th e Cour t ' s view, th eContr ibut ion Agreement i s c l ea r on i t s face and d id not t r ans f e rthe pa ten t s - in - su i t to DGTI. In reac hing t h i s co nc lu sio n, th eCourt i s persuaded t h a t Sect ion 2.01 and 1.07 of th e Co ntrib utio nAgreement, when read t oge the r , ind ica te t h a t pa ten t s a ret rans fe r red from P l a i n t i f f to DGTI once they are l i s t ed inSchedule A. Spec i f i c a l l y , Sect ion 2.01 of the Cont r ibu t ionAgreement s t a t e s :

Effec t ive on the T ran sfe r Date, [P la in t i f f ] herebyconveys, t r an s fe r s , ass igns , and d el iv ers to DGTI, andDGTI hereby accep t s from [P la in t i f f ] . a l l of[P l a in t i f f ' s ] r i gh t and title to and i n t e r e s t in th ePatent Rights , Technology and Work Processes , whichr i gh t s are owned o r con t ro l led by [P la in t i f f ] on th eTransfer Date o r t h e rea f t e r .

(DSTX 2 2.01, emphasis added.) While t h i s s ta tement appears tobe a broad t r ans f e r it must be read in the con tex t o f Sec tion1 .07 , which provides an exp l i c i t de f i n i t i on of th e term ~ P a t e n tRigh ts . " Spec i f i c a l l y , Sect ion 1.07 def ines Paten t Rights as :

Any and a l l pa t e n t s . . which are owned so le ly o rcon t ro l led by [P la in t i f f ] on the Trans fe r Date o rth er ea fte r, th at [P la in ti f f ] i s able to ass ign to DGTIwit hout c on sent of o r account ing to a Third Par ty o rAff i l i a t ed Company, without dimin ish ing th e roya l t i e spaid o r payable by o r otherwise mate r i a l l y af fec t ingth e ob l iga t ions of such Third Par ty o r Aff i l i a t edCompany with respec t to such pa ten t r i gh t s , and withoutresu l t ing in a lo s s of r i gh t s . The part i e s sha l lprovide a schedule of Patent Rights as Schedule A toth i s Agreement within ninety (90) days of the Effec t ive

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Date, and sha l l provide subsequent supplements theretofrom t ime to t ime during the term.

(DSTX 2 1.07, emphasis added.) Thus, Sect ion 1.07 def ines"Paten t Rights" by re fe rence to Schedule A, to p ro te c t aga ins tP l a i n t i f f ' s lo s s of r i gh t s . Accordingly, th e Court concludest h a t under the Contr ibut ion Agreement, a t r ans f e r o f the pa ten t s -i n - su i t i s not ef fec tua ted unless and un t i l the pa ten t s areexp l i c i t l y l i s t ed on Schedule A.

Defendants contend t h a t the pa ten t s - in - su i t were t r an s fe r r edautomat ica l ly because a Schedule A never ex is ted , and Defendantsdi spu te both the app l i c ab i l i t y and au then t i c i ty of the documentt i t l e d "Schedule B Supplement - Paten t Rights ." (DSTX 12.)While the Court unders tands De fe nd an ts ' c on ce rn s with Schedule B,th e Court i s p ers ua de d, b ased on th e evidence adduced a t t r i a l ,t h a t Schedule B was, in f ac t , in tended to be Schedule A and wasused by the pa r t i e s as Schedule A. In making t h i s determina t ion ,the Court c red i t s th e tes t imony of Kate Maxwell and f inds t h a tSchedule B was mis t i t l ed and was in tended to be Schedule A.(Bench Tr i a l Tr. 98:3-99:7 . ) The Court fu r the r concludes t h a tMs. Maxwell 's tes t imony concerning the crea t ion o f the documentand i t s s to rage as a computer f i l e supports i t s au then t i c i t y . Inadd i t ion , the Court f inds t ha t th e i nc lus ion of the phrase"Paten t Rights" in th e title of the document fu r the r evidencesth e pa r t i e s ' in te n tio n t ha t t h i s document cons t i t u t e Schedule Aand /or f u l f i l l th e purposes of the Schedule A as requi red by the

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Cont r ibu t ion Agreement. (Bench Tra i l Tr. 96:9-101:21; DSTX 12.)Defendants poin t out t h a t Schedule B was not completed

with in th e t ime frame es tab l i shed by th e Co ntr ib utio n Agreement .In the Cour t ' s view, however, t h i s fac t i s i r r e l evan t , becauset he re i s no evidence t h a t a f a i l u re to t imely comp le te S chedu le Ar e su l t s in an automatic , mass t r an s fe r of a l l pa ten t s owned byP l a i n t i f f .

Defendants a lso contend t h a t th e pa ten t s - in - su i t weret r an s fe r r ed by th e Co ntr ib utio n Agreement because they were notl i s t ed on Schedule D, the list of excluded pa t en t s , un t i l 2009.Although Sect ion 1.03 of the Contr ibut ion Agreement ca l l s fo r alist of excluded in tang ib les designated as Schedule D, th e Courti s n ot p ers uad ed t h a t th e f a i l u re to inc lude th e pa ten t s - in - su i ton Schedule D ef fec tua ted t h e i r t r an s fe r . As th e Court hasnoted, th e t r an s fe r of the pa ten t s in s u i t i s governed by Sect ion2 .01 . Sect ion 2.01 does not discuss "Excluded In t ang ib le Assets"o r Schedule D, and i n s t ead discusses th e t r ans f e r of pa ten t s byre fe rence to the "Paten t R igh ts ," th e de f i n i t i on of whichembraces th e pa ten t s l i s t ed on Schedule A. Thus, th e Courtconcludes t h a t Schedule D i s e s sen t i a l l y i r r e l evan t to p a ten tt r ans f e r as t h a t process i s descr ibed in Sect ion 2.01 of theCont r ibu t ion Agreement .

As fo r Defendants ' arguments concerning th e course o fconduct of P l a i n t i f f and DGTI, the Court i s n ot p er su ad ed t h a t

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t h i s evidence a l t e r s t h e p l a i n and unambiguous mean ing o f t h eC o n t r i b u t i o n Agreement. Moreover, Mr. G i l c r e a s t ' s o p i n i o nconcerning t h e impact o f t h i s course o f conduct evidence wasrendered without s p e c i f i c knowledge about P l a i n t i f f , DGTI o rt h e i r r e l a t i o n s h i p , and t h e r e f o r e , t h e Cour t a f f o r d s t h i stes t imony little weight .216:15, 217:7-218:1 .)V. CONCLUSION

(See Bench T r i a l Tr. 211 :1 9- 22 , 2 15 :3 -

I n sum, t h e Cour t concludes t h a t t h e C o n t r ib u t i o n Agreementd i d not r e s u l t i n a t r a n s f e r o f ownership o f t h e p a t e n t s - i n - s u i t .Schedule B c o n s t i t u t e d a n d / o r was meant t o c o n s t i t u t e Schedule A,but f o r a t y p o g r a p h i c a l e r r o r , and t h e p a t e n t s - i n - s u i t a r e no tl i s t e d on Schedule B. Accordingly , t h e Cour t concludes t h a tP l a i n t i f f has e s t a b l i s h e d t h a t it owned t h e p a t e n t s - i n - s u i t a tt h e i n c e p t i o n o f t h i s l i t i g a t i o n and throughout i t s pendency, andt h e r e f o r e , t h e Court concludes t h a t P l a i n t i f f has s t a n d i n g .

An a p p r o p r i a t e Order w i l l be e n t e r e d concerning t h e Motionsa d ju d ic a te d h e re i n .

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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF DELAWARE

THE DOW CHEMICAL COMPANY,P l a i n t i f f ,

v .NOVA CHEMICALS CORPORATION(CANADA), and NOVA CHEMICALSINC. (Delaware) ,

Defendants .

Civ i l Action No. 05-737-JJF

o R D E RAt Wilmington, th i s 3v of July 2010, fo r the reasons s e t

fo r th in the Memorandum Opinion i s sued t h i s date ;IT IS HEREBY ORDERED t ha t :1. Defendants ' Motion In Limine To Exclude In t roduc t ion

Of, And Testimony, Regarding Schedul e A And Supplemental ScheduleB (D.I . 529) i s DENIED.

2. Defendants ' Motion To Present Exper t Testimony InStanding Tr i a l (D.I. 523) i s GRANTED.

UN DISTRICT JUDGE

The Dow Chemical Company v. Nova Chemicals Corporation (Canada), et al., C.A. 05-737-JJF (D. Del....

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