BASF Corp. v. SNF Holding Co. (Fed. Cir. 2020)

By Kevin E. Noonan --

In what may be simple happenstance, the Federal Circuit issued opinions on the same day reversing a District Court grant of summary judgment in opinions written by Judge Lourie, here in BASF Corp. v. SNF Holding Co.

The case arose over BASF's allegations of infringement by SNF of U.S. Patent No. 5,633,329.  The technology relates to an improved method for preparing high-molecular-weight polymers produced by polymerization of "water-soluble, monoethylenically unsaturated monomers."  The art recognized a problem in making such polymers in that they are "sticky" and attach to the walls of the reaction vessel.  Prior art solutions, acknowledged to be unsatisfactory, included mechanical "scraping," inter alia, with a piston (which damaged the reactor walls), injecting a separating liquid (which contaminate the reactor), or injecting an inert gas (which is ineffective because it tended to blow through gaps between the polymer and the reactor wall).  The '329 patent provided a solution by including a conical taper in the reaction vessel with specific dimensions as illustrated in this patent drawing:

The Court considered Claim 1 to be representative:

1.  A process for preparing high molecular weight polymers, which comprises polymerizing water-soluble, monoethylenically unsaturated monomers and, if desired, crosslinkers which contain at least two nonconjugated, ethylenically unsaturated double bonds in the molecule, and, if desired, water-insoluble monoethylenically unsaturated monomers in aqueous solution in the presence of polymerization initiators
    in a tubular reactor which has a conical taper at the end, the ratio of the diameter of the reactor (D1) to the diameter at the end of the conical taper of the reactor (D2) being from 2:1 to 25:1 and the angle between D1 at the start of the conical taper and the inner cone wall being >45° and <90°, and
    removing the gelatinous reaction mixture by injection of an inert gas.

In response to BASF filing a complaint against SNF, Defendant petitioned for inter partes review, which petition was granted but resulted in a Final Written Decision that the challenged claims were not unpatentable.  Trial ensued and the District Court granted summary judgment that asserted claims 1 and 3-7 were invalid as being anticipated and claim 2 invalid for obviousness.  The prior art applied by the District Court to these claims was a polymer synthesis process termed the Sanwet® Process that was earlier developed buy Sanyo Chemical Industries in Japan.  Sanyo entered into an agreement with Celanese to produce polymers using the Sanwet® Process prior to the critical date under the terms of a confidentiality agreement (i.e., the process could not be publicly disclosed until a time after the critical date).

The District Court applied the following interpretation to subsections of 35 U.S.C. § 102 (as it was codified prior to enactment of the Leahy-Smith America Invents Act):

• "one person's use or knowledge" of the claimed invention would satisfy the provisions of §102(a) that the invention was "known or used by others in this country" (and whether the invention was kept secret or confidential was irrelevant); and

• commercial use of a claimed process raised the public use and/or on sale bar set forth in 102(b).

The District Court granted summary judgment of anticipation on both the public use and on-sale bars.  Evidence supporting this judgment was that Celanese gave tours of the plant where the process was being practiced, and was using the process commercially before the critical date.  The license agreement, together with disclosure of the technical details of the Sanwet® Process constituted a sale, not only a license, because "the transmission of the process description to a user with the ability to perform the process constitutes putting the process 'on-sale,'" citing Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373, 1378 (Fed. Cir. 2003)).  This appeal followed.

The Federal Circuit reversed and remanded for further proceedings, in an opinion by Judge Lourie, joined by Judges Moore and Chen.  With regard to prior art knowledge or use under pre-AIA § 102(a), the Federal Circuit held that the District Court had misapplied the meaning of the terms "known or used by others" under the statute.  The Federal Circuit agreed with BASF that knowledge or use not accessible to the public did not qualify as invalidating prior art, citing Carella v. Starlight Archery & Pro Line Co., 804 F.2d 135, 139 (Fed. Cir. 1986); Woodland Tr. v. Flowertree Nursery, Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998); and Minn. Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1306 (Fed. Cir. 2002) for this principle.  The opinion sets forth the history of this principle, including In re Borst, 345 F.2d 851, 854 (CCPA 1965), Supreme Court precedent from Pennock v. Dialogue, 27 U.S. (2 Pet.) 1 (1829); Gayler v. Wilder, 51 U.S. (10 How.) 477, 498 (1850); Coffin v. Ogden, 85 U.S. (18 Wall.) 120, 124–25 (1873); and UCB, Inc. v. Watson Labs. Inc., 927 F.3d 1272, 1289–91 (Fed. Cir. 2019); as well as two Second Circuit cases from the legendary Judge Learned Hand, Metallizing Eng'g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir. 1946), and Gillman v. Stern, 114 F.2d 28 (2d Cir. 1940).  The opinion finds this principle is consistent with the constitutional requirement that a patent grant "promote progress," stating that "[p]rior knowledge or use that is not accessible to the public "upon reasonable inquiry," confers no benefit on the public, and thus does not suffice as a defense under § 102(a)."

With regard to the District Court's grant of summary judgment, the opinion finds that there are genuine issues of material fact with regard to the "extent to which Sanyo's technical information and the performance of the Sanwet® Process at the Portsmouth plant were actually subject to confidentiality restrictions."  The existence of such questions is almost always fatal to summary judgment and thus the court reversed summary judgment granted by the District Court on these grounds.

Turning to the public use and on-sale bar grounds for summary judgment relied upon by the District Court, the panel agreed with BASF that the hidden commercial use by Celanese did not satisfy the statutory requirements.  Citing the Supreme Court's "rule of Shimadzu," the opinion states that such public use requires the invention to be "'not purposely hidden' and . . . that the use of a process in the ordinary course of business—where the process was 'well known to the employees' and no 'efforts were made to conceal' it from anyone else."  Electric Storage Battery Co. v. Shimadzu, 307 U.S. 5, 20 (1939); the opinion cites numerous precedent for this standard, including Motionless Keyboard Co. v. Microsoft Corp., 486 F.3d 1376, 1384–85 (Fed. Cir. 2007); Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1382 (Fed. Cir. 2005); New Railhead Mfg., L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1297 (Fed. Cir. 2002); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 721 F.2d 1540, 1548–50 (Fed. Cir. 1983); and Egbert v. Lippmann, 104 U.S. (14 Otto) 333, 336 (1881).  Once again, the Court found disagreement between the parties on factual matters (including the purportedly public tours, and the content of newspaper articles) sufficient to raise genuine issues of material fact.  Accordingly, the Federal Circuit reversed summary judgment on these grounds and remanded to the District Court.

In this regard, the panel also rejected as "simply wrong" SNF's contention that "a third party's commercial exploitation of a secret process creates a per se public-use bar to another inventor," under the Gore and Metallizing precedent.  These cases stand for loss of right for secret commercial use by an inventor; the Court rejected SNF's attempt to extend the bar based on secret, third-party use.  "The primary reasons for the statutory bars are to prevent the public from being deprived of that which it has come to rely on as publicly available, to encourage prompt disclosure of inventions, and to prevent effective extension of patent term by gamesmanship," according to the opinion, citing TP Labs., Inc. v. Prof. Positioners, Inc., 724 F.2d 965, 968 (Fed. Cir. 1984).  None of these policy goals would be furthered by precluding patenting based on the secret use of a claimed invention by a third party.

Finally, with regard to SNF's on-sale grounds for invalidating the asserted '329 patent claim, the Federal Circuit agreed with BASF that the commercial agreements between Sanyo and Celanese nor the later acquisition of Celanese (by Hoechst) were commercial "sales" under the statute.  Here, the Court relied on definitions for "sales" on the Uniform Commercial Code, as the court did in Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d 1041, 1048 (Fed. Cir. 2001).  And the opinion held that this case was governed by the Court's decision in In re Kollar, 286 F.3d 1326 (Fed. Cir. 2002), where a license to practice a claimed method was not a sale, unless "the essential features of the claimed process here were . . . embodied in a product sold or offered for sale before the critical date," citing Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003).  For substantially the same reason, the panel rejected SNF's argument that later acquisition of Celanese by Hoechst constituted a sale that raised the on-sale bar.

BASF Corp. v. SNF Holding Co. (Fed. Cir. 2020)
Panel: Circuit Judges Lourie, Moore, and Chen
Opinion by Circuit Judge Lourie

Comments

[PlayerII]

Did this decision just fly past last year's Supreme Court decision in Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., 139 S. Ct. 628 (2019)? Helsinn is only cited once, in a footnote.

How can this stand in light of Helsinn?

[Kevin E Noonan]

The difference is that in Helsinn the issue was the Patentes’s activities before the critical date, and here it is a third party.

The opinion discusses the policy grounds for the rule when it is the patentee’s actions that do not arise from third party actions, and indeed would be contrary to them

[Paul F. Morgan]

Here in BASF Corp. v. SNF Holding Co. the Fed. Cir. clearly distinguished between the 102 "on sale" bar which the Sup. Ct. said in Helsinn Healthcare S.A. v. Teva Pharmaceuticals still applies to secret commercial sales, versus the "PUBLIC use" bar and Learned Hand's Metallizing Eng'g Co. v. Kenyon Bearing & Auto Parts Co., plus the Fed. Cir. Gore v. Garlock.

[Mark S. Graham]

So, all the clamor in the wake of Helsinn that it expanded 102(a)(1) prior art to encompass evidence of secret "commercial use," "offers of sale," and "sales" by anybody (including third parties) anywhere in the world for any length of time was unfounded gibberish?

So, if party patents a purportedly novel chemical (that has alleged utility as an additive for gasoline) and evidence arises that the chemical had actually been made secretly by a third party in the US, offered for sale, and sold confidentially as an additive for gasoline several years before the patent was first applied for, then such evidence would not amount to prior art against the patent under 102(a)(1)? What if evidence of the same activity in, say, a third party in Germany comes to light?

I don't see anything in 102(a)(1) that appears to limit its reach to activities of the inventor, and I believe everyone agrees the absence of any geographical limitation causes it to reach pre-filing evidence of the noted activity anywhere in the world.

When will we stop putting a gloss on statutory language like 102(a) by reading words into it that are not there? If we interpret these things the way they are written, then maybe it will cause Congress to get its act together.

[skeptical]

Mr. Graham,

You hint at (but do not name) the aspect of the America Invents Act that was made PRIOR TO full passage of that act by the writers (timing IS an important consideration):

Metallizing was abrogated.
The (long errant) conflation of protection under two different Constitutionally based protections (trade secret under the Commerce Clause and patent protection under the Intellectual Property Clause) being INDEED separate and distinct, were corrected by the AIA.

Of course, this comment can only introduce a concept that has been explicated in far more detail previously.