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Syngenta Crop Protection, LLC v. Willowood, LLC

United States District Court, M.D. North Carolina

March 24, 2017

SYNGENTA CROP PROTECTION, Plaintiff,
v.
WILLOWOOD, LLC, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Catherine C. Eagles, District Judge.

         Syngenta Crop Protection, LLC has sued four affiliated companies denominated collectively here as Willowood, [1] alleging patent and copyright infringement. Syngenta contends Willowood has infringed its patents in connection with the manufacture and sale of Willowood's Azoxy 2SC, AzoxyProp Xtra, and Tebustrobin S.C. products and has infringed its copyrights by verbatim copying of Syngenta product labels. Syngenta seeks partial summary judgment on Counts I through IV, asserting that its 5, 602, 076 Patent, 5, 633, 256 Patent, 5, 847, 138 Patent, and 8, 124, 761 Patent are valid and that Willowood infringed the patents. Syngenta makes related evidentiary objections to opinion testimony by the defendant's expert Dr. Mark A. Lipton.[2] Willowood seeks summary judgment on Count IV, asserting that its products do not infringe the '761 Patent as a matter of law, and on Counts V and VI, asserting that Syngenta does not have a valid copyright and that its copying constituted fair use.

         The Court will grant in part and deny in part Syngenta's motion for summary judgment and will deny Willowood's motion for summary judgment as to Count IV. The Court retains under advisement Willowood's motion for summary judgment as to Counts V and VI, which will be resolved by separate order.

         I. Facts

         The following facts are undisputed. Syngenta holds several patents protecting azoxystrobin, a fungicidal compound used to protect various crops, and the process for making it.[3] The '076 and '256 Patents expired on February 11, 2014, and the ' 138 Patent expired on December 8, 2015. Doc. 96-1 at ¶ 29, 30. The '761 Patent will expire in April 2029. Id. at f 31. Willowood sells generic versions of crop-protection products, including the generic azoxystrobin fungicides Azoxy 2SC and AzoxyProp Xtra. Doc. 12 at ¶¶ 73, 75; Doc 16 at ¶¶ 4, 8. Willowood and Syngenta use azoxystrobin technical, a relatively pure form of the chemical compound azoxystrobin, as the active ingredient in their azoxystrobin fungicides. Doc. 96-1 at ¶¶ 34-35; Doc. 12 at ¶ 37 (admitting allegation in Doc. 1 at ¶ 37).

         II. Count I (the '076 Patent) and Count II (the '256 Patent)

         Syngenta moves for summary judgment on these two counts, contending that the evidence shows that the two patents are valid and that Willowood infringed the patents. The Court views the evidence in the light most favorable to Willowood, the non-moving party, as is appropriate at summary judgment.

         a. Validity

         Patents are "presumed valid, " 35 U.S.C. § 282(a), unless the defendant can show invalidity by clear and convincing evidence. Microsoft Corp. v. Mi Ltd. P'ship, 564 U.S. 91, 95 (2011); Insite Vision Inc. v. Sandoz, Inc., 783 F.3d 853, 858 (Fed. Cir. 2015). Willowood presents no evidence of invalidity for either the '076 or '256 Patents. Doc. 137 at 17:13-18:15. The Court will grant summary judgment for Syngenta on this issue.

         b. Infringement

         i. Relevant Facts

         The '076 and '256 Patents claim a group of chemical compounds, which include azoxystrobin. Docs. 1-8, 1-9; Doc. 96-1 at ¶¶ 74, 87. In 2013, W-Ltd bought five kilograms of azoxystrobin technical from its Chinese supplier, Yangcheng Tai He Chemicals Corp., ("Tai He"), and sold it to W-USA. See Doc. 137 at 41:12-: 15; Doc. 105 at 6-7 n.3; Doc. 15 at ¶ 6, W-USA imported the five kilograms of azoxystrobin technical into the United States before the expiration of the two patents. Doc. 96-7 at 3; Doc. 96-9 at 5, 6. W-LLC commissioned Adjutants Unlimited, Inc. to formulate fungicides using azoxystrobin technical and to create product samples. See Doc. 137 at 26:3-:7. W-LLC then commissioned Analytical & Regulatory Chemistry, Inc. (ARC) to analyze the product samples for its EPA applications. Doc. 96-7 at 3; Doc. 96-10 at 41:21-42:10. Before performing these studies, and before importing the azoxystrobin technical, Willowood knew of the '076 and '256 Patents and knew that these activities would likely infringe the patents. See Doc. 96-7 at 3; Doc. 96-10 at 305:11-:18.

         ii. Direct Infringement by W-USA and W-Ltd

         Anyone who "makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention" without the patent holder's permission has infringed the patent. 35 U.S.C. § 271(a).

         Willowood concedes that in 2013, W-USA infringed the '076 and '256 Patents by importing five kilograms of azoxystrobin technical into the United States. Doc. 96-9 at 5, 6. The Court will grant summary judgment against W-USA on these two counts.

         Willowood also concedes that W-Ltd sold azoxystrobin technical to W-USA, which is located in Roseburg, Oregon. See Doc. 15 at ¶ 6; Doc. 16 at ¶ 3. Willowood asserts that the sale did not infringe because the shipment of azoxystrobin technical "FOB China" by W-Ltd, a Hong Kong company, was not a sale "within the United States" under § 271(a). See Doc. 15 at ¶ 3, 6; Doc. 137 at 18:16-:19.

         Free on board or "FOB" is a shipping term that indicates when in the delivery process title transfers from the buyer to the seller. Litecubes, LLC v. N. Light Prods., Inc., 523 F.3d 1353, 1358 n.1 (Fed. Cir. 2008). "FOB China" means that title transferred to the buyer, W-USA, when the seller, W-Ltd, conveyed the goods to the shipper in China. See Id. at 1358 n.1, 1369.

         In analyzing where a sale took place, the Court should not "exalt form over substance." Id. at 1370 (quoting TV. Am. Philips Corp. v. Am. Vending Sales, Inc., 35 F.3d 1576, 1579 (Fed. Cir. 1994)). When other factors indicate an intention to sell infringing products to customers in the United States, shipment FOB a location abroad neither limits the place of sale to the location from which the goods were shipped nor precludes liability under § 271. SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360, 1375 (Fed. Cir. 2010), aff'd sub nom. Glob.-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011); see also Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., 617 F.3d 1296, 1310-11 (Fed. Cir. 2010). To determine the location of the sale, the fact-finder can consider the location of the buyer and seller, N. Am. Philips, 35 F.3d at 1579, "where the products were shipped from and where the products were shipped to, " SEB, 594 F.3d at 1375, "the transfer of tangible property, " Transocean, 617 F.3d at 1311, and "the agreement by which such a transfer t[ook] place." Id.; see also Litecubes, 523 F.3dat 1369.

         Here, the seller, W-Ltd, was in Hong Kong, Doc. 15 at ¶ 3, while the buyer, W-USA, was in the United States. Doc. 16 at ¶ 3. W-Ltd shipped the azoxystrobin technical FOB China to W-USA, for delivery in the United States. See Id. at ¶ 8; Doc. 15 at ¶ 6. There is a genuine issue of material fact on whether the sale took place in the United States. See SEB, 594 F.3d at 1375 (approving instructions to the jury to consider evidence including FOB terms, invoices with U.S. companies, and delivery to the United States to determine the location of the sale). Summary judgment will be denied as to whether W-Ltd infringed.

         iii. Indirect Infringement by W-LLC

         "Whoever actively induces infringement of a patent shall be liable as an infringer." 35 U.S.C. § 271(b). Induced infringement requires (1) "active steps taken to encourage direct infringement, " Takeda Pharm. U.S.A., Inc. v. W.-Ward Pharm. Corp., 785 F.3d 625, 630 (Fed. Cir. 2015) (quotation omitted), and (2) knowledge or willful blindness that the induced acts constitute patent infringement. Glob.-Tech Appliances, 563 U.S. at 766, 768. An active step sufficient for induced infringement includes causing, urging, encouraging, or aiding another to infringe the patent. Takeda Pharm., 785 F.3d at 631 n.3 (citing legal Corp. v. Tokyo Electron Co., Ltd., 248 F.3d 1376, 1379 (Fed. Cir. 2001)).

         W-LLC commissioned Adjuvants to formulate azoxystrobin fungicides from the imported azoxystrobin technical and commissioned ARC to analyze samples of the resulting end products. Doc. 137 at 20:9-: 19, 26:3-:7; Doc. 96-10 at 41:21-42:10. W-LLC knew that this use of azoxystrobin technical by Adjuvants and ARC would infringe Syngenta's patents. Doc. 96-10 at 305:5-:18. By commissioning Adjuvants and ARC to undertake formulation and analysis that required using azoxystrobin technical, W-LLC actively induced infringement of the '076 and '256 Patents. The Court will grant summary judgment in favor of Syngenta against W-LLC.

         III. Count III (the '138 Patent)

         a. Validity

         Syngenta moves for summary judgment as to the validity of the ' 138 Patent, which protects a chemical process used to produce azoxystrobin technical. Willowood proffers Dr. Lipton's expert opinion as evidence that the ' 138 Patent is invalid due to obviousness, see 35 U.S.C. § 103, and asserts that summary judgment should be denied. Syngenta contends that Willowood's evidence of obviousness is insufficient to raise a disputed question of material fact and moves to exclude Dr. Lipton's analysis.

         As noted supra, the burden to show invalidity is on the challenger, and therefore Willowood must show by clear and convincing evidence that at the time of the invention, the patent's claimed subject matter was obvious to a person of ordinary skill in the art. Plantronics, Inc. v. Aliph, Inc., 724 F.3d 1343, 1353 (Fed. Cir. 2013). To prove obviousness, the defendant must explicitly provide "[a] reason for combining disparate prior art references." In Touch Techs., Inc. v. VGO Commc'ns, Ina, 751 F.3d 1327, 1351 (Fed. Cir. 2014); KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 418 (2007) (requiring that arguments explicitly provide an "articulated reasoning with some rational underpinning" to make the asserted combinations (quoting In re Kahn, 441 F.3d 977, 988 (Fed. Cir. 2006))).

         In evaluating obviousness, an expert should take steps "to guard against slipping into use of hindsight and to resist the temptation to read into the prior art the teachings of the invention in issue." Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 36 (1966) (quotation omitted); see KSR Int'l, 550 U.S. at 421 (noting a factfinder "must be cautious of arguments reliant upon ex post reasoning"); Insite Vision, 783 F.3d at 859. In this case, Dr. Lipton stated several times that "the substance of claim 6" was the "starting point" of his obviousness analysis. Doc. 96-15 at 142:8-:21, 144:5-:6. He explicitly admitted that he started with Claim Six and worked backwards. Doc. 96-15 at 140:7-: 19.

         Relying on Interactive Gift Express, Inc. v. CompuServe Inc., 256 F.3d 1323, 1331 (Fed. Cir. 2001), Willowood contends that "an analysis of claim validity must start with die claim itself." Doc. 102 at 13. However, Interactive involved claim construction, not validity, and it does not justify a hindsight analysis. See 256 F.3d at 1331. Willowood also asserts that Dr. Lipton only started with Claim Six to identify prior art and to understand the invention. See MPEP § 2145(X)(A) (9th ed. Nov. 2015). However, his deposition belies this assertion:

Q: So as part of your invalidity analysis you assume that someone of ordinary skill would be interested, in the first instance, in making compound (XV) from compound (X), correct?
A: Since that is the substance of claim 6, that's my starting point.

Doc. 96-15 at 142; 16-:21. Willowood points to no explanation from Dr. Lipton indicating that he had a reason beyond the ' 138 Patent to assume that a person of ordinary skill would be motivated to attempt the intermediate combinations of prior art necessary to achieve the ' 138 Patent's process. Dr. Lipton analyzed obviousness using the "patent itself as [a] roadmap" and "did not articulate reasons why a person of ordinary skill in the art at the time of the invention would combine" particular prior art references. InTouch Techs., 751 F.3dat 1351; see Doc. 96-15 at 146:11-:20.

         Because of the hindsight embedded in his analysis and the lack of reasons for combining the relevant prior art, Dr. Lipton's expert opinion is not the product of a reliable method and will not help the jury determine obviousness. See Fed. R. Evid. 702; InTouch Techs., 751 F.3d at 1351-52. The Court will grant Syngenta's motion to exclude this evidence. Without any additional evidence on the validity of the ' 138 Patent, Willowood cannot meet its burden to demonstrate obviousness.[4] The Court will grant summary judgment for Syngenta on the issue of the validity of the '138 Patent.

         b. Infringement

         The '138 Patent claims a process for preparing a group of compounds, including azoxystrobin, by performing an electrification step followed by a condensation step. See Doc. 96-1 at ¶ 94-99, 111-13; Doc. 1-10 at 16-17. It is undisputed that W-Ltd buys azoxystrobin technical from Tai He and sells it to W-USA, and that W-USA imports the azoxystrobin technical into the U.S. and uses it to formulate its end products, which W-IXC sells to the public. Doc. 9640 at 64:4-: 15, 278:4-: 14; Doc. 96-8 at 3. It further is undisputed that the azoxystrobin technical that W-Ltd buys from Tai He is made overseas by a process that contains the etherification and condensation steps set forth in the ' 138 patent See Doc. 99-9 at 23, 28;[5] Doc. 99-8 at 4-5, 7; Doc. 137 at 40:9-41:10.

         It is an act of infringement to "import[] into the United States or offer[] to sell, sell[], or use[] within the United States a product which is made by a process patented in the United States." 35 U.S.C. § 271(g). Syngenta contends that it is entitled to summary judgment on infringement because the Willowood entities infringed the ' 138 Patent under § 271(g) by importing into the United States azoxystrobin technical made by the claimed process, using it to formulate end products, and selling the azoxystrobin technical and resulting end products in the United States. Willowood asserts that § 271(g) requires ...


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