Scott Daniels | January 2, 2013
This is a good story.
It begins in 2003 when U.S. Patent No. 6,615,065 issued to Somanetics. Two years later, Somanetics filed a reissue application based on the ‘065 patent. In 2008 the Patent Office granted ex parte reexamination of the ‘065 patent based on a request filed by CAS, and the ‘065 reissue application and the ‘065 reexamination were merged into a single proceeding. Then in 2009, while the merged reissue/reexamination was pending, Somanetics sued CAS for infringement of the ‘065 patent.
In July 2010, Somanetics was acquired by Nellcor, and in October of that year, Nellcor settled the infringement action against CAS. Among CAS’s covenants in the settlement agreement was a promise that it would not challenge Nellcor’s patent, specifically that it would not
challenge or assist a Third Party in challenging the validity, enforceability or ownership of the Litigated Patents in the United States Patent and Trademark Office (collectively, the “CAS Covenant”). Notwithstanding the foregoing sentence, if the Litigated Patents are re-asserted against CAS after the Effective Date of this Agreement, CAS may challenge (I) the validity of the Litigated Patents and/or (ii) the enforceability of the Litigated Patents due solely to alleged inequitable conduct.
(Emphasis added). The phrase “Litigated Patents” was expressly defined in the settlement agreement to mean “U.S. Patent Nos. 5,482,034, 5,902,235 and/or 6,615,065.” (Emphasis added).
Soon thereafter, at the Patent Office, Nellcor amended its pending claims in the merged reissue/reexamination to recite a “cross-talk” feature. One month later, CAS filed a Protest in reissue/reexamination, asserting that Nellcor’s amended claims were unpatentable over certain prior art, including a newly cited reference. (Protests are quite rare and typically are filed against reissue applications).
The examiner then rejected the amended claims on the basis of the newly cited reference filed by CAS. Subsequently, the examiner withdrew the rejection, replacing it with a new rejection. According to Nellcor, the new rejection, though not relying on the reference cited by CAS, was based in part on the reasoning presented in the CAS Protest.
In December 2011, Nellcor sued CAS for filing the Protest and thereby breaching the no-challenge provision of their settlement agreement. Nellcor moved for summary judgment; it also asked for temporary and permanent injunctive relief prohibiting CAS from attacking the ‘065 patent at the Patent Office in the future. Last month Judge Sean Cox of the Eastern District if Michigan denied Nellcor’s motions, concluding that CAS’s Protest did not constitute a breach of the settlement agreement. Nellcor v. CAS, 2012 U.S. Dist. LEXIS 179270.
For Judge Cox, the decisive issue was whether the definition of “Litigated Patents” in the settlement agreement “included the amended claims in the [‘065] reissue/reexamination.” The Judge began his analysis by citing 37 C.F.R. § 1,565(d) which provides, essentially, that a merged reissue/reexamination follows the procedures for reissue applications. He then referred to U.S.C. §§ 251, 252 for the proposition that “at the conclusion of a reissue proceeding, the original patent is ‘surrendered’ and the USPTO will grant a new reissued patent if the patent owner is entitled to a patent.” He distinguished such reissue applications from reexaminations which conclude with a reexamination certificate that retains the original patent number.
Judge Cox concluded that the amended claims in Nellcor’s pending reissue application could lead to a new patent, not a certification of the original ‘065 patent. The Judge therefore found that CAS’s Protest, directed against a reissue application, was not an attack on the ‘065 patent, and CAS had not breached the settlement agreement.