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May 12, 2022

Hit the Brakes: Experimental Use, Enhanced Damages Determinations Require Redo

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The US Court of Appeals for the Federal Circuit reversed and remanded a district court decision regarding experimental use under 35 U.S.C. § 102(b) and the application of enhanced damages based on an allegedly flawed noninfringement and invalidity opinion. Sunoco Partners Mktg. & Terminals L.P. v. U.S. Venture, Inc., Case Nos. 20-1640; -1641. (Fed. Cir. Apr. 29, 2022) (Prost, Reyna, Stoll, JJ.)

Sunoco sued Venture for infringement of four patents related to blending butane into gasoline. Venture argued that certain patent claims were invalid because they were subject to the on-sale bar of 35 U.S.C. § 102(b). The district court found that the sale at issue was primarily for experimentation and that the on-sale bar did not apply. Venture also argued that certain claim terms required measuring the actual vapor pressure of the butane and gasoline, but the district court rejected this argument. The district court found infringement and awarded Sunoco $2 million in damages, which it trebled to $6 million after finding that Venture lacked a good faith belief of invalidity or noninfringement because the legal opinion Venture relied upon was flawed. Venture appealed.

On appeal, Venture challenged numerous issues, including the district court's rejection of its on-sale bar defense, construction of two claim terms and decision to enhance damages.

The Federal Circuit first addressed the district court's finding that the on-sale bar did not apply to certain claims of two of the asserted patents. Reviewing de novo, the Court applied the Supreme Court's 2019 Helsinn v. Teva decision, which requires that the on-sale bar applies if the invention was the subject of a commercial sale and  ready for patenting. Analyzing the first prong, the Court looked to the contract language of the sale at issue. The inventor's company offered to sell and install its butane blending technology at a customer's fuel terminal more than one year before filing the patent application. The terms of the agreement required that the customer commit to purchasing at least 500,000 barrels of butane as consideration for the installation of the fuel mixing system. The Court noted that this agreement expressly described the transaction as a "sale" and did not reference any experimental purpose.

The Federal Circuit was not swayed by the lower court's view that the contract did not require the customer to pay for the system directly, finding that a commitment to buy product in the future constituted a sale. The Court also gave little weight to the preinstallation testing terms of the agreement, finding that those tests were not experiments, but rather tests to confirm that the equipment was operating as contractually promised. Additional contract terms further cemented the Court's view that this transaction was a sale, including language that the technology had already been "developed" and that title to the equipment transferred to the customer. The Court concluded that the sale of the system to the customer was not primarily for experimentation. The Court reversed the district court's experimental-use determination and vacated its infringement determination, directing the lower court to analyze the second prong to determine whether the invention was ready for patenting at the time of the contract such that the on-sale bar applied.

The Federal Circuit next turned to the district court's construction of two claim terms relating to the vapor pressure of the butane and gasoline. Certain asserted claims required that the butane-gasoline blend ratio be determined from a vapor pressure of the gasoline stream and a vapor pressure of the butane stream. Venture argued that the claim language required that vapor pressure of the butane stream be determined by a measurement taken from the stream, whereas Sunoco argued that there was no requirement to determine the "actual" butane vapor pressure and that estimates could be used. The Court agreed with Sunoco, finding no requirement that the actual vapor pressure be measured. Finding that the plain language of the claim term did not expressly require an actual measurement, the Court looked to a passage in the specification stating that the vapor pressures are "preferably measured." The Court affirmed the district court's finding, concluding that taking actual measurements was merely an optional preference.

The Federal Circuit also addressed another claim term relating to vapor pressure. An asserted method claim included limitations for receiving a measurement of the gasoline vapor pressure and calculating a blend rate. Venture argued that the measured vapor pressure must be used to calculate the blend rate and that it only measured gasoline vapor pressure data for recordkeeping purposes. The Court disagreed with this restriction, finding that the vapor pressure data did not need to be used in the blend rate calculation. The Court reasoned that the claim language did not state that the measurement must be used in the blend-rate calculation and that the claim's use of "comprising" language implied that the calculation step could relate to unclaimed elements. The Court affirmed the district court's claim construction and judgment that Venture infringed the patent limitation using this language.

The Federal Circuit next turned to the district court's enhanced damages determination. The district court enhanced damages for four reasons:

  • Venture effectively copied the patented system.
  • The noninfringement opinion letter Venture relied on did not show a good faith belief of noninfringement.
  • Venture expanded its butane blending business post-suit.
  • Venture's litigation conduct was "less-than-ideal."

The Court reviewed these findings for abuse of discretion.

The Federal Circuit reasoned that any copying of the patented system and post-suit expansion stemmed from Venture's reliance on the noninfringement opinion. The Court explained that the opinion of counsel must be competent, or it is of little value in showing a good faith belief of noninfringement. The district court found that the opinion letter was flawed and that the lawyer lacked basic knowledge about a type of tank used by Venture. The Federal Circuit found that this was a clear factual error. The Court looked to testimony that the district court ignored that showed that the lawyer was simply confused about the usage of a term by Sunoco's lawyer, and that other testimony established that he did in fact understand the technology. The Court found that this error undermined three of the district court's grounds for enhancing damages. Having found three of the four grounds to be flawed, the Court noted that acts of litigation misconduct standing alone are not sufficient for an increased damages award. The Court thus vacated the district court's damages enhancement and remanded for a reassessment of enhancement.

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