IP Law Daily ‘Single-entity’ rule not applicable to dispute over process of making fungicide product
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Wednesday, December 18, 2019

‘Single-entity’ rule not applicable to dispute over process of making fungicide product

By Thomas Long, J.D.

Liability under 35 U.S.C. § 271(g) for importing and selling infringing products made abroad did not require the patented process to have been practiced by or under the control of a single entity.

The "single-entity rule"—which requires that all steps of a patented process be performed by or at the direction or control of a single entity before infringement liability under that section can attach—was erroneously applied by a district court to an infringement dispute over a patented process for manufacturing the fungicidal compound azoxystrobin, the U.S. Court of Appeals for the Federal Circuit has held. Weighing an issue of first impression, the court reasoned that the acts that give rise to liability under 35 U.S.C. § 271(g) are the importation, offer for sale, sale, or use within this country of a product that was made abroad by a process patented in the United States, rather than practicing the patented process abroad. Therefore, whether the process is practiced by a single entity is immaterial to the infringement analysis under that section. The court accordingly reversed the district court’s determination on summary judgment that the U.S.-based seller of a generic fungicide product did not infringe under Section 271(g) by importing and selling infringing products made in China by an affiliated manufacturer. The appellate court also held that the district court prematurely decided that copyright infringement claims over the defendants’ alleged copying of product labels were precluded by the Federal Insecticide Fungicide and Rodenticide Act. This decision was vacated and the district court was instructed on remand to conduct further proceedings to determine whether the copyrighted labels were protected under existing copyright doctrines and were necessary for the expedited approval of the defendants’ generic pesticide product (Syngenta Crop Protection, LLC v. Willowood, LLC, December 18, 2019, Reyna, J.).

Syngenta Crop Protection, LLC, sued Willowood, LLC, Willowood USA, LLC, Willowood Azoxystrobin, LLC, and Willowood Limited in the U.S. District Court for the Middle District of North Carolina for patent infringement, asserting four patents directed to a fungicide compound and its manufacturing processes. Syngenta also accused the defendants of engaging in copyright infringement by copying its product labels. The district court dismissed the copyright infringement claims after finding that they were precluded by the Federal Insecticide Fungicide and Rodenticide Act (FIFRA). In a March 2017 opinion, the district court granted-in-part and denied-in-part summary judgment in favor of Syngenta with respect to patent infringement. After a jury trial, the district court entered judgment in favor of Willowood Limited on all patent infringement claims; in favor of all defendants on infringement of one patent in suit; and against Willowood, LLC, and Willowood USA, LLC, on infringement of the remaining three patents. The district court denied Syngenta’s motions for judgment as a matter of law. Both parties appealed various aspects of the district court’s orders.

Patents-in-suit. Syngenta owned four patents covering azoxystrobin, a fungicidal compound used to protect various crops, and the process for making it. Those patents were U.S. Patent Nos. 5,602,076 ("the ‘076 Patent"), 5,633,256 ("the ‘256 Patent"), 5,847,138 ("the ‘138 Patent"), and 8,124,761 ("the ‘761 Patent"). The ’076 patent was entitled "Certain Fungicides, Pesticides and Plant Growth Regulants." The ’256 patent was entitled "Certain Pyrimidinyloxy-phenyl Acrylates, Derivatives Thereof and Their Fungicidal Use." The ’076 and ’256 patents (collectively, "the Compound Patents") expired on February 11, 2014; they were directed to a group of chemical compounds, including azoxystrobin. The ’138 patent was entitled "Chemical Process" and expired on December 8, 2015. The ’138 patent was directed to a two-step process for manufacturing azoxystrobin that included an etherification step followed by a condensation step. The ’761 patent, entitled "Processes for the Preparation of Azoxystrobin Using DABCO as a Catalyst and Novel Intermediates Used in the Processes," was not set to expire until April 15, 2029. The ’761 patent was directed to a process of using the chemical catalyst 1,4-diazabicyclo[2.2.2]octane ("DABCO") during the condensation step to manufacture azoxystrobin.

Asserted copyrights. Syngenta marketed and sold its fungicide products under several brand names, including QUADRIS® and QUILT XCEL®. Both of those products were sold with detailed multi-page labels that provided directions for use, storage, and disposal, as well as first-aid instructions and environmental, physical, and chemical hazard warnings. Syngenta registered these two labels with the U.S. Copyright Office on March 25, 2015.

Accused products. The Willowood parties sold crop protection products, using generic azoxystrobin fungicides Azoxy 2SC and AzoxyProp Xtra. Azoxystrobin technical, a relative pure form of the chemical compound azoxystrobin, was the active ingredient in both Willowood’s and Syngenta’s products. Syngenta argued that the Willowood products infringed various claims of the patents-in-suit and unlawfully copied the Syngenta products’ copyrighted labels.

Copyright claims. Syngenta challenged the district court’s summary judgment order dismissing its copyright claims in their entirety. The dismissal was based on the court’s holding that FIFRA "precludes copyright protection for the required elements of pesticide labels as against the labels of me-too [i.e. generic] registrants." In the Federal Circuit’s view, this ruling was premature. "Because the text of FIFRA does not, on its face, require a me-too registrant to copy the label of a registered product, the statute only conflicts with the Copyright Act to the extent that some particular element of Syngenta’s label is both protected under existing copyright doctrines and necessary for the expedited approval of Willowood’s generic pesticide product," the appellate court said. "This determination requires this court to review the merits of Syngenta’s copyright claims, which the district court did not reach."

The Federal Circuit vacated the district court’s grant of summary judgment on Syngenta’s copyright claims and remanded for further consideration. On remand, the district court was to first decide whether the Copyright Act would prohibit Willowood’s use of any portion of Syngenta’s label. For example, the appellate court said that the district court should consider whether the fair-use doctrine or limits on copyrightable subject matter, such as the merger doctrine, would eliminate infringement liability. "Only if the district court concludes that the Copyright Act would in fact prohibit Willowood’s conduct in a manner inconsistent with the purposes of FIFRA should it revisit the question of whether and to what extent FIFRA precludes Syngenta’s copyright claims for any part of its pesticide labels," the appellate court explained. In the absence of a "truly irreconcilable conflict between Copyright Act liability and implementation of FIFRA," the copyright claims should not be precluded.

Infringement under Section 271(g). Syngenta next challenged the district court’s interpretation of 35 U.S.C. § 271(g) to require that all steps of a patented process be performed by or at the direction or control of a single entity before infringement liability under that section can attach, the so-called "single entity rule." On summary judgment, the district court held that that a genuine issue of material fact exists as to whether a "single entity" performed the patented process disclosed by the ’138 patent because Willowood presented evidence that a third-party, not affiliated with Willowood, performed portions of the manufacturing process.

Noting that this was an issue of first impression, the Federal Circuit concluded that the district court erred by imposing a single-entity requirement under Section 271(g). Pursuant to the statutory language, the acts that give rise to liability under Section 271(g) are the importation, offer for sale, sale, or use within this country of a product that was made by a process patented in the United States. According to the court, nothing in the statute suggests that liability arises from practicing the patented process abroad. Therefore, whether the process is practiced by a single entity is immaterial to the infringement analysis under that section, the court said. The single-entity rule was derived from Section 271(a), which states that "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent." The district court’s conclusion that Section 271(g) imposed a similar requirement was erroneous, said the Federal Circuit, because infringement liability under the two sections is distinct. Whereas direct infringement under Section 271(a) of a process patent occurs only when a single party practices every step of the claimed process, liability under Section` 271(g) is not predicated on practicing the claimed process, but rather on importing, offering for sale, selling, or using a product. Legislative history also made it clear, in the court’s view, that practicing a patented process abroad does not trigger liability under Section 271(g) in the same manner that practicing a patented process domestically does under Section 271(a). Section 271(a) covers all patented processes, whether or not they result in a product. Infringement under Section 271(g) instead requires importation, sale, offer for sale, or use within the United States of a product made by a patented process. Applying a single-entity requirement to the practice of a patented process under Section 271(g) would impose an undue evidentiary burden on patentees that is contrary to the intent of Congress, the Federal Circuit added.

It was undisputed that Willowood USA imported into the United States an azoxystrobin compound that was manufactured abroad using the process patented by the ’138 patent. The Federal Circuit therefore reversed the district court’s judgment that Willowood USA did not infringe the ’138 patent under Section 271(g). However, substantial evidence supported the jury’s finding that Willowood China did not import into the United States or sell or offer for sale in the United States the azoxystrobin compound at issue, so the appellate court affirmed the district court’s judgment that Willowood China did not infringe the ’138 patent under Section 271(g). Because neither the jury nor the district court made any findings concerning Willowood LLC’s role, if any, with respect to the azoxystrobin compound made using the process claimed in the ’138 patent, the Federal Circuit vacated the district court’s judgment that Willowood LLC did not infringe the ’138 patent under Section 271(g) and remanded for further proceedings. The appellate court also affirmed the district court’s conclusion that Willowood China did not infringe the other three patents-in-suit.

This case is Nos. 18-1614 and 18-2044.

Attorneys: Russell Evan Levine (Kirkland & Ellis LLP) for Syngenta Crop Protection, LLC. Steven Edward Tiller (Whiteford, Taylor & Preston LLP) and Alan Duncan (Mullins Duncan Harrell & Russell PLLC) for Willowood, LLC, Willowood USA, LLC, and Willowood Azoxystrobin, LLC.

Companies: Syngenta Crop Protection, LLC; Willowood, LLC; Willowood USA, LLC; Willowood Azoxystrobin, LLC

MainStory: TopStory Copyright Patent FedCirNews

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