Federal Circuit Rejects A123 Bid to Head Back to Boston

November 23rd, 2010 by Eric Lane Leave a reply »

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In a previous post, I discussed the patent litigation between Boston area lithium ion battery maker A123 Systems Inc. (A123) and Canadian utility Hydro-Quebec (H-Q).

A123 initially brought a suit in April 2006 against H-Q in federal court in Boston as a declaratory judgment (DJ) action for non-infringement and invalidity of U.S. Patent Nos. 5,910,382 (’382 Patent) and 6,514,640 (’640 Patent).  H-Q is the exclusive licensee of the ’382 and ’640 Patents.

The ’382 and ’640 Patents are entitled “Cathode materials for secondary (rechargeable) lithium batteries” and relate to host materials for use as electrodes in lithium ion batteries.  The patented materials provide a larger free volume for lithium ion motion that allows higher conductivity and therefore greater power densities.

In September 2006 the court dismissed the case without prejudice when the two patents began re-examination proceedings in the U.S. Patent and Trademark Office (PTO).  

Also in September 2006, H-Q and the University of Texas (UT), which owns the ’382 and ’640 Patents, sued A123 for infringement of the patents in the Northern District of Texas.

In spring 2009, after the PTO completed its re-examination of both patents, A123 asked the court in Boston to reopen its DJ action.  A123 argued that the Boston case should take precedence over the pending Texas action because it was the earlier filed case.

However, the court ruled that the Boston action could not be reinstated because A123 had failed to join the University of Texas (a123_memorandum.pdf).

The court held that UT was a necessary party as the owner of the patents-in-suit because UT had not transferred all substantial rights in the patents to H-Q (the H-Q license contained some field of use restrictions).

Not only was UT not joined by A123, but UT could not be joined as a defendant in the Boston suit, the court held, because it is immune from suit as a state university.  Under the Eleventh Amendment, a federal court cannot hear a suit against a state without the state’s consent.

A123 appealed to the Court of Appeals for the Federal Circuit (the appellate court that hears all patent appeals).

Earlier this month the Federal Circuit affirmed the district court decision, denying A123′s bid to re-open its declaratory judgment action in its home court in Boston.

On appeal, A123 challenged the district court’s determination that UT had not transferred all substantial rights to the patents to H-Q, arguing that in a prior lawsuit and in a letter to A123 H-Q held itself out as holding all rights to the patents, including the right to enforce the patents.

The Federal Circuit disagreed and found the evidence supported the district court’s determination.  In particular, witness testimony indicated that H-Q holds an exclusive license to two fields of use claimed in the patents:

(1) an exclusive license to manufacture, use, sell, import, and offer for sale rechargeable batteries with a solid electrolyte, gelled, plasticized or not plasticized, and

(2) an exclusive and worldwide license to manufacture and sell lithium iron phosphate (“LiFePO4″) in bulk quantities for all applications, including, but not limited to, secondary batteries. 

Pursuant to the license, UT retained the following rights:

to license other parties in all other patented fields of use, including (1) the production, use, and sale of rechargeable batteries, including those with lithium manganese, lithium titanium, and lithium nickel cathod ematerial, having a liquid electrolyte and (2) the use of lithium iron phosphate with liquid electrolytes.

The Federal Circuit found no representations by H-Q that contradicted this testimony and noted that even if there had been, “such a unilateral representation could not alter the UT’s own rights in the patents.”

On Eleventh Amendment sovereign immunity, the Federal Circuit rejected A123′s argument that UT waived its immunity by filing suit against A123 for infringement of the patents in Texas.  The court reviewed its pertinent precedent on this issue, which holds:

where a waiver of immunity occurs in one suit, the waiver does not extend to an entirely separate lawsuit, even one involving the same subject matter and the same parties 

So A123 is stuck as a defendant in Texas, where the infringement action is moving forward.  In a scheduling order issued yesterday (scheduling_order.pdf), the court set the claim construction hearing for early December.

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