Elysium's Opposition to ChromaDex's Motion to Dismiss as Moot Elysium's Patent Misuse Cl
I'm not going to go deep into in this time, because I feel like a stable boy with a giant bucket to catch whatever comes out of the back end of the Elysium horse -- not a fun job.
But speaking of a change of horses, Foley Hoag has excreted this brief into the federal judicial system, not Skadden. Standing behind a slightly less-expensive horse turns out to be a comparable experience.
Here, read it yourself:
Just kidding; I'll degrade myself, and the reason why is because there is a bombshell in the brief's introduction:
In seeking to divest the Court of jurisdiction, ChromaDex has failed to provide the one thing the caselaw ChromaDex itself cites requires: a covenant not to sue for infringement of its patents. Instead, it has reserved all rights to enforce the patents against Elysium.
On the surface, Elysium is merely arguing that it can't know whether the patent misuse matter is resolved if ChromaDex might yet sue it for patent infringement.
But if you look one-level deeper, this is an astonishing assertion.
Obviously Elysium was not infringing the patent when it was distributing the ingredients that it licensed. Yes, Elysium did something very bad -- obviously breach of contract, and arguably fraud -- but there was no patent infringement claim arising from the facts that are the subject of this lawsuit.
So if Elysium is looking for a covenant not to be sued for patent infringement, that strongly suggests to me that Elysium is worried that it is currently infringing with its new Basis formulation.
And if they are worried, I'm sure they are worried for a good reason. Elysium would NOT be worried about a frivolous lawsuit -- they have plenty of lawyers to handle routine litigation (indeed, Elysium is currently battling IP fights in three different federal fora concurrently: Here in C.D.Cal, IPR before PTAB, and a trademark infringement case in the SDNY.)
So get out your popcorn, because ChromaDex probably won't release Elysium from liability for patent infringement unrelated to this litigation. Indeed, based on Elysium's brief, I'd say it's just a matter of time before the ChromaDex's patent infringement suit gets filed.
Elysium's argument comes down to this: "How do we know you're going to pay us our damages?"
To give you a sense of the highly refined substance that is being offered to the Court in this brief, take a look at this sentence from the "Facts" section of the brief (page 2):
Under the Trademark Agreement, Elysium was required to pay royalties on sales of any product containing an ingredient supplied by ChromaDex, regardless of whether Elysium used ChromaDex’s licensed trademarks. Id. ¶ 56. ChromaDex’s actions misused its patents by conditioning its sale of NR (and thus access to its patents) on an agreement to license its trademarks. Id. ¶¶ 39, 47-52.
I view this account as shamefully honest, because by Elysium's own admission, the royalties were paid on product sales, and the trademarks had nothing to do with it. Therefore, Elysium was not charged for the trademarks, and the whole factual foundation of the patent misuse claim collapses.
The shamefully DIS-honest part of Elysium''s first sentence is that it refers to a "Trademark Agreement" -- there is no such thing. It's called a "Trademark License and Royalty Agreement," and it's called that for a reason -- because it governs two separate things, not one. I wonder if the court will notice?
You don't believe me that the agreement in question is not called what Elysium called it? Read it for yourself.
The next sentence in the brief is also Shamefully DIS-honest:
In December 2016, after Elysium raised issues with ChromaDex’s compliance with the parties’ agreements and sought an audit, ChromaDex abruptly terminated the NR Supply Agreement. Id. ¶¶ 83-84. Shortly thereafter, ChromaDex filed this lawsuit alleging...
That is called a false timeline, and it leaves the impression that ChromaDex abruptly terminated the agreement after they received an audit request. What Elysium fails to mention is that another thing happened, too: Elysium refused to pay for a multi-million dollar order after it was delivered.
This kind of BS-ing the facts is bad form, I was taught not to do it, and it is what is NOT supposed to happen when you hire big law firms in federal court. I hate what Skadden does, but at least they do it competently. This is Foley's brief.
I guess Elysium agrees with me that the federal court in this case has been fast asleep and will believe anything that it is fed. We'll see if that remains true.
Rather than review the brief in detail, I will summarize thus:
Elysium is conflating its Patent Misuse claim (which involves sums allegedly due for trademark licensing) with ChromaDex's potential future claim for patent infringement based on a completely different set of operative facts, which is Elysium's apparent subsequent patent infringement.
I think that even this federal court would not hold that a plaintiff's mooted patent misuse claim could be revived if the plaintiff credibly threatened to infringe? This strikes me as nonsense.
Wait, here's more BS verbal sophistry! Elysium says,
The reason courts require a covenant not to sue for infringement to moot a claim seeking a declaratory judgment of patent invalidity or unenforceability is obvious...
That's sophistry because the declaratory judgment in this case is not for patent invalidity or unenforceability, but for Patent Misuse. Patent Misuse does not render a patent invalid or unenforceable -- or at least, not after the alleged misuse has been purged.
That's ChromaDex's point -- the alleged misuse of the trademark agreement has been purged, so there is no longer any possibility that the patent can be found invalid or unenforceable due to patent misuse.
What is this I say, that purging the misuse allows enforcement of the patent? You don't need to be a legal expert to find it; it's the blackest of black letter law -- you can read it right on wikipedia:
Most types of misuse can be erased (or "purged") so the patent is valid again by abandoning the misusing practice and causing its effects to fully dissipate.
So Elysium's absurd argument comes to this: The only way ChromaDex can purge a patent misuse is by forfeiting the patent. The law certainly does not say anything like that.
Elysium next argues that under MedImmune, a licensee is entitled to seek a declaratory judgment to resolve whether or not they are infringing, rather than to risk treble damages.
That may be a correct reading of MedImmune, but it's irrelevant to the Patent Misuse claim here, which is resolved.
If Elysium wants to determine whether it has a right to infringe ChromaDex's patent, that will require ANOTHER declaratory judgment action, one seeking to determine the validity of ChromaDex's patent -- not unlike what Elysium is actually brewing in its IPR proceeding before the PTAB.
The fact that Elysium might also be asserting a DIFFERENT Declaratory Judgment action relating to the general validity of ChromaDex's intellectual property does not entitle it to pursue THIS declaratory judgment action, which is about something else.
Even if Elysium is right that "Under the totality of the circumstances, there is a real and immediate controversy between the parties," that controversy is not about patent misuse; it is about Elysium's apparent desire to infringe even absent misuse.
That controversy is not before this court.