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  • Shelly Albaum

Bogus Patent Misuse Claim Lives


So yesterday Judge Carney denied ChromaDex's motion to dismiss Elysium's bogus (or "fictitious," if you prefer) Patent Misuse claim. You can read the judge's order here:

Order Denying Dismissal of Patent Misuse Claim

It is important to note that the standards for dismissing the claim as moot have nothing to do with the underlying merits of the claim. The court's opinion is a discussion of the legal doctrine of mootness, which is interesting to nobody on the planet but a few law professors who wonk out on civil procedure. But it does have real world implications.

So I will just spend a minute on the technical legal issue of mootness, which comes down to this: If I say, "Fine, you win, you can have what you want, I'll put the funds in escrow, and the escrow agent will give you whatever you are entitled to," does a court have a legal right to continue adjudicating the matter?

Judge Carney says, "Yes, because the money is not yet in your wallet, and because you might have some future claim against me based on a different cause of action and different facts having nothing to do with Patent Misuse, but involving the word Patent, and so you two get back in the ring, and while my clerk goes to refill the popcorn tub."

Although I got "A's" in Intellectual Property and in Antitrust from Professor (now Judge) John S. Wiley, I did worse in Civil Procedure, so you don't want to hear my analysis of mootness doctrine.

But I would point out the two fundamental ongoing tragedies of the Central District's handling of this case.

First, the purpose of the federal court system is to resolve disputes, not to develop legal doctrine, and so the federal court here is a willing co-conspirator with Elysium to unnecessarily prolong this litigation, racking up costs for both parties and largely defeating the purpose of the court system. Worse, the court sends an immoral a message to future litigants that if you cannot sustain millions of dollars in legal fees, then the federal court cannot provide justice in what ought to be a fairly routine legal dispute -- customer fails to pay its bills -- because the Court will indulge the customer's legally tenuous and even fictitious counterclaims all the way to trial.

Second, there is no denying that the federal court's reasoning continues to be crude and unsubtle. The parties have once again provided a hundred pages of incredibly thoughtful, detailed, assiduously researched, and well-presented argument, which the court blindly bulldozes to announce that a potential future patent infringement claim is sufficient to breathe life into a dead patent misuse claim.

You'd never know from the court's opinion -- although you would from the parties' briefs -- that Patent Misuse and Patent Infringement are totally different causes of action, with different types of proof, different remedies -- and most important, different elements. The thing that was mooted was the predicate for a Patent Misuse claim. The fact that Elysium might ALSO be infringing ChromaDex's patents is a completely different issue.

If Elysium would like the federal government to decide whether its behavior infringes ChromaDex's patents, there are ways for it to do that. For example, it can challenge the patents' validity before the PTAB (which it is doing) or it can file an action in federal court for a declaration that ChromaDex's patents are invalid or that Elysium's actions are non-infringing.

A normal, responsible court would (1) try to resolve, rather than to unnecessarily prolong the dispute, and (2) keep its causes of action straight, and explain to Elysium that Patent Misuse and Patent Infringement are two totally different concepts, and we don't use the mootness doctrine to conflate two different things here in the Central District.

But that is not the kind of court we have.

I would support my general position that the court is not doing its job and is willfully ignorant with just one example, although there are plenty more in the briefs. This quote from the Federal Circuit -- which is where Patent Litigation expertise lies in he federal court system, and which CDCal ought not to be casually disregarding -- appears in one of Cooley's bulldozed briefs, but Judge Carney does not mention it in his opinion:

“A patentee has no obligation to spend the time and money to test a competitors’ product nor to make a definitive determination, at the time and place of the competitors’ choosing, that it will never bring an infringement suit. And the patentee’s silence does not alone make an infringement action or other interference with the plaintiff’s business imminent. Prasco, 537 F.3d at 1341”

Apparently the Central District's view is that the Federal Circuit is not mandatory authority and so its guidance can be disregarded. There is a technical sense in which that is true, but there is a deeper sense in which it is not true, and federal judges confronting ferociously argued highly technical intellectual property issues might learn from appellate courts that practice this kind of law for a living.

So, into Discovery we go. After Discovery, we'll probably see another round of dispositive motions that test the strength of the evidence. At that time, Judge Carney will have another chance to look at whether Elysium produced any evidence that the thing he allowed them to try to prove actually happened -- that ChromaDex for no conceivable reason made Elysium pay for ChromaDex's trademarks (potentially, theoretically illegal) instead of for ChromaDex's Niagen (perfectly legal). If not, Judge Carney should dispose of the claim at that time.

Last spring, ChromaDex bet that if it wrote off about $750K in Niagen royalties it could avoid even more than that in litigation costs. That turns out to have been a bad bet, because they lost the $750K claim and STILL got the litigation costs. But it wasn't a stupid bet. It should have worked. It was legally sound. A different court would have handled it differently.

#ChromaDex #ElysiumHealth #CDXC #Litigation

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