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  • Shelly Albaum

Elysium's Motion to Stay in Delaware


Elysium has filed in Delaware (1) an Amended Answer and (2) a motion to stay Chromadex's patent infringement action. You can read them here:

Elysium's Amended Answer







Elysium's Motion to Stay

Amended Answer

The only difference between the Amended Answer and the original Answer is the addition of three new affirmative defenses: License, Waiver, and Patent Exhaustion.

Footnote 6 of the Elysium's Motion to Stay gives us a hint as to what those affirmative defense are for:

6. ChromaDex indicated, during the parties’ meet-and-confer regarding this motion, that it may argue that Elysium infringed the asserted patents when it sold accused product containing NR previously supplied by ChromaDex.

I think what's going on here is that ChromaDex is preparing to argue that Elysium's patent infringement did not begin only when Elysium started producing Mystery NR, but before that when Elysium intentionally and deceitfully ordered enough product to allow it to sell beyond the license period. The new affirmative defenses speak to that, but I can imagine good arguments on both sides.

Motion to Stay

Elysium says that the patent infringement case should be put on hold until the PTAB determines whether the patents are even valid, and until the California litigation determines whether Elysium's Patent Misuse defense prevents ChromaDex from asserting the patents against Elysium anyway.

The very first part of Elysium's argument makes some sense, and I can imagine the Court granting a stay for a short time, but each successive argument by Elysium is weaker.

Stay Based on PTAB '086

Elysium's first and best argument is that the PTAB might decide that the '086 patent is invalid, and the PTAB is statutorily required to resolve the matter within 12 months of instituting the trial, which would be January 19, 2019. So why not wait a couple months and maybe avoid the work?After all, ChromaDex won't be prejudiced -- they weren't in a hurry to file the infringement action, and Elysium isn't trying to delay a resolution, given that Elysium has been trying to get this patent invalidated for almost a year and a half.

That makes a fair amount of sense (putting aside the possibility that the PTAB might not timely respond, like the FDA did not respond), and I wouldn't be surprised to see a stay granted pending resolution of the PTAB proceeding.

A stay doesn't make a HUGE amount of sense, because no matter what the PTAB says their ruling is likely to be appealed to the US Court of Appeals for the Federal Circuit, so Elysium's vision of a speedy resolution is probably an optical illusion, but it still might make sense to wait that long.

Stay Based on PTAB '807

Elysium ventures onto MUCH thinner ice when it proposes that the PTAB proceeding might completely invalidate the '807 patent, too, because the PTAB might decide to reinterpret the phrase "isolated" in the '086 patent, and it might do that in such a way that Claim 2 of the '086 patent is invalidated, and it might then somehow apply that to the '807 patent, too.

This is wishful thinking, which is not the legal standard for granting a stay. Regardless of what you think of the logic of Elysium's proposal, a careful read of the transcript of the PTAB hearing does not reveal -- at least to me -- a lot of evidence that the PTAB is eager to revise their definition of "isolated" in Claim 2, even if they are legally required to review their own holding. On page 20 of the transcript of the oral hearing, one of the Patent Judges asks Elysium "Is 'isolated' still at issue in this case, counsel?" It is, or was, but maybe not very much.

So since the '807 Patent is not before the PTAB, and there is no strong reason to believe that the PTAB's ruling on '086 will impact their prior determination on '807, the PTAB proceeding doesn't actually provide any justification to stay a claim for infringement of the '807 patent.

Is it economical to hold up infringement claims on two patents just because there MIGHT be issues with one of them? Maybe not. I'm sure ChromDex's opposition brief will have something to say about that.

Stay Based on California Proceeding

Then Elysium goes entirely off the rails and proposes that the pending breach of contract and trade secret litigation in California warrants a stay of the patent infringement action in Delaware. The thin reed to which Elysium clings is its Patent Misuse defense in California.

That's a thin reed not only because it is a bogus or fictional claim, as I have argued ad nauseam, but also because it's inapposite.

Even if there were a patent misuse, that doesn't make the question of infringement irrelevant. As ChromaDex has argued extensively for other purposes, Patent Misuse doesn't even make sense as an issue in the absence of patent infringement, so Elysium has got it entirely backwards when they argue that that the Courts should first determine whether ChromaDex misused its patent, and later determine whether ChromaDex even had an enforceable patent to misuse.

But that's not the only thing Elysium has got backwards here. Even if the patent were misused, that would simply raise an obligation on the part of ChromaDex to purge any misuse, which it has preemptively done, which would mean that the question in California is -- at best for Elysium -- when, and not whether, Elysium's liability for patent infringement began to accrue.

The legal issue of when Elysium's liability for patent infringement begins or began to accrue does not provide any reason not to adjudicate the patent's validity.

So Elysium's assertion in its brief that resolution of the patent misuse claim might "entirely dispose of this case...ending this case altogether" is a whopper. It would only true if the California Court also found that there was no conceivable way that ChromaDex could purge the misuse, which is of course impossible.

And as wildly as Elysium waves in the air its three successes in preventing its Patent Misuse claim from being dismissed on numerous grounds, that doesn't show the validity of the Patent Misuse defense, and therefore also does not establish any reason why the underlying issue of the patent's validity shouldn't be adjudicated at once -- if anything, it should have been adjudicated first or contemporaneously, which has been ChromaDex's position all long.

Elysium actually blames ChromaDex for the illogical sequencing -- "ChromaDex made the deliberate choice to forego asserting patent infringement in the California Litigation" -- and therefore, says Elysium, the Delaware Court should have the benefit of the California Court's determination that ChromaDex is entitled to assert its patent, before the Delaware Court decides whether ChromaDex even has a patent to assert.

That's just too backwards to even recount, but we have learned recently that you can't believe everything you read in federal court filings. It is entirely Elysium's fault, not ChromaDex's fault, that the sequence is as it is. ChromaDex did everything in its power to prevent this. So characterizing it as a ChromaDex's "strategic choice" is too many for me.

One last point. I detect a deterioration in the quality of Elysium's lawyering, both in their argument and their evidence.

As to Elysium's Argument, I complained last time that Elysium's Affirmative Defense #10 -- Unclean Hands -- was illogical in a first-year-law-student kind of way. The affirmative defense reads as follows:

In the California Litigation, ChromaDex has sought to have Elysium’s patent misuse counterclaim dismissed on the grounds that there is no actual controversy between ChromaDex and Elysium related to potential patent infringement litigation. In particular, ChromaDex asserted that it had not accused Elysium of patent infringement, had not taken any actions to imply such a claim, had not made plans to assert that Elysium’s BASIS® product infringes ChromaDex’s patent rights, and had not taken any affirmative action to enforce its patent rights against Elysium. In view of its representations to a Federal Court in California that it does not accuse Elysium of infringing the asserted patents, ChromaDex cannot seek to enforce the asserted patents against Elysium in this Court.

The problem with this is that federal jurisdiction requires a present case or controversy, and ChromaDex was simply pointing out that there was not one. This kind of argument is similar to the doctrine of ripeness. Both are threshold tests to determine whether the time is right for courts to engage with an issue. However, under no circumstance does a party's raising a ripeness or active-controversy defense waive their right later to assert a claim when the controversy becomes present or the issue becomes ripe. It's just nonsense.

It is nonsense when Elysium says in its Affirmative Defense that ChromaDex's past accurate observation that it was not currently asserting a claim prevents ChromaDex from making a present accurate observation that now it IS asserting a claim. That's just now how any legal doctrine works -- not estoppel, not unclean hands, not anything.

And it is nonsense AGAIN when Elysium asserts in its Motion for a Stay that the "first filed" rule requires that Elysium's Patent Misuse claim be adjudicated prior to any court hearing ChromaDex's patent infringement claim. Honestly, Judge Carney should not have entertained Elysium's affirmative defense, styled as a Declaratory Judgment action, without having the underlying claim (patent infringement) before him.

But since he did, the Patent Misuse Declaratory Judgment action is now completely independent of the Patent Infringement Claim. They involve completely different evidence. Judge Carney in California can find a misuse (or not) without considering the validity of the underlying patents, and Judge Connolly in Delaware can find the patents valid (or not) without considering the possibility of misuse.

If this is inefficient, it is entirely because Elysium insisted, over multiple objections, on asserting its defense against infringement before it was accused of infringement. I highly doubt that the Court will determine that an infringer gets to deny a patent owner its forum-selection rights by preemptively seeking a non-infringement or mis-use determination and then using the first-filed rule to say -- as Elysium attempts to say -- that the patent owner must then assert its infringement claim on the schedule and in the forum selected by the defendant or not at all. I don't think that's the law. I don't think that there is a reasonable argument to be made for the extension of the law in that direction. And I don't even think it's a necessary argument for Elysium to get what they want.

The second reason I am suspicious of Elysium's lawyering, their evidence, is that Elysium's brief is riddled with Lexis cites for cases that are in fact on Westlaw. It probably can be judicially noticed that Westlaw is a superior legal research product, and the law firms that choose Lexis or FastCase do so in order to save money. Elysium either has a cut-rate firm, or a firm that is acting like a cut-rate firm. [Full Disclosure: I have spent most of my career working on and for Westlaw, which is how I know that of which I speak. But don't take my word for it. Do a survey of Lexis-only cites, and see which firms those are mostly coming from.]

Conclusion

There is a plausible case for a stay, but the more you look at that case, the more it unravels. We'll see what ChromaDex's opposition brief looks like.

#CDXC #ChromaDex #Litigation #ElysiumHealth

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