Oral Argument Before CAFC Scheduled
The Court of Appeals for the Federal Circuit has scheduled oral argument on Elysium's patent appeal for March 5, 2020, at 10am at the Howard Markey National Courts Building, 717 Madison Place, NW, Washington DC, 20439 (Courtroom 402). The public is invited to attend. Each side receives 15 minutes. The three-judge panel members will be disclosed the morning of argument.
Here is the Court's notice:
It's nice that we're invited to attend the hearing, but I won't be flying to DC for it, and neither should you -- partly because the hearing doesn't much matter, and partly because the Court says they'll post a recording on their website.
Here is a reminder of what this is about and where we are:
In July, 2017, Elysium asked the Patent Trials Appeal Board (PTAB) to set aside ChromaDex's two main patents on NR -- the '807 Patent (supplements) and the '086 Patent (pharmaceuticals) -- on the grounds that it was known in the 1920's the milk could cure dogs of pellagra, and therefore since the 1927 milk might have contained NR, and the NR might have caused the perceived effect, using NR in a health supplement was already known, and thus not a new invention that could be patented
That was a stupid idea for many reasons, but one of them is that NR had not been discovered in the 1920's, and there is no reason to believe that the NR in the milk, as opposed to something else in the milk (like NAM), cured the dogs.
As investors, we shouldn't really care too much, because Elysium Basis and ChromaDex Niagen are health supplements, not pharmaceuticals, so the '807 Patent is the one that matters. The pharmaceutical potential of NR, and thus the '086 patent, have turned out to be of less importance.
The PTAB eventually struck four of the five claims in the '086 patent, but left standing claim 2, which protects "isolated" NR as a pharmaceutical. That wasn't a good enough result for Elysium, because getting rid of 4 out of 5 claims doesn't get rid of 80% of their potential patent infringement damages. The one claim still standing is sufficient to support a patent infringement action, and to support treble damages, too, if the infringement was willful. As every carnival-goers know, you have to knock ALL the cans off the pedestal or you do not win a prize.
So it was no surprise when Elysium appealed the PTAB's ruling to the Court of Appeals for the Federal Circuit.
ChromaDex initially appealed, too, to get the other four claims reinstated by the CAFC.
We covered Elysium's appellate brief, even though it was mostly the same BS that the PTAB had already rejected. It's important to note that the PTAB is a graveyard for patents and an overly aggressive invalidator of claims. So if you can't convince the PTAB to invalidate a patent, the likelihood that the CAFC is going to say the PTAB wasn't harsh enough is just very low. The opposite is more likely -- about 25% of the time the CAFC reversed the PTAB.
ChromaDex filed its opposition brief defending Claim 2, but abandoned its attempts to resuscitate the other four claims. That was probably because the one claim was enough to press a patent infringement action in the unlikely event of a future pharmaceutical infringer (there is no pharmaceutical to infringe right now), and so there just wasn't a good business justification for the legal spend necessary to fix the PTAB's errors.
Elysium filed its Reply Brief in October. So for three months we have been waiting for an oral argument date. Unlike at the trial level, oral argument at the Court of Appeals will really happen. And once it happens, then the Court can spend some months finally writing an opinion explaining its judgment presumably affirming the PTAB's refusal to strike Claim 2.
And THEN we can finally get on with our Patent Infringement case, which is one of the few things left in all these litigations that actually matters a lot.
ChromaDex sued Elysium for patent infringement in September, 2018. Unfortunately, the case was assigned to a very green Trump appointee with little or no patent experience who had just taken his spot on the bench the prior month.
Elysium moved to stay the patent infringement action in November 2018. You would think that if Elysium believed its own bluster about how it is not infringing any valid patent that Elysium would be eager to let a court affirm that, so that Elysium could get on with its life.
But instead, Elysium has done whatever it could to delay the reckoning in Delaware. The new judge, Colm Connolly, waited seven months before addressing the stay motion -- every single day in every single one of those seven months was effectively a grant of the stay for another day.
And then when Judge Connolly finally addressed the stay motion, he granted it, rejecting most of Elysium's argument, but calling it a "close call" whether to await the outcome of the California trial, which was then scheduled for October, 2019. Judge Connolly thought it worth waiting, because the California trial would resolve the patent misuse issue, which would in turn determine whether ChromaDex was entitled to a full-portion of damages for patent infringement or only a time-limited portion.
That wasn't a good reason to wait, because (1) The patent misuse claim is bogus; (2) If Elysium is not infringing, as it says, then misuse doesn't matter; and (3) Infringement still has to be resolved in Delaware, regardless of any subsequent temporal adjustments to damages. But although you can pay a filing fee in federal court, you can't make the judge hear your case.
Then the California case got unexpectedly pulled off calendar by Judge Carney for no good reason. As a result, ChromaDex filed a motion in Delaware to lift the stay, since there was no longer a pending California trial to wait for. That motion was fully briefed before Thanksgiving. Then Judge Connolly began anew his 7- month litigation death-march, where he ignores a fully briefed motion with emergency attributes until it suits him.
Finally, on January 6, 2020, the Sphinx, or the Oracle, or whatever it is we see perched atop the bench in Delaware spoke, saying, "The parties are directed to submit a joint status report after the January 13, 2020 hearing on motions in" the California action and no later than January 30.
Presumably Judge Connolly wants to know whether the Patent Misuse claim got tossed yet (it didn't). But even if it did get tossed, Elysium argued in its briefs that the imminent appeal before the CAFC could justify further delays in the patent infringement action, because what if Elysium won and the '086 patent got thrown out? Then the Court would only have to deal with the '807 patent.
If Judge Connolly was on top of his game and wanted to move his docket along, he would decide that the patent owner (Dartmouth) is irreparably harmed every day that an infringer is allowed to grow its business without paying royalties, that the case for infringement is quite strong, that the non-liability scenarios are entirely speculative, and that in any case these tangential issues in California and before the CAFC can get resolved while the parties are in discovery in Delaware. Thus, there is NO CONCEIVABLE JUSTIFICATION to allow this stay to continue. The patent infringement action has already been stayed for FOURTEEN MONTHS for no good reason, and justice delayed is justice denied, etc., etc., etc.
But, if you've read The Nonsense Factory, then you know that our faith in the civil justice system's willingness to vindicate our clear legal rights is badly misplaced.
In any case, oral argument before the CAFC will be March 5, and then Judge Connolly will have one less reason to delay Elysium's reckoning day.