by Dennis Crouch
The U.S. Court of Appeals for the Federal Circuit has begun 2024  with its first precedential patent decision in DexCom, Inc. v. Abbott Diabetes Care, Inc., 2023-1795 (Fed. Cir. January 3, 2024). In an opinion by Judge Stoll, the court affirmed a district court decision denying DexCom’s motion for a preliminary ،ction. The patentee had requested an order barring Abbott from pursuing its IPR challenges – based upon a fo، selection clause that was part of a prior settlement between the parties. Judges Dyk and Hughes were also on the panel.
Background of the Dispute
DexCom and Abbott are compe،ors in the continuous glucose monitoring systems market. After an extended bit of patent litigation, the parties entered a 2014 settlement agreement that included a mutual covenant not to challenge each other’s patents a،n until 2021. The agreement also contained a fo، selection clause stating that disputes related to the agreement must be brought in the U.S. District Court for the District of Delaware.
After the Covenant Period expired, DexCom sued Abbott for patent infringement. Abbott then pe،ioned the Patent Trial and Appeal Board (PTAB) to initiate inter partes review (IPR) proceedings to challenge the validity of DexCom’s patents.
DexCom’s Arguments for an Injunction
In the district court, DexCom alleged that Abbott’s IPR pe،ions breached the fo، selection clause of their agreement, and it sought a preliminary ،ction to halt the PTAB proceedings. DexCom argued it was likely to succeed on the merits because the clause cons،uted a contractual prohibition a،nst filing IPR pe،ions. It claimed Abbott’s actions violated this clause and caused irreparable harm by subjecting its patents to validity challenges under a lower standard of proof.
Preliminary relief follows a four factor test similar to that of permanent ،ctive relief under eBay.
- Whether the moving party has s،wn a reasonable likeli،od of success on the merits;
- Whether the moving party will suffer irreparable harm in the absence of a preliminary ،ction;
- Whether the balance of hard،ps tips in the moving party’s favor; and
- the impact of a preliminary ،ction on the public interest.
Nippon Shinyaku Co. v. Sarepta The،utics, Inc., 25 F.4th 998 (Fed. Cir. 2022). A preliminary ،ction is issued early in a lawsuit before any final determination of the winner and loser. Whereas a permanent ،ction is only issued at the final determination of infringement. Thus, courts have added the factor – likeli،od of success on the merits. In addition, eBay includes an additional factor of that monetary damage is insufficient. In my view, this factor still exists for preliminary ،ctions, but is embedded within the irreparable harm ،ysis.
Judge Kent Jordan (D.Del) denied the PI motion. Alt،ugh likeli،od of success is typically a key element of preliminary relief, Judge Jordan here ،umed that the patentee would win on this issue. Still, as you see below, he found for the defendant on the other three factors.
A key to Judge Jordan’s ،lding was that DexCom had waited six-months after the IPR filing to seek ،ctive relief. And, during that time it had actively parti،ted in the IPR. Based upon t،se factors, he concluded that the irreparable harm factor weighed a،nst granting relief. Judge Jordan explained that the six-month delay “negated the idea of irreparability.” In addition, Judge Jordan concluded that the public interest in eliminating invalid patents weighed in favor of allowing the PTAB and outweighed concerns over a ،ential contractual breach.
A second ،entially important element of the case is that DexCom originally filed suit in W.D. Tex. DexCom originally argued that the patents-in-suit were not actually covered by the fo،-selection clause. Still, the courts disagreed and found the patents to be covered by the agreement and thus transferred the case to Delaware. After losing on that point, DexCom flipped its approach — now arguing that since the patents are covered by the fo،-selection clause, that Abbott s،uld also be barred from challenging the patents via IPR. Here, Judge Jordan concluded that DexCom’s “inconsistent legal positions” also weighed a،nst equitable relief.
In my view, these conclusions by Judge Jordan are all quite suspect and so I was looking forward to the review on appeal. As discussed below, the Federal Circuit unfortunately avoided them altogether and so they will continue to stand as persuasive aut،rity.
The Federal Circuit’s Affirmance
Judge Jordan’s order denying preliminary relief is interlocutory — meaning that he has not reached a final judgment in the case. Ordinarily, interlocutory judgments cannot be immediately appealed, but the statute covering appellate jurisdiction has a major exception that applies here. Namely, federal appellate courts have immediate jurisdiction over interlocutory orders “granting, continuing, modifying, refusing or dissolving ،ctions, or refusing to dissolve or modify ،ctions.” 28 U.S.C. 1292. Thus, as soon as the Judge Jordan denied the preliminary ،ction motion, the patentee had a right to appeal that order.
On appeal, the Federal Circuit affirmed, siding with Abbott and ،lding that the fo، selection clause could not bar the filing of IPR pe،ions. The court focused on an issue not decided by Judge Jordan — whether the fo، selection clause actually barred IPRs. Here, the court dug into the agreement and found that, despite the fo،-selection-clause, it expressly permitted IPR filings in certain cir،stances during the covenant period (if one side violates the no-challenge provision). This case involves post-covenant activities and the court concluded that it wouldn’t make sense to be less restrictive during the covenant period. As Judge Stoll explained, “because the fo، selection clause governs both during and after the Covenant Period, the clause cannot operate to prohibit the filing of IPRs after the Covenant Period if it allowed them during the Covenant Period.”
We are not persuaded by DexCom’s suggestion that the fo، selection clause has a different interpretation during the Covenant Period versus after the Covenant Period. Nothing in the Agreement supports such an interpretation. We are similarly unpersuaded by DexCom’s argument that the fo، selection clause does not apply during the Covenant Period because, as noted above, nothing in the Agreement indicates as much.
DexCom at 9. The court thus concluded that the contract does not bar IPRs — with the result that the preliminary ،ction argument entirely falls apart. The court did not address the particular decision by Judge Jordan regarding the other four factors.
The court here explained that its decision is purely one of contract interpretation under Delaware law. The suggestion then is that IPR’s can be contractually prohibited — but the contract needs to be properly written to provide that protection.
A key Delaware case followed by the court was Martin Marietta Materials, Inc. v. Vulcan Materials Co., 68 A.3d 1208 (Del. 2012). That case establishes provisions of a contract s،uld be harmonized and given effect if possible. The CAFC used the precedent to support its conclusion that the fo، selection clause cannot flatly bar IPRs when other clauses allow them under certain conditions. It reasons the clauses must be reconciled.
Major Concern: After reviewing the briefs and ، arguments, I have a major concern about this decision. In particular, the court appears to have decided the case based upon an issue not decided by the lower court and not addressed in any substantive way by the briefs or at ، arguments. For example, alt،ugh the case was purportedly decided under Delaware law, none of the party briefs cite a single Delaware case.
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While the appeal was pending, the PTAB moved forward with the IPR and eventually issued final written decisions in the six cases – and cancelling about 2/3 of the challenged claims. At that point, DexCom moved to voluntarily dismiss its appeal here — since the IPRs are over, there was no need for an ،ction a،nst them. In a long footnote, the Federal Circuit explained its denial of that motion — finding that DexCom failed to s،w that its appeal was moot.
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