On December 17, 2012, in Intel Corp. v. Negotiated Data Solutions, LLC, the U.S. Court of Appeals for the Federal Circuit (Prost, Linn,* Wallach) affirmed the district court's summary judgment that Intel did not infringe U.S. Reissue Patents No. 38,820 (a reissue of U.S. Patent No. 5,533,018), No. 39,216 (a reissue of U.S. Patent No. 5,594,734) and No. 39,395 (a reissue of U.S. Patent No. 5,566,169), which related to data communication networks, because Intel was licensed to practice the patents-in-suit pursuant to an agreement with N-Data's predecessor in interest, National Semiconductor Corp. The Federal Circuit stated: The parties here ask this court to determine whether the National Agreement, which licenses National Patents to Intel, automatically extends to any reissue patents that are derived from those licensed National Patents. N-Data contends that 35 U.S.C. § 252 as a whole defines a nuanced arrangement where only substantially identical claims reach back to the date of the original patent and argues that the Agreement expressly covers only patents owned or controlled by National during the term of the license. Thus, according to N-Data, while the Agreement covered the Original Patents, it does not cover the Reissue Patents, which were each issued directly to N-Data after the Agreement had expired.

Back before the district court, Morris filed another motion for summary judgment, this time invoking the defense of equitable intervening rights. Absolute intervening rights, set forth in 35 U.S.C. § 252, precludes infringement liability for any activity that predates a reexamination certificate, where the reexamination substantively and substantially altered the claims. See 35 U.S.C. § 307(b).

The district court also found that John Bean acted in bad faith by failing to dispute Morris’s contentions of invalidity until after Morris had built its business manufacturing and selling the chillers accused of infringement. John Beam appealed.Under 35 USC § 252, a court has the discretion to permit an accused infringer to continue to manufacture and sell an otherwise infringing product if the accused infringer made substantial preparation to commercialize the product prior to the re-examination of the patent. The policy rationale underlying equitable intervening rights is that the public has a right to use anything that is not specifically claimed in the original patent.

The Federal Circuit affirmed. Under 35 U.S.C. § 252, a court may permit continued manufacture, use, and sale of a product where “substantial preparation was made before the grant of the reissue” patent, under terms that “the court deems equitable for the protection of investments made or business commenced before the grant of the reissue.” John Bean argued that the district court abused its discretion because, among other reasons, Morris had recouped the investments made prior to the grant of the reissue.

To Morris, this seemed unfair: It had invested in making poultry chillers based on the patent as it stood in 2002, then the reexamination pulled the rug out from under it. So Morris asserted the affirmative defense of equitable intervening rights under 35 U.S.C. § 252. That defense allows a would-be infringer to continue making, using, or selling a product if it did so before reissuance or reexamination. But that is allowed only “to the extent and under such terms as the court deems equitable for the protection of investments made or business commenced before the grant of the reissue.”

On SJ, the district court held that the Agreement applied to the patents-in-suit, protecting Intel from claims of direct infringement and indirect infringement based upon sales by third parties incorporating Intel products. On appeal, the Federal Circuit first examined the facts under the reissue provisions set forth in 35 U.S.C. § 252. N-Data argued that under its interpretation of § 252, only substantially identical claims reach back to the date of the original patent and that the Agreement only covered patents owned or controlled by National during the term of the license. Thus, N-Data believed that while the Agreement covered the Original Patents, it did not cover the Reissue Patents, which were each issued directly to N-Data after the Agreement had expired.

Schoelch v. Mitchell, 625 F.3d 1041, 1045 (8th Cir. 2010). The Court further explained that reviewing the district court’s decision falls under an abuse of discretion standard, which permits “decisions that are flexible, intuitive, and tailored to the particular case.”The Court first highlighted that under 35 U.S.C. § 252, the affirmative defense of equitable intervening rights may protect a defendant accused of infringing either a reissued or reexamined patent. The Court explained that ”[g]ranting equitable intervening rights is a matter of judicial discretion” and that ”[o]nce granted, [these rights] give the alleged infringer the continued right to manufacture, sell, or use the accused product after the reexamination certificate is issued ‘when the defendant made, purchased, or used identical products, or made substantial preparation to make, use, or sell identical products before the reissue date.’

Equitable intervening rights is an affirmative defense that arises from 35 U.S.C. § 252, which provides, in relevant part:The court . . . may provide for the continued manufacture, use, offer for sale, or sale of the thing made . . . of which substantial preparation was made before the grant of the reissue . . . to the extent and under such terms as the court deems equitable for the protection of investments made or business commenced before the grant of the reissue (emphasis added).The defense is premised on the concept that the public has the right to rely upon the scope of a patent’s claims as originally issued.

Six weeks later, John Bean sued Morris for patent infringement. Morris moved for summary judgment of equitable intervening rights.The doctrine of intervening rights is found in 35 U.S.C. §252, and applies to reexamined patents under 35 U.S.C. §307(b). Under those sections, an infringer may be protected from liability for infringement of claims that were substantively and substantially altered during either reissuance or reexamination of a patent.

The defense of intervening rights allows a party whose products infringe a reissued or reexamined patent to continue to use or sell specific products that were made, purchased, or used before the reissuance or reexamination under certain conditions. There are two types of intervening rights which each derive from 35 U.S.C. § 252: “absolute” intervening rights and “equitable” intervening rights.“Absolute” intervening rights provide an accused infringer with the right to use or sell a product that was made, used, or purchased before the grant of the reexamination certificate, as long as such activity did not infringe a claim of the reexamined patent that was in the original patent.In other words, when a patentee substantively amends its claims to avoid an invalidity ruling, the defendant is then shielded from allegations of infringement regarding the original claims based on products that existed before the amendments were made.