Aia America, Inc. v. Avid Radiopharmaceuticals , 866 F.3d 1369 ( 2017 )

United States Court of Appeals
for the Federal Circuit
______________________
AIA AMERICA, INC., FKA ALZHEIMER'S
INSTITUTE OF AMERICA, INC.,
Plaintiff-Appellant
v.
AVID RADIOPHARMACEUTICALS,
Defendant-Appellee
TRUSTEES OF THE UNIVERSITY OF
PENNSYLVANIA, UNIVERSITY OF SOUTH
FLORIDA BOARD OF TRUSTEES,
Defendants
______________________
2016-2647
______________________
Appeal from the United States District Court for the
Eastern District of Pennsylvania in No. 2:10-cv-06908-
TJS, Judge Timothy J. Savage.
______________________
Decided: August 10, 2017
______________________
PETER BUCKLEY, Fox Rothschild, LLP, Philadelphia,
PA, argued for plaintiff-appellant.
LAWRENCE SCOTT BURWELL, Finnegan, Henderson,
Farabow, Garrett & Dunner, LLP, Reston, VA, argued for
defendant-appellee. Also represented by CHARLES E.
2 AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS
LIPSEY; LAURA POLLARD MASUROVSKY, Washington, DC;
MANISHA A. DESAI, Eli Lilly and Company, Indianapolis,
IN.
______________________
Before NEWMAN, LOURIE, and HUGHES, Circuit Judges.
HUGHES, Circuit Judge.
AIA America, Inc. appeals the district court’s award of
attorney’s fees to Avid Radiopharmaceuticals and the
Trustees of the University of Pennsylvania. Because the
Seventh Amendment right to a jury trial does not apply to
requests for attorney’s fees under § 285 of the Patent Act,
the district court did not err by making factual findings
not foreclosed by the jury’s verdict on standing, and AIA’s
due process rights were not violated, we affirm.
I
AIA America, Inc. sued Avid Radiopharmaceuticals
and the Trustees of the University of Pennsylvania (col-
lectively, Avid) for infringement of U.S. Patent Nos.
5,455,169 and 7,538,258. The patents are generally
directed to research technologies stemming from the
discovery of the “Swedish mutation,” a genetic mutation
that is associated with early-onset familial Alzheimer’s
disease. For example, the ’169 patent claims a nucleic
acid encoding a human amyloid precursor protein with
the Swedish mutation. Dr. Michael J. Mullan is named as
the sole inventor of both patents.
Avid, in response, alleged that AIA lacked standing to
assert the ’169 and ’258 patents. According to Avid,
Ronald Sexton, AIA’s founder, and Dr. Mullan, the pur-
ported sole inventor, orchestrated a scheme to appropriate
for themselves inventions from Imperial College (Imperi-
al) in London and the University of South Florida (USF).
Avid argued that the scheme began when members of
Dr. John Hardy’s Imperial research group (including Dr.
AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS 3
Mullan, then a Ph.D. student) made the groundbreaking
discovery of one of the first gene mutations that causes
Alzheimer’s disease. The gene mutation was later called
the “London Mutation.” Under a sponsored research
agreement, Imperial gave options to that discovery to
Athena, a pharmaceutical company.
Dr. Hardy and his team believed the Athena agree-
ment undervalued their research. Soon thereafter, Mr.
Sexton, a Kansas City businessman who had no experi-
ence in scientific research but saw a business opportunity
for himself, offered Dr. Hardy and his team a better deal
than they had with Athena. Initially, Dr. Hardy and his
team attempted to undermine the agreement with Athena
by misrepresenting the origins of their work on the Lon-
don Mutation. This attempt failed when Imperial deter-
mined that it owned the discovery under United Kingdom
law by its employment of the inventors. Dr. Hardy, his
team, and Mr. Sexton then “decided to make sure [they]
didn’t give anything else away.” J.A. 2759:13–14.
Therefore, when Dr. Hardy started investigating Alz-
heimer’s mutations in Swedish families and realized the
data was “screaming” that there was a mutation in the
DNA, he decided not to identify the actual sequence of the
mutation at Imperial. JA 2790:9–18. Instead, he sent the
DNA to Dr. Mullan, who had graduated from Imperial
and moved to USF, so the DNA could be sequenced there.
To hide the involvement of Dr. Hardy and the Imperial
researchers, the resulting patent application on the
Swedish mutation was filed in Dr. Mullan’s name alone.
To further their scheme, Mr. Sexton, Dr. Hardy, and
Dr. Mullan sent false letters to Imperial denying Dr.
Hardy’s involvement in the discovery. The group also
misled USF into believing that this discovery related to
prior research to which Imperial had rights, thereby
securing USF’s signature on a letter waiving USF’s own-
ership of the newly discovered Swedish mutation. After
4 AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS
the patent application was filed, it was immediately
assigned to Sexton’s newly-formed company, AIA.
AIA, meanwhile, maintained that Dr. Mullan was
properly named the sole inventor of the ’169 and ’258
patents and that Dr. Mullan’s employer, USF, waived any
ownership rights in the patents.
The district court ordered targeted discovery and held
a jury trial on AIA’s standing, in which twelve witnesses
testified and over 200 exhibits were introduced. As part
of the trial, Dr. Hardy testified about the conspiracy by
which, he, Dr. Mullan, and Mr. Sexton denied Imperial
and USF rights in the Swedish mutation. The jury de-
termined that USF did not knowingly and intentionally
waive its ownership rights to the Swedish mutation and
that Dr. Hardy was a co-inventor. Based on the jury’s
verdict, the district court found AIA lacked standing to
assert the ’169 and ’258 patents and entered judgment in
favor of Avid. We summarily affirmed that decision.
Alzheimer’s Inst. of Am., Inc. v. Avid Radiopharmaceuti-
cals, 560 F. App’x 996 (Fed. Cir. 2014).
Avid subsequently moved for attorney’s fees. The dis-
trict court allowed the parties to submit extensive brief-
ing, evidence, and declarations on the issue of fees. After
holding a hearing in which AIA was allowed to present
arguments in opposition to the motion, the court awarded
fees in the amount of $3,943,317.70 to Avid. AIA appeals
the award of attorney’s fees, but not the amount awarded.
We have jurisdiction under 28 U.S.C. § 1295(a)(1) (2012).
II
We first address AIA’s argument that the Seventh
Amendment requires a jury trial to decide the facts form-
ing the basis to award attorney’s fees under § 285 of the
Patent Act. Specifically, AIA argues that when an award
of attorney’s fees is based in part or in whole on a party’s
state of mind, intent, or culpability, only a jury may
AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS 5
decide those issues. We review de novo the question of
whether a party is entitled to a jury trial. Tegal Corp. v.
Tokyo Electron Am., Inc., 257 F.3d 1331, 1339 (Fed. Cir.
2001).
A litigant has a right to a jury trial if provided by
statute, or if required by the Seventh Amendment. See
Feltner v. Columbia Pictures Television, Inc., 523 U.S.
340, 345 (1998). With no right to a jury trial provided in
the statute, AIA relies solely on the Seventh Amendment.
The Seventh Amendment preserves the right to a jury
trial for “[s]uits at common law.” U.S. Const. amend. VII.
The phrase “suits at common law” refers to suits in which
only legal rights and remedies were at issue, as opposed
to equitable rights and remedies. Granfinanciera, S.A. v.
Nordberg, 492 U.S. 33, 41 (1989). A legal remedy requires
a jury trial on demand, while an equitable remedy does
not implicate the right to a jury trial. Curtis v. Loether,
415 U.S. 189, 196 n.11 (1974). A two-step inquiry deter-
mines whether a modern statutory cause of action in-
volves only legal rights and remedies. Tull v. United
States, 481 U.S. 412, 417–18 (1987). First, we must
“compare the statutory action to 18th-century actions
brought in the courts of England prior to the merger of
the courts of law and equity.” Id. at 417. “Second, we
examine the remedy sought and determine whether it is
legal or equitable in nature.” Id. at 417–18. The Su-
preme Court has stressed the second step of this test is
the more important of the two. Chauffeurs, Teamsters &
Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565 (1990)
(“The second inquiry is the more important in our analy-
sis.”).
Turning to the first step, the nature of the claim, Eng-
lish courts for centuries have allowed claims for attorney’s
fees in both the courts of law and equity. Arthur L.
Goodhart, Costs, 38 Yale L. J. 849, 851–54 (1929). But
when brought in the courts of law, judges, not juries,
6 AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS
determined attorney’s fees. Id. Therefore, since either a
judge in the court of law or an equity court would deter-
mine attorney’s fees, this implies that attorney’s fees
generally do not involve legal rights.
As to the second step, the nature of the remedy, the
fact that the relief sought is monetary does not necessari-
ly make the remedy “legal.” Terry, 494 U.S. at 570. In
the context of attorney’s fees, when attorney’s fees are
themselves part of the merits of an action, they are re-
garded as a “legal” remedy. For example, a lawyer’s fee
claim against a client is a question for the jury, Simler v.
Conner, 372 U.S. 221, 223 (1963) (per curiam), and a
claim for attorney’s fees under a contractual indemnifica-
tion provision is a contractual “legal right” that is also a
question for the jury, McGuire v. Russell Miller, Inc.,
1 F.3d 1306, 1315–16 (2d Cir. 1993). By contrast, when
attorney’s fees are awarded pursuant to a statutory
prevailing party provision, they are regarded as an “equi-
table” remedy because they raise “issues collateral to and
separate from the decision on the merits.” Budinich v.
Becton Dickinson & Co., 486 U.S. 196, 200 (1988) (inter-
nal quotation marks and citations omitted). Since Avid
sought fees as a prevailing party under 35 U.S.C. § 285,
the attorney’s fees in this action are properly character-
ized as an equitable remedy.
Both steps of the Tull test reflect that requests for at-
torney’s fees under § 285 are equitable and do not invoke
the Seventh Amendment right to a jury trial. See Swof-
ford v. B & W, Inc., 336 F.2d 406, 413–14 (5th Cir. 1964)
(holding there is no right to a jury trial for attorney’s fees
under § 285).
Despite the foregoing, AIA argues that if a decision on
attorney’s fees involves considerations of a party’s state of
mind, intent, and culpability, then those questions must
be presented to a jury under the Seventh Amendment.
AIA, however, has pointed to no cases finding that once
AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS 7
an issue is deemed equitable, a Seventh Amendment right
to a jury trial may still attach to certain underlying
determinations. Nor does AIA’s argument fit within the
Supreme Court’s framework of when the right to a jury
trial attaches to a claim. In 18th-century England, if a
claim was in the court of equity, the equity court had the
discretion to submit a claim to a jury but was never
required to submit any issue to a jury, regardless of
whether it was deciding issues of state of mind, intent,
and culpability. Garsed v. Beall, 92 U.S. 685, 695 (1875).
Finally, AIA’s position is at odds with other statutory
prevailing party provisions. See, e.g., Great Am. Fed. Sav.
& Loan Ass’n v. Novotny, 442 U.S. 366, 375 (1979) (“[Title
VII] expressly allows the prevailing party to recover his
attorney’s fees . . . . Because the Act expressly authorizes
only equitable remedies, the courts have consistently held
that neither party has a right to a jury trial.”). In sum,
AIA’s right to a jury trial under the Seventh Amendment
was not violated.
II
AIA next argues that the district court erred by mak-
ing factual findings on issues that were not considered by
a jury. According to AIA, our decisions in Door-Master
Corp. v. Yorktowne, Inc., 256 F.3d 1308 (Fed. Cir. 2001)
and Jurgens v. CBK, Ltd., 80 F.3d 1566 (Fed. Cir. 1996)
precluded the district court from making factual determi-
nations about AIA’s state of mind, intent, and culpability
since these questions were never presented to the jury.
Our decisions in Door-Master and Jurgens stand for
the straight-forward proposition that after a trial on legal
issues, a court may not make findings contrary to or
inconsistent with the resolution of any issues necessarily
and actually decided by the jury. See also Kinetic Con-
cepts, Inc. v. Smith & Nephew, Inc., 688 F.3d 1342, 1360
(Fed. Cir. 2012); Therma-Tru Corp. v. Peachtree Doors
Inc., 44 F.3d 988, 994 (Fed. Cir. 1995) (“[T]he court may
8 AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS
not make findings in conflict with those of the jury.”).
These decisions do not prevent a court, when deciding
equitable issues, from making additional findings not
precluded by the jury’s verdict. See Paragon Podiatry
Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1190 (Fed.
Cir. 1993) (holding that in the context of the equitable
defense of inequitable conduct, “a disputed finding of
intent to mislead or to deceive is one for the judge to
resolve, not the jury”). Thus, the district court was not
foreclosed from making additional findings about AIA’s
state of mind, intent, and culpability.
III
Finally, AIA argues that its due process was violated
because the district court did not give AIA the opportunity
to submit evidence regarding its intent, state of mind, or
culpability. Contrary to AIA’s argument, the district
court provided both parties the opportunity to fully brief
the motion seeking attorney’s fees and allowed both
parties to submit any additional evidence and affidavits.
The district court also held a hearing on the motion where
AIA was allowed to present arguments. To the extent
AIA believes its due process was violated because the
district court did not allow it to present evidence regard-
ing intent to a jury, AIA was not entitled to a jury trial on
the issue of attorney’s fees. Accordingly, the district court
did not deprive AIA of due process.
IV
Because there is no right to a jury trial for attorney’s
fees under § 285, because the district court did not err by
making factual findings not foreclosed by the jury’s ver-
dict, and because AIA was not deprived of due process, we
affirm.
AFFIRMED
AIA AMERICA, INC. v. AVID RADIOPHARMACEUTICALS 9
COSTS
Costs to Appellee.