APPLERA CORPORATION v. MJ RESEARCH INC.

3:98cv1201(JBA)

309 F.Supp.2d 293 (2004) | Cited 0 times | D. Connecticut | March 16, 2004

Ruling on Motion in Limine to Preclude Evidence and Argument that Applera Packaged or Tied PCR Process Patent Rights With Thermal Cycler Patent Rights [Doc. # 773(4)]

Plaintiffs Applera Corporation and Roche Molecular Systems, Inc. seekto exclude any evidence or argument by defendants MJ Research Inc. andMichael and John Finney that Applera has unlawfully packaged or tied PCRprocess patent rights with thermal cycler patent rights. For the reasonsdiscussed below, plaintiffs' motion is denied.

I. Discussion

MJ's antitrust counterclaim and patent misuse defense are based in parton the allegation that Applera unlawfully tied the rights to its PCRprocess patents with its thermal cycler patents by coercing suppliers andend users to buy licenses for both sets of patent rights, even if theyneed or want only one kind of license. Applera seeks to exclude evidenceand argument on this claim, arguing that it is untenable as a matter oflaw because it is undisputed that Applera offered MJ the rights to thetwo sets of patents separately. While MJ does not dispute that AppleraPage 2offered rights to the two sets of patents separately, MJ assertsthat (1) the separate offer was valid only for suppliers who purchasedlicenses for the PCR process patent rights; and (2) even if Appleraoffered licenses for the two sets of patent rights separately, suppliersincluding MJ were coerced into purchasing the entire package.

A. Separate Licenses

It is well established that "[i]f each of the products may be purchasedseparately in a competitive market, one seller's decision to sell the twoin a single package imposes no unreasonable restraint on either market.. . ." Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984);see also Northern Pac. R. Co. v. United States, 356 U.S. 1, 6 n. 4 (1958)("Of course where the buyer is free to take either product by itselfthere is no tying problem even though the seller may also offer the twoitems as a unit at a single price.").

Applera provides substantial support for its contention that it offeredseparate licensing arrangements for its process patents and its thermalcycler patents. First, it is undisputed that Applera offered MJ separaterights to the PCR process patents and thermal cycler patents under boththe Supplier Authorization Program (SAP) and End User AuthorizationProgram (EAP). In a letter dated December 22, 1994, for example, Applerastated:Page 3

As we discussed during our meeting, rights for either the authorization under the PCR process patents or the license under the instrument patents are available separately to thermal cycler suppliers. The financial terms to thermal cycler suppliers for an agreement granting only authorization rights under the PCR process patents are $30,000 issuance fee and per instrument fee, based on the capacity of the thermal cycler, as follows: $400 for a capacity of up to 96 samples plus $25 for each additional 96 samples or part thereof. The financial terms to thermal cycler suppliers for an agreement granting only rights under the instrument patents are $90,000 issuance fee and 9% Net Sales Price. . . .[Applera] makes the above rights available to end users. As you requested, I am enclosing current copies of [Applera's] three types of end user thermal cycler agreements: authorization rights under the PCR process patents and license under the PCR instrument patents, authorization rights under the PCR process patents only, and license under the PCR instrument patents only.Letter of Hanna Fischer to John and Michael Finney, Dec. 22, 1994 [Doc.# 788, Ex. 10] at PE 011991-2.1Page 4

In fact, MJ received from Applera end user authorization licenses tothe PCR process patents without obtaining rights to the thermal cyclerpatents.2 Applera has also submitted copies of every SupplierAuthorization Program (SAP) agreement that it reached with the variousthermal cycler suppliers on the market, each, with one exception, statingthat Applera offered the supplier the patent rights separately.3 Infive of thesePage 5agreements, the suppliers chose to accept only the process patentrights, without also taking the instrument patent rights. Applera alsopresented evidence that before the implementation of its SupplierAuthorization Program, it granted Kodak thermal cycler rights only,4and offered another thermal cycler supplier Agreement between Kodak andApplera was signed in 1993, prior toPage 6terms for a license for instrument patent rights only license, withoutrequiring licensing of the PCR process patents.5 Moreover, Applerahas entered into 20 end user authorization agreements with 11 companies,granting PCR process rights separately from the instrument patentrights. See Thermal Cycler Authorization Agreements [Doc. # 788, Ex.31]. Applera's internal policy from February 7, 1994 provided thatApplera "would be prepared to discuss terms for only the authorization[i.e. process patents] or the license [i.e. instrument patents]." SeeThermal Cycler Licensing Program Status Update, Feb. 7, 1994 [Doc. #788, Ex. 28] at PE 110559-10. The terms set forth in the policy statementwere the following: Authorization + License: $100,000 upfront issuance fee + per instrument $300 + 7% net revenues Authorization only: $30,000 upfront issuance fee + $400/instrument + $25/96 wells for instruments with > 96 wells

License only: $90,000 upfront issuance fee + 7% net revenues.Page 7

The memo noted, however, that "[Applera] will discuss Authorization-onlyand License-only terms only when brought up by Supplier." See ThermalCycler Licensing Program Status Update, Feb. 7, 1994 [Doc. # 788, Ex. 28]at PE 110559-10. Applera's "script" for responding to licenses inquiriesalso instructed that the suppliers be informed that the "patent rightsare available separately, but [Applera] supplies them in a combinedagreement at some financial savings." See PCR Licensing Script, updated6/23/98 [Doc. # 788, Ex. 29] at PE 016233. Applera's letters to suppliersin the course of negotiating licensing agreements also specify that thepatent rights are available separately. See [Doc. # 788, Ex. 30].

While MJ does not dispute this evidence, it challenges itsimplication. In particular, MJ contends that while process patent rightsmay have been available separately if suppliers like MJ did not wish topurchase licenses for the thermal cycler patents, Applera de facto refusedto license its thermal cycler patent rights to "unauthorized" supplierslike MJ who refused to purchase process patent licenses.6Page 8

B. Coercion

Mandatory package licensing may be found if MJ was not provided with arealistic choice. The pricing scheme for the separate licenses must notbe structured to compel purchase of the package, i.e. structured so thatno reasonable buyer would purchase the rights separately. See Areeda,Elhauge & Hovenkamp, X Antitrust Law ¶ 1758b (1996) at 343. Thethreshold question, then, is "whether the discount has an effect similarto an outright refusal to sell tying product A separately." Id. at 341.As the Second Circuit stated in Trans Sport, Inc. v. Starter Sportswear,Inc., 964 F.2d 186, 192 (2d Cir. 1992), the buyer "must allege factssufficient to support an inference that [the seller] has `appreciableeconomic power' in the tyingPage 9product, and affected a substantial amount of commerce. In other words, areasonable trier of fact must be able to find `actual coercion by theseller that in fact force[d] the buyer to purchase the tied product. . ..'" Such coercion "should be presumed when the defendant's separate pricefor either product equals or exceeds the package price." Hovenkamp, at §1758.

MJ argues that a mandatory package licensing scheme was de factopresent because the financial terms of the separate licenses wereunreasonable, and coerced prospective licensees into purchasing theentire package of patent rights even though they did not want or needthem. The record shows that MJ was offered two different pricing lists.The first, in 1994, priced the thermal cycler licenses less than thecombined set of patent rights. MJ points to the second offer, made in1996, which it interprets to price licenses for a complete set ofinstrument patent rights at a rate higher than the package for bothinstrument and process patent rights. Applera's proposal from February9, 1996 provided the following terms:Page 10

Patent Rights Issuance Fee Per Thermal Cycler Fees

Amplification Patent $120,000 $300 + 9% Net Sales Rights + PCR Price Instrument Patents (`852, `675) + `610 patent Amplification Patent $100,000 $300 + 7% Net Sales Rights + PCR Price Instrument Patents (`852, `675) Amplification Patent $30,000 $400 for capacity to Rights only 96 samples plus $25 for each additional 96 sample capacity PCR Instrument Patents (`852, `675) $90,000 9% Net Sales Price only `610 patent only $75,000 5% Net Sales PriceSee Summary of Financial Terms Presented to MJ Research Inc., Feb. 9,1996 [Doc. # 470, Ex. 67]. MJ interprets this summary to mean that if itwished to purchase the full set of instrument patent rights (`852, `675,`610), but not the process patent rights, it would be required to pay$90,000 + $75,000 upfront, or $165,000, and 9% + 5% of the Net SalesPrice, or 14%, which is considerably more expensive than the license costfor the package of instrument and process patent rights.

In response, Applera argues first that MJ has posited a false result,because a "supplier is unlikely to license only the thermal cyclerpatents because the PCR process patents andPage 11thermal cycler patents are blocking patents." See Memorandum in Supportof Plaintiffs' Motion in Limine to Preclude Evidence and Agrument thatApplera Packaged or Tied PCR Process Patent Rights with Thermal CyclerPatent Rights [Doc. # 774, Ex. 4] at 3 n.3. "By definition, blockingpatents disclose interdependent parts of the same product." InternationalMfg. Co. v. Landon, Inc., 336 F.2d 723, 730 (9th Cir. 1964). Thus,"[a]license package containing blocking patents may be considered asingle distinct product," and would not present an unlawful tie. Id.Applera does not explain how its claim that the thermal cycler patents are"blocking patents" because they cover thermal cyclers used for PCR isconsistent with this Court's claim construction. See Claim Constructionof Disputed Terms in U.S. Patents 5,333,675, 5,656,493, and 5,473,610[Doc. # 715] at 3 (construing `675 patent as follows: "The preamble isnot limiting because it describes a use of an invention and because thebody of the claim defines a structurally complete invention capable ofPCR such that a deletion of the preamble would not affect thatstructure. Even if the preamble were construed as a limitation of theclaim, the language `capable of' does not require that the apparatus mustactually be used to perform PCR.") (citation omitted); see also id. at 26(construing `610 patent similarly). Of the thermal cycler patents indispute, only the `493 patent has been construed to cover thermal cyclersused for PCR and for nothingPage 12else (as the patent requires the presence of reagents).

Applera conclusorily argues that MJ's interpretation of its pricinglist to require the payment of two upfront fees and two "per cycler" feesis incorrect, but offers no supporting evidence. The price list isambiguous. It nowhere states what the price for the full set of thermalcycler patent rights would be, and, even more importantly, nowhere makesavailable the full set of thermal cycler patent rights, separately fromthe process patent rights. Viewed in the light most favorable to MJ,there is clearly a factual dispute which, if resolved in MJ's favor, maysuffice for a jury's finding of coercion. Applera's evidence that otherthermal cycler suppliers bought process patent rights separately from thethermal cycler patent rights cannot create a presumption that, in theinverse, the purchase of thermal cycler patent rights without the processpatent rights was economically viable. Because issues of material factabout the actual terms of Applera's pricing program remain in dispute, atrial determination is necessary.Page 13

II. Conclusion

For the foregoing reasons, plaintiffs' Motion in Limine to PrecludeEvidence and Argument that Applera Packaged or Tied PCR Process PatentRights With Thermal Cycler Patent Rights [Doc. # 773(4)] is DENIED.

IT IS SO ORDERED.

1. See also Letter of Hanna Fischer to John and Michael Finney, August1, 1995 [Doc. # 788, Ex. 10] at PE 016163 ("As we have told you, we arenow offering combined rights at a substantial savings over the samerights purchased separately. Nonetheless, the rights are assuredlyavailable separately."); Letter of Hanna Fischer to Michael Finney, April2, 1996 [Doc. # 788, Ex. 10] at PE 011815 ("I have prepared a ThermalCycler Authorization Agreement that covers only the upfront fee componentof a license for the PCR process (`authorization'), as you requested inyour telephone call. This agreement does not include a license under theapparatus patents that we have discussed before. Since you have receivedcopies of the three types of "end user" agreements that [Applera] hasavailable and have discussed the agreements with us on several occasion,you are aware that the authorization rights under the PCR process and alicense under the apparatus patents are available separately or incombination (and that [Applera] is able to offer the rights atsubstantial savings in a combined agreement). As you know, it is[Applera's] position that for MJ Research thermal cyclers you needapparatus rights as well. In sending you the Thermal Cycler AuthorizationAgreement you requested, I remind you that apparatus rights are availableseparately and that, should you execute a license agreement for apparatusrights at a future date for these instruments, the license agreementwould be at the rate for apparatus rights only.").

2. See Thermal Cycler Authorization Agreement between Applera and MJ[Doc. # 788, Ex. 11] at PE 020813 ("Whereas, [Applera] offers the aboveprocess rights and apparatus rights separately or in combination, and, PCRUser has requested PCR process license rights only, without rights underany apparatus claims.").

3. See Thermal Cycler Authorization Agreement between Applera and ColdSpring Harbor Laboratory, Feb. 26, 1997 [Doc. # 788, Ex. 12] at PE 017539("Whereas, [Applera] offers the above process rights and apparatus rightsseparately or in combination, and Thermal Cycler Supplier has requestedPCR process license rights only, without rights under any apparatusclaim.); Thermal Cycler Supplier Authorization Agreement between Appleraand GeneSystems, Sept. 1, 2002 [Doc. # 788, Ex. 13] at PE 108246("Whereas, ABI has offered to Thermal Cycler Supplier the above Rocheprocess rights, and the ABI systems, apparatus, automated method andpressing heated cover rights separately or in combinations, and ThermalCycler Supplier has requested only under the above Roche processpatents, without rights under the above identified ABI patents andapplications."); Thermal Cycler Supplier Authorization Agreement betweenApplera and Kaybee Engineering Ltd., Oct. 8, 1999 [Doc. # 788, Ex. 14] atPE 082979 (Kaybee received only process patent rights); Thermal CyclerSupplier Authorization Agreement between Applera and Stratagene, Jan. 1,1995 [Doc. # 788, Ex. 15] at 022309 (Stratagene received only processpatent rights); Thermal Cycler Supplier Agreement between Applera andCephoid, Apr. 15, 2000 [Doc. # 788, Ex. 18] at PE 105093 (Cephoidreceived only process patent rights); Thermal Cycler SupplierAuthorization Agreement between Applera and Appligene Oncor, signed Feb.26 and Mar. 8, 1998 [Doc. # 788, Ex. 16] at PE 016597 (stating thatApplera offered separate process and thermal cycler rights and Appligenerequested those rights in combination); Thermal Cycler Supplier Agreementbetween Applera and Bio-Rad Laboratories, Inc., Apr. 1, 1998 [Doc. #788, Ex. 17] at PE 017024 (same); Thermal Cycler Supplier Agreementbetween Applera and Eppendrof-Netheler-Hinz GmbH, June 1, 1997 [Doc. #788, Ex. 19] at PE 017945 (same); Thermal Cycler Supplier Agreementbetween Applera and Life Sciences International Plc, Dec. 27, 1996 [Doc.# 788, Ex. 20] at PE 19160 (same); Thermal Cycler Supplier Agreementbetween Applera and Microcosm, Inc., October 16, 2002 [Doc. # 788, Ex.21] at PE108222 (same); Thermal Cycler Supplier Agreement between Appleraand MWG Biotech AG, Aug. 1, 1999 [Doc. # 788, Ex. 22] at PE 083095(same); Thermal Cycler Supplier Agreement between Applera and SanyoElectric Co., Ltd., June 1, 1995 [Doc. # 788, Ex. 23] at PE 021637(same); Thermal Cycler Agreement between Applera and Scinics Corp., Nov.1, 1999 [Doc. # 788, Ex. 24] at PE 086316 (same); Thermal Cycler SupplierAgreement between Applera and Smiths Detection, June 15, 2003 [Doc. #788, Ex. 25] at PE 109222 ("Whereas, ABI has offered to Thermal CyclerSupplier the above Roche process rights, and the Perkin-Elmer systems,apparatus, automated method and pressing heated cover rights separately orin combinations, and Thermal Cycler Supplier has requested rights underthe above Roche PCR process patents and ABI systems patent rights andautomated method patent rights only, without rights under the aboveidentified ABI apparatus and pressing heated cover patents andapplications."). In the one SAP agreement in which the thermal cycler patent rights werenot provided for separately, the instrument patents applications werestill pending, and had not yet been issued. See Thermal Cycler SupplierAgreement between Applera and Takara, April 25, 1994 [Doc. # 788, Ex. 26]at PE 022732.

4. See Agreement, June 3, 1993 [Doc. # 788, Ex. 27]. The theimplementation of the Supplier Authorization Program, when Applera firstbegan licensing its process patents to suppliers. The agreement withKodak thus makes no mention of the existence of the process patents, orthe need to obtain licenses to perform PCR on thermal cyclers under theprocess patents.

5. See Letter from Hanna Fischer to S. Constantine, Jan. 19, 1996[Doc. # 788, Ex. 32] at 2 ("A worldwide license under only the apparatusrights has financial terms of 9% NSP (thermal cyclers and satellitemodules), license issue fee of $90,000, and back royalties calculated at100%.).

6. MJ argues that Applera refused to offer separate licenses for thethermal cycler patents to other thermal cycler suppliers if Applerabelieved the supplier needed rights to both the process and thermalcycler patents. For example, Applera responded to the supplier Bio-Rad'sinquiry as to separate pricing as follows: [A]lthough I will gladly provide you with the current per-thermal cycler terms for authorization rights under the PCR process patents only or license rights under the apparatus patents only, I believe this can be handled contractually at the time it becomes necessary. [Applera]'s position will be that for thermal cyclers which we agree do not need a license under the identified apparatus patent rights, the per-thermal cycler authorization rate for the process rights will be the rate [Applera] is charging for those rights only. Similarly, for thermal cyclers which Perkin-Elmer agrees do not need an authorization under the process rights, the per thermal cycler rates for a license under the apparatus patents will be the rate Perkin-Elmer is then charging for those rights only.Letter of Hanna Fischer to Sanford Wadler, BIO-RAD Laboratories, Sept.12, 1996 [Doc. # 470, Ex. 69]. MJ acknowledges, however, that MJ itself was offered a choice ofunbundled rights, at least formally. MJ claims no injury or threatenedinjury to itself resulting from Applera's actions toward othersuppliers.

Ruling on Motion in Limine to Preclude Evidence and Argument that Applera Packaged or Tied PCR Process Patent Rights With Thermal Cycler Patent Rights [Doc. # 773(4)]

Plaintiffs Applera Corporation and Roche Molecular Systems, Inc. seekto exclude any evidence or argument by defendants MJ Research Inc. andMichael and John Finney that Applera has unlawfully packaged or tied PCRprocess patent rights with thermal cycler patent rights. For the reasonsdiscussed below, plaintiffs' motion is denied.

I. Discussion

MJ's antitrust counterclaim and patent misuse defense are based in parton the allegation that Applera unlawfully tied the rights to its PCRprocess patents with its thermal cycler patents by coercing suppliers andend users to buy licenses for both sets of patent rights, even if theyneed or want only one kind of license. Applera seeks to exclude evidenceand argument on this claim, arguing that it is untenable as a matter oflaw because it is undisputed that Applera offered MJ the rights to thetwo sets of patents separately. While MJ does not dispute that AppleraPage 2offered rights to the two sets of patents separately, MJ assertsthat (1) the separate offer was valid only for suppliers who purchasedlicenses for the PCR process patent rights; and (2) even if Appleraoffered licenses for the two sets of patent rights separately, suppliersincluding MJ were coerced into purchasing the entire package.

A. Separate Licenses

It is well established that "[i]f each of the products may be purchasedseparately in a competitive market, one seller's decision to sell the twoin a single package imposes no unreasonable restraint on either market.. . ." Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12 (1984);see also Northern Pac. R. Co. v. United States, 356 U.S. 1, 6 n. 4 (1958)("Of course where the buyer is free to take either product by itselfthere is no tying problem even though the seller may also offer the twoitems as a unit at a single price.").

Applera provides substantial support for its contention that it offeredseparate licensing arrangements for its process patents and its thermalcycler patents. First, it is undisputed that Applera offered MJ separaterights to the PCR process patents and thermal cycler patents under boththe Supplier Authorization Program (SAP) and End User AuthorizationProgram (EAP). In a letter dated December 22, 1994, for example, Applerastated:Page 3

As we discussed during our meeting, rights for either the authorization under the PCR process patents or the license under the instrument patents are available separately to thermal cycler suppliers. The financial terms to thermal cycler suppliers for an agreement granting only authorization rights under the PCR process patents are $30,000 issuance fee and per instrument fee, based on the capacity of the thermal cycler, as follows: $400 for a capacity of up to 96 samples plus $25 for each additional 96 samples or part thereof. The financial terms to thermal cycler suppliers for an agreement granting only rights under the instrument patents are $90,000 issuance fee and 9% Net Sales Price. . . .[Applera] makes the above rights available to end users. As you requested, I am enclosing current copies of [Applera's] three types of end user thermal cycler agreements: authorization rights under the PCR process patents and license under the PCR instrument patents, authorization rights under the PCR process patents only, and license under the PCR instrument patents only.Letter of Hanna Fischer to John and Michael Finney, Dec. 22, 1994 [Doc.# 788, Ex. 10] at PE 011991-2.1Page 4

In fact, MJ received from Applera end user authorization licenses tothe PCR process patents without obtaining rights to the thermal cyclerpatents.2 Applera has also submitted copies of every SupplierAuthorization Program (SAP) agreement that it reached with the variousthermal cycler suppliers on the market, each, with one exception, statingthat Applera offered the supplier the patent rights separately.3 Infive of thesePage 5agreements, the suppliers chose to accept only the process patentrights, without also taking the instrument patent rights. Applera alsopresented evidence that before the implementation of its SupplierAuthorization Program, it granted Kodak thermal cycler rights only,4and offered another thermal cycler supplier Agreement between Kodak andApplera was signed in 1993, prior toPage 6terms for a license for instrument patent rights only license, withoutrequiring licensing of the PCR process patents.5 Moreover, Applerahas entered into 20 end user authorization agreements with 11 companies,granting PCR process rights separately from the instrument patentrights. See Thermal Cycler Authorization Agreements [Doc. # 788, Ex.31]. Applera's internal policy from February 7, 1994 provided thatApplera "would be prepared to discuss terms for only the authorization[i.e. process patents] or the license [i.e. instrument patents]." SeeThermal Cycler Licensing Program Status Update, Feb. 7, 1994 [Doc. #788, Ex. 28] at PE 110559-10. The terms set forth in the policy statementwere the following: Authorization + License: $100,000 upfront issuance fee + per instrument $300 + 7% net revenues Authorization only: $30,000 upfront issuance fee + $400/instrument + $25/96 wells for instruments with > 96 wells

License only: $90,000 upfront issuance fee + 7% net revenues.Page 7

The memo noted, however, that "[Applera] will discuss Authorization-onlyand License-only terms only when brought up by Supplier." See ThermalCycler Licensing Program Status Update, Feb. 7, 1994 [Doc. # 788, Ex. 28]at PE 110559-10. Applera's "script" for responding to licenses inquiriesalso instructed that the suppliers be informed that the "patent rightsare available separately, but [Applera] supplies them in a combinedagreement at some financial savings." See PCR Licensing Script, updated6/23/98 [Doc. # 788, Ex. 29] at PE 016233. Applera's letters to suppliersin the course of negotiating licensing agreements also specify that thepatent rights are available separately. See [Doc. # 788, Ex. 30].

While MJ does not dispute this evidence, it challenges itsimplication. In particular, MJ contends that while process patent rightsmay have been available separately if suppliers like MJ did not wish topurchase licenses for the thermal cycler patents, Applera de facto refusedto license its thermal cycler patent rights to "unauthorized" supplierslike MJ who refused to purchase process patent licenses.6Page 8

B. Coercion

Mandatory package licensing may be found if MJ was not provided with arealistic choice. The pricing scheme for the separate licenses must notbe structured to compel purchase of the package, i.e. structured so thatno reasonable buyer would purchase the rights separately. See Areeda,Elhauge & Hovenkamp, X Antitrust Law ¶ 1758b (1996) at 343. Thethreshold question, then, is "whether the discount has an effect similarto an outright refusal to sell tying product A separately." Id. at 341.As the Second Circuit stated in Trans Sport, Inc. v. Starter Sportswear,Inc., 964 F.2d 186, 192 (2d Cir. 1992), the buyer "must allege factssufficient to support an inference that [the seller] has `appreciableeconomic power' in the tyingPage 9product, and affected a substantial amount of commerce. In other words, areasonable trier of fact must be able to find `actual coercion by theseller that in fact force[d] the buyer to purchase the tied product. . ..'" Such coercion "should be presumed when the defendant's separate pricefor either product equals or exceeds the package price." Hovenkamp, at §1758.

MJ argues that a mandatory package licensing scheme was de factopresent because the financial terms of the separate licenses wereunreasonable, and coerced prospective licensees into purchasing theentire package of patent rights even though they did not want or needthem. The record shows that MJ was offered two different pricing lists.The first, in 1994, priced the thermal cycler licenses less than thecombined set of patent rights. MJ points to the second offer, made in1996, which it interprets to price licenses for a complete set ofinstrument patent rights at a rate higher than the package for bothinstrument and process patent rights. Applera's proposal from February9, 1996 provided the following terms:Page 10

Patent Rights Issuance Fee Per Thermal Cycler Fees

Amplification Patent $120,000 $300 + 9% Net Sales Rights + PCR Price Instrument Patents (`852, `675) + `610 patent Amplification Patent $100,000 $300 + 7% Net Sales Rights + PCR Price Instrument Patents (`852, `675) Amplification Patent $30,000 $400 for capacity to Rights only 96 samples plus $25 for each additional 96 sample capacity PCR Instrument Patents (`852, `675) $90,000 9% Net Sales Price only `610 patent only $75,000 5% Net Sales PriceSee Summary of Financial Terms Presented to MJ Research Inc., Feb. 9,1996 [Doc. # 470, Ex. 67]. MJ interprets this summary to mean that if itwished to purchase the full set of instrument patent rights (`852, `675,`610), but not the process patent rights, it would be required to pay$90,000 + $75,000 upfront, or $165,000, and 9% + 5% of the Net SalesPrice, or 14%, which is considerably more expensive than the license costfor the package of instrument and process patent rights.

In response, Applera argues first that MJ has posited a false result,because a "supplier is unlikely to license only the thermal cyclerpatents because the PCR process patents andPage 11thermal cycler patents are blocking patents." See Memorandum in Supportof Plaintiffs' Motion in Limine to Preclude Evidence and Agrument thatApplera Packaged or Tied PCR Process Patent Rights with Thermal CyclerPatent Rights [Doc. # 774, Ex. 4] at 3 n.3. "By definition, blockingpatents disclose interdependent parts of the same product." InternationalMfg. Co. v. Landon, Inc., 336 F.2d 723, 730 (9th Cir. 1964). Thus,"[a]license package containing blocking patents may be considered asingle distinct product," and would not present an unlawful tie. Id.Applera does not explain how its claim that the thermal cycler patents are"blocking patents" because they cover thermal cyclers used for PCR isconsistent with this Court's claim construction. See Claim Constructionof Disputed Terms in U.S. Patents 5,333,675, 5,656,493, and 5,473,610[Doc. # 715] at 3 (construing `675 patent as follows: "The preamble isnot limiting because it describes a use of an invention and because thebody of the claim defines a structurally complete invention capable ofPCR such that a deletion of the preamble would not affect thatstructure. Even if the preamble were construed as a limitation of theclaim, the language `capable of' does not require that the apparatus mustactually be used to perform PCR.") (citation omitted); see also id. at 26(construing `610 patent similarly). Of the thermal cycler patents indispute, only the `493 patent has been construed to cover thermal cyclersused for PCR and for nothingPage 12else (as the patent requires the presence of reagents).

Applera conclusorily argues that MJ's interpretation of its pricinglist to require the payment of two upfront fees and two "per cycler" feesis incorrect, but offers no supporting evidence. The price list isambiguous. It nowhere states what the price for the full set of thermalcycler patent rights would be, and, even more importantly, nowhere makesavailable the full set of thermal cycler patent rights, separately fromthe process patent rights. Viewed in the light most favorable to MJ,there is clearly a factual dispute which, if resolved in MJ's favor, maysuffice for a jury's finding of coercion. Applera's evidence that otherthermal cycler suppliers bought process patent rights separately from thethermal cycler patent rights cannot create a presumption that, in theinverse, the purchase of thermal cycler patent rights without the processpatent rights was economically viable. Because issues of material factabout the actual terms of Applera's pricing program remain in dispute, atrial determination is necessary.Page 13

II. Conclusion

For the foregoing reasons, plaintiffs' Motion in Limine to PrecludeEvidence and Argument that Applera Packaged or Tied PCR Process PatentRights With Thermal Cycler Patent Rights [Doc. # 773(4)] is DENIED.

IT IS SO ORDERED.

1. See also Letter of Hanna Fischer to John and Michael Finney, August1, 1995 [Doc. # 788, Ex. 10] at PE 016163 ("As we have told you, we arenow offering combined rights at a substantial savings over the samerights purchased separately. Nonetheless, the rights are assuredlyavailable separately."); Letter of Hanna Fischer to Michael Finney, April2, 1996 [Doc. # 788, Ex. 10] at PE 011815 ("I have prepared a ThermalCycler Authorization Agreement that covers only the upfront fee componentof a license for the PCR process (`authorization'), as you requested inyour telephone call. This agreement does not include a license under theapparatus patents that we have discussed before. Since you have receivedcopies of the three types of "end user" agreements that [Applera] hasavailable and have discussed the agreements with us on several occasion,you are aware that the authorization rights under the PCR process and alicense under the apparatus patents are available separately or incombination (and that [Applera] is able to offer the rights atsubstantial savings in a combined agreement). As you know, it is[Applera's] position that for MJ Research thermal cyclers you needapparatus rights as well. In sending you the Thermal Cycler AuthorizationAgreement you requested, I remind you that apparatus rights are availableseparately and that, should you execute a license agreement for apparatusrights at a future date for these instruments, the license agreementwould be at the rate for apparatus rights only.").

2. See Thermal Cycler Authorization Agreement between Applera and MJ[Doc. # 788, Ex. 11] at PE 020813 ("Whereas, [Applera] offers the aboveprocess rights and apparatus rights separately or in combination, and, PCRUser has requested PCR process license rights only, without rights underany apparatus claims.").

3. See Thermal Cycler Authorization Agreement between Applera and ColdSpring Harbor Laboratory, Feb. 26, 1997 [Doc. # 788, Ex. 12] at PE 017539("Whereas, [Applera] offers the above process rights and apparatus rightsseparately or in combination, and Thermal Cycler Supplier has requestedPCR process license rights only, without rights under any apparatusclaim.); Thermal Cycler Supplier Authorization Agreement between Appleraand GeneSystems, Sept. 1, 2002 [Doc. # 788, Ex. 13] at PE 108246("Whereas, ABI has offered to Thermal Cycler Supplier the above Rocheprocess rights, and the ABI systems, apparatus, automated method andpressing heated cover rights separately or in combinations, and ThermalCycler Supplier has requested only under the above Roche processpatents, without rights under the above identified ABI patents andapplications."); Thermal Cycler Supplier Authorization Agreement betweenApplera and Kaybee Engineering Ltd., Oct. 8, 1999 [Doc. # 788, Ex. 14] atPE 082979 (Kaybee received only process patent rights); Thermal CyclerSupplier Authorization Agreement between Applera and Stratagene, Jan. 1,1995 [Doc. # 788, Ex. 15] at 022309 (Stratagene received only processpatent rights); Thermal Cycler Supplier Agreement between Applera andCephoid, Apr. 15, 2000 [Doc. # 788, Ex. 18] at PE 105093 (Cephoidreceived only process patent rights); Thermal Cycler SupplierAuthorization Agreement between Applera and Appligene Oncor, signed Feb.26 and Mar. 8, 1998 [Doc. # 788, Ex. 16] at PE 016597 (stating thatApplera offered separate process and thermal cycler rights and Appligenerequested those rights in combination); Thermal Cycler Supplier Agreementbetween Applera and Bio-Rad Laboratories, Inc., Apr. 1, 1998 [Doc. #788, Ex. 17] at PE 017024 (same); Thermal Cycler Supplier Agreementbetween Applera and Eppendrof-Netheler-Hinz GmbH, June 1, 1997 [Doc. #788, Ex. 19] at PE 017945 (same); Thermal Cycler Supplier Agreementbetween Applera and Life Sciences International Plc, Dec. 27, 1996 [Doc.# 788, Ex. 20] at PE 19160 (same); Thermal Cycler Supplier Agreementbetween Applera and Microcosm, Inc., October 16, 2002 [Doc. # 788, Ex.21] at PE108222 (same); Thermal Cycler Supplier Agreement between Appleraand MWG Biotech AG, Aug. 1, 1999 [Doc. # 788, Ex. 22] at PE 083095(same); Thermal Cycler Supplier Agreement between Applera and SanyoElectric Co., Ltd., June 1, 1995 [Doc. # 788, Ex. 23] at PE 021637(same); Thermal Cycler Agreement between Applera and Scinics Corp., Nov.1, 1999 [Doc. # 788, Ex. 24] at PE 086316 (same); Thermal Cycler SupplierAgreement between Applera and Smiths Detection, June 15, 2003 [Doc. #788, Ex. 25] at PE 109222 ("Whereas, ABI has offered to Thermal CyclerSupplier the above Roche process rights, and the Perkin-Elmer systems,apparatus, automated method and pressing heated cover rights separately orin combinations, and Thermal Cycler Supplier has requested rights underthe above Roche PCR process patents and ABI systems patent rights andautomated method patent rights only, without rights under the aboveidentified ABI apparatus and pressing heated cover patents andapplications."). In the one SAP agreement in which the thermal cycler patent rights werenot provided for separately, the instrument patents applications werestill pending, and had not yet been issued. See Thermal Cycler SupplierAgreement between Applera and Takara, April 25, 1994 [Doc. # 788, Ex. 26]at PE 022732.

4. See Agreement, June 3, 1993 [Doc. # 788, Ex. 27]. The theimplementation of the Supplier Authorization Program, when Applera firstbegan licensing its process patents to suppliers. The agreement withKodak thus makes no mention of the existence of the process patents, orthe need to obtain licenses to perform PCR on thermal cyclers under theprocess patents.

5. See Letter from Hanna Fischer to S. Constantine, Jan. 19, 1996[Doc. # 788, Ex. 32] at 2 ("A worldwide license under only the apparatusrights has financial terms of 9% NSP (thermal cyclers and satellitemodules), license issue fee of $90,000, and back royalties calculated at100%.).

6. MJ argues that Applera refused to offer separate licenses for thethermal cycler patents to other thermal cycler suppliers if Applerabelieved the supplier needed rights to both the process and thermalcycler patents. For example, Applera responded to the supplier Bio-Rad'sinquiry as to separate pricing as follows: [A]lthough I will gladly provide you with the current per-thermal cycler terms for authorization rights under the PCR process patents only or license rights under the apparatus patents only, I believe this can be handled contractually at the time it becomes necessary. [Applera]'s position will be that for thermal cyclers which we agree do not need a license under the identified apparatus patent rights, the per-thermal cycler authorization rate for the process rights will be the rate [Applera] is charging for those rights only. Similarly, for thermal cyclers which Perkin-Elmer agrees do not need an authorization under the process rights, the per thermal cycler rates for a license under the apparatus patents will be the rate Perkin-Elmer is then charging for those rights only.Letter of Hanna Fischer to Sanford Wadler, BIO-RAD Laboratories, Sept.12, 1996 [Doc. # 470, Ex. 69]. MJ acknowledges, however, that MJ itself was offered a choice ofunbundled rights, at least formally. MJ claims no injury or threatenedinjury to itself resulting from Applera's actions toward othersuppliers.

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