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By David Taylor and Corinne Marie Pouliquen

A $4.5 million award for infringement of patents on techniques for sorting bull semen was affirmed by the U.S. Court of Appeals for the Federal Circuit in XY, LLC v. Trans Ova Genetics, L.C., 890 F.3d 1282 (Fed. Cir. 2018). The case serves as a reminder to those in the agricultural industry of the importance in protecting agricultural innovations, in particular protecting innovations through patents. The case highlights that patent protection extends not just to agricultural equipment or crop fertilizers, but to all sorts of innovations that are useful in the agricultural field. This case also makes clear the importance of having a portfolio of patents, because while one of the patents was eventually held invalid, the remaining five patents were upheld as valid and found to have been infringed.

The plaintiff XY, LLC (“XY”) and defendant Trans Ova Genetics, L.C. (“Trans Ova”) had previously entered into a five-year licensing agreement under which Trans Ova was authorized to use XY’s patented technology in animal breeding. Eventually, there was a falling out between the parties, and each accused the other of breaching the contract, XY accused Trans Ova of patent infringement, and Trans Ova accused XY of anti-trust violations and challenged the validity of XY’s patents.

XY eventually sued Trans Ova for patent infringement and breach of contract involving six patents relating to sorting of X- and Y-chromosome-bearing sperm cells for use in animal breeding. Some of the patents required the use of “flow cytometry,” a process by which cells flow through a flow cytometer at a high rate of speed in a fluid stream and are evaluated at several thousands of cells per second.

Sorting animal semen using flow cytometry was known in the field. A prior art document, the Johnson patent, disclosed techniques involving staining DNA in sperm cells with a dye, using a laser beam to activate the fluorescence of the dye (with X-chromosome cells being brighter than Y-chromosome cells), detecting the amount of fluorescence in the cells, and sorting the cells into separate containers of X and Y cells. Fortunately for XY, its patents were not limited to that prior art methodology.

At trial, XY’s six patents were arranged into four groups:  (1) the “Fluid Patents” directed to sheath fluids introduced to cytometry devices and methods in a “coordinated fashion” such that the cells’ fluid environment changed at various stages of the sorting process to minimize stress on the cells and keep as many of the cells alive as possible, (2) the “Freezing Patent” in which sperm is first sorted and then cryopreserved to facilitate storage and shipment to locations where the sperm is thawed for use in procedures such as artificial insemination and fertilization, (3) the “In-Vitro Fertilization Patent” involving in-vitro fertilization using sorted and reverse sorted sperm, and (4) the “Reverse Sort Patents” directed to a sorting process that reverses the steps of the Freezing Patent to first freeze the sperm and sort the sperm after thawing.

The jury found the patents valid and Trans Ova to have infringed the six XY patents. The jury awarded XY $4,585,000 in infringement damages for past infringement. The jury also effectively adopted the testimony of XY’s damages expert in awarding XY ongoing royalties of 15 percent of gross sales for Trans Ova’s future infringement and 4 percent for reverse sorting services. The district court lowered the rates to 12.5 percent of gross sales for future infringement and 2 percent for reverse sorting services.

Although the Federal Circuit held one patent, the Freezing Patent, invalid, the Court upheld the jury’s finding that the remaining patents were valid based on the jury’s reasonable reliance on the testimony of XY’s expert witness. With respect to the Johnson patent, the Federal Circuit found that the jury reasonably relied on the testimony of XY’s expert that the Johnson patent did not contemplate any coordination in introducing fluids so as to aid the sperm in adapting at each transition between sorting stages.

Turning its attention to the ongoing royalty awarded by the district court, the Federal Circuit found that the district court provided no reasoned basis for lowering the ongoing royalties awarded by the jury. Accordingly, the Federal Circuit vacated the district court’s ongoing royalty rate and remanded with instructions to recalculate the rate in accordance with those provided by the jury.

David Taylor and Corinne Marie Pouliquen are partners with the law firm of Berenato & White, LLC in its Bethesda office. The firm concentrates its practice in the area of intellectual property law.