Shocking? The Federal Circuit's opinion in Agrizap, Inc. v. Woodstream Corp. doesn't necessarily reach that amplitude. Yet the decision does contain some high-wattage lessons for patent holders, as well as for those seeking to short-circuit the letter (or spirit) of existing confidentiality agreements.
Let's just say this one's a live-wire.
Agrizap held patent rights to certain rodent control technology. The patent at issue included a methodology-known as a resistive switch-that uses the animal's body to complete an electrical circuit. Once complete, the circuit triggers a generator that then dispatches the varmint through electrocution. Agrizap marketed its invention under the brand name "Rat Zapper."
Alleged infringer Woodstream is a nationwide distributor of more traditional pest control products. It entered into a confidentiality agreement with Agrizap which ultimately culminated in the Rat Zapper being marketed under a Woodstream label. Pursuant to the parties' agreement, Agrizap agreed not to compete in those venues where the Woodstream branded Rat Zapper was sold.
At the same time, Woodstream was trying to figure out how to make a similar product itself. Nonetheless, it assured Agrizap that actions taken in furtherance of that goal-like sending the Rat Zapper to China-were for purposes permitted under the parties' agreement. Within three years of entering into its agreement with Agrizap, Woodstream began selling its own resistance-switch based Electronic Mouse Trap (EMT) and Electronic Rat Trap (ERT) in direct competition with the Rat Zapper.
Agrizap brought suit for both patent infringement and fraudulent misrepresentation. After trial, the jury returned damage awards for both claims. Various post-trial motions ensued and the district ultimately entered a final judgment which affirmed the $1.2 million fraudulent misrepresentation award, but overturned as a matter of law, the $1.4 million infringement damages. Both parties appealed.
The Federal Circuit first reviewed the fraudulent misrepresentation claim. It affirmed the jury's award, even though Agrizap never propounded a specific dollar amount for its fraud damages. The court said, as wrong-doer, Woodstream had to bear the risk of uncertainty because Agrizap did introduce general evidence regarding the losses caused by Woodstream's conduct.
The Federal Circuit found that the district had erred in its determination that the patent covering the Rat Zapper was not obvious. Instead, the Federal Circuit said that the Rat Zapper did nothing more than combine familiar elements to yield a predictable result-the very definition of obviousness employed in KSR. Agrizap's evidence regarding commercial success, long-felt need and Woodstream's copying could not overcome the fact the Rat Zapper was basically a combination of previous patents. The Court referenced other patents that made use of animal-based resistive switches, as well as Agrizap's own patent for the Gopher Zapper, which employed a mechanical switch to complete the circuit.
Agrizap illustrates the risks patent holders face under the new rules for obviousness. Those considering infringement litigation will want to do their best to make sure that their own action doesn't become the conduit for their patent's invalidation. Additionally, Agrizap demonstrates the impact extra-patent agreements can have on litigation. Here, good contractual housekeeping kept a significant portion of the damages viable despite an invalid patent. The lesson? To fully assess risk, patent holders who think they smell a rat (or licensees contemplating becoming one) need to look beyond the patents in order to determine which party's most likely to get zapped.