C5 Medical Werks, LLC v. CeramTec GmbH

228 F. Supp. 3d 1183, 121 U.S.P.Q. 2d (BNA) 1776, 2017 U.S. Dist. LEXIS 1411, 2017 WL 56073
CourtDistrict Court, D. Colorado
DecidedJanuary 5, 2017
DocketCivil Action No 14-cv-00643-RBJ
StatusPublished

This text of 228 F. Supp. 3d 1183 (C5 Medical Werks, LLC v. CeramTec GmbH) is published on Counsel Stack Legal Research, covering District Court, D. Colorado primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
C5 Medical Werks, LLC v. CeramTec GmbH, 228 F. Supp. 3d 1183, 121 U.S.P.Q. 2d (BNA) 1776, 2017 U.S. Dist. LEXIS 1411, 2017 WL 56073 (D. Colo. 2017).

Opinion

R. Brooke Jackson, United States District Judge

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER OF JUDGMENT

This case was tried to the Court from August 29, 2016 to September 8, 2016 and from October 3, 2016 to October 5, 2016.

I. FINDINGS OF FACT

A. The Parties.

1. Defendant/counter-plaintiff CeramTec GmbH (“CeramTec”) is a company that produces pink-colored ceramic hip implant components sold under the name BIOLOX Delta. See Trial Tr. 619:1-10; DX-399. CeramTec sells these products to Original Equipment Manufacturers (“OEMs”). DX-1095. OEMs incorporate BIOLOX Delta products into hip implant systems that the OEMs in turn sell to hospitals for use by surgeons in orthopedic surgeries. Id.; Tr. 1618:19-1619:3. CeramTec currently controls roughly 95% of the ceramic hip implant market in the United States. Tr. 1617:21-25.

2. Plaintiff/eounter-defendant C5 Medical Werks, LLC (“C5”), which later became CoorsTek Medical, LLC (“Coor-sTek”), was founded in 2005 to produce [1186]*1186ceramic products, including ceramic hip implant components, for sale in the orthopedic market.1 Tr.149:19- 151:25, 153:3-17, 213:9-15.

B. Timeline of Events.

3. On July 2,1996 CeramTec applied for a utility patent on a ceramic cutting tool. DX-423 at 1. This application asserted that CeramTec had solved a pre-existing problem with certain ceramic composites known as zirconia-toughened alumina or “ZTA” ceramics whereby the introduction of zirconium used to toughen the material caused a drop in the material’s hardness. See Tr. 657:16-658:5; PX-190 (Applicant’s April 15, 1997 Response to Patent Office). CeramTec claimed that through the introduction of chromium in a specific molar ratio with other components of ZTA ceramics, namely zirconium dioxide, Tr. 657:19-25; see also PX 190 at 216, it could achieve hardness scores for ZTA ceramics that had never been achieved with corresponding zirconium dioxide contents, Tr: 657:19-658:8; PX-190 at 216. Hardness is an important characteristic of ceramic materials because it affects the ceramic’s wear properties, which influence performance.2 Tr. 219:12-16, 643:25-644:13.

4. Although an existing patent already taught the use of chromium in ZTA ceramics, see Tr. 656:20-657:7 (describing the “Ekstrom” patent), the Patent Office issued CeramTec a patent on November 3, 1998 (the ’816 patent). DX-423 (the ’816 patent). CeramTec overcame a contrary office action based in part on the company’s insistence that it had discovered that a small and specific ratio of chromium improved ZTA ceramic hardness values dramatically. Tr. 656:20-659:10; DX-423; PX-190.

5. Around the same time that it obtained the ’816 patent, CeramTec developed BIO-LOX Delta. See DDX-1017; Tr. 1016:20-1017:15; 1018:20-23. In producing BIO-LOX Delta, which is a ZTA ceramic product, CeramTec practices at least claim 3 of the ’816 patent. ECF No. 247 at 2, ¶ 4 (joint pretrial stipulations). The chromium added to BIOLOX Delta gives it a light pink color. DX-228; DX-281.

6. In the early 2000s, CeramTec began to market BIOLOX products commercially. DDX-1017.

7. In September of 2002 CeramTec obtained another patent for ZTA ceramics (the ’957 patent). PX-142. Like the ’816 patent, the ’957 patent claimed the use of chromium in ZTA ceramics. PX-142 (the ’957 patent), claims 1-4 and at 4:37— 56, 5:12-51, 7:14-27. Echoing the ’816 patent, the ’957 patent also explained that the introduction of chromium in a specific ratio with zirconium counteracted a drop in hardness. PX-142 at 5:41-44 (“[T]he chromium addition counteracts any drop in the hardness values when the proportion of zirconium dioxide rises.”). CeramTec does not specifically practice the ’957 patent in producing BIOLOX Delta products. Tr. 394:4-10. This patent is still in force today.

8. CeramTec owns an additional patent on ZTA ceramics (the ’957 patent) and a pending patent application (U.S. Patent Publ. No. 2012/0142237 or the ’554 Appl.) that similarly teach the use of chromium to improve the properties of ceramic materials. PX-550 (the ’957 patent), claims 1 and 20; PX-551 (the ’554 Appl.), claim 8; Tr. 1136:16-24.

[1187]*11879. In April of 2004 CeramTec made two submissions to the Food & Drug Administration (“FDA”) in which the company represented that the addition of chromium in its composite material counteracts a drop in hardness caused by an increasing amount of zirconia. See PX-79 at 6; PX-86 at 6.

10. In 2006 CeramTec produced research that suggested that chromium did not increase hardness. Tr. 1100:18-1101:4. CeramTec refers to this as its first “data point” that chromium might actually be a non-functional component of BIOLOX Delta. See id.

11. However, despite that research and a few additional studies in the late 2000s that reached similar results, see PX-554, the company did not change its public stance that chromium increased hardness. On the contrary, it maintained its position that chromium increased hardness in additional submissions to the FDA in September 2008, October 2008, February 2012, October 2012, and June of 2013. PX-79; PX-86; PX-87 at 26-27; PX-22 at 6; PX-82; PX-88; PX-84 at 26; PX-166 at 34. CeramTec also reiterated this stance, as well as the fact that chromium turned the product pink, in numerous training materials for its customers, research articles, and marketing campaigns spanning this same time period. See, e.g., Tr. 1151:4-14, 2029:1-9 (referencing an e-mail chain involving the marketing “story” of chromium increasing hardness that CeramTec adopted); DX-215 (e-mail chain); Tr. 223:4—231:1; PX-429 (Summary of Ceram-Tec presentations); PX-40 (Training Guide); PX-129 (Research).

12. In 2009 C5 entered the ceramic hip component market and began to compete with CeramTec with two products of its own: (1) Cerasurf-p, a ceramic product that like BIOLOX Delta contáins chromium and is pink; and (2) Cerasurf-w, a white ceramic product that does not contain chromium. DX-517; DX-090 at 91; DX-90 at 118; DX-517; Tr. 297:4-12; DX-519 at 9; DX-065. Initially, C5’s internal testing revealed no difference in hardness or strength between Cerasurf-p, which contains chromium, and Cerasurf-w, which does not. See DX-527. Nevertheless, additional testing C5 conducted eventually showed statistically significant evidence that its pink material was harder than its white material. See, e.g., Tr. 1307:11-12, 1941:3-20. While the Cerasurf-p product looks identical to CeramTec’s BIOLOX Delta product aside from the companies’ logos engraved on these products, C5 claims that it carefully designed its product so that it did not infringe on Ceram-Tec’s ’816 patent. Tr. 923:1-13; Tr. 239:3-13.

13. Although BIOLOX Delta controlled the vast majority of the ceramic hip implant market at this time, CeramTec soon grew concerned when C5 entered the market. See PX-44 at 62; PX-68 at 2. The company subsequently took three actions to preserve its market share. First, on April 9, 2013 CeramTec filed an application with the United States Patent and Trademark Office (“USPTO”) seeking trade dress protection on the pink color of chromium in BIOLOX Delta on the principal register. DX-156; DX-157. In response to questions, CeramTec asserted that the col- or pink was not a functional component of BIOLOX Delta.

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228 F. Supp. 3d 1183, 121 U.S.P.Q. 2d (BNA) 1776, 2017 U.S. Dist. LEXIS 1411, 2017 WL 56073, Counsel Stack Legal Research, https://law.counselstack.com/opinion/c5-medical-werks-llc-v-ceramtec-gmbh-cod-2017.