Article

Note: Fresenius Medical Care Holdings (Applicant) sued Baxter International (Beneficiary) seeking declaratory judgment of patent invalidity. Following a judgment as a matter of law that the patents were valid and a jury trial awarding damages of US$17,171,429, Applicant provided Beneficiary with a supersedeas bond standby letter of credit in the amount of US$18 million, and both parties appealed. The LC provided that Beneficiary could draw on the LC if the appeal were dismissed, or the judgment affirmed or affirmed-in-part. The LC also allowed Applicant to cancel the LC upon a completed appeal and mandate reversing that part of the judgment giving rise to the damages.

The US Federal appellate court reversed the trial court in part, and affirmed in part, remanding the case for further proceedings. Applicant filed a motion for a retrial on the issue of damages, which was denied, and Beneficiary informed Applicant of its intention to draw on the LC. When Applicant's request that Beneficiary not draw on the LC pending the appeal of the denial went unanswered, Applicant asked the bank to cancel the LC.

Beneficiary moved to have Applicant held in civil contempt for unwillingness to comply with the final judgment. The U.S. District Court for the Northern District of California, Chen, J., denied the motion.

The Judge noted that the circumstances were not so unusual that a judgment of contempt was warranted. Beneficiary would have had to show that Applicant's "interpretation of the Federal Circuit decision and its legal effect was not in good faith and was unreasonable", and Beneficiary did not meet this standard. Additionally, the Judge noted that a new trial on damages would be consistent with the Federal Circuit's opinion ordering further proceedings, giving Applicant a reasonable good faith argument.

[JEB/jsc]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.