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LifeNet Health v. Lifecell Corp.

United States District Court, E.D. Virginia, Norfolk Division

March 18, 2015

LIFENET HEALTH, Plaintiff,
v.
LIFECELL CORPORATION, Defendant

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For LifeNet Health, Plaintiff: Michael Harry Jacobs, LEAD ATTORNEY, Crowell & Moring LLP, Washington, DC; Stephen Edward Noona, LEAD ATTORNEY, Kaufman & Canoles, P.C., Norfolk, VA; Jennifer Helen Burdman, Michael Joseph Songer, William Sauers, PRO HAC VICE, Crowell & Moring LLP (DC-NA), Washington, DC; Mark Edward Warmbier, Kaufman & Canoles PC (Norfolk), Norfolk, VA.

For LifeCell Corporation, Defendant: Brian Andrew Wainger, William Rueger Poynter, Kaleo Legal, Virginia Beach, VA; Brianne Bharkhda, Gary Michael Rubman, George F. Pappas, James P. Hughes, Jeffrey Howard Lerner, Megan Keane, Michael Sawyer, William Edward Zapf, III, PRO HAC VICE, Washington, DC; Erica Nicole Andersen, Grant Drews Johnson, Covington & Burling LLP (DC), Washington, DC; Eudokia Evie Spanos, PRO HAC VICE, Covington & Burling LLP (NY-NA), New York, NY.

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OPINION AND ORDER

Henry Coke Morgan, Jr., Senior United States District Judge.

This matter is before the Court upon Defendant LifeCell Corporation's (" Defendant" or " LifeCell" ) Motion for New Trial or in the Alternative Remittitur, Doc. 415, and Motion for Judgment as a Matter of Law, Doc. 419 (hereinafter " Motions" ). A hearing was held on Thursday, January 29, 2015. Ruling from the bench, the Court DENIED the Motions as to divided infringement and the jury instruction concerning the References Cited and took the remainder of the Motions under advisement. For the reasons stated herein, the Court DENIES the Motions in their entirety.

I. BACKGROUND

A. Overview of the Patent Claims

United States Patent No. 6,569,200 (" the '200 patent" ) was issued on May 27, 2003 and is titled " Plasticized Soft Tissue Grafts, and Methods of Making and Using Same."

The '200 patent contains fifteen (15) claims, five (5) of which arc independent (Claims 1--3, 7, and 15). Plaintiff asserted claims 1--4, 7--8, and 10. Doc. 65 at 4. These claims are reproduced below.

o Claim 1: A plasticized soft tissue graft suitable for transplantation into a human, comprising:
a cleaned soft tissue graft having an internal matrix; and
one or more plasticizers contained in said internal matrix;

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said one or more plasticizers are not removed from said internal matrix of said plasticized soft tissue graft prior to transplantation into a human.
o Claim 2: A plasticized soft tissue graft, comprising:
a cleaned, soft tissue graft; and
one or more plasticizers, wherein said cleaned soft tissue graft is impregnated with one or more plasticizers, and said one or more plasticizers are not removed from said internal matrix of said plasticized soft tissue graft prior to transplantation into a human.
o Claim 3: A plasticized soft tissue graft, comprising: a cleaned, soft tissue graft comprising one or more plasticizers, and said one or more plasticizers are not removed from an internal matrix of said plasticized soft tissue graft prior to transplantation into a human.
o Claim 4: The soft tissue graft of any one of claims 1,2,3, wherein said soft tissue graft is suitable for direct transplant into a human without rehydration.
o Claim 7: A method for producing a plasticized soft tissue graft suitable for transplantation into a human, comprising: impregnating a cleaned, soft tissue graft with one or more plasticizers to produce a plasticized soft tissue graft, and said one or more plasticizers arc not removed from said internal matrix of said plasticized soft tissue graft prior to transplantation into a human.
o Claim 8: The method of claim 7, said step of impregnating, comprising: incubating said cleaned, soft tissue graft with a plasticizer composition comprising one or more plasticizers and one or more biocompatible solvents.
o Claim 10: The method of claim 8, wherein incubating comprises soaking said cleaned, soft tissue graft in said plasticizer composition.

The Court construed eight (8) disputed terms in the above claims as follows:

Disputed Term

The Court's Construction

" plasticized soft

a load-bearing and/or non-load-bearing soft

tissue graft"

tissue product, including skin, pericardium,

dura mater, fascia lata, and a variety of

ligaments and tendons composed of an internal

matrix where free and loosely bound waters of

hydration in the tissue have been replaced with

one or more plasticizers without altering the

orientation of the collagen fibers, such that the

mechanical properties, including the material,

physical and use properties, of the tissue

product are similar to those of normal hydrated

tissue

" suitable for

No further construction needed

transplantation

into a human"

" cleaned"

a process during which cellular elements and

small molecular weight solutes are removed

" plasticizer"

biocompatible compounds which are soluble in

water and can easily displace/replace water at

the molecular level

" said one or more

No further construction needed

plasticizers are

not removed from

[an/said] internal

matrix of said

plasticized soft

tissue graft prior

to transplantation

into a human"

" impregnating" /

filling or filled

" impregnated"

" without

without hydrating a plasticized soft tissue graft

rehydration"

prior to implantation into a patient

" incubating"

soaking or otherwise exposing

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Doc. 122 at 14. The Court also adopted the parties' agreed constructions for the following three (3) terms:

1. internal matrix: the intercellular substance of such soft tissue including for example ligaments and tendons, including collagen and elastin fibers and base matrix substances

2. plasticizer composition: composition which includes one or more plasticizers and one or more biocompatible solvents

3. biocompatible solvents: any solvent material which does not provoke an adverse response in the patient

Id. at 7.

B. Summary of the Patent[1]

The functioning of the '200 patent may be described as follows. It is unique and advanced the science in several ways. Its " cleaning" of the tissue removes cellular matter including DNA, and it is the DNA in the tissue graft which causes the transferee's body to reject the tissue graft. After this cleaning, the tissue contains what is defined as its internal matrix, and the tissue with its internal matrix is " impregnated" with a preservative, which the patent refers to as a " plasticizer," thereby creating a " plasticized soft tissue graft." " Plasticized soft tissue grafts" are packaged in their respective containers by both Plaintiff and Defendant. Plaintiffs container includes a solution with water, 30% glycerol, and biocompatible solvents, while Defendant's contains water and " solution E," which contains water and a variety of chemical preservatives including glycerol and biocompatible solvents. The function of their respective preservatives is the same. Plaintiffs product utilizing its '200 patent is packaged " ready to use," as the preservative/plasticizer keeps the soft tissue graft sterile, hydrated, and in retention of its properties as normal hydrated tissue. For the same reasons, Defendant's products Strattice, AlloDerm RTU, Conexa, and GraftJacket RTU are " ready to use." The evidence does not establish whether Plaintiffs products produced in accordance with the '200 patent are more or less effective than Defendant's products which utilized solution E.

In addition to packaging their products in the preservative/plasticizer, their respective products can be stored at room temperature for periods of time up to three (3) years. Prior to the granting of Plaintiffs '200 patent, there were tissue grafts on the market, including Defendant's products, which were sterile and biocompatible; however, these products did not possess all of the features of being " ready to use," being storable at room temperature, and offering an extended shelf life. Instead, such grafts were freeze-dried or fresh-frozen and had to be hydrated, defrosted, or otherwise prepared for use by the surgeon. Coordinating product readiness and the surgeon's readiness was difficult.

The jury found that Defendant's products, Strattice, AlloDerm RTU, Conexa, and GraftJacket RTU, directly infringed

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the '200 patent, and the patent was not invalid for obviousness, anticipation, or lack of enablement. It fixed Plaintiffs damages at a lump-sum royalty of $34,741,971. Notably, Defendant's sales records for AlloDerm RTU (" ready to use" ) demonstrated that it captured 75% of the market from its own freeze-dried AlloDerm RTM product in a period of two years. See PTX-087. The original AlloDerm RTM was itself sterile and biocompatible, but Defendant's AlloDerm RTU and its other three infringing produces added the very features the '200 patent brought to the marketplace: ready to use, storable at room temperature, and an extended shelf life. Defendant countered with a survey that it claimed showed the most important features of its products were not the features of the '200 patent; however, the survey did not show what Defendant claimed, but instead merely showed that surgeons preferred a product that works. Moreover, the survey did not ask the crucial question of whether the patented features were what caused surgeons to switch from Defendant's freeze dried products to its new " ready to use" products. See DTX-177.

C. Procedural History

On September 6, 2013, Plaintiff filed a one-count Complaint alleging that Defendant had infringed the '200 patent. Doc. 1. An eleven-day jury trial commenced on November 3, 2014 and proceeded in four phases. In phase one, Plaintiff presented evidence of infringement and damages. In phase two, Defendant presented evidence of non-infringement, damages, and its invalidity defenses. In phase three, Plaintiff was given the opportunity to rebut Defendant's evidence of non-infringement and damages, and it presented its defense to LifeCell's invalidity contentions. Finally, in phase four, Defendant was allowed to offer rebuttal evidence as to invalidity. The Court granted a Rule 50 motion filed by Defendant as to the issue of willful infringement. Accordingly, the jury was tasked with resolving the issues of infringement, invalidity, and damages.

On November 18, 2014, the jury returned its verdict, awarding Plaintiff damages in the amount of $34,741,971. On November 20, 2014, judgment was entered in that amount, in addition to Plaintiffs costs of action. Doc. 395.

On December 18, 2014, Defendant moved for judgment as a matter of law or, in the alternative, a new trial. Docs. 415, 419. Plaintiff filed its oppositions on January 2, 2015. Docs. 431, 432. Defendant filed its reply briefs on January 8, 2015. Docs. 433, 434. As directed by the Court, Defendant filed a supplemental submission on February 5,2015. Doc. 460. Plaintiff filed a responsive supplemental submission on February 12, 2015. Doc. 466.

II. LEGAL STANDARD

In a patent case, the Federal Circuit applies the law of the regional circuit on matters of procedural law. Wordtech Sys. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, 1318-19 (Fed. Cir. 2010).

A. Motion for Judgment as a Matter of Law

Rule 50(b) of the Federal Rules of Civil Procedure allows a party to renew, within twenty-eight (28) days after the entry of judgment, a motion for judgment as a matter of law made pursuant to Rule 50(a) that was not granted by the Court. Fed.R.Civ.P. 50(b). Rule 50(a) explains that such a motion " must specify the judgment sought and the law and facts that entitle the movant to the judgment." Fed.R.Civ.P. 50(a)(2). The Court may grant such a motion if it finds " that a reasonable jury would not have a legally sufficient

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evidentiary basis to find for the party on [the relevant] issue." Fed.R.Civ.P. 50(a)( 1). The Court may not, however, " disturb the verdict where there was sufficient evidence for a reasonable jury to find in the non-movant's favor." Dotson v. Pfizer. Inc., 558 F.3d 284, 292 (4th Cir. 2009). In deciding whether to grant a motion for judgment as a matter of law, the Court must view the evidence " in the light most favorable to the prevailing party." Id.

B. Motion for a New Trial

Rule 59(a)(1)(A) allows the Court, on motion, to grant a new trial " after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court[.]" Fed.R.Civ.P. 59(a)(1)(A). A " decision on a motion for a new trial rests within the sound discretion of the trial court." City of Richmond v. Atlantic Co., 273 F.2d 902, 916 (4th Cir. 1960).

In the Fourth Circuit, on a motion for a new trial it is the duty of the trial court to set aside the verdict and grant a new trial if" (I) the verdict is against the clear weight of the evidence, or (2) is based upon evidence which is false, or (3) will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict." Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors. Inc., 99 F.3d 587, 594 (4th Cir. 1996). The first and second prongs are factual determinations. Fairshter v. American Nat'l Red Cross, 322 F.Supp.2d 646, 650 (E.D. Va. 2004) (citing Atlas Food Sys. Servs., Inc., 99 F.3d at 594). " The third prong requires a policy analysis under which the 'judge's unique vantage point and day-to-day experience with such matters lend expertise.'" Id. (quoting Atlas Food Sys. Servs., Inc., 99 F.3d at 594). On a Rule 59 motion, the Court " may make credibility judgments in determining the clear weight of the evidence." Lovell v. BBNT Solutions. LLC, 295 F.Supp.2d 611. 618 (E.D. Va. 2003) (citing Knussman v. Maryland, 272 F.3d 625, 647 (4th Cir. 2001)).

III. DISCUSSION[2]

A. Infringement of the '200 Patent

In phase one, Plaintiff presented its evidence of infringement, upon which it bore the burden of proof by a preponderance of the evidence. The jury found in favor of Plaintiff that Defendant's accused products infringed upon the asserted claims. The major dispute as to infringement centered on whether plasticizers were removed from the internal matrix of Defendant's products by soaking the grafts in a saline solution for two minutes, as stated in Defendant's Instructions for Use (" IFU" ).

The jury's verdict is supported by substantial evidence that plasticizer was not removed from the internal matrix of the graft. There is no dispute that Defendant introduced testing showing removal of plasticizers from the skin graft. See DTX-256 (showing removal of 25-30% of certain plasticizers from Strattice at two minutes); DTX-365 (showing removal of 20-50% of certain plasticizers from AlloDerm RTU at two minutes). Dr. Kaplan testified, however, that the plasticizers removed did not come from the internal matrix, because " [i]f you've removed the plasticizer

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from the internal matrix, the matrix will no longer have the right mechanical properties to match native structure tissue and function." Tr. at 467:17--24. Obviously, removing the tissue from the packaging containing the liquid preservative in which it is stored will remove some of the plasticizer from the surface of the tissue, but that does not mean it is also removed from the internal matrix.

Dr. Kaplan also testified why the two-minute rinse would not remove plasticizers from the internal matrix, offering a detailed description of the science behind the binding of plasticizers, and how disrupting the binding would alter the tissue. Id. at 467:13--469:15. In other words, when the preservative is removed from the internal matrix the tissue will deteriorate. He further explained that although the exterior of the graft contains internal matrix materials, the plasticizers " will come out of the graft but it's not part of the matrix." Id. at 583:11--14. In reaching his conclusion, he relied on the " data provided from LifeCell's own documentation" and testified that the " documentation provided all of the needed information on the materials." Id. at 470:6--12.

Defendant's expert, Dr. Badylak, testified that the plasticizers were removed from the internal matrix. Id. at 1130:21. However, the jury was not bound by Dr. Badylak's opinion and instead accepted that of Dr. Kaplan, returning a verdict in favor of Plaintiff. Moreover, the Court also does not find Dr. Badylak a persuasive witness for purposes of Defendant's Rule 59 Motion. Although Dr. Badylak appears to be an exceptionally accomplished scientist, his testimony failed to persuade the Court for three reasons. First, he was argumentative on the stand, advocating as opposed to testifying. See, e.g., Tr. at 1101:16-1102:4 (discussing the " beauty of solution E" when asked if the plasticizers were slippery); id at 1322:18-19 (referring to LifeCell's data as " our" data). Second, he objected to questions asked by Plaintiffs counsel instead of allowing defense counsel to object. See, e.g., id. at 1344:20-23 (objecting to the form of a question). Third, he openly disregarded the Court's claim construction.[3] See, e.g., id. at 1152:19-1153:21 (disagreeing with the Court's claim construction for impregnating/impregnated).

In support of its Motions, Defendant brought forth five main arguments as to why the Court should rule that it has not directly infringed the '200 patent. First, it argued that it cannot directly infringe product claims 1--4 of the '200 patent because it does not transplant the products into a human. Doc. 428 at 2--6. Second, and for similar reasons, Defendant argued that it does not infringe the method claims, 7, 8, and 10, because it does not perform the step of transplantation. Id. at 6--8. Third, Defendant argued that the Court erred in several of its claim constructions and, that under the proper constructions, the evidence cannot support a finding of infringement. Id. at 8--16. Fourth, Defendant argued that, even accepting the Court's constructions, Plaintiff still could not show that the accused products met the " not removed" limitation found in all of the claims. Id. at 9--13; see also Doc. 416 at 10. Fifth, Defendant also objected to three of the jury instructions regarding infringement. Additionally, Defendant argued that the Court's refusal to strike Stephen Kunin's testimony warrants a new trial. The Court addresses each contention in turn.

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1. Direct Infringement of Claims 1--4 of the '200 Patent

Claims 1--4 of the '200 patent are product claims. Defendant argued under Rule 50 that it cannot be liable for direct infringement of claims 1--4 because of the " not removed ... prior to transplantation" limitation. Doc. 428 at 3. Defendant argued that it can only directly infringe if it was directly responsible for transplanting the grafts into humans. Id. According to Defendant's theory, the surgeons are the direct infringers. Plaintiff argued that the limitation is met because " the physical properties of those grafts are such that the plasticizers cannot be removed from the internal matrix whether or not the grafts are rinsed." [4] Doc. 432 at 10.

Defendant principally relied on Cross Med. Prods. Inc. v. Medtronic Sofamor Danek. Inc., 424 F.3d 1293 (Fed. Cir. 2005). At issue in Cross Med. was an apparatus claim with the limitation " operatively joined," construed to require that " the interface and the bone segment are connected and in contact such that the device is effective to perform posterior stabilization." Id. at 1306, 1310--11. The Federal Circuit noted that it was the surgeons, not Medtronic, that joined the interface portion to the bone, thus Medtronic did not directly infringe because it was the surgeons who made the infringing apparatus. Id. at 1311. It was not enough that Medtronic's device was capable of being infringed because the claim required that the anchor face had to be in contact with the bone. Id. Defendant argued that Cross Med. controls because the surgeons are the ones who make the apparatus (the graft) by transplanting grafts into the patients, and there is no evidence of any agency relationship between Defendant and the surgeons. See also Aristocrat Techs. Australia Ptv Ltd. v. Int'l Game Techs., 709 F.3d 1348, 1362 (Fed. Cir. 2013) (quoting Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1307 (Fed. Cir. 2012) ( '" for a party to be liable for direct patent infringement under 35 U.S.C. § 271(a), that party must commit all the acts necessary to infringe the patent, either personally or vicariously.'" )).

Plaintiff argued that Cross Med. can be distinguished from this case because in Cross Med. the surgeon completed the manufacturing of the final product. Doc. 432 at 12. In the instant case, Plaintiff argued that the products already satisfy the limitation because its expert, Dr. Kaplan, testified that the two-minute rinse has no effect on the removal of plasticizer from the internal matrix. Id. Thus, the surgeons do not alter the product. Id. The jury's findings of infringement necessarily support the theory that only LifeCell's actions produce the infringing product. Id. Accordingly, because plasticizers were not removed from the internal matrix prior to transplantation, the surgeons did not " make" the product; they used the product as manufactured by Defendant and in accordance with Defendant's instructions.

Defendant also attempted to compare this case to Centillion Data Sys., LLC v. Qwest Commc'ns Int'l. Inc., 631 F.3d 1279 (Fed. Cir. 2011). In Qwest, the accused products consisted of two parts: " Qwest's back office systems and front-end client applications that a user may install on a personal computer." Id. at 1281. The Federal Circuit agreed with Qwest's position that it did not directly infringe on the patient at issue because it had no control

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over the personal computer. Id. at 1286. " Supplying the software for the customer to use is not the same as using the system." Id.

Here, however, LifeCell is doing more than supplying a graft; the graft is ready to be used. Evidence is in the record that the two-minute soak did not remove plasticizers from the internal matrix, and thus the surgeons did not " make" the product; they used the product as produced by Defendant. Defendant's own expert, Dr. Badylak, testified that the plasticizers were safe and thus did not have to be removed. See Tr. at 1099:21--1100:1. Moreover, Defendant provided the IFU to the surgeons and further prepared materials and hired speakers to teach surgeons how to use the product. Egan Dep. at 107:02--20; see also PTX-064. Therefore, viewing the evidence and the reasonable inferences therefrom in favor of Plaintiff, Defendant has " made" a product that directly infringes on the '200 patent. Accordingly, the Court DENIES the Motion on this ground.

2. Direct Infringement of Claims 7--8 & 10 of the '200 Patent

Defendant moved under Rule 50 for a finding that it did not infringe the method claims of the '200 patent. Again focusing on the " not removed ... prior to transplantation" limitation, Defendant argued it cannot directly infringe these claims because it does not perform all of the steps of the claimed methods; thus, it cannot be liable for direct infringement. Doc. 428 at 6. According to Defendant, no evidence exists that it performed the step of transplanting the graft into a human nor that it directed and controlled the conduct of another party who did so. Id. Plaintiff argued that it claimed a method of producing a graft and that there is no dispute about the evidence showing Defendant produced a graft where plasticizers were not removed from the internal matrix. Doc. 432 at 13.

" To establish liability for direct infringement of a claimed method or process under 35 U.S.C. § 271(a), a patentee must prove that each and every step of the method or process was performed." Aristocrat Techs., 709 F.3d at 1362. " Thus, 'for a party to be liable for direct patent infringement ... that party must commit all the acts necessary to infringe the patent, either personally or vicariously.'" Id. (quoting Akamai Techs., Inc., 692 F.3d at 1307). Accordingly, in the context of a method claim, " a patent holder must establish that an accused infringer performs 'all the steps of the claimed method, either personally or through another acting under his direction or control.'" Id. (quoting Akamai, 692 F.3d at 1307). Defendant primarily relied on two cases in support of its argument, Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), and Aristocrat.

In Aristocrat, the patent covered a slot machine game. Aristocrat, 709 F.3d at 1350. In the asserted claims, the player, rather than the game operator, " makes a wager" and performs the step of " activating said user interface at said particular gaming machine by said player during said displaying of said second game to affect the display of said second game[.]" Id. at 1350--51. Thus, to establish infringement, the defendant " must exercise direction or control over a player playing the game." Id. As the operator did not have sufficient control over the player to establish vicarious liability, there was no infringement. Id. at 1363.

Similarly, in Muniauction, the patent covered a computerized system allowing bond issuers to run an auction and bidders to submit bids via the Internet. Muniauction, 532 F.3d at 1323. Thus, the issue was whether " the actions of at least the

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bidder and the auctioneer may be combined under the law so as to give rise to a finding of direct infringement by the auctioneer." Id. at 1329. The Federal Circuit found that the defendant could not be liable for direct infringement because it did not perform every step of the methods, nor did it have another party perform the steps on its behalf. Id. at 1330. The fact that defendant " controls access to its systems and instructs bidders on its use is not sufficient to incur liability for infringement." Id.

Thus, according to Defendant, it cannot be liable for infringement here because the surgeons who transplant the grafts complete the process by performing the " method step" of transplantation. Plaintiff argued these cases are " distinguishable because they require steps that must be performed by different entities." Doc. 432 at 14. Moreover, Plaintiff argued that the jury necessarily concluded " that there is nothing that surgeons can do that affects the presence of plasticizer in the internal matrix prior to transplantation." Id. at 14--15.

In the matter at hand, the jury's verdict is based on substantial evidence that plasticizer was not removed from the internal matrix of the graft. See supra p. 8. Thus, as Plaintiff correctly argued, infringement is complete because the surgeons' actions do not remove plasticizers from the internal matrix. While transplantation was relevant to the infringement analysis, because the product would not infringe if plasticizers were removed from the internal matrix, the method itself claims a process for " producing a plasticized soft tissue graft suitable for transplantation into a human." Accordingly, the claim is infringed if the graft was suitable for transplantation, as Defendant's own expert testified. See Tr. at 1098:2--9; 1099:23 (testimony that the preservatives were not harmful). Thus, whereas infringement was not complete in Aristocrat and Muniauction until the users interacted with the systems, here the surgeons were provided a graft that actually infringed and whose method of production infringed. Further, Defendant directed the surgeons on how to transplant the graft in the IFU. Therefore, the Court DENIES the Motion as to this ground.

3. Sufficiency of the Evidence

Defendant next argued that under the constructions adopted by the Court, substantial evidence ...


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