News from Notch Consulting, Inc.

Flexsys and Sinorgchem both issued press releases today responding to the CAFC’s decision of Friday, December 21, 2007 regarding the ongoing patent infringement suit alleging that Sinorgchem is violating Flexsys’s patents for 4-ADPA production technology.

Here is the Flexsys release.

Here is the Sinorgchem release — it is in Chinese. I am working to find a translation.

More commentary on the decision is here. Scroll down to December 23 (“Forceful Newman dissent in Sinorgchem vs. ITC”). Read the comments on this post.

Here is our post on the decision.

Below is the main text of the Flexsys press release.

Flexsys To Petition Full Court For Review of Appellate Decision From ITC Action

Flexsys patents remain valid; Exclusion order remains in effect

ST. LOUIS – December 27, 2007 — Solutia Inc. today announced that its Flexsys subsidiary will soon be filing a petition for rehearing by all of the judges of the Court of Appeals for the Federal Circuit (CAFC). This matter involves Flexsys’ ongoing patent infringement dispute with Sinorgchem regarding process technology for the manufacture of 4-ADPA and its PPD derivatives. In July 2006, the International Trade Commission (ITC) ruled in favor of Flexsys. Last week, a three-judge panel of the CAFC ruled 2-1 that Sinorgchem had not literally infringed Flexsys’ patents, and remanded the case to the ITC to determine whether Sinorgchem had infringed under the doctrine of equivalents.

“We will be moving quickly to file a petition for rehearing,” said Tim Wessel, vice president, Antidegradants and Crystex®. “Importantly, the ITC exclusion order that prohibits Sinorgchem’s importation of 4-ADPA and 6PPD into the United States remains in full effect. We agree with the strongly worded dissent that the ITC decision should be upheld.”

UPDATE: The timeline for the rehearing is difficult to pin down as it is subject to a number of variables. Flexsys has 45 days to file for a rehearing, and the scheduling is then up to the judicial system. A Flexsys spokesperson indicated that they hope to see the case before the full Circuit by 2Q 2008.

There was a major development on Friday in the ongoing patent infringement dispute between Flexsys and Shandong Sinorgchem regarding process technology for the manufacture of 4-ADPA (4-aminodiphenylamine), the precursor to 6PPD rubber antidegradants. On December 21, 2007, the US Federal Appeals Court (CAFC) issued a ruling that vacated and remanded a February 2006 decision by the US International Trade Commission that found that Sinorgchem had infringed on the Flexsys patents (Flexys America’s U.S. Pat. Nos. 5,117,063 and 5,608,111).
Here is a copy of the decision.

cafc-decision-12_21_07-sinorgchem-v-itc-and-flexsys.pdf

Here is some background on the case: In February 2005, Flexsys America LP (then a joint venture between Solutia and Akzo Nobel, now a subsidiary of Solutia) filed a complaint with the US International Trade Commission alleging that Sinorgchem was violating its patents for 4-ADPA production under Section 337 of the Tariff Act of 1930. The process in question is a continuous catalytic hydrogenation technology, which involves reacting nitrobenzene with a solvent (aniline) in the presence of a suitable base (tetramethylammonium hydroxide, or TMAH) and a controlled amount of protic material (or proton donor — in this case water).

Given that there is no dispute that the two processes utilize the same materials and basic steps, the initial finding and the most recent appeal focussed on the definition of the term “controlled amount of protic material” in the original patent descriptions. The central question is whether the Flexsys patents require a specific amount of protic material (defined as “at most 4% when aniline is the solvent”) or whether the quantity required is variable between upper and lower limits. Sinorgchem argued that its process uses more protic material than is described in the Flexsys patent (i.e., more then 4%), meaning its process does not infringe. Flexsys argued that the amount of protic material is variable, meaning that the Sinorgchem process does infringe.

The initial February 2006 ITC ruling sided with Flexsys on this issue, but on appeal a majority of the CaFC’s three-judge panel agreed with Sinorgchem’s definition and therefore concluded that Sinorgchem had not literally infringed on the Flexsys patents. It therefore vacated and remanded the ITC decision. One member of the three member panel, District Judge Newman, dissented, stating in part,

“. . . my colleagues have made finding contrary to the detailed and unchallenged text of the patent specifications, and have construed the claims so that they exclude a major part of the invention described in the patents.”

Note that the finding addressed only literal infringement; it did not reach the question of whether Sinorgchem’s process would infringe under the doctrine of equivalents. The decision stated,

“On remand, the ITC should address the claim of doctrine of equivalents infringement in light of our holding that there was no literal infringement.”

Here is some commentary on the CAFC ruling.

From Anticipate This!, a patent and trademark law blog, comes an interesting and well considered commentary on the decision. Here is the link.

The Patent Prospector, a forum on patent information and opinion, also has a commentary. Here is the link.

For an overview of recent restructuring at Flexsys following the acquisition by Soluia, click here.

Update: A source at Flexsys notes that despite the ruling the patent is valid and the Exclusion Order against Sinorgchem 6PPD and other 4-APDA derivatives remains in effect. Flexsys plans to appeal the ruling.

Major changes are underway at Flexsys, which is the world’s leading producer of rubber chemicals, with a 20% market share overall and leading positions in 4-ADPA feedstocks, 6PPD antidegradants and sulfenamide and ultra accelerators. Flexsys was formed in 1995 as a joint venture between Solutia and Akzo Nobel.

On May 2, 2007, Solutia completed its acquisition of Akzo Nobel’s 50% share in the company, making Flexsys a wholly owned subsidiary. Here is the press release on the acquisition. Along with Flexsys, the new Solutia has five primary businesses: Saflex (interlayers for laminated glass); CPFilm (aftermarket window films); Nylon Plastics & Fiber; and Specialty Products.

On November 29, 2007, Solutia’s plan for Chapter 11 reorganization was approved by New York’s Bankruptcy Court. Solutia entered Chapter 11 in December 2003 due to costs associated with asbestos and PCB litigation, as well as legacy costs dating back to its spinoff from Monsanto. The company expects the reorganization to become effective in late December or January. Here is the press release on the reorganization plan.

Since the acquisition, Solutia has replaced much of the management at Flexsys. James Voss was named as president of Flexsys effective May 2, 2007. He is also a senior VP for Solutia. His bio is here, and the press release is here. Mr. Voss has served as Solutia’s senior VP – business operations since 2005; he came over to Solutia from Premcor, an oil refiner, where he was a senior VP and chief administrative officer. Mr. Voss succeeds Enrique Bolaños, who ran Flexsys for the last eight years. He reports to Jeff Quinn, Solutia’s president and CEO.

On October 3, 2007, Solutia named Ray Kollar as Vice President, Commercial Services, where he has global responsibility for Flexsys’ sales, marketing, technical and customer service functions. Mr. Kollar succeeds William Woodyard, who had been with Flexsys since its creation. Mr. Kollar came to Flexsys from Intel Corporation, where he worked for 20 years, primarily in senior marketing-related positions. The press release is here.

As part of the integration of Flexsys into Solutia, redundant staff were also eliminated, including positions in HR, finance, accounting, and general counsel. Notch Consulting has learned that existing sales managers will remain in place for the most part.

On July 19, 2007, Flexsys completed the acquisition of the rubber chemicals business of Chemetall GmbH (Frankfurt). The deal was initiated prior to Solutia’s acquisition of Flexsys. The acquired business produces accelerators, primarily dithiocarbamates and other ultras. Terms were not disclosed. Notch Consulting estimates that Chemetall’s rubber chemicals business generates about $40 million in annual revenues.

Finally, the integration will involve the consolidation of facilities. Flexsys’ US headquarters has been moved from Flexsys America’s prior offices in Akron, Ohio to Solutia’s offices in St. Louis. The Akron office will remain open as a research and sales office. The move is mostly complete and will be wrapped up by year-end. The European offices of Flexsys NV in Brussels, Belgium will be completely integrated into Solutia LLN’s existing offices in Louvain-La-Neuve (near Brussels), Belgium. This should be complete by the end of Q1 2008.