Key Points

  • The Federal Circuit reversed a $9,151,133 attorneys' fee award entered against ChromaDex and the Trustees of Dartmouth College under 35 U.S.C. § 285.
  • The panel held that the District of Delaware committed legal error by treating the Supreme Court's Myriad decision as dispositive of ChromaDex's patent-eligibility position.
  • ChromaDex's markedly-different-characteristics theory, modeled on Natural Alternatives v. Creative Compounds, required analysis of factors beyond Myriad, so its losing position was not exceptionally meritless.
  • The panel refused Elysium's request for a remand, finding the existing record and arguments could not support an exceptionality finding.
  • The opinion, by Judge Chen for a panel with Judges Prost and Stoll, is nonprecedential; costs were awarded to the appellants.

A federal appeals court on Oct. 30 reversed a $9.1 million attorneys' fee award that a Delaware federal judge had ordered ChromaDex Inc. to pay after the company lost a patent suit, holding that the company's failed legal argument was not so weak that it should have to cover the defendant's legal bills.

A three-judge panel of the U.S. Court of Appeals for the Federal Circuit ruled that Chief Judge Colm F. Connolly of the District of Delaware abused the court's discretion in declaring the case "exceptional" and shifting fees to ChromaDex and its co-plaintiff, the Trustees of Dartmouth College. Judge Chen wrote the nonprecedential opinion for the panel, which also included Judges Prost and Stoll. The panel reversed outright and refused the request of the winning defendant, Elysium Health Inc., to send the fee question back for another look.

Under 35 U.S.C. § 285, a court may award reasonable attorney fees to the prevailing party in "exceptional cases." The decision holds that losing on patent eligibility did not make ChromaDex's case exceptional, because its position required analysis well beyond the Supreme Court precedent the trial court had found decisive. "A party's position on issues of law ultimately need not be correct for them to not 'stand[ ] out,' or be found reasonable," the panel wrote, quoting a 2015 Federal Circuit ruling.

ChromaDex owns two patents on dietary supplements containing isolated nicotinamide riboside, or NR, a form of vitamin B3 naturally present in cow's milk. The claimed compositions are formulated to be taken orally and to increase NAD+ biosynthesis, which, according to the patents, can treat a disease associated with the NR kinase pathway. The opinion notes that the trace NR in milk is bound to a whey protein and does not itself increase NAD+ biosynthesis, though milk's tryptophan does.

In July 2017, Elysium asked the Patent Trial and Appeal Board to review the patent, arguing that milk itself fell within the claims. The board declined to institute review in January 2018, finding that the NR in milk is not "isolated" as the board construed that term, which required roughly 25% purity. ChromaDex sued Elysium for infringement in September 2018.

In the district court, Elysium won summary judgment on the ground that the claims covered a product of nature and were therefore ineligible for a patent under 35 U.S.C. § 101. The Federal Circuit affirmed in 2023 in a decision the new opinion calls ChromaDex I. That ruling relied in part on Association for Molecular Pathology v. Myriad Genetics, the Supreme Court's 2013 decision rejecting patents on isolated DNA, to hold that "the act of isolating the NR compared to how NR naturally exists in milk is not sufficient, on its own, to confer patent eligibility."

Elysium then sought fees, arguing that "ChromaDex has pursued this litigation against Elysium as if the Myriad case did not exist." ChromaDex responded that it had addressed Myriad in expert discovery and at summary judgment, and that its main theory rested on other precedents holding that a claimed composition can be patented if it has markedly different characteristics from what exists in nature.

Chief Judge Connolly sided with Elysium. The district court wrote that ChromaDex's litigation position, generally and with respect to Myriad specifically, "was so lacking in substance that it 'st[oo]d out' from the dozens of [other] § 101 challenges" the court had handled. It called Myriad's holding "crystal clear" and faulted ChromaDex's summary judgment opposition, which "mentioned Myriad just once." The court awarded Elysium $9,151,133, over ChromaDex's objection to including about $3.9 million incurred before the hearing on the meaning of the patent's terms.

The Federal Circuit disagreed. "In our view, it was legal error to treat Myriad as the beginning and the end of the patent-eligibility analysis for ChromaDex's claims," Judge Chen wrote. The panel acknowledged that Myriad "played a key role" in ChromaDex I and that an argument resting only on the NR being isolated would have closely resembled the argument the Supreme Court rejected for isolated DNA.

"But ChromaDex's arguments went further, thus requiring additional, meaningful analysis," Judge Chen continued. The company had likened its supplements to those upheld in Natural Alternatives International v. Creative Compounds, a 2019 Federal Circuit decision finding claims to dietary supplements containing the natural product beta-alanine patent-eligible because they recited an amount that effectively increased athletic performance. ChromaDex argued that its isolated NR can increase NAD+ biosynthesis in a way naturally occurring NR cannot.

The panel noted that ChromaDex I had rejected that argument only after working through several factors that Myriad did not address: the claims required no specific quantity of NR, they did not attribute the increased NAD+ biosynthesis to the isolated NR, the claimed NR need not be freed from the whey protein, and milk raises NAD+ biosynthesis on its own through tryptophan. "Thus, we do not view this case as open and shut in light of Myriad," Judge Chen wrote.

The court concluded that although ChromaDex lost, the substantive strength of its eligibility position was not so meritless or unreasonable as to set the case apart from others. Because the district court "legally erred in finding Myriad dispositive," the panel held, it abused its discretion in granting the fee award.

In a footnote, the panel rejected Elysium's invitation to remand, concluding that neither the district court's analysis nor Elysium's record and arguments could support an exceptionality finding. Quoting a Federal Circuit decision from earlier this year, the panel wrote that "[a] remand is not warranted in this case for additional costly proceedings to give [Elysium] a chance to develop and present new evidence or arguments."

Mark Mosier of Covington & Burling LLP argued for ChromaDex and Dartmouth. Jeremy Younkin of Foley Hoag LLP argued for Elysium.

The judgment reverses the fee award without further proceedings in the district court, and the panel awarded costs on appeal to ChromaDex.