NOTE 10
COMMITMENTS AND CONTINGENCIES
INFRINGEMENT
On October 13, 2009, the U.S. Patent and Trademark Office ("USPTO") issued U.S. Patent No. 7,601,858, titled "Method of Processing Ethanol Byproducts and Related Subsystems" (the '858 Patent) to GS CleanTech Corporation, a wholly-owned subsidiary of GreenShift Corporation. On October 27, 2009, the USPTO issued U.S. Patent No. 7,608,729, titled "Method of Freeing the Bound Oil Present in Whole Stillage and Thin Stillage" (the '729 Patent) to GS CleanTech. Both the '858 Patent and the '729 Patent relate to the Company's corn oil extraction technologies. GS CleanTech Corporation, our wholly-owned subsidiary, subsequently filed legal actions in multiple jurisdictions alleging infringement by various persons and entities. Multiple additional related suits and countersuits were filed. On May 6, 2010, we submitted a "Motion to Transfer Pursuant to 28 U.S.C. § 1407 for Consolidated Pretrial Proceedings" to the United States Judicial Panel on Multidistrict Litigation (the "Panel") located in Washington, D.C. In this motion, we moved the Panel to transfer and consolidate all pending suits involving infringement of our patents to one federal court for orderly and efficient review of all pre-trial matters. On August 6, 2010, the Panel ordered the consolidation and transfer of all pending suits in the U.S. District Court, Southern District of Indiana for pretrial proceedings (the "MDL Case").
In October 2014, the District Court in Indiana ruled in favor of the defendants on their motions for summary judgment alleging that our corn oil extraction patents were invalid, including U.S. Patent Nos. 7,601,858 (the "'858 patent"); 8,008,516 (the "'516 patent"); 8,008,517 (the "'517 patent"); and 8,283,484 (the "'484 patent" and, collectively, the "Patents in Suit"). In rendering that decision, among other things, the court agreed with the defendants that the inventions giving rise to the Patents in Suit were "reduced to practice" in 2003 as a result of limited, confidential small-scale bench testing, and that an invalidating "offer for sale" occurred when the inventors submitted a confidential non-public letter to an operating ethanol plant in 2003 in connection with the inventors' efforts to conduct a confidential full-scale feasibility test. That full-scale feasibility test eventually occurred in May 2004. Our first patent application was filed shortly thereafter.
In September 2016, the District Court ruled that the Patents in Suit were additionally unenforceable, concluding that since it had previously determined that the invention had been "reduced to practice" and "offered for sale" in 2003, the only reasonable inference that could be drawn was that our inventors and attorneys knowingly withheld material information with the intent to deceive the USPTO about the timing of the "reduction to practice" (i.e., that the invention was "ready for patenting" after the 2003 bench test as alleged by the defendants, instead of 2004 as our inventors and attorneys believed).
CleanTech strongly disagrees with the District Court's conclusions in each ruling, and believes that each decision relied heavily on an erroneous determination that the inventions were "reduced to practice" in 2003 as a result of the limited, small-scale bench testing – the first experimentation ever conducted by the inventors. Critically, no jury trial or hearing was ever held in respect of the material factual determinations supporting the court's 2014 ruling, including material factual issues that should have resulted in the right to a jury trial.
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Further, in connection with ongoing patent filings, the USPTO allowed CleanTech's corn oil extraction patents after considering the very information that the court found to have been withheld, and upon which the bulk of the court's recent ruling was based. All of the information alleged to have been "knowingly withheld" from the USPTO in connection with the Patents in Suit was provided to and considered by the USPTO prior to issuance of several additional patents that are not explicitly discussed in the prior rulings (U.S. Patent Nos. 9,212,334 (the "'334 patent"); 9,108,140 (the "'140 patent"); 9,320,990 (the "'990 patent"); and 9,012,668 (the "'668 patent" and, collectively, the "New Patents")).
Consequently, in October 2016, CleanTech filed a motion under Rule 59 to vacate or alter the court's prior rulings, in part on the foregoing bases, but also based on the logic of new Federal Circuit law, which, if applied to this case, should exclude the inventors' 2003 confidential non-public letter from the scope of the on-sale bar applicable to commercial offers for sale.
Under applicable standards, a patent is not invalid until and unless a final judgment of invalidity is rendered after all available appeals have been exhausted. Neither the October 2014 nor the September 2016 ruling is a final non-appealable judgment. CleanTech intends to mount a vigorous appeal of both rulings to the extent that they are not modified in connection with CleanTech's pending Rule 59 Motion, a ruling on which can be expected within the next two to six months
