Supreme Court Will Resolve Level of Intent Required for Inducing Patent Infringement Under §271(b)
October 12, 2010
The U.S. Supreme Court on Oct. 12 agreed to address what is the correct level of intent required for a defendant to be liable for inducing patent infringement under 35 U.S.C. §271(b) (Global-Tech Appliances v. SEB S.A., U.S., No. 10-6, 10/12/10).
The high court will decide whether the proper standard is one stated in a recent Federal Circuit case or one that it set forth in a 2005 case examining inducement in the copyright context.
In this case, the high court has granted certiorari on one question:
Whether the legal standard for the state of mind element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is "deliberate indifference of a known risk" that an infringement may occur, as the Court of Appeals for the Federal Circuit held, or "purposeful, culpable expression and conduct" to encourage an infringement, as this Court taught in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 937, 125 S. Ct. 2764, 2780, 162 L. Ed. 2d 781, 801 (2005)?
Panel Ruling Found ‘Deliberate Indifference of a Known Risk’ of a Patent.
In the ruling below, SEB S.A. v. Montgomery Ward & Co., 594 F.3d 1360 (Fed. Cir. 2010), a jury had found that Pentalpha willfully infringed and induced infringement of a patent (4,995,312) on a deep fryer with a skirt that is well-insulated from the heat of the fryer’s metal pan. Pentalpha had purchased an SEB deep fryer in Hong Kong, copied its “cool touch” features, and begun selling fryers to Sunbeam Products Inc. in 1997. Pentalpha then obtained a noninfringement opinion from an attorney who analyzed 26 patents, but did not inform the attorney that it had copied SEB’s deep fryer. Pentalpha learned of SEB’s suit against Sunbeam in April 1998, which was settled when Sunbeam agreed to pay SEB $2 million.
The Federal Circuit affirmed the ruling against Pentalpha. Judge Randall R. Rader, now Chief Judge of the Federal Circuit, explained in the panel decision that “the standard of deliberate indifference of a known risk is not different from actual knowledge, but is a form of actual knowledge.” He said that the record showed “adequate evidence to support a conclusion that Pentalpha deliberately disregarded a known risk that SEB had a protective patent.”
In his opinion, Rader relied on the en banc ruling in DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006), which held that a plaintiff must show that the alleged infringer knew or should have known that his actions would induce actual infringements. However, Rader acknowledged that DSU Medical “did not … set out the metes and bounds of the knowledge-of-the-patent requirement,” and that he was not purporting to do so in his panel opinion.
Having decided to define the boundaries, the Supreme Court will answer whether "deliberate indifference of a known risk" or "purposeful, culpable expression and conduct" to encourage an infringement is the proper test under §271(b).
Chippendales’ Cuffs & Collar Male Stripper Mark Is Not Inherently Distinctive
October 1, 2010
The Chippendales Cuffs & Collar trade dress for “adult entertainment services, namely exotic dancing for women,” is not inherently distinctive because it is a mere variant or refinement of the Playboy mark, which includes cuffs and collar together with bunny ears and was widely used for almost 20 years before Chippendales’ first use, the U.S. Court of Appeals for the Federal Circuit ruled Oct. 1 (In re Chippendales USA Inc., Fed. Cir., No. 2009-1370, 10/1/10).
The court first disagreed with the Trademark Trial and Appeal Board’s suggestion that no costume in the context of the live adult entertainment industry can enjoy the status of an inherently distinctive mark, saying each trademark “must be evaluated individually” under the test set forth in Seabrook Foods Inc. v. Bar-Well Foods Ltd.. However, in affirming the TTAB’s refusal to register this mark as inherently distinctive, the court agreed that the Cuffs and Collar trade dress is a mere variant or refinement of the pervasive Playboy bunny suit that had been in use for many years.
Chippendales’ Mark: Exotic Male Dancing for Women.
In this case, Chippendales, which opened its first strip club in Los Angeles in 1978, a year later had its male performers wear an abbreviated tuxedo—wrist cuffs and a bowtie collar without a shirt—as part of their act. This costume, referred to as the “Cuffs & Collar,” has been featured prominently in Chippendales’ advertising and performances over the past several decades. Chippendales filed an application to register the Cuffs & Collar trade dress in 2000, and three years later received from the Patent and Trademark Office a registration (No. 2,694,613) for the Cuffs & Collar mark for “adult entertainment services, namely exotic dancing for women.” The ’613 mark became incontestable in 2008 under 15 U.S.C. § 1065.
In 2005, Chippendales filed a second application (Serial No. 78/666,598), this time seeking to register the Cuffs & Collar mark as inherently distinctive for “adult entertainment services, namely exotic dancing for women,” in the nature of live performances. Chippendales claimed that it was entitled to a registration on the ground that the mark was inherently distinctive, even though it had secured a registration under Section 2(f) of the Lanham Act, 15 U.S.C. § 1052(f).
However, the examining attorney issued a final office action refusing to register the Cuffs & Collar as inherently distinctive.
The Trademark Trial and Appeal Board affirmed that decision, relying on Seabrook Foods Inc. v. Bar-Well Foods Ltd., 568 F.2d 1342 (C.C.P.A. 1977). The TTAB reasoned that this mark is not inherently distinctive because it, or a variation of it, particularly the Playboy bunny suit, had long been in use.
Request for Inherently Distinctive Registration Not Moot.
The Federal Circuit began by observing that trademarks are assessed on a scale formulated in Abercrombie & Fitch Co. v. Hunting World Inc., 537 F.2d 4 (2d Cir. 1976), which evaluates whether word marks are “arbitrary” or “fanciful,” “suggestive,” “descriptive,” or “generic.” Marks that “arbitrary,” “fanciful,” or “suggestive” are inherently distinctive.
“Inherent distinctiveness does not depend on a showing that consumers actually identify the particular mark with the particular business; this is a question of acquired distinctiveness, or secondary meaning,” the Federal Circuit wrote. Thus, if the mark is inherently distinctive, it is presumed that consumers will view it as a source identifier. Marks that are “descriptive” and acquire secondary meaning may also qualify for protection under Section 2(f), but “generic” marks generally do not qualify for trademark protection at all.
Further, the court pointed out that “trade dress,” which encompasses the design and appearance of the product and its packaging, has been recognized in Supreme Court authority as being capable of inherent distinctiveness. Two Pesos Inc. v. Taco Cabana Inc., 505 U.S. 763 (1992). The Cuffs and Collar mark worn by Chippendales dancers constitutes “trade dress” because it is part of the “packaging” of the product, which is “[a]dult entertainment services, namely exotic dancing for women,” the court said, pointing to the ’598 application.
Judge Timothy B. Dyk then noted that “all registrations for marks in the Principal Register, regardless of whether the mark has acquired or inherent distinctiveness, are accorded the same benefits and evidentiary presumptions under 15 U.S.C. § 1057(b).” He said that once a mark achieves incontestable status under 15 U.S.C. § 1065, it is entitled to the benefits of section 1115(b), which precludes all but a limited number of challenges to a mark’s validity or enforceability. However, he acknowledged that “there may be differences in the context of enforcement” as each federal appeals court applies some test that examines mark “strength” and other factors. “Thus, whether a particular mark is inherently distinctive may affect the scope of protection accorded in an infringement proceeding,” he said.
Accordingly, the court reasoned that the potential benefit of a registration based on inherent distinctiveness in an infringement suit creates “a viable controversy,” and that the grant of a Section 2(f) registration for a mark of acquired distinctiveness did not moot Chippendales’ request here.
Inherent Distinctiveness Measured at Time of Registration.
Though Chippendales then argued that inherent distinctiveness should be measured when the mark is first in use, the court agreed with the PTO’s position that the correct time is at the time of registration. Trademark rights are not static, and it would be “fundamentally unfair” to measure inherent distinctiveness at the time of first use, Dyk said. He explained:
The test for inherent distinctiveness depends on whether the mark, or a variation thereof, has been in common use in general or in the particular field. A term or device that was once inherently distinctive may lose its distinguishing characteristics over time. … It would be unfair for an applicant to delay an application for registration and then benefit from having distinctiveness measured at the time of first use. This would allow an applicant to preempt intervening uses that might have relied on the fact that the registration for the mark as inherently distinctive had not been sought at an earlier time.
All Exotic Dancing Costumes Are Not Alike.
Finally, the court examined the TTAB’s ruling against Chippendales under Seabrook, which considers trade dress inherent distinctiveness based on:
 whether it was a “common” basic shape or design,
 whether it was [not] unique or unusual in the particular field,
 whether it was a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods, or
 whether it was capable of creating a commercial impression distinct from the accompanying words.
If a mark satisfies any of the first three tests, it is not inherently distinctive, Dyk said, citing McCarthy on Trademarks and Unfair Competition (4th ed. 2008). Further, he said that the fourth factor—whether the trade dress was capable of creating a commercial impression distinct from the accompanying words—is not applicable here.
Dyk found that the TTAB erred in suggesting that any costume in the context of the live adult entertainment industry lacks inherent distinctiveness. The Board seems to lump the Cuffs & Collar together with the well-known examples of a doctor wearing a stethoscope, or a construction worker wearing a utility belt, or a cowboy wearing chaps and a ten-gallon hat, Dyk said, adding:
It is incorrect to suggest that no costume in the context of the live adult entertainment industry could be considered inherently distinctive. Simply because the live adult entertainment industry generally involves “revealing and provocative” costumes does not mean that there cannot be any such costume that is inherently distinctive. Each such trademark must be evaluated individually under the Seabrook factors. The “mere refinement or variation” test is not satisfied by showing that costumes generally are common in the industry.
Cuffs & Collar a Mere Variant or Refinement of Playboy Bunny Suit.
Still, the Federal Circuit agreed with the TTAB’s conclusion that the “mere refinement” prong of Seabrook is satisfied here by the pervasiveness of the Playboy mark, which includes the cuffs and collar together with bunny ears. Dyk stated:
The use of the Playboy mark constitutes substantial evidence supporting the Board’s determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive. The Playboy bunny suit, including cuffs and a collar, was widely used for almost twenty years before Chippendales’ first use of its Cuffs & Collar trade dress. The Cuffs & Collar mark is very similar to the Playboy bunny costume, although the Cuffs & Collar mark includes no bunny ears and includes a bare-chested man instead of a woman in a corset. While the Playboy clubs themselves did not involve exotic dancing, the mark was registered for “operating establishments which feature food, drink and entertainment.” The Cuffs & Collar mark was also worn by waiters and bartenders at Chippendales establishments, which Chippendales argues reinforced the association of the mark with the Chippendales brand. Additionally, the pervasive association between the Playboy brand and adult entertainment at the time of the Board’s decision leads us to conclude that the Board did not err in considering the mark to be within the relevant field of use. Thus, the Playboy registrations constitute substantial evidence supporting the Board’s factual determination that Chippendales’ Cuffs & Collar mark is not inherently distinctive under the Seabrook test.
Panel Bound by Seabrook Test.
Finally, the appellate court turned away Chippendales’ argument that the Federal Circuit should overrule the Seabrook test based on the Supreme Court’s decision in Wal-Mart Stores Inc. v. Samara Brothers Inc., 529 U.S. 205 (2000), which found that product design trade dress can never be inherently distinctive, and can only qualify for protection through acquired distinctiveness. “Nothing in the Wal-Mart decision questioned or undermined the reasoning in Seabrook, Dyk insisted, pointing out that it cited Seabrook but did not express any disagreement with that test to determine the inherent distinctiveness of trade dress. Since Wal-Mart only rejected that inherent distinctiveness test in the context of product design, this “panel is bound by Seabrook, and only the court en banc may overturn it,” Dyk said.
The opinion was joined by Senior Judge Daniel M. Friedman and Judge Kimberly Moore.
Chippendales was represented by Stephen W. Feingold of Kilpatrick Stockton, New York. The Patent and Trademark Office, Alexandria, Va., was represented by Christina J. Hieber, associate solicitor.
Read the In re Chippendales opinion
Disclosure That Merely Allows One Skilled in Art to ‘Envision’ an Invention Fails the Written Description Test of 35 U.S.C. §112, ¶1
September 7, 2010
An award of priority by the Board of Patent Appeals and Interferences was improper because it was based on the finding that a Japanese patent application could satisfy the written description requirement of 35 U.S.C. §112, ¶1 by merely “envisoning” a recombinant DNA process for directly producing mature human fibroblast interferon used to fight tumors, the Federal Circuit ruled Sept. 7 (Goeddel v. Sugano, Fed. Cir., No. 2009-1156, 9/7/10).
The question is not whether one skilled in this field of science might have been able to produce mature hFIF by building upon the teachings of the Japanese application, but instead whether that application “convey[ed] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date,” the court said, quoting its recent en banc ruling in Ariad Pharm. Inc. v. Eli Lilly & Co.
Interferences Over Human Fibroblast Interferon.
This case involves two related patent interference priority contests between one party— Haruo Sugano, Masami Muramatsu, and Tadatsugu Taniguchi (collectively “Sugano”) —and another party—David V. Goeddel and Roberto Crea (collectively “Goeddel”). The interferences—the “DNA Interference” and the “Protein Interference”—are both focused on a recombinant DNA process for directly producing mature “Human Fibroblast Interferon” (hFIF), which combats tumors. The naturally occurring gene produces a precursor form of hFIF, consisting of 187 amino acids in a specific sequence. However, the active “mature” form of hFIF is a protein consisting of 166 amino acids, which is produced inside the human cell upon cleavage of the first 21 amino acids from the precursor sequence.
The DNA Interference is between Goeddel’s U.S. Patent Application No. 07/374,311, and two Sugano patents, U.S. Patent No. 5,326,859 and its continuation-in-part, U.S. Patent No. 5,514,567. Goeddel’s ’311 patent application claims priority from U.S. Application No. 06/190,799, filed on September 25, 1980. The sole count of that interference is DNA encoding a mature human fibroblast interferon having a certain sequence of 166 amino acids and unaccompanied by a human fibroblast interferon presequence.
The Protein Interference is between Sugano’s U.S. Application No. 08/463,757, filed June 5, 1995, and Goeddel’s U.S. Patent No. 5,460,811, which also claims priority from the ‘799 application. The sole count of that interference is a composition comprising water and a nonglycosylated mature human fibroblast interferon polypeptide having a certain sequence of 166 amino acids.
The Board of Patent Appeals and Interferences awarded Sugano priority of invention as to both interferences based on Sugano’s “Japanese Application,” which was filed on March 19, 1980. Goeddel appealed.
‘Envisioning’ an Invention Does Not Meet Written Description Test.
The Board found that the gene described in the Japanese Application encodes the 187 amino acid precursor hFIF, and that “[t]he sequences of mature hFIF DNA or polypeptide are not explicitly disclosed.” However, in awarding priority to Sugano, the Board found that mature hFIF would be “readily apparent” to a person skilled in this field, in view of the Japanese Application’s description of the precursor hFIF and a scientific article by Knight entitled “Human Fibroblast Interferon: Amino Acid Sequence Analysis and Amino Terminal Amino Acid Sequence,” which identifies the first 13 amino acids of mature hFIF. To the Board, the Japanese Application satisfies the requirements of constructive reduction to practice because Knight’s partial sequence of the first 13 amino acids of mature hFIF would allow a skilled artisan to determine where in the 187 amino acid precursor the presequence ends and the mature sequence begins.
Goeddel attacked the Board’s conclusion that a skilled artisan “should have been able to envision” the DNA molecule that would encode mature hFIF unaccompanied by its presequence, stressing that the Japanese Application describes only the expression of precursor hFIF.
Quoting case authority, Sugano insisted that patent applications are “written for a person of skill in the art, and such a person comes to the patent with the knowledge of what has come before,” and thus “it is unnecessary to spell out every detail of the invention in the specification.” Lizard Tech. Inc. v. Earth Res. Mapping, Inc., 424 F.3d 1336 (Fed. Cir. 2005). Thus, in referencing the Knight article, the Japanese Application “conveyed” mature hFIF with “reasonable clarity” to a person of skill in the art, Sugano argued, quoting Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555 (Fed. Cir. 1991).
The Federal Circuit disagreed with the Board and Sugano, holding that the Japanese Application failed to meet the Patent Act’s written description requirement at 35 U.S.C. §112, ¶1. This statute states:
The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same…
“Section 112, in the context of interference priority, requires that the subject matter of the counts be described sufficiently to show that the applicant was in possession of the invention,” Judge Pauline Newman wrote. That a modified gene encoding the 166 amino acid protein could have been “envisioned” does not establish constructive reduction to practice of the modified gene, she said, continuing:
The question is not whether one skilled in this field of science might have been able to produce mature hFIF by building upon the teachings of the Japanese Application, but rather whether that application “convey[ed] to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.” Ariad Pharm. Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1351 (Fed. Cir. 2010) (en banc); see also Lockwood v. American Airlines Inc., 107 F.3d 1565, 1572 (Fed. Cir. 1997) (in claiming priority under §120, “[a] description which renders obvious the invention for which an earlier filing date is sought is not sufficient”); Bradford Co. v. Conteyor North Am., Inc., 603 F.3d 1262, 1269 (Fed. Cir. 2010) (same). The Japanese application does not describe a bacterial expression vector that directly produces the mature hFIF, nor does it suggest producing a modified gene to directly encode the 166 amino acid mature hFIF. The Board erred in ruling that that priority is established if a person of skill in the art could “envision” the invention of the counts.
Enzo Biochem, Inc. v. Gen-Probe Inc., 323 F.3d 956 (Fed. Cir. 2002) and University of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004), fail to support the view that envisioning an invention not yet made is a constructive reduction to practice of that invention, Newman wrote. She said that Enzo confirmed that the deposit of an actual sample can meet the written description requirement when science is not capable of a complete written description. University of Rochester, she observed, held that the description of the COX-2 enzyme did not also serve to describe all unknown compounds capable of inhibiting the enzyme. Precedent in evolving science is attuned to the state of the science, but remains bound by the requirement of showing “that the inventor actually invented the invention claimed,” Newman concluded, quoting Bradford and Fiers v. Revel, 984 F.2d 1164 (Fed. Cir. 1993).
The opinion was joined by Judges Alan D. Lourie and William C. Bryson.
Goeddel were represented by Thomas E. Friebel of Jones Day, New York. Sugano was represented by Noah A. Levine of Wilmer Cutler Pickering Hale and Dorr, New York.
PTO Issues Updated Patent Examination Guidelines Under 2007 KSR Decision, Provides ‘Teaching Points’
September 1, 2010
The U.S. Patent and Trademark Office Sept. 1 issued guidelines that it hopes will aid examiners in making obviousness assessments under Section 103 of the Patent Act based on the U.S. Supreme Court’s 2007 decision in KSR Int’l Co. v. Teleflex Inc. (75 Fed. Reg. 53643, 9/1/10).
The guidelines take lessons from a body of cases decided by the U.S. Court of Appeals for the Federal Circuit since KSR and set forth relevant factors for examiners to consider in the examination process. “Now that a body of post-KSR case law is available to guide office personnel and practitioners as to the boundaries between obviousness and nonobviousness, this update can be used to compare and contrast situations in which claimed subject matter was found to have been obvious with those cases in which it was determined not to have been obvious,” PTO Director David Kappos said in a press release. Kappos said that this update “will be helpful to USPTO patent examiners, inventors and the patent bar because it reviews several cases from the Federal Circuit that have involved the application of the law of obviousness since the KSR case was decided by the Supreme Court.”
KSR Principles for Obviousness Stated in 2007 Guidelines.
In KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007), the Supreme Court ruled that the Federal Circuit’s teaching-suggestion-motivation (TSM) inquiry is not the sole test for determining whether a claimed invention is obvious under Section 103.
Rather, as pointed out in the PTO’s 2007 KSR Guidelines (72 Fed. Reg. 57526, 10/10/07), KSR made clear that the TSM test is but one approach and that there are six other obviousness rationales to consider: (1) Combining prior art elements according to known methods to yield predictable results; (2) simple substitution of one known element for another to obtain predictable results; (3) use of a known technique to improve similar devices, methods, or products in the same way; (4) applying a known technique to a known device, method, or product ready for improvement to yield predictable results; (5) obvious to try—choosing from a finite number of identified, predictable solutions, with a reasonable expectation of success; and (6) known work in one field of endeavor may prompt variations of it for use in either the same field or a different one based on design incentives or other market forces if the variations are predictable to one of ordinary skill in the art.
“Any rationale employed must provide a link between the factual findings and the legal conclusion of obviousness, the PTO’s 2010 KSR Guidelines stated. Further, it stressed that while the factual inquiries of Graham v. John Deere Co., 383 U.S. 1 (1966) are key to a proper obviousness determination, the Supreme Court in KSR did not place any limit on the particular approach to be taken to formulate the line of reasoning. “In other words, the KSR decision is not to be seen as replacing a single test for obviousness—the TSM test—with the seven rationales listed in the 2007 KSR Guidelines.”
Updated Guidelines Include ‘Teaching Points’.
After noting KSR’s flexible approach to the obviousness inquiry, the PTO’s 2010 KSR Guidelines went on to set out some important “teaching points” from a body of Federal Circuit cases that have been handed down since KSR. However, the 2010 guidelines stressed the following caveat:
The ‘‘teaching point’’ may be used to quickly determine the relevance of the discussed case, but should not be used as a substitute for reading the remainder of the discussion of the case in this 2010 KSR Guidelines Update. Nor should any case in this 2010 KSR Guidelines Update be applied or cited in an Office action solely on the basis of what is stated in the ‘‘teaching point’’ for the case.
Each cited case and “teaching point” are set forth as follows:
Combining Prior Art Elements
In re Omeprazole Patent Litigation, 536 F.3d 1361 (Fed. Cir. 2008).
Even where a general method that could have been applied to make the claimed product was known and within the level of skill of the ordinary artisan, the claim may nevertheless be nonobvious if the problem which had suggested use of the method had been previously unknown.
Crocs, Inc. v. U.S. Int’l Trade Comm’n., 598 F.3d 1294 (Fed. Cir. 2010).
A claimed combination of prior art elements may be nonobvious where the prior art teaches away from the claimed combination and the combination yields more than predictable results.
Sundance, Inc. v. DeMonte Fabricating Ltd., 550 F.3d 1356 (Fed.Cir. 2008).
A claimed invention is likely to be obvious if it is a combination of known prior art elements that would reasonably have been expected to maintain their respective properties or functions after they have been
Ecolab, Inc. v. FMC Corp., 569 F.3d 1335 (Fed. Cir. 2009).
A combination of known elements would have been prima facie obvious if an ordinarily skilled artisan would have recognized an apparent reason to combine those elements and would have known how to do so.
Wyers v. Master Lock Co., No. 2009–1412, —F.3d—, 2010 WL
2901839 (Fed. Cir. July 22, 2010).
The scope of analogous art is to be construed broadly and includes references that are reasonably pertinent to the problem that the inventor was trying to solve. Common sense may be used to support a
legal conclusion of obviousness so long as it is explained with sufficient reasoning.
DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314 (Fed. Cir. 2009).
Predictability as discussed in KSR encompasses the expectation that prior art elements are capable of being combined, as well as the expectation that the combination would have worked for its intended purpose.
An inference that a claimed combination would not have been obvious is especially strong where the prior art’s teachings undermine the very reason being proffered as to why a person of ordinary skill would have combined the known elements.
Substituting One Known Element for Another
In re ICON Health & Fitness, Inc., 496 F.3d 1374 (Fed. Cir. 2007).
When determining whether a reference in a different field of endeavor may be used to support a case of obviousness (i.e., is analogous), it is necessary to consider the problem to be solved.
Agrizap, Inc. v. Woodstream Corp., 520 F.3d 1337 (Fed. Cir. 2008).
Analogous art is not limited to references in the field of endeavor of the invention, but also includes references that would have been recognized by those of ordinary skill in the art as useful for applicant’s purpose.
Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008).
Because Internet and Web browser technologies had become commonplace for communicating and displaying information, it would have been obvious to adapt existing processes to incorporate them for those functions.
Aventis Pharma Deutschland v. Lupin, Ltd., 499 F.3d 1293 (Fed. Cir. 2007).
A chemical compound would have been obvious over a mixture containing that compound as well as other compounds where it was known or the skilled artisan had reason to believe that some desirable property of the mixture was derived in whole or in part from the claimed compound, and separating the claimed compound from the mixture was routine in the art.
Eisai Co. Ltd. v. Dr. Reddy’s Labs., Ltd., 533 F.3d 1353 (Fed. Cir. 2008).
A claimed compound would not have been obvious where there was no reason to modify the closest prior art lead compound to obtain the claimed compound and the prior art taught that modifying the lead compound would destroy its advantageous property. Any known compound may serve as a lead compound when there is some reason for starting with that lead compound and modifying it to obtain the claimed compound.
Procter & Gamble Co. v. Teva Pharmaceuticals USA, Inc., 566 F.3d 989 (Fed. Cir. 2009).
It is not necessary to select a single compound as a ‘‘lead compound’’ in order to support an obviousness rejection. However, where there was reason to select and modify the lead compound to obtain the claimed compound, but no reasonable expectation of success, the claimed compound would not have been obvious.
Altana Pharma AG v. Teva Pharms. USA, Inc., 566 F.3d 999 (Fed. Cir. 2009).
Obviousness of a chemical compound in view of its structural similarity to a prior art compound may be shown by identifying some line of reasoning that would have led one of ordinary skill in the art to select and modify a prior art lead compound in a particular way to produce the claimed compound. It is not necessary for the reasoning to be explicitly found in the prior art of record, nor is it necessary for the
prior art to point to only a single lead compound.
The Obvious to Try Rationale
In re Kubin, 561 F.3d 1351 (Fed. Cir. 2009).
A claimed polynucleotide would have been obvious over the known protein that it encodes where the skilled artisan would have had a reasonable expectation of success in deriving the claimed polynucleotide using standard biochemical techniques, and the skilled artisan would have had a reason to try to isolate the claimed polynucleotide. KSR applies to all technologies, rather than just the ‘‘predictable’’ arts.
Takeda Chem. Indus. v. Alphapharm Pty., Ltd., 492 F.3d 1350 (Fed. Cir. 2007).
A claimed compound would not have been obvious where it was not obvious to try to obtain it from a broad range of compounds, any one of which could have been selected as the lead compound for further investigation, and the prior art taught away from using a particular lead compound, and there was no predictability or reasonable expectation of success in making the particular modifications necessary to transform the lead compound into the claimed compound.
Ortho-McNeil Pharmaceutical, Inc. v. Mylan Labs, Inc., 520 F.3d 1358 (Fed. Cir. 2008).
Where the claimed anti-convulsant drug had been discovered somewhat serendipitously in the course of research aimed at finding a new anti-diabetic drug, it would not have been obvious to try to obtain a claimed compound where the prior art did not present a finite and easily traversed number of potential starting compounds, and there was no apparent reason for selecting a particular starting compound from among a number of unpredictable alternatives.
Bayer Schering Pharma A.G. v. Barr Labs., Inc., 575 F.3d 1341 (Fed. Cir. 2009).
A claimed compound would have been obvious where it was obvious to try to obtain it from a finite and easily traversed number of options that was narrowed down from a larger set of possibilities by the prior art, and the outcome of obtaining the claimed compound was reasonably predictable.
Sanofi-Synthelabo v. Apotex, Inc., 550 F.3d 1075 (Fed. Cir. 2008).
A claimed isolated stereoisomer would not have been obvious where the claimed stereoisomer exhibits unexpectedly strong therapeutic advantages over the prior art racemic mixture without the correspondingly expected toxicity, and the resulting properties of the enantiomers separated from the racemic mixture
Rolls-Royce, PLC v. United Technologies Corp., 603 F.3d 1325 (Fed. Cir. 2010).
An obvious to try rationale may be proper when the possible options for solving a problem were known and finite. However, if the possible options were not either known or finite, then an obvious to try rationale cannot be used to support a conclusion of obviousness.
Perfect Web Techs., Inc. v. InfoUSA, Inc., 587 F.3d 1324 (Fed. Cir. 2009).
Where there were a finite number of identified, predictable solutions and there is no evidence of unexpected results, an obvious to try inquiry may properly lead to a legal conclusion of obviousness. Common sense may be used to support a legal conclusion of obviousness so long as it is explained with sufficient reasoning.
Consideration of Evidence
PharmaStem Therapeutics, Inc. v. ViaCell, Inc., 491 F.3d 1342 (Fed. Cir. 2007).
Even though all evidence must be considered in an obviousness analysis, evidence of nonobviousness may be outweighed by contradictory evidence in the record or by what is in the specification. Although a reasonable expectation of success is needed to support a case of obviousness, absolute predictability is not required.
In re Sullivan, 498 F.3d 1345 (Fed. Cir. 2007).
All evidence, including evidence rebutting a prima facie case of obviousness, must be considered when properly presented.
Hearing Components, Inc. v. Shure Inc., 600 F.3d 1357 (Fed. Cir. 2010).
Evidence that has been properly presented in a timely manner must be considered on the record. Evidence of commercial success is pertinent where a nexus between the success of the product and the claimed invention has been demonstrated.
Asyst Techs., Inc. v. Emtrak, Inc., 544 F.3d 1310 (Fed. Cir. 2008).
Evidence of secondary considerations of obviousness such as commercial success and long-felt need may be insufficient to overcome a prima facie case of obviousness if the prima facie case is strong. An argument for nonobviousness based on commercial success or long-felt need is undermined when there is a failure to link the commercial success or long-felt need to a claimed feature that distinguishes over the prior art.
Read the PTO’s 2010 KSR Guidelines as published in the Federal Register.
CAFC Upholds Validity of Lilly’s Method Patents on Evista Osteoporosis Drug, But Agrees That Particle Size Patents Fail Written Description Test
September 1, 2010
The U.S. Court of Appeals for the Federal Circuit Sept. 1 agreed with a ruling that several Eli Lilly method patents covering the Evista osteporosis drug are not invalid for obviousness or lack of enablement, but it agreed that two other patents related to raloxifene’s particle size is invalid for failing to meet the Patent Act’s written description requirement (Eli Lilly and Co. v. Teva Pharmaceuticals USA Inc., Fed. Cir., No. 2010-1005, 9/1/10).
Importantly, the court left in place a permanent injunction against any manufacture or distribution of a generic version of the drug Evista® until the expiration of the Bone Loss Patents or the Low Dose Patent.
Lilly Fights Generic Versions of Evista.
Evista® is Eli Lilly and Co.’s treatment for postmenopausal osteoporosis, and its active ingredient is raloxifene hydrochloride. Raloxifene is part of a class of compounds known as antiestrogens, which were originally developed for the treatment of a number of breast cancers after estrogen was shown to stimulate breast cancer growth. While antiestrogens work to inhibit the growth of a cancer by binding to estrogen receptors in breast cancer cells, they can have the side effects of estrogen itself, one of which is an increased risk of endometrial cancer.
Teva Pharmaceuticals USA Inc. filed an Abbreviated New Drug Application (ANDA) for Food and Drug Administration approval to market a generic form of raloxifene hydrochloride 60 mg tablets for the prevention of osteoporosis in postmenopausal women. Pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV), Teva’s ANDA included a “Paragraph IV” certification that Lilly’s patents (6,906,086); RE39,049; and RE38,968 (collectively the “Bone Loss Patents”); RE39,050 (the Low Dose Patent); and 6,458,811 and 6,894,064 (the Particle Size Patents) are invalid, unenforceable, or would not be infringed by Teva’s manufacture, use, or sale of its generic product. After receiving notice of the Paragraph IV certification, Lilly filed this patent infringement suit.
The district court ruled that Teva did not show that the Bone Loss Patents or the Low Dose Patent would have been obvious to one of skill in the art under Section 103 of the Patent Act or that those patents were invalid for lack of enablement under Section 112, ¶1, but it held that the Particle Size Patents did not comply with Section 112, ¶1’s written description requirement.
The district court permanently enjoined any manufacture or distribution of a generic version of the drug Evista® until the expiration of the Bone Loss Patents or the Low Dose Patent.
Teva appealed, and Lilly cross-appealed.
Bone Loss Patents Not Obvious.
In affirming the ruling that Teva failed to show clear and convincing evidence as to the obviousness of the Bone Loss Patents, the Federal Circuit first rejected Teva’s reliance on the Schreiber patent (5,075,321), which disclosed raloxifene as a treatment for autoimmune diseases.
“Teva was not able to show a credible connection between the type of osteoporosis at issue in this case―postmenopausal osteoporosis―and autoimmune diseases,” and “the record indicates that raloxifene combats the two diseases differently,” Chief Judge Randall R. Rader wrote. “Without a closer relationship, Teva cannot show that an ordinarily skilled artisan would have expected Dr. Schrieber’s article to have relevance for the treatment of postmenopausal osteoporosis,” he said. Further noting that “[t]he Schreiber Patent relies solely on animal studies” and that the prior art had concerns about the low bioavailability or absorption of raloxifene in humans, Rader said that “a person of ordinary skill would not have drawn a connection between Dr. Schreiber’s proposed treatment of autoimmune diseases in humans and a treatment for a very different condition.”
This new use of raloxifene would not have been readily apparent as a likely successful application for a compound that might fight autoimmune diseases. Beyond that, Dr. Schrieber’s bare proposal to use raloxifene in humans to treat autoimmune diseases, based only on animal studies, is insufficient to require a finding that an ordinary skilled artisan would have expected that a compound with known bioavailability issues―and known clinical failures―would successfully treat any human condition.
Looking then at the Jordan prior art reference, the court noted that this study showed a clear preference for tamoxifen over raloxifene for the prevention of osteoporosis in postmenopausal women. Here, Rader pointed to the district court’s conclusion that this preference, coupled with evidence of the concerns about raloxifene’s bioavailability and Jordan’s writing on the unsuitability of rapidly metabolized free hydroxyl compounds like raloxifene for this purpose, would not have led a skilled artisan to have a reasonable expectation of success in using raloxifene. Rader could find no error in this conclusion.
Nor was the court persuaded by Teva’s reliance on the Jones patent (4,418,068), which discloses that a class of compounds including raloxifene has less inherent estrogenicity and that “use in human subjects is preferred.”
The Jones Patent does not help Teva overcome concerns about bioavailability that would have prompted one of ordinary skill in the art to look elsewhere for a post-menopausal osteoporosis treatment. The Jones Patent was filed before Lilly had published its failures in testing raloxifene as a treatment for breast cancer and before publications by Dr. Jordan, Dr. Lindstrom, and others that highlighted the bioavailability problems associated with raloxifene. The record does not contain any reason that a person of ordinary skill would have ignored those later publications.
Accordingly, the Federal Circuit upheld the district court’s conclusion that the ordinary artisan would not have considered it obvious to use raloxifene to treat postmenopausal osteoporosis.
Continuing, the appellate court noted that Teva hinged its Section 103 obviousness theory as to the Low Dose Patent on the success of its argument on the Bone Loss patents. Having affirmed the district court’s conclusion that the Bone Loss Patents would not have been obvious, it reached the same conclusion as to the Low Dose Patent.
Though Teva also tried to assert on appeal that the Bone Loss Patents and the Low Dose Patent were invalid for nonstatutory double patenting, the Federal Circuit declined to address this issue, saying that “Teva did not raise its double patenting argument before the district court.”
Particle Size Patents Fail Enablement Test.
The Federal Circuit went on to also agree with the district court’s ruling that the Bone Loss/Low Dose inventions were not invalid for lack of enablement under 35 U.S.C. § 112, ¶1.
However, it still upheld the ruling below that the Particle Size Patents failed Section 112, ¶1’s written description requirement. As Rader emphasized, representative Claim 1 of the ’811 patent recites:
A compound of formula I . . . [raloxifene] and pharmaceutically acceptable salts and solvates thereof, characterized in that the compound is in particulate form, said particles having a mean particle size of less than about 25 microns, at least about 90% of said particles have a size of less than about 50 microns. than about 25 microns” and that at least about 90% of the particles have a size of “less than about 50 microns.”
While the district court sided with Lilly by reading “in particulate form” broadly to include raloxifene particles both before and after formulation, it went on to find that the Particle Size Patents did not disclose the idea of measuring the particle size of raloxifene extracted from a tablet, nor did the inventors perform any tests to determine how the granulation or tableting process could affect particle size.
Citing its recent en banc ruling in Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336 (Fed. Cir. 2010) for the proposition that written description is a question of fact, the Federal Circuit could find no clear error in the district court’s conclusion. Quoting Ariad, Rader stressed that the test for written description is “whether the disclosure of the application . . . reasonably conveys to those skilled in the art that the inventor had possession of the claimed subject matter as of the filing date.” Looking at the ’811 patent under this test, he said:
The patent specification only discloses measurements of bulk raloxifene. The record then features conflicting evidence about the reading a person of ordinary skill in the art would give to the passages to determine that the inventor possessed the invention of formulated raloxifene falling within the claimed size range. Lilly’s own expert conceded that “[o]ne reading the [Particle Size Patent] in 1996 would not know whether the particle size was being increased or decreased [or remain the same] in the formulation.” … With that concession, Lilly cannot establish that the district court made a clearly erroneous factual finding.
Accordingly, the court affirmed the judgment invalidating the asserted claims of the Particle Size Patents.
The opinion was joined by Judges Richard Linn and Sharon Prost.
Eli Lilly was represented by Charles E. Lipsey of Finnegan, Henderson, Farabow, Garrett & Dunner, Reston, Va. Teva was represented by Edward H. Rice of Loeb & Loeb, Chicago.
Read the Eli Lilly and Co. v. Teva Pharmaceuticals USA Inc. opinion.
CAFC Reverses Ruling That U.S. Daewoo Entity Is Not Liable for Infringement Default Judgment Against Its U.S. Predecessor
September 1, 2010
The U.S. Court of Appeals for the Federal Circuit ruled Sept. 1 reversed a district court’s ruling that a U.S-based Daewoo Electronics company has no liability as a successor in interest to another U.S.-based Daewoo company that closed business operations during patent infringement litigation and was found liable for damages based on a default judgment (Funai Electric Co. Ltd. v. Daewoo Electronics Corp., Fed. Cir., No. 2009-1225, 9/1/10).
Rejecting the district court’s application of Korean successor liability law, the appellate court reasoned that a de facto merger had taken place, whereby the predecessor company, a California corporation with its principal place of business in New Jersey, was succeeded by another Daewoo entity incorporated in Florida with a principal place of business in New Jersey. Citing the U.S. Supreme Court’s decision this year in Hertz Corp. v. Friend, the court applied New Jersey successor liability law since that state was the “nerve center” of both the predecessor and successor companies.
Ceasing Operations to Avoid Infringement Liability?
In this case, four Daewoo Electronics entities were sued for infringing six Funai Electric Co. Ltd. patents relating to various electrical and mechanical components video cassette players and recorders (VCRs). After a U.S. federal district court in California granted summary judgment that three of the patents were not infringed, a jury went on to rule that the other three patents (6,021,018; 6,421,210; and 6,064,538) were infringed and awarded Funai more than $8 million.
When two of the defendant companies—Korea-based Daewoo Electronics Co. Ltd. (DECL) and California-based Daewoo Electronics Company of America (DECA)—ceased participating in the litigation and closed operations, the district court entered a default judgment holding them jointly and severally liable. DECL and DECA did not appeal the award or pay the judgment, and Funai sought to hold successor companies Daewoo Electronics Corp. (DEC) of South Korea and Daewoo Electronics America Inc. (DEAM) of Florida liable for payment.
However, the district court applied Korean successor liability law and ruled that neither DEC nor DEAM (collectively Daewoo) could be liable for the judgment entered against their predecessors in the absence of an express agreement.
Daewoo appealed the adverse infringement and damages rulings, and Funai cross-appealed the district court’s refusal to enhance damages and the decision on successor liability.
Application of Korean Law Improper for These U.S. Companies.
Finding substantial evidence for the jury’s infringement and damages verdicts, the Federal Circuit affirmed both rulings in favor of Funai. Though the appellate court also rejected Daewoo’s appeal as to patent invalidity, it also found no abuse of district court’s decision to deny Funai’s request for enhanced damages based on willful infringement.
However, Judge Pauline Newman went on to find that “the district court erred in ruling that Korean law applies to the successor liability relationship between these United States corporations.” To Newman, “[t]his is not a question of conflict with foreign law, or choice between domestic and foreign law, for no foreign law is involved in this question of successor liability for a default judgment for violation of United States law.” She said that it was unnecessary to resolve whether the judgment against DECL (Korea) can be collected from its successor Korean company. Rather, Newman said, “the only question is the liability of the United States successor DEAM for this default judgment against its predecessor DECA, for infringing activities of the predecessor before the transfer to DEAM.”
Putting it another way, she said:
The question is whether a domestic corporation incurring a judgment of a United States court is insulated from that judgment if the judgment would not be enforceable under the laws of its foreign parent.
Favoring Funai on this question, the Federal Circuit reversed the district court’s ruling that Korean law applies to absolve DEAM of successor liability for the judgment against DECA.
“Applying the guidance of the rules of choice of law among competing states,” Newman said, “the United States has an overriding interest in the integrity of judgments of its courts with respect to violations of United States law by entities doing business in the United States.” As to whether to apply the successor liability law of California, Florida, or New Jersey, the court found that New Jersey law was most appropriate under the U.S. Supreme Court’s recent ruling in Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010).
In that case, the high court ruled that for diversity jurisdiction the “principal place of business” is “the place where a corporation’s officers direct, control, and coordinate the corporation’s activities,” from which it follows that the laws of the principal place of business should normally apply to transactions flowing from the corporation’s “nerve center.” Drawing further from Hertz, Newman said that this key place “should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination,” and “not simply an office where the corporation holds its board meetings.” She found no dispute “that New Jersey meets these criteria, for both DECA and its successor DEAM.”
Continuing its analysis, the appellate court agreed with Funai’s argument that DEAM is a mere continuation of DECA, like a de facto merger. While New Jersey precedent looks at four factors in the liability inquiry, Newman quoted authority stating that “the most relevant factor is the degree to which the predecessor’s business entity remains intact.” Wilson v. Fare Well Corp., 356 A.2d 458 (N.J. Super. 1976). There was no doubt as to this point, she said, citing the parties’ stipulation that DEAM continued the business operations of DECA, including sales of the VCR products here accused of infringement, at the same New Jersey address. “DECA’s corporate headquarters and management and employees became DEAM’s,” and “DECA ceased operations in its name, collecting outstanding accounts, selling its office building to DEAM, and dissolving DECA as a corporation, all by the end of 2004,” she added. Quoting Wilson, Newman said that the DECA-DEAM transfer between was simply a “new hat” for DECA.
The district court’s ruling was affirmed in part, reversed in part, and remanded.
The opinion was joined by Judge Alan D. Lourie.
In a concurring opinion, Judge Richard Linn said that he disagreed only with the majority’s decision to address the issue of patent marking constructive notice in reviewing the damages award on the ‘018 patent. “I would simply affirm on the basis of the substantial evidence and not decide the constructive notice question,” Linn wrote.
Funai was represented by Michael J. Lyons of Morgan, Lewis & Bockius,
Palo Alto, Calif. Daewoo was represented by Perry R. Clark, Law Offices of Perry R. Clark, Palo Alto.
Read the Funai Electric Co. Ltd. v. Daewoo Electronics Corp. opinion
Plaintiff Had Standing to Bring False Patent Marking Suit Against Brooks Brothers on Behalf of U.S. Government
August 31, 2010
The U.S. Court of Appeals for the Federal Circuit ruled that a plaintiff bringing a suit against clothier Brooks Brothers Inc. for false marking had standing because the plaintiff had asserted an injury in fact to the United States caused by Brooks Brothers’ alleged conduct that is likely to be redressed by a monetary reward (Stauffer v. Brooks Brothers Inc., Fed. Cir., No. 2009-1428, 8/31/10).
Standing Denied to Plaintiff Suing for Government Under § 292.
The Patent Act at 35 U.S.C. § 292 provides for a fine of not more than $500 for each offense of false patent marking, and at Section 292(b) provides that “[a]ny person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.”
In this case, a district court had ruled that attorney Raymond Stauffer could not sue Brooks Brothers Inc. for marking bow ties featuring an “Adjustolox” mechanism with patent numbers of two patents (2,083,106 and 2,123,620) which expired more than 50 years ago.
The district court held that Stauffer had not sufficiently alleged that the United States had suffered an injury in fact because his allegations that Brooks Brothers wrongfully suppressed competition with false markings were too conjectural or hypothetical to constitute an injury in fact.
§ 292 Plaintiff May Assert Injury Suffered by Government.
The Federal Circuit reversed the ruling and remanded the case.
Quoting Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), it acknowledged that for a case or controversy to exist for purposes of Article III of the Constitution, every plaintiff must show (1) that he has suffered an “injury in fact,” an invasion of a legally protected interest that is “(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical,” (2) that there is “a causal connection between the injury and the conduct complained of,” and (3) that the injury is likely to be redressed by a favorable decision. It then noted that Section 292(b) is a qui tam provision, i.e., a statute that authorizes someone to pursue an action on behalf of the government as well as himself. Citing Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765 (2000), Judge Alan D. Lourie observed that a qui tam plaintiff, or relator, can establish standing based on the United States’ implicit partial assignment of its damages claim.
As Section 292(b) is such a qui tam provision by partially assigning its claim to “any person,” this provision operates as a statutory assignment of the United States’ rights and gives the assignee standing to assert the injury in fact suffered by the assignor, the court continued. “Thus, in order to have standing, Stauffer must allege that the United States has suffered an injury in fact causally connected to Brooks Brothers’ conduct that is likely to be redressed by the court,” Lourie said. “In passing the statute prohibiting deceptive patent mismarking, Congress determined that such conduct is harmful and should be prohibited,” and “[b]ecause the government would have standing to enforce its own law, Stauffer, as the government’s assignee, also has standing to enforce section 292,” Lourie reasoned.
Though Brooks Brothers put much weight on the fact that Lujan denied plaintiffs standing under a citizen-suit provision, Lourie found that case distinguishable because the provision at issue allowed private individuals to sue the government. “Here, in contrast, the qui tam provision operates not to allow individuals to sue the government, but to allow individuals to stand in the government’s stead, as assignees of the government’s own claims,” he wrote. Lujan does not preclude Congress from assigning the government’s claims to “any person,” even if that person has no concrete injury himself, Lourie continued. “[U]nder Vermont Agency, the United States’ sovereign injury is sufficient to confer standing upon it and therefore upon Stauffer, its implicit partial assignee.”
Concluding, the court found that Stauffer had asserted the elements required for standing:
By allowing any person to sue, Congress granted individuals a legally cognizable right to half of the penalty defined in section 292(a). Thus, Stauffer has sufficiently alleged (1) an injury in fact to the United States that (2) is caused by Brooks Brothers’ alleged conduct, attaching the markings to its bow ties, and (3) is likely to be redressed, with a statutory fine, by a favorable decision.
The Federal Circuit also went on to find that the district court erred when it denied the government’s motion to intervene in the case. “Contrary to Brooks Brothers’ position, the government has an interest in enforcement of its laws and in one half the fine that Stauffer claims,” it said, stressing that Stauffer cannot adequately represent that interest.
Finally, although amicus curiae Ciba Vision Corp. contested the constitutionality of Section 292, the Federal Circuit declined to decide the issue since it was not raised or argued by the parties.
The opinion was joined by Chief Judge Randall R. Rader and Judge Kimberly A. Moore.
Stauffer appeared pro se.
Stephen L. Baker of Baker & Rannells, Raritan, N.J. represented Brooks Brothers. The government was represented by Douglas N. Letter, U.S. Department of Justice. Thomas P. Steindler of McDermott Will & Emery, Washington, D.C., represented amicus curiae Ciba Vision. Bryan P. Collins of Pillsbury Winthrop Shaw Pittman, McLean, Va., represented amicus curiae Stanley Black & Decker.
Read the Stauffer v. Brooks Brothers Inc opinion
En Banc Federal Circuit Reads Patent Misuse Doctrine as Having a ‘Narrow Scope’
August 30, 2010
The en banc U.S. Court of Appeals for the Federal Circuit ruled Aug. 30 that the doctrine of patent misuse is limited in scope (Princo Corp. v. International Trade Commission, Fed. Cir., No. 2007-1386, 8/30/10).
Affirming a ruling by the International Trade Commission, the majority found that U.S. Philips Corp. had not misused its compact disc technology patents by agreeing with Sony Corp. that the technology in Sony’s patent would not be separately licensed but would be part of a group licensing package. It ruled that the misuse defense did not apply first because Philips did not leverage its patents beyond the scope of the patent grant. Rather, the court noted that the allegedly suppressed technology belonged to Sony, and that patent was not asserted in this case. Second, the court held that there was no misuse because the accused infringer failed to show that the Philips-Sony deal had anticompetitive effects.
Judge Sharon Prost concurred in part in an opinion joined by Judge Haldane Robert Mayer. Judge Timothy B. Dyk’s dissenting opinion was joined by Judge Arthur Gajarsa.
Philips and Sony Collaborate on CD Technology.
In this case, U.S. Philips Corp. and Sony Corp. developed technologies for which information could be encoded onto recordable compact discs (“CD-Rs”) and rewritable compact discs (“CD-RWs”). The standards that were generated for CD-Rs and CD-RWs were collected in a publication entitled “Recordable CD Standard,” also known as the “Orange Book.” While Philips has two patents (4,999,825 and 5,023,856) (Raaymakers patents) related to this technology and Sony has one patent 4,942,565) (Lagadec patent), the companies agreed that the Raaymakers approach was preferred. According the companies’ engineers, the Lagadec approach was prone to error and difficult to implement. They incorporated the Raaymakers approach in the Orange Book as the standard for manufacturing CD-R/RW discs, but the Lagadec patent and the Raaymakers patents were all included in the Orange Book package licenses offered by Philips.
In the late 1990s, Princo Corp. entered into a package license agreement with Philips. After Princo stopped paying the licensing fees required by the agreement, Philips filed a complaint with the International Trade Commission, alleging that Princo was violating section 337(a)(1)(B) of the Tariff Act of 1930, 19 U.S.C. § 1337(a)(1)(B), by importing CD-Rs and CD-RWs that infringed Philips’s patents.
In this en banc appeal, the Federal Circuit addressed Princo’s defense that the Raaymakers patents were unenforceable for patent misuse because Philips and Sony agreed to suppress the availability of the Lagadec technology.
Finding that “the conduct alleged in this case is not the type of conduct that could give rise to the defense of patent misuse,” the appellate court affirmed the ITC’s ruling below in favor of Philips.
Judge William C. Bryson, writing for the majority, observed Supreme Court authority stating this basic rule of patent misuse: a patentee may exploit his patent but may not “use it to acquire a monopoly not embraced in the patent.” Transparent-Wrap Mach. Corp. v. Stokes & Smith Co., 329 U.S. 637 (1947). He said that “the key inquiry under the patent misuse doctrine is whether, by imposing the condition in question, the patentee has impermissibly broadened the physical or temporal scope of the patent grant and has done so in a manner that has anticompetitive effects. … Where the patentee has not leveraged its patent beyond the scope of rights granted by the Patent Act, misuse has not been found.” Federal Circuit cases interpreting Supreme Court decisions in this context have characterized patent misuse as the patentee’s act of “impermissibly broaden[ing] the ‘physical or temporal scope’ of the patent grant with anticompetitive effect,” he noted, quoting Windsurfing Int’l, Inc. v. AMF, Inc., 782 F.2d 995 (Fed. Cir. 1986).
At the same time, the court acknowledged that a patentee enjoys substantial rights under the patent grant—including the right to suppress the invention while continuing to prevent all others from using it, to license to others, or to refuse to license, to charge royalties, and to limit license scope to a particular field of use. Given the broad range of conditions that the patent grant allows a patentee to place on licensing, right to practice the patent, patent misuse “has largely been confined to a handful of specific practices by which the patentee seemed to be trying to ‘extend’ his patent grant beyond its statutory limits,” the court said, quoting USM Corp. v. SPS Techs., Inc., 694 F.2d 505 (7th Cir. 1982).
As there is a “narrow scope” for the misuse doctrine, “we have emphasized that the defense of patent misuse is not available to a presumptive infringer simply because a patentee engages in some kind of wrongful commercial conduct, even conduct that may have anticompetitive effects,” Bryson continued. He added:
The misuse must be of the patent in suit. An antitrust offense does not necessarily amount to misuse merely because it involves patented products or products which are the subject of a patented process.” …While proof of an antitrust violation shows that the patentee has committed wrongful conduct having anticompetitive effects, that does not establish misuse of the patent in suit unless the conduct in question restricts the use of that patent and does so in one of the specific ways that have been held to be outside the otherwise broad scope of the patent grant.
Though patent misuse is mainly a judicially created defense, Congress has not been completely silent on this issue, Bryson said. Here, he noted that Congress at Patent Act Section 271(d), 35 U.S.C. §271, describes five types of conduct that may not provide the basis for a finding of misuse. “Importantly, Congress enacted section 271(d) not to broaden the doctrine of patent misuse, but to cabin it,” Bryson said, citing Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176 (1980) and legislative history. In amending the statute in 1988, he said, “Congress was concerned about the open-ended scope of the doctrine and sought to confine it to anticompetitive conduct by patentees who leverage their patents to obtain economic advantages outside the legitimate scope of the patent grant.”
Raaymakers Patents Not Leveraged.
Within this setting, the majority boiled this case down to this question: “When a patentee offers to license a patent, does the patentee misuse that patent by inducing a third party not to license its separate, competitive technology?” It answered in the negative, saying that “Princo has not pointed to any authority suggesting that such a scenario constitutes patent misuse, and nothing in the policy underlying the judge-made doctrine of patent misuse would support such a result.”
The Federal Circuit then quoted Zenith Radio Corp. v. Hazeltine Research Inc., 395 U.S. 100 (1969) in framing the first prong of its analysis this way: patent misuse, in short, is about “patent leverage,” i.e., the use of the patent power to impose overbroad conditions on the use of the patent in suit that are “not within the reach of the monopoly granted by the Government.” At minimum, this inquiry requires that the patent in suit significantly contribute to the practice under attack, Bryson said. However, he stressed that here “there is no such link between the putative misconduct and the Raaymakers patents.”
The purported agreement between Philips and Sony has none of the features that courts have characterized as constituting patent misuse. In particular, it does not leverage the power of a patent to exact concessions from a licensee that are not fairly within the ambit of the patent right. … If the purported agreement between Philips and Sony not to license the Lagadec technology is unlawful, that can only be under antitrust law, not patent misuse law; nothing about that agreement, if it exists, constitutes an exploitation of the Raaymakers patents against Philips’s licensees. …
In sum, this is not a case in which conditions have been placed in patent licenses to require licensees to agree to anticompetitive terms going beyond the scope of the patent grant. Rather, in this case the assertion of misuse arises not from the terms of the license itself but rather from an alleged collateral agreement between Sony and Philips. In that setting, the doctrine of patent misuse does not immunize Princo against the legal effect of its acts of infringement.
Here, he took the opportunity to reject the dissenting opinion’s reliance on Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942) as prohibiting the conduct in this case. There, the patentee owned a patent on a machine used to add salt to canned foods and leased the patented machines to canners on the condition that they would only use salt tablets purchased from the patentee. After the patentee brought an infringement suit against a lessee who used the machine with its own salt tablets, the Supreme Court found the patent unenforceable, reasoning that the patent had been used unlawfully “to secure an exclusive right or limited monopoly not granted by the Patent Office and which it is contrary to public policy to grant.”
Distinguishing Morton Salt, Bryson said:
It was because of the unlawful condition on the patent license that the Court in Morton Salt declined to enforce the patent. Significantly, the Court explained that its ruling was based on the use of the patent “as a means of restraining competition with the patentee’s sale of an unpatented product,” and that the successful prosecution of an infringement action “is a powerful aid to the maintenance of the attempted monopoly of the unpatented product,” thus “thwarting the public policy underlying the grant of the patent.” …There is no such exploitation of the Raaymakers patents in this case.
No Anticompetitive Effects Shown.
Having found that Princo failed to show that Philips unlawfully leveraged its Raaymakers patents, the majority further held that a finding of patent misuse is unwarranted here because Princo failed to establish that the alleged agreement to suppress the Lagadec technology had anticompetitive effects.
Though Princo had asked the court to overrule the line of authority holding that patent misuse requires a showing that the patentee’s conduct had anti-competitive effects, it declined to do so. “Our position is consistent with the traditional characterization of the defense of patent misuse by the Supreme Court … and the 1988 amendment to 35 U.S.C. § 271(d), which makes clear that Congress intended to limit patent misuse to practices having anticompetitive effects,” Bryson wrote.
The majority went on to agree that Princo failed to show (1) that the Lagadec technology was a viable technology and (2) that any agreement not to license Lagadec would have had the anticompetitive effects necessary to condemn that agreement under rule-of-reason analysis.
The ITC’s ruling was affirmed.
Bryson’s opinion was joined by Chief Judge Randall R. Rader and Judges Pauline Newman, Alan D. Lourie, Richard Linn, and Kimberly Moore.
Concurring in part, Judge Sharon Prost, joined by Judge Haldane Robert Mayer, agreed that a finding of patent misuse was unwarranted because Princo failed to show that the agreement regarding the Lagadec patent had anticompetitive effects. While expressing doubt as to whether the misuse doctrine is as narrow or as broad as defined by the majority and dissenting opinions, Prost said that in this case she would “reserve judgment on the precise metes and bounds of the patent misuse doctrine.”
Dyk Dissenting: Majority’s Test Closes Off Nascent Technologies.
Judge Timothy B. Dyk, in his dissenting opinion which was joined by Judge Arthur J. Gajarsa, said that the majority’s “strict standard fails to provide adequate protection against the suppression of nascent technology, and allows patent holders free rein to prevent the development of potentially competitive technologies except in the most extreme and unlikely circumstances.” Pointing to Morton Salt in a footnote, he argued that the majority should not separated the the agreement to promote the Raaymakers patents from the agreement to suppress the Lagadec patent. “This misconduct renders both the Raaymakers and Lagadec patents unenforceable,” he charged.
Citing the electric light bulb, telephone, radio, telegraph, and television as examples, Dyk said that numerous technologies were thought to fail in the early stages of development but became successful commercial applications over time. Further, he noted that even a flawed technology can benefit competition. It “would be inimical to the purpose of the Sherman Act to allow monopolists free reign to squash nascent, albeit unproven, competitors at will—particularly in industries marked by rapid technology advance and frequent paradigm shifts,” Dyk said, quoting United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001). “It is one thing for Philips and Sony to agree that Sony would not compete; it is quite another to use the patent monopoly to prevent anyone from utilizing a competitive technology to compete with the joint venture and thus to preserve Phillips’ virtual monopoly on recordable CD technology.”
Princo was represented by Eric L. Wesenberg of Orrick, Herrington & Sutcliffe, Menlo Park, Calif.
The International Trade Commission, Washington, D.C., was represented by Clara Kuehn, Office of the General Counsel.
Philips was represented by Eric C. Dumont of Wilmer Cutler Pickering Hale and Dorr, Washington, D.C.
Amicus curiae American Intellectual Property Law Association was represented by Richard S. Taffet of Bingham McCutchen, New York.
Charles A. Weiss of the New York Intellectual Property Law Association, New York, represented amicus curiae New York Intellectual Property Law Association.
Herbert C. Wamsley of the Intellectual Property Owners, Washington, D.C., represented amicus curiae Intellectual Property Owners Association.
Richard M. Brunell of the American Antitrust Institute, Washington, D.C., represented amicus curiae American Antitrust Institute.
Amicus curiae Federal Trade Commission, Washington, D.C., was represented by David L. Sieradzki, Office of General Counsel.
Read the Princo v. International Trade Commission opinion
PTO Issues Interim Guidelines to Comport With the Bilski v. Kappos Ruling
August 27, 2010
The U.S. Patent and Trademark Office July 27 issued interim patent examination guidelines to comport with the U.S. Supreme Court’s June 28 ruling in Bilski v. Kappos on the scope of patentable subject matter under Section 101 of the Patent Act.
As noted in our earlier story, Bilski v. Kappos held that the machine-or-transformation test applied by the Federal Circuit is not the sole test for determining subject matter eligibility under Section 101. “This interim guidance, which was published in the Federal Register today, is a supplement to previously issued interim instructions dated August 24, 2009, and it supersedes the interim guidance memo to the examining corps dated June 28, 2010,” the PTO said in its July 27 press release.
“With this set of interim guidance, we are providing the patent examining corps and the IP community with additional guidance regarding factors that may be considered in determining subject matter eligibility in light of the Supreme Court’s decision in Bilski,” Under Secretary of Commerce for Intellectual Property and Director of the USPTO David Kappos stated. “We now seek input from the public as we further refine and finalize this guidance. In the meantime, this interim guidance will assist our examiners in their examination of applications where subject matter eligibility of method claims must be determined.”
Read the PTO’s Aug. 27 Interim Guidelines.
The United States Patent and Trademark Office (USPTO) has prepared further interim guidance for the patent examining corps to use when determining subject matter eligibility under 35 U.S.C. § 101 in view of the recent decision by the United States Supreme Court in Bilski v. Kappos The USPTO is seeking public comment on this interim guidance and intends to issue final guidance after evaluating the public comments.
The interim guidance being published for comment today sets forth the factors that should be considered in determining subject matter eligibility of method claims in view of the abstract idea exception. The machine-or-transformation test remains an investigative tool and is a useful starting point for determining whether a claimed invention is a process under 35 U.S.C. § 101 but, as the Supreme Court made clear, is not the sole test for determining subject matter eligibility. The interim guidance provides additional factors to aid in the determination of whether a claimed method is an abstract idea.
Device Reduced to Practice Shortly After Claimed Bundle Breaking Machine Is Ruled a Simultaneous Invention
August 20, 2010
A device that met every limitation of a patented machine and was reduced to practice within a short time after that claimed machine qualifies as a simultaneous invention and a secondary indication of obviousness, the U.S. Court of Appeals for the Federal Circuit ruled Aug. 20 (Geo. M. Martin Co. v. Alliance Mach. Sys. Int’l LLC, Fed. Cir., No. 2009-1132, 8/20/10).
Strong evidence that the claimed cardboard bundle breaker was rendered obvious by two prior art machines, “coupled with the near-simultaneous invention” of this third machine, led the Federal Circuit to agree with the district court’s ruling of invalidity for obviousness.
Cardboard Bundle Breaking Machine Found Obvious.
George M. Martin Co., which has 90 percent of the market for machines that break bundles of cardboard sheets, sued Alliance Machine Systems Int’l LLC for infringing the patent (6,655,566) covering its bundle breaker machine. After a jury failed to reach a unanimous verdict on invalidity, infringement, and damages, the district court entered a judgment as a matter of law that the patent was invalid for obviousness based on KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007).
The district court found invalidity for obviousness under Patent Act § 103, relying on the Pallmac and Visy machines in the prior art and the near-simultaneous invention of the Tecasa machine, which met every limitation of every asserted claim of the ’566 patent and was first known in the United States as of June 2002—almost three months before the ’566 patent filing date.
Claimed Invention Only Minimally Different From Prior Art.
Claim 1 of the ’566 patent, the only independent claim, is written in Jepson form, describing in the preamble prior art bundle breakers and then claiming a “compliance structure” on each upper clamp as an improvement. The compliance structure allows the bundle breaker to simultaneously break multiple stacks of corrugated board of different heights.
“The district court correctly concluded as a matter of law that the differences between the prior art and the claimed improvement were minimal,” Chief Judge Randall R. Rader wrote. As to the Pallmac machine, he noted that it clamps incoming logs with a compliance structure from the bottom, while the claimed invention does so from the top. Though Martin insisted that the differences between the bottom-up and top-down approaches created a genuine issue of fact as to obviousness, Rader disagreed. Bottom versus top is just the type of “finite number of identified, predictable solutions” that justifies a legal conclusion that the result, when expected, is “the product not of innovation but of ordinary skill and common sense,” he said, quoting KSR.
Nor was Rader persuaded by testimony from Martin’s expert that one cannot simply take the Pallmac design and flip it from bottom to top. He stated:
That testimony, however, is irrelevant to the obviousness analysis. With one exception, discussed below, the claims themselves do not recite engineering details but merely require that the compliance structures be mounted to clamps that are “above” the conveyor belts. Indeed, Alliance’s witness did testify that flipping the Pallmac machine was simple “from [a] concept point of view.” Moreover, to the extent that engineering obstacles did stand in the way to constructing a machine that used a top-down approach, the Visy machine demonstrated that such obstacles could be overcome.
Teaching ‘Compliance Structure,’ Visy Is Prior Art.
As to the Visy machine, Martin insisted that the device was not prior art because it did not work for its intended purpose.
However, in the obviousness context, a reference need not work to qualify as prior art, Rader explained. “Even if a reference discloses an inoperative device, it is prior art for all that it teaches,” he stressed, quoting Beckman Instrument Inc. v. LKB Produkter AB, 892 F.2d 1547 (Fed. Cir. 1989). The main issue here is whether Visy discloses a “compliance structure,” and it does, he said. Noting that the district court defined this term as “a structure that deforms to allow a more uniformdistribution of force,” Rader said that Martin’s own tests “clearly and convincingly establish that the Visy machine contains a structure.”
To Martin, Visy was not an “improvement in a bundle breaker” like the claimed invention because it could not reliably break multiple bundles of uneven heights.
However, the Federal Circuit said that Martin was placing too much weight on the term “improvement.” Given the patentee’s Jepson claiming, the extent of the claimed “improvement” is defined only by the body of the claim, the court said. Here, the claim recites a “said improvement comprising,” and “comprising” is a term of art that indicates that only what follows is essential, Rader noted, citing Genentech Inc. v. Chiron Corp., 112 F.3d 495 (Fed. Cir. 1997). If the patentee intended to claim an improvement that included a structure for “reliable breaking” measured against some kind of commercial production standard, it should have explicitly done so or argued on appeal for a construction of “compliance structure” that contains such a standard. However, it did neither, Rader said. Similarly finding that the claims do not require a threshold throughput or commercial speed, the court rejected Martin’s assertion that the Visy machine is not prior art because it fails to work at “production speed.”
Close Reduction to Practice Date Makes Tecasa a Simultaneous Invention.
Given the strong evidence of obviousness based on Pallmac and Visy, the appellate court then looked to the evidence of secondary considerations of nonobviousness.
A product’s commercial success is relevant to the nonobviousness of a claim only insofar as the success of the product is due to the claimed invention, the court observed, citing Ormco Corp. v. Align Tech. Inc., 463 F.3d 1299 (Fed. Cir. 2006). Here, it noted that Alliance had conclusively shown that Martin’s success was due to its pre-existing market share in the stacker market since 1960—long before the ’566 patent issued in 2003. Thus, the court found this factor of little weight here.
Despite Martin’s claim of a long-felt need for its product, the court said that, given the minimal differences between the prior art and the claimed invention, “it cannot be said that any long-felt need was unsolved.” The court used a similar rationale to rebuff Martin’s claim that others had failed in this area. Moreover, Rader said Martin’s evidence of wide industry praise has more to do with its market share and less to do with the claimed device.
In rare instances, the secondary consideration of simultaneous invention might also supply “indicia of ‘obviousness,’” the Federal Circuit observed, quoting Ecolochem Inc. v. S. Cal. Edison Co., 227 F.3d 1361 (Fed. Cir. 2000) and Graham v. John Deere Co., 383 U.S. 1 (1966).
While Martin challenged the district court’s conclusion that the Tecasa machine qualified as a simultaneous invention indicating obviousness, the Federal Circuit backed this ruling. It noted that the Pallmac machine was first installed in 1998, and that the Visy machine was first sold in 1996—well before the Martin invention was reduced to practice. Tecasa came along shortly thereafter, and independently made, simultaneous inventions, made “within a comparatively short space of time,” are persuasive evidence that the claimed apparatus “was the product only of ordinary mechanical or engineering skill,” Rader said, quoting Concrete Appliances Co. v. Gomery, 269 U.S. 177 (1925).
Accordingly, the court found that the evidence of secondary considerations failed to create a reasonable dispute as to obviousness.
The district court’s ruling was affirmed.
The opinion was joined by Senior Judge Glenn Archer and Judge Sharon Prost.
Martin was represented by Kenneth E. Keller of Krieg Keller Sloan Reilley & Roman, San Francisco. Alliance was represented by J. Thomas Vitt of Dorsey & Whitney, Minneapolis.
Read the Geo. M. Martin Co. v. Alliance Mach. Sys. Int’l LLC opinion
§271(a) Imposes Liability for Two U.S. Companies Agreeing on Offer to Sell Potentially Infringing Article to Be Delivered in the U.S.
August 18, 2010
The U.S. Court of Appeals for the Federal Circuit ruled Aug. 18 that the scope of liability under Patent Act §271(a) for “offers to sell” covers conduct by two U.S. companies who agree to have a potentially infringing device delivered in the U.S. even though the contract was executed abroad (Transocean Offshore Deepwater Drilling Inc. v. Maersk Contractors USA Inc., Fed. Cir. No. 2009-1556, 8/18/10).
Vacating a summary judgment of noninfringement, the court rejected the argument that §271(a) could not apply because the companies met in Norway to execute an offer to sell an oil rig to be delivered in the U.S. Gulf of Mexico. It said that “[t]he focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.”
Oil Rig Patents Found Invalid and Not Infringed.
Transocean Offshore Deepwater Drilling Inc. has three patents 6,047,781, 6,068,069, and 6,085,851 that describe an oil derrick that includes two stations—a main advancing station and an auxiliary advancing station—that can each assemble drill strings and lower components to the seabed. Because a conventional rig utilized a derrick with a single top drive and drawworks, it could only lower one element at a time and had to perform many steps involved in drilling a well in series.
Transocean brought an infringement suit against Maersk Contractors USA Inc., and the district court granted a summary judgment that the patents were invalid for obviousness under Section 103(a) of the Patent Act and for lack of enablement under Section § 112 ¶ 1 of the Patent Act, and that the patents were not infringed.
Nonobviousness Evidence Wrongly Ignored.
The Federal Circuit first addressed the obviousness ruling under 35 U.S.C. 103(a). The patent claims asserted here generally require (1) a first advancing station capable of advancing tubular members to the seabed, (2) a second advancing station also capable of advancing tubular members to the seabed, and (3) a transfer assembly to move tubular members between the first advancing station and the second advancing station.
The appellate court agreed with the district court’s ruling that the Horn and Lund inventions in the prior art establish a prima faciecase of obviousness.
“In combination, Horn and Lund teach all of the limitations of the claims, two advancing stations that can advance tubular members to the seabed as well as a transfer assembly to move tubular members between the stations,” Judge Kimberly Moore wrote. Noting that it is not enough to simply show that the references disclose the claim limitations, she then quoted the statement in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) that “it can be important to identify a reason that would have prompted a person of ordinary skill in the art to combine the elements as the new invention does.” Here, the Horn patent provides the reason to combine where it mentions “the possibility of concentrating common auxiliary equipment,” Moore said, quoting its language. She said that Lund’s transfer assembly is just the type of “auxiliary” equipment that one could concentrate for two advancing stations under a single derrick. Accordingly, the Federal Circuit held that the teachings of the prior art references and this reason to combine support a prima faciecase that the claims would have been obvious to one of ordinary skill in the art.
Despite this prima facie showing, the Federal Circuit still reversed the summary judgment of obviousness because Transocean offered “strong” evidence of nonobviousness to rebut the prima faciecase, the district court erroneously ignored that evidence, and this evidence created a material issue of fact. Transocean provided evidence that the dual activity rig was met with wide industry skepticism, that it is now widely praised by the industry, that its implementation has been a commercial success, that it commands a higher licensing premium than standard rigs, and that its success has caused others, including Maersk, to copy. The district court ignored this objective evidence of nonobviousness, but Federal Circuit case law is clear that this type of evidence “must be considered in evaluating the obviousness of a claimed invention,” Moore said, quoting Iron Grip Barbell Co. v. USA Sports Inc., 392 F.3d 1317 (Fed. Cir. 2004). “Viewing the objective evidence of nonobviousness in a light most favorable to Transocean, we cannot hold that the claims would have been obvious as a matter of law.”
Enablement Issues Also Remain.
Next, Moore turned to the district court’s ruling that the claims were invalid for lack of enablement under 35 U.S.C. § 112 ¶ 1, which requires that the patent specification “contain a written description of the invention . . . to enable any person skilled in the art . . . to make and use the same.”
As an initial matter, Moore said that the district court erred in requiring Transocean to enable the invention to allow a skilled artisan to take advantage of the invention’s “timesaving” aspect. A specification must enable the invention to be practiced without undue experimentation, but “[i]t is not required to enable the most optimized configuration, unless this is an explicit part of the claims,” Moore stated. “In the present case, transferring tubular members from one location to another may be enabled by simply disclosing the use of a crane or a rail-mounted system. It is irrelevant whether the enabling disclosure would provide the most efficient transfer.”
While the district court ruled that a skilled artisan could not practice the invention without undue experimentation, the Federal Circuit found several enablement issues still in dispute and held that summary judgment should not have been granted. Accordingly, the summary judgment for lack of enablement was reversed.
Conduct of U.S. Companies Fell Within Scope of §271(a).
Finally, the appellate court addressed the issue of infringement under §271(a) of the Patent Act, which states that: “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States. . . infringes the patent.”
Here, Transocean sued Maersk USA after Maersk A/S (a Danish company) and Statoil ASA (a Norwegian company) negotiated an offer to sell the accused rig and Maersk USA and Statoil Gulf of Mexico LLC (a Texas company) signed a contract in Norway. The contract specified that the “Operating Area” for the rig was the U.S. Gulf of Mexico.
The district court ruled that because the negotiations and execution took place outside the U.S., there was no offer to sell within the United States under § 271(a).
On appeal, Transocean argued that a contract between two U.S. companies for delivery or performance in the U.S. must be an offer to sell within the United States under § 271(a).
Maersk USA, however, cited authority suggesting that all offer activities must occur within the U.S. for there to be “offer to sell” liability. Rotec Indus. Inc. v. Mitsubishi Corp., 215 F.3d 1246 (Fed. Cir. 2000); MEMC Elec. Materials Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369 (Fed. Cir. 2005).
The Federal Circuit sided with Transocean and vacated the summary judgment of noninfringement.
Moore observed that an offer to sell is a distinct act of infringement separate from an actual sale, and that an offer to sell differs from a sale in that it need not be accepted to constitute an act of infringement. Further, she cited an article pointing out that the damages flowing from an unaccepted offer to sell are quite different from those for an actual sale. Timothy R. Holbrook, Liability for the “Threat of Sale”: Assessing Patent Infringement for Offering to Sell an Invention and Implications for the On-Sale Patentability Bar and Other Forms of Infringement, 43 Santa Clara L. Rev. 751 (2003).
“In order for an offer to sell to constitute infringement, the offer must be to sell a patented invention within the United States,” Moore said, stressing that “[t]he focus should not be on the location of the offer, but rather the location of the future sale that would occur pursuant to the offer.” She continued:
The statute precludes “offers to sell . . . within the United States.” To adopt Maersk USA’s position would have us read the statute as “offers made within the United States to sell” or “offers made within the United States to sell within the United States.” First, this is not the statutory language. Second, this interpretation would exalt form over substance by allowing a U.S. company to travel abroad to make offers to sell back into the U.S. without any liability for infringement. …This company would generate interest in its product in the U.S. to the detriment of the U.S. patent owner, the type of harm that offer to sell within the U.S. liability is meant to remedy. …These acts create a real harm in the U.S. to a U.S. patentee.
Neither Rotec nor MEMC preclude our determination that an offer by a U.S. company to sell a patented invention to another U.S. company for delivery and use in the U.S. constitutes an offer to sell within the U.S. First, SEB S.A. v. Montgomery Ward & Co., 594 F.3d 1360, 1375 (Fed. Cir. 2010) contemplated whether the territorial reach of the offer to sell language had been decided by Rotec and concluded that it had not. The defendants in Rotec did argue that because the offer was made in China, not the U.S., they did not infringe. … And the Rotec court discussed the evidence regarding meetings and communications made in the United States. … The Rotec court held that there was no offer to sell, not because of the location of the offer or of the ultimate sale, but rather because there was no evidence that an offer was communicated or conveyed by the defendants. … The MEMC case is even further attenuated as it did not even consider location of the offer or the contemplated sale, but instead held there was no offer to sell because the emails at issue, which contained only technical data and no price terms, cannot constitute an offer that could be made into a binding contract by acceptance. …
We conclude that neither Rotec nor MEMC control this case. We hold that the district court erred because a contract between two U.S. companies for performance in the U.S. may constitute an offer to sell within the U.S. under § 271(a). The fact that the offer was negotiated or a contract signed while the two U.S. companies were abroad does not remove this case from statutory liability. We therefore vacate the district court’s summary judgment of noninfringement.
Further, the Federal Circuit found error in the district court’s ruling that there was no sale within the U.S. in this case. “As with the offer to sell, there remains a dispute over whether the unmodified rig that was sold was the patented invention, a question not reached by the district court,” Moore wrote.
Collateral Estoppel/Willfulness Rulings Upheld.
However, the Federal Circuit found no error in the district court’s ruling that Transocean was collaterally estopped from asserting infringement by a modified rig Maersk USA actually delivered to the U.S. Noting that this modified rig was held noninfringing in Transocean’s earlier suit against GlobalSantaFe Corp., the appellate court agreed that Transocean could not now insist that this modified design infringes.
Given evidence that Maersk USA modified one of its rigs to conform to the injunction in the case against GlobalSantaFe, the appellate court further agreed that, “as a matter of law, there is no willfulness” under the en banc ruling in In re Seagate Tech. LLC, 497 F.3d 1360 (Fed. Cir. 2007). “Proof of willful infringement . . . requires at least a showing of objective recklessness,” Moore observed, quoting that case. “Although the contract does show that Maersk USA knew of Transocean’s patents, it also shows intent to avoid infringement.”
The district court’s ruling was reversed in part, vacated in part, affirmed in part, and remanded.
The opinion was joined by Judges Arthur Gajarsa and Haldane Robert Mayer.
Transocean was represented by Gregory A. Castania of Jones Day, Washington, D.C. Maersk USA was represented by William H. Frankel of Brinks Hofer Gilson & Lione, Chicago.
Read the Transocean Offshore Deepwater Drilling Inc. v. Maersk Contractors USA Inc. opinion.
CAFC Finds No Joint Infringement by Two Companies Because Plaintiff Could Not Prove ‘Control or Direction’ by One
August 9, 2010
The U.S. Court of Appeals for the Federal Circuit Aug. 9 ruled that two companies could not be liable for joint infringement of a patent because the plaintiff failed to show that one of the defendants had “control or direction” over the entire process as “mastermind” (Golden Hour Data Systems Inc. v. emsCharts Inc., Fed. Cir., No. 2009-1306, 8/9/10).
Though affirming the ruling of no joint infringement, the 2-1 majority vacated a finding of inequitable conduct for more fact-finding on whether the patent applicants intended to deceive the Patent and Trademark Office during prosecution.
Dissenting on both rulings, Judge Pauline Newman argued that it is incorrect as a matter of law to hold that there cannot be joint infringement when two entities collaborate to practice a patented invention, and argued that there was “no basis for a second-bite ruling of inequitable conduct” because deceptive intent was not proven below.
Emergency Medical System Ruled Not Jointly Infringed and Unenforceable.
In this case, Golden Hour Data Systems Inc. sued emsCharts Inc. and Softtech LLC for infringing its patent (6,117,073) on an “Integrated Emergency Medical Transportation Database System” which covers a system for dispatching emergency medical transport (often performed by helicopter), treating patients, and patient billing. emsCharts produces a web-based medical charting program, and Softtech produces computer-aided flight dispatch software called Flight Vector, which coordinates flight information, such as patient pickup and delivery, and flight tracking. The two companies formed a strategic partnership, allowing their two programs to work together.
While a jury rendered an infringement verdict, the district court entered a judgment as a matter of law of no joint infringement, and further held the patent unenforceable for inequitable conduct.
Golden Hour appealed.
Undisclosed Data Highly Material, but Intent to Deceive Issues Remain.
Turning first to inequitable conduct, the Federal Circuit quoted authority that “[a] patent may be rendered unenforceable due to inequitable conduct if an applicant, with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution.” Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309 (Fed. Cir. 2006). It further noted that a party seeking to render a patent unenforceable due to inequitable conduct must prove both materiality and intent by clear and convincing evidence.
The Federal Circuit affirmed the district court’s finding that information on a billing system known as AeroMed that the ’073 patent applicants (Hutton and Fuller) did not produce to the Patent and Trademark Office was highly material. Though the claims that led to the ’073 patent were initially rejected as anticipated by the Sloane patent (5,619,991), Hutton and Fuller overcame the rejected by arguing that Sloane did not disclose integrated billing for the actual services rendered. In their 1998 Information Disclosure Statement (IDS), they acknowledged their awareness of the AeroMed system based on an undated brochure, but their IDS did not disclose the integrated billing system described in the brochure. “Given the significance of integrated billing to patentability, the failure to disclose the billing characteristics of the AeroMed system in the IDS was also highly material,” Judge Timothy B. Dyk wrote.
Golden Hour had argued that a reasonable examiner could not have considered the brochure material to patentability because the Manual of Patent Examining Procedure rules would prohibit consideration of the brochure because it was not known to be prior art.
Dyk rejected the argument. “There is no requirement that the information [identified in an IDS] must be prior art references in order to be considered by the examiner,” he said, quoting MPEP § 609 (2008). Further, he cited authority indicating that information may be material even if it does not qualify as prior art. Duro-Last Inc. v. Custom Seal Inc., 321 F.3d 1098 (Fed. Cir. 2003). “The information in the brochure here was clearly material,” and “may well have been prior art,” he said, pointing to testimony by AeroMed’s developer that the brochure was created before a 1996 conference. Even if the brochure was not itself prior art, “the brochure and the information contained therein were material because they contradicted other representations to the PTO,” Dyk added.
While finding the undisclosed information highly material, the court noted that there still had to be clear and convincing evidence that the applicants intended to deceive the PTO. For Dyk, there was a remaining “key question” of “whether Fuller and/or Hutton in fact read the brochure.” He explained:
Here, there are two possible explanations for the failure to advise the PTO about the integrated billing disclosed in the brochure: (1) that Fuller and Hutton failed to read the brochure, and (2) that one or both read it and deliberately withheld the information. The distinction between these two explanations is important. If one or both read the brochure and deliberately did not disclose the damaging information on the inside, their actions would give rise to an inference of intent to deceive. However, if they did not read the brochure (and did not do so to avoid learning of damaging information), those actions regarding the failure to disclose the information on the inside of the brochure would at most, amount to gross negligence. Gross negligence is not inequitable conduct.
He directed the district court on remand to provide detailed factual findings on “crucial facts—such as whether Fuller and/or Hutton read the entire brochure; whether, knowing the information to be material, they deliberately withheld it; or whether they deliberately refused to read the entire brochure in order to avoid learning damaging information.”
Accordingly, the inequitable conduct ruling was vacated.
Joint Infringement Theory Requires One Defendant to Be ‘Mastermind.’
The appellate court went on to affirm the finding of no joint infringement of the integrated system. Again, the emsCharts program charts patient information and provides integrated billing, while Softtech produces computer-aided flight dispatching. They enabled their software programs to work together.
The Federal Circuit acknowledged that emsCharts and Softtech both performed some of the claimed steps of the patent. However, quoting Muniauction Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), it ruled that Golden Hour did not prove that one party had “control or direction” over the entire process such that all steps of the process can be attributed to the controlling party i.e., the “mastermind.”
Here, the district court concluded that the evidence of control or direction was insufficient as a matter of law to uphold a finding of joint infringement. We agree with the district court that the evidence here was insufficient for jury to infer control or direction. We see no need for extended discussion of this issue and we affirm the district court’s grant of JMOL as to the process claims the jury found to be jointly infringed (claims 15-22).
The district court also granted JMOL as to systems claims 1 and 6-8. On appeal Golden Hour apparently argues that emsCharts was liable for infringement of those claims because emsCharts sold its emsCharts.com program and Softtech’s Flight Vector software together, and together these systems comprised the systems of the asserted claims. Such a sale might well create liability on the part of emsCharts for the sale of the patented system, whether or not emsCharts controlled Softtech. The problem is that by agreement, claims 1 and 6-8 were submitted to the jury only on a joint infringement theory. Such a verdict can only be sustained if there was control or direction of Softtech by emsCharts. Under these circumstances, JMOL was properly granted as to the systems claims as well as to the process claims.
The district court’s ruling was affirmed in part, vacated in part, and remanded.
Senior Judge Daniel Friedman joined the opinion.
Newman: Infringement and Inequitable Conduct Rulings Are Wrong.
However, in her dissenting opinion, Judge Pauline Newman argued that this infringement decision was wrong as a matter of law because the defendants collaborated to practice every limitation of the claims. The “strategic partnership” formed here to sell the infringing system as a unit “is not immune from infringement simply because the participating entities have a separate corporate status,” Newman argued.
Moreover, Newman said that since deceptive intent was not proven below, “the charge of inequitable conduct should be laid to rest” and “there is no basis for a second-bite ruling of inequitable conduct.” She found it especially imprudent to remand the inequitable conduct issue as there are several open issues for the Federal Circuit to resolve en banc in the pending case of Therasense Inc. v. Becton, Dickinson & Co., Fed. Cir., No. 2008-1511, 4/26/10).
“The charge of inequitable conduct carries high stakes for both the attorney, whose career it can threaten, and the applicant, who can lose a perfectly valid patent,” Newman said. She continued:
For the Golden Hour patent, the question of patentability in view of the AeroMed brochure was before the jury, and the jury verdict of validity despite the AeroMed brochure is not challenged. Since intent to deceive was not established before the trial judge, and materiality is reasonably disputed, there is no basis for a second-bite ruling of inequitable conduct. I would lay the matter to rest or, at a minimum, stay the proceedings until conflicting precedent is clarified in accordance with the pending en banc hearing of the Therasense appeal.
Golden Hour was represented by Carter G. Phillips of Sidley Austin, Washington, D.C. Eric H. Weisblatt of Wiley Rein, Washington, D.C., represented emsCharts and Softtech.
Read the Golden Hour Data Systems Inc. v. emsCharts Inc. opinion
Patented Methods for Increasing the Bioavailability of Skelaxin Oral Dosage ‘With Food’ Are Invalid for Inherent Anticipation
August 2, 2010
The U.S. Court of Appeals for the Federal Circuit ruled Aug. 2 that two patents covering methods for taking the brand name muscle relaxant Skelaxin “with food” to increase bioavailability are invalid as being inherently anticipated by references in the prior art (King Pharmaceuticals Inc. v. Eon Labs Inc., Fed. Cir., No. 2009-1437, 8/2/10).
Patents Found Invalid by District Court.
The muscle relaxant metaxalone was first discovered in the 1960s, and the first patent (3,062,827) claiming the method of producing the compound was issued in 1962 to A.H. Robins Company Inc., which began selling metaxalone under the brand name Skelaxin. Elan Pharmaceuticals Inc. eventually acquired the rights to Skelaxin and sold those rights to King Pharmaceuticals Inc. in 2003.
Eon Labs Inc. was sued for infringing two patents (6,407,128 and 6,683,102) after seeking Food and Drug Administration approval to market generic versions of metaxalone tablets.
The district court granted summary judgment that four patent claims were invalid for being directed to unpatentable subject matter under § 101 of the Patent Act, that three were claims invalid for obviousness under §103, and that the remaining claims were invalid for anticipation under § 102.
Prior Art Discloses Taking Drug ‘With Food.’
As to the ‘128 patent, the Federal Circuit first looked at whether Claim 1 requiring a “a therapeutically effective amount “of the drug “with food” was inherently anticipated by three prior art references—Kazem Fathie, Musculoskeletal Disorders and Their Management with a New Relaxant, Clinical Medicine 678 (April 1965) (Fathie II); Joseph A. Albanese, Nurses’ Drug Reference 427 (2ed. 1982) (Albanese); and Anne C. Abrams, Clinical Drug Therapy 145 (1995).
Under 35 U.S.C. § 102, a claim is anticipated “if each and every limitation is found either expressly or inherently in a single prior art reference,” Judge Arthur J. Gajarsa observed, quoting Celeritas Techs. Ltd. v. Rockwell Int’l Corp., 150 F.3d 1354 (Fed. Cir. 1998). Each of these references discloses administering metaxalone “with food” or “with meals” to treat musculosketal conditions, he said. While King insisted that these references failed to disclose the precise food conditions mentioned in examples, the court found that the patent claim language only recites taking metaxalone “with food.” The only steps required in the ‘128 patent to increase metaxalone’s bioavailability are (1) ingesting metaxalone (2) with food, and both are undeniably disclosed by the prior art, Gajarsa wrote.
Having found Claim 1 of the ’128 patent invalid, the Federal Circuit found that because claims 2-3, 8-11, and 15-17 had the same or similar preamble, they were also inherently anticipated. Though Claims 4-6, 12-14, and 18-20 of the ’128 patent recited time ranges for food consumption, King’s own expert’s testified that “with food” could mean taking metaxalone “1 hour prior to up to about 2 hours after eating.” As each included at least part of this range, Gajarsa found that Claims 4-6, 12-14, and 18-20 of the '128 patent were also inherently anticipated.
Claim 21 of ’128 Patent Not Patent Ineligible, but Still Anticipated.
Continuing, the appellate court turned to Claim 21 of the ’128 patent, which included the limitation "informing the patient that administration of a therapeutically effective amount of metaxalone in a pharmaceutical composition with food results in an increase in the maximal plasma concentration (Cmax) and extent of absorption (AUC(last)) of metaxalone compared to administration without food."
In finding this claim invalid, the district court applied the machine-or-transformation test for patentable subject matter under § 101 set forth in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), and held that “the act of informing another person of the food effect of metaxalone does not transform metaxalone into a different state or thing.” However, citing Parker v. Flook, 437 U.S. 584 (1978), the Federal Circuit observed that § 101’s patentability analysis is to directed to the claim as a whole, not individual limitations. Thus, it agreed with King’s argument that the district court erred by finding invalidity after focusing solely on the “informing” limitation.
Gajarsa said that this case is not “the proper vehicle for determining whether claims covering medical treatment methods are eligible for patenting under § 101 because even if claim 21 recites patent eligible subject matter, that subject matter is anticipated.” Specifically, he noted that independent Claim 1 was already found anticipated and that the only potential source of novelty in dependent Claim 21 is the “informing” limitation. The court held that the step of “informing” someone about the existence of an inherent property of that method cannot add novelty to a method that is otherwise anticipated by the prior art. It drew a parallel to "printed matter" cases, such as In re Gulack, 703 F.2d 1381 (Fed. Cir. 1983), which hold that if claimed printed matter is not functionally related to a claimed product, it cannot be used to distinguish the invention from prior art. “The rationale behind this line of cases is preventing the indefinite patenting of known products by the simple inclusion of novel, yet functionally unrelated limitations,” Gajarsa said, citing In re Ngai, 367 F.3d 1336 (Fed. Cir. 2004).
Claim 22, which also depends from Claim 1 but adds a limitation for a label instructing patients on taking the drug with food, was found by Gajarsa to be “squarely within our printed matter cases.” Though King insisted that the printed matter cases should be limited to product claims and distinguished from the method of Claim 22, Gajarsa could find no reason to limit that case authority solely to product claims.
Invalidity of ’102 Patent Claims Also Upheld.
Continuing, the appellate court affirmed the invalidity of Claims 7, 9, and 12-15 of the ’102 patent, which it found nearly identical to claim 22 of the ’128 patent.
As with the analysis it stated for the district court’s invalidity ruling on Claim 21 of the ’128 patent, the Federal Circuit found error in the district court’s finding that Claim 1 of the ’102 patent was invalid under § 101 of the Patent Act. Gajarsa said that the district court acted improperly “because it ignored the claim as a whole and focused on one limitation.” Still, as with Claim 21 of the ’128 patent, he ruled that the “informing” limitation was the sole source of novelty for Claim 1 of the ’102 patent. “Because this limitation is not functionally related to the otherwise anticipated method, the claim is anticipated,” he wrote.
Having found Claim 1 of the ’102 patent invalid, the court here affirmed the invalidity of dependent Claims 2-4, independent Claim 8, and its dependent Claims 10 and 11.
The court further affirmed the ruling that Claim 5 of the ’102 patent was invalid for obviousness based on the Albanese and Dent prior art references. “It would be obvious to a person of ordinary skill in the art to combine Dent’s teaching of taking a tablet dosage of metaxalone four times a day with Albanese’s teaching of administering metaxalone with food,” Gajarsa wrote. On this point, he quoted the statement that in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2008) that “[a] person of ordinary skill is also a person of ordinary creativity, not an automaton.”
No Jurisdiction Over Prior Owner of ’128 Patent.
Finally, the appellate court held that the district court erred in granting a judgment of invalidity against Elan because subject matter jurisdiction was lacking.
Though Elan had brought suit after Eon sought to market a generic 400 mg metaxalone tablet, while that suit was pending, Elan transferred all of its ’128 patent rights to King in a 2003 sale. “Had Elan retained the right to sue Eon in some instances, then an actual case or controversy may exist,” but Elan “did not retain any such rights,” Gajarsa wrote.
The district court’s ruling was affirmed in part and vacated in part.
The opinion was joined by Judges William C. Bryson and Sharon Prost.
King Pharmaceuticals was represented by Gregory A. Castanias of Jones Day, Washington, D.C. Eon Labs was represented by Martin B. Pavane of Cohen Pontani Lieberman & Pavane, New York. Elan was represented by James B. Monroe of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C.
Read the King Pharmaceuticals Inc. v. Eon Labs Inc. opinion
CAFC: No En Banc Review of Ruling That Hatch-Waxman
Does Not Allow Generics to Correct Orange Book Use Codes
July 29, 2010
The U.S. Court of Appeals for the Federal Circuit July 29 refused en banc review of a panel decision holding that the Hatch-Waxman Act does not authorize a counterclaim to correct or delete use code information submitted by innovator drug companies to the Food and Drug Administration for the Orange Book listing of approved drugs (Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories Ltd., Fed. Cir., No. 2010-1001, 7/29/10).
In the court’s April panel ruling, the court held that “the counterclaim provision only authorizes suits to correct or delete an erroneous patent number or expiration date” and does not extend to other information such as use codes for the diabetes drug Prandin. Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories Ltd., 601 F.3d 1359 (Fed. Cir. 2010).
However, agreeing with Judge Timothy B. Dyk’s dissenting opinion in the panel decision, Judge Arthur J. Gajarsa here insisted that this case should be reviewed en banc because the majority read the counterclaim provision “contrary to its manifest Congressional purpose.” According to Gajarsa, the majority’s construction of the Hatch-Waxman Act “eliminates the careful balance Congress has struck between encouraging pharmaceutical discoveries and ensuring that the American people have access to low cost generic drugs.”
Caraco Counterclaims to Correction Orange Book Listing.
Brand drug manufacturer Novo Nordisk A/S owns a patent (RE 37,035) on the chemical composition of repaglinide, which expired on March 14, 2009, and another patent (6,677,358) on the use of repaglinide in combination with metformin to treat diabetes, which does not expire until 2018. The Food and Drug Administration’s Orange Book listing of approved drug products lists both of these patents for Novo’s drug Prandin. Though the FDA had approved repaglinide for two other uses—(1) by itself, (ie., monotherapy) and (2) in combination with thiazolidinediones—Novo does not own any patents covering the latter two approved uses.
Caraco Pharmaceutical Laboratories Ltd., a generic manufacturer, filed an abbreviated new drug application under the Hatch-Waxman Act to market the monotherapy use of repaglinide to treat diabetes, a use no longer covered by a patent. In June 2005, Novo sued Caraco, claiming that if Caraco marketed repaglinide, it would nonetheless infringe the ’358 patent because Caraco’s label would suggest the use of repaglinide together with metformin.
Following the FDA’s suggestion, Caraco sought a carve-out statement pursuant to 21 U.S.C. § 355(j)(2)(A)(viii) to make clear that it was not seeking approval to market the use of repaglinide in combination with metformin and limiting its label to the monotherapy use. The FDA approves the Section viii statement only where there is no overlap between the proposed carve-out label submitted by the generic manufacturer and the use code narrative submitted by the pioneering manufacturer.
To counter this statement Section viii statement, Novo changed the Orange Book use code associated with the ’358 patent from “use of repaglinide in combination with metformin to lower blood glucose” to “a method for improving glycemic control in adults with type 2 diabetes mellitus.”
Since this latter use clearly exceeded Novo’s patent scope by covering patented and unpatented uses, Caraco counterclaimed under § 355(j)(5)(C)(ii) for an order requiring Novo to change the use code to correctly reflect the claim of patent coverage in the Orange Book.
The U.S. District Court for the Eastern District of Michigan found that Novo had improperly filed an overbroad use code narrative for the ’358 patent and issued an injunction directing the company to correct the Orange Book listing.
Panel Decision Read Hatch-Waxman Act Narrowly.
The counterclaim provision, which was added to the Hatch-Waxman Act in the Medicare Prescription Drug Improvement and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (2003), states that:
[The ANDA] applicant may assert a counterclaim seeking an order requiring the holder to correct or delete the patent information submitted by the holder under subsection (b) or (c) of this section on the ground that the patent does not claim either–
(aa) the drug for which the application was approved; or
(bb) an approved method of using the drug.
Finding “no ambiguity in the statutory language,” Judge Randall R. Rader agreed with Novo’s position that the counterclaim provision is limited to cases where the listed drug does not claim “any” approved method of use. When an indefinite article is preceded and qualified by a negative, standard grammar generally provides that “a” means “any,” he said, citing dictionary references. Thus, Rader rejected Caraco’s broader reading that the provision allows a counterclaim when “all” approved methods are not stated for the drug.
Further, Rader noted that, while Congress created the counterclaim in response to Mylan Pharms. Inc. v. Thompson, 268 F.3d 1323 (Fed. Cir. 2001), the legislative language it chose suggests that the 2003 Amendment sought to correct the specific issue raised in Mylan, i.e., to deter pioneering manufacturers from listing patents that were not related at all to the patented product or method. Since the present case involves a patent listing that covers one of several approved methods of using a formulation protects that patented method and thus bears a direct relation to the purpose of Orange Book listings, Rader said, this case is distinguishable from Mylan.
To be more specific, the terms of the counterclaim provision do not authorize an order compelling the patent holder to change its use code narrative. The counterclaim provision states that a generic manufacturer can request an order compelling “the holder to correct or delete the patent information submitted by the holder under subsection (b) or (c).” … Subsection (b) requires a pioneering manufacturer to submit “the patent number and the expiration date of any patent . . . which claims a method of using such drug.” … Subsection (c) states that “[i]f requires a pioneering manufacturer to submit “the patent number and the expiration date the patent information described in subsection (b) of this section could not be filed with the submission of an application,” the holder “shall file with the Secretary the patent number and the expiration date of any patent . . . which claims a method of using such drug.” …
Thus, the Act defined the term “patent information” as “the patent number and the expiration date.” … The reference in subsection (c) to “the patent information described in subsection (b)” could only mean the patent number and the expiration date, because no other “patent information” appears in the statute. Therefore, to maintain consistency in the statutory terms, “the patent information” in the counterclaim provision must also mean the patent number and the expiration date … Thus, the counterclaim provision only authorizes suits to correct or delete an erroneous patent number or expiration date. The authorization does not extend to the use code narrative.
Accordingly, the Federal Circuit reversed the district court’s grant of summary judgment on Caraco’s “attempted, but unsuccessful, counterclaim” and vacated the injunction.
Judge Raymond C. Clevenger agreed with Rader in a concurring opinion.
Dissenters: Ruling Allows Innovators to Game the System.
Dissenting from the panel decision, Dyk said that the ruling “construes the statute contrary to its manifest purpose and allows the same manipulative practices to continue in the context of method patents.” Disagreeing with the majority’s reading of “patent information,” he insisted that the statute does not require the listing of patent numbers and expiration dates in the abstract, but contemplates the description of the scope of the patent and of the relationship between the patent and the drug or the method of use. The description of that scope and relationship is itself “patent information,” Dyk argued. “Today’s decision strikingly limits the counterclaim provision with the consequence that, in all likelihood, the ANDA applicant is left without any remedy to correct an erroneous Orange Book listing with respect to a method of use patent. This cannot be what Congress intended.”
Agreeing with Dyk’s view, Gajarsa was disappointed with the denial of Caraco’s petition for rehearing en banc. He said that the court should have taken this issue en banc because the “majority opinion thus eviscerates Section viii.” Gajarsa added:
A generic, like Caraco, cannot use Section viii if the pioneering manufacturer’s use code is erroneously broad. With the majority’s blessing, pioneering drug manufacturers now have every incentive to follow Novo’s lead and draft exceedingly broad use codes thereby insulating them-selves from generic competition and rendering Section viii a dead letter.
The evisceration of Section viii is exacerbated by the fact that, as Judge Clevenger points out in his concurring opinion in the panel decision, the majority decision likely leaves generic manufacturers such as Caraco with no other remedy. … The FDA declined to grant Caraco’s Section viii carve-out because the broad use code for the ’358 patent now appears to cover Caraco’s proposed carve-out label. Caraco also cannot disprove infringement in the infringement lawsuit because the FDA requires it to use Novo’s original label, which includes information regarding the patented combination therapy. Thus, Caraco will apparently have to wait to launch its generic repaglinide product until 2018, the date on which Novo’s ’358 patent on the combination therapy expires—despite the fact that the ’358 patent concededly does not cover the use for which Caraco seeks to market the drug. This is an untenable and absurd result, and contravenes the intent of Congress in adopting the counterclaim provision.
James F. Hurst of Winston & Strawn, Chicago, represented Caraco and Sun Pharmaceutical Industries Ltd.
Josh A. Krevitt of Gibson, Dunn & Crutcher, New York, represented Novo Nordisk.
William A. Rakoczy of Rakoczy Molino Mazzochi Siwik, Chicago, represented amicus curiae Generic Pharmaceutical Association.
Amicus curiae Apotex Inc. of Toronto, Canada, was represented by Shashank Upadhye, vice president and global head of intellectual property.
David A. Balto of the Law Offices of David A. Balto, Washington, D.C., represented amici curiae Consumer Federation of America and National Legislative Association on Prescription Drug Prices.
Shannon M. Bloodworth of Perkins Coie, Washington, D.C., represented amicus curiae Mylan Pharmaceuticals Inc.
Michael D. Shumsky of Kirkland & Ellis, Washington, D.C., represented amicus curiae Teva Pharmaceuticals USA Inc.
Read the July 29 order
denying Caraco‘s en banc petition.
Eli Lilly Patent Claiming Gemcitabine Cancer Treatment Is Ruled Invalid
July 28, 2010
The U.S. Court of Appeals for the Federal Circuit ruled July 28 that an Eli Lilly patent claiming gemcitabine as a cancer treatment is invalid for obviousness-type double patenting based on an earlier patent that the company was issued for using gemcitabine to treat viral infections (Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co., Fed. Cir., No. 2010-1105, 7/28/10).
District Court Finds ‘826 Patent Invalid Based on ‘614 Patent.
Eli Lilly and Co. markets the drug Gemzar® for the treatment of various forms of cancer. The active ingredient in Gemzar® is gemcitabine. Lilly’s patent (5,464,826) issued on Nov. 7, 1995 claims a method of using gemcitabine for treating cancer, while its earlier patent (4,808,614) claims a method of using gemcitabine for treating viral infections.
The ’826 patent, however, claims a method of using gemcitabine for treating cancer.
Sun Pharmaceutical Industries Ltd. filed an Abbreviated New Drug Application with the Food and Drug Administration for marketing approval on a generic version of Gemzar® and certified that both the ’614 patent and the ’826 patent were invalid or not infringed.
Sun filed this declaratory action against Lilly, seeking a judgment that the ’826 patent is invalid and not infringed.
The district court concluded that, given that Claim 12 of the ’614 patent discloses gemcitabine’s anticancer use, Claims 2, 6, and 7 of the later ’826 patent, which claim a method of using gemcitabine for cancer treatment, are not patentably distinct as a matter of law.
Double Patenting Decision Upheld.
The Federal Circuit affirmed the district court’s ruling, agreeing with its application of Geneva Pharmaceuticals Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373 (Fed. Cir. 2003), and Pfizer Inc. v. Teva Pharmaceuticals USA Inc., 518 F.3d 1353 (Fed. Cir. 2008).
Finding that those decisions “control this case,” Judge Sharon Prost noted that Geneva and Pfizer both found claims of a later patent invalid for obviousness-type double patenting where an earlier patent claimed a compound, disclosing its utility in the specification, and a later patent claimed a method of using the compound for a use described in the specification of the earlier patent. Quoting language from both cases, she observed that a “claim to a method of using a composition is not patentably distinct from an earlier claim to the identical composition in a patent disclosing the identical use.”
In its analysis, the appellate court turned away Lilly’s argument that, in Geneva and Pfizer, the specification of the earlier patent disclosed a single use for the claimed compound, which was an essential part of the patented invention and thus necessary to patentability. To Lilly, the double patenting analysis of those cases does not apply to the later ’826 patent claims reciting a method of using gemcitabine for cancer treatment because, though the specification of the earlier ’614 patent disclosed gemcitabine’s use in treating both viral infections and cancer, the antiviral use provided the essential utility necessary to the patentability of the ’614 patent.
However, as a factual matter, the court disputed the suggestion that Pfizer involved a single disclosed utility that was alone essential to the patentability of the claimed compound. Further, Prost stressed that “the analysis in the Pfizer decision shows that obviousness-type double patenting encompasses any use for a compound that is disclosed in the specification of an earlier patent claiming the compound and is later claimed as a method of using that compound.”
Pfizernever implies that its reasoning depends in any way on the number of uses disclosed in the specification of the earlier patent. … Instead, its broad analysis reflects that the court considered the multiple uses for the compound that were discussed in the specification of the earlier patent. Indeed, the Pfizer decision ultimately invalidated claims in the later patent that were separately directed to these multiple uses, including inflammation, inflammation-associated disorders, and the specific inflammation-associated disorders of arthritis, pain, and fever. …
Thus, the holding of Geneva and Pfizer, that a “claim to a method of using a composition is not patentably distinct from an earlier claim to the identical composition in a patent disclosing the identical use,” extends to any and all such uses disclosed in the specification of the earlier patent.
Further, Prost rebuffed Lilly’s argument that the district court erred in relying on the specification of the issued ’614 patent, rather than the specification of an earlier application, to determine the relevant disclosed uses of the compound gemcitabine for its obviousness-type double patenting analysis. “Both Geneva and Pfizer make clear that, where a patent features a claim directed to a compound, a court must consider the specification because the disclosed uses of the compound affect the scope of the claim for obviousness-type double patenting purposes,” she said. “In other words, the double patenting doctrine is concerned with the issued patent and the invention disclosed in that issued patent, not earlier drafts of the patent disclosure and claims.”
The opinion was joined by Judge Arthur J. Gajarsa and William C. Bryson.
Sun Pharmaceutical was represented by James F. Hurst of Winston & Strawn, Chicago. Lilly was represented by Charles E. Lipsey of Finnegan, Henderson, Farabow, Garrett & Dunner, Reston, Va
Read the Sun Pharmaceutical Industries Ltd. v. Eli Lilly and Co. opinion