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  • Intervet Inc. v. Merial Ltd. (Fed. Cir. 2010)

    Claim Construction of DNA-reciting Claims

    By Kevin E. Noonan —

    The Federal Circuit considered claims to isolated DNA sequences encoding portions of the genome of a porcine circovirus in Intervet Inc. v. Merial Ltd. last week, remanding the case to the District Court based on disagreements with the lower court's construction of three claim terms.  The Federal Circuit also took the occasion to opine on the extent of subject matter surrendered by amendment of these claims during prosecution.  The greatest interest in the opinion has arisen from the dissent, by Judge Dyk, who sua sponte raised the issue of patent-eligibility for isolated DNA molecules.  Although his concern with the decision in AMP v. USPTO seemingly turns the jurisprudential pyramid on its head, discussion of the dissent, and its departures from both factual and legal realities will await a later post.

    Intervet The case arose as a declaratory judgment action, with Intervet asking the District Court to declare that its porcine vaccines did not infringe the claims of Merial's U.S. Patent No. 6,368,601.  Merial's claims were related to particular strains of porcine circovirus that cause postweaning multisystemic wasting syndrome (PMWS), a disease of livestock pigs.  While viruses of this type were known in the art (termed "Type I" or "PVS-1" strains in the opinion), none of them were pathogenic.  Patentees discovered novel strains of these viruses that were associated with PMWS (termed "Type II" or "PVS-2" in the opinion), and disclosed five separate strains.  Samples of all five strains were deposited, and the complete nucleotide sequence of four of them included in the specification.  These four strains showed 96% nucleotide sequence "homology" (although as used by the Court this term is equivalent to "sequence identity"), compared with Type 1 strains, to which the Type II strains showed 76% nucleotide sequence identity.  The specification also identified thirteen open reading frames (ORFs), nine of which were specific for Type II viruses and four in common between Type I and Type II viruses.

    Two groups of claims were at issue in the litigation:

    9.  A vector comprising an isolated DNA molecule comprising a sequence selected from the group consisting of ORFs 1 to 13 of porcine circovirus type II.

    32.  An isolated DNA molecule comprising a nucleotide sequence encoding an epitope which is specific to PCV-2 and not specific to PCV-1.

    The District Court construed several claim terms, three of which were considered by the Federal Circuit and are germane it its opinion:

    • "porcine circovirus type II" was construed as consisting of the five nucleotide sequences that the patentee placed on deposit with the USPTO.

    • "ORFs 1-13" were construed as the DNA sequences of the thirteen ORFs of SEQ ID 4 listed in a table under Example 13 of the patent.

    • Claim 32 was construed as a whole to be a construct comprising at least one DNA molecule that is unique to one of the five sequences on deposit with the PTO.

    Based on this claim construction, the District Court granted summary judgment of noninfringement to Intervet.  The Court said it was undisputed that the accused infringing vaccine contained a DNA molecule 99.7% homologous to one of the deposited sequences, and thus, outside the literal scope of the claims, "which required strict identity to one of the five deposited sequences."  Merial appealed.

    Federal Circuit Seal The Federal Circuit reversed the District Court's construction of the first two of these claim terms, in an opinion by Judge Prost and joined by Judge Bryson and Judge Dyk (in part).  The Court independently construed the claim term "porcine circovirus type II," which the District Court had limited to the specific deposited sequences.  The Federal Circuit began its analysis with reference to the patent specification, which "states that the five deposited strains and listed sequences are 'representative of' a 'type of porcine circovirus,' and thus do not constitute the entire scope of the invention" (emphasis in original).  Accordingly, the Court cited Enzo Biochem, Inc. v. Gen-Probe, Inc., 323 F.3d 956, 967 (Fed. Cir. 2002), and In re Smythe, 480 F.2d 1376, 1383 (C.C.P.A. 1973), for the proposition that a claimed genus can be broader than the species disclosed to represent the genus.  (The majority opinion also states in a footnote that it does not reach validity issues not raised by the parties, suggesting that on remand Merial will need to contend with sufficiency of disclosure grounds of invalidity under § 112.)  The opinion cites the specification as not disclosing any "quantitative threshold" to distinguish type I and type II strains, stating that the distinction is based on serological similarities and differences as well as pathogenicity, and that "[t]his conclusion comports with the way that viruses are typically classified in the relevant art."  According to the opinion, "the pathogenicity and homology patterns are the defining properties of the new type of virus.  The claim construction of 'porcine circovirus type II' is therefore properly limited to porcine circoviruses that have these two defining properties."

    In view of the disclosure, and the relatedness of the different strains of type II virus disclosed, the Federal Circuit construed the term "porcine circovirus type II" as "a pathogenic pig virus having a circular genome that is at about 96% or more homologous with the four sequences disclosed in the present specification, and about 76% or less homologous with the [Type I] sequence."  The opinion states that this claim construction is "not inconsistent with the other descriptive language in the specification."

    The Federal Circuit found that the accused infringing vaccines, comprising nucleotide sequences having 99.7% sequence identity, were not entitled to summary judgment of noninfringement in view of its claim construction, and remanded to the District Court for further proceedings based on the panel's interpretation of this claim term.

    The Federal Circuit next construed the term "ORFs 1-13," saying this term was also improperly construed by the District Court.  In the CAFC's opinion "the court erred in confining the scope of the term to the precise limits of the representative ORFs listed in Example 13, and the exact DNA sequence of SEQ ID 4."  Once again, the Court found the claim term to be representative of type II sequences, and thus that the genus was broader than the recited species.  In part this was due to explicit disclosure of variation in the ORF sequences in the specification, although the extent of that variation in the specification was described merely as "slight natural variation" that the skilled worker could expect.  Salient to the Federal Circuit's determination that the District Court had too narrowly construed this claim term was the observation that "[i]ndeed, limiting the construction of the term to the exact ORF sequences of SEQ ID 4 would even exclude from the claimed ORFs two of the four sequenced strains of PCV-2, the ORF variations for which sequences are expressly disclosed following the table in Example 13."  And, the opinion notes, "[w]e have already construed that set of circovirus strains to be broader than just the four sequenced strains, so it would be incongruous to selectively impose the narrower construction here, as the dissent suggests."

    The opinion held that "the term ORFs 1-13 is properly construed as 'lengths of translatable DNA between pairs of start and stop codons, corresponding to the 13 ORFs identified in the patent specification,'" reversed summary judgment, and remanded to the District Court for further proceedings based on the Federal Circuit's interpretation of this claim term.

    The District Court properly construed claim 32 to mean "an isolated DNA molecule that includes, but is not necessarily limited to, a DNA sequence which codes for an immunodominant region of a protein, wherein the sequence is from the genome of a PCV-2 circovirus, and not from the genome of a PCV-1 circovirus," according to the Federal Circuit's opinion.  The District Court found that this claim could read on sequences in common between the two types of PCV, so long as there was at least one nucleic acid that was not in common.

    Merial However, the basis for Merial's challenge to the District Court's decision regarding this claim was in how the lower court applied it.  The District Court determined that the "from" the genome language "excluded sequences that were physically derived from a non-PCV-2 source."  Merial argued that including such a "manufacturing" or process limitation was improper, and the Federal Circuit agreed; in its analysis, the panel focused on the term "specific to," "since it appears that this term is the hook for the requirement that the sequence be unique to and derived from PCV-2."

    Merial argued the term "specific to" was a term of art in the immunological arts, referring to the propensity of an antibody to bind an antigen.  While the Federal Circuit recognized this specialized meaning, "epitope is thus bound by antibodies that are 'specific to' PCV-2" as recited in the claim.  "In light of the patent description and a general understanding of the relevant art," according to the opinion, "the claim would be understood by one of skill in the art to be using the term 'specific to' in a colloquial or non-technical sense."

    The Federal Circuit then construed the relevant language of claim 32 as:

    [A] nucleotide sequence encoding an epitope that is specific to PCV-2 and not specific to PCV-1, as that term is used in claim 32, is a nucleotide sequence that encodes part of a polypeptide sequence of PCV-2, but not part of a polypeptide sequence of PCV-1.  More specifically, it encodes at least one epitope found on the PCV-2 virus, but not found on the PCV-1 virus.

    Insofar as the District Court's construction required the encoded epitope to be unique to PCV-2 among all possible antigens, it is in error, according to the opinion, because "[i]f the term 'specific to PCV-2' meant that the epitope must be found only on PCV-2 and no other antigen, then the subsequent limitation 'and not specific to PCV-1' would be redundant."

    Turning to the doctrine of equivalents, the Federal Circuit found that the District Court had erred in its application of prosecution history estoppel to limit the extent to which Merial was entitled to rely on the doctrine.  "The district court erred . . . in applying controlling Federal Circuit and Supreme Court law to the prosecution history of the '601 patent.  As a result, the scope of the district court's bar on Merial's ability to invoke the doctrine of equivalents was overly broad."

    What raised the estoppel were amendments to claim 9.  As originally draft the claim read:

    9.  A vector comprising an isolated DNA molecule comprising a sequence selected from the group consisting of ORFs 1-13.

    This claim was rejected, on the grounds that while "[t]he ORFs are assumed to be derived from porcine circovirus . . . as written, the claims could encompass ORFs from any organism," specifically the prior art Type I sequences.  Although the inventors submitted argument that these ORFs could not be derived from any other organism, being specifically defined by sequence in the specification, they nevertheless amended claim 9 by adding the limitation that the ORFs were "of porcine circovirus type II," which resulted in allowance of the claim.

    The opinion found no fault with the District Court's determination that this was a narrowing amendment, and that the amendment was substantially related to patentability.  Where the District Court erred, according to the opinion, was in the scope of the resulting estoppel.  The proper extent of this estoppel, according to the Federal Circuit, was that:

    Merial is thus estopped from arguing that ORFs of pathogenic circoviruses found in other organisms are equivalent to ORFs of PCV-2.  It is also estopped from arguing that ORFs of a pathogenic strain of PCV-1 are equivalent to ORFs of PCV-2, despite the strain having strong homology with [Type I virus] and weak homology with the representative strains disclosed in the patent.

    However:

    Merial is not, however, estopped from arguing that a pathogenic porcine viral sequence with over 99% nucleotide homology with one of the five representative strains is equivalent to that strain.  Such a draconian preclusion would be beyond a fair interpretation of what was surrendered.

    The opinion directed that on remand the District Court consider the extent to which Merial could show infringement under the doctrine of equivalents.

    An analysis of the dissent, both on its "merits" and with regard to recent efforts by groups representing the plaintiffs in the AMP v. USPTO case to influence the makeup of the panel that hears the Federal Circuit appeal, will follow in a later post.

    Intervet Inc. v. Merial Ltd. (Fed. Cir. 2010)
    Panel: Circuit Judges Bryson, Dyk, and Prost
    Opinion by Circuit Judge Prost; opinion concurring-in-part and dissenting-in-part by Circuit Judge Dyk

  • FCBA Submits Amicus Brief on Motion for Recusal in AMP v. USPTO

    By Donald Zuhn —

    ACLU Last week, the Federal Circuit Bar Association (FCBA) submitted an amicus curiae brief regarding the motion for recusal filed by Plaintiffs-Appellees in Association for Molecular Pathology v. United States Patent and Trademark.  Plaintiffs-Appellees filed their motion on June 28, seeking to have Chief Judge Rader recuse himself from any involvement in the appeal (see "Appellees Move for Recusal of Chief Judge Rader in AMP v. USPTO Appeal").  Their motion is based on Chief Judge Rader's attendance at two events at which the AMP v. USPTO case was discussed and the Chief Judge's comments at these events (the two events:  a session entitled "Patenting Genes: In Search of Calmer Waters" at the Biotechnology Industry Organization (BIO) International Convention, and a panel entitled "Patent Eligible Subject Matter" at the Fordham University School of Law Eighteenth Annual Conference on International Intellectual Property Law & Policy).  Plaintiffs-Appellees contend that "Chief Judge Rader's statements in this case have created an appearance of partiality that calls into question his ability to engage in impartial legal analysis based on the record and the argument of the parties."

    Federal Circuit Seal The FCBA begins the 14-page brief by stating that "[a]n informed and balanced set of legal rules in the area of judicial recusal are vitally important to the public interest," and, in particular, that "the continued perception of judicial impartiality and the ability of judges to participate in appropriate non-judicial discourse and legal education are both valuable and worthy of vigilant protection."  With these interests in mind, the FCBA offers its brief "solely to direct the Court to relevant sources of law, and thus to aid resolution of this important issue, which is invested with the public interest."

    The brief notes that the recusal motion appears to raise an issue of first impression, namely "[w]hen should a circuit judge be recused based on prior public statements made in the course of active participation in an educational conference?"  For the FCBA, the resolution of this issue requires that § 455(a) of the Judicial Code, which provides that "[a]ny justice, judge, or magistrate judge of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned," and Canon 3A(6), which states that judges generally "should avoid public comment on the merits of a pending or impending action," be interpreted in harmony with Canon 4, which states that "[a] judge may speak, write, lecture, teach, and participate in other activities concerning the law, the legal system, and the administration of justice."  In particular, the FCBA contends that:

    [T]he important goal of ensuring that federal judges continue to decide cases in a manner that is, and appears to be, impartial should be harmonized with the need to foster appropriate judicial involvement in public educational activities.  Accordingly, any overbroad application of Section 455(a) and Canon 3A(6) that would chill judicial participation in extra-judicial educational activities, as encouraged by Canon 4, should be rejected.

    On the subject of the involvement of judges in educational conferences, the brief asserts that "[i]f judicial participation in extra-judicial educational activities is to have real meaning, judges must be permitted to address, appropriately, the relevant and significant issues that are the subject of such educational conferences," adding that "[t]his is true even when (as will usually be the case) those general issues happen to have relevance to one or more pending cases."  The brief considers three types of educational involvement for judges: (1) teaching at law schools, where judges should not be required to "teach in an overly-cautious and reticent manner for fear that their statements will serve as grist for [recusal] motions"; (2) contributing to legal treatises or casebooks, which "necessarily comment on the state of the law"; and (3) participating in continuing legal education programs, which "in many ways are the most effective fora for the healthy exchange of ideas and concerns between judges and others involved in the legal system."  With respect to this last category, the FCBA suggests that "[i]n light of the general prohibition of Canon 3 and in order to avoid any possible claim of apparent partiality, some judges may already shy away from appropriate — and indeed enlightening –interaction with attorneys."

    The FCBA then sets forth several principles that should govern resolution of recusal issues.  First, the brief notes that "[c]ourts have . . . rejected recusal based on a judge's participation at a conference in which information germane to a pending case is discussed, even if the presentation may be described as 'one-sided.'"  With respect to a judge's comments, however, the brief states that while "the law is clear that a judge may normally express his or her opinion on a point of law, regardless of the relevance of that opinion to pending case . . . , the law is also clear that a judge cannot make public statements suggesting that he or she has pre-judged a case or otherwise is biased in favor of a litigant."  The FCBA concludes the brief by proposing that:

    [I]t would be appropriate to adopt the following standard for assessing whether recusal is required based on a judge's allegedly case-related comments at a conference:  If the judge's comments can reasonably be understood as general expressions regarding the law, recusal is not warranted, even if the views expressed are also relevant to a particular pending or impending case.  Correspondingly, recusal should be considered, based on such comments, only if the objectively reasonable interpretation is that those comments constituted the expression of the judge's specific views regarding the proper disposition of a particular identifiable pending or impending case, and reflect bias or predisposition (i.e., an unwillingness to consider the case with an open mind).

  • Therasense, Inc. v. Becton, Dickinson & Co. — Briefing Schedule Update

    By Donald Zuhn —

    Bayer In April, the Court of Appeals for the Federal Circuit decided that the appeal in Therasense, Inc. v. Becton, Dickinson & Co. warranted en banc consideration, and asked the parties to brief ten questions concerning the issue of inequitable conduct (see "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson").  According to the Court's original Order, Defendants-Appellees had until 30 days from the date of service of Plaintiffs-Appellees' brief (which was filed with the Court on July 26, 2010) to file their response.  On June 1, the Federal Circuit issued an Order granting Defendant-Appellee Bayer Healthcare's motion to extend the deadline for all Defendants-Appellees to file their responsive en banc briefs to October 8, 2010.  Pursuant to Rule 29(e) of the Federal Rules of Appellate Procedure, amicus curiae briefs in support of Appellees-Defendants must be filed no later than 7 days after their brief is filed (amicus curiae briefs in support of Plaintiffs-Appellees or in support of neither party were due on August 2, 2010).

    Patent Docs thanks Brian Kramer of Morrison & Foerster LLP for informing us of the revised briefing schedule.

  • BIO Files Amicus Brief in Therasense Case

    By Kevin E. Noonan —

    Biotechnology Industry Organization (BIO) On August 2nd, the Biotechnology Industry Organization (BIO) filed an amicus curiae brief with the Federal Circuit in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of neither party ("BIO . . . has no interest in the ultimate disposition of this litigation") urges the en banc Court to "set aside its prior legal framework on which the inequitable conduct defense presently rests and adopt a more certain framework."

    BIO's proposed "more certain framework" has three requirements for establishing inequitable conduct.  First, there must be either a "misrepresentation or omission of a material fact."  Second, the misrepresentation or omission must occur as the result of "a specific intent to deceive the PTO."  Finally, the PTO must "reasonabl[y] rel[y] on the misrepresentation or omission, to the public's detriment, in issuing an invalid claim."  As in the current framework, all of these elements must be established by clear and convincing evidence.  The en banc Court is not constrained by earlier precedent, either its own or from the CCPA, nor any rules or practices established by the PTO, the brief asserts.  The proposed framework is not inconsistent with binding Supreme Court precedent, according to the brief, because the current standard is based not on that precedent, but on CCPA precedent (specifically, Norton v. Curtiss, 433 F.2d 779 (CCPA 1970)) and PTO Rule 56.

    The brief argues that its proposed "more certain framework" is necessary because no matter how "laudatory" the goal may be of promoting full disclosure during patent prosecution, in practice the inequitable conduct defense has been "damaging to the U.S. patent system."  This is the case because the Court's attempt to "apply the law on inequitable conduct in a fair and uniform manner" has been "without much success."  "Nonuniformity and unpredictability" are the hallmarks of the history of decisions regarding the defense, outcomes due in large part to the "nonuniform foundation from which [the inequitable conduct] doctrine developed," BIO argues:  decisions from the Supreme Court "concerned about patent 'monopolies"; "disparate" district court and CCPA precedent; and "rules designed to aid the PTO in conducting its business."  The result is an "unworkable and outdated framework for deciding inequitable conduct cases."  The brief contends that this situation was exacerbated by the Kingsdown Med. Consultants, Ltd. v. Hollister, Inc. case, because the abuse of discretion standard, coupled with "balancing" evidence of materiality and intent, "made uniformity of [an inequitable conduct determination] nearly impossible."

    The results of this nonuniformity "creates more harm than good" for U.S. patents, according to the brief.  This is illustrated by practices before the PTO, such as "pressure on applicants to make prophylactic submissions of large amounts of information that examiners neither want nor consider material," which "hinders rather than promotes candid interactions between applicants and examiners."  The consequence:  "[v]oluminous information disclosure statements" are submitted, or searches and disclosure of search results are scrupulously avoided.  Examiners, having "10 hours or less to prepare a first Office action (including searching and IDS review) can expect little help from wary applicants" due to concerns about "future allegations of concealment or misrepresentation."  This creates the incentive, BIO contends, for patent prosecution to be focused on legal grounds only, and to limit any discussions of the prior art to examiner interviews "that leave essentially no trace on the prosecution history."  Current application of the inequitable conduct doctrine also inhibits applicants from submitting affidavits from experts or others (such as the inventors) that could be "helpful" to the Office, because such documents are "fraught with litigation risk."

    Litigation statistics also provide ample evidence that the Court's application of the inequitable conduct doctrine has had a "negative impact."  For example, the brief cites studies performed at the University of Houston Law Center that show the frequency of inequitable conduct decisions between 2005-09 (334) is "on par" with decisions on invalidity due to obviousness (364).  This is a particular problem for patents on biopharmaceuticals, where "42% of all post-Kingsdown appeals to the Federal Circuit on the issue of inequitable conduct involved patents on biologics, drugs, medical devices, diagnostics or agricultural biotechnology products" by 2006 (with the trend continuing today:  in an analysis of primarily district court cases, 35% of the allegations of inequitable conduct involved biotechnology, drug, or medical device patents).  This is contrasted with the likelihood of successfully asserting the inequitable conduct defense:  for cases decided between 2007-09 the brief cites statistics that inequitable conduct was found only about 15% of the time.  The brief articulates the reason why defendants assert the defense so frequently when it prevails so rarely:  when found, "inequitable conduct is more likely to influence the ultimate disposition of the litigation because of it deep impact on the patent-in-suit and the patentee's business, and a less-than-encouraging prospect of appellate review under a deferential clear error/abuse of discretion standard."  The brief supplies a cogent example from the Purdue Pharma L.P. v. Endo Pharms. Inc. case (410 F.3d 690 (Fed. Cir 2005)), where the Court's reversal of its own earlier inequitable conduct holding "came too late to avoid irreparable harm to all those involved" (including $114 million in infringing sales and follow-on litigation over "allegedly fraudulently procured patents and allegedly sham litigation for their enforcement" for the patentee, as well as "serious business uncertainty and the possibility of substantial damages liability" for the infringers).  "[M]ost significantly," the brief states, "vacatur [of the Court's inequitable conduct determination] came too late to avoid layoff of half the patentee's R&D workforce," putting not only a human face on the consequences of the Court's motley jurisprudence in this area but (in these times) their negative economic consequences.

    Patents protecting biotechnological products are "particularly attractive" targets for inequitable conduct charges, BIO asserts.  They are procured "against a backdrop of fast-moving science and competing business needs that make it virtually impossible" to "'keep an eye' on all potentially relevant information" that may be "circulating into and out of a company."  This information includes the professional activities the company's scientists, who "present their findings," "write scientific publications," and "exchange information" with colleagues outside the company without consulting their patent attorneys.  In addition, in the practice of a company's research activities "[l]arge numbers of [scientific and other] references are collected by research departments and become 'known' to [company] scientists," who don't have the responsibility to consider the company's pending patent applications and the relevance thereto of such information.  Personnel outside the scientific and patenting sections of a company can also obtain information that may be considered, in hindsight, to be relevant to patent prosecution, such as regulatory affairs employees or individuals involved in business development or investor relations.  This creates a situation where persons deemed by the patent law to fall under the duty of disclosure may become aware of such information (even if it merely "flicker[s] across the computer screen of a patent practitioner").  Added to this are:

    [T]he selection of prior art for submission in light of shifting legal standards; the inclusion of experimental data to support enablement and best mode; the parsing of foreign office actions for references and examiner commentary; the coordination of opposition proceedings abroad; the disclosure of professional relationships with scientific experts; [and] communications to U.S. and foreign examiners in related applications.

    (A litany clearly culled from various recent Federal Circuit decisions supporting the inequitable conduct defense.)  From all this, the brief maintains that "it will almost certainly be possible to find statements than an effective advocate can portray as inconsistent with representations made to the PTO, or uncited prior art that can be recast as material to examination."  And, the brief reminds the en banc Court, all these activities have occurred "in the remote past" in view of the timelines for product development, patent prosecution, and litigation in the biotechnology industry.  The potential for inequitable conduct allegations is particularly significant for down-stream licensees, who may be able to perform sufficient due diligence to "develop a reasonable level of confidence" about the validity of the patents they are licensing but cannot have "the same level of confidence that their patents . . . are also enforceable."  Since licensing is an important component of investment and technology transfer (inter alia, from universities) in biotechnology, the current manner by which the Court applies the inequitable conduct doctrine produces "business uncertainty" than is antithetical to conditions where the biotechnology industry can "flourish."

    The brief also cites the recent approval of a biosimilars pathway for biologic drugs as creating "systematic litigation pressure" on biotechnology patents and a "strong likelihood" of litigation on those patents.  The "high commercial stakes" for both innovators and follow-on biologic producers "ensure that [patents] will be challenged by any means possible."  This reality can result in "innovations protected by such patents" to be left "idle" as the result of the uncertainty created by the current inequitable conduct regime.  "Nothing in the doctrine's historical roots compels such an outcome," the brief asserts.

    Turning from these policy reasons for changing the current test for inequitable conduct, the brief expands on its own proposed standard.  The brief first distinguishes its proposed standard from common law fraud, a body of law from which BIO admits it has "borrow[ed]" but from which it is also distinct.  For one thing, common law fraud is a legal tort, whereas here inequitable conduct is a defense plead in equity.  "Even less clear" is the doctrine of "unclean hands" used, inter alia, but the Supreme Court as the basis of the inequitable conduct doctrine in the canonical modern trilogy of cases: Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); and Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945).  While the Supreme Court provided "no clear guidance" in these cases as to how the inequitable conduct doctrine should be applied, this very failure "leaves courts with a wide range of discretion" in applying the doctrine, a discretion supported by language from these cases themselves, according to the brief.  Indeed, the brief argues that both common law fraud and unclean hands "have very little to do with this Court's present inequitable conduct law," something BIO believes should preclude their use "to police prosecution misconduct," if only because of "their lack of clarity and applicability."

    The hallmark of Supreme Court decisions on inequitable conduct, as well as BIO's proposed "more certain framework," is the public interest specifically "where unenforceability may be justified to remedy public harm."  This requires a balance:  striking down patents procured by inequitable conduct that harms the public interest, and avoiding striking down valid patents "because it causes more public harm than good."  The public is "entitled to rely on . . . the presumptive validity of patents," says the brief, and "[b]ad-faith applicants who deceive the PTO into issuing invalid claims indeed cause public harm."  Those harms include "wrongful commercial decision-making" that result in "inefficiencies and misallocations of resources."  In view of these harms, patent unenforceability may be the appropriate remedy, BIO contends.  But the "public interest" is a factor that "works both ways," the brief goes on to say, and it is not the case that the public interest "is advanced if valid patents are held unenforceable" (emphasis in the original).  This argument is the converse of the one made regarding invalid patents:  the commercial and investment utility of start-up biotechnology companies based on valid patents, and the reliance (and ability to rely) on such patents to garner investment.  There are issues of competition for scare resources, such as clinical data, scientific expertise, and regulatory agency attention that depend, in part, on whether a promising product has adequate patent protection.  Even for competitors, uncertainty about patent enforceability affects decisions on whether to market a competing product, to develop a "design-around," or to "redirect their business into a different market altogether."  "[E]very such decision is the right one to make if the patent is valid," according to the brief, but "[t]o affirm the validity of such patents in litigation — and then hold them unenforceable — undoes years of correct commercial decisionmaking and sends a message that businesses [patentees, their investors, their licensees and their competitors alike] cannot rely on patents.  This outcome does not 'promote the progress of the useful arts,' and causes more public harm than good," the brief concludes.  This argument supports BIO's position that, as one of the requirements for unenforceability, "the applicant must have caused the PTO to issue at least one invalid claim" in order to be guilty of inequitable conduct.

    BIO's brief thus proposes a "but for" standard of materiality, cast in the terms of the present test under Kingsdown Medical.  The brief argues that a host of other factors that have been used recently to establish materiality, including "attorney argument, . . . past relationships with declarants, or noncompliance with small entity fee requirement," should not be material because they do not affect claim validity.  The brief also argues that whether a reference is material should be determined at the time of trial, to avoid (at least) "the need for certain discovery about what would have happened . . . in the distant past."  Rather, BIO argues that the Court should consider whether "an individual having a duty of disclosure engaged in misconduct that caused the PTO, acting reasonably, to issue at least one invalid claim."  The burden would thus be on an infringer to establish materiality, perhaps even "permit[ting] the parties to forego [discovery on intent] until materiality is established."  And by focusing the initial inquiry on materiality under a "but for" standard, whether the Office (and the public) materially relied on the "misrepresentation or omission" would take precedence, in accord with the idea that the public interest is damaged (and thus is a sufficient reason for a sanction) "where the applicant's misconduct caused the PTO to issue an invalid claim."  The brief argued that this "but for" standard would not be inconsistent with Supreme Court precedent outside the "unclean hands" context, such as U.S. v. Am. Bell Tel. Co., 128 U.S. 315 (1888) (inventorship) and Walker Process Equip. v. Food Mach. & Chem. Corp. (antitrust), stating that "[n]othing in these and other Supreme Court cases demands that this Court continue to apply a broad and inclusive materiality standard" (emphasis in original).  Such a result would be consistent with Kingsdown Medical, however; as the brief argues, former Chief Judge Markey noted in that case that the alleged misconduct "did not result in the patenting of anything anticipated or rendered obvious by anything in the prior art and thus took nothing from the public domain," i.e., caused no public injury.  863 F.2d at 873.

    Turning to the intent element, the brief cites Kingsdown Medical for the requirement that both materiality and intent "must be independently proven and that gross negligence is not sufficient to establish intent" (emphasis in original).  However, the brief notes, the Court has strayed from these principles in recent cases, particularly citing Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008) with regard to the effects of evidence of materiality on intent:

    [A]n inference of intent to deceive is appropriate when:  (1) highly material information is withheld; (2) the applicant knew of the information and knew or should have known of the materiality; (3) and the applicant fails to provide a credible explanation for withholding the information.

    BIO's brief proposes that the current test be "set aside" and substituted with a requirement for "specific" intent:  "the evidence would have to show that the individual charged with inequitable conduct not only intended to make the representation or to withhold material information but that he or she intended to deceive the PTO" — that is, "actual knowledge of the falsehood would be required."  This standard does not preclude intent from being inferred (or said another way, it does not require a "smoking gun" of direct evidence of intent to deceive), but it would not permit intent to be inferred merely on a finding of a "high degree" of materiality or gross negligence.  "Deception is of a different character and requires evidence of culpability, not ignorance," the brief maintains.  "More should be required" than simply gross negligence under a "should have known" standard, and gross negligence or even incompetence should not be mistaken for a specific intent to deceive using BIO's proposed standard.

    The brief is much less agreeable to the "balancing" inquiry and the abuse of discretion standard under which it is reviewed, calling for the en banc Court to "eliminate" this part of the current inequitable conduct calculus.  The use of a "sliding scale" where "a high level of materiality can offset a low level of intent, or vice versa, has further muddled the present inequitable conduct analysis and contributed to the high costs" for both patentees and accused infringers, as well as inviting the parties "to place significant weight on the materiality prong . . . in effect ignoring the need for evidence of intent."  Balancing, the brief notes, is not mandated by any Supreme Court precedent, and BIO's standard would be straightforward to implement merely by finding "but for" materiality of a withheld reference and specific intent, each independently established by clear and convincing evidence.  The brief characterizes its approach as using "an objective patentability defect which establishes culpability if caused deliberately and in bad faith," a "simpler, more effective inquiry."

    None of these changes need affect how the PTO conducts examination and other proceedings, the brief argues.  The Office has the authority "to adopt and enforce a materiality standard that best meets its administrative needs."  This could include a "more inclusive standard" for materiality than BIO advocates should be used by the courts, justified because the roles of the Office and the judiciary are different.  The Office must promulgate rules and practices that "advance its policy goals of timely, efficient and quality examination," which may include "incentivizing the submission of the most relevant information patent applicants regard as material."  The courts, on the other hand, act to "balance the interests of private litigants and protect the 'paramount' interest of the public," and thus how courts assess inequitable conduct should not "intru[de] into the operation of the agency," for example by providing incentives to over-disclose references while under-disclosing the relevance thereof.  "Much confusion in this area has arisen from an assumption that the administrative and judicial materiality standards somehow have to be the same," the brief asserts.  "They do not," and "[p]roblems only arise when conduct that is lawful under the agency's regulations is later found unlawful in private actions," citing Digital Control v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006).  The Court should recognize these differences and "adopt a standard [BIO's] where the public interest, not the PTO's administrative convenience, is paramount."

    In its Statement of Interest, BIO asserts that represents "over 1,150 corporate, academic and non-profit members," the majority of which "are small and mid-size businesses that have yet to bring a product to market."  These businesses, working "in an environment of rapidly-evolving science, high rates of publication, and vibrant scientific and public discourse . . . face difficult choices about which information to cite to the PTO," and thus "the risk of misstatements and omissions is significant."  Patents are frequently a biotechnology company's "most valuable business assets," and are placed at risk by charges of inequitable conduct driven by hindsight, something that "is particularly evident in the biopharmaceutical area."  These circumstances, and the particular risk BIO's member companies face with regard to their patents because of the uncertainty created by the inequitable conduct defense as it is now applied by the courts, are the basis for BIO's interest in the questions presented by the en banc Court, despite BIO's lack of interest in the specific outcome of this case between the parties.

  • Court Report

    By Sherri Oslick —

    Gavel About Court Report:  Each week we will report briefly on recently filed biotech and pharma cases.

    Lupin Atlantis Holdings S.A. v. Ranbaxy Laboratories Ltd. et al.
    2:10-cv-03897; filed August 4, 2010 in the Eastern District of Pennsylvania

    • Plaintiff:  Lupin Atlantis Holdings S.A.
    • Defendants:  Ranbaxy Laboratories Ltd.; Ranbaxy Pharmaceuticals Inc.; Ranbaxy, Inc.; Ethypharm S.A.

    Infringement of U.S. Patent No. 7,101,574 ("Pharmaceutical Composition Containing Fenofibrate and the Preparation Method," issued September 5, 2006) following a Paragraph IV certification as part of Ranbaxy's filing of an ANDA to manufacture a generic version of Lupin's Antara® (fenofibrate, used to treat hypercholesterolemia and hypertriglyceridemia).  View the complaint here.


    Illumina Inc. et al. v. Complete Genomics Inc.
    1:10-cv-00649; filed August 3, 2010 in the District Court of Delaware

    • Plaintiffs:  Illumina Inc.; Solexa Inc.
    • Defendant:  Complete Genomics Inc.

    Infringement of U.S. Patent Nos. 6,306,597 ("DNA Sequencing by Parallel Oligonucleotide Extensions," issued October 23, 2001), 7,232,656 ("Arrayed Biomolecules and Their Use in Sequencing," issued June 19, 2007), and 7,598,035 ("Method and Compositions for Ordering Restriction Fragments," issued October 6, 2009) based on defendant's manufacture and sale of its Complete Genomics Analysis Platform products and services.  View the complaint here.


    OptiGen, LLC v. Animal Genetics, Inc.
    5:10-cv-00940; filed August 3, 2010 in the Northern District of New York

    Infringement of U.S. Patent Nos. 5,804,388 ("Chromosome 9 and Progressive Rod-Cone Degeneration Disease Genetic Markers and Assays," issued September 8, 1998) and 7,312,037 ("Identification of the Gene and Mutation Responsible for Progressive Rod-Cone Degeneration in Dog and a Method for Testing Same," issued December 25, 2007), both licensed to OptiGen, based on defendant's making, sale, offering for sale, and/or use of testing methods for PRCD.  View the complaint here.


    Daiichi Sankyo Inc. et al. v. Lupin Ltd. et al.
    1:10-cv-00644; filed July 30, 2010 in the District Court of Delaware

    • Plaintiffs:  Daiichi Sankyo Inc.; Genzyme Corp.
    • Defendants:  Lupin Ltd.; Lupin Pharmaceuticals Inc.

    Infringement of U.S. Patent Nos. 5,607,669 ("Amine Polymer Sequestrant and Method of Cholesterol Depletion," issued March 4, 1997) and 5,693,675 ("Alkylated Amine Polymers," issued December 2, 1997) following a Paragraph IV certification as part of Lupin's filing of an ANDA to manufacture a generic version of plaintiffs' Welchol® (colesevelam hydrochloride, used to treat primary hyperlipidemia and type 2 diabetes mellitus).  View the complaint here.


    Pfizer Inc., et al. v. Teva Pharmaceuticals USA Inc.
    1:10-cv-05794; filed July 30, 2010 in the Southern District of New York

    • Plaintiffs:  Pfizer Inc.; Pfizer Ireland Pharmaceuticals
    • Defendants:  Teva Pharmaceuticals USA Inc.

    Infringement of U.S. Patent No. 6,110,940 ("Salts of an Anti-Migraine Indole Derivative," issued August 29, 2000) following a Paragraph IV certification as part of Teva's filing of an ANDA to manufacture a generic version of Pfizer's Relpax® (eletriptan hydrobromide, used for the acute treatment of migraine with our without aura).  View the complaint here.


    KV Pharmaceutical Co. et al. v. Perrigo Israel Pharmaceuticals Ltd. et al.
    1:10-cv-00641; filed July 29, 2010 in the District Court of Delaware

    • Plaintiffs:  KV Pharmaceutical Co.; FP1096 Inc.
    • Defendants:  Perrigo Israel Pharmaceuticals Ltd.; Perrigo Co.; Femmepharma Holding Co. Inc.

    Infringement of U.S. Patent No. 5,993,856 ("Pharmaceutical Preparations and Methods for Their Administration," issued November 30, 1999) following a Paragraph IV certification as part of Perrigo's filing of an ANDA to manufacture a generic version of KV's Gynazole-1® (butoconzaole nitrate, used to treat vaginal yeast infections).  View the complaint here.

  • Conference & CLE Calendar

    Calendar

    August 5-10, 2010 – 2010 ABA Annual Meeting (American Bar Association) – San Francisco, CA

    August 11, 2010 – "Bilski: Implications of the Supreme Court's Long-Awaited Ruling:  Strategies for Prosecuting or Challenging Patent Process Claims Going Forward" (Strafford) – 1:00 – 2:30 PM (EDT)

    August 16-17, 2010 – Advanced Patent Prosecution Workshop 2010: Claim Drafting & Amendment Writing (Practising Law Institute) – San Francisco, CA

    August 17, 2010 – "Bilksi: The Impact of the Final Decision on University TTOs" (Technology Transfer Tactics) – 1:00 – 2:30 PM (EDT)

    August 18-19, 2010 (Postponed to January 26-27, 2011) – The Life Sciences Lawyer's Guide to Patent Term Adjustment and Patent Term Extensions*** (American Conference Institute) – New York, NY

    August 25-26, 2010 – FDA Boot Camp*** (American Conference Institute) – San Francisco, CA

    August 26, 2010 – "The Future of Patenting in Biomedicine" (Technology Transfer Tactics) – 1:00 – 2:30 PM (EDT)

    September 1-2, 2010 – 7th Annual Pharmaceutical Law Summer School (IBC Legal) – London, UK

    September 7-9, 2010 – BioPatent Design (Pharma IQ) – Munich, Germany

    September 12-14, 2010 – 2010 Annual Meeting (Intellectual Property Owners Association) – Atlanta, GA

    September 15, 2010 – Prior Art & Obviousness 2010: Current Trends in Sections 102 & 103 (Practising Law Institute) – San Francisco, CA

    September 16, 2010 – Developments in Pharmaceutical and Biotech Patent Law 2010 (Practising Law Institute) – New York, NY (Groupcasts to be held in Philadelphia, PA; Pittsburgh, PA; Mechanicsburg, PA; New Brunswick, NJ; and Boston, MA)

    September 20-22, 2010 – 2nd Annual Business of Biosimilars (Institute for International Research) – Boston, MA

    September 22-23, 2010 – Biosimilars & Biobetters: Aligning Business & Science for Success*** (SMi Conferences) – London, UK

    September 27-28, 2010 – FDA Boot Camp*** (American Conference Institute) – Boston, MA

    October 6-7, 2010 – Maximizing Pharmaceutical Patent Lifecycles*** (American Conference Institute) – New York, NY

    October 18-19, 2010 – 5th Summit on Biosimilars and Follow-on Biologics*** (Center for Business Intelligence) – Washington, DC

    ***Patent Docs is a media partner of this conference or CLE

  • USPTO Acts Quickly to Comply with Court Order

    By Kevin E. Noonan —

    Medicines Company The U.S. Patent and Trademark Office has acted promptly to comply with Judge Claude Hilton's Order earlier this week that the Office accept The Medicines Company (MDCO) Patent Term Extension Request for U.S. Patent No. 5,196,404, by granting the patent an interim patent term extension.  In responding to the Order, Director David Kappos noted that the Office had granted two previous interim extensions to accommodate the litigation schedule, the latest lasting until ten days after the District Court rendered a USPTO Seal - background decision.  Accordingly, the latest extension extends from August 13, 2010 until August 13, 2011.  It can be expected that the Office will use that time to examine MDCO's Request and make its determination, in cooperation with the FDA, regarding the length of extension to which the '404 patent is entitled.

    Of course, this action has no bearing on whether the Office ultimately decides to appeal Judge Hilton's decision in this case.

    For additional information regarding this topic, please see:

    • "The Medicines Company Prevails in Patent Term Extension Dispute," August 4, 2010
    • "House Passes Patent Term Extension Bill," June 27, 2008

  • Pay-For-Delay Provision Added to Senate Appropriations Bill

    By Donald Zuhn —

    Senate Seal Last week, the Senate Appropriations Committee managed to accomplish something that the Senate as a whole could not:  pass an appropriations bill containing a pay-for delay (or reverse payment) provision.  Only one week earlier, the Senate had voted in favor of the House "2010 Supplemental Appropriations Act" (H.R. 4899), but not before stripping the bill of a provision that would have allowed the Federal Trade Commission (FTC) to "initiate a proceeding . . . against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product," wherein the agreement has "anticompetitive effects" (see "Senate Removes Pay-For-Delay Provision from Appropriations Bill").

    While the House added its pay-for-delay provision to what was primarily a war appropriations bill ($37.12 billion of the bill's funding was earmarked for U.S. troops in Iraq and Afghanistan), the Senate Appropriations Committee placed its pay-for-delay provision (entitled "Preserving Access to Affordable Generics") in the "Financial Services and General Government Appropriations Act, 2011" (S.3677).  Following the Committee's passage of S. 3677, the bill was placed on the Senate Legislative Calendar and now awaits a vote by the full Senate.

    Kohl, Senator In a press release issued shortly after the Appropriations Committee passed S. 3677, Senator Herb Kohl (D-WI) (at left), who sits on the Committee, noted that "[t]he cost of brand-name drugs rose nearly ten percent last year [and] the cost of generic drugs fell by nearly ten percent."  He contended that "[a]t this time of spiraling health care costs, we cannot turn a blind eye to these anticompetitive backroom deals that deny consumers access to affordable generic drugs."  In 2009, Senator Kohl introduced the "Preserve Access to Affordable Generics Act" (S. 369), which would have made it unlawful:

    [F]or any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which–
    (1) an ANDA filer receives anything of value; and
    (2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time.

    (see "Bill to Prohibit Reverse Payments Introduced in the Senate").

    The pay-for-delay provision in S. 3677 would, like the House amendment to H.R. 4899, allow the FTC to "initiate a proceeding . . . against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, in connection with the sale of a drug product," wherein the agreement has "anticompetitive effects."  Under S. 3677, "an agreement shall be presumed to have anticompetitive effects and be unlawful if– (i) an ANDA filer receives anything of value; and (ii) the ANDA filer agrees to limit or forego research, development, manufacturing, marketing, or sales of the ANDA product for any period of time," unless "the parties to such agreement demonstrate by clear and convincing evidence that the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement."  The pay-for-delay provision in S. 3677 also provides a list of competitive factors to be used in determining whether the parties have met this burden.  Finally, the bill would impose civil penalties "sufficient to deter violations of this section" that could total up to three times the value received by the NDA holder or up to three times the value given to the ANDA filer if no such value had been received by the NDA holder.

    Generic Pharmaceutical Association (GPhA) In a statement released by the Generic Pharmaceutical Association (GPhA), the trade group said that it was "extremely disappointed that [] legislation that could ultimately ban patent settlements [] passed out of the Senate Appropriations Committee," calling the addition of the pay-for-delay provision "a procedural façade with highly negative impact" and the Approproations Committee's passage of the provision "not the way the process should work."

  • The Medicines Company Prevails in Patent Term Extension Dispute

    By Kevin E. Noonan —

    Medicines Company Yesterday, Judge Claude M. Hilton, District Court Judge for the Eastern District of Virginia, handed The Medicines Company (MDCO) a victory in its long-standing dispute with the U.S. Patent and Trademark Office over the timeliness vel non of its Patent Term Extension Request for its patent on the blockbuster drug Angiomax® (bivalirudin).  In his opinion granting summary judgment to MDCO, it was clear that the judge was not happy with the Office's response to his earlier Order mandating reconsideration of its decision that the Request was not timely filed; judicial displeasure, if not pique, seems reasonable in view of the seemingly summary way the Office "complied" with the earlier Order.

    FDA The tale has been often told on the circumstances surrounding MDCO's PTE Request.  Pursuant to 35 U.S.C. § 156, MDCO had 60 days from the date that Angiomax® received regulatory (FDA) marketing approval to file its PTE Request (35 U.S.C. § 156(d)(1)).  The approval letter was sent by FDA to MDCO by facsimile transmission at 6:17 pm on Friday, December 15, 2000.  The FDA subsequently published the approval date for Angiomax® on its website as being December 19, 2000.  MDCO filed its PTE Request on February 14, 2001, a date that is 61 days after December 15, 2000, 58 days after December 18, 2000 (the Monday following the date of the Friday night fax) and 57 days after the approval date FDA posted on its website for Angiomax®.  These calculations were complicated by a later-issued directive by the PTO that, for purposes of calculating the time period for filing a PTE Request, the Office would consider the day FDA mailed its approval letter in the calculation (i.e., the times above are each increased by one day) (In re Patent Term Extension Application for U.S. Patent No. 5,817,338, 2008 WL 5477276 (Comm'r. Pat. Dec. December 16, 2008)).  In any case, the PTO, relying on a certification from FDA that the approval date was Friday, December 15, 2000, refused MDCO's Request, costing the company to lose 4.5 years (about 1773 days) of extension for its U.S. Patent No. 5,196,404 (which nominally expired on March 23, 2010).

    MDCO filed a request for reconsideration of this decision, on the grounds that the FDA faxed its letter "after hours" on a Friday, "and that under FDA's practices, facsimiles submitted to FDA after close of business are considered received by the Agency on the next business day" (emphasis added).  Applying this standard, the approval notification date would have been Monday, December 18th, and MDCO's Request would have been timely filed even under an interpretation including the approval date in the 60-day period.  The PTO transmitted the request for reconsideration to FDA (since the dispute involved FDA procedures), which the FDA rejected without comment or support, maintaining that the approval date was Friday, December 15th.

    USPTO Seal The PTO did not issue a formal denial of MDCO's request, but instead permitted the company to file an amended request for reconsideration and an amended extension application, which were filed on March 13, 2007.  Less than six weeks later, on April 26, 2007, the PTO denied the request, again with no explanation of the inconsistency in the FDA's position on submissions to and notices from the agency.  It was at this time that the Office applied the revised calculation for determining when a PTE Request must be filed, determining in this case that MDCO had filed its Request 2 days late.

    MDCO filed a petition for leave to file a second request for reconsideration on the grounds that it had not had an opportunity to address this new interpretation of the deadline date for filing its PTE Request.  In its papers MDCO argued that there was no requirement in the statute that would preclude the Office from adopting its proposed "next business day" rule, and that such an interpretation would "comport with the statute's text and purpose."  While the Office granted leave for filing the second request for reconsideration (based on the "extraordinary situation" occasioned by its change in how days were counted for calculating the filing deadline), it denied the request substantively.  The PTO's position was that the Office did not have the authority under § 156 to adopt the proposed "next business day" rule, at least because there was no basis to distinguish "during business hours" from "after business hours" in the statute, which recites the date (per the PTO, "span[ning] the course of 24 hours").

    District Court for the Eastern District of Virginia MDCO brought suit in Judge Hilton's Court, and on March 16, 2010 the judge ordered on remand that the Office reconsider its position on the grounds that "§156(d)(1) was a remedial statute and that it should be liberally construed," and that "the PTO was not bound by statute or case law to reject the business day interpretation of the work date in §156(d)(1)."  Three days later, the Office "without any additional hearings" issued another decision again rejecting the "next business day" interpretation of the statute advanced by MDCO.  The Office went further, holding that the timing provisions of the statute were not remedial in nature, and that the Office was bound by Federal Circuit authority to interpret the word "date" in the statute as the calendar day on the FDA approval letter.  In response, MDCO returned to the District Court under the Administrative Procedures Act, 5 U.S.C. §§ 551-706, arguing that the agency's action was arbitrary and capricious.

    The Court began its analysis on the question of what level of deference was owed to the PTO decision, under either Skidmore v. Swift, 323 U.S. 134 (1944), or Chevron U.S.A. Inc. v. National Resource Defense Council, Inc., 467 U.S. 837 (1984), so-called "Chevron deference" being a higher level.  The Court noted that an agency is entitled to Chevron deference generally for its interpretations of law "set forth after notice-and-comment rulemaking or formal adjudication under 5 U.S.C. §§556-557."  Immediately, the Court disqualified the latter grounds for applying Chevron deference to its decision in this case, stating that "[t]he government does not deny that PTE decisions are informal adjudications."  To qualify for Chevron deference regarding the PTE determination, the Court required a "relatively formal administrative procedure," evidence that Congress intended that such decisions be given deferential judicial review, and that the Office itself gives such decisions precedential effect, citing Pesquera Mares Australes Ltda. v. U.S., 266 F.2d 1372 (Fed. Cir. 2001).

    The Court found that the circumstances under which the PTO makes PTE determinations (ex parte review, the level of discretion given to the Director to require additional information from applicants, and the absence of formal hearings or administrative review other than requests for reconsideration) are inconsistent with the kinds of "relatively formal process[es] envisioned in Pesquera."  Moreover, the Court cited Federal Circuit precedent that PTO proceedings are not governed by 5 U.S.C. §§ 556-557, citing Brand v. Miller, 487 F.3d 862 (Fed. Cir. 2007).  The Court rejected the PTO's arguments to the contrary; indeed, the Court distinguished the government's citation of Glaxo Operations UK Ld. v. Quigg, 894 F.2d 392 (Fed. Cir. 1990), for the proposition that PTE determinations should be given deference by noting that the Court deferred to the agency's "scientific and technical expertise," but that the Court had "expressly rejected the PTO's claim for deference to its statutory interpretations of PTE proceedings" (expressly, that "we will give . . . little or no deference to the [PTO's] surmise of Congress' intent in framing its definition").  Nor does the Court find that the Office is entitled to Chevron deference under 35 U.S.C. § 2(b)(2), which is limited to procedural rulemaking not statutory interpretation.  The Court also rejected the government's argument that the Office's decision should be given Chevron deference due to consistent application of the calendar day interpretation of the statutory language, in the face of admissions by the Office that it had "never previously considered the choice between calendar day and business day interpretations of §156(d)(1)" (saying that "it cannot claim to give precedential effect to decisions that do not exist"), particularly since the Office is entitled to change its position at any time with no more than a "reasonable explanation" of why it has done so.

    The Court then arrived at the heart of the matter:

    It is well established that "[d]eviation from [a] court's remand order in . . . subsequent administrative proceedings is itself legal error, subject to reversal on further judicial review."  Sullivan v. Hudson, 490 U.S. 877, 886 (1989).  If an agency is dissatisfied with any part of a district court's order, the remedy is to appeal the case and not, under guise of a hearing, to relitigate a question already finally decided by the district court.  Hooper v. Heckler, 752 F.2d 83, 88 (4th Cir. 1985).  When a case returns to a court for a second time after the court has remanded it with explicit instructions to the agency, the court examines with care the order of the agency to ensure that its earlier decision has been followed.  Guillen-Garcia v. INS, 60 F.3d 340, 344 (7th Cir. 1995).

    It is abundantly clear that the Court believed the Office did not comply with this legal standard.  The opinion reviewed its instructions to the Office from its earlier Order, that the statute, being remedial in nature should be given "liberal construction," something that the Office had done in the Synchromed case (In re Patent No. 4,146,029 (Comm'r. Pat. July 12, 1988)).  The Office declined to do so in this case, based on its interpretation that while § 156 may be remedial generally, "the specific timing provision at issue, §156(d)(1), is not."  This decision was in error, according to the Court's opinion, inter alia because "[a]ll of the provisions of a remedial statute . . . should be construed liberally."  "[E]verything is to be done in advancement of the remedy that can be done consistently with any fair construction that can be put upon [the statute]," according to the opinion, citing as an example White v. Cotzhausen, 129 U.S. 329 (1889).  The Court rejected the government's contention that because "Congress did not provide a mechanism for USPTO to prevent the loss of an applicant's patent when the applicant missed a deadline" it was compelled to reject the Court's earlier directive that § 156(d)(1) should be construed liberally.  And the Court further found that "[t]he PTO's failure to acknowledge its prior relevant practices is an independent violation of the Administrative Procedures Act," citing the Synchromed case.  Finally, the Court rejected the government's position that § 156(d)(1) and another part of the statute, § 156(g)(1))B)(ii), must be construed identically, since "[t]he relevant statutory language is different and the provisions serve distinct purposes" (§ 156(d)(1) defines the time for filing the PTE Request, while § 156(g)(1))B)(ii) defines the dates for calculating the time FDA took to review and approve the drug).  The Court discerned a clear distinction between the meaning and purpose of the two portions of the statute, and noted that "the logic that led the FDA to adopt for itself a business day construction [with regard to §156(g)(1))B)(ii)] . . . applies with equal force to the construction of §156(d)(1)."

    The Court further took the Office to task for ignoring its earlier instructions:

    Even if the PTO were writing on a blank slate without the benefits of the Court's prior opinion, its decision still could not stand.  In numerous respects, the decision violates the APA and advances an interpretation of §156(d)(1) that is unreasonable even under the most deferential standard of review, let alone the more exacting review that applied to the appeal of a remanded order [citing Chamber of Commerce v. SEC, 443 F.3d 890 (D.C. Cir. 2006)].

    The Court then addressed the practical consequences of the PTO's asserted interpretation of the rule, to illustrate its unreasonableness.  The Court says that under the Office's interpretation, "the date stamped on the FDA approval letter starts the 60-day period for filing [a PTE Request], even if the FDA never sends the letter, sends it to the wrong address, delays in sending it or sends it by means that would take multiple days to reach the applicant."  (The Court also noted that the Federal Rules of Civil Procedure automatically add three days for a party to act within a specified time after service if service is accomplished by any means other than hand delivery.)  Since the PTO's decision failed to address this issue, "[t]hat failure, by itself, renders the PTO's decision arbitrary and capricious."  The issue is not whether such failures are likely or if there are provisions in place to prevent them, but that "over time mistakes are inevitable . . . .  An interpretation that imposes such drastic consequences when the government errs could not be what Congress intended."

    The Court left little to chance in assuring that the Office will understand its Order this time:

    The Court finds the proper interpretation of §156(d)(1) is a business day construction of the phrase "beginning on the date."  Of the parties' competing interpretations the business day construction is consistent with the statute's text, structure and purpose.

    "[T]he courts are the final authorities on issues of statutory construction" and "must reject administrative constructions of [a] statute . . . that are inconsistent with the statutory mandate or frustrate the policy that Congress sought to implement" [citing Ethicon, Inc. v. Quigg, 849 F.2d 1442 (Fed. Cir. 1988)].

    The judge's order was simple:  that the PTO accept MDCO's PTE Request as having been timely filed, and that the Office interpret the meaning of the timing provisions of § 156(d)(1) to include the next business day for notifications received after the close of business.

    It remains to be seen whether the Office will challenge this ruling, and if it does not whether it will expedite review of MDCO's PTE Request (and restore the additional term to this expired patent).

  • Pharma and Software Companies File Joint Amicus Brief in Therasense Case

    By Kevin E. Noonan —

    Sanofi-Aventis_large Last Friday, sanofi-aventis and Microsoft joined in filing an amicus curiae brief with the Federal Circuit in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of appellants and urging the en banc Court to reverse the three-judge panel's affirmance of inequitable conduct against Abbott, was limited to one of the "questions" posed to the parties and amici by the Federal Circuit when granting en banc review:  "[w]hether the specific intent element of the inequitable conduct doctrine is properly derived from the common law" (see "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson").

    Microsoft The brief's short answer is yes, particularly with regard to the specific intent standard.  Amici remind the Federal Circuit that the Supreme Court has spent a decade "[r]econciling patent-law doctrines with legal principles of general applicability," citing Microsoft v. AT&T Corp., 550 U.S. 437 (2007), and eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006); the brief could have cited half a dozen more instances representing the high court's decade-long assault on Federal Circuit jurisprudence.  The brief also cites one of the effects of this drubbing, that the Federal Circuit itself has been influenced in cases such as In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), and Knorr-Bremse v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc).  Here, the brief asserts that the CAFC has the opportunity to conform another area of its jurisprudence to the "same contours" as in other legal contexts.

    Intent generally is not required for patent infringement, a strict liability tort.  It is only in "extraordinary situations," amici argue, that intent becomes an issue:  for infringers when the allegation is for inducing infringement, and for patentees when the allegation is inequitable conduct.  The brief argues that specific intent, defined as "[t]he intent to accomplish the precise act with which one has been charged" (reflecting the origins of the concept in criminal law) is the standard that a court should apply when establishing inequitable conduct.

    Support for this standard is found, amici argue, in the Supreme Court cases establishing the inequitable conduct doctrine: Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945); and Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933).  These cases were defined by "extreme circumstances of 'deliberate,' 'corrupt,' 'sordid,' and 'highly reprehensible' conduct," the brief asserts.  The brief cites language from the cases relating to ''corrupt transaction[s]' that were 'highly reprehensible'" (citing Keystone Driller); "a 'deliberately planned and carefully executed scheme to defraud'' both the Patent Office and the Court of Appeals (citing Hazel-Atlas Glass); and a history that was "'steeped in perjury and undisclosed knowledge of perjury'" (citing Precision Instrument).  All these cases involved "intentional misconduct" (emphasis in original) — actual wrongdoing — and the brief argues that it is this level of culpability that justifies the "exceptional treatment" (i.e., unenforceability) occasioned by an inequitable conduct determination.

    The brief also cites instances where the alleged conduct was not sufficient for the Supreme Court to refuse to enforce the patent, specifically U.S. v. American Bell Telephone Co., 167 U.S. 224, 239-40 (1897).  There, the brief maintains the Court 'derived from land patent cases a high standard for those who seek to challenge a patent for inequitable conduct."  Quoting the Court as stating that:

    The dignity and character of a patent from the United States is such that the holder of it cannot be called upon to prove that everything has been done that is usual in the proceedings had in the land department before its issue, nor can he be called upon to explain every irregularity or even impropriety in the process by which the patent is procured.

    Citing U.S. v. Marshall Mining Co., 129 U.S. 579, 589 (1889).  The brief makes the point that the Court did not cancel Bell's patent based on "extreme delay" in its issuance, on the grounds that the government's case depended on "the existence of a knowledge which no one had; of an intention which is not shown."  The brief also cites Corona Cord Tire Co., v. Dovan Chem. Corp., 276 U.S. 358 (1928), where "false, 'perhaps reckless,' affidavits [were] insufficient to render [a] patent unenforceable."

    The brief proffers the argument that courts apply the common law where Congress has not spoken to the contrary, citing Dura Pharm. Inc. v. Broudo, 544 U.S. 336 (2005), and Neder v. U.S., 527 U.S. (1999).  With regard to specific intent, the common law standard is not "'volition' of 'knowledge' of one's acts."  Rather, what is required is that the "accused wrongdoer must have desired or purposefully sought not just its actions but the wrongful consequences of the actions taken," citing the Restatement (Second) of Torts (1965).  Amici argue that the "intention to cause unlawful consequences" is what "separates specific intent from negligence and recklessness."  Indeed, the brief argues that the Supreme Court has "expressly rejected theories of 'intent' predicated only on negligence or gross negligence," citing Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976).

    The brief then cites multiple instances outside the fraud context where the common law requires specific intent, including conspiracy, secondary liability (such as "aiding and abetting"), and inducing infringement in patent and copyright cases, including Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005); DSU Med. Corp. v. JMS Co., 471 U.S. 1293 (Fed. Cir. 2006) (en banc); and Kyocera Wireless Corp v. ITC, 545 F.3d 1340 (Fed. Cir. 2008).  Returning to common law fraud, the brief again cites multiple cases that stand for the proposition that the Supreme Court "has repeatedly reiterated that '[f]raud means an intent to deceive,'" such as Lord v. Goddard, 54 U.S. (13 How.) 198, 211 (1851), among others.  The lack of immunity under the antitrust law for patents "procured by intentional fraud" under Walker Process Equip. Inc. v. Good Mach. & Chem. Corp., 382 U.S. 172 (1965), is also cited as an example where the common law standard requiring specific intent is applied in the patent law context.  And as the principle appellant's brief argued, specific intent is required for unenforceability in copyright, but not in the absence of an intent to defraud, S.O.S. Inc. v Payday, Inc., 886 F.2d 1081 (9th Cir. 1989).

    The brief concludes from this precedent that inequitable conduct should also require a finding of specific intent.  "There is no reason for patent law to diverge from general law (or the antitrust or copyright laws in particular) on this most important question," according to amici.  The Federal Circuit has already held that negligence, even gross negligence, is not sufficient to satisfy the intent prong for inequitable conduct, Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc), the brief reminds the Court, consistent with a requirement for specific intent for inequitable conduct.

    The brief notes, however, that the Court has "departed" from the (relatively) strict standard enunciated by the en banc court in Kingsdown, particularly citing Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), for its "intent inferred from materiality" holding; the brief not only states that this case was wrongly decided, but calls upon the en banc Court to overrule it, to "clarify that materiality and intent are separate requirements that must each be proved independently."  The brief argues that the "so-called sliding scale applied in some inequitable conduct cases is flawed at each of its steps."  According to the brief, the first step, that highly material information is withheld, "inserts materiality into the test for intent."  The second step, whether the applicant knew of the information and knew or should have known it was material, is "a mere negligence standard."  And the third step, that the applicant fails to provide a credible explanation for withholding the information, requires applicants "to disprove intent based on [this combination of] materiality and negligence."  In addition to wrongly establishing a test wherein "a highly material omission can satisfy both the materiality and intent test — so long as the applicant should have known of the materiality," the brief argues that "[m]ere materiality coupled with negligence cannot be reconciled with the purposefully wrongful conduct required by [either] the Supreme Court's precedent or [the Federal Circuit's] decision in Kingsdown," citing (now) Chief Judge Rader's dissent in Aventis Pharma SA v. Amphastar Pharm. Inc., 525 F.3d 1334 (Fed. Cir. 2008).

    The brief recites the familiar litany of deleterious consequences resulting from the inequitable conduct doctrine as applied by recent Federal Circuit decisions, including the "plague" in litigation, "in no small part due to an unduly permissive view of the intent element taken by some [Federal Circuit] decisions," and the "strong incentives" that the "proliferation of inequitable conduct charges" provide for patent applicants to "inundate the PTO with information in the hopes of forestalling a later inequitable conduct charge."  The brief reminds the Court that "perpetuating the 'plague' of 'inequitable conduct as a litigation strategy" would have consequences that are "particularly severe in the pharmaceutical industry, on which the American public depends for disease-curing, lifesaving innovations," as well as in the computer industry, "which has been a major engine of American economic growth since before the first microprocessor."  "[E]very conceivable policy counsels against allowing an inequitable conduct claim to proceed in any but the most extreme cases of fraud and deception," the brief asserts, reminding the Court that it "should not condone any measure of inequitable conduct that would produce a chilling effect on the 'Progress of . . . useful Arts.'"

    This reining-in of inequitable conduct can be achieved by requiring a showing of specific intent, according to the brief, and the application of this "high standard" is warranted by the "dire consequences" that can result (patent unenforceability).  In addition to achieving desirable policy goals, adopting a specific intent standard would enable the Court "to reconcile this area of patent law with long-standing principles of general applicability," a goal sanctioned by the many recent Supreme Court decisions that have shaped patent law and Federal Circuit jurisprudence in that direction.  In so arguing, these amici further remind the CAFC that inequitable conduct, like obviousness and the doctrine of equivalents, are patent law doctrines ultimately flowing from Supreme Court decisions, and about which the Supreme Court may take a sufficient interest that it may decide to weigh in should the Federal Circuit not come to a decision consistent with the position the amici advocate.

    For additional information regarding this topic, please see:

    • "IPO Files Amicus Brief in Therasense Case," August 2, 2010
    • "Abbott Files Brief in Therasense Case," July 28, 2010
    • "CAFC Sets Date for Oral Argument En Banc in Inequitable Conduct Appeal," June 9, 2010
    • "Therasense, Inc. v. Becton, Dickinson & Co. — Briefing Schedule Update," May 16, 2010
    • "Therasense, Inc. v. Becton, Dickinson & Co. Briefing," May 13, 2010
    • "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson," April 28, 2010