By Kevin E. Noonan —

It has been a staple of introductory civil
procedure exams to include a complicated fact pattern that, at root, leads to a
determination that the lawsuit should be dismissed for failure to state a claim
for which relief can be granted.  The salience of such a fact pattern can be appreciated by the Federal
Circuit's decision in HIF Bio, Inc. v. Yung Shin Pharmaceuticals Industrial Co., where after extensive proceedings in state and federal courts, including
the U.S. Supreme Court, the ultimate determination is that the case should be
dismissed.

The case arose from a discovery by two inventors of
the effects of a chemical, designated YC-1, on a protein complex called HIF-1.  This protein complex stimulates blood
vessel growth in tumors that express it.  The inventors believed that YC-1 could be useful as a cancer treatment
by inhibiting blood vessel growth, which could "kill the tumor by starving
it for oxygen and nutrients."  These inventors assigned their rights, including rights to a provisional
application, to plaintiff HIF Bio, Inc.

According to the facts established in earlier
proceedings, the two inventors discussed their research with another scientist,
Dr. Teng, who provided the YC-1 necessary for the inventors to perform their
experiments.  "As an academic
courtesy," the opinion notes, the inventors provided this scientist with
information about their work, including pre-publication drafts of scientific
papers disclosing their results.  Without the inventors' knowledge, however, Dr. Teng disclosed these
results to defendant Yung Shin Pharmaceuticals, a Taiwanese company, and more
than one year before the inventors filed their provisional application Dr. Teng
filed his own provisional application and later a PCT application, claiming the
use of YC-1 as an anti-angiogenesis agent for use in treating cancer (and
naming Yung Shin's President, Dr. Lee as a co-inventor), assigning his rights
to Yung Shin.

The lawsuit
was first brought in California state court, naming Drs. Teng and Lee, Yung
Shin, and Carlsbad Technology, Inc. (CTI, a California company helping to
commercialize the invention), as well as Yung Shin's patent counsel and another
Taiwanese company Yung Zip Chemical Co.  Upon motion by CTI the case was moved to U.S. District Court for the
Central District of California.  Among the twelve counts alleged in the complaint were a declaratory
judgment for ownership and inventorship of "the invention" disclosed
in Yung Shin's patent applications, a RICO count for conspiracy, and counts for
"slander of title, conversion, actual and constructive fraud,
intentional interference with contractual relations and prospective economic
advantage, negligent interference with contractual relations and prospective
economic advantage, breach of implied contract, unfair competition and
fraudulent business practices, unjust enrichment-constructive trust, and
permanent injunction."

The
District Court dismissed CTI's motions under Fed. R. Civ. P. 12(b)(1) and
12(b)(6) and remanded the case to state court, holding that "the first and
second causes of action claimed 'rights of inventorship and ownership of
inventions [which] are valid state law claims'" and refusing to exercise
supplemental jurisdiction over the state law claims.  CTI appealed to the Federal Circuit, which refused to
recognize jurisdiction based on the panel's interpretation that review was
barred under 28 U.S.C. § 1447(d), a decision overturned by the Supreme Court,
which specifically held that the Federal Circuit had jurisdiction and that § 1447(d)
did not bar appellate review.  The
Court remanded the case to the Federal Circuit for further proceedings, which
this opinion has now resolved.

The
opinion, written by Judge Gajarsa and joined by Chief Judge Michel and Judge
James F. Holderman of the Northern District of Illinois, sitting by
designation, reviewed the District Court's refusal to exercise supplemental
jurisdiction under an abuse-of-discretion standard (i.e., granting the district court substantial deference).  However, the opinion notes that the
discretion not to exercise supplemental jurisdiction does not apply to any
claims "arising under" federal law, citing Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1328
(Fed. Cir. 1998), as well as several precedents from other circuit courts of
appeal.  Moreover, the Federal Circuit
reviewed the question of whether the District Court had jurisdiction without deference, being limited to "only to those
cases in which a well-pleaded complaint establishes either that federal patent
law creates the cause of action or that the plaintiff's right to relief
necessarily depends on the resolution of a substantial question of federal
patent law, in that patent law is a necessary element of the well-pleaded
claims," citing Christianson v. Colt
Indus. Operating Corp., 486 U.S. 800, 808-09 (1988).

Under
these standards, the panel held that the District Court erred in refusing
jurisdiction on the second cause of action, which sought a declaratory judgment
that assignors of plaintiff HIF Bio were "the first and true inventors"
of the invention, defined as the discovery that "YC-1 had the potential to
become the first anti-angiogenic, anti-cancer agent to HIF-1."  The "case-or-controversy"
arose, according to the complaint, from Drs. Teng and Lee filing (and having
published) their PCT application claiming inventorship of the use of YC-1 for
treating cancer.  Not helping the District Court were averments made by plaintiffs that "they are not
contesting patents or patent applications, but are instead seeking declaratory
judgment on the issue of inventorship under state common law."  In determining that the question of
inventorship was a "valid state law claim" the District Court erred,
according to the Federal Circuit.  The panel noted that this question was directly addressed in Univ. of Colo. Found. v. Am. Cyanamid Co.,
196 F.3d 1366, 1372 (Fed. Cir. 1999), where the CAFC held that "the field
of federal patent law preempts any state law that purports to define rights
based on inventorship."  Policy rationales, including varying standards of inventorship between
different states and the potential for different remedies for improper
inventorship, any of which "might frustrate the dual federal objectives of
rewarding inventors and supplying uniform national patent law standards."  The panel's
interpretation was supported by the allegations made in the complaint, which
all depended on inventorship of pending patent applications.  Therefore:

[T]he only possible theory upon
which relief could be granted to the plaintiffs would be one in which
determining the true inventor(s) of competing patent applications is essential.  Because inventorship is a unique question of patent law, the cause of action
arises under § 1338(a).

However,
the panel noted that these claims were for pending applications, thus making
the complaint "tantamount to a request for either a modification of
inventorship on pending patent applications or an interference proceeding,"
citing Larson v. Correct Craft, Inc.,
569 F.3d 1319, 1325 (Fed. Cir. 2009).  However, this relief is not within the Court's purview, according to the
panel; whether an interference is granted is a power invested in the Director
of the Patent and Trademark Office and Undersecretary of Commerce under 35
U.S.C. §§ 116 and 135.  "While
the question of who invented an invention disclosed in pending patent
applications is a question of federal patent law, Congress, through §§116 and
135(a), has limited the avenues by which such inventorship can be contested,"
said the Court.  While admitting
that some district courts have recognized a private cause of action under § 116,
the Court takes this opportunity to "expressly hold" that § 116
of the patent statute does not contain a private cause of action to challenge
inventorship of a pending application (the opportunity for which having
increased dramatically upon publication of pending U.S. patent
applications).  (And of course the Court does recognize the private cause of action provided by 35 U.S.C. § 356 for
issued U.S. patents.)  As a result:

Given their proper import, §§ 116 and
135(a) preclude the district court from granting plaintiffs' requested relief —
a declaration of the "true" inventor of a pending patent application.  Accordingly, while the district court has jurisdiction over the cause of
action, it should have dismissed the claim under Rule 12(b)(6) because no
private right of action exists.  See Litecubes, LLC v. N. Light Prods., Inc.,
523 F.3d 1353, 1361 (Fed. Cir. 2008) ("[If] the complaint fails to allege
a cause of action upon which relief can be granted, this 'failure to state a
proper cause of action calls for a judgment on the merits and not for a
dismissal for want of jurisdiction.'" (quoting Bell v. Hood, 327
U.S. 678, 682 (1946))).

As
for the remaining causes of action, which more readily fall within the ambit of
state law, CTI contended that they all depend on the patent law issue
recognized in count 2 of the complaint, inventorship of the patents in
suit.  The panel notes that while
inventorship is a question that "arises under" federal patent law,
the Court's own precedent has cautioned that "a claim arises under the
patent laws only if the inventorship issue is essential to the resolution of
the claim," citing Bd. of Regents,
Univ. of Tex. Sys., 414 F.3d at 1363 and Thompson v. Microsoft Corp., 471 F.3d 1288, 1291-92 (Fed. Cir.
2006).  Existence of "an
alternative, non-patent theory" for relief "compels the conclusion"
that the question does not arise under the patent laws and thus that the District Court was within the exercise of its sound discretion in refusing
supplemental jurisdiction.  Of the
remaining nine causes of action cited in the complaint for which inventorship was "essential"
was slander of title, according to the panel.  Plaintiffs' burden is to establish that they invented the
subject matter in Defendants' claims first, and that "public statements"
(including publication of Defendants' PCT application) "are false and
caused plaintiffs damage."  The opinion states that this cause of action "is indisputably a
question of federal patent law," since it requires a determination of who
was the correct inventor.  Accordingly, the District Court's decision to remand to state court
rather than exercise supplemental jurisdiction was an abuse of discretion.  However, as above, the panel determines
that the question of who is the correct inventor in a pending application is
not within the proper jurisdiction of the District Court but of the Patent
Office.  Thus, as with the two
frank federal law claims, the District Court "should dismiss [the
complaint] under Rule 12(b)(6) for failure to state a claim for which relief
may be granted."

Nor
were any of the other causes of action recited in the complaint sufficient to "arise
under" the patent laws, "because each cause of action could be
resolved without reliance on the patent laws."  Thus,
the panel decision reversed the decision of the District Court not to exercise
jurisdiction and remanded, with a mandate to dismiss the complaint under Fed.
R. Civ. P. 12(b)(6) for failure to state a claim for which the Court could
grant relief.

HIF
Bio, Inc. v. Yung Shin Pharmaceuticals
Industrial Co. (Fed. Cir. 2010)
Panel:  Chief Judge Michel, Circuit Judge Gajarsa, and Chief District Judge Holderman
Opinion by Circuit Judge Gajarsa

Image of HIF1A protein (above) by Emw, from the Wikipedia Commons under the Creative
Commons
license.

    By Kevin E. Noonan —

In Ortho-McNeil Pharmaceutical, Inc. v. Lupin
Pharmaceuticals, Inc., the Federal Circuit has rendered a decision on the
question of whether separate enantiomers can have "first commercial
marketing or use" status for purposes of patent term extension under 35
U.S.C. § 156.

The Hatch-Waxman regime for patent term extension
(the Drug Price Competition and Patent Term Restoration Act, codified in part
at 35 U.S.C. § 156 et seq.) permits an extension of a patent that claims
a drug that required regulatory approval prior to being put on the market.  One of the limitations on patents
entitled to the extension is that regulatory approval be the "first
commercial marketing or use"of the drug.  It is known that certain drugs exist as racemic mixtures of
enantiomers, molecules that differ structurally by being mirror image arrangements
of the same component atoms, and that these enantiomers can have differ
physical, chemical, and biological properties.  Differences in the biological properties of these molecules
can be striking:  due to the
enantiomeric nature of biological molecules in a patient, it can be (and has
frequently been) the case that one of the enantiomers possesses substantially
all of the biological activity of the racemic mixture while the other
enantiomer is far less biologically active (and can be totally inactive).  This raises the question of the status
of separated enantiomers as "new drug products" and whether they can
be "first commercial marketing or use" if the racemate has previously
been granted market approval, pursuant to 35 U.S.C. § 156(a)(5)(A).  An example of one such situation is
Prilosec® (racemic omeprazole) and Nexium® (the S enantiomer
thereof).  The Federal Circuit
answered this question in the affirmative in its decision rendered on May 10th.

This case involves the antibiotic levafloxicin (marketed
as Levaquin®), which is the stereospecifically-synthesized levorotatory
enantiomer of ofloxacin, a racemic mixture.  Daiichi Sankyo, owners of the patent in suit (U.S. Patent
No. 5,053,407) and their licensee filed suit against Lupin in response to Lupin's
ANDA filing, pursuant to 35 U.S.C. § 271(e)(2).  Lupin stipulated to infringement, validity, and
enforceability of the '407 patent, contending only that the Patent Office and
FDA had improperly granted Daiichi an 810 patent term extension under § 156 of
the patent statute.  Relevant to
the District Court's decision in Daiichi's favor, and the Federal Circuit's
affirmance, the '407 patent specifically claims levafloxicin (i.e., this
enantiomer was determined to be patentable over the existence of ofloxacin in
the prior art) and the FDA required Daiichi to satisfy the requirements of an
NDA for levafloxacin as for a new chemical entity (NCE).  The District Court accorded "great
deference" to the PTO's determination that levafloxacin was a different
drug product than ofloxacin under the terms of the statute, pursuant to the
regulatory framework upheld in Glaxo Operations UK Ltd. v. Quigg, 894
F.2d 392, 399 (Fed. Cir. 1990), where patent term was
extended on a patent claiming a new ester of a previously-approved drug
comprising salts of the same acid.

Both at trial and in the appeal, Lupin argued that
since levafloxacin was the "active ingredient" of ofloxacin, and was
present in the racemate, it was in essence the "same" drug product
both as levafloxacin and ofloxacin, and thus the patent claiming levafloxacin
(the '407 patent) should not be entitled to patent term extension.  Daiichi argued, and the Federal
Circuit agreed, that both the PTO and FDA had consistently treated separate
enantiomers to be different drug products than racemic mixtures thereof.  That the FDA required Daiichi to obtain "full
regulatory approval" and that the PTO found levafloxacin to be
independently patentable over ofloxacin were used by Daiichi to support its
argument.  The argument was
supported by expert testimony of Dr. David Lin, a former FDA official (Director
of the Division of New Drug Chemistry at the FDA), that:

'in each and every instance in which it has considered
the question, the FDA has described a racemate as a single active ingredient,
distinct from its enantiomers, and each enantiomer as a single active
ingredient distinct from the other and from the racemate,' Lin Decl. ¶20, J.A.
1280 (including examples and Orange Book descriptions, at Lin Decl. Ex. C, J.A.
1278-1439)

The Federal Circuit, in an opinion by Judge Newman
joined by Judges Rader and Linn, agreed with Daiichi and the District Court
that the '407 patent term was properly extended because levafloxacin was the "first
commercial marketing or use" of this drug regardless of its existence as a
component (even the active component) of previously approved and marketed
ofloxacin.  "We discern no basis for challenging these established FDA
and PTO practices.  The FDA and PTO practices are in accordance with Glaxo,
where the court held that 'product' as used in §156(a) is the active
ingredient present in the drug."  The Court also held that amendments to the statute enacted in 2007,
wherein "an applicant 'for a non-racemic drug containing as an active
ingredient (including any ester or salt of the active ingredient) a single
enantiomer that is contained in a racemic drug approved in another application'
to, under certain conditions, 'elect to have the single enantiomer not be
considered the same active ingredient as that contained in the approved racemic
drug'" did not mandate that the PTO or FDA change their practices
regarding approval of separate enantiomers and patent term extensions of
patents specifically claiming such enantiomers.  This interpretation, according to Judge Newman's opinion, "would
change the long-standing term-extension policy of the FDA and the PTO; such a
far-reaching change is not achieved by legislative silence."

In addition to clarifying (or at least
putting the Federal Circuit's imprimatur upon) the status of separate
enantiomers to obtain independent patent protection and be entitled to patent
term extension for "first commercial marketing or use"
as new drug products, the Court's decision may
provide a boon to "evergreening" efforts by pharmaceutical companies
marketing drugs comprising racemic mixtures of enantiomers.  This is not a panacea, of course, at
least because in the wake of the Supreme Court's KSR v. Teleflex
decision the Federal Circuit has determined that patents for separated
enantiomers can be invalidated on obviousness grounds (compare, for
example, Aventis Pharma Deutschland GmbH v. Lupin, Ltd. with Sanofi-Synthelabo v. Apotex, Inc.).  But under
the right circumstances (for example, as here where separation of the
enantiomers is difficult or impossible), the capacity for separate enantiomer
patents to be eligible for patent term extension provides more incentives for
companies marketing drugs comprising racemic mixtures of enantiomers to expend
R&D (and marketing) efforts and capital on such separations (or
stereospecific syntheses).  In a
world of finite resources, these efforts can be expected to siphon resources
away from new drug development.  While this may be smart business (and in view of the unpredictability of
new drug development, drug companies may not be able to spurn such
opportunities), it may not be in the best interest of further pharmaceutical
innovation.

Ortho-McNeil Pharmaceutical, Inc. v. Lupin Pharmaceuticals, Inc. (Fed. Cir. 2010)
Panel:  Circuit Judges Newman, Rader, and Linn
Opinion by Circuit Judge Newman