Opposing Federal Circuit Preliminary Injunction Standards in Abbott Laboratories v. Sandoz

    By Kevin E. Noonan —

The decision of the Court of Appeals for the Federal Circuit in Abbott Laboratories v. Sandoz, affirming the District Court's grant of a preliminary injunction, nicely illustrates the way the Federal Circuit exercises its prerogatives in applying the abuse of discretion standard.  In our previous post, we discussed the portion of the decision relating to how the CAFC reviewed the District Court's determination of the first prong of the preliminary injunction standard, establishing a reasonable expectation of success on the merits, with regard to invalidity.  This post will discuss how the Federal Circuit conducted its review of how the District Court evaluated Sandoz's contentions that the patents-in-suit, U.S. Patent Nos. 6,010,718 and 6,551,616, were unenforceable due to inequitable conduct during patent prosecution.

Sandoz made three assertions of inequitable conduct against the '718 patent and an additional two inequitable conduct assertions against the '616 patent.  For the '718 patent, the first assertion involved a statement by one of the inventors, Dr. Linda Gustavson, in a declaration submitted during prosecution.  In her declaration, Dr. Gustavson stated that there was a statistically-significant difference in the Cmax of clarithromycin API in the extended release (ER) formulations claimed in the '718 patent when compared with immediate release (IR) formulations in the prior art.  However, during litigation, Dr. Gustavson admitted that she never performed statistical analyses on the differences reported between ER and IR formulations.  Abbott countered that the experimental evidence was submitted to the Patent Office and that the statistical significance of the difference was not material to patentability, despite the prosecuting attorney's use of Dr. Gustavson's declaration as support in overcoming an obviousness rejection asserted by the Examiner.  The District Court, using the "reasonable examiner" test for materiality, decided that although it was "obviously troublesome that Gustavson made her assertion without having actually performed the statistical test," her statement was not material to patentability.  The Federal Circuit supported this conclusion by stating:

Since 1) no claim of the '718 patent requires the extended release formulation to have a statistically significant lower Cmax than the immediate release formulation; 2) the data in fact shows the Cmax of the extended release formulation to be lower (albeit not statistically significantly lower) than the Cmax of the immediate release formulation; and 3) the extended release formulation was in fact pharmacokinetically different from the immediate release suspension formulation, it is more likely than not that the PTO would not have found the "statistically significantly lower" statement to be important.

The District Court also found no evidence of an intent to deceive under these circumstances, rejecting Sandoz's contention that the combination of the false statement and the materiality of the information was sufficient to infer intent.  The Federal Circuit's majority opinion, written by Judge Newman and joined by Judge Archer, found no abuse of discretion in the District Court's weighing of the evidence of materiality and intent and refusing to find inequitable conduct.

Sandoz's second assertion related to clinical trial evidence obtained after the filing date of the application that was granted as the '718 patent, concerning the results of "taste perversion" experiments, i.e., the tendency of different formulations to have an unpleasant metallic taste.  These test results were submitted to the FDA and included on Abbott's Biaxin® XL product label but were not disclosed to the examiner during prosecution.  Sandoz contended that these test results showed a higher incidence of taste perversion for ER formulations compared with prior art IR formulations, contrary to the disclosure in the '718 patent specification.  Abbott opposed this contention (supported by an expert declaration) on the grounds that the taste tests were done at different API concentrations in the formulation and were thus not directly comparable.  The District Court found that this information was material under Rule 56, but that a reasonable examiner would not have considered the information "important" in deciding whether to grant the '718 patent because the dosages were not comparable (and the reasonable examiner would have required a comparison at equivalent dosages in order for the information to be "important" to making a patentability determination).  Moreover, the District Court found no intent to deceive, because there was no evidence of deliberate withholding of information from the examiner, once again refusing to infer intent from the degree of materiality of the undisclosed information.  The Federal Circuit agreed with the District Court that under its precedent (including Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) and Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995)), materiality and intent to deceive must be independently established, and that there was no abuse of discretion in the District Court's refusal to find inequitable conduct on this basis asserted by Sandoz.

Sandoz's last inequitable conduct contention regarding the '718 patent was based on Abbott's failure to disclose another set of clinical trial results obtained after the '718 patent was filed, relating to pharmacokinetics of clarithromycin administered under different conditions.  These test results concerned comparisons between IR formulations and "modified release" (MR) formulations in the prior art for mean DFL (degree of fluctuation) values.  The District Court did not find these studies material because, inter alia, the MR formulations were different from the claimed ER formulations.  The majority opinion did not find clear error in this determination by the District Court.

Turning to the '616 patent, the District Court rejected Sandoz's first inequitable conduct contention because it was directed to taste perversion claims cancelled before examination in the application that resulted in the granted '616 patent.  The majority opinion cited Scripps Clinic & Research Found. v. Genentech, Inc., 927 F.2d 1565 (Fed. Cir. 1991), for the proposition that "[a] reference that is material only to withdrawn claims can not be the basis of a holding of inequitable conduct" and agreed with the District Court's conclusion that the "withheld" information was not material to patentability of any claims in the '616 patent.

Sandoz's second inequitable conduct contention was based on another undisclosed set of clinical trial results, which Sandoz's expert testified did not support formulations useful in claimed methods for reducing gastrointestinal side effects.  Again in this instance, these clinical trial results were submitted to the FDA but not to the PTO.  The District Court determined that there was sufficient evidence in the '616 patent specification to support claimed to methods for reducing gastrointestinal side effects of clarithromycin administration and that the clinical trial data did not contradict this disclosure.  Thus, the clinical trial results were not material according to the District Court, and in the absence of any affirmative evidence of an intent deceive, the '616 patent claims were not unenforceable for inequitable conduct on this evidence.

The majority opinion agreed, and further stated:

This is not a case of new information that affects the fundamental invention; this is a case of challenging every action or inaction of the "conduct" of patent solicitation, although patentability is unaffected.  The purpose of Kingsdown was to bring patent practice into the mainstream of the law and administrative practice.  The law severely punishes fraudulent practices, and the patent practice includes recognition that the inventor usually knows more about the field than does the "expert" patent examiner.  However, routine a
ctions that do not affect patentability and that are devoid of fraudulent intent are not subject to a different standard than other inquiries into fraudulent procurement.  The Administrative Procedure Act governs patent examination, see Dickinson v. Zurko, 527 US 150 (1999), and actions of patent examiners are reviewed with recognition of examiner expertise so well as recognition of the occasionally imperfect examination process.  "It was to mitigate the 'plague' whereby every patentee's imperfections were promoted to 'inequitable conduct' that this court reaffirmed that both materiality and culpable intent must be established."  Allied Colloids, Inc. v. American Cyanamid Co., 64 F.3d 1570, 1578 (Fed. Cir. 1995).

This succinctly states the majority opinion's philosophical view, shared by other members of the Court (most notably, Judge Rader) that a finding of inequitable conduct results in such a draconian remedy (patent unenforceability) that it should be found only on those rare occasions where a defendant can bear the heavy burden of establishing both prongs, materiality and intent to deceive, by clear and convincing evidence.

The dissent illustrates the opposite philosophical stance, wherein a court is justified in using circumstantial evidence to support a determination of an intent to deceive, said circumstantial evidence including the materiality of the withheld information.  In this regard, Judge Gajarsa (at right) points to two of Sandoz's inequitable conduct contentions that were persuasive to him that granting a preliminary injunction was an abuse of discretion.  The first, was Dr. Gustavson's admission that she did not perform any statistical analyses of her experimental data but nonetheless asserted in her declaration that the differences in Cmax between ER and (prior art) IR formulations were statistically significant.  Here, the affirmative nature of the misrepresentation was sufficient, because according to Judge Gajarsa the District Court "created such a high bar for materiality that in essence no statement or withholding of information would be material if it would not change the ultimate outcome of allowing the patent."  This, according to the dissent, was inconsistent with such precedent as Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d 1354 (Fed. Cir. 2003), where "[t]he fact that the examiner did not have to rely on the purity representations in issuing the patent is not inconsistent with a finding of materiality.  Although the inventors' statements regarding purity were not the principal focus of the office action response, they were clearly an important aspect of it.  Under the circumstances, a reasonable examiner would have wanted to know that the patentability argument based on purity was unsupported by the experimental results cited by the inventors."

Judge Gajarsa also took issue with the District Court's finding that Abbott's withholding clinical trial evidence on DFL values was not material, since (according to the dissent) "the extent the PK parameters of the ER formulation differed from the clarithromycin formulations in the prior art was the primary focus of the examiner's concerns regarding patentability, and Abbott's ability to establish sufficient differences was the basis for allowing the claims."  Judge Gajarsa objected to a materiality standard the would permit a patentee to selectively disclose "one set of studies that supported patentability and therefore could ignore studies reaching the opposite result," citing Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182 (Fed. Cir. 1993).  Thus, in Judge Gajarsa's estimation, Sandoz had raised sufficient doubts about the enforceability of the patents in suit that its grant of a preliminary injunction was an abuse of discretion.

While it may appear that Judge Gajarsa's criticisms of the District Court's consideration of the evidence regarding inequitable conduct has logical force (particularly in view of the Federal Circuit's recent decision, in Aventis Pharma S.A. v. Amphastar Pharma, Inc., that misstatements in a declaration evinced an intent to deceive sufficient to support an inequitable conduct determination), the issue here is the same as that raised by the differing views on the standard for establishing vel non a likelihood of success on the merits based on invalidity.  The Federal Circuit clearly views its mandate to include plenary review of a district court's decisions for which the lower court is entitled to a deferential, abuse of discretion standard of review.  As was seen in our earlier post, this has led to conflicting decisions from different appellate panels on whether the likelihood of success prong of the preliminary injunction analysis can be defeated by a defendant raising a substantial question of unpatentability.  Here, the Federal Circuit appears committed to reviewing the evidence presented in support of the twin requirements of materiality and intent, and then further reviewing the subtle balancing by a district court in determining whether a defendant has established (or a likelihood of establishing) inequitable conduct sufficient to preclude grant of a preliminary injunction.  In addition to seemingly squandering significant judicial resources in performing this review, the CAFC's behavior raises questions about whether it is giving appropriate deference to areas properly within the sound discretion of the district court.

For additional information regarding this case, please see:

• "Abbott Laboratories v. Sandoz, Inc. (Fed. Cir. 2008) – Part I," October 28, 2008