Patent Docs

USPTO Files Opening Brief in Tafas v. Dudas Appeal

July 22, 2008

By Donald Zuhn and Benjamin Huber —

Last Friday, the U.S. Patent and Trademark Office and USPTO Director Jon Dudas filed their opening brief in the Tafas v. Dudas appeal. As we previously reported, the Patent Office and Director Dudas had until July 18th (i.e., sixty days from the May 19th docketing date) to serve and file their opening brief. The Appellees — Dr. Triantafyllos Tafas and SmithKline Beecham Corp., SmithKline Beecham PLC, and Glaxo Group Ltd. (GSK) — now have until August 27th, absent any extensions, to file their brief.

By now, many patent practitioners are probably quite familiar with the sequence of events that led to the Patent Office’s appeal. Briefly, Dr. Tafas and GSK sought to enjoin the Patent Office from enforcing its new continuation and claims rules package, which was published last August. The day before the rules package was set to take effect (strangely enough, on Halloween), Judge James C. Cacheris of the Eastern District of Virginia granted Dr. Tafas’ and GSK’s motions for a temporary restraining order and preliminary injunction.

Last April (this time on April Fool’s Day), Judge Cacheris made the injunction permanent, finding that "the [continuation and claims] Rules are substantive in nature and exceed the scope of the USPTO’s rulemaking authority under 35 U.S.C. § 2(b)(2)," Judge Cacheris voided the new rules. Citing Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996), and two other CAFC cases that cite Merck, Judge Cacheris determined that the relevant case law was clear: "Section 2(b)(2)’s authority is limited to rules governing the ‘conduct of proceedings’ before the Office, the USPTO does not have the authority to issue substantive rules, and it does not have the authority to make substantive declarations interpreting the Patent Act." Judge Cacheris also determined that the continuation and claims rules were "substantive rules that change existing law and alter the rights of applicants such as GSK and Tafas under the Patent Act," and "constitute a drastic departure from the terms of the Patent Act as they are presently understood." Judge Cacheris concluded his opinion by offering a thorough explanation as to why the cornerstones of the continuation and claims rules — the 2+1 rule and 5/25 rule — were indeed substantive rules (see "No April Fool’s Joke — Tafas and GSK Win on Summary Judgment").

In its opening brief, the Patent Office makes two main assertions: first, that the Office acted within its rulemaking authority, and second, that the continuation and claims rules do not violate the relevant statutory provisions. While the assertions themselves are unsurprising, the approach taken by the Patent Office represents an intriguing departure from the framework adopted by Judge Cacheris’ opinion, and reveals at least a portion of the Office’s appellate strategy. Where Judge Cacheris focused mainly on the substantive nature of the continuation and claims rules, and explicitly avoided a determination regarding whether the Patent Office was entitled to any deference, the Office relies heavily on its belief that Chevron deference places the continuation and claims rules beyond reproach (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)).

By asserting that it is entitled to such deference, the Patent Office is attempting to shift the focus of the appeal towards the language of 35 U.S.C. § 2 and away from the likely effects of the continuation and claims rules. In the Office’s view of Chevron deference, the important question in the appeal is not whether the continuation and claims rules are procedural or substantive, but instead whether the rules fall within a permissible interpretation of the Patent Act. Further, the PTO’s brief does not stop at the notion that the Office is entitled to deference in the promulgation of the continuation and claims rules themselves. Rather, the Patent Office argues that its own, expansive interpretation of the scope of its rulemaking authority, and its determination that the continuation and claims rules do not violate other provisions of the Patent Act, are both entitled to deference. As such, the PTO’s primary argument essentially asserts that the Office can decide that it has the authority to promulgate a set of rules, put those rules into effect, and declare the rules commensurate with any potentially adverse limitation imposed by statutes while remaining largely unchecked by the judiciary.

Apparently not content to use Chevron deference as a shield, the Patent Office also uses deference-based arguments to attack Judge Cacheris’ opinion. The Patent Office rejects outright Judge Cacheris’ ruling that the continuation and claims rules fall outside the scope of the Office’s rulemaking authority, asserting that the rules fit "comfortably within the terms of Section 2(b)(2)," because they merely govern the conduct of proceedings in the Office and facilitate the processing of patent applications. Beyond simply challenging Judge Cacheris’ view of the PTO’s rulemaking authority, the Office asserts that Judge Cacheris erred by refusing to adopt the Office’s own, conveniently broad view of its rulemaking authority.

For information regarding this topic, please see:

• "Save the Date — Initial Scheduling of the Tafas/GSK v. Dudas Appeal," May 21, 2008
• "USPTO to Appeal Tafas/GSK v. Dudas," May 7, 2008
• "No April Fool’s Joke — Tafas and GSK Win on Summary Judgment," April 1, 2008
• "Judge Cacheris Takes GSK Case under Advisement," February 8, 2008
• "GSK Summary Judgment Hearing Set for Friday Morning," February 7, 2008
• "New Briefing Deadline Set In PTO Rules Case," December 18, 2007
• "Court Sets Summary Judgment Schedule in New Rules Case," December 3, 2007
• "No Discovery in New Rules Case," November 27, 2007
• "Tafas v. Dudas; SmithKline Beecham Corp. v. Dudas (E.D. Va. 2007)," October 31, 2007
• "USPTO Late to Its Own Party," October 31, 2007
• "GSK Secures Injunction," October 31, 2007 (includes links to Court’s Order and Opinion)
• "GSK TRO/Preliminary Injunction Hearing," October 29, 2007
• "GSK Brings Out the Big Guns Opposing the New Continuation and Claims Rules," October 24, 2007
• "Hooray! – (Finally) the Big Dogs Have Joined the Hunt," October 11, 2007
• "Rules Challenger Amends Complaint and Withdraws PI Motion," September 11, 2007
• "Inventor Sues PTO to Prevent New Continuation and Claims Rules from Taking Effect," August 30, 2007
Eisai Co. v. Dr. Reddy’s Laboratories, Inc. (Fed. Cir. 2008)

July 21, 2008

By Kevin E. Noonan —

Sanity may be returning to the Federal Circuit’s treatment of two issues, obviousness and inequitable conduct. In Eisai Co. v. Dr. Reddy’s Laboratories, Inc., the Court (in an opinion by Judge Rader joined by Judges Linn and Prost) affirmed the District Court’s determination that the patent-in-suit, U.S. Patent No. 5,045,552 was not obvious and was not obtained through inequitable conduct. In doing so, the Court illustrated how its approach to chemical obviousness has developed after KSR Int’l Co. v. Teleflex Inc. and suggested that its inequitable conduct analysis may be returning to the principles enunciated in Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).

The ‘552 patent discloses and claims rabeprazole, a proton pump inhibitor that suppress gastric acid production by inhibiting action of the enzyme H+, K+ ATPase. Eisai sells the sodium salt of rabeprazole as Aciphex® for duodenal ulcers, heartburn, and related disorders. It has worldwide sales of more than $1 billion. Eisai filed suit pursuant to notification from Defendants Dr. Reddy’s Laboratories and Teva Pharmaceuticals that each company had filed an Abbreviated New Drug Application (ANDA) containing a Paragraph IV certification that the ‘552 patent was invalid and/or unenforceable. (Mylan Laboratories, Inc. and Mylan Pharmaceuticals also filed ANDAs, but Eisai’s lawsuit against those companies was stayed pending resolution of this action; Mylan agreed to be bound by the final judgments and any appeals in Eisai’s lawsuit against Dr. Reddy’s and Teva.)

Neither Defendant contested that filing an ANDA constituted infringement under the Hatch-Waxman Act, and both asserted the affirmative defense that the ‘552 patent was unenforceable for being obtained by Eisai through inequitable conduct. In addition, Teva asserted that the ‘552 patent claims were invalid as being obvious over three prior art references. The District Court granted summary judgment in Eisai’s favor on infringement, invalidity, and inequitable conduct. Infringement was not appealed by either Defendant.

Teva based its allegations that the ‘552 patent was obvious over three prior art references: 1) European Patent No. 0 174 726, claiming lansoprazole (see below); 2) U. S. Patent No. 4,255,431, claiming omeprazole; and 3) an article by Brändström et al., entitled "Structure Activity Relationships of Substituted Benzimidazoles." Lansoprazole was disclosed in the ‘726 EP for treating ulcers, and differs from rabeprazole in having a trifluoroethoxy at the 4-position on the pyridine ring instead of a methoxypropoxy substituent:

Omeprazole differs more significantly in chemical structure, having a methoxy substituent at the equivalent 4-position:

The Brändström reference discloses a generic structure for anti-ulcerative compounds having a benzimidazole-sulfinylmethyl-pyridine core structure that encompasses lansoprazole, omeprazole, and rabeprazole:

The Federal Circuit adopted for the purposes of the appeal two properties of lansoprazole: that it was twenty-fold more active than omeprazole in its anti-ulcer action, and that the trifluoroethoxy group improved lipophilicity "that would have made it desirable to the skilled artisan."

The Court took this as evidence that lansoprazole would have been considered a "lead compound" for the skilled artisan in the search for alternative anti-ulcer compounds. Contrary evidence considered by the Court was testimony by Teva’s expert that the data set forth in the ‘726 EP application would not permit the level of acid secretion to be determined. Moreover, the District Court, and the Federal Circuit, considered the teachings of the ‘726 EP application that the trifluoroethoxy substituent provided "a special path to achieving lipophilicity," a desirable property for an anti-ulcer medication, something Teva’s expert testified was supported by a separate prior art reference. Another of Teva’s experts refused to testify as to the relevance of the ‘726 EP application to the patentability of the ‘552 patent claims, and the Federal Circuit further noted that there was "no discernible reason for a skilled artisan to begin with lansoprazole only to drop the very feature, the fluorinated substituent, that gave this advantageous property."

The Federal Circuit articulated the following principles for applying the Supreme Court’s KSR teachings to the question of chemical obviousness:

First, KSR assumes a starting reference point or points in the art, prior to the time of invention, from which a skilled artisan might identify a problem and pursue potential solutions. Second, KSR presupposes that the record up to the time of invention would give some reasons, available within the knowledge of one of skill in the art, to make particular modifications to achieve the claimed compound. See Takeda Chem. Indus. v. Alphapharm Pty., Ltd., 492 F.3d 1350, 1356 (Fed. Cir. 2007). ("Thus, in cases involving new chemical compounds, it remains necessary to identify some reason that would have led a chemist to modify a known compound in a particular manner to establish prima facie obviousness of a new claimed compound."). Third, the Supreme Court’s analysis in KSR presumes that the record before the time of invention would supply some reasons for narrowing the prior art universe to a "finite number of identified, predictable solutions," 127 S. Ct. at 1742. In Ortho-McNeil Pharmaceutical, Inc. v. Mylan Laboratories, Inc., 520 F.3d 1358, 1364 (Fed. Cir. 2008), this court further explained that this "easily traversed, small and finite number of alternatives . . . might support an inference of obviousness." To the extent an art is unpredictable, as the chemical arts often are, KSR’s focus on these "identified, predictable solutions" may present a difficult hurdle because potential solutions are less likely to be genuinely predictable. (Emphasis added)

The Federal Circuit stated that the record showed no reasons why the skilled artisan would have identified modifying lansoprazole to substitute the lipophilicity-conferring trifluoroethoxy group as a predictable solution to the problem of providing an alternative anti-ulcer compound. The Court characterized Teva’s argument as relying on "unsupported assertions" that compounds other than lansoprazole, such as rabeprazole, would have been identified by the skilled artisan as an alternative anti-ulcer compound. Thus, finding no genuine issue of material fact and no evidence that the District Court committed clear error, the Federal Circuit affirmed the finding that the ‘552 patent claims were non-obvious.

Turning to the question of inequitable conduct, the defendants raised five bases for their allegations: first, that Eisai did not disclose a related, co-pending application that disclosed the "ethyl homolog" of rabeprazole; second, failing to disclose rejections in the related application alleged to be material to patentability; third, failing to disclose a prior art reference (WO 86/02646); fourth, by submitting a misleading declaration; and finally, concealing the existence of lansoprazole in the prior art. The District Court found the materiality of the ethyl homolog application to be low, even in the face of Teva’s allegation that its existence could have provoked an obviousness-type double patenting rejection. Although the Federal Circuit stated that disclosure of the co-pending application would have been "prudent," Eisai’s failure to do so was not inequitable conduct, according to the Federal Circuit because the low materiality of the application was coupled with a record "devoid of any real suggestion of intent to deceive." Similarly, the District Court found, and the Federal Circuit agreed, that there was "no compelling evidence" of an intent to deceive relating to Eisai’s failure to disclose the rejections asserted by the Examiner in the co-pending application. This determination was based in part on the District Court’s appreciation that filing separate applications on sufficiently-related subject matter in an effort to "hide" the existence of each of them from the Patent Examiner was "implausibly risky" in view of the likelihood that the same examiner would be assigned to both. The District Court found the undisclosed reference to be merely cumulative to art of record during prosecution of the ‘552 patent. Although the Court found the declaration at issue "highly material," it was unconvinced by the Defendants that the failure to disclose the relationship between the anti-ulcerative properties of rabeprazole and the "ethyl homolog" was material, characterizing the undisclosed information as "additional" and "unnecessary." Moreover, there was a sufficient lack of any evidence of an intent to deceive to render "stillborn" the inequitable conduct allegation. Finally, the lansoprazole allegation, which the District Court had dismissed on summary judgment, was supported by evidence of neither materiality nor an intent to deceive.

More important than the decision in this case regarding inequitable conduct was the Federal Circuit’s discussion of the guiding principles of law it applied:

Inequitable conduct in prosecuting a patent application before the United States Patent & Trademark Office may take the form of an affirmative misrepresentation of material fact, a failure to disclose material information, or the submission of false material information, but in every case this false or misleading material communication or failure to communicate must be coupled with an intent to deceive. Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1378 (Fed. Cir. 2008). Materiality, defined as "what a reasonable examiner would have considered important in deciding whether to allow a patent application," and intent are both questions of fact, and require proof by clear and convincing evidence. Id. To satisfy the "intent" prong for unenforceability, "the involved conduct, viewed in light of all the evidence, including evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive." Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc) (citing Norton v. Curtiss, 433 F.2d 779 (CCPA 1970)). Gross negligence is not sufficient. Id. This is a high bar.

Lately, it hasn’t been a high bar. Indeed, since Kingsdown, the Court has expanded the limits of the behavior it has considered amounts to inequitable conduct. Examples of this expansion include improperly claiming small entity status (Nilssen v. Osram Sylvania, Inc.), improperly filing a petition to make special (General Electro Music Corp. v. Samick Music Corp.), failing to disclose that a declarant had been a paid consultant prior to filing an expert declaration under 37 C.F.R. § 1.132 (Ferring B.V. v. Barr Laboratories, Inc.), misjoinder of inventorship (PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc.), and inaccuracies in an expert declaration (Aventis Pharma S.A. v. Amphastar Pharma, Inc.). Judge Rader, who dissented in Aventis Pharma, here emphasized the need, in his opinion, for affirmative instances of "culpable conduct" rather that mere omissions, with the concomitantly more difficult need to discern evidence of intent from such conduct. And Judge Rader is more clearly focused, in Aventis and in this opinion, on a defendant carrying the extraordinary burden of establishing inequitable conduct by clear and convincing evidence.

It remains to be seen whether Judge Rader’s formulation of the proper boundaries of what constitutes inequitable conduct for the Federal Circuit will prevail.

Eisai Co. v. Dr. Reddy’s Laboratories, Inc. (Fed. Cir. 2008)
Panel: Circuit Judges Rader, Linn, and Prost
Opinion by Circuit Judge Rader
More on USPTO Rulemaking Practices

July 21, 2008

By Donald Zuhn —

Yesterday, we reported
on the Patent Office’s publication of a Notice in the Federal (73 Fed.
Reg. 32559) requesting that interested members of the public comment on
the Office’s estimates for any additional burdens imposed on applicants
by the new appeals rules. In a departure from recent Patent Office
practice, the Notice was published in the Federal Register but not on
the Office’s website, and in a departure from standard rulemaking
procedure, the Notice was published on June 9, 2008, only one day
before the appeals Final Rule Notice was published.

Following yesterday’s report, David Boundy (at left), the Vice President of
Intellectual Property for Cantor Fitzgerald L.P., wrote us to provide a
few additional details regarding the USPTO rulemaking process. With
respect to the differences between Executive Order 12866 and the
Paperwork Reduction Act (PRA), Mr. Boundy noted that the former
requires an agency to account for all of the economic effects resulting
from any rules changes, while the latter addresses only the costs
relating to the gathering, organizing, storing, and submitting of
information (i.e., the "paperwork" burden). Mr. Boundy noted that over
the past two years, the Patent Office has failed to recognize this
distinction, and as a result has frequently failed to account for all economic
burdens in its E.O. 12866 analyses.

Under E.O. 12866 (as well as a third agency rulemaking mandate, the
Regulatory Flexibility Act), the Patent Office must account for any
loss of, or reduction in, patent value or business investment that would
result from a particular rules change. In particular, the Office is
required to submit all rules changes that have a greater-than-zero
economic effect to the Office of Management and Budget (OMB) after
writing the first draft of a Notice of Final Rulemaking, and then give
the OMB a 90-day period in which to review the rules changes. Once the
90-day period has passed, E.O. 12866 has no further impact on a
particular rules package.

The PRA, on the other hand, creates a continuing obligation to analyze
the paperwork burdens of a particular rules package. Mr. Boundy noted
that the claims and continuation rules — which were permanently
enjoined on April 1st in Tafas/GSK v. Dudas — are being held up at the
OMB on the basis of this continuing obligation. So, even if the Patent
Office is successful in its appeal, it will have to confront a patent
community that is better prepared to argue excessive paperwork burdens.

Mr. Boundy pointed out that the Patent Office at present lacks the
authority to enforce its new appeals rules because it has not yet
received the OMB’s blessing under the PRA (as indicated by the "OMB
Control Number" that appears on most PTO forms). Mr. Boundy noted that
the Patent Office’s obligations under the PRA are not too imposing —
the Office need only fairly and accurately account for the paperwork
burdens imposed by a particular change in the rules. After the Office
has complied with this obligation, its up to the OMB to either sign off
on the rules changes or let the Office know that the rules changes create an excessive
paperwork burden.

With respect to the new appeals rules, Mr. Boundy suggests that the
Patent Office has used a two-fold strategy to evade proper E.O. 12866
review by first concluding that the new appeals rules were not
economically significant (thus sidestepping its obligation to "show its
work" with regard to economic impact), and then by delaying its PRA
review until now.

To those interested in submitting comments to the Patent Office in
response to the June 9th Notice, Mr. Boundy advises that appropriate
subject matter would include an evaluation of the fairness,
objectivity, and reliability of the estimates in the Notice. In
particular, comments should focus on issues where the estimates in the
Notice breach the requirements of the PRA (specifically the
requirements set forth in 5 C.F.R. § 1320.8, .9, .11, and .12) or
contravene the Office’s own Information Quality Guidelines, which
establish the ground rules for the Office’s own PRA analysis (and which
can be found here).
Teva to Acquire Barr

July 21, 2008

By Sherri Oslick —

In a transaction merging two major players in the generic pharmaceutical arena, Teva Pharmaceutical Industries Ltd. and Barr Pharmaceuticals, Inc. announced late last week that they have entered into an agreement by which Teva will acquire Barr for $7.46 billion plus the assumption of $1.5 billion in debt. The transaction is expected to close by the end of 2008, pending antitrust clearance and Barr stockholder approval.

Barr Pharmaceuticals, Inc., a holding company, operates through subsidiaries Barr Laboratories, Inc., Duramed Pharmaceuticals, Inc., and PLIVA d.d. and its subsidiaries.

Teva is the leading generic pharmaceutical company worldwide, and Barr the fourth largest. Together, the two companies, totaling to over 500 currently marketed products and over 200 pending ANDA applications (including approximately 70 first to file Paragraph IV challenges), will hold nearly 25% of the market share for all U.S. generic companies, and just under 16% of the market share for all U.S. pharma companies. The combined company will operate in more than 60 countries, employ about 37,000 people, and have an expected annual income of nearly $12 billion.

For additional information regarding the merger, please see:

• Teva’s press release
• Barr’s press release
• Barr’s presentation to investors
USPTO Rulemaking Practices Being Called into Question (Again)

July 20, 2008

By Kevin E. Noonan and Donald Zuhn —

The U.S. Patent and Trademark Office has attempted (with varying levels of success) to implement a number of new rules packages in the past two years, including new continuation and claims rules, alternative claiming rules, and IDS rules, but none of these rules packages has been implemented as yet. One new rules package that has been published as a Final Rule in the Federal Register concerns changes in how rejected patent claims are appealed to the Board of Patent Appeals and Interferences (see "New Appeals Rules Published"). This is the agency Board charged with performing the administrative review required to trigger (if unsuccessful) an applicant’s right to appeal, either to the District Court (under 35 U.S.C. § 145) or the Federal Circuit (under 35 U.S.C. § 141). The Notice of Final Rule was published on June 10, 2008.

Despite publishing as a Final Rule, however, the Patent Office has yet to implement the new appeals rules, which is perhaps due to the Office’s failure to follow proper procedures within the Executive Branch for this type of administrative agency rulemaking. In particular, the Office failed to timely comply with the requirements of the Paperwork Reduction Act (PRA), which mandates that the Office analyze paperwork burdens imposed on applicants by any Office rulemaking. The PRA directs the Office to submit its assessment of any added paperwork burdens to the White House Office of Management and Budget (OMB), and mandates that an agency proposing a new rule assess any additional burdens imposed by the rule "fairly, objectively, and accurately."

The Patent Office, it seems, did not perform the PRA assessment at the time the Notice of Proposed Rulemaking for the appeals rules package was published on June 30, 2007. Indeed, because the new appeals rules were deemed by the Office "to be not significant for the purpose of Executive Order 12866," the Office appears to have simply sidestepped its obligation to provide a PRA assessment. (Executive Order 12,866, which was first promulgated in 1993 under the Clinton Administration and amended twice — in 2002 and 2007 — by the current Bush Administration, requires that the Office account for the economic effects of a new rules package, unless that package is deemed to have effects that are "not significant.") As a result, the Office did not request that the OMB grant its approval under the PRA until the day before the Notice of Final Rulemaking was published. Now, it appears, the OMB has requested that the Office comply with the PRA.

Accordingly, on June 9, 2008 (the day before appeals Final Rule Notice was published), the Office published a Federal Register Notice (73 Fed. Reg. 32559), requesting that interested members of the public comment on the Office’s estimates for any additional burdens imposed on applicants by the new appeals rules. The Notice made public the Office’s analyses, including its estimates on the number of appeals expected per annum as well as ancillary added costs (such as postage). Curiously, the Office did not list the June 9, 2008 Notice on its website (see the "Federal Register Notices" column on the "News and Notices" page of the USPTO website) or any other forum for notifying the public. While the June 9th Notice is sufficient under the Administrative Procedures Act, which was made law well before the advent of websites, it marks a departure from the Office’s recent practice of posting such notices on its website. In fact, the Office published a similar Notice regarding the alternative claiming rules a little more than four months ago (see "Patent Office Publishes Notice Regarding Impact of Proposed Markush Claims Rules on Small Entities" and "You Can’t Fight the USPTO — or Can You?").

Comments regarding the June 9th Notice must be submitted no later than August 8, 2008, and must be sent to Susan K. Fawcett, Records Officer, USPTO, Office of the Chief Information Officer, Customer Information Services Group, Public Information Services Division. Comments received by the USPTO are supposed to be forwarded to the OMB without characterization or editing by the Office.

Whether the Office’s actions in this instance evince an intention to reduce the amount of public participation in the OMB’s PRA review, or are just another reflection of a "gang that couldn’t shoot straight" performance level that has all too frequently characterized their actions over the past few years, two things are clear about the circumstances. First, the OMB will not permit the Office to implement the new appeals rules until it has done its own PRA review, and second, the Notice gives concerned members of the patent public the opportunity to make their views known. There is no evidence that the OMB is doing anything other than exercising its authority and fulfilling its responsibilities, or that anyone at the OMB has any reason to prevent the Office from implementing the new appeals rules in the absence of public comment challenging or refuting the Office’s position that there is essentially no additional burden imposed by the new rules. Thus, it is imperative that any member of the concerned patent public make those concerns known to the OMB within the comment period.

For those more inclined to see intent rather than ineptitude behind this latest example of the Office appearing less than above-board when dealing with the public (see "Docs at BIO: "Gotcha" Games Continue at USPTO"), prudence suggests that any comments be sent not only to Ms. Fawcett at the Office but to the OMB directly. In doing so, it may be worthwhile to attach a cover letter to the following effect:

Susan_Dudley@omb.eop.gov
The Honorable Susan E. Dudley
Administrator
Office of Information and Regulatory Affairs
Office of Management and Budget
Washington, DC 20503

Re: Comments on Information Collection Request 0651-00xx (formerly 0651-0030), 72 Fed. Reg. 32559 (Jun. 9, 2008) for RIN 0651-AC12, Rules of Practice Before the Board of Patent Appeals and Interferences in Ex Parte Appeals, 73 Fed. Reg. 32938 (Jun. 10, 2008)

Dear Ms. Dudley:

Enclosed is a copy of a comment letter we filed on the U.S. Patent and Trademark Office’s Information Collection Request for the Patent Office’s recently-finalized Appeal Rule.

We are sending it to you separately to ensure that these comments are before the Office when making its determinations in this matter. We believe that having these comments directly, without any input, recasting or characterization by the Patent Office will permit the OMB to fairly and accurately assess the objective and reproducible information presented therein. In our view, the Patent Office has recently shown the tendency to recast or characterize public comment in ways that may not accurately reflect such information. For example, in the Notice of Final Rulemaking for this very rule, the PTO repeatedly reformulated the public comments in a manner that appeared to make it easier to discount the commenter’s concerns or assessments contrary to the Office’s position. In addition, for several comments the Office had no discernable response but simply failed to address the comment meaningfully. Indeed, a recent Notice of Final Rulemaking states that the Patent Office refuses to implement the oversight principles in the OMB’s Good Guidance Practices Bulletin, and refuses to provide supervisory enforcement to require employee compliance with the procedural requirements of the Patent Office’s guidance document (72 Fed. Reg. at 46752, col. 2-3).

Thus, to ensure that our comments are accurately addressed, and that the Patent Office follows OMB’s regulatory oversight, we have provided a separate copy to you. You should confirm that whatever summary or response that the Patent Office provides to you accurately paraphrases the issues raised in our letter, and addresses them in a way that complies with various OMB guidelines.

We also write to bring to your attention our disagreement with the Patent Office’s characterization of three major rules as all being "not significant" for purposes of Executive Order 12,866: (a) this Appeal Rule (RIN 0651-AC12), (b) RIN 0651-AC00, Examination of Patent Applications that Include Claims Containing Alternative Language, 72 Fed. Reg. 44992 (August 10, 2007) ("Markush Rule"), and (c) RIN 0651-AB95 Changes to Information Disclosure Statement Requirements and Other Related Matters, 71 Fed. Reg. 38808 (July 10, 2006) ("IDS Rule"). We understand that the Patent Office was not permitted to make this designation for anything except rules that have essentially zero effect on the public. But each of the three rules has effects – in paperwork and other compliance costs, loss of patent asset value, and loss of investment in innovation – that are easily several times the $100 million threshold for "economically significant" rules. The IDS Rule alone imposes several billion dollars of paperwork burden, and the Appeal and Markush Rules would each impose hundreds of millions, or billions, of dollars of effect in lost asset value and investment. We are troubled by assertions from the Patent Office to the OMB that these rules fall outside the scope of your review, based on this mischaracterization of the staggering economic effects of each of its rules. In our view, the best course would be for the OMB to order the Patent Office to withdraw all three of these rules, and re-promulgate them (if the Office wishes to) only accompanied by a full Regulatory Impact Analysis on each.

We thank David Boundy of Cantor Fitzgerald for bringing this issue to our attention.
Court Report

July 20, 2008

By Sherri Oslick —

About
Court Report: Each week we will report briefly on recently filed
biotech and pharma cases, and a few interesting cases will be selected
for periodic monitoring.

Endo Pharmaceuticals Inc. et al. v. Actavis South Atlantic LLC
2:08-cv-03482; filed July 11, 2008 in the District Court of New Jersey

Infringement of U.S. Patent No. 5,958,456 ("Controlled Release Formulation (Albuterol)," issued September 28, 1999) following a paragraph IV certification as part of Actavis’ amendment of their ANDA (adding additional dosage forms) to manufacture a generic version of Endo’s Opana® ER (oxymorphone hydrochloride, used to treat moderate to severe pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time). View the complaint here. As reported here, Endo has previously asserted this patent against Actavis in response to Actavis’ initial paragraph IV certification.

Sanofi-Aventis et al. v. Sun Pharmaceutical Industries Ltd. et al.
1:08-cv-06286; filed July 11, 2008 in the Southern District of New York

Infringement of U.S. Patent Nos. 4,847,256 ("4,5-dihydro and 4,5,6,7-tetrahydropyrazolo(1,5-A)-pyrimidines" issued July 11, 1989) and 6,429,210 ("Polymorphic Clopidogrel Hydrogenesulphate Form," issued August 6, 2002) following a paragraph IV certification as part of Sun’s filing of an ANDA to manufacture a generic version of Sanofi-Aventis’ and Bristol-Myers Squibb’s Plavix® (clopidogrel bisulfate, used for the reduction of atherothrombotic events). View the complaint here.

AstraZeneca Pharmaceuticals LP et al. v. Teva Pharmaceuticals USA
1:08-cv-00426; filed July 10, 2008 in the District Court of Delaware

Infringement of U.S. Patent No. RE37,314 ("Pyrimidine Derivatives," issued August 7, 2001) following a paragraph IV certification as part of Teva’s filing of an amended ANDA to manufacture a generic version of AstraZeneca’s Crestor® (rosuvastatin calcium, used to treat high cholesterol). View the complaint here.
Conference & CLE Calendar

July 20, 2008

July 24-25, 2008 – Advanced Patent Prosecution Workshop 2008: Claim Drafting & Amendment Writing (Practising Law Institute) – New York, NY

August 11-12, 2008 – Advanced Patent Prosecution Workshop 2008: Claim Drafting & Amendment Writing (Practising Law Institute) – San Francisco, CA

August 10-15, 2008 – Advanced Courses (Patent Resources Group) – Washington, DC

September 11, 2008 – Developments in Pharmaceutical and Biotech Patent Law (Practising Law Institute) – New York, NY

September 11-12, 2008 – Current Issues in Complex IP Licensing (Law Seminars International) – Philadelphia, PA

September 15-16, 2008 – Biotech Patents*** (American Conference Institute)

September 21-23, 2008 – 2008 Annual Meeting (Intellectual Property Owners Association) – San Diego, CA

September 22-23, 2008 – USPTO Boot Camp: Patent Edition*** (American Conference Institute) – Alexandria, VA

September 22-23, 2008 – FDA Boot Camp*** (American Conference Institute)

September 22-23, 2008 – Patent Litigation 2008 (Practising Law Institute) – San Francisco, CA

October 6-7, 2008 – Patent Litigation 2008 (Practising Law Institute) – McLean, VA

October 7-8, 2008 – Global Patent Litigation*** (American Conference Institute) – New York, NY

October 15, 2008 – Developments in Pharmaceutical and Biotech Patent Law (Practising Law Institute) – San Francisco, CA

October 15-17, 2008 – Maximizing Pharmaceutical Patent Lifecycles*** (American Conference Institute) – New York, NY

October 23-24, 2008 – Patent Litigation 2008 (Practising Law Institute) – Chicago, IL

October 28-29, 2008 – Pharma/Biotech IP Due Diligence*** (C5) – Amsterdam, Netherlands

November 10-11, 2008 – Patent Litigation 2008 (Practising Law Institute) – Atlanta, GA

November 17-18, 2008 – Patent Litigation 2008 (Practising Law Institute) – New York, NY

***Patent Docs is a media partner of this conference or CLE
C5 Pharma/Biotech IP Due Diligence Conference

July 18, 2008

C5 (UK) will be holding its Pharma/Biotech IP Due Diligence conference on October 28-29, 2008 in Amsterdam, Netherlands. The conference will offer presentations on the following topics:

• Current trends in patent reform and how they impact your due diligence;
• Assessing the level of due diligence required and special considerations for complex multi-jurisdictional and multi-party transactions;
• A practical look at drafting the checklist and due diligence team selection;
• Essential valuation issues affecting the diligence review;
• Finding the target’s prior licensing, contractual, and third party obligations;
• Freedom to operate: Ensuring the purchaser/licensee has right to commercialize the IP at issue;
• Evaluating the scope, validity, and enforceability of the target’s patents;
• U.S. and EU regulatory provisions affecting the due diligence process and updates on regulator enforcement priorities;
• Competition law considerations affecting due diligence;
• How will developments in follow-on biologics and biosimilars impact on due diligence?
• Managing due diligence when dealing with industry/university collaborations and licenses;
• Establishing what venture capitalists expect from the due diligence process;
• Protecting confidentiality, trade secrets, and privilege during a diligence review: A U.S. perspective; and
• Preparing and communicating the due diligence analysis.

An additional post-conference workshop entitled: "Drafting an Effective Due Diligence Report" will be offered in the afternoon on October 29, 2008. In the post-conference workshop, attendees will learn how to draft a comprehensive and effective report of due diligence findings. In particular, the post-conference workshop will focus on the following topics:

• Ascertaining the structure and essential elements of due diligence reports;
• Determining the scope of, and any limitations on, the investigation;
• Drafting the executive summary;
• Presenting the search results and patentability/validity analysis;
• Assessing the scope of available patent protection;
• Addressing any obligations associated with the use of the technology to be transferred;
• Presenting the freedom-to-operate search results and analysis;
• Identifying other risks or problems and stating whether they have been resolved;
• Assessing potential exposure and the chance of the adverse party prevailing in litigation;
• Weighing the effect of any disclaimers and limitations of liability;
• Factoring in risks associated with future products and agreements in the works;
• Noting post-completion recommendations: What the buyer should do once the deal is finalized;
• Knowing what else should be included in (and excluded from) the report; and
• Limiting distribution of the report to preserve confidentiality and privilege.

The agenda for the Pharma/Biotech IP Due Diligence conference can be found here. A brochure for this conference can be requested here.

The registration fee for the conference is £1499 ($2,995). Those registering on or before September 26, 2008 will receive a £100 ($200) discount off the registration fee and those registering on or before August 15, 2008 will receive a £200 ($400) discount off the registration fee. Those interested in registering for the conference can do so here, by calling +44 (0) 20 7878 6888, by faxing a registration form to +44 (0) 20 7878 6896, or by e-mailing Karolina Persson at k.persson@C5-Online.com.

Patent Docs is a media partner of the C5 Pharma/Biotech IP Due Diligence conference.
Adequate Method Claiming Requirements: Muniauction, Inc. v. Thomson Corp.

July 17, 2008

By Kevin E. Noonan —

The Federal Circuit clarified its position on method claim infringement to the detriment of the plaintiff in Muniauction, Inc. v. Thomson Corp., vacating an $84.6 million dollar judgment (in a contingency fee case, no less). In a jury trial, Defendants Thomson Corp. and I-Deal LLC were found to infringe U.S. Patent No. 6,161,099, and that the asserted claims (claims 1, 2, 9, 14, 18, 20, 24, 31, 32, 36, 40, 42, 46, and 56) were not invalid. (The District Court reviewed the non-obviousness determination upon Thomson’s JMOL motion, filed after the Supreme Court’s decision in KSR Int’l Co. v. Teleflex Inc., but denied the motion.) The District Court found infringement to be willful and granted a permanent injunction. The Federal Circuit reversed (in a unanimous opinion by Judges Gajarsa, Plager, and Proust, Judge Gajarsa writing for the Court), finding claims 1, 9, 14, 31, 36, and 56 to be obvious, and that the remaining claims were not infringed.

The patent was directed to "electronic methods for conducting ‘original issuer auctions of financial instruments,’" i.e., methods for performing auctions for original-issuer municipal bonds over the Internet. As explained in the opinion, these types of auctions are typically structured so that the issuer — a municipality — offers the bonds in a block to "bidders" (underwriters) who purchase the entire bond offering on an "all or nothing" basis, and then the underwriters sell individual bonds to the public. The bonds typically comprise a variety of debt instruments having different maturity dates and principal amounts, so the bidder must offer a price based on these amounts and maturity dates.

The portion of the decision invalidating claims 1, 9, 14, 31, 36, and 56 for obviousness has been discussed elsewhere (see Patently-O, "Obviousness is Reviewed De Novo"). It is the remaining claims asserted by Muniauction, which the Federal Circuit found not to be infringed, that concern us here. The Court’s non-infringement decision was based on its determination that "no single party performs every step of the asserted claims" (which the CAFC characterized as being undisputed by the parties), coupled with the further rubric that a method claim can only be infringed if all steps of the claimed method are performed (see BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007)). Here, some steps of the claimed methods were performed by the bidder, while others ("a majority") were performed by the auctioneer’s computer system. Thus, the Federal Circuit opined, the "issue [was] whether the actions of at least the bidder and the auctioneer may be combined" to amount to infringement by the auctioneer.

The Court decided they could not. In its opinion, the CAFC relied on the principles enunciated in the BMC Resources case, which required that a single "party" must perform every step of a claimed method. (The Court also cited its decision in NTP Inc. v. Research in Motion, that the users of the accused system could not directly infringe method claims where one step of the method was performed in Canada.) Since a literal application of this rule would permit a defendant to avoid infringement liability by having a third party carry out at least one step of the method, the CAFC had adopted what it termed the "mastermind" test, wherein direct infringement will lie against multiple actors performing the steps of a claimed method if "one party exercises ‘control or direction’ over the entire process."

The question for the Federal Circuit was whether Thomson exercised sufficient control over the bidders to impute their actions to Thomson for purposes of infringement liability. The Court concluded that Thomson did not, saying that the BMC Resources test would be satisfied "in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of the claimed method." Thomson was in no way in control of the actions by the bidders, and Muniauction having presented "no legal theory" supporting liability, the Court reversed the judgment and vacated the damages award.

The case is certainly a cautionary tale, but it may have particular relevance to biotechnology claiming, as illustrated by the CAFC’s earlier decision in Monsanto Co. v. Syngenta Seeds, Inc. In that case, the Federal Circuit affirmed a judgment of non-infringement of claim 4 of U.S. Patent No. 5,538,880:

4. A process comprising obtaining progeny from a fertile transgenic plant obtained by the process of claim 1 which comprise said DNA.

And claim 5 of U.S. Patent No. 6,013,863:

5. The process of claim 1 further comprising obtaining transgenic glyphosate resistant progeny plants of subsequent generations from said fertile transgenic plant.

where claim 1 in each patent recited the method for producing the transgenic plants.

The District Court found that the asserted claims of the ‘880 and ‘863 patents required not merely the step of obtaining transgenic progeny but also the process of producing the transgenic plant in the first place, based on the dependent-claim structure of the asserted claims of these patents. It was undisputed that the predecessor in interest of these patents, DeKalb Genetics Corp., had produced the transgenic plants initially and had thus performed these steps recited by the claims.

The Federal Circuit unanimously affirmed in an opinion by Judge Rader. The CAFC rejected both of Monsanto’s theories of infringement: first, that claim 4 of the ‘880 patent was an independent claim and did not require performance of the steps recited in earlier claims; and second, that performance of the transgenic plant production steps by DeKalb did not preclude a finding of Syngenta’s infringement by performing the ultimate step of obtaining the progeny transgenic plants. Regarding Monsanto’s first theory, the Federal Circuit stated that claim 4 of the ‘880 patent and claim 5 of the ‘863 patent were cast in the conventional form of dependent claims. By itself this would not be sufficient, however, and the CAFC analyzed these claims with regard to whether they not only referenced at least one earlier claim but further limited the referent claim (pursuant to 35 U.S.C. § 112, fourth paragraph). In this analysis, the Federal Circuit held that claim 4 fulfilled the statutory requirements of a dependent claim, and further stated that while Monsanto could have presented claim 4 as merely requiring the product of process claim 1 as a starting material, it had not. The prosecution history supported this interpretation, as the claim as originally presented was "unquestionably" a dependent claim, and the patentees had asserted that amendments made to cast the claim into the form that issued as claim 4 were "directed to matters of form not affecting the scope of the invention" and did not introduce new matter.

The Federal Circuit also rejected Monsanto’s contention, made during oral argument, that claim 1 was a product-by-process claim and thus merely provided a starting material for the process of claim 4. Having affirmed the District Court’s determination that claims 4 (of the ‘880 patent) and 5 (of the ‘863 patent) were dependent claims, the Federal Circuit held that Syngenta’s performance merely of the ultimate step of the properly-construed process claim was not infringement as a matter of law. The principle is simple: although an independent claim may be infringed while its dependent claim is not, the converse is not true (see Wahpeton Canvas Co., Inc. v. Frontier, Inc., 870 F.2d 1546, 1552 (Fed. Cir. 1989)). Here, it was undisputed that the steps comprising the independent claims of both asserted patents were performed not by the accused infringer Syngenta, but by Monsanto or DeKalb. Thus, since Syngenta did not infringe these independent claims, it could not infringe the asserted dependent claims. Moreover, the steps of the corresponding independent claims were practiced by Monsanto or DeKalb prior to grant of either of the asserted patents. Accordingly, this activity did not support Monsanto’s infringement claims (made under both § 271(a) and § 271(g)).

Thus, although not expressly addressing the issue raised in the Muniauction case, the Court’s decision in Monsanto is consistent: that a single party, or parties where one party is the "mastermind" who exerts "control or direction," must perform all steps of a method claim.

These results suggest that biotechnology patent claims, drafted in ignorance of these principles, may be at risk. As we have suggested earlier, caution should accompany claim drafting dependent on process steps, even should those process steps be necessary to overcome prior art or to fulfill the requirements of § 112. In the Monsanto case, the outcome might have been different had claim 4 of the ‘880 patent recited a claim such as:

A process comprising obtaining progeny from a fertile transgenic plant comprising a chimeric gene encoding a chloroplast transit peptide/5-enolpyruvylshikimate-3-phosphate synthase fusion polypeptide expressed at a level sufficient to increase the plant’s resistance to glyphosate.

or even better,

Progeny of a fertile transgenic plant comprising a chimeric gene encoding a chloroplast transit peptide/5-enolpyruvylshikimate-3-phosphate synthase fusion polypeptide expressed at a level sufficient to increase the plant’s resistance to glyphosate.

Either of these claims would be free of any process steps that could raise issues with regard to performance of any steps other than the steps Syngenta certainly performed in this case, i.e., producing progeny of Monsanto’s transgenic plants.

The CAFC’s case law, consistent and evolving, thus suggests that prudent biotechnology patent prosecutors consider the interrelationships between independent, "method of making," claims and any dependent, "method of using" claims, to avoid this latest trap for the unwary.

Muniauction, Inc. v. Thomson Corp. (Fed Cir. 2008)
Panel: Senior Circuit Judge Plager and Circuit Judges Gajarsa and Prost
Opinion by Circuit Judge Gajarsa
Insmed Announces Partnership With Former House Ways and Means Chairman

July 17, 2008

By Donald Zuhn —

Insmed Inc., a biopharmaceutical company based in Richmond, Virginia, announced today that it has retained the former Chairman of the House Ways and Means Committee, Bill Thomas (at right), as a strategic advisor in its continuing effort "to bring follow-on biologics to U.S. customers and consumers." The former Representative from California, who served in the House for twenty-eight years and headed the Ways and Means Committee from 2001-2007, noted that during his time in Congress he "helped lay the groundwork to allow biologic competition from follow-on biologics," and was "excited to partner with Insmed to continue that fight." He also argued that "[g]iven the rising costs of healthcare, Congress needs to pass legislation creating a pathway for follow-on biologics," since such legislation would lead to competition and "foster innovation and benefits for consumers."

As we reported in February, Insmed launched a campaign earlier this year to publicize the importance of establishing a regulatory pathway in the U.S. for follow-on biologics. As a developer of follow-on biologics, Insmed has more than a passing interest in convincing Congress to pass follow-on biologics legislation. Noting that Insmed has released data demonstrating the bioequivalence of INS-19 and Neupogen® in Phase I clinical trials (see Patent Docs report), Insmed President and CEO Dr. Geoffrey Allan stated that the company wanted "to demonstrate to Washington policymakers that the capability to produce safe, effective and more affordable biologics exists today," and that Insmed’s partnership with Chairman Thomas would help it do so.

For additional information regarding this and other related topics, please see:
• "Insmed Announces Bioequivalent G-CSF Biologic," July 10, 2008
• "Dr. Robert Shapiro Discusses Follow-on Biologics Report," February 19, 2008
• "Insmed Announces National Awareness Campaign Regarding Follow-on Biologics," February 13, 2008

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