Patent Docs

Briefs for In re Kubin filed by Amgen and BIO

June 12, 2008

By Kevin E. Noonan —

Amgen Inc., the real party in interest, and the Biotechnology Industry Organization filed briefs recently asking the Federal Circuit to overturn the decision by the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences in Ex parte Kubin (see Patent Docs post). The Board upheld an examiner’s rejection that the claims were unpatentable under 35 U.S.C. § 103 for being obvious and under 35 U.S.C. § 112, first paragraph, for failing to satisfy the written description requirement. The Board based its obviousness determination on its interpretation that the Supreme Court’s KSR Int’l Co. v. Teleflex Inc. decision weakened prevailing Federal Circuit law (In re Deuel) that novel nucleic acid molecules were non-obvious.

The Board determined that all the claims would stand or fall together, since they were not argued separately; accordingly, their analysis was confined to claim 73:

The Board based its decision on language in the KSR decision that inventions that are "obvious to try" may also be obvious. Here, the Board determined that it would have been "obvious to try" to isolate the claimed gene, Natural killer cell Activation Inducing Ligand (NAIL), using well-established molecular biological techniques. The Board cited three prior art references, two of which were Valiente, which identified the existence of a protein, p38, present on the cell surface of natural killer cells and a monoclonal antibody specific for p38; and Sambrook et al., a standard reference work describing gene cloning techniques (otherwise known as the "Maniatis manual"). The Valiente reference contained a prophetic example to the effect that the gene encoding the p38 protein could be isolated using methods such as those disclosed in Sambrook et al. The Board considered but did not rely upon a reference to Matthews, which disclosed a mouse protein, 2B4, expressed on the cell surface of natural killer cells (2B4 is the mouse ortholog of human p38 although that was not disclosed in the art). Although the Board stated that it found Matthews "cumulative" of the teachings of Valiente and Sambrook, it used this reference as an "illustration" of how a gene could be isolated.

In its brief, Amgen argues that the Board both misinterpreted and misapplied the Supreme Court’s KSR decision. In its argument, Amgen emphasized the Board’s determination that the art was "complex and unpredictable," and asserted that this unpredictability rebutted the Board’s application of the KSR rubrics with regard to when something "obvious to try" was also obvious. The relevant portion of the KSR decision mandated that the result be predictable, which precluded KSR from being properly applied against Amgen’s claims:

When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under §103.

In making this argument, Amgen distinguished the simple mechanical subject matter in KSR with the complexity of Kubin’s invention.

Amgen also cataloged the deficiencies in the cited art. According to Amgen, the Valiente reference failed to disclose the isolation of p38 protein, or any amino acid sequence of the protein, or any ligand or binding partner of the p38 protein. Valiente also provided no disclosure of any method for cloning a gene encoding the p38 protein. The principle deficiency of the Matthews reference is that the relationship between 2B4 and p38 — that 2B4 was the mouse ortholog of human p38 — was not known in the art, and thus the Board’s reliance on Matthews was hindsight reconstruction. In contrast, Amgen argued that Kubin identified a ligand, CD48, with which the p38 protein specifically binds on the NK cell surface, as well as a unique method for cloning the NAIL gene from pooled mRNA populations from activated and resting human NK cells that was not disclosed in any prior art (but which used Valiente’s p38-specific monoclonal antibodies).

The focus on Amgen’s argument was not the non-obviousness of the way the gene was isolated but rather on the complete absence of any disclosure in the cited art of structure that would render obvious the claimed gene. Amgen also argued that the Board’s application of KSR was hindsight reconstruction, since once the gene was obtained, its isolation could always be considered "obvious." Finally, Amgen argued that KSR did not overturn Federal Circuit precedent regarding the standards for finding obvious a chemical compound, specifically as it relates to nucleic acids in In re Deuel, but including In re Bell and also Amgen Inc. v. Chugai Pharmaceutical Co., Noelle v. Lederman, and Takeda Chem. Indust. v. Alphapharma Pty. Inc.

BIO’s brief, which was limited to the obviousness question, argued that the Board was incorrect in ignoring Deuel as binding precedent, and misapplied the KSR decision to have "weakened" the precedential value of Deuel. The brief also characterized the Board’s "evidence" of factual distinctions between Kubin and Deuel (namely, that advances in technology made isolation of the NAIL gene more predictable than isolation of the subject matter in Deuel) "unfounded," and further challenged the Board’s reliance on In re Wallach to support the idea that improvements in technology could influence the obviousness vel non of nucleic acid claims. BIO argued that the Board has misinterpreted Wallach as well as KSR; in Wallach the prior art disclosed the complete, full-length amino acid sequence of the protein encoded by the claimed gene, whereas here the art contained not even a partial amino acid sequence of the NAIL-encoded protein (p38). BIO proffered one unique argument in support of the patentability of Amgen’s claimed gene: that the Board’s method for determining obviousness was contrary to statute, since it depended on the obviousness of the "way" in which the NAIL gene was isolated, and the statute clearly states that "[p]atentability shall not be negatived by the manner in which the invention was made." BIO’s brief also emphasized the policy considerations behind overturning the Board and the negative consequences to the biotechnology industry should the Federal Circuit refuse to do so. BIO argued that, applying the Board’s test for obviousness, almost all biotechnology inventions (and many chemical ones) could be considered obvious and that this threatened innovation.

While most attention has been focused on the obviousness question, the Board’s written description decision may be at least as important, since it presents a question not yet squarely put to the Federal Circuit. The Board held that Amgen was not entitled to a claim to an isolated nucleic acid encoding a protein having 80% identity to the disclosed amino acid sequence and that bound to CD48. Amgen’s specification disclosed the amino acid sequence of the protein encoded by the NAIL gene, as well as domains of the protein (signal peptide, extracellular domain, transmembrane domain, and cytoplasmic domain), including the portion of the protein that bound to CD48 (amino acids 22-221). The specification also disclosed conservative substitutions of these sequences, in addition to deletions, insertions, and fusions. These teachings were generic, however, and no specific amino acid sequence variants were disclosed. The Board held that the absence of any specifically-disclosed variants was a failure to satisfy the written description requirement and upheld rejection on these grounds. As Amgen pointed out, however, this determination was directly contrary to the Written Description Guidelines promulgated by the Office on January 6, 2001 (Example 14), as well as the more recently-revised set of Revised Training Materials (Example 11B) (see "An Analysis of the New Written Description Training Materials – DNA Hybridization & Percent Identity"), and the Board offered no explanation other than that the Guidelines did not constitute a "rigid rule" that the Board was compelled to follow.

Amgen argued that its specification contained sufficient disclosure to satisfy the written description requirement and was in compliance with both sets of examination guidelines. Amgen argued that it had disclosed a correlation between structure and function — CD48 binding to amino acids 22-221 — as required under Enzo Biochem v. Genprobe, and that the sequence identity limitation of 80% defined the claimed genus of related species sufficiently for the skilled artisan to understand that Kubin was in possession of the invention throughout its entire scope. The essence of Amgen’s argument is succinctly expressed in two paragraphs:

The Board’s requirement for a further identification of which particular amino acids are required for binding amounts to nothing less than imposing a per se requirement that an adequate description of protein variants must be presented solely in terms of structure – a rigid approach to §112 that this Court has rejected. Indeed, "there is no per se rule that an adequate written description of an invention that involves a biological macromolecule must contain a recitation of known structure." Falkner, 448 F.3d at 1366; see also Capon v. Eshhar, 41 8 F.3d 1349, 1357 (Fed. Cir. 2005) (the descriptive text required varies with the nature and scope of the invention and the state of knowledge in the field); Univ. of Rochester v. G.D. Searle & Co., 358 F.3d 916, 927-28 (Fed. Cir. 2004) (applicants have flexibility in how they opt to describe their invention). Nor is there any requirement that the specification expressly identify which sequences fall outside the scope of the claim. See Vas-Cath Inc. v. Mahurkar, 935 F.2d 1555, 1566 (Fed. Cir. 1991) (court erred by applying a legal standard that requires the drawings relied upon for §112, ¶1 support to necessarily exclude all diameters other than those within the claimed range).

To require patent applicants to enumerate each and every amino acid that can or cannot be altered within the genus, as the Board would require, ignores the high level of skill that exists in the art of biotechnology, the very same high level of skill that the Board recognized in its obviousness analysis. Indeed, it would place an unduly onerous burden on the biotechnology industry to require a level of specificity that is unnecessary for skilled artisans to understand whether an applicant actually invented what is claimed. And it is unwarranted by the Court’s case law, which specifically endorses a flexible approach. See Rochester, 358 F.3d at 927-28. Here, the descriptive text conveys to those of ordinary skill that Appellants have in fact invented the NAIL-peptide variants recited in claim 73. This is all the law requires.

While the Federal Circuit has developed its written description jurisprudence in University of California v. Eli Lilly, Enzo, and University of Rochester v. G.D. Searle generally in the context of patent infringement litigation, the Patent Office has applied its Guidelines to effectively preclude an applicant from claiming "conservative substitutions," on the basis that there was no disclosure of a "representative number of species." (Of the 8,367 issued U.S. patents reciting "isolated" and "nucleic acid" in the claims, only 20 contain the term "conservative substitution.") It has become clear that an applicant could never disclose a sufficient number of substitutions that the Office would consider "representative" based on the type of generic disclosure set forth in Kubin’s specification, and that it was impractical if not impossible to comply with the Office’s requirements. The Federal Circuit has not spoken on this aspect of how the Office has applied its written description jurisprudence (which continues to have its detractors on the Court). The Office has extended the CAFC’s requirement that structural domains important for biological activity be identified, to require that an applicant identify which amino acid residues can be modified and which cannot. This is a clear extension of the analysis set forth in Eli Lilly that has no support in any Federal Circuit decision. Yet, the Office routinely refuses to allow claims containing "conservative substitutions" within their scope. In re Kubin puts the question squarely before the Federal Circuit for the first time, and perhaps this will be the occasion for the CAFC to finally review en banc the law of written description as it has developed for the past 12 years.

The Patent Office brief is currently due on July 21st.
In re Omeprazole Patent Litigation (Fed. Cir. 2008)

June 11, 2008

By Donald Zuhn —

Yesterday, the Federal Circuit affirmed the determination by the District Court for the Southern District of New York that Defendants-Appellees Mylan Laboratories, Inc., Mylan Pharmaceuticals, Incorporated, Esteve Quimica, S.A., and Laboratorios Dr. Esteve, S.A. (Mylan) did not infringe U.S. Patent Nos. 4,786,505 and 4,853,230, which relate to oral pharmaceutical preparations for omeprazole. Omeprazole is the active ingredient in Prilosec®, which is marketed by Plaintiffs-Appellants Astrazeneca, AB, Aktiebolaget Hassle, KBI-E, Inc., KBI, Inc., and Astrazeneca LP (Astrazeneca) for the treatment of gastric and duodenal ulcers, and which acts by inhibiting the production of gastric acid.

Astrazeneca developed the omeprazole oral formulation claimed in the ‘505 and ‘230 patents in order to overcome formulation problems with omeprazole resulting from the compound’s susceptiblity to degradation in acid-reacting and neutral media, and sensitivity to heat, organic solvents, moisture, and light. In particular, the claimed oral formulation includes, inter alia, a core containing omeprazole and an alkaline reacting compound (ARC).

Seeking approval to market a generic version of Astrazeneca’s omeprazole formulation, Mylan filed an Abbreviated New Drug Application (ANDA) with the FDA. Mylan’s formulation includes an inert sugar/starch core with an active coating of omeprazole, talc, and hydroxypropyl methylcellulose.

In response to Mylan’s ANDA filing, Astrazeneca filed suit for infringement of the ‘505 and ‘230 patents. Astrazeneca similarly filed infringement suits against a number of other generic drug manufacturers seeking to market generic omeprazole formulations. These suits were consolidated with the action against Mylan in a multi-district litigation, and then tried in two waves.

During a 42-day bench trial, both Astrazeneca and Mylan presented evidence as to whether Mylan’s formulation contained an ARC in the active core region, as required by the claims. In particular, Astrazeneca argued that the talc in Mylan’s formulation was alkaline and that the source of this alkalinity was carbonates (i.e., the use of talc introduces carbonates into the active drug layer, and these carbonates are the ARCs required by the claims). Astrazeneca’s expert performed tests that indicated that carbonates were present in Mylan’s talc, and that these carbonates were the source of the alkalinity of the talc. Mylan countered with tests that indicated that their talc contained no detectable amount of carbonates. After weighing the competing evidence, the District Court determined that Astrazeneca failed to prove that Mylan’s talc contained carbonates, and found for Mylan on the issue of infringement.

On appeal, the Federal Circuit rejected each of Astrazeneca’s arguments for reversal. The CAFC first rejected Astrazeneca’s argument that the District Court had applied the wrong legal standard (i.e., something higher than a preponderance of the evidence), determining that the District Court "knew, understood, and applied the proper standard of proof." The Federal Circuit next rejected Astrazeneca’s argument that it had met its burden of proof since the District Court had "ignored vast amounts of evidence that showed the presence of carbonates in the talc." The CAFC, however, noted that such an argument "amounts to mere disagreement with the court’s factual findings, which cannot serve as a basis for reversing the court." As a result, the Federal Circuit affirmed the District Court’s finding of noninfringement.

In re Omeprazole Patent Litigation (Fed. Cir. 2008)
Nonprecedential disposition
Panel: Circuit Judges Lourie, Bryson, and Gajarsa
Opinion by Circuit Judge Lourie
Will Biotechnology Solve the World Food Crisis?

June 11, 2008

By Kevin E. Noonan —

The current crises in energy and food have followed eerily similar paths. The founding of OPEC and the exponential rise in crude oil prices during and after the 1973 Arab-Israeli conflict produced a short-lived emphasis in the U.S. with fuel efficiency and smaller automobiles. These were predominantly imported from Japan and U.S. automakers were unable to compete despite government efforts to encourage conservation, such as mandated fuel efficiency standards, "gas guzzler" taxes, and the 55 mph speed limit. But during the 1980’s and 1990’s, as the relative cost of gasoline in the U.S. fell, U.S. automakers and consumers returned to bigger automobiles, particularly SUVs, as safety and room for suburban soccer moms and their broods were more important considerations than fuel efficiency. Indeed, the small trend towards more fuel-efficient cars since the turn of the century was motivated more by the threat from greenhouse gases and global warming than fuel costs per se. Until recently.

Similarly, the last time world food supplies were threatened by world population growth was the 1960’s, and the response was "The Green Revolution," a combination of technology transfer and agricultural subsidies by individual Western governments, including our own and institutions like the World Bank. These efforts were so successful that by the 1980’s an American government official scoffed at the idea that poor and developing nations should be concerned with local agriculture when they could just "buy American."

But today the world food supply is dwindling as an increasing number of the increasing populations in countries like China and India are becoming prosperous enough to pursue a greater percentage of the food supply. This has led to food riots in some countries and calls for increased government cooperation and subsidies for food. As reported in a May 18th article in The New York Times, the world may soon reap what it has sown over the past twenty years, as a result of severe neglect of the infrastructure research and development efforts in countries around the world (see "World’s Poor Pay Price as Crop Research Is Cut"). The Times article documents how research institutions like the International Rice Research Institute in the Philippines and the International Maize and Wheat Improvement Center in Mexico, remnants of the Green Revolution efforts, have suffered years of underfunding and neglect. Ironically, these institutes and others have made scientific developments in insect resistance and increased yields that could address some of the causes of reductions in food supply, but don’t have the funds to transfer the technology to the farmers, mostly impoverished, that most need it. One example discussed in the article is the brown plant hopper, a rice pest that threatens rice harvests throughout Asia. Scientists at the Rice Institute "have identified 14 genetic traits that could help rice plants survive" infestation by this pest, but there are no funds to support the work of transferring these traits into the most common rice varieties. Staffing has been drastically cut (from 5 entymologists supervising 200 employees to 1 entymologist with a staff of 8) and the physical plant of the institute neglected. A similar situation exists in the Maize and Wheat Institute in Mexico, where scientists have developed drought-tolerant corn that could be used in Africa and disease-resistant wheat that could be grown in parts of Asia. But without funding, these new varieties cannot be sent to the places that most need them.

And while Western governments are awakening to the problem, they have not reversed a decades-long trend to reduce agricultural aid. As cited in the article, the U.S. under the Bush Administration has slashed 75% of the monies this country gives to global efforts (and the researchers manning those efforts) to improve crops grown in poor countries. What makes the situation worse is the penny-wise/pound foolish nature of American policies, since at the same time the Administration has asked Congress for an "extra" $770 million in food aid for poor countries. The Times sets forth a series of informative graphs showing the decline in agricultural aid over the past 20 years (click on graphs to enlarge).

Agricultural support from the World Bank, for example, has dropped from $7.7 billion in 1980 to 2 billion in 2004 (although this trend may be reversed under the new President, Robert B. Zoellick, who has proposed doubling agricultural lending to Africa). On the whole, the article states that Western countries have reduced agricultural aid from $6 billion in 1980 to $2.8 billion in 2006; U.S. support in that time frame has fallen from $2.3 billion to $624 million according to the Times.

The frightening reality is that the food supply is always finely balanced between agriculture and nature i.e., pests and diseases that affect yield, much like the constant battle between disease-causing microorganisms and antibiotics. Traditional plant breeding programs, because they can take several generations or growing seasons to establish useful traits are more vulnerable to variations in support and effort and operate best when the research is sufficient to stay abreast if not ahead of diseases, pest, environmental changes, and other yield reducing phenomenon. This is precisely what the world has not done over the past 25 years, and one of the reasons why worldwide agriculture is lagging behind population growth for the first time in more than a generation. As Robert S. Ziegler, director general of the Rice Institute is quoted in the article as saying, "[c]utting back on agricultural research today is pure folly."

This is where biotechnology might provide an antidote. One of the advantages of biotechnology as compared with traditional agricultural research is that it can be more easily targeted and new traits more rapidly introduced, as a consequence inter alia of being able to assess genotype as well as phenotype. The biotechnology approach also has the benefit of being part of private enterprise, which can avoid the bureaucratic and political inertia associated with government-run programs. The fruits of agricultural biotechnology can also have a plurality of applications, so that applying the technology to profit-making ventures can subsidize technology transfer to countries without the ability to afford it. (In some ways this is already happening in the pharmaceutical industry, where drug pricing is much lower even in developing countries like Brazil as a result of government policies that force Western drug companies to provide lower drug prices. Ultimately, the differential costs are borne by Western consumers more able to pay the full price.) Under these circumstances, initiatives like the ones announced by Monsanto last week, pledging to provide pest-, disease-, and drought-resistant varieties of important crop species may become an important solution to the world food problems.

Only the naïve would not recognize the potential for abuses under a system where a significant component of global food technology is in private hands. But the reality is that biotechnology provides the only known solution with the potential to alleviate the results of decades of neglect of more traditional agricultural research in a time frame short enough to make a difference between starvation and survival for the world’s poorest inhabitants. It would be unconscionable to forego the potential of biotechnology in these efforts.

For additional information on this topic, please see:

• "Monsanto Moves to Address World Food Shortages," June 4, 2008
USPTO News: New Appeals Rules Published

June 10, 2008

By Donald Zuhn —

As we reported yesterday, the U.S Patent and Trademark Office published a notice in the Federal Register today setting forth amended rules of practice before the Board of Patent Appeals and Interferences (BPAI) in ex parte appeals (new appeals rules). The lengthy 41-page notice (73 Fed. Reg. 32938) is broken up into six sections:

• Background (page 1 of the notice), which summarizes the Office’s rationale and objectives in amending the appeals rules;

• Explanation of New Rules (pages 1-12), which, as the heading suggests, provides an explanation for each of the changes to the rules;

• Changes Made to Rules as Proposed (pages 12-18), which shows how the new appeals rules as published in today’s notice differ from the appeals rules as proposed in the Office’s July 2007 notice of proposed rulemaking (additions to the proposed rules are indicated by brackets and deletions are indicated by braces);

• Discussion of Comments (pages 18-33), which provides the Patent Office’s answers to the 109 comments it received;

• Rulemaking Considerations (pages 33-36), in which the Office certifies that the new appeals rules satisfy rulemaking considerations of the Administrative Procedure Act, Regulatory Flexibility Act, Executive Orders 13132 and 12866, and Paperwork Reduction Act; and

• List of Subjects in 37 CFR Part 41 (pages 36-41), which sets forth the text of the amended portions of 37 C.F.R. Chapter 1, part 41.

According to the notice, the new appeals rules were needed to address a rising number of ex parte appeals. In particular, the Board received 4,639 ex parte appeals in FY 2007 — an increase of more than 1,000 appeals from FY 2006 — and the Office expects the Board to receive more than 6,000 ex parte appeals in FY 2008. Thus, the Office’s goal was to amend the rules in such a way that the Board would be better able to handle the increasing number of ex parte appeals in a timely manner.

The notice indicates that "[a] major objective of the amended rules is to avoid unnecessary returns to examiners by the Appeals Center and the Board, along with the resulting delays in application and appeal pendency." The Patent Office contends that the requirements set forth in the new appeals rules are more objective, and as a result, "both appellants and examiners will have a better understanding of what is required, thereby minimizing, if not eliminating, a need to hold appeal briefs defective."

In support of the new appeals rules, the Office argues that a number of the changes to the rules have been modeled after the Federal Circuit rules. In addition, the Office notes that some of the changes were made because the old appeals rules "turned out in practice to be too subjective." As one example, the notice states that the requirement for a summary of the invention has been replaced with an analysis of the claims and drawings (and means or step plus function analysis if relevant).

According to the notice, one other objective of the new appeals rules is improved appellant briefing. The Office contends that the 30-page limit for appeal briefs will help accomplish this objective by promoting "concise and precise writing." While the 30-page limit excludes the statement of the real party in interest, statement of related cases, table of contents, table of authorities, status of amendments, jurisdictional statement, signature block, and appendix, it will cover a number of sections required under the new appeals rules. These sections include a "statement of facts," in which the appellant must set out the material facts relevant to the rejections on appeal, and an "argument" section, in which the appellant must explain why the examiner is believed to have erred as to each rejection to be reviewed. In the latter section, the appellant must "address all points made by the examiner with which the appellant disagrees and must identify where the argument was made in the first instance to the examiner or state that the argument has not previously been made to the examiner."

One other change to the new rules is the promulgation of new Rule 41.56, which allows for the imposition of sanctions against an appellant who fails to comply with an applicable rule.

As we noted in our report yesterday, the new appeals rules will apply to any appeal briefs filed on or after December 10, 2008.

While the new appeals rules are unlikely to have the impact the new continuation and claims rules would have had if allowed to stand or the impact the IDS or alternative claiming rules packages will have when (or if) the Office publishes final rules, Cantor Fitzgerald Vice President David Boundy (at left) sent us a note earlier today to let us know that he nevertheless found the new appeals rules to be quite problematic. In addition to taking issue with the manner in which the Office "answered" a number of comments, Mr. Boundy also had problems with the section on Rulemaking Considerations.

With respect to the Office’s answers, Mr. Boundy argued that the Office improperly paraphrased comments and then provided answers to the paraphrased comment rather than the actual comment. He also contended that the Office made up facts out of thin air (e.g., stating, without any factual basis, that it takes only "10 to 15 minutes" to generate a Table of Contents and Authorities for an appeal brief). Mr. Boundy further chastised the Office for ignoring comments that pointed out that the Federal Circuit permits the skipping of page numbers in the appendix (thus reducing the time required to prepare the appendix), and instead, adhering to rules that require an appendix to begin at page 1 and be consecutively numbered to the end. Foreseeing the problems such a rule will cause, he offered a prayer for "the appellant who needs to insert an additional page in the last few days before filing the brief."

Mr. Boundy also found fault with the Office’s "attempts" to comply with the Paperwork Reduction Act and Executive Order 12866. In particular, he noted that even though substantial issues had been raised under the Paperwork Reduction Act and Executive Order 12866, "the PTO simply brushed the issues aside with no comment, except to baldly assert that the Appeal Rule imposes zero cost of compliance and zero sacrifice of rights."

Mr. Boundy concluded by stating that:

Since 2001, the PTO has regarded rules of procedure as expendable, to be ignored when constraining PTO action but enforceable when applicable to constrain applicants, and Due Process is something for dewey-eyed foreigners. This Notice of Final Rulemaking appears to continue the trend.
Quanta Computer, Inc. v. LG Electronics, Inc. (2008)

June 9, 2008

By Kevin E. Noonan —

The Supreme Court handed down its opinion in Quanta Computer, Inc. v. LG Electronics, Inc. today, deciding a question of patent exhaustion in the sale of computer components. The decision, strengthening the patent exhaustion principle, was not really a surprise for a number of reasons. First, it was consistent with Supreme Court precedent, most particularly United States v. Univis Lens Co., 316 U. S. 241 (1942). Second, the decision is in keeping with the Supreme Court’s longstanding antipathy to patent "monopolies" and anything that would result in extending them outside their most limited scope. Finally, of course, the case represented another opportunity to reverse the Court of Appeals for the Federal Circuit; the Supreme Court has spent the last decade or so in establishing its own supremacy in patent law at the expense of whatever consistency the Federal Circuit has attempted (rightly or wrongly) to impose.

The case involved sales by Quanta and the other defendant computer makers of computers comprising both Intel and non-Intel produced components. LG Electronics, who licensed the patents-in-suit (U.S. Patent Nos. 4,939,641; 5,379,379; and 5,077,733) to Intel, imposed a condition on its licenses with Intel that sales were not authorized to third parties that would mix Intel and non-Intel components, and further that Intel was under an affirmative obligation to inform its customers that such uses were not licensed. The patents-in-suit claimed methods for organizing read/write requests in computer cache and random access memory (the ‘379 patent); methods for prioritizing access of peripheral devices to the microprocessor via the computer bus (the ‘733 patent); and a system for "ensuring that the most current data are retrieved from main [RAM] memory by monitoring data requests and updating main memory from the cache when stale data are requested" (the ‘641 patent). It was undisputed that Quanta and the other defendants purchased patented microprocessors from Intel that fell within the scope of the LG patents, that they were aware of the restrictions and limitations placed on their use of these components by the license between LG and Intel and that the defendants sold computer systems comprising Intel components operatively linked to non-Intel components. Although the District Court granted summary judgment in favor of Quanta, the Federal Circuit reversed in part and remanded, on the grounds that method claims were not subject to patent exhaustion or, in the alternative, that LG had not licensed Intel to sell components for use in computers having both Intel and non-Intel components.

In its decision reversing the Federal Circuit, a unanimous Court (in an opinion written by Justice Thomas) settled one unsettled question of patent exhaustion and reinforced its test for calculating the extent of the doctrine. Directly reversing the Federal Circuit, the Court held that method claims are not exempt from patent exhaustion. Citing previous Supreme Court cases that "rest on solid footing" (including Ethyl Gasoline Corp. v. United States, 309 U.S. 436 (1940), and Univis), the opinion asserted that it had never treated composition and method claims differently, applying the "substantial embodiment" test to apply the patent exhaustion principle to method claims. The reasoning mirrored in some ways the District Court’s reasoning in University of Rochester v. G. D. Searle on the composition/method distinction: if method claims were not subject to exhaustion, all patents would contain (or all patent families would contain) method claims that could be used to coerce royalty payments otherwise exhausted for composition claims by sales of a patent-protected item. The Supreme Court (reasonably) concluded that patent exhaustion must apply to method claims to prevent such shenanigans (characterized by the Court as an "end-run around exhaustion") from negating the value of the doctrine to the public.

The Supreme Court reiterated the test for whether exhaustion applies that it enunciated in Univis: sales that "substantially embody" the patents in suit will be sales that exhaust the patent right to obtain royalties. The Univis case involved sales of eyeglass "blanks" for making patented compound lenses, and the products sold by the alleged infringers were the final eyeglasses containing lenses ground from the blanks sold by the patentee. In Univis, the Court opined (albeit in an action brought by the United States under the antitrust laws, not the Patent Act) that the lens blanks embodied essential features of the patented lenses and thus sales of the blanks exhausted patent rights in the finished lenses.

Here, the Supreme Court concluded that the components at issue, microprocessors and chipsets, "substantially embodied" the system and method claims of the patents-in-suit. It analogized these components with the lens blanks in Univis, which it asserted "did not fully practice the patents at issue" because they needed to be ground into lenses, here the patented microprocessors and chipsets did not "function at all" until they were assembled into the final product (i.e., the computer comprising non-Intel components). "If [the opinion states], as in Univis, patent rights are exhausted by the sale of the incomplete item, then LGE has no postsale right to require that the patents be practiced using only Intel parts." The Court rejected the three LG arguments that attempted to distinguish this case from Univis. First, according to LG, Univis is properly limited to cases where the products "contain all the physical aspects needed to practice the patent." Second, this case can be distinguished from Univis because there was no "patentable distinction" between the lenses and lens blanks in Univis, and there are such distinctions here (inter alia, the existence of multiple patents for the alleged infringing articles). Finally, LG invoked Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961) for the countervailing principle that "combination" patents should not be exhausted by the sale of one component of the combination.

On the contrary, the Supreme Court found Univis controlling. The "only reasonable and intended use [of the microprocessors and chipsets] was to practice the patent," said the Court, just as the only "reasonable and intended use" of the lens blanks in Univis was to make the patented eyeglasses. Moreover, the microprocessors and chipsets embodied the essential features of the patented invention, since all that was required was to attach them to other conventional computer components in conventional ways (much as the lens blanks in Univis were converted to lenses using conventional grinding techniques not encompassed by the patent claims). (Interestingly, the Court noted that Quanta was limited to using such conventional methods because the internal structure of the Intel microprocessors and chipsets were protected by Intel as trade secrets, and Quanta could not modify them. "Intel all but practiced the patent itself by designing its products to practice the patents, lacking only the addition of standard parts.") Finally, the Court rejected LG’s reliance on Aro, distinguishing that case as involving replacement of a part of a combination and because Aro is limited to claims relying on the combination of elements and not any individual component of the combination.

Finally, the Supreme Court addressed the question of whether the license terms precluded application of the exhaustion doctrine and determined they did not. Important in the Court’s determination was that the license agreement did not contain the preclusive condition; a separate "Master Agreement" between the parties recited that provision. But "Intel’s authority to sell its products embodying the LGE Patents was not conditioned on the notice [that the mixed combination of components was an unauthorized use] or on Quanta’s decision to abide by LGE’s directions in that notice," because breach of the provisions of the Master Agreement precluding sale of Intel microprocessors and chipsets to third parties who combined them with non-Intel components did not constitute a breach of the licensing agreement.

The decision has important ramifications for biotechnology patent claims. There are two immediately-evident examples: cases where a patentee having method claims and composition claims limits by so-called "label license" the uses for a patented article; and cases where a patented article has the biological property of replication, where the license precludes use of replicates of the article after purchase. An example of the first type of situation are the limits placed on the practice of the polymerase chain reaction, based on patents to the amplification method and the thermostable polymerase. The restrictions were of two types: first, licenses to the method were granted only upon purchase of the polymerase and use of an "authorized" thermocyler. Second, the method (and for that matter, the polymerase) was not licensed for diagnostic uses, only for scientific research. Under the patent exhaustion doctrine set forth in the Quanta opinion, it is likely that neither of these restrictions would be enforceable. First, although the polymerase has other uses that would not infringe the claims of the PCR method patent, it is likely that sale of the thermostable polymerase would exhaust the method claims as well, since the thermostable characteristic of the polymerase embodies essential features of the claimed invention. This is even more likely regarding the diagnostic use prohibition, since it represents the kind of restriction the Court prohibited in Adams v. Burke: "when a patented item is ‘once lawfully made and sold, there is no restriction on [its] use to be implied for the benefit of the patentee.’" Adams, 17 Wall. 453, 457 (1873).

The second type of post-sale restrictions important to biotechnology are those that restrict use of a patented article that is capable of self-replication; the most (in)famous cases of this type are the Monsanto herbicide-resistant seed cases, where the "label license" prohibits replanting seed produced using the recombinant seed purchased from the company. Monsanto has recently been the victor in a number of lawsuits against farmers who were found to have harvested recombinant seed from one years’ planting and replanted it the following year; the Federal Circuit has upheld lower court determinations that this constituted patent infringement as activity falling outside the scope of the license (see, e.g., Patent Docs post on Monsanto Co. v. David). Although critically important economically (since it is clear that Monsanto would not be in the seed business for very long in the absence of these restrictions), it is difficult to see how these restrictions could pass muster under the rubrics for applying patent exhaustion set forth in today’s Quanta decision. Certainly, it is without question that the seeds "embody" (figuratively and literally) the "essential features" of the patented invention, and thus the types of limitations Monsanto (and other seed producers) have placed on replanting of their patented seeds are unlikely to prevail if they try to assert them under the patent laws.

As has been the Supreme Court’s penchant in several recent cases, there is an important caveat to its holding to be found in a footnote; here, it is footnote number 7:

We note that the authorized nature of the sale to Quanta does not necessarily limit LGE’s other contract rights. LGE’s complaint does not include a breach-of-contract claim, and we express no opinion on whether contract damages might be available even though exhaustion operates to eliminate patent damages. See Keeler v. Standard Folding Bed Co., 157 U. S. 659, 666 (1895) ("Whether a patentee may protect himself and his assignees by special contracts brought home to the purchasers is not a question before us, and upon which we express no opinion. It is, however, obvious that such a question would arise as a question of contract, and not as one under the inherent meaning and effect of the patent laws.").

Monsanto also employs a contract to prohibit replanting of its seeds, and it is clear that a patentee could condition sale of a patented article on contractual provisions restricting its use. Such an arrangement has clear disadvantages as compared with patent law claims, including variations in application of the law (and enforceability of the agreement) state-by-state, as well as the potential to implicate the antitrust laws. But such agreements may be the only way remaining for biotechnology companies to protect their inventions in both the preceding types of situations.

The Quanta decision provides comfort to those many who have been battling seed producers over replanting restrictions. It is also yet another example of the value of patent rights being eroded by Supreme Court decisions that run counter to the determinations of the Federal Circuit.
USPTO News: Patent Office to Publish New Appeals Rules on Tuesday

June 9, 2008

By Donald Zuhn —

The U.S. Patent and Trademark Office announced today that new rules regarding ex parte appeals before the Board of Patent Appeals and Interferences will be published in the Federal Register on Tuesday, June 10, 2008. According to the Office’s press release, the new appeals rules "will add clarity and efficiency to the appeal process." Commenting on the new rules, USPTO Director Jon Dudas said that the "[b]y exchanging information and crystallizing the issues of the dispute earlier in the process," the new appeals rules will result in a "more streamlined appeal process and more efficient decision-making." In addition, the Office expects that the new appeals rules "will result in some appeals being resolved before they reach the Board."

Under the new appeals rules, examiners will no longer provide a response to the reply brief, new grounds of rejection will no longer be permitted in an examiner’s answer, and a supplemental examiner’s answer will no longer be permitted in response to a reply brief. In addition, the new appeals rules will clearly set forth the requirements for briefs, with some requirements being eliminated (e.g., the "summary of the claimed subject matter"). According to the Patent Office, the page limitations that will be imposed under the new appeals rules will "ensure concise and clear arguments."

The Office noted that the new appeals rules reflect changes made to the notice of proposed rulemaking that was published in the Federal Register on July 30, 2007. For example, the initial page limits set for the appeal brief and reply brief were increased by five pages to 30 and 20 pages, respectively.

The new appeals rules will go into effect on December 10, 2008, six months from the date the new rules are published in the Federal Register, and the new appeals rules will apply to all appeals in which an appeal brief is filed on or after that date.

Patent Docs will present a more comprehensive report on the new appeals rules following their publication on Tuesday.
Court Report

June 8, 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.

Lupin Limited et al. v. Sanofi-Aventis Deutschland GMBH et al.
2:08-cv-00258; filed June 5, 2008 in the Eastern District of Virginia

Declaratory judgment of non-infringement and invalidity of U.S. Patent No. 7,368,469 ("Use of Inhibitors of the Renin-Angiotensin System in the Prevention of Cardiovascular Events," issued on May 6, 2008), assigned to Sanofi-Aventis and licensed to King Pharmaceuticals, in conjunction with Lupin’s filing of an ANDA to manufacture a generic version of King’s Altace® (ramipril, used to lower cardiovascular risk and to treat hypertension). View the complaint here.

Cephalon, Inc. et al. v. Watson Pharmaceuticals, Inc. et al.
3:08-cv-00308; filed June 3, 2008 in the District Court of Nevada

Cephalon, Inc. et al. v. Watson Pharmaceuticals, Inc. et al.
1:08-cv-00330; filed June 2, 2008 in the District Court of Delaware

The complaints in these cases are substantially identical. Infringement of U.S. Patent Nos. 6,200,604 ("Sublingual Buccal Effervescent," issued March 13, 2001) and 6,974,590 (same title, issued December 13, 2005) following a paragraph IV certification as part of Watson’s filing of an ANDA to manufacture a generic version of Cephalon’s Fentora® (fentanyl citrate buccal tablets, used to treat breakthrough pain in adult patients with cancer). View the Delaware complaint here.

Sepracor Inc. et al. v. Sun Pharmaceutical Industries, Ltd.
2:08-cv-02705; filed May 30, 2008 in the District Court of New Jersey

Infringement of U.S. Patent No. 5,698,558 ("Methods for Treating Allergic Disorders Using Optically Pure (-)Cetirizine," issued December 16, 1997), licensed to UCB, following a paragraph IV certification as part of Sun’s filing of an ANDA to manufacture a generic version of UCB’s XYZAL® (levocetirizine dihydrochloride, used to treat seasonal and perennial allergic rhinitis). View the complaint here.

Otsuka Pharmaceutical Co., Ltd. v. Zydus Pharmaceuticals USA, Inc. et al.
3:08-cv-02675; filed May 30, 2008 in the District Court of New Jersey

Infringement of U.S. Patent No. 5,006,528 ("Carbostyril Derivatives," issued April 9, 1991) following a paragraph IV certification as part of Zydus’ filing of an ANDA to manufacture a generic version of Otsuka’s Abilify® (aripiprazole, used to treat bipolar disorder and schizophrenia). View the complaint here.

Sanofi-Aventis et al. v. Sandoz, Inc.
3:08-cv-02693; filed May 30, 2008 in the District Court of New Jersey

Infringement of U.S. Patent Nos. 5,338,874 ("Cis oxalato (trans 1-1,2-cyclohexanediamine) PT(II) Having Optically High Purity," issued August 16, 1994) and 5,716,988 ("Pharmaceutically Stable Preparation of Oxaliplatinum," issued February 10, 1998) following a paragraph IV certification as part of Sandoz’s filing of an ANDA to manufacture a generic version of plaintiffs’ Eloxatin® (oxaliplatin for injection, used to treat colorectal cancer). View the complaint here.
New Patent PDF Download Tool

June 8, 2008

By Donald Zuhn —

Rolf Claessen, a patent attorney with Kreisler Selting Werner in Cologne, Germany, recently contacted Patent Docs to let us know about a new tool he is offering on his useful IP portal, IP Newsflash. The new tool, Free Patent PDF Download, allows patent practitioners to download patents and published applications from, inter alia, the U.S., Europe, PCT, and Japan. IP Newsflash offers a number of other free IP tools, including a patent family search tool that compiles INPADOC data from the European Patent Office, a prior art search that utilizes an artificial-intelligence engine developed by IPCentury, and a depository of EP caselaw. In order to use the patent download tool, you will have to become a registered user at IP Newsflash, but the same holds true for another free patent download site that we find useful, FreePatentsOnline. We encourage Patent Docs readers to to give these tools a test drive and let us know what you think.
Conference & CLE Calendar

June 8, 2008

June 11, 2008 – Advanced Patent Licensing 2008: What You Need to Know Before Licensing Your Patent (Practising Law Institute) – San Francisco, CA

June 16, 2008 – Prior Art & Obviousness 2008: The PTO and CAFC Perspective on Patent Law Sections 102 & 103 (Practising Law Institute) – San Francisco, CA

June 17-20, 2008 – BIO International Convention (Biotechnology Industry Organization) – San Diego, CA

June 18-20, 2008 – Fundamentals of Patent Prosecution 2008: A Boot Camp for Claim Drafting & Amendment Writing (Practising Law Institute) – New York, NY

June 23, 2008 – Multilateral Patents (Law Seminars International) – San Francisco, CA

July 1, 2008 – Prior Art & Obviousness 2008: The PTO and CAFC Perspective on Patent Law Sections 102 & 103 (Practising Law Institute) – New York, NY

July 9-11, 2008 – Fundamentals of Patent Prosecution 2008: A Boot Camp for Claim Drafting & Amendment Writing (Practising Law Institute) – San Francisco, CA

July 16, 2008 – Patent Claim Construction Workshop (Law Seminars International) – Seattle, WA

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

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

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

***Patent Docs is a media sponsor of this conference or CLE
Espresso: New Technology Search Engine

June 6, 2008

By Donald Zuhn —

Dr. Michael Wisz, the Chief Technical Officer of Emerjent, Inc., recently contacted Patent Docs to inform us about Espresso, a new web-based search application that Emerjent is touting as "the premier emerging technology information search engine." The search engine, which requires a free registration to access, can be found here.

According to Emerjent’s website, Espresso differs from search engines such as Google and Yahoo because it relies on more focused searches of document collections that are "essential to tracking emerging technologies, especially those in biotechnology, chemistry, biology, and medicine." These collections include all issued U.S. patents and published U.S. patent applications; peer-reviewed research papers; NIH, NSF, and SBIR/STTR research grants; grant solicitation announcements; news stories from 1000 "trusted technology sources," and market and web search data. Emerjent notes that "[m]any of these documents are not even accessible from today’s web search engines." Emerjent also notes that because Espresso’s collection of documents is smaller, it can go beyond typical indexing to extract information about people, companies, and universities, and then map connections between these entities.

recent posts

about