Federal Circuit Splits on Approach to Analyzing Graham Factors

In Merck Sharp & Dohme Corp. v. Hospira, Inc.,[1] the Federal Circuit affirmed the lower court’s ruling that the asserted claims of Merck’s U.S. Patent No. 6,486,150 (the ’150 patent) were obvious despite evidence of commercial success and copying by others. Concerned that the majority’s opinion constituted a shortcut around a proper Graham analysis, Judge Newman dissented and highlighted the court’s inconsistent application of secondary considerations of nonobviousness in the context of establishing a prima facie case of obviousness. The decision is also noteworthy for its clarification of the so-called blocking patent and the effect of such a patent on evidence of commercial success.

Ertapenem is an antibiotic known to be susceptible to degradation by hydrolysis of the lactam nitrogen (red circle) and dimerization at the pyrrolidine nitrogen (blue square). Although the prior art taught that ertapenem stabilized from dimerization, the claims at issue in the ’150 patent were directed to methods of manufacturing a formulation of the drug stabilized from both dimerization and hydrolysis.  Intending to manufacture a generic version of Merck’s ertapenem formulation, Invanz®, Hospira informed Merck that it had filed an abbreviated new drug application (ANDA) with a paragraph IV certification, and Merck sued for infringement.

At trial, the district court found that the asserted claims of the ’150 patent were obvious even though the prior art was silent regarding multiple steps of Merck’s claimed process, because the “recipe” was known in the art and the previously untaught steps were merely routine manufacturing steps.[2] Agreeing with the district court’s analysis, the Federal Circuit explained that the steps were simply “experimental details.” Thus, one skilled in the art and having knowledge of the principles in the prior art would have employed the steps to solve the problems of degradation of ertapenem.[3]

Having found that the district court did not commit legal error in ruling that the previously untaught steps “would have been discovered by routine experimentation while implementing known principles,” the court next addressed Merck’s objective evidence of nonobviousness.[4] The Federal Circuit agreed with the district court that Merck’s product enjoyed commercial success but determined that the lower court’s analysis that such evidence was weakened because of the existence of a blocking patent (a patent directed to ertapenem itself) was flawed.[5] The court acknowledged that it previously held that when a patent precludes market entry and has exclusive statutory rights stemming from FDA marketing approvals, objective evidence of commercial success can be discounted.[6] But here, the court noted that developers of new compounds often obtain a package of patents protecting the product, including compound, formulation, use, and process patents, and that such patents often result from a restriction requirement or from continuing improvements in a product or process. Accordingly, the court stated that multiple patents do not necessarily detract from evidence of commercial success of a product or process, which speaks to the merits of the invention, not to how many patents are owned by a patentee. Instead, the court clarified that commercial success is a fact-specific inquiry that may be relevant to an inference of nonobviousness, “even given the existence of other relevant patents.”[7]  Nonetheless, the majority did not find clear error in the district court’s holding that the evidence of commercial success would not overcome the weight of evidence that the asserted claims were obvious.[8]

Evidence of copying by others as indicia of nonobviousness was also presented to the district court. Specifically, the evidence indicated that Hospira, after multiple alternative processes failed to yield a stabilized ertapenem, resorted to a process that the lower court found would infringe the ’150 patent.[9] Here, Hospira argued that evidence of copying is not compelling in the context of ANDA cases because the Hatch-Waxman Act requires generic manufacturers to copy the approved drug. The Federal Circuit agreed with the lower court that the Act does not require the generic manufacturer to copy the New Drug Application (NDA) holder’s process of manufacturing the drug. In any event, the Federal Circuit agreed with the district court that the evidence of copying by Hospira of Merck’s patented process would not “overcome the weight of the competing evidence of obviousness.”[10]

In her dissenting opinion, Judge Newman admonished the Federal Circuit for its inconsistent approach to analyzing obviousness cases and argued for a return to the standard of evaluating obviousness recited in Graham and reconfirmed in KSR International Co. v. Teleflex, Inc., 550 U.S. 398, 399 (2007), that “established the factual premises and fixed the placement of burdens.”[11] She cited several cases in which the court, in her opinion, “recognized and correctly applied the Graham factors” and several cases as evidence of a “shortcut” analysis in which the court “converted three of the four Graham factors into a self-standing ‘prima facie’ case, whereby the objective considerations must achieve rebuttal weight.”[12] This analysis, according to Judge Newman, diminishes objective evidence to a rebuttal role and “distorts the placement and the burden of proof,” even though the court has previously said that the most probative evidence pertaining to obviousness may often be objective indicia and that they should be “considered as part of all the evidence, not just when the decision maker remains in doubt after reviewing the art.”[13] Because the district court stated that secondary indicia such as copying and commercial success “simply cannot overcome a strong prima facie case of obviousness,” Judge Newman would have remanded the case to the lower court for reconsideration under a proper Graham analysis, i.e., with the proper “analytic criteria under the four Graham factors.”[14]

This case is a reminder that the Federal Circuit’s approach to analyzing the Graham factors is not consistent and, according to at least Justice Newman, evidence of secondary considerations of nonobviousness needs to be part of all the evidence, not a rebuttal to the first three factors. The case also sets forth that the existence of a blocking patent or requirements of the Hatch-Waxman Act do not necessarily diminish evidence of commercial success or copying.


[1] Merck Sharp & Dohme Corp. v. Hospira, Inc., No. 2017-1115 (Fed. Cir. Oct. 26, 2017).
[2] Slip op. at 4.
[3] Id. at 9.
[4] Id.
[5] Id. at 10.
[6] Merck Sharp & Dohme Corp. v. Hospira, Inc. at 10 (citing Merck & Co. v. Teva Pharm. USA, Inc., 395 F.3d 1364, 1377 (Fed. Cir. 2005).
[7] Id. at 10-11. However, it is not clear whether the existence of FDA rights in combination with another patent would have diminished the evidence of commercial success.
[8] Id. (emphasis included).
[9] Id. at 5.
[10] Id. at 11 (emphasis added).
[11] Merck Sharp & Dohme Corp. v. Hospira, Inc., at 2-3 (Newman dissent).
[12] Id. at 3.
[13] Id. at 4 (citing Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1538-39 (Fed. Cir. 1983).
[14] Id. at 6.

The Federal Circuit Provides a Tutorial on Patent Venue

The Federal Circuit in In re Cray, Inc., Appeal No. 2017-129 (Fed. Cir. Sept. 21, 2017), has provided extensive guidance to district courts on the meaning of an alleged infringer’s “regular and established place of business” under the second prong of the patent venue statute, 28 U.S.C. § 1400(b). It granted a petition for a writ of mandamus to do so in order to carry out its mandate to bring uniformity to patent law. Slip op. at 6-7 (citing Panduit Corp. v. All States Plastic Mfg. Co., 744 F.2d 1564, 1574 (Fed. Cir. 1984); In re Queen’s Univ. at Kingston, 820 F.3d 1287, 1291 (Fed. Cir. 2016)).

Although § 1400(b) and its substantively identical predecessor statute date back to 1897 and have received numerous interpretations by federal courts of appeals, for almost the past three decades patent owners could sue alleged infringers wherever they did business under the general venue statute, 28 U.S.C. § 1391, rendering § 1400(b) null. See Allen Sokal, The Supreme Court, Reversing the Federal Circuit, Holds That “Residence” in the Patent Venue Statute Refers to Only a Domestic Corporation’s State of Incorporation (May 24, 2017). The Supreme Court resurrected § 1400(b), however, in TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 614 (overruling VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990)), by holding that § 1400(b) is the exclusive provision for determining venue in patent infringement suits. Consequently, alleged infringers sued in what they regard as unfavorable districts, such as, in this case, the Eastern District of Texas, or districts where the plaintiff/patent-owner maintains its principal place of business, are now moving under § 1400(b) to dismiss or to transfer venue. In In re Cray, the Eastern District of Texas denied the defendant’s motion to dismiss or transfer, and the defendant’s petition for a writ of mandamus provided the Federal Circuit an opportunity to expound on the requirements of § 1400(b) in a discussion that goes far beyond the facts of the case. Continue Reading

Intellectual Ventures v. Motorola: Use = Benefit for the Purposes of System Claims Infringement

On Sept. 13, 2017, the United States District Court for the Federal Circuit clarified the meaning of the term “use” as it applies to system claims in patent infringement actions. In doing so, the court held that an infringer must benefit from all elements of a system claim in order to infringe, reversing and remanding a finding of infringement.

Intellectual Ventures sued Motorola in the United States District Court for the District of Delaware for infringement of various claims of U.S. Patent Nos. 7,810,144 and 7,120,462. The ’144 patent (“File Transfer System for Direct Transfer Between Computers”) relates to the process of transferring computer files electronically from one computer to another, with claim limitations directed to a “communications device” capable of transmitting to an “authenticating device” and with the said authenticating device “configured to generate a delivery report that indicates a delivery event and a time of the delivery event.”

Motorola allegedly directly infringed this claim through customers’ use of the accused system to send text-plus-photo messages using multimedia messaging service centers (MMSCs). However, Motorola argued that Intellectual Ventures could not show Motorola’s directly infringing “use” of the “authenticating device configured to … generate a delivery report.” Continue Reading

A Cautionary Tale: IPR Petition Denied Based on Third-Party Submission

In Cultec, Inc. v. StormTech LLC, IPR2017-00777, Paper 7 (Aug. 22, 2017), the Patent Trial and Appeal Board (Board) denied an inter partes review because the same or substantially the same prior art or arguments were said to have been previously presented to the Patent Office during ex parte prosecution of the challenged patent by way of a third-party submission under 37 C.F.R.  § 1.290.[1] In addition to other disadvantages associated with third-party submissions, such as providing the patent applicant an opportunity to address the submitted art in an ex parte context, would-be petitioners also need to consider that such a submission could foreclose a future inter partes review. The Cultec decision (Decision) also highlights the unpredictability of any particular panel in exercising its discretion under 35 U.S.C. § 325(d) to deny a petition.[2]

In this case, the petitioner challenged claims 1-20 of U.S. Patent No. 9,255,394 (the ’394 patent) as obvious over primary reference Cobb in view of secondary references Fouss and/or Ellis (Decision at 7). The third-party submission was filed in the application that matured into the ’394 patent and presented Cobb for consideration by the examiner.[3] The submission stated that Cobb was cited in related U.S. patent application No. 14/175,477 (the ’477 application) in an office action dated Sept. 17, 2015, and that the statement of relevance presented in the office action “is adopted for this submission” (id. at 8-9, citing the third-party submission). The ’477 application matured into U.S. Patent No. 9,556,576 (the ’576 patent), and the ’576 patent and the ’394 patent and their underlying applications were said to disclose the same subject matter, as both applications were continuations of the same parent application and claimed priority to the same provisional application (id. at 9). Because the examiner of the ’477 application was also the examiner of the ’394 patent, the Board concluded that “the Examiner was well-aware of the Cobb reference and its specific disclosure” (id. at 9-10).  Continue Reading

Federal Circuit’s Concern Regarding PTAB ‘Panel-Stacking’ – Back To The Future?

In Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., 2017 U.S. App. LEXIS 15923, Circuit Judge Dyk, in a concurring opinion joined by Circuit Judge Wallace, questioned “whether the practice of expanding panels where the PTO is dissatisfied with a panel’s earlier decision is the appropriate mechanism of achieving the PTO’s desire for uniformity.” Id. concurring slip op. at 4. This question arose in view of the Patent Trial and Appeal Board (PTAB) convening an expanded panel to consider Broad Ocean’s request for rehearing in the underlying inter partes review regarding the original three-Administrative Patent Judge panel decision to deny joinder under 35 U.S.C. § 315(b), (c). The newly expanded panel set aside the original panel’s decision and permitted joinder.

The enlargement of a PTAB panel upon rehearing raises two questions. Is the PTAB authorized to expand an original panel after it issues its decision? And does such an expansion of the panel after it issues its decision raise due process issues? Both of these questions were in front of the Federal Circuit in In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc), overruled on other grounds by In re Bilski, 545 F.3d 943 (Fed. Cir. 2008).  Continue Reading

Visual Memory v. NVIDIA: The Importance of a Robust Written Description

Introduction

In Visual Memory v. NVIDIA (Fed. Cir. 2017), the Federal Circuit reversed the district court’s holding that Visual Memory’s U.S. Patent No. 5,953,740 is drawn to patent-ineligible subject matter. Instead, the court ruled that the ’740 patent claims an improvement to computer memory systems and is not directed to an abstract idea.

The ’740 Patent

At a high level, the ’740 patent describes a computer memory system that can be connected to different kinds of processors. The memory system has “programmable operational characteristics” based on characteristics of the processor; it includes several caches and a main memory (DRAM) connected to a bus. One cache can be programmed to store only code data, and another cache can be programmed to buffer data writes to the main memory only from the processor. The main memory can be programmed to selectively reopen either code or non-code data pages. (See ’740 patent abstract.) Figure 1 of the patent is copied below.

As shown in Figure 1, the memory system 10 includes a system memory (DRAM) 12, an internal cache 16, a pre-fetch cache 18 and a write buffer cache 20, each connected to bus 14. Access to DRAM 12 is controlled by DRAM controller 22. The data stored in system memory 12 can be divided into code data (instructions) and non-code data. The memory system 10 is designed for use with a host processor in combination with other bus masters or devices that compete with the host processor for access to the memory system 10. (See ’740 patent col. 3 lines 34-50.) Continue Reading

Federal Circuit Suggests Solution to Patent Owner’s Dilemma When Applicant for Biosimilar Product Refuses Discovery

In Amgen, Inc. v. Hospira, Inc., Appeal No. 2016-2179 (Fed. Cir. Aug. 10, 2017), the Federal Circuit suggested what an owner of a reference product suing an applicant for a biosimilar under the Biologics Price Competition and Innovation Act of 2009 (BPCIA) must do when the applicant refuses discovery that the patent owner needs to determine whether it has a good faith basis for suit. Neither the collateral order doctrine nor mandamus provides the solution.

Under the BPCIA, an applicant for a biosimilar product can piggyback on a reference biological product that FDA has approved by showing that “there are no clinically meaningful differences between the biological product and the reference product in terms of … safety, purity, and potency.” Slip op. at 3 n.1 (citing 42 U.S.C. § 262(l)(2)(A)-(B)). Under the head-spinning statutory patent dance addressed by the Supreme Court in Sandoz, Inc. v. Amgen, Inc., 137 S. Ct. 1664 (2017), the applicant must, inter alia, provide the patent owner (the sponsor of the reference product) a copy of the application “and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application.” Slip op. at 3 (citing 42 U.S.C. § 262(l)(2)(A)). Based on that information, the parties identify patents to be immediately litigated in a first phase of the litigation under paragraph (l)(3). Id.

Continue Reading

Regeneron Pharmaceuticals, Inc. v. Merus N.V.: The Federal Circuit Revisits the Defense of Inequitable Conduct

In Regeneron Pharmaceuticals, Inc. v. Merus N.V., No. 2016-1346, slip op. (Fed. Cir. July 27, 2017) (hereafter, “Slip Op.”), the Federal Circuit seems to have loosened the standards for finding a patentee culpable of inequitable conduct during patent prosecution. By affirming the district court’s finding of inequitable conduct, the court in Regeneron condones the use of circumstantial evidence arising during litigation to infer that the patentee had specific intent to deceive the Patent and Trademark Office (PTO) during prosecution. The opinion was authored by Chief Judge Prost and joined by Judge Wallach. Judge Newman dissented.

Inequitable Conduct

“Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent.” Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011). To show that an applicant engaged in inequitable conduct before the PTO, a party must show by clear and convincing evidence that “the applicant misrepresented or omitted material information with the specific intent to deceive the PTO.” Id. at 1287. This analysis requires a showing of both materiality of the misrepresentation and intent to deceive. Id. The defense is most often wielded as an assertion by the accused infringer that the patent applicant knowingly withheld a material prior art reference from the PTO during prosecution. Continue Reading

USPTO Report on Patent Eligible Subject Matter

 

On July 25, the USPTO published a new report titled “Patent Eligible Subject Matter: Report on Views and Recommendations From the Public.” The report attempts to synthesize public comments on the appropriate boundaries of patent eligible subject matter.

The report includes a section reviewing the historical development of patent subject matter eligibility in the U.S. This section includes a discussion of the Supreme Court’s Bilski, Mayo, Myriad and Alice decisions, as well as the Federal Circuit’s application of the Supreme Court’s framework. Continue Reading

The Federal Circuit Reverses a Hindsight Reconstruction of An Important Pharmaceutical Invention

In Millennium Pharmaceuticals v. Sandoz,[1] the Federal Circuit reversed the district court’s holding of obviousness of certain claims of Millennium-owned U.S. Patent No. 6,713,446 (the ‘446 patent), finding that the district court improperly applied the lead compound analysis and the inherency doctrine and clearly erred by rejecting objective indicia of non-obviousness.

The disputed claims of the ‘446 patent[2] are directed to Velcade®, a freeze-dried (lyophilized) formulation of D-mannitol N-(2-pyrazine) carbonyl-L-phenylalanine-L-leucine boronate (I) and methods of its preparation and reconstitution. Velcade is Millennium’s oncology product prescribed for multiple myeloma and mantle cell lymphoma. Compound (I) is a mannitol ester of bortezomib. The portion of the molecule depicted in red below identifies the ester linkage between bortezomib and the mannitol sugar. Continue Reading

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