Petribytes – November 2016

Quarterly takeaways from key Federal Circuit decisions affecting life sciences patent law

Written by Matthew Langer, PhD, partner in Cooley's patent counseling & prosecution group

Contract Manufacturer's Sale to Inventor: The Medicines Company v. Hospira

On rehearing en banc, the Federal Circuit in Meds. Co. v. Hospira, Inc., Nos. 2014-1469, 2014-1504 (Fed. Cir. July 11, 2016), held that a contract manufacturer's sale of manufacturing services to an inventor does not constitute an invalidating sale of the invention under 35 USC § 102(b) where neither title to nor right to market the invention's embodiments passes to the contract manufacturer.

The Medicines Company (TMC) asserted against Hospira a patent claiming "[p]harmaceutical batches … comprising bivalirudin" and having a specified pH and maximum impurity level and a patent claiming pharmaceutical batches comprising bilvalirudin and being prepared according to a specified process. The district court proceedings and appellate history are summarized below. TMC petitioned for rehearing en banc. The Federal Circuit granted TMC's petition, vacated its panel decision and reinstated TMC's appeal.

Relying on Pfaff v. Wells Elecs., Inc., 525 US 55 (1998), the Federal Circuit made clear that "the on-sale bar under 35 USC § 102(b) applies when, before the critical date [of one year prior to filing a patent application], the claimed invention … was the subject of a commercial offer for sale …." Meds. Co., slip op. at 17 (emphasis added). According to the Federal Circuit, "the mere sale of manufacturing services by a contract manufacturer to an inventor to create embodiments of a patented product for the inventor does not constitute a 'commercial sale' of the invention [because a] commercial benefit – even to both parties in a transaction – is not enough to trigger the on-sale bar of § 102(b); the transaction must be one in which the product is 'on sale' in the sense that it is 'commercially marketed'." Id. at 19.

The Federal Circuit underscored that under the facts of the case, the supplier "acted as a pair of 'laboratory hands' to reduce [TMC's] invention to practice", id. at 22, and the "sale was only of [the supplier's] manufacturing services [b]ecause [it] lacked title [and] was not free to use or sell the claimed products or to deliver the patented products to anyone other than [TMC], nor did it do so, id. As to Hospira's argument that finding no on-sale bar would improperly permit an inventor to "stockpile" an invention prior to the critical date, the Federal Circuit stated "not every activity that inures some commercial benefit to the inventor can be considered a commercial sale." Id. at 26.

Distinguishing Special Devices, Inc. v. OEA, Inc., 270 F.3d 1353 (Fed. Cir. 2001), where the Federal Circuit declined to adopt a supplier exception to the on-sale bar, the court reasoned that it did so "in the face of a concession by the inventor that the transaction between it and its supplier was a commercial sale." Meds. Co. at 30. The Federal Circuit cautioned, however, "[w]here the supplier has title to the patented product or process, the supplier receives blanket authority to market the product or disclose the process for manufacturing the product to others, or the transaction is a sale of product at full market value, even a transfer of product to the inventor may constitute a commercial sale under § 102(b)." Id. at 31.

The court remanded to the original panel all other issues for consideration in the first instance.

Read the full decision

Patent-Eligible Methods: Rapid Litigation Management v. CellzDirect

In Rapid Litig. Mgmt. Ltd. v. CellzDirect, Inc., No. 2015-1570 (Fed. Cir. July 5, 2016), the Federal Circuit vacated the district court's decision that patentee's method claims are patent-ineligible under 35 USC § 101 and remanded for further proceedings.

Patentee's claim 1 is representative:

  1. A method of producing a desired preparation of multi-cryopreserved hepatocytes, said hepatocytes being capable of being frozen and thawed at least two times, and in which greater than 70% of the hepatocytes of said preparation are viable after the final thaw, said method comprising:
    1. subjecting hepatocytes that have been frozen and thawed to density gradient fractionation to separate viable hepatocytes from nonviable hepatocytes,
    2. recovering the separated viable hepatocytes, and
    3. cryopreserving the recovered viable hepatocytes to thereby form said desired preparation ….

Celsis In Vitro, Inc., sued CellzDirect, Inc., and Invitrogen Corporation for infringement. Defendants moved for summary judgment of invalidity under § 101. The district court granted defendants' motion, relying on the Supreme Court's two-step test set forth in Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (2014). As to step one, the district court concluded that patentee's discovery that hepatocytes are capable of surviving multiple freeze-thaw cycles is a patent-ineligible law of nature. As to step two, the court determined that the patent lacks an inventive concept because the inventors simply reapplied a well-understood freezing process. Rapid Litig. Mgmt., slip op. at 5-6. Defendants appealed.

The Federal Circuit disagreed that patentee's claims are directed to a patent-ineligible concept. According to the Federal Circuit, the "end result" of the claims is "not simply an observation or detection" of the ability of hepatocytes to survive multiple freeze-thaw cycles, id. at 10, but instead "a desired outcome, e.g., [a] method of producing things", id. The Federal Circuit underscored that "the natural ability of the subject matter to undergo the process does not make the claim 'directed to' that natural ability", id., because "[i]f that were so, we would find patent-ineligible methods of, say, producing a new compound (as directed to the individual components' ability to combine to form the new compound), treating cancer with chemotherapy (as directed to cancer cells' inability to survive chemotherapy), or treating headaches with aspirin (as directed to the human body's natural response to aspirin)", id.

Read the full decision

Burden to Prove Obviousness in an IPR Remains with Petitioner: In re: Magnum Oil Tools

In In re: Magnum Oil Tools Int'l, Ltd., No. 2015-1300 (Fed. Cir. July 25, 2016), the Federal Circuit concluded that the Patent Trial and Appeal Board (PTAB) improperly shifted to the patentee the burden to prove nonobviousness and, accordingly, reversed the PTAB's judgment of invalidity.

McClinton Energy Group, LLC (Petitioner), petitioned the PTAB for inter partes review (IPR) of Magnum's patent, relating to plugs for sectioning wellbores during hydraulic fracturing. Petitioner argued that the patent's claims are obvious over a first primary reference and two additional references. Petitioner alleged that the patent's claims are obvious over a second primary reference and the additional references, incorporating by reference its arguments in connection with the first primary reference. The PTAB instituted review based on the second primary reference, but not the first primary reference, and concluded that the claims are obvious. Magnum requested rehearing, arguing that there was no evidence supporting the PTAB's finding that the second primary reference in combination with an additional reference provided a reasonable expectation of success. The PTAB denied Magnum's request. Magnum, slip op. at 10-11.

Petitioner and Magnum settled their dispute surrounding the patent. Magnum appealed the PTAB's decision. Petitioner filed a request to withdraw from the appeal, which the Federal Circuit granted, and the Patent Office (PTO) intervened under 35 USC § 143. Magnum, slip op. at 11.

The Federal Circuit determined that the PTAB faulted Magnum, the patentee, for allegedly failing to explain why Petitioner's arguments in connection with the first primary reference are inapplicable to the second primary reference and that the PTAB shifted to Magnum the burden to prove that the claims would not have been obvious. Id. at 20-21. In particular, the court determined that because Petitioner "failed to articulate a motivation to combine the specific teachings" of the second primary reference and additional references, id. at 22, the PTAB had "no basis for its conclusion that [Petitioner] had met its burden of proving by a preponderance of the evidence that the claimed invention would have been obvious", id. at 25. The Federal Circuit emphasized that although the PTO has broad authority to establish procedures for IPRs, "that authority is not so broad that it allows the PTO to raise, address, and decide unpatentability theories never presented by the petitioner and not supported by record evidence." Id. at 26.

Read the full decision

Prosecution Estoppel: UCB v. Yeda Research

In UCB, Inc., v. Yeda Research and Dev. Co., Ltd., No. 2015-1957 (Fed. Cir. Sept. 8, 2016), the Federal Circuit determined that patent applicant's presentation and subsequent cancellation of claims estopped it from arguing that its broad claim covers subject matter of claims canceled during prosecution.

The claims originally filed in patentee Yeda's patent application recited a "monoclonal" antibody. During prosecution, however, the original claims were limited to murine antibodies. Yeda subsequently added a new claim that likewise recited a monoclonal antibody. Yeda argued that unlike the original monoclonal-antibody claims, the new claim does not require that the monoclonal antibody be murine. The examiner rejected the new claim on the ground that the specification did not enable monoclonal antibodies from a broad range of species. In response, Yeda argued that the term "monoclonal" should encompass chimeric monoclonal antibodies; added additional claims specific to rat, hamster and human antibodies and chimeras thereof; and submitted an expert declaration opining that a skilled person was able to produce non-murine antibodies at the time of Yeda's invention.

The examiner withdrew the rejection of the new claim, but rejected the additional claims on the bases that they constituted new matter and were not supported in the specification. Yeda retained the new claim and canceled the additional claims. The new claim issued as the patent's claim 1.

UCB sued Yeda, seeking a declaratory judgment that UCB's product Cimzia® does not infringe Yeda's patent. The district court granted summary judgment of noninfringement, holding that claim 1 does not cover chimeric or humanized antibodies. Yeda appealed.

The Federal Circuit affirmed. Because Yeda canceled the additional claims, including those relating to human antibodies and chimeras, in response to the claims' rejection, the Federal Circuit agreed with the district court that Yeda "cannot now … recover claim scope that was yielded in order to obtain issuance of the patent". UCB, slip op. at 7-8. As to Yeda's argument that claim 1 was never narrowed during prosecution and that for this reason prosecution estoppel cannot apply to claim 1, the Federal Circuit reiterated "the general rule is that a patent applicant cannot later obtain scope that was requested during prosecution, rejected by the Examiner, and then withdrawn by the applicant." Id. at 9.

Read the full decision

Willfulness Post-Halo: WesternGeco v. ION Geophysical

In WesternGeco LLC v. ION Geophysical Corp., Nos. 2013-1527, 2014-1121, 2014-1526 (Fed. Cir. Sept. 21, 2016), the Federal Circuit vacated the district court's judgment denying enhanced damages for willful infringement and remanded for further proceedings consistent with Halo Elecs., v. Pulse Elecs., Inc., 579 US __,136 S. Ct. 1923 (2016).

WesternGeco sued ION for patent infringement. The jury found that ION infringed. WesternGeco moved for enhanced damages for willful infringement. The district court held that ION's infringement was not willful because ION's invalidity defenses rendered ION not objectively reckless, a requirement for willfulness under In re Seagate, LLC, 497 F.3d 1360 (Fed. Cir. 2007). WesternGeco appealed. The Federal Circuit unanimously affirmed the district court's denial of WesternGeco's motion for enhanced damages. WesternGeco petitioned for certiorari. The Supreme Court decided Halo, granted certiorari, vacated the Federal Circuit's decision and remanded.

On remand, the Federal Circuit explained that Halo rejected Seagate's "require[ment of] finding … objective recklessness before district courts may award enhanced damages", WesternGeco, slip op. at 7 (emphasis added) (quoting Halo, 136 S. Ct. at 1932); held that "subjective willfulness alone … can support an award of enhanced damages", WesternGeco, slip op. at 7; and left to the district court's discretion the question of enhanced damages.

The Federal Circuit reiterated that "[a]wards of enhanced damages … are not to be meted out in a typical infringement case, but are instead designed as a 'punitive' or 'vindictive' sanction for egregious infringement behavior", id. (alteration in original) (quoting Halo, 136 S. Ct. at 1932), and underscored that the "objective reasonableness of the accused infringer's positions can still be relevant for the district court to consider when exercising its discretion" to award enhanced damages, WesternGeco, slip op. at 8.

Lastly, the Federal Circuit made clear that Halo lowered to a preponderance of the evidence the standard of proving willfulness.

Read the Halo decision
Read the WesternGeco decision

Related Contacts
Matthew Langer Partner, New York