United States: IP Update, Vol. 14, No. 8, August 2011 (Part 1)

Patents

Can Genes Be Patented?

NTP Patents Revisited

Baseless Infringement Allegations (by an NPE) Warrants "Exceptional" Case

Patent License Is Presumed to Cover Continuation Applications

Narrowing Claim Amendment Blocks Application of the Doctrine of Equivalents, Again

Previous Litigation Results in Court Hanging Up on Plaintiff Based on Collateral Estoppel

Federal Circuit Jurisdiction over State-Law Tort Claim

Eastern District of Texas Gives Generics a Headache

Second Circuit Dismisses $500M Telecom Antitrust Suit

Trademarks

Kimberly-Clark Finds a Soft Touch on Appeal

Lanham Act Attorneys' Fees Awarded in the Absence of Damages

Alleged Trademark Sublicense Assignable in Bankruptcy

Voluntarily Invoking Federal Jurisdiction Constitutes Waiver of Sovereign Immunity

Copyrights

eBay Abrogates Presumption of Irreparable Harm in Copyright Cases in Ninth Circuit

Ninth Circuit Adopts Lower Court's Use of Its Own "Blades of Chaos" to Filter Out the Unprotectable Elements of a Plaintiff's Copyright Infringement Claim

Copyright Infringement Suit Survives Dismissal Based on Proposed Amended Complaint

Trade Secrets

Personal Jurisdiction in Trade Secret Cases

Patents / Patent-Eligible Subject Matter

Can Genes Be Patented?
by William Gaede

It has long been held that inventions reflecting the "hand of man" may be patented. It has also long been established that products of nature, abstract principles, or natural phenomena may not be patented. Since the early 1980s, the United States Patent and Trademark Office (USPTO) has issued patents on isolated DNA sequences, but the issue of whether DNA sequence claims constituted patentable subject matter under 35 U.S.C. § 101 had not been tested fully in litigation. The U.S. Court of Appeals for the Federal Circuit has now concluded that while isolated DNA sequences may constitute patentable subject matter, a method that compares gene sequences does not. Association for Molecular Pathology v. U. S. Patent and Trademark Office, Case No. 10-1406 (Fed. Cir., July 29, 2011) (Lourie, J.) (Moore, J., concurring-in-part) (Bryson, J., concurring-in-part and dissenting-in-part).

In May 2009 various individuals, medical researchers and organizations represented by the American Civil Liberties Union filed suit challenging gene patents held by Myriad Genetics. The patent claims at issue were directed to isolated DNA sequences, methods of detecting BRCA mutations and methods of using cells transformed with mutant BRCA to screen for potential drugs. In the ensuing litigation, the U.S. District Court for the Southern District of New York struck down Myriad's patent claims, finding that they constituted unpatentable subject matter under § 101. Specifically, the district court concluded that the claims directed to isolated DNA encoding the BRCA1 or BRCA2 proteins (or fragments thereof) were directed to unpatentable subject matter because they claimed a product of nature. In doing so, the district court observed that products isolated from nature must possess "markedly different characteristics" from the product in nature to constitute patentable subject matter. Further, the district court concluded that DNA is "distinct in its essential characteristics from any other chemical found in nature [and its] existence in an 'isolated' form alters neither this fundamental quality of DNA as it exists in the body nor the information it encodes." The district court also found Myriad's method claims to be unpatentable abstract mental processes of comparing or analyzing two gene sequences and concluded that the claimed steps of analyzing and comparing failed to recite the specific transformative steps that are a hallmark of patentable subject matter. Finally, the district court found Myriad's cell-screening claims, which are directed to a method of identifying compounds useful in treating BRC-associated cancer by screening compounds against cells transformed with BRCA, also failed the transformation test because the transformative steps were mere data-gathering. Myriad appealed.

The Federal Circuit reversed-in-part and affirmed-in-part the district court ruling. Writing for the majority, Judge Lourie explained that, "[w]e reverse the district court's decision that Myriad's composition claims to 'isolated' DNA molecules cover patent-ineligible products of nature under §101 since the molecules as claimed do not exist in nature." Based on a "markedly different characteristics" standard articulated in Diamond v. Chakrabarty, the Court concluded that isolated DNA has "markedly different chemical characteristics" compared to corresponding native DNA.

In this case, the claimed isolated DNA molecules do not exist in nature within a physical mixture to be purified. They have to be chemically cleaved from their chemical combination with other genetic materials. In other words, in nature, an isolated DNA molecule is not a purified form of a natural material, but a distinct chemical entity. In fact, some forms of isolated DNA require no purification at all, because DNA can be chemically synthesized directly as isolated molecules.

As to the method claims, the Federal Circuit noted that in accordance with the Supreme Court's Bilski decision, whether a claim includes transformation still remains an important and useful clue to patentability of method claims, and explained that "Myriad's method claims directed to 'comparing' or 'analyzing' DNA sequences are patent ineligible; such claims include no transformative steps and cover only patent-ineligible abstract, mental steps." The claims do not specify any action prior to the step of "comparing" or "analyzing" two sequences; the claims just recite the one step of "comparing" or "analyzing." Moreover, those terms' plain meaning does not include Myriad's proposed sample-processing steps; neither comparing nor analyzing means or implies "extracting" or "sequencing" DNA or otherwise "processing" a human sample.

However, method claims directed to screening compounds with cells transformed with mutant BRCA were found to be patent eligible. Here, the Court found the necessary "transformation" in the claim's steps of "growing a transformed eukaryotic host cell" and "determining the rate of growth of said host cell."

Judge Moore filed a concurring opinion, distinguishing between sequence claims directed to isolated cDNA and isolated sequences that are identical to naturally occurring sequences, which she through would present a "much closer call." Judge Bryson dissented in part as to shorter or longer sequences that were isolated from nature, stating that such sequences would not constitute patentable subject matter.

Practice Note: Given the outcome, the parties are likely to petition the full Federal Circuit for en banc review and may ultimately petition the Supreme Court for review of this important decision.

Patents / Reexamination / § 112 and Claim Construction

NTP Patents Revisited
by Hasan Rashid

In two opinions deciding eight reexamination appeals, the U.S. Court of Appeals for the Federal Circuit blessed the U.S. Patent and Trademark Office's (USPTO's) § 112 review of originally issued claims appurtenant to a review of a priority claim but vacated what it considered to be an overbroad claim construction even under the "broadest reasonable interpretation" standard. In re NTP, Inc., Case Nos. 10-1243, -1254, -1263, -1274, -1275, -1276, -1278 (Fed. Cir., Aug. 1, 2011) (Moore J.); In re NTP, Inc., Case No. 10-1277 (Fed. Cir. Aug. 1, 2011) (Gajarsa, J.).

In these cases, the Court revisited the patent family central to the infamous NTP v. Research in Motion litigation. During the litigation, Research in Motion (RIM) requested reexamination of eight patents. In one of the opinions, the Court affirmed the Board of Patent Appeals and Interferences' (BPAI's) decision regarding the propriety of undertaking a § 112 written descriptive review to analyze a patent owner's priority claim and, in the other, remanded the case for further proceedings at the USPTO in view of what it concluded was an overbroad claim construction.

In the opinion by Judge Gajarsa, the Court sanctioned a review to determine the priority date of the patent, which shares a common specification with its parent, based on §112 written description. After affirming the BPAI's construction of the claim term "destination processor," the scope of which was found to not be supported by the parent, the Court turned to the issue of whether the priority date to which that claim was entitled could be reviewed. Under 37 C.F.R. §§ 1.552(a) and 1.906(a), reexamining originally issued claims for § 112 compliance is improper. Here, NTP unsuccessfully argued that this impropriety barred a priority review, because priority implicates a § 112 compliance review. NTP also argued that the common specification must support the claims simply because the USPTO issued the claims.

Judge Gajarsa found nothing in the patent statute or regulations prohibiting a priority review during reexaminations, noting that a priority review includes a review of § 112 with respect to a parent of the present application. To hold otherwise would hamstring the USPTO any time a patentee claimed an earlier priority date.

Addressing NTP's other argument, the Court explained that verification of priority in the present application is not presumed simply because the Manual of Patent Examining Procedure (MPEP) requires it. Rather, for a presumption to apply, a factual inquiry into the issue must have been made in the parent application. NTP failed to show that the examiner considered priority or even reviewed the parent application during original prosecution.

In the opinion by Judge Moore, the Court vacated what it considered the BPAI's overbroad constructions of the terms "electronic mail," "electronic mail message" and "electronic mail system" as inconsistent with even the broadest responsible construction standard. As the Court explained, under Philips, any claim construction, even one invoking the broadest reasonable interpretation, must begin with the claim language and rely on the specification to glean the understanding of one skilled in the art. As the Court explained, "[w]hile the board must give the terms their broadest reasonable construction, that construction cannot be divorced from the specification and record evidence". Using these tools, the Court narrowed the USPTO's construction and remanded the case.

Practice Note: Even though originally issued claims are not subject to § 112 review in reexamination, a reexamination requester may obtain § 112 review by relying on prior art having a date that requires a patentee to rely on an earlier priority date.

Patents / Sanctions

Baseless Infringement Allegations (by an NPE) Warrants "Exceptional" Case
by Isaac Crum

Affirming the district court's finding that plaintiff, Eon-Net's, infringement claims were objectively baseless and made in bad faith, the U.S. Court of Appeals for the Federal Circuit upheld sanctions totaling over $600,000 against Eon-Net and its attorneys. Eon-Net LP v. Flagstar Bancorp, Case No. 09-1308 (Fed. Cir., July 29, 2011) (Lourie, J.).

Eon-Net asserted that Flagstar Bancorp infringed three patents covering document processing systems that disclose a system and method for imputing information from a hard copy document, storing portions of the inputted information in memory and formatting the stored document information for use by a computer program. In pursuing its infringement claims against Flagstar, Eon-Net argued that Flagstar's processing of information entered on Flagstar's website infringed the asserted patents.

Flagstar filed a motion for summary judgment and a motion for sanctions—arguing that its website does not infringe, that Eon-Net's claims were baseless and that Eon-Net failed to investigate or identify allegedly infringing products. The district court granted both motions and held that the written description limited the asserted claims to processing information in hard copy documents. The district court also awarded Flagstar attorneys' fees and costs. After Eon-Net appealed this ruling, the Federal Circuit vacated and remanded the judgment "because the district court failed to afford Eon-Net notice and the opportunity to present its infringement and claim construction arguments during the briefing on the motions." The Federal Circuit held that "[w]ithout a full claim construction analysis, including a consideration of Eon-Net's claim construction arguments ... it was impossible to determine if Eon-Net's claim construction and infringement positions were without merit."

On remand, the district court permitted briefing and held a claim construction hearing. The district court then concluded that the key disputed terms were limited to information originating from a hard copy document. After the district court issued its claim construction, the parties entered into a stipulated order of non-infringement of the asserted patents. Afterward, the district court, finding the case "exceptional" under § 285 and finding that Eon-Net and its attorneys violated F.R. Civ. P. 11, awarded Flagstar sanctions and attorneys' fees and costs totaling over $600,000. Eon-Net and its attorneys appealed.

On appeal, the Federal Circuit affirmed the district court's claim construction limiting the scope of the asserted patents to information originating from hard copy documents. The Federal Circuit also affirmed the § 285 and Rule 11 sanctions, finding that the district court did not commit clear error in its exceptional case finding and did not abuse its discretion by imposing Rule 11 sanctions. The Court stated that "many varieties of misconduct can support a district court's exceptional case finding, including lodging frivolous filings and engaging in vexatious or unjustified litigation." The Court went on to find that the district court did not err in finding that Eon-Net brought the litigation in bad faith and that the litigation was objectively baseless—two requirements for sanctions under § 285 if there is no litigation misconduct or misconduct in securing the asserted patent. In so finding, the Federal Circuit agreed with the district court that Eon-Net's litigation tactics, its failure to engage in good faith in the claim construction process and the owner of Eon-Net's "lack of regard for the judicial system" all supported the district court's imposition of sanctions. In addition, the Federal Circuit, citing iLOR v. Google, found that because the "written description clearly refutes Eon-Net's claim construction, the district court did not clearly err in finding that Eon-Net pursued objectively baseless infringement claims." Finally, the Federal Circuit agreed with the district court's finding that Eon-Net's history of filing "nearly identical patent infringement complaints against a plethora of diverse defendants, where Eon-Net followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation" bore the "indicia of extortion." The Federal Circuit also agreed that Eon-Net acted in bad faith by "exploiting the high cost to defend complex litigation to extract a nuisance value settlement from Flagstar."

Patents / Licensing

Patent License Is Presumed to Cover Continuation Applications
by Babak Akhlaghi

The U.S. Court of Appeals for the Federal Circuit concluded that "where ... continuations issue from parent patents that previously have been licensed as to certain products, it may be presumed that, absent a clear indication of mutual intent to the contrary, those products are impliedly licensed under the continuations as well." General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., Case No. 11-1115 (Fed. Cir., July 8, 2011) (Linn, J.).

In 2004 and 2005, Leviton Manufacturing sued General Protecht Group, Inc. (GPG) for infringement of two U.S. patents. In 2007 the parties settled their case. The settlement agreement included a covenant not to sue, stating that Leviton covenanted not to sue GPG for alleged infringement of the patents. The settlement agreement also included a dispute resolution forum selection clause specifying that any dispute arising out of or relating to the agreement should be decided in the U.S. District Court for the District of New Mexico.

Leviton continued prosecuting continuation applications of the patents from the prior suits after the settlement agreement, and new patents ultimately matured from these continuations. In 2010 Leviton sued GPG for infringement of the new patents in the U.S. District Court for the Northern District of California. GPG then filed its own suit in the district court of New Mexico, seeking an injunction against Leviton's continued litigation in the Northern District of California. GPG contended that it had a license to practice the asserted patents under the settlement agreement. The district court found that GPG enjoyed a likelihood of success on this issue and granted the preliminary injunction enforcing the forum selection clause. Leviton appealed.

In the appeal, Leviton asserted that the settlement agreement does not as a matter of law give GPG an implied license in the continuation patents. The Federal Circuit disagreed and affirmed the grant of injunction, relying on its earlier decision in TransCore. The Federal Circuit noted that "a patent licensor [is prohibited] from derogating from rights granted under the license by 'taking back in any extent that for which [it] has already received consideration.'" The Federal Circuit concluded that Leviton's actions derogate from previously granted rights for which it received consideration under settlement agreement by accusing the same product that was subject to the previous settlement agreement and asserting infringement of the same inventive subject matter as disclosed in the licensed patents. The Federal Circuit stated that if Leviton did not intend its license to encompass continuation applications, it had an obligation to make this intention clear:

Patents / Doctrine of Equivalents

Narrowing Claim Amendment Blocks Application of the Doctrine of Equivalents, Again
by Heather Morehouse Ettinger, Ph.D.

Addressing whether an amendment narrowing the claim scope during the prosecution limited the patentee's ability to capture a generic's different, but potentially equivalent, product as infringing, the U.S. Court of Appeals for the Federal Circuit affirmed a decision on summary judgment, finding that prosecution history estoppel applied and barred the application of the doctrine of equivalents (DOE). Duramed Pharmaceuticals, Inc. (Teva Women's Health) v. Paddock Laboratories, Inc., Case No. 10-1419 (Fed. Cir., July 21, 2011 (Lourie, J.).

In this Abbreviated New Drug Application (ANDA) litigation, to prevent Paddock from marketing a generic version of Duramed's (now Teva Women's Health) conjugated estrogen pharmaceutical composition (Cenestin) for hormone replacement therapy, Duramed asserted a patent having claims directed to pharmaceutical compositions comprising conjugated estrogens in a solid dosage form coated with a moisture-barrier coating comprising ethylcellulose. Because Paddock's ANDA indicated that it planned on using conjugated estrogen pharmaceutical compositions with a barrier made of polyvinyl alcohol, rather than ethylcellulose, Duramed sued Paddock for patent infringement under the DOE. The district court granted Duramed's motion for summary judgment of non-infringement, finding that the narrowing of the claims to recite a particular moisture barrier coating in view of the prior art was substantially related to patentability and, therefore, under Festo, a presumption of prosecution history estoppel applied. The district court further found that Duramed had not overcome this presumption, and thus the DOE could not be applied, because the prior art illustrated that polyvinyl alcohol moisture barriers were foreseeable. Duramed appealed.

The Federal Circuit affirmed, agreeing with the district court that, under Festo, because Duramed narrowed the scope of the claims during prosecution, a presumption of prosecution history estoppel applied. The Federal Circuit also agreed with the district court that Duramed had failed to rebut this presumption. Specifically, the Court found Duramed's argument that foreseeability required that polyvinyl alcohol must have been known for use with conjugated estrogens unconvincing. Rather, citing its decision in Schwarz, the Court noted that "when the language of both the original and issued claims begins with the words '[a] pharmaceutical composition,' that language defines the field of the invention for purposes of determining foreseeability." Accordingly, the Court concluded that polyvinyl alcohols as a moisture barrier need only to have been known in the field of pharmaceutical compositions at the time of the amendment. Citing prior art submitted by Paddock disclosing the use of polyvinyl alcohol as a moisture-barrier coating in pharmaceutical compositions, the Court found that it was foreseeable by Duramed that this composition could have been used as a moisture barrier instead of ethylcellulose and, by amending the claims to require ethylcellulose, Duramed has surrendered this foreseeable equivalent.

Patents / Collateral Estoppel

Previous Litigation Results in Court Hanging Up on Plaintiff Based on Collateral Estoppel
by Mark R. Anderson

Sustaining a grant of summary judgment based on collateral estoppel, the U.S. Court of Appeals for the Federal Circuit held that the district court properly granted summary judgment that the patent owner had already litigated a similar case and the Federal Circuit had previously found that accessing a catalog website over the internet with a computer or cell phone did not infringe the asserted claims. Furnace Brook LLC v. Aeropostale, Inc., Case No. 11-1025 (Fed. Cir,. July 22, 2011) (Moore, J.) (O'Malley, J., dissenting).

Furnace Brook sued Aeropostale for infringing a patent related to an interactive computer catalog accessed by telephone that also has a communication link between the telephone and the computer. Furnace Brook had previously asserted this patent against Overstock.com. In the prior litigation, the Federal Circuit construed the same patent claim to require "a dial-up connection to the catalog server" and that "the communication link be established over a telephone network by dialing the computer system directly." In the Overstock.com case, the Federal Circuit found that accessing a website over the internet without directly dialing the computer system did not infringe the patent. The first Federal Circuit panel also found that Furnace Brook had not presented any evidence of infringement under the doctrine of equivalents. The district court granted Aeropostale's motion for summary judgment of non-infringement based on collateral estoppel. Furnace Brook appealed.

The Federal Circuit began the analysis by reviewing the U.S. Court of Appeals for the Seventh Circuit's standard for collateral estoppel, which it applied in this case. Furnace Brook argued that the prior litigation was not based on the "telephone terminal" limitation, but was instead based on the "selective communication link" element of the claim. Furnace Brook argued that it had never had the opportunity to litigate the "selective communication link" element of the claim and thus could not be collaterally estopped from litigating that element in this case. The Court disagreed and noted that the holding in the prior litigation was based on the "telephone terminal" element, and that Furnace Brook admitted that it had the opportunity to fully litigate that element. Therefore, since Furnace Brook had already been given the opportunity to litigate the dispositive claim element, collateral estoppel applied. The Court noted that even if they disagreed with the holding of the prior case, an earlier decision of the Federal Circuit is binding on a later panel. Therefore, the district court properly granted summary judgment.

Judge O'Malley dissented, writing that the majority had not properly considered the procedural history of the case. Judge O'Malley found that since the Federal Circuit had changed the construction of the claims in the prior litigation and did not remand the case to the district court, Furnace Brook was not given an opportunity to fully litigate whether a "telephone terminal" could include a personal computer or a cellular phone. Judge O'Malley found that these issues were not in dispute in the previous case until after the Federal Circuit modified the claim construction, and therefore Furnace Brook had no reason to present evidence on the issue at the district court. Accordingly, Judge O'Malley found that Furnace Brook and did not fully litigate the issue in the prior case.

Patents / Jurisdiction

Federal Circuit Jurisdiction over State-Law Tort Claim
by Adam A. Auchter

In a case in which the issue of jurisdiction was neither raised by the parties nor addressed by a prior panel, the U.S. Court of Appeals for the Fifth Circuit concluded that a state-law tort claim presented questions of patent law that involved a sufficiently substantial federal interest to permit federal jurisdiction over a state law tort. The court also found that the law-of-the-case doctrine did not bar a lack of jurisdiction determination. USPPS, Ltd. v. Avery Dennison Corp., Case No. 10-50612 (5th Cir., July 19, 2011) (Prado, J.).

USSPS' owner and founder Joe Pat Beasley filed a patent application in 1999 for an invention related to personalized postage stamps. While the application was pending, Beasley negotiated a contract for licensing and production with Avery. In 2001, the U.S. Patent and Trademark Office (USPTO) approved the application for issue upon payment of the required fees. Beasley and Avery entered into another agreement under which Avery would be responsible for prosecuting the application and paying all related fees and expenses. Beasley then revoked all prior powers of attorney and appointed Avery's law firm, Renner, to prosecute the patent application. USPPS claims that Renner never disclosed to Beasley or USPPS that the firm did not represent Beasley but was loyal to Avery.

Renner abandoned Beasley's original patent application to add additional claims and submitted a second application. USPPS and Avery then entered into a royalty agreement on the sales of the personalized postage stamps. After the USPTO subsequently rejected the second application, Renner notified Avery and USPPS that the applications had been abandoned. Afterward, Avery notified USPPS that it intended to sell personalized postage stamps without further payment of royalties after the royalty agreement expired.

USPPS filed claims for fraud and breach of fiduciary duty. The district court initially dismissed the suit as time-barred. The 5th Circuit reversed and remanded for further factual development on the grounds that the discovery rule or fraudulent-concealment doctrine might apply. No argument was made concerning jurisdiction on that appeal. The district court later granted Avery summary judgment and USPPS appealed.

The Fifth Circuit's sua sponte then questioned whether exclusive appellate jurisdiction rested in the Federal Circuit. The court performed a two-part inquiry, first determining whether the case required deciding an issue of patent law and second, whether the patent issue to be decided rises to the level of creating a substantial interest such that the Federal Circuit has exclusive jurisdiction.

The 5th Circuit looked to Federal Circuit case law, Air Measurement Technologies and Immunocept, which had concluded that § 1338 federal jurisdiction was proper over state-law claims of malpractice if the alleged malpractice required the court to construe a patent. In Davis, the Federal Circuit had extended this doctrine to cases where no patent had actually issued since the plaintiff had to prove that the patents would have been obtained but for the alleged attorney negligence. Like Davis, USPPS was required to prove the patentability of the invention in order to prove an element of its claims.

The 5th Circuit, however, had previously declined to follow or extend Air Measurement Technologies in Singh, a trademark case. The 5th Circuit differentiated this case by explaining that there is a strong federal interest in the "removal [of] non-uniformity in the patent law" and that Scherbatskoy, a prior 5th Circuit case, implicitly recognized a special federal interest in patent law which was not present in a trademark case.

USPPS also contended that since the 5th Circuit failed to disclaim jurisdiction at the motion-to-dismiss stage, it was precluded from doing so under the law-of-the-case doctrine, which precludes reexamination of issues of law or fact decided on appeal. The court noted that the Supreme Court in Steel Co. rejected a prior decision that did not address jurisdiction as nonprecedential on the question of whether jurisdiction was proper. Since the issue of jurisdiction was not raised by the parties nor addressed by the prior panel, the current panel declined to defer to the prior exercise of jurisdiction "by implication."

Since the court determined that the tort claim required deciding an issue of patent law, that the Federal Circuit has a substantial interest in deciding the patent issue and that the law-of the case doctrine did not bar the transfer, the case was ordered to be transferred to the U.S. Court of Appeals for the Federal Circuit.

Patents / Hatch-Waxman

Eastern District of Texas Gives Generics a Headache
by Natalie A. Bennett

The U.S. District Court for the Eastern District of Texas recently ruled against generic drug manufacturers, granting an injunction barring U.S. Food and Drug Administration (FDA) approval of three abbreviated new drug applications. Pozen Inc. v. Par Pharmaceutical et al., No. 6:08-cv-437 (E.D. Tex., Aug. 5, 2011) (Davis, J.). The ruling, which is the first Hatch-Waxman Act patent case to go to trial in E.D. Texas adjudicated Pozen's contentions that certain generic drug companies infringed various patents covering the migraine pharmaceutical sold as Treximet®. In a detailed decision, the district court weighed multiple non-infringement positions as well as invalidity defenses based on double patenting, obviousness, anticipation, and lack of written description and engaged in a Therasense analysis before dismissing allegations of inequitable conduct.

The migraine tablet combining therapeutic agents sumatriptan and naproxen sodium was brought to market by Pozen's exclusive licensee GlaxoSmithKline (GSK), which was obligated to pay Pozen a royalty that would decrease by 70 percent once a generic version of the drug entered the market. After the defendants sought approval for generic versions of Treximet® under the Hatch-Waxman Act and certified that the three contested patents were invalid and/or would not be infringed, Pozen sued.

Judge Davis rejected the defendants' non-infringement arguments based on impermissibly narrow claim construction that was not supported by the claim language, especially since the generic products were admittedly bioequivalent to Treximet®. In connection with one of the asserted patents, the court delved into a function-way-result equivalence analysis that compared the architecture of the branded and generic tablets. In applying a claim construction that required identified percentages in formulating sumatriptan and naproxen into distinct tablet layers, the court accepted plaintiff's equivalence theory to broaden the specific numerical range provided in an earlier order. The court concluded that the function of achieving separate, distinct layers of each agent was achieved in substantially the same way in the generic product as in the claimed invention. Further, evaluating alleged disclaimers made by the patent owner during the course of the prosecution, Judge Davis concluded that the generic products could not avoid infringement through a characterization as "admixtures" that would obviate Pozen's infringement allegations.

Regarding validity, Judge Davis separately discussed each alleged invalidating prior art reference and, in doing so, considered the related expert testimony, declarations from the prior art author where in evidence and clinical records. The court ultimately concluded that there was insufficient evidence to overcome the presumption of validity. The defendant's written description arguments were also rejected, as the court concluded that the disclosure was adequate to inform one of skill in the art how to make and use the claimed invention.

The court found little merit in the defendants' contention that two pilot studies submitted to the U.S. Patent and Trademark Office (USPTO) skewed results for the sake of presenting advantageous, yet misleading data. Following Pozen's explanation at trial, Judge Davis was satisfied that the testing data and representations made to the USPTO were accurate and, furthermore, that there was no evidence indicating deceptive intent as required by the Federal Circuit's Therasense decision. (See IP Update Vol. 14, No.6.)

In light of the licensing agreement between Pozen and its exclusive distributor GSK, Judge Davis found that the launch of a generic product would "devastate Pozen" and could even force the patentee out of business. He found that the reduction of revenue combined with decreased resources satisfied the eBay requirement for irreparable harm. Balancing the equities and finding that monetary damages could not compensate for the effects of the defendants' infringement, the court issued an injunction that blocked the generics from entering the market until the expiration of the asserted patents.

Practice Note: Generic drug cases are most typically filed in the district courts in Delaware, New Jersey and New York. This action was closely watched by commentators familiar with Hatch-Waxman litigation, especially after the Eastern District of Texas amended its local Rules in April 2011 to adopt provisions modeled after local Rules in New Jersey that facilitate early disclosures. So-called Hatch-Waxman. These disclosure requirements mandate that the defendants provide the entirety of the disputed Abbreviated New Drug Application, as well as invalidity and non-infringement contentions early in the case. Similarly, a name-brand drug company is required to disclose all infringement positions in chart form. As with all patent cases in the Eastern District of Texas, these disclosures include the expectation that all accompanying documents and things will be produced without formal requests for production.

Antitrust / Standing

Second Circuit Dismisses $500M Telecom Antitrust Suit
by James Buchanan Camden and William Diaz

The U.S. Court of Appeals for the Second Circuit upheld a district court's decision to dismiss Site-Sites.com, Inc.'s $500 million antitrust suit against Verizon Communications and several other telecommunications companies for lack of standing. Siti-Sites.Com, Inc., v. Verizon Communications, Inc. et al., Case No. 11-65 (2d Cir., July 5, 2011) (summary order).

Siti-Sites (Siti) alleged that Allied Security Trust, a patent holding company with members including Verizon Communications and Cisco Systems, conspired with the co-defendants to prevent non-practicing entities (NPE) from licensing or selling certain patents for 3G and 4G wireless products in which Siti had a financial interest. Pursuant to a 2006 settlement agreement with MLR, LLC, Siti was entitled to up to 40 percent of MLR's gross proceeds on the patents at issue. In its complaint, Siti stated that the defendants' alleged antitrust violations resulted in an 84 percent decrease in licensing frequency and its cash flow between March 2007 and March 2010.

In their motion to dismiss, the defendants argued that Siti lacked antitrust standing because "any alleged injury to Siti—that is, its alleged reduction in revenues—is indirect, and results only from a supposed downturn in MLR's business." The defendants also moved to dismiss on the grounds that Siti failed to allege any antitrust violation. The district court granted the defendants' motion to dismiss on standing alone. Siti appealed.

The 2d Circuit agreed that Siti lacked standing to sue for alleged antitrust violations regarding the MLR patents. The court concluded that Siti owned only the "contractual right to a percentage of MLR's gross proceeds," and therefore "any alleged antitrust injury Siti suffered [was] derivative" of an injury to MLR. Consequently, the court affirmed the district court's dismissal of Siti's complaint.

Practice Note: While the antitrust laws are a powerful tool for plaintiffs seeking to remedy competitive harm, the courts require such plaintiffs to meet the stringent requirements for antitrust standing. Plaintiffs who are too remote from the alleged anticompetitive conduct will face an uphill battle to proceed with their antitrust claims.

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