By Kevin E. Noonan --
The effects of the Supreme Court's decision in KSR Int'l Co. v. Teleflex Inc. continue to ripple unpredictably through the Federal Circuit's jurisprudence, promoting inconsistencies in obviousness determinations by the Court that seem contrary to its mandate to harmonize U.S. patent law. The most recent illustration of this effect is in Celsis In Vitro, Inc. v. Cellzdirect, Inc., where a divided panel affirmed the grant of a preliminary injunction over a dissent based, in part, on a rigid understanding of the implications of the KSR decision.
The suit by Celsis alleged infringement of U.S. Patent No. 7,604,929, specifically a method for providing cryopreserved human hepatocytes:
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:
(A) subjecting hepatocytes that have been frozen and thawed to density gradient fractionation to separate viable hepatocytes from non-viable hepatocytes,
(B) recovering the separated viable hepatocytes, and
(C) cryopreserving the recovered viable hepatocytes to thereby form said desired preparation of hepatocytes without requiring a density gradient step after thawing the hepatocytes for the second time, wherein the hepatocytes are not plated between the first and second cryopreservations, and wherein greater than 70% of the hepatocytes of said preparation are viable after the final thaw.
Thus, the claim recited three steps: subjecting frozen and thawed hepatocytes to a density gradient to separate viable from non-viable cells; recovering the viable cells, and freezing the cells again that have >70% viable cells after a second thaw without requiring density gradient step. Evidence before the District Court established that human hepatocytes are fragile and hard to cryopreserve, being very susceptible to damage when frozen and thawed and that there was an expectation in the art that repetition would make that worse, i.e., there would be even fewer viable cells after several freeze/thaw cycles. Human hepatocytes were in short supply and there was large demand, with available sources in the art being limited to fresh tissue that is rarely available. As a consequence, research was disrupted because it was dependent on sporadic availability of these cells. The opinion in the art was that hepatocytes could not be productively cryopreserved because too many non-viable cells were produced, the Court noting that "experts in this field met initial attempts to freeze hepatocytes with skepticism." The accused infringing article was a pooled multi-cryopreserved hepatocyte product allegedly produced using the claimed method (although the opinion does not give the details of the accused products "[f]or confidentiality reasons") sold in direct competition with the Celsis product (also a pooled multi-cryopreserved hepatocyte product). The District Court (Judge Milton Shadur of the Northern District of Illinois) granted the preliminary injunction.
The Federal Circuit affirmed, in an opinion by Chief Judge Rader joined by Judge Prost, with a dissent by Judge Gajarsa. The majority opinion recited the "four factors" considered with regard to a preliminary injunction: "(1) likelihood of success on the merits, (2) irreparable harm, (3) balance of hardships, and (4) public interest." Defendants challenged the District Court's decision on the first prong based on non-infringement and invalidity (for obviousness). Regarding infringement, there was a "battle of the experts" won by Celsis, perhaps in part because defendants put forward their marketing director as an expert. The Celsis expert provided testimony on the meaning of claim term "density gradient fractionation" and then "applied the term to the accused process." The District Court's decision regarding infringement was also based decision on construction of the term "not requiring" for performing a second density gradient fractionation as being inclusive of methods that actually perform a second density gradient fractionation (provided it is not "required"). The District Court expressly rejected defendants' construction that "not requiring" was equivalent to "prohibited," based on its interpretation that this construction incorporated a limitation from the specification into the claim (which the Court characterized as "hokum"). On this record, the Federal Circuit found no abuse of discretion by the District Court in deciding there was a likelihood that Celsis would succeed in its infringement claim.
The second issue was non-obviousness. Evidence from both parties included a "vast proliferation of authors and articles dealing with hepatocytes and use of cryopreservation." The District Court concluded that the claimed method was non-obvious because "not a single one of that astonishingly large body of literature was devoted to the subject of multi-cryopreservation of hepatocytes" (with the District Court noting stress on "multi"). The District Court rejected testimony from defendants' expert that one of his articles disclosed multi-cryopreservation of hepatocytes, finding that the reference was limited to fetal hepatocytes, which were not the same as adult hepatocytes. Also, since fetal cells were replication-competent, District Court credited testimony from the Celsis expert that it was not possible to determine "whether the same cells were cryopreserved more than once" (which was conceded by defendants' expert). This reference not the issue on appeal, however; there was another reference that taught whether single-cryopreserved hepatocytes could substitute for fresh hepatocytes (in humans, dogs and monkeys).
In reviewing the District Court's non-obviousness determination, the majority recited the Graham v. John Deere Co. analytical framework of factual inquiries regarding: "(1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the claimed invention and the prior art; and (4) objective evidence of nonobviousness," citing Eli Lilly & Co. v. Teva Pharm. USA, Inc., 619 F.3d 1329, 1336 (Fed. Cir. 2010). On this record, the majority found no abuse of discretion, while noting that defendants would be able to "expand upon the arguments it made at the preliminary injunction stage" at trial. The majority "does not opine on the final determination, which lays in the realm of the district court in the first instance." The opinion emphasized the unpredictability in the art, affirming the District Court's finding that "the art was a crowded field for many years and yet there was not one reference to multi-cryopreservation" and "taught away from multiple freezings." In addition, the opinion noted that the expectation in the art was that a second freezing would result in "greater loss of cells after the second cryopreservation than after the first" and relied upon this understanding as grounds for deciding the art did not render obvious the claimed invention.
In a passage noted in the dissent, the majority specifically found that the second reference relied upon in the appeal did not provide "any teaching, suggestion, or motivation . . . that multiple rounds of freezing would somehow increase rather than decrease cell viability" and criticized defendants' argument as "vague reference to 'market need.'" Rather, the majority said that "without more" this was evidence of the objective criteria of "long felt need" and thus was "supportive of non-obviousness." And as part of its analysis, the majority found the District Court's decision to be based in art on a (negative) assessment of defendants' witnesses' credibility, something the reviewing court gives "wide discretion" to the district court, citing Conoco, Inc. v. Energy & Envtl. Int'l, L.C., 460 F.3d 1349, 1362-63 (Fed. Cir. 2006), Bristol- Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., 326 F.3d 1226, 1236 (Fed. Cir. 2003), Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223, 1231-32 (Fed. Cir. 2007), and Agfa Corp. v. Creo Prods. Inc., 451 F.3d 1366, 1379 (Fed. Cir. 2006). Rather, the opinion states:
Not one of LTC's experts testified to actually performing the claimed process or documenting their alleged understanding before the time of the invention, despite having the financial, scientific, and professional incentive to do so. The district court found that LTC's experts did not predict the results of the claimed methods at the time of the invention, nor could they find any reference in the prior art suggesting that any other scientist had.
The Federal Circuit also found no abuse of discretion by the District Court in determining that the other prongs of the test, irreparable harm, balance of the hardships and the public interest, were satisfied. "Irreparable harm" in this case included "price erosion, damage to ongoing customer relationships, loss of customer goodwill (e.g., when an effort is later made to restore the original price), and loss of business opportunities," all of which the majority found were "valid grounds for finding irreparable harm," citing Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1362 (Fed. Cir. 2008), and Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1382-83 (Fed. Cir. 2006). The Court based its agreement on the balance of the hardships on the fact that "[defendant's] losses were the result of its own calculated risk in selling a product with knowledge of Celsis' patent," citing Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1383 (Fed. Cir. 2006). The public interest "favors the enforcement of Celsis' patent rights" in this case because "investment in drug research and development must be encouraged and protected by the exclusionary rights conveyed in valid patents," and does not constitute an abuse of discretion because "[t]hat incentive would be adversely affected by taking market benefits away from the patentee and giving them to the accused infringer in this case."
Judge Gajarsa's dissent illustrates how the Supreme Court's KSR decision has a tendency to tip the balance between an objective assessment of the prior art as understood by one having ordinary skill in the art and its relevance to the claimed invention in favor of a court's subjective determination that an invention is obvious (the "I know it when I see it" standard). In addition, Judge Gajarsa evinces a belief that a preliminary injunction is "an 'extraordinary and drastic' remedy" that should be denied if a defendant can raise a (presumably unrebutted) "substantial question" on the patent's validity. Here, he writes that the District Court abused its discretion by committing legal error with regard to obviousness by holding defendants "to a clear and convincing standard of proof" and "reinvigorate[ing] the pre-KSR standard for obviousness, rigidly requiring an explicit teaching, suggestion, or motivation for multi- cryopreserving hepatocytes."
The basis for this opinion is that, in his view, the absence of "two limitations of the claimed invention" (freezing and thawing hepatocytes a second time and making the density gradient fractionation optional after the second thaw)" in the prior art did not defeat defendants' obviousness argument, because "obviousness does not require that each element of the claimed invention must be present in the prior art," citing Tegal Corp. v. Tokyo Electron Am., Inc., 257 F.3d 1331, 1349 (Fed. Cir. 2001). Indeed, in his view "all of the claimed elements were present in the prior art," including "(1) thawing cryopreserved hepatocytes; (2) using density gradient fractionation to separate viable and non-viable cells; and (3) refreezing and rethawing the hepatocytes." Taking each limitation individually (rather than considering the invention as a whole according to the plain language of the statute), the dissent notes that "[b]oth cryopreservation and density gradient fractionation were well known in the art at the time of the invention." In Judge Gajarsa's opinion, the remaining step recited in the claim was "nothing more than measuring the viability of cells thawed for a second time. If the cells have more than 70% viability, they meet this limitation; if they do not have 70% viability, they do not meet this limitation." Citing Great Atl. & Pac. Tea Co. v. Supermarket Equip. Corp., 340 U.S. 147, 152-153 (1950), the dissent characterizes the invention as a "patent for a combination which only unites old elements with no change in their respective functions [and] obviously withdraws what already is known into the field of its monopoly." The invention in Judge Gajarsa's view of nothing more than "[r]epeating known steps to obtain a desired result" which is not inventive, citing Perfect Web Techs., Inc. v. InfoUSA, Inc., 587 F.3d 1324, 1330-31 (Fed. Cir. 2009). The dissent also characterizes the majority's recognition that the art was unpredictable, and would have expected the claimed invention to be inoperative, as trying to "have it both ways," citing Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1364 (Fed. Cir. 2007), for the principle that "some degree of unpredictability" cannot render an invention non-obvious "so long as there was a reasonable expectation of success," despite the majority's reliance on evidence that there was no such reasonable expectation of success in this case.
The dissent also finds fault with the majority's citation of defendants' failure to provide evidence of any "teaching, suggestion or motivation" in the art as being contrary to the Supreme Court's KSR precedent, eliding the nuance that the Court corrected the Federal Circuit for rigid application of the test and, in fact, preserved the TSM test as being a useful analytical tool for deciding obviousness provided it was not rigidly applied.
The dissent illustrates the difficulties that arise from the Supreme Court's most quoted passage from KSR:
'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 in the art has good reason to pursue the known options within his or her technical grasp,' the invention is likely obvious.
The first portion of the sentence conflates the obviousness analysis from Graham v. John Deere with one of the objective indicia of non-obviousness; it is clear that grounds for finding an invention non-obviousness ("long-felt need in the art") cannot also be a basis for finding an invention obvious ("when there is a design need or market pressure to solve a problem"). Rather, it is only when the Supreme Court's statement is taken in its entirety that the two analytical frameworks can be reconciled: that in response to the need (long-felt or otherwise), and when there exists a "finite number of identified, predictable solutions" and (in a portion of the Supreme Court's teachings not recited in the dissent) "[i]f this leads to the anticipated success," then "it is likely the product not of innovation but of ordinary skill and common sense." It would appear that the required expectation of success was missing under the facts of this case.
The other basis for Judge Gajarsa's disagreement with the majority relates to the burden placed on defendant in avoiding the preliminary injunction. According to the dissenting opinion, defendants were required merely to provide evidence that the asserted claims were "vulnerable" and did not need to establish (by clear and convincing evidence) that the claims were invalid. This amounts to merely raising a "substantial question" regarding the claims' validity according to Judge Gajarsa, citing Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001); Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997), and Kimberly-Clark Worldwide, Inc. v. First Quality Baby Products, LLC, 431 Fed. Appx. 884, 886-7 (Fed. Cir. 2011). The District Court (and the majority) improperly shifted the burden to defendants, according to the dissent, and should have "simply decide[d] whether it is more likely than not that the patent will be proven invalid at trial," citing Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1379-80 (Fed. Cir. 2009).
Once again, these diverging standards for deciding questions of obviousness create a certain nostalgia for the wisdom of Judge Learned Hand in considering obviousnses:
The test laid down [in 35 U.S.C. § 103] is indeed misty enough. It directs us to surmise what was the range of ingenuity of a person "having ordinary skill" in an "art" with which we are totally unfamiliar; and we do not see how such a standard can be applied at all except by recourse to the earlier work in the art, and to the general history of the means available at the time. To judge on our own that this or that new assemblage of old factors was, or was not, "obvious" is to substitute our ignorance for the acquaintance with the subject of those who were familiar with it. Reiner v. I. Leon Co., 285 F.2d 501 (2d Cir. 1960)
Courts, made up of laymen as they must be, are likely either to underrate, or to overrate, the difficulties in making new and profitable discoveries in fields with which they cannot be familiar; and so far as it is available, they had best appraise the originality involved by the circumstance which preceded, attended and succeeded the appearance of the invention. Safety Car Heat & Light Co. v. General Electric Co., 155 F.2d 937 (2d Cir. 1946).
Celsis In Vitro, Inc. v. Cellzdirect, Inc. (Fed. Cir. 2012)
Panel: Chief Judge Rader and Circuit Judges Gajarsa and Prost
Opinion by Chief Judge Rader; dissenting opinion by Circuit Judge Gajarsa