Patent Docs

Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc. (Fed. Cir. 2010)

Federal Circuit Transfers "Hot Potato" Diagnostic Method Case

    By Kevin E. Noonan --

The Federal Circuit's majority decision in Laboratory Corp. of America Holdings ("LabCorp") v. Metabolite Laboratories, Inc., and Judge Dyk's dissent, illustrate how often factual considerations, and different views of the same facts, can influence if not determine a legal outcome.  Here, the issue was the Federal Circuit's jurisdiction to hear an appeal on a patent and know-how license from the same parties who went before the Supreme Court three years ago on a patent question relating to diagnostic assays for vitamin deficiencies.  The Supreme Court's non-decision left intact the Federal Circuit's underlying affirmance of an infringement judgment by the Colorado District Court.  This case concerned LabCorp's declaratory judgment suit over whether it had breached its licensing agreement with Metabolite rather than addressing patent infringment per se.  And that basis, and how the different members of the panel viewed it, was outcome-determinative for both the majority opinion (written by Judge Gajarsa and joined by Judge Moore) as well as Judge Dyk in dissent.

The lawsuit involved a dispute over the terms of the judgment entered in the original patent infringement/breach of contract case.  The license between the parties encompassed both the patent (U.S. Patent No. 4,940,658) as well as "know-how" developed by Metabolite under a license from the patent owner, Competitive Technologies Inc. (CTI).  LabCorp licensed the homocysteine-based assay recited in Claim 13 of the '658 patent until 1998, when it began using a competing test sold by Abbott Laboratories.  This action led to the first lawsuit, filed by Metabolite and claiming patent infringement and breach of contract.  That action led to a jury verdict of infringement in favor of CTI and breach of contract for Metabolite.  Significantly for the present decision, the jury found by Special Verdict that the license from Metabolite had been terminated.  The case then famously went before the Federal Circuit, where the judgment was affirmed, and to the Supreme Court, which granted certiorari, heard argument, and then decided that certiorari had been improvidently granted, Justices Breyer, Souter, and Stevens dissenting.

The action below was a declaratory judgment under diversity jurisdiction under 28 U.S.C. § 1332, by LabCorp that it did not breach the License Agreement by post-judgment activities, including outsourcing the homocysteine assay to a third party company that had a non-exclusive license from CTI (and thus raised no patent infringement issues).  Metabolite filed a counterclaim for breach of contract and other state law claims.  The District Court held on summary judgment that there was no breach of contract since the contract had been adjudged to be terminated by the jury in the first Metabolite case.  In response to Metabolite's appeal of this decision to the Federal Circuit, LabCorp moved for the CAFC to transfer the appeal to the Tenth Circuit, based on an asserted lack of jurisdiction.  "The issue of this court's jurisdiction over Metabolite's appeal is now squarely before [the court]," according to the opinion.

The Federal Circuit's majority opinion, by Judge Gajarsa and joined by Judge Moore, first addressed the question of its own jurisdiction.  While based on specific statutory provisions (28 U.S.C §§ 1295(a)(1) and 1338), the CAFC assessed its jurisdiction under the two-prong test enunciated by the Supreme Court in Christianson v. Colt Industries Operating Corp., 486 U.S. 800 (1988):

Under Christianson, "arising under" jurisdiction "extend[s] only to those cases in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims."  Christianson, 486 U.S. at 808-09.

This test was refined, according to the opinion, by the Court's decision in Grable & Sons Metal Products, Inc., v. Darue Engineering & Manufacturing, 545 U.S. 308, 314 (2005), which "refined the Christianson two-part test for § 1338 jurisdiction by requiring a determination of whether 'a state-law claim necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.'"  Grable, 545 U.S. at 314.  Turning to the requirements of the well-pleaded complaint rule, the Court said that "arising under" jurisdiction was determined "from the plaintiff's statement of his or her own claim 'unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose,'" Christianson, 486 U.S. at 809, and that the Court looked "'not to the declaratory judgment complaint, but to the action that the declaratory defendant would have brought,'" citing Speedco, Inc. v. Estes, 853 F.2d 909, 912 (Fed. Cir. 1988) and Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1578 (Fed. Cir. 1993).

Applying this law to these facts, the majority held that Metabolite did not bear its burden of "demonstrating that its hypothetical claim depends on resolution of a substantial question of federal patent law,'" citing Christianson, 486 U.S. at 808-09.  The "hypothetical" claim Metabolite would have brought in response to LabCorp's declaratory judgment complaint "would have been a breach of contract claim," according to the Court, and in order to prevail Metabolite would be required to "prove the elements of breach of contract cause of action under New Jersey law."  Metabolite claimed that in order to prevail on its breach of contract claim, it had to establish that it was entitled to royalties, and this required evidence of patent infringement.  The majority disagreed, based on the determination of patent infringement in the first Metabolite case.  There was no "disputed question of patent law central to the disposition of the breach of contract claim."  This requirement for a substantial question of patent law to be in dispute for the Federal Circuit to have jurisdiction is consistent with Supreme Court precedent according to the majority, citing Christianson and Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 689-90 (2006).  This was not such a case, in the majority's opinion, because the infringement question was not in dispute (having been finally adjudicated in the first Metabolite case).  Thus, "[b]ecause the issue of patent law is not disputed and substantial, we do not have jurisdiction over this appeal," citing Grable, 545 U.S. at 314-15.

In dissent Judge Dyk disagreed, characterizing the question as involving "whether the res judicata" effect of the Federal Circuit's earlier Metabolite decision required treating the contract provisions as having been terminated.  Judge Dyk supported his view that the case should not be transferred with two lines of reasoning.  First, a suit to determine the res judicata effects of a prior judgment "arising under" the patent laws is itself a suit that arises under patent law in his view.  Second, in Judge Dyk's view, a necessary predicate of deciding the contract question raised a substantial question of patent law, i.e., what activity regarding patented technology fell within the scope of the license.  The parties' contentions directly disputed the scope of the prior judgment, with LabCorp contending that the license was terminated by that judgment and Metabolite maintaining that the judgment did not terminate the license.  In this context, Judge Dyk believed that the question of the scope of the earlier judgment directly affected the question before the Court, because of the necessity for a contractual obligation in order for there to be damages for breach of that obligation.

Considering the res judicata effect of the District Court's prior judgment certainly "arises under" federal law; the question was whether it arose under federal patent law.  And the dissent maintained that this question required the Court to consider whether it should "'look through' the prior judgment to determine whether it [was] predicated on an action that 'arises under' federal patent law."  Citing Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507-08 (2001) and Vaden v. Discover Bank, 129 S. Ct. 1262 (2009), Judge Dyk contended that such a "look through approach" was appropriate here, and that the result was the conclusion that the issue "arose under" federal patent law.  In the alternative, Judge Dyk contended that the issue between the parties when the complaint was filed involved a contract that made a patent issue "determinative" (the royalties under the contract being tied to net sales of "licensed assays" falling within the scope of licensed patent claims), analogizing the facts here with U.S. Valves, Inc. v. Dray, 212 F.3d 1368 (Fed. Cir. 2000).  Timing is also critical:  "[a]t the time the complaint was filed in this case, there was a substantial, disputed issue of patent law, because the issue of whether the outsourced homocysteine assays were in fact covered by the '658 patent claims was contested by LabCorp."  According to Judge Dyk, the fact that the patent issue "became" undisputed during the course of the lawsuit was not sufficient to deprive the Court of jurisdiction.  "[L]ater concessions (such as those ultimately made in this case that the outsourced assays were licensed assays) do not operate to defeat jurisdiction that rightfully attached at the outset of the case," citing a plethora of Supreme Court precedent:  Dole Food Co. v. Patrickson, 538 U.S. 468, 478 (2003); St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289-90 (1938); Minneapolis & St. Louis R.R. Co. v. Peoria & Pekin Union Ry. Co., 270 U.S. 580, 586 (1926); Anderson v. Watt, 138 U.S. 694, 702-03 (1891); and Mollan v. Torrance, 22 U.S. (9 Wheat.) 537, 539 (1824).

One immediate consequence of the transfer is a greatly reduced risk that this case will make it back to the Supreme Court on a patent question.  This is good news in view of the stance of at least some of the Justices regarding the patent-eligibility of (in)famous Claim 13 of the '658 patent (see "The Relevance of In re Bilski to the Patentability of the Metabolite Claim").  In any event, the Supreme Court is said by some to be poised to issue its decision on Bilski v. Kappos, which has the potential to address fundamentally the way the courts assess patent-eligibility of method claims.  In addition, the Supreme Court is expected to send the Prometheus Laboratories, Inc. v. Mayo Collaborative Services case back to the Federal Circuit for reconsideration in view of its decision in Bilski.  Thus, the ultimate question of whether diagnostic method claims like Metabolite's Claim 13 are patent-eligible will likely take some time to be decided, and as a consequence uncertainty on this question will persist, to no one's benefit.

Lab. Corp. of Am. Holdings v. Metabolite Labs., Inc. (Fed. Cir. 2010)
Panel:  Circuit Judges Gajarsa, Dyk, and Moore
Opinion by Circuit Judge Gajarsa, dissenting opinion by Circuit Judge Dyk

AUTM Survey Shows Drop in Issued Patents

    By Donald Zuhn --

Last month, the Association of University Technology Managers (AUTM) released its U.S. licensing survey for FY2008.  According to a GenomeWeb Daily News report, a majority of the academic and research institutions that answered the survey indicated that they filed more patent applications and were involved in more start-ups during the fiscal year ending June 30, 2008.  However, survey respondents also indicated that they secured fewer patents, entered into fewer licensing agreements, and saw the introduction of fewer new products during the survey period.

With respect to application filings, the survey showed that respondents disclosed 20,115 inventions in FY2008, which constituted a more than 1% increase from the 19,827 inventions disclosed in FY2007, and a more than 6% increase from the 18,874 inventions disclosed in FY2006.  Start-ups by survey respondents were also up, albeit slightly, from 3,381 in FY2007 to 3,388 in FY2008.

As for patent grants, the survey showed that the number of patents issued to survey respondents dropped from 3,622 in FY2007 to 3,280 in FY2008 -- a 9% decline.  (With respect to the AUTM survey, the high water mark for issued patents came in FY2003, when respondents secured 3,933 patents.)  The most recent survey also showed a 9% drop in new products introduced, down from 686 in FY2007 to 648 in FY2008, and a 5% decline in licenses, down from 4,354 in FY2007 to 4,144 in FY2008.

The AUTM FY2008 U.S. Licensing Survey can be obtained here (at a cost of $60).

AsymmetRx, Inc. v. Biocare Medical, LLC (Fed. Cir. 2009)

    By Donald Zuhn --

Last week, the Federal Circuit determined that Plaintiff-Appellant AsymmetRx, Inc. did not have standing to bring an action for infringement of the patents-at-suit absent the participation of the President and Fellows of Harvard College.  As a result, the CAFC vacated and remanded an order by the District Court for the District of Massachusetts granting summary judgment in favor of Defendant-Appellee Biocare Medical, LLC.

Harvard owns U.S. Patent Nos. 6,946,256 and 7,030,227, which relate to anti-p63 monoclonal antibodies and methods for using them to detect malignant carcinoma.  In 2002, Harvard entered into a license agreement with Biocare to make, use, and sell p63 antibodies.  The Biocare license states that it "does not include a license under any U.S. or foreign patents" -- the '256 and '227 patents were pending but had not issued at the time Harvard entered into the agreement with Biocare.

In 2004, Harvard entered into a license agreement with AsymmetRx that also concerned p63 antibodies.  The AsymmetRx license states that AsymmetRx receives "an exclusive commercial license" for the '256 and '227 patents.  Under the terms of the AsymmetRx license, Harvard could (a) make and use the claimed p63 antibodies for academic research purposes, (b) grant non-exclusive licenses for the claimed p63 antibodies to other non-profit or governmental institutions for academic research purposes, (c) render the license non-exclusive if AsymmetRx failed to meet certain commercial use or public availability benchmarks or FDA filing milestones, and (d) suggest sub-licensees to AsymmetRx (Harvard would also receive a portion of all sublicensing income).  In addition, the agreement gave AsymmetRx the right to prosecute in its own name any infringement of the '256 and '227 patents, provided that AsymmetRx gave "careful consideration to the views of Harvard and to potential effects on the public interest in making its decision whether or not to sue" prior to filing suit.  Harvard also retained the right to join as a party in any such infringement action, and AsymmetRx was required to secure written consent from Harvard before settling or otherwise voluntarily disposing of any such infringement action.

In 2007, AsymmetRx sued Biocare for infringement of the '256 and '227 patents, alleging that Biocare's sale of p63 antibodies violated its exclusive rights.  The parties filed cross-motions for summary judgment, and the District Court granted Biocare's motion and denied AsymmetRx's motion.

In vacating the District Court's order granting summary judgment, the Federal Circuit determined that "Harvard retained substantial control over the patent rights it was exclusively licensing, such that its agreement with AsymmetRx did not convey all substantial rights under the patents and thus did not make the license tantamount to an assignment."  Because "AsymmetRx must therefore be considered a licensee, not an assignee," the panel determined that under Waterman v. Mackenzie, 138 U.S. 252 (1891), and subsequent cases, "AsymmetRx does not have a sufficient interest in the '256 and '227 patents to sue, on its own, as the 'patentee' entitled by 35 U.S.C. § 281 to judicial relief from infringement" (absent joinder of the patentee).

In reaching this determination, the Court compared the terms of the AsymmetRx license with those of licenses in three other CAFC cases, and determined that the terms of the AsymmetRx license were more similar to those in the license at issue in Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1130 (Fed. Cir. 1995), than the licenses at issue in Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870, 874 (Fed. Cir. 1991), and Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000).  Under the license in Abbott, the patentee retained a limited right to make, use, and sell products embodying the patented inventions, a right to bring suit if the licensee declined to do so, and the right to prevent the licensee from assigning its rights under the license to any party other than a successor in business.  In addition, the licensee could not "prejudice or impair the patent rights" in prosecuting or settling any infringement action.  In Vaupel, the license allowed the patentee to retain a veto right on sublicensing, the right to obtain patents on the invention in other countries, a reversionary right in the patent in the event of bankruptcy, and a right to receive infringement damages, the licensee was granted the right to sue in its entirety, subject only to the obligation to inform the patentee of the existence of the suit.  Finally, in Speedplay, the license did not grant the original patentees the right to participate in an infringement action brought by the licensee, or limit the licensee's management of that action.  In view of these three cases, the panel determined that:

This case is more similar to Abbott than to Vaupel or Speedplay in terms of what rights Harvard retained under the patents.  Although the AsymmetRx License effected a broad conveyance of rights to AsymmetRx, Harvard retained substantial interests under the '256 and '227 patents, including the right to sue for infringement, and AsymmetRx therefore does not have the right to sue for infringement as "patentee" under the patent statute.

That Harvard had licensed rights to anti-p63 antibodies to both Biocare and AsymmetRx (the latter in the form of an exclusive license) did not escape the panel's notice:

Harvard, by granting licenses to two parties involving the same subject matter, has potentially put itself in the conflicting position of having to aid two licensees opposed to each other.  Complicating matters is the fact that Harvard is continuing to accept royalty payments from Biocare resulting from sales in the commercial diagnostic market that AsymmetRx asserts are infringing its patent rights.  If anything, this added complication indicates that the purpose of Rule 19 [the federal joinder rule] to avoid multiple suits or incomplete relief arising from the same subject matter is best served by joinder of Harvard, which would permit the relationships between AsymmetRx, Biocare, and Harvard to all be resolved at the same time as well as solve the standing problem.

AsymmetRx, Inc. v. Biocare Medical, LLC (Fed. Cir. 2009)
Panel: Circuit Judges Lourie and Rader and District Judge Clark
Opinion by Circuit Judge Lourie

Alnylam to Donate RNAi Patents to Patent Pool

    By Donald Zuhn --

Last month, Alnylam Pharmaceuticals announced that it would contribute more than 1,500 of its RNA interference (RNAi) patents to the patent pool established by GlaxoSmithKline earlier this year.  Alnylam is known for the development of therapeutics based on RNAi for the treatment of respiratory syncytial virus (RSV) infection, liver cancer, hypercholesterolemia, Huntington's disease, and TTR amyloidosis.

The biopharmaceutical company, based in Cambridge, MA, becomes the first company other than GSK to add patents to the pool.  The pool, which was formed to aid in the discovery and development of new medicines for the treatment of sixteen neglected tropical diseases (as defined by the U.S. Food and Drug Administration), was established by GSK in March with an initial contribution of about 800 GSK patents.  GSK CEO Andrew Witty stated that GSK was delighted by Alnylam's donation, noting that "[t]he key objective of the pool is to make it easier for researchers across the world to access intellectual property that may be useful in the search for new medicines to treat neglected tropical diseases," and adding that "[t]he more companies, academic institutions and foundations that join the pool, the more effective it will be."  Alnylam CEO Dr. John Maraganore stated that Alnylam is "committed to the innovation of medicines for patients, so we cannot ignore the potential of our technology to make a difference in the discovery of important new medicines for neglected diseases that afflict millions of people each year."  He added that Alnylam was "very proud to be joining GSK in this unique and bold vision of social responsibility for some of the world's poorest nations."

The patents in the pool will be provided on a royalty-free, non-profit basis in Least Developed Countries (as identified by the United Nations, and including much of western and central Africa and several countries in Southeast Asia) via licensing agreements with qualified third parties.  The sixteen neglected tropical diseases being targeted by the pool are:  tuberculosis, malaria, blinding trachoma, buruli ulcer, cholera, dengue/dengue haemorrhagic fever, racunculiasis, fascioliasis, human African trypanosomiasis, leishmaniasis, leprosy, lymphatic filariasis, onchocerciasis, schistosomiasis, soil transmitted helminthiasis, and yaws.

Biotech/Pharma Business Briefs

    By Jason Derry --

Peptimmune and Novartis Sign $500 Million Deal

Peptimmune Inc. and Novartis AG recently announced a licensing deal for Peptimmune's multiple sclerosis drug candidate, PI-2301.  The deal gives Novartis an exclusive license to the drug candidate.  Novartis will assume all responsibilities relative to clinical development, manufacturing, and marketing of PI-2301.  The deal could be worth up to $500 million for Peptimmune if certain milestones are met.  In addition, Peptimmune will be entitled to royalties on drug sales.

BMS to License HCV Therapy from Zymogenetics

Bristol-Myers Squibb (BMS) and ZymoGenetics recently announced a licensing deal for ZymoGenetics' hepatitis C therapy PEG-interferon lambda.  BMS will pay ZymoGenetics $85 million upfront and a license fee of $20 million for 2009.  ZymoGenetics will also be entitled to further payments based on certain milestones events.  In all, the deal could be worth up to $1.1 billion for ZymoGenetics.

Merck to License MS Drug

Merck KGaA recently announced that it has entered a licensing agreement with Apitope, a British biotech company, to license Apitope's multiple sclerosis drug, ATX-MS-1467.  Merck has reported that it will pay Apitope up to $204.8 million in upfront payments and possible milestone payments.  Apitope will also be entitled to royalties.  Apitope's press release regarding the agreement can be viewed here.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Biotech/Pharma Business Briefs

    By Jason Derry --

Endo to Acquire Indevus

On January 5, 2009, Endo Pharmaceuticals Holdings Inc. announced that it will buy Indevus Pharmaceuticals Inc. for an initial payment of about $370 million and an additional $267 million, based on certain milestones.  Currently, Indevus has marketed products for the treatment of overactive bladder, prostate cancer, hypogonadism, and central precocious puberty.  Indevus also has a number of potential products in its pipeline.  Endo has a number of marketed pain management products.  The acquisition will bolster Endo's sales force and product line.

Escalon Acquires Hematology Business

On January 2, 2009, Escalon Medical Corp. announced the acquisition of Immunodiagnostic Systems Holdings' hematology business.  According to the press release, the acquisition will cost Escalon $5.9 million spread over the next four years.

Roche Licenses Anti-inflammatory Compounds

On December 30, 2008, BusinessWeek reported that Roche has entered a licensing agreement with Synta Pharmaceuticals for certain preclinical anti-inflammatory compounds.  The initial licensing fee is reportedly $25 million in cash.  The deal may be worth more than $1 billion in milestones and royalties if three products emerge to market from the licensed compounds.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Cellectis and Regeneron Resolve Licensing Dispute

    By Donald Zuhn --

Earlier this month, Cellectis SA, based in Romainville Cedex, France, announced that it had reached an agreement with Regeneron Pharmaceuticals, Inc., of Tarrytown, NY, concerning the use of the French biotech company's homologous recombination patent estate.  Under the agreement, Regeneron would pay the French biotech company $12.45 million for the use the Cellectis patents.  Cellectis noted that the agreement resolved a more than four-year-old dispute regarding a licensing agreement the companies entered into in December 2003.  According to Cellectis' press release, the dispute concerned the interpretation of the 2003 agreement, which encompassed patents and patent applications directed to a process for the specific replacement of genes by homologous recombination.

In addition to the $12.45 million payment, Regeneron will also pay Cellectis "a low single-digit royalty" based on revenue received by Regeneron from future licenses or sales of its VelociGene® or VelocImmune® products and services.  Under the terms of the agreement, Regeneron will not have to pay royalties with respect to its prior licensing deals with AstraZeneca UK Ltd., Astellas Pharma Inc., and sanofi-aventis, or its commercial sales of antibodies based on Regeneron's VelocImmune technology.  Finally, the agreement between Cellectis and Regeneron calls for Regeneron to purchase of 368,301 ordinary shares of Cellectis stock.

For additional information regarding the agreement, please see:

• A report on the agreement by The Business Review

Sigma-Aldrich Licenses Apoptosis Marker

    By Jason Derry --

Sigma-Aldrich Co. has announced a licensing deal with NeuroSurvival Technologies Ltd. by which Sigma-Aldrich will be allowed to market and manufacture a marker that can detect apoptosis in vitro and in vivo.  The marker, commercially known as Apo-TRACE, is one of a number of small molecules, referred to collectively as ApoSense™, that NeuroSurvival has developed to detect apoptotic cells in vivo.  An overview of NeuroSurvival's ApoSense™ technology is available here.  The markers can be used for molecular imaging in the areas of disease staging/diagnosis, treatment monitoring, and drug development.

ApoSense™  Positron Emission Tomography (PET) scans can be viewed here.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Pfizer to Acquire Encysive Pharmaceuticals

    By Jason Derry --

Pfizer Inc. has announced that it has an agreement in place to acquire Encysive Pharmaceuticals Inc. for about $195 million.  Encysive is a biotechnology company that has a product currently marketed in the European Union, and several other foreign markets, for treating pulmonary arterial hypertension.  The product, THELIN (sitaxsentan sodium), is an endothelin A receptor antagonist.  THELIN has been approved in Australia and Canada, but is still awaiting approval in the U.S.  Pfizer has indicated that it will conduct the necessary Phase III trial to move the drug toward approval.  Encysive has several other drug candidates in its pipeline in various clinical stages of development.  Pfizer has indicated that Encysive will eventually be merged with a Pfizer subsidiary.

For additional information, please see:

• Reuters report

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Human Genome Sciences and Xencor Enter Antibody Collaboration

    By Christopher P. Singer --

On February 7, 2008, Human Genome Sciences, Inc. (HGS) and Xencor, Inc. announced that the two companies will enter a collaboration agreement relating to Xencor's proprietary XmAb™ humanization and optimization technologies.  Xencor's technology will be applied to several new monoclonal antibody drug candidates developed against antigens discovered by HGS.

Under the agreement, Xencor will receive an upfront payment and is eligible for additional payments for development and commercial milestones, as well as royalty payments on any commercialized products arising from the agreement.  All preclinical and clinical development, manufacturing and commercialization will be handled by HGS.

According to Xencor, its XmAb™ engineered Fc domains are designed to improve one or more important effector functions of an antibody candidate, such as enhanced antibody-mediated tumor cell killing, extended half-life, and selective regulation of immune cells.  Xenxor's XmAb™ Fv technology generates high-quality human sequence diversity in antibody variable domains in order to improve affinity, stability, and production yield.

Monsanto Co. v. David (Fed. Cir. 2008)

Monsanto Prevails Again against Infringing Farmer

    By Kevin E. Noonan --

In recent weeks, Monsanto has prevailed in patent infringement lawsuits involving its patented seeds from various crop species genetically engineered to be resistant to glyphosate herbicides such as Roundup® (also a Monsanto product).  The U.S. Supreme Court recently refused to grant certiorari to the defendant in Monsanto Co. v. McFarling (despite representation by noted academic Mark Lemley of Stanford; see "Supreme Court Fails to Grant Certiorari in Monsanto Co. v. McFarling") and the defendant, Mr. McFarling, an individual farmer is thus liable for a judgment of $375,000.

The latest Monsanto victory against another individual farmer, Loren David (although both Mr. McFarling and Mr. David own farms far larger than the typical “family farm” that the appellation “individual farmer” might bring to mind) was affirmed yesterday in a unanimous decision by the Court of Appeals for the Federal Circuit.  In this case, the damages award was even larger -- $786,989.43 -- comprising both compensatory damages of $226,214 and prejudgment interest, attorneys fees, and costs.  And while based on the same general activity held to infringe the same patent (U.S. Patent No. 5,352,605) in McFarling (replanting genetically-engineered seed contrary to both the patent license and a contractual agreement not to do so), Mr. David’s behavior and inconsistent testimony, as well as the interesting legal arguments raised by his counsel, warrant further consideration.

Monsanto first became suspicious that Mr. David was replanting its genetically-engineered Roundup Ready® soybean seed when the amount of seed Mr. David purchased in 2003 was not sufficient for the acreage planted nor consistent with the amount of Roundup® herbicide he applied to his fields.  Monsanto thus suspected, as in McFarling, that Mr. David was replanting Roundup Ready® seed obtained from a prior year’s planting.  As in McFarling, the company sold Mr. David its patented soybean seeds subject to the conditions of an agreement, termed the “Technology Agreement” (which Mr. David signed) that requires him to pay a one-time license fee of $6.50 per 50 lb. bag, and to agree not to plant himself, or supply to others, "saved" seeds, i.e., seeds produced from the originally purchased seeds.  The Technology Agreement also required Mr. David to pay $7.75 per unit (50 lb. bag of seed) sold.  Mr. David had participated in this arrangement with Monsanto between 1999 and 2003, when the infringing activity occurred.

Monsanto’s evidence at trial was based on residual soybean plant material obtained from Mr. David’s farm in 2004 (after the 2003 soybean crop had been harvested), which showed that the soybeans were recombinant; records showing that Mr. David had purchased an insufficient amount of Monsanto Roundup Ready® soybean seed for the 2003 growing season for the acreage planted; and records showing that Mr. David purchased more than 1,000 gallons of Roundup® herbicide, which would have killed any native soybeans not protected by expression of the recombinant protein in Monsanto’s Roundup Ready® seeds.  This evidence was supported by expert testimony as to the amount of seed needed to plant Mr. David’s acreage.

The District Court after a bench trial found Mr. David’s testimony (and his daughter’s testimony on his behalf) to be unconvincing, particularly since the District Court found that Mr. David changed his testimony (three times by Mr. David, according to the Federal Circuit’s opinion) in an effort to provide a non-infringing explanation for the evidence of the infringement.  Moreover, affirmative evidence produced by Mr. David in his defense was unavailing; for example, he had records for the purchase of additional Roundup Ready® seed in 2003, but these records were for purchases made after the entirety of his fields had been planted that year.  The District Court found this to be an effort to mislead Monsanto into believing he had not saved seed from the 2002 crop, in violation of the Technology Agreement and infringement of Monsanto’s ‘605 patent.

On appeal, Mr. David argued that his activities were not infringing because the ‘605 patent is not directed towards a plant or seed but rather to a gene.  Representative claims of the ‘605 patent include the following:

1.  A chimeric gene which is expressed in plant cells comprising a promoter from a cauliflower mosaic virus, said promoter selected from the group consisting of a CaMV (35S) promoter isolated from CaMV protein-encoding DNA sequences and a CaMV (19S) promoter isolated from CaMV protein-encoding DNA sequences, and a structural sequence which is heterologous with respect to the promoter.

4.  A plant cell which comprises a chimeric gene that contains a promoter from cauliflower mosaic virus, said promoter selected from the group consisting of a CaMV (35S) promoter and a CaMV (19S) promoter, wherein said promoter is isolated from CaMV protein-encoding DNA sequences, and a structural sequence which is heterologous with respect to the promoter.

8.  A plant transformation vector which comprises a disarmed plant tumor inducing plasmid of Agrobacterium tumefaciens and a chimeric gene, wherein the chimeric gene contains a promoter from cauliflower mosaic virus, said promoter selected from the group consisting of a CaMV(35S) promoter and a CaMV(19S) promoter, and a structural sequence which is heterologous with respect to the promoter.

Mr. David argued that the patent specification did not satisfy the written description requirement of 35 U.S.C. § 112, first paragraph, and specifically that the specification lacked the “specificity that would be required of a patented plant variety.”  Cited in support of this argument was the Supreme Court’s J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc. case, which Mr. David argued “stands for the proposition that plants can only receive patent protection under the Plant Patent Act of 1930, 35 U.S.C. §§ 161-164 (the 'P.P.A.'), the Plant Variety Protection Act of 1970, 7 U.S.C. § 2321 (the 'P.V.P.A.'), or under a utility patent on a plant variety.”  However, the Federal Circuit disagreed, in an opinion written by Judge Lourie joined by Judges Bryson and Moore.  Indeed, the Federal Circuit held that the plain meaning of the Supreme Court’s decision was precisely the opposite:  that there was no basis to "narrow the reach of §101 where Congress has given [the Court] no indication that it intends this result."  The CAFC analyzed the infringing act as "planting a seed containing the [claimed] gene sequence . . . [t]he gene itself is being used in the planting, and infringing act."

The Federal Circuit recognized Mr. David’s complaint to be the same as Mr. McFarling's:  a belief that he had the right to replant the patented seed despite the exclusive right of the patentee and his own participation in the Technology Agreement.  Having decided that such replanting was an infringing act in McFarling, this panel had no reason to come to any other conclusion.

Despite losing his appeal on the underlying infringement decision, the Federal Circuit vacated and remanded the damages award as being excessive.  Specifically, the CAFC found that the District Court was correct in deciding that this was an “exceptional” case under 35 U.S.C. § 285, in view of evidence that Mr. David “knew that saving seed was a violation of the Technology Agreement, yet . . . did so anyway” and “[h]e attempted to cover up his infringement and deceive Monsanto.”  The Federal Circuit characterized his actions as “a case of a farmer with apparent disregard for patent rights, license agreements, and the judicial process,” not a case of a farmer “unknowingly infringing a patent.”  The CAFC did find, however, that the award contained both the damages dictated by the terms of the Technology Agreement ($164,608.03) as well as costs Monsanto requested under 28 U.S.C. § 1920 ($30,542.99).  These awards together seemed duplicative, and the Federal Circuit remanded the case to the District Court for reconsideration of the damages award.  The Federal Circuit also included in the remand a recalculation of the amount of the reasonable royalty Monsanto was entitled to, based on the estimates the District Court used to calculate the amount of patented soybean seed Mr. David substituted with his saved seed.  The CAFC did not, however, overturn the royalty rate, which was identical to that imposed in McFarling ($55.04 per unit), and much higher than the contractual rate under the Technology Agreement ($7.75 per unit).  Significantly, the opinion notes that it would be within the District Court’s sound discretion to accept Monsanto’s expert’s estimate for the number of units to use in calculating a reasonable royalty, but left it to the District Court to make that determination in the first instance.

Maybe farmers will get the message after this run of victories by Monsanto.  However, it is not at all clear to what extent the Supreme Court’s impending decision in Quanta v. LG will influence Monsanto’s ability to put these types of limitations on its patented products.  Should the Supreme Court expand the scope of the patent exhaustion principle, or restrict a patentee’s right to limit the uses to which a patented product is put, Monsanto may have to revisit these issues with the next crop of recalcitrant farmers with a more uncertain outcome.

Monsanto Co. v. David (Fed. Cir. 2008)
Panel:  Circuit Judges Lourie, Bryson, and Moore
Opinion by Circuit Judge Lourie

For additional information regarding other related topics, please see:

• "Court Report," February 3, 2008
• "Court Report," January 28, 2008
• "Court Report," January 13, 2008
• "Court Report," January 7, 2008
• "Supreme Court Fails to Grant Certiorari in Monsanto Co. v. McFarling," January 7, 2008
• "Court Report," December 16, 2007
• "Court Report," November 18, 2007
• "Court Report," October 21, 2007
• "Court Report," July 1, 2007
• "Monsanto Co. v. McFarling (Fed. Cir. 2007)," June 4, 2007
• "Court Report," May 20, 2007
• "Court Report," May 7, 2007
• "Court Report," April 15, 2007
• "Court Report," March 11, 2007
• "Court Report," March 4, 2007
• "Court Report," February 28, 2007

Additional information regarding this case can also be found at Patently-O.

Novartis to Supply Cancer Drug to Thai Patients

    By Donald Zuhn --

Last week, Swiss drug maker Novartis AG agree to supply its cancer drug Glivec® at no cost to patients in Thailand in exchange for the Thai government’s agreement not to issue a compulsory license on Novartis’ patent.  Glivec® (imatinib), which is sold as Gleevac® (imatinib mesylate) in the U.S., is marketed for the treatment of chronic myeloid leukemia (CML) and gastrointestinal stromal tumor (GIST).

Prior to the agreement, the Thai government had issued compulsory licenses on at least six therapeutics:  Merck's Efavirenz (for treating AIDS), sanofi-aventis’ Plavix (for treating heart disease), Abbott Laboratories’ Kaletra (for treating AIDS), Novartis Letrozole (for treating breast cancer), sanofi-aventis’ Docetaxel (for treating breast and lung cancer), and Roche’s Erlotinib (for treating lung, pancreatic, and ovarian cancer).

Under the agreement, Novartis will make Glivec® freely available to the three-quarters of the Thai population that is covered under the state’s healthcare program.  Dr. Vichai Chokevivat, Chairman of the Forum for Ethical Review Committees in Asia and the Western Pacific Region (FERCAP) and a member of the negotiating team that brokered the agreement, estimated that 900 Thai patients could receive Glivec® under the pact.  In the absence of the agreement, treatment with Glivec® would cost 1.3 million baht ($40,000) per year.  [Interestingly, a generic version of Glivec® made in India costs $50,000 baht ($1,538) per year.]

Novartis has declined to comment on the agreement with the Thai government.

For additional information on the agreement, please see:

• Reuters report

For information regarding this and other related topics, please see:

• "Neocolonialism in the Current Global Drug Pricing Regime?" August 19, 2007
• "More on the Global Drug Patenting Crisis," August 14, 2007
• "EU Trade Commissioner Sends Warning Letter to Thailand," August 13, 2007
• "Trying to Find a Solution to the Global Drug Pricing Crisis," July 16, 2007
• "Pharma Sanity Lacks Global Reach," July 13, 2007
• "Brasil Prevails in Dispute with Abbott over AIDS Drug Pricing," July 9, 2007
• "Africa (Still) Depending on the Kindness of Strangers in Anti-AIDS Drug Pricing," May 29, 2007
• "U.S. Trade Policy Becoming Less Pharma-Friendly," May 18, 2007
• "The "Unfairness" of World Intellectual Property Protection According to The New Yorker," May 17, 2007
• "Worldwide Drug Pricing Regime in Chaos," May 9, 2007
• "Not Getting It about Patented Drug Prices at The Wall Street Journal," May 6, 2007
• "A Modest Proposal Regarding Drug Pricing in Developing Countries," May 2, 2007
• "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries," May 1, 2007
• "Abbott Agrees to Offer AIDS Drug at Reduced Price," April 12, 2007
• "No New Abbott Medicines for Thailand," March 14, 2007
• "More Compulsory Licensing in Thailand," February 1, 2007

Stem Cell Sciences to Collaborate with Myelin Repair Foundation

    By Jason Derry --

Stem Cell Sciences plc has announced an agreement with Myelin Repair Foundation (MRF) to develop methods for generating sustainable cultures of human brain cells.  Under the terms of the agreement, MRF will work on developing methods for culturing neural stem cells, and inducing the stem cells to differentiate into neurons, oligodendrocytes, and astrocytes.  The cultures and techniques developed through the agreement should be useful for research, validating targets, and drug screening studies.  Although Stem Cell Sciences will have the first right of negotiation with respect to commercializing any potential products that are derived under the agreement, the parties are hoping that the neuroscience community at large will benefit from the source of brain cells and methods discovered during the collaboration.

Stem Cell Sciences is a research and development company that focuses on stem cell research.  The company's mission is to discover and develop stem cell-based therapeutics.

Myelin Repair Foundation is a non-profit organization that is focused on research and development of myelin repair therapeutics for the treatment of multiple sclerosis and other neurological diseases.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

WARF Licenses Stem Cell Patent Portfolio to BioTime

    By Donald Zuhn --

Earlier this month, the Wisconsin Alumni Research Foundation (WARF) announced that it had entered into a licensing agreement with BioTime, Inc. for 173 of WARF's human embryonic stem cell patents and patent applications (commonly known as the Thomson patents for inventor James Thomson).  WARF is a private, non-profit patenting and licensing organization that supports the University of Wisconsin-Madison.  WARF noted that with the BioTime agreement, WARF had completed 23 licensing agreements for its stem cell technology with 17 different companies.

BioTime, an Emeryville, California-based biotech company that focuses on the development of blood plasma volume expanders, intends to use the Thomson patent portfolio to enter the field of regenerative medicine, which BioTime believes is the third major revolution in biotechnology (to recombinant DNA technology and genomics).  BioTime's subsidiary, Embryome Sciences, Inc., will be handling the company's regenerative medicine work, which will include the development of a technology platform for the identification, scale-up, and purification of different cell types from human embryonic stem cells.  BioTime's CEO, Dr. Michael West, has had a long relationshiop with WARF, dating back to his founding of Geron Corporation, which provided early support for Dr. Thomson's work, and which became WARF's first commercial licensee of WARF's stem cell technology.

For information regarding this and other related topics, please see:

• "It's Time to Stop the Hypocrisy over Stem Cell Patents - Part III," July 4, 2007
• "WARF Responds to the Patent Office on Its Re-examined Stem Cell Patents," June 26, 2007
• "The Potential Usefulness of Adult Stem Cells Reaffirmed," June 25, 2007
• "Can Fibroblasts Solve The Problems with Human Embryonic Stem Cells?" June 15, 2007
• "Massachusetts to Invest $1 Billion on Medical and Science Research," May 10, 2007
• "It's Time to Stop the Hypocrisy over Stem Cell Patents - Part II," April 26, 2007
• "It's Time to Stop the Hypocrisy over Stem Cell Patents - Part I," April 17, 2007
• "WARF Stem Cell Patent Claims Rejected in Re-examination," April 3, 2007
• "NIH Chief Dissents on Federal Stem Cell Funding Ban," March 20, 2007
• "Stem Cells a Go! in California," February 28, 2007
• "Limitations on the Usefulness of Adult Stem Cells," February, 28, 2007

Seattle Genetics Earns Milestone Payment from Genentech for Initiation of Clinical Trial

    By Christopher P. Singer --

In a January 7, 2008 news release, Seattle Genetics, Inc. announced that it will receive a $4 million milestone payment from its collaboration with Genentech, Inc.  This payment arose as a result of Genentech's initiation of a phase Ib clinical trial of SGN-40 in combination with Rituxan® (rituximab) for patients with relapsed follicular or marginal zone non-Hodgkin lymphoma.  According to Seattle Genetics, preclinical data in several non-Hodgkin lymphoma models indicates that the combination of SGN-40 and Rituxan may have enhanced activity compared to either agent alone.

SGN-40 is a humanized monoclonal antibody that is currently in phase I and phase II clinical trials for non-Hodgkin lymphoma and multiple myeloma under a worldwide collaboration agreement with Genentech.  SGN-40 targets the CD40 antigen, which is expressed on most B lineage hematologic malignancies, as well as solid tumors such as bladder, renal, and ovarian cancer.  Seattle Genetics and Genentech have several other ongoing phase I and II trials relating to SGN-40 alone and in combination with other therapeutics.

According to the press release, Seattle Genetics received an upfront payment of $60 million in February 2007, and is entitled to receive potential milestone payments exceeding $800 million and escalating double-digit royalties starting in the mid-teens on sales of SGN-40, under its collaboration agreement with Genentech.  More information about the Seattle Genetics antibody technology can be found here.

Celltrion and CSL to Collaborate

    By Jason Derry --

Celltrion, Inc. and CSL Limited have announced an agreement to develop and commercialize a monoclonal antibody for treating acute myeloid leukemia (AML).  The antibody, designated CSL 360, is currently in Phase 1 clinical trials in Australia.  CSL is a global, biopharmaceutical company located in Australia, having facilities throughout the world.  CSL focuses on developing protein-based medicines and vaccines.  Celltrion is a Korean biopharmaceutical company that provides development and manufacturing services relative to biologics, such as recombinant proteins and antibodies.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Otsuka Pharmaceutical Co. and PDL BioPharma Strike Deal for IV Busulfex

    By Christopher P. Singer --

In a December 17, 2007 press release, Otsuka Pharmaceutical Co., Ltd. and PDL BioPharma, Inc. announced a finalized agreement in which Otsuka acquires intellectual property related assets to IV Busulfex® (busulfan) from PDL.  Under the agreement, Otsuka obtains rights to trademarks, patents, and other Busulfex-related assets, in return for a $200 million cash payment.  IV Busulfex was approved by the FDA in 1999 and is an oncologic drug used in conditioning regimen prior to allogeneic hematopoietic progenitor cell transplantation (blood/bone marrow transplantation).  The drug is marketed in over forty countries with sales of just under $30 million from September 2006 to September 2007 (an increase of nearly 30% from the prior year).  According to the press release, IV Busulfex fits in well with Otsuka's current efforts to develop oncology drugs in the United States, including drugs for treatment of severe pain related to cancer (phase II), oral mucositis, and leukemia (each in phase I).  This transaction is expected to close in the first quarter of 2008.

Affymetrix to Buy USB Corp.

    By Jason Derry --

Affymetrix Inc. has announced today that it will acquire USB Corporation for approximately $75 million.  USB develops and sells molecular biology products, biochemical reagents, and DNA sequencing reagents, including enzymes and kits for molecular biology research applications.  Affymetrix is a leader in the field of microarray technology for genetic analysis.  The products and technology acquired by Affymetrix will enable it to accelerate development of new genetic analysis products, and add value to its available product portfolio.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Eisai to Buy MGI PHARMA

    By Jason Derry --

Eisai Co., Ltd. and MGI PHARMA, Inc. have announced that Eisai will acquire MGI PHARMA for approximately $3.9 billion.  Eisai is a research-based company focusing on discovery, development, and marketing of therapeutic products in the fields of neuroscience, gastrointestinal disorders, and oncology.  MGI PHARMA is a biopharmaceutical company that focuses on oncology.  MGI PHARMA currently has a number of products on the market in the U.S., including Aloxi® (palonosetron hydrochloride) for injection, Dacogen® (decitabine) for injection, and Gliadel® Wafer (polifeprosan 20 with carmustine implant), and also has a large pipeline of therapeutic agents in various clinical trials.  Eisai's acquisition of MGI PHARMA is in line with its strategic plan of strengthening its worldwide position in the field of oncology.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.

Exiqon to Acquire Oncotech

    By Jason Derry --

Exiqon A/S and Oncotech Inc. have announced that Exiqon will acquire Oncotech for approximately $45 million.  Oncotech provides diagnostic tests that help physicians optimize treatment regimens for cancer patients.  Exiqon provides a number of products to assist in analyzing gene expression, including microRNA profiling products and services.  Through the acquisition, Exiqon and Oncotech will combine their respective expertise to develop molecular diagnostic tests based on microRNA biomarkers.  The companies expect at least one such test to be available within the coming year.

Jason Derry, Ph.D., who graduated with honors from DePaul University College of Law, is a molecular biologist and founding author of Patent Docs.