By Andrew Williams --
Anyone that has been monitoring the outcome of district court cases recently will be aware of the perils of not including sufficient information, or not timely supplementing, preliminary infringement or invalidity contentions required by many local patent rules. The purpose of these contentions, which are often exchanged very early in a case, is to help identify potentially dispositive issues and to provide a framework for discovery. Therefore, the parties are required to articulate their theories of the case early in order to avoid the "shifting sands" approach to litigation. And, even though a party is not required to prove infringement at this stage, Courts have been reluctant to allow a party to shift their contentions, especially as the case moves closer to trial.
It is with this backdrop that the Federal Circuit decided the Anticancer, Inc. v. Pfizer, Inc. case on Monday, October 20, 2014. The Court held that a district court abused its discretion by imposing a fee-shifting sanction on AntiCancer as a requirement to amend its contentions (which the lower court found to be deficient). One problem was that, at the time, AntiCancer had not yet had the opportunity to take any discovery from Pfizer or its co-defendant. Nevertheless, the Federal Circuit's opinion rested almost entirely on the impropriety of the particular sanction as a condition for supplementation as a matter of Ninth Circuit jurisprudence. It is therefore unclear whether this opinion will have an impact beyond this Circuit. It is also unclear whether this case will be of help to all of the parties that have been barred from raising a theory of infringement or invalidity later in litigation due to the fact that it was not included in the preliminary contentions. A take away lesson might be that, even though a party might get bailed out because a sanction is beyond the inherent powers of the court, it is still a best practice to be as explicit as possible in the contentions.
The case had an interesting procedural history. AntiCancer filed a lawsuit against Pfizer in the United States District Court for the Southern District of California for breach of a license agreement, breach of the duty of good faith and fair dealing, and unjust enrichment. After that complaint was filed, AntiCancer discovered that scientists at Pfizer and Crown Bioscience, Inc. authored publications that allegedly infringed AntiCancer's patents. The court granted a motion to amend the complaint to add patent infringement counts and to add Crown Bioscience as a party. The problem was that according to the Case Management Conference Order, the preliminary infringement contentions were due 5 days later. AntiCancer's contentions were 22 pages, 18 of which were claim charts which drew primarily from the defendant's scientific publications. Pfizer ultimately filed a summary judgment motion on the infringement counts because it believed that the claim charts were defective. According to Pfizer, the charts were missing claim elements for every asserted claim. The lower court agreed as to three elements, but permitted AntiCancer to supplement under the condition that it pay defendants' attorney fees. Because AntiCancer objected to this condition, the summary judgment motion was granted. The parties resolved the other counts, and the case was dismissed with prejudice. AntiCancer appealed.
The Federal Circuit noted that even though summary judgment is reviewed without deference, the application of a local rule is reviewed for the abuse of discretion. The Court was also required to consider whether Federal Circuit or regional law applied. Even though the question whether contentions are deficient involves substantive patent law, the imposition of fee-shifting sanctions is a matter of discipline under the court's inherent authority, thereby implicating regional law. Under Ninth Circuit precedent, such sanctions are only permissible if the court makes an explicit finding that counsel's conduct "constituted or was tantamount to bad faith." Therefore, the Court concluded, the fee-shifting sanction would only have been proper if AntiCancer's actions were in bad faith.
To make this determination, the Court looked to what was required to be included in the preliminary infringement contentions by the local patent rules. Interestingly, many of the requirements are similar to those found in the new heightened pleading requirements found in the pending patent reform legislation. Important to this case, the local rules require "a chart identifying specifically where each element of each asserted claim is found within the Accused Instrumentality . . . ." The lower court found this identification to be deficient with respect to three claim elements, "promoter monitoring," "delivering cells," and "metastasis to a second site," even though AntiCancer argued that one skilled in the art would have understood that these elements were present, even if the identification didn't contain these specific words per se.
Therein is the problem for many patents in general, and those in the life sciences in particular. The ultimate audience for these contentions (the Judge) might not have the requisite understanding of the technology. Therefore, even if the attorneys involved believe that the identification of a claim limitation is clear in a reference, without an explanation to "connect the dots," the court might find the claim limitation to be missing. That was the case here. The technology involved was the use of green fluorescent protein linked to a gene promoter. Specifically, two representative claim were (1) a method of monitoring the ability a promoter to promote expression of a gene by delivering cells to an animal that contain a fluorophore operatively linked to a promoter and subsequently observing the fluorophore, and (2) a nude mouse model for progression of human neoplastic disease that, among other things, "has sufficient immune-deficiency to allow a transplanted neoplastic tissue to grow at said primary site and metastasize to said secondary tumor site . . . ."
For each of the three "missing" elements, AntiCancer alleged that they were present in the publications (and therefore by extension, in the contentions), and provided a detailed explanation of why and where they could be found. In addition, AntiCancer submitted a declaration from Dr. Robert M. Hoffman explaining the science involved. The district court noted that if AntiCancer had provided in its contentions this level of detail and explantion, there would have been no deficiencies. In fact, the court used AntiCancer's ability to explain the location of each limitation as evidence that discovery from defendants was unnecessary to satisfy AntiCancer's obligation at the time. AntiCancer took the position that such explication was not required by the local rules, and that it had identified each limitation on its claim charts.
As already noted, the Federal Circuit did not focus on whether the district court was correct in finding the contentions deficient. Indeed, it concluded that the Court "need not intrude upon the district court's authority to require supplementation of the Preliminary Infringement Contentions when such supplementation may assist the procedures at trial." Instead, the Court focused on whether the sanctions were appropriate. And, because Ninth Circuit law requires a finding of bad faith, and the lower court did not make such a finding, the Court vacated and remanded. Instead, the lower court found that the contentions were "woefully insufficient" and "vague," and that AntiCancer acted "unreasonable" and "disingenuous." These findings, according to the Federal Circuit, do not amount to "bad faith."
Another observation that can be discerned from this case is the mischief that could be caused by the heightened pleading standards found in the pending patent reform legislation. In this case, the Federal Circuit noted that AntiCancer's complaint complied with the Federal Rule of Civil Procedure. Instead, the defendants focused on the information required for the preliminary contentions by the local rules, alleging that they were deficient. If such information were required to be included in a complaint, defendants would routinely file motions to dismiss based on the sufficiency of the pleading. This would cause cases to be decided, and potentially dismissed, on procedural grounds (were all of the requirements met) before any substantive analysis of the allegations are made. Whereas requiring more detail than that found in Form 18 is probably a good idea, instituting the level of heightened pleading standards as can be found in the current proposed legislation is probably a bad idea. For all of the supporters of the legislation that argue that such concerns are unfounded, one need only look at Pfizer's summary judgment motion on the contentions as evidence that accused infringers will use any means to get a case dismissed.
AntiCancer, Inc. v. Pfizer, Inc. (Fed. Cir. 2014)
Panel: Circuit Judges Newman, Reyna, and Taranto
Opinion by Circuit Judge Newman