By Kevin E. Noonan --
In Schwarz Pharma, Inc. v. Paddock Labs., Inc., the Federal Circuit affirmed a District Court determination that infringement under the doctrine of equivalents was precluded by prosecution history estoppel, and decided whether a patentee is an indispensable party to confer standing on the exclusive licensee.
Schwarz Pharma and its corporate parent, the German company Schwarz Pharma AG, are the exclusive licensees of U.S. Patent No. 4,743,450, owned by Warner-Lambert Co. The patent relates to Angiotensin Converting Enzyme (ACE) inhibitors combined with stabilizers (to prevent degradation) for treating hypertension, marketed by Schwarz Pharma as Univasc®. Specifically, the '450 patent teaches use of an alkali or alkaline earth metal carbonate to inhibit cyclization and discoloration.
Claim 1 of the '450 patent reads as follows:
A pharmaceutical composition which contains:
(a) a drug component which comprises a suitable amount of an ACE inhibitor which is susceptible to cyclization, hydrolysis, and discoloration,
(b) a suitable amount of an alkali or alkaline earth metal carbonate to inhibit cyclization and discoloration, and
(c) a suitable amount of a saccharide to inhibit hydrolysis.
The suit was initiated in response to a Paragraph IV certification by Paddock as part of its ANDA submission to the FDA for approval of its moexipril hydrochloride (an ACE inhibitor; "MH") and magnesium oxide ("MgO") formulation. The parties stipulated that Paddock's formulation did not literally infringe the '450 patent claims. The District Court granted Paddock's motion for summary judgment that prosecution history estoppel precluded infringement under the doctrine of equivalents. Specifically, independent claim 1 as filed recited "metal containing stabilizer" and independent claim 16 (a method claim) recited "an alkali or alkaline earth-metal salt." Both were amended to recite "an alkali or alkaline each metal carbonate," and the District Court held that the estoppel raised by that amendment precluded Paddock's MgO-containing formulation from infringing the composition or method claims.
The Federal Circuit affirmed in an opinion written by Judge Lourie and joined by Judges Michel and Moore. As an initial matter, the Federal Circuit addressed Paddock's jurisdictional objection that Schwarz Pharma did not have standing to appeal in its own right. The patentee, Warner-Lambert, did not appeal (although it did join the Schwarz Pharma licensees in suing at the District Court). The question was whether Schwarz Pharma had standing to appeal in its own name without participation of the patentee. It is certainly possible to see why a patentee might have a different perspective than its licensee, even an exclusive licensee, on whether an appeal was desirable. In view of the propensity for the Federal Circuit to creatively construe claims, for example, a patentee might be content to exit the litigation with its claims relatively intact based on the District Court's claim construction. This is particularly the case where under the District Court's construction the licensee's activities remain within the scope of the construed claims. On the other hand, under these circumstances a licensee might have no disincentive to appeal, since reversal would provide it with a victory in the infringement action, and further construction of the claims by the Federal Circuit, or invalidation of the patent claims, could free it from its obligations under the license.
Schwarz Pharma made the distinction between the requirement for constitutional standing and prudential standing; the latter, according to Schwarz Pharma, is important in the District Court case to prevent an accused infringer from being subject to multiple lawsuits for the same accused infringing activities. No such concerns are implicated on appeal, and constitutional standing, which Schwarz Pharma asserts it possesses, is thus sufficient.
The Federal Circuit, saying the issue was one of first impression, held that the concerns behind the prudential requirement that a patentee must be joined to avoid the risk of multiple suits by different plaintiffs (the licensee and the patentee, separately) against the same defendant for the same allegedly-infringing acts did not apply on appeal. That risk did not exist on appeal, because the patentee (Warner-Lambert) would be bound by the determination of the District Court as modified vel non on appeal. Moreover, another reason for compelling joinder of the patentee below is to protect the patentee from the risk of having its patent invalidated without the opportunity to participate, another consideration that does not apply (the Federal Circuit neglecting its own claim construction jurisprudence and the effects it can have on a patentee's property rights). The CAFC also asserted as a basis for its holding that Schwarz Pharma, as plaintiff, was entitled to appeal decisions by the District Court adverse to its interests. However, in making its decision to permit Schwarz Pharma to appeal without joinder by Warner-Lambert, the Federal Circuit chose to value the risk to the accused infringer, and the interests of the licensee, over the patentee's (legitimate) concerns for its patent rights.
On the merits, Schwarz Pharma argued that prosecution history estoppel did not preclude infringement under the doctrine of equivalents because the patentee "never claimed compositions or processes involving MgO." The specification, according to Schwarz Pharma, supported an interpretation of the terms "metal containing stabilizer" and "alkali or alkaline earth metal salt" to mean only alkali or alkaline earth metal cations and carbonate, borate, or silicate anions, and thus MgO never fell within the scope of the original claims. Alternatively, Schwarz Pharma argued that there were genuine issues of material fact regarding whether MgO was a foreseeable equivalent of an alkali or alkaline earth metal carbonate, and that there was no more than a tangential relationship of the claim limitation and the MgO equivalent.
The Federal Circuit disagreed, finding that the specification disclosed more broadly than Schwarz Pharma contended, and that the plain meaning of "metal containing stabilizer" and "alkali or alkaline earth metal salt" encompassed MgO; thus, amendment of the independent claims to recite "alkaline earth metal carbonate" raised an estoppel for all foreseeable equivalents relinquished by the amendment. The CAFC found that the amendments were made in response to an obviousness rejection and thus were presumptively made for reasons relating to patentability. The Federal Circuit also rejected Schwarz Pharma's contention that while MgO was known, it was not known to stabilize ACE inhibitors from the type of degradation disclosed in the '450 patent. Finally, the CAFC considered Schwarz Pharma's "tangential relation" argument to mean that rejection over the asserted reference could have been overcome without amendment. The Federal Circuit called this argument irrelevant and merely speculative, and placed upon Schwarz Pharma (as licensee) the consequences of the patentees decisions during prosecution, consistent with more than a decade of Federal Circuit jurisprudence (see Sage Products, Inc. v. Devon Indus., Inc.). The Federal Circuit thus found no reason to disturb the District Court's judgment below.
Schwarz Pharma, Inc. v. Paddock Labs., Inc. (Fed. Cir. 2007)
Panel: Chief Judge Michel and Circuit Judges Lourie and Moore
Opinion by Circuit Judge LourieAdditional information regarding this case can be found at Patently-O and the Orange Book Blog.
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