In re Omeprazole Patent Litigation (Fed. Cir. 2008)

    By Kevin E. Noonan --

The Federal Circuit today affirmed AstraZeneca's latest victory in its long-running battle against generic drug companies who filed ANDAs for its (former) blockbuster drug, Prilosec®.  The Court affirmed in toto the decisions of Judge Barbara S. Jones, the District Court judge sitting in the Southern District of New York who has handled the consolidated infringement actions brought by AstraZeneca under 35 U.S.C. § 271(e)(2)(A).  The two sets of defendants, Apotex Corp., Apotex, Inc., and Torpharm Inc. on the one hand and Impax Laboratories on the other, were found to infringe the patents in suit, and neither defendant had established that these patents were invalid by clear and convincing evidence.

The Federal Circuit characterized the decision appealed from in this case as the "second wave" of the consolidated, multidistrict litigation involving these patents and various generic company ANDA filers who filed Paragraph IV certifications that AstraZeneca's patents were invalid.  The Court had heard and affirmed the first wave decisions in In re Omeprazole Patent Litigation, 86 Fed. App'x. 76 (Fed. Cir. 2003) and In re Omeprazole Patent Litigation, 483 F.3d 1364 (Fed. Cir. 2007).  In this case, the Court addressed separately and rejected the contentions of each of the two parties defendant, in a unanimous decision by Judge Bryson, Judges Lourie and Gajarsa concurring.

There were two patents in suit, U.S. Patent Nos. 4,786,505 and 4,853,230.  Claim 1 of the '505 patent reads as follows:

An oral pharmaceutical preparation comprising:
    (a) a core region comprising an effective amount of a material selected from the group consisting of omeprazole plus an alkaline reacting compound, an alkaline omeprazole salt plus an alkaline reacting compound and an alkaline omeprazole salt alone;
    (b) an inert subcoating which is soluble or rapidly disintegrating in water disposed on said core region, said subcoating comprising one or more layers of materials selected from among tablet excipients and polymeric film-forming compounds; and
    (c) an outer layer disposed on said subcoating comprising an enteric coating.

And claim 1 of the '230 patent reads as follows:

A pharmaceutical preparation comprising:
    (a) an alkaline reacting core comprising an acid-labile pharmaceutically active substance and an alkaline reacting compound different from said active substance, an alkaline salt of an acid labile pharmaceutically active substance, or an alkaline salt of an acid labile pharmaceutically active substance and an alkaline reacting compound different from said active substance;
    (b) an inert subcoating which rapidly dissolves or disintegrates in water disposed on said core region, said subcoating comprising one or more layers comprising materials selected from the group consisting of tablet excipients, film-forming compounds and alkaline compounds; and
    (c) an enteric coating layer surrounding said subcoating layer, wherein the subcoating layer isolates the alkaline reacting core from the enteric coating layer such that the stability of the preparation is enhanced.

Impax challenged the District Court's decisions on both procedural and substantive grounds.  Procedurally, Impax asserted error in each of the District Court decisions regarding jurisdiction over the action after AstraZeneca's patents-in-suit had expired and denying its demand for a jury trial.  (The District Court dealt with the latter ground summarily, stating that it had once before rejected Impax's contentions with regard to its petition for a writ of mandamus, and upholding its prior determination as "the law of the case.")  On the jurisdictional question, the patents-in suit expired between the end of the bench trial and when the District Court entered judgment, and according to Impax, patent expiry eliminated any "case or controversy" between the parties.  The District Court also extended the time that the FDA was prohibited from allowing Impax's ANDA for six months from the date of patent expiry, as a consequence of the Agency's granting AstraZeneca a six-month period of pediatric exclusivity.  (Pursuant to 21 U.S.C. § 355(a), the FDA has the authority to request that an NDA holder perform pediatric studies on the effect of an approved drug.  If the NDA holder performs such studies, the Agency can extend the term of a patent-holder's exclusivity for an additional six months after Orange Book listed patents have expired.  In this case, that date was October 20, 2007.)

The Federal Circuit affirmed the District Court's interpretation of the statute, saying that the relevant provisions clearly give the District Court the authority to extend a patentee's period of exclusivity for the six-month additional period provided as a reward for performing pediatric testing at the FDA's behest.  The CAFC pointed to the express words of the statute, that "the period during which an ANDA may not be approved under section 355(j)(5)(B) 'shall be extended by a period of six months [i.e., the period of pediatric or market exclusivity] after the date the patent expires (including any patent extensions).'"  The Federal Circuit also rejected Impax's underlying basis for its argument, that patent expiry removed the District Court's jurisdictional basis under Article III's "case or controversy" requirement.  Stating the principle that what is required for a case to be justiciable is "a real and substantial controversy," the CAFC refused to permit patent expiry to be a ground for destroying jurisdiction when there clearly remained a "real and substantial controversy" between the parties (since Impax conceded that, even as they construed the situation, the District Court would have retained its authority if it had rendered its decision before the patents expired).  The Federal Circuit also rejected Impax's reliance on Kearns v. Chrysler Corp. and Roche Palo Alto v. Apotex, saying that the Kearns case concerned injunctive relief under 35 U.S.C. § 283 not § 271(e)(4)(A), and that in Roche, the dispute was on "the particular terms of the district court's order" (i.e., how the court worded its order), not a challenge on whether relief was available under the statute.

Impax's appeal of the District Court's decision that its ANDA product infringed the patents-in-suit was based on whether AstraZeneca had introduced sufficient and relevant evidence that each of the claim elements could be identified in its product.  First, Impax attacked the District Court's finding that the Impax formulation contains an "effective amount" of omeprazole and an alkaline reactive compound (ARC).  Second, Impax argued that there was insufficient evidence that its formulation contained an inert subcoating.  Since this appeal was from the District Court's decision after a bench trial, Impax had the burden of showing clear error in the District Court's decisions, a burden the Federal Circuit held it did not carry on either ground of appeal.  The CAFC had construed the meaning of the term "effective amount" in the so-called "first wave" phase of the litigation, to require the limitation applied to both the amount of omeprazole and the amount of the ARC.  Further, the CAFC had construed the meaning of the term "alkaline reacting compound" to mean "(1) a pharmaceutically acceptable alkaline, or basic, substance having a pH greater than 7 that (2) stabilizes the omeprazole or other acid-labile compound by (3) reacting to create a micro-pH of not less than 7 around the particle of omeprazole or other acid-labile compound."  Impax contended that this construction required AstraZeneca to introduce evidence of comparative stability testing to show that Impax's formulation fell within the scope of the claim.

The Federal Circuit rejected this contention, saying that the evidence AstraZeneca did introduce established that the ARC created the recited "'micro-pH' in the drug core," which the CAFC said was "the same evidentiary burden that the district court placed on Astra" in the first wave of the litigation.  Accordingly, the CAFC found no clear error in the District Court's determination that AstraZeneca had established infringement by a preponderance of the evidence.  Similarly, the CAFC rejected Impax's contention that, absent affirmative evidence that its formulation showed "enhanced stability," the District Court had "read [the limitation] out of the claims entirely" of the '230 patent.  All that was required, according to the Federal Circuit, was that AstraZeneca establish "the presence of an inert subcoating and a drug core having a micro-pH of not less than 7," and the CAFC found no clear error in the District Court's reliance on AstraZeneca's evidence in this regard.  Finally, the CAFC rejected Impax's contention that its decision in Warner-Lambert Co. v. Teva Pharmaceuticals USA, Inc. mandated a different result, since in that case the Federal Circuit reversed a summary judgment determination (where its review of the District Court's decision was de novo), while here it was reviewing a final judgment (requiring evidence of clear error).

The Federal Circuit also rejected Impax's second contention, that its formulation did not satisfy the "inert subcoating" limitation of the patents-in-suit, and that the District Court was in error for crediting AstraZeneca's expert testimony that the subcoating was formed "in situ," i.e., as a consequence of reaction between the components of the formulation rather than being introduced as a discrete step during formulation.  The Federal Circuit found no clear error in the District Court's determination that AstraZeneca's expert testimony and evidence was more credible than Impax's contrary interpretation of that expert testimony.

Finally, although disagreeing with the District Court's determination that AstraZeneca's Phase III clinical trials were an "experimental use" rather than a "public use," the Federal Circuit nonetheless upheld the District Court's decision that the patents-in-suit were not invalid based on public use prior to one year before their earliest priority date(s) under 35 U.S.C. § 102(b).  The basis for the CAFC's decision was evidence that AstraZeneca's invention was not "ready for patenting," as required by the Supreme Court's decision in Pfaff v. Wells Electronics, Inc.  The inventors testified that, although they had produced certain embodiments of the claimed invention prior to the Phase III clinical trials (and prior to the critical date), they did not (indeed, could not) know whether these embodiments would work for their intended purpose until receiving the results of the clinical trials.  Thus, according to the District Court, the claimed invention had not been reduced to practice until the clinical trials were over and thus were not "ready for patenting" during the clinical trials.  The Federal Circuit affirmed this determination, based on evidence of the uncertainty during development of the formulations and that the clinical trials were required to establish that the claimed invention had been reduced to practice.

Apotex also appealed the District Court's determination that its ANDA formulations infringed, as well as the District Court's rejection of its anticipation and obviousness challenges to the validity of the patents-in-suit.  Since the Federal Circuit characterized the infringement appeal as a dispute between the evidence presented by each side's experts, it found no clear error in the District Court's decision to credit AstraZeneca's expert testimony over the contrary expert testimony of the Apotex experts.  The CAFC also affirmed the District Court's determination that the patents-in-suit were not anticipated by two U.S. and one European prior art patent; here, the challenge was on claim construction, specifically the meaning of the term "alkaline salt" and "acid labile."  The CAFC rejected Apotex's contention that an "alkaline salt" was limited to salts comprising an element from Groups I and II of the periodic table, finding that it was contrary to the specification of the '230 patent and claim 8, which included within the scope of the term ammonium salts (which do not contain any Group I or Group II elements).  Regarding the term "acid labile," the Court interpreted the cited prior art to disclose acid-stable compounds that did not anticipate the claims at issue.

Apotex also asserted a large number of references to support its contention that the claims of the patents-in-suit were obvious.  The basis for the District Court's rejection of Apotex's obviousness claim is that the prior art did not recognize the need for a subcoating between the omeprazole/ARC-containing core and the enteric coating.  Even if the skilled worker in the art had recognized the need (i.e., that there would be a "negative interaction" between the core and the enteric coating), the District Court provided "multiple paths" that the worker of ordinary skill could consider in addressing the problem.  In this regard, Apotex raised the Supreme Court's discussion of the "obvious to try" standard set forth in the KSR Int'l. Co. v. Teleflex, Inc. decision.  The Federal Circuit distinguished on the grounds that the District Court "found that a person of skill in the art would not have seen a reason to insert a subcoating in the prior art formulation."  The District Court's finding of non-obviousness, affirmed by the Federal Circuit, "was based on Apotex's failure to demonstrate that a person of skill in the art would conclude that a negative interaction would take place between the enteric coating and the drug core," i.e., that the skilled worker would not have recognized that there was a problem to be solved in the first place, thus removing a necessary predicate to employing the "obvious to try" analysis.

This decision represents the latest (and perhaps the final) victory for AstraZeneca over its Prilosec® franchise.  These victories have about them, however, something of a Pyrrhic quality in view of events that have occurred since these suits were initiated almost ten years ago.  The most important of these is that AstraZeneca has transferred its focus from Prilosec® to Nexium®, the purified S-enantiomer of omeprazole.  Second, one ANDA filer, Kremers Urban Development Co., was found not to infringe AstraZeneca's patents and launched a generic omeprazole product almost five years ago; this launch was followed by others, and indeed AstraZeneca partnered with Proctor & Gamble to put an over-the-counter form of omeprazole on the market.  In this case, once Impax launched "at risk" prior to patent expiry, AstraZeneca amended its complaint to request damages, but before trial it stipulated for the District Court to dismiss its damages claims with prejudice in order for the Court to join Impax in the consolidated bench trial.  Accordingly, it appears that AstraZeneca actually gained very little, in market share, damages, or exclusivity, as a result of its participation in this protracted litigation.  This result provides a cautionary tale and to some degree refutes those who mischaracterize patent litigation as a "jackpot" or an impediment to innovation.  AstraZeneca protected its Prilosec® franchise at great cost, but it is reasonable to ask, to what end and for what benefit?  It doesn't appear to be an easy question to answer.

In re Omeprazole Patent Litigation (Fed. Cir. 2008)
Panel: Circuit Judges Lourie, Bryson, and Gajarsa
Opinion by Circuit Judge Bryson

Comments

[EG]

"AstraZeneca protected its Prilosec® franchise at great cost, but it is reasonable to ask, to what end and for what benefit? It doesn't appear to be an easy question to answer."

Kevin,

A very astute question to ask as this litigation went on for about 9 years to reach this point. For us looking for precedent on various issues on Hatch-Waxman and other patent subjects, it does provide quite a bit stuff to use.

[Bruce]

Kevin,

This is most outrageous and senseless decision to come out of the CAFC for years. The CAFC panel has without the blink of any eye restated the long settled meaning of "reduction to pratice". The CAFC has now decided that "safety and effeciay" testing of Phase III trials required for FDA approval, may well be a necessary in order for a drug to be considered "reduced to practice".

This opinion yells in the face of countless prior CAFC decisions which state just the opposite. Testing for FDA approval is by far a much higher standard than what is required for "reduction to practice"

UTTER NONENESE!

[Kevin E. Noonan]

Dear EG:

I'm sure AstraZeneca doesn't intend the usefulness of the case to be how it helps the rest of us understand Hatch-Waxman, but you may be right, in the end that may be its greatest (maybe only) legacy.

Thanks for the comment.

[Kevin E. Noonan]

Dear Bruce:

I think the basis for the court's decision is that the claim is for an (oral) pharmaceutical preparation/formulation. The problem with the decision differs a little between the two patents in suit. The '230 patent affirmatively recites functional features of the claimed structural elements (like "enhanced stability") that could be said to be uncertain until the results of the trials were known. If that limitation was given patentable weight, then whether the invention was reduced to practice could depend on those results.

Keep in mind, Judge Jones has handled these cases from their inception, and has ruled that omeprazole is "extremely difficult to formulate." If the CAFC gave that determination weight (and deference as a factual finding), it supports the idea that the inventors didn't know whether the formulation would work until they tested it in a sufficient number of people to have the clinical trial results.

This analysis works less well in the case of the '505 patent, but perhaps the court didn't think there was much profit in distinguishing between two expired patents. Given that Impax and Apotex could enter the market in October 2007, the entire case has an historical taint to it that might have affected the decision.

Insofar as anyone tries to use this case to equate Phase III clinical trials with reduction to practice as a general rule, I agree with you - at best this is a special case that should be distinguished on the facts. It will be interesting to see if any enterprising PTO examiners try to use this case to require Phase III trials to satisfy Sec. 101 or 112 requirements.

Thanks for the comment.

[Bruce]

The really troubling aspect of this decision is that the CAFC panel is essentially taking the DC's "findings of facts" which the DC used in its determination of "experimental use" and is extrapolating those facts to the CAFC's determination of lack of "reduction to practice".

The DC "found" that the Phase III trials were intended to prove "safety and effeciacy", thus supporting a ruling on experimental use. But the CAFC is now using those findings of "saftey and effeciacy testing" to prove that there was a lack of reduction to practice.

This is pure judicial mischief. Obviously, the parties were fully focused on "experimental use" not on "reduction to practice". But now comes the CAFC to cherry pick findings to support its very different approach for affirming the ruling of the DC.

But the CAFC think that the formulation would have survived Phase II if it hadn't met a threshold FDA requirement for safety and effeciacy? of course there was RTP.

More troubling is how the CAFC has being conflating the SCOTUS Pfaff decision that relates to the "on sale bar" with the "public use bar". The Supreme Court in Pfaff held that the on-sale bar only applied when the invention was ready for patenting. It further held the RTP would generally imply that invention was ready for patenting. But they never said that this same rule applies to the "public use" bar. Obviously, the concept of "use" clearly suggests that the invention was RTP'd. You cannot "use" a drug if it wasn't RTP'd.

[Kevin E. Noonan]

Bruce:

I don't disagree, but the claim is not to a drug per se, but rather to a particular formulation having certain properties. IF, and it's a big if, the CAFC was saying the inventors would only know if the claimed invention worked for its intended purpose after the results of the clinical trials were in, then the panel had a rational basis for its decision.

But you are correct that the issue was experimental use and not on sale, and this panel certainly seems to have these concepts confused. However, the decision cites Invitrogen Corp. v. Biocrest Mfg., L.P., 424 F.3d 1374, 1380 (Fed. Cir. 2005) (“the ready for patenting component of Pfaff’s two-part test [is] another necessary requirement of a public use bar.”) This is the lynchpin that joins the "ready for patenting" requirement with the public use bar. Think of the old corset case, or even the City of Elizabeth experimental use case. You could argue that you can't drive down a road until the road has been reduced to practice, but that use was not an invalidating public use because the inventors needed to know whether the road was ready for patenting (to put it in this panel's parlance).

You are right that this decision is ripe for abuse, but there is a logic in it.

Thanks for the comment.

[EG]

Kevin,

I hadn't thought before about the issue of whether the Pfaff "ready for patenting" prong applied to "public use" versus "on sale". But the "ready for patenting" prong would seem reasonably to apply to "public use" here in the context of whether the clinical studies were needed to confirm that the formulation would work. Otherwise, you put a drug company in the dilemma of filing for a patent to avoid the clinical study being a "public use", only to find out later in the clinical that it didn't work as formulated.

You may recall the 2004 case of SmithKline Beecham Corp. v. Apotex Corp. where the Federal Circuit initially put a significant cloud over whether clinical studies were “experimental” and thus not a “public use.” The Federal Circuit there ruled that the clinical testing: (1) only measured the safety and efficacy of the patented drug as an antidepressant; (2) was not needed to define what was claimed, i.e., the drug itself; and (3) was therefore not “experimental,” but was instead an invalidating “public use.” Fortunately for SmithKline, the Federal Circuit vacated this panel decision en banc.

Surprisingly, the Federal Circuit in Omeprazole didn't refer to this SmithKline case, but it certainly illustrates why some reasonable latitude should be given to the drug manufacturer not to rigidly treat clinical studies as a potential "public use".