Patent Docs

Global-Tech Appliances, Inc. v. SEB S.A. (2011)

Supreme Court Renders Opinion on Induced Infringement

By Kevin E. Noonan --

The Supreme Court issued its opinion today in Global-Tech Appliances, Inc. v. SEB S.A., affirming the Federal Circuit decision upholding a jury verdict that defendants were liable for inducing infringement.  As was the case in Bilski v Kappos, the opinion today spends little time discussing why the Federal Circuit decision was correct.  Instead, it concerns itself with construing the inducement statute and criticizing the appellate court for applying the wrong standard to arrive at the right result.  In doing so, the High Court evinces again its penchant for reaching far afield (here, criminal law) for principles that permit it to criticize the Federal Circuit in the exercise of its role in defining the contours of U.S. patent law, its recognized area of expertise.

Here, the Federal Circuit was confronted with the following factual situation.  The District Court had upheld (by denying defendants' motion for judgment as a matter of law) a jury verdict that defendants were liable for inducing infringement of the patent-in-suit.  The facts supporting this decision were these:

• Defendants had copied "all but the cosmetics" of one of patentee's commercially available deep fryers;

• The copied article was purchased (and copied) outside the country, where no U.S. patent markings were placed on the article;

• Defendants obtained an opinion of counsel regarding freedom to operate, but did not inform the patent attorney performing the patent search that the article had been copied;

• Defendant's president was "well versed" in U.S. patents (holding several himself) and was aware that the patentee was also "cognizant of patent rights" from prior dealings; and

• There was no exculpatory evidence that defendants had any actual belief that the copied article was not protected by a patent.

The Federal Circuit, in an opinion by (then) Circuit Judge Rader joined by Circuit Judges Bryson and Linn, recognized that there was no direct evidence that defendants were aware of a patent, and yet this pattern of behavior is certainly suggestive that the defendants had done everything they could to remain ignorant of the existence of any patent covering the copied product.  In this absence of evidence of actual knowledge the panel turned to Supreme Court precedent, applying the "deliberate indifference" standard.  This standard, adopted from "a different civil context" was "not necessarily a 'should have known' standard," since "[t]he latter [i.e., the "should have known" standard] implies a solely objective test, whereas the former may require a subjective determination that the defendant knew of and disregarded the overt risk that an element of the offense existed," citing Farmer v. Brennan, 511 U.S. 825, 840 (1994).  Expanding on how the panel applied this test, the opinion stated that "an accused infringer may defeat a showing of subjective deliberate indifference to the existence of a patent where it shows that it was genuinely 'unaware even of an obvious risk'" and that "the standard of deliberate indifference of a known risk is not different from actual knowledge, but is a form of actual knowledge," citing examples from its sister circuits.  Thus, contrary to its traditional tendency to establish objective, bright-line tests that can be clearly understood by patentees and accused infringers alike (and after a decade of Supreme Court reversals of their efforts), the Federal Circuit applied a subjective test for inducing infringement that defendants clearly satisfied.  The panel was even careful to eschew any interpretation that the opinion was intended to be definitive:

This opinion does not purport to establish the outer limits of the type of knowledge needed for inducement.  For instance, a patentee may perhaps only need to show, as Insituform []Techs., Inc. v. CAT Contracting, Inc., 161 F.3d 688, 695 (Fed. Cir. 1998) suggests, constructive knowledge with persuasive evidence of disregard for clear patent markings, similar to the constructive notice requirement in § 287(a) . . . .  This court does not set those boundaries now, just as it did not set them in DSU Med. [Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006) (en banc)].

These efforts did not satisfy the Supreme Court.  Writing for an 8-1 majority (with dissenting Justice Kennedy espousing an even more stringent "actual knowledge" standard), Justice Alito first parsed 35 U.S.C. § 271(b) for exactly what knowledge the accused infringer needed to possess:  whether it is just that "the inducer lead another to engage in conduct that happens to amount to infringement" or whether the inducer knows that the induced conduct is infringing.  The statute is unclear, or at least ambiguous, according to the Court, since it can be sensibly read either way.  The Court found the case law to be equally unavailing, since cases prior to enactment of § 271 as part of the 1952 Patent Act included under "inducing infringement" conduct now codified as inducing infringement (§ 271(b)) and contributory infringement (§ 271(c)).  Reviewing those cases, the opinion finds that what is now called contributory infringement was "more common" but that the cases contain "conflicting signals" as to the nature and extent of the required knowledge.

The Court finds precedential its decision in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476 (1964), where the Court found that contributory infringement under § 271(c) required that an infringer "must know 'that the combination for which his component was especially designed was both patented and infringing," despite the Court's characterization that Aro was "a badly fractured decision"; indeed, the principle relied upon by the Court was contained in Justice Black's dissent (because he disagreed with the judgment; however, he was in the majority with respect to the interpretation of § 271(c), and his opinion sets out the reasoning of the majority on this point).  This decision had stare decisis effect, because "[t]he 'holding in Aro II has become a fixture in the law of contributory infringement under [section] 271(c),'" citing 5 R. Moy, Walker on Patents § 15:20, p. 15–131 (4th ed. 2009).  Further, the opinion noted that respondent SEB "has not asked us to overrule it" and that "Congress has not seen fit to alter §271(c)'s intent requirement in the nearly half a century since Aro II was decided."  The Court thus assessed the meaning of § 271(b) "on the premise that §271(c) required actual knowledge of the patent that is infringed."  Using this premise, the Court finds that "the same knowledge is needed for induced infringement under §271(b)," in view of the "common origins" of the two statutory provisions and their similar language.  "It would thus be strange to hold that knowledge of the relevant patent is needed under §271(c) but not under §271(b)," Justice Alito concludes.

Having determined that some knowledge regarding infringement was required, the majority then turned to the quality and quantity of that knowledge.  Without extensive comment on their reasoning, the majority states baldly that, in the absence of evidence of actual knowledge (which would satisfy the statutory requirement), "we agree [with defendant-petitioner] that deliberate indifference to a known risk that a patent exists is not the appropriate standard under §271(b)."  Instead, the opinion adopts the "willful blindness" doctrine from criminal law as the appropriate standard.  This standard requires "(1) the defendant must subjectively believe that there is a high probability that a fact exists [here, presumably, the existence of a patent] and (2) the defendant must take deliberate actions to avoid learning of that fact."  As applied in the criminal law, "defendants cannot escape the reach of these statutes [that require knowing or willful acts] by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances" and thereby are as culpable as defendants who have "actual knowledge."  Citing the ALI Model Penal Code, § 2.02(7), the standard includes "a situation in which 'a person is aware of a high probability of [the fact's] existence, unless he actually believes that it does not exist.'"  The Court further defines how the concept of willful blindness is to be applied by stating that it "surpasses recklessness and negligence," because "a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known of the critical facts," citing G. Williams, Criminal Law § 57, p. 159 (2d ed. 1961).  The opinion contrasts this level of culpability with recklessness, where the defendant "merely knows of a substantial and unjustified risk of such wrongdoing," citing ALI Model Penal Code § 2.02(2)(c) (1985), and with negligence, where the defendant "should have known of a similar risk but, in fact, did not," citing ALI Model Penal Code § 2.02(2)(d).

The Court's opinion states that the Federal Circuit test departs from the proper willful blindness standard in two important respects:

First, it permits a finding of knowledge when there is merely a "known risk" that the induced acts are infringing.  Second, in demanding only "deliberate indifference" to that risk, the Federal Circuit's test does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.

Despite these criticisms, the majority upheld the Federal Circuit's decision affirming the District Court judgment below that defendants were liable for inducing infringement.

Reviewing the two opinions, the Supreme Court clearly believes that the difference in their approach and the standard applied by the Federal Circuit is that willful blindness requires not only the existence of a known risk but a high probability of that risk that is appreciated by the defendant, coupled with active efforts by the defendant to avoid knowing that the induced activities are infringing.  The latter is subject to objective evidentiary support, being based on conduct that can be interpreted regarding its intent.  The former requirement, however, is expressly subjective and perhaps not as amenable to competent proofs sufficient to establish infringement.  In this sense, the Court's opinion has increased the burden on patentees to enforce their patent rights.

In a biotech/pharma context, the effects of the opinion may be less negative.  For pharmaceutical products regulated by the FDA, the Orange Book provides not only actual notice but would be expected to vitiate any claim that an accused defendant did not appreciate the existence of the risk of patent infringement; the complex patent infringement portions of the recently enacted "follow-on biologics" approval pathway similarly make lack of appreciation of the known risk an unlikely defense.  In other aspects, particularly regarding method claims, the Court's decision may indeed make inducing infringement a less likely source of protection against infringement.

A careful consideration of the Court's opinion reveals parallels between the types of factual situations that arise in the inducing infringement context with another aspect of patent law where an accused malefactor's subjective knowledge and intent are at issue -- inequitable conduct.  While perhaps resulting in a different outcome, the application of the willful blindness standard to inducing infringement has obvious analogies with the question of the intent required to show a patentee's intent to deceive by failing to disclose information or references material to patentability.  There are certainly distinctions, in view of the "special relationship" traditionally recognized between the PTO and patent applicants and the duty of candor imposed upon applicants by Rule 56 and Supreme Court precedent, compared with a third-party infringer and the question of whether the existence of a patent and induced infringement thereof can be established by a patentee.  However, in both instances the accused's behavior and the intent of that behavior is at issue; it may be profitable to assess, in each instance, whether the principles enunciated today regarding the standard for inducing infringement may be adopted to defeat a charge of inequitable conduct.

Global-Tech Appliances, Inc. v. SEB S.A. (2011)
Opinion of the Court by Justice Alito, joined by Chief Justice Roberts and Justices Scalia, Thomas, Ginsburg, Breyer, Sotomayor, and Kagan;
Dissenting opinion by Justice Kennedy.

Commerce Secretary Provides Administration's Views on America Invents Act

By Donald Zuhn --

In similar letters sent earlier today to the Chairman and Ranking Member of the House Judiciary Committee, Secretary of Commerce Gary Locke (at right) outlined the Department of Commerce's position on the House version of the America Invents Act (H.R. 1249), which was reported out of Committee almost seven weeks ago (see "House Judiciary Committee Approves H.R. 1249").  Secretary Locke began each letter by noting that "passage of needed reforms to our patent laws has been a high priority for me during my time as Secretary of Commerce because of its importance to America's competitiveness and our economic growth."

With the Republican-controlled House focused on cost cutting and deficit reduction, the Secretary reminded the letters' recipients, Chairman Lamar Smith (R-TX) and Rep. John Conyers, Jr. (D-MI), that "[e]nactment of a balanced bill is an important part of the Administration's goal of 'out-innovating' our economic competitors and winning the future -- and it can be done with no cost to taxpayers and no addition to the deficit."  While acknowledging that the Senate (S. 23) and House versions of the bills are not identical, Secretary Locke stated that the Administration was "confident that the variations between the two can be resolved and that enactment of a bipartisan consensus bill is within reach."  The Secretary spent the remainder of each letter outlining the Administration's views on five "key provisions" of the House bill, which he said were "important to our goals of an appropriately funded and well-functioning USPTO and successful passage of a balanced bill."

Secretary Locke started by tackling the first-inventor-to-file provision, declaring that the Administration "strongly support[s] the proposed transition of the United States to a first-inventor-to[-]file system."  Arguing that this transition is "an essential feature of any final bill that will simplify the process of acquiring rights while protecting innovators," the Secretary pointed out that "[t]he first-inventor-to-file provision is consistent with the practices of our economic competitors, and would benefit U.S. businesses by providing a more transparent and cost-effective process that puts them on a level playing field with the rest of the world."  With regard to the grace period provided by the House bill -- which has been a topic of debate in patent circles since the bill was reported out of Committee -- Secretary Locke contended that H.R. 1249 "provides a more transparent and certain grace period (a key feature of U.S. law) and a definite filing date that enables inventors to promote, fund and market their technology while making them less vulnerable to costly patent challenges, which disadvantage small entity inventors."  According to the Secretary, these changes "will benefit all stakeholders, both small and large, regardless of the field of innovation."

Moving to the USPTO fee setting and funding provisions, Secretary Locke stated that the fee-setting authority provided in the bill would allow the USPTO to "ensure full cost recovery at no expense to America's taxpayers," as well as "process applications more quickly and produce higher-quality patents that are less likely to be subject to a court challenge."  Pointing to the "deliberative and transparent [fee] review process" set forth in the bill, the Secretary suggested that the bill contained "a comprehensive and appropriate set of mechanisms to ensure all fee changes are well-considered and well-calibrated."

Addressing the bill's post-grant review provisions, the Secretary stated that the Administration "supports establishing a new post-grant review proceeding and retooling the existing post-grant inter partes reexamination procedure," arguing that "[t]hese proceedings will serve to minimize costs and increase certainty by offering efficient and timely alternatives to litigation as a means of reviewing questions of patent validity," and "provide a check on patent examination, ultimately resulting in higher quality patents."  As for the Office's ability to handle the burden of these proceedings, Secretary Locke indicated that "[v]arious safeguards and flexibilities are included in the proposed proceedings to enable USPTO to effectively implement and manage them."

With regard to pre-issuance submissions, the Secretary contended that "the opportunity for third parties to submit potentially relevant prior art to the USPTO after publication of an application and before examination" will "increase the quality of patents."

The Secretary closed his letter by discussing the expansion in H.R. 1249 of the prior user defense to all areas of technology, stating that "[a]s a matter of fairness, we believe that innovators who independently create and commercialize technology should not be penalized for, or deprived of, their investment."  Taking note of the concerns raised by "some in the university community," Secretary Locke offered "to work with the Committee on any proposed revisions" to the provision.

In a press release concerning Secretary Locke's letter to House leadership, the U.S. Patent and Trademark Office indicated that the America Invents Act "enhances the U.S. patent system by increasing certainty of patent rights through implementation of a first-inventor-to-file standard for patent approval while also reducing the need for cost-prohibitive litigation, which all too often ties up new ideas in court, stifling innovation and holding back job creation," adding that "[u]ltimately, the proposed legislation will provide the most meaningful reforms to the U.S. patent system in 60 years."  The release also stated that the legislation will create an "updated patent infrastructure [that] will level the playing field for small enterprises seeking to participate in the global marketplace -- reducing expensive and time-consuming litigation, simplifying the process of acquiring rights and creating a system that mirrors others around the world, all while enhancing American competitiveness and spurring economic growth."

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

• "Patent Reform News Briefs," May 11, 2011
• "Boundy Issues Call to Arms on America Invents Act," April 21, 2011
• "More Reaction to H.R. 1249," April 18, 2011
• "House Judiciary Committee Approves H.R. 1249," April 14, 2011
• "Reaction to Manager's Amendment to House Patent Reform Bill," April 13, 2011
• "House Judiciary Chairman Releases Manager's Amendment to H.R. 1249," April 12, 2011
• "Reaction to House Patent Reform Bill," March 31, 2011
• "House Introduces Its Version of 'America Invents Act,'" March 30, 2011
• "Patent Reform Discussion Moves to House," March 29, 2011
• "The Disappearance of Deceptive Intent in S. 23," March 23, 2011
• "'Reform' at the U.S. Patent and Trademark Office," March 22, 2011
• "Few 'Reform' Provisions Remain in S. 23 Relating to the Judiciary," Marech 21, 2011
• "Additional Opportunities for Pre- and Post-grant Review, and Brand New Patent Trial and Appeal Board in S. 23," March 17, 2011
• "Post-grant Review Provisions of S. 23," March 16, 2011
• "Inventor's Interests, If Not Rights, Limited by S. 23," March 15, 2011
• "What Are the Provisions of the Proposed "First-Inventor-to-File" System in S. 23?" March 14, 2011
• "Obama Administration Supports S. 23," March 9, 2011
• "Reaction to Senate Passage of S. 23," March 8, 2011
• "Senate Passes S. 23," March 8, 2011

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc): Judge O'Malley's Opinion

    By Kevin E. Noonan --

The Federal Circuit delivered its en banc opinion on inequitable conduct last week in Therasense, Inc. v. Becton, Dickinson & Co.  Judge O'Malley wrote separately, concurring in part with the majority while also dissenting in part, in an idiosyncratic opinion that reflects, in part, her experience.  While a relative newcomer to the Federal Circuit, Judge O'Malley brings a distinguished career as a district court judge to the appellate bench, making hers a unique voice among her colleagues.

Judge O'Malley's (at left) focus is on what she terms "clear guidelines," for patent practitioners as well as the courts.  However, Judge O'Malley recognizes that absolute precision or the kind of "defining rules [that can exist] in the scientific world" are not only impracticable in the law, but in fact that under equitable principles, law is actually "imprecise by design."  This idea provides the basis for her disagreement with the majority, specifically with the Court's adoption of the "but-for" test for the materiality prong of their inequitable conduct analysis, as well as the parts of the decision that vacated and remanded the question of materiality to the District Court (while concurring with the decision to send the inequitable conduct question back to the lower court for reconsideration).  She writes that the majority opinion's guidance and direction with regard to the intent question mandate this remand, since the District Court's decision "understandably referred to standards governing its intent determination drawn from our prior case law" and the Federal Circuit clearly set forth the standard that "a district court must find that the conduct at issue is of 'sufficient culpability to require a finding of intent to deceive,'" citing Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988).  And like the other dissenters, she rejects any application of a "sliding scale" that would conflate or diminish the requirement that "intent to deceive and materiality must be found separately" (although like the dissent, albeit less broadly, in a footnote Judge O'Malley enunciates the type of "guidance" that has led to the conundrums and difficulties that the majority has tried to reduce in its opinion:

While I join this portion of the majority opinion (Part V), I do so with the understanding that the majority does not hold that it is impermissible for a court to consider the level of materiality as circumstantial evidence in its intent analysis.  As in all other legal inquiries involving multiple elements, the district court may rely on the same items of evidence in both its materiality and intent inquiries.  A district court must, however, reach separate conclusions of intent and materiality and may not base a finding of specific intent to deceive on materiality alone, regardless of the level of materiality.

Judge O'Malley's disagreement with both the majority and the dissent is that both, in her view, attempt to impose strict guidelines (or "hard and fast rules") on the inequitable conduct question that she finds incompatible with the equitable principles underlying the doctrine.  She cites Supreme Court cases for the propositions that the Chancellor in equity is given the power to "do equity" and to "mould each decree to the necessities of the particular case," citing Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982) (quoting Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944)) and have the power to be flexible in "moulding" such decrees, citing Holmberg v. Armbrecht, 327 U.S. 392, 396 (1946).  And she notes that the Supreme Court has not found patent law to be an exception to these general rules of equitable jurisprudence, citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393-94 (2006), as an example.

Both the majority opinion and the dissent err when they "eschew flexibility in favor of rigidity," suggesting "tests for materiality [that] apply in all cases."  Judge O'Malley sees both opinions as being inquiries that are "black or white, while equity requires judicial consideration of shades of gray."  Her concern is specifically directed at district courts, particularly in cases where neither of the tests (those proposed by the majority or the dissent) are met, yet equity "demands" that a patent not be enforced (albeit in "an extraordinary case").  She rejects the majority's panacea of using the "unclean hands" principle for "egregious misconduct," both because she objects to the majority's formulation that the inequitable conduct doctrine is distinct from "the unclean hands principles the Supreme Court described and explained in its trilogy of cases" (saying there is no authority to support this dichotomy" and noting that "[i]f 'unclean hands' remains available in cases of PTO misconduct, charges of unclean hands could simply supplant the very allegations of inequitable conduct the majority seeks to curb."  She finds equal fault with the dissent's proposal to define materiality by PTO Rule 56, since this would "not allow, for in- stance, for a finding of inequitable conduct for conduct not encompassed by Rule 56."

She sets forth her view as follows:

We should adopt a test that provides as much guidance to district courts and patent applicants as possible, but, in doing so, we may not disregard the equitable nature of the inquiry at hand.  Thus, we must make clear that, while we believe the test we offer encompasses virtually all forms of conduct sufficient to warrant a finding of inequitable conduct, we leave open the possibility that some form of intentional misconduct which we do not currently envision could warrant equitable relief.

This would be consistent with Supreme Court precedent and with "the flexible nature of equity jurisdiction."

Such flexibility should also extend to determination of the remedy for a finding of inequitable conduct, she argues, citing Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 386 (1970), for the proposition that "the lower courts should exercise the sound discretion which guides the determinations of courts of equity, keeping in mind the role of equity as the instrument for nice adjustment and reconciliation between the public interest and private needs as well as between competing private claims."  Judge Rader's "atomic bomb" of complete unenforceability is "neither compelled by statute, nor consistent with the equitable nature of the doctrine," and Judge O'Malley would expressly "hold that, in the exercise of its discretion, a district court may choose to render fewer than all claims unenforceable, may simply dismiss the action before it, or may fashion some other reasonable remedy, so long as the remedy imposed by the court is "commensurate with the violation," citing Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 465 (1979).  Judge O'Malley believes that this would "reduce the incentive to use inequitable conduct as a litigation tactic and address many of the concerns that trouble my colleagues and were expressed by Abbott and certain amici in these en banc proceedings"; she also opines that "[c]areful application of the pleadings requirements set forth in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)" can be used by district courts to address this problem.

The opinion also sets forth the judge's test for materiality:

(1) but for the conduct (whether it be in the form of an affirmative act or intentional non-disclosure), the patent would not have issued (as Chief Judge Rader explains that concept in the majority opinion);

(2) the conduct constitutes a false or misleading representation of fact (rendered so either because the statement made is false on its face or information is omitted which, if known, would render the representation false or misleading); or

(3) the district court finds that the behavior is so offensive that the court is left with a firm conviction that the integrity of the PTO process as to the application at issue was wholly undermined.

Finally, she joins the majority in rejecting the dissent's view that the proper materiality standard is PTO Rule 56, calling it "both too vague and too broad," particularly insofar as it would encompass acts that are "not sufficiently egregious to fall within the bounds of the Supreme Court trilogy from which the doctrine emerged."  Of course, the judge also rejects the majority's test, saying it is too narrow, since "[g]iven the scope and complexity of PTO proceedings, misconduct can and does occur outside the context of written affidavits."

Turning to the case at bar, Judge O'Malley would affirm that the EPO arguments not submitted to the PTO during prosecution of the '551 patent were material (saying this information would satisfy her proposed test "or any reasonable test for materiality that comports with Supreme Court precedent" as well as the majority's "but-for" test), so that a remand on the materiality issue "is neither necessary nor appropriate."

The majority addresses Judge O'Malley's objections by asserting as a "mischaracterization" limiting "affirmative egregious acts" to the example of the case below -- filing a false affidavit.  The majority states that its test provides "clear guidance to patent practitioners and the courts [in the general case regarding "but for" materiality], while the egregious misconduct exception gives the test sufficient flexibility to capture extraordinary circumstances."  The majority contends that Judge O'Malley "appears to eschew the use of any test" due to the fact that for any test there may be instances that are not encompassed by the test.  While acknowledging the flexibility required for applying equitable doctrines, the majority notes that "[c]ourts have long applied rules and tests in determining whether a particular factual situation falls within the scope of an equitable doctrine," citing Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008) (preliminary injunctions); eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (permanent injunctions); Gutierrez v. Waterman S.S. Corp., 373 U.S. 206, 215 (1963)(laches), and in particular, Lonchar v. Thomas, 517 U.S. 314, 323 (1996) (stating that "[c]ourts of equity must be governed by rules and precedents no less than the courts of law . . . [because] the alternative is to use equity chancellor's conscience as a measure of equity, which alternative would be as arbitrary and uncertain as measuring distance by the length of each chancellor's foot").

No doubt the differing views of majority, the dissent, and Judge O'Malley's objections to both will be useful for the parties in the expected petition for certiorari and plaintiff's opposition to the petition.  Perhaps the most important party to be heard will be the Solicitor General, and his position is likely to depend on how the USPTO views the Federal Circuit's en banc opinion.  Director Kappos has indicated that guidelines for implementing the Court's opinion will be forthcoming (see "USPTO Studying Therasense Decision, Will Issue Guidance Soon") and that may provide the first inkling of whether the PTO believes that the Court's decision will positively or negatively affect its ability to properly provide effective patent examination.

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)
Before Chief Judge Rader and Circuit Judges Newman, Lourie, Bryson, Gajarsa, Linn, Dyk, Prost, Moore, O'Malley, and Reyna
Opinion by Chief Judge Rader, joined in full by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and joined in part by Circuit Judge O'Malley
Concurring-in-part and dissenting-in-part opinion by Circuit Judge O'Malley
Dissenting opinion by Circuit Judge Bryson, joined by Circuit Judges Gajarsa, Dyk, and Prost

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

• "USPTO Studying Therasense Decision, Will Issue Guidance Soon," May 26, 2011
• "Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc): The Dissenting Opinion," May 26, 2011
• "Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)," May 25, 2011
• "Abbott Files Reply Brief in Therasense Case," November 8, 2010
• "Appellees File Reply Brief in Therasense v. Becton Dickinson," October 27, 2010
• "Bayer Submits Brief in Therasense v. Becton Dickinson," October 20, 2010
• "PhRMA Files Amicus Brief in Therasense Case," August 22, 2010
• "PTO Files Amicus Brief in Therasense Case," August 19, 2010
• "American Bar Association Files Amicus Brief in Therasense Case," August 17, 2010
• "Therasense, Inc. v. Becton, Dickinson & Co. -- Briefing Schedule Update," August 8, 2010
• "BIO Files Amicus Brief in Therasense Case," August 8, 2010
• "Pharma and Software Companies File Joint Amicus Brief in Therasense Case," August 3, 2010
• "IPO Files Amicus Brief in Therasense Case," August 2, 2010
• "Abbott Files Brief in Therasense Case," July 28, 2010
• "CAFC Sets Date for Oral Argument En Banc in Inequitable Conduct Appeal," June 9, 2010
• "Therasense, Inc. v. Becton, Dickinson & Co. -- Briefing Schedule Update," May 16, 2010
• "Therasense, Inc. v. Becton, Dickinson & Co. Briefing," May 13, 2010
• "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson," April 28, 2010

Court Report

By Sherri Oslick --

About Court Report:  Each week we will report briefly on recently filed biotech and pharma cases.

Abbott Laboratories et al.v. Sandoz Inc.
1:11-cv-00424; filed May 13, 2011 in the District Court of Delaware

• Plaintiffs:  Abbott Laboratories; Wisconsin Alumni Research Foundation
• Defendant:  Sandoz Inc.

Infringement of U.S. Patent No. 5,587,497 ("19-nor-Vitamin D Compounds," issued December 24, 1996) following a Paragraph IV certification as part of Sandoz's filing of an ANDA to manufacture a generic version of Abbott's Zemplar® (paricalcitol, used to treat secondary hyperparathyroidism in patients with kidney failure).  View the complaint here.

Lupin Atlantis Holdings S.A. v. Mylan Inc. et al.
2:11-cv-03129; filed May 12, 2011 in the Eastern District of Pennsylvania

• Plaintiff:  Lupin Atlantis Holdings S.A.
• Defendants:  Mylan Inc.; Mylan Pharmaceuticals, Inc.; Ethypharm S.A.

Lupin Atlantis Holdings, S.A. v. Mylan Inc. et al.
2:11-cv-00630; filed May 12, 2011 in the Western District of Pennsylvania

• Plaintiff:  Lupin Atlantis Holdings, S.A.
• Defendants:  Mylan Inc.; Mylan Pharmaceuticals Inc.; Ethypharm S.A.

The complaints in these cases are substantially identical.  Infringement of U.S. Patent Nos. 7,101,574 ("Pharmaceutical Composition Containing Fenofibrate and the Preparation Method," issued September 5, 2006) and 7,863,331 ("Pharmaceutical Composition Containing Fenofibrate and Method for the Preparation Thereof," issued January 4, 2011) following a Paragraph IV certification as part of Mylan's filing of an ANDA to manufacture a generic version of Lupin's Antara® (fenofibrate, used to treat hypercholesterolemia and hypertriglyceridemia).  View the E.D. Penn. complaint here.

Medicis Pharmaceutical Corp. et al.v. Actavis Mid Atlantic LLC
1:11-cv-00409; filed May 11, 2011 in the District Court of Delaware

• Plaintiffs:  Medicis Pharmaceutical Corp.; Dow Pharmaceutical Sciences, Inc.; Alyzan, Inc.
• Defendant:  Actavis Mid Atlantic LLC

Infringement of U.S. Patent Nos. 6,387,383 ("Topical Low-Viscosity Gel Composition," issued May 14, 2002) and RE41,134 ("Slow Release Vehicles for Minimizing Skin Irritancy of Topical Compositions," issued February 16, 2010) based on Actavis' filing of an ANDA to manufacture a generic version of Medicis' Ziana® (clindamycin phosphate and tretinoin gel, used to treat acne).  View the complaint here.

Takeda Pharmaceutical Co. et al.v. Macleods Pharmaceuticals Ltd.
1:11-cv-03109; filed May 6, 2011 in the Southern District of New York

• Plaintiffs:  Takeda Pharmaceutical Co.; Takeda Pharmaceuticals North America, Inc.
• Defendant:  Macleods Pharmaceuticals Ltd.

Infringement of U.S. Patent Nos. 5,965,584 ("Pharmaceutical Composition," issued October 12, 1999), 6,329,404 (same title, issued December 11, 2001), 6,166,043 (same title, issued December 26, 2000), 6,172,090 (same title, issued January 9, 2001), 6,211,205 (same title, issued April 3, 2001), 6,271,243 (same title, issued August 7, 2001), and 6,303,640 (same title, issued October 16, 2001) following a Paragraph IV certification as part of Macleods filing of an ANDA to manufacture a generic version of Takeda's Actos® (pioglitazone hydrochloride, used to treat type II diabetes).  View the complaint here.

Eli Lilly and Company v. Zydus Pharmaceuticals USA, Inc.
2:11-cv-02582; filed May 5, 2011 in the District Court of New Jersey

Infringement of U.S. Patent No. 5,658,590 ("Treatment of Attention-Deficit/Hyperactivity Disorder," issued August 19, 1997) following a paragraph IV certification as part of Zydus' filing of an ANDA to manufacture a generic version of Lilly's Strattera® (atomoxetine hydrochloride, used to treat attention-deficit/hyperactivity disorder).  Also, breach of prior Consent Judgment.  View the complaint here.

Schering Corp. v. Sandoz, Inc.
3:11-cv-02589; filed May 4, 2011 in the District Court of New Jersey

Infringement of U.S. Patent Nos. 5,661,151 ("Tetrahydrofuran Antifungals," issued August 26, 1997), 5,703,079 (same title, issued December 30, 1997), and 6,958,337 ("Crystalline Antifungal Polymorph," issued October 25, 2005) following a Paragraph IV certification as part of Sandoz's filing of an ANDA to manufacture a generic version of Schering's Noxafil® (posaconazole, used in the prophylaxis of fungal infections in immunocompromised patients, and in the treatment of oropharyngeal candidiasis).  View the complaint here.

Conference & CLE Calendar

June 2, 2011 - EPO Opposition & Appeals -- The Case Law (Patent Resources Group and Management Forum) - Chicago, IL

June 3, 2011 - European Patents -- The Case Law (Patent Resources Group and Management Forum) - Chicago, IL

June 7-8, 2011 - Biosimilars*** (American Conference Institute) - New York, NY

June 8, 2011 - Biotechnology/Chemical/Pharmaceutical (BCP) Customer Partnership Meeting (U.S. Patent and Trademark Office) - 10:00 am - 4:00 pm (EDT)

June 19-20, 2011 - IP Business Congress (Intellectual Asset Management magazine) - San Francisco, CA

June 21-22, 2011 - 10th Annual Forum on Pharma Patent Lifecycles (C5) - London, England

June 23, 2011 - Chemical Patent Practice Road Show: Prosecution and Litigation Strategies (American Intellectual Property Law Association) - Chicago, IL

June 27-30, 2011 - BIO International Convention (Biotechnology Industry Organization) - Washington, DC

July 16-19, 2011 - 2011 Annual Meeting; The Nuts & Bolts of Patent Prosecution Practice; and 2011 Patent Practice Update (National Association of Patent Practitioners) - Las Vegas, NV

July 18-19, 2011 - Hatch-Waxman Boot Camp*** (American Conference Institute) - San Diego, CA

July 20-21, 2011 - Advanced Forum on Life Sciences Collaborative Agreements and Acquisitions*** (American Conference Institute) - San Francisco, CA

July 25-27, 2011 - Intensive Patent Law Seminar (Chisum Patent Academy) - Seattle, WA

September 18-20, 2011 - Accelerating Intellectual Property and Innovation in South Africa (South African Department of Science and Technology) - Cape Town, South Africa

***Patent Docs is a media partner of this conference or CLE

NAPP Annual Meeting

The National Association of Patent Practitioners (NAPP) will be holding its 2011 Annual Meeting on July 16-19, 2011 in Las Vegas, NV.  An optional short-course entitled: "The Nuts & Bolts of Patent Prosecution Practice," which is structured for the patent practitioner who has 0-3 years of patent prosecution experience, will be offered on July 16.  Topics to be covered during the short course include:

• Patent Searching
• Inventorship & Ownership
• Patent Specification & Claim Drafting
• Patent Drawings
• Information Disclosure
• Office Actions
• Final Disposition: Notice of Allowance and Issuance
• Growing a Successful Patent
• Practitioner Knowledge Tools
• Building a Successful Solo Practice

Following the organization's annual membership meeting on July 17, a two-day conference entitled: "2011 Patent Practice Update" will be held on July 18-19.  Topics to be covered during the conference include:

• Accelerated Examination Practice
• Interviews for Compact Prosecution
• Anticipating Claim Construction & Strategic Claims Drafting
• Practitioner's Liability and How to Avoid Malpractice Claims
• BPAI Appeals Practice
• WIPO/PCT Updates
• USPTO Speaker -- TBA
• Outsourcing Foreign Filings
• Portfolio Management
• U.S. Patent Reform
• Multi-Party Infringement
• Federal Circuit Update
• Inequitable Conduct
• Doing Business in Asia
• Patents in Korea
• Ethical Issues in Patent Practice

A program for the meeting, including an agenda, list of speakers, and registration information can be downloaded here.

The registration fee for the short-course ranges from $395 (for NAPP members) to $595 (for non-members); law students can attend the short course free of charge.  The registration fee for the annual meeting and conference is $245 (for law students), $695 (for NAPP members), or $895 (for non-members).  The registration fee for both the short-course and annual meeting/conference is $245 (for law students), $895 (for NAPP members), and $1,095 (for non-members).  NAPP members or non-members registering by June 15 will receive a $100 discount off the above rates (law students are not eligible for this discount).  Those interested in registering for the meeting can do so here.

USPTO Studying Therasense Decision, Will Issue Guidance Soon

    By Donald Zuhn --

In a statement released earlier today, the U.S. Patent and Trademark Office announced that it was "carefully studying" the Federal Circuit's "important" en banc decision in Therasense, Inc. v. Becton, Dickinson & Co. to assess its impact on agency practice and procedure, and expected to issue guidance regarding that impact "soon."  USPTO Director David Kappos noted that the Office would "soon issue guidance to applicants regarding the materials they must submit to the Office under their duty of disclosure."  The Office's press release states that "[t]he Court's decision resolves uncertainties in many aspects of how district courts must apply the inequitable conduct doctrine," adding that "[i]t also directly affects applicant behavior in front of the USPTO and, in particular, their disclosure of information relevant to the patentability of their inventions."

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc): The Dissenting Opinion

By Kevin E. Noonan --

The Federal Circuit delivered its en banc opinion on inequitable conduct on Wednesday in Therasense, Inc. v. Becton, Dickinson & Co.  Four judges dissented from that opinion, with Judge Bryson writing for his fellow Circuit Judges Gajarsa, Dyk, and Prost.  Judge O'Malley wrote separately, concurring in part and dissenting in part.  Despite coming in at slightly longer than the majority opinion, Judge Bryson's dissent differs from the majority on but one aspect of inequitable conduct, the standard for assessing materiality.  The dissenting judges argue that the best measure of a material reference is the one used by the U.S. Patent and Trademark Office, codified as PTO Rule 56 (37 C.F.R. § 1.56).  Otherwise, the dissenters agree with the majority that "[t]here is broad consensus that the law of inequitable conduct is in an unsatisfactory state and needs adjustment" due to "differing standards" having been applied in making inequitable conduct decisions.  There is also consensus with the majority that such "doctrinal uncertainty has had adverse consequences both for patent litigation and for the PTO," including an excess of inequitable conduct claims in litigation and the resulting tendency for "some patent prosecutors to err on the side of 'over-disclosure; in order to avoid the risk of rendering all claims of an otherwise valid patent unenforceable because of the omission of some marginally relevant reference."

There is "substantial agreement" on resolving the issues of intent to deceive and the application of the "sliding scale":  indeed, "the parties to this case and most of the amici agree that proof of inequitable conduct should require a showing of specific intent to deceive the PTO," and that "negligence, or even gross negligence, should not be enough."  There is also agreement, according to the dissenting opinion, that courts should not apply a "sliding scale" "whereby a strong showing as to one element [i.e., materiality or intent to deceive] can make up for weaker proof as to the other."

The question, then, is the materiality standard, for which there is consensus among neither the parties, the amici, or the Court.  The dissent believes the proper (and broader) standard should be Rule 56:

[I]nformation is "material" if it is "not cumulative to information already of record or being made of record in the application" and
    (1)  It establishes, by itself, or in combination with other information, a prima facie case of unpatentability of a claim; or
    (2)  It refutes, or is inconsistent with, a position the applicant takes in:
        (i)  Opposing an argument of unpatentability relied on by the Office, or
        (ii)  Asserting an argument of patentability.

The dissent believes this is the proper standard for two reasons:  first, that the PTO is in the best position to determine whether information is material to its purposes (examination), and second that the majority's higher materiality standard will not provide "appropriate incentives" for patent applicants to comply with the duty of disclosure.  Judge Bryson believes that this standard is consistent with the Court's precedent, particularly J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553 (Fed. Cir. 1984).  There, according to the dissenting opinion, a five-judge panel of the court decided that:

• Inequitable conduct is broader than common-law fraud, citing Norton v. Curtiss, 433 F.3d 779, 793 (CCPA 1970);

• Failure to disclose material information could be just as culpable as providing false information; and

• PTO Rule 56 "established 'the appropriate starting point' because that standard 'most closely aligns with how one ought to conduct business with the PTO,'" citing Norton and Driscoll v. Cebalo, 731 F.2d 878, 884 (Fed. Cir. 1984).

While the Court has "occasional[ly] depart[ed]" from the intent standard established by Kingsdown Medical Consultants, Ltd. v. Hollister Inc., the dissent argues that the materiality standard as established by this line of precedent has been consistently applied by the Court (albeit admitting that "there has been some variation" in which version of the Rule has been applied).

The dissenting judges would reaffirm this standard, and their opinion characterizes the majority opinion as "radical" and that it "does not merely reform the doctrine of inequitable conduct, but comes close to abolishing it altogether."  The dissent believes that proper application of the principles enunciated in Kingsdown and the other cited prior precedent would be sufficient to resolve the deleterious effects of widespread use of the inequitable conduct defense, in concert with heightened pleadings requirements (Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)), use of Rule 11 sanctions, and the exercise of the court's "equitable judgment," all of which the dissent finds preferable to the majority's "Draconian" solution (and none of which have been particularly effective to date).

Citing the PTO's amicus brief, the dissent argues that the "but for" materiality test makes inequitable conduct a redundancy, since only those claims that are invalid anyway would be unenforceable for inequitable conduct.  Thus, the dissent argues, this test provides little incentive to promote the policy goals of the duty of disclosure before the PTO (discounting the disciplinary aspects in view of deficiencies in the PTO's ability to detect inequitable conduct and ignoring the unlikelihood that most practitioners would intentionally put their careers in jeopardy).  The dissent cites several cases where the Court has rejected the "but for" materiality test, including Merck & Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1421 (Fed. Cir. 1989); Purdue Pharma L.P. v. Endo Pharms. Inc., 438 F.3d 1123, 1132 (Fed. Cir. 2006); Hoffmann-LaRoche, Inc. v. Promega Corp., 323 F.3d 1354, 1368 (Fed. Cir. 2003); Molins PLC v. Textron, Inc., 48 F.3d 1172, 1179-80 (Fed. Cir. 1995); and A.B. Dick Co. v. Burroughs Corp., 798 F.2d 1392, 1396 (Fed. Cir. 1986).  The dissent argues that the incentives of Rule 56 are necessary because "an open door may tempt a saint" and the "large stakes sometimes at issue in patent prosecution[]" make "a regime that ensures that a dishonest but potentially profitable course of action can be pursued with essentially no marginal added risk is an unwise regime no matter how virtuous its subjects."

The dissent also argues that the "but for" materiality standard is inconsistent with the three canonical Supreme Court cases that were the genesis of the inequitable conduct doctrine:  Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945), a view directly opposed to the majority's reading of these cases.  For the dissenting judges, none of these cases involved a determination by the Court that the patents in question would not have issued "but for" nondisclosure of the undisclosed information.  In the dissent's view, the Supreme Court trilogy established the following principles:

(1)  the public has a special interest in seeing that patent monopolies "spring from backgrounds free from fraud or other inequitable conduct";

(2)  as a corollary to that public interest, patent applicants "have an uncompromising duty to report to [the Patent Office] all facts concerning possible fraud or inequitableness underlying the applications";

(3)  all facts relevant to such matters must be submitted to the Patent Office, "which can then pass upon the sufficiency of the evidence";

(4)  the intentional failure to disclose to the Patent Office that a patent application is tainted by fraud is sufficient cause to justify not enforcing the patent; and

(5)  the misconduct in question need not constitute actionable fraud; it is sufficient if the conduct constitutes a willful act that violates standards of equitable conduct in dealing with the Patent Office.

In addition, the dissent cites Kingsland v. Dorsey, 338 U.S. 318, 319 (1949), for the principle that "the relationship of attorneys to the Patent Office requires the highest degree of candor and good faith.  In its relation to applicants, the Office . . . must rely upon their integrity and deal with them in a spirit of trust and confidence . . . ," and accordingly that it falls to the courts to police applicants' (and their counsels') behavior.  This forms the predicate for the dissent's argument that the Court should adopt the PTO's materiality standard, Rule 56.

The dissent relies on the Norton decision, where the Court both endorsed the Commissioner's (now Director's) authority to "strike a patent application for fraud on the PTO in violation of the PTO's Rule 56" as well as defining "fraud on the PTO" to be broader than common-law fraud, due to the "relationship of confidence and trust" between applicants (and their counsel) and the agency.  Thus, the Norton court held that "the test for materiality 'cannot be applied too narrowly if the relationship of confidence and trust between applicants and the Patent Office is to have any real meaning,' and that findings of materiality should not be limited to those cases in which the true facts, if they had been known, 'would most likely have prevented the allowance of the particular claims at issue.'"  According to the dissent, this standard was consistently applied ever since, citing cases decided throughout the Federal Circuit's history (although the dissenting opinion does recognize that the standard has changed, from a "reasonable examiner" under the 1977 version of the Rule to the current Rule, adopted in 1992).  Of course, if that was indeed the controlling standard, the majority's decision has now overruled it.

Finally, the dissent cites to other areas of the law, specifically securities law regarding insider trading (where the existence of undisclosed information is "regarded as material without the need to prove reliance," citing Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-54 (1972), and Matrixx Initiatives, Inc. v. Siracusano, No. 09-1156 (U.S. Mar. 22, 2011)) and proxy solicitations, citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976); mail and wire fraud, citing United States v. Olatunji, 872 F.2d 116; naturalization proceedings, citing  Kungys v. United States, 485 U.S. 759, 772 (1988); and even common law fraud, citing the Restatement (Second) of Torts  § 538, all for the proposition that materiality is not subject to a "but for" test in any of these instances.

The dissent summarizes its underlying policy objections succinctly:

Under this court's new rule, an applicant who conceals information with the intent to deceive the PTO will be free to enforce his patent unless it can be proved by clear and convincing evidence that the patent would not have issued but for the fraud.  Even though the majority justifies its new rule in part by asserting that it will improve the prosecution of patents before the PTO, I am convinced that the new rule is likely to have an adverse impact on the PTO and the public at large, a view that -- significantly -- is shared by the PTO itself.

As for the case at bar (which the dissenting judges believe "illustrate why the materiality standard of Rule 56 is a suitable test for inequitable conduct claims based on disclosure violations"), the dissent would affirm, believing that "the district court made all the findings necessary to support its holding that the '551 patent was unenforceable for inequitable conduct."

The majority opinion sets forth its views on the arguments made in the dissent.  The majority notes that the Federal Circuit "is not bound by the definition of materiality in PTO rules," citing Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1549-50 (Fed. Cir. 1996), for the proposition that the PTO does not have substantive rulemaking authority.  The majority also states that, with all due regard for "the PTO's knowledge in its area of expertise," the effects of inequitable conduct "ha[ve] had adverse ramifications beyond its effect on the PTO" (specifically, in litigation).  The opinion acknowledges that the Court has used Rule 56 in the past "as a starting point for determining materiality," and that the Rules standards have changed over time.  But this inconsistency in the PTO's definition of materiality "has led to uncertainty and inconsistency in the development of the inequitable conduct doctrine," citing Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1316 (Fed. Cir. 2006), for the application of the 1977 version of Rule 56, and Bruno Independent Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 394 F.3d 1348, 1352-53 (Fed. Cir. 2005), for applying the 1992 version of the Rule.  The majority expressly states that it "declines to adopt the current version of Rule 56 in defining inequitable conduct because reliance on this standard has resulted in the very problems this court sought to address by taking this case en banc":

The first prong of Rule 56 is overly broad because information is considered material even if the information would be rendered irrelevant in light of subsequent argument or explanation by the patentee.  Under this standard, inequitable conduct could be found based on an applicant's failure to disclose information that a patent examiner would readily agree was not relevant to the prosecution after considering the patentee's argument.  Likewise, the second prong of Rule 56 broadly encompasses anything that could be considered marginally relevant to patentability.  If an applicant were to assert that his invention would have been non-obvious, for example, anything bearing any relation to obviousness could be found material under the second prong of Rule 56.  Because Rule 56 sets such a low bar for materiality, adopting this standard would inevitably result in patent prosecutors continuing the existing practice of disclosing too much prior art of marginal relevance and patent litigators continuing to charge inequitable conduct in nearly every case as a litigation strategy.

The majority also disagrees with the dissent's view that "but for" materiality is not required in other contexts, specifically common law fraud where the opinion cites its own section of Restatement (Second) of Torts (§ 525) for the proposition that reliance is required.  More generally, the opinion states that copyright and trademark law are more appropriate analogous areas of law for comparison, and there "[b]ut-for proof is required to invalidate both copyrights and trademarks based on applicant misconduct," citing 17 U.S.C. § 411(b)(1) (copyright) and Citibank, N.A. v. Citibanc Group, Inc., 724 F.2d 1540, 1544 (11th Cir. 1984) (trademarks).

It is interesting to note that Footnote 1 of the dissent, relating to prohibiting the "sliding scale," in fact would return this aspect of the inequitable conduct to status quo ante:

It is important to distinguish between relaxing the required proof of intent if the proof of materiality is strong, which is impermissible, as opposed to considering the degree of materiality as relevant to the issue of intent, which is appropriate, particularly given that direct evidence of intent, such as an admission of deceptive purpose, is seldom available.  See Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1366 (Fed. Cir. 2007); Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181, 1190-91 (Fed. Cir. 2006); GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1274 (Fed. Cir. 2001); Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1189 (Fed. Cir. 1993); Merck &  Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989).

Permitting evidence of materiality to color the assessment of the intent to deceive has resulted in precisely the situation the majority opinion is intended to remedy, as evidenced by the cases cited in support of this principle, which constitute many of the cases where arguably "minor misconduct" has been bootstrapped into an inequitable conduct finding.

Judge O'Malley in her opinion, concurring in part and dissenting in part, "do[es] not weigh in on the policy debate between the majority and the dissenters."  Her views will be discussed in a future Patent Docs post.

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)
Before Chief Judge Rader and Circuit Judges Newman, Lourie, Bryson, Gajarsa, Linn, Dyk, Prost, Moore, O'Malley, and Reyna
Opinion by Chief Judge Rader, joined in full by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and joined in part by Circuit Judge O'Malley
Concurring-in-part and dissenting-in-part opinion by Circuit Judge O'Malley
Dissenting opinion by Circuit Judge Bryson, joined by Circuit Judges Gajarsa, Dyk, and Prost

Federal Circuit Grants En Banc Review in McKesson Technologies Inc. v. Epic Systems Corp.

By Donald Zuhn --

One day after issuing its en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., the Federal Circuit decided that the appeal in McKesson Technologies Inc. v. Epic Systems Corp. warrants en banc consideration.  In the Court's per curiam order, it noted that the panel that heard the appeal considered the petition for rehearing submitted by Plaintiff-Appellant, McKesson Technologies Inc., as well as McKesson's motion for expedited consideration and offer of accelerated briefing in view of the Court's grant of en banc review in Akamai Technologies, Inc. v. Limelight Networks, Inc., Defendant-Appellee Epic Systems Corp.'s response to the motion to expedite, and McKesson's reply.  The petition, motion, response, and reply were then referred to the other Circuit Judges, a poll on whether to rehear the appeal en banc was requested and taken, and the Court decided to hear the appeal en banc and vacate the panel's April 12, 2011 opinion.

The parties have been asked to file new briefs addressing the following issues:

1.  If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement?  See Fromson v. Advance Offset Plate, Inc., 720 F.2d 1565 (Fed. Cir. 1983).

2.  Does the nature of the relationship between the relevant actors -- e.g., service provider/user; doctor/patient -- affect the question of direct or indirect infringement liability?

McKesson must file its brief by June 20, 2011, and Epic Systems must file its response 30 days from the date of service of McKesson's brief.  McKesson's reply would be due 15 days from the date of service of Epic Systems' response.  The Court noted that it would entertain briefs of amici curiae, which may be filed without consent and leave of Court.

Last month, the Federal Circuit decided to hear the Akamai Technologies, Inc. v. Limelight Networks, Inc. appeal en banc.  In that appeal, which was originally decided on December 20, 2010, the parties have been asked to file new briefs addressing the following issue:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

Pursuant to the Court's order, Plaintiffs-Appellants' (Akamai Technologies and the Massachusetts Institute of Technology) brief is due on June 4, 2011, Defendant-Cross Appellant Limelight Networks' is due 30 days from the date of service of Plaintiffs-Appellants' brief, and Plaintiffs-Appellants' reply brief is due 15 days from the date of service of Limelight Networks' response.  The Court noted that it would entertain briefs of amici curiae, which may be filed without consent and leave of Court.

McKesson Technologies Inc. v. Epic Systems Corp. (Fed. Cir. 2011)
Order, per curiam

Increase in Drug-Resistant Bacteria Creating Need for New Antibiotics

By James DeGiulio --

Over the past five years, the pharmaceutical industry seems to have had little interest in developing new antibiotics despite drug-resistant bacteria representing a serious public health issue.  Since the appearance of the first antibiotic-resistant bacterial strains in the 1940's, at least thirteen strains that are impervious to many antibiotics have been discovered.  According to the Infectious Disease Society of America, bacteria that are resistant to one or more drugs are responsible for some 100,000 U.S. hospital deaths a year, and cost the health care system more than $34 billion.  According to a recent Bloomberg report, however, smaller biotech firms may be assuming the role normally occupied by large pharmaceutical companies, and stepping up to develop new classes of antibiotics.

Due to lack of expected revenue opportunity, the pharmaceutical industry has all but abandoned the development of new antibiotics.  While important for quality medical care, antibiotics rarely provide blockbuster potential to a pharmaceutical company.  Because antibiotics are used for only weeks at a time, as compared with years for drugs that treat chronic diseases, the revenue stream for antibiotics is not long-term.  Furthermore, physicians are advised to limit antibiotic treatment because of concerns that overuse can spur resistance, which can have a negative effect on sales.  This removes incentives to spend funds on research and regulatory approval for new antibiotics.  Indeed, since 2006, only three of 111 drugs approved by the FDA were antibiotics, and only two of the top six drugmakers are currently developing antibiotics.  The top five antibiotics earned a relatively modest combined $6 billion in 2010 in the U.S.

Despite this antibiotic apathy among big industry players, there is certainly a public health need for developing new antibiotics.  For patients hospitalized with skin infections, for example, it is reported that about 20 percent will not respond to first-choice treatment with clindamycin or Bactrim.  For these patients, the hospital has two options, both of which are much more expensive than clindamycin or Bactrim treatment:  a 10-day course of Pfizer's Zyvox, which costs about $1,000, or alternatively, an intravenous drug like vancomycin can be used, which requires a hospital stay.

Smaller biotech companies are beginning to fill the void left by the lack of interest in new antibiotics by big pharma.  Smaller companies do not necessarily need a blockbuster drug to flourish, and antibiotics present a manageable product.  Some of the early entrants are already projecting solid returns on their efforts.  Optimer, a San Diego-based company, is nearing approval for Dificid, a drug that fights stomach infections, which is expected to generate $500 million a year in sales.  The Medicines Co., of Parsippany, New Jersey, is developing oritavancin, a skin infection antibiotic which is expected to generate as much as $300 million.  Other companies in final testing of drugs that may gain U.S. marketing approval by 2014 include Paratek Pharmaceuticals Inc. (omadacycline, an injectable derivative of tetracycline), Cubist Pharmaceuticals Inc. (drug targeting pneumonia, abdominal and urinary tract infections caused by gram-negative bacteria), and Durata Therapeutics (dalbavancin, a lipoglycopeptide that breaks down the cell walls and membranes of bacteria).

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)

By Kevin E. Noonan --

The Federal Circuit delivered its en banc opinion on inequitable conduct today in Therasense, Inc. v. Becton, Dickinson & Co.  In an opinion written by Chief Judge Rader and joined by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and by Judge O'Malley in part, the Court issued clear standards for establishing the inequitable conduct defense.  Simply put, first, an omitted reference is a material reference only if "but for" its exclusion the claim or patent would not have issued.  Second, there must be clear and convincing evidence of a specific intent to deceive by the applicant.  Third, a court cannot use a "sliding scale" to find inequitable conduct, i.e., it cannot find sufficient a weak showing of intent based on a strong showing of materiality; both materiality and intent to deceive must be supported by clear and convincing evidence.  And finally, in view of the severity of the remedy of unenforceability, courts should apply equity to ensure that the remedy is not imposed for misconduct that was "immaterial to the issuance of the patent."

To recap the factual background of this case, the technology involves disposable blood glucose test strips for measuring the amount of glucose in blood, where the amount of glucose in the sample is read using an electrode.  Specifically claimed are test strips without a membrane over the electrode:

1.  A single use disposable electrode strip for attachment to the signal readout circuitry of a sensor to detect a current representative of the concentration of a compound in a drop of a whole blood sample comprising:
    a) an elongated support having a substantially flat, planar surface, adapted for releasable attachment to said readout circuitry;
    b) a first conductor extending along said surface and comprising a conductive element for connection to said readout circuitry;
    c) an active electrode on said strip in electrical contact with said first conductor and positioned to contact said whole blood sample;
    d) a second conductor extending along said surface comprising a conductive element for connection to said read out circuitry; and
    e) a reference counterelectrode in electrical contact with said second conductor and positioned to contact said whole blood sample,
    wherein said active electrode is configured to be exposed to said whole blood sample without an intervening membrane or other whole blood filtering member . . . .

(U.S. Patent No. 5,820,551).  The prior art (including patentee's own prior patent, U.S. Patent No. 4,545,382) contained protective membranes to prevent electrode fouling.  This patent contained language wherein a membrane was "optionally, but preferably" included in the test strip.  Attorney argument, supported by expert witness declaration (from Abbott's Director of R&D) asserted that the "membraneless" feature of the '551 patent claim distinguished over the '382 prior art.  The Examiner required a declaration that the prior art required a membrane, and Abbott's R&D Director attested that the worker of ordinary skill would understand the "optionally, but preferably" language in the '382 patent to require a membrane.

Prior to submitting this argument, however, counsel before the European Patent Office had submitted a response, supported by the same expert's declaration, in the European counterpart of the '382 patent that was directly contradictory to the arguments presented to the U.S. Examiner during prosecution of the '551 patent.  Before the EPO, the expert attested and the European attorney argued that the membrane was not necessary to control permeability, an argument used to distinguish over another prior art reference that disclosed a test strip having a membrane.

Litigation ensued between the parties, with Becton, Dickinson ("BD") filing a declaratory judgment action that its disposable glucose strip did not infringe two other Abbott patents (U.S. Patent Nos. 6,143,164 and 6,592,745), and Abbott (successor in interest to Therasense) counterclaimed for infringement of the '164, '745, and '551 patents.  The District Court granted summary judgment of non-infringement of the '143 and '745 patents, that the '745 patent claims were invalid for anticipation, and that claims 1-4 of the '551 patent were obvious over the '382 patent in view of U.S. Patent 4,225,410.  The District Court also found that the '551 patent was unenforceable for inequitable conduct, based on the failure to submit the briefs filed in the EPO during prosecution of the '551 patent.  The en banc Court vacated a prior panel decision in order to address the inequitable conduct issue.

The majority opinion starts, as it must, with the three canonical Supreme Court cases that were the genesis of the inequitable conduct doctrine:  Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945).  The opinion characterizes each of these cases as involving "the manufacture or suppression of evidence," either before the U.S. Patent and Trademark Office, during litigation or both, and notes that the remedy was that the case was dismissed, i.e., the patentee was precluded from obtaining relief from the court due to unclean hands.  The majority opinion notes that these cases each "dealt with particularly egregious misconduct, including perjury, the manufacture of false evidence, and the suppression of evidence" and also involved "'deliberately planned and carefully executed scheme[s] to defraud' not only the PTO but also the courts," citing Hazel-Atlas Glass, 322 U.S. at 245.  However, from these origins the Court acknowledges that the inequitable conduct doctrine "came to embrace a broader scope of misconduct, including not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts but also the mere nondisclosure of information to the PTO."  The Court also notes that the remedy invoked also changed, from dismissal of the lawsuit to "unenforceability of the entire patent" involved in the lawsuit.

Along with "this wider scope and stronger remedy," the opinion states that a showing of both materiality and intent came to be required.  The opinion cites Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008), for the conventional requirement for establishing inequitable conduct:  a finding that "applicant misrepresented or omitted material information with the specific intent to deceive the PTO" and that "[t]he accused infringer must prove both elements -- intent and materiality -- by clear and convincing evidence."  Finally, "[i]f the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant's conduct before the PTO warrants rendering the entire patent unenforceable."

The majority opinion recognizes that the Supreme Court cases cited above did not contain any standard for materiality, and that those Supreme Court cases provide precedential support for a court to invoke the unclean hands doctrine "to supply a remedy for egregious misconduct."  The opinion also notes that the standards for establishing both materiality and intent have "fluctuated" over time, citing cases where the Court "espoused low standards for meeting the intent requirement," Driscoll v. Cebalo, 731 F.2d 878, 885 (Fed. Cir. 1984) (establishing a "knew or should have known" standard); Orthopedic Equip. Co., Inc. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383-84 (Fed. Cir. 1983) (finding gross negligence sufficient to establish intent to deceive), and "a broad view of materiality," citing Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984) (applying a "reasonable examiner" standard based on 37 C.F.R. § 1.56 (1977)).  "Further weakening" what was required to establish inequitable conduct, according to the opinion, was the practice of using a "sliding scale" that permitted a finding of inequitable conduct "based on a reduced showing of intent if the record contained a strong showing of materiality, and vice versa."

The rationale for lowering the standards, according to the majority was to "foster full disclosure to the PTO."  However, the opinion notes that "[t]his new focus" had "numerous unforeseen and unintended consequences," including "increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality."  Citing a Report from the National Research Council of the National Academies, the opinion states that charging inequitable conduct "conveniently expands discovery into corporate practices before patent filing and disqualifies the prosecuting attorney from the patentee's litigation team," and in addition "cast a dark cloud over the patent's validity and paint the patentee as a bad actor."  The opinion also cites the doctrine's focus on "moral turpitude" as a reason why it "discourages settlement and deflects attention from the merits of validity and infringement issues," citing a Committee Position Paper from the AIPLA.

"Perhaps most importantly," according to the majority, the remedy of complete unenforceability of the entire patent makes inequitable conduct the "atomic bomb" of patent law, citing Chief Judge Rader's dissent from Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334 (Fed. Cir. 2008).  Not only can't inequitable conduct be "cured by reissue," but the "taint . . . can spread from a single patent to render unenforceable other related patents and applications in the same technology family," citing Consol. Aluminum Corp. v. Foseco Int'l Ltd., 910 F.2d 804, 808-12 (Fed. Cir. 1990).  The opinion also notes that an inequitable conduct finding can be used to support claims sounding in antitrust and unfair competition, may invoke the "exceptional case" provisions of 35 U.S.C. § 285, and may be used to pierce the attorney-client privilege under the crime-fraud exception.  The opinion also asserts that the consequences of this state of affairs extends further than litigation and plagues "the entire patent system."  These negative effects include the practice of "patent prosecutors regularly bury[ing] PTO examiners with a deluge of prior art references, most of which have marginal value," constituting a "tidal wave of disclosure [that] makes identifying the most relevant prior art difficult."

In view of these negative and unintended consequences, the opinion directly states that "[t]his court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public."  (The section of the brief outlining how the Court has "tightened the standards" was joined by Judge O'Malley.)  First, the Court holds that an accused infringer "must prove that the patentee acted with the specific intent to deceive the PTO," citing Star Scientific.  Specifically, a finding of negligence, gross negligence, or the application of a "should have known" standard "does not satisfy this intent requirement," citing Kingsdown Medical Consultants, Ltd. v. Hollister Inc.  Rather, there must be clear and convincing evidence that an applicant "made a deliberate decision to withhold a known material reference," citing Molins PLC v. Textron, Inc. (emphasis in the opinion).  In the event that this standard remains unclear, the Court expressly set forth the requirement:  "the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it."  The opinion characterizes this standard as being consistent with the "origins in the trio of Supreme Court cases that set in motion the development of the inequitable conduct doctrine."

Second, the opinion states that "[i]intent and materiality are separate requirements," citing Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d 1354, 1359 (Fed. Cir. 2003), and thus "[a] district court should not use a 'sliding scale,' where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa."  In addition, "a district court may not infer intent solely from materiality."  Recognizing that "direct evidence of deceptive intent is rare," the opinion permits district courts to "infer intent from indirect and circumstantial evidence," citing Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009).  The opinion warns, however, that such an inferred intent "must be 'the single most reasonable inference able to be drawn from the evidence,'" citing Star Scientific, emphasizing that the evidence "'must be sufficient to require a finding of deceitful intent in the light of all the circumstances,'" citing Kingsdown Medical (emphasis in opinion).  Again leaving little room for doubt, the opinion states that "when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found," citing Scanner Techs. Corp. v. ICOS Vision Sys. Corp., 528 F.3d 1365, 1376 (Fed. Cir. 2008).  Finally, the absence of "a good faith explanation for withholding a material reference" by the patentee is not sufficient to establish an intent to deceive.

Acknowledging the failure of prior precedent to reduce the "proliferation of inequitable conduct charges" by focusing on the intent prong, the Court then addressed the materiality standard.  Once again stating the standard expressly, the Court holds that "as a general matter, the materiality required to establish inequitable conduct is but-for materiality," i.e., "[w]hen an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art"; the opinion cites Corona Cord Tire Co. v. Dovan Chem. Corp., 276 U.S. 358 (1928), as relevant and Supreme Court precedent consistent with this standard.  In the application of this materiality standard, the opinion states that a district court "must determine" whether the claim at issue would have been granted if the PTO was aware of the reference, using the preponderance of the evidence burden and giving the claims their "broadest reasonable construction," as would have occurred during ex parte prosecution.  The Court sets out an important indication of how this standard might be put into practice, stating that a "deliberately withheld reference" is "necessarily material" if a claim is "properly invalidated" by a court, since the clear and convincing evidence standard for invalidity is higher than the preponderance standard that the PTO applies.  The opinion does accommodate an exception to these principles in cases of "affirmative egregious conduct" as existed in the canonical Supreme Court precedential trio.  Such egregious misconduct is material per se, according to the opinion, and making this distinction "strikes a necessary balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitable conduct."

Turning to the remedy, the opinion notes that inequitable conduct is an equitable doctrine, and thus its application is rooted in "basic fairness."  Thus, a finding of inequitable conduct having a remedy of complete unenforceability "should only be applied in instances where the patentee's misconduct resulted in the unfair benefit of receiving an unwarranted claim," citing the statement in Star Scientific that "[j]ust as it is inequitable to permit a patentee who obtained his patent through deliberate misrepresentations or omissions of material information to enforce the patent against others, it is also inequitable to strike down an entire patent where the patentee committed only minor missteps or acted with minimal culpability."  While not expressly cited, cases where inequitable conduct has been found for improperly claiming small entity status (Nilssen v. Osram Sylvania, Inc.), improperly filing a petition to make special (General Electro Music Corp. v. Samick Music Corp.), failing to disclose that a declarant had been a paid consultant prior to filing an expert declaration under 37 C.F.R. § 1.132 (Ferring B.V. v. Barr Laboratories, Inc.), misjoinder of inventorship (PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc.), and inaccuracies in an expert declaration (Aventis Pharma S.A. v Amphastar Pharma, Inc.) seem to be encompassed by this characterization.

The majority vacated and remanded the case to the District Court to consider the inequitable conduct question in light of the standards set forth in the opinion, while affirming without comment or discussion the invalidity findings below.

Most of the rubrics and principles on which the opinion's standards are founded upon can be found in earlier precedent cited liberally throughout the majority opinion; in this regard, the case is similar to the en banc Court's treatment of claim construction standards in Phillips v. AWH Corp. in 2005.  However, the adoption of the "but-for" standard (and an "objective but-for" standard at that) clearly indicates that the Court majority has been persuaded that inequitable conduct has once again become a sufficiently significant plague that its exercise can only be curbed by "tightening" the objective grounds upon which it can be proven (after similarly tightening the requirements for how it is plead in Exergen Corp. v. Wal-Mart Stores, Inc.).

The dissenting and concurring opinions will be discussed in subsequent posts, along with the majority's rejoinder regarding the arguments set forth in those opinions.

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)
Before Chief Judge Rader and Circuit Judges Newman, Lourie, Bryson, Gajarsa, Linn, Dyk, Prost, Moore, O'Malley, and Reyna
Opinion by Chief Judge Rader, joined in full by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and joined in part by Circuit Judge O'Malley
Concurring-in-part and dissenting-in-part opinion by Circuit Judge O'Malley
Dissenting opinion by Circuit Judge Bryson, joined by Circuit Judges Gajarsa, Dyk, and Prost

FDA Officials Hint at Provisions of Biosimilar Guidances

By Kevin E. Noonan --

Under the biologics pathway provisions of the Patient Protection and Affordable Care Act (P.L. 111-148), § 351(k) of the Public Health Service Act, codified at 42 U.S.C. § 262(k)), the FDA is given the authority to develop procedures for approving biosimilar applications.  Recognizing the complexities of the issues involved, Congress granted the agency broad authority to impose, or dispense with, explicit requirements under the broad umbrella that a biosimilar have comparable safety and efficacy of the reference biologic drug product:

§ 351(k)(2)(A):

(i) REQUIRED INFORMATION.—An application submitted under this subsection shall include information demonstrating that—

(I) the biological product is biosimilar to a reference product based upon data derived from—

(aa) analytical studies that demonstrate that the biological product is highly similar to the reference product notwithstanding minor differences in clinically in- active components;

(bb) animal studies (including the assessment of toxicity); and

(cc) a clinical study or studies (including the assessment of immunogenicity and pharmacokinetics or pharmacodynamics) that are sufficient to demonstrate safety, purity, and potency in 1 or more appropriate conditions of use for which the reference product is licensed and intended to be used and for which licensure is sought for the biological product;

(II) the biological product and reference product utilize the same mechanism or mechanisms of action for the condition or conditions of use prescribed, recommended, or suggested in the proposed labeling, but only to the extent the mechanism or mechanisms of action are known for the reference product;

(III) the condition or conditions of use prescribed, recommended, or suggested in the labeling proposed for the biological product have been previously approved for the reference product;

(IV) the route of administration, the dosage form, and the strength of the biological product are the same as those of the reference product; and

(V) the facility in which the biological product is manufactured, proessed, packed, or held meets standards designed to assure that the biological product continues to be safe, pure, and potent.

(ii) DETERMINATION BY SECRETARY.—The Secretary may determine, in the Secretary's discretion, that an element described in clause (i)(I) is unnecessary in an application submitted under this subsection.

The devil being particularly resident in the details of how FDA will make these decisions, there is great interest in the standards the agency will set on for fulfilling these requirements, from both innovator biologic drug companies and potential biosimilar drug applicants (who some, like the FTC, believe will be the same companies in many instances).

This month there were hints from FDA officials on the general contours of these requirements.  The most significant of these came from Janet Woodcock, Head of the FDA's Center for Drug Evaluation and Research, who was quoted by Reuters on May 9th as saying that human clinical trials may not be required in every case to obtain biosimilar approval.  She described there being a "spectrum," where "some [biologic drugs] will get much closer than others in your ability to characterize them," for example on analytical grounds.  Dr. Woodcock also said that if a company were to develop a longer-lasting version of a drug (for example, a PEGylated version), or increased its safety or efficacy, such a drug would be considered a "new molecule" that would be entitled to 12 years of data exclusivity, thus raising the possibility of "evergreening" biologic drugs in ways that many in the debate over the pathway thought (or intended) would be precluded.  Dr. Woodcock further indicated that the experience of biosimilar drug applicants in Europe would be considered by the agency.

Similar statements were made by Dr. Rachel Behrman, Associate Director of Medical Policy at CDER in an interview broadcast on the May 1st edition of BioCentury This Week.  In her responses, Dr. Behrman stated that the standard generally was whether the agency "has confidence" that the biosimilar will have the same safety and efficacy as the innovator biologic drug.  Conceding that biologic drugs could not have the same degree of "sameness" as conventional generics, she said that the agency had made an "extraordinary amount of progress" since the Act was passed, including gathering resources for implementation and meeting with manufacturers, including a "significant outreach to the [biosimilar] community."  She also affirmed that the "biosimilar industry" will be broader than small molecule generics and will include traditional innovator companies.

What all these companies want to know is the standards that will be required for biosimilar applicants, and she echoed remarks by Dr. Woodcock that the agency expects to issue guidances -- "not just one" -- by the end of 2011.  She said that analytical comparisons would be "fundamental" in establishing that approved biosimilar drugs will have "the same [biological] effect without any clinically meaningful differences" with regard to safety and efficacy.  The focus will be on analytics regarding, for example, chemical structure of molecule prior to any clinical data, and her remarks suggested that the quality of the analytical data will be relevant to the extent of the biological/clinical testing required.  In this regard, she said that a basic tenet of the agencies thinking is that "duplicative testing is unethical," and that data and other information from biosimilar drugs licensed in Europe will be considered.  She noted however that the law requires a single reference drug product approved by the FDA (i.e., a licensed "American" biologic reference product), which precludes wholesale reliance on European products.  With regard to interchangeability, Dr. Behrman called that a "high hurdle" where the "safety of patients is paramount."  While not enunciating a formal standard, Dr. Behrman said that a patient would have to be able to go "back and forth and back and forth . . . without any compromise in safety or efficacy" for a biosimilar drug to be declared interchangeable.  She also emphasized that each biosimilar drug would be evaluated on a "case-by-case" basis with regard to extrapolation of different indications based, inter alia, on common mechanisms of action.

These considerations will be important, particularly in view of the many biologic drugs that will be "eligible" for biosimilar competition in the next five years, where the market is estimated to increase from $243 million to $3.7 billion, according to a report by Datamonitor.

Court Report - Part II

By Sherri Oslick --

About Court Report:  Each week we will report briefly on recently filed biotech and pharma cases.

Alza Corp. et al. v. Impax Laboratories, Inc. et al.
1:11-cv-00395; filed May 5, 2011 in the District Court of Delaware

• Plaintiffs:  Alza Corp.; Ortho-McNeil-Janssen Pharmaceuticals, Inc.
• Defendants:  Impax Laboratories, Inc.; Teva Pharmaceuticals USA, Inc.; Teva Pharmaceutical Industries Ltd.

Infringement of U.S. Patent No. 6,930,129 ("Methods and Devices for Providing Prolonged Drug Therapy," issued August 16, 2005) following a Paragraph IV certification as part of Impax's amendment of its ANDA (adding additional dosage forms) to manufacture a generic version of Alza's Concerta® (methylphenidate hydrochloride, used to treat attention deficit hyperactivity disorder).  View the complaint here.

Flamel Technologies S.A. v. Lupin Ltd. et al.
1:11-cv-00826; filed May 4, 2011 in the District Court of the District of Columbia

• Plaintiff:  Flamel Technologies S.A.
• Defendants:  Lupin Ltd.; Lupin Pharmaceuticals, Inc.

Infringement of U.S. Patent No. 6,022,562 ("Medicinal and/or Nutritional Microcapsules for Oral Administration," issued February 8, 2000) following a paragraph IV certification as part of Lupin's filing of an ANDA to manufacture a generic version of GSK's Coreg® CR (carvedilol, used to treat congestive heart failure).  View the complaint here.

Novartis AG et al. v. Kappos
1:11-cv-00821; filed May 3, 2011 in the District Court of the District of Columbia

• Plaintiffs:  Novartis AG; Novartis Corp.
• Defendant:  David J. Kappos

Review and correction of the patent term adjustment calculation made by the U.S. Patent and Trademark Office for U.S. Patent Nos. 7,081,532 ("N-phenyl-2-pyrimidine-amine Derivatives," issued July 25, 2006), 7,097,827 ("Devices, Compositions and Methods for the Pulmonary Delivery of Aerosolized Medicaments," issued August 29, 2006), 7,253,257 ("Human Metabotropic Glutamate Receptor Subtype mGluR7b," issued August 7, 2007), 7,323,451 ("Crystalline and Amorphous Forms of Beta-L-2′-deoxythymidine," issued January 29, 2008), 7,442,388 ("Phospholipid-based Powders for Drug Delivery," issued October 28, 2008), 7,516,741 ("Aerosolization Apparatus with Feedback Mechanism," issued April 14, 2009), 7,687,637 ("5-phenylthiazole Derivatives and Use as Pi3 Kkinase Inhibitors," issued March 30, 2010), 7,696,216 ("Aryl-quinazoline/aryl-2-amino-phenyl Methanone Derivatives," issued April 13, 2010), and 7,776,851 ("Use of Neurokinin Antagonists in the Treatment of Urinary Incontinence," issued August 17, 2010).  View the complaint here.

Takeda Pharmaceutical Co. et al. v. Mylan Inc. et al.
3:11-cv-02506; filed May 2, 2011 in the District Court of New Jersey

• Plaintiffs:  Takeda Pharmaceutical Co.; Takeda Pharmaceuticals North America, Inc.; Takeda Pharmaceuticals LLC; Takeda Pharmaceuticals America, Inc.; Ethypharm, S.A.
• Defendants:  Mylan Inc.; Mylan Pharmaceuticals Inc.

Infringement of U.S. Patent Nos. 5,464,632 ("Rapidly Disintegratable Multiparticular Tablet," issued December 7, 1995) and 6,328,994 ("Orally Disintegrable Tablets," issued December 11, 2001) following a Paragraph IV certification as part of Mylan's filing of an ANDA to manufacture a generic version of plaintiffs' Prevacid® SoluTab (lansoprazole delayed release orally disintegrating tablets, used to treat ulcers, gastroesophageal reflux disease, erosive esophagitis, and pathological hypersecretory conditions, including Zollinger-Ellison syndrome).  View the complaint here.

Jazz Pharmaceuticals, Inc. v. Roxane Laboratories, Inc.
2:11-cv-02523; filed May 2, 2011 in the District Court of New Jersey

Infringement of U.S. Patent No. 7,895,059 ("Sensitive Drug Distribution System and Method" issued February 22, 2011) following a Paragraph IV certification as part of Roxane's filing of an ANDA to manufacture a generic version of Jazz's Xyrem® (sodium oxybate, used to treat narcolepsy).  View the complaint here.

Report Gauges Economic Impact of Human Genome Project

By Donald Zuhn --

Earlier this month, the Battelle Memorial Institute announced the issuance of a report concerning the economic impact of the Human Genome Project.  In the report, the research group indicated that the return on the $3.8 billion the U.S. government invested in the project between 1988 and 2003 totaled $796 billion.  The report also indicated that the project has created some 310,000 jobs (as of 2010), generating $244 billion in total personal income.  In 2010 alone, the project and associated genomics research and industry activity generated $67 billion in economic output, supported jobs that produced $20 billion in personal income, and provided $3.7 billion in federal taxes -- almost paying back the government's total investment in the project in a single year.  In addition, Battelle noted that the project had launched a "genomic revolution" that would "create significantly more jobs in the future."

The report also noted that the project led to significant breakthroughs including new forms of personalized medicine and genetics therapy, greater productivity in agriculture, and potential sources of renewable energy.  Life Technologies CEO Greg Lucier (the report was sponsored by Life Technologies' foundation) stated that "[f]rom a simple return on investment, the financial stake made in mapping the entire human genome is clearly one of the best uses of taxpayer dollars the U.S. government has ever made," adding that "[t]his project has been, and will continue to be, the kind of investment the government should foster."

The report reached four main conclusions:

1.  The economic and functional impacts generated by the project are already "large and widespread."  As discussed above, the project generated a total economic output of $796 billion between 1988 and 2010, generating 310,000 jobs (and 3.8 million job-years of employment) and $244 billion in personal income (or $63,700 per job-year).

2.  The federal government invested $3.8 billion in the Human Genome Project from 1990 to 2003, which corresponds to $5.6 billion in 2010 dollars, and provided a return on investment of 141 to 1.

3.  The impacts of the project are just beginning.  The report noted that "large scale benefits in human medicine and many other diverse applications are still in their early stages," stating that "[t]he best is truly yet to come."

4.  The project is "arguably the single most influential investment to have been made in modern science and a foundation for progress in the biological sciences moving forward."

According to the report, the total effort to decode the human genome involved many public and private players over many more years, and the work of entities such as Celera Genomics played an important part, and Battelle's analysis of the functional impacts of the Human Genome Project necessarily included all these contributions.