Patent Docs

Medtronic Inc. v. Boston Scientific Corp. (Fed. Cir. 2012)

By Kevin E. Noonan --

Five years ago, the Supreme Court abrogated (in a footnote) the Federal Circuit's "reasonable apprehension of suit" standard governing when a plaintiff could bring a declaratory judgment suit against a patentee, typically for non-infringement and/or invalidity or unenforceability.  The policy reason for the decision was reasonable, particularly for a Court caught up in the zeitgeist that patents harm innovation; like the Court in the 1940's, this Court is more concerned with keeping the patent genie in the innovation bottle than recognizing the importance of patents in promoting disclosure (and consequently promoting innovation).  The policy consideration motivating the Court followed the rationale in Lear v. Adkins two generations before:  that a licensee is the party most motivated to invalidate an invalid patent.  The decision eliminated the Hobson's choice created for licensees under the Federal Circuit's standard, of either continuing to pay royalties on an invalid patent or one they did not infringe, or refusing to pay and run the risk of being liable for treble damages, attorney's fees, and an injunction.

But no matter how reasonable the Court's rationale, it has created consequences that fall, in the first instance, to the Federal Circuit to consider and sort out.  That process continues in Medtronic Inc. v. Boston Scientific Corp.  The case involved a declaratory judgment action relating to devices for cardiac resynchronization therapy, a treatment that addressed conditions like congestive heart failure that cannot be treated using conventional implanted defibrillators or pacemakers.  The devices are protected by Reissue Patent Nos. RE38,119 and RE39,897.  Medtronic sublicensed the '119 reissue patent from Eli Lilly & Co., a predecessor-in-interest as licensee of this patent from the assignee, Morowski Family Ventures, Inc. (MFV, a declaratory judgment defendant here).  The sublicense (which predated the MedImmune decision) permitted Medtronic to challenge the '119 reissue patent (and any related patents such as the '897 reissue patent) while depositing royalty payments into escrow.  This arrangement was superseded by a Litigation Tolling Agreement that required MFV to identify Medtronic products that were purportedly "covered" by the reissue patents.  MFV exercised this right and Medtronic dutifully instituted a declaratory judgment action.  Another aspect of the Agreement important to the outcome of this case is that MFV was precluded from filing a patent infringement counterclaim because Medtronic remained a licensee in good standing (i.e., these actions did not constitute a breach of the Agreement).

The District Court decided that the patents were neither invalid nor unenforceable and not infringed.  An issue in the lawsuit was which party bore the burden of proving infringement.  This issue was relevant because it affected the impact of the evidence; specifically, the District Court's decision was based on the failure of MFV's expert to "consider 'each limitation of each asserted claim in comparison to each accused product before rendering his infringement opinions,' and that defendants 'failed to prove literal infringement by a preponderance of the evidence,'" because according to the lower court the burden of proving infringement always rests on the patentee.  That decision provided MFV's basis for appeal to the Federal Circuit.

The Federal Circuit reversed, in an opinion by Judge Linn joined by Judges Lourie and Prost.  The panel recognized the conundrum created by the application of the Supreme Court's MedImmune decision to the situation.  The opinion begins with a recognition that this situation is different from the "conventional" declaratory judgment action, where a patentee would be able to file a patent infringement counterclaim.  This is relevant to the case before the Court because the typical situation also constitutes the fact pattern in the prior precedent, making that precedent inapposite for the District Court (or the panel) to rely upon for its decision (this is precisely the precedent the District Court did rely upon, of course).  In addition, the Agreement required Medtronic to file a declaratory judgment action, and accordingly the panel held that the burden should fall on Medtronic to "prove that at least one limitation of each claim of MFV's patents is not met by Medtronic's products."

The panel found unavailing not only the prior precedent noted above but also Medtronics' argument that MFV should be required to establish infringement as a consequence of its identification of Medtronics' products that purportedly infringed the reissue patents-in-suit.  In the "post-MedImmune world," according to the Court, the conventional apportionment of burdens fails under these circumstances.  The better analysis is to require the "burdens of pleading and proof" to be "assigned to the plaintiff who generally seeks to change present state of affairs and who therefore naturally should be expected to bear the risk of failure of proof or persuasion," citing Schaffer ex rel. Schaffer v. Weast, 546 U.S. 49, 56-57 (2005) (quoting 2 J. Strong, McCormick on Evidence § 337, p. 412 (5th ed. 1999)).  While this burden would not shift in a conventional patent infringement counterclaim (and, indeed, that claim would be waived if not pled), cases mandating this result "only stand for the rote proposition that when there is a direct claim for infringement, in a complaint or by way of counterclaim, the patentee cannot prevail without proving all the elements of infringement under 35 U.S.C. § 271" (and were decided prior to the Supreme Court's MedImmune decision).  Here, Medtronic is seeking relief, according to the panel, and patentee MFV is precluded by the license from asserting a patent infringement counterclaim, while also requiring MFV to identify allegedly infringing Medtronic products.  In contrast to Medtronic, which "already has a license; [] cannot be sued for infringement; [] is paying money into escrow; and [] wants to stop," MFV "seeks nothing more than to be discharged from the suit and be permitted to continue the quiet enjoyment of its contract."  Under these circumstances, "it is Medtronic and not MFV that is asking the court to disturb the status quo ante and to relieve it from a royalty obligation it believes it does not bear" and thus Medtronic that should be required to "present evidence showing that it is entitled to such relief."  And here, where neither party introduced any evidence regarding infringement or noninfringement there is no principled reason why Medtronic should receive the declaration of noninfringement it seeks."

The opinion also addressed the equities of this burden allocation:

[T]he one claim for relief sought in this case is the claim Medtronic asserts to be relieved from liability under the license by having a court declare the products in question to be noninfringing.  Medtronic is the party seeking this relief and Medtronic must bear the burden of proving it is entitled to such relief.  A contrary result would allow licensees to use MedImmune's shield as a sword -- haling licensors into court and forcing them to assert and prove what had already been resolved by license.  Because the declaratory judgment plaintiff is the only party seeking the aid of the court in the circumstances presented here, that party must bear the burden of persuasion.  Therefore, this court holds that in the limited circumstance when an infringement counterclaim by a patentee is foreclosed by the continued existence of a license, a licensee seeking a declaratory judgment of noninfringement and of no consequent liability under the license bears the burden of persuasion.

On this basis the Federal Circuit remanded back to the District Court.  In addition, the opinion reversed certain claim construction decisions by the District Court that were the basis for the finding that the claims were not invalid and remanded for further proceedings based on the panel's construction of the claim.

While it is likely that this case presents a unique situation between the parties, licensees under MedImmune should often (if not frequently) be in a position where the patentee is foreclosed from asserting a patent infringement counterclaim (because, inter alia, the licensee continues to pay royalties in escrow).  Unless a licensee/declaratory judgment plaintiff brings suit solely on the questions of invalidity or unenforceability, under the precedent enunciated in this case licensees will bear the burden of establishing non-infringement.

Medtronic Inc. v. Boston Scientific Corp. (Fed. Cir. 2012)
Panel: Circuit Judges Lourie, Linn, and Prost
Opinion by Circuit Judge Linn

Promega Corp. v. Life Technologies Corp. (Fed. Cir. 2012)

By Donald Zuhn --

Last month, in Promega Corp. v. Life Technologies Corp., the Federal Circuit affirmed a decision by the District Court for the Western District of Wisconsin granting a motion to compel arbitration by Invitrogen IP Holdings, Inc.  The appeal involved a 1996 licensing agreement between Research Genetics, Inc. and Promega Corp. concerning German, U.S., European, and Japanese patents (including U.S. Patent No. RE37,984) directed to genetic identification.  The agreement contained provisions specifying that the agreement could "not be assigned by either party without the express written consent of the other party," and that "[a]ll controversies or disputes arising out of or relating to this Agreement, or relating to the breach thereof, shall be resolved by arbitration."

Following Research Genetics' merger with Invitrogen Corp., Promega granted written consent allowing Research Genetics to assign its rights under the agreement to Invitrogen.  Two years later, Promega again granted written consent allowing Invitrogen to assign its rights under the agreement to Invitrogen IP Holdings.  Following Invitrogen's merger with Applied Biosystems Inc., the combined company changed its name to Life Technologies Corp., with Invitrogen IP Holdings remaining a wholly owned subsidiary of Life Technologies.

After acquiring information regarding payments by Promega on its sublicensees' sales of products incorporating the licensed patents, Life Technologies notified Promega of its alleged noncompliance with the agreement.  When negotiations between the parties failed to resolve the issue, Life Technologies demanded arbitration pursuant to the agreement's arbitration clause.  Promega responded by filing suit against Life Technologies, seeking a declaratory judgment of non-arbitrability of Life Technologies' claims and alleging infringement of five patents (including the '984 patent).  With respect to the issue of arbitration, Promega contended that the rights under the agreement had never been assigned to Life Technologies and therefore that Life Technologies was not entitled to demand arbitration.  After discovering that Invitrogen IP Holdings had not assigned its rights under the agreement to Life Technologies, Invitrogen IP Holdings served Promega with a demand for arbitration on its behalf and filed a motion to compel arbitration.  Following limited discovery on the issues of whether Invitrogen IP Holdings was the current assignee of the agreement and whether it maintained its legal existence, the District Court entered an order compelling arbitration between Promega and Invitrogen IP Holdings with respect to claims relating to the agreement.  The District Court's order was certified as a final order and Promega appealed.

In a split decision affirming the District Court's order compelling arbitration, Judge Dyk, writing for the Court, begins by noting that the Federal Arbitration Act (FAA) mandates enforcement of valid, written arbitration provisions, "establish[ing] a national policy favoring arbitration when the parties contract for that mode of dispute resolution."  Judge Dyk then addressed each of Promega's arguments as to why it should not be compelled to arbitrate.

As to Promega's argument that the arbitration clause was permissive rather than mandatory (with Promega noting that the agreement states that the parties "may invoke the arbitration provision" if there is a dispute over whether a material breach has occurred), the Court countered that "[w]hile the agreement does not compel a party to demand arbitration, once a party does so, the plain language of the 1996 agreement shows that arbitration is mandatory, not permissive."  With regard to Promega's argument that Invitrogen IP Holdings is merely a shell subsidiary, that the real party-in-interest is Life Technologies, and that there was no agreement between Promega and Life Technologies to arbitrate, the Court stated that "[b]ecause there was no assignment, the rights under the 1996 agreement remain with IP Holdings," and "[b]ecause there is no dispute that IP Holdings remains a corporation in good standing under Delaware law, we conclude that there is a valid agreement between Promega and IP Holdings to arbitrate."

With respect to Promega's argument that the arbitration provision does not encompass the dispute over Promega's alleged failure to pay royalties because the parties intended arbitration to apply only to small disputes between non-competitors, the Court noted that the agreement's arbitration clause "is not limited to small disputes, or to disputes with those who do not compete with Promega," but rather, "clearly and unambiguously applies to all disputes arising out of or relating to the 1996 agreement."  As for Promega's argument that compelling arbitration would be unjust and unfair because the agreement's arbitration procedures do not permit third-party discovery, the Court pointed out that the agreement provides that during arbitration, "either party may engage in discovery upon any matter, not privileged, relevant to the dispute, claim or controversy," including "written interrogatories, requests for production of documents and tangible things, requests for admissions and oral depositions of the other party and its employees," and further, that Invitrogen IP Holdings represented during oral argument that Life Technologies would consent to discovery and the production of relevant documents during arbitration.

Promega also argued that arbitration was inappropriate given that its infringement claims remained pending in the District Court.  In rejecting this argument, the Federal Circuit noted that "[t]he district court's duty to compel arbitration is not altered by the fact that non-arbitrable claims may remain pending in the district court."  As for Promega's equitable defenses of laches, waiver, unjust enrichment, and estoppel, the Federal Circuit stated that "[d]efenses to liability under the agreement must be raised before the arbitrator," adding that "[t]here is no claim here that there is a ground for revocation of the agreement itself."

In a short dissent, Judge Newman stated that "there is no agreement to arbitrate as between the parties in interest for this dispute," noting that "[n]o consent was given to assignment of the contract to Life Technologies."  She therefore concluded that "[i]n the absence of agreement to arbitrate, arbitration cannot be imposed."

Promega Corp. v. Life Technologies Corp. (Fed. Cir. 2012)
Panel: Chief Judge Rader and Circuit Judges Newman and Dyk
Opinion for the court by Circuit Judge Dyk; dissenting opinion by Circuit Judge Newman

Biotech/Pharma Licensing News

By Kwame Mensah --

Last month, Castle Biosciences Inc., a Friendswood, Texas-based corporation specializing in rare cancer molecular diagnostics, announced that it had acquired an exclusive worldwide license to intellectual property covering a gene expression profiling test for thymoma, which is a rare tumor derived from the epithelial cells of the thymus gland.  Castle Biosciences acquired intellectual property rights from Indiana University Research and Technology Corp., a non-profit technology transfer group associated with the university which discovered the gene profile signature that facilitates Castle Biosciences' DecisionDx-Thymoma test.

Castle Biosciences stated that the test has displayed accurate prediction of metastatic risk in patients with thymoma, while also accurately confirming the disease stage at diagnosis.  Castle Biosciences continues to work with Indiana University to complete clinical validation and is aiming to have the test clinically available by the end of this quarter.  Patrick Loehrer, director of the Indiana University Melvin and Bren Simon Cancer Center in Indianapolis, stated that "[t]he ability to accurately assess metastatic risk based upon the thymoma's molecular signature will enable personalizing therapeutic options and assist in deciding which patients should receive post-operative therapy."

In addition to its new DecisionDx-Thymoma test, Castle Biosciences also markets tests for diagnosis of uveal melanoma, gliomas and glioblastoma.

AUTM Survey Shows Significant Increases in University Patent Filings and Issuances in FY2010

By Donald Zuhn --

The Association of University Technology Managers (AUTM) recently presented the highlights of the AUTM Licensing Activity Survey Summary for FY2010.  While the full report will be released later this fall, the academic technology transfer organization noted that "[d]espite continuing difficult economic conditions, university and research institute licensing and startup activity remained very strong" in 2010.  In particular, the AUTM survey found that 651 university start-ups were created in 2010, up 9.2% from the 596 university start-ups created in 2009.  The survey also found that licensing revenue rose 3.0% from 2009 to 2010, reversing a sharp decline that saw revenue drop 32.5% between 2008 and 2009.  The number of licenses also increased in 2010, albeit only by 0.6%.

The AUTM survey also found that research expenditures were up 10.5% to $59.1 billion and income from licenses hit $2.4 billion (up from $2.3 billion in 2009).  With regard to IP management, the survey shows that invention disclosures increased by 1.6% to 20,642; 12,281 new U.S. patent applications were filed by survey respondents (up 46.8% from the 8,364 applications filed in 2009); and 4,469 U.S. patents were issued to survey respondents (a 30.8% increase from the 3,417 patents issued to respondents in 2009).  AUTM noted that the increase in patent issuances was the largest the group had seen in the 17 years that it has been collecting licensing data.

The survey was generated from 183 responses to a survey sent to 307 U.S. institutions, consisting of 236 universities and colleges, 65 hospitals and research institutions, two national laboratories, and four third-party technology investment firms.  Additional information regarding the AUTM survey can be found here.

For additional information on other related topics, please see:

• "University Start-ups and Licensing Activity Held Steady During Recession," October 7, 2010
• "AUTM Survey Shows Drop in Issued Patents," March 9, 2010

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

Federal Circuit Transfers "Hot Potato" Diagnostic Method Case

    By Kevin E. Noonan --

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

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

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

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

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

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

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

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

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

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

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

AUTM Survey Shows Drop in Issued Patents

    By Donald Zuhn --

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

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

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

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

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

    By Donald Zuhn --

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

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

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

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

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

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

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

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

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

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

Alnylam to Donate RNAi Patents to Patent Pool

    By Donald Zuhn --

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

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

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

Biotech/Pharma Business Briefs

    By Jason Derry --

Peptimmune and Novartis Sign $500 Million Deal

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

BMS to License HCV Therapy from Zymogenetics

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

Merck to License MS Drug

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

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

Biotech/Pharma Business Briefs

    By Jason Derry --

Endo to Acquire Indevus

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

Escalon Acquires Hematology Business

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

Roche Licenses Anti-inflammatory Compounds

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

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

Cellectis and Regeneron Resolve Licensing Dispute

    By Donald Zuhn --

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

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

For additional information regarding the agreement, please see:

• A report on the agreement by The Business Review

Sigma-Aldrich Licenses Apoptosis Marker

    By Jason Derry --

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

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

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

Pfizer to Acquire Encysive Pharmaceuticals

    By Jason Derry --

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

For additional information, please see:

• Reuters report

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

Human Genome Sciences and Xencor Enter Antibody Collaboration

    By Christopher P. Singer --

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

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

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