Supreme Court Unanimously Rules for Generic Manufacturers in Improper Patent Listing Case

By Charles Pierce

In Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 566 U.S. ___ (2012), the Supreme Court unanimously clarified the prerequisites of 21 U.S.C. §355(j)(5)(C)(ii)(I) counterclaims seeking to correct or delete patent information that a name-brand pharmaceuticals manufacturer submits to the FDA.

Repaglinide is a drug that has been approved by the FDA for the treatment of diabetes.  The FDA approved three methods: repaglinide alone, repaglinide in combination with metformin, and repaglinide in combination with thiazolidinediones.  The compound was covered by the ‘035 patent that Novo had owned, but the patent had expired in 2009.  Novo currently owns the ‘358 patent, a method-of-use patent which claims “a method for treating [diabetes by] administering . . . repaglinide in combination with metformin.”

Generic drug makers, rather than submit a new drug application (NDA), may submit an abbreviated new drug application (ANDA) that piggy back on the brand’s NDA.  Following the expiration of the ‘035 patent, Caraco filed such an ANDA seeking permission to market a generic version of repaglinide alone and repaglinide in combination with thiazolidinediones for the treatment of diabetes.  Before the FDA granted approval, Novo changed its use code for the ‘358 patent to cover all methods of using repaglinidine.  Caraco then filed a certification stating that the ‘358 patent would not be infringed, and Novo treated this as an act of infringement and sued.  Caraco filed a counterclaim under § 355.

21 U.S.C. §355(j)(5)(C)(ii)(I) states that when sued for infringement, an ANDA applicant may:

“Assert a counterclaim seeking an order requiring the [brand] to correct or delete the patent information submitted by the [brand] under subsection (b) or (c) [of §355] on the ground that the patent does not claim either –

(aa) the drug for which the [brand’s NDA] was approved; or

(bb) an approved method of using the drug.”

The parties disagreed on the meaning of the phrase “on the ground that the patent does not claim . . .  an approved method of using the drug.”  Novo argued that this should mean that the only time a counterclaim is allowed is when the patent does not claim any approved method of using the drug.  Caraco argued that instead, a counterclaim was allowed when the ANDA applicant applies for a method of using the drug not covered by the patent.  The Supreme Court agreed with Caraco.

The Supreme Court first examined the statutory context and noted that the statute contemplates that a single patented use should not prevent an ANDA from being approved.  By Novo’s reading, a patent claiming a single method of use would be sufficient to deny both FDA approval and a cause of action to ANDA applicants seeking to market the drug for unrelated uses.  Finding this result to be contrary to the statutory intention, the Court ruled for Caraco’s interpretation.

Novo also argued that Caraco’s counterclaim should fail because use codes are not patent information submitted under subsections (b) or (c) for the purposes of the statute.  The Supreme Court again disagreed with Novo.  First, the Court ruled that a use code does qualify as patent information because it describes the method of use claimed in a patent.  Use codes are required under 21 CFR §314.53 and when issuing §314.53, the FDA noted that its authority stemmed from 21 U.S.C. §355.  Because of this, the Court then decided that subsections (b) or (c), which require an NDA applicant to submit the patent number and expiration date of any patent claiming the drug or its method of use, cover use codes.  The Supreme Court also noted that if a counterclaim in such a case was not allowed, than the term “correct” in “assert a counterclaim seeking an order requiring the [brand] to correct or delete the patent information” would be read out of §355(j)(5)(C)(ii)(I).  Thus, the Court ruled that use codes are patent information submitted under subsections (b) or (c).

Finally, the Court rejected Novo’s legislative history arguments.  Novo first argued that Caraco’s interpretation of §355 would resurrect a scheme rejected by Congress.  A 2002 bill had sought to require brands to file patent information, and allow generic companies to bring actions to correct such information.  The bill failed, but the Supreme Court here declined to view the failure as a Congressional rejection of the requirement, noting that bills may be proposed and rejected for any number of reasons.

The Supreme Court then rejected Novo’s final argument – that the counterclaim was established only in response to the Federal Circuit’s decision in Mylan Pharmaceuticals, Inc. v. Thompson, 267 F. 3d 1323 (Fed. Cir. 2001).  In Mylan, the Federal Circuit had decided that no action to delist an improperly listed patent from the Orange Book was available.  The Court noted that even assuming that Congress was responding to Mylan, the situation presented in this case was similar to that in Mylan: an unrelated drug patent blocked FDA approval for a generic manufacturer.  The Supreme Court unanimously ruled for Caraco, deciding that a cause of action exists for generic manufacturers when the brand lists a method-of-use patent that does not cover a method of use for which the generic manufacturer seeks FDA approval.

Supreme Court Holds that New Evidence May Be Presented in § 145 Actions, Must Be Reviewed De Novo

By Charles Pierce

In Kappos v. Hyatt, 566 U.S. ___ (2012), the Supreme Court unanimously ruled that in a 35 U.S.C. § 145 action, there are no evidentiary restrictions beyond those imposed by the Federal Rules of Evidence, and the Federal Rules of Civil Procedure.  The Supreme court also held that when new evidence is presented, the district court must make a de novo finding on a disputed question of fact.

In 1995, Gilbert Hyatt filed U.S. Patent Application No. 08/471,701 (the ‘702 application), “Improved Memory Architecture Having a Multiple Buffer Output Arrangement.”  After amendments, the ‘702 application had a total of 117 claims, which were all rejected by the examiner.  Hyatt appealed to the Board of Patent Appeals and Interferences,  and the Board approved 38 claims, but upheld the examiner’s rejection for lack of adequate written description for the rest.  Hyatt then filed an action under 35 U.S.C. § 145 in District Court.

35 U.S.C. § 145 states,

An applicant dissatisfied with the decision of the Board of Patent Appeals and Interferences in an appeal under section 134(a) of this title may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director in the United States District Court for the District of Columbia if commenced within such time after such decision, not less than sixty days, as the Director appoints. The court may adjudge that such applicant is entitled to receive a patent for his invention, as specified in any of his claims involved in the decision of the Board of Patent Appeals and Interferences, as the facts in the case may appear, and such adjudication shall authorize the Director to issue such patent on compliance with the requirements of law. All the expenses of the proceedings shall be paid by the applicant.

In his § 145 action, Hyatt submitted to the District Court a written declaration identifying portions of the patent specification that he viewed as supporting his claims.  The District Court declined to consider Hyatt’s declaration, on the ground that applicants may not present new issues unless there was some reason presented for failure to present the issue to the Patent Office.  The District Court then granted summary judgment to the Director of the Patent Office, after reviewing the remaining evidence under the substantial evidence standard.

On appeal, the Federal Circuit first affirmed the district court’s decision, then granted rehearing en banc and held that new evidence in §145 proceedings is subject only to the Federal Rules of Evidence and the Federal Rules of Civil Procedure, and that when new evidence is introduced, the district court must make a de novo finding.  The Director then appealed, and the Supreme Court affirmed the en banc decision.

The Supreme Court reasoned that “§ 145 neither imposes evidentiary limits nor establishes a heightened standard of review.”  566 U.S. ___, ___ slip op. at 6.  Rejecting the Director’s argument that administrative law principles should apply to § 145, the Supreme Court noted that unlike the APA, 35 U.S.C. § 145 does not limit judicial review to the administrative record.  The Supreme Court also cited the lack of limits in the text of the statute, the competence of a district court to receive new evidence and act as fact finder, and that § 145 does not provide for remand to the PTO.

The Supreme Court also based its reasoning on Butterworth v. United States ex rel. Hoe, 112 U.S. 50 (1884), a case filed under R. S. 4915, the direct predecessor to § 145.  In Butterworth, the court had described R. S. 4915 proceedings as independent from Patent Office hearings, and ruled that parties may introduce additional evidence.  The Supreme Court also distinguished Morgan v. Daniels, 153 U.S. 120 (1894) (which applied a deferential standard to an R. S. 4915 review), as Morgan involved an interference proceeding and such proceedings are no longer addressed in the same section of the Patent Act as district court challenges.  Finally, in Morgan, no new evidence was presented.  Butterworth being closer than Morgan to the facts of this case, the Supreme Court held that new evidence may be presented with no restriction save for the Federal Rules of Evidence and the Federal Rules of Civil Procedure, and that where new evidence is presented, the district court must review it de novo.

Introducing Stein McEwen LLP Fall 2012 IP Training Program October 1-19, 2012

 Stein McEwen LLP is pleased to announce that it will be hosting an intellectual property training program from October 1-12 with an add-on session from October 15-19, 2012 in Washington DC.

 The purpose of the Stein McEwen LLP Fall 2012 IP Training Seminar is to provide an overview of U.S. Intellectual Property Law, including patents, trademarks, copyrights, and trade secrets. The lectures will cover fundamentals of patent procurement, with optional sessions extending to the scopes of trademarks and copyrights, IP licensing, and IP litigation. A series of lectures will be presented by Stein McEwen LLP attorneys regarding these subjects, including workshops for the participants to receive hands-on experience.  These workshops will include activities such as reviewing disclosures of an invention and drafting sample claims to cover the subject matter of the invention. Tours of the U.S. Patent and Trademark Office, the U.S. Court of Appeals for the Federal Circuit, and a U.S. District Court will allow the participants an opportunity to understand the complexities of these agencies and courts.  At the U.S. Court of Appeals for the Federal Circuit, the participants will likely have an opportunity to observe a portion of a hearing involving patents. The IP Training Seminar is intended to provide a broad-based understanding of U.S. Intellectual Property Law, with a strong emphasis on patents. The already-implemented and still-to-take-effect provisions of the Smith-Leahy America Invents Act (AIA) will be woven throughout the syllabus.

 

Who Should Attend?

In-house staff members of corporate IP departments, patent attorneys, staff members of overseas law firms, inventors, and members of academia who deal in some aspect of IP.

Basic understanding of patent law for at least one country is recommended. No formal registration of any country’s patent office is required.

More information can be found at www.smiplaw.com/seminar_ipt.cfm.

If you have any questions, please contact Sarah Brogi at sbrogi@smiplaw.com or SM2012training@smiplaw.com.

Stein McEwen issues Vol. 8, Issue 2 of the SteinMcEwen Newsletter (April 2012) with Emphasis on Patentable Subject Matter

We are pleased to present the latest edition of the Stein McEwen, LLP Newsletter, Vol. 8, Issue 2 (April 2012).
The newsletter includes information on the following:

• Supreme Court Provides New Test for Patentable Subject Matter
• Ninth Circuit Finds President of Restaurant and Lounge Personally Liable For Unlicensed Public Music Performance
• Federal Circuit Defines Language of 35 U.S.C. § 271(e)(2) in a Hatch-Waxman Controversy
• Federal Circuit Says § 101 Requires “Concrete Steps” In Software Methods
• Federal Circuit Finds Computer Software For Real Estate Investment Strategy To Be Abstract
• Typhoon Touch v. Dell: Claims Saved From Aristocrat Invalidity But No Infringement Found
• Hermes Loses Trademark Battle on its Chinese Name for the Third Time in China
• Cell Phone Network Patent Survives § 112 Attacks in Federal Circuit
• Broadening Reissue Application Filed Within Two Years Allows Subsequent Broadening Reissue Applications After the Two Year Bar Regardless of Whether the Claim Language is Related
• Difference in Prior Art Requirements in Obviousness and Anticipation; Broad Genus Disclosures in Prior Art
• Claim Language Defined in the Specification Is Reason for Overturning District Courts Ruling of Invalidity for Violating the Recapture Rule
• Federal Circuit Overturns District Court’s Narrow Claim Construction
• The Harari Cases: Copied Claims Found Unsupported Despite Proper Incorporation of Prior Applications
• Vexatious Plaintiff Is Slapped With $4.5M In Fees
• Federal Circuit Rules that the Invention of a Method of Making Chemical Compounds May Be Sufficient Contribution to Qualify for Joint Inventorship of the Compounds
• Stein McEwen Welcomes New Additions
• Feature Comment: Eastern District of Texas Presents Its Take on the Model Discovery Order
• Feature Comment: Linsanity Hits Trademark Registration both in the United States and China: A Study In Contrasts For Celebrity Brand Protection

For more information on Stein McEwen, LLP, please visit www.smiplaw.com

Board of Patent Appeals and Interferences Rules on Indefiniteness of the Term “Substantially Filled,” Prima Facie Obviousness in an Engine Cooling Method

By Charles Pierce

In Ex Parte Evans et al. (Appeal 2011-004119; Application serial no. 11/823,993), the Board of Patent Appeals and Interferences reversed examiner rejections under 35 U.S.C. § 112 for indefiniteness, and 35 U.S.C. § 103(a) for obviousness.

Claim 1 of the patent states:

A method for cooling an internal combustion engine using a reduced toxicity, ethylene glycol and water based heat transfer fluid, said method comprising the steps of:

(a) formulating a heat transfer fluid comprising (1) a glycol component consisting of ethylene glycol and propylene glycol, wherein the weight of the propylene glycol is between 5% less to less than 30% of the total weight of the glycol component and wherein the glycol component is less toxic than 10,000 mg/kg on an acute LD₅₀(rat) oral toxicity basis, and (2) water, wherein the water comprises between 40% and 70% by weight of the total weight of the heat transfer fluid; and

(b) substantially filling the cooling system of the internal combustion engine with the heat transfer fluid such that the heat transfer fluid absorbs heat that is produced by the internal combustion engine and releases the absorbed heat to the atmosphere. (emphasis added).

The examiner rejected this claim reasoning that because the term “substantially” is not defined, the specification does not sufficiently describe the invention such that a person of ordinary skill in the art would be reasonably apprised of its scope.  The board disagreed.  They noted that “substantially” was used to describe how much a cooling system should be filled, and any person skilled in the art would know what can be considered substantially filled.  The term “substantially” was used to avoid a strict measurement,  because slight variations in the amount of fluid may still be considered to have filled a cooling system.  The board decided that the claim was sufficiently definite.

The board also disagreed with the examiner’s obviousness rejections.  The examiner’s rejection was that the claims were prima facie obvious.  The board noted that no reference disclosed the weight range of the propylene glycol in the glycerol component, or the weight range of the glycerol in the polyhydric alcohol component.  Because the references also disclosed only the components of the invention, the board ruled that they were not enough for a person of ordinary skill in the art to create the claimed cooling method.

Broadening Reissue Application Filed Within Two Years Allows Subsequent Broadening Reissue Applications After the Two Year Bar Regardless of Whether the Claim Language is Related

By Kevin M. Repper

In the case of In re Erik P. Staats and Robin D. Lash, No. 2010-1443 (Fed. Cir. 2012), the Federal Circuit made a decision based on their interpretation of 35 U.S.C. §251 and the precedent court case In re Doll, 419 F.2d 925 (C.C.P.A).  35 U.S.C. §251 discloses that “whenever any patent is, through error without any deceptive intention, deemed wholly or partly inoperative or invalid, by reason of a defective specification or drawing, or by reason of the patentee claiming more or less than he had a right to claim in the patent, the Director shall, on the surrender of such patent,…reissue the patent… for the unexpired part of the term of the original patent.” The reissue statute imposes a two-year limit when the patentee intends on broadening the scope of the claims of the original patent.

Doll interpreted section 251 and explicitly rejected the PTO’s argument that “claims presented in a reissue application filed within two years of the original patent grant are barred by 35 U.S.C. §251 when such claims are not submitted until more than two years after the grant and are broader in scope than both the original patent claims and the broadening reissue claims originally submitted.” Therefore, it is allowable for one to file broadening claims outside of the two year window as long as the patent holder filed initial broadening claims within the two year window. In the present case, the court must decide whether the Board correctly held that a broadening reissue application filed outside of the two year period is not timely if it is not related to an earlier application filed within the two year period.

Staats filed an application for a patent with the USPTO and it was issued on August 17, 1999 as U.S. Patent Number 5,940,600 (‘600 patent). The ‘600 patent described improvements to the management of isochronous data transfers such as the transfer of real-time video data from one component in a computer system to another component in the computer system. The ‘600 patent included a first embodiment, which used a linked list of buffers and a second embodiment that did not use the linked list of buffers. Both the first and second embodiments were described in the specification, however only the first embodiment was claimed in the original patent.

Staats timely filed a broadening re-issue application relating to the first embodiment in the specification.  Staats filed a second broadening reissue application on May 12, 2004, as a continuation of the first broadening reissue application. Again, the second broadening reissue application only addressed errors related to the first embodiment.  Almost seven years after the original ‘600 patent issued, Staats filed a third broadening reissue application as a continuation of the second broadening reissue application.  In the third broadening reissue, Staats added claims that were drawn towards the second embodiment that did not include the linked list of buffers.

Although acknowledging the precedent in Doll, the examiner rejected the third reissue application under 35 U.S.C. §251 after finding that the new broadened claims were not related in any way to what was covered in the original broadening reissue.  On appeal, although recognizing that it was bound by Doll, the Board found that the newly added broadening claims were directed to an invention that was independent and distinct from that claimed in the original patent application and the first broadening reissue application. According to the Board, the broadening sought in the third application was unforeseeable from the original reissue application and the public notice function of 35 U.S.C. §251 had not been met.

The PTO argued that the language of the statute, requiring that the broadening reissue be applied for within two years, does not suggest that the first broadening reissue can serve as a placeholder for later applications. The PTO contended that a patentee must give the public adequate notice within two years of what the patentee intends to broaden and Staats clearly did not do in regards to the claims listed in the third broadening re-issue application.

The PTO continued to argue that while Doll is binding it is nevertheless distinguishable. According to the PTO, the broadened claims challenged in Doll were related to the subject matter covered by the claims identified and broadened within the two-year window and thus was adequately notified of Doll’s later broadening.  The court rejects this argument because the court in Doll never made the distinction between related and unrelated claims.  Doll simply ruled that the two year window only applies to the first broadening reissue application.  The court further points out that the PTO’s approach is unmanageable because it would be difficult to distinguish one patent embodiment from another or to determine when a later claim is related to an earlier one.

According to the court, as long as you file the first broadening reissue application within section 251’s two year limit, you may continue to file reissue applications outside of the two year limit, regardless of whether the claim language is related. Staats filed his first broadening reissue application within the two year window and therefore the Board’s rejection of the third reissue application was remanded for further proceedings consisting with the opinion.

President of Restaurant and Lounge Is Found Personally Liable For Unlicensed Public Music Performance

By Evelyn Li

The United States Court of Appeals for the Ninth Circuit affirmed a California district court’s granting of a summary judgment in favor of plaintiff-appellees for a total of $203,728.22. The judgment included a statutory infringement damage of $4,500 for each of the 8 infringements ($36,000), and attorneys’ fees and costs in the amount of $167,728.22. Plaintiff-appellees, Range Road Music, Inc. together with Sony/ATV harmony, Williamson Music Company and several other music companies (“Music Companies”) sued East Coast Foods, Inc.(“East Coast”) and its president Herbert Hudson for copyright infringement after collecting evidence through an independent investigator, Scott Greene, on unlicensed public performances of music owned by the Music Companies. Scott Greene was retained by American Society of Composers, Authors, and Publishers (ASCAP) to visit the restaurant “Long Beach Roscoe’s” owned by East Coast to investigate whether copyright infringement was likely occurring at the venue. Greene’s report identified eight songs, which were later confirmed by ASCAP as owned by the Music Companies, which were publicly performed in the restaurant during his visit. In addition to the report, the Music Companies also showed that ASCAP had repeatedly requested the East Coast to pay licensing fees between 2001 and 2007.

The defendants appealed to the Ninth Circuit after the district court granted summary judgment for the Music Companies and awarded damages as well as attorneys’ fees and costs against East Coast and Hudson. The Ninth circuit then reviewed the district court’s grant of summary judgment de novo both on the issue of the district court’s evidentiary ruling and the award of attorneys’ fees, and it found both judgments to be proper.

The main issues discussed by the Ninth circuit was (1) whether the district court erred in granting summary judgment for the Music Companies on its complaint of vicarious liability for copyright infringement; (2) whether East Coast and Hudson can be held liable for vicarious infringement; and (3) whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion.

The court found the Music Companies’ complaint sufficient because, first, they adequately provided specific evidence to raise a plausible inference that East Coast and Hudson exercised control over and financially benefitted from the infringing performance at the Long Beach Roscoe’s; and, second, the Music Companies provided sufficient evidence to establish a prima facie case of copyright infringement with no genuine issue of material facts. To reach the conclusion on whether the Music Company’s complaint was sufficient, the court explored the case law in Metro-Goldwyn-Mayer Studio Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) and Twentieth Century Music Corp v. Aiken, 422 U.S. 151 (1975) to find that a vicarious infringer “profits from direct infringement while declining to exercise a right to stop or limit it” and, “The entrepreneur who sponsors such a public performance for profit is also an infringer—direct or contributory.”  Then, the court went on to discuss whether Scott Greene’s uncontested declaration was sufficient to establish that no genuine issue of material fact existed as to the Music Companies’ claim. East Coast and Hudson argued that Greene’s declaration was inadmissible because it was “expert testimony by a lay witness.” However, the court disagreed by stating that “identifying popular songs does not require ‘science, technical, or other specialized knowledge’ (Fed. R. Evid. 702).” Furthermore, the court mentioned “many of Greene’s identifications did not even require him to tax his memory: the live band announced the titles of several of the compositions they covered, and Greene transcribed other titles directly from a CD jewel case.”

In addition, the court found the argument raised by East Coast and Hudson that the Music Companies’ evidence of copyright infringement was inadequate due to a lack of showing on “substantial similarity” between the compositions performed at Roscoe’s and the copyrighted works to be a red herring. Under Funky Films, 462 F.3d 1072 (9th Cir. 2006), a demonstration of substantial similarity is only necessary to prove infringement “absent evidence of direct copying.” Accordingly, the court found no genuine issue of material fact existed because there were substantial proof of direct copying in this case.

Thus, the court concluded that the district court was correct in granting summary judgment for the Music Companies on the complaint of vicarious liability for copyright infringement.

Turning to the second issue on East Coast and Hudson’s liability for the infringement, the court looked to Perfect 10. Inc. v. Amazon.com, Inc., 487 F. 3d 701 which states that a defendant “exercises control over a infringer when he has both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” Applying the facts in this case, the court found that East Coast and Hudson not only “exercised control over both the Long Beach Roscoe’s and the Sea Bird Jazz lounge,” but they also have “derived a financial benefit from the musical performances in the lounge.” Therefore, the court concluded that the district court properly held that Hudson and East Coast were jointly and severally liable for copyright infringement. Although Hudson and East Coast demonstrated that they are not proper defendants because Hudson has never owned the Long Beach Roscoe’s, the court found such argument to be “unsubstantiated and self-serving.”

On discussing the third issue on whether the district court’s award of attorney’s fees and costs to the Music Companies was an abuse of discretion, the Ninth Circuit relied on Entm’s Research Grp., Inc. v. Genesis Creative Grp., Inc., 122 F.3d 1211 (9th Cir. 1997) and 17 U.S.C. § 505 to find that the district court “properly applied factors set forth in Entertainment Research Group and articulated a reasoned explanation for its fee award.” Besides, the court also mentioned that such liability could have been avoided if East Coast and Hudson had purchased a license during the seven years in which ASCAP “importuned them to do so.” Also, the court found that the obfuscation of the corporate structure of Roscoe’s caused much of the fees and costs for East Coast and Hudson as well.

In conclusion, the Ninth Circuit affirmed the district court’s decision as to all the above mentioned three issues. East Coast and Hudson will be most likely paying the Music Companies a total of $203,728.22 for the unlicensed music performance in the public.