The following is a summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit for the week ending April 10, 2015. Chris Byrnes and Chris Douglas prepared this edition
Case Summaries
Infringement: Hatch-Waxman Act
Remedies: Damages: Reasonably Royalty
AstraZeneca AB, et al. v. Apotex Corp., et al., No. 14-1221 (Fed. Cir. (S.D.N.Y.) Apr. 7, 2015). Opinion by Bryson, joined by O’Malley and Clevenger.
Affirming-in-part, reversing-in-part, and remanding for a recalculation of damages based on a reasonable royalty, the Federal Circuit held that a royalty rate of 50 percent constituted fair compensation in view of the district court’s detailed findings regarding the relevant pharmaceutical market, regulatory delays and unavailability of a noninfringing alternative, and a consideration of contemporaneous licensing agreements. The Federal Circuit also held that the district court’s consideration of the value of the saleable product as a whole was reasonable in view of the patent claims, despite the active ingredient of the product no longer being under patent. In addition, the Federal Circuit held that the district court improperly factored a post-patent-expiration “pediatric exclusivity” period provided by the Food and Drug Administration (“FDA”) into the damages calculations. In view of these holdings, the Federal Circuit upheld the district court’s damages calculation except for the portion relating to the pediatric exclusivity period, which it remanded for recalculation.
AstraZeneca AB, Aktiebolaget Hassle, KBI-E, Inc., KBI, Inc., and AstraZeneca LP (collectively “Astra”) sued Apotex Corp., Apotex, Inc., and TorPharm Inc. (collectively “Apotex”) for infringement of U.S. Patent Nos. 4,786,505 (“the ’505 patent”) and 4,853,230 (“the ’230 patent”). The patents relate to pharmaceutical formulations containing omeprazole, the active ingredient in Astra’s highly successful prescription drug, Prilosec. The Federal Circuit previously affirmed the district court’s decision that Apotex had infringed the ’505 and ’230 patents. The district court then awarded damages to Astra based on a reasonable royalty, finding that Astra was entitled to 50 percent of Apotex’s gross margin from its sales of omeprazole between 2003 and 2007. The district court made detailed findings of fact regarding the omeprazole market, the role of generics in the market, regulatory delays and unavailability of noninfringing alternatives, and related licensing agreements. Based on such considerations, the district court entered a final judgment against Apotex in the amount of $76,021,994.50 plus prejudgment interest.
Apotex appealed, arguing that the court’s analysis improperly discounted evidence that the market for omeprazole was “well on its way to full genericization,” placed undue emphasis on Astra’s ability to keep Apotex temporarily off the market by refusing to grant a license, and improperly discounted contemporaneous licensing agreements that Astra entered into with other companies for royalty rates lower than 50 percent. The Federal Circuit rejected each of these arguments, holding that the district court’s reasoning was neither legally nor factually erroneous. In particular, the Federal Circuit held that regulatory delay caused by FDA approval was appropriately considered by the district court and that the district court’s reliance on licensing negotiations from other entities involved in litigation with Astra were appropriately persuasive.
The Federal Circuit also held that the district court properly calculated damages on the value of the omeprazole product as a whole, rejecting Apotex’s arguments that the district court should have calculated damages by apportioning the relative contribution of value between the active ingredient and the “inventive element” of the patents, i.e., the subcoating. Specifically, the Federal Circuit held that the entire market value rule does not apply in this case because the asserted patents cover the infringing product as a whole, not a single component of a multi-component product.
In addition, the Federal Circuit rejected the district court’s inclusion in the damages calculation of the six-month “pediatric exclusivity” period provided by the FDA under 21 U.S.C. § 355a, reasoning that, because the patents were expired during that period, Apotex’s sales during that period were not attributable to its patents and were not invaded by Apotex’s infringement.
http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1221.Opinion.4-2-2015.1.PDF
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Patentable Invention: Obviousness: Scope and Content of Prior Art
Infringement: Hatch-Waxman Act
Defenses: Invalidity
Litigation Practice and Procedure: Procedure: Admissibility of Evidence
Insite Vision, Inc., et al. v. Sandoz, Inc., et al., No. 14-1065 (Fed. Cir. (D.N.J.) Apr. 9, 2015). Opinion by Linn, joined by Prost and Newman.
Affirming the district court’s determination that four patents were not invalid as obvious, the Federal Circuit held that a prior art reference does not render a patent obvious when a list of disclosed ingredients does not identify the active ingredient recited in the claims and when persons of ordinary skill in the art would have had solubility and stability concerns with modifying the prior art to include the claimed ingredient. The Federal Circuit further held that a patent licensed to an entity, but not commonly owned or subject to a duty to assign to a common owner, can qualify as prior art to other patents licensed to that entity. Finally, the Federal Circuit held that a late proffer of a European Patent Office (“EPO”) file history is properly excluded from evidence under Pennypack Woods Home Ownership Ass’n, 559 F.2d 894, 904-05 (3d Cir. 1977), when the Pennypack factors are either neutral or favor the non-moving party.
In 2011, Insite Vision, Inc. (“Insite”), Inspire Pharm., Inc. (“Inspire”), and Pfizer, Inc. (“Pfizer”) (collectively “the Plaintiffs”) filed a complaint against Sandoz, Inc., Sandoz GmbH, and Sandoz Industrial Products, S.A. (collectively, “Sandoz”), alleging infringement of U.S. Patent Nos. 6,861,411 (“the ’411 patent”); 6,239,113 (“the ’113 patent”); 6,569,443 (“the ’443 patent”); and 7,056,893 (“the ’893 patent”). The patents relate to the topical administration of azithromycin to the eye. Pfizer is the assignee of the ’411 patent. Insite is the assignee of the ’113, ’443, and ’893 patents (“the ISV patents”). Inspire is the exclusive sub-licensee of the ’411 patent and the exclusive licensee of the ISV patents. Inspire markets a product named “Azasite®,” which is listed in the Food and Drug Administration’s Approved Drug Products with Therapeutic Equivalence Evaluations, along with the patents-in-suit. Sandoz filed an Abbreviated New Drug Application for its generic version of Azasite® along with a certification pursuant to 21 U.S.C. § 355(j)(2)(A)(vii)(IV) stating that the claims of the patents-in-suit were invalid and/or not infringed. In response, the Plaintiffs sued Sandoz for infringement.
After claim construction in the district court, Sandoz stipulated to infringement but contested the validity of the patents-in-suit as obvious under 35 U.S.C. § 103(a). Before trial, Sandoz moved to add the file history of the European counterpart of the ’411 patent as an exhibit. The district court denied the motion, concluding that the late proffer of the EPO file history was prejudicial. Following a bench trial, the district court concluded that Sandoz failed to show by clear and convincing evidence that the asserted claims were invalid as obvious. Sandoz appealed, arguing that the district court erred in finding the patents-in-suit not invalid and that the district court erred in excluding the EPO file history from evidence.
The Federal Circuit ruled that the district court did not improperly abrogate Merck & Co., Inc. v. Biocraft Laboratories, Inc., 874 F.2d 804 (Fed. Cir. 1989), by finding that a prior art reference that included a “laundry list of potential active ingredients” did not render obvious the ISV patents because the list did not include the claimed ingredient, azithromycin. In reaching its decision, the Federal Circuit confirmed that the district court properly “framed” the obviousness inquiry by defining the problem facing those skilled in the art at the time the invention was made and not based narrowly on the solution claimed by the patent at issue. The court thus affirmed the district court’s holding that Sandoz failed to demonstrate that the patents-in-suit are invalid as obvious.
The Federal Circuit also ruled that the ’411 patent qualifies as prior art to the ISV patents under 35 U.S.C. §§ 102(e) and 103(c) because the patents are not commonly owned or subject to a duty to assign to a common owner.
Finally, the Federal Circuit held that the district court properly applied the Pennypack factors in deciding to exclude Sandoz’s “eleventh hour proffer” of the EPO file history. The court determined that there was no indication as to how the Plaintiffs would have been able to cure the prejudice of the late proffer, and the relevance and probative value of the EPO file history under United States law was questionable.
http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1065.Opinion.4-7-2015.1.PDF
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Patent Office Procedures: Reexamination
Defenses: Invalidity
Litigation Practice and Procedure: Jurisdiction: Moot or Unripe Issues
Automated Merchandising Systems, Inc. v. Lee, No. 14-1728 (Fed. Cir. (E.D. Va.) Apr. 10, 2015). Opinion by Taranto, joined by Prost and Fogel (sitting by designation).
The Federal Circuit affirmed a determination that a patent owner cannot force the U.S. Patent and Trademark Office (“PTO”) to terminate an inter partes reexamination due to the parties entering into a consent judgment whereby the parties stipulated to the validity of the patents. The Federal Circuit also held that the patent owner’s challenge to the PTO’s refusal to terminate pending reexaminations cannot proceed because the refusal is not a “final agency action” under the Administrative Procedure Act (“APA”), 5 U.S.C. § 704.
In 2011, Crane Company requested an inter partes reexamination of U.S. Patent Nos. 6,384,402; 6,794,634; 7,191,915; and 7,343,220 (“the AMS patents”) owned by Automated Merchandising Systems, Inc. (“AMS”). Crane’s request was made after years of litigation in the Northern District of West Virginia where AMS had sued Crane for infringement of the AMS patents. While the reexaminations were underway, AMS and Crane settled their dispute. As a result, the Northern District of West Virginia issued a consent judgment stating that “[t]he parties stipulate that [the AMS patents] are valid,” that “[a]ll claims . . . are dismissed with prejudice,” and that “[t]his judgment is final.” However, the PTO refused to terminate the reexaminations under 35 U.S.C. § 317(b), finding that the consent judgment did not show that Crane had failed to sustain its burden of proving invalidity of any patent claim. The PTO confirmed that its refusal to terminate the proceedings was “a final agency action.”
AMS filed suit in the Eastern District of Virginia invoking the court’s jurisdiction under 28 U.S.C. §§ 1331, 1338, 1346; the APA, 5 U.S.C. §§ 701-706; the Declaratory Judgment Act, 28 U.S.C. § 2201; and the mandamus authority of 28 U.S.C. § 1361. AMS argued that the PTO was required to terminate the reexaminations under 35 U.S.C. § 317(b) in view of the consent judgment. The district court determined that the consent judgment did not amount to an adjudication of the merits of the validity of the AMS patents and, thus, denied AMS’s summary judgment motion to terminate the reexaminations and granted summary judgment in favor of the PTO.
On appeal, the Federal Circuit considered whether the PTO’s refusal to terminate the reexaminations constituted a final agency action such that the PTO’s decision was subject to judicial review under 5 U.S.C. § 704. The PTO had not raised the issue of whether the PTO’s decision constitutes a “final agency action” before the district court. Nevertheless, the Federal Circuit held that it was proper to overlook the PTO’s failure to preserve the issue under L.E.A. Dynatech, Inc. v. Allina, 49 F.3d 1527 (Fed. Cir. 1995), reasoning that the issue involves a pure question of law and presents a significant question of continuing public concern.
The Federal Circuit held that the PTO’s refusal to terminate the inter partes reexaminations does not qualify as a “final agency action” under § 704 because its decision was interlocutory in nature and had no legal consequences aside from requiring AMS to continue to participate in the proceedings to preserve its interests. In addition, the Federal Circuit held that mandamus relief under 28 U.S.C. §§ 1361 and 1651 was unavoidable because AMS had an adequate remedy through appeal of any final adverse PTO determination. The Federal Circuit also held that relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, was improper because such relief is discretionary and often not applied to administrative determinations that are not final or otherwise ripe for review. Accordingly, the Federal Circuit did not reach a decision with regard to whether the PTO was required to terminate the reexaminations under 35 U.S.C. § 317(b) in view of the consent judgment.
http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1728.Opinion.4-8-2015.1.PDF
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Remedies: Damages: Attorneys’ Fees
Remedies: Damages: Exceptional Case (Enhanced Damages)
Litigation Practice and Procedure: Discovery: Sanctions
Litigation Practice and Procedure: Procedure: Exceptional Case (Litigation Misconduct)
Oplus Technologies, Ltd. v. Vizio, Inc., No. 14-1297 (Fed. Cir. (C.D. Cal.) Apr. 10, 2015). Opinion by Moore, joined by Prost and O’Malley.
The Federal Circuit vacated and remanded the U.S. District Court for the Central District of California’s denial of attorneys’ fees and expert witness fees under 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent power. The court held that the district court abused its discretion in denying fees, reasoning that when a court finds litigation misconduct and a case is exceptional under 35 U.S.C. § 285, the court must articulate the reasons for its fee decision.
Oplus Technologies, Ltd. (“Oplus”) filed a patent infringement suit in the Northern District of Illinois against Vizio, Inc. (“Vizio”) and Sears Holding Corp. (“Sears”), which was transferred to the Central District of California. After the case was transferred, Oplus moved the Judicial Panel on Multidistrict Litigation to transfer the case back to the Northern District of Illinois and consolidate it with additional cases Oplus had filed against Sears and other companies. The Panel denied Oplus’s motion, and the case concluded on the merits when the Central District of California granted summary judgment of noninfringement. Vizio then moved to recover attorneys’ fees and expert witness fees pursuant to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent power.
The district court denied fees under § 285 despite finding the case exceptional and finding that Oplus and its counsel engaged in litigation misconduct. Specifically, the court found that Oplus implemented an abusive discovery strategy by avoiding its own litigation and discovery obligations while forcing its opponent to provide as much information as possible about its products, sales, and finances. The court also found that Oplus’s counsel, Niro, Haller & Niro, improperly issued a subpoena for documents that counsel had accessed under a protective order from a prior litigation. The court further found that Oplus used improper litigation tactics by presenting contradictory expert evidence and infringement contentions as well as misrepresenting legal and factual support. Despite each of these findings, the court denied an award of attorneys’ fees and expert witness fees because it found “little reason to believe that significantly more attorney fees or expert fees have been incurred than would have been in the absence of Oplus’s vexatious behavior.” The court also denied fees under § 1927, reasoning that there is no evidence to suggest that Oplus’s behavior stemmed from bad faith or a sufficient intent to harass. The court likewise denied fees under its inherent power, reasoning that other tools exist to sanction Oplus’s behavior.
Vizio appealed, arguing that the denial of fees was an abuse of discretion. After reviewing the record, the Federal Circuit ruled that there was no basis to support the court’s refusal to award fees. The court held that under such facts, the discovery abuses, unprofessionalism, and changing litigation positions had to have increased expenses for Vizio. The Federal Circuit rejected Oplus’s argument that fees are not warranted because the district court found that Oplus’s allegations against Vizio were not objectively baseless at the time of filing. The Federal Circuit also reasoned that the Supreme Court’s recent decisions lowering the standard for assessing entitlement to fees support its decision to vacate and remand for further consideration. The Federal Circuit confirmed that although an award of fees is clearly within the discretion of the district court, when a court finds litigation misconduct and that a case is exceptional, the court must articulate the reasons for its fee decision.
http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/14-1297.Opinion.4-8-2015.1.PDF
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