The Federal Circuit’s Review of Bayer’s Erectile Dysfunction Treatment Suggests Tolerance for a Wide Girth When Aiming for a Narrow Point

In Bayer Pharma AG v. Watson Laboratories, Inc. (Fed. Cir. November 1, 2017), the Federal Circuit overturned the District of Delaware’s finding that Watson failed to prove by clear and convincing evidence that the subject matter encompassed by the claims of Bayer’s U.S. Patent 8,613,950 (the ‘950 patent) was obvious under 35 USC 103. The CAFC invalidated claims 9 and 11 of the ’950 patent as unpatentably obvious. The Federal Circuit made this determination de novo based on the underlying findings of fact from the district court. Continue Reading When Are Swashbuckling Experts Seemingly ‘Flooding’ a Court with Large Number of References?

shutterstock_99945896The value of an early stage biotech company is driven primarily by the quality and scope of its intellectual property. As such, these companies’ primary goal is to stake out and consolidate a defensible claim in their technology space.

In sizing up an early stage company’s IP portfolio during due diligence, many investors and acquirers tend to focus on prior art issues related to patentability and freedom-to-operate concerns posed by the potential risk of someday being sued for infringing a third party patent. However, a hyper-focus on patentability and freedom to operate may be misplaced during early stages of technical development.

Often overlooked is the fact that substantive patent prosecution often winds through years of negotiation with the Patent Office. Moreover, claim sets in a filed patent application continuously evolve not only in response to Examiner rejections but also to track and cover important developments in lead candidate selection and pre-clinical product design, for example.

Additionally, biotech companies usually take advantage of the safe harbor set forth in 35 U.S.C. § 271(e)(1) to avoid charges of infringement for research activities associated with pre-/clinical development. This affords them a certain luxury of freedom with respect to third party patents as they develop their technologies.  Therefore, while early stage companies are expected to understand their competitive IP ecosystem, be aware of potentially threatening third party IP and even have an informal game plan in place to deal with such risks; sophisticated investors and BigPharma acquirers infrequently require that such companies will have actually made cash-draining licensing investments or aggressively attacked third party patents through litigation or Inter Partes Review.

In practice, therefore, sophisticated due diligence with respect to an early stage intellectual property portfolio is often better served scrutinizing an entirely different and more pressing aspect of the technology: Chain of Title.

Between 2007 and 2012, U.S. industrial biopharmaceutical annual R&D spending dropped by about 15%.  It is reasonable to assume that BigPharma’s internal early stage research programs disproportionately fell victim to such cuts.  It is no surprise, therefore, that we have seen an increasing amount of initially publically funded academically derived technologies flowing through start-ups into larger companies.

Inventors generating these new technologies usually collaborate with other researchers at various universities, corporations and service providers. While University professors and post-docs generally owe a duty to assign their inventions to their respective institutions, industrial sponsored research arrangements and third-party grant making entities such as government agencies and philanthropies may nevertheless have their own rights in the IP arising out of the research they support.

Thus a complex juxtapositions of funding sources, inventors, technicians, institutions and former employers — particularly in an area of investigation where the number of experts is small — represents a minefield with respect to issues of technology control and ownership. If not properly managed from the outset Chain of Title issues can explode once a technology is deemed to have commercial value and an aggrieved party believes they are being excluded when the proverbial ‘cookie tray’ is being passed around in the form of liquidity event, for example.

We have often helped parties dealing with tangled chain of title issues.  In the best cases, critical transactions are merely held up and cap tables potentially adjusted while ownership issues are cleaned up.  In the worst cases, an exit is scuttled or a party is sued for breach of contract, breach of a duty of loyalty and misappropriation of trade secrets for example or even accused of inequitable conduct before the USTPO for willfully misnaming or excluding inventors.

Irrespective of who ultimately prevails on the merits in such disputes, the cost in terms of unproductive time, lost opportunity, money, anxiety and reputational damage will no doubt, have been immense. These are particularly painful to bear at the start up stage when cash and key person attention are at a high premium.

Therefore, when conducting due diligence on early stage biotechnologies, it is of critical importance to generate a comprehensive list of all scientists and technicians who were involved in the earliest stages of a technology asset.  Each such individual’s contribution should be carefully analyzed with respect to whether they likely qualify as a legal inventor for example.  Inventorship under U.S. law is tied to conception and linked in concrete terms a claim in a patent or patent application.  The standard for inventorship with respect to know how can be much less clear.

In addition to analyzing inventive contribution, each such person’s obligations to assign their rights in their inventions must be assessed. For example, is a person entitled to keep all rights for themselves or are they obligated to assign to their respective employer/university?  Have the critical requirements of the Bayh-Dole Act, e.g., iEdison reporting, been complied with by federally-funded institutions?  Furthermore, does the inventor in question have a relationship with a funding agency, e.g., through a sponsored research agreement with a biopharma industry partner that has a rights, e.g., of first refusal, to the inventions it funded.  It is imperative that these investigations are conducted early, be properly memorialized and that relevant employee policies, employment and funding agreements are collected and cataloged in preparation for potential future third party due diligence.

Only after matters related to IP inventorship, ownership and control are clarified, is a company in a strong position to efficiently go about raising money or seeking partners to exploit its intellectual property assets.

shutterstock_170688149For the first time, the Federal Circuit addressed the requirement of “actual notice” of a published patent application in order for a patent holder to obtain damages before issuance of a patent.1 The case arose from the appeal of a district court’s grant of summary judgement that Adobe Systems was not liable for patent pre-issuance damages under 35 U.S.C. § 154(d), because it had no knowledge of the published U.S. Patent Application that matured into the asserted U.S. Patent No. 8,578,820.

Section 154(d) provides an exception to the general rule that damages for patent infringement can only accumulate during the term of the patent, allowing for damages to accrue beginning on the date of publication of an application that matures into an issued patent. In order to obtain these damages, a patent holder must demonstrate that 1) the asserted claims were “substantially identical” in the publication and in the ultimately issued patent and 2) that the accused infringer had “actual notice” of the published patent application.2

In addressing the meaning of “actual notice” in 35 U.S.C. § 154(d), the court concluded that this term included knowledge of the published application, but this knowledge did not have to come as a result of actions by the owner of the published application.3. Thus, the court dismissed Adobe’s argument that “an affirmative act” by the patent holder is required to give “actual notice” to the potential infringer of the published application. However, they did agree with Adobe that “constructive knowledge” is not “actual notice” of the published application.4

In an attempt to demonstrate that Adobe had “actual notice” of the publication that preceded the ‘820 patent, Rosebud presented three different rationales to the court. First, Rosebud asserted that because the parties were involved in two prior law suits over patents in the same family as the ‘820 patent, and Adobe knew of a grandparent patent to the ‘820 patent, it therefore also knew of the publication of the ‘820 patent application. Secondly, Rosebud argued that because Adobe followed Rosebud and its product, it would have become aware of publication of the ‘820 patent application. Finally, Rosebud suggested that it is standard practice when defending against a charge of patent infringement to search for patents and applications related to the asserted patent, and thus, Adobe surely would have discovered the publication of the ‘820 patent application.5

The court rejected each of Rosebud’s assertions. The court noted that even though the ‘280 patent shares a specification with the patents involved in prior lawsuits between Rosebud and Adobe, there was no evidence that Adobe had knowledge of the published application, and specifically, the claims of the published application.6 Knowledge of related patents does not equate to actual notice of the published patent application.7 With regard to Rosebud’s assertions that Adobe followed Rosebud and its products, the court found no evidence suggesting that Adobe or its employees were monitoring Rosebud and its products, and specifically there was no evidence that suggested that Adobe actively sought out Rosebud’s published patent applications.8 Finally, the court disagreed that it was standard practice during litigation to review related patents, or applications during litigation, particularly because the prior lawsuit between Rosebud and Adobe never reached the claim construction stage.9

Based on the Federal Circuit’s ruling, two potential practice tips emerge for companies prosecuting in the biotech space. The first is to consider including picture claims directed to a desired product in an application, such that claims of a published application may be in a form that meets the “substantially identical” requirement of 35 U.S.C. § 154(d) when they ultimately issue as a patent. While the requirement for similarity of the claims was not specifically addressed in Rosebud, the court did highlight the importance of a potential infringer having actual knowledge “of the claims of the published patent application and the fact that the applicant is seeking a patent covering these claims.”10

The second tip relates to whether to institute a “competitor monitoring” policy within a company, or for a client. Certainly the court in Rosebud indicated that simply being aware of related patents or applications, or even monitoring a client’s products, would probably not rise to the level of the required “actual notice” of the published application.11 The answer to this question certainly includes weighing the value of following a competitor with the risk that this process may result in “actual notice” of a competitor’s published patent application.12 Most likely each company, and potentially each technology sector in the biotech space, may have a different answer to this balance.

1 Rosebud LMS Inc., v. Adobe Sys. Inc., No. 2015-1428 (Fed. Cir. Feb 9, 2016).
2 35 U.S.C. § 154(d) (2006).
3 Id. at page 7.
4 Id. at page 5.
5 Rosebud, No. 2015-1428 at pages 7-8.
6 Id. at page 8.
7 Id.
8 Id. at pages 8-9.
9 Id. at page 9.
10 Id. at page 8.
11 Id. at pages 8-9.
12 Id. at page 5 (“the ordinary meaning of “actual notice” also includes knowledge obtained without an affirmative act of notification.”)

shutterstock_430169764The Federal Circuit recently denied Dow Chemical’s request for rehearing and rehearing en banc of Dow Chem. Co. v. Nova Chems. Corp. decided on August 28, 2015.1 The panel decision found that when multiple methods of measurement for a claimed parameter exist, a patentee must designate which method is being used. For a review of the court’s decision in the Dow Chem case, see our previous article here.

Although the Order gave no explanation for the denial, the opinion contained two concurrences and one dissent.
Chief Judge Prost, in a concurrence with Judges Dyk and Wallace joining, stated:

that clear and convincing evidence is the standard for patent invalidation; that the burden to establish indefiniteness rests with the accused infringer; that findings of fact by juries are entitled to deference; and that knowledge of someone skilled in the art may be pertinent to the indefiniteness question. In particular, we agree that if a skilled person would choose an established method of measurement, that may be sufficient to defeat a claim of indefiniteness, even if that method is not set forth in haec verba in the patent itself.

Judge Moore’s concurrence (with Judges Newman, O’Malley, and Taranto joining and Judge Chen joining in part) stated that the panel’s opinion in the case did not change any case law that has been created by the Supreme Court or the Federal Circuit. Judge Moore highlighted that extrinsic evidence can be relied upon to determine whether a patent’s specification is sufficiently definite, that fact finding made incident to the ultimate legal conclusion of indefiniteness receive deference on appeal, and the burden of proving indefiniteness lies ultimately with the party challenging validity. Judge Moore’s concurrence acknowledged that she “may disagree with and even find troubling” the panel’s resolution of the case, this alone was not a sufficient reason for en banc review.2

Judge O’Malley, in a dissent with whom Judge Reyna joined, theorized that the Dow Chem case should not have been heard by the Federal Circuit in the first instance as there was no jurisdiction under the Federal Rules of Civil Procedure. Judge O’Malley highlighted that the Federal Circuit had already affirmed the district court’s Rule 54(b) (partial final judgment) ruling on validity, infringement, and damages. She also noted that the only judgment appealed to the Federal Circuit in this instance pertained to a calculation of damages for infringement but not the indefiniteness issue itself. Therefore, Judge O’Malley asserted that the issue decided upon was not in the jurisdiction of the court.

1 Dow Chem. Co. v. Nova Chems. Corp., 14-1431, (Fed. Cir. August 28, 2015)(order denying request for panel rehearing and rehearing en banc).
2 Id. (Moore, J., concurring).

shutterstock_90590239In companion cases related to the generic version of enoxaparin marketed by Momenta and Sandoz, the CAFC decided:1

1. Neither Teva’s nor Amphastar’s enoxaparin products infringe under 35 U.S.C. § 271(g)2 because they are not “made by” Momenta’s patented process, and
2. Amphastar’s use of Momenta’s patented method is not protected by the 35 U.S.C. § 271(e)(1) safe harbor.

Momenta brought suit against Teva and Amphastar asserting that (i) Teva’s importation into the U.S. of an enoxaparin product would infringe Momenta’s ‘886 patent under 35 U.S.C. § 271(g), (ii) Amphastar’s manufacture in the U.S. of enoxaparin infringes the ’886 patent under 35 U.S.C. § 271(a), and this infringement does not fall within the safe harbor of 35 U.S.C. § 271(e)(1)3, and (iii) Amphastar’s sale of enoxaparin in the U.S. infringes the ‘886 patent under 35 U.S.C. § 271(g).4

The decision explains that Teva does not manufacture enoxaparin in the U.S., but rather imports the product into the United States.5 Unlike Teva, Amphastar manufactures its enoxaparin product within the United States, and Momenta asserted that Amphastar uses its patented method as an intermediate step in the multi-step process of manufacturing its drug.6

The crux of the decision relating to infringement under Section 271(g) lies in whether Teva’s and Amphastar’s enoxaparin products are “made by” Momenta’s patented “method of analyzing.”

Claim 1 of US ’886 recites (in part) “A method for analyzing an enoxaparin sample for the presence or amount of a non naturally occurring sugar …” In deciding non-infringement under Section 271(g), the Court noted7 that:

1. “All of the asserted claims of the ‘886 patent are directed to ‘[a] method for analyzing an enoxaparin sample.’”
2. “Use of the word ‘analyzing’ indicates practicing the claimed invention requires that the enoxaparin already be ‘made.’”

In considering Momenta’s arguments8, the court concluded that the ordinary meaning of “made” as used in § 271(g) means “manufacture” and extends to the creation or transformation of a product, such as synthesizing, combining components, or giving raw materials new properties.9 However, the court stated that “ma[king]” does not extend to testing to determine whether an already synthesized drug substance possesses existing qualities or properties.10

Citing to its previous decision in Housey11, where the court held that a product was not “made by” a process patented in the United States for purposes of § 271(g) where “the patented process [was] not used in the actual synthesis of the drug product,” the court reiterated that the word “made” in 271(g) equates to “manufacture.”

Momenta’s assertions that the FDA’s GMP regulations define “‘[m]anufacture’ and ‘[p]rocessing’ of drug products as including ‘testing[] and quality control of drug products,’” were rejected by the court emphasizing that such definition applies to 21 C.F.R. § 210.3(b)(12)12 and not § 271(g).

Regarding Amphastar’s infringement under § 271(g), based on the holding that the accused products were not “made by” the patented process, the court did “not reach the question of whether that subsection applies if the patented process is practiced domestically rather than abroad.”13

The court’s decision seems to have relied on the claim term “analyzing” which appears in the preamble. A claim preamble typically will not be seen as limiting unless it “breathes life and meaning into the claim.”14 Further, the preamble can be limiting when elements in the preamble serve as an antecedent basis for limitations in the claim body.15 In this instance, the court did not address the issue whether the claim preamble was a limitation.

The fact that the decision, in part, relied on the basis that the claims are directed to “method for analyzing” invites exploring into whether the court would:

a. come to the same conclusion in a situation involving a claim directed to “a method comprising…[with a step of analyzing a product sample as the last step]” instead of “a method for analyzing, comprising …”?
b. determine that “a method comprising…[with a step of analyzing a product sample as the last step],” falls within the meaning of § 271(g) in circumstances similar to the Momenta v. Teva scenario?

Under both scenarios, whether the court would come to the same conclusion would rest on various factors, including whether the claim also includes traditional manufacturing steps. It is thus possible that the scope of such claim will not be limited to “a method for analyzing…” The court may reason that such claim relates to both a method of manufacturing the product and a method of quality control release testing.

Similarly, under scenario (b), because the scope of a claim directed to “a method comprising…” would not be limited to “a method for analyzing…”, the court may more readily find that this claim falls within the meaning of § 271(g).

Focusing solely on claim interpretation, it would be interesting to see what the court would decide when confronted with a claim that is directed to (i) a method for analyzing X, comprising steps that include manufacturing X with the last step as analyzing X, as compared to a claim directed to (ii) a method, comprising steps that include manufacturing X with the last step as analyzing X.

1 Momenta Pharma., Inc. v. Teva Pharma. USA Inc., Nos. 2014-1274, -1277, -1276, and -1278 (Fed. Cir. Nov. 10, 2015).
2 Section 271(g) provides that “[w]hoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States shall be liable as an infringer, if the importation, offer to sell, sale, or use of the product occurs during the term of such process patent. In an action for infringement of a process patent, no remedy may be granted for infringement on account of the noncommercial use or retail sale of a product unless there is no adequate remedy under this title for infringement on account of the importation or other use, offer to sell, or sale of that product. A product which is made by a patented process will, for purposes of this title, not be considered to be so made after—
(1) it is materially changed by subsequent processes; or
(2) it becomes a trivial and nonessential component of another product.”

3 Momenta Pharma., Inc. at 4.
4 Id. at 5.
5 Id. at 4.
6 Id. at 5.
7 Id. at 11.
8 Momenta argued that (i) “made” means “manufactured,” and (ii) its patented method is “a crucial interim step used directly in the manufacture of [Teva’s] product[s],” asserting that its “method is used [by Teva] to select and separate batches of intermediate drug substance that conform to USP requirements for enoxaparin from batches that do not,” and that selected batches are then “further process[ed].”
9 Id. at 9.
10 Id. at 8-9.
11 Bayer AG v. Housey Pharm., Inc., 340 F.3d 1367, 1373 (Fed. Cir. 2003).
12 Momenta Pharma., Inc. at 11. “§ 210.3 explicitly states that its definitions apply when the terms are used in parts 210, 211, 225, and 226 of Chapter 1 of Title 21 (“Food and Drugs”).
13 Id. at 12.
14 In re Wertheim, 541 F.2d 257 (CCPA 1976).
15 Eaton Corp. v. Rockwell Int’l Corp., 323 F.3d 1332 (Fed. Cir. 2003).

shutterstock_405242659The patent eligibility of diagnostic testing methods remains uncertain after the Federal Circuit refused to rehear Ariosa v. Sequenom.1 In Ariosa, the Federal Circuit panel found that Sequenom’s patent on fetal DNA testing was patent ineligible, despite noting the high commercial value of the technology. The panel concluded that the claims failed Mayo’s2 two step analysis for patent eligibility. The claims recited a method for detecting fetal DNA (cffDNA), which can be used for non-invasive genetic testing of the fetus in a variety of applications.

In denying Sequenom’s petition for re hearing en banc, Judge Lourie, with Judge Moore joining, opined that the patent eligibility test in Mayo is too restrictive, but ultimately concluded that the Federal Circuit panel correctly applied the test. Judge Dyk, in a separate concurrence, explained his reasons for reaching the same conclusion. Judge Newman, on the other hand, would have granted rehearing en banc, explaining that “this incorrect decision is [not] required by Supreme Court precedent.”

Judge Lourie’s concurrence expresses concern that a broad range of claims “of this sort” appear in jeopardy because of Mayo, which held that if certain steps merely recite natural laws, the remaining steps must be sufficiently innovative apart from the natural laws. Judge Lourie stated that the claims at issue “contain the nucleus of patent-eligible subject matter” because they “rely on or operate by, but do not recite, a natural phenomenon or law.” Instead, taking maternal serum, separating it, etc. are all physical steps requiring human intervention.3

Judge Dyk’s concurrence takes a different approach, and focuses on claim breadth. Judge Dyk proposes that claims involving laws of nature should be held patent eligible “if the breadth of the claim is sufficiently limited to a specific application of the new law of nature discovered by the patent applicant and reduced to practice . . . .”4 From Judge Dyk’s point of view, the approach would reach the correct balance of allowing the inventor to preclude others from practicing what he/she invented, but not prevent new applications of the natural law by others.5

Judge Newman’s dissent would have granted the petition for en banc rehearing, arguing that the facts of this case diverge significantly from the facts of Mayo and Myriad. In Mayo, argues Judge Newman, the medicinal products and its metabolites were previously known, whereas in the present case, the claims are directed to a new method. Likewise, in Myriad, the claims were directed to the natural phenomenon itself, and the holding was limited to the patent ineligibility of genes and the information they encode.

1 Ariosa Diagnostics, Inc. v. Sequenom, No., slip op. 2014-1139 (Fed. Cir. Dec. 2, 2015).
2 Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012).
3 Id. at 5
4 Id. at 9
5 Id. at 11

shutterstock_337013831Here in Washington, D.C., the Trans-Pacific Partnership (TPP) is the latest talk of the town. The TPP is a proposed trade agreement among twelve Asia-Pacific countries concerning a variety of economic policy matters, including intellectual property. TPP’s membership includes several of the U.S.’s largest trading partners, e.g., Canada, Japan, and Mexico. The membership countries reached agreement in early October after years of negotiation. Congress is expected to vote on the agreement in 2016. The full text released on November 15, 2015; the whole of Chapter 18 relates to intellectual property. Overall, it appears that the patent-related provisions in the TPP reflect well-established U.S. patent practice. If ratified, the TPP would likely benefit U.S. companies as it would simplify worldwide patent procurement.

Below is a ten-point summary of the TPP’s patent-related provisions:

New use of a known product is patentable. Article 18.37, paragraph 2 provides that in all states who are parties to the agreement, at least one of the following is patentable: new uses of a known product, new method of a known product, or new processes of using a known product.

Methods of medical treatment may be unpatentable. Based on considerations of public policy and morality, Article 18.37, paragraph 3(a) provides that a party may exclude from patent protection “diagnostic, therapeutic and surgical method for the treatment of human or animals.”

Animals and plants may be unpatentable. Similarly, Article 18.37, paragraphs 3(b) and 4 provide that animals and plants may be excluded from patent protection. However, the language of the text provides a specific caveat: microorganisms apparently do not count as animals. The text also specifically provides that that plant-derived inventions are patentable.

Novelty comes with a one-year grace period. While many non-U.S. jurisdictions’ patent law operates on absolute novelty, Article 18.38 provides a one-year grace period following initial disclosure in all member states. The Article’s language actually resembles AIA 35 U.S.C. § 102(b)(1)(A).

Publication of pending patent applications. Under Article 18.44, all parties are required to publish patent applications 18 months after the filing date or, if priority is claimed, from the earliest priority date.

Public access of patent file history. Article 18.45 provides that the prosecution history of published applications and granted patents are open to the public. The prosecution history contains at a minimum: prior search results, communications from applicants, and art citations from applicants and third parties.

Patent term adjustment. Article 18.46, paragraph 4 contains provisions that are similar in spirit to 35 U.S.C. § 154(b) (Adjustment of Patent Term). The Article guarantees a maximum period of application pendency, which is no more than five years from the filing date, or three years from a request of examination, whichever is longer. Additional delay in examination is compensated by adjusting the patent term.

Patent term extension for pharmaceuticals. Analogously, Article 18.48 provides a bare-minimum equivalent of the Hatch-Waxman Act’s “patent term extension” for pharmaceutical products delayed by marketing approval process. However, the language of the text is rather unspecific, and the availability of such patent term extension is subject to a great number of qualifying conditions.

Presumption of validity for patents. Article 18.72, paragraph 3 gives examined and granted patents a presumption of validity in an enforcement proceeding. In a related footnote, it seems that the burden of proof is placed on the party challenging the validity.

Damages for infringement. As provided by Article 18.74, paragraph 3, TPP parties can order payment of damages from an infringer. However, the Article’s provisions appear to be limited to willful infringement (“an infringer who knowingly, or with reasonable grounds to know, engage in infringing activity”). Paragraph 4 mentions the factors that may be considered in calculating damages, include lost profits, and the market price of the infringe goods or services. Paragraph 10 further provides that the losing party will pay the prevailing party’s court expenses and attorney’s fees.

shutterstock_148390613On October 16, 2015, the Federal Circuit denied petitions for panel rehearing and rehearing en banc in Amgen Inc. v. Sandoz Inc.1 The petitions arose from the Federal Circuit’s July 21, 2015, decision2 interpreting key provisions of the BPCIA.

The BPCIA, or Biosimilars Act was designed to create an abbreviated licensure pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with a biological product that has already been approved by the FDA. Popularly referred to as the “patent dance,” 42 U.S.C. § 262(l) provides a procedure for exchanging patent information between the biosimilar applicant and the reference product.

A summarized in a previous post, in interpreting two provisions (42 U.S.C. § 262(l)(2)(A)3 and 42 U.S.C. § 262(l)(8)(A)4) of the BPCIA “patent dance” the panel (Judges Lourie, Newman, and Chen) held that:

A. because the BPCIA, in other provisions (42 U.S.C. § 262(l)(9)(C) and 35 U.S.C. § 271(e)(2)(C)(ii)), provides the consequence for failing to disclose the required information, the “shall” provision in paragraph (l)(2)(A) does not mean “must,” and hence a subsection (k) applicant does “not violate” the BPCIA by withholding the required information.5

B. under paragraph (l)(8)(A), a subsection (k) applicant may only give effective notice of commercial marketing after the FDA has licensed its product; and that when a subsection (k) applicant completely fails to provide its aBLA and the required manufacturing information to the RPS by the statutory deadline, the requirement of paragraph (l)(8)(A) is mandatory.6

Thus, the Federal Circuit concluded that:
1. Sandoz took a path expressly contemplated by paragraph (l)(2)(A), and hence it did not violate the BPCIA by not disclosing its aBLA and the manufacturing information by the statutory deadline;7 and

2. Based on paragraph (l)(8)(A), Sandoz may not market its biosimilar product Zarxio until 180 days after it provided a post-approval notice of commercial marketing, because as a subsection (k) applicant, Sandoz, failed to provide its aBLA and the required manufacturing information to Amgen by the statutory deadline.8

However, the panel’s decision was divided, with Judges Lourie and Chen holding that the patent dance provisions were optional, with Judge Newman dissenting; and Judges Lourie and Newman holding that notice of commercial marketing cannot be given until product approval, with Judge Chen dissenting.

Following the court’s July 21, 2015 decision, both Amgen and Sandoz filed petitions for en banc review. The petitions essentially highlighted the arguments Amgen and Sandoz made in their briefing on Appeal. Amgen contended that the “shall” language in paragraph (l)(2)(A) is mandatory, and that the other provisions highlighted by the Court do not provide remedies for failure to providing the required information. Sandoz argued that word “licensed” in paragraph (l)(8)(A) does not refer to the product at the time of notice, rather to the product that will be marketed, and that the panel erred by holding that the notice was mandatory and enforceable.

Given the amicus briefs filed by the Biotechnology Industry Organization, Abbvie Inc. and Janssen Biotech, Inc., urging that the BPCIA patent dispute resolution procedures should be mandatory coupled with the Federal Circuit’s clearly divided decision, the denial to grant en banc review may not have been anticipated.

Although neither party sought a stay of the mandate issued by the Federal Circuit on October 23, 2015, it wouldn’t be surprising if one or both parties petition the Supreme Court for certiorari (due January 14, 2016).

Even if neither Amgen nor Sandoz decide to file for certiori, the Supreme Court will most likely have to tackle the “patent dance” provisions in the future, particularly in view of the complaint9 filed by Amgen against Apotex, which raises issues similar to those addressed in Amgen v. Sandoz. Sooner or later, it appears that the Supreme Court may step in to interpret the boundaries of the “patent dance” floor.

1 Amgen, Inc. v. Sandoz, Inc., slip op. no. 2015-1499 (Fed. Cir. Oct. 16, 2015).
2 Amgen, Inc. v. Sandoz, Inc., 794 F.3d 1347 (Fed. Cir. 2015). In characterizing the biosimilars statute, the panel decision quoted Winston Churchill’s description of Russia as “a riddle wrapped in a mystery inside an enigma.”
3 42 U.S.C. § 262 (l)(2)(A) of provides that “[n]ot later than 20 days after the Secretary notifies the subsection (k) applicant that the application has been accepted for review, the subsection (k) applicant shall provide to the reference product sponsor a copy of the application submitted to the Secretary under subsection (k), and such other information that describes the process or processes used to manufacture the biological product that is the subject of such application . . .”
4 42 U.S.C. § 262 (l)(8)(A) provides that “[t]he subsection (k) applicant shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).”
5 Amgen, 794 F.3d 1347 at 1349-1361.
6 Id. at 1354-1368.
7 <span id=”seven”Id. at 1361.
8 Id. at 1368
9 Amgen v. Apotex, Case No. 15-cv-61631-JIC (S.D. FL. Aug. 6, 2015).

shutterstock_546475333Section 27 of the America Invents Act, passed on September 16, 2011, requires the USPTO to conduct a study on genetic testing and provide Congress with recommendations for providing confirmatory genetic diagnostic testing where those tests or the information needed to conduct those tests are covered by patents and exclusive licenses.1 Confirmatory genetic diagnostic testing is “the performance of a genetic diagnostic test, by a genetic diagnostic test provider, on an individual solely for the purpose of providing the individual with an independent confirmation of results obtained from another test provider’s prior performance of the test on the individual.”2

Congress directed the USPTO to study four areas: (1) the impact that the current lack of independent second opinion testing has had on the ability to provide the highest level of medical care to patients and recipients of genetic diagnostic testing, and on inhibiting innovation to existing testing and diagnoses; (2) the effect that providing independent second opinion genetic diagnostic testing would have on the existing patent and license holders of an exclusive genetic test; (3) the impact that current exclusive licensing and patents on genetic testing activity has on the practice of medicine, including but not limited to: the interpretation of testing results and performance of testing procedures; and (4) the role that cost and insurance coverage have on access to and provision of genetic diagnostic tests.3

This September, four years after this initial mandate, the USPTO released a report on its findings.4 In its report, the USPTO evaluated the availability of confirmatory testing with regard to the Supreme Court’s recent rulings in Mayo and Myriad, which effectively changed the legal landscape of patents covering gene-based diagnostics.5 Due to this new legal backdrop, the USPTO noted that it is extremely unlikely that patents will be able to impose significant barriers to the availability of genetic testing, let alone confirmatory testing.6

The USPTO came to four main conclusions, first revealing that the evidence they had was not only sparse, but also at times contradictory.7 First, demand for confirmatory genetic testing is very small, and for some tests the need can already be met by several sources.8 Second, the USPTO found that providing confirmatory genetic testing would not have a significant negative impact on the existing patent and license holders of an exclusive genetic test.9 Because demand for confirmatory testing is so small, lost profits associated with it would be comparatively small. Further, where an exclusive licensee already has the right to exclude others from conducting the primary test, there will be little economic harm done by an independent entity doing a confirmatory test, provided that independent entity does not attempt to unlawfully enter the market for primary testing. Third, due to the findings in Myriad10 and Mayo,11 the impact exclusive licensing and patents has on genetic testing activity will likely become moot. The underlying correlations between gene mutations and their medical effects are now likely going to be unpatentable subject-matter, making genetic diagnostic tests using those methods and materials non-infringing.12 Finally, the USPTO found that the availability of insurance does play a role in the decision to have confirmatory testing done, especially when the cost of the test is substantial.13

The USPTO concluded its report by stating that due to the findings of Myriad and Mayo, Congress does not need to take any immediate action with respect to confirmatory genetic diagnostic testing.14 Multiple providers are now able to enter the business of providing genetic testing without the potential of infringement, meaning patent and license exclusivity will not impede the availability of and access to these tests. However, this public availability could also lead large commercial entities to stop developing and marketing tests due to the risk of not being able to recoup their investments.15 In closing, the USPTO left Congress with three recommendations for the future: (1) continue to monitor confirmatory testing for barriers to access; (2) create a mechanism to facilitate sharing test results across providers to improve testing and analytic quality; and (3) consider the importance of cost and insurance on any policy discussions of confirmatory genetic diagnostic testing.16

For the biotech industry, this report merely confirms and reinforces the Supreme Court’s rulings in Mayo and Myriad. While the USPTO was given an opportunity to inform Congress on the appropriate policy decisions to help the biotech industry in the aftermath of this new legal landscape that are considered by many to be an emotional response to a nonexistent problem, it instead chose a more cautious route. Mayo and Myriad and the USPTO’s conclusions in this report could lead many entities, large and small, to forgo research and development that in the past has lead to major medical breakthroughs and instead find other ways of preserving their exclusivity and funding their investments.

1 Leahy-Smith America Invents Act, Pub. L. No, 112-29, §27, 125 Stat. 284 (2011).
2 Id.
3 Id.
4 USPTO, USPTO Report on Confirmatory Genetic Diagnostic Testing, (Sept. 28, 2015) at 8-9.
5 Id. at 5.
6 Id. at 13.
7 <span id=”seven”Id. at 14.
8 Id. at 15.
9 Id. at 21.
10 Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013)
11 Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012).
12 Id. at 24.
13 Id. at 26.
14 Id. at 32.
15 Id. at 32.
16 Id. at 29-30.

shutterstock_420413953The Federal Circuit in Shukh v. Seagate held that “concrete and particularized reputational injury can give rise to Article III standing” under 35 U.S.C. § 256.1 Standing under § 256 exists “when a plaintiff has either an expectation of ownership of a patent or a concrete financial interest in the patent.”2 In Shukh, the Federal Circuit expanded the scope of § 256 standing stating “a trier of fact could conclude that Dr. Shukh’s omission from the disputed patents had a concrete impact on his reputation in his field,”3 and accordingly vacated the district court’s grant of summary judgment and remanded for further proceedings.

On appeal, Shukh challenged the district court’s decision that he lacked standing to pursue his § 256 claim on two grounds.

First, Shukh argued that the Federal Circuit panel should overrule its prior holding in Filmtec Corp. v. Allied-Signal.4 The court reasoned under Filmtec, Dr. Shukh’s assignment in the Employment Agreement of his ownership and financial interests in his inventions conveyed legal title in those inventions to Seagate.5 Because of this conveyance, the district court found that Dr. Shukh has no ownership interest or financial interest in the patents that would give him standing to pursue his § 256 claim. The court refused to recognize Shukh’s reasoning, as it cannot overrule the Filmtec holding without en ban action.6

Secondly, Shukh argued that the district court erred in granting summary judgment to Seagate on his § 256 claim for lack of standing. He argued that a trier of fact could conclude that his reputation was damaged because he was not recognized as the inventor of the patents.

The Federal Circuit had previously declined to decide whether reputational injury, standing alone, may satisfy the constitutional standing requirements for a § 256 claim.7 However, the court in the instant case held that concrete and particularized reputational injury can give rise to Article III standing. The court noted, “being considered an inventor of important subject matter is a mark of success in one’s field, comparable to being an author of an important scientific paper.”8 The court reasoned that “[p]ecuniary consequences may well flow from being designated as an inventor.”9 The Federal Circuit determined that “there is a genuine dispute of material fact as to whether Dr. Shukh’s negative reputation for seeking credit for his inventions is traceable to Seagate’s omission of Dr. Shukh as an inventor from the disputed patents.”10 Accordingly, the Federal Circuit vacated and remanded the case to the district court with respect to the court’s ruling on reputational injury as a basis for § 256 standing.

While it remains critical for companies to include the appropriate “does hereby assign” language in their relevant contracts (e.g., employment contracts or consulting contracts) as elucidated in Stanford v. Roche,11 based on the Federal Circuits reasoning in Shukh v. Seagate, it appears that such language may not completely shield a company from a suit for omitting a potential inventor.

1 Shukh v. Seagate Tech., LLC, 2015 U.S. App. LEXIS 17311, *8 (Fed. Cir. Oct. 2, 2015).
2 Id. at *29 (D. Minn. Mar. 25, 2013).
3 Alexander Shukh v, Seagate, 2015 U.S. App. LEXIS 17311 at *12-13.
4 Filmtec Corp. v. Allied-Signal Inc., 939 F.2d 1568 (Fed. Cir. 1991).
5 Shukh v. Seagate Tech., LLC, 2011 U.S. Dist. LEXIS 33924, *15 (D. Minn. Mar. 30, 2011).
6 Shukh, 2015 U.S. App. LEXIS 17311, at *7./span>
7 Chou v. Univ. of Chi., 254 F.3d 1347, 1359 (Fed. Cir. 2001) (declining to consider whether reputational injury could satisfy Article III standing requirements because the claimed inventor had alleged a concrete financial interest in the patent).
8 Id. at 1359.
9 Id.
10 Shukh, 2015 U.S. App. LEXIS 17311 at *12-13.
11 See Bd. of Trs. v. Roche Molecular Sys., 131 S. Ct. 2188, 2199-2205 (2011)./span>