Last week, the U.S. Court of Appeals for the Federal Circuit ruled that a District Court judge committed a “clear error” when he concluded that Allergan’s patent on Acular was valid because it wasn’t an obvious variation of earlier known compounds. The Fed Circuit, saying there were necessary factors that weren’t considered, ordered him to review the issue.

The ruling gives Canadian generic-drug maker Apotex Inc. a second chance to seek the invalidation of the patent. Acular (ketorolac tromethamine) is Allergan Inc.’s treatment for eye inflammations, first approved by the FDA in 1992 to treat allergies, photophobia, post-surgical pain and post-surgical inflammation. Allergan contends that the patent is valid until 2009.

Apotex, Inc., Apotex Corp. and Novex Pharma (collectively “Apotex”) appealed from the final judgment of the United States District Court for the Northern District of California, which, after a bench trial, held U.S. Patent No. 5,110,493 (the “‘493 patent”) owned by Syntex LLC not invalid, enforceable, and infringed by Apotex’s Abbreviated New Drug Application (“ANDA”).

Allergan, Inc., Syntex’s distributor, has exclusive rights to manufacture the commercial embodiment of the ‘493 patent. The Federal Circuit found that the district court committed legal error in establishing certain factual predicates to its non-obviousness determination and reversed the judgment of validity and remanded for further consideration.

The ‘493 patent, entitled “Ophthalmic NSAID Formulations Containing a Quaternary Ammonium Preservative and a Nonionic Surfactant,” claims a formulation for sterile, preserved eye drops to treat eye inflammation such as that caused by conjunctivitis or eye surgery. The ‘493 patent teaches combining a nonsteroidal anti-inflammatory drug (“NSAID”) such as ketoralac tromethamine (“KT”) and a quaternary ammonium preservative such as benzalkonium chloride (“BAC”) with a surfactant such as octoxynol 40.

The NSAID is the active ingredient for reducing eye inflammation. The quaternary ammonium preservative, in turn, kills any bacteria introduced into the eye during administration of the NSAID. However, quaternary ammonium preservatives, such as BAC, do not always mix well with NSAIDs. Neither ingredient is water soluble plus the two active ingredients may react with each other to form complexes when mixed. These complexes will eventually cause the mixture to look cloudy or lose its antibacterial properties.

On appeal, the critical issue was whether the use of the surfactant octoxynol 40 in the claimed formulations is an obvious alteration of similar formulations taught in the prior art. At trial, Apotex argued that based on the prior art, a person of ordinary skill in the art would expect to succeed in stabilizing a formulation containing an NSAID and BAC with a nonionic surfactant. Contending that the formulation claimed in the ‘493 patent is just such a formulation, Apotex argued that it is legally obvious.

The Federal Circuit found clear error based upon the following observations:

First, the court clearly erred in finding that “[n]o pharmaceutical formulation other than ACULAR has ever included Octoxynol 40.” Second, the court clearly erred in discussing the McCutcheon reference and in finding that each of the Waterbury, Gilbert, and Han references teach away from the use of octoxynol 40 in the claimed formulations. Further, the court was under the impression that, in the absence of evidence that those references teach away from combination, there was a failure of proof that there would have been any motivation by one of ordinary skill in the art to use octoxynol 40 in the claimed formulations. In so concluding, the district court failed to examine the expert testimony of Dr. Mitra on the question of whether one of ordinary skill in the art would have deemed the invention obvious, and as a subset of the overall obviousness question, whether octoxynol 40 produced the unexpected results asserted by Syntex. In addition, we think the district court failed to appreciate that the prosecution history of the relevant patents, while not establishing inequitable conduct, casts some doubt on the final examiner’s conclusion that the claimed surfactant produces unexpected results sufficient to overcome a prima facie case of obviousness. Finally, we feel the district court should reconsider the significance of the commercial success of the patented formulation in light of our recent decision in Merck & Co. v. Teva Pharmaceuticals. USA, Inc., 395 F.3d 1364 (Fed. Cir. 2005).

The Federal Circuit upheld District Court’s interpretation of terms in the patent, but declined to address whether Apotex’s proposed generic version would infringe the patent until the validity issue is resolved.

Allergan’s eye-care business, which includes Acular and Restasis drops for chronic dry eyes, accounted for $999.5 million, or 57%, of Allergan’s sales last year. The Federal Trade Commission had been investigating whether Allergan and Syntex improperly thwarted generic competition by misusing the patent rights. The agency dropped the probe based on the finding of validity by the trial judge. Since Apotex was the first to challenge the Acular patent, it will have six months of exclusive rights to sell the only generic brand on the market.

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