In Pharmastem Therapeutics v. ViaCell (No. 05-1490/1551) , the U.S. Court of Appeals for the Federal Circuit upheld an earlier decision by the U.S. District Court for the District of Delaware that ViaCell, through its marketing of ViaCord does not infringe PharmaStem’s U.S. Patent No. 5,192,553 and U.S. Patent No. 5,004,681, which relate to certain aspects of collection, cryopreservation, storage and use of hematopoietic stem cells from umbilical cord blood. The court went even further in finding the ‘553 and the ‘681 patents invalid based on prior art.

The district court judge, in overturning a jury verdict against ViaCell and the other defendants, found that PharmaStem had failed to prove infringement. The district court focused on the requirement that the recited compositions contain stem cells “in an amount sufficient to effect hematopoietic reconstitution of a human adult.”

The court felt that PharmaStem did not attempt to prove by testing or by reference to data collected by the defendants that at least some of the cord blood samples preserved by the defendants satisfied that requirement. Instead, PharmaStem used representations made by the defendants in their marketing materials.

As to infringement of the ’553 patent, the district court concluded that PharmaStem had failed to prove that the defendants were guilty of contributory infringement despite the fact that the jury found (1) that cryopreserved cord blood has no substantial noninfringing uses; (2) that the defendants and transplant physicians were acting in concert or working together to complete the process of infringement of the asserted claims of the ’553 patent; and (3) that the defendants contributorily infringed “by selling or offering to sell cryopreserved cord blood that was actually used by a third party in the direct infringement” of the asserted claims.

The jury found the defendants liable for “acting in concert or working together” with the transplant physicians, or contributing to the infringement of the ‘553 patent but the trial court judge decided to go against the juries findings and held:

Although the defendants charge enrollment, processing, and banking fees with respect to their storage services, they do not sell or offer to sell the cord blood units. Indeed, the record evidence on this issue is clear that the defendants sell a service, not cord blood units.

Disregarding the jury’s findings, the court ruled that liability for contributory infringement “is clearly dependent upon the accused infringer’s selling or offering to sell a component of the patented process, here cord blood units,” the court held that the jury’s verdict could not stand.

With respect to infringement of the ’681 patent, the Federal Circuit agreed with the lower decision finding that none of the statements represented that the stem cells in any of the cryopreserved cord blood samples were sufficient in number to effect hematopoietic reconstitution of an adult:

Instead, the defendants’ statements emphasized the potential therapeutic usefulness of the cord blood in general and referred to future uses of stored blood in adult transplants only as possibilities. (emphasis added)

The contributory infringement section of the Patent Act, 35 U.S.C. § 271(c) provides:

“Whoever offers to sell or sells . . . a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent” shall be liable as a contributory infringer.

The district court construed the contributory infringement statute to require a sale or an offer of sale of a product because liability under section 271(c) “is clearly dependent upon the accused infringer’s selling or offering to sell a component of the patented process, here cord blood units.” The court held that the statute is not satisfied by the provision of a service for compensation.

Huh?

PharmaStem had argued that the jury could properly characterize the transaction as a “sale” but the Federal Circuit, through some sort of linguistic jujitsu, is able to turn this around and say that there was not a sale since “title” of the cells remained with the patients:

While cord blood is certainly a product, the transaction between the defendants and their clients is plainly not the sale of “a material or apparatus for use in practicing a patented process,” as is required by section 271(c) with respect to method patents. The evidence at trial showed that the cord blood remained the property of the families throughout the period in which the defendants stored it.

But section 271(c) is not limited to the sale of a product and extends to the sale of a service.

Au contraire, says the Federal Circuit:

Although that language describes in various different ways the items that may be sold for purposes of creating liability for contributory infringement, all of the descriptions refer to the sale of a product of some sort; none of them refer to the provision of a service.

The court said thusly:

[T]here was no evidence that any of the defendants made a sale of either products or services to the transplanters. To the contrary, the evidence showed that the service the defendants provided was a service to the donor families, for which the families paid a fee, and that there was no sale of any sort by the defendants to the transplanters or any fee paid by the transplanters to the defendants. The defendants simply transferred the cord blood units to designated transplanters upon direction from the families. Such a transaction does not constitute a “sale” to a transplanter under any definition of the term “sale.”

Basically, the court allows all of the participants to escape liability by playing a “hide the sale” shell game.

The court went even further in holding the patents invalid for obviousness. Using what could look like hindsight, the court found the patented invention obvious even where experts in the field could not come up with the same invention and even though the USPTO allowed the ’681 and ’553 patents, and the ’681 patent following reexamination, over some of the same references.

The court felt that the patents’ own specification told a different story. Citing a number of references, the inventors stated the following:

A human hematopoietic colony-forming cell with the ability to generate progenitors for secondary colonies has been identified in human umbilical cord blood. In addition, hematopoietic stem cells have been demonstrated in human umbilical cord blood, by colony formation, to occur at a much higher level than that found in the adult.

Admissions in the specification regarding the prior art are binding on the patentee for purposes of a later inquiry into obviousness.


Judge Newman, dissenting, did not mince words: 

I respectfully dissent. After a three week trial the jury sustained the validity of these patents, the district court in a thorough opinion upheld the verdicts of validity, and validity was confirmed in three reexaminations by the Patent and Trademark Office. Today my colleagues on this panel hold that the inventions in the ‘681 patent and its continuation-in-part the ‘553 patent are obvious to them, and not infringed.

The panel majority scours the prior art for clues that could fit the eventual achievement, and then rules that the achievement was obvious, no matter that it eluded the others whose work is now compiled by this court so as to invalidate these patents.

On the ‘681 Patent:

The theory that each stored sample had to be separately analyzed by PharmaStem to show infringement was not presented as law to the jury. This was a new standard for infringement, for the jury was not told that the defendants’ analyses of stem cell content could not provide evidence of stem cell content.

When there is substantial evidence in support of the jury’s verdict, it is irrelevant whether the appellate court would have preferred different or additional evidence.

On the ‘553 Patent:

The jury found the defendants liable for “acting in concert or working together” with the transplant physicians, or contributing to the infringement of the ‘553 patent.

My colleagues grant JMOL on the ground that since the defendants are providing a service, not selling a product, they can not meet the “sale” requirement of contributory infringement, 35 U.S.C. ‘271(c). PharmaStem points out that a reasonable jury could have found that the defendants sell (rent) their blood-storage facilities to the donor’s family, and that the defendants either contribute to or act in concert with the transplanting surgeon to practice the claimed method.

The principles of patent infringement are not negated when the steps of a method claim are performed by more than one entity.

It is irrelevant whether any steps of a method claim can be viewed as a “service;” infringement requires only that the steps be performed. As discussed in Dawson Chemical Co. v. Rohm and Haas Co., 448 U.S. 176, 188 (1980), the purpose of the contributory infringement statute is “to protect patent rights from subversion by those who, without directly infringing the patent themselves, engage in acts designed to facilitate infringement by others,” a criterion that the jury could have found was met by the facts and relationships of this case.

 

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