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Thanks so much!

The sun-deprived can spend an hour “ljusing” (literally “brightening” in English) at the café. Breakfast and an hour of light treatment will run you 160 Swedish Krona or about $24 U.S. I can't make it to Sweden this year (although I wish I could pick up a new XC70) so I got the funky, blue light emitting diode (LED) golite to counteract the effects of spending all my time in a north-facing office. Even Eastman Kodak is getting into the act.

Not sure if it works. I still want to through my co-workers out the window. Maybe I'll try stronger coffee.

Samuels' Infamy or Praise review provides an overview of law blawgs within the concept of the mountain representing Purgatory, the place wherein those souls neither condemned to Hell nor raised to Heaven may be purified of their sins so that they might enter Heaven. This is known in my firm as "Of Counsel."

Samuels shows the terraces of the mountain of Purgatory from Pride through Lust. We especially enjoyed Robert Ambrogi's post on a handy how-to video that's not to be missed.

If you don't know, the Invention Secrecy Act of 1951 requires the government to impose secrecy orders on certain patent applications that contain sensitive information, thereby restricting disclosure of the invention and withholding the grant of a patent. This requirement can be imposed even when the application is wholly created and owned by a private individual or company without government sponsorship or support.

There are several types of secrecy orders which range in severity from simple prohibitions on export (but allowing other disclosure for legitimate business purposes) up to classification, requiring secure storage of the application and prohibition of all disclosure. A secrecy order withholds the grant of a patent, orders that the invention be kept in secrecy and restricts filing of foreign patent applications.

It seemed to me that the number of secrecy orders has been on the rise. It turns out, I'm not the only one that thinks the government is keeping more secrets since 9/11. At the end of fiscal year 2006, there were 4942 secrecy orders in effect, some of which have been in effect since the 1930s. Even the NSA had nine of its patent applications blocked in the fiscal year to March 2005 against five in 2004, and none in each of the three years up to 2003.

This week, I received a note from a reader about information on secrecy orders posted by the Federation of American Scientists (FAS), a group formed in 1945 by atomic scientists from the Manhattan Project who felt that scientists, engineers and other innovators had an ethical obligation to bring their knowledge and experience to bear on critical national decisions, especially pertaining to the technology they unleashed, i.e., the Atomic Bomb. Endorsed by 67 Nobel Laureates in chemistry, economics, medicine and physics, FAS addresses a broad spectrum of issues in carrying out its mission to promote humanitarian uses of science and technology.

Secrecy orders provide a security procedure to prevent technical data contained in a patent application from being disclosed in a manner that would be detrimental to the national security. Secrecy orders are imposed by the PTO upon specific recommendation by defense agencies, including the Army, Navy, Air Force, National Security Agency, Department of Energy and National Aeronautics and Space Administration.

The PTO conducts an initial security screening of all patent applications. Government-owned applications are not reviewed by the PTO for technical content. It is the responsibility of the cognizant defense agencies to review their own applications and recommend a secrecy order to the PTO where appropriate.

Applications in which there is no apparent government property interest are made available by the PTO to defense agencies for their inspection when, in the opinion of the Commissioner of Patents, disclosure might be detrimental to the national security. If, upon inspection, a defense agency determines that disclosure "would be detrimental" to the national security, it may recommend that the Commissioner of Patents place a secrecy order on the application.

When the Secrecy Order issues, the law specifies that the subject matter or any material information relevant to the application, including unpublished details of the invention, shall not be published or disclosed to any person not aware of the invention prior to the date of the Order, including any employee of the principals except as permitted by the Secrecy Order. The law also requires that all information material to the subject matter of the application be kept in confidence, unless written permission to disclose is first obtained from the Commissioner of Patents and Trademarks except as provided by the Secrecy Order. Therefore, the subject matter under Secrecy Order is to be safeguarded under adequate protection to prevent access by unauthorized persons.

I suppose we should not get too worked up about this given the lengthy history. Concerns about invention secrecy and national security date back to the First World War. In an effort to address the government’s concerns, Congress passed the act of October 6, 1917. The Invention Secrecy Act of 1951 created 35 U.S.C. sections 181 through 188, entitled Secrecy of Certain Inventions and Filing Application in Foreign Countries. Section 181 deals with the conditions set forth by a secrecy order, namely that the order shall last one year, or in the event of war, for the duration of the hostilities plus one year, on in the time of a national emergency (as declared by the president), for the duration of the emergency plus six months, all orders being renewable.

Section 181 also sets out that the applicant may appeal the issuance of a secrecy order to the Secretary of Commerce. Section 182 provides that in the event of an unauthorized disclosure of the contents of a secret patent, the inventor forfeits all rights to a patent to which he might have otherwise been entitled. Section 183 outlines the conditions for an inventor’s right to compensation, which is valid for six years from the date of issue on the patent, and includes compensation for government use, and for damages caused by the secrecy order. Section 184 states that any applicant must not file in a foreign country for six months after filing in the United States, to allow proper review of the invention for its relevance to national security. Section 185 applies the same penalties for foreign filing as for an unauthorized disclosure (as outlined in section 182). Section 186 describes the penalties for any violation of the secrecy order, which are up to $10,000 or two years in prison, or both. Section 187 exempts officers and agents of the United States from these prohibitions. Section 188 lists the persons who may wield secrecy orders, which include the Atomic Energy Commission, Secretary of Defense, Secretary of Commerce, and the heads of any government agencies the President designates.

More on secrecy orders on patents here.

Overview of all types of secrecy orders here.

35 U.S.C. §181. Secrecy of certain inventions and withholding of patent.

Robert wanted to know:

What is the one law-related blog you feel you must read as regularly as possible? No fair naming your own. From your responses, I hope to find guidance in deciding which blogs should be on my own must-read list.

To be fair, I must confess that I got busy with a talk I was giving and forgot to vote. What's worse, the site I was going to vote for was none other than: Patently-O! Sorry 'bout that Dennis.

See the further drama here.

His services for the company were intimately intertwined with his government duties. Sunderland led efforts for a material transfer agreement on behalf of the NIH, whereby his staff would collect and then pass the spinal-tap samples to Pfizer. As part of the research, Sunderland helped provide Pfizer with hundreds of government-owned tissue samples for analysis. About the same time, in early 1998, "Sunderland initiated negotiations with Pfizer to be paid as a consultant for his work on the same project," according to the criminal filing.

Sunderland's not alone. Congressional investigators found that 44 researchers had off-the-books relationships with drug and biotech companies. Conflicts of interest in the pharmaceuticals area may in the news quite a bit lately but they're not new. I don't think that it indicates any new trend or that the world going to hell in a handbasket. I think if you want to know the root of the issue, you need look no further than the bottom line for drug sales. The global pharmaceutical market is forecast to grow to $842 billion in 2010. Just the top 16 new blockbuster drugs in 2005 generated combined sales of $18.1 billion. These eye-popping numbers can put a lot pressure on the marketplace - some innocent, some not so innocent.

Sunderland, 55, could get up to a year in prison and a $100,000 fine.

I am preparing a petition to revive a US application that has gone abandoned, we think unintentionally. There are a number of case specific issues, which are not expressly provided for in MPEP 711.03. In particular, there appears to have been a mis-communication between the agent of record, at the time the application went abandoned, and the Applicant about the importance of a particular limitation in a claim element. The application went abandoned in favor of a subsequently filed CIP to add some limiting language to the specification and claims; this as a result of the mis-communication (and poor advice from the then agent of record). The CIP issued as a patent, but it now turns out that the licensee in charge of manufacturing the product believes that the product covered by the now abandoned application should have been the one to enter the marketplace and not the one covered in the issued patent. Finally, and probably a lost cause in light of MPEP 711.03, the application before it went abandoned went through three rounds of prosecution in which it received numerous 103(a) rejections, all essentially based on the same piece of art. The arguments which were put forth by the agent to address the rejections were inappropriate for this type of rejection, and thus led the Applicant to chose the abandonment route rather than continue prosecution.

Have any of your blog readers encountered such a problem and if so, were they successful in petitioning the Commissioner to revive the application?

The broadening reissue application allows you to go back to the USPTO once the patent is issued whenever there has been an error made and the inventor did not get all of the inventions (or the breadth of the invention) that he or she was entitled to. There are some requirements. First, the error must have been made without any deceptive intent. Second, the broadening reissue application, however, must be filed within two years after the patent issues. After that, it is too late. See 35 U.S.C. §251.

A broadened reissue claim is a claim which enlarges the scope of the claims of the patent, i.e., a claim which is greater in scope than each and every claim of the original patent. If a disclaimer is filed in the patent prior to the filing of a reissue application, the disclaimed claims are not part of the "original patent" under 251. A claim of a reissue application enlarges the scope of the claims of the patent if it is broader in at least one respect, even though it may be narrower in other respects.

Anyone have other suggestions here?

After Impax sued Aventis in District Court for a declaratory judgment that Impax did not infringe, induce infringement of, or contribute to the infringement of U.S. Pat. No. 5,527,814 by filing an Abbreviated New Drug Application for the sale of riluzole, the district court found that Impax failed to prove the patent as invalid. Impax Laboratories v. Aventis Pharmaceuticals (05-1313).

Riluzole, sold under the name Rilutek, is the chemical compound 6-trifluoromethoxy-2-benzothiazolamine used for the treatment of patients with amyotrophic lateral sclerosis (“ALS”). ALS, commonly referred to as Lou Gehrig’s disease, is a disease of the central nervous system involving the progressive degeneration of the nerves that carry impulses to muscles.

Under 35 U.S.C. § 271(e)(2), it is an act of infringement to submit an ANDA under 21 U.S.C. § 355(j) for a drug claimed in a patent before the patent’s expiration. Therefore, Impax needs to knock out the ‘814 patent.

So, Impax asserted that the claims of the ’814 patent were invalid over the prior art and invalid by reason of incorrect inventorship. Impax later amended its complaint to add allegations of inequitable conduct.

In the district court Impax claimed that claims 1-5 of the ’814 patent were anticipated by the ’940 patent. The ’940 patent, which is owned by Aventis, is directed to a class of compounds disclosed in formula I:

The ’940 patent includes many different compounds, but it exempts 6-trifluoromethoxy-2-benzothiazolamine. That is, 6-trifluoromethoxy-2-benzothiazolamine could fall within the literal scope of formula I but is explicitly exempted from formula I. The ’940 patent states that 6-trifluoromethoxy-2-benzothiazolamine is not new, and thus does not form part of the invention. The ’940 patent goes on to state that the compounds of formula I are useful in treating medical conditions associated with the effects of glutamate such as ALS.

The ’940 patent claims priority from the ’624 application, which has a disclosure similar to that of the ’940 patent. However, the ’624 application does not exempt 6-trifluoromethoxy-2-benzothiazolamine from the family of formula I compounds as a claimed compound.

Impax argued that every limitation of claims 1-5 of the ’814 patent was disclosed by the ’940 patent in describing a class of compounds generally encompassed by formula I, including riluzole, and that the ’940 patent taught that riluzole is useful in treating ALS and also taught effective administration.

Aventis argued that the ’940 patent excluded riluzole from the compounds and that even if the ’940 patent included riluzole, it did not anticipate the ’814 patent because it failed to disclose the invention in the ’814 patent and was not enabling because it did not provide specific instruction for using riluzole and actually taught away from riluzole.

The district court concluded that the ’814 patent was not anticipated because “formula I entails such a large number of compounds . . . [that] one of ordinary skill in the art would not have recognized that riluzole was effective in treating ALS without additional detail or guidance that is not found in the disclosure of the ’940 patent.” Therefore, the court reasoned, formula I was not enabling.

In order to be anticipating, a prior art reference must be enabling so that the claimed subject matter may be made or used by one skilled in the art. Prior art is not enabling so as to be anticipating if it does not enable a person of ordinary skill in the art to carry out the invention.

The CAFC held that:

The enablement requirement for prior art to anticipate under section 102 does not require utility, unlike the enablement requirement for patents under section 112. Rasmusson v. SmithKline Beecham Corp., 413 F.3d 1318, 1325-26 (Fed. Cir. 2005) … Significantly, we have stated that ‘anticipation does not require actual performance of suggestions in a disclosure. Rather, anticipation only requires that those suggestions be enabled to one of skill in the art.’” (citations omitted).

“Whether a prior art reference is enabling is a question of law based upon underlying factual findings.” Minn. Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1301 (Fed. Cir. 2002). In Amgen, we stated that, when, as here, an accused infringer asserts that either claimed or unclaimed material in a prior art patent anticipates patent claims asserted against it, the infringer is entitled to a presumption that the allegedly anticipating material is enabled.

The district court found that the ’940 patent did not anticipate the ’814 patent because the disclosure of the ’940 patent was not enabling at least in part because there was no evidence that it would be “effective.” Id. Under Rasmusson, the effectiveness of the prior art is not relevant. Id. Rather, the proper issue is whether the ’940 patent is enabling in the sense that it describes the claimed invention sufficiently to enable a person of ordinary skill in the art to carry out the invention. The CAFC then remanded to allow the district court to make a factual determinations and then reach its own legal conclusion as to whether the ’940 patent is enabled.

The CAFC thought differently, however, of the ‘624 patent holding:

As found by the district court, riluzole is just one of hundreds of compounds included in formula I. When a reference discloses a class of compounds, i.e., a genus, a person of ordinary skill in the art should be able to “at once envisage each member of th[e] . . . class” for the individual compounds, i.e., species, to be enabled. In re Petering, 301 F.2d 676, 681 (C.C.P.A. 1962). If the members cannot be envisioned, the reference does not disclose the species and the reference is not enabling. Here, with the large number of compounds included in formula I and no specific identification of riluzole by the ’624 application, the ’624 application does not disclose riluzole, and therefore, cannot enable treatment of ALS with riluzole. The ’624 application cannot anticipate any of claims 1-5 of the ’814 patent.

Judge Rader, concurring in part, opined that:

[T]he court determined that the language of the ‘940 patent itself created “substantial uncertainty” regarding use of glutamate inhibiting compounds in the treatment of ALS. Id. The court determined that the language in the patent discussing conditions implicating glutamate to be speculative, at best. Id. Thus, I read the district court to have found that the ‘940 disclosure did not put one of skill in the art in possession of the invention at all. Elan Pharms., Inc. v. Mayo Found., 346 F.3d 1051, 1057 (Fed. Cir. 2003). When it found that the disclosure leaves “substantial uncertainty,” the trial court sufficiently supported its holding. Id. The ‘940 disclosure does not make it a potential treatment in any way.

Anticipation does not require proof of “utility,” or (in other words) “actual performance of suggestions in a disclosure,” Bristol-Myers Squibb Co. v. Ben Venue Labs., 246 F.3d 1368, 1378 (Fed. Cir. 2001), but in this case, the district court has found that the disclosure does not make even a suggestion of disclosure to one of skill in the art. Beyond the efficacy question, the ‘940 patent does not even disclose the necessary suggestion to enable one of ordinary skill in the art to look to riluzole for the treatment of ALS in the first place. Thus, I would affirm the district court’s determination of anticipation without requiring a remand in this case.

The Coalition for Patent Fairness is a lobbying group backed by a number of high-tech companies in support of S. 3818, the Patent Reform Act of 2006, introduced by Senators Orrin Hatch (R-Utah) and Patrick Leahy (D-Vt.), to reform patent laws. Coalition members include Intel, Cisco Systems and Hewlett-Packard. The Coalition is concerned about the so-called patent trolls - companies that exist primarily to make money from patents through litigation instead of commercialization.

The tech companies want to put a damper on all the patents on all the patents on business methods, designs and undeveloped technologies that casues them to spend lots of money to defend. While Microsoft Corp., Cisco Systems Inc., Intel Corp. and other tech companies have filed amicus briefs calling for a change to the system, Johnson & Johnson, GE and DuPont, have filed their own briefs arguing that major changes to the patent system would jeopardize billions of dollars invested in product innovation. They want to protect pharmaceutical and chemical products from generic manufacturers and counterfeiters.

In the KSR case, KSR manufactures gas pedals that can be adjusted for the height of the driver and uses electronic signals rather than a mechanical cable to accelerate when the pedal is pushed. Both features were developed separately but Teleflex sued KSR claiming that KSR's combination of the two features infringed on a patent it was issued in May 2001. KSR argues that the patent should be invalidated because the combination of the two features is obvious.

In KSR, the Federal Circuit held that the prior art did not render the claimed invention unpatentable because they had not proven, beyond genuine dispute and by clear and convincing evidence, that there was a suggestion or motivation to combine the teachings of the prior art in the particular manner claimed by the patent at issue (U.S. Patent No. 6,237,565).

The Supreme Court granted cert to answer the following question:

Whether the Federal Circuit has erred in holding that a claimed invention cannot be held obvious, and thus unpatentable under 35 U.S.C. § 103(a), in the absence of some proven "'teaching, suggestion, or motivation' that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed."

Section 103 was first enacted in 1952; it provides that a patent cannot issue on subject matter that would have been "obvious" to a hypothetical "person having ordinary skill in the art" or PHOSITA. Four factual inquiries underlie an evaluation of obviousness: (1) the scope and content of the prior art; (2) the differences between the claimed invention and the prior art; (3) the level of ordinary skill in the art; and (4) any other objective indicia of non-obviousness, such as commercial success of the claimed invention, long felt but unmet need.

KSR argues that under the Supreme Court's interpretation of § 103, a combination of pre-existing elements does not constitute an "invention", and does not meet the "condition for patentability" specified in § 103(a), if each element in the claimed combination does nothing more than what it was previously known or designed to do. They argue that the Federal Circuit's interpretation of § 103 is wrong in holding that a combination of pre-existing elements will always constitute an "invention", and will always meet the "condition for patentability" specified in § 103, unless there is proven "some 'suggestion, teaching, or motivation' that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed." They argue that the "teaching-suggestion-motivation test" has no basis in the text of § 103 or in any decision of the Supreme Court.

Critics of the test argue that this has made it too difficult to prove that a claimed invention is obvious. This is of particular importance to pharmaceutical and biotechnology research-based companies who are against any change to the test (and might make it difficult to patent known drugs for new uses).

We will probably see some modification to the obviousness test but I don't think the Court will swing wildly against the "teaching-suggestion-motivation" test.

For more on KSR, see Denis Crouch's Patently-O.

For a less sympathetic view of the Coalition, see the Patent Prospector's take here.

Now, Amgen's petition for a panel rehearing and rehearing en banc has been denied by the Court of Appeals for the Federal Circuit.

The issue remains over the District Court's findings on the infringement and validity of two patents with claims to the production of erythropoietin, the infringement of one product patent under the doctrine of equivalents, and the validity of one product patent. The Federal Circuit found the production patents valid and infringed (U.S. Patent Nos. 5,618,698 and 5,756,349). The court reversed the District Court's determination that TKT infringed Amgen's U.S. Patent No. 5,621,080 under the doctrine of equivalents, and remanded to the District Court for further consideration of the remaining validity issue on one of the other product patents (U.S. Patent No. 5,955,422).

The patents at issue are directed to recombinant DNA technology relating to the production of the hormone erythropoietin (“EPO”). Epogen a form of the protein erythropoietin that is produced outside of the human body and delivered by injection. Transkaryotic's product Dynepo, however, is a gene. When injected, Dynepo leads to the production of a slightly different form of erythropoietin inside the body.

Transkaryotic uses what it calls gene-activation technology. It relies on the fact that all human cells have a complete set of genes, even though the gene for producing EPO is not active except in kidney cells. So Transkaryotic inserts an on switch into human cells grown in culture, activating the gene for EPO. The switch is surrounded by genetic sequences that match those found upstream of the EPO gene on the chromosome. That guides the switch to the spot where it will turn on the EPO gene and not any other gene.

On remand, the trial court construed "therapeutically effective amount" in claim 1 of the '422 patent to require that the claimed EPO increase hematocrit and also be useful in healing or curing certain patients identified in the specification (those with anemia-like disorders). The CAFC held that the language used in the specification indicated that the invention was used in therapy to produce any or all of five identified effects; increasing hematocrit was only one of the biological effects produced by the invention. Thus, the trial court misinterpreted this part of the specification when it read the passage as limiting the invention to products with any or all of the first four effects ascribed in vivo to EPO and also an increase in hematocrit.

The CAFC felt that the trial court made an artificial distinction between the first four effects and the fifth effect (an increase in hematocrit). Also the CAFC believed that "therapeutic utility" was not dependent on the product having an effect in a living being, such as curing disease believing that the patentee used the words "therapeutically effective" in order to broadly claim a pharmaceutical composition with a wide range of effects.

The trial court ruled that claims 2-4 of the '080 patent were not invalid and that Amgen was not estopped from asserting infringement under the doctrine of equivalents. The trial court found that the presumption was rebutted because the amendment limiting the claims of the '080 patent to EPO with the amino acid sequence of Figure 6 was tangential to EPO having a 165-amino acid sequence and also set forth an alternative rationale based on the "some other reason" language.

The Federal Circuit upheld the trial court's finding that Amgen failed to show that EPO with a 165-amino acid sequence was not foreseeable at the time of the amendment. However, the CAFC held that the trial court erred when it found that Amgen had met its burden of rebutting the presumption under both the tangentiality and "some other reason" rationales. Amgen's third preliminary amendment limited the '080 patent to EPO having 166 amino acids. As for the "some other reason" rationale, the patentee knew of the 165-amino acid sequence at the time of the amendment, but chose to limit the claims to the 166-amino acid sequence.

Amgen argued that the district court correctly interpreted the term since only amounts of EPO producing effects—particularly increased hematocrit—that counteract these anemia-like diseases are “therapeutically effective.”

Chief Judge Michel, dissenting-in-part, summed up things thusly:

[S]ince the majority holds that other asserted patents are not invalid and are literally infringed by HMR 4396, (and here I agree), the district court likely will enter an injunction … Prolonging this litigation seems futile when, in the end, an injunction will likely issue regardless of how "therapeutically effective" is construed or whether claim 1 of the '422 patent is invalid.

In my view, four practical problems have emerged under the Markman-Cybor regime: (1) a steadily high reversal rate; (2) a lack of predictability about appellate outcomes, which may confound trial judges and discourage settlements; (3) loss of the comparative advantage often enjoyed by the district judges who heard or read all of the evidence and may have spent more time on the claim constructions than we ever could on appeal; and (4) inundation of our court with the minutia of construing numerous disputed claim terms (in multiple claims and patents) in nearly every patent case.

Our standard of review of no deference to the trial judge's claim constructions, expressed in Cybor, rests upon the premise that claim construction is always a purely legal exercise, devoid of factual content. We have likened claim construction to statutory construction. I believe that this analogy is open to serious question. In interpreting statutes, a judge, whether trial or appellate, essentially asks himself/herself, "What does the disputed term mean to me, the judge, as an artisan in the law?" With claim construction, on the other hand, the judge is supposed to inquire, essentially, "How would the average artisan in the relevant field of technology understand the disputed claim terms in the context of the rest of the patent, the prosecution history, and the prior art?"

This petition order also had a dissents from Judges Newman and Moore with concurrences by Judges Lourie, Gajarsa, Linn and Dyk. With such a divided court, we may well see Amgen VI in the Supreme Court. All over a product that Transkaryotic dropped years ago.

When undertaking a due diligence review during a company merger or acquisition, negotiating a license or joint venture agreement, purchasing patent other intellectual property rights, there are some basic steps to go through in order to cover the important issues of the transaction.

Some of the steps in due diligence procedures designed to flush out the needed information include:

What IP Rights?

The identification of all intellectual property rights is very useful in predicting future value of a business. The best approach, then, is to simply list (with a detailed description) all intellectual property rights. In addition to exploring the right-to-use, it is also important to determine what intellectual property assets are held by the business itself. For example, while it is not always guaranteed that a holder of a patent has the right to make, use or sell its own patented product or service, it is important to develop a position of strength for its products and services.

The procurement of a set of intellectual property rights may not guarantee immunity from a competitor’s pressure but a business which is active in procurement of rights is often much more aware of other’s rights. It also may be able to bargain (i.e., cross-license) with a competitor over certain rights to avoid a costly settlement or to be blocked in the marketplace all together.

Prioritize Your Rights

Not all intellectual property rights may be of significant value to a business. Therefore, it is necessary to review all aspects of the company and assign priorities to the rights according to their value. The more important the rights are to the future vitality of a business, the more due diligence that will be necessary. Mature products and services often are the most important source of the current financial state of a business. However, a changing market demands that much more due diligence be performed in order to understand any future product changes or improvements that are being implemented or planned.

While some businesses may choose to compete in the market without obtaining patents or aggressively protecting trademark rights, a competitor in a market may be working toward reducing the competitive advantage of a business by securing substantial patents, trademarks or other intellectual property rights. It is quite common for at least one player in a multi-firm market to follow such a strategy in an attempt to force competitors to either take licenses or stop making or using the proprietary technology. Such tactics are frequently successful in securing a superior competitive position.

Can You Use It?

It is one thing to own IP rights; it is another thing to be able to conduct a business without infringing third party IP rights. Thus, the fact that a company has a patent for a product does not give it the right to make the product. The unfettered right to use, make or sell certain technology, or to use trademarks or material subject to copyrights, is often crucial to the health of any business. If a competitor holds patents, trademarks, copyrights or other related rights that dominate a successful product or service of a business, the profitability of a business, and even the ability to survive, may be at stake.

In addition, if patent, trademark, and trade secret rights, for example, have been licensed in from another company, it will be important to look to the license agreement to determine whether the scope of the license is sufficient in relation to the company’s business activities. One should not stop at the license agreement, however, because it is also possible that the licensor company obtained additional IP, such as patents, not in the license agreement, that may affect freedom to operate.

Thus it is often important to conduct independent IP searches in areas of relevance to the company’s business to identify third party patents, trademarks, or copyrights that may be of importance. Additionally, it is important to scrutinize any demand letters, litigation history, and other relationships with competitors to identify potential third party IP risks. Preferably, a company will periodically monitor the intellectual property rights held by competitors.

Check Under the Hood

Title to recordable IP rights (e.g., patents, trademarks and copyrights) should be verified by doing the appropriate searches. Any licenses, assignments, government rights, and liens (secured or unsecured) also should be verified by searches. In addition, any new intellectual property interests arising from an investment, acquisition or sale should be recorded in appropriate state and federal offices. Ownership interests in foreign countries require separate title searches, as well as separate assignments or other legal instruments for perfecting rights in those foreign countries.

For intellectual property rights not identifiable as an issued patent, a registered trademark or a registered copyright, detailed listings and explanations also should be provided. Such rights may include trade secrets, know-how, common law trade names, trade dress (unique appearance), trademarks and unregistered copyrights. For each of these, the inventors, authors and uses of the rights should be identified and the dates of first use recorded. In some businesses, these rights can be at the heart of a business and never should be ignored. Often, the dates of creation of first use are critical in protecting and preserving the rights. For example, dates and evidence of use of common law trademarks are important to preserve superior rights over a later user.

AstraZeneca sold DIPRIVAN® for treatment in humans and RAPINOVET® for veterinary use. The composition consists of an injectible oil-in-water emulsion containing propofol, or 2,6-diisopropylphenol, as its active ingredient. DIPRIVAN® is administered to patients by infusion, which involves the use of a “giving set.” A giving set involves connecting a reservoir containing the propofol emulsion with the patient’s vein via the appropriate tubing.

AstraZeneca researchers began developing an improved formulation using preservatives and discovered that one preservative in particular, disodium edetate, was unexpectedly effective in retarding microbial growth in the propofol formulation without disrupting the oil-in-water emulsion for at least twenty-four hours. In March 1995, the inventors applied for a patent on their improved DIPRIVAN® formulation. In December 1995, AstraZeneca also filed a supplemental New Drug Application (“NDA”) on the new formulation.

In 1995, scientists at ESI Lederle (later part of Baxter) learned of the reports of infection relating to original DIPRIVAN®. ESI decided to develop a similar generic formulation and screened antimicrobial agents in an effort to replace the edetate in the improved DIPRIVAN® formulation with a different agent. They found that the calcium trisodium salt of diethylenetriaminepentaacetic acid (pentetate), which is also referred to as DTPA, was a promising candidate as an antimicrobial agent.

In selecting that compound, they noted that since calcium trisodium DTPA is “structurally similar to edetate, product stability is predicted to be unaffected.” ESI filed a patent application on its pharmaceutical composition and was later granted U.S. Patent 6,028,108. ESI filed an ANDA with a Paragraph IV Certification asserting that the patents in suit were invalid, unenforceable, or would not be infringed by its generic propofol formulation, which led to this suit.

The district court issued a Markman ruling construing the term, “edetate" as “EDTA as well as compounds structurally related to EDTA regardless of how they are synthesized.” Based on the district court’s construction of edetate as encompassing structural analogs of EDTA, the court found that Mayne’s generic propofol formulation literally infringed claims 1 and 3-14 of the asserted patents, and claim 38 of the ’520 patent and claims 38 and 39 of the ’520 patent under the doctrine of equivalents.

Claim construction is an issue of law reviewed de novo while the district court’s determination of infringement is a question of fact that we review for clear error. In construing edetate, the court noted that the patentees defined edetate in the specification as EDTA and derivatives thereof. The court proceeded to define the term derivatives by adopting a broad definition, specifically one that encompasses structural analogs of EDTA as well as synthetic derivatives.

The CAFC disagreed with the district court’s definition of derivatives as unsupported by the intrinsic evidence. The part of the specification describing “edetate” reads:

By the term “edetate” we mean ethylenediaminetetraacetic acid (EDTA) and derivatives thereof, for example the disodium derivative is known as disodium edetate. In general suitable edetates of this invention are those salts having lower affinity for EDTA than calcium. Particular derivatives of use in the present invention include trisodium edetate, tetrasodium edetate and disodium calcium edetate.

The CAFC concluded that

[T]he listing of EDTA salts as “[p]articular derivatives of use in the present invention,” coupled with the statements regarding the uniqueness of edetate as the only successful antimicrobial agent, and the patentees’ description of EDTA salts as advantageous, preferable, and “exceptional,” limit the term “derivatives” to EDTA salts or compounds that maintain the EDTA free acid structure. Those statements are inconsistent with a definition of “derivatives” that includes structural analogs that can encompass a large number of non-derivative compounds. That definition fails to recognize that the patentees’ discovery focused on the unexpected effectiveness of edetate and its salts as antimicrobial agents.

Under the DOE, Mayne argued (1) that the court clearly erred in its analysis with regard to the “way” prong of the function-way-result test by improperly defining the “way” in which edetate works (that it should have been one that incorporates the specific metal ions that are chelated, the strength of the bonds that are formed during chelation, and the stability constants); (2) that it was impermissible as a matter of law for the meaning of edetate to extend to calcium trisodium DTPA by equivalence because the patentees chose to narrowly claim their invention (i.e., using the narrower term “edetate rather than broader terms such as “polyaminocarboxylates” or “metal ion chelators”); and (3) that the lack of known interchangeability between calcium trisodium DTPA and edetate as an antimicrobial agent indicates that the substitution of calcium trisodium DTPA is a “substantial” change weighing against a finding of equivalence.

The district court concluded that calcium trisodium DTPA and edetate were equivalent after finding that the differences existing between the two were insubstantial. In reaching this conclusion, the court performed a function-way-result analysis. The court identified the “function” of edetate as “retard[ing] microbial growth in propofol oil-in-water emulsions.” The court then defined the “way” that edetate worked as by metal ion chelation and found that the result achieved was “retard[ing] microbial growth to the extent required by the microbiological test set forth in the claims.”

In reaching a conclusion that the compounds are equivalent, the CAFC held that:

Contrary to Mayne’s assertion, the inventors did not clearly disavow other polyaminocarboxylates, including DTPA, by claiming edetate. There is no evidence that the patentees made a clear and unmistakable surrender of other polyaminocarboxylates, or calcium trisodium DTPA in particular, during prosecution. See Cordis Corp. v. Medtronic AVE, Inc., 339 F.3d 1352, 1363 (Fed. Cir. 2003) (noting that a “clear and unmistakable surrender of subject matter” is required to find estoppel by argument). Indeed, the district court found that “the antimicrobial activity of calcium trisodium DTPA was unforeseeable during prosecution.” Nov. 2, 2005 Opinion, slip op. at 37-38. Mayne itself acknowledged the unforeseeability of DTPA while prosecuting its own patent. Id. at 38. Thus, a person of ordinary skill in the art reading the patent would not conclude that by claiming “edetate,” the patentees surrendered or waived coverage of all polyaminocarboxylates, including DTPA, as an equivalent, particularly in light of the unforeseeability of calcium trisodium DTPA as an equivalent.

The CAFC also rejected the conclusion that the accused product does not infringe under the doctrine of equivalents based on the fact that Mayne was able to receive a patent on its generic propofol formulation stating:

As stated in Warner-Jenkinson, known interchangeability is only one factor to consider in a doctrine of equivalents analysis. It aids the fact-finder in assessing the similarities and differences between a claimed and an accused element. … As discussed above, the court made factual findings that insubstantial differences exist between calcium trisodium DTPA and edetate, and further found that the separate patentability of Mayne’s generic formula did “not outweigh the substantial evidence of equivalence between Mayne’s calcium trisodium DTPA and the claimed edetate.” Nov. 2, 2005 Opinion, slip op. at 39. We see no clear error in that finding.

Affirmed

Before marketing a new branded drug, the manufacturer must file with the FDA a New Drug Application (NDA), including evidence the drug is safe and effective, and the identifying number and expiration date of any patent or patents covering the drug. When it approves the NDA, the FDA must publish the patent information, which it does in Approved Drug Products with Therapeutic Equivalence Evaluations (a/k/a the Orange Book).

Before marketing a generic drug, the manufacturer may submit an Abbreviated New Drug Application (ANDA). Unlike an NDA, an ANDA need not contain evidence of the drug’s safety or efficacy. However, each ANDA, however, must contain "a certification ... with respect to each patent which claims [a drug or a method of using a drug listed in the Orange Book] for which the applicant is seeking approval under this subsection and for which information is required to be filed under subsection (b) or (c) of this section - (I) that such patent information has not been filed, (II) that such patent has expired, (III) [that] such patent will expire [on a specified date], or (IV) that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted[.]"

The Act rewards the first manufacturer to file an approved ANDA containing the certification in paragraph IV by giving it a 180-day period of marketing exclusivity, which begins with the earlier of the applicant’s first commercial marketing of the generic drug or when the applicant prevails in a suit over infringement or the validity of the patents covering the branded drug.

When a patent is removed from the Orange Book (or delisted), the FDA by regulation requires the sponsor of the corresponding ANDA to delete its paragraph IV certification with respect to the delisted patent. If no patent covering the branded drug remains listed, then the generic applicant must file a paragraph I certification, and the FDA treats the ANDA as though it had never contained a paragraph IV certification. As a result, the generic applicant that was first to file an approved application does not get the 180-day period of exclusivity.

Merck submitted to the FDA information with respect to three patents covering the drug Zocor®: U.S. Patent Nos. 4,444,784, RE 36,481, and RE 36,520. Teva and Ranbaxy each filed an ANDA to market generic simvastatin. The two ANDAs - both of which were eligible for a 180-day period of marketing exclusivity because they involved different dosages - each contained a paragraph IV certification with respect to the '481 and '520 Patents. With respect to the '784 Patent, Ranbaxy and Teva each filed a paragraph III certification that it would expire in December 2005.

Merck, however, did not sue Ranbaxy or Teva for patent infringement based upon their paragraph IV certifications. Instead, before their ANDAs were approved, Merck asked the FDA to delist the '481 and '520 Patents from the Orange Book, which the agency did in 2004. Consequently, Ranbaxy and Teva were required to delete the paragraph IV certifications from their ANDAs and thereby lost their eligibility for a period of marketing exclusivity.

Ranbaxy and Teva each filed a citizen petition asking the FDA to relist the two patents. The FDA denied the petitions because Merck had not sued Ranbaxy or Teva for patent infringement. Ranbaxy and Teva then repaired to the district court, which entered a summary judgment for the plaintiffs, and the FDA appealed.

The D.C. Circuit held that the FDA’s requirement that a generic manufacturer’s patent challenge give rise to litigation as a condition of retaining exclusivity when a patent is delisted is inconsistent with the Act, which provides that the first generic manufacturer to file an approved application is entitled to exclusivity when it either begins commercially to market its generic drug or is successful in patent litigation.

While Dastgheib's lawyers said he was entitled to at least $1.2 billion, the jury left him empty-handed. Dastgheib claimed the company couldn't have developed the successful drug without his underlying research and claimed it denied him royalties and recognition for his contribution. Genentech denied making the agreement and said Dastgheib's research had little impact on its development of the drug. Lucentis, introduced June 30, had $153 million in third-quarter sales for Genentech.

Lucentis (ranibizumab) is an ophthalmic drug used to treat the wet form of age-related macular degeneration. Lucentis is an antibody fragment to Vascular Endothelial Growth Factor (VEGF) and is designed to bind to and inhibit VEGF, a protein that plays a role in angiogenesis (the formation of new blood vessels). It works by keeping new blood vessels from forming under the retina (a sensory membrane that lines the inside of the eye). In people with a certain type of eye disease, new blood vessels grow under the retina where they leak blood and fluid. This is known as the "wet form" of macular degeneration.

Lawyers argued that Dastgheib was owed at least $1.2 billion, a third of the drug's estimated $3.5 billion value. An attorney for Genentech, argued the amount was closer to $48,000 using the company's pay scale for independent scientists. Genentech initially paid Dastgheib $2,000 for five days' worth of work on the project.

Dastgheib claimed that he had provided "vitally important" research to Genentech that led to its development of Lucentis and Genentech reneged on its promise to give him 1 percent of its gross revenues and professional recognition for his role in discovering the drug.

Dastgheib had argued he reviewed more than 90,000 human eye specimens before coming up with a theory linking a form of eye disease known as macular degeneration to VEGF. Dastgheib claims that Genentech used the slides as the basis for its research and omitted Dastgheib's involvement both from articles about the drug and its NDA application to the U.S. Food and Drug Administration.

Genentech claims that it had already identified the VEGF factor through its own research and collaborations with outside scientists. It didn’t help that Dastgheib didn’t have anyone corroborate his story.

In the end, Dastgheib was unable to prove his claim and, after a 12-day trial before U.S. District Judge Eduardo C. Robreno, the jury rejected all three of Dastgheib's claims -- fraud, unjust enrichment and unfair trade practices. The next time, you can bet he’ll ask for all the details in ink.

Tufts study said the $1.2 billion estimate reflects the costs of drugs that fail in testing and the time costs associated with bringing a new biopharmaceutical to market. Of this amount, capitalized out-of-pocket preclinical cost totaled $615 million, while similar clinical period cost totaled $626 million. A new biotech product took 97.7 months on average to wend its way through clinical development and regulatory review, about eight percent longer than for pharmaceuticals, according to the Tufts CSDD analysis.

Among the cost challenges faced for biotech drugs are safety concerns, which have made regulators more cautious about the drugs they approve. According to study, only 58 new drugs in 2002-04 received marketing approval from the U.S. Food and Drug Administration (FDA), a 47% drop from the peak of 110 new drugs in the 1996-98 period.

Interestingly, the study found that drug sponsors who make more extensive use of Contract Research Organizations (CROs) tend to complete projects faster, while maintaining quality comparable to submissions involving minimal use of CROs. In addition, projects involving high CRO usage typically are submitted more than 30 days closer to the projected FDA submission date than low CRO usage projects. Tufts CSDD estimates that $5.5 billion, or 15%, of global drug development spending, excluding pass-through fees (e.g., central lab costs and investigator grants), went to contract clinical services in 2004. This compares to 12% in 2001.

Closely tied to the cost estimates is a study showing that the cost per patient of running Phase 3 clinical studies of new pharmaceuticals now exceeds $26,000, on average according to a report “Clinical Operations: Accelerating Trials, Allocating Resources and Measuring Performance”, published by Cutting Edge Information. The survey data reveal that Phase 3 studies are the most costly as measured on a per-patient basis. Phase 2 trials are comparatively cheaper, with the average per-patient cost at just over $19,300 per patient. Phase 1 trials, which test drugs’ safety on a smaller number of patients, are even less expensive at about $15,700 per patient.