September 2006

DC’s Prescription Drug Excessive Pricing Act of 2005, Down But Not Out

Patent

DCMAPBiotechnology Industry Organization v. District of Columbia (Fed. Cir.)

In October 2005, the District of Columbia (DC) enacted the “Prescription Drug Excessive Pricing Act of 2005.”  [Text]. As its name implies, the legislation prevents excessive pricing of patented drugs.

(a) A prima facie case of excessive pricing shall be established where the wholesale price of a patented prescription drug in the District is over 30 percent higher than the comparable price in any high income country in which the product is protected by patents or other exclusive marketing rights.

(b) [If a prima facie case is made, a defense is to show that the] given prescription drug is not excessively priced given demonstrated costs of invention, development and production of the prescription drug, global sales and profits to date, consideration of any government funded research that supported the development of the drug, and the impact of price on access to the prescription drug by residents and the government of the District of Columbia.

BIO and PhRMA immediately filed suit charging that the law was an unconstitutional violation of the Dormant Commerce Clause and the Foreign Commerce Clause, and asserted that the legislation was preempted under the Federal Patent Act. [Complaint].

The DC District Court quickly invalidated the legislation as both preempted and unconstitutional. [Opinion].

Now, the case is up on appeal at the Federal Circuit (05cv02015).

  • In a dramatic press release, WilmerHale calls the law “sweeping and draconian” …
  • STUDENT NOTE TOPIC: This case provides for an interesting note topic focusing on which appellate courts should have jurisdiction over constitutional and other challenges to the patent laws. (CAFC vs. Regional Circuits).

Pfizer Agrees Not To Sue Apotex on Zoloft Patents

Patent

Apotex v. Pfizer (Supreme Court)

Orange Book Games: A generic manufacturer asks for a lawsuit when it files an Abbreviated New Drug Application (ANDA) with the FDA along with an assertion that the listed patents either don’t cover the drug or are invalid.  That filing gives the brand manufacturer a right to immediately sue for declaratory relief based on a theory of constructive patent infringement.

Sometimes the brand manufacturer decides not to sue immediately — leaving the generic on unsure ground because the brand mfg may be simply waiting to sue until the generic ramps up its operation and is about to go on the market.

In its petition for certiorari filed in February 2006, Apotex questioned this process — arguing that the “prospect of massive patent liability deters the generic manufacturer from entering the marketplace.”  Apotex requested that the unsure situation should give the generic a right to pursue declaratory relief. The drug in question here is Zoloft.

The Supreme Court had requested input from the Solicitor General, and have been waiting for that brief since May. In a preemptive move, Pfizer has filed a new brief – asserting that facts on the ground leave the case moot.  In particular, Pfizer provided Apotex with an unconditional covenant not to sue Apotex with respect to the patent-in-suit. In addition, Pfizer argues that the case is moot because generic Zoloft is already on the market.

 

Evidence Based Prosecution II: Independent and Dependent Claims

Academic Studies, Patent, Patent Prosecution

ScreenShot033_small

Part II of my new series on evidence based prosecution focuses simply on a descriptive feature of the patent application.  How many independent claims should you file? Although we don’t answer that question here, we can answer the question of how many are usually filed.  Using data collected from patent applications published thus-far in 2006, I constructed the chart above comparing the average number of independent claims in a patent application to the total number of claims in the patent. 

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Section 295 Non-Infringement Burden Shifting: Does Not Require Evidence Where Non-infringement is Clear

Patent, Patent Cases 2006

Kemin Foods v. Pigmentos Vegetales (Fed. Cir. 2006).

Kemin holds patents related to purifying lutein that is is extracted from plants. A jury gave Kemin the verdict based on infringement under the doctrine of equivalents. The court then issued a permanent injunction and Pigmentos appealed. 

The CAFC decision is essentially a lesson in reasoned deference — the CAFC affirmed each of the district court’s decisions and only overruled one evidentiary decision by the magistrate.

An interesting squib in the opinion involves the permanent injunction.

As is true in many patent cases, the defendant continued to modify its accused process throughout the litigation.  Based on those changes, the district court agreed to shift the burden of proving non-infringement to the defendant.  35 U.S.C. 295 provides statutory support for burden shifting when there is “a substantial likelihood . . . that the [accused] product was made by the patented process” after the plaintiff shows “a reasonable effort to determine the process actually used in the production of the product and was unable so to determine.”

After the decision, Kemin argued that the permanent injunction should apply to “any process run by [the defendant] at any time through the date of the jury verdict.”  Kemin’s reasoning was that Section 295 required the defendant to present non-infringement evidence about any of those processes — and its failure to do so should result in in an injunction to stop the activity.  The CAFC disagreed — simply because the new processes could not lead to infringement because they did not use  propylene glycol as required by the claim language.  The court remanded for a determination of whether the new non-propylene glycol processes lead to infringement of another claim.

The unstated principle that emerges here is that Section 295 burden shifting cannot be used to capture clearly non-infringing activities even if the defense presents no evidence of the non-infringement.

 

USPTO Disciplinary Actions

Patent

Sheinbein v. Dudas (Fed. Cir. 2006).

Sol Sheinbein was a patent attorney.  In an infamous 1997 event, he helped his son escape to Israel to hide from authorities in the U.S. His son was being investigated for a brutal murder, and a Maryland court determined that his father had committed criminal obstruction.  Sheinbein was barred from the practice of law in Maryland and DC and from practicing before the USPTO based on 37 CFR 10.23.  That rule provides the following:

  • (a) A practitioner shall not engage in disreputable or gross misconduct. 
  • (b) A practitioner shall not:
    • (1) Violate a Disciplinary Rule.
    • (2) Circumvent a Disciplinary Rule through actions of another.
    • (3) Engage in illegal conduct involving moral turpitude.
    • (4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.
    • (5) Engage in conduct that is prejudicial to the administration of justice.
    • (6) Engage in any other conduct that adversely reflects on the practitioner’s fitness to practice before the Office.

Examples of violations include being disbarred from the practice of law based on ethical grounds or violation of a law of the United States. The CAFC agreed that disbarment in another jurisdiction can be a sufficient basis for the PTO’s finding of unfitness without any specific fact-finding by the PTO.

Statute of limitations: The statute provides a five-year statute of limitations for the exclusion.  Sheinbein argued that the period had passed.  The CAFC disagreed — agreeing with the PTO that the five-years begins at the time of being disbarred from the neighboring states.

  • CAFC Decision
  • More about the Samuel Sheinbein case here and here.
  • The PTO’s office of enrollment and discipline posts most of its disciplinary decisions here.

Should software code be included in patent applications?

Patent

Typically software patents describe the invention through a series of flow-charts and other symbolic representation of operations.  Usually, the software code itself is not included in the application. Rather, the code is often kept as trade secret.  From a practical standpoint, practitioners may want to rethink their approach based on these two associated cases:

  • TouchCom v. Dresser, 427 F.Supp.2d 730 (E.D.Tx. 2005) (holding that the software code should have been present to provide structure for means-plus-function claims).
  • TouchCom v. Bereskin & Parr (D.D.C) (TouchCom has filed suit against the Canadian IP firm, charging that the firm committed malpractice by failing to submit the software code).

Now, one seemingly important issue in this case is that TouchCom’s patent says that the code is included in “Schedule A” — while in actuality much of the software code was omitted from the Schedule. In addition, TouchCom did not appear to provide any non-code structure either.

CAFC: Reissue Recapture Rule is “Objective”

Patent, Patent Cases 2006

Healthy_choiceKim v. ConAgra (Fed. Cir. 2006).

Here’s another case where technicalities of the patent system apparently trapped an unsuspecting patentee.

“[W]e reject Kim’s position that she should be treated differently from other patentees because she was pro se during some parts of the prosecution.”

Potassium bromate has been traditionally used in bread-making, but people are concerned with its carcinogenic effects. Yoon Ja Kim, a chemist, found that a combination of ascorbic acid and food acid could serve the purpose of potassium bromate. (i.e., to “strengthen dough, increase loaf volume, contribute to fine crumb grain, and increase shelf life”). Kim filed a pro se patent application and got her patent.

Kim then sued ConAgra — asserting that “Healthy Choice” brand breads infringed on the patent. A jury then found that the patent was not invalid and infringed. The district court, however granted JMOL of non-infringement in ConAgra’s favor. Kim appealed.

Claim Construction and Infringement: The asserted claims both appeared as follows:

A potassium bromate replacer composition consisting essentially of . . .

Although not defined in the specification, CAFC found the preamble term “potassium bromate replacer” to be limiting to the extent that any infringing composition must “perform essentially the same function in the production of that bread as would potassium bromate.”

Kim, acting as her own expert witness, showed that the accused products included the same ingredients as listed in the claims (and that potassium bromate was not an ingredient).  However, Kim did not prove that those ingredients were functionally active in the accused products. 

Then, the court found that other ingredients, such as vital wheat glutten, ferrous sulfate, and dough strengthening enzymes, might be active.  If that is the case, Kim’s “consisting essentially of” transition language would remove those from the ambit of infringement.

Validity – Recapture: Even though the court found no infringement, it went-on to discuss validity. Kim’s patent is a reissue, and the defense argued that the patent violated the rule against recapture.  That rule forbids a reissue applicant to recapture scope surrendered during prosecution unless it was “erroneously excluded from that patent.” 

Prior precedent made this look like a subjective rule — it is not. “Surrender” means that an objective observer who is later “looking at the prosecution history would conclude that the purpose of the patentee’s amendment or argument was to overcome prior art and secure the patent.”  According to the CAFC, the objective standard gives the public more clarity as to when they can rely on a patentee’s admission during prosecution. Interestingly for Kim, he would have lost under the subjective standard, but wins under an objective standard [for reasons too long to describe here.]

Dissent by Judge Schall: Schall would not have included the extensive functional limitation of the preamble potassium bromate replacer because “Kim acted as her own lexicographer in defining the term ‘potassium bromate replacer’ as ‘a slow acting oxidant that is functional throughout the entire manufacturing process.’”

My question is: Have you looked at the ingredient list of your bread lately?

 

Voting Rights

Patent

Voting_boothSeptember 19, 2006 is primary day here in Massachusetts.  In the recent Patently-O readership poll, 542 readers cast their vote (one per computer). Those results show that slightly over half of the voting readers work in law firms.  Of those, two-fifths are in small firms.  Twenty-two percent of readers hail from in-house jobs in corporate America while about fifteen percent come from academia.  Government jobs only grabbed eight percent — although that category was not added until after 150 people had already voted. Thanks for participating!

In a related note, Patently-O reader (and creator of ToolPat) Scott Kamholz recently did his own empirical work of blue and red states. His results:

9,060 total U.S. patents issued to U.S. assignees in August 2006.
6,635 issued to assignees in “blue” states.
2,425 issued to assignees in “red” states.

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New Patent Law Scholarship

Articles and Publications, Patent
  • MortarboardPatent Reform: Matthew Sag and Kurt Rohde, Patent Reform and Differential Impact. Sag (DePaul) and Rohde (MBHB) want to get patent reform rolling — they suggest that we throw-out the chaff because it slowing down the process. Their differential impact approach helps us focus on reforms that will stop the abuse of “bad patents.” 
  • Software Patents: Robert Merges (Berkeley), Patents, Entry and Growth in the Software Industry. A decade ago, everyone predicted that software patents would turn the industry on its head.  Professor Merges finds that software patenting has not been earth shattering.  Big companies have adapted and “new firm entry remains robust.”
  • Federal Circuit: Professors Nard (CWRU) and Duffy (GWU) suggest that we rethink the CAFC experiment and the virtues of uniformity in their new article, Rethinking Patent Law’s Uniformity Principle. CAFC jurisprudence is becoming a bit stale and would benefit greatly from at least one other sister-court deciding patent appeals.
  • Takings: Adam Mossoff (Michigan State) is quickly becoming known for his studies on the history of patent jurisprudence. In the wake of Zoltek, where the CAFC refused to protect patent rights under the takings clause of the Fifth Amendment, Mossoff took the court to task — especially for its continuation of the untrue myth that “patents were never secured as constitutional private property in the nineteenth century.”  In his new article, Mossoff concludes that “[i]t is time to set the historical record straight, and to recognize that nineteenth-century courts applied the Takings Clause to patents, securing these intangible property rights as constitutional private property.”
  • Google Scholar: For those of you who do not know about it, Google Scholar is getting pretty good and should now be on your agenda for most prior art searches. http://scholar.google.com.

 

Patently-O TidBits and Reader Poll #1

Patent
  • The USPTO recently released a new revision of the MPEP — 8th Edition, Revision 5. Does anyone have a mark-up of the changes?
  • Dan Ravicher continues to do interesting work at PubPat. There credo is that “wrongly issued patents and unsound patent policy harm the public.” Their new blog is called “Software Patent Watch.”
  • Professors Keith Aoki, James Boyle, and Jennifer Jenkins recently published their comic book “Bound by the Law.” It is available for free online here. Great work!
  • Cory Hojka points out an important distinction between infringement of a patent and infringement of a copyright here.
  • James DeLong remarks on Antitrust and IP here.
  • What lessons can we learn about informal and low budget representations?

Please help with my Readership Poll:

Create Free Polls

CAFC: Means-Plus-Function Interpretations Absent Trigger Language

Patent

KilmerMIT v. Abacus Software (Fed. Cir. 2006).

MIT’s patent covers a system for producing color copies.  Prior to expiration of the patent, the educational behemoth sued several hundred accused infringers. Most of the cases settled, but four parties continued to fight the patent.

After claim construction, the parties stipulated to a judgment of non-infringement. The first half of the appeal focused on when non-explicit claim language can be deemed “means-plus-function.”

But first, the 2–1 majority began their opinion with an announcement that the appellate court should only decide claim construction issues that served as the basis of the noninfringement judgment — and not any other claim construction issue.  In addition, the appellate panel had some trouble with the construction because there was no information in the record regarding the accused devices.

Even with respect to the claim construction issues on which the judgment is based we perceive a problem with the mechanism by which this case has been litigated. As in Lava Trading, the record does not disclose the nature of the accused devices, and our rulings on claim construction in this case unfortunately must be made without knowledge of the accused devices. 

On with the construction where the court searched for meaning of the claims as they would have been interpreted when the patent application was filed back in 1982.

Scanner: Based on a 1982 dictionary definitions, the court agreed that a scanner must have a moving element doing the scanning. Thus, although television cameras can do the same job as a scanner, they are not scanners. (The specification also distinguishes from cameras).  Similarly, the court found that a 1982 scanner requires that the scanned specimen must be placed in close proximity to the scanner.

Colorant Selection Mechanism: At MIT’s suggestion, the lower court held the term “colorant selection mechanism” should be interpreted as a means-plus-function claim even though it lacked the keyword “means.”

[A] limitation lacking the term “means” may overcome the presumption against means-plus-function treatment if it is shown that the claim term fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function.

The panel agreed that terms such as “mechanism,” “means,” “element,” and “device” “typically do not connote definite structure.”  A typographical error in dependent claim 3 sealed the deal.  In that claim, the patent refers to “said colorant selection means” even though only the mechanism had been introduced.

Aesthetic Correction Circuitry: Unlike a mechanism, the CAFC found that “circuitry” provided sufficient structure to avoid means-plus-function interpretation.

Chief Judge Michel Dissented and would have found “circuitry” to imply means-plus-function.

Note: There is more to this case that may be discussed in a later post.

Patent Reform

Patent, Patent Legislation

As we speak, the IPO is holding its annual meeting in Chicago.  From the meeting:

  • PTO Director Jon Dudas announced that he has not yet decided whether to implement changes to limit continuation practice.
  • The IPO has created some information on patent reform.  First, a one-page sheet outlining the various draft bills. Second, a five-page comparison chart. And third, a red-line version of S.3818 that was introduced by Senators Hatch and Leahy. Word on the street — nothing is expected to pass in 2006. . .

Patent Lotteries: A Question for the Crowd

Patent

Long_tailA number of studies have shown that patent valuation is highly skewed.  The majority of patents are barely worth enough to cover prosecution costs, a substantial number have a moderate return, and a few are highly valuable. Chris Anderson just wrote a book on taking advantage of highly-skewed markets — titled The Long Tail.

The effect of this skew in the IP world has been dubbed the “patent lottery” because most of the payout involves a low probability of a high return. 

Lots of people think of the state-run lottery as a total scam because the expected value of a one dollar ticket is only about fifty cents.  The state rakes-in about half of the cost of every ticket and pays the other half out in winnings.  For anyone interested in wealth management and growth — this is not a good investment strategy. But, the state-run lottery is hugely popular with billions of dollars thrown at the system every year by hopeful winners. ($1.8b in Illinois alone in FY2005).  People explain this phenom in many ways — usually some combination of arguments such as: (1) the thrill of playing is worth the fifty-cent loss, (2) we generally don’t do well calculating the return low odds, and (3) we make stupid choices. [Note here that I have purchased a number lottery tickets in the past — especially when the jackpot is very large.]

Unlike the state-run lottery, in the patent system we don’t really know the odds of success very well and we don’t know whether potential innovators are willing to play “bad odds.”  I would like to get some input on this point.  Question for readers:

Would you or your clients be willing to invest time and/or money in developing a new innovation that had only a small chance of reaping huge rewards if you knew that the expected (and most likely) return would less than your original investment?

Comments are open — you can also e-mail me dcrouch@gmail.com.

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Judge Kimberly A. Moore

Patent

Book Cover: Patent LitigationPublic Announcement:

The Honorable Kimberly A. Moore was sworn in as a circuit judge on the U.S. Court of Appeals for the Federal Circuit on September 8, 2006. The oath of office was administered to Judge Moore by Chief Judge Paul Michel in the presence of Judge Moore’s family and judges of the court. A public ceremony will follow, date to be announced later.

Unlike many new judges, Judge Moore has a significant history of interesting and thought provoking scholarship.  A thorough study of her writings would set an interesting marker to be compared with her judicial decisions down the line.

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Upcoming Conferences

Conference or CLE, Patent
  • Patent Litigation Strategies: BNA is hosting a couple of interesting conferences based on their excellent book — Patent Litigation Strategies. The first is September 27–28 in Palo Alto and they will hold the same conference in DC on November 15–16.  More Info.
  • Markman: Here in Boston, Suffolk is hosting an interesting conference on patent claim interpretation on October 20. More Info.
  • Biotech Patents: I’ll be moderating an interesting panel at Biotech Patents conference here in Boston on November 29–30 hosted by American Conference Institute. More Info.

 

Obviousness: Motivation to Combine References Found in Expert Testimony

Patent

OxybutAlza v. Mylan (Fed. Cir. 2006, 06–1019).

Alza holds the patent on a once-daily controlled release oxybutynin formulation used to treat urinary incontinence. (U.S. Patent No. 6,124,355). Alza’s formulation is sold as Ditropan XL®.  Mylan wants to sell a generic version and challenged the patent, and the district court obliged by finding the patent invalid as obvious.

In affirming the obviousness finding, a unanimous decision penned by Judge Gajarsa presents its defense of the much criticized teaching/suggestion/motivation test (TSM Test) for obviousness that is currently on review before the Supreme Court in the Teleflex case.

The meat of the opinion begins with a reminder that the motivation test did not arise with Federal Circuit, but rather that the making of the CCPA.  The 1943 case of Fridolph, for instance, instructs that when “considering more than one reference, the question always is: does such art suggest doing the thing the [inventor] did.”

Next, the opinion explains that the TSM test “has been developed consistent with the Supreme Court’s obviousness jurisprudence as expressed in Graham and the text of [Section 103(a)].”  The court explains that the purpose of the proof portion of the TSM test test is to avoid the problem associated with hindsight.  The theory is that obviousness “should be based on evidence rather than on mere speculation or conjecture.”

Many of the briefs in Teleflex argue that the TSM test is “rigid.”  In Alza, the court disagreed, arguing that the test is flexible “because a motivation may be found implicitly in the prior art.” (emphasis in original).

We do not have a rigid test that requires an actual teaching to combine before concluding that one of ordinary skill in the art would know to combine references. This approach, moreover, does not exist merely in theory but in practice, as well. Our recent decisions in Kahn and in Cross Medical Products amply illustrate the current state of this court’s views.

In Kahn, the court emphasized the availability of implicit proof of a motivation to combine references, and in Cross Medical, the court found that motivation could come from “general knowledge.”

In this case, the patent holder Alza argued that back in 1995, there was no suggestion to try (or likelihood of success of) using controlled release pills because nobody thought that the formulation could be absorbed in the colon.  Defendant Mylan relied on an expert witness who testified that back in 1995 there would have been a reasonable likelihood that a controlled release pill would work – and thus that there was a motivation to try it.  Alza presented some references that suggested that controlled-release pills might not work, but those did not specifically discuss absorption of the type of molecule contained in Ditropan. 

Based on the expert testimony, the lower court agreed that the TSM test had been satisfied and that the patent was invalid as obvious.  The appellate panel affirmed on a clear error standard, finding that:

we cannot perceive clear error in the district court’s factual findings that while colonic absorption was not guaranteed, the evidence, viewed as a whole, is clear and convincing that a person of ordinary skill in the art would nonetheless have perceived a reasonable likelihood of success and that she would have been motivated to combine prior art references to make the claimed invention.

Obviousness affirmed.

 

Professor Kimberly Moore Unanimously Confirmed

Patent

Without controversy, the nomination of Professor Kimberly Moore (George Mason) to become a Federal Circuit judge has been unanimously confirmed by the Senate (92–0).  Congratulations!

The main question now is: What will David Lat say in his new tabloid: Above the Law.

eBay v. MercExchange Unanswered Question

Patent

Here are a handful of unanswered questions that leave us a bit in limbo post-ebay.

  • What (if any) presumption of irreparable harm is associated with an infringed patent? (in z4 no presumption was found)
  • How should willfulness of the infringement factor into the injunction analysis? If it “should” be factored-in, which of the four factors would it fall under? (In z4, willfulness was not considered a factor).
  • The Supreme Court ruled that a plaintiff’s willingness to license its patents and its lack of commercial activity in practicing the patents could not be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue — but to what extent can those weigh in favor of an injunction.
  • Those of us having a law & economics background have difficulty with the concept of irreparable harm because the basis of idea that “most patent-related injuries can be fully compensated by some ex post cash payment” (Lichtman).  Couple that with Professor Laycock’s ground-breaking worth on the Death of Irreparable Injury where he shows that irreparable injury jurisprudence is for the most part a sham that does not alter the outcome. Bottom line, when will there be irreparable injury? What we do know is that failure to work and a willingness to license do not preclude a finding of irreparable harm.
  • How will irreparable for permanent injunction differ from the analysis during a preliminary injunction determination?
  • Once an injunction is denied, how will we calculate damages and is ongoing infringement willful?