## United States Court of Appeals for the Federal Circuit
2007-1397, -1398 EISAI CO. LTD. and EISAI, INC., Plaintiffs-Appellees,

v. DR. REDDY’S LABORATORIES, LTD. and DR. REDDY’S LABORATORIES, INC., Defendants-Appellants, and TEVA PHARMACEUTICALS USA, INC., Defendant-Appellant.
Joseph M. O’Malley, Jr. , Paul, Hastings, Janofsky & Walk er, LLP, of New York, New York, argued for plaintiffs-appellees . With him on the brief were Bruce M. Wexler , David M. Conca , Gary G. Ji , and Quinn E. Clancy

. Maurice N. Ross , Budd Larner, P.C., of Short Hi lls, New Jersey, argued for defendants-appellants Dr. Reddy’s Labor atories, Ltd., and Dr. Reddy’s Laboratories, Inc. With him on the brief were Andrew J. Miller , Louis H. Weinstein , Ellen T. Lowenthal , and Dmitry V. Sheluho

. Henry C. Dinger , Goodwin Procter LLP, of Bost on, Massachusetts, argued for defendant-appellant Teva Pharma ceuticals USA, Inc. With him on the brief were Elaine H. Blais , and David M. Hashmall , Frederick H. Rein , and Emily L. Rapalino , of New York, New York. Appealed from: United States District Cour t for the Southern District of New York Judge Gerard E. Lynch

## United States Court of Appeals for the Federal Circuit

2007-1397, -1398 EISAI CO. LTD. and EISAI, INC., Plaintiffs-Appellees,

v. DR. REDDY’S LABORATORIES, LTD. and DR. REDDY’S LABORATORIES, INC., Defendants-Appellants, and TEVA PHARMACEUTICALS USA, INC., Defendant-Appellant.

Appeals from the United States District Cour t for the Southern District of New York in case No. 03-CV-9053 and 03-CV-9223, Judge Gerard E. Lynch.

__________________ _________ DECIDED: July 21, 2008

__________________ _________ Before RADER, LINN, and PROST, Circuit Judges

. RADER, Circuit Judge

. On summary judgment, the United States Di strict Court for the Southern District of New York found in favor of plaintiffs Eisai Co., Ltd. and Eisai, Inc. (collectively Eisai) with respect to the validity and enforceability of U.S. Patent No. 5,045,552 (’552 patent). Eisai Co. v. Teva Pharms. USA, Inc. , No. 03 Civ. 9223 (S.D.N.Y. Oct. 5, 2006) ( SJ Validity Order ); Eisai Co. v. Dr. Reddy’s Labs., Ltd. , No. 03 Civ. 9053 (S.D.N.Y. Oct. 5,2006) ( SJ Enforceability Order ). After a bench trial, the di strict court found that Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively Dr. Reddy’s) and Teva Pharmaceuticals USA, Inc. (Tev a) had failed to prove the remaining allegations of inequitable c onduct, and that Eisai had estab lished that Dr. Reddy’s and Teva infringed Eisai’s ’552 patent. Eisai Co. v. Dr. Reddy’s Labs, Ltd. , No. 03 Civ. 9053 (S.D.N.Y. May 11, 2006) ( Trial Order ). Because the district court correctly determined that the ’552 patent is non-obvious over the proffered pr ior art and that Eisai’s alleged acts during prosecution did not rise to the le vel of inequitable conduc t, this court affirms. I The ’552 patent claims rabepr azole and its salts. Rab eprazole is part of a class of drugs known as proton pump inhibitors, which suppress gastric acid production by inhibiting action of the enzyme H + K + ATPase. The distinctions between rabeprazole and its salts are not relevant for this appeal. Ther efore this court refers to rabeprazole and its salts collectively as “rabepr azole.” Rabeprazole’s sodium salt is the active ingredient in Aciphex, a pharmaceutical approved in 1991 by the FDA for the treatment of duodenal ulcers, heartburn, and a ssociated disorders. Aci phex has been a commercial success, garnering over $1 billion in worldwide yearly sales. Dr. Reddy’s and Teva each filed Abbrev iated New Drug Applications (ANDAs) under the Hatch-Waxman Act, 21 U.S.C. § 355 and 35 U.S. C. § 271(e), seeking to manufacture a generic version of Aciphex before the expiration of the ’552 patent. Because filing an ANDA is an artificial, but le gally cognizable, act of patent infringement,

see Glaxo Group Ltd. v. Apotex, Inc. , 376 F.3d 1339, 1344 (2004) , Eisai filed suit against Dr. Reddy’s and Teva. Eisai also sued Mylan Laboratories Inc. and Mylan

2007-1397, -1398 2Pharmaceuticals Inc. (collectively Mylan), another ANDA filer, but that proceeding was stayed pending the outcome of these actions. Mylan agreed to be bound by the final judgments and any appeals in these cases. Eisai Co., Ltd. v. Mylan Labs., Inc. , No. 04 Civ. 656 (S.D.N.Y. Nov. 3, 2004). Both Dr. Reddy’s and Teva conc eded infringement of claims 1-6 of the ’552 patent, but assert ed that the ’552 patent is unenforceable for inequitable conduct. Trial Order at 6-7. Dr. Reddy’s stipulated to the validity of all six of the ’552 patent’s claims, id. at 6, but Teva argued before the district court and maintains on appeal that the ’552 patent is invalid for obviousness. Both Dr. Reddy’s and Teva appeal the trial court’s judgment s of enforceability. Neit her Dr. Reddy’s nor Teva appeals the trial court’s judgment of infringement. This court has jurisdiction under 28 U.S.C. § 1295(a)(1). II This court reviews a grant of su mmary judgment without deference. Dayco Prods., Inc. v. Total Containment, Inc. , 329 F.3d 1358, 1362 (Fed. Cir. 2003). Obviousness under 35 U.S.C. § 103(a) is ultimately a legal question, based on underlying factual determinations. See Richardson-Vicks Inc. v. Upjohn Co. , 122 F.3d 1476, 1479 (Fed. Cir. 1997). The factual determinations underpinning the legal conclusion of obviousness include 1) the scope and content of the pr ior art, 2) the level of ordinary skill in the art, 3) the differences between the cl aimed invention and the prior art, and 4) evidence of secondar y factors, also known as objective indicia of nonobviousness. Graham v. John Deere Co. , 383 U.S. 1, 17-18 (1966 ). Thus, in reviewing a district court’s summary j udgment of non-obviousness, this court reviews the record for genuine issues of material fact without deference, bearing in mind the movant’s

2007-1397, -1398 3burden to prove invalidity by clear and convincing evidence. See Monarch Knitting Mach. Corp. v. Sulzer Morat GmbH , 139 F.3d 877, 881 (Fed. Cir. 1998). Where, as here, the patent at issue cl aims a chemical compound, the analysis of the third Graham factor (the differences between the claimed invention and the prior art) often turns on the structural similarities and differences between the claimed compound and the prior art compounds. See Eli Lilly & Co. v. Zeni th Goldline Pharms., Inc. , 471 F.3d 1369, 1377 (Fed. Cir. 2006) (noting that, for a chemical compound, a prima facie case of obviousness requires “structural simi larity between claimed and prior art subject matter . . . where the prior art gives r eason or motivation to make the claimed compositions” (quoting In re Dillon , 919 F.2d 688, 692 (Fed. Cir. 1990) (en banc))). Obviousness based on structural similarity thus can be proved by identification of some motivation that would have led one of ordinary skill in the art to select and then modify a known compound (i.e. a lead compound) in a particular way to achieve the claimed compound. See Takeda Chem. Indus. v. Alphapharm Pty., Ltd. , 492 F.3d 1350, 1356 (Fed. Cir. 2007). In keeping with the fl exible nature of the obviousness inquiry, KSR Int’l Co. v. Teleflex Inc. , 127 S. Ct. 1727, 1739 (2007), the requisite motivation can come from any number of s ources and need not necessarily be explicit in the art. See Aventis Pharma Deutschland GmbH v. Lupin, Ltd. , 499 F.3d 1293, 1301 (Fed. Cir. 2007). Rather “it is sufficient to show that the claimed and prior art compounds possess a ‘sufficiently close relationship . . . to create an expectation,’ in light of the totality of the prior art, that the new co mpound will have ‘similar properties’ to the old.” Id. (quoting Dillon , 919 F.2d at 692).

2007-1397, -1398 4Teva asserts that a combination of thr ee prior art references renders the ’552 patent obvious: 1) European Patent No. 174,726 (owned by Takeda), claiming lansoprazole (EP ’726); 2) United States Patent No. 4,255,431 (to Junggren), claiming omeprazole (’431 patent); and 3) an article by Brändström, et al., entitled “Structure Activity Relationships of Substituted Benz imidazoles” (Brändström). EP ’726 teaches, inter alia, the ulcer treatment compound lansopr azole. Lansoprazole differs structurally from rabeprazole at the 4-pos ition on the pyridine ring, as indicated in the diagram below. Lansoprazole has a trifluoroethoxy (OCH 2 CF 3 ) substituent, whereas rabeprazole has a methoxypropoxy (OCH 2 CH 2 CH 2 OCH 3 ) substituent.

Appellant Teva’s Br. at 28. Otherwise, the tw o compounds are identical. See SJ Validity Order at 7. Both rabeprazol e and lansoprazole are “asymme trically substituted” with respect to the 4-position on the pyridi ne ring because the s ubstituent at the 3- position (a methyl group in both compounds) is not the same as the substituent at the 5- position (a hydrogen in both compounds). The ’431 patent discloses a broad class of gastric acid inhibiting compounds, including omeprazole, the first commercial pr oton pump inhibitor, sold as Prilosec. Although sharing the same basic structure, omeprazole is struct urally farther afield from rabeprazole than is lansoprazole. For instance, omeprazole’s pyridine ring is symmetrically substituted and has a methoxy (OCH 3 ) group at the 4-position.

2007-1397, -1398 5Finally, Brändström describes a class of anti-ulcerative compounds having a benzimidazole-sulfinylmethyl-pyridine co re (the Brändström core structure):

Brändström Core Structure Rabeprazole, lansoprazole, and omeprazole are all Brä ndström core structure compounds. Taking the evidence in the light most favorable to Teva, this court assumes that as per EP ’726, lansoprazole is twenty times superior to omeprazole for anti-ulcer action, as measured by an indomethac in-induced gastric lesion assay in rats. This court also assumes that lansoprazole has certain traits , including lipophilicity (the ability of a compound to cross lipid membr anes) and low molecular weight, that would have made it desirable to a skilled artisan. Under these assumptions, one of skill in this art may have considered it a candidate for a lead compound in the search for anti-ulcer compounds. To the contrary, the district court emphasized the differences bet ween anti-ulcer action and gastric acid inhibition. The trial court spec ifically noted that Teva’s ex pert testified with respect to the EP ’726 data that “[t]he level of acid secr etion . . . from these [anti-ulcer] data . . . cannot be determined.” SJ Validity Order at 13. In this context, this court consults the counsel of KSR that “any need or problem known in the field of endeavor at the time of

2007-1397, -1398 6invention and addressed by t he patent can provide a reason for combining the elements in the manner claimed.” 127 S. Ct. at 17 42. Thus lansoprazole’s candidacy as a starting point to devel op new anti-ulcer compounds versus new gastric acid inhibitors does not resolve the lead compound analysis, at least not in the absence of any contrary indications. Cf. Takeda , 492 F.3d at 1359 (negative side effects could dissuade one of skill from using a particu lar compound as a starting point). Nonetheless, as the district court noted, the EP ’726 reference teaches at best that the fluorinated s ubstituent of lansoprazole provides “a special path to achieving lipophilicity.” SJ Validity Order at 10 (emphasis in original). And Teva’s expert identified a separate reference teaching that fluorine-substituted gr oups increase lipophilicity. Id. The record, however, shows no discernible reason for a skilled artisan to begin with lansoprazole only to drop the ve ry feature, the fluorinated s ubstituent, that gave this advantageous property. Indeed, Teva’s pharmacology exper t, Dr. John Forte, declined to opine on lansoprazole’s relevance to an examiner assessing the patentability of rabeprazole. J. A. at 14894. And Dr. Reddy’s pharmaco logy expert, Dr. Simmy Bank, testified in deposition that “I thought [lansopra zole] had nothing to do with this trial.” J. A. at 14756. This court notes that the district court did not rigi dly limit Teva’s obviousness arguments by forcing Teva to select a single lead compound. Rather Teva alone selected lansoprazole as the anchor for its obvious ness theory, not the district court. In KSR , the Supreme Court noted that an invent ion may have been obvious “[w]hen there [was] . . . a design need or market pressure to solve a problem and there [were] . . . a finite number of identified, predictable so lutions.” 127 S. Ct. at 1742 (tense changes

2007-1397, -1398 7supplied to clarify, as the Co urt stated and as per 35 U.S.C. § 103, that the obviousness inquiry must rely on evidence availabl e “at the time” of the invention, see Takeda , 492 F.3d at 1356 n.2). The Su preme Court’s analysis in KSR thus relies on several assumptions about the prio r art landscape. First, KSR assumes a starting reference point or points in the art, prior to the time of invention, from which a skilled artisan might identify a problem and pursue potential solutions. Second, KSR presupposes that the record up to the time of invention woul d give some reasons, available within the knowledge of one of skill in the art, to make particular modifications to achieve the claimed compound. See Takeda , 492 F.3d at 1357 (“Thus, in cases involving new chemical compounds, it remains necessary to identify some reason that would have led a chemist to modify a known compound in a particular manner to establish prima facie obviousness of a new claimed compound.”). Third, the Supreme Court’s analysis in KSR presumes that the record before the time of invention would supply some reasons for narrowing the prior art universe to a “f inite number of i dentified, predictable solutions,” 127 S. Ct. at 1742. In Ortho-McNeil Pharmaceutical, Inc. v. Mylan Laboratories, Inc. , 520 F.3d 1358, 1364 (Fed. Cir. 2008), this court further explained that this “easily traversed, small and finite number of alte rnatives . . . might support an inference of obviousness.” To the extent an art is unpredictable, as the chemical arts often are, KSR ’s focus on these “identified, predictabl e solutions” may present a difficult hurdle because potential solutions are le ss likely to be genuinely predictable. In other words, post- KSR , a prima facie case of obviousness for a chemical compound still, in general, begi ns with the reasoned identific ation of a lead compound. Teva cannot create a genuin e issue of material fact on obviousness through the

2007-1397, -1398 8unsupported assertion that co mpounds other than lansoprazole might have served as lead compounds. Further, the re cord contains no reasons a skilled artisan would have considered modification of lansoprazole by removing the lipo philicity-conferring fluorinated substituent as an iden tifiable, predictable solution. In sum, the district court properly concluded that the re cord did not support a case of obviousness of the ’552 patent as a matter of law. III As with other summary judgment issues, th is court reviews a district court’s summary judgment on inequitable conduct without deference. Innogenetics, N.V. v. Abbott Labs. , 512 F.3d 1363, 1378 (Fed. Cir. 2008). In contrast, where a judgment regarding inequitable conduct follow s a bench trial, this court reviews the district court’s findings of materiality and intent for clear error and its ultimate conclusion for an abuse of discretion. ACCO Brands, Inc. v. ABA Locks Mfrs. Co. , 501 F.3d 1307, 1315 (Fed. Cir. 2007). Inequitable conduct in prosecuting a patent application before the United States Patent & Trademark Office may take the form of an affirmative misrepresentation of material fact, a failure to disclose material information, or the submission of false material information, but in every case this false or misleading material communication or failure to communicate must be coupled with an intent to deceive. Innogenetics , 512 F.3d at 1378 (citations omitted). Materia lity, defined as “what a reasonable examiner would have considered important in deciding whether to allow a pa tent application,” and intent are both questions of fact, and require proof by clear and convincing evidence. Id. To satisfy the “intent” prong for unenforc eability, “the involved conduct, viewed in

2007-1397, -1398 9light of all the evidence, in cluding evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive.” Kingsdown Med. Consultants, Ltd. v. Hollister Inc. , 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc) (citing Norton v. Curtiss , 433 F.2d 779 (CCPA 1970)). Gros s negligence is not sufficient. Id. This is a high bar. On appeal, Teva and Dr. Reddy’s allege that Eisai misled the Patent Office in five ways: 1) failing to disclose Eisai’s own co -pending ’013 application, which claimed the “ethyl homolog” of rabepraz ole (compound SHKA 661); 2) withholding rejections from the ’013 application’s prosec ution that also would have been applicable to the ’552 patent’s prosecution; 3) failing to disclos e the prior art “Byk Gulden patent” (WO 8602646); 4) submitting a misleading declarat ion (the Fujisaki Declaration) to the examiner of the ’552 patent; and 5) concealing lansoprazole from the examiner. The district court rejected the fifth assertion on summary judgment, SJ Enforceability Order at 58, and the other four after a bench trial, Trial Order

. Teva and Dr. Reddy’s first and second a llegations rely on Eisai’s failure to disclose the fact of, and rejections contain ed in, Eisai’s patent application claiming the “ethyl homolog” of rabeprazole. Known to Eisai’s scient ists as compound SHKA 661, the ethyl homolog differs fr om rabeprazole as its name suggests. SHKA 661 has one fewer methylene unit at the 4-position of t he pyridine ring, givi ng SHKA 661 an ethoxy group rather than a propoxy group at this positi on. The district court correctly pointed out that calling SHKA 661 the “e thyl homolog” of rabeprazole in this case could carry a misleading implication with respect to i nequitable conduct. The record supplies no evidence to suggest that Eisai’s scientists ev er referred to SHKA 661 by this name, or

2007-1397, -1398 10thought of SHKA 661 and rabeprazole “primarily in relation to each other.” Trial Order at 17 n.7. Rather, the di strict court found credible the testimony that Eisai scientists considered SHKA 661 separ ately patentable, even though Eisai ultimately did not pursue that course. Id. at 22-23; 42-43. Furthermo re, even if a provisional obviousness-type double-patenting rejection might have issued in the prosecution of the ’552 patent due to the co-pending SHKA 661 app lication, the district court found the materiality of this potential situation low, because applicants routinely overcome this type of rejection, id. at 44, by amending claims or filing a terminal disclaimer. Nonetheless, the district court did not hold t hat the fact of the copendency of these two applications to be totally immaterial, ac curately noting that applicants should be encouraged to disclose closely related applications. Id. at 47. While disclosure of the co-pending SHKA 661 application to the Patent Office during the prosecution of t he ’552 patent would have been prudent, Eisai’s failure to do so is by no means fatal, for two reasons. First, the district c ourt had ample evidence from which to conclude that the materialit y of the SHKA 6 11 application was low, as outlined above. Second, the record is devoid of any real suggestion of intent to deceive the Patent Office, much less the clear and c onvincing evidence required to support a finding of inequitable conduct. As for the rejections of the ’013 applicat ion that would have been relevant to the prosecution of the ’552 patent, the district court did not reach materiality because it discerned insufficient proof of intent to deceive. The district court found the documentary evidence (fax ed exchange between Eisa i employees Mr. Shuhei Miyazawa, one of the inventors of the ’552 patent, and Mr. Mitsuo Taniguchi, Eisai’s

2007-1397, -1398 11patent agent, regarding Mr. Miya zawa’s presentation to a pharmaceutical trade industry group) to supply no compelling evidence of intent, based on testimony from both parties to the fax. Witness credibility determinati ons lie squarely within the district court’s discretion. See Medichem, S.A. v. Rolabo, S.L. , 437 F.3d 1157, 1171 (Fed. Cir. 2006). The district court was ultimately undist urbed by the Taniguchi/Miyazawa communication based on its evaluation of the witness testimony presented, and this court sees no abuse of discretion. These facts certainly do not rise to the level of “culpability” this court required in Kingsdown , 863 F.2d at 876, to establis h intent to deceive, or even gross negligence. Finally, the district court found that Teva’s theory that Eisai deliberately hid the ball from the Patent Office by separately filing the ’552 and ’013 prosecutions to be “implausibly risky,” given that such similar applications would usua lly be assigned to the same examiner in the same art unit. Trial Order at 53. The district court thus had ample bases from which to conclude that Eisai’s failure to discl ose its co-pending ’013 application along with the rejections issued in its prosecution, while not completely forthcoming, did not rise to the level of inequitable conduct. With respect to the Byk Gulden patent, Teva and Dr. Reddy’s argue that Eisai’s failure to disclose this reference to the Pa tent Office during prosecution of the ’552 patent was material because a reasonable exam iner would have used it to issue a new and stronger prima facie obvious ness rejection on the basis of Byk Gulden’s disclosure of asymmetrically-substituted compounds havi ng a methoxyethoxy at the 4-position of the pyridine ring. But the district court found Byk Gulden’s teachings cumulative with references already disclosed to the Pat ent Office (Junggren or J unggren combined with

2007-1397, -1398 12Beecham). As per 37 C.F.R. § 1.56, cumulative evidence is definitionally not material evidence. See Monsanto Co. v. Bayer Bioscience N.V. , 514 F.3d 1229, 1237 (Fed. Cir. 2008). Here, the Junggren refer ence specifically disclosed asymmetrically substituted compounds, including a compound having a 4- position methoxyethoxy substituent. Thus the Byk Gulden reference offered noth ing new to the record already before the Patent Office. And even Teva’s expert co nceded Byk Gulden would not have provided the examiner with anything new. Id. at 57. Thus the district court was well within its discretion in concluding that the Byk Gulden patent was not material to the prosecution of the ’552 patent. Even if Byk Gulden had been material, t he lack of clear and convincing evidence of intent to dec eive would nonetheless have imposed an insurmountable bar to finding inequitable conduc t, for the reasons given by the district
court. As for the Fujisaki Declarat ion, Eisai submitted it duri ng prosecution to overcome an obviousness rejection. Because this reference shows rabeprazole’s pharmacological properties , the trial court found it highly material. Id. at 59. Teva and Dr. Reddy’s argue that the data presented in the Fujisaki Decl aration were misleading. They contend that the comparison wit h two non-prior art compounds without a comparison of the ethyl homolog of rabep razole, SHKA 661, sent the examiner on a dead-end side trip. The distri ct court properly characterized this argument as “contorted.” Id. The Fujisaki Declarat ion indisputably showed a comparison between rabeprazole and the prior art compound called out by the examiner, demonstrating rabeprazole’s superiority. Furt her, as discussed above, t he materiality of SHKA 661 and the patent application claiming it was low. The data from the Fujisaki Declaration

2007-1397, -1398 13were relevant to prosecution, but Ei sai had no obligation to include additional, unnecessary data such as a comparison to SHKA 661. Thus the district court did not abuse its discretion in concludi ng that Eisai did not commit inequitable conduct in failing to include additional data in the Fujisaki Declaration to the examiner. Even here, where the submission to the Patent Office itself wa s highly material to prosecution, the lack of deceptive intent rendered stillborn yet anot her allegation of inequitable conduct. Finally, Teva and Dr. Reddy’s assert that th at Eisai deceptively declined to inform the examiner of a patent applic ation for lansoprazole, a pr ior art proton pump inhibitor (and the active ingredient in Prevacid). The district court disposed of this argument on summary judgment. The district court foun d that Teva and Dr. Reddy’s had presented neither direct evidence of dec eptive intent nor any evidenc e to support an inference of materiality. SJ Enforceability Order at 58. The strongest evidence of some problem was the passing comment of one Eisai “insider” that the similarity of lansoprazole and rabeprazole “bothers me.” Id. at 59. But this vague, subjective statement is not sufficient by any means to establish materiality, let alone intent. Moreover, given lansoprazole’s fluorinated substituent and it s resultant impotence to render the ’552 patent invalid, the district court properly rejected this strained theory of inequitable conduct on summary judgment. IV In a series of thoughtful, thorough opinions, the district court carefully explained its reasoning with respect to both obviousness and inequitable conduct. Because the district court properly conclud ed that Teva and Dr. Reddy’s fa iled to prove that the ’552

2007-1397, -1398 142007-1397, -1398 15 patent was invalid for obviousness or unenfor ceable for inequitable conduct, this court affirms the district court’s judgment.

AFFIRMED

COSTS Each party shall bear its own costs.