## United States Court of Appeals for the Federal Circuit

04-1252

SYNTEX (U.S.A.) LLC and ALLERGAN, INC., Plaintiffs-Appellees,

v.

APOTEX, INC., APOTEX CORP., and NOVEX PHARMA, Defendants-Appellants.

David J. Harth , Heller Ehrman White & McAuliffe LLP, of Madison, Wisconsin, argued for plaintiffs-appellees. With him on the brief were Alexander L. Brainerd , Keith R. Weed , and Olga Rodstein , of Menlo Park, California, and Christine Saunders Haskett , of San Francisco, California. Manny D. Pokotilow , Caesar, Rivise, Bernstein, Cohen & Pokotilow, LTD., of Philadelphia, Pennsylvania, ar gued for defendants-appella nts. With him on the brief were Robert S. Silver , Alan H. Bernstein , Mona Gupta and William J. Castillo . Of counsel on the brief was Ronald S. Lemieux , Squire, Sanders & Dempsey L.L.P., of Palo Alto, California.

Appealed from: United States District Cour t for the Northern District of California Judge Martin J. Jenkins

## United States Court of Appeals for the Federal Circuit

04-1252 SYNTEX (U.S.A.) LLC and ALLERGAN, INC., Plaintiffs-Appellees,

v. APOTEX, INC., APOTEX CORP., and NOVEX PHARMA,

Defendants-Appellants.

________________________ DECIDED: May 18, 2005

________________________

Before CLEVENGER, GAJARSA, and PROST, Circuit Judges

. Opinion for the court filed by Circuit Judge GAJARSA. Concurri ng opinion filed by Circuit Judge PROST. GAJARSA, Circuit Judge

. Apotex, Inc., Apotex Corp. and Novex P harma (collectively "Apotex") appeal from the final judgment of the United States Dis trict Court for the Northern District of California, which, after a bench trial, held U. S. Patent No. 5,110,493 (the "'493 patent") owned by Syntex (U.S.A.) LLC not invalid, enforceable, and infringed by Apotex's Abbreviated New Drug Application ("ANDA"). Allergan, Inc., Syntex's distributor, has exclusive rights to manufacture the co mmercial embodiment of the '493 patentmarketed under the trademark ACULAR. 1 Syntex (U.S. A .) LLC v. Apotex , Inc. , No. 01- CV-2214 (J anuary 27, 2004). Because we find the district court commi tted legal error in establishing certain factual predicates to its non-obviousness determination, we reverse the judgment of validity and remand for furt her consideration c onsistent with this opinion. BACKGROUND
A. The Patents and Prosecution His tory The '493 patent, entitled " O phthalmi c NSAID Formulations Containing a Quaternary Ammonium Preserva tive and a Nonionic Surfact ant," claims a formulation for sterile, preserved eye drop s to treat eye inflam mation suc h as that caused b y conjunctivitis or eye surgery. The '493 patent teaches combining a nons teroidal anti-inflammatory drug ("NSAID") such as ketoralac trometha mine ("KT ") and a quaternary ammonium preservative such as benzalk onium chloride ("BAC") with a surfactant suc h as octoxy nol 40. The NSAID is the active ingr edient fo r r educing ey e inflammation. The quaternary ammonium preservative, in turn, kills any bacteria introduced into the eye durin g administration of the NSAID. However, quaternary ammonium preservatives, such as BAC, do not always mix well with NSAIDs. Neit her ingredient is water soluble, and the two active ingredients may react with eac h other to form complexes when mixed. These complexes will event ua lly caus e the mixture to look cloudy or lose its antibacterial properties.

1 Hereinafter, the appellees are collective l y referred to as "Syntex. " ACULAR is a trademark owned by Syntex, Inc.

04-1252 2The chemical arts often solve this type of mixing problem by using surfactants. A surfactant is a "surface active agent" used to make otherwise insoluble chemicals soluble in water. The '493 pat ent claims to solve the complex formation problem by adding octoxynol 40, a surfactan t, to the KT/BAC mixture. The '493 patent claim s ophtha lmic formulations (eye dr ops) useful for treating eye inflam mation, methods of using eye drops to treat eye disease, and preservative systems fo r use in eye drops. The claims of the '493 patent fall into three categories: claims 1 to 7 are composition claims, clai ms 8 to 14 are method claims, and claims 15 and 16 rec i te a "preservative system." Claim s 1, 8, and 15 are in dependent claims, the others are all dependent. Claim 1, the basic embodiment of the compound, provides: 1. An ophthalmologic a lly acceptable no n-steroidal anti-inflammatory drug formulation, comprising: an opthalmologically acc eptable non-steroidal anti-i nflammatory carboxy l group-containing drug in an ef fect ive amount for ophthalmic t r eatment between 0.001% and 10.0% wt/vol; a quaternary ammonium pres ervative in an antimicrobi ally effective amount between 0.0001% and 1.0% wt/vol; an ethoxy l ated alkyl phenol that conf orms generally to the formula C 8 H 17 C 6 H 4 (OC H 2 CH 2 ) n OH 2 where n has an average value of 40 in a stabiliz ing amount be tween 0.0 01% and 1.0% wt/vol; and an aque ous vehicle q.s. to 100%. '493 patent, col. 8, ll. 42-55. The '493 patent issued from U.S. Pat ent Applic ation No. 07/624,027 ("the '027 application"), which was filed on Decem ber 7, 1990. The '027 application was a continuation of U.S. Patent Application No

. 07/096,173 ("the '173 application") filed on

2 This is the formula for octox y nol 40.

04-1252 3September 11, 1987. The two app lications were reviewed by different examiners at the Patent and Trademark Office ("PTO"). Each examiner rejected the application befo re him as obvious in view of U.S. Patent No. 4,349,563 to Gil bert and U.S. Patent No. 4, 559,343 to Han in view of McCutcheon's Emulsifiers and Detergents p.154 (1982) ("McCutcheon's"). U.S. Patent No. 4,454,151 to Wat e rbury, anot her patent assigned to Sy nt ex, was listed on the ' 4 93 patent as prior art, but was not cited by the examiner in hi s obviousness rejection. The prior art patents Waterbury, Gilbert, and Han all teach ophthalmic formulation s containing NSAIDs, q uaternary preservatives, and n o n ion i c su rfactants to stabiliz e th e formulation. While Waterbury, Gilbert, and Han do not teach the specific use of octoxynol 40, they do teach using the general class of water-soluble no nionic surfactants as stabiliz e rs. Waterbury and Gilbert teach the use of polysor bate 80. 3 McCutcheon's, a comprehensive directory of emulsifiers and detergents, teach that octoxynol 40 was a known stabilizer. Accord ing to bot h examiner s, it was well kn own in the art that surfactants such as octoxy nol 40 hav e a stabilizing effect on ophthalmi c compounds containing NSAIDs. 4 The examiner reviewi ng the '027 continuation application rejected what has become claim 1 on the gr ounds that "[t]he mere substitution of one [surfactant] for another . . . is not deemed a patentable dis t inction in the absence of a showing of some unobvious result."

3 Polysorbat e 80 is sometimes referred to as "tween 80" by the PT O, district court, and the parties. For the purposes of this opinion, all references to tween have been replaced with polysorbate 80. 4 Consequently, within the context of this art, surfactants are sometimes referred to as stabilize r s.

04-1252 4Syntex res ponded to that re jecti on by asserting that it had provided acc e ptable data demonstrating results superior to the fo rmulations disclos ed by the Han and Gilbert references. Syntex s u pported its superior re sults claim with a dec laration from Deborah M. Lidgate ("Lidgate"), one of the named inventor s. In the declarat ion, Lidgate stated that "octoxynol 40, and not oc toxynol 3 or octoxynol 5, is s u itable to use wit h benzalk onium chloride to prepare a preserva tive system for an ophthalmic formulation, or to prepare an ophthalmic formulation, of the present application." In presenting her findings of superior results, Lidgate excluded the additional experiment al data that she had developed showing octo xy nol 12.5 to be a surfactant capable of stabiliz ing a KT/BAC formulation. Follo wing this submis sion, t he examiner allowed the a pp lic ation to issue, stating that Syntex had "overcome the prior art rejections . . . by showing that unexpected results are obtained when one uses [octox ynol 40]. These results are unobvious because o ne of ordinary skill in the art woul d not have known that one surfactant would outperform other surfact ants." The patent iss ued on May 5, 1992. Syntex markets the patented ophthalmi c f o rmulation as A CUL AR. A C ULAR embodies t he claims of the '493 patent and has been approved by the Food and Drug Administration ("FDA" ). From 1993 to 2001, ACULAR captured a substantial market share for ophthalmic anti -inflammation drugs

.

04-1252 5B. The Hatch-Waxman Amendments The Hatch-Waxman Amendments 5 to the Federal Food, Drug, and Cosmetic Act permit an applic ant to file an ANDA with th e FDA reque s ting approval of a bioequivalent ("generic") version of a drug that is already listed by the FDA as approved for safety and effectiveness without having to submit additional sa f e ty and efficacy data. See 21 U.S.C. § 355(j)(2)(A). The overall sch eme of the Hatch-Waxman Amendments is described in detail in our decisions in Mylan Pharmac euticals, Inc. v. Thompson , 268 F.3d 1323 (Fed. Cir. 2001) and Andrx Pharmaceuticals, Inc. v. B i ovail Corp. , 276 F.3d 1368 (Fed. Cir. 2002) and need not be repeated here. For t he purposes of this opinion it suffices to know that an ANDA may be f iled for drugs currently protected by patents and listed in the FDA' s Orange Book. Mylan Pharmaceuticals, Inc. , 268 F.3d at 1325- 26. In its filing, the applicant must certify either (1) that it will not market its drug prior t o the expiration of the relevant pat ents, or (2) that the relevant pate n ts "are invalid or will not be infringed by the manufacture, use or sale of the new drug for which the ANDA is submitted." 21 U.S.C. § 355(j) (2)(A)(vii)(IV). An ANDA applicant filing its a pplic ation with the F D A and making a Secti on IV certification must noti fy the holder of the patent, who may then bring an action against the applic ant f o r infringement under 35 U.S.C. § 271(e)(2). See 21 U.S.C. §§ 35 5(j)(2)(B)(i) and (j)(5)( B)(iii). In its notice th e applicant must include "a detailed statem ent of the f a ctual a nd legal bas is [sic] of the opinion of the applic ant that the patent is invali d or will not be infringed." 21 U.S.C. § 355(j)(2)(B)(iv). Such a notic e can state t hat the patent is inva lid on the basis of

5 The Hatch-Waxman Amendments were enacted as a part of the Drug Price Com petition and Patent Term Restor ation Act of 1984, Pub. L. No. 98-417, codified at 21 U.S.C. §§ 355 and 360cc, and 35 U.S.C. §§ 156, 271, 282.

04-1252 6anticipation, obviousness or non-enforceable fo r patent misuse or inequitable conduct. Submission of an ANDA is an act of patent infringement if the ANDA seeks approval to manufacture, use, or sell a dr ug that is c l aimed in a pat ent or the use of which is claimed in a patent. 35 U.S.C. § 271(e); 6 Eli Lilly & Co. v. Med t ronic, Inc. , 496 U.S. 661, 676 (1990) ("The function of [35 U.S.C. § 271(e) is] to define a new (and somewhat artificial) ac t of infringement for a very lim ited and technical purpos e that relates only to certain drug applic ations."). C. The District Court Proceedings Apotex manufactures generic pharmaceutic als. On April 25, 2001, A potex notified Sy ntex that it had filed ANDA 76-109 with the FDA to ma rket a generic version of ACULAR inc l uding a Section IV certification. In its not ice to Syntex, Apotex stated that it believed the ' 493 patent to be inv a lid on the grounds of obviousness and inequitable conduct, and not infringed by Apotex's propos ed generic version of ACULAR. On June 6, 2001, Syntex filed suit against Apotex for pat ent infringement.

6 35 U.S.C. § 271(e) provides in relevant part: (2) It shall be an act of infringement to submit- (A) an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act or described in s e cti on 505(b)(2) of such Act for a drug claimed in a patent or the use of whic h is c l aimed in a patent, . . . if the purpose of such submission is to obtain approval under suc h Act to engage in the commercial manufacture, use, or sale of a drug or veterinary biological product claimed in a patent or the use of which is claimed in a patent before t he expiration of such patent. An ANDA is an applic ation und er section 505(j) of t he Federal F o od, Drug, and Cosmetic Act.

04-1252 7The distric t court held a Mark man hearing and iss ued a Claim Construction Order. In construing t w o disputed claim terms 7 of the ' 493 patent, the district court ruled that the term "in a stabiliz ing a m ount" in cl aim 1 was not a limitation, but merely described t he intended results of using oc t o xynol 40 in an "amo unt between 0.001% and 1.0% wt/vol." '493 patent, col. 8, li ne 55. The claim term makes clear that combinin g the recited ingredient s in the claimed weigh t to volume ratio will stabilize th e compound. Syntex moved for summary judgment of infringement based upon the court's specific claim construction. Apotex did not oppose Syntex's mot i on. The d i strict court compared the claims of the '493 patent with the drug formulation and uses set forth in Apotex's ANDA 76-109 application and determi ned that there was no factual dispute. The district court found that the generic ver s ion of ACULAR identified in the ANDA 76- 109 submission would infringe each claim of the '493 pat ent, and granted Syntex's motion for partial summary judgment that Apotex had literally infringed each claim of the '493 patent. After a bench trial on the issues of invalid ity and unenforceablity, the district court restated its determination that Apotex's proposed gen eric version of ACUL A R infringe d all of the claims of the '493 patent. The district court f ound that ACULAR is coextens iv e with the method claims of t he '493 patent. The district court also determined that Apotex's proposed generic drug is v i rtually identical to ACULAR in its composition, preservative system, and intended uses. On t he basis of thes e findings, the distric t court reiterated that the formulation defined by ANDA 76-109 direc t ly infringed claims 1-

7 The district court's conclusion that the claim t e rm "antimicrobially effective" is not a claim limitation is not being appealed.

04-1252 86, 8-13, and 15-16 of the '493 pat ent. The district court furt her stated that claims 7 and 14 were infringed under the doctrine of equiv a lents. 8
The district court held that the '493 patent was not invalid, rejecting Apot ex's invalidity ar guments based on obviousness. Mo reover, the district court conc luded that Syntex had overcome the PTO examiner's obvious nes s objection by making a showing that the prior art taught away from the us e of octoxynol 40 in ophthalmic solutions containing BAC and NSAIDs, a nd that the use of oct o xynol 40 generated unexpected results. The district court also found that the substantial succ ess of ACULAR on the market confirmed that the '493 patent claims were non-obvious. Finally, the district court found no inequit able conduct. The court re jected Apotex's c ont entions that Syntex had affirmatively mis r epresented the unexpecte d nature of octoxynol 40's ability to stabiliz e the KT/BAC combinatio n by delibe r at ely withh olding test results concerning the ability of octoxynol 12.5 to acc o mplish the sa me objectives as the claimed surfactant. The distric t court found that the test re sults concerning octoxynol 12. 5 were not material, and that Syntex lacked intent to deceive the PTO. Apotex appeals the district court's claim construction ruling, it s judgment of infringement, its non-obviousness determi nat ion, and its findi ng of no inequitable conduct. We have jurisdiction pursuant to 28 U.S.C. § 1295(a )(1).

8 Claims 7 and 14, the dist rict court observed, specified a sodium c h loride concentration of 0.79%. The ANDA formulati on contains 0.8% sodi um chloride. The court concluded this minor difference would not permit the ANDA formulation to escape infringement under the doctrine of equivalents.

04-1252 9DISCUSSI ON
A. Standard of Review This court reviews de novo the grant of summary judg ment. Genzyme Cor p . v. Transkaryotic Therapies, Inc. , 346 F.3d 1094, 1096 (Fed. Cir. 2003). Summary judgment is appropriate when there are no genuine issues of material fact and the moving par ty is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc

. , 477 U.S. 242, 247-48 (1986). A determination of patent infringement consists of two step s: (1) the court must first interpret the claim, and (2) it must then compare the properly construed claims to the alleg edly infringing devic e. See Cybor Corp. v. F AS Techs., Inc. , 138 F.3d 1448, 1454 (Fed. Cir. 1998) (en banc). Claim cons truction, the first step, is a matte r of la w that this court reviews de novo . Id. at 1456. Generally, the second s t ep is a factual question that we review for clear error. Bai v. L & L Wings, Inc. , 160 F.3d 1350, 1353 (Fed. Cir. 1998). However, factual inferences that are material to the grant of a summary judgment are not accorded such deference—they are reviewed to ascertain whet her there is a genuine issue of material fact. Leme l son v. TRW, Inc. , 760 F.2d 1254, 1260 (Fed. Cir. 1985). This court reviews for clear error the dist rict court's determinat ion of the factual inquiries underlying obviousne ss , while it reviews de novo the legal conclusion that a claim is invalid as obvious. Mc Neil-PPC, I n c. v. L. Perrigo Co. , 337 F.3d 1362, 1368 (Fed. Cir. 2003), cert. denied , 540 U.S. 1107 (2004). Th e factual determinations relevant to the obviousness inquiry include: (1) the scope and content of the prior art; (2) the differences between the claimed inv ention and the prior art; (3) the level of ordinary sk ill in the ar t; and (4) secondary cons iderations, if any, such as c o mmercial

04-1252 10success, unexpected results, c opying, long-felt but unresolv ed need, and the failure of others to develop the inventio n. Graham v. John Deer e Co. , 282 U.S. 1, 17-18 (1966). "What the prior art teaches, wh ether it teaches away from the claimed inv ention, and whether it motivates a combinat ion of teac hi ngs from different references ar e questions of fact." In re Fulton , 391 F.3d 1195, 1199-1200 (Fed. Cir. 2004). A finding of inequitable conduct is committe d to the trial judge' s discretion and is reviewed under an abuse of discr etion standard. Kingsdown M ed. Consult ants, Ltd. v. Hollister, Inc. , 863 F.2d 867, 876 (Fed. Cir. 1988). "T o overturn such a determination, the appellant must estab lis h that the ruling is based on clearly erroneous fin d ings of fact or on a misapplication or misint erpretation of applicable law, or evidenc es a clear error of judgment on the part of the district court." Mo lins PLC v. Textron, Inc. , 48 F.3d 1172, 1178 (Fed. Cir. 1995) (citing Kings down Medical Consultants , 863 F.2d at 876. Findings of materiality and intent are factual findings subject to the clearly erroneous standard a nd, therefore, will not be disturbe d on ap pe al un less t h is court h a s a defin ite and firm conviction that a mist ake has been committed. Id.
B. Cla im Con s truction Apotex challenges the district court's claim construction on the ground that the term "in a stabiliz ing amount" should prop e r ly be read as a cla i m limitation. We agree with the district court that the term "in a stabiliz ing am ount" simply describes the intended result of using the weight to volume ratios reci ted in the claims. Ac cordingly ,
we conc lude that the district court correct l y construed the dis p uted term of the '493 patent and correctly determined that Apotex's proposed generic version of ACULAR

04-1252 11would infringe all of the claims of the '493 patent. We now turn to Apotex's assertions of invalidity and unenforceability. C. Obviousness On appeal, the critical issue is whether the use of the su rfactant octoxyno l 40 in the claimed formulations is an obvious altera tion of similar formulations taught in the prior art. Because the distri ct court cl early erred in its fact findings regarding obvious nes s, we remand for fu rther consideration. At trial, Apotex argue d that based on the prior art, a person of ordinary skill in the art would expect to succeed in stabilizing a formulation containing an NSAID and BAC with a nonionic surfactant. Cont ending that the formulation claim ed in the '493 patent is just such a formulation, Apotex ar gued that it is legally obvious. After conducting a bench trial, the district c ourt made factual findings pertaining to the issue of obviousness. The district court noted that because the prior art at issue had been before the e x aminer during prosecut ion, the burden of proving the challenged claims obvious "is particularly high." Syntex (U.S.A.) L L C v. Apotex , Inc. , No. 01-CV2214, slip op. at 40, (Dec. 29, 2003). The tr ial court then concluded that Apotex ha d failed to m eet this heightened burden. In par ticular, the court held that nonobviousness was demonstrated by the fact that octo xynol 4 0 had nev e r been used in a dru g formulation; there was no motiv a tion to comb ine the prior art references, which teac h away from the use of the surf actant octoxy nol 40; that the use of octoxynol 40 in the claimed formulation produced unexpected re sults; and that Syntex had provided convinc i ng evidence of t he commercial success of A CULAR, the product purportedly covered by claims of the '493 patent. Syntex , slip op. at 45.

04-1252 12Our review of the record reveals clear erro r by the district court in several of the grounds that led it to conclude that the invention claimed by the claims in suit would not have been obvious. First, the court clearly erred in fi nding that "[n]o pharmaceutica l formulation other than ACULAR has ever in cluded Octoxynol 40." Second, the court clearly erred in discus s ing the McCutcheon reference and in finding that each of the Waterbury, Gilbert, and Han references teach away from the use of octoxyn o l 40 in the claimed formulations. Further, the court wa s under the impression that, in the absence of evidenc e that those references teach away from combination, there was a failure o f proof that there would have been any motivati on by one of ordinary skill in the art to use octoxynol 40 in the claimed formulations. In so concluding, the district court failed to examine the expert testimony of Dr. Mitra on the ques tion of whether one of ordinary skill in the art would have deeme d the inven t i on obviou s , and as a subset of the overall obvious nes s question, whether octoxynol 40 produced t he unexpected results asserted by Syntex. In addition, we think the dist rict court failed to appreciate that the prosecution history of the re levant patents, while not est ablishing inequitable conduc t, casts some doubt on the final examiner' s conclusion that th e claimed surfactant produces unexpected results sufficient to ov er come a prima facie case of obviousness

. Finally, we feel the district court should reconsider the si gnificance of the commercial success of the patent ed formulation in light of our rec e nt decis ion in Merck & Co. v. Teva Phar maceuticals. USA, Inc. , 395 F.3d 1364 (Fed. Cir. 2005). On remand, the district court's reconsi deration of the obviousness issue should proceed in light of our co rrections of the record.

04-1252 131. Use of Octoxynol 40 in Pharmaceuticals The district court erred in f i nding th at octoxynol 40 was not used in pharmaceuticals prior to its use in the pat ented invention. This finding is clearly contradicted by statements in the record m ade by Lidgate and F u , in ventor s of the '49 3 patent. Lidgate and F u are both named authors of a Pharmaceutical Report published in September of 1987, t hat clearly states that octoxyno l 40 was a well kn own ingredient in pharmaceutical products. Although Syntex contends that because this report was published five days after the priority date of the '493 pat ent it discloses no "prior uses" of octoxyno l 40, we thin k it incr edulous that octoxynol 40 c ould progress from no use, to "well known . . . in pharmaceutical products" in a matter of five days. Accordingly, this report reflects that the use of octoxynol 40 in pharmaceutical compositions was know n in the art at the relevant time, an import ant fact to consider in assessing the obvious nes s of the claims in suit.
2. Teaching Away The district court clearly erred in conclu ding that the Waterbur y, H an, and Gilbert references teach away from the use of oc toxynol 40 as a nonion ic su rfactant in ophthalmic formulations involv ing NSAIDs and BA C. In addition, the district court incorrectly dismissed the relevance of the McCutcheon reference to the overall obvious nes s analysis. What a reference teaches or suggests must be examined in the context of the knowledge, skill, and reas oning abil ity of a sk illed artisan. What a reference teaches a person of ordinary sk ill is not, as Syntex's e x pert appears to believe, limited to w hat a reference specific ally "talk s about" or w hat is specifically "mentioned" or “written” in the reference. Under the pr oper legal standard, a reference

04-1252 14will teach away when it suggests that the developments flowin g from its disclosures are unlik ely to produce the objecti ve of the applicant's in vention. In re Gurley , 27 F.3d 551, 553 (Fed. Cir. 1994). A statement that a particular combi nation is not a preferred embodiment does not teach away absent c l ear discouragement of that combination. In re Fulton , 391 F.3d at 1199-1200. The trial c o urt found that the Waterbury re ference teaches away from the use of octoxynol 40 becaus e the only formulation di sclosed in the patent did not include a surfactant, and the only surfacta nt mentioned in the referenc e was polysorbate 80. This is error because a prior art reference that does not specifically refer to one element of a combination does not, per se, teach away. If it did, only references that anticipate could be used to support an obviousness analysis. However, prior art references that ar e capable of rendering an invent ion obvious under a section 103 analysis are not limited to reference that also anticipat e the patent at issue. The trial court's finding that Waterbury teaches away is also error because at col. 13, ll. 44-48, Waterbury disclos es "ophthalmic formulati ons" with "active ingredient . . . stabilizer, and preservative." The Han r e ference was deemed to teach a w ay because, although it disclos ed the use of NSAIDs, BAC, and nonionic sur f actants in ophthalmic formulations, col. 3, Example 1, the nonionic surfactants it menti oned did not include oct o xynol 40. This was error, because Han teaches NSAIDs, BAC, and nonion ic surfactants. As with the Waterbury reference, the fact that octo xynol 40 was not one of the surfactants mentioned does not, without more, support the contention that the use of octoxynol 40 is nonobv ious.

04-1252 15Gilbert, according to the district court, t eaches away because it "states exp licit ly that a stabi lizer is not preferred." Syntex , slip op. at 35. This is error because although the preferred embodiment of Gilbert does not use a stabilizer, Gilbert disclos es at col. 3, ll. 11-22 ophthalmic formulation s that "opti onally . . . contain a stab iliz er." Gilbert also disclos es the combination of an NSAID, BAC, and a surfac tant, and disclos es a number of stabilize r s, of which at least some, acco rding to Apote x 's exp e rt Dr. Mitra, are nonionic surfactants. Finally, the district court disc ounted the significance of the McCutcheon’s reference to the us e of octoxynol 40 bec ause although it identif i ed octoxy nol 40 as an emulsifier and a stabilizer, it did not describe the use of oc toxynol 40 in phar maceuticals and indic a ted that it had other uses. Mc Cutcheon's cannot be so lightly overlooked, because, as noted above, the record shows that octoxynol 40 was previously used in pharmaceuticals. On remand, the dis t rict court should reevalu a te the importance of these references with the understand ing that they provide material disclos ure and do not teach away

. 3. Apotex's Expert Testimony The distric t court, in concluding that the cited references teach away f r om combination, further found that the evidenc e produced no motivation to combine. While the question of whether to combine McCutc heon's with other references is a live issue on remand, there is another focus that needs to be appreciat ed to fully explore the obvious nes s issue.

04-1252 16As the district court appreciated, the bar e question of whether it would hav e been obvious to substitute one s u rfactant for another misplaces the proper focus on th e obvious nes s of the invention as a whole, and likely invites hinds i ght conclus i on, forbidden by our precedent. See Gillette Co. v. S.C. Johnson & Son., Inc. , 919 F.2d 720, 724-25 (Fed. Cir. 1990). Apotex's expert testimony, however, cann ot be lightly disregarded on the t h eory that Dr. Mitra only sought to show the ob viousness of substituting octoxy nol 40 for another surfactant. Mitra's te stimony may be relevant on an other level, which is the very point on which the examiner conclud ed that the otherwise suspect inv ention was non-obvious. Mitra's testimony has to be cons idered as well on the point of whether the results produced by use of oc t o xynol 40 are sufficiently une xpected as t o secure t h e validity of the claims in suit. In this case, Apotex's exp e rt provided his th eory of why a person of skill in the art would not have found it unusual to seek, find, and employ octoxynol 40 in making formulations such as those claimed in the '493 patent. Dr. Mi tra explained that the references at issue informed a scientis t to use water-soluble, micelle-forming, 9 nonionic

9 A micelle-forming compound has a hydr ophilic side (water-loving) and a hydrophobic side (water-hating) . When bound together in such a manner that they form a surface, the two sided natur e of such compounds enable t hem to form little bubbles, known as micelles. When the micelle is form ed such that the hydr ophilic side is on t h e outside of the bubble and the hydrophobic side is on the inside of the bubble, a sufficiently large micelle can encapsulate hy drophobic co mpounds inside the bubble. A micelle formed in this manner can enable ot her wise ins o luble compounds to dissolv e in water.

04-1252 17surfactants act as stabilizers in a KT/BAC ophthalmic formulation. 10 H e a l s o s e t f o r t h a scientific rationale for the informed selection of certain nonionic surfac tants, and testified that octoxy nol 40 was k nown and used in many prod ucts, including cosmetics. 11 D r

. Mitra also opined that knowledg e of the c h emical qualities of sur f actants useful to the claimed s u bject matter would c ause a pers on, "as a matter of science" to "go into another nonionic surfactant lik e octoxynols." To be clear, we do not require that the district court cr edit all (or any) of this testimony. On remand, however , the district court should c onsider Apotex's claim of obvious nes s in light of the applic able legal principles and unencumbered by the factual errors identified above.

10 In his Ex pert Report, Dr. Mitra st ated that "[t]he Wa terbury '151 patent shows that the non-ionic surfactant polysor bate 80 solubilizes BAC. Therefore, one would expect that other non- ionic surfactants such as octoxynol 40, function as a surfactant." Dr. Mitr a also stated that [b]y the time of the cl aimed inve ntion on or before 1987, one of ordinar y skill in the art of ophthalmic p harmaceutical formulations wou l d hav e known that . . . . non-ionic surfac tants, such as polys orbate 80, were used in ophthalmic formul a tions as a surface active agent as a solubilizer, to increase s p reading and to reduce surf ace tension. Octoxynol 40 was known as a non-ionic surfactant as shown by Grant & Hackh's Chemical Dictionary – Fifth Edition, McGraw-Hill, 1987 and GAF product brochures.

11 Dr. Mitra concluded t hat "[t]he Waterbury '151 patent shows that the nonionic surfac tant polysorbate 80 so lubilizes BAC. Therefore, one would e x pec t that other non-ionic surfactants would work equally well an d one would thus look to other patents/publications which show that other non-ionic surfact ants such as octoxynol 40, function as a surfactant." Dr. Mitra so concluded bec ause the stabiliz er disclosed in Waterbury, polys orbate 80, wa s a water-soluble, mice lle-fo rming, nonionic s u rfactant. Dr. Mitra opined that since oc toxynol 40 is also a wa ter-soluble, micelle-forming, nonionic s u rfactant, both compounds are capabl e of solubiliz ing the KT/BAC complex by encapsulation.

04-1252 184. The Prosec ution History The prosecution history makes clear that the PTO in itially believed a person o f ordinary skill in the art would know to us e a nonion ic surfactant that possessed the qualities of octox y nol 40 in the claimed formulation. In an Office Action dated April 28, 1989, the examiner rejected claims in t he '173 parent application directed to the formulation containing octoxy nol 40 becaus e "it is known to us e nonionic s u rfactants." In particular, the examiner stated: "The mere substitution of one nonionic [surfactant] for another, that is, [octoxynol 40] for the nonioni c of the primary reference is not deemed a patentable distinction in the absenc e of some unobvious result." Syntex res ponded to this rejection by pr oviding data from a test comparing the efficacy of octoxy nol 40, polys orbate 80, and myrj 52, purportedly demonstrating unexpected results. T he PTO examiner deemed this showing ins u fficient: It has not been shown that the claimed nonionics prov ide any unexpected results over the nonionics of the primary references . The data at page 5 of the response shows only that "o ctoxy nol 40" gave somewhat better results than some conventional nonionic s u rfactants. Howev e r, these data do not compare "octoxynol 40" to the nonionics of the primary references. Furthermore the conc entrations of the Octoxynol 40 is [sic] greater than that of the other nonionic surfactants. Therefore, no conclus i on can be drawn from said data . Also the showing is not commensurate with the claims which, exc ept for claims 8, 9, and 13, recite no propor tions and broadly set forth the NSAID, quarte rnary ammonium preservative and polyoxyethylatedoctylphenol surfact ant. Finally, the data (1) do not specify the amount of the NSAID and (2 ) are not in declaration form. The response therefore does not overcome the rejection. (Emphases added). The '173 parent applic ation was ultimately abandoned. The '027 c ontinuation application was assi gned to a different PTO examiner. In an Office Action dated February 25, 19 91, the n e w examiner entered the sam e rejection, restating, verbatim, that: "The mere substitution of one nonionic [surfactant]

04-1252 19for another, that is, [octoxynol 40] for the nonionic of the primary reference is not deemed a patentable distincti on in the absence of some unobvious result." Syntex res ponded by stating t hat it had "shown in the prosecution of the parent to this applic ation [the ' 173 parent application] that ot her nonionic surfactants, such as [polysorbate 80] and myrj, fail to act as st abilizers in the claimed formulations." This statement contradicted the expr ess finding of the init ia l PTO examiner that Syntex's earlier data failed to show unexpected resu lts. Whether the second examiner was aware of the earlier rejection of Syntex's claims is unknown. But the relevance of the incons istency between the views of two examiners is not insignific ant. Syntex supported its view of unexpected results wit h the Lidgate Declaration, which contained test data purporting to dem onstrate the unexpected superiority of octoxynol 40 in c o mparison to other octoxynols. The appl icant 's declaration averred that octoxynol 40 is s a tisfactory for use in the claimed formulati on while octoxynols 3 and 5 are unsatisfactory. The Lidgate Declaration, however, omitted data s h owing that octoxynol 40 did not "outperform other surfac tants." The rec o rd shows that Syntex knew that, when compared, octoxynol 12. 5 and octoxynol 40 produced test sampl e s that "looked equiv a lent at all temperatures." In addition, t he '493 patent itself discuss ed the use of a shorter chain oc t o xynol, oct o xynol 10, in the disclosed formulations. Although we conc lude, later in this opinion, that Synt ex did not commit inequitable conduct as charged ( notably, A potex never asserted that Syntex's arguments to the second examiner are suspect), we think the unv arnished view of the prosecution history shows some weakness in the conclus i on that the patentee established unexpect ed results for the claimed surfactant.

04-1252 20While we recognize that an is sued patent is e n titl ed to the presumption of validity, 35 U.S.C. § 282, and t hat a challenger's burden to show inv a lidit y is more difficult to satisfy when pr ior art references have been presented to the PTO, Bausch & Lomb, Inc. v. Barnes -Hind/Hydr ocurve, Inc. , 796 F.2d 443, 447 (Fed. Cir. 1986), we think this case is unus ual becaus e certain key facts existed that give rise to some doubt as to the strength of the factual propo sition that octoxynol 40 in deed produced unexpected results. With full respect for th e general propositions that the issued patent is entitled to a presumption of validity, and that the examiners are ex pecte d to perform reasonably , see Baus ch & Lomb , 796 F.2d at 447 (we assume that the patent examin er has some ex pertise in interpre ting the references and some fami liarity with the level of skill in the art), on re mand the district court should r e view the f ile histor y as part of its assessment of whether the invention claime d by the claims in suit are nonobvious. 5. Commercial Success Given the error in its fact finding, the di strict court should also reevaluat e its analys is of the secondary cons iderations. The district c ourt appeared to rely heavily on the commercial success of ACUL AR. As discussed in Merck , th e secondary consideration of com m ercial suc c ess exists largely to provide a means for patentees to show in c l ose cases that subject matter that appears obvious is in law unobv ious because a high degree of com m ercial success per mits the in f e rence that others have tried and failed to reach a solut i on. Merck , 395 F.3d at 1376. In Merck , we held that evidenc e of commercial success resulted in a particular l y weak inference bec ause prior art patents prevented other s from competing to reach t he solution embodied in the claims at issue. 395 F.3d at 1376-77.

04-1252 21Based on the record, we are of the view th at the district court should consider the impact of the Merck analys is on this case. Assuming that the active ingredient in the formulation was previously patented, the commercial success of ACULAR may heavily derive from subject matter that does not on the whole contribut e to the patentable distinctiveness of these claims. In such a case, the tri a l court should carefully cons ider whether the nexus requi rement of our law is satisfied. See I n r e H u a n g , 100 F.3d 135 (Fed. Cir. 1996).
D. Inequitable Conduct This court has held that a breach of t he duti e s of candor, good faith, and honesty when pros ecuting pat ent applications consti tutes inequitable conduct. Molins PLC , 48 F.3d at 1178. "[I]ne quitable conduct duri ng the prosecution of a patent application renders the subsequently issued patent unenforceable." Life T e chs., Inc. v. Clontec h Lab., Inc. , 224 F.3d 1320, 1324 (Fed. Cir. 2000). A ffirmative misrepresentations of a material fact coupled with an intent to decei ve can constitute inequitable conduct. See Molins , 48 F.3d at 1178. "Mat eriality and intent to deceive ar e distinct factual inquiries , and eac h must be shown by clear and convincing evidence." Life Techs. , 224 F.3d at 1324. Prior to March 16, 1992, this court " held that materiality for purposes of an inequitable conduct determinati on required a showing that 'a reasonable examiner would hav e consider ed such [dat a] important in deciding wh ether to allow the patent

04-1252 22application. '" 12 Dayco Prods., Inc. v

. Total Containment, Inc. , 329 F.3d 1358, 1363 (Fed. Cir. 2003). In making the ultimate determinat ion of inequitable c onduct, the trial court "must conduct a balancing test between the le vels of materiality and intent, with a greater showing of one factor allowing a less er showing of the other." Id. Apotex argues that Syntex's submissi on of the Lidgate Decl aration and the test results exc l uding data on octoxy nol 12.5 c ons tituted inequitable condu ct. The district court rejec t ed thi s argument fi nding the omi tt ed test re sul t s l a cki ng i n materi al i t y and finding no intent to deceive the PTO. The di strict court concluded that test results concerning octoxynol 12.5 were not material because (1) the purpose of the declaratio n was to show that not all octoxy nols would work, not that octoxynol 40 was the only octoxyno l t hat would stabiliz e the formulation; (2) octoxyn o l 5 was the clos est prior art mentioned by the examiner; and (3) the ' 493 patent discl osed the potential us e of octoxynol 10 as a surfactant thereby putting the e x aminer on notice that octoxynol 40 was not the only possible useful s u rfactant. The district court also c oncluded that Lidgat e, Freyber g, and Fu, the inventors of the '493 patent, lacked intent to deceive the PTO. The district court found the testimony of these individuals to be credibl e. It also found that Apote x failed to establish by clea r and convincing evidence that these indiv i duals breac hed their dut y of good faith and candor to the PTO.

12 The '027 applic ation was filed on December 7, 1990, and the '493 patent issued on May 5, 1992. In 1992, the rul e regarding the standard for materiality of disclos ures made to the PTO during prosecuti on changed. Bec a use the PTO issued its notice of allo wab ility regarding the Lidga te Declara t ion on December 3, 1991, the previous st andard was in effect at all relev ant points. Consequently , it is not necessary for us to address the import of thi s change in standard.

04-1252 23Credib ility determinations are the type of fa c t ual determinations that are best left to the fact finder, the trial court. Apotex poin ts to no evidence t hat the district court failed to consider Synt ex's conduct, but rath er asks us to replace the court's credibilit y determinations with our own. We decline t o do so and find no c l ear error in the district court's finding of no intent to deceive. The withheld test results showing that octoxynol 12.5 was capable of stabilizing the KT/BAC formulation, while material to Lidgate's statem ent that octoxy nol 40 wa s generally superior to other octoxynols in st abilizing the KT/BAC formulation, was not sufficiently material to overcome t he insufficient showing of intent. Given that both materiality and intent must be found and that t here was no c l ear error in the district court's fi nding of intent, the determinati on of no inequitable conduct is affirmed.
E. Infringement Analysis Since we reverse the district cour t's finding that the '493 patent is nonobv ious , we do not reach the question of whether Apotex's submission of an ANDA for a generic v e rsion of ACULAR co nstitutes an act of patent infringement under 35 U.S.C. § 271(e). CONCLUS ION We affirm the district c ourt's determination that ther e was no inequitable conduct in the prosecution of the '493 patent. We also affirm the dist rict court's claim interpretation. However, because the district court committed cl ear error in the findings underlying its determination of nonobviousness, we reverse t he court's nonobviousness

04-1252 24determination and remand that issue to the dist rict court for further consideration of obvious nes s. Accordingly, the judgm ent of the district court is AFFIRMED-IN-PART, REV E RS E D -I N-PART AND REM A NDED-IN-PART

. COSTS Each party shall bear its own costs.

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## United States Court of Appeals for the Federal Circuit

04-1252
SYNTEX (U.S.A.) LLC and ALLERGAN, INC., Plaintiffs-Appellees,

v. APOTEX, INC., APOTEX CORP., and NOVEX PHARMA,

Defendants-Appellants.

PROST, Circuit Judge , concurring. I agree with the majority’s well-reasoned anal yses with respect to almost all of issues raised in this case, as well as the ma jority’s decision to remand this case to the district court for reconsideration of whether the ’493 patent is invalid for obviousness. I write separately only to point out my disagreement with one particu lar portion of the majority’s opinion. I respectfully disagree with the opinion’s focus on the proceedings at the Patent and Trademark Office (“PTO”) when analyzing whether the district court correctly found that the claimed ophthalmic formulation pr oduced unexpected results. The majority analyzes the prosecution hist ory of the ’493 patent, pointing out an “inconsistency between the views of two examiners” in t he parent and continuation applications and a statement during prosecution t hat the majority believes “cont radicted the express finding of the initial PT O examiner.” Ante , at 20. In light of thes e aspects of the prosecution history, the majority concludes that “this ca se is unusual because key facts existed thatgive rise to some doubt as to the strength of the factual propositi on that octoxynol 40 indeed produced unexpected results” and instructs t he district court to “review the file history as part of its assessment of whether the inv ention claimed by the claims in suit are nonobvious.” Ante , at 21. Thus, the majority require s that the district court analyze the views of separate exami ners at the PTO and review st atements made by the patent prosecutor for possible mischaracteriza tions of the prosecution history. I view this investigation into the prosec ution history as problematic in several respects. First, this investigation shifts the focus from the appropriate question for the district court to address on remand: whether the evidence shows the ’493 patent claims an ophthalmic formulation that produced unexpect ed results. Next, as the majority concedes, ante , at 20, Apotex never asserted that Syntex’s arguments to the second examiner concerning the pr osecution history are suspect. Moreover, had Apotex asserted that these arguments were suspect, I believe the assertion would be relevant to the issue of inequitable conduct and not obvious ness. In this rega rd, I don’t view the statement referred to by the majority as a clear mischaracterization of the prosecution history. And the patent pros ecutor likely believed the prev ious data submitted to the first examiner did show unexpec ted results even if the first examiner believed the data did not. I also find it hard to believe that the second examiner was somehow duped into thinking that the first ex aminer agreed that the prev ious data showed unexpected results even if the statement could be understood to be misleading. In general, I fail to see how the conduct of a patent applicant is relevant to an obviousness determination. Alleged misconduc t at the PTO, in terms of either mischaracterizations or omissions, goes to the heart of an inequitable conduct inquiry

04-1252 2but is simply irrelevant to an obviousness inqui ry. That is not to say that if evidence showing that a claimed invention does not produce unexpected results was not disclosed to the PTO then that evidence should not be considered by the district court in its obviousness analysis. On the contrary, a district court should consider evidence relevant to an obviousness analysis even if that evidence is not disclosed to the PTO. In sum, I believe that, here, the district court should address the evidence in the record to determine whether the claim ed ophthalmic formulation showed unexpected results. For example, the di strict court should review all of Lidgate’s test results, including test results not disclosed to the PTO such as the comparison of octoxynol 12.5 with octoxynol 40, as well as Dr. Mitra’s reasons to discredit some of those test results. In my view, however, there is nothing so unus ual about this case as to compel the district court on remand to review all eged misconduct by the patent applicant at the PTO.

04-1252 3