Source: https://www.ocipla.org/district-court-ptab-happenings-march-2018/
Timestamp: 2019-01-20 22:23:20
Document Index: 223058078

Matched Legal Cases: ['§ 102', '§ 314', '§ 325', '§ 314', '§42', '§ 262']

District Court & PTAB Happenings – March 2018 | OCIPLA
W.D. Tex. Court Finds Kimble Inapplicable to Royalties Based on a Foreign Patent; Enforces License
by Andrew Ford Schwerin, Akin Gump
In a dispute over a worldwide license agreement for elliptical machines, the court found enforceable a provision that required royalty payments after the expiration of U.S. patents, but before the expiration of a Chinese patent. Judge Lamberth, sitting with the Western District of Texas, issued the memorandum opinion on January 19, 2018.
The parties, Nautilus, Inc. (“Nautilus”) and Icon Health & Fitness, Inc. (“Icon”), are both exercise-equipment companies. Nautilus gave Icon a license to use its U.S. and foreign patented technology in Icon’s elliptical machines. In the agreement, Icon received a nonexclusive license in exchange for a five-percent royalty on gross sales of “Products” (elliptical machines that fall within the scope of one or more licensed patents). On January 25, 2015, all of the patents licensed under the license had expired except for one—Nautilus’s Chinese patent. Icon made some payments after the January 2015 expiration date, but ultimately took the position that its devices that were manufactured and partially assembled in China were not “Products” under the license. Nautilus sued to enforce the license. This teed up the issue that touched on the Supreme Court’s 2015 decision in Kimble v. Marvel Entm’t. LLC, 135 S. Ct. 2401, 2415 (2015): Could the court enforce royalties owed on “Products” that were imported into the United States after the expiration of a U.S. patent, but made in China under a nonexpired Chinese patent?
Before analyzing royalties, the court had to determine whether the products actually infringed the Chinese patent under Chinese law, as was required by the license agreement. The Chinese patent covered the final assembled product— the individual components and the structural relationships between them—but, Icon manufactured unassembled machines that were subsequently assembled in the United States by customers using a provided instruction manual. The court ruled that, under Chinese law providing the instruction manual was equivalent to providing the structural relationship between the parts. This meant that the devices infringed under Chinese law and, accordingly, were “Products” covered by the parties’ license.
Turning to the royalty issue, the court examined whether the royalty provision was enforceable when only the Chinese patent remained in effect. Brulotte v. Thys Co., which was recently upheld in Kimble, holds that contracts requiring the payment of royalties after the expiration of a U.S. patent are unenforceable. 379 U.S. 29, 32 (1964). Although the court observed that the Brulotte rule was a “bad rule,” the court acknowledged that it was bound to apply it and that the rule had recently been affirmed by Kimble on stare decisis grounds. As the court observed, however, Brulotte and Kimble still allow a licensor to contract for royalties post-expiration of its U.S. patents if the post-expiration royalties are tied to some separate right that exists independently of the expired patent. According to the court’s reasoning, such a separate, independent right could be provided by another unexpired patent.
The court looked to the 9th Circuit’s analysis in Zila, Inc. v. Tinnell, which the court found to be a “substantially similar” case. 502 F.3d 1014 (9th Cir. 2007). The Zila court found enforceable a royalty provision after the expiration of the licensed U.S. patents where a licensed Canadian patent was still in effect. It reasoned that Brulotte does not “[E]xtend its royalty-canceling powers to contracts for foreign patents . . . . Even if the principle announced in Brulotte were to obviate Zila’s obligation to pay royalties on the [American] patent once it expired, . . . it [does not] displace[] Zila’s obligation to pay royalties on the valid Canadian patent.” Id. at 1023-24.
Judge Lamberth “wholly agreed” with the Zila decision, and, accordingly, Nautilus prevailed. The court proceeded to find that the total damages owed was “at least $1,782,508,” including interest. Finally, the court found that, under the license, Nautilus was entitled to attorney’s fees.
Nautilus, Inc. v. Icon Health & Fitness, Inc., No. SA-16-CV-00080-RCL, 2018 U.S. Dist. LEXIS 9828 (W.D. Tex. Jan. 19, 2018)
Akin Gump Staff
Sanofi-Aventis LLC and Regeneron Pharmaceuticals (“Petitioners”) filed three separate requests for an inter partes review (IPR) of Immunex Corporation’s (“Patent Owner”) patent related to asthma and allergy treatment—U.S. Patent No. 8,679,487 (“the ’487 patent”). Petitioners’ first challenge, which was denied institution, contested whether the ’487 patent’s claims were anticipated because they were not entitled to the benefit of an earlier effective filing date. Petitioners’ second challenge, based on 35 U.S.C. § 102(e), was also denied institution. On July 31, 2017, Petitioners raised a third patent challenge, based on obviousness, for which the PTAB instituted IPR. This third bite at the institution apple is uncommon because the PTAB typically exercises its discretion to deny institution in similar instances. Indeed, the PTAB noted that it did not exercise its discretion due to the “unique facts” of the proceeding.
The PTAB has the discretion under § 314(a) to deny institution of an IPR for multiple follow-on petitions. The PTAB detailed seven factors in General Plastic Indus. Co. Ltd. v. Canon Kabushiki Kaisha, IPR2016-01357, Paper No. 19 (PTAB Sept. 6, 2017) (precedential) that it looks to “when determining whether to exercise that discretion.” The PTAB has previously exercised its discretion to deny so-called “follow-on petitions” that stage arguments in multiple petitions to use petitioner’s preliminary responses as a “roadmap” to gain institution. The General Plastic factors that the PTAB weighs are non-exhaustive and principally include:
whether, at the time of the second petition filing, the petitioner had received the patent owner’s preliminary response from the first petition.
The Patent Owner argued that Petitioners had not met the General Plastic factors because their petition challenged the same patent claims, Petitioners knew of the prior art references, and Petitioners had already received the Patent Owner’s preliminary response. Nonetheless, the PTAB declined to exercise its discretion to deny institution of the IPR.
The PTAB’s decision to not exercise its discretion turned on Petitioners’ belated discovery that the Patent Owner had endorsed two prior art methods for practicing a claim element in a parallel European Patent Office proceeding. Upon discovering this potentially invalidating art, Petitioners immediately hired experts to conduct testing. Petitioners then filed the third IPR petition only eight days after they completed testing. The PTAB determined that Petitioners’ efforts to investigate and complete testing on a matter not at issue in the two initial petitions was reasonable. Petitioners’ diligent actions stood in stark contrast to the disallowed practice from General Plastic wherein a petitioner “strategically stage[d] [its] prior art and arguments in multiple petitions, using [Patent Owner’s preliminary response] as a roadmap, until a ground is found that results in the grant of review.” IPR2016-01357, slip op. at 17.
Relatedly, the PTAB has discretion to decline IPR institution under 35 U.S.C. § 325(d) if “the same or substantially the same prior art or arguments previously were presented to the [Patent] Office.” The PTAB considered this threshold issue in this proceeding, and its analysis tracked the above § 314(a) reasoning. The PTAB determined that, because the patent examiner did not have Petitioners’ new testing evidence, the Patent Office had not considered the same prior art.
Ultimately, Petitioners demonstrated a reasonable likelihood that they would prevail on both of the unpatentability grounds. This case suggests that the PTAB may allow “follow-on” petitions in some cases if a Petitioner is diligent in filing the petition and has a reasonable basis for not raising the grounds in an earlier Petition..
by Rehan M. Safiullah, Akin Gump
In a recent order, the Patent Trial and Appeal Board (PTAB) granted Patent Owner’s request to seek a subpoena and cross-examine an office manager at the Internet Archives. The request relates to Petitioner’s submission of an affidavit from Mr. Butler to support its argument that certain prior art was publicly accessible based on the Internet Archives’ “Wayback Machine.” The “Wayback Machine” has archived billions of webpages over time, and is sometimes used in PTAB proceedings to argue that a webpage was publicly accessible as of the date it was archived. Patent Owner sought to cross-examine Mr. Butler on a variety of issues, which petitioner opposed.
The PTAB explained that a party can compel testimony under 37 CFR §42.25(a), but must be “very specific” as to the evidence it seeks and must show good cause. Additionally, any showing by Patent Owner that it is entitled to such relief must be balanced with the “significant inconvenience” to an uninterested third-party witness, such as Mr. Butler.
Patent Owner offered four factual bases for seeking to cross-examine Mr. Butler and met its burden on three. The PTAB rejected the first basis, in which Patent Owner argued that certain pages were not authentic based on the lack of footers. The PTAB stated that Patent Owner was essentially accusing someone of wrongdoing and that such a showing had not been made. But the PTAB permitted Patent Owner to cross-examine Mr. Butler on (1) his knowledge of the dates of image files subsumed within a webpage, (2) the particular hyperlink that Mr. Butler selected to arrive at the archived webpage, and (3) his personal knowledge of the statements in his affidavit.
The PTAB nonetheless “cautioned that cross-examination that deviates from the underlying basis for the narrow subject matter set forth in Mr. Butler’s Affidavit . . . will not be tolerated.” Order at 7. The PTAB also limited cross-examination to two hours, limited re-direct to one hour, and limited the use of cross-examination testimony to credibility and weight of evidence (as opposed to admissibility).
Coastal Indus., Inc. v. Shower Enclosures Am., Inc., IPR2017-00573, Paper No. 27 (PTAB Feb. 20, 2018)).
In a Report and Recommendation issued December 7, 2017, Magistrate Judge Burke in the District of Delaware recommended that Amgen’s BPCIA complaint for infringement against Coherus Biosciences Inc. be dismissed with prejudice on the ground that prosecution history estoppel barred Amgen from bringing claims for infringement under the doctrine of equivalents.
In August 2016, Coherus filed an abbreviated Biologics License Application (aBLA), seeking Food and Drug Administration approval to market a biosimilar form of Amgen’s pegfilgrastim product, Neulasta®. Pegfilgrastim is a modified form of granulocyte colony stimulating factor that promotes the creation of white blood cells. After Coherus filed its aBLA, Amgen and Coherus engaged in the exchange of information dictated by the BPCIA, i.e., “the patent dance,” and ultimately agreed–pursuant to 42 U.S.C. § 262(l)(6)(A)–that a single Amgen patent, U.S. Patent No. 8,273,707 (the “’707 patent”), would be included in the lawsuit.
The ’707 patent generally discloses a process for purifying proteins by using column chromatography to separate the proteins of interest from other components. The methods of the ’707 patent include treating the protein mixture with a combination of salts prior to filtering on the column. Critically, both of the independent claims of the ’707 patent require the use of a combination of salts in the loading solution, which must be selected from one of citrate and sulfate, citrate and acetate, or sulfate and acetate.
The salt combination limitations were added by amendment to the claims of the ’707 patent during patent prosecution after Amgen’s claims were rejected as obvious in view of a single reference, Holtz. Holtz was described as teaching a method for purifying a protein by column chromatography; it also discloses salts, such as the citrate, sulfate and acetate salts for use in protein purification. To overcome the obviousness rejection, Amgen argued that Holtz failed to teach combinations of salts to increase the dynamic capacity of a purification column, let alone the “particular combinations of salts recited in the pending claims.” (emphasis in original). Following a second rejection based on Holtz, Amgen reiterated this distinction and submitted a declaration from one of its named inventors to further support its position. Amgen’s claims were subsequently granted.
However, the manufacturing process set forth by Coherus for its biosimilar pegfilgrastim product utilized a different combination of salts not claimed by the ’707 patent. As a result, Amgen was forced to assert infringement under the doctrine of equivalents theory. In its motion to dismiss, Coherus argued that Amgen was foreclosed from arguing equivalence by virtue of prosecution history estoppel. More specifically, Coherus argued that, by narrowing its claims during prosecution to include only the three disclosed salt combinations, Amgen disavowed alternative combinations.
On review, the court found that Amgen clearly and unmistakably surrendered processes using combinations of salts other than those specifically identified in the claims of the ’707 patent. In so doing, the court acknowledged that, had Amgen distinguished its claims from Holtz based solely on the use of a combination of salts, as opposed to the use of a single salt, then no estoppel would apply. But in light of Amgen’s repeated emphasis that its particular combinations of salts provided enhanced benefits over the prior art, including through an inventor declaration that described test results for those particular salt combinations, Amgen was barred from arguing that its claims could reach further.