Patent Baristas

The big news this week was that biotechnology was the hottest sector in venture capital in the first quarter of this year. A report out Monday by the National Venture Capital Association, which published the study together with PricewaterhouseCoopers based on data from Thomson Financial, showed that investors poured $7.1 billion into 778 deals. Overall, life sciences businesses received 36 percent of the total dollars for the quarter.

A whopping $1.5 billion went into 102 biotech deals, the single largest investment in a sector, unseating software as king of the venture pot. Medical device deals set a record of $1.08 billion for 96 deals, a 60 percent increase from the amount of funding in the fourth quarter of 2006. The study highlights the fact that an aging population will bring a resulting increase in interest in both medical devices and and biotech research.

Later Stage investing also jumped in the quarter to the highest dollar level since the fourth quarter of 2000 reflecting the fact that biotech and medical device companies require a substantial amount of capital to get through the regulatory process.

Not everybody saw the quarter as a gold rush. Funding dollars for Seed and Early Stage companies declined 30 percent in Q1 to $1.1 billion in 259 companies, a 26 percent decline in deals. Although, the overall spread showed that Seed/Early Stage companies accounted for 33 percent of the deal volume; Expansion Stage for 35 percent; and Later Stage for 32 percent. The results were also skewed geographically with all of the Midwest receiving $233 million (4.08%) compared to the $2.16 billion (37.73%) going to Silicon Valley alone.

The survey excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in-kind and venture leasing. See the report at MoneyTree Report.

In 2001, AstraZeneca filed suit in the US against against several pharmaceutical companies that were seeking permission from the Food and Drug Administration (FDA) to market generic versions of Prilosec, Astra’s gastric acid inhibiting drug, for infringement of a patent directed to a process for making an omeprazole formulation.

Andrx filed counterclaims of non-infringement, invalidity and unenforceability for inequitable conduct during prosecution of the ‘281 patent. Andrx also asserted that the process patent as well as two formulation patents, U.S. Patent Nos. 4,786,505 (the ’505 patent) and 4,853,230 (the ’230 patent), were unenforceable for alleged litigation misconduct by AstraZeneca.

The matter was tried in the U.S. District Court for the Southern District of New York along with the consolidated claims of three other ANDA applicants. In October 2002, the District Court entered an order and an opinion finding that Astra’s ‘505 and ‘230 patents are valid and that the generic versions of Prilosec developed by Andrx infringe those patents. On December 11, 2003, the Federal Circuit Court of Appeals affirmed the lower court’s opinion that Astra’s patents are valid and infringed by the Andrx product. (Omeprazole II).

This appeal involves Phases II and IV of the same litigation. In Re Omeprazole Patent Litigation, United States Court of Appeals for the Federal Circuit, Nos. 04-1562, -1563, -1589.

In May 2004, the District Court ruled that claims 1, 2, 3, 7, 9, 16, and 20-21 of Astra Aktiebolag’s United States Patent No. 6,013,281 (the ’281 patent) were literally infringed, but also ruled that the ‘281 patent was invalid due to prior art and obviousness.. The court dismissed Andrx’s litigation misconduct and other counterclaims and affirmative defences, leaving intact the court’s October 2002 decision finding the ‘230 and ‘505 patents not invalid and infringed by Andrx. The October 2002 decision was affirmed in all respects on appeal in December 2003. The court entered final judgement regarding the ‘281 patent in July 2004. Unlike the patents that claimed a formulation in Phases I and III, the ’281 patent claims only a process.

Omeprazole is the generic name for Prilosec®. Omeprazole inhibits the production of gastric acid when, after absorption, Omeprazole transforms into its active species in the parietal cells (acid-producing cells in the stomach lining) and inhibits acid production. However, omeprazole degrades in acidic and neutral environments. Therefore, it must be protected from contact with gastric juices while traveling to the parietal cells. Thus, an omeprazole formulation needs a protective enteric coating around the core containing the active alkaline reacting compound (ARC) and a separating layer between that core and the coating.

The ’281 patent recites a method for making this pharmaceutical formulation. The pharmaceutical formulation is composed of a core that contains a proton pump inhibitor like omeprazole to decrease gastric acid secretion, a water soluble separating layer, and an enteric coating layer. Specifically, the ’281 patent recites:

The district court found that Andrx literally infringed Astra’s ’281 patent. Omeprazole III, slip op. at 14-18. Indeed, Andrx admitted that its process met all but one portion of claim 1 of the ’281 patent — the portion requiring in situ formation of a separating layer but disagreed with the district court’s construction of “a water soluble salt” in claim 1.

Andrx argued that the district court erred in finding that its product infringes the ’281 patent because it does not have a water soluble separating layer, but instead a layer composed of “almost 50% talc.” According to Andrx, its separating layer with talc is not water soluble, but only disintegrates in water. Andrx claimed that disintegration is not soluble.

The district court found that a Korean patent application anticipated claims 1, 2, 3, 7, 16, and 20-21 of the ’281 patent since the Korean patent application disclosed the exact proportions of the principal ingredients in the ’281 patent’s example 1 and the only ’281 “limitation” missing from the Korean application is the language “thereby forming in situ a separating layer.”

Anticipation requires disclosure of each and every claim limitation in a single prior art reference, either explicitly or inherently and the Korean patent application does not explicitly recite this feature. Therefore, anticipation turns on whether the Korean application inherently disclosed “in situ” formation.

Finding the claim limitation inherent in the earlier disclosure, Judge Rader stated that:

As noted, a prior art reference without express reference to a claim limitation may nonetheless anticipate by inherency. See In re Cruciferous Sprout Litig., 301 F.3d 1343, 1349 (Fed. Cir. 2002). Moreover, “[i]nherency is not necessarily coterminous with knowledge of those of ordinary skill in the art. Artisans of ordinary skill may not recognize the inherent characteristics or functioning of the prior art.” Id.; Schering Corp. v. Geneva Pharms., 339 F.3d 1373, 1377 (Fed. Cir. 2003) (rejecting the contention that inherent anticipation requires recognition in the prior art). Though Drs. Lövgren and Lundberg may not have recognized that a characteristic of CKD’s Method A ingredients, disclosed in the CKD Patent Application, resulted in an in situ formation of a separating layer, the in situ formation was inherent.

The record shows formation of the in situ separating layer in the prior art even though that process was not recognized at the time. The new realization alone does not render that necessary prior art patentable. … Thus, the trial court correctly found inherent anticipation.

Judge Newman, concurring in part, dissenting in part stated that”

Anticipation requires that “each element of the claim at issue is found, either expressly described or under the principles of inherency, in a single prior art reference or that the claimed invention was previously known or embodied in a single prior art device or practice.” Kalman v. Kimberly-Clark Corp., 713 F.2d 760, 771 (Fed. Cir. 1983).

The principle of “inherency,” in the law of anticipation, requires that any information missing from the reference would nonetheless be known to be present in the subject matter of the reference, when viewed by persons experienced in the field of the invention. However, “anticipation by inherent disclosure is appropriate only when the reference discloses prior art that must necessarily include the unstated limitation, [or the reference] cannot inherently anticipate the claims.” Transclean Corp. v. Bridgewood Servs., Inc., 290 F.3d 1364, 1373 (Fed. Cir. 2002) (emphasis in original); Hitzeman v. Rutter, 243 F.3d 1345, 1355 (Fed. Cir. 2001) (“consistent with the law of anticipation, an inherent property must necessarily be present in the invention described by the count, and it must be so recognized by persons of ordinary skill in the art”); In re Robertson, 169 F.3d 743, 745 (Fed. Cir. 1999) (that a feature in the prior art reference “could” operate as claimed does not establish inherency).

Mylan Laboratories has announced that the U.S. Food and Drug Administration (FDA) has confirmed Mylan’s current status as the only approved ANDA for all strengths of Amlodipine Besylate Tablets.

The decision came to light in a filing on Wednesday with the U.S. District Court for the District of Columbia, which had enjoined the FDA from approving any additional Abbreviated New Drug Applications for amlodipine besylate tablets, 2.5 mg, 5 mg and 10 mg , for a period starting from April 11, 2007 through to at least April 13, 2007. The FDA informed the court that it would be soliciting views of interested parties on this matter by April 4, and that it would render an agency decision on April 11, 2007.

Mylan launched its generic version of Norvasc last month saying it is entitled to 180 days as the sole generic Norvasc seller and has been seeking a temporary restraining order to bar other generic Norvasc approvals during that time. Mylan appealed to the District of Columbia to stop the FDA from immediately approving other applications for amlodipine besylate products. The court ordered FDA to announce its final decision on further Norvasc generic approvals.

The FDA notified Mylan and all amlodipine besylate ANDA applicants that all of the unapproved amlodipine besylate ANDAs are currently blocked from approval by pediatric exclusivity and if the mandate from the March 21 appellate court decision related to the validity of the amlodipine besylate patent does not issue before September 25, 2007, “Pfizer and Mylan will have no additional competition during the interim period and thus will obtain the full benefit that could be derived under pediatric and 180-day marketing exclusivity.”

The FDA stated that in the event an appellate court order is issued prior to September 25, the only ANDA eligible for approval during that period will be from Apotex because of the favorable court decision in the Pfizer case. Mylan will continue to assert that even Apotex should either be blocked by Mylan’s 180-day exclusivity or not be approved during the pediatric exclusivity period based on multiple prior FDA rulings.

Amlodipine besylate tablets are the generic version of Pfizer’s Norvasc tablets, which had U.S. sales of approximately $2.7 billion for the 12-month period ending Dec. 31, 2006, according to IMS Health.

Earlier, in Pfizer v. Mylan Labs (02cv1628), a patent infringement action was brought by Pfizer under U.S. Pat. Nos. 4,572,909 and 4,879,303, which cover an amlodipine besylate product sold under the trade name Norvasc®.

Mylan filed an Abbreviated New Drug Application (“ANDA”) for approval to sell generic amlodipine besylate. Mylan certified pursuant to 21 C.F.R. 314.94(a)(12)(i)(A)(4) (paragraph IV certification) that it was seeking approval to market its generic copy of Norvasc® prior to the expiration of the ’909 and ’303 patents. The application stated that to the best of Mylan’s knowledge neither the ’909 nor the ’303 patents would be infringed by the manufacture, use or sale of the proposed generic amlodipine besylate.

Pfizer sued Mylan for infringement of both patents and sought “[a]n order preliminarily enjoining and permanently enjoining [Mylan] from making, using, selling, offering to sell, or importing into the United States the Mylan Amlodipine Tablets described in ANDA No. 76-418 until after the expiration of the ‘909 patent term, . . ., and after the expiration of the ‘303 patent term . . .”

Mylan argued that Pfizer’s claims for inducing infringement and infringement of the ‘909 patent should be dismissed for lack of subject matter jurisdiction. According to Mylan, since the ‘909 patent expired on July 31, 2006, there is no longer a case or controversy with respect to the ‘909 patent. Pfizer responded that the district court retains jurisdiction over a patent infringement case when the patent has expired but the period of pediatric exclusivity remains at issue. Because the ‘909 patent expired on July 31, 2006, the court found that the rights secured by the patent are no longer protectable and entitlement to injunctive relief becomes moot because such relief is no longer available.

A recent petition for cert addresses the question of what, if any, recourse is available to a patentee against the United States for infringed method claims, where some or all of the method steps are carried out in another country, but the product of that process is imported into the US. In addition, the petition raises the question of whether patents are property subject to the Fifth Amendment Takings Clause. See, Zoltek Corp. v. U.S., Docket No.04-5100o.

The petition, filed on behalf of Zoltek Corp., after the Federal Circuit declined to grant relief for allegedly infringing acts of the Federal government, illustrates a judicial loophole that compromises a patentee’s ability to protect patent rights against the government.

Zoltek, a publicly traded U.S. company, owns the rights to a patent which claims a method for making and processing paper-like sheet products made from carbon fibers. The product produced by the method is useful in military applications such as providing stealth qualities to aircraft. The U.S. contracted with Lockheed Martin Corporation to design and build an F-22 fighter, who in turn, subcontracted portions of the work. The subcontractors used materials made exclusively in Japan, while the product itself (fiberglass mats) was processed in the United States.

The federal government generally enjoys sovereign immunity which can be limited by Congress. For infringement of patents, 28 U.S.C § 1498(a) provides such a limitation, stating that:

whenever an invention described in and covered by a patent of the United States is used. .. by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.
35 U.S.C § 1498(a) (Emphasis added.)

§ 1498(c) limits the scope of § 498(a), providing that the exception “does not apply to any claim arising in a foreign country.”

Zoltek brought suit in the Court of Federal Claims, alleging that the patent, RE34,162, was infringed in violation of 35 USC §1498. The U.S. defended on the grounds that the accused processes were used, in whole or in part, outside the U.S. and thus the claims were excluded from 1498(c) as “claim[s] arising in a foreign country.” The CFC held that 1498(c) barred Zoltek’s claims, but directed Zoltek to allege a taking under the Fifth Amendment.

The Federal Circuit affirmed on slightly different grounds, citing earlier opinions holding that § 271(a) must be satisfied for § 1498 to apply. The Federal Circuit held that the US did not meet 271(a), as “a process cannot be used ‘within’ the United States as required by the [infringement statutes] unless each of the steps is performed within this country.” Because one of the steps of the claimed process—the manufacture of the fibers—occurred outside of the U.S., the Federal Circuit held that there was no infringement under § 271, and §1498 could not apply. As such, the ruling created a “easy-out,” for the US government and its contractors for avoiding infringement of method claims: practice at least one step outside of the United States.

The Federal Circuit further denied the claims asserted under the Fifth Amendment, holding that Zoltek’s only grounds for judicial recourse was 28 U.S.C §1498. The Federal Circuit held that patent rights were not property, but rather, a “creature of patent law” protected only by such relief as the federal government saw fit to grant under 28 U.S.C § 1498(a). According to the Federal Circuit, “property interests… are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law,” and to hold otherwise would “read [§1498] out of existence.”

In its petition, Zoltek argues that the Federal Circuit’s opinion strips an entire class of property owners—patent holders—of their Fifth Amendment right to just compensation for the taking of their patent rights, and compromises the incentive to invent methods or processes that could be of import to the U.S. government.

Under the holding of the Federal Circuit, where the U.S. government outsources any one step of a patented process, the patentee no longer has a chance to recover for infringement. This compromises the economic incentive for inventors to provide valuable and useful technologies, making the practice of innovating in this sector a “far riskier endeavor.” (See Zoltek’s petition for cert., p. 15.)

As stated by Judge Plager in his dissent in the Federal Circuit ruling, allowing the government, without liability, to appropriate the products of a patented process merely by performing “any one step” of such process outside the United States “is an invitation to strategic conduct if ever there was one.” Id., citing 442 F.3d 1345, 1383 (Fed. Cir. 2006).

Zoltek further argues that patents should indeed be considered property that is subject to the takings clause of the 5^th Amendment, citing the current Patent Act, which states that “[s]ubject to the provisions of this title, patents shall have the attributes of personal property,” and numerous Supreme Court holding acknowledging the same.

In view of the ease with which the federal government could avoid claims of infringement merely by enlisting foreign sources to practice steps of a claimed method or process, this case is worth watching. The Federal Circuit holding creates an illogical imbalance in the patent law: a patentee could pursue a private company for infringement under 271(g) for these acts, while the federal government and its contractors are immune. Judge Plager’s view — that this holding is an invitation to strategically practice patented processes so as to avoid the necessity of a license — certainly raises the question of whether this holding adequately serves patent policy in encouraging innovation.

For an alternative view on the issue of patents as property subject to the Takings Clause, see Professor Isaacs’s recent note entitled “Not All Property is Created Equal: Why Modern Courts Resist Applying the Takings Clause to Patents, and Why They are Right to Do So.”

If you or a colleague will be attending BIO 2007 in Boston, we’d like to invite you to join us for a breakfast seminar featuring four of Ohio’s premiere bioscience research institutions. 

The breakfast event, entitled “Partnering with Ohio’s World-Class Research Institutions” is scheduled for Monday, May 7 from 7:45am-9:15am at M.J. O’Connor’s Irish Pub, next to the Boston Park Plaza Hotel.

Tech transfer and commercialization leaders from Ohio State University, University of Cincinnati, Case Western Reserve University, and Ohio University will present a select sampling of available IP and sponsored research opportunities to bio and pharma industry execs.

The event is sponsored by Frost Brown Todd LLC and a full breakfast will be served. Attendance is free, but RSVPs are required as space is limited. To RSVP, call 614.675.3686, x6 or email Matt Schutte at:  mschutte@BioOhio.com

Please join us for a great meal, insightful conversation, and invaluable networking … all before the BIO Convention really gets into full swing.  And when we’re done, a BIO shuttle stop is only a few steps away.

Directions from Mapquestâ„¢ here. 

After Abbott Laboratories announced that it would not launch new medicines in Thailand in response to the military-installed government’s decision not to honor the company’s patent for its AIDS drug, the company has now announced a new plan.

Abbott and World Health Organization (WHO) Director-General, Margaret Chan, have agreed on a neew approach to provide Kaletra/Aluvia (lopinavir/ritonavir) capsules and tablets to more patients in the developing world, while supporting continued long-term biopharmaceutical research and development.

Abbott will offer the governments of more than 40 low and low-middle income countries (as defined by World Bank criteria) and NGOs a new price of $1,000 per patient per year. This price is lower than any generic price available in the world today for this medicine and is approximately 55 percent less than the average current price for these countries.

Abbott will immediately begin discussions with individual countries where Abbott’s patents are respected to maximize the number of patients that can be provided Kaletra/Aluvia capsules and tablets at this new price. Abbott said it is taking this action in order to further increase access and address the debate around pricing of HIV medicines: by increasing affordability while preserving the system that enables the discovery of new medicines.

Abbott and the WHO pointed out that patents must exist so that there are incentives for sustained research and development. Without this system, new drugs, including HIV medicines, would not exist.

Specifically, with regard to Thailand, Abbott indicated that more work needs to be done with the government of Thailand to achieve a positive outcome. Meanwhile, Kaletra capsules remain available in Thailand and will be eligible for the new price.

Earlier, the Thai Ministry of Public Health announced that it would issue compulsory licenses for Kaletra and for Plavix, an anti-platelet medication that reduces the risk of unstable blood clots in people with heart disease.

Abbott had said it would not seek licenses for seven new products in Thailand, in retaliation for the Thai government’s decision to issue a compulsory license for the HIV protease inhibitor Kaletra (lopinavir/ritonavir).