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Fresh From the Bench: Precedential Patent Cases From the Federal Circuit

May 19, 2017

Overview

In Mylan v. Aurobindo the Circuit affirms the grant of a preliminary injunction based upon the infringement of one of the three patents in suit. However, the panel reverses the injunction as to the other two patents based on the district court improperly analyzing the doctrine of equivalents under the “function, way, result” test, noting that the “substantial differences” test may be more appropriate in chemical cases. In ArcelorMittal the patentee filed a motion to dismiss based on lack of a case or controversy because it provided defendant/counterclaimant with covenants not to sue. The motion was denied because the covenants were not unconditional. Rovalma is yet another case in which the Circuit vacates and remands a determination of obviousness because the Board failed to provide a reasoned analysis for its obviousness determination.

Thanks to my colleague Mark Meininger for his help with this week’s report.

Pete

Mylan Institutional v. Aurobindo Pharma Ltd., Fed. Cir. Case 2017-1645 (May 19, 2017)

The Circuit affirms in part and reverses in part the grant of a preliminary injunction. In doing so, the panel points out how difficult it is to analyze chemical cases under the “function” and “way” part of the “function, way, result” test, suggesting that the “substantial differences” test might be more appropriate for analysis of the doctrine of equivalents in chemical cases.

Aurobindo sought FDA approval to sell a generic version of Mylan’s Lymphazurin® product, a dye used to map lymph nodes . Mylan sued for infringement and the district court granted a preliminary injunction as to all three of the patents in suit, ruling that the two process patents were infringed under the “function, way, result” (“FWR”) test and that Aurobindo did not raise a substantial question of validity of the third patent directed to the compound itself.

Aurobindo argues on appeal that it had raised a substantial question of infringement as to the process patents under the DOE because manganese dioxide oxidizes isoleuco acid in a different “way” than silver oxide. The panel concludes that the district court’s analysis of equivalence in this case was flawed, “no doubt because of the sparse and confusing case law concerning equivalents, particularly the paucity of chemical equivalence case law, and the difficulty of applying the legal concepts to the facts.” The panel then attempts to provide more clarity on these subjects.

The panel first cites the Supreme Court’s 1997 Warner Jenkinson v. Hilton case for the proposition that chemical cases may not be well-suited to consideration under the FWR test. The “result” of using a claimed compound may be more easily evaluated, as the structure and uses of one compound may be directly compared with those of another. But that is not how infringement under FWR is determined. It must be determined on a limitation-by-limitation basis. In the case of a chemical process claim, the “result” of a process producing a chemical compound may be clear—why else would a claim for infringement of a process claim be brought if the claimed result is not obtained? But the “function” and “way” of a particular limitation of a chemical process claim may remain vague and often overlap. Thus, either the district court did not address the “way” prong of the FWR analysis, or it performed a “way” analysis without considering critical factors. Either characterization constitutes error in the equivalents analysis. In this case, “the district court conducted an incomplete FWR analysis while essentially bypassing the substantial differences test, in a situation where the latter test might seemingly be more appropriate.” The panel thus concludes that the court’s grant of a preliminary injunction based on the process patents constituted an abuse of discretion.

The panel then turns to consideration of the Mylan patent directed to the compound itself. Aurobindo points to no legal error in the district court’s analysis of the record evidence; it argues only that the court erred in “misreading the factual content of the prior art.” However, the panel notes that what the prior art teaches is a question of fact that is reviewed with deference, especially at the preliminary injunction stage. The Circuit does not reweigh evidence on appeal. As to irreparable injury, the panel agrees with Mylan that the district court’s determinations as to (1) lost sales, lost research and development, price erosion, and having to directly compete with an infringer; (2) there was a causal nexus between Aurobindo’s infringement and Apicore’s harm; and (3) without infringing the process and purity patents, Aurobindo would not be able to make the product described in its ANDA. Because Aurobindo does not challenge the district court’s findings that the balance of equity and public interest factors weigh in favor of granting the preliminary injunction, the grant of the injunction as to the patent directed to the compound itself is affirmed.
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ArcelorMittal v. AK Steel Corporation, Fed. Cir. Case 2016-1357 (May 16, 2017)

In a split decision, the Circuit rejects Arcelor’s appeal contending that the district court that invalidated its claims did not have subject matter jurisdiction because covenants not to sue submitted by Arcelor were not unconditional. Arcelor moved to dismiss AK’s counterclaims for declaratory judgment. With its motion, Arcelor tendered a covenant not to sue as to the patent in suit. Arcelor argued that the tendered covenant rendered moot subject matter jurisdiction over AK’s counterclaims for declaratory judgment, but its motion was denied.

This first covenant by Arcelor came in its brief in support of its motion to dismiss. Subsequently, an unsigned covenant was submitted as an exhibit. A facially unconditional, signed covenant was later submitted to AK with a cover letter stating that the covenant was “conditioned on resolution of Arcelor’s motion” in another of the cases.

On appeal, the panel notes that based on the Supreme Court’s MedImmune case, it should take a “consider all the circumstances” approach and look outside the terms of the covenant itself. As a result, the panel may consider Arcelor’s cover letter, to give effect to Arcelor’s intent to make conditional delivery of the unconditional covenant. Therefore, according to the majority, there was no error in the district court’s retention of subject matter jurisdiction.

Another issue on appeal was whether there was subject matter jurisdiction over an additional two claims. Arcelor contended that the two claims were not part of the cases due to earlier pretrial elections. The panel held that Arcelor’s statements to the court and Arcelor’s tacit acceptance of AK’s representations about the litigation status of the claims reflected Arcelor’s continued attempt to assert the claims. Therefore, the majority found no error on the part of the district court.

In dissent, Judge Wallach argues that the majority’s totality of the circumstances approach is inconsistent with the Supreme Court’s 2103 Already case, which is more closely applicable than MedImmune. In any event, the majority’s analysis of the totality of the circumstances is faulty.
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Rovalma, S.A. v. Bohler-Edelstahl GMBH, Fed. Cir. Case 2016-2233 (May 11, 2017)

Rovalma’s ’056 patent is directed to methods for making steels with certain desired thermal conductivities. The Board instituted IPR based on Böhler’s petition and its construction of the claims at issue. In its final written decision, however, the Board rejected Böhler’s construction and adopted Rovalma’s construction instead. Böhler had not submitted arguments or evidence for unpatentability based on Rovalma’s construction. Nevertheless, the Board determined that Rovalma’s own submissions demonstrated that the claims, construed as Rovalma urged, would have been obvious to a relevant skilled artisan over the same prior art that Böhler invoked.

On appeal, Rovalma argued that the Board exceeded its statutory powers in relying on Rovalma’s own submissions based on the Circuit's 2016 In re Magnum Oil decision that rejected the PTO's contention ‎that the Board could make an argument on behalf of a petitioner‎. The panel distinguished Magnum, noting that as long as Rovalma had ‎adequate notice and opportunity to address the arguments, the Board's statutory authority was not ‎exceeded.‎

Rovalma also argued on appeal that substantial evidence does not support the Board’s determination. The panel concludes that the Board did not set forth its reasoning in sufficient detail to determine what inferences it drew from Rovalma’s submissions. Therefore the panel cannot determine whether the Board’s decision was substantively supported and procedurally proper, and therefore the Board’s decision is vacated and remanded.

This case is yet another example of the Circuit demanding further details in Board decisions. Other recent examples include: PersonalWeb Tech., LLC v. Apple, Inc., 848 F.3d 987 (Fed. Cir. 2017); In re Marcel Van Os, 844 F.3d 1359 (Fed. Cir. 2017); In re NuVasive, Inc., 842 F.3d 1376 (Fed. Cir. 2016); and In re Warsaw ‎Orthopedic, Inc., 832 F.3d 1327 (Fed. Cir. 2016).
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