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March 24, 2014

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

March 24, 2014

By Peter E. Heuser


Peter Heuser - Intellectual Property Attorney - Portland, OR
By Peter E. Heuser

Peter Heuser - Intellectual Property Attorney - Portland, OR

Energy Recovery – Contempt ruling found to be an abuse of discretion because the defendant didn't violate any clear restrictions in a Consent Order.

Alcon – A ruling of noninfringement was affirmed where the patentee never read its claims on the accused drugs but instead analyzed infringement based on tests performed during development of its own product. However, the panel reversed rulings that the patents in suit violated enablement and written description requirements of § 112.

Energy Recovery, Inc., v. Hauge, Fed. Cir. Case 2013-1515 (3/20/2014)

Here a unanimous Circuit panel including Chief Judge Rader reversed a district court's contempt ruling because the defendant did not violate the "intellectual property rights" or any other clear restriction of a Consent Order.

The parties were previously in litigation over intellectual property rights related to pressure exchangers used in reversed osmosis. Hauge had been president of Energy Recovery, Inc. (ERI), and to settle litigation resulting from his separation from the company, the parties entered into an agreement that was adopted by the district court in a Consent Order. After the expiration of the non-compete provisions of the Order, Hauge filed for and was issued a patent directed to a pressure exchanger, and subsequently began selling equipment based on his patent. He also entered into a consulting agreement with two then-current ERI employees to assist him in his new venture.

The district court granted ERI's motion to have Hauge found in contempt for violating the Order, and enjoined him from manufacturing and selling pressure exchangers and replacement parts for ERI's systems. The court also awarded ERI attorneys' fees.

Giving a hint as to how it was going to rule, the panel first noted that it had jurisdiction pursuant to 28 USC § 1292(c)(1) because the contempt ruling was modifying the terms of a prior order. Then, applying Fourth Circuit law since the issues were not ones unique to patent law, the panel held that none of Hauge's conduct violated the Order, which provided that he assign to ERI "(i) the patents and patent applications . . . ; (ii) any and all patent rights . . . , intellectual property rights, property rights . . . ; and (iv) all other intellectual property and other rights relating to pressure exchanger technology predating this Order."

Since patent rights were not at issue, only clause (iv) was before the Circuit. The panel ruled that nothing in the Order expressly precluded Hauge from using any manufacturing process, and civil contempt is appropriate only if the court can point to an Order that "sets forth in specific detail an unequivocal command which a party has violated."

The panel noted that while Hauge's hiring two employees of ERI may constitute trade secret misappropriation, that would not justify a finding of contempt. But then the opinion just mentions what would seem to be critical - that ERI's trade secret claim in California state court based on the same conduct resulted in a unanimous jury verdict in favor of Hauge. In any event, concluding that Hauge did not violate any provision of the Order, the panel held that the district court abused its discretion in finding Hauge in contempt, and vacated the injunction.

What is most interesting in the case is the fact that the Circuit didn't examine more closely the relationship between "all other intellectual property and other rights" and the trade secrets involved in ERI's manufacturing processes. We all would normally consider trade secrets to be "intellectual property rights." Also, at least a mention of the collateral estoppel effect of the state court action for trade secret misappropriation would have been appropriate. But obviously the panel wanted to stress that unless there is a violation of clear and unambiguous language in a prior court order, the Circuit will reverse, even in the face of the high "abuse of discretion" standard of review. Given the Circuit's demonstration that it will not affirm a contempt ruling without a clear violation of an order, we will all have to pay close attention to the language of consent orders we are drafting if we expect a violation to be treated with a finding of contempt.

Alcon Research Ltd. v. Barr Laboratories, Inc., Fed. Cir. Case 1212 – 1340, 1341 (3/18/2014)

The Circuit panel held that the district court's ruling that Barr's product would not infringe the asserted claims was not clearly erroneous. Nor did the court abuse its discretion in denying Barr's motion to amend for JMOL of noninfringement of two other patents. However, the court's invalidity determinations as to enablement and written description were not in accordance with law, so the panel affirmed in part and reversed in part the court's rulings.

Alcon owns patents directed to methods for enhancing the stability of prostaglandin compositions, including its glaucoma and ocular hypertension drug Travatan Z®. Barr submitted an Abbreviated New Drug Application ("ANDA") to the FDA, seeking approval to make a generic version of Travatan Z®. Alcon filed suit, asserting that Barr's ANDA submission constituted an act of infringement. The district court found that Barr's product did not infringe, and the panel agreed that Alcon failed to present evidence of infringement since Alcon relied solely on a theory that the data reported in a stability study conducted during its development work could be extrapolated to infer that Barr's composition infringed. Critically, Alcon did not dispute that the composition of Barr's generic product was significantly different from the compositions tested in Alcon's study.

The district court also held certain claims invalid under 35 U.S.C. § 112,¶ 1, but the panel ruled that the court erred in both its enablement and its written description analysis. To prove that a claim is invalid for lack of enablement, a challenger must show that a person of ordinary skill in the art would not be able to practice the claimed invention without undue experimentation. After the challenger has put forward evidence that some experimentation is needed to practice the patented claim, the court may consider whether the amount of experimentation is either "undue" or sufficiently routine such that an ordinarily skilled artisan would reasonably be expected to carry it out. According to the panel, the district court erred here because Barr failed to make the threshold showing that any experimentation is necessary to practice the claimed methods.

The claimed methods comprise only a single step— adding a chemically-stabilizing amount of PECO to the prostaglandin composition—that Barr's own expert testified was "routine." The claims as a whole merely require that the addition of PECO to the composition provide some increase in chemical stability, but do not require a particular level of stability or a particular magnitude of increase. The patents disclose exemplary compositions within the scope of the claims, detail how those example compositions are prepared from commercially-available ingredients, and provide step-by-step procedures for adding PECO to a prostaglandin composition in a way that embodies the claimed invention. The district court's non-enablement ruling was premised on testimony that many "variables" including the number of prostaglandins and the range of PECOs encompassed by the claims, as well as "[v]arious parameters including pH, buffer, buffer concentration, preservatives, chelating agents, and other excipients may affect the chemical stability of prostaglandins in ophthalmic formulations." However, Barr adduced no evidence at trial that changing any of the "variables" or "[v]arious parameters" identified by the district court would render Alcon's claimed invention inoperable, nor was there any evidence that experimenting with those variables was required for an ordinarily skilled artisan to be capable of increasing the chemical stability of a prostaglandin by adding PECO. Therefore, the panel reversed the district court's judgment that asserted claims of the patents were invalid for lack of enablement.

The panel then turned to the district court's ruling that the specifications of the patents did not provide an adequate written description of the claimed invention. According to the panel, the standard for satisfying the written description requirement is whether the disclosure "allow[s] one skilled in the art to visualize or recognize the identity of the subject matter purportedly described." There is no requirement that the disclosure contain "either examples or an actual reduction to practice"; rather, the critical inquiry is whether the patentee has provided a description that "in a definite way identifies the claimed invention" in sufficient detail that a person of ordinary skill would understand that the inventor was in possession of it at the time of filing.

The panel determined that the patent disclosures demonstrate that the inventors possessed the claimed invention. They conceived of and described their invention at the time the patent applications were filed, including the idea that adding PECO would enhance the chemical stability of prostaglandins across a range of various formulation parameters. That is all that the written description requirement demands. The panel therefore reversed the district court's judgment that certain claims were invalid for lack of an adequate written description.

Barr unsuccessfully moved the district court for JMOL of noninfringement of two other Alcon patents on the ground that the court's resolution of the matter required correction in order "to prevent manifest injustice." The panel affirmed the denial because Barr had never filed a counterclaim, which would have provided Alcon with fair notice of the risk of such an adverse determination. In so ruling, the panel noted that Rule 59(e) is not a vehicle for reopening judgments to present information that was long possessed by the movant. Had Barr moved to amend the complaint to add declaratory judgment counterclaims much earlier when such a motion should have been filed, the district court might have exercised its discretion differently. Therefore, the panel affirmed the district court's denial of Barr's motion to amend for JMOL of noninfringement.

While the opinion suggests that Alcon's counsel erred in failing to apply the claims to Barr's processes, it seems that there must have been more to the case – that for some reason Alcon did not have access to what it needed to meet its burden of proving infringement. As to validity, it is always helpful to see the Circuit reiterate the requirements for enablement and written description, as these requirements are often the subject of validity challenges that are decided by judges who don't handle these issues very often.


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