In Regeneron v. Merus, a divided panel affirms a determination of unenforceability for violation of the duty of disclosure.  What is interesting about the case is that neither the district court nor the majority reviewed evidence related to specific intent to mislead the PTO. Instead, given Regeneron’s litigation misconduct, the majority rules that it was no abuse of discretion for the district court to sanction Regeneron by drawing an adverse inference of specific intent. In Soft Gel v. Jarrow, the obviousness of patent claims is affirmed even though the inventor conducted subsequent studies to confirm why previous test results, claimed in the patent, were achieved. Follow-up studies do not, according to the panel, mean that his original work was nonobvious or otherwise incredible.


Regeneron Pharmaceuticals, Inc. v. Merus N.V., Fed. Cir. Case 2016-1346 (July 27, 2017)

The Circuit affirms a district court determination that Regeneron engaged in inequitable conduct as to a patent covering a genetically engineered mouse which produces antibodies that are important in research relating to the treatment of diseases in humans. The basis of the inequitable conduct ruling was that the withheld art was brought to Regeneron’s attention shortly before a notice of allowance was issued. Regeneron disclosed the prior art during prosecution of every related application, but now takes the position that the art did not have to be disclosed in connection with the prosecution of this patent because the art was merely cumulative and was not therefore but-for material.

The district court bifurcated the case into two trials. The first was to deal with materiality and the second was to deal with intent. After the first trial in which the references were determined to be material, the district court ruled that Regeneron’s “repeated violations of discovery orders and improper secreting of relevant and non-privileged documents” permitted the court to draw an adverse inference that Regeneron’s agents specifically intended to deceive the PTO by not disclosing the withheld references. The district court therefore concluded that Regeneron had committed inequitable conduct and held the patent to be unenforceable.

The opinion first reviews the requirements from Therasense to prove inequitable conduct but then jumps right into an analysis of the district court’s rulings. The majority provides a detailed review, comparing the withheld prior art to that which was submitted, and concludes that the court did not clearly err in finding each of the withheld references but-for material. The majority also rules that the court did not abuse its discretion in sanctioning Regeneron by drawing an adverse inference of specific intent.

The troublesome litigation conduct included failing to provide detailed infringement contentions, broken down element-by-element as required by the local rules. This conduct included obfuscation at a hearing before the court, where the court felt that Regeneron was attempting to “game” the system by shifting the burden to Merus to propose claim constructions and then to take shots at those proposals. Regeneron also failed to provide the evidence it had of conception and reduction to practice, again as required by the local rules, even though such documents existed. The district court concluded, and the panel majority did not disagree, that the most troublesome behavior was the failure to disclose many documents between counsel and Regeneron after the district court had ruled that the attorney client privilege had been waived by intentionally producing one very detailed opinion.

Based on its review of the privilege log and its in camera review of some of the documents on the log, the district court concluded that Regeneron’s behavior warranted sanctioning. Before imposing its sanction, however, the district court considered several alternate options, including allowing only certain relevant documents into evidence and permitting some witnesses while excluding others. However, the court concluded that to do so would have required a top-to-bottom re-review of the Regeneron privilege log, additional document production, fact depositions, and revised expert reports and depositions. Given its concerns with Regeneron’s pattern of misconduct, the district court concluded that this would have to occur with the direct oversight of a special master, significantly increasing the time and cost for both Merus and the district court. After reviewing these findings, the majority concludes that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.

Regeneron argued that the district court’s sanction was not an adverse inference but was, in fact, a dismissal which should have required a predicate finding of bad faith. However, the majority holds that the district court’s sanction was a properly drawn adverse inference against Regeneron. Judge Newman’s dissent relies heavily on the Circuit’s 2001 Aptix v. Quickturn decision for the proposition that litigation misconduct cannot support a finding of unenforceability of a patent for inequitable conduct, but the majority holds that, in Aptix, the district court declared a patent unenforceable as a “penalty” because Aptix engaged in litigation misconduct under the doctrine of unclean hands. The Circuit reversed that decision holding that “the doctrine of unclean hands does not provide a suitable basis for the district court’s judgment, as this equitable doctrine is not a source of power to punish.” Here, Regeneron is accused not only of post-prosecution misconduct but also of engaging in inequitable conduct during prosecution. Moreover, here, Regeneron’s litigation misconduct obfuscated its prosecution misconduct. The district court did not punish Regeneron’s litigation misconduct by holding the patent unenforceable. Only after Merus proved the remaining elements of inequitable conduct did the district court hold the patent unenforceable.

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Soft Gel Technologies, Inc. v. Jarrow Formulas, Inc., Fed. Cir. Case 2016-1814 (July 26, 2017)

The Circuit affirms inter partes reexamination rejections of patent claims directed to formulations of soft gel capsules.  CoQ10 is a compound that is required for the biological activity of certain proteins, affecting the function of almost all cells in the body, making it essential for the health of all human tissues and organs. In clinical trials, CoQ10 has been shown to be effective in regulating blood pressure and cholesterol levels, and thwarting cancer and other diseases. Although CoQ10 is synthesized by the body, the body may require more than it can synthesize or obtain through normal dietary intake. Oral supplementation can compensate for a CoQ10 deficiency, but CoQ10 is not very soluble in hydrophilic solvents such as water. At the time of the inventions most solvents used to administer CoQ10 in liquid form could dissolve, at most, only about 5 to 10 percent of the CoQ10, so CoQ10 was generally administered in solid form. The claims of the Soft Gel patents focus on solutions of CoQ10 and a monoterpene called limonene. Limonene is a compound that can have one of two different three dimensional physical structures, labeled d-limonene and l-limonene.

The examiner rejected various claims of the three patents at issue. On appeal, the Board considered five references. The first, a published patent application to Motoyama, claims an oral formulation containing CoQ10 dissolved in an oil. The next two references have overlapping disclosures; the first is a patent to Khan, and the second is a dissertation by Nazzal on which that patent is based. Both references note the poor solubility of CoQ10 in aqueous solvents such as water, and both posit that solvents such as lipids or oils could be used instead. The fourth reference was Fenaroli’s Handbook of Flavor Ingredients, which notes that lemon essential oil has many different components, but “contains approximately 90% limonene (by weight).” The fifth reference is a monograph published by the World Health Organization’s International Agency for Research on Cancer (“IARC”), which states that limonene is the most frequently occurring natural monoterpene. The monograph further explains that limonene occurs naturally in the d- and l- forms, and that “the d form comprises 98-100% of the limonene in most citrus oils.”

On appeal, Soft Gel challenges as erroneous the Board’s factual findings (1) that d-limonene is the main constituent of lemon oil, (2) that Khan does not teach away from dissolving CoQ10 in lemon oil, and (3) that a person of ordinary skill would have had a reasonable expectation of success regarding the combination.

The panel rejects Soft Gel’s first argument, noting that the IARC and Fenaroli references together show that lemon oil consists of approximately 88 to 90 percent d-limonene by weight. Soft Gel’s “teaching away” argument is also thrown out because, according to the panel, Khan merely notes the difficulty of dissolving CoQ10 in many solvents other than essential oils such as lemon oil. Kahn goes on to teach the use of essential oils to make CoQ10 more available to the body, which is precisely what is claimed in Soft Gel’s patents. Therefore, Kahn clearly does not teach away from the use of lemon oils.

Soft Gel further contends that a person of ordinary skill in the art would not have had a reasonable expectation of success in combining the references to use d-limonene in Motoyama’s invention. Soft Gel points out that Motoyama, Nazzal, and Khan do not expressly mention d-limonene. But Soft Gel ignores the finding that the main constituent of lemon oil, as used in Nazzal and Khan, is d-limonene. Moreover, after describing the same formulation that is disclosed in Khan, Nazzal recommends further study of the nature of the interaction that exists between CoQ10 and essential oils and, more specifically, the “chemical components of essential oils, such as limonene, menthone, and carvone.” Those recommendations for future research show that a person of skill in the art would have recognized—and at least Nazzal did recognize—that the monoterpenes limonene and carvone are of interest in the essential oil-CoQ10 mixtures.

Finally, according to Soft Gel, the reason Dr. Khan conducted follow up research was because it must not have been obvious that the lemon oil results in his earlier experiments were attributable to d-limonene. In making that argument, Soft Gel applies an incorrect legal standard for obviousness, requiring “absolute predictability” rather than “a reasonable expectation of success.” Dr. Khan may have had just that expectation in conducting his subsequent research, in which he investigated whether d-limonene was responsible for the lemon oil-CoQ10 results. As the Board correctly noted, simply because Dr. Khan later undertook a study to evaluate limonenes in a particular drug delivery system does not mean that it would not have been obvious that limonenes would have worked to some extent. Follow up studies are frequently conducted to confirm what is suspected to be true.

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