Bristol-Myers Squibb – On a 7-4 vote the Circuit refuses to grant en banc hearing to review the invalidation of a BMS patent to a hepatitis B treatment even though the prior art drug from which it evolved was toxic to humans. Dissenting opinions note that the panel’s decision sets the bar too high to maintain the validity of drug patents. The reasoning of the panel and the majority is that the toxicity of the prior art drug was not discovered until after the filing date of the patent in suit and therefore was not relevant to what would have been obvious at the time of the invention.

World Class The patent in suit claims a bracket for orthodontic braces that avoids or ‎reduces interference with the gums even when being ‎mounted on a molar tooth. While the panel notes that the meaning of “support surface” is not unambiguous from the claim language, the specification makes it clear that the construction determined by the district court was the proper one.‎

AntiCancer − The district court ordered that AntiCancer would be permitted to supplement Preliminary Infringement Contentions ‎that the court found defective under the local patent rules, provided that it concurrently pay ‎the attorney fees and costs incurred by the defendants in ‎connection with their motion for summary judgment ‎related to the Contentions. AntiCancer objected to this ‎condition, and the district court entered summary judgment of noninfringement, dismissing the complaint with prejudice. The Circuit determines that the fee-shifting condition was improperly ‎imposed because the court did not find that AntiCancer’s filing constituted or was tantamount to bad faith, so the judgment based thereon is vacated.‎

IRIS − IRIS Corporation brought suit in district court, alleging that JAL committed patent infringement by examining the electronic passports of its passengers within the United States. Because the allegedly infringing acts were carried out “for the United States” under 28 U.S.C. § 1498(a), the panel affirms the district court’s decision to dismiss IRIS’s complaint.

Bristol-Myers Squibb Company v. Teva Pharmaceuticals USA, Inc., Fed. Cir. Case 2013-1306 (October 20, 2014)

Writing for the majority, Judge Dyk describes this case as presenting the question of whether evidence postdating the invention can be used to establish unexpected results. The panel’s position is correct and is mandated by ‎§ 103, which provides that an invention is not patentable if it “would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains.”

The patent applicant’s discovery of unexpected results at the time of the invention can help to establish that the invention would not have been obvious to another skilled person. But hindsight bias must be avoided in determining obviousness. And under longstanding Supreme Court authority, the pertinent knowledge is that possessed at the time of the invention. See KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007). According to the majority, there is no basis for rehearing en banc.

Judge O’Mally concurs, writing separately to assuage BMS and the amici’s fears that the panel decision has rewritten the test for obviousness for pharmaceutical patents. In her view, the concerns expressed are unjustified and mischaracterize the opinion. This case does not forge new ground or set down immutable principles. It simply decides that, on the record before it, the district court did not err in finding the asserted claim of the patent invalid as obvious. The opinion makes no dramatic changes to the law, closes no doors on what evidence may be considered in undertaking an obviousness inquiry, establishes no hard and fast tests for what results might be considered unexpected in a case involving a pharmaceutical compound, and does not improperly shift the burden of proof or denigrate the importance of objective indicia of non-obviousness. On this record and upon a fair reading of the panel opinion, she does not believe en banc consideration is warranted.

Judge Newman, with Judges Lourie and Reyna, argues that the panel’s decision creates several new standards for determination of obviousness. For example, the court deemed it irrelevant to the obviousness determination that the prior art “lead compound,” the carbocyclic analog of 2′-deoxyguanosine (2′-CDG), is highly toxic to humans, whereas the new product entecavir is non-toxic.

Judge Newman notes that the case has aroused extensive commentary, particularly in the chemical and pharmaceutical fields; the request for rehearing en banc is supported by much of the nation’s research-based industry, which has filed briefs as amici curiae to point out the disincentives and uncertainties flowing from the court’s rulings. As summarized by amicus Intellectual Property Owners Association:

This decision introduces substantial uncertainty into what appeared to be a clear legal standard; allowing this uncertainty to fester would affect countless pending and future cases. Obviousness is an issue in most patent examinations, litigations, and administrative proceedings. Particularly in unpredictable chemical and pharmaceutical fields, unexpected results evidencing differences and objective considerations can tip the balance between obviousness and non-obviousness. Patent owners would benefit from the certainty of an en banc ruling on when and how later-discovered differences between an invention and prior art may be considered in the obviousness analysis.

Until this case, inventors could confidently establish patentability of a new product or a new use by showing that the new property or use was unexpected in light of the prior art.

Judge Taranto also dissents, noting that BMS created a new chemical compound: entecavir. Its structure is a modification of a prior art compound, apparently a common phenomenon in pharmaceutical chemistry, where small changes can make large differences. The prior art compound (2′-CDG) was described in published papers. It had shown excellent activity against certain viruses, including the hepatitis B virus, in tests on cell lines in in vitro experiments; but it had never been tested even in animals, let alone humans, whether for efficacy or toxicity. BMS’s novel compound proved to be effective and nontoxic (safe) for the treatment of hepatitis B, and it was patented and came to be approved and widely used for that purpose. In contrast, the prior art compound never came to have any human-therapeutic use, because, just after BMS sought its patent, 2′-CDG was tested in animals for the first time, and the tests so conclusively showed it to be toxic that it has never been used in humans. In short, the BMS compound, which is a novel molecule, is dramatically different from the prior art compound in providing practical human benefits: one provides such benefits, the other does not. But that difference was identified only after BMS filed for its patent, because the prior art compound, not having been tested in animals or humans, was not then known to be toxic.

After a trial, the district court invalidated the asserted claim of the BMS patent, determining that a hypothetical skilled artisan would have had a reasonable expectation of success in achieving therapeutic usefulness in humans and would not have found the favorable safety/efficacy profile of entecavir to be unexpected, because, at that time, the prior art compound, never having been tested even in animals, was not known to be toxic.

Judge Taranto expresses the concern that the ruling raises questions about core aspects of the widely used approach to obviousness analysis—particularly, the proper meaning of “reasonable expectation of success” and “unexpected results.” Those questions would benefit from plenary consideration and would allow a focus on and full analysis of the doctrinal issues, considering the language of section 103 (what it resolves and what it leaves open); the role of section 103 in the statute as a whole (which places a premium on early filing).

Comment: Given the sharp split of the Circuit and the significance of this issue to the pharmaceutical industry, this is a case that would benefit from Supreme Court review. Evidently it is common that a great deal of evidence regarding new drugs is developed after patent applications are filed. While Judge O’Malley’s concurrence suggests this ruling applies only to the narrow facts of this case, the panel decision and Judge Dyk’s opinion seem to be fairly absolute: post-filing evidence is not to be considered in the obvious analysis.

World Class Technology Corporation, v. Ormco Corporation,Fed. Cir. Case 2013-1679, 2014-1692 (October 20, 2014)

Ormco’s patent claims a bracket for orthodontic braces that avoids or reduces interference with the gums even when being mounted on a molar tooth. The district court construed two claim terms—”support surface” and “ledge,” and the panel affirms.

Claim 1 of the ‘896 patent is representative of the asserted claims:

1. A self-ligating orthodontic bracket for coupling an archwire with a tooth, comprising: a bracket body configured to be mounted to the tooth, the bracket body including a support surface, a ledge, and an archwire slot including a base surface and opposing first and second slot surfaces extending from the base surface, the base surface being interposed between the opposing first and second slot surfaces, the support surface being acutely angled with respect to the base surface, and the ledge opposing the support surface across the archwire slot and including a surface that is generally parallel to the base surface; and a movable member coupled with the bracket body and movable between an opened position in which the archwire is insertable into the archwire slot and a closed position in which the movable member retains the archwire in the archwire slot, wherein the movable member comprises a first portion and a second portion extending at an acute angle from the first portion, the first portion engaging the acutely angled support surface of the bracket body when the movable member is in the closed position, the second portion being generally parallel to the base surface and extending across the archwire slot from the first slot surface to the second slot surface when the movable member is in the closed position.

Construction of “support surface”

The claim language does not by itself convey a clear, unambiguous meaning in the respect at issue. To begin with, while “support surface” requires a surface that provides support, and the slide is undisputedly what must be supported, the language itself does not resolve when the slide must be supported. An “engaging” must take place in the fully closed position, according to the claim. But the phrase “support surface” standing alone could mean that support must be provided generally during movement of the slide.

Moreover, the claim requires two surfaces on either side of the archwire slot and gives the surfaces two different names: the “support surface” and the “ledge” surface. That difference suggests that their roles are different—which points away from Ormco’s suggestion that they are interchangeable regarding the timing of contact with the slide. Indeed, the claim not only gives them separate names, but requires the two surfaces to line up differently relative to the base surface of the slot: the support surface must be at an acute angle relative to the base surface; the ledge surface must be parallel to the base surface. And the claim requires a specific interaction (“engaging”) between one surface (the support surface) and a portion of the angled slide when in the closed position, with no analogous requirement for the other surface.

Rather than providing an unambiguous, clear meaning, therefore, the claim language leaves uncertainty about whether, contrary to Ormco’s view, the slide must move along the support surface (and not the ledge surface) as it enters the bracket and moves toward the slot. In such circumstances, we turn to the specification to resolve the uncertainty. Where, as here, the claim language itself leaves interpretive questions unanswered, a construction that stays true to the claim language and most naturally aligns with the patent’s description of the invention will be, in the end, the correct construction.

Critically, the specification in this case identifies gum avoidance as the sole purpose of the acute angle the support surface must make with the slot base. Under Ormco’s construction, however, the acute angle would not serve the sole stated purpose in the arrangement that Ormco’s construction is aimed at covering—in which the slide is inserted from the top, first moves along the ledge, and arrives at the support surface for closing after crossing the slot. In that embodiment, there is no problem of gum contact and no need for the acute angle. Such a construction is unmoored from, rather than aligned with, the description of the invention.

The specification also sharpens the distinction between the support surface and the ledge surface that is suggested by the use of two different terms for the two surfaces. Whereas the support surface is linked with slide movement, the ledge is not. It is mentioned in a single paragraph. That paragraph explains that when the slide is closed, one end of the slide “abuts the labial surface of [the] ledge.” The rest of the paragraph then describes a portion of the bracket connected to the ledge that covers the end of the slide, protecting the slide against food and acting as a stop for the slide’s movement. Such statements are inconsistent with Ormco’s constructions of “ledge” and “support surface,” which would allow the slide to move along either surface interchangeably.

For those reasons, the panel concludes that the specification makes clear that the district court correctly resolved the uncertainties in the claim language, adopting a construction that aligns with the description of the invention.

Claim Differentiation Does Not Apply

Given that conclusion, the panel also rejects Ormco’s argument that the difference between claim 6 and claim 1 demands a broad construction of claim 1. The doctrine of claim differentiation creates a presumption that distinct claims, particularly an independent claim and its dependent claim, have different scopes. But our construction of “support surface” does not give claim 1 the same scope as claim 6. At a minimum, claim 6 requires that the support surface form a corner (edge) with one side of the slot. That requirement is not implicit in claim 1 under our construction of “support surface.” To provide support for the slide throughout its movement, the support surface need not come directly up to the slot (or, therefore, form a corner with a slot side), but could stop short of the slot.

The focus of claim 6 seems more on a geometric characterization than on any question about support during movement; and the claim is readily understood to reinforce the connection between the support surface and the slide’s movement by tying the “translation plane” to the “support surface.” In any event, as we have concluded, the specification firmly establishes the requirement of slide support that Ormco disputes. That conclusion precludes drawing the inference from claim 6 that Ormco urges. Indeed, recognizing that claim drafting often involves finding different expressions to define the same invention, we have held that even the presumption of different claim scope is overcome by a contrary construction dictated by the written description.

Finally, the panel notes that it does not find support for Ormco’s position in the prosecution history, on which neither side places substantial weight.

Comment: Just last week in CardSoft, LLC, v. Verifone, Inc., et al., Fed. Cir. Case 2014-1135 (October 17, 2014), the Circuit rejected another claim differentiation argument noting, as in World Class, that the specification made the proper construction clear so the presumption of claim differentiation was overcome. These cases show that claim differentiation, long considered a canon of claim construction, is no longer favored by the Circuit.

AntiCancer, Inc. v. Pfizer, Inc., et al.,Fed. Cir. Case 2013-1056 (October 20, 2014)

This litigation concerns patents owned by AntiCancer on technology related to the imaging of gene expression using a green fluorescent protein linked to a gene promoter. The fluorescent protein is derived from a species of green-glowing jellyfish named Aequorea victoria. The patented inventions are described as useful for drug discovery and evaluation in cancer control and treatment.

This appeal is from the district court’s summary judgment of noninfringement arising from application of the Patent Local Rules of the Southern District of California. The district imposed a fee-shifting sanction as a condition of permitting AntiCancer to supplement its preliminary infringement contentions that the court found defective under Patent Local Rule 3.1. The court ordered that AntiCancer may supplement its contentions, provided that it concurrently pay the attorney fees and costs incurred by defendants in connection with their motion for summary judgment related to the contentions. AntiCancer objected to this condition, and the court entered summary judgment of noninfringement and dismissed the complaint with prejudice. The panel concludes that the fee-shifting condition was improperly imposed; the judgment based thereon is vacated.

Standard of Review

The grant of summary judgment is reviewed without deference. Summary judgment is appropriate when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. A district court’s application of its local rules is reviewed on the standard of abuse of discretion. See O2 Micro Intl Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355 (Fed. Cir. 2006). In O2 Micro, this court discussed when and whether Federal Circuit law or regional circuit law applies to issues arising under patent local rules, and concluded that it depends on whether the issue is of substantive patent law or of regional procedure. The question of whether a filing under the Patent Local Rules needs supplementation may involve substantive patent law, but the question of whether fee-shifting is an appropriate condition for such supplementation is primarily a matter of discipline under the court’s inherent authority, not substantive patent law.

Under Ninth Circuit precedent, before awarding sanctions under its inherent powers the court must make an explicit finding that counsel’s conduct constituted or was tantamount to bad faith. This rigid imposition that district courts make an explicit finding of bad faith is justified under Ninth Circuit law because of the “very potency of inherent powers.”

Patent Local Rule 3.1

The purpose of preliminary infringement contentions is to assist the court and guide the parties in focusing on potentially dispositive issues, providing a framework for discovery and generally facilitating the proceedings. Rule 3.1 provides that the patentee must serve preliminary infringement contentions‎ that include an identification of each claim allegedly infringed and the product(s) infringed, an element-by-element claim chart, and a statement as to whether each element is found literally or as an equivalent.

The Southern District of California adopted Patent Local Rules similar to those of the Northern District of California and refers to decisions of the Northern District as authority for their interpretation. The Circuit observed in O2 Micro that the Northern District’s rules were designed to “require parties to crystallize their theories of the case early in the litigation so as to prevent the shifting sands approach to claim construction.” The district court cited the explanation by the Northern District of California that “‘infringement contentions need not prove infringement but must outline a plaintiffs theories of infringement.”

The Preliminary Infringement Contentions

AntiCancer states that its Contentions showed its theories of infringement, provided notice of the information to be obtained by discovery, and complied with the letter and purpose of Patent Local Rule 3.1. AntiCancer states that its “infringement theories were as crystallized as they could be” before AntiCancer could “possibly have taken any discovery to support its infringement claims and to learn the actual details of the defendants’ internal research activities.” For each patent claim identified as infringed in AntiCancer’ s Preliminary Infringement Contentions, and each element of each claim, AntiCancer identified a specific portion of the Pfizer publication. The district court held that AntiCancer’s claim charts did not provide all of the information the Patent Local Rules require.

The panel reviews the three claim elements for which the district court found AntiCancer’s Preliminary Infringement Contentions deficient, and concludes that there is no reasonable basis for making the finding of bad faith that would be required to sustain the fees sanction, without which summary judgment here is improper. In Network Caching, the Northern District court explained that the Preliminary Infringement Contentions “are not meant to provide a forum for litigation of the substantive issues; they are merely designed to streamline the discovery process.” 2003 WL 21699799, at *5.


When a complaint meets the standards of the Federal Rules, and there has been no reasonable opportunity for discovery and evidentiary development of the issues, it is rarely appropriate to summarily decide the merits against the complainant. The Circuit need not intrude upon the district court’s authority to require supplementation of the Preliminary Infringement Contentions when such supplementation may assist the procedures of trial. However, exercise of a court’s inherent authority to levy a sanction as a condition of supplementing the Contentions requires conduct that constituted or was tantamount to bad faith. The panel determines that there is no finding, and there is no basis for a finding, of such impropriety here.

The panel therefore concludes that the district court exceeded its discretion in imposing the condition of payment of the defendants’ attorney fees and costs in order to permit AntiCancer to supplement its Preliminary Infringement Contentions. The condition and the summary judgment based thereon are vacated and the case is remanded for further proceedings.

IRIS Corporation, v. Japan Airlines Corporation, Fed. Cir. Case 2010-1051 (October 21, 2014)

IRIS Corporation brought suit in district court, alleging that JAL committed patent infringement by examining the electronic passports of its passengers within the United States. Because the allegedly infringing acts were carried out “for the United States” under 28 U.S.C. § 1498(a), the panel affirms the district court’s decision to dismiss IRIS’s complaint.

The patent in suit discloses methods for making a secure identification document containing an embedded computer chip that stores biographical or biometric data. JAL examines passports according to federal law, including the Enhanced Border Security Act, the Visa Entry Reform Act of 2002, and certain international treaties. According to IRIS, some of these passports are made using the methods claimed in its patent.

IRIS alleges that JAL infringed its patent under 35 U.S.C. § 271(g) by “using electronic passports in the processing and/or boarding of passengers at JAL services passenger check-in facilities throughout the United States.” JAL moved to dismiss IRIS’s suit for failure to state a claim upon which relief can be granted, among other things, arguing that federal laws requiring the examination of passports conflict with the patent laws and therefore exempt JAL from infringement liability. It also argued that IRIS’s exclusive remedy is an action against the United States under 28 U.S.C. § 1498(a). The district court granted JAL’s motion to dismiss, adopting only JAL’s conflict-of-laws rationale. IRIS appeals.

The Circuit reviews dismissal for failure to state a claim upon which relief can be granted under the law of the regional circuit. In this case, we apply Second Circuit law and review the district court’s judgment de novo.

The parties ask us to decide, among other things, whether the United States has assumed liability under 28 U.S.C. § 1498(a) for JAL’s allegedly infringing activities. The statute states:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States . . . the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims . . . .

28 U.S.C. § 1498(a) (2012) (emphasis added). The statute further clarifies that an accused activity is “for the United States” if two requirements are met: (1) it is conducted “for the Government,” and (2) it is conducted “with the authorization or consent of the Government.”

The government’s authorization or consent may be either express or implied. In this case, the government has clearly provided its authorization or consent because—as the parties and the United States agree—JAL cannot comply with its legal obligations without engaging in the allegedly infringing activities. Under such circumstances, the government has expressly authorized or consented to those activities.

But, standing alone, a governmental grant of authorization or consent does not mean that the alleged use or manufacture is done “for the United States” under § 1498(a). To qualify, the alleged use or manufacture must also be done “for the benefit of the government.” “[I]ncidental benefit to the government is insufficient,” but “[i]t is not necessary [for the Government] to be the sole beneficiary. . . . .”

The government benefits here because JAL’s examination of passports improves the detection of fraudulent passports and reduces demands on government resources. This, in turn, directly enhances border security and improves the government’s ability to monitor the flow of people into and out of the country. When the government requires private parties to perform quasi-governmental functions, such as this one, there can be no question that those actions are undertaken “for the benefit of the government.”

We also note that the United States has unequivocally stated its position that suit under § 1498(a) is appropriate here. Although the government’s statement is not dispositive, it reinforces our conclusion that the United States has waived sovereign immunity in this case and, therefore, that IRIS’s exclusive remedy is suit for recovery against the United States under § 1498(a).

Accordingly, because JAL’s allegedly infringing acts are carried out “for the United States” under 28 U.S.C. § 1498(a), we affirm the district court’s decision to dismiss IRIS’s suit.

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