PATENT CASE OF THE WEEK 

Immunex Corp. v. Sandoz Inc., Appeal No. 2020-1037 (Fed. Cir. July 1, 2020)

In this Biologics Price Competition and Innovation Act case, the Federal Circuit affirmed the bench trial ruling of the district court that the claims of two asserted patents covering a rheumatoid arthritis treatment were not invalid. In so doing, the Court developed the standard for determining common ownership for purposes of obviousness-type double patenting in cases where an asserted double-patenting reference is owned by a licensee of the patent holder.

In this case, the patents-in-suit were owned by Hoffman-La Roche Inc., but in what the majority referred to as “a novel theory of common ownership,” appellant Sandoz contended that they were effectively owned by Immunex, Roche’s exclusive licensee, and invalid for obviousness-type double patenting over Immunex’s patents.

The patents-in-suit were subject to an “Accord & Satisfaction” agreement between Roche, Immunex, and others. Under the terms of the agreement, Immunex received a paid-up, irrevocable, exclusive license to the U.S. patent family including the patents-in-suit, as well as the sole right to grant sublicenses and to make, have made, use, sell, offer for sale, and import products covered by the patent. Immunex was also granted the sole right to prosecute patent applications related to the patents-in-suit, the first right to rectify infringement of the licensed patents by instituting suit or by sublicense, and the right to retain the entirety of any damages award resulting from such an infringement suit. Immunex also received an option to purchase an assignment of the patents-in-suit upon request for $50,000, a small fraction of the consideration paid for the exclusive license and Immunex’s other rights.

Under the agreement, Roche retained the right to practice the patents only for internal, non-clinical research, as well as a secondary right to sue for infringement should Immunex fail to rectify infringement within 180 days following written notification from Roche. At that time, Roche would have the sole right to rectify infringement, exclusive of Immunex, and to retain the entirety of any damages award resulting from such an infringement suit. Both parties’ rights were transferrable only upon written consent from the other party.

At trial and on appeal, Sandoz argued that Immunex effectively owned the patents-in-suit because “all substantial rights” had transferred to Immunex under the agreement, a test previously used only to determine who may sue as a “patentee” under 35 U.S.C. § 281. Rejecting Immunex’s argument that obviousness-type double patenting requires common ownership “at the time of the invention,” the majority partially agreed with Sandoz, holding that where a licensee receives the right to prosecute the patent at issue, the “all substantial rights” test is informative in evaluating common ownership for purposes of obviousness-type double patenting. The Court opined that looking to the “all substantial rights” test achieves the proper balance between deterring gamesmanship in prosecution, such as seeking unjustified term extensions through claims not patentably distinct from earlier commonly-owned claims, and avoiding any chilling effect on routine collaborations and licensing between parties working in the same field of research.

However, the majority disagreed that the Accord & Satisfaction agreement transferred “all substantial rights” to Immunex in this case. The Court focused specifically on Roche’s retention of a secondary right to sue, as enforcement rights are frequently the most important consideration in determining whether all substantial rights have been transferred. The majority rejected Sandoz’s argument that the secondary right was “illusory,” which relied on precedent in which a licensee could undercut the patent owner’s right to sue by granting a sublicense to parties sued by the patent owner. In this case, the Court found that Roche’s secondary right was not illusory, because Immunex was divested of its right to sue or sublicense following expiration of the 180-day notice period. The Court also relied on Roche’s right to veto any assignment of Immunex’s interest in the patents-in-suit, as such restrictions on alienability are also inconsistent with a transfer of all substantial rights.

Because the majority thus found that the asserted Immunex patents were not “commonly owned,” it found that obviousness-type double patenting did not apply. The Court also affirmed the district court’s findings on the merits that the asserted claims were supported by adequate written description and not shown to be obvious over the prior art.

Judge Reyna dissented, agreeing with the majority’s use of the “all substantial rights” test, but arguing that Roche’s rights under the Accord & Satisfaction agreement were illusory because Immunex could order Roche to assign the patents at any time for de minimus consideration, and prevent Roche from initiating an infringement suit by issuing a royalty-free license to any alleged infringer within the 180-day written notice period. As such, Judge Reyna opined that the patents-in-suit were invalid for obviousness-type double patenting.

The opinion can be found here.

Author: Jason Wrubleski

ALSO THIS WEEK

Electronic Communication Technologies, LLC v. ShoppersChoice.com, LLC, Appeal No. 2019-2087 (Fed. Cir. July 1, 2020)

The District Court for the Southern District of Florida denied an award for attorney’s fees for ShoppersChoice following a judgment invalidating Electronic Communications Technologies, LLC’s (“ECT”) only remaining claim for infringement under the patent at issue. ShoppersChoice appealed. The Court vacated and remanded for an abuse of discretion because the district court “failed to conduct an adequate inquiry” into the relevant factors. Specifically, the District Court failed to “actually assess the totality of the circumstances” by not considering “ECT’s manner of litigation and the objective unreasonableness of ECT’s infringement claim.” Aiding the Court’s decision was a recent Central District of California decision awarding fees against ECT in a similar suit. See Kindred Studio Illustration & Design, LLC v. Elec. Commc’n Techs., LLC (“True Grit”), Case No. 2:18-cv07661-GJS, 2019 WL 3064112, at *6–9 (C.D. Cal. May 23, 2019). The True Grit court found that case to be exceptional because of ECT’s litigation history. “[B]etween 2011 and 2015, ECT, under its former name Eclipse, filed lawsuits against at least 150 defendants, alleging infringement of claims in the ’261 patent and in other patents in the ’261 patent’s family.” The Court held that ECT’s “failure to proceed in litigation past claim construction hearings indicates the use of litigation to achieve a quick settlement with no intention of testing the strength of the patent or its allegations of infringement,” and “a relevant consideration” for whether this was an “exceptional case.” The Court also found the district court’s failure to consider “the objective unreasonableness” of ECT’s alleged infringement against ShoppersChoice an abuse of discretion because another district court had “invalidated claims of patents in the ’261 patent’s family as patent ineligible under § 101” two years earlier. The Court vacated and remanded for further consideration under 35 U.S.C. § 285.

The opinion can be found here.

Author: Bazsi Takacs

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