Shire – On remand from the Supreme Court to reconsider a claim construction ruling in light of Teva, the Circuit again reverses the district court’s claim construction, finding that the disputed terms can be construed based on the intrinsic evidence. Despite Shire’s arguments to the contrary, the Supreme Court did not hold that a deferential standard of review is triggered any time a district court hears or receives extrinsic evidence. Here, there is no indication that the district court made any factual findings that underlie its claim constructions.
Alps – The denial of the motion of Ohio Willow Wood to dismiss for lack of standing is reversed because Alps did not possess either legal title or all substantial rights at the outset of this litigation. Neither the execution of an amended agreement between Alps and the patent owner, nor the filing of a supplemental complaint changes the result that no standing existed at the time the action was filed.
Shire Development, LLC v. Watson Pharm. Inc., Fed. Cir. Case 2013-1409 (June 3, 2015)
Shire sued Watson for infringement of a ‘720 patent directed to a controlled-release oral pharmaceutical composition for treating inflammatory bowel disease. The Circuit reversed the district court’s claim construction, and Shire filed for certiorari. Following its ruling in Teva, the Supreme Court remanded the case back to the Circuit to decide construction consistent with Teva.
Claim 1 recites:
1. Controlled-release oral pharmaceutical compositions containing as an active ingredient [mesalamine], comprising:
a) an inner lipophilic matrix consisting of substances selected from the group consisting of unsaturated and/or hydrogenated fatty acid, salts, esters or amides thereof, fatty acid mono-, di- or triglycerides, waxes, ceramides, and cholesterol derivatives with melting points below 90° C., and wherein the active ingredient is dispersed both in said the lipophilic matrix and in the hydrophilic matrix;
b) an outer hydrophilic matrix wherein the lipophilic matrix is dispersed, and said outer hydrophilic matrix consists of compounds selected from the group consisting of polymers or copolymers of acrylic or methacrylic acid, alkylvinyl polymers, hydroxyalkyl celluloses, carboxyalkyl celluloses, polysaccharides, dextrins, pectins, starches and derivatives, alginic acid, and natural or synthetic gums;
c) optionally other excipients;
wherein the active ingredient is present in an amount of 80 to 95% by weight of the total composition, and wherein the active ingredient is dispersed both in the lipophilic matrix and in the hydrophilic matrix.
The construction of “inner lipophilic matrix” and “outer hydrophilic matrix” is being reviewed by the Circuit. TheCircuit reviews for factual findings that underlie a district court’s claim construction under the “clear error” standard. However, in this case the intrinsic evidence fully determines the claim construction so the Circuit’s review is de novo. Teva, 135 S. Ct. 831 (2015).
Shire argues that because the district court heard testimony from various expert witnesses during a Markman hearing and at trial, the Circuit must defer to the district court’s constructions of the appealed terms. The Supreme Court held that the Federal Circuit “should review for clear error those factual findings that underlie a district court’s claim construction.” Teva, 135 S. Ct. at 842. The Court did not hold that a deferential standard of review is triggered any time a district court hears or receives extrinsic evidence. Here, there is no indication that the district court made any factual findings that underlie its constructions of “inner lipophilic matrix” and “outer hydrophilic matrix.”
“Inner Lipophilic Matrix” and “Outer Hydrophilic Matrix”
The district court relied on the specification to first construe “matrix” to mean “a macroscopically homogeneous structure in all its volume.” That construction is correct. But the court erred by construing “lipophilic matrix as a matrix that includes at least one lipophilic excipient.” That construction erroneously focuses on the lipophilic properties of an excipient in the matrix, rather than properties of the matrix itself.
Looking first to the language of the claims, “lipophilic” is an adjective that modifies matrix. The Background of the Invention explains that a lipophilic matrix is one “in which the main component of the matrix structure” exhibits certain lipophilic properties. And the specification teaches that a lipophilic matrix “generally entails non-linear, but exponential release of the active ingredient.” Thus, a “lipophilic matrix” is more than just a matrix with at least one lipophilic excipient. The matrix itself must exhibit lipophilic characteristics. The ‘720 patent teaches that this occurs when “the main component of the matrix structure” is lipophilic.
In construing the matrix terms, the panel rejects Watson’s position that the inner matrix and outer matrix must be “separate and distinct.” Watson based its arguments on alleged disclaimers by the applicants during the prosecution. The district court acknowledged that the applicants described their matrices as “separate” to distinguish over the prior art references, but found that “nowhere in the prosecution history, claims, or specification does the term ‘separate and distinct’ appear.” Although the prosecution history statements do not rise to the level of unmistakable disavowal, they do inform the claim construction.
The prosecution history, the structure of the claim itself, the ordinary meaning of the claim terms, including the Markush group limitations, and the patent’s description of the invention compel a claim construction which requires that the inner lipophilic matrix is separate from the outer hydrophilic matrix.
Looking to the claim structure itself, the claims require the inner lipophilic matrix to be separate, if not distinct, from the outer hydrophilic matrix. Element (a) of claim 1 recites “an inner lipophilic matrix.” Element (b) of claim 1 separately recites “an outer hydrophobic matrix.” The separation of these elements within the claims indicates that the claim requires two separate matrices. Moreover, the logical reading of the claim requires separation between the matrices because the matrices are defined by mutually exclusive spatial characteristics—one inner, one outer—and mutually exclusive compositional characteristics—one hydrophilic, one lipophilic.
The lack of overlap of the components of the two Markush groups supports the requirement that the volumes be separate. Accordingly, the correct construction requires that the inner volume contain substances from the group described for the inner lipophilic matrix (which are all lipophilic substances), and that the outer volume separately contain substances from the group described for the outer hydrophilic matrix (which are all hydrophilic). The ‘720 patent specification also teaches “separate” matrices.
Comment: This opinion continues theCircuit’s consistent post-Teva refusal to apply deferential, clear error review where claim construction can be decided without reference to the extrinsic evidence. Also see Info-Hold, Inc. v. Applied Media Technologies Corp., 783 F.3d 1262 (Fed. Cir. 2015) ; Enzo Biochem, Inc. v. Applera Corp., 780 F.3d 1149 (Fed. Cir. 2015) ; In re Papst Licensing Digital Camera Litigation, 778 F.3d 1255 (Fed. Cir. 2015). This is consistent with the oft-cited holding of Vitronics Corp. v. Conceptronic, 90 F. 3d 1576 (Fed. Cir. 1996) that an analysis of the intrinsic evidence alone will, in most situations, resolve any ambiguity in a disputed claim term. Extrinsic evidence may also be considered, if needed to assist in determining the meaning or scope of technical terms in the claims, but in those cases where the public record unambiguously describes the scope of the patented invention, reliance on any extrinsic evidence is improper.
Alps South, LLC v. The Ohio Willow Wood Co., Fed. Cir. Case Nos. 2013-1452, 1488, 2014-1147, 1426 (June 5, 2015)
Alps sued OWW for infringement of a ‘109 patent directed to liners positioned between the residuum of an amputated limb and a prosthetic limb. A jury found that the patent was valid and willfully infringed. Among other pre- and post-trial motions, OWW filed an unsuccessful motion to dismiss, contending that Alps lacked standing to sue.
After the ‘109 patent issued, the inventor assigned the patent to his company, AEI. Alps and AEI signed a license agreement under the ‘109 patent and shortly thereafter, without naming AEI as a co-plaintiff, Alps filed suit against OWW. Because Alps did not name AEI as co-plaintiff, OWW filed a motion to dismiss for lack of standing. While the motion was pending, Alps and AEI executed an amended license agreement that eliminated several limitations on Alps’ rights and removed certain rights retained by AEI. Although the amended agreement was executed long after Alps commenced the action, Alps and AEI referred to this as a nunc pro tunc agreement, intending the effective date to be the date of the original agreement.
The district court denied the motion to dismiss, concluding that the terms of the original agreement, giving Alps the right to exclude, transfer, and sue, sufficed to provide Alps with standing. The district court further explained that none of the rights retained or reserved by AEI were substantial enough to require that AEI be joined as a co-plaintiff. Alternatively, the court noted that under the amended agreement, Alps clearly possesses the substantial rights to proceed without AEI in the case.
Shortly before trial the district court reconsidered the standing issue and expressed concern about Alps’ standing, and invited Alps to join the patent owner as a co-plaintiff. Alps declined to do so, and the case proceeded to trial, after which a jury found the ‘109 patent valid and willfully infringed.
Alps Had No Standing Under the Original Agreement
Before we may exercise jurisdiction over a patent infringement action, we must satisfy ourselves that the plaintiff possessed standing as defined by 35 U.S.C. § 281. Under § 281, a “patentee” has standing to pursue a patent infringement action. The word “patentee” is not limited to the person to whom the patent issued, but also includes “successors in title to the patentee.” 35 U.S.C. § 100(d). The parties dispute whether Alps was a “patentee” under § 281.
In addition to the patent owner, an exclusive licensee has standing to sue in its own name, without joining the patentee where “all substantial rights” in the patent are transferred. If, however, the transferee does not hold all substantial rights, it may sue third parties only as a co-plaintiff with the patentee.
OWW first argues that Alps’ original agreement with AEI did not convey all substantial rights in the ‘109 patent to Alps. To determine whether an exclusive license is tantamount to an assignment, we must ascertain the intention of the parties to the license agreement and examine the substance of what was granted. Here, the original agreement was an exclusive license, also granting Alps the right to enforce the ‘109 patent. Moreover, it provided that AEI would cooperate “to the extent necessary . . . , including (without assignment of ownership to any patent rights) transferring of such rights to Alps as are necessary to enable Alps to enforce the patent rights in its own name.”
At the same time, however, the original agreement prohibited Alps from settling any infringement actions without AEI’s prior written consent. AEI also retained the right to pursue infringement litigation if Alps declined to do so. Most importantly, the agreement limited Alps’ right to “develop, make, have made, use, sell, offer to sell, distribute, lease, and import” products covered by the ‘109 patent, to the particular “field of use” of prosthetic liners, suspension sleeves, knee braces, and related health care gel products. The license similarly limited Alps’ right to pursue patent infringement to the same field of use.
To establish standing, Alps relies on its receipt of the right to exclude and the right to sue. Yet, because the license restricted these rights to a field of use, AEI retained the exclusive right to make, use, and sell products covered by the ‘109 patent in all areas outside the field of prosthetic products.
Precedent dictates that the original agreement’s field of use restriction is fatal to Alps’ argument that it had standing to file this action. The Supreme Court has long recognized that an exclusive licensee cannot sue for infringement without joining the patent owner if the license grants merely “an undivided part or share of the exclusive right granted under the patent.” Waterman v. Mackenzie , 138 U.S. 252 (1891). More recently, in International GamcoInc. v. Multimedia Games, Inc., 504 F.3d 1273 (Fed. Cir. 2007), we explained that finding that a field of use licensee has standing “to sue in its own name alone poses a substantial risk of multiple suits and multiple liabilities against an alleged infringer for a single act of infringement.” 504 F.3d at 1278. Accordingly, we concluded that our standing jurisprudence “compels an exclusive licensee with less than all substantial rights, such as a field of use licensee , to join the patentee before initiating suit.” Because the license restricted Alps’ rights to the field of prosthetic products, Alps lacked standing to pursue this litigation without naming AEI as a co-plaintiff.
The Amended Agreement Cannot be Given Retroactive Effect
Alps next argues that it cured any standing by amending the agreement to eliminate the field of use restriction and to eliminate the provision permitting AEI to pursue litigation against potential infringers if Alps declined to do so. Importantly, the amended agreement purported to be effective as of the same date as the original license agreement. Neither party seems to dispute that if the amended agreement had been executed prior to Alps filing suit, Alps would have had standing to sue without joining AEI.
“Nunc pro tunc assignments are not sufficient to confer retroactive standing.” Enzo APA & Son, Inc. v. Geapag A.G. , 134 F.3d 1090 (Fed. Cir. 1998). In Enzo , the licensee filed a patent infringement suit, but the written license agreement that existed at the time of filing did not include any rights to the asserted patent. After the licensee filed the action, the licensee sought to retroactively acquire title to the asserted patent by executing an amended license agreement with an effective date that predated the initiation of the suit. We concluded that this standing defect could not be cured by a retroactive agreement. We further noted that a party may not vindicate rights in court before the party actually possesses the rights.
Alps argues that we have routinely permitted plaintiffs to cure standing defects during the course of a lawsuit. The cases cited by Alps, however, involve our practice of endorsing joinder of patent owners, under Rule 21 Fed. R. Civ. P., in order to avoid dismissal for lack of standing. But Enzo precludes us from expanding this practice to permit a plaintiff to cure a standing defect by executing a nunc pro tunc agreement after filing a case.
The Supplemental Complaint Similarly Does not Cure the Standing Problem
Alps also relies on its supplemental complaint, which it filed after reexamination of the patent. Alps argues that because the trial proceeded on the patent claims that emerged from reexamination, the supplemental complaint’s reference to the nunc pro tunc agreement cured any defect in standing. We disagree. The party asserting patent infringement is required to have legal title to the patents on the day it filed the complaint and that requirement can not be met retroactively. Finally, although the supplemental complaint refers to the original exclusive license agreement, nothing in the supplemental complaint mentions the amended nunc pro tunc agreement.
Alps’ attempt to characterize its supplemental complaint as an amended complaint fares no better. To be sure, 28 U.S.C. § 1653 permits parties to amend their complaints to correct defective allegations of jurisdiction. But this provision is drafted in terms of ” allegations of jurisdiction,” which means that the ability to amend applies only to incorrect statements about jurisdiction that actually exists, and not defects in the jurisdictional facts themselves. Here, when Alps filed its complaint, it was merely an exclusive field of use licensee that lacked all substantial rights in the ‘109 patent. There were no errors in the jurisdictional facts as pleaded in the original complaint. Thus, Alps could not avail itself of § 1653 to amend the jurisdictional allegations that appeared in its original complaint.
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