reas exp of success and unclean hands slides · •The Federal Circuit disagreed, vacated the...

REASONABLE EXPECTATION OF SUCCESS IN PATENT INFRINGEMENT AND HATCH-WAXMAN LITIGATIONS

THE 'EXPANDED' UNCLEAN HANDS DOCTRINE AS A DEFENSE

IIPRD SEMINARNOV. 2018

MARK BOLANDSUGHRUE MION, PLLC

© 2018 Sughrue Mion, PLLC

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• Obviousness requires that:– where there is a reason to modify or combine prior art to achieve the

claimed invention, – there must also a reasonable expectation of success.– This is especially true with respect to bio / chemical / pharma patents.

• The Federal Circuit does not frequently address this prong of obviousness in much detail.– However, in the last year or so, lack of a reasonable expectation of success

was a major factor in several obviousness rulings by the Federal Circuit.– One originated from a district court (Genzyme Corporation v. Dr. Reddy’s

Lab, Dec. 18, 2017), (“Genzyme”) and the other from the Patent Trial and Appeals Board (“Board”) (In re Stepan Company, Aug. 25, 2017) (“In re Stepan”).

OBVIOUSNESS & REASONABLE EXPECTATION OF SUCCESS


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• In Genzyme, the Federal Circuit explained that a hypothesis presented in passing in a reference, without more, is not enough fora POSA to have a reasonable expectation of success.

• In In re Stepan, the Federal Circuit emphasized that reasonable expectation of success requires a motivation to do more than simply vary all parameters or try all possible choices until success is achieved.

• While In re Stepan has relevance for patent applicants facing conclusory obviousness rejections, its rationale applies to district court challenges as well.

• Genzyme is cautionary for patent challengers relying too heavily on isolated, unsupported statements in the prior art as a basis for satisfying the reasonable expectation of success prong.

OBVIOUSNESS & REASONABLE EXPECTATION OF SUCCESS


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• In Genzyme, No. 2016-2206 (12/18/2017), the Federal Circuit affirmed the D.Ct’s judgment that the claim at issue was not obvious.

• The technology related to obtaining hematopoietic stem cells from blood.– These stem cells reside in the bone marrow where they develop into

mature blood cells, including white blood cells (WBCs).– The stem cells are found in the blood only in very small numbers, but

can be “mobilized” from the bone marrow into the blood through a process called mobilization.

– In the bone marrow, they are anchored at least in part through a bond between CXCR-4, a receptor located on the stem cell surface, and SDF-1, a protein (chemokine) produced in the bone marrow.

Genzyme Corporation v. Dr. Reddy's Lab


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• Genzyme developed a method for mobilizing and harvesting hematopoietic stem cells from the blood, by sequentially administering two drug products: G-CSF and plerixafor. (Plerixafor is the active chemical ingredient in Genzyme’sMozobil®. )

• The method was covered by claim 19 of the '590 patent. :– A method to obtain progenitor and/or stem cells from a

subject administering G-CSF and plerixafor to the subject, in an amount effective to mobilize the progenitor and/or stem cells and harvesting the progenitor and/or stem cells



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– Genzyme brought a Hatch-Waxman action against Dr. Reddy’s Laboratories (DRL) which was seeking approval to market a generic version of Mozobil®.

– In its defense, DRL asserted that claim 19 was invalid for obviousness.

– The district court disagreed, and DRL appealed. A major issue on appeal was whether an ordinarily skilled person would have had a reasonable expectation of success in combining the asserted prior art references to arrive at Genzyme’s method.

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• DRL’s obviousness claim was based on a combination of a journal article by Hendrix et al. and U.S. Patent 5,824,304 (’304 patent), or alternatively over the combination of WO 00/45814 (’814 application) and the ’304 patent.

• Prior Art:– Hendrix is focused on the use of plerixafor for treating HIV.– It reports an increase in WBC counts in subjects to whom plerixafor was

administered.– To explain the increase, it referred to known information that plerixafor can

“completely inhibit” binding of SDF-1 to CXCR-4, and hypothesized that “binding of [plerixafor] to CXCR4 may inhibit the chemotactic effects of SDF-1, causing release of WBCs from the endothelium and/or stem cells from bone marrow.” Genzyme at 5 (emphasis added).



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• Prior Art (cont’d):– The ’304 patent is related to the interaction between another protein-receptor

pair: VLA-4, found in bone marrow, and the VLA-4 receptor, found on stem cells.

– The patent discloses a method of increasing stem cell numbers in blood by administering an agent that blocks the binding of VLA-4 to its receptor, thereby releasing stem cells from the bone marrow.

– The patent also discloses administering G-CSF to stimulate production of stem cells in the bone marrow. The combination of G-CSF and the blocking agent, leads to mobilization of stem cells.

– The ’814 application, like Hendrix, describes the relationship between plerixafor and WBC elevation, not information about using plerixafor to mobilize stem cells.



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• Summary: Obviousness challenge based on the combination of ‘304 + Hendrix, or alternatively '304 + WO '814.– '304 patent disclosed increasing the number of stem cells in the

peripheral blood by administering a blocking agent of VLA-4 antigens, but did not disclose plerixafor as the blocking agent

– Hendrix and WO '814 disclosed increasing white blood cells by administering plerixafor, which inhibits binding of SDF-1 to CXCR-4.

– Hendrix also disclosed – in passing – that plerixafor may cause stem cell mobilization.

• DRL argues it would have been obvious to substitute the blocking agent of VLA-4 antigens in the' 304 patent with plerixafor as taught by Hendrix or WO '814

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• District Court:– Bottom line: DRL argued that claim 19 differed from the

’304 patent (secondary reference) only in the use of plerixafor as the blocking agent• However, DRL asserted that such use would have been obvious due

to the express suggestion in Hendrix that plerixafor could function as a blocking agent for releasing stem cells from the bone marrow. Id. at 6.

– The district court (D. Del., Judge Sleet) disagreed and noted among other points the evidence of a history of failure in the field of mobilization of stem cells.



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• The Federal Circuit also disagreed with DRL.• It cited record testimony that a typical stem cell has around

one hundred different types of receptors on its surface and that there was no evidence that VLA-4 localizes stem cells in the marrow similarly to the CXCR-4/SDF-1 bond. Id. at 7. – Thus, there could have been no expectation that CXCR-4 and VLA-4

would behave similarly with regard to mobilization. Id.– That plerixafor may cause stem cell mobilization, the Court

emphasized, was hypothesized in the Hendrix article “in an isolated sentence, without explanation.”

– The rest of the seven pages in the Hendrix article related to elevation of WBC counts.



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• Further, the Federal Circuit noted that SDF-1 was referenced for attracting lymphocytes, not stem cells, and the discussion of CXCR-4 was described as being expressed in different types of WBCs, not stem cells. Id. at 7-8.– A POSA would therefore have recognized that the presence of stem

cells was never tested by the Hendrix authors. Id. at 8.• Other relevant facts were:

– CXCR-4 antagonists were only studied in the HIV field, there was a history of failure with respect to the search (more than a dozen candidates) for better stem cell mobilization agents, and

– no one had ever mobilized stem cells with any CXCR-4 antagonist, let alone plerixafor. Id.



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• With respect to DRL’s asserted combination of the ’814 application and the ’304 patent, the Federal Circuit agreed with the district court that obviousness would have required the erroneous assumption that an ordinarily skilled person would have known that WBCs were a proxy for stem cells. Id. at 9.– Bottom line: under these facts, a reasonable expectation of success did not

exist.

• Although non-precedential, Genzyme is a reminder that evidence of unpredictability in a field can seriously undermine expectation of success.– In such fields, taking hypotheses or conclusory statements in prior art

references at their face value to demonstrate obviousness is unlikely to be successful.

– Defendants need to address the references as a whole, in proper context, through appropriate expert testimony.



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• In re Stepan (No. 2016-1811, 8/25/2017) relates to an appeal by Stepan Company from a decision of the PTAB affirming the Examiner’s rejection of all claims of the ’567 application at issue.

• The invention: The sole independent claim in the ’567 application is directed to a herbicidal formulation, containing an ultra-high load, aqueous glyphosate salt-containing concentrate that includes a surfactant system.– Surfactants make glyphosates more effective as herbicides by

improving their adherence to leaves.– The claimed concentrate has a cloud point above at least 70 ºC or

no cloud point when the concentrate is heated to its boiling point.

– The surfactant system contains three components.

In re Stepan Co.


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• The invention: A cloud point is the temperature at which a solution becomes cloudy due to the surfactants becoming insoluble and separating into layers.– One can avoid cloudiness by choosing a surfactant having a

cloud point higher than the solution’s temperature or by cooling the solution before adding the surfactant.

– The ’567 application explains that because glyphosate salt is made at about 75 ºC, it is advantageous to formulate glyphosate with a surfactant system exhibiting a high cloud point so as to avoid having to wait for the glyphosate salt reaction product to cool down.

In re Stepan Co.


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• The Prior Art: The vast majority of claims in the ’567 application were rejected for obviousness over a prior art reference disclosing highly-loaded glyphosate compositions containing surfactants with a cloud point of at least 50 ºC and ideally 60 ºC.– The examiner found that the reference teaches preferred surfactants

having two of the three required components, the third component being optional, and further that “any combination” of surfactants could be used in the glyphosate compositions.

– The examiner stated that while the reference did not teach a cloud point above 70 ºC, achieving this cloud point would have been a matter of “optimizing the formulation” because of the teaching in the reference that the ideal cloud point should be above 60 ºC. Id.

In re Stepan Co.


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• The PTAB basically adopted the examiner’s findings. • The Federal Circuit disagreed, vacated the PTAB’s decision,

and remanded.– It found that the Board had failed to articulate why an ordinarily skilled

person would have had a reasonable expectation of success to formulate the claimed surfactant system with a cloud point above at least 70 ºC.

– Quoting from an earlier opinion, the Court said, “[T]o have a reasonable expectation of success, one must be motivated to do more than merely to vary all parameters or try each of numerous possible choices until one possibly arrived at a successful result.”

– Simply reciting the teaching from the reference that “any combination” of surfactants might be used and that a cloud point above 60 ºC was desired was not sufficient.

In re Stepan Co.


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• Also, the Federal Circuit found that the Board indisputably erred when it disregarded as irrelevant some of the evidence presented by Stepan.– The evidence showed that

• none of the examples in the prior art reference included all three of the surfactant components, and that

• the closest examples -- having two of the three components -- failed to achieve a cloud point above at least 70 ºC. Id.

– This evidence was clearly relevant to expectation of success, but had essentially been ignored.

– Not surprisingly, the Court instructed the Board to take the evidence into consideration on remand.

In re Stepan Co.


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• Bottom line: The Board’s obviousness decision was not upheld because of– 1) its failure to make specific factual findings on the issue

of expectation of success, and also– 2) for not considering all relevant evidence on the issue.

• Again, conclusory positions without consideration of all evidence, and proper context, is insufficient to show a reasonable expectation of success, or lack thereof, whether in prosecution or litigation.

In re Stepan Co.


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• In yet a third context – obviousness between two sets of claims in an interference-in-fact analysis – evidence on the ‘reasonable expectation of success’ prong also was critical to the outcome.

• The Federal Circuit recently considered an interference proceeding between the University of California (“UC”) and the Broad Institute over the use of CRISPR-Cas9 technology. – The Court affirmed a Patent Trial and Appeal Board (“Board”) decision finding

that there was no interference-in-fact between UC’s patent application and the claims of twelve patents and one application owned by Broad Institute. Regents of the Univ. of Cal. v. Broad Inst., Inc., No. 2017-1907, 2018 U.S. App. LEXIS 25535 (Fed. Cir. Sept. 10, 2018)

Univ. of California v. Broad Institute


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• The claims at issue relate to use of an engineered CRISPR-Cas9 system for targeted cutting of DNA molecules. – CRISPR-Cas systems naturally occur in prokaryotes, such as bacteria,

but not in eukaryotic cells. • UC’s earlier-filed claims were generic, encompassing the use

of the novel CRISPR-Cas9 system in any environment, including in vitro, in prokaryotic cells, and in eukaryotic cells.

• In contrast, the claims in the Broad Institute’s later-filed patents and application were limited to use of the same CRISPR-Cas9 system in eukaryotic cells.

• Thus, the respective claim sets stood in a genus-species relationship.



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• The Board declared an interference, naming UC as Senior Party.• In the motions phase, Broad Institute moved to terminate, for no

interference-in-fact between the competing claim sets. • Broad Institute argued that its claims were patentably distinct from

UC’s claims because a person of ordinary skill in the art (“POSA”) would not have reasonably expected the CRISPR-Cas9 system to work in a eukaryotic cell.

• The test to determine whether an interference has occurred considers “whether ‘the subject matter of a claim of one party would, if prior art, have anticipated or rendered obvious the subject matter of a claim of the opposing party and vice versa.’”

• A claim is rendered obvious if a POSA would have been motivated to combine or modify the teachings in the prior art and would have had a reasonable expectation of success.



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• The Board found that while there was ample motivation, a POSA would not have had a reasonable expectation of success for applying the CRISPR-Cas9 system in a eukaryotic cell. – Broad Institute’s expert testified that

• the differences between prokaryotic and eukaryotic cells made the CRISPR-Cas9 system unpredictable in eukaryotic cells, and that

• these differences would have caused a POSA not to have a reasonable expectation of success when applying CRISPR-Cas9 in eukaryotes.

– Further, in a published article after UC’s filing date, UC’s expert witness recognized many of the same potential hurdles in applying the CRISPR-Cas9 system in eukaryotic cells, concluding that whether the system would work in eukaryotes “remains to be seen.”



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• The Board also considered published statements by UC inventors; one UC inventor noted after-the-fact that– there were “many frustrations” in getting CRISPR-Cas9 to work in human cells,– that she thought success in doing so would be “a profound discovery,” and– that there was a “huge bottleneck” in making genetic modifications in plants and

animals • Evidence in the record also showed the UC inventor’s colleagues

recognized that Institute’s development was significant.– “CRISPR is turning out to be absolutely spectacular…”

• The Board viewed this after-the-fact evidence as indicating that a POSA would have lacked a reasonable expectation of success before carrying out the experiments in eukaryotic cells.

• Thus, the junior party’s species claims were found non-obvious over the senior party’s generic claims, and the interference was terminated.

Univ. of California v. Broad Institute- INVENTORS' OWN STATEMENTS WERE GIVEN WEIGHT


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• UC appealed, but the Federal Circuit found there was substantial evidence to support the Board’s findings and affirmed.

• In particular, the fairly significant weight given to the UC inventors’ and expert’s statements in publications – even well after-the-fact – was confirmed to have been an appropriate weighing of the evidence by the Board.

• Bottom line: Evidence showing frustration or doubt about the practicability or possible execution of an invention, as well as praise after the fact, can support a finding of no reasonable expectation of success.



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• In an astonishing decision, the district court rejected and tossed aside a $200 million jury verdict for Merck against Gilead’s infringing Hep-C sofosbufir drugs, and the Federal Circuit affirmed. 888 F.3d 1231 (Fed. Cir. 2018)

• Rather than enforcing the jury verdict, the district court held instead that the patents are unenforceable due to Merck’s “unclean hands” involving both business and litigation misconduct. The district court explained:– “The record … reflects a pervasive pattern of misconduct by Merck and its

agents constituting unclean hands, which renders Merck’s ‘499 and ‘712 Patents unenforceable against Gilead. . . .Candor and honesty define the contours of the legal system. When a company allows and supports its own attorney to violate these principles, it shares the consequences of those actions. Here, Merck’s patent attorney, responsible for prosecuting the patents-in-suit, was dishonest and duplicitous in his actions with Pharmasset, with Gilead and with this Court, thus crossing the line to egregious misconduct. Merck is guilty of unclean hands and forfeits its right to prosecute this action against Gilead.”

UNCLEAN HANDS– Gilead Sciences v. Merck


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• Notable is the fact that the unclean-hands doctrine traditionally only applies to block a party from seeking equitable relief (as opposed to legal relief).

• Here, it appears that Merck was only seeking compensatory money damages — something purely legal.

• This is an anomaly never really addressed by the district court.

UNCLEAN HANDS– Gilead Sciences v. Merck


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• 2001: Merck filed patent applications that eventually led to the patents-in-suit. – Merck chemist / patent attorney Phillipe Durette helped with the

prosecution.

• 2002: Jeremy Clark working for a predecessor to Gilead (Pharmasset) was reviewing Merck’s early published patent applications “looking for loopholes.”– Clark came upon a proposed compound that led to sofosbuvir –

the active drug at issue in this case.

• 2003: Pharmasset (Clark) filed a patent application for sofosbuvir.

UNCLEAN HANDS– Gilead Sciences v. Merck – RELEVANT FACTS


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• 2004: Merck and Pharmasset began to collaborate on development, but setup (1) a non-disclosure agreement and (2) a firewall blocking Merck patent prosecutors from seeing details of Pharmasset. – However, in a phone call, Durette was told about the secret

/ unpublished Pharmasset (Clark) patent application. After the phone call, Durette stopped his participation in the collaboration, but continued to prosecute the Merck patents.

• 2005: The Pharmasset (Clark) patent application became public, and Durette then amended the claims in the Merck applications to specifically target and read on the Pharmassetcompound, sofosbuvir.



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• Durette prosecuted the first Merck application until it issued in 2006.

• Jeffrey Bergman took over prosecution of the pending family for Merck in 2010, and narrowed the claims to targeted metabolites of the same sofosbuvircompound.

• Later at trial, Durette served as the corporate (R. 30(b)(6)) witness for Merck and the district court found that he gave false testimony in his deposition — denying that he had been part of the phone call mentioned above.



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• The main bad acts by Merck were that its agent Durette– (1) joined the early call, against the terms of the

firewall, learning about Pharmasset’s specific interest in developing sofosbuvir; then

– (2) continued to prosecute the applications after improperly learning of the information, and in fact redrafted claims to specifically read on the compound; and

– (3) lied about it at trial. • Collectively, those were enough for an “unclean hands”

finding.

UNCLEAN HANDS– Gilead Sciences v. Merck – BAD ACTS


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• The doctrine of unclean hands has long been part of the U.S. law operating under the maxim: “those seeking equity must do equity.”

• In other words, a party asking for equitable relief must come to court with “clean hands.”

• In the 1933 case of Keystone Driller Co. v. General Excavator Co., 54 S.Ct. 146(1933), the Supreme Court articulated how the doctrine operates in patent cases.– The Court began with the traditional maxim that a “[c]omplainant, to

be entitled to equitable relief, must not only show that he has good cause of action, but that he comes into court with clean hands.”

UNCLEAN HANDS– Gilead Sciences v. Merck – HISTORICAL UNDERPINNINGS


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• Keystone Driller (cont’d):

– He must be frank and fair with the court, nothing about the case under consideration should be guarded, but everything that tends to a full and fair determination of the matters in controversy should be placed before the court.’ Story’s Equity Jurisprudence (14th Ed.) s 98. . . . This court has declared: ‘It is a principle in chancery, that he who asks relief must have acted in good faith. The equitable powers of this court can never be exerted in behalf of one who has acted fraudulently, or who by deceit or any unfair means has gained an advantage. To aid a party in such a case would make this court the abetter of iniquity.’ Bein v. Heath, 6 How. 228, 247, 12 L.Ed. 416.

UNCLEAN HANDS– Gilead Sciences v. Merck – HISTORICAL UNDERPINNINGS


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• The “unclean hands” defense must be tied to the matter in litigation — courts look to see whether the bad-acts are connected to the cause of action at issue.

• For example, in Therasense v. Becton Dickinson, 649 F.3d 1276 (Fed. Cir. 2011), the en banc Federal Circuit reviewed Keystone:– Keystone involved the manufacture and suppression of evidence. The patentee

knew of “a possible prior use” by a third party prior to filing a patent application but did not inform the PTO. After the issuance of the patent, the patentee paid the prior user to sign a false affidavit stating that his use was an abandoned experiment and bought his agreement to keep secret the details of the prior use and to suppress evidence. With these preparations in place, the patentee then asserted this patent, along with two other patents, against Byers Machine Co. (“Byers”). Unaware of the prior use and of the cover-up, the court held the patents valid and infringed and granted an injunction….

UNCLEAN HANDS– Gilead Sciences v. Merck – BAD ACTS TIED TO THE LITIGATION


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• Therasense, discussing Keystone Driller:– The patentee then asserted the same patents against General Excavator Co. and

sought a temporary injunction based on the decree in the previous Byers case. The district court denied the injunctions but made the defendants post bonds. The defendants discovered and introduced evidence of the corrupt transaction between the patentee and the prior user. The district court declined to dismiss these cases for unclean hands. On appeal, the Sixth Circuit reversed and remanded with instructions to dismiss the complaints. The Supreme Court affirmed. The Supreme Court explained that if the corrupt transaction between the patentee and the prior user had been discovered in the previous Byers case, “the court undoubtedly would have been warranted in holding it sufficient to require dismissal of the cause of action.” Id. at 246. Because the patentee used the Byers decree to seek an injunction in the cases against General Excavator Co. and Osgood Co., it did not come to the court with clean hands, and dismissal of these cases was appropriate.

UNCLEAN HANDS– Gilead Sciences v. Merck – BAD ACTS TIED TO THE LITIGATION


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• One thing that the Therasense court missed here in its discussion of Keystone is that the equitable defense of unclean hands was applied to the equitable remedies sought by the patentee –temporary injunction. It was not a direct defense to the associated legal remedies.

• The Federal Circuit in Gilead clearly affirmed the district court’s application of the traditionally equitable “unclean hands” doctrine to bar a legal remedy awarded by the jury – a damages award of $200M.

• Thus, under current Federal Circuit precedent, unclean hands may be raised as a defense where the facts might otherwise not support a finding of inequitable conduct under the current, strict Therasense standard.

UNCLEAN HANDS– Gilead Sciences v. Merck – BROADER REMEDY THAN INEQUITABLE CONDUCT?


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• For example, a main thrust of Merck’s argument was that the bad-acts were not “material” since the Merck attorney did not take any advantage of the improperly gained knowledge until after the Gilead patent published.– And, at that point, it was standard patent practice to amend claims to

parallel a competitor’s patent application.

• Thus, the bad acts (at least pre-litigation) might not be consideredto meet the “but-for cause” materiality standard for inequitable conduct.

• Here, however, the court refused to extend the strict Therasensemateriality standard to the unclean hands doctrine, leaving open a broader defense of “unclean hands” for defendants to pursue in future cases.

UNCLEAN HANDS– Gilead Sciences v. Merck – BROADER REMEDY THAN INEQUITABLE CONDUCT?


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• Companies with internal prosecution counsel and staff need to observe strict rules for external communications.

• Prosecution bars in Protective Orders are essential from a defendant’s standpoint in patent and Hatch-Waxman cases.

• Whenever it appears that claim amendments were made to try to capture a defendant’s technology and a prior collaboration or litigation with a prosecution bar took place, discovery into the background facts could be fruitful in developing potential “bad acts” defenses, including unclean hands.

UNCLEAN HANDS– Gilead Sciences v. Merck – IN-HOUSE COUNSEL


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• Merck has sought review at the Supreme Court. Merck & Co., Inc. v. Gilead Sciences, Inc., Docket No. 18-378 (Supreme Court 2018).

• Petition was filed in September. Response is due Nov. 23.• In its petition for writ of certiorari, Merck asks one question:

– Whether the equitable defense of unclean hands precludes legal relief in the form of damages.

• Merck summarizes its case:– “In Manufacturers’ Finance Co. v. McKey, 294 U.S. 442 (1935),

this Court rejected the unclean-hands defense as ‘inapplicable’ in damages actions. The plaintiff ’s legal rights were not “subject to denial or curtailment in virtue of equitable principles applicable only against one who affirmatively has sought equitable relief.”

UNCLEAN HANDS– Gilead Sciences v. Merck –Petition for Writ of Certiorari


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• Merck summarizes its case (cont’d):– “The Federal Circuit has gone the opposite direction.

Citing the Federal Rules of Civil Procedure’s 1938 merger of procedures for law and equity and the 1952 Patent Act, the Federal Circuit allows the equitable defense of unclean hands to bar legal actions for patent infringement. Thus, in the decision below, the Federal Circuit held that unclean hands could nullify a jury’s $200 million damages award. That mistaken expansion of unclean hands beyond its equitable origins has profound impacts. And it reflects disarray on the issue throughout federal courts.”

UNCLEAN HANDS– Gilead Sciences v. Merck –Petition for Writ of Certiorari


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