Omnicef isn’t what it used to be. The widely used antibiotic had been a huge money-maker for Illinois-based Abbott Laboratories, bringing in billions of dollars in revenue. But in May 2007, the patent on the drug’s composition expired. Competitors began making and selling generic versions of it. Abbott’s revenue from U.S. sales of Omnicef plunged–going from $637 million in 2006, to $235 million in 2007, to just $25 million in 2008.

Abbott, however, still has one U.S. patent on the drug, known generically as cefdinir. The patent covers a crystalline form of cefdinir as well as a series of steps by which this chemical is “obtainable.” And Abbott didn’t let this patent–No. 4,935,507 (’507 patent)–sit idle.

One month before the expiration of its broad product patent on cefdinir, Abbott asserted the ’507 patent against Sandoz Inc. (one of the country’s largest manufacturers of generic drugs) and several other drug makers, seeking to enjoin them from making and selling generic cefdinir. The Federal District Court for the Northern District of Illinois denied Abbott’s request for a preliminary injunction, ruling in May 2007 that there was no infringement because the defendants’ version of crystalline cefdinir was slightly different from the version specified in the ’507 patent.

The Federal Circuit upheld the ruling in May 2009–but in a rather unusual way. In Abbott Laboratories v. Sandoz Inc., the court sua sponte issued part of its decision en banc in order to spell out the rights given by one type of patent. This ruling on product-by-process patents resolves a split in Federal Circuit law, but opens up new issues in prosecuting and litigating patents.

Moreover, the ruling narrows the protection given to product-by-process patents, which may be a blow to companies relying on these patents. “The ruling may hurt those in the biotech, chemical, pharmaceutical and machinery industries,” says Michael Gollin, a patent attorney at Venable.

Prescription for Description

Since 1992, the Federal Circuit has been of two minds about product-by-process patents. These patents traditionally have been used to protect innovative products with structures that were not fully known, such as new drug molecules. Instead of describing a product by its structure, this type of patent describes a product in terms of the process used to create it.

The Federal Circuit, however, has issued conflicting opinions about the scope of protection for these patents. One line of cases follows the 1991 decision in Scripps Clinic & Research Foundation v. Genentech. In that case, a Federal Circuit panel held that a party infringes product-by-process patent whenever it makes the patented product without authorization–even if the infringer uses a different process for creating the product.

A conflicting line of cases follows a 1992 panel decision in Atlantic Thermoplastics Co. Inc. v. Faytex Corp. These cases hold that a product-by-process patent is infringed only if the defendant has used the patented process in order to produce the patented product.

The Federal Circuit’s May en banc ruling finally resolved this split. Abbott rejected the rule of Scripps Clinic and endorsed the rule of Atlantic Thermoplastic.

Some experts hail the decision for bringing much-needed certainty to the scope of product-by-process patents.

“[I]f product-by-process patents were not limited by the claimed processes, people wouldn’t know if they were infringing,” says Arti Rai, who teaches patent law at Duke University. A company could discover an innovative process for making a product that appears similar to another’s patented product, but if the patented product is defined only in terms of its creation, it would be hard to determine whether the two products are the same–and that one is infringing.

Blurry Boundaries

Abbott does not offer guidelines for determining when something is a product-by-process claim. And unfortunately, the boundaries can be blurry. “For instance, there are product claims with process implied, and product claims with some kind of process limitation,” Gollin says. He adds that even in Abbott, the eight members of the majority disagreed with the three dissenters over whether Abbott’s ’507 patent was a product-by-process patent.

The bottom line: A patent owner could believe it has a product patent, but a court could decide it is just a product-by-process patent–and give it far less protection.

Abbott therefore opens up a new line of defense in patent infringement suits. “Accused infringers for the foreseeable future will argue that any patent claim [the plaintiff asserts] is a product-by-process claim, and they are not infringing the claimed process,” Gollin says.

The decision also creates another difficulty: different standards for obtaining and enforcing product-by-process claims. Suppose a company has a product-by-process claim, and there is another process that would create the same product. That other process would not infringe the patent claim under Abbott; it would be considered sufficiently distinct. But if that other process was discovered first, it would be considered similar enough to kill the company’s later product-by-process patent application. The patent office would find the earlier process was prior art that anticipated the invention, and therefore reject the patent application.

These conflicting standards make product-by-process patents tough to obtain and enforce. “I don’t think that’s going to fly in the long run,” says Rebecca Eisenberg, who teaches patent law at the University of Michigan. “It doesn’t make sense to have the same claim language mean different things for infringement and validity purposes.”

Technological Advancements

Product-by-process claims have become less popular in recent years, thanks to advances in science. “We have better technological means for determining the structure of a product,” Eisenberg says. This enables companies to patent more of their inventions as product claims instead of product-by-process claims.

The decrease in product-by-process patent claims may accelerate in the wake of Abbott. However, it would be a mistake for companies to completely abjure such claims, experts assert. “They are a useful part of a patent portfolio,” Gollin says.

Compared with a product claim, a product-by-process claim can be harder to attack. “A product-by-process claim may be narrower than a product claim, but sometimes narrowness saves a claim,” Eisenberg says. “A broad claim to a product may be invalidated by prior art, but a product-by-process claim may be upheld. … If the claimed process is a superior way of producing that product, that may be a valuable claim.”

A product-by-process claim also offers some advantages over a mere process claim. The former is easier to enforce against infringing imports and damages are easier to prove.

To best protect their inventions, companies should use a variety of patent claims, experts advise. “Abbott underscores the importance of claim diversity,” Gollin says. “You shouldn’t put all your types of claims in one basket.”