Robert C. Scheinfeld
Robert C. Scheinfeld ()

It has been tough sledding recently in the Court of Appeals for the Federal Circuit for some pharmaceutical patent owners. In three recent decisions, each pharmaceutical patent considered by the Federal Circuit was invalidated. But these cases also give insight on some important issues. The first two decisions address how the Federal Circuit reviews evidence and determinations of obviousness by the Patent Trial and Appeal Board (PTAB) in post-grant proceedings governed by the America Invents Act (AIA). The third decision clarifies a debate among the patent bar as to whether the AIA changed the law regarding the “on-sale” bar by overruling prior case law as to so-called “secret sales.” This article reports on these recent Federal Circuit decisions.

‘Novartis AG v. Noven Pharma.’

On April 1, 2017, the Federal Circuit affirmed a PTAB decision during inter partes review finding that claims-at-issue in two patents asserted by Novartis were obvious in view of the prior art. On appeal, Novartis argued that the PTAB erred in reaching a different conclusion than the Federal Circuit and the Delaware District Court in two prior opinions, which addressed the “same” arguments and evidence and found the same claims-at-issue not to be obvious. Novartis also argued that the prior art references could not properly be combined to support obviousness.

In Novartis, the claims-at-issue are directed to a pharmaceutical composition including a compound commonly known as rivastigmine, useful for treatment of Alzheimer’s, “in a free base or acid addition salt form” along with an antioxidant.

First, the Federal Circuit rejected Novartis’ argument that the prior judicial opinions of non-obviousness were binding on the PTAB. The Federal Circuit identified some differences in the record before the PTAB compared to the record before the Delaware District Court, including additional prior art and expert declarations, and noted “[i]t is unsurprising that different records may lead to different findings and conclusions.” 853 F.3d 1289, 1294 (Fed. Cir. 2017). Even if the record were the same, however, the Federal Circuit found Novartis’ argument would fail as a matter of law, highlighting the different standards of review in each proceeding. That is, a “petitioner in an inter partes review proves unpatentability by a preponderance of the evidence (see 35 U.S.C. §316(e)) rather than by clear and convincing evidence[ ] as required in district court litigation.” Thus, quoting the Supreme Court, the “different evidentiary burdens mean that the possibility of inconsistent results is inherent to Congress’[s] regulatory design.”

Second, the Federal Circuit rejected Novartis’ argument that there would be no motivation to combine the references found to render the claims-at-issue obvious. The crux of Novartis’ argument was that the record only taught adding an antioxidant to rivastigmine “when required to address a known oxidative degradation problem,” and the record did not show such problem with rivastigmine existed in the prior art. 853 F.3d at 1295. The Federal Circuit found substantial evidence supporting the PTAB’s finding that a skilled artisan would have assessed the structure of rivastigmine to determine whether an antioxidant should be added, rather than merely waiting until after testing to discover a degradation condition. The Federal Circuit emphasized that Novartis’ arguments would require the court to reweigh the evidence and give greater weight than the PTAB to Novartis’ expert’s testimony, which the Federal Circuit cannot do. Id. at 1295-96 (citing In re Warsaw Orthopedic, 832 F.3d 1327, 1333 (Fed. Cir. 2016)).

‘Novartis AG v. Torrent Pharma.’

On April 12, 2017, the Federal Circuit again affirmed the PTAB, finding all claims of another patent owned by Novartis unpatentable as obvious. 853 F.3d 1289 (Fed. Cir. 2017). On appeal, among other issues, Novartis raised challenges that (1) the PTAB erred by considering in its obviousness analysis a prior art reference that was denied as a ground of institution of the proceeding; and (2) the PTAB failed to consider evidence teaching away from the combination of references.

The patents-at-issue are directed to a pharmaceutical composition including a sphingosine-1 phosphate (S1P) receptor agonist (fingolimod) and a sugar alcohol, and in a solid form suitable for oral administration, which is useful for treating autoimmune diseases such as multiple sclerosis. To overcome challenges with creating a solid composition using fingolimod, the ’283 patent describes that the sugar alcohol used to form the composition “may suitably be mannitol,” which is less likely to absorb unwanted moisture.

Torrent filed a petition for inter partes review presenting three prior art challenges, i.e., that (1) all claims are obvious in view of two references, Chiba and Aulton, (2) a subset of claims are anticipated by a third reference, Sakai, and (3) all claims are obvious in view of Chiba and Sakai. Essentially, Chiba teaches a solid oral composition of fingolimod with an excipient; Aulton teaches mannitol is an “expensive,” but “commonly used” excipient in solid oral compositions; and Sakai teaches a combination of fingolimod and mannitol, but in a liquid formulation. The PTAB instituted review of the first ground based on Chiba and Aulton, yet declined review of the other two grounds involving the reference Sakai.

The PTAB later found all claims obvious in view of Chiba and Aulton, which the PTAB found “strongly suggest” the two-ingredient compound of the claims-at-issue. In addition to the teachings of the references themselves, the PTAB cited, as an additional reason to combine Chiba and Aulton, that Sakai explicitly teaches combining the two ingredients (but as a liquid).

On appeal, Novartis argued that since all grounds of invalidity involving Sakai were not instituted, the PTAB’s later reliance on Sakai in its obviousness opinion violated the requirements of notice and opportunity to respond in the Administrative Procedure Act (APA). The Federal Circuit, however, found no violation of the APA, noting that Novartis’ complaints of “surprise” were unfounded at least because the parties had an opportunity to address Sakai as evidence of motivation to combine during briefing and expert discovery. The court also highlighted that Sakai was merely one of several independent grounds for motivation to combine Chiba and Aulton set forth by the parties and cited by the PTAB.

Second, Novartis argued that, in its motivation to combine analysis, the PTAB failed to consider the disadvantages of using mannitol as an excipient, e.g., that mannitol is “expensive” as described by the Aulton reference itself. The Federal Circuit found substantial evidence supported the PTAB’s conclusion that mannitol was “commonly used” as an excipient, in spite of its disadvantages, one of which the PTAB noted was cost. The court found that the PTAB’s arguably limited discussion of the disadvantages, along with citation to the relevant discussion of this issues in the parties’ briefing, was sufficient to support the PTAB’s conclusions.

‘Helsinn Healthcare v. Teva Pharm.’

On May 1, 2017, the Federal Circuit invalidated four more pharmaceutical patents, these owned by Helsinn Healthcare. No. 2016-1284, 2017 WL 1541518, at *3 (Fed. Cir. May 1, 2017). This case involved the on-sale bar provisions of 35 U.S.C. §102, as applied to three patents filed under the pre-AIA statute and one patent filed under the AIA version. The district court found, for the pre-AIA patents, there was a commercial offer for sale before the one-year, critical date for on-sale bar to apply, but found no invalidity because the invention was not ready for patenting before the critical filing date. With respect to the AIA patent, the district court found there was not a commercial offer for sale, because AIA had changed the relevant standard, and in any event, the invention also was not ready for patenting before the critical date.

The Federal Circuit reversed the district court on both grounds. Importantly, the Federal Circuit clarified for the patent bar that the AIA did not change the statutory meaning of “on sale” in this case. The court also found the claims were ready for patenting before the critical date, and thus, all four patents were time-barred under the on-sale bar.

The patents-at-issue are directed to intravenous formulations using unexpectedly low concentrations of palonosetron (e.g., a 0.25 mg dose) to treat chemotherapy-induced nausea and vomiting, a serious side effect of chemotherapy treatment. Almost two years before applying for a patent, Helsinn and MGI Pharma, a U.S. pharmaceutical marketing and distribution company, entered into two agreements, a (1) license agreement—which the parties agreed covered the 0.25 mg dose of palonosetron and a 0.75 mg dose, and (2) a supply and purchase agreement—under which MGI agreed to purchase from Helsinn its requirements of the 0.25 mg and 0.75 mg palonosetron products, or whichever of the two dosages were approved for sale by FDA.

The Federal Circuit found these agreements, even though they would have terminated if the FDA approved neither product, nonetheless bear “all the hallmarks of a commercial contract for sale” under commercial contract law. The court also found no ambiguity in the provision for the purchase of either or both size doses, finding no distinction between this agreement, which covers two potential products, and two separate agreements, one for each product.

Importantly, the Federal Circuit addressed whether the AIA changed the meaning of the on-sale bar under 35 U.S.C. §102. Before the AIA, §102(b) barred the patentability of an invention that was “in public use or on sale in this country, more than one year prior to the date of the application for patent.” 35 U.S.C. §102(b) (2006) (emphasis added). The Federal Circuit has construed under this statute that so-called “secret sales,” i.e., sales that do not put the invention into the possession of the public, still trigger this on-sale bar. AIA amended §102 to bar the patentability of an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U.S.C. §102(a)(1) (emphasis added). Here, Helsinn, the USPTO, and various other amici argued that Congress, by the addition of the language “or otherwise available to the public” in the AIA, changed the law of on-sale bar to exclude such “secret sales,” and thus require that the sale make the invention available to the public to trigger the on-sale bar.

The Federal Circuit disagreed that the AIA overruled any of its prior on-sale bar decisions. The court noted its prior cases have applied the on-sale bar “even when there is no delivery, when delivery is set after the critical date, or, even when, upon delivery, members of the public could not ascertain the claimed invention.” The Federal Circuit found no indication in the Congressional Record that Congress intended to overrule these cases. Thus, the court concluded that, after the AIA, if the existence of the sale is public (which was undisputed here), the details of the invention need not be publicly disclosed in the terms of sale to trigger the on-sale bar.

The Federal Circuit also found that the invention was “ready for patenting” because it was reduced to practice, i.e., “shown to work for its intended purpose” of reducing chemotherapy-induced nausea and vomiting during regulatory testing prior to the critical date for on-sale bar. The Federal Circuit held the district court erred by requiring that the drug must show “efficacy” under FDA standards—a more demanding standard than the proper “works for its intended purpose” standard for reduction to practice.

Conclusion

This run of bad luck for pharmaceutical patent owners has nonetheless provided valuable insight into issues arising post-AIA, including issues of administrative due process, deference given to the PTAB’s weighing of the evidence in determinations of obviousness, and perhaps most significant, the substantive scope of a sale required to trigger an on-sale bar.