Federal Circuit Review - Issue 240

240-1. Federal Circuit Reversed the Board’s Obviousness Finding of OSI’s Drug Treatment Patent Where the Prior Art Did Not Include Efficacy Data

The Federal Circuit recently issued an opinion reversing the Patent Trial and Appeal Board’s (the “Board”) decision that claims 44-46 and 53 of U.S. Patent No. 6,900,221 (the “’221 Patent”) were unpatentable as obvious because the Board’s finding of reasonable expectation of success was not supported by substantial evidence. OSI Pharms., LLC v. Apotex Inc., No. 18-1925, 2019 U.S. App. LEXIS 29851 (Fed Cir. Oct. 4, 2019) (Before Newman, Taranto, and Stoll, Circuit Judges) (Opinion for the Court, Stoll, Circuit Judge).

The ’221 Patent, owned by OSI Pharmaceuticals, LLC (“OSI”) claims a method of treating non-small cell lung cancer (NSCLC) using the compound erlotinib. OSI markets erlotinib under the name Tarceva®. The Board instituted an IPR of the ’221 Patent and concluded that its claims were obvious over prior art and therefore unpatentable. OSI appealed, and the Federal Circuit reversed.

The Board’s conclusion that the asserted combinations of prior art would have provided a person of ordinary skill with a reasonable expectation of success in using erlotinib to treat NSCLC in a mammal were not supported by substantial evidence. The substantial evidence standard asks “whether a reasonable fact finder could have arrived at the agency’s decision,” and “involves examination of the record as a whole, taking into account evidence that both justifies and detracts from an agency’s decision.” Furthermore, “substantial evidence is not a fixed quantum of evidence, and may only be determined with respect to the standard of proof.”

First, in finding that there is a “clear inference” in the prior art Gibbs reference that “erlotinib has anti-cancer activity against non-small cell lung cancer,” the Board misinterpreted Gibbs to teach more than substantial evidence supports. Gibbs disclosed the following:

ZD-1839 and [erlotinib], competitive inhibitors of ATP binding to the receptor’s active site, are currently in clinical trials (12, 13). Their mechanism of action has led to some concern about safety, given the variety and physiological significance of protein kinases and other enzymes that bind ATP. However, these compounds appear to have good anti-cancer activity in preclinical models, with an acceptable therapeutic index, particularly in patients with non-small cell lung cancer.

Gibbs is a review article that analyzes other research studies; its reference to the anti-cancer activity of erlotinib comes not from the author’s first-hand knowledge but from two outside sources. The first of these sources does not mention erlotinib at all while the second source does not mention NSCLC. Furthermore, there is no evidence that a publication discussing erlotinib’s effect on NSCLC existed at the time Gibbs was published. The Board erred by not considering that none of the cited articles supported its reading of Gibbs; the Board’s reading of Gibbs was, therefore, not supported by substantial evidence.

Second, with the prior art references properly interpreted, the Board’s finding that the references provide a reasonable expectation of success was not supported by substantial evidence. The Court first considered the Schnur reference – a patent relating to a class of compounds “which are useful in treating hyperproliferative diseases, such as cancers, in mammals” – in view of Gibbs. Schnur lists erlotinib as a preferred compound, describes a method for synthesizing erlotinib, and states that lung cancer is one of the many conditions that could be treated. It, however, broadly discloses at least 105 compounds for the treatment of twelve types of cancer. It, alone or in combination with Gibbs, does not disclose any information about erlotinib’s efficacy in treating NSCLC in a mammal. Considering the extreme unpredictability and limited success of NSCLC’s treatments, the combination of Gibbs and Schnur further fails to disclose any “indicator or mechanism on which a person of ordinary skill could rely to reasonably expect success.”

The Court next considered the combination of Schnur with OSI’s Form 10-K, a form required to be filed by the SEC which provides an overview of OSI’s business and financial condition. While the Board relied on the 10-K’s statement that erlotinib had completed Phase I clinical trials and expert testimony that a drug’s IND submission, required for Phase I trials, contains preclinical efficacy, the Court emphasized the absence of any data regarding erlotinib’s effect on NSCLC in the 10-K: “There is nothing in OSI’s 10-K suggesting the existence of erlotinib preclinical efficacy data that is specific to NSCLC. Even if a skilled artisan could presume that some preclinical data exists, there is no basis for assuming that the data pertains to NSCLC as opposed to other cancers.” Furthermore, the Board failed to consider the 99.5% failure rate of the other 1,630 new drug compounds that entered Phase II trials for the treatment of NSCLC between 1990 and 2005. Considering that the prior art does not disclose any data – whether clinical, pre-clinical or in-vitro – about erlotinib’s efficacy in treating NSCLC together with the extreme unpredictability and limited success of NSCLC treatments, the Court concluded that a reasonable fact finder could not find a reasonable expectation of success: “These references provide no more than hope—and hope that a potentially promising drug will treat a particular cancer is not enough to create a reasonable expectation of success in a highly unpredictable art such as this.”

Rather than articulating a blanket rule that a showing of efficacy is required for prior art to render a drug treatment patent claim obvious, the Court narrowed its ruling to the facts of the case: “To be clear, we do not hold today that efficacy data is always required for a reasonable expectation of success. Nor are we requiring ‘absolute predictability of success.’ . . . We conclude only that, on these particular facts, a reasonable fact finder could not find a reasonable expectation of success.”

Finally, OSI raised a constitutional challenge to the Board’s decision, which the Court rejected. Specifically, OSI questioned the constitutionality of retroactively applying IPRs to pre-AIA patents, such as the ’221 Patent. Following oral argument in this case, the Court issued a number of opinions holding that the application of IPRs to pre-AIA patens does not violate the constitution. Thus, the Court held that the Board’s decision did not create a constitutional issue.

When reviewing factual findings for substantial evidence, the Federal Circuit must consider not only evidence that justifies the Board’s decision but also evidence that detracts from it. In order to establish a reasonable expectation of success to render a drug treatment patent obvious where success of treatments has been limited and unpredictable, prior art may need to disclose efficacy data.

240-2. Federal Circuit Holds Board Decision Denying Request to Seek Certificate of Correction Based on Merits of Petition to be an Abuse of Discretion

The Federal Circuit recently vacated and remanded a Patent Trial and Appeal Board decision rejecting a request for authorization to file a motion for leave to petition the U.S.P.T.O. Director for a Certificate of Correction to correct a mistake in the chain of priority listed on the face of a patent that was subject to a post-grant review proceeding. See Honeywell International, Inc. v. Arkema Inc., Arkema France, Nos. 2018-1151, 22018-1153 (Fed. Cir. October 1, 2019) (Before Newman, Reyna, and Hughes, Circuit Judges) (Opinion for the Court, Reyna, Circuit Judge)

The case arrived at the Federal Circuit by way of appeal from Honeywell International Inc. (“Honeywell”), the owner of U.S. Patent No. 9,157,017 (the ’017 patent), which is related to fluoroalkene compounds used in refrigeration systems and other applications. Honeywell appealed from the final order of a pair of post-grant review (PGR) proceedings involving the ’017 patent that ultimately held claims 1-20 of the ’017 patent to be unpatentable.

During the prosecution of the ’017 patent, Honeywell filed a preliminary amendment that cancelled the 20 claims recited in the original application and added 20 new claims directed to automobile conditioning systems. Honeywell later claimed that it inadvertently failed to make the corresponding amendments to the list of priority applications, and as a result, the list of priority applications listed on the face of the ’017 patent when it was issued was materially the same as the initial application. After the patent issued, Arkema Inc. (“Arkema”) filed two petitions for PGR, asserting that the priority applications listed on the face of the ’017 patent did not provide written description support for the issued claims, entitling the claims to a priority date in 2014 (when the application for the ’017 patent was filed) instead of the 2002 priority date that would result if the priority chain adequately supported the claims. Only patents that have at least one claim with an effective date on or after March 16, 2013, are eligible for PGR proceedings.

Honeywell asserts that it first noticed the mistake when preparing its Patent Owner Response in the PGR proceedings. At that time, Honeywell requested permission to file a motion for leave to petition the Patent and Trademark Office Director (“the Director”) for a Certificate of Correction that would amend the priority claim of the ’017 patent, pursuant to 35 U.S.C. § 255. Under § 255, patentees may petition the Director to issue a Certificate of Correction to correct a mistake in an issued patent that is “of a clerical or typographical nature or of minor character…” upon a showing that the mistake was in good faith and that correction does not involve such changes in the patent as would constitute a new matter or require re-examination.”

The Board rejected Honeywell’s request for permission to file a motion for leave, finding that Honeywell had failed to show that the § 255 requirements had been met and that it would be improper to allow Honeywell’s motion because of the prejudice that would inure to Arkema.

The Federal Circuit considered whether it was within the Board’s discretion to deny Honeywell’s request for permission to move for leave to petition the Director on the basis that Honeywell had not met the requirements of § 255. The Court first rejected Arkema’s argument that the Board’s decision was unreviewable as an agency action committed to agency discretion by law under 5 U.S.C. 701(a)(2), stating that § 701(a)(2) only applies in the rare instance where an authorizing statute is so broadly written that there is no law to apply.

The Court then recounted that to correct a patent subject to PGR proceedings the patentee must seek authorization from the Board to file a motion, if granted, the patentee moves the Board for leave to petition the Board, and if granted, the patentee petitions the Director for a Certificate of Correction. The Court stated that in reviewing previous motions for leave to seek a Certificate of Correction from the Director, the Board had determined only whether there is a “sufficient basis” supporting that the mistake “may” be correctable. The Court held that this was the appropriate standard of review and is consistent with § 255, relevant regulations, and Congress’s intent that post-issuance proceedings created under the America Invents Act provide the PTO with the opportunity to correct its errors in granting a patent. The Court stated that by evaluating whether Honeywell had met the “minor character” and “good faith” requirements of § 255, the Board had assumed the authority expressly delegated to the Director in § 255.

Additionally, the Court held that the Board had failed to provide an explanation or reasoned basis for its decision to deny the request to file the motion. The Court stated that nothing in the record or in the Board’s decision warranted denying Honeywell’s request to file the motion for leave to petition the Director, and that the Board did not have the information necessary to make a reasoned decision because it had decided the merits of Honeywell’s petition at the stage when Honeywell was merely requesting authorization to file a motion for leave. Additionally, the Court stated that the Board had seen no evidence of whether the mistake was made in good faith or whether Arkema would be prejudiced by a correction. The Court further noted that the PTO has previously allowed patentees to correct priority claims through Certificates of Correction, and that the Board did not address this prior practice nor what differentiated Honeywell’s request.

In so holding, the Court vacated the Board’s decision and remanded the proceeding for the Board to authorize Honeywell to file a motion seeking leave to petition the Director for a Certificate of Correction and then to review the motion under the new standard.

In deciding whether to grant a party’s request for permission to file a motion for leave to seek a Certificate of Correction from the PTO Director, the Board is only to evaluate whether there is a sufficient basis supporting that the mistake may be correctable. The Director alone is authorized to evaluate the merits of the patentee’s petition.

240-3. Claims Invalid Under Section 101 Where No Means Specified for Implementing Natural Law to Achieve Desired Result

The Federal Circuit recently affirmed a district court decision granting summary judgment to Neapco Holdings LLC (“Neapco”) on the basis that asserted claims of a patent owned by American Axle & Manufacturing, Inc. (“AAM”) were ineligible under 35 U.S.C. § 101. See Am. Axle & Mfg. v. Neapco Holdings LLC, No. 2018-1763, 2019 U.S. App. LEXIS 29655 (Fed. Cir. Oct. 3, 2019) (Before Dyk, Moore, and Taranto, Circuit Judges) (Opinion for the court, Dyk, Circuit Judge) (Dissent, Moore, J.). The decision was not unanimous, however, with Judge Moore penning a dissent that alleged the majority improperly expanded Section 101.

U.S. Patent No. 7,774,911 (“the ’911 patent”) owned by AAM generally related to a method for manufacturing driveline propeller shafts, which are employed in automotive vehicles, with liners that would “attenuate . . . vibrations transmitted through a shaft assembly.” AAM sued Neapco for infringement of the ’911 patent, and the parties filed cross-motions for summary judgment as to patent ineligibility under Section 101. The district court concluded that the asserted claims were directed to laws of nature, specifically Hooke’s law and friction damping, and that the claimed additional steps regarding tuning the liners merely consisted of well-understood, routine, and conventional activity that “add[ed] nothing significant beyond the sum of their parts taken separately.” The district court therefore the claims were patent ineligible, and AAM appealed.

In evaluating whether the asserted claims were ineligible under Section 101, the Federal Circuit applied the two-step Mayo/Alice test. At step one, which asks whether the claims are directed to a law of nature, natural phenomenon, or abstract idea, the Court determined that the claims were merely directed to an application of Hooke’s law, a natural law that relates the mass and stiffness of an object to the frequency at which that object vibrates, and possibly other natural laws as well. The Court found that while the claims stated that the liner should be tuned to dampen vibrations and achieve a desired result, the claims did not describe a specific method for applying Hooke’s law to do so. Further, although the patent specification recited variables that could be altered to change the frequencies exhibited by a liner, the Court stated that the claims did not instruct how the variables would need to be changed to tune the liner to dampen vibrations. Ultimately, the majority affirmed that the claims were directed to ineligible subject matter, stating that:

While AAM may have discovered patentable refinements of this process . . . neither the specifics of any novel computer modelling nor experimental modal analysis are disclosed in the patent, much less included in the claims themselves, and these unclaimed features cannot function to remove claims 1 and 22 from the realm of ineligible subject matter. This case might well be significantly different, if, for example, specific FEA models were included in the claims. But, the claims’ general instruction to tune a liner amounts to no more than a directive to use one’s knowledge of Hooke’s law, and possibly other natural laws, to engage in an ad hoc trial-and-error process of changing the characteristics of a liner until a desired result is achieved.

The majority also briefly discussed Parker v. Flook, 437 U.S. 584 (1978) to support the idea that “a claim to a natural law concept without specifying the means of how to implement the concept is ineligible under section 101.” According to the Court, AAM’s claims “simply instruct the reader to tune the liner,” which amounts to “an application of a natural law (Hooke’s law) to a complex system without the benefit of instructions on how to do so.”

The Court then turned to step two of Mayo/Alice, which asks if there is an inventive concept that amounts to significantly more than a patent upon an ineligible concept itself. The majority found that there was no inventive concept to transform the claims into patent eligible matter, stating that the claimed advance was merely controlling various known characteristics of the liner to achieve attenuation. “This direction to engage in a conventional, unbounded trial-and-error process does not make a patent eligible invention, even if the desired result to which that process is directed would be new and unconventional.”

In her dissent, Judge Moore argued that the majority “expands § 101 well beyond its statutory gate-keeping function and the role of this appellate court well beyond its authority.” Judge Moore averred that the majority improperly reduced the Mayo/Alice test to a single question, whether the claim was directed to a law of nature. She was “deeply troubled by the majority’s disregard for the second part of the Alice/Mayo test, its fact finding on appeal and its repeated misrepresentation of the record, in each instance to the patentee’s detriment.” Judge Moore argued that invalidity in this case must be based on lack of enablement under Section 112(a), and that Section 101 should not be stretched to cover every concern there might be over an invention’s patentability. She also argued that there was a sufficient disclosure of an “inventive concept” under Section 101 to be patent eligible subject matter, and that the majority misapplied the law to arrive at an erroneous determination that no inventive concept existed.

Claims directed to a natural law without specifying the means for or providing instruction for how to implement the natural law to achieve the claimed result are not directed to patent eligible subject matter under Section 101.

240-4. Overall Similarities Outweigh Slight Differences when Establishing a Prior Design Patent as Primary Reference in Obviousness Analysis

The United States Court of Appeals for the Federal Circuit recently issued a ruling vacating-in-part and affirming-in-part a decision by the Patent Trial and Appeal Board (“PTAB”) in and IPR, which held Gamon Plus’s design patents regarding the ornamental design for a gravity feed dispenser display were non-obvious. The Federal Circuit reasoned overall similarities outweigh slight differences in design when determining the primary reference used in an obviousness analysis. See Campbell Soup Co. v. Gamon Plus, Inc., No. 18-2029 (Fed. Cir. Sept. 26, 2019) (Before Prost, Newman, and Moore, Circuit Judges) (Opinion for the Court, Moore, Circuit Judge).

Gamon Plus, Inc. (“Gamon”) owns U.S. Patent Nos. D612,646 and D621,645 regarding the ornamental design for a gravity feed dispenser primarily used as a rack that dispenses cans. In 2016 Gamon sued Campbell for infringement of its ’646 and ’645 design patents, prompting Campbell Soup Company (“Campbell”) and Trinity Manufacturing LLC to petition for inter partes review of Gamon’s design patents. The PTAB instituted inter partes review on the grounds that the sole claim in each of the ’646 and ’645 patents would have been obvious over (1) Linz in view of Samways, (2) Samways, or (3) Samways in view of Linz. The PTAB held Campbell did not establish unpatentability by a preponderance of evidence because neither Linz nor Samways were similar enough to Gamon’s claimed designs to constitute a primary reference. Subsequently, Campbell appealed.

When determining whether a design patent is obvious under section 103, the ultimate inquiry is “whether the claimed design would have been obvious to a designer of ordinary skill who designs articles of the type involved.” Durling v. Spectrum Furniture Co., 101 F. 3d 100, 103 (Fed. Cir. 1996). Subsequently, the fact finder must find a primary reference that embodies “basically the same” characteristics of the claimed design. Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1329 (Fed. Cir. 2012). To determine whether this threshold is met, one must “(1) discern the correct visual impression created by the patented design as a whole; and (2) determine whether there is a single reference that creates basically the same visual impression.” High Point Design LLC v. Buyers Direct, Inc., 730 F.3d 1301 (Fed. Cir. 2013). Using this legal framework, the Federal Circuit analyzed whether Linz or Samways could serve as a proper primary reference.

First, the PTAB held Linz was not a proper primary reference. The PTAB explained Linz does not disclose any object with regards to size, shape, and placement of such object in the display area. In particular, Linz does not disclose “a cylindrical object below the label area in a similar spatial relationship” as Gamon’s claimed design. Further, the PTAB stated that adding a hypothetical can to Linz before comparing the designs for obviousness is improper, as the design is not “in existence” and such modification would lead to substantial differences in the overall design.

On appeal, the Federal Circuit disagreed and reversed the PTAB’s factual finding that Linz is not a proper primary reference because of lack of substantial evidential support. The Federal Circuit explained that the parties do not dispute Linz’s claimed design is made to hold a cylindrical object in its display area and pointed to the six out of seven cited references on the first page of Linz directed to dispensers for cylindrical objects as support. Rather, the parties only dispute the dimensions of a can that would be used in Linz in comparison to the dimensions of the can depicted in Gamon’s claimed design. The Federal Circuit ultimately held that these “ever-so-slight” differences in design when viewed in light of the overall similarities between Linz and Gamon’s claimed design do not destroy the ability of Linz to create “basically the same” visual impression as the claimed design. Thus, the Federal Circuit found it was improper for the PTAB to prevent Linz from being used as the primary reference in the obviousness analysis.

Second, the PTAB held Samways was not a proper primary reference. The PTAB explained that substantial modifications were required for Samways to give basically the same visual impression. Specifically, the PTAB pointed to Samways’ dual dispensing area versus Gamon’s single dispensing area and its taller front label area that extends across both dispensing areas.

The Federal Circuit agreed with the PTAB holding that substantial evidence supports the determination that Samways is not a proper primary reference. The Federal Circuit explained that Samways does not give basically the same visual impression of Gamon’s claimed design, as impermissible major modifications would first be required to create the impression that Samways could be substantially similar to Gamon’s patents.

Accordingly, the Federal Circuit vacated-in-part, affirmed-in-part, and remanded the case back to the PTAB for additional proceedings. Further, the Federal Circuit instructed the PTAB to consider non-instituted grounds for unpatentability consistent with the recent Supreme Court decision, SAS Institute Inc., v. Iancu, 138 S. Ct. 1348 (2018).

Judge Newman dissented-in-part from the majority. Judge Newman disagreed with the majority’s holding that the PTAB improperly excluded Linz as a proper primary reference due to lack of substantial evidential support. Judge Newman explained that Linz does not depict any cylindrical object, whereas Gamon’s design patents require such cylindrical object. Judge Newman exclaimed that judicial insertion of the missing cylindrical object into the Linz design patent was an improper application of patent law, as a primary reference must first be established for the design as a whole before the reference design can be modified. For this reason, Judge Newman found the PTAB correctly deemed Linz an improper primary reference since Linz did not create “basically the same” visual impression of Gamon’s claimed design.

Overall similarities can outweigh slight differences in design when establishing the primary reference in an obviousness analysis. Thus, the burden of establishing a primary reference is eased, as a prior design patent with slight differences can create “basically the same” visual impression.