Orange Book Blog

Motion to Amend Pleadings to Assert Inequitable Conduct Denied in Rapamycin Case

Pfizer Inc. v. Sandoz Inc., No. 12-654-GMS-MPT (D. Del.)

    by Malaika D. Tyson

Undue delay that resulted in prejudice to Pfizer coupled with failure to demonstrate good cause are some of the reasons why on November 4, 2013, Magistrate Judge Mary Pat Thynge issued a report and recommendation denying Sandoz’s motion to amend its answers, defenses and counterclaims to add an inequitable conduct defense.

On May 24, 2012, Pfizer filed suit against Sandoz for infringement of U.S. Patent No. 8,026,276 directed to parenteral formulations of rapamycin.  In Sandoz's expert reports, which were served August 20, 2013, Sandoz first raised the theory of inequitable conduct.  On September 20, 2013, Sandoz moved to amend its pleadings to add claims of inequitable conduct.  The deadline to amend the pleadings was March 22, 2013.

When deciding whether to grant leave to amend pleadings under Rule 15(a), the court considers four elements: 1) undue delay by the movant; 2) unfair prejudice to the nonmovant; 3) improper purpose; and 4) futility.  As for the good cause requirement of Rule 16(b), the movant must demonstrate "that the amendment could not have been reasonably sought in a timely manner despite diligence."

While undue delay alone is "not sufficient to justify a denial of leave to amend," it weighs in favor of denial.  Here, the court focused on the actions of Sandoz, concluding that because Sandoz had the required documents in its possession within a few weeks of the deadline to amend the pleadings, its delay was undue.  The court was not convinced by Sandoz’s explanation for the delay--the volume of the record and concurrent litigation--concluding that Sandoz did not establish good cause under Rule 16(b) because it could not "satisfactorily explain its substantial delay."

The court then concluded that Pfizer would be subject to unfair prejudice if the leave to amend was granted.  Even though the inequitable conduct allegations were based on documents within Pfizer's control, the court concluded that Pfizer had "a significantly compressed time frame" for a response compared to the "fourteen months" Sandoz had to develop its inequitable conduct defense.

The court also concluded that Sandoz's amendment would be futile (improper purpose was not challenged by Pfizer and therefore not addressed by the court).  Inequitable conduct is based in fraud and under Rule 9(b) the elements of fraudulent claims must be plead with particularity.  Sandoz argued that Pfizer’s Rule 131 and Rule 132 declaration were "unmistakably false and the falsehood is both material and evidence of specific intent."  But the court concluded that Sandoz failed to "create a reasonable inference of specific intent to deceive the PTO" because "other than alleging that the inventor filed two false affidavits, [Sandoz] does no more than argue that information and belief is sufficient to reasonably infer intent. Thus, there is an insufficient factual basis to draw an inference of specific intent to deceive."

Finally the court held that "[e]ven if the proposed amendment is not futile, the failure to demonstrate good cause and inadequately explained delay for filing the motion resulting in prejudice warrant denying the motion."

On November 12, 2013, the parties jointly submitted a letter to the court stating that they had agreed to settle the case.

District of Delaware Invalidates Entecavir Patent as Obvious

Bristol-Myers Squibb v. Teva Pharms., No. 10-805-CJB (D. Del.)

    by Aaron F. Barkoff

Today, in the District of Delaware, Judge Burke issued a 171-page opinion holding that claim 8 of U.S. Patent No. 5,206,244, covering the entecavir molecule, is invalid as obvious.  Entecavir is the active ingredient in Baraclude tablets, which are indicated for the treatment of chronic hepatitis B virus (HBV) infection.  The 30-month stay of final approval of Teva's ANDA was set to expire tomorrow.

Entecavir is a carbocyclic nucleoside analog that mimics the naturally-occurring nucleoside 2'-deoxyguanosine (dG):

Teva argued successfully that one of ordinary skill in the art seeking to make an anti-HBV compound at the time of the invention (1990) would have selected 2'-CDG, another prior art carbocyclic nucleoside analog, as a "lead compound" and would have modified 2'-CDG at the 5' position by adding an exocyclic methylene:

Judge Burke devoted 140 pages of his opinion to findings and conclusions that entecavir would have been obvious in light of the prior art.  The court held that "the prior art clearly would have directed the skilled artisan to select 2'-CDG, a carbocyclic analog, as a lead compound for further development efforts," finding that "in direct contrast to BMS's arguments in its briefing, the testimony of its own expert at trial repeatedly and conclusively established that researchers were, in fact, treating and using 2'-CDG as a lead compound in the relevant time period."  Similarly, in holding that a person of ordinary skill would have had a reason to modify 2'-CDG by adding a carbon atom at the 5' position, the court found "that the powerful admissions by BMS's expert severely undercut BMS's arguments to the contrary regarding motivation to combine."  The court likewise found BMS's arguments regarding reasonable expectation of success unpersuasive, stating, "notably, BMS's opening brief fails to address this factor of the prima facie case in any great detail."

Before concluding that claim 8 of the '244 patent is invalid as obvious, the court examined the objective evidence of nonobviousness, observing that "all evidence relevant to obviousness or nonobviousness [must] be considered, and be considered collectively."  First, the court, "following the direction of the Federal Circuit and this Court's case law, [found] that Teva's choice to copy entecavir, while not irrelevant to the obviousness analysis, does not amount to compelling evidence of nonobviousness here."  Next, the court found "that Baraclude has been a commercial success, though a less dynamic one than BMS asserts in its briefs."  The court then analyzed the testimony of a BMS expert, Dr. Gish, relating to skepticism of those in the art, but found that "in the absence of additional corroborating evidence . . . [Dr. Gish's] verbal claim of skepticism is simply not enough to weigh in BMS's favor as to this factor regarding nonobviousness."  The court similarly found evidence of failure of others to be weak.

The court ultimately concluded:

Teva has made out a strong prima facie case of obviousness.  The evidence that it put forward at trial in that regard was multi-faceted and compelling.  In addition, as to almost every significant portion of the prima facie case, Teva's position was not only bolstered by the opinion of its expert, Dr. Heathcock, but also by the testimony of BMS's expert, Dr. Schneller.  On cross-examination, Dr. Schneller was forced to concede the accuracy of many significant points that Teva sought to assert as to that prima facie case.  The force of this evidence was clear, and it was convincing.

As noted above, the evidence as to objective considerations was mixed.  Some of those considerations redounded to the benefit of BMS's position as to nonobviousness to a degree, but as to a number of other considerations, the impact of that evidence was not particularly compelling.  The totality of that evidence did not strongly persuade the Court as to entecavir's nonobviousness.

In addition to obviousness, Teva argued that the '244 patent is unenforceable due to inequitable conduct.  Teva based its inequitable conduct allegation on the fact that prior art disclosing 2'-CDG was not cited to the PTO during prosecution (which, incidentally, strengthened Teva's obviousness position).  Here, the court sided with BMS, finding that Teva did not demonstrate "that the single most reasonable inference in this case is that [BMS] had the specific intent to deceive the PTO, nor that the evidence requires a finding of deceitful intent in light of all of the circumstances."

Though successful in the district court, it is unclear when Teva will begin marketing its generic entecavir tablets, as Teva's ANDA has apparently not yet received tentative approval.  In addition, according to the Orange Book, BMS holds a three-year exclusivity on Baraclude that expires in October 2013 and another three-year exclusivity that expires in October 2015.  Meanwhile, BMS will very likely appeal today's decision to the Federal Circuit.

Federal Circuit Affirms Unenforceability of TAXOTERE Patents

Aventis Pharma S.A. et al. v. Hospira, Inc. et al., No. 2011-1018 (Fed. Cir.)

In a precedential decision earlier this week, the Federal Circuit affirmed a district court decision holding two patents on TAXOTERE (docetaxel), U.S. Patent Nos. 5,750,561 and 5,714,512, unenforceable for inequitable conduct.  The Federal Circuit also affirmed findings that claim 5 of the '561 patent and claim 7 of the '512 patent are invalid for obviousness and that claim 7 of the '512 patent is not infringed.

The decision is notable as one of the few cases--and the first Hatch-Waxman case--involving inequitable conduct that the Federal Circuit has decided since Therasense, which raised the bar for proving inequitable conduct.  In addition, the decision illustrates how losing a claim construction argument can lead to losing on validity, which in turn can lead to losing on inequitable conduct.

Claim 5 of the '561 patent recites:

5.  A perfusion, which contains approximately 1 mg/ml or less of [docetaxel], and which contains less than 35 ml/l of ethanol and less than 35 ml/l of polysorbate, wherein said perfusion is capable of being injected without anaphylactic or alcohol intoxication manifestations being associated therewith.

Claim 7 of the '512 patent depends from claims 1 and 6.  When the claims are considered together, claim 7 effectively recites:

7.  A composition comprising docetaxel, said composition being dissolved in polysorbate, said composition being essentially free or free of ethanol.

On appeal, Sanofi argued that the term "perfusion" in claim 5 of the '561 patent should have been construed to mean that the composition is effective for treatment, safe, and stable for at least eight hours.  Citing its recent decision in Thorner v. Sony Computer, the Federal Circuit refused to read those limitations into the claim.  And, because Sanofi's counsel conceded at oral argument that under the district court's construction of "perfusion," claim 5 was obvious over the prior art (the "GV reference" and the "Vidal reference"), the Federal Circuit affirmed the district court's judgment that claim 5 is invalid as obvious.

With respect to claim 7 of the '512 patent, Sanofi disputed the district court's construction of "essentially free or free of ethanol."  But the Federal Circuit ignored that dispute because the parties agreed that the "composition" of claim 7 encompassed both stock solutions and perfusions and, according to the Federal Circuit, "Sanofi has not addressed the district court's obviousness finding with respect to stock solutions in its opening brief."  The Federal Circuit therefore held that Sanofi waived any argument that the claimed stock solutions were not obvious over the prior art.

Turning to inequitable conduct, the Federal Circuit described the issues as follows:

The district court found that the Vidal and GV references were material to patentability and that inventor Fabre intentionally withheld them with the intent to deceive the U.S. Patent and Trademark Office.  Based on these findings, the court concluded that the '512 patents were unenforceable for inequitable conduct.  Sanofi argues that we should reverse the court's inequitable conduct judgment because Fabre explained why he did not disclose these references to the PTO and, thus, the court's finding that he acted with the intent to deceive was not the single most reasonable inference that could be drawn from the evidence.  Additionally, Sanofi contends that these references were not material to patentability because they were duplicative of references that were before the PTO.

The Federal Circuit addressed materiality first, quoting from Therasense:  "when a 'claim is properly invalidated in district court based on the deliberately withheld reference, then that reference is necessarily material' for purposes of the inequitable conduct inquiry."  The court stated:

Here, we have affirmed the district court's finding that the '561 and '512 patents were invalid based on, inter alia, the withheld GV and Vidal references.  Because such references are necessarily material to patentiablity, the district court did not err in finding that the materiality requirement was established.

Thus, a claim-construction loss led to a validity loss, which led to an inequitable-conduct loss.

Of course, inequitable conduct also requires intent to deceive, which, according to the Federal Circuit (quoting Therasense again), is shown by proving "by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it."  Here, the court concluded that, even though the district court reached its decision before Therasense, "Based on the district court's thorough discussion of its factual findings and its well-reasoned analysis that is consistent with Therasense, this determination was not an abuse of discretion."

En Banc Federal Circuit Reins In Inequitable Conduct

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)

    by Nabeela Rasheed

In a landmark en banc decision today, the Federal Circuit rewrote the law of inequitable conduct.  This case was of great interest to the patent community, as evidenced by the 33 amicus briefs submitted.  From the pharmaceutical industry, amicus briefs were filed by Apotex; Sanofi-Aventis; Eli Lilly & Co.; BIO; Eisai; Johnson & Johnson; PhRMA; Teva; and GPhA.  In the decision, the Federal Circuit unabashedly states that it is reining in inequitable conduct because to do so is in the interests of patent prosecutors, inventors, courts and the public at large.

The patent-in-suit, U.S. Patent No. 5,820,551, claims disposable blood glucose test strips for diabetes management.  The strips comprise an electrode configured to be exposed directly to whole blood--i.e., without a membrane covering the electrode.  The patent application was filed by Abbott in 1984 and underwent a protracted prosecution over a period of 13 years.  A key reference cited by the PTO for anticipation and/or obviousness was another Abbott patent (the '382 patent).

During prosecution, the prosecuting patent attorney and the Director of R&D both made contributions in order to overcome the art-based rejections.  The attorney argued that the '382 patent required a membrane and the claims under examination did not.  But the PTO was unconvinced.  Thus, the Director of R&D submitted an affidavit analyzing the '382 patent and the patent attorney represented that the affidavit showed that the art cited required a membrane barrier for whole blood.  Meanwhile, several years earlier in the European counterpart application, Abbott did not categorically deny that there was a membrane in the '382 prior art device, but instead characterized it as serving a different purpose.  So in essence there was a discrepancy in how the patentee had characterized the prior art in two different jurisdictions--the EPO and the USPTO.

At the district court, the ‘551 patent was held unenforceable for inequitable conduct because Abbott did not disclose to the PTO the statements made in the prosecution of the European patent.  There were also findings of invalidity and non-infringement.  Abbott appealed the judgments of invalidity, unenforceability and noninfringement.  Last fall, the Federal Circuit upheld noninfringement and invalidity.  Abbott then petitioned for rehearing en banc.

In granting Abbott’s petition, the Federal Circuit “recognize[ed] the problems created by the expansion and overuse of the inequitable conduct doctrine.”  In today’s decision, the court reviewed the “unclean hands” line of cases that initially spawned the inequitable conduct doctrine (Keystone, Hazel-Atlas and Precision).  While the unclean hands doctrine remains for egregious acts of deliberate fraud, the inequitable conduct doctrine developed further to require a two-part test of intent and materiality, where the two tests were on a sliding scale.  That is, a showing that withheld prior art was especially material would compensate if there were little evidence of bad intent.  In today's decision, the court does away with this sliding scale, noting that that it “conflate[s] and dilute[s]” both the standard of materiality and intent.