Delaware IP Law Blog

On March 17, 2008, the United States Supreme Court denied PharmaStem's writ of certiorari in the case of PharmaStem Therapeutics, Inc. v. Viacell, Inc., et al. This case involved various cord blood storage patents and was originally filed in the District of Delaware. A jury originally reached a verdict for PharmaStem and against Viacell Inc., Cyro-Cell Inc., Corcell Inc. and CBR Systems Inc. in an amount of $7,124,333.92; and entered judgment on Viacell's antitrust counterclaim in favor of PharmaStem and against Viacell. Judge Sleet later overturned the infringement verdict (see a copy of the opinion here). The Federal Circuit opinion affirmed the District Court's finding of non-infringement but reversed the District Court on the issue of obviousness, finding the patents invalid and entered judgment for the defendants. (See Federal Circuit opinion here.)

Our fellow blogger at 271patent.blogspot recently had an interesting post discussing the statistics on reexamination in 2007 as set forth in a USPTO Report.

The latest statistics on Ex Parte Reexamination (through December 2007) have been released by the PTO. As expected, the number of reexamination requests continue to climb:

2002 - 272 filings
2003 - 392 filings
2004 - 441 filings
2005 - 524 filings
2006 - 511 filings
2007 - 643 filings
2008 - 165 filings

The success rate for requestors has not changed, and continues to favor requestors. Overall, all claims are confirmed in 26% of reexams, claims are changed in 64% of reexams, and 10% of reexams result in all claims being cancelled.

Average pendency of an ex partereexamination is 2 years, and median pendency is just over a year-and-a-half (18.6 months).

For full post see here.

A quick perusal of our blog for the month of February might cause one to think that the three of us left for a month long ski trip in the Rockies. Rest assured, we were here in Delaware following the few district court opinions that issued. We are speculating that small number of opinions may be due to the case reassignments and readjusting of dockets based on the order issued by the Court in late January regarding the vacant judicial position. If that's the case, things are working their way out as quite a few opinions have issued in the last week or so. Postings to come in the near future…

Crown Packaging Tech., Inc. v. Rexam Beverage Can Co., C.A. No. 05-608-MPT (D. Del. Jan. 22, 2007)

Rexam moved for partial summary judgment of invalidity and noninfringement. The Court granted both motions in part. As to noninfringement, the Court held that Rexam did not infringe the claim at issue under the doctrine of equivalants, granting Rexam's noninfringement summary judgment motion. Other noninfringement arguments were denied as moot. As to invalidity, although Rexam asserted several bases for invalidity (including § 102, § 103, lack of adequate written description, and indefiniteness), the Court granted summary judgment only on inadequate written description grounds, mooting the other invalidity bases.

Most of the opinion dealt with the inadequate written description issue, and I will spend the remainder of this post on that issue. Rexam argued that the claim at issue failed to comply with § 112, para. 1 because it did not include the "annular reinforcing bead" limitation contained in the patent's other asserted claims. Section 112, para. 1 requires the specification to "describe the invention sufficiently to convey to a person of skill in the art that the patentee had possession of the claimed invention at the time of the application." Lizardtech v. Regents of Univ. of Cal., 424 F.3d 1336, 1345 (Fed. Cir. 2005). Based on intrinsic evidence, inventor testimony, and expert testimony, the Court found that "[n]owhere is there an indication that the inventors possessed a can end having the other elements of claim 34 of the '875 patent [claim at issue] without also having an annular reinforcing bead." Op. at 13. Thus, the Court held that the specification did not support the broader claim without the "annular reinforcing bead" limitation, and the claim was therefore invalid for failure to comply with the written description requirement.

Let's pause for a moment and consider the analytical framework of this decision. I submit that this decision is correct under Federal Circuit precedent, but this issue – claims broader than the specification – fits more neatly under either the noninfringement or claim scope inquiries. Under the Gentry Gallery decision and its progeny, the Federal Circuit usually (depending on the panel) holds that a feature described in a patent as "essential" or "critical" to the invention must be present in that patent's claims. If such a feature is not present, the claim is invalid for lack of an adequate written description. That is, a claim is invalid if the inventor did not possess the claimed invention, which must contain the essential element, at the time of the application. The Court here, however, also correctly points out that an explicit statement of limitation is not required for the specification to limit the claims. See Op. at fn 46. (Patent prosecutors, of course, almost never describe a feature as the "invention" or "essential to the invention" for just this reason, as well as other reasons related to claim interpretation.) In this case, the patent specification did not describe the annular bead limitation as "essential" or "critical" to the invention; the specification merely failed to mention an embodiment that did not contain the annular bead. In fact, even the abstract of the patent at issue referenced the annular bead limitation. Op. at 6.

Under these circumstances, it seems fair to limit the patentee to embodiments containing the annular bead. After all, even the patent abstract contains the annular bead limitation. It seems strange to me, though, to analyze this issue as one of invalidity for lack of a written description. Before Gentry Gallery, Lizardtech (Op at fn 20), Enzo, and other similar cases, no one would have argued that this issue, claims drafted more broadly than the preferred embodiments, was an inadequate written description problem. You might have argued that the claim scope should be narrowed so as not to include the broader interpretation (claim scope) or that the reverse doctrine of equivalents applied such that the accused product would not infringe (noninfringement). Now, however, after Gentry Gallery and cases like it, we find ourselves in a situation where the Court is forced to determine what the inventor thought of as "essential" or "critical" features to his/her invention at the time of filing, and then strike any claims that do not include these features. It seems to me that this problem would be better dealt with either during the claim construction phase (Limit the scope of the claims based on the specification, being careful not import a limitation from the specification into the claims. This would allow the claims to be interpreted so as to preserve their validity – a canon of claim construction) or during the infringement determination (The reverse doctrine of equivalents, if it still exists, would prevent infringement where the claims are broader than the specification).

What do you think about accused infringers using the written description requirement as a sword in this manner? Should the Federal Circuit overrule Gentry Gallery? Or resurrect the reverse doctrine of equivalents? Please post your comments.

What will be the effect of the Supreme Court's decision in <%media(20070110-Medimmune.pdf|Medimmune v. Genentech)%>? I propose that Medimmune will lead to more lawsuits by licensees due to decreased risk on the licensee, but only under certain economic conditions-when the license fee savings from litigating the invalidity and/or noninfringement issues is greater than the attorneys' fees the licensee must expend to litigate the suit. To explain this proposition, let us examine a licensee's options before and after Medimmune.

Before:

The licensee has only two choices: 1) continue paying the license fee or 2) repudiate the license agreement by stopping payment and then sue. If the licensee decides to sue, the licensee must take a significant risk�if they lose, they may end up paying more in damages (including treble damages and attorneys� fees) than they would have paid under the license, or they may be enjoined from practicing the invention (although the chances of an injunction are not what they used to be). If the licensee wins, however, they most likely will have forfeited their attorneys� fees in litigating the suit, but can practice (and have been practicing) the invention free of charge.

After:

The licensee now has three possible courses of action: 1) continue paying the license fee, 2) repudiate the license agreement by stopping payment and then sue, or 3) continue making license payments, but proceed with a declaratory judgment suit for invalidity and noninfringement.
Choices 1 and 2 are analytically the same as before Medimmune. Choice 3, however, is new and different. The following equation sets forth the main economic risks in play, other than the risk of losing the invalidity or noninfringement suit (presumably a low risk or the licensee should keep paying the royalties under the license), when deciding how to proceed:

Choice 1: (remaining patent term in years)(yearly license fee) + (other competitive considerations)

Choice 2: (damages, including treble damages)(chance of losing) + (monetary and competitive cost of an injunction)(chance of an injunction) +(your attorneys� fees)(percentage chance of NOT recovering your attorneys� fees) + (other side�s attorney�s fees)(percentage chance of other side recovering their fees) + (your costs and other side�s costs)(chance you are NOT the prevailing party)

Choice 3: (your attorneys� fees)(percentage chance of NOT recovering your attorneys� fees) + (other side�s attorney�s fees)(percentage chance of other side recovering their fees) + (your costs and other side�s costs)(chance you are NOT the prevailing party) + (average time to verdict)(yearly license fee) [Note that the Medimmune Court expressed �no opinion on whether a nonrepudiating licensee is similarly relieved of its contract obligation during a successful challenge to a patent�s validity.� Thus, it is possible that a licensee could recover the royalties paid during litigation]

Under Choice 3, the licensee may keep paying the license fee, but sue as well. In most situations, the licensee�s largest risk when suing will be losing its attorneys� fees. If the licensee wins, then it can practice the invention free of charge. If the licensee loses, it simply keeps paying the contractually agreed upon license payments, thus limiting the licensee�s potential exposure. To come out on top in this scenario, the licensee generally must 1) successfully prevail on either the invalidity or noninfringement issues and 2) realize a license fee savings in excess of its attorneys� fees (unless the licensee is fortunate enough to recover its attorneys� fees). Thus, it only makes economic sense for the licensee to continue paying the license fee and sue the patentee if the license fee is relatively large. That is, the license fee savings from prevailing in court must be sufficiently large so as to justify the uncertainty associated with attempting to invalidate a patent or prove noninfringement.

Notice what risks are NOT associated with Choice 3, but would be associated with repudiating a license and suing or being sued (the only method available prior to Medimmune, other than taking a license). In a declaratory judgment suit brought while continuing to pay royalties, the licensee has no risk of damages (treble or otherwise) and no risk of an injunction. While the Supreme Court has recently reduced the likelihood of obtaining an injunction, an injunction is still possible in most cases. Notice, however, that Choice 3 includes the added expense of paying the license fee during litigation. Thus, Medimmune has created a new way to attack the questions of whether to take a license and whether to continue under a license, and this new choice eliminates the risk of damages and an injunction that licensees previously had when forced to repudiate a license before suing. A licensee�s decision on whether to continue under a license or bring suit against the patentee, however, in general, will be guided by the amount of the license fee payments in comparison to the potential attorneys� fees.

For example, take the situation where a licensee has entered into a license that pays the patentee an average of $3 million a year and make the following assumptions: the time to decision is 2 years, the attorneys� fees to litigate the case are $4 million, and the patent term has 10 years remaining. Under Choice 2 above (pre-Medimmune), the licensee would only need to pay the $4 million in attorneys� fees up front and would save $30 million in license fees if it prevails, which would result in a total savings of $26 million ($30 million minus $4 million). Under Choice 3 above (post-Medimmune), the licensee would need to pay $4 million in attorneys� fees and $6 million in license fees during litigation and would save only $24 million in license fees if it prevails, which would result in a total savings of $14 million ($24 million minus $10 million). Thus, Choice 2 would provide a greater savings to the licensee in this scenario, but that greater savings comes with greater risk�the licensee could lose the case and end up paying damages and/or subject to a permanent injunction.

I make many assumptions in this analysis that may or may not be true in a majority of situations. I welcome anyone�s comments on the validity of this analysis, or any other ideas.

The District of Delaware has long been a center for intellectual property litigation, drawing parties and law firms from across the nation to the federal courthouse in Wilmington. In 2005, intellectual property filings - patent, copyright, and trademark - outpaced all non-prisoner civil filings in Delaware. Nearly fifteen percent of the dockets of Delaware's four district judges involve disputes over intellectual property. With this volume comes experience and a large body of locally developed case law, especially patent-focused case law. Opinions and orders issue frequently.

The flow of patent cases also gives rise to a local patent litigation bar expert in the substantive and procedural nuances of practice in the District of Delaware. To complement that body of knowledge, three of those practitioners have created this blog. Dedicated to informing the intellectual property bar of the latest developments in the Delaware courts, we will bring you commentary on the latest decisions the moment they are handed down, as well as links to the actual opinions. From time to time, we will also post commentary on past decisions of note. Registered visitors will also be able to post their own comments.

The nature of litigation constantly evolves. If you are litigating an intellectual property case in the District of Delaware, or contemplating litigation, this blog will keep you up-to-date on what you need to know about what is happening in the Delaware courts.