Former Grad Student Fails in Bid for “Constructive Trust” in Professor’s Patent

On July 16, 2015, in Genspera v. Mahka, the Federal Circuit affirmed without discussion (i.e., under Rule 36) a district court decision denying a former doctoral student’s claim to a constructive trust in a patent issued to her former thesis advisor, a professor at Johns Hopkins University. The affirmed district court decision also denied her conversion claim against the professor.

The professor, along with another professor at Johns Hopkins, are named inventors on patents claiming a cancer prodrug. The graduate student, Mahka, claims that she came up with the idea for the only specific chemical compound claimed in the patents, a compound that is currently undergoing clinical testing. Genspera is a company started by the professors to develop and commercialize the prodrug.

Mahka initially sought to be added as an inventor to the patents, but the district court granted Genspera summary judgment because “a finding that Mhaka added an invention to the Application after the disclosure was filed would invalidate the Patents, and a district court cannot apply § 256 to require the Patent Office to add an inventor to an issued patent when doing so would invalidate the patent.”  The problem was that the prodrug allegedly invented by Mahka was not created until after the filing date of the patents.

Mahka then turned to state law causes of action. She claimed conversion of her invention by the professors, but the district court rejected this claim. The court found that under Maryland law the tort of conversion does not extend to completely intangible rights, and that Mahka’s asserted rights in the “invention” claimed in the patents was completely intangible.

Mahka also sought a constructive trust, a form of equitable relief which would have required the professors to share some of the benefits they derived from the patents, specifically stock in Genspera.  A constructive trust remedy is applied when “property has been acquired by fraud, misrepresentation, or other improper method, or where the circumstances render it inequitable for the party holding the title to retain it.” Its purpose is “to prevent the unjust enrichment of the holder of the property.”

The district court denied this claim, finding that it was barred by laches, i.e., Mahka waited too long to file her lawsuit.  The district court held that she needed to file her claim within three years of learning of the alleged failure to name her on the patent, and that she had waited more than four years.  After leaving Johns Hopkins, Mahka worked at a venture capital firm doing intellectual property research, which is where she allegedly learned of the patents.  She learned about them, and her omission as an inventor, in 2008, and contacted John Hopkins at that time, who advised her to hire her own lawyer. She waited until 2012 to file a lawsuit, at which point her cause of action was time-barred.

Federal Circuit Affirms IPR Invalidation of Columbia University Next-Generation Sequencing Patents

On July 17, 2015, in Trustees of Columbia University in the City of New York v. Illumina , the Federal Circuit affirmed inter partes review (IPR) decisions invalidating all challenged claims in three Columbia University patents related to Next-Generation DNA sequencing. In particular, the three patents (U.S. Patent Nos. 7,713,698 (the “’698 patent”) (Appeal No. 2014-1547), 8,088,575 (the “’575 patent”) (Appeal No. 2014-1548), and 7,790,869 (the “’869 patent”) (Appeal No. 2014-1550) are directed towards synthetic nucleotide analogs that comprise the following features: (1) a deaza substitution in the base component of the nucleotide; (2)  a label attached to the base component (as opposed to the sugar component); and (3) a removable cap at the 3’OH position of the sugar component of the nucleotide. The nucleotide analogs are useful in automated sequencing-by-synthesis methods.

 In a nonprecedential opinion, the Federal Circuit found that that the Patent Trial and Appeal Board (PTAB) had not erred in finding all of the challenged claims either anticipated or obvious in view of seven prior art references. Most of the references are listed on the face of at least one of the patents, and thus (at least as a formal matter) were considered by the patent examiner during prosecution of the patents. In particular, the primary reference relied upon by the PTAB (Roger Tsien et al., WO 91/06678 (May 16, 1991) (“Tsien”)) was before the patent examiner. In a nutshell, the Federal Circuit agreed with the PTAB that the references disclosed all of the elements of the claimed inventions and provided a motivation to combine the elements, with a reasonable expectation of success.

 One of the issues on appeal was whether the PTAB had erred by not explicitly determining the level of skill in the art. The Federal Circuit held that under certain circumstances a failure to determine the level of skill, or an incorrect determination of the level of skill, can be a reversible error, but not always, particularly “where the prior art itself reflects an appropriate level and a need for testimony is not shown.” In this case, the Federal Circuit found that it was not necessary for the PTAB to explicitly define the relevant level of skill in the art.

 Interestingly, in making its arguments regarding level of skill in the art, Columbia actually argued against its own interests, as explicitly pointed out by the Federal Circuit. In particular, Illumina’s expert testified that one of skill in the relevant art would be knowledgeable with respect to molecular biology, while Columbia argued that one of skill in the art of DNA sequencing technology would be skilled in both molecular biology and chemistry. As pointed out by the Federal Circuit, the higher the level of skill in the art, the more likely it is that the invention would have been obvious to the skilled artisan. Thus, by arguing that the PHOSITA is skilled in both molecular biology and chemistry, Columbia was actually arguing that the PHOSITA has a higher level of skill, which would tend to make the invention more obvious. The Federal Circuit concluded that PTAB had not erred in finding that the invention would have been obvious to one skilled in molecular biology, and that it would have been even more obvious to one having skill in both molecular biology and chemistry.

The Federal Circuit also identified another instance in which Columbia made arguments that went against its own interest. Columbia argued that other companies had copied its invention from a grant application filed by the inventors, and that this “copying by others” was an objective indication that the invention was nonobvious. But Columbia also argued that these other companies had thought that they would be able to patent invention, which the Federal Circuit found was inconsistent with them having copied the invention. After all, how could they have thought that they could patent the invention if they had knowingly copied it from someone else’s grant application?

The Federal Circuit found that the near-simultaneous invention by others was a secondary consideration weighing “modestly in favor of obviousness.” In particular, two other entities were found to have independently come up with the invention prior to publication of the Columbia patent applications, i.e., prior to public disclosure of the invention. Columbia argued that this independent inventive activity did not constitute “prior art,” but the Federal Circuit criticized Columbia’s argument as reflecting “confusion over the difference between simultaneous invention on the one hand and anticipation and obviousness on the other.”

These IPRs arose out of an ongoing patent infringement litigation between Intelligent Bio-Systems Inc. (IBS, Columbia’s exclusive licensee) and Illumina, in which both sides have asserted that the other infringes patents relating to Next-Generation DNA Sequencing technologies.  Both sides have successfully invalidated some of their opponent’s patents using the IPR process. In Trustees of Columbia University in the City of New York v. Illumina the Federal Circuit has affirmed the PTAB's invalidation of the IBS/Columbia patents.  We are still waiting to hear the outcome of Illumina’s appeal of the PTAB’s decisions invalidating a number of patent claims it has asserted against IBS (the parties’ briefs have already been filed in that case).

The Medicines Company v. Hospira: Use of Contract Manufacturer Creates On-Sale Bar

In The Medicines Company v. Hospira, decided July 2, 2015, the Federal Circuit held that a patent owner’s use of a contract manufacturer to prepare three “validation batches” of a drug formulation embodying the claimed invention created an invalidating on-sale bar, even though the contract was for manufacturing service, not for the sale of product, and title to the drug always resided with the patent owner, and even though the batches were produced for the purpose of demonstrating to FDA that the invention resulted in a formulation that safisfied FDA specifications.  The decision illustrates the risk of using a contract manufacturer prior to filing a patent application, particularly now that the AIA has called into question the availability of the one year grace period previously available under pre-AIA 102(b).   

The Medicines Company (TMC) owns U.S. Patent No. 7,582,727 and U.S. Patent No. 7,598,343, which claim formulations of the drug bivalirudin. TMC sells bivalirudin under the Angiomax® brand. From 1997 to October 2006, TMC used Ben Venue Laboratories (BVL) as a contract manufacturer of Angiomax®. In 2005, BVL ran into some production problems and began producing batches of Angiomax that contained an impurity (Asp9-bivalirudin) at levels exceeding FDA’s approved maximum of 1.5%.

TMC hired a consultant to investigate and resolve the issue, and the consultant discovered a method of formulating Angiomax that reduced the level of impurity to below 0.6%.  In July 2008, TMC filed patent applications based on this discovery, resulting the ‘727 and ‘343 patents.  Prior to the critical date, i.e., more than one year before the filing date, TMC hired BVL to prepare three “validation batches” of bivalirudin falling within the scope of the claims for the purpose of proving to FDA that the product met the already-approved specifications for finished bivalirudin product.  Subsequently, post-critical date, TMC sold some of the drug produced by BVL.

In the The Medicines Company v. Hospira, an ANDA litigation, the district court upheld the validity of the patents, finding that the contract manufacture of the three validation batches by BVL did not create a 102(b) on-sale bar. The district court based its decision on its determination that TMC did not purchase the validation batches from BVL, but rather that the transaction was better characterized as “a contract manufacturer relationship in which Ben Venue was paid to manufacture Angiomax for The Medicines Company, [and] wherein title to the Angiomax always resided with The Medicines Company. [As] the invoices clearly stated, “Charge to manufacture Bivalirudin lot.”

The district court acknowledged that in Plumtree Software, Inc. v. Datamize, LLC, 473 F.3d 1152, 1163 (Fed.Cir. 2006), the Federal Circuit stated that “performing the patented method for commercial purposes before the critical date constitutes a sale under § 102(b).” However, the district court found that the “reasoning behind this statement is that the purpose of § 102(b) ‘is to preclude attempts by the inventor or his assignee to profit from commercial use of an invention for more than a year before an application for patent is filed.’” In contrast, TMC had the batches manufactured for validation purposes, and “at the time of the supposed sale, the batches were not for commercial purposes, but experimental batches made in order to verify that the invention worked for its intended purpose. [TMC] ‘purchased’ the validation batches for its own secret use, [and the] fact that the batches were subsequently sold does not change the underlying transaction from experimental to commercial. At the time of the transaction, the intent was experimental.”

On appeal, the Federal Circuit reversed, finding that under Federal Circuit precedent there is no “supplier” exception, so it did not matter that the patent owner was the purchaser, and that paying another entity to manufacture patented product constitutes an invalidating “sale” even though title never changed hands and the patent owner contracted for services, not for sale of a product.

The Federal Circuit acknowledged that under some circumstances use of a contract manufacturer in the development of an invention does not create an on sale bar. For example, in Trading Technologies Int'l, Inc. v. eSpeed, Inc., 595 F.3d 1340 (Fed. Cir. 2010) the inventor of an automated trading system paid a contractor on an hourly basis to produce software embodying the invention, because the inventor lacked the technical expertise to do so himself. The court in Trading Technologies stated that “[inventors] can request another entity's services in developing products embodying the invention without triggering the on-sale bar[, and thus the inventor’s request to the contractor] to make software for his own secret, personal use could not constitute a sale under 35 U.S.C. § 102(b)."

In The Medicines Company the Federal Circuit distinguished Trading Technologies, finding that TMC used the validation batches for commercial purposes, as opposed to the “secret, personal use” in Trading Technologies. The courted seem to find it significant that the verification batches were marked with commercial product codes and customer lot numbers and sent to TMC for “commercial and clinical packaging, consistent with the commercial sale of pharmaceutical drugs," and that each batch had a commercial value of over $10 million, i.e., a “not insignificant” amount.  Furthermore, even though the verification batches were produced for the purpose of demonstrating to FDA that the drug met FDA specifications, and none of the drug was sold prior to the critical date, it appears that after the critical date TMC did sell drug produced in the verification batches.

The Federal Circuit also found that the district court had clearly erred in finding that the experimental use doctrine bars the application of the on-sale bar to the verification batches. The Federal Circuit’s explanation for this is a bit confusing. The court begins by stating that “experimental use cannot occur after a reduction to practice,’” but later in the same paragraph asserts that “the experimental use defense may be available even if the invention had been reduced to practice if the inventor was unaware that the invention had been reduced to practice (i.e., worked for its intended purpose) and continued to experiment.”

TMC argued that it had not reduced the invention to practice when the batches were made because at that time it did not appreciate the maximum impurity level limitation of the claimed invention. The Federal Circuit rejected this argument, however, finding that this “is not a situation in which the inventor was unaware that the invention had been reduced to practice, and was experimenting to determine whether that was the case. The batches sold satisfied the claim limitations, and the inventor was well aware that the batches had levels of Asp ⁹-bivalirudin well below the claimed levels of 0.6%."

PTAB Denies IPR Petition Challenging MiMedx Patent on Placental Tissue Grafts

On June 29, 2015, the Patent Trial and Appeal Board (PTAB) denied a petition by Tissue Transplant Technology Ltd. and Human Biologics of Texas, Ltd. for inter partes review (IPR) of U.S. Patent No. 8,709,494, owned by MiMedx Group, Inc. (IPR2015-00320). The MiMedx patent is directed towards “placental membrane tissue grafts (amnion and chorion) and methods of preparing, preserving, and medical uses for the same.”  MiMedX commercializes the technology and appears to be a competitor of the petitioners.

The ‘494 patent is one of four patent that have been asserted against the petitioners  in MiMedx Group, Inc. v. Tissue Transplant Technology Ltd. et al., Case No. 1:14-CV-719-HLH (W. D. Tex.). The other three asserted patents (U.S. Patent Nos. 8,597,687; 8,372,437; and 8,323,701) are also the subject of IPR petitions: IPR2015-00420, IPR2015-00664, and IPR2015-00669, respectively.  The PTAB has yet to decide whether to institute these three remaining IPR requests.

MiMedx has also asserted the patents in a lawsuit pending in the Northern District of Georgia.  MiMedx Group, Inc. v. Liventa Bioscience, Inc. et al., Case No. 1:14-CV-00178 (N.D. Ga.).  The defendants in that case are the petitioners in IPR2015-00664 and IPR2015-00669.  In both cases, the district court has denied the petitioners' requests to stay the litigation pending resolution of the IPR petitions, so the infringement litigation is still moving forward concurrently.