In an appeal decided last month, the Federal Circuit reversed and remanded a decision of noninfringement by the District Court for the District of New Jersey with respect to U.S. Patent No. 7,524,834, and affirmed the District Court's finding of obviousness with respect to U.S. Patent No. 6,598,603.  The panel also affirmed the District Court's dismissal of invalidity counterclaims brought by Defendants-Cross Appellants Apotex, Inc. and Apotex Corp., and the lower court's decisions regarding the bond amount.

The '834 patent is directed to a sterile, pharmaceutically effective budesonide product, which is used to treat asthma in children.  Claims 1 and 50 of the '834 patent recite (emphasis in opinion):

1.  A pharmaceutically acceptable micronized powder composition at least 98.5% by weight of which is pure budesonide or an ester, acetal or salt thereof, wherein the composition meets the criteria of sterility according to the US Pharmacopoeia [sic] 23/NF18, 1995, pages 1686-1690 and 1963-1975. ’834 Patent col. 11 ll. 48–52.

50.  A pharmaceutically acceptable suspension consisting of a micronized powder composition at least 98.5% by weight of which is pure budesonide or an ester, acetal or salt thereof suspended in an aqueous solution, wherein the suspension meets the criteria of sterility according to the US Pharmacopoeia [sic] 23/NFl8, 1995, pages 1686-1690 and 1963-1975.

The '603 patent is directed to a once-daily treatment of patients with budesonide administered by nebulizer.  Independent claim 1 of the '603 patent recites:

1.  A method of treating a patient suffering from a respiratory disease, the method comprising administering to the patient a nebulized dose of a budesonide composition in a continuing regimen at a frequency of not more than once per day.

AstraZeneca markets a "once-daily nebulized budesonide suspension used to treat asthma in children" under the name Pulmicort Respules®.

Seeking approval to market generic versions of AstraZeneca's Pulmicort Respules® drug, Appellees Breath Ltd.; Apotex, Inc. and Apotex Corp.; Sandoz, Inc.; and Watson Laboratories, Inc. filed Abbreviated New Drug Applications (ANDAs) with the FDA.  In response to those ANDA filings, AstraZeneca brought suit against the Appellees for induced infringement of the patents at issue, and the Appellees counterclaimed for declaratory judgments of invalidity and noninfringement.

With respect to Appellees Apotex, Inc. and Apotex Corp. (Apotex), the District Court granted AstraZeneca's request for a preliminary injunction, preventing Apotex from launching its generic product, subject to AstraZeneca's posting of a bond.  In response to a motion made by Apotex at trial, the District Court increased the bond amount to cover future damages, but refused to increase the bond amount to cover past damages.  Following a bench trial, the District Court found that claims 50 and 51 of the '834 patent were not infringed by Apotex and Sandoz, and that claims 1, 2, 50, and 51 of the '834 patent were not infringed by Breath and Watson.  Although the District Court determined that Appellees' labels induce infringement of claims 1-3, 7, 8, 12-17, and 24-28 of the '603 patent, the lower court also found these claims invalid as anticipated and obvious.  Finally, the District Court declined to exercise jurisdiction over Apotex's invalidity counterclaims directed to certain claims of the '603 patent (the lower court had first dismissed AstraZeneca's assertion of infringement with respect to these same claims).

The District Court's finding of noninfringement with respect to the '834 patent was based on the lower court's construction of the phrase "micronized powder composition" as meaning "heat sterilized finely divided dry particles."  The District Court also determined that "heat sterilized" refers to "particles that have been sterilized through a process, consistent with heat sterilization, that allows them to essentially maintain the same pharmacological activity, physico-chemical properties, chemical purity, and physical form as the starting material."  AstraZeneca argued that the District Court erred by importing limitations into the claims because the plain meaning of the phrase "micronized powder composition" has nothing to do with heat sterilization.  In reversing and remanding the District Court's finding of noninfringement, the Federal Circuit noted that "[w]ith respect to the ordinary, plain meaning of the term 'micronized powder composition,' none of the three words imposes, or even implies, any form of sterilization."  While acknowledging that "[t]here is no dispute that the patent refers only to dry heat sterilization as the preferred method of achieving the claimed 'micronized powder composition' and criticizes, often sharply, other forms of sterilization," the panel determined that such criticism did not rise to the level of a disavowal of the phrase's otherwise plain meaning.  Noting that the '834 patent describes processes, products, and methods of use, the opinion states that "[a]t most, the specification is confusing with respect to whether it limits only the disclosed process to a specific form of sterilization or both the process and the disclosed product to a specific form of sterilization," adding that this "confusion leaves available an interpretation of the patent that the products, as opposed to the processes, are not limited to any particular form of sterilization."  Because the Court could not conclude that AstraZeneca disclaimed non-heat sterilized micronized powder compositions, the panel determined that the District Court erred by adding the "heat sterilized" limitation into the asserted claims, and that a more accurate construction of the phrase "micronized powder composition" would be "finely divided dry particles."

As for the District Court's finding of invalidity with respect to the asserted claims of the '603 patent, the lower court determined that the '603 patent disclosed "once-daily dosing of nebulized budesonide" and that a skilled artisan would have been motivated to arrive at this "obvious conclusion."  In particular, the District Court found that the prior art included numerous studies that "taught the safety and efficacy of once-daily inhaled budesonide," including once-daily treatment of children and that practitioners would attempt to titrate a drug dose down to the lowest possible dose, i.e., a once-a-day dose.  The District Court also found that the prior art taught that nebulizers were the "most practical delivery device for certain patients like young children."  In affirming the District Court's finding of obviousness, the panel identified no clear error in the lower court's underlying factual determinations, and determined that those facts established by clear and convincing evidence that the asserted claims of the '603 Patent are obvious.

With respect to the District Court's decision to decline jurisdiction over Apotex's invalidity claims, the panel declined to say that the lower court abused its discretion in dismissing those counterclaims, as "[t]he decision whether to accept jurisdiction of a Declaratory Judgment counterclaim is quintessentially left to the discretion of the district court."

Finally, with respect to District Court's decisions regarding the bond amount, the Federal Circuit first noted that a bond amount is a procedural issue that is not unique to patent law, and therefore, that the law of the Third Circuit applied.  Looking to the Third Circuit's decision in Sprint Commc'n Co. v. Cat Commc'n Int'l, 335 F.3d 235 (3d Cir. 2003), the Federal Circuit concluded that "the Third Circuit would consider improper an increase to cover past damages even in the present circumstances."  In affirming the District Court's refusal to increase the bond amount to cover past damages, the opinion explains that:

AstraZeneca expected that its liability would be limited to the bond amount before Apotex's motion.  AstraZeneca cannot be fairly informed after it obtained the benefit of the injunction that it must later pay more for the benefit it already obtained in order to obtain the benefit of a continued injunction.  The bond would no longer serve to cabin or fix liability, and that would result in an unexpected liability, which Sprint sought to prohibit.  It is immaterial whether the injunction has been dissolved, as in Sprint, or continues, as it does here.  Either way: the party securing the injunction decided to accept the preliminary relief by posting the bond required at the time.  Later requiring that party to post a higher bond for a period that already has passed results in a situation where that bond no longer fixes exposure or caps liability.  The party no longer simply could withdraw its request for an injunction over that period because that period already would have passed.

AstraZeneca LP v. Breath Ltd. (Fed. Cir. 2013)
Nonprecedential disposition
Panel: Chief Judge Rader and Circuit Judges Bryson and Linn
Opinion by Circuit Judge Linn