The Federal Circuit held recently that the "all substantive rights" test, used heretofore to determine the identity of the "patentee" for purposes of satisfying 35 U.S.C. § 281, should be the standard for determining common ownership in applying the judicially created doctrine of obviousness-type double patenting (ODP), in Immunex Corp. v. Sandoz Inc. This decision may serve to complicate the legal landscape for patent licensees when addressing a common ownership question. As in the St Regis Mohawk Tribe v. Mylan decision, ultimately contract law, not patent law, provides the basis for the Court's decision in this case.
The case arose in litigation under the Biologics Price Competition and Innovation Act (BPCIA, relevant provisions codified under 42 U.S.C. § 262(l)) over Sandoz' biosimilar application for its product Erelzi, a generic form of Enbrel® (etanercept), which is used for reducing the signs and symptoms of moderately to severely active rheumatoid arthritis. Etanercept is a fusion protein "made by combining a portion of a 75 kilodalton human tumor necrosis factor receptor protein (the extracellular portion) with a portion of immunoglobulin G1 (IgG1), specifically, the portion including the hinge region, CH2 and CH3 domains." Immunex is the exclusive licensee of Hoffmann-La Roche for U.S. Patent Nos. 8,063,182 (to the etanercept composition of matter) and 8,163,522 (methods for making etanercept).
Immunex received FDA approval for Enbrel® and entered into a royalty-bearing license agreement for Roche for patents and applications that contained claims relevant to this product (including the '182 and '522 patents). Amgen later acquired Immunex and entered into an "Accord and Satisfaction" agreement with Roche, the purpose of which was "to eliminate the continuing obligations to pay royalties to Roche." The terms of this agreement gave Immunex a "paid-up, irrevocable, exclusive license to the U.S. patent family for the patents-in-suit." Relevant to the Federal Circuit's decision, the Agreement gave Immunex "the sole right to grant sublicenses, to make, have made, use, sell, offer for sale and import products covered by the patent family" and "the exclusive right to prosecute patent applications in the U.S. patent family." Immunex also received the right to enforce the patents in the first instance, Roche reserving the right to sue (and retain all damages received) upon Immunex' notice that it would not bring suit. Also, Roche can practice the claimed invention only for internal, research purposes under the terms of the agreement.
Sandoz stipulated to Infringement and trial was held on patent validity. The District Court held that Sandoz had not established by clear and convincing evidence that the claims were invalid for obviousness, failure to satisfy the written description requirement nor obviousness-type double patenting. With regard to the OPD issue, the District Court set forth the following reasons why Sandoz' arguments were not persuasive:
(1) that Sandoz's proposed test for common-ownership does not apply;
(2) even if that test applies, the patents-in-suit and the asserted double-patenting reference patents are not commonly owned;
(3) even if they are commonly owned, the two-way, rather than the one-way test for obviousness-type double patenting applies as to some of the double-patenting references; and
(4) the patents-in-suit are patentably distinct from each of the asserted double patenting references.
Sandoz appealed.
The Federal Circuit affirmed, in an opinion by Judge O'Malley joined by Judge Chen; Judge Reyna filed a dissenting opinion directed to the ODP issue. The opinion characterized Sandoz' common ownership argument as "novel," in that although the patents in suit are owned by Roche they are "effectively" owned by Immunex under the Accord & Satisfaction agreement. This amounted to an application of the "all substantial rights" test used to determine standing to sue under 35 U.S.C. § 281. The majority agreed that this test can be "informative" in determining common ownership but Sandoz has not done so here because "the agreement at issue here did not transfer all substantial rights from the assignee, Roche, to the exclusive licensee, Immunex." Further:
Under Sandoz's theory of common ownership, if a party is the effective patentee for purposes of the ability to bring an infringement suit, then it is also an effective patentee for purposes of obviousness-type double patenting," according to Sandoz and if the rule were contrary an assignment can be turned into a license. In particular, "if a party acquires all substantial rights in a patent application, including the right to control prosecution, then obviousness-type double patenting should apply to prohibit issuance of claims that are not patentably distinct from claims in patents already owned by that party.
The majority expressly rejected Immunex' position, that common ownership arises only when "the relevant inventions were owned by the same entity at the time of the invention," citing MPEP § 804.03(II) for its analysis of 35 U.S.C. 102(b)(2)(C) or pre-AIA 35 U.S.C. 103(c)(1). The majority further rejected Immunex' historical argument that revisions to the patent statute in 1984 created a "gap" that ODP was intended to fill to prevent two patents arising on obvious variants of a patented invention, citing In re Longi, 759 F.2d 887, 893 (Fed. Cir. 1985) (the opinion noting that the Court had more recently rejected this interpretation in Geneva Pharm., Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373, 1377, 1386 (Fed. Cir. 2003), as has the PTO in Ex Parte Maurice, No. 2005-2463, 2005 WL 4779419, at *2 (B.P.A.I. Sept. 19, 2005)).
The Federal Circuit agreed with Sandoz that the interpretation that the "all substantial rights" test was an appropriate measure for common ownership was more consistent with the purpose of the ODP doctrine, but refused to "import into this judicially-created doctrine the entirety of our body of law analyzing who is a statutory 'patentee' pursuant to 35 U.S.C. § 281," making the distinction:
We conclude only that where one of the rights transferred is the right to prosecute the patent at issue, identification of the effective "patentee" is informative in evaluating whether the patents are "commonly owned" for purposes of obviousness-type double patenting.
Here, the Accord and Satisfaction agreement did not satisfy this test, according to the panel majority. While there are many factors that can be assessed for this determination, the panel focused on two: "enforcement and alienation," and "the scope of the licensee's right to sublicense, the nature of license provisions regarding reversion of rights, the duration of the license grant, and the nature of any limits on the licensee's right to assign its interests in the patent," citing Alfred E. Mann Found. v. Cochlear Corp., 604 F.3d 1354, 1360-1 (2010). Under Delaware law, the majority applied the de novo standard of review regarding interpreting the District Court's construction of the terms of the contract and clear error for parole evidence of the parties' intent (although in view of the express terms of the agreement the Federal Circuit found no need to resort to parole evidence).
With regard to the parties' intent, the District Court found, and the Federal Circuit agreed, that the parties "specifically intended for the Accord & Satisfaction to be a license such that Roche would remain the owner of the patents-in-suit." This determination was supported in the District Court by the express language of the agreement (wherein it was termed a "license") as well as testimony from an Amgen witness. This portion of the District Court's opinion came in for criticism by the panel opinion, the majority stating that "we have clarified that 'whether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions,'" citing Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225, 1230 (Fed. Cir. 2019) (emphasis in original) (quoting Waterman v. Mackenzie, 138 U.S. 252, 256 (1891)).
But the panel opinion is intentionally parsimonious in instructing that rather than "import[ing] into [the] judicially created doctrine [of obviousness-type double patenting] the entirety of our body of law analyzing who is a statutory 'patentee' pursuant to 35 U.S.C. § 281," rather setting forth the principle that "only that where one of the rights transferred is the right to prosecute the patent at issue, identification of the effective 'patentee' is informative in evaluating whether the patents are 'commonly owned' for purposes of obviousness-type double patenting" (emphasis in opinion). The panel opinion held that the party having the right to control prosecution satisfies the "all substantial rules" test, and as a result "prevent[s] the unjustifiable issuance of claims that are patentably indistinct from claims already owned by that party." Perhaps most importantly, "looking to the 'all substantial rights' test achieves the proper balance between deterring gamesmanship in prosecution, on the one hand, and avoiding any chilling effect on routine collaborations and licensing between parties working in the same field of research, on the other."
Applying these principles to this case, the panel majority held that Roche had not transferred all substantial rights to Immunex and thus the patents were not commonly owned because the license was not substantially an assignment, as Sandoz had argued. Considering the enforcement and alienation provisions of the agreement the Federal Circuit majority held that it is "clear" that Roche did not transfer all its substantive rights in the patents. For the panel majority, retention by Roche of the "secondary" right to sue for infringement was dispositive, saying it was "thoroughly inconsistent" with a conclusion that the license was effectively an assignment.
The opinion expressly distinguished the Court's earlier decision in Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000), because there the licensee could frustrate the licensor's secondary right to sue by offering putative infringers a license, whereas here Immunex could not do so once Roche's secondary right has been triggered by Immunex's decision not to bring suit.
The panel also considered Roche retaining the right to veto any assignment by Immunex to a third party to be inconsistent with transfer of all substantial rights in the license.
The majority also affirmed the District Court's decision that Sandoz had not established by clear and convincing evidence that the claims were invalid for obviousness or failure to satisfy the written description requirement (Judge Reyna did not dissent from this part of the opinion). Regarding written description, the panel affirmed the District Court's decision that the existence of the full-length p75 amino acid sequence in the prior art adequately supported claims directed to a fusion protein between full-length p75 and the Fc portion of IgG, even though the specification only disclosed such a fusion protein comprising a truncated p75 sequence, on the grounds that "[i]t is well-established that a patent specification need not re-describe known prior art concepts," citing Capon v. Eshhar, 418 F.3d 1349, 1357 (Fed. Cir. 2005) (these sequences were also available to the public from deposited materials). In addition, the panel credited the District Court's reliance on expert witness testimony, wherein the lower court was due deference under the clear error standard of review.
Regarding obviousness, the panel found unpersuasive Sandoz' arguments regarding motivation to combine and secondary indicia. The panel found Sandoz' own arguments at trial and in post-trial motions regarding the relationship between motivation to combine and use of etanercept for treating inflammatory disorders contradicted its position. For the relevant objective indicia (clinical success, long-felt need, and failure of others) the panel held that the District Court had properly concluded that Immunex had demonstrated the required nexus between the claims and the etanercept product. As stated in the opinion, "Sandoz's arguments regarding objective indicia are merely disagreements with the district court's weighing of the evidence," which is not clear error.
Judge Reyna's dissent on the ODP question amounted to his disagreement with the majority's application of the "all substantial rights" standard to the Accord and Satisfaction agreement between the parties; he discerned "gamesmanship" in the course of prosecuting the patents-in-suit. On substantive law, Judge Reyna also opined that the "one-way" test for obviousness-type double patenting should be applied to this situation. His reasoning was that because the District Court found that both the Patent Office and Roche were responsible for the delay in prosecution leading to the later-filed application granting first as a patent, the situation did not satisfy the requirement for applying the two-way test that the Patent Office be solely responsible for the delay.
Immunex Corp. v. Sandoz Inc. (Fed. Cir. 2020)
Panel: Circuit Judges O'Malley, Reyna, and Chen
Opinion by Circuit Judge O'Malley; dissenting opinion by Circuit Judge Reyna
