The Federal Circuit has taken the occasion, in appeals from the Patent Trial and Appeal Board as well as district courts, to remand judgments whenever the Court believes that the record below is devoid of sufficient detail to properly assess the correctness of the decisions made below (see "Merck Sharp & Dohme Corp. v. Wyeth LLC (Fed. Cir. 2019)" and "NeuroGrafix v. Brainlab, Inc. (Fed. Cir. 2019)"). Recently, the Court took advantage of another opportunity to remind a district court of the need to provide ample factual bases for its decisions and avoid a "rush to judgment," in Ferring B.V. v. Allergan, Inc.
The case involved the claims to patent ownership of a former consultant, Seymour Fein, for Ferring Pharmaceuticals. Mr. Fein was a consultant for Ferring Pharmaceuticals for a little less than four years, until Ferring terminated his consulting agreement in November 2002. During his contract, employment Mr. Fein was involved in a project involving desmopressin, a synthetic analog of naturally occurring arginine vasopressin that is a hormone related to water retention in humans. In particular, desmopressin was used to treat sleep disruption caused by nocturia. The compound had low bioavailability and a large range of absorption, and it was thought that increasing desmopressin doses (to reduce these aspects of use of the drug) could pose a safety issue. A study performed by Ferring scientists starting in October 2000 supported the use of low doses and plasma concentrations of desmopressin as a clinically effective nocturia treatment. However, the drug was also accompanied by hyponatremia (low blood sodium ion concentration), which can be life-threatening, and Mr. Fein was asked to consult on this problem as part of his consulting duties. According to the opinion Mr. Fein suggested using low doses of desmopressin formulated "in a waterless orodispersible form (a 'melt') [and administered] sublingually through the mucosal membranes of the mouth" as a solution to the problem. When tested, such a formulation showed double the bioavailability of previously marketed forms of the drug. Clinical trials and a patent application filing by Ferring followed (but this application named no inventors). Thereafter, Mr. Fein was not further involved with development of these formulations of the drug. Instead, he was tasked with overseeing (until Ferring cancelled his consulting agreement) an intravenous desmopressin administration study, where he suggested improvements that permitted a greater weight range of participants. When Ferring filed a PCT application claiming priority to the initial application, Mr. Fein was named as an inventor but his contract with Ferring was terminated shortly thereafter.
Mr. Fein communicated with Ferring through his attorney for the next two years regarding his inventive contribution to embodiments of the invention encompassing sublingual desmopressin administration. In his extensive correspondence, Mr. Fein informed Ferring that his consulting agreement contained no obligation that he assigned any inventions to Ferring and his inventive contribution to the invention claimed in Ferring's PCT application (as acknowledged by Ferring naming him as an inventor). In response, Ferring informed Mr. Fein that it had "dropped" the sublingual administration feature of the claimed invention and hence Mr. Fein was no longer properly an inventor. Mr. Fein acquiesced to Ferring's decision but informed the company that he was also an inventor of "the associated low dosage possibilities enabled by the sublingual administration route" which had not been specifically claimed in the pending application. Somewhat aggressively, Mr. Fein notified Ferring that he intended to pursue patent protection on the sublingual administration route invention as well as "the associated low dosage possibilities" which he assumed Ferring would relinquish any claims thereto. Ferring's response included its reasoning that it was not pursuing these aspects of the invention because they were in the public domain. However, Ferring refused to provide a blanket disclaimer of ownership or inventorship by Ferring employees without reviewing any patent application Mr. Fein might thereafter file.
Mr. Fein did file his application, PCT/US2003/014463, naming himself as sole inventor and claiming priority to the earlier-filed Ferring application. The claims were directed to low dose desmopressin formulations not limited to a sublingual route of administration. In response (the next day, according to the opinion), Ferring filed its own new PCT application, claiming priority to its earlier applications, that did not contain claims directed to desmopressin formulations for sublingual administration nor name Mr. Fein as an inventor. According to the opinion, these various Ferring PCT applications resulted in eventual grant of U.S. Patent Nos. 7,569,429 and 7,947,654. For his part, Mr. Fein conducted clinical trials and filed U.S. patent applications, which resulted in grant of U.S. Patent No. 7,799,761 containing claims reciting "pharmaceutical compositions comprising varying low doses of desmopressin administered by various routes of delivery" (not limited to sublingual delivery routes). This prompted Ferring to write to inform Mr. Fein that it believed his patent applications contained proprietary and confidential information and that Mr. Fein was not entitled to the invention claimed in the '761 patent. Continued correspondence between the parties failed to resolve these issues. In the meantime, Mr. Fein took steps to commercialize the invention encompassed by the '761 patent claims and pursued further patent protection, including U.S. Patent Nos. 7,405,203 and 7,579,321. In response, Ferring attempted without success to have the Patent Trial and Appeal Board re-examine the '203 patent.
Ferring filed suit in the Southern District of New York to correct inventorship under 35 U.S.C. § 256 and for state law claims. In that suit, co-defendant Allergan (joined by all co-defendants) moved for summary judgment that Ferring's claims under § 256 were barred by equitable estoppel and District Court Judge Sweet granted that motion. The basis for summary judgment grant by the District Court was that "Ferring's inaction for over seven years" after Mr. Fein's correspondence (through his attorney) satisfied the "misleading conduct" prong of the equitable estoppel standard. The Court understood the evidence to show that Ferring's response to Mr. Fein's assertion that he had invented low-dose desmopressin formulations "was not that the low dosage invention was Ferring's intellectual property, but that it was not patentable at all, and that Ferring would no longer be pursuing claims directed toward it." Under the facts before it, the Court held that the reliance and prejudice prongs of the equitable estoppel standard were also satisfied and granted summary judgment accordingly. Thereafter, the Court granted Ferring a stay and certified the judgment to permit Ferring to appeal.
After Judge Sweet's unfortunate demise, the judge assigned to the case addressed co-defendant's counterclaims that Mr. Fein should be named as an inventor of Ferring's '429 and '654 patents, refusing to amend inventorship. This appeal followed.
The Federal Circuit vacated and remanded the decisions of the District Court, in an opinion by Judge O'Malley joined by Judges Reyna and Chen. The panel rejected Ferring's challenges on the grounds that the District Court had misapplied the law, specifically with regard to consideration of pre-issuance conduct in MCV, Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1572 (Fed. Cir. 1989), and the effect of differences in claim scope under Radio Sys. Corp. v. Lalor, 709 F.3d 1124 (Fed. Cir. 2013), and John Bean Techs. Corp. v. Morris & Assocs., Inc., 887 F.3d 1322 (Fed. Cir. 2018). With regard to the latter argument, the panel "declined to adopt a bright-line rule that equitable estoppel cannot apply whenever the scope of the issued patent is different than what the parties discussed in communications leading to the allegedly misleading conduct" while recognizing that "differences in claim scope are relevant to the equitable estoppel inquiry."
Nevertheless, the Court stated that such differences can give rise to material issues of fact that the remainder of its opinion addressed. Specifically, Ferring argued that the District Court drew inferences in support of defendants regarding its misleading conduct that were not the only inferences that could be drawn. The panel noted that most commonly a patentee objects to activities as infringing and then fails to file suit for years. Under these circumstances the Court recited these elements of the equitable estoppel defense:
(1) the patentee engages in misleading conduct that leads the accused infringer to reasonably infer that the patentee does not intend to assert its patent against the accused infringer; (2) the accused infringer relies on that conduct; and (3) as a result of that reliance, the accused infringer would be materially prejudiced if the patentee is allowed to proceed with its infringement action.
And relevant to the issue before the Court, the opinion asserts that "[t]o justify summary judgment of equitable estoppel, any inference that a patentee made a misleading communication by omission or acquiescence 'must be the only possible inference from the evidence,'" citing SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, 767 F.3d 1339, 1350 (Fed. Cir. 2014). The panel did not believe the inference drawn by the District Court in defendants' favor, that Ferring purportedly acquiesced to sole inventorship by Mr. Fein, was not the only inference. Thus, the Court opined that the District Court erred in concluding as a matter of law that Ferring's attempt to correct inventorship contradicted its earlier position as reflected in correspondence with Mr. Fein's attorney. The error was the District Court's view that the scope of the claims discussed in that correspondence was commensurate with the scope of Mr. Fein's granted claims. And by "fail[ing] to address material differences in the scope of Fein's issued patent claims as compared to the invention described in the [attorney] correspondence and Fein's application claims" the District Court abused its discretion. Specifically, the panel understood (and believed the parties understood) that Ferring had "disavowed any ownership claim to the sublingual, transmucosal route of delivery of desmopressin and its associated low-dosage possibilities that Fein identified as his invention." But those are not the claims Mr. Fein pursued. "Instead, Fein pursued claims untethered to sublingual administration of desmopressin," according to the opinion (in fact the panel understood the claims to be untethered to any particular administration route). And none of those claims are limited to sublingual administration. Moreover, these claims were pursued despite Ferring's caution that they were not disavowing any claim to "other material" that could be in those applications. Under these circumstances, the Court believed that "a reasonable factfinder could conclude that it would have been unreasonable for Fein to infer from Ferring's pre-2004 communications that Ferring intended to relinquish inventorship rights in the issued claims of the Fein patents."
In addition, the opinion disagrees with the District Court's conclusion that Ferring was put on notice when Mr. Fein communicated his patent applications to them, because "that conclusion rested on an inadequate claim scope analysis." In particular, the panel focused on "duration of action limitations" contained in "most of Fein's issued claims" that were "completely absent from Fein's application claims." This was relevant because "Ferring based its § 256 claims in part on the very duration of action limitations the district court overlooked."
The Court also disagreed with the District Court's conclusions because in the panel's view its interpretation of the significance of the correspondence was not the only reasonable one, and "[t]o justify summary judgment of equitable estoppel, any inference that a patentee made a misleading communication by omission or acquiescence 'must be the only possible inference from the evidence,'" citing A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1042 (Fed. Cir. 1992) (en banc). Much of the Federal Circuit's concern in this regard involved the usual "back-and-forth" between Fein and Ferring counsel in this correspondence which is open in retrospect to differing interpretations and is not sufficiently straightforward to justify the District Court's inferences or conclusions. Accordingly, the Court stated "[i]n view of the varying reasonable interpretations of the [attorney] correspondence, we must vacate the district court's summary judgment of equitable estoppel and remand for further proceedings."
Finally, the Federal Circuit addressed the issue of unclean hands. Being an equitable remedy, defendants' assertion of equitable estoppel requires their own conduct to be without reproach. In this case, Ferring contended that "the district court erred by ignoring evidence that Fein intentionally and deliberately copied Ferring's . . . clinical study protocol for use in his own clinical studies." Ferring asserted several bases for its unclean hands allegations that the panel did not specifically address. However, the opinion notes that for some of these arguments and evidence supporting them there was no discussion in the record and thus "[we have] no basis to infer that the district court considered Ferring's evidence" in this regard, which the Court found was another abuse of discretion. The Court accordingly left correction of these errors to the District Court on remand.
Ferring B.V. v. Allergan, Inc. (Fed. Cir. 2020)
Panel: Circuit Judges O'Malley, Reyna, and Chen
Opinion by Circuit Judge O'Malley