HZNP Medicines LLC v. Actavis Laboratories UT, Inc. (Fed. Cir. 2019)

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The Federal Circuit earlier this week affirmed a District Court's decision invalidating almost all of the claims asserted against an ANDA filer, in HZNP Medicines LLC v. Actavis Laboratories UT, Inc.  Nevertheless, because a claim was held invalid and infringed, the proposed generic compound is delayed from coming to market.

The case arose as ANDA litigation over HZNP Medicines' osteoarthritis drug, PENNSAID® 2%.  After Actavis (nee Watson Labs) sent HZNP its Paragraph IV letter HZNP filed suit (asserting somewhat prolixically) twelve Orange Book-listed patents:  U.S. Patent Nos. 8,217,078; 9,132,110; 8,618,164; 9,168,304; 9,168,305; 8,546,450; 9,101,591; 8,563,613; 9,220,784; 8,871,809; 8,252,838; and 9,066,913.  These patents formed two groups as considered by the Federal Circuit:  the first group comprising the '450, '078, '110, and '164 patents, directed to methods of using diclofenac formulations for treating osteoarthritis, particularly in the knee.  Claim 10 of the '450 patent was deemed illustrative:

10.  A method for applying topical agents to a knee of a patient with pain, said method comprising:
    applying a first medication consisting of a topical diclofenac preparation to an area of the knee of said patient to treat osteoarthritis of the knee of said patient, wherein the topical diclofenac preparation comprises a therapeutically effective amount of a diclofenac salt and 40–50% w/w dimethyl sulfoxide;
    waiting for the treated area to dry;
    subsequently applying a sunscreen, or an insect repellant to said treated area after said treated area is dry, wherein said step of applying a first medication does not enhance the systemic absorption of the subsequently applied sunscreen, or insect repellant; and
    wherein said subsequent application occurs during a course of treatment of said patient with said topical diclofenac preparation.

The remaining asserted patents (the '838, '591, '304, '305, '784, '613, '809, and '913 patents) constituted the second group; claim 49 of the '838 patent is illustrative of what is claimed in these patents:

49.  A topical formulation consisting essentially of:
    1–2% w/w diclofenac sodium;
    40–50% w/w DMSO;
    23–29% w/w ethanol;
    10–12% w/w propylene glycol;
    hydroxypropyl cellulose; and
    water to make 100% w/w, wherein the topical formulation has a viscosity of 500–5000 centipoise.

The District Court found all but one of the asserted claims to be invalid for indefiniteness based on its construction of three claim terms:

• "the topical formulations produced less than 1% of impurity A after 6 months at 25 and 60% humidity" was indefinite for failing to provide any definition for "impurity A";
• "the formulation degrades by less than 1% over 6 months" was indefinite because there were no means specified for evaluating indefiniteness; and
• (most curiously) "consisting essentially of" was indefinite because "the parties disputed what were "basic and essential" properties of the claimed formulations and thus the scope of what additional components could be added in excess of the recited elements was indefinite.

With regard to the District Court's assessment of the "basic and essential" properties of the claimed formulations, the Court recognized five properties:  "(1) better drying time; (2) higher viscosity; (3) increased transdermal flux; (4) greater pharmacokinetic absorption; and (5) favorable stability."  The Court limited its determination to the first, "better drying time" property, and found it to be indefinite because the specification set forth two methods for measuring this property gave inconsistent results.  This persuaded the District Court that the skilled worker would not know which measurement method to use, which precluded the skilled artisan from having the "reasonable certainty" required under Nautilus, Inc. v. Biosig Instruments, Inc., 572 U.S. 898, 910 (2014), for the "consisting essentially of" term to be indefinite.  In response to HZNP's motion for reconsideration (which the District Court denied), the Court further found the "favorable stability" property to be indefinite because "the specification failed to provide the requisite guidance" for deterring stability.

Consequently, the District Court granted summary judgment of noninfringement, either literal or for inducement, in favor of Actavis.  The basis for this decision regarding inducement was a comparison of HZNP'S and Actavis' formulation label.  While HZNP's claimed method required the practice of three steps ("(1) application of the medication to knee, (2) waiting for the area to dry, and (3) application of sunscreen, insect repellant, or a second topical medication"), the labels differed because "Horizon's claimed method requires application of a second topical agent whereas [both] the [HZNP and Actavis] label merely permits, without encouraging, post-product application of sunscreen, insect repellant, or a second topical medication."

The parties went to trial on the sole remaining claim, claim 12 of the '913 patent, reciting a method of treatment comprising administering the claimed formulation twice daily.  Actavis stipulated that if valid its ANDA product would infringe, but argued the claim was obvious.  The prior art Actavis relied upon was HZNP's earlier PENNSAID® 1.5% product, which Actavis asserted had deficiencies known in the prior art ("frequent application and vulnerability to run-off") and the changes HZNP made in the formulation would have been reasonably expected to address these known deficiencies (and that the changed components were also known in the art, being merely "obvious optimizations of result-effective variables that produced a predictable result").  The District Court agreed with HZNP, that "the field of topical pharmaceutical formulations is complex and unpredictable" and that the litany of changes required to change the 1.5% formulation to the claimed 2.0% formulation would not have been obvious.  The parties appealed.

The Federal Circuit affirmed, in an opinion by Judge Reyna joined by Chief Judge Prost; Judge Newman concurred-in-part and dissented-in-part.  Regarding the judgment of invalidity for indefiniteness, the majority agreed that HZNP's failure to identify "impurity A" was fatal to the invalidated claims, rejecting HZNP's argument that the skilled worker would have understood, from sources like pharmacopeias, the identity of this impurity from how diclofenac was known to degrade under the conditions set forth in the specification.  Relying on the claim language, the majority found no basis for assuming that the skilled worker would have identified impurity A as being a diclofenac degradation product to the exclusion of other sources of this impurity in the formulation.  The extrinsic evidence was properly considered by the District Court to be unavailing, according to Judge Reyna and the Chief Judge, because the specification merely disclosed the results of the analytical methods but did rely on the data present in pharmacopeias to identify the impurity.  The District Court and the majority here linked its finding that "impurity A' was indefinite to support the further finding that the term "degrades" was indefinite ("Since "impurity A" is indefinite, it logically follows that another term, such as the "degrades" term, which relies on "impurity A" for its construction, must also be indefinite.")

The panel majority's explanation of why it affirmed the District Court's finding that "consisting essentially of" was indefinite was more involved.  While recognizing that this transition phrase "has a distinct meaning within our jurisprudence," the majority also agreed with the District Court that the indefiniteness question implicates the nature of the "basic and novel" properties of the formulation consisting of the expressly recited components; the phrase permits the claims to encompass formulations "consisting of only the specified materials and those that do not materially affect the basic and novel properties of the claimed invention."  Using the specification as a guide, the majority agreed that the District Court properly identified five basic and novel properties.  The majority then concluded that the indefiniteness standard enunciated by the Nautilis Court properly applied to those properties, rejecting HZNP's contention that the standard applied only to the elements recited in the claims:

By using the phrase "consisting essentially of" in the claims, the inventor in this case incorporated into the scope of the claims an evaluation of the basic and novel properties.  The use of "consisting essentially of" implicates not only the items listed after the phrase, but also those steps (in a process claim) or ingredients (in a composition claim) that do not materially affect the basic and novel properties of the invention.  Having used the phrase "consisting essentially of," and thereby incorporated unlisted ingredients or steps that do not materially affect the basic and novel properties of the invention, a drafter cannot later escape the definiteness requirement by arguing that the basic and novel properties of the invention are in the specification, not the claims.  Indeed, this contravenes the legal meaning associated with the phrase "consisting essentially of."  And a holding to the contrary would promote the innovation-discouraging "zone of uncertainty" that the Supreme Court has warned against.

The majority then set forth a discussion illustrating the distinctions between applying these principles in claim construction and the ultimate question of infringement, concluding that the Court's jurisprudence directs "courts evaluating claims that use the phrase "consisting essentially of" may ascertain the basic and novel properties of the invention at the claim construction stage, and then consider if the intrinsic evidence establishes what constitutes a material alteration of those properties."  Here, the majority held that the District Court properly applied these rubrics in coming to the conclusion that the term "consisting essentially of" was indefinite based on the "basic and novel" feature of better drying time.

Coming to questions of infringement, the panel majority affirmed the District Court's holding that practice of Actavis' product according to its label did not induce infringement.  Inducement here would require the instruction in Actavis' label to perform the three distinct steps, whereas the District Court held, and the Federal Circuit majority agreed that, only the first step, applying the inventive formulation, was required to be performed.

Finally, regarding the District Court's holding that Actavis had not shown by clear and convincing evidence that claim 12 of the '913 patent was obvious, the majority here found no clear error in the District Court's reliance on expert testimony regarding the differences between the 1.5% and claimed 2% varieties of PENNSAID® and affirmed.

Judge Newman's dissent was based on the majority's indefiniteness determinations regarding the transition phrase "consisting essentially of" and whether the Actavis label induced infringement, characterizing the majority's opinion in the former to be "departures from long-established law and long-understood practice" and in the latter to be "contrary to statute and precedent."  With regard to the majority's decision regarding the term "consisting essentially of," Judge Newman believes the majority's decision to be "not correct as a matter of claim construction, it is not the law of patenting novel compositions, and it is not the correct application of section 112(b)."  Judge Newman faults the majority for incorporating method steps (better drying time) or properties (increased stability) into indefiniteness determinations of composition of matter claims.  And Judge Newman does not believe that Actavis established invalidity by clear and convincing evidence.  But the Judge's principal concern was that the majority's decision will "cast countless patents into uncertainty."  Finally, the Judge believes that the possibility that some patients may not follow Actavis' label instructions is not a proper basis for absolving them from infringement liability.

HZNP Medicines LLC v. Actavis Laboratories UT, Inc. (Fed. Cir. 2019)
Panel: Chief Judge Prost and Circuit Judges Newman and Reyna
Opinion by Circuit Judge Reyna; opinion concurring in part and dissenting in part by Circuit Judge Newman

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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