PATENT CASE OF THE WEEK  

HZNP Medicines LLC v. Actavis Laboratories UT, Inc., Appeal Nos. 2017-2149, et al. (Fed. Cir. Oct. 10, 2019)

In a lengthy decision following a bench trial, the Court addressed a matter of first impression concerning use of the term “consisting essentially of” as used as a transitional term in patent claims, finding the term in this case to be indefinite. The Court also addressed issues concerning induced infringement and non-obviousness.

The patents are pharmaceutical patents concerning treatments for osteoarthritis. The case is a Hatch-Waxman case, brought about by the filing of an ANDA application for a generic alternative to Horizon Pharma’s patented products.

One of the patents used the transitional phrase “consisting essentially of” in the following claim:

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… 

The district court held that the term “consisting essentially of” as used in this claim was indefinite, and the Federal Circuit affirmed.

As the court explained,

The phrase “consisting essentially of” has a distinct meaning within our jurisprudence. It is a transition phrase often used to signal a partially open claim. The phrase serves as a middle ground between closed-ended claims using the phrase “consisting of” and open-ended claims using the phrase “comprising.” Accordingly, a drafter will generally include the phrase “consisting essentially of” before (a) a list of ingredients when dealing with a composition claim, or (b) a series of steps when dealing with a process claim. By doing so, “the drafter signals that the invention necessarily includes the listed ingredients [but] is open to unlisted ingredients that do not materially affect the basic and novel properties of the invention.” Put differently, “[t]he phrase ‘consisting essentially of’ … permit[s] inclusion of components not listed in the claim, provided that they do not ‘materially affect the basic and novel properties of the invention.’” (Internal cites omitted).

The question raised by this case is whether the “basic and novel properties of the invention” themselves have to be sufficiently definite, applying the Supreme Court’s decision in Nautilus, Inc. v. Biosig Instruments, Inc., 572 U.S. 898 (2014). In an extensive analysis, including analyzing past cases using the same phrase, the Court held for the first time that they do.

Applying that rule to this case, the Court found that the “basic and novel properties” were insufficiently defined. One of those properties as articulated in the patent is “better drying time.” The Court found the elucidation of this property to be indefinite because of an inconsistency in the specification. Specifically, there were two different tests reported, but they did not “provide consistent results at consistent times.” As summarized by the Court:

Here, an evaluation of the specification reveals inconsistencies about the basic and novel property of “better drying time.” Two tests are disclosed, but those tests do not provide consistent results upon which a POSITA would be able to evaluate “better drying time.” Consequently, we conclude that the district court did not err in its determination that a POSITA would not know under what standard to evaluate the drying rate of the invention, thus rendering the basic and novel property of “better drying rate” indefinite.

The Court further provided the following qualifiers to its opinion:

To be clear, we do not hold today that so long as there is any ambiguity in the patent’s description of the basic and novel properties of its invention, no matter how marginal, the phrase “consisting essentially of” would be considered indefinite. Nor are we requiring that the patent owner draft claims to an untenable level of specificity. We conclude only that, on these particular facts, the district court did not err in determining that the phrase “consisting essentially of” was indefinite in light of the indefinite scope of the invention’s basic and novel property of a “better drying time.” 

Judge Newman issued a dissenting opinion. She would have held the terms to be definite, arguing, “[i]t is hard to imagine a clearer statement than a list of ingredients that the claimed formulation ‘consists essentially of.’”  The majority, however, suggested that the applicants should have used the term “consisting of” rather than “consisting essentially of,” that by adding the word “essentially” they expanded the scope of the claims to cover other, unknown chemicals, and that the public needed to be put on notice of the bounds of that increased claim scope.

The Court also found other claim terms indefinite, addressed package labeling as it relates to a claim of induced infringement, and found one other claim nonobvious.

The opinion can be found here.

ALSO THIS WEEK  

Fraunhofer-Gesellschaft Zur Förderung Der Angewandten Forschung E.V. v. Sirius XM Radio Inc., Appeal No. 2018-2400 (Fed. Cir. Oct. 17, 2019)

In this appeal from the United States District Court for the District of Delaware, the Federal Circuit addresses issues relating to patent licensing in connection with a motion to dismiss. The Federal Circuit here reversed the district court’s dismissal for failure to state a claim because the contract at issue was ambiguous as to whether the rights of Sirius, a sub-licensee to a master license agreement between Fraunhofer and a third party, survived the termination of the master agreement after the third party filed for bankruptcy. As such, the Court reversed and remanded for further factual findings. The Court also reversed the denial of Fraunhofer’s motion to amend its complaint to include evidence of the parties’ intent and held the district court erred by not considering extrinsic evidence relating to same.

The opinion can be found here.

B.E. Technology, LLC v. Facebook, Inc., Appeal No. 2018-2356 (Fed. Cir. Oct. 9, 2019)

In this case, the Federal Circuit reviewed a determination of whether Facebook was the “prevailing party” for purposes of a Rule 54(d)(1) costs award. Plaintiff/patent owner B.E. Tech. had sued Facebook on claims that were subsequently held unpatentable in inter partes review proceedings. Facebook then moved in the district court for judgment on the pleadings under Fed. R. Civ. P. 12(c), but the district court instead dismissed plaintiff’s claims as moot in light of the IPR result. The district court nonetheless found that Facebook was the “prevailing party” and awarded $4,424.00 in costs. The Federal Circuit collected Supreme Court and its own authority on the “prevailing party” question, to the effect that while some judicial imprimatur on the case is required to confer “prevailing party” status, a decision on the merits is not a prerequisite. The Federal Circuit affirmed, finding that as in Raniere v. Microsoft Corp., 887 F.3d 1298 (Fed. Cir. 2018) (defendant was “prevailing party” where claims dismissed for lack of standing), the court’s dismissal for mootness placed the required judicial imprimatur on B.E. Tech.’s claim. 

The opinion can be found here.