Shire Development LLC v. Watson Pharmaceuticals Inc. (Fed. Cir. 2017)

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The Federal Circuit, in its third opinion involving ANDA litigation between these parties over Shire's LIALDA® (mesalamine) product, has apparently brought this case to a close in generic drug maker Watson's favor, in a decision handed down last Friday.

The lawsuit involved Watson's ANDA filing seeking approval for a generic version of Shire's controlled-release oral pharmaceutical composition for the treatment of inflammatory bowel disease, Crohn's disease, and ulcerative colitis, sold by Shire under the brand name LIALDA®.  Shire listed U.S. Patent No. 6,773,720 in the Orange Book having claims for its patented formulations of the active pharmaceutical ingredient mesalamine (5-amino salicylic acid).  These formulations were characterized as having high concentrations (85-90% by weight) of the API.  The formulations contain an "inner hydrophobic matrix" and an "outer hydrophilic matrix," as used in the following representative claims of the '720 patent:

1.  Controlled-release oral pharmaceutical compositions containing as an active ingredient 5- amino-salicylic acid, comprising:
    a) an inner lipophilic matrix consisting of sub- stances selected from the group consisting of unsaturated and/or hydrogenated fatty acid, salts, esters or amides thereof, fatty acid mono-, di- or triglycerid[e]s, waxes, ceramides, and cholesterol derivatives with melting points below 90° C., and wherein the active ingredient is dispersed both in said the lipophilic matrix and in the hydrophilic matrix;
    b) an outer hydrophilic matrix wherein the lipophilic matrix is dispersed, and said outer hydrophilic matrix consists of compounds selected from the group consisting of polymers or copolymers of acrylic or methacrylic acid, alkylvinyl polymers, hydroxyalkyl celluloses, carboxyalkyl celluloses, polysaccharides, dextrins, pectins, starches and derivatives, alginic acid, and natural or synthetic gums;
    c) optionally other excipients;
    wherein the active ingredient is present in an amount of 80 to 95% by weight of the total composition, and wherein the active ingredient is dispersed both in the lipophilic matrix and in the hydrophilic matrix.

The claimed formulations provide the "sustained and uniform manner" by which the mesalamine API is released as the drug passes through the gut.

In the first trial on the merits, the District Court construed the term "inner hydrophobic matrix" to mean "a matrix including at least one lipophilic excipient, where the matrix is located within one or more substances," and construed "outer hydrophilic matrix" to mean "a matrix of at least one hydrophilic excipient, where the matrix is located outside the inner lipophilic matrix."

On appeal the Federal Circuit reversed, holding that these constructions did not comport with the "ordinary and customary" meanings of the claim terms because they were "impermissibly broad."  Specifically, that panel held that the District Court had properly construed the term "matrix" in each instance as "a macroscopically homogeneous structure in all its volume," but disagreed with how the court construed "lipophilic matrix" to mean "a matrix that includes at least one lipophilic excipient."  This error arose because the District Court's construction "focuse[d] on the lipophilic properties of an excipient in the matrix, rather than the properties of the matrix itself."  That panel believed that the intrinsic evidence mandated a construction wherein lipophilicity (or, for that matter the hydrophilicity) is a characteristic of the matrix, not the excipient in the matrix, according to distinctions found in the specification.

Shire petitioned for certiorari and the Supreme Court vacated this decision and remanded to the Federal Circuit for reconsideration in view of the Court's intervening decision in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.  In that case, the Court set forth the standard of Federal Circuit review of district courts' claim construction, changing the completely de novo standard of Fas v. Cybor to one wherein questions of law are to be reviewed de novo but factual determinations of a district court should be reviewed for clear error, i.e., giving deference to the district court's factual findings pursuant to Federal Rule of Civil Procedure 52(a)(6).  Notably, this change was not mandated for cases where a district court relied solely on the intrinsic evidence (plain meaning of the claim language, the specification and the prosecution file history).  On remand, the Federal Circuit saw fit not to change its earlier determination that the District Court had erred (based on its determination that the District Court had relied only on intrinsic evidence) and remanded the matter to the District Court for trial according to that panel's claim construction.

This appeal is the result of that trial, wherein the District Court again found infringement under 35 U.S.C. § 271(e)(2).  And once again the Federal Circuit reversed, in an opinion by Judge Hughes, joined by Chief Judge Prost and Judge Taranto.  In this opinion, the panel focused on the Markush groups recited in the claims ("selected from the group consisting of"; see Ex parte Markush, 1925 C.D. 126 (Comm'r Pat. 1925) and MPEP 803.02), which format the opinion noted was relevant to the opinion because, in its earlier claim construction they formed the basis for the Court's determination that "'the correct construction requires that the inner volume contain substances from the group described for the inner lipophilic matrix (which are all lipophilic substances), and that the outer volume separately contain substances from the group described for the outer hydrophilic matrix (which are all hydrophilic).'"  The District Court here found that the presence of components of the lipophilic and hydrophilic matrices comprising Watson's formulation falling outside the scope of the Markush groups did not bar infringement because these components were "'unrelated' to the invention because they did not drive the water-affinity property of their respective matrices."  In some instances, permitting unrelated components to be present in an invention claimed using Markush group language is permissible, according to the opinion, provided that these are related to "aspects unrelated to the invention," citing Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1331 (Fed Cir. 2004).  Here, however, Watson's formulation "does not facially satisfy the claim 1(b) Markush limitation," according to the opinion, because the extragranular space comprising the outer hydrophilic matrix contains lipophilic magnesium stearate, a component not recited in the claim 1(b) Markush group.

Specifically, the Federal Circuit rejected the District Court's distinction that "magnesium stearate in the extragranular space is overwhelmed by the hydrophilic properties of the sodium starch glycolate in the extragranular space" based in part on expert testimony that the hydrophilic "'sodium starch glycolate is more potent than the mag[nesium] stearate" when "outside" the granules.'"  Indeed, the District Court found (and the Federal Circuit agreed) that magnesium stearate "retained its lipophilic character in the extragranular space" to the same extent that it exerted a lipophilic effect in granules.  On that basis, the panel held that the compound "structurally and functionally" is related to the invention as claimed and thus violates the Markush group of claim 1(b), which does not recite magnesium stearate as a member thereof.  In doing so, the panel rejected Shire's contention (adopted by the District Court) that magnesium stearate in Watson's formulation was used as a lubricant and not for its lipophilic properties and was not lipophilic enough to render the outer matrix lipophilic.  According to the opinion, Norian did not impose a requirement that related components were only those that "advance or are intended to advance" the inventive elements recited in a Markush group, on the grounds that such a requirement would be equivalent to construing "consisting of" in the Markush language to have a scope of "comprising" or "consisting essentially of" (the latter phrasing being most closely related to the scope that Shire advanced in its claim construction arguments).

The Court remanded with directions to enter judgment of non-infringement, thus putting Watson in the position to be able to market its generic mesalamine formulation (the Hatch-Waxman 30-month stay having expired long ago).  Shire may still appeal, either by requesting rehearing en banc or filing another certiorari petition.  Insofar as the Federal Circuit's opinion is based on the District Court's factual findings (supported by expert testimony) cert. is not a foregone conclusion.  It will depend on whether Shire can convince the Justices that the Federal Circuit has not minded the High Court's lessons regarding claim construction.  Perhaps needing to delve into the minutiae of Markush claiming will be enough to deter the Court from revisiting this aspect of claim construction so soon after its Teva decision (similar to the Court refusing to grant cert. in the Sequenom case after its recent spate of diagnostic method claim cases).  But this case provides a reminder of the tortured path litigants may need to take to get what presumably is a final outcome, and the uncertainty that persists until entry of a final judgment from which there is no further appeal.

Shire Development LLC v. Watson Pharmaceuticals Inc. (Fed. Cir. 2017)
Panel: Chief Judge Prost and Circuit Judges Taranto and Hughes
Opinion by Circuit Judge Hughes

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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