On November 19, 2020, a unanimous panel of the Court of Appeals for the Federal Circuit (“Federal Circuit”) decided Vectura Ltd. v. GlaxoSmithKline LLC, affirming a $90 million verdict.1 Vectura Ltd. (“Vectura”) sued GlaxoSmithKline LLC and Glaxo Group Ltd. (collectively, “GSK”) in the United States District Court for the District of Delaware, alleging that GSK infringed Vectura’s U.S. Patent No. 8,303,991 (the “’991 patent”).2 The ’991 patent “concerns the production of ‘composite active particles’ for use in pulmonary administration, such as in dry-powdered inhalers.”3 Vectura alleged that GSK infringed the ’991 patent through its sale of its Ellipta-brand inhalers.4 A jury found that the ’991 patent was both valid and infringed by GSK, and that Vectura was entitled to a royalty payment of $89,712,069.5 The district court denied GSK’s post-trial motions for judgment as a matter of law or, in the alternative, a new trial, and remittitur.6 GSK appealed and the Federal Circuit affirmed.7
Vectura offers some insights on well-versed areas of patent law, including claim construction, infringement, and damages. First, Vectura explains the circumstances under which a product or apparatus claim may be limited by a process for making that product or apparatus as disclosed in a patent’s specification. Second, Vectura clarifies that an appropriate method for calculating damages for patent infringement can be the entire market value of a product, when damages are based on a prior license between the parties. Overall, Vectura adds but another thin layer to the longstanding, but ever-evolving, areas of infringement, claim construction, and damages law.
FACTUAL AND PROCEDURAL BACKGROUND
Vectura, a pharmaceutical formulation development company specializing in inhaled medicines, is the assignee of the ’991 patent, which issued on November 6, 2012 and relates to pharmaceutical compositions for inhalation.8 Claim 1 of the ’991 patent recites:
Composite active particles for use in a pharmaceutical composition for pulmonary administration, each composite active particle comprising a particle of active material and particulate additive material on the surface of that particle of active material, wherein the composite active particles have a mass median aerodynamic diameter of not more than 10 μm, and wherein the additive material promotes the dispersion of the composite active particles upon actuation of a delivery device.9
Claim 2 depends from claim 1 and limits the additive material of claim 1 in relevant part to “a metal stearate or derivative thereof.”10 Claim 3 depends from claim 2 and recites:
Composite active particles as claimed in claim 2, wherein the additive material includes magnesium stearate.11
In 2016, Vectura sued GSK alleging, among other things, that GSK’s sale of its Ellipta-brand inhalers, including the Breo, Anoro, and Incruse devices (collectively, the “Infringing Products”), infringed claim 3 of the ’991 patent.12 Each of the Infringing Products “features one or more ‘blisters,’ which are sealed receptacles containing a single active ingredient, an excipient, and, optionally, additive material.”13 The excipient in the Infringing Products is lactose and the additive material is magnesium stearate.14 “As for the active ingredients, the blisters contain one of three drugs—vilanterol, umeclidinium, or fluticasone.”15 As contemplated by the ’991 patent, “[t]he active ingredient produces the desired chemical or biological effect, while the additive particles promote the dispersion and delivery of the active ingredient into the lungs when the inhaler is activated.”16 GSK uses a “multi-step mixing process” to prepare the mixtures containing magnesium stearate, whereas the ’991 patent discloses a “milling process” entailing “milling solid active particles in the presence of solid additive particles with sufficient energy to break down coarse particles into fine particles, resulting in the additive particles smearing over, and fusing onto, the active particles.”17
The district court construed the relevant claim terms as follows18:
|“promotes the dispersion of the composite active particles”
||“wherein a composition that contains one or more composite active particles has increased dispersion of the active material upon activating a delivery device for inhalation into the lungs by a patient, as compared to the same composition wherein unmodified active particles are substituted for the composite active particles”
|“composite active particles”
||“[a] single particulate entit[y/ies] made up of a particle of active material to which one or more particles of additive material are fixed such that the active and additive particles do not separate in the airstream.”
In arriving at its construction, the district court rejected GSK’s argument that the term “composite active particles” includes a process limitation requiring that the composite active particles be produced by the milling process disclosed in the ’991 patent.19 Under the district court’s construction, Vectura prevailed on the issues of validity, infringement, and willful infringement.20 The jury awarded $89,712,069 in damages, reflecting a 3% royalty on a royalty base of $2.99 billion in sales of the Infringing Products.21 The district court denied GSK’s post-trial motions for judgment as a matter of law or, in the alternative, a new trial, and remittitur, and granted Vectura’s motion for supplemental damages, pre- and post-judgment interest, and an ongoing royalty, thus increasing Vectura’s damages award to over $106 million.22
GSK appealed the district court’s decision denying its post-trial motions, raising four issues on appeal. First, GSK argued that Vectura failed to present substantial evidence that the Infringing Products use additive material that “promotes the dispersion” of active material for purposes of establishing infringement.23 Second, GSK challenged the district court’s construction of the term “composite active particles.”24 Third, GSK argued that a new trial on damages was necessary in light of flaws in the methodology used by Vectura’s expert in calculating the royalty.25 Fourth, GSK insisted that it was entitled to a new trial on damages because of prejudicial references to GSK’s sales of the Infringing Products at trial.26
The Federal Circuit began by articulating the relevant legal standards applied in reviewing the district court’s decision. Because the denial of a motion for judgment as a matter of law and a new trial does not raise issues unique to patent law, the Federal Circuit applied the regional circuit’s standard of review, in this case, the Third Circuit.27 “Under Third Circuit law, a district court must grant judgment as a matter of law if a jury’s verdict is not supported by substantial evidence, i.e., if ‘the record is critically deficient of the minimum quantum of evidence from which the jury might reasonably afford relief.’”28 Moreover, a district court should not grant a new trial unless “the jury’s verdict is against the great weight of evidence and either is a miscarriage of justice or cries out to be overturned.”29 Applying these principles, the Court considered each of GSK’s arguments in turn.
A. Infringement: Testing, Expert Testimony, Documentary Evidence, and Testimony of Both Parties’ Fact Witnesses Constituted Substantial Evidence to Support the Jury’s Verdict
Turning to GSK’s first argument—that Vectura failed to present substantial evidence supporting infringement—the Court first noted that “[t]he parties agree that, under the district court’s [claim construction], Vectura needed to prove that the use of magnesium stearate in the [Infringing Products] improves the dispersion of the active ingredient . . . .”30 GSK contended that Vectura failed to meet its burden on this issue because it relied principally on a defective scientific test performed by GSK.31 The Federal Circuit, while noting that the scientific test was “not a perfect model for GSK’s commercial products,” nonetheless held that “the jury could conclude that despite its drawbacks, [the test] generally supported the view that coating the active ingredient with magnesium stearate improves dispersion of the active ingredient.”32 This was so, in part, because the authors of the report on the test concluded that “coating all components with magnesium stearate produced a blend with . . . a high degree of dispersion, and that when the active drug is coated with magnesium stearate, better uniformity has been observed.”33 Moreover, the Court held that “[m]ore fundamentally” and “regardless of any infirmities” in the test, there was an abundance of other evidence supporting the jury’s finding, including testing evidence, testimony from infringement experts, and testimony of employees from both GSK and Vectura, as well as documentary evidence.34 Accordingly, “substantial evidence supported the jury’s implied finding” that the Infringing Products use additive material that “promotes the dispersion” of the active material.35 Vectura highlights the value of providing multiple layers and types of evidence, especially when testing may not be a perfect model.
B. Claim Construction: Process Steps Cannot Be Imported into a Product Claim if Statements by the Patentee Indicate Only a Preference for the Process
The Court next turned to GSK’s argument that the district court erred in construing the term “composite active particles.”36 According to GSK, the district court should have construed that term to require that the composite active particles be produced by the milling process disclosed in the specification of the ’991 patent.37 GSK pointed to statements in the specification of the ’991 patent as well as statements made during the prosecution of the ’991 patent, arguing that the statements showed that the milling process is essential to the claimed composite active particles and that the applicant disclaimed particles made by other processes.38 “Because GSK challenge[d] the district court’s claim construction based only on intrinsic evidence, [the Federal Circuit] applie[d] de novo review.”39
In assessing the merits of GSK’s claim construction arguments, the Court reviewed prior precedent addressing the question of when an apparatus claim includes a process limitation.40 In particular, the Court noted that in Andersen Corp. v. Fiber Composites, LLC, it construed an apparatus claim to include a process limitation, whereas in Continental Circuits LLC v. Intel Corp., it declined to import such a limitation into the apparatus claim.41 “In both cases, [the Federal Circuit] recognized that ‘process steps can be treated as part of the product claim if the patentee has made clear that the process steps are an essential part of the claimed invention.’”42 The Court distinguished the cases in that in Andersen “the specification used ‘language of requirement, not preference,’ when describing the apparatus-producing process,” whereas in Continental Circuits “the specification ‘merely indicate[d] a preference for using’ the apparatus-producing process.”43 The Court held that the specification of the ’991 patent was more akin to that in Continental Circuits than to that in Andersen.44
In arriving at its conclusion, the Court held that “[a]lthough the ’991 patent contains a few statements suggesting that its high-energy milling is required, those statements are outweighed by the numerous statements indicating that high-energy milling is merely a preferred process.”45 Moreover, the Court held that “the fact that the ’991 patent criticizes other methods is not dispositive,” and that statements made during the prosecution of the ’991 patent merely distinguished the prior art “based on the unique structure of the claimed composite particles, not the disclosed milling method.”46 Thus, the milling method disclosed in the specification of the ’991 patent was not an essential part of the claim.47 This case demonstrates the difficulty of importing method limitations from the specification into a formulation claim.
C. Damages: Apportionment May Not Be Required If a Patentee Relies on a Prior License to Establish Damages
The Court next turned to GSK’s argument that Vectura’s damages theory was legally flawed and required a new trial on the issue of damages.48 Vectura’s damages theory was based on a prior license between the parties.49 The prior license “featured a tiered royalty structure in which GSK would pay a royalty of 3% on its first 300 million British pounds in sales, 2% on sales between 300 million and 500 million pounds, and no additional royalties on sales above 500 million pounds.”50 Vectura’s damages expert retained the 3% royalty rate and GSK’s total sales as the royalty base, but declined to apply the royalty cap specified in the prior license, citing changed circumstances.51 GSK argued that it was improper for Vectura to use GSK’s total sales of the Infringing Products because Vectura failed to show that the patented portion of the Infringing Products drove consumer demand, and thus, Vectura needed to apportion the royalty base to account for non-infringing components in the Infringing Products.52
In addressing GSK’s arguments, the Court noted that although “an entire-marketvalue (sic) royalty base is appropriate only when the patented feature creates the basis for customer demand or substantially creates the value of the component parts,” the Court has held that “when a sufficiently comparable license is used as the basis for determining the appropriate royalty, further apportionment may not necessarily be required.”53 This is so because “a damages theory that is dependent on a comparable license (or a comparable negotiation) may in some cases have ‘builtin (sic) apportionment.’”54 Built-in apportionment “effectively assumes that the negotiators of a comparable license settled on a royalty rate and royalty base combination embodying the value of the asserted patent.”55 Accordingly, the Court held that Vectura’s damages theory was not improper. Moreover, the Court held that although certain remarks by Vectura’s counsel at trial were improper, it would not second-guess the district court’s conclusion that those remarks were not so prejudicial as to warrant a new trial.56
The Federal Circuit’s recent decision in Vectura revisits some well-trodden areas of patent law—infringement, claim construction, and damages—and offers some practical considerations for patent applicants and patentees. First, patent applicants seeking to claim a product or apparatus made by a specific process should avoid making statements that indicate the process is an essential component of the apparatus or product, lest that process be construed as an element of the claim. Language of preference for the method, rather than requirement, may prevent a court from finding that an apparatus claim is limited by the disclosed process. Second, when seeking damages based on a prior comparable license, the patentee may not be required to apportion the royalty base to account for non-infringing components of the accused products. The patentee should offer evidence showing that the prior license embodied the value of the asserted patent.
1 Vectura Ltd. v. GlaxoSmithKline LLC, No. 2020-1054, 2020 U.S. App. LEXIS 36393 (Fed. Cir. Nov. 19, 2020), aff’g 397 F.Supp.3d 579 (D. Del. 2019).
2 Id. at *1–2.
3 Id. at *2.
4 Id. at *3.
5 See id. at *6.
6 Id. at *6–7.
7 Id. at *7.
8 See U.S. Patent No. 8,303,991, at , , col. 11 ll. 44¬–47 (issued Nov. 6, 2012).
9 ’991 patent, at cl. 1.
10 Id. at cl. 2.
11 Id. at cl. 3.
12 Vectura, 2020 U.S. App. LEXIS 36393, at *3–4.
13 Id. at *4.
16 Id. at *2.
17 Id. at *2, 4–5.
18 Id. at *5–6.
20 Id. at *6.
22 See id. at *7; Vectura Ltd. v. GlaxoSmithKline LLC, C.A. No. 16-638-RGA, 2019 U.S. Dist. LEXIS 155768, at *1 (D. Del. Sept. 12, 2019).
23 Vectura, 2020 U.S. App. LEXIS 36393, at *7.
25 Id. at *7–8.
26 Id. at *8.
28 Id. (quoting Gomez v. Allegheny Health Servs., Inc., 71 F.3d 1079, 1083 (3d Cir. 1995)).
29 Id. (quoting Leonard v. Steamtech Int’l Inc., 834 F.3d 376, 386 (3d Cir. 2016)).
30 Id. at *8–9.
31 Id. at *9.
32 Id. at *10–11.
33 Id. at *10–11 (internal quotations omitted).
34 Id. at *11–12.
35 Id. at *14.
36 See id. at *14–15.
37 Id. at *15.
39 Id. at *15–16.
40 See id. at *17–21 (analyzing Continental Circuits LLC v. Intel Corp., 915 F.3d 788 (Fed. Cir. 2019) and Andersen Corp. v. Fiber Composites, LLC, 474 F.3d 1361 (Fed. Cir. 2007)).
41 Id. at *17.
44 Id. at *18.
45 Id. (internal citations omitted).
46 Id. (internal citations omitted).
47 Id. at *18–19, *21.
48 Id. at *21.
49 Id. at *22.
52 Id. at *22¬–23.
53 Id. at *23.
54 Id. at *24.
56 Id. at *34–35.