Trial courts tend to get more than the benefit of the doubt when their decisions are viewed under the "abuse of discretion" standard, and juries similarly are affirmed unless there isn't substantial evidence supporting their verdicts. Both these rubrics, which extend more generally to cases involving disputes outside patent law, were used by the Federal Circuit to affirm both the finding of infringement and a hefty ($89,712,069) damages calculation in Vectura Ltd. v. GlaxoSmithKline LLC.
The case arose involving Vectura's patented components for pulmonary administration for dry-powder inhalers, the components claimed in U.S. Patent No. 8,303,991. Vectura asserted Claim 3, dependent on independent claim 1 as further limited to magnesium stearate as the "additive material" against GSK in the litigation:
1. 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.
(wherein the District Court's construction of the italicized limitations was at issue on appeal).
Vectura asserted this claim against three GSK accused infringing articles:
• Breo, which comprises two blisters, one containing a mixture of vilanterol, lactose, and magnesium stearate and the second containing a mixture of fluticasone and lactose, but not magnesium stearate.
• Anoro, which comprises two blisters, one containing a mixture of vilanterol, lactose, and magnesium stearate and the second containing a mixture of umeclidinium, lactose, and magnesium stearate.
• Incruse, which comprises only one blister, containing a mixture of umeclidinium, lactose, and magnesium stearate.
GSK's method of preparing its accused infringing articles was relevant to Vectura's infringement accusations:
GSK first mixes the lactose excipient with magnesium stearate in the absence of the active ingredient. That step yields lactose particles that are discontinuously coated with magnesium stearate. After a de-lumping step, GSK then mixes the lactose particles with the active ingredient. In that step, small particles of the active ingredient are deposited onto the larger lactose particles, which are already coated with small particles of magnesium stearate.
The District Court construed two terms of Claim 3:
[T]he court construed the phrase "promotes the dispersion of the composite active particles" (the dispersion limitation) to mean "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.
The court construed the term "composite active particles." GSK's proposed construction of that term included a process limitation requiring that the composite active particles be "formed by milling . . . using sufficient energy and duration to ensure sufficient break-up of agglomerates of both constituents, dispersal, and even distribution of additive over the active particles." The district court rejected GSK's proposed construction, holding that the term "composite active particles" does not include a process limitation. The court construed the term to mean "[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."
The District Court found a "distinction without a difference" under this claim construction of GSK's process of mixing the active ingredient with magnesium stearate in the presence of lactose instead of in its absence. The jury found that this claim was infringed and not invalid, and GSK appealed the District Court's denial of motions for judgment as a matter of law on infringement and damages. This appeal followed (and did not involve the District Court's judgment that the claims were not invalid).
The Federal Circuit affirmed, in an opinion by Judge Bryson, joined by Chief Judge Prost and Judge Wallach. GSK raised four issues on appeal:
• First, that the district court should have granted JMOL on infringement because "Vectura failed to present substantial evidence that the accused inhalers use additive material that "promotes the dispersion" of the active material," or in the alternative granted GSK a new trial.
• Second, that the district court should have granted JMOL on claim construction, wherein "the district court's construction of the term "composite active particles" was erroneous, requiring a new trial on infringement."
• Third, for a new trial on damages because of flaws in Vectura's expert's calculations.
• Finally, for a new trial on damages due to prejudicial arguments made to the jury regarding GSK sales made by Vectura's damages expert and counsel.
The Federal Circuit opinion set forth for the reader's convenience the standards of its review: substantial evidence for jury verdicts, citing Personalized User Model, LLP v. Google Inc., 797 F.3d 1341, 1345 (Fed. Cir. 2015); and abuse of discretion for its new trial motion, citing Union Carbide Chems. & Plastics Tech. Corp. v. Shell Oil Co., 308 F.3d 1167, 1182 (Fed. Cir. 2002).
GSK argued that under the District Court's construction it was not disputed between the parties that Vectura had the burden to show "the use of magnesium stearate in the accused inhalers improves the dispersion of the active ingredient compared to identical products in which only the lactose excipient is coated with magnesium stearate." GSK argued the District Court erred in denying its motion for JMOL on this issue because in its view the jury based its decision that Vectura had satisfied its burden on an allegedly flawed scientific test. The asserted flaws had to do with whether the lactose alone was covered with magnesium stearate vs. coating the drug-containing particles and the lactose (wherein the latter composition was dispersed better in the lungs). The Federal Circuit found GSK's argument was deficient because this test was not the only basis for the jury's determination. The District Court found in denying JMOL that Vectura relied on aspects other than the flawed study and that there was "ample other evidence" the jury could have relied upon other than the putatively flawed study. This included evidence that a magnesium stearate coating "helps overcome the tendency of the particles to stick together and therefore increases the dispersion of the particles in the lungs" and test results wherein GSK's accused infringing products showed the particles "were consistently associated with magnesium stearate." The District Court also held that the jury was entitled to rely on GSK documentary evidence regarding satisfaction of the dispersal limitation in Claim 3. Thus, according to the panel, the totality of the evidence developed below was sufficient to satisfy the substantial evidence standard for affirming the jury's verdict of infringement.
GSK's second argument on appeal was that proper construction of the claim limitation "composite active particles" required that these particles be produced by a "high-energy milling" process (which GSK argued does not describe their process). According to GSK, the '991 specification discloses high-energy milling, and disclosure of this process was used during prosecution of the '991 patent to overcome a prior art reference. Thus, according to GSK, a correct construction of the "composite active particles" requires the particles (and drugs made from those particles) to be made using a "high-energy milling" process.
On the merits, the Federal Circuit considered "this case [to] fall between two prior cases from this court: 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)." In the Continental Circuits case, the Federal Circuit had refused to import a process limitation into an apparatus claim, whereas in the Anderson case, the Court had construed an apparatus claim to encompass a process limitation. From these cases the panel enunciated a standard, wherein "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." As a practical matter, the opinion states this standard another way, saying the Court looks to "language of requirement, not preference." Here, from the Federal Circuit's assessment of the '991 patent specification the Court reached the conclusion that the disclosure in the specification was more similar to the circumstance in the Continental Circuits case, where the specification set forth a preference but not a requirement for the process step (citing several instances in the specification supporting this view). And with regard to the prosecution history, the opinion states the Court rejected GSK's argument because the distinction GSK raised to overcome the asserted prior art reference was directed at another aspect of the method for making the claimed composition.
With regard to damages, the Federal Circuit considered the parties' prior licensing history, wherein Vectura had previously granted GSK a nonexclusive license that had expired in 2016. This license had had a "tiered structure" ("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") that Vectura's expert used as a "comparable license" in reaching her damages conclusions. Significantly, however, the expert did not include the cap of no additional royalties after 500 million pounds, based on "changed circumstances." In contrast. GSK's royalty rate was much lower (only 0.0187%).
GSK argued that Vectura's analysis was flawed because it used the "entire market value" approach rather than distinguishing the non-infringing components of the accused infringing articles. The Court considered the damages theories to relate to "a rather unusual circumstance," because the choice is usually between where "an entire-market-value royalty base is appropriate only when the patented feature creates the basis for customer demand or substantially creates the value of the component parts, and apportionment is required when an entire-market-value royalty base is inappropriate," citing Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1326 (Fed. Cir. 2014). Here, however, the Court thought that any such apportionment is contained ("built-in") in the earlier license so re-apportionment was unnecessary. The panel opined that the District Court properly credited Vectura's expert's testimony regarding the comparability of her damages calculations as a reasonable royalty and the terms of the earlier license. And with regard to the lack of a royalty cap, the Court held that "[i]t was . . . permissible for the jury to credit Ms. Schenk's testimony and to award damages without applying a royalty cap."
GSK's other grounds for a new trial based on damages was that Vectura's damages expert and counsel mentioned the total sales of GSK's products and that this was prejudicial. The District Court had found some of these references to be improper but in total that they were not so prejudicial as to warrant a new trial. Asserting that "[o]n the issue of the impact of improper conduct at trial, the views of the judge who supervised the trial proceedings are entitled to considerable weight," Fineman v. Armstrong World Indus., Inc., 980 F.2d 171 (3d Cir. 1992), the Federal Circuit found these disclosures not to be sufficiently prejudicial for it to find the District Court's denial of JMOL to be an abuse of discretion.
Vectura Ltd. v. GlaxoSmithKline LLC (Fed. Cir. 2020)
Panel: Chief Judge Prost and Circuit Judges Bryson and Wallach
Opinion by Circuit Judge Bryson