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Fish Federal Circuit Summary Service: Issue # 296

May 1, 2007

Fish Federal Circuit Summary Service: Issue # 296

May 1, 2007

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District Court Erred in Finding No Declaratory Judgment Jurisdiction
Sony Electronics, Inc. v. Guardian Media Technologies, Ltd.
Date: Aug. 3, 2007
Panel: Newman, Friedman, Prost
Author: Prost
District court: S.D. Cal.
Trial judge: Brewster
Summary: The Fed Cir vacates district court’s dismissal for lack of subject matter jurisdiction. Guardian had extensive licensing discussions with several companies that all filed declaratory judgment suits around the same time, but Guardian never explicitly threatened to sue any of them. The Fed Cir faulted the district court for focusing on the lack of a threat (explicit or implicit), given the change in the law from MedImmune v. Genentech, 127 S.Ct. 764 (2007). It did not matter that Guardian was always willing to enter a business resolution. The district court also erred in using its discretion to deny jurisdiction, because: (1) its conclusion that this was a “close case” was based on an error of law, and (2) there was no evidence to suggest that the simultaneously filed suits were designed to provide improper leverage (the district court had felt otherwise).

Apart from providing new factual scenarios, this case does not seem to say anything that has not already been said in other post-Medimmune decisions.


DJ Jurisdiction Now Tested Under an “All the Circumstances” Approach
Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp.
Date: Mar. 30, 2007
Panel: Mayer, Freidman (concur), Gajarsa
Author: Gajarsa
District court: D.N.J.
Trial judge: Linares
Summary: Fed Cir reverses dismissal of declaratory judgment action. Novartis had five patents in the Orange Book, Teva filed a paragraph IV certification on all the patents, and Novartis sued Teva on only one. This gave Novartis the full protections of the Hatch-Waxman Act, while still allowing it to hedge its bets on the other patents and hold those over Teva’s head even if Novartis lost the main trial. The Fed Cir did not like this and said Teva should have the opportunity to clear the air. The Fed Cir analyzed Medimmune and announced that it would be applying an “all the circumstances” standard to find an injury-in-fact for declaratory judgment jurisdiction (rather than its old two-part test), and it pointed to this evidence: (1) Novartis said the patents may be infringed by listing them in the Orange Book; (2) Teva’s paragraph IV certificate claimed that it did not infringe (and was itself an artificial act of infringement); (3) the combination of the “civil action to obtain patent certainty” provision of 21 USC 355(j)(5)(C), the ANDA DJ provision, and the purpose of the Hatch-Waxman Act, which are all aimed at clearing up patent disputes between the parties so cheap drugs can get on the market; (4) Novartis’ suit on the first patent has placed Teva’s ANDA (which covers all five patents) into question; (5) the possibility of future litigation because of Novartis’ strategy.

Judge Friedman concurred because he felt the majority said too much — he would simply have noted that footnote 11 in Medimmune plainly wipes out the twp-step test, and that the various facts in the case plainly show a live controversy.

Note: In referring to Teva’s ANDA filing, the Fed Cir noted: “It logically follows that if such an action creates a judiciable controversy for one party, the same action should create a justiciable declaratory judgment controversy for the opposing party.” By this logic, any infringer should be able to file a DJ suit because it is subject to suit. Perhaps the difference is that infringement is not as certain in the run-of-the-mill case as it is in an ANDA. So how about this tactic? A company sees a problematic but arguably invalid patent, forms an infringing prototype that is different in material ways from the product it ultimately wants to market, uses and/or sells the prototype (in a medium volume), admits infringement in a letter to the patentee and asks the patentee to admit the patent is invalid, and then files a DJ when the patentee refuses. Because infringement is admitted, it seems such a situation could be argued to differ little from this case.


Terminally Disclaimed Patent May Still Receive Hatch-Waxman Term Extension
Merck & Co. v. Hi-Tech Pharmacal Co.
Date: Mar. 29, 2007
Panel: Linn, Friedman, Plager
Author: Linn
District court: D.N.J.
Trial judge: Cooper
Summary: Fed Cir affirms judgment on the pleadings that Merck’s patent was still in effect (despite a terminal disclaimer that would have had it expire several years ago), because Hatch-Waxman term extension makes it expire next year. The Fed Cir reasoned that a terminal disclaimer does not trump a term extension because the extension does not affect the base expiration date for the patent (which is the date to which the terminal disclaimer points) so the extension does not interfere with the disclaimer, and (1) the text of 35 USC 156 plainly states that term “shall be extended” if certain prerequisites are met; (2) the legislative history is to the same effect, and (3) the statute includes exceptions for PTO delays but says nothing about terminal disclaimers.


Relying on S Ct’s MedImmune opinion, Fed Cir Abolishes “Reasonable Apprehension” Declaratory Judgment Test
SanDisk Corp. v STMicroelectronics, Inc.
Date: Mar. 26, 2007
Panel: Bryson (concurring in result), Linn, Dyk
Author: Linn
District court: N.D. Cal.
Trial judge: Fogel
Summary: Fed Cir vacates dismissal of SanDisk’s declaratory judgment action. DJ Jurisdiction: To determine whether there was an actual “case or controversy” under the Declaratory Judgment Act, the Fed Cir reviewed and discussed the recent Supreme Court decision in MedImmune v Genentech, 127 S.Ct. 764 (2007), noting that footnote 11 of MedImmune disapproved of the Fed Cir’s current two-part test for declaratory judgment (DJ) jurisdiction and concluding that “[t]he Supreme Court’s opinion in MedImmune represents a rejection of our reasonable apprehension of suit test.” Slip op. at 13. While acknowledging that MedImmune addressed DJ jurisdiction in the context of a signed license, the Fed Cir extended the high court’s reasoning to “conduct prior to the existence of a license,” explaining that:

In the context of conduct prior to the existence of a license, declaratory judgment jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee. But Article III jurisdiction may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do. We need not define the outer boundaries of declaratory judgment jurisdiction, which will depend on the application of the principles of declaratory judgment jurisdiction to the facts and circumstances of each case. We hold only that where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights. In this particular case, SanDisk established the requisite Article III case or controversy because “ST sought a right to a royalty under its patents based on specific, identified activity by SanDisk,” including: (i) ST’s presentation of a thorough, element-by-element infringement analysis by “seasoned litigation experts” as part of “license negotiations;” (ii) ST’s liberal discussion of SanDisk’s “present, ongoing infringement of ST’s patents and the need for SanDisk to license those patents” during the negotiations; (iii) exchange of materials containing copies of patents, reverse engineering reports, and infringement analysis diagrams; (iv) STs communication it had the right to a royalty; and (v) SanDisk’s insistence it could proceed without paying royalties.

Promise not to sue: The Fed Cir “decline[d] to hold that Jorgenson [ST’s Licensing VP]’s statement that ST would not sue SanDisk eliminates the justiciable controversy created by ST’s actions, because ST has engaged in a course of conduct that shows a preparedness and willingness to enforce its patent rights despite Jorgenson’s statement.” Id. at 18. Because ST has made infringement allegations along with specific acts, “ST’s statement that it does not intend to sue does not moot the actual controversy created by its acts.” Id.

District court’s discretion: As a separate ground for dismissal, the district court indicated in a footnote that it would have declined to exercise DJ jurisdiction in this case. The Fed Cir noted that “there are boundaries to that discretion” and that “the exercise of discretion must be supported by a sound basis for refusing to adjudicate an actual controversy.” Id. at 19. Because the district court’s footnote statement was made in the context of the now-obsolete “reasonable apprehension” precedent and failed to provide grounds for refusing jurisdiction, the Fed Cir vacated and remanded the case.In his concurrence, Judge Bryson agreed that MedImmune undermined the “reasonable apprehension” test, but disagreed with the majority’s broad decision and its examination of the facts surrounding the parties’ negotiations. Noting that the facts here do not involve any unusual circumstances from normal licensing discussions, Judge Bryson warned that “it would appear that under the court’s standard virtually any invitation to take a paid license relating to the prospective licensee’s activities would give rise to an Article III case or controversy if the prospective licensee elects to assert that its conduct does not fall within the scope of the patent.”

Note: In footnote 1 of the majority’s opinion, the Fed Cir indicated that “[t]o avoid the risk of a declaratory judgment action, ST could have sought SanDisk’s agreement to the terms of a suitable confidentiality agreement… [but instead, only] sought to condition its open licensing discussions and the infringement study on adherence to Federal Rule of Evidence 408.” Slip op. at 4. According to the majority, Rule 408 is insufficient to prevent use of negotiation communications as basis for DJ jurisdiction.


Broad Claim Not Enabled If Specification Only Discloses One Preferred Embodiment While “Teaching Away” From Using/Making Other Embodiments
Liebel-Flarsheim Co. v. Medrad, Inc.
Date: Mar. 26, 2007
Panel: Lourie, Rader, Bryson
Author: Lourie
District court: S.D. Ohio
Trial judge: Bechwith
Summary: Fed Cir affirms summary judgment of invalidity, dismisses cross-appeal on infringement and inventorship, and affirms ruling that inequitable conduct counterclaim is moot. In a previous appeal, Liebel convinced the Fed Cir to construe patents-in-suit related to fluid injector with a replaceable syringe as covering embodiments with a pressure jacket and embodiments without such jacket.

Enablement: Applying this claim construction, the Fed Cir agreed with the district court in this appeal that there was no enablement because: (i) the specification never discloses any embodiment without a pressure jacket; (ii) the specification “teaches away” from the use of such jacket-less embodiments as “impractical,” which is an important fact because “where the specification teaches against a purported aspect of an invention, such a teaching “is itself evidence that at least a significant amount of experimentation would have been necessary to practice the claimed invention;” slip op. at 12; and (iii) the inventors admitted they were unable to produce a jacket-less system and failed to pursue such system because it was “too risky.” The Fed Cir then rejected the argument that the disclosure of several embodiments within the properly construed claim excuses the enablement of the full claimed scope, because while “the specification need not necessarily describe how to make and use every embodiment of the invention” where the skilled artisan can fill the missing gaps, the disclosure in this case “does not permit one skilled in the art to make and use the invention as broadly as it was claimed, including without a pressure jacket.” Id. at 14-15. In reaching this conclusion, the court relied on AK Steel where, as in this case, the patentee had a broad claim covering two embodiments but only disclosed one and taught away from using the other.

Anticipation: The Fed Cir agreed with district court that the anticipatory reference, as supplemented by another patent expressly incorporated by reference, discloses every limitation of the claimed invention. That the reference does not disclose certain parameters or properties of the syringe is irrelevant where these requirements were not part of the claims as construed.

Cross-appeal: Fed Cir declined to reach cross-appeal regarding infringement and inventorship, “the latter actually being an alternative ground for a holding of invalidity, not a proper basis for a cross-appeal.” Inequitable conduct: Because defendant admitted that counterclaim of inequitable conduct was not relevant at this time and there is no pending motion for attorney fees, the Fed Cir agreed that counterclaim was moot.


Fed Cir Reverses Finding of Nonobviousness By Delving Into the Facts
Pfizer, Inc. v. Apotex, Inc.
Date: Mar. 22, 2007
Panel: Michel, Mayer, Linn
Author: Michel
District court: N.D.Ill.
Trial judge: Rosenbaum
Summary: Fed Cir reverses judgment (bench trial) that Pfizer’s Norvasc was not invalid. The patent covers the besylate salt of amlodipine — the question appears to be whether a skilled artisan would have appreciated that besylate, from among many other options, would have formed a salt (which is desirable) and would have certain practical benefits such as non-stickiness. This is a very long opinion in which the Fed Cir takes pains to point out that it is not finding facts.

Procedure: The district court erred in finding a prima facie case of obviousness based solely on the fact that the examiner had initially rejected the claims during prosecution — courts are not bound by an examiner, and the burden of persuasion (which remains on the challenger at all times) takes care of the issue. The error was harmless, however.

Motivation to Combine: The Fed Cir (1) rejected Pfizer’s argument about the motivation not appearing in the main piece of prior art because the motivation can come from elsewhere; (2) credited unrebutted “compelling” expert testimony that a POSITA would have been motivated toward the claims because of problems in the prior art; (3) rejected the concept that bensylate would not have been selected because it was rarely used in drug formulations, because a POSITA would have looked at a smaller group of potential solutions and would have known about positive characteristics of besylate (and every salt other than hydrochloride is rare), and because it did not matter that the prior art references were not directed to the same diseases as the claims-in-suit because the besylate was used for manufacturability, and not as an active ingredient.

Reasonable Expectation of Success: The district court erred by looking at unpredictability alone, when unpredictability does not block an obviousness finding as long as there is a reasonable expectation of success (otherwise, every new idea would be patentable in an unpredictable art). On the merits, the evidence showed that an inventor quickly compiled a short-list of possible anions, the main prior art patent indicated that substitutions would work, and Pfizer’s supplemental NDA filing was to the same effect.

Obvious to Try: The Fed Cir felt uncomfortable on this point, emphasizing that each case is decided on its own narrow facts. On the facts, only one parameter was being tweaked by the inventors, the prior art did not merely instruct to pursue a general approach, and the trial-and-error procedures here related more to verifying the properties of each salt than to discovering a new compound — i.e., this case was like earlier cases involving the optimization of a range.

Objective Indicia: Pfizer’s switch to the new formulation was not relevant because there was no evidence that Pfizer planned to abandon amlodipine or was going to lose significant time and investment dollars. [I don’t understand this point.] The superior qualities of the claimed drug were either minimal overall, minimal when compared to the closest prior art rather than to other distant prior art, and not relevant because the benefits must be unexpected to be evidence of non-obviousness [this point seems wrong], and the qualities were at best adequate rather than superior. Even if they were superior, that alone would not overcome the evidence of obviousness.

Judge Linn concurred in the result without opinion.


The opinions expressed are those of the authors on the date noted above and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes only and is not intended to be and should not be taken as legal advice. No attorney-client relationship is formed.