Before I finally waded through the 135-page monstrosity called the en banc decision in CLS Bank International v. Alice Corp. (seven opinions, one a brief per curiam opinion, and six full opinions, including Chief Judge Rader at the end “waxing lyrically” about the “good old days” when he first joined the Federal Circuit), out came last Friday the remand decision in Ultramercial, LLC v. Hulu, LLC (Ultramercial II). I’ve already observed that Rader had “thrown down the gauntlet” at his Federal Circuit colleagues in Ultramercial I by stating that “breadth and lack of specificity does not render the claimed subject matter impermissibly abstract.” See Throwing Down the Gauntlet: Rader Rules in Utramercial that Breadth and Lack Specificity Does Not Make Claimed Method Impermissibly Abstract*. In Ultramercial II, Rader (again joined by Judge O’Malley but not completely by Judge Lourie) has squarely “thrown down the gauntlet” again, now before the Supreme Court to either clarify their “fuzzy” Bilski ruling, or “get out of the way” and let the Federal Circuit do the job it was created by Congress to do in 1982, namely be the primary arbiter of patent law jurisprudence, including patent eligibility under 35 U.S.C. § 101.
In Ultramercial I and II, the patentee (Ultramercial) asserted that U.S. Pat. No. 7,346,545 (the ‘545 patent) was infringed by Hulu, LLC (“Hulu”), YouTube, LLC (“YouTube”), and WildTangent, Inc. (“WildTangent”). The ‘545 patent relates to a method for distributing copyrighted products (e.g., songs, movies, books, etc.) over the Internet for free in exchange for viewing an advertisement with the advertiser paying for the copyrighted content. WildTangent’s motion to dismiss for failure to state a claim was granted by the district court based on the claimed method being patent-ineligible under 35 U.S.C. § 101. (Hulu and YouTube were dismissed from the case apparently for other reasons.)
Chief Justice Roberts and Justice Kagan, August 7, 2010. Justice Kagan delivered the opinion for a unanimous Court in Monsanto v. Bowman.
In the case of Bowman v. Monsanto Co., Farmer Bowman may have believed that the “third time” would be “charm.” In two prior cases, Monsanto Co. v. Scruggs and Monsanto Co. v. McFarling, the Federal Circuit had ruled in favor of Monsanto, the owner of the patented Roundup Ready® soybeans, and against Farmer Scruggs and Farmer McFarling. Even so, Farmer Bowman, as probably did his legal counsel, may have believed that the Supreme Court’s 2008 decision in Quanta Computer, Inc. v. LG Electronics, Inc. would undermine the Federal Circuit’s view that patent exhaustion didn’t apply to Monsanto’s patented Roundup Ready® soybeans. But in a unanimous decision, the Supreme Court affirmed the Federal Circuit’s 2011 ruling that Farmer Bowman’s unlicensed planting of these patented Roundup Ready® soybeans (sold for commodity use only) was an infringing use that was not subject to the doctrine of patent exhaustion. Alas, Farmer Bowman found no solace in Quanta.
To understand the ruling in Bowman, you must first understand Monsanto’s patented Roundup Ready® soybean technology, its Technology Agreement with purchaser’s of those soybeans delineating the licensed use thereof, as well as the fairly complex fact situation of Farmer Bowman’s use (or more appropriately wily misuse) of the “commodity” soybeans he purchased from a local grain elevator and subsequently planted for the express purpose of harvesting the resulting seed. Monsanto’s patented technology involved genetically modified soybeans that exhibited resistance to N-phosphonomethylglycine-based herbicides (commonly known as “glyphosate” or “glyphos”), such as Monsanto’s Roundup® herbicide product. These genetically modified soybeans were known as Roundup Ready® soybeans because of their resistance to such herbicides.
In my first installment on Paragraph IV Certifications under Hatch-Waxman, I explored the basics of this “beast.” See A Primer on Paragraph IV Certifications: Into the Belly of the Hatch-Waxman Beast Part 1. In my second installment on Paragraph IV Certifications under Hatch-Waxman, I discussed one of the more litigated “trouble spots” for Paragraph IV Certifications, namely the “carve out” cases. See Carve Outs: Into The Belly of the Hatch-Waxman Beast Part 2. In my third and final installment, I’ll focus on probably the most contentious “trouble spot,” namely Hatch-Waxman “reverse payment” cases, now before the Supreme Court in FTC v. Watson Pharmaceuticals(renamed as FTC v. Actavis, Inc.) for which oral argument was recently heard. So let’s strap on our safety belts one last time, and dive back into the “belly” of this Hatch-Waxman “beast” to look at “reverse payment” cases.
“Reverse payment” cases are an outgrowth of a key feature I noted in my first article on the basics of Paragraph IV Certifications: the filing of an Abbreviated New Drug Application (ANDA) by the generic drug maker with a Paragraph IV Certification is treated as a technical act of patent infringement. After receiving notice of the Paragraph IV Certification, the patent owner/NDA holder has 45 days to bring suit, otherwise the FDA can move forward on approving the ANDA. Conversely, if the patent owner/NDA holder does bring an infringement suit within the prescribed 45 day period, the FDA cannot approve that ANDA for 30 months, unless the patent(s) that are the subject of the Paragraph IV Certification are earlier deemed invalid or not infringed in that suit.
In my first installment on Paragraph IV Certifications under Hatch-Waxman, I explored the basics of this “beast.” See A Primer on Paragraph IV Certifications: Into the Belly of the Hatch-Waxman Beast Part 1 . And as promised, in this second installment, I’ll now focus on one of the more litigated “trouble spots” for Paragraph IV Certifications, namely the “carve out” cases. (In my third and final installment, I’ll talk about the other “trouble spot,” namely Hatch-Waxman “reverse payment” cases, which is now before the Supreme Court in the 11th Circuit case of FTC v. Watson Pharmaceuticals, renamed as FTC v. Actavis, and for which oral argument was recently heard.) So strap on your safety belts again, and let’s dive back into the “belly” of Hatch-Waxman Paragraph IV Certification “beast” to look at “carve outs.”
“Carve outs” essentially involve a situation where there is an FDA approved drug for which the generic drug maker seeks to market that drug, again through an Abbreviated New Drug Application (ANDA), but instead for an FDA approved use, where also that FDA approved use is unpatented. While these “carve outs” also involve the filing of a Paragraph IV Certification, there is a slight but important twist in that Certification: inclusion of what is called a “section viii statement” that the generic drug maker “is not seeking approval for a method of use that is claimed in the patent.” When submitting the “section viii statement,” the generic drug maker must also provide a proposed label that removes or “carves out” the claimed method of use. The FDA will then approve this “carve out” statement only if: (1) there is no overlap between the proposed label submitted by the generic drug maker and a use described in the Orange Book; and (2) removing the information about the claimed method of use from the label doesn’t render the drug less safe or effective.
In a moment of extreme weakness, I agreed to Gene’s request to doing a primer on Paragraph IV Certifications under the Drug Price Competition and Patent Term Restoration Act, commonly referred to as Hatch-Waxman. I don’t know if you would call me an expert, but I’ve studied many, many cases involving Paragraph IV Certifications under Hatch-Waxman. The courts have found Hatch-Waxman to be a hydra-like monster with a labyrinth of sections that are frequently confusing (or worse yet, conflicting). Paragraph IV Certifications are a particular trouble spot in Hatch-Waxman. So if you’re up to diving into the “belly of this beast,” let’s examine the characteristics of this most infamous of the Hatch-Waxman monsters.
To understand Paragraph IV Certifications, you must first address what an Abbreviated New Drug Application (ANDA) is. ANDAs are how generic drug manufactures expedite the approval of their generic drugs. To use the language of the Federal Circuit, “[g]eneric drug companies are not required to conduct their own independent clinical trials to prove safety and efficacy, but can instead rely on the research of the pioneer pharmaceutical companies.” See the 2008 Federal Circuit case of Janssen Pharmaceutica, N.V. v. Apotex, Inc. which provides an excellent explanation of what the ANDA and Paragraph IV certification process is all about. Instead, in the ANDA process, the generic drug company may rely upon this clinical safety and efficacy of the “pioneer pharmaceutical company” if it can “show show bioequivalence of its generic drug to the NDA drug.” “Bioequivalence” is defined by the FDA as “the absence of a significant difference in the rate and extent to which the active ingredient or active moiety in pharmaceutical equivalents or pharmaceutical alternatives becomes available at the site of drug action when administered at the same molar dose under similar conditions in an appropriately designed study.” I’ll get to where those “pioneer pharmaceutical companies” and “NDA drugs” enter the ANDA approval process next.
EDITORIAL NOTE: The decisiondenying Apple’s permanent injunctionwas recently followed by theCAFC decision in Presidiothat tilts the pendulum back toward the awarding of permanent injunctions when competitors are involved. Eric Guttag and I have communicated via e-mail about permanent injunctions. Guttag wrote the following article in 2006. I asked if I could republish it here and he agreed. Here is Guttag’s take on eBay v. MerchExchange.
Justice Clarence Thomas delivered the opinion of a unanimous Supreme Court in eBay v. MerchExchange in 2006.
Once upon a time, the view was that “methods of doing business” could not be patented. That view changed forever with the 1998 case of State Street Bank & Trust Company v. Signature Financial Group Inc. [i] In State Street, the Court of Appeals for the Federal Circuit (Federal Circuit) held there was no “business method” exception to patentability: “Whether the [patent] claims are directed to subject matter within § 101 [ii] should not turn on whether the claimed subject matter does “business” instead of something else. [iii]
In certain quarters, the grant of patents on “business methods” has been increasingly viewed with alarm and concern. One concern is that the holder of such patents could permanently enjoin such infringement, thus potentially increasing the bargaining position of the “business method” patent holder. That concern is very real. For example, in the “non-business method” patent context, the Federal Circuit held in the 1989 case of Richardson v. Suzuki Motor Company that, in view of the recognized “right to exclude” under the patent, “the general rule [is] that an injunction will issue when infringement has been adjudged, absent a sound reason for denying it.” [iv]
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