“[T]hanks to its prosecution efforts, Immunex has effectively extended to 2029 its right to exclude public use of the etanercept fusion protein via the patents-in-suit.” – Judge Reyna’s Dissent
On July 1, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed a holding of the U.S. District Court for the District of New Jersey in Immunex Corporation, Amgen Manufacturing, Limited, Hoffman-La Roche Inc. v. Sandoz, Inc., Sandoz International GMBH, Sandoz GMBH, holding that Sandoz failed to prove that the asserted claims were invalid for obviousness-type double patenting (ODP), failure to meet the written description requirement, and obviousness for lack of motivation to combine the prior art references. The ruling for now blocks Sandoz from marketing its biosimilar version (Erelzi) of the popular rheumatoid arthritis drug, Enbrel.
Judge Reyna dissented, arguing that certain clauses of the licensing agreement were illusory, thereby rendering the agreement an effective assignment for purposes of ODP.
U.S. Patent Nos. 8,063,182 (‘182 patent) and 8,163,522 (‘522 patent) are directed to the fusion protein etanercept, which is the active ingredient in Immunex’s biologic drug Enbrel® for reducing the symptoms of rheumatoid arthritis. The ‘182 and ‘152 patents claim etanercept and methods of making etanercept, respectively. The applications that matured into the ‘182 and ‘152 patents were filed by Roche. Immunex is Roche’s exclusive licensee and Amgen is Roche’s exclusive sublicensee.
The Accord & Satisfaction Agreement
Following several years of separately researching the tumor necrosis factor (TNF) to determine if targeting TNF could provide any therapeutic benefits, Immunex obtained Food and Drug Administration (FDA) approval of Enbrel® in 1998. Immunex and Roche subsequently entered into a licensing agreement (Immunex-Roche agreement) granting Immunex a license to the applications that led to the ‘182 and ‘522 patents. In 2002, Amgen acquired Immunex and, in 2004, Amgen, Immunex, Roche, and non-party Wyeth entered into an “Accord & Satisfaction” agreement (the agreement) for the purpose of “eliminat[ing] the continuing obligations to pay royalties to Roche” pursuant to the Immunex-Roche agreement. By way of the agreement, Immunex was granted an irrevocable, exclusive license to the patents-in-suit with the sole rights to grant sublicenses, to prosecute the patent applications subject to the agreement, and to obtain an assignment upon request for $50,000. The terms of the agreement also granted Immunex the first right to pursue any potential infringement actions. Roche was required by the terms to cooperate with Immunex with respect to prosecution of the patent application and any infringement actions filed by Immunex. However, the agreement granted Roche a secondary right to sue for infringement if Immunex failed to initiate an action after 180 days of written notification by Roche.
In 2016, Immunex, accompanied by Roche, filed a patent infringement action against Sandoz for infringement of the ‘182 and ‘152 patents. Sandoz did not contest infringement but argued that the patents were invalid for obviousness-type double patenting, lack of written description, and obviousness. The district court held that Sandoz failed to establish that the patents were invalid and entered final judgment in favor of Immunex and Roche. Sandoz appealed to the CAFC.
Obviousness-Type Double Patenting
On appeal, the CAFC initially considered Sandoz’s obviousness-type double patenting arguments, which asserted that the patents-in-suit were obvious in view of several patents filed by Immunex. Sandoz argued that “if a party acquires all substantial rights in a patent application, including the right to control prosecution, then obviousness-type double patenting should apply to prohibit issuance of claims that are not patentably distinct from claims in patents already owned by that party.” In response, Immunex argued that “common ownership-based obviousness-type double patenting only arises when the relevant inventions were owned by the same entity at the time of the invention.” The CAFC rejected Immunex’s “time of invention” test, stating the test was “inconsistent with more recent case law.” Thus, the CAFC agreed with Sandoz that the test for common ownership was consistent with the principles underlying obviousness-type double patenting such as the prevention of unjust extension of patent terms.
The CAFC then turned to the issue of whether the Accord & Satisfaction agreement was “effectively an assignment [that] transferred all substantial rights in the patents-in-suit to Immunex.” Looking only to the substance of the agreement, the CAFC considered the provisions and determined that the “enforcement and alienation rights” of the agreement made it clear that Roche did not transfer all substantial rights to Immunex. In particular, the CAFC noted that Roche’s retention of the secondary right to sue was inconsistent with a conclusion that rights to the patents-in-suit were effectively assigned to Immunex.
The Court also considered Sandoz’s argument that Roche’s secondary right to sue was “illusory” because Immunex can “undercut Roche’s ability to sue by granting a royalty-free sublicense to an alleged infringer.” Sandoz cited Speedplay, Inc. v. Bebop, Inc. for the proposition “that the licensor’s retained right to sue was illusory because the licensee could render that right nugatory by granting the alleged infringer a royalty-free sublicense.” The CAFC distinguished Speedplay by explaining that Speedplay was specifically directed to instances where a “licensee’s right to grant royalty-free sublicenses to defendants sued by the licensor [were] rendered illusory the licensor’s right to sue.” The CAFC noted that the agreement provided that, once Roche’s secondary right to sue was activated, Immunex loses its right to rectify any infringement; therefore, Immunex would not be able to grant a sublicense to defendants sued by Roche. Thus, the CAFC concluded that Roche’s secondary right to sue was not illusory.
The majority also rejected Sandoz’s argument that Immunex’s right to convert the license into an assignment upon payment of $50,000 equated to a transfer of all substantial rights. Explaining that the agreement made it “clear that the purpose of the agreement was ‘to eliminate the continuing obligations to pay royalties to Roche’”, the CAFC concluded that Roche did not transfer all substantial rights in the patents-in-suit to Immunex and obviousness-type double patenting did not apply.
Written Description and Obviousness
The CAFC considered and rejected both of Roche’s written description and obviousness arguments. The CAFC noted that the district court did not err by “ looking outside the four corners of the specification or engag[ing] in an ‘obviousness-based’ written description analysis” in considering how a person of ordinary skill in the art would interpret the written description. Thus, the court concluded that the district court’s analysis of the written description was not in error.
In response to Sandoz’s argument that the district court improperly relied on the therapeutic effects of the claimed protein to establish that there was no motivation to combine the claimed components, the CAFC noted that Sandoz similarly relied on the therapeutic benefits of the claimed invention in making its motivation to combine argument before the district court. Thus, the CAFC found no error in the district court’s conclusion that a skilled artisan would be dissuaded from making the claimed combination. Similarly, the CAFC found no error in the district court’s finding that there was a sufficient nexus between the claimed invention and the objective indicia of non-obviousness. The CAFC affirmed the district court’s conclusion that the patents-in-suit were not invalid.
Judge Reyna’s Dissent
Circuit Judge Reyna wrote a nine-page dissenting opinion in which he explained that the agreement was an effective assignment of the patents-in- suit to Immunex. Reyna noted that he would have held that Immunex was a common owner for ODP purposes and Immunex’s patents-in-suit were invalid for ODP in view of one of Immunex’s previously issued patents.
Reyna commended the majority for adopting the “all substantial rights” test for determining common ownership for OPD purposes, but noted that “the majority’s adoption of that test was for naught” because the majority incorrectly determined that the agreement did not transfer all substantial rights to Immunex. Reyna pointed out that the transfer of the sole right to control prosecution to Immunex was significant because, once Immunex gained control of the prosecution, it amended the applications to claim etanercept, which was already claimed in Immunex’s other patents. Thus, according to Reyna:
[T]hanks to its prosecution efforts, Immunex has effectively extended to 2029 its right to exclude public use of the etanercept fusion protein via the patents-in-suit (which Immunex effectively owns in all material respects). Given this backdrop, I would hold that Immunex effectively owns the patents-in-suit for ODP purposes.
Reyna also explained that the rights retained by Roche, including the secondary right to sue, are illusory because “they do not prevent Immunex from enjoying the patents-in-suit in any meaningful way.” Specifically, Reyna noted that Immunex’s right to an assignment upon payment of $50,000 can undo Roche’s secondary right to sue or decision to veto an assignment. Reyna also noted that, during negotiations, Roche offered Immunex an assignment from the start, but Immunex insisted on including the $50,000 clause in the agreement. Further, according to Reyna, “it is unreasonable to conclude that $50,000 represents a meaningful hinderance to Immunex’s effective ownership over the patents-in-suit” considering that “Immunex paid approximately $45 million dollars for its alleged ‘license.’”
Additionally, Reyna said that there was a second reason that Roche’s secondary right to sue was illusory, i.e. “Roche’s ‘right’ to commence a civil action for infringement is subject to Immunex’s approval.” In particular, Reyna explained that the agreement specifies that Roche must notify Immunex of any infringement in a written request and Immunex has the right to nullify Roche’s secondary right to sue by issuing a royalty-free sublicense to the alleged infringer; thus, the “sleight of hand …is that Immunex retains full control over whether Roche can initiate suit.”
In response to the majority’s reasoning for distinguishing Speedplay, Reyna explained “that the Speedplay licensee could issue a sublicense post-suit does not render Roche’s secondary right to sue any less illusory.” Noting that the agreement provides that Immunex the right to issue a royalty-free sublicense within 180 days of receiving Roche’s written request to correct infringement, Reyna explained that if Roche were to activate it’s secondary right sue, it is only because Immunex allowed it to do so.
Reyna also commented on the second prong of the OPD inquiry, i.e. whether the patents-in-suit are patentably indistinct from Immunex’s previously issued patent, by noting that the district court improperly determined that the doctrine of OPD does not apply because the patents-in-suit were patentable distinct from Immunex’s prior patent under the “two-way” test, rather than the “one-way” test. Reyna noted that the “case law is clear that if the applicant’s ‘actions, or inactions, had a direct effect on the prosecution,’ the PTO is not ‘solely responsible for the delay, and, thus, the ‘two-way test…does not apply.’” Reyna reasoned that the one-way test should have applied because both Roche and Immunex contributed to the delay in prosecution by requesting for extension and in delaying to file the etanercept claims. Noting that there was “no serious dispute that under the one-way test—which asks whether the asserted patent claim is obvious over or anticipated by the earlier-issued patent claim”, Reyna concluded that Immunex’s patents-in-suit were invalid for ODP in view of Immunex’s earlier patent.
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