IP Watch: Obviousness on Review

Emerging medical device companies frequently rely on the patentability of their discoveries—however small—as the basis for attracting investors and developing marketable products. But not everyone agrees that patentability should be so readily conferred to incremental advances of the sort that underpin many ‘me-too' medical products. Now, a review being undertaken by the U.S. Supreme Court may greatly diminish the window of patentability available to such products—perhaps with devastating effects on small companies in the medical device industry.

Since the end of June, the intellectual property blogosphere has been buzzing with speculation about the potential impact of the Supreme Court's forthcoming review in the case of KSR International Co. v. Teleflex Inc. on appeal from the Court of Appeals for the Federal Circuit. At issue is the test currently applied to prove the ‘nonobviousness' of a claimed invention, a basic statutory condition for patentability in the United States.

“The vast majority of new medical device products can be characterized as combinations of known elements taken from known medical devices or other fields,” explains Mark D. Barrish, a partner at Townsend and Townsend and Crew LLP (Palo Alto, CA) . “Emerging medical device companies seek patents, funding, and markets for new products that combine existing mechanical, energy delivery, signal processing, and/or therapeutic compound components so as to provide new and improved forms of medical treatment.

“Even the original vascular guidewire coil may have had a structure which was, at least mechanically, basically the same as a clutch cable from a Volkswagen,” says Barrish. “This largely known structure still represented a fundamentally new medical device invention that benefited from patent protection to justify funding for FDA trials and to help launch an entirely new branch of medicine.”

The question before the Supreme Court is “whether the Federal Circuit has erred in holding that a claimed invention cannot be held ‘obvious,' and thus unpatentable under 35 USC 103(a), in the absence of some proven ‘teaching, suggestion, or motivation' that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed.”

The counsel of record for the petitioner, automotive parts manufacturer KSR International, is James W. Dabney, a partner in the New York City office of the law firm of Fried, Frank, Harris, Shriver & Jacobson LLP. Dabney handles a wide variety of litigation matters with an emphasis on patent, trademark, copyright, and related disputes involving intellectual property. Also involved in the firm's case before the Supreme Court is John F. Duffy, professor of law at George Washington University School of Law and of counsel to the Washington, DC, office of Fried Frank.

According to a press release from Fried Frank, the ‘teaching-suggestion-motivation test' is entirely a product of the Federal Circuit that has resulted in “a flood of patents claiming subject matter that comprises no actual advance in technology.” The test has been used since the creation of the Federal Circuit, in 1982, and the Supreme Court has not reviewed the nonobviousness condition since that time.

“In the United States, obviousness issues are primarily determined in two completely different settings: in the patent office, by a technically trained examiner, based on a review of readily obtainable documents and input from the party seeking the patent; and in a federal district court, by a nontechnical judge or jury, based on extensive and adversarial technical and legal input from the parties,” explains Barrish. “The Court of Appeals for the Federal Circuit has sought to make the patent law uniform by imposing objective evidentiary standards for obviousness that can be applied in both settings. But the factual issues and Court of Appeals decision in KSR International Co. v. Teleflex Inc. help show that some modification of the existing obviousness standards may well be appropriate.”

KSR's position is that the Federal Circuit has departed substantially from Supreme Court precedent for construing the nonobviousness condition for patentability, and has “improperly applied an exceptionally low standard of patentability that has no basis in the text of the governing statute (35 USC 103) or applicable Supreme Court precedent,” says the Fried Frankrelease.

“Companies that make genuine technological innovations have no need for an extremely lax standard of patentability,” explains Dabney. “But they are often victimized by self-styled ‘inventors' who seek to appropriate others' technology by patenting trivial adaptations of it.”

“With the growing numbers of patents in the field, both growing and established medical device companies are being confronted by patents covering little more that a minor rearrangement of structures used in the same field years before the patent was ever filed,” agrees Barrish.

According to Tim Malloy, a founding partner and shareholder in the intellectual property law firm of McAndrews, Held & Malloy (Chicago), “The case really boils down to whether you need specific instructions on which dots to connect in order to render a patent invalid for obviousness. It would seem that the Supreme Court thinks that the answer is ‘no.'

“If an invention would have been obvious to those skilled in the technological field, the lack of a literal roadmap showing how to combine two related references should not be necessary to prove the invention obvious,” says Malloy.

However, Barrish cautions that eliminating the Federal Circuit's existing roadmap could have its own risks. “The danger with more subjective and flexible tests is that one person's common sense may turn out to be another person's hindsight reconstructions of an invention,” he says.

Two national reports on the patent system, one authored by the Federal Trade Commission and the other by the National Academies of Sciences, have urged reform of the Federal Circuit's standard. Last May, the Solicitor General of the United States and the U.S. Patent and Trademark Office filed a brief urging the Supreme Court to overturn the Federal Circuit's standard because it “renders patent examination and litigation more costly, it grants patent applicants unjustified rewards for disclosing noninnovative subject matter, and it forecloses competitors from using the public storehouse of knowledge that should be freely available to all.”

“Such a decision would not be the end of the world for patent owners,” says Malloy. “If anything, it should make newly issued patents stronger. And it could go a long way to rid our system of weak patents that never should have issued in the first place.”

“The Supreme Court's decision in KSR is likely to mean fewer, but stronger, patents for innovations in all fields of technology,” agrees Dabney.

Gen-Probe, Bayer Agreement a Bonus for Siemens

At the end of June, Gen-Probe Inc. (San Diego) announced that it had reached agreement with Bayer Healthcare LLC (Leverkusen, Germany), a member of the Bayer Group, to end a series of disputes involving multiple patent litigations and contract arbitrations.

Under the terms of the binding agreement, Gen-Probe agreed to withdraw its patent litigation against Bayer and to grant Bayer immunity from suit with respect to all existing and future Gen-Probe patents for all of Bayer's current nucleic-acid diagnostic products. Further, future Bayer products will be immune from suit under four specified Gen-Probe patent families.

Correspondingly, Bayer agreed to grant Gen-Probe immunity from suit under certain Bayer patents with respect to Gen-Probe's current Tigris instrument and future instruments. As part of the agreement, Bayer will pay Gen-Probe certain lump sum royalties over the next 18 months.

Gen-Probe was advised by Stephen P. Swinton, a partner in the San Diego office of Latham & Watkins LLP. Swinton is a specialist in complex litigation involving patent rights and related intellectual property matters. His clients have included companies in the software, electronics, pharmaceutical, biotechnology, medical device, semiconductor, and telecommunications industries. “We were pleased to assist in Gen-Probe both in its arbitration and patent litigation with Bayer,” Swinton says. “The settlement not only reaffirms the value of Gen-Probe's intellectual property portfolio but also enables it to move forward in exciting new fields.”

The two companies also approved terms of settlement for their separate arbitration related to their collaboration for viral products. This final decision incorporates the interim awards previously determined by the arbitrator. However, under the terms of the settlement, Bayer will not be required to reimburse Gen-Probe $2 million for legal expenses, as originally ordered by the arbitrator.

“We are pleased to have concluded our legal disputes with Bayer, and to gain additional revenue that will enable us to invest in commercially attractive, previously unfunded development projects that will drive future growth,” said Henry L. Nordhoff, Gen-Probe's chairman, president, and chief executive officer.

In the settlement, Bayer agreed to pay Gen-Probe $5 million, plus an additional $10.3 million as a one-time royalty for 2007 and $16.4 million as a one-time royalty for 2008, if it sells any products subject to the Gen-Probe patents in those years. Subject to those payments, Bayer's rights to the related Gen-Probe patents will be considered fully paid-up and royalty free.

News of the settlement came just days before the announcement that Bayer Diagnostics (Tarrytown, NY) was to be acquired by Siemens Medical Solutions (Malvern, PA), in a deal valued at $5.4 billion. The Siemens acquisition does not alter the effectiveness of the agreement, which provides that Bayer may assign its rights and obligations to a purchaser of the Bayer Diagnostics business.

Although the sale of Bayer Diagnostics does not significantly change the value of the agreement to Gen-Probe, the agreement is especially important to Siemens. According to Bill Bowen, Gen-Probe vice president and general counsel, the agreement provides Siemens with a clearer path to entry in an important and promising market. “The settlement agreement provides Siemens with assured ‘freedom to operate' with respect to the Gen-Probe patents for current and future Siemens nucleic-acid diagnostic products—the fastest growing segment of clinical diagnostics,” says Bowen.

Commenting on Siemens' acquisition of Bayer Diagnostics, Erich R. Reinhardt, DEng, member of the Siemens managing board and president of the Siemens Medical Solutions Group, observed that, “Molecular medicine is becoming increasingly important, since it enables healthcare professionals to identify the causes of disease using genetic profiles. With the help of molecular medicine, it will be possible not only to predict the effects of the medications selected and tailor treatment for individual patients, but also to diagnose disease at an early stage.”

Reinhardt added, “With the acquisition of Bayer Healthcare Diagnostics, we will now have a comprehensive portfolio in this key future-oriented market.”

Inequitable Conduct Voids Bar-Coding Patent

In an unusual ruling, the U.S. District Court for the Eastern District of California (San Diego) recently found that a disputed patent involving a medical bar-coding system had been obtained through inequitable conduct and is therefore unenforceable.

The ruling was issued at the end of June in the case of McKesson Information Solutions Inc. v. Bridge Medical Inc., a dispute over a bar-coding technology that can be used at a patient's bedside to ensure that the correct patient receives the correct medication. The court found that the original patent prosecutor had withheld key information from an examiner at the U.S. Patent and Trademark Office (PTO). Through a bench trial, the court found his denials of intent and excuses “implausible and not credible.”

Attorneys for Morrison & Foerster LLP (San Diego) attained the favorable ruling on behalf of their client, Bridge Medical (Solana Beach, CA), a wholly owned subsidiary of AmerisourceBergen Corp.

“This is an exceptional achievement from both a patent litigation point of view and a medical standpoint,” said Morrison & Foerster intellectual property litigation partner Eric Acker, colead trial attorney in the case. “It is very unusual for a patent to be found unenforceable, but even more remarkable is the impact this decision will have on patient safety in hospitals.”

In February 2004, the need to reduce medication errors led FDA to issue a rule requiring bar codes on all medication, blood, and biological products used in hospitals (21 CFR 201.25 and 610.67). Earlier this month, the agency issued a Federal Register notice calling for public comment about the feasibility, utility, benefits, and costs involved in developing and implementing some form of unique device identification system for medical devices (71 FR 46233–46236).

“This ruling has liberated the entire bar-coding at the point-of-care market from any further interference from this early, defective patent,” said Jose Patiño, a Morrison & Foerster litigation partner and the other lead trial attorney on the case. “The decision has cleared the way for a wider use of Bridge Medical's important, and potentially life-saving, technology.

Stryker, Storz Get a Judgment

At the end of July, Stryker Corp. (Kalamazoo, MI) and Karl Storz Endoscopy–America (Culver City, CA) received a favorable judgment releasing both companies from patent infringement claims relating to their medical imaging equipment.

Luma Corp. (Princeton, WV) had alleged that Stryker and Storz products infringed claims of the company's U.S. Patent no. 5,740,801, “Managing Information in an Endoscopy System.” The '801 patent describes a system for acquiring and storing images during a medical procedure.

The accused Stryker products included the Stryker SDC Pro and SDC Pro II digital picture capture systems, and Hermes, a system for controlling medical devices in an operating room through voice commands. Stryker contended that none of its products were infringing Luma's '801 patent.

After examining the claims, Judge David A. Faber of the U.S. District Court for the Southern District of West Virginia (Bluefield, WV) granted a summary judgment in favor of the codefendants. With regard to Stryker's products, Faber ruled that they do not infringe eight asserted claims of the patent-in-suit, and further ruled that two other claims of the patent-in-suit were invalid.

The court also compared Storz's accused products against the claims of the '801 patent, and found that 53 of its 55 claims were not infringed. The court went on to find that the remaining two claims of the '801 patent were invalid based on a prior art patent that was never considered by the U.S. Patent and Trademark Office, but was brought to the court's attention by the attorneys for the company.

Stryker was represented by attorneys Greg Vogler, Tim Malloy, Bob Surrette, Deborah Laughton, and Merle Elliott of the law firm of McAndrews, Held & Malloy (Chicago). Storz was represented by attorneys from the firm of St. Onge Steward Johnston & Reens LLC ( Stamford, CT). Luma was represented by attorneys from the firm of Perkins Coie LLP (Seattle).

The court's ruling ends the plaintiff's case against both Stryker and Storz. “This is an important, decisive victory for our client,” said Greg Vogler, board member at McAndrews, Held & Malloy.

Boston Scientific and St. Jude Medical Settle Disputes

In late July, St. Jude Medical Inc. (St. Paul, MN) and Boston Scientific Corp. (Natick, MA) announced the settlement of four patent litigation matters pending between the companies. Three of the disputes involved cardiac rhythm management (CRM) devices and one was related to neuromodulation. As part of the settlement, each company agreed to cross-license certain aspects of their patent portfolios in these areas.

The majority of the settled disputes were originally between St. Jude Medical and Guidant Corp. (Indianapolis), which was acquired by Boston Scientific earlier this year. The disputes involved components in pacemakers, defibrillators, and neurostimulators.

In addition to settling the four IP disputes, the companies also agreed on how they will proceed with two remaining CRM patent infringement cases, one dating back to 1996. According to a statement filed with the Securities and Exchange Commission (Washington, DC), St. Jude Medical has agreed to give up certain defenses previously available to it, while Boston Scientific has agreed not to pursue certain claims.

“We are pleased to have reached a reasonable commercial settlement of the lawsuits,” said James Tobin, president and CEO of Boston Scientific. “We are also pleased to have reached an agreement on additional cross-licenses, which will help reduce the possibility of future patent disputes between our companies.”

Daniel J. Starks, St. Jude Medical chairman, president, and CEO, concurred. “We are pleased to have reached these agreements, which eliminate much of the expense and uncertainty associated with the litigation and enable the company to focus its resources and attention on providing patients with life-saving products,” he said.

Financial terms of the settlement were not disclosed.

© 2006 Canon Communications LLC

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