Holding: In Immunex Corp. v. Sandoz Inc., No. 2020-1037 (Fed. Cir. July 1, 2020) (O'MALLEY, Chen, Reyna) (Reyna, dissenting), the Federal Circuit affirmed 2-1 the district court's finding that the asserted patents, to which infringement had been stipulated, were not invalid for obviousness-type double patenting ("OTDP"), lack of written description support, or obviousness.1 Judge Reyna dissented and would have held the patents invalid for obviousness-type double patenting.  Of particular interest is the OTDP aspect of the Court's decision, which we will focus on here.

Background: Sandoz sought approval to market Erelzi, a biosimilar version of Immunex's Enbrel® (etanercept) treatment for rheumatoid arthritis. Roche, its exclusive licensee Immunex, and exclusive sublicensee Amgen, initiated this patent infringement suit against Sandoz pursuant to the Biologics Price Competition and Innovation Act ("BPCIA").

The patents at issue were U.S. 8,063,182 ("the '182 patent"), directed to etanercept, and U.S. 8,163,522 ("the '522 patent"), directed to methods of making etanercept. The '182 patent issued Nov. 22, 2011, and the '522 patent issued April 24, 2012, both stemming from a common parent filed by Roche in 1990.

Working independently from Roche, Immunex obtained FDA approval for Enbrel® in 1998. About one year later, Immunex and Roche entered into the "Immunex-Roche agreement" giving Immunex a license to the priority application family in exchange for paying Roche royalties on the sales of Enbrel®.

Amgen acquired Immunex in 2002, and in 2004 the parties entered into an "Accord & Satisfaction" agreement ("A&S Agreement") concerning the same patent family. "The purpose of the agreement was 'to eliminate the continuing obligations to pay royalties to Roche pursuant to the Immunex-Roche agreement."

The A&S Agreement granted Immunex a paid-up, irrevocable, exclusive license to the U.S. patent family for the patents-in-suit and the exclusive right to prosecute patent applications in the U.S. patent family. The A&S Agreement gave Immunex the sole right to grant sublicenses, to make, have made, use, sell, offer for sale and import products covered by the patent family. Immunex also has the first right to rectify any suspected infringement of the licensed patent family at its sole expense and under its sole control, by instituting suit or by sublicense. Any award of damages or lost profits resulting from such an infringement suit may be kept by Immunex in its entirety. Immunex also has the right to an assignment of the patents-in-suit upon request and upon the payment of $50,000.  Id. at *7.

Roche retained the right to practice the patents for internal, non-clinical research only and the secondary right, but not obligation, to sue if Immunex fails to rectify infringement or initiate an action for such infringement within 180 days after written notification by Roche. If Roche sues, it may retain the entirety of any award of damages or lost profits as a result of such suit.  Id. at *7-8.

According to the A&S Agreement, neither party may assign its rights to third parties without the other party's written consent.  Id. at *18.

Court Decision: The district court found that Sandoz failed to prove that the patents at issue were invalid for OTDP. The Federal Circuit affirmed.

OTDP

The Federal Circuit's OTDP analysis centered on the issue of common ownership as a threshold issue because "[t]he [OTDP] doctrine applies to all commonly-owned patents, even in cases where the obvious variants are invented by different inventors." Immunex, at *9 (citing In re Longi, 759 F.2d 887, 895 (Fed. Cir. 1985)).

Sandoz argued that the patents-in-suit were invalid for OTDP over several Immunex patents relating to Enbrel®. According to Sandoz, even though the patents-in-suit are formally assigned to Roche, Immunex is effectively the owner because it obtained "all substantial rights" to the patents under the A&S Agreement.

The district court had concluded that the patents-in-suit were not shown to be invalid for OTDP for four reasons:

  1. Sandoz's proposed test for common-ownership does not apply;
  2. even if that test applies, the patents-in-suit and the asserted double-patenting reference patents are not commonly owned;
  3. even if they are commonly owned, the two-way, rather than the one-way test for obviousness-type double patenting applies as to some of the double-patenting references; and
  4. the patents-in-suit are patentably distinct from each of the asserted double patenting references.

Id. at *10.

While ultimately affirming that OTDP had not been shown based on the district court's second point, the Federal Circuit did not reject, as a matter of law, Sandoz' "novel theory of common ownership" for OTDP based on the transfer of "all substantial rights" as the district court had concluded. 

Instead, the Court found that "Sandoz's proposed test for common ownership-determining whether a party controlling prosecution was the 'effective patentee' under the 'all substantial rights' test-appears consistent with both principles underlying obviousness-type double patenting, namely, preventing unjustified patent term extensions and preventing harassment from multiple suits." Id. at *14.

The Court was careful to communicate the limits of its holding however:

We conclude only that where one of the rights transferred is the right to prosecute the patent at issue, identification of the effective "patentee" is informative in evaluating whether the patents are "commonly owned" for purposes of obviousness-type double patenting. Where, as here, a party ultimately controls prosecution of both sets of patents, the "all substantial rights" test aids in preventing the unjustifiable issuance of claims that are patentably indistinct from claims already owned by that party. Under these circumstances, looking to the "all substantial rights" test achieves the proper balance between deterring gamesmanship in prosecution, on the one hand, and avoiding any chilling effect on routine collaborations and licensing between parties working in the same field of research, on the other.

Id. at *14-15.

In reaching its conclusion on this legal point, the Federal Circuit ejected Immunex's argument that under the 1984 Patent Act "common ownership" for OTDP requires that the inventions were owned by the same entity at time of the invention.  Relying on In re Longi, 759 F.2d 887 (Fed. Cir. 1985) and Geneva Pharm., Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373 (Fed. Cir. 2003), the Court responded that they "previously rejected Immunex's reading of the history of the 1984 Act" and that "Immunex's 'time of invention' test is also inconsistent with more recent case law."

On the facts of the case, the Federal Circuit found that "all substantial rights" were not transferred to Immunex by the A&S Agreement because Roche retained enforcement and alienation rights. "[U]nder Section 3.6 of the agreement, once Roche's secondary right to sue is triggered, Immunex no longer has any right to rectify any infringement and cannot frustrate a Roche-initiated suit by granting a royalty-free sublicense to defendants sued by Roche, and Roche retains the entirety of any award of damages." Id. at *19. In addition, "under Section 11.4 of the agreement, Immunex may not assign its rights in the patents-in-suit to a third party without Roche's written consent." Id. at *20.

The Court distinguished Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245 (Fed. Cir. 2000), which held that a licensor's retained right to sue was illusory because the licensee could nullify that right by granting the alleged infringer a royalty-free sublicense.  Under the A&S Agreement, by contrast, "once Roche's secondary right to sue is triggered, Immunex no longer has any right to rectify any infringement and cannot frustrate a Roche-initiated suit by granting a royalty-free sublicense to defendants sued by Roche, and Roche retains the entirety of any award of damages."  Id. at *19.  

Since the Court found that the patents-in-suit were not commonly owned with the asserted reference patents, OTDP did not apply.

Judge Reyna's Dissent

Judge Reyna, writing in dissent, would have found that Immunex is a common owner for OTDP and would have found the patents-in-suit invalid for OTDP under the one-way test, rather than the two way test forwarded by the majority.

Judge Reyna agreed with adopting the "all substantial rights" test for OTDP and "commend[ed] the majority for adopting" it.   Id. at *3.  He decried, however, the majority's application as "permit[ing] the type of gamesmanship it sought to prevent-gamesmanship in prosecution which could result in unjustified extension of patent rights." Id. at *3. He pointed out that, originally, the Roche applications:

from which the patents-in-suit issued did not claim the etanercept fusion protein, but rather a different fusion protein and a mutated version of etanercept. How-ever, once Immunex retained control of prosecution, Immunex amended the applications to claim etanercept, which Immunex itself had claimed in its own patents and which was an active ingredient in Immunex's Enbrel® product. Thus, thanks 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.

Id. at *3-4.

Judge Reyna viewed the A&S Agreement as having transferred "all substantial rights" to Immunex; any rights remaining with Roche were "illusory." In support, he pointed to, among other things, an A&S Agreement provision under which "Immunex can at any time nullify Roche's rights by ordering Roche to assign the patents-in-suit to Immunex upon payment of $50,000 . . . Thus, if Immunex disagrees with Roche's decision to initiate suit or Roche's decision to veto an assignment, Immunex can undo Roche's decisions by simply obtaining official ownership of the patents-in-suit." Id. at *35.

Judge Reyna also wrote to comment that he believed the district court erred in applying the "two-way" test rather than the "one-way" test in its OTDP analysis. According to Judge Reyna, the district court determined that the patents-in-suit were patentably distinct from Immunex's previously issued '225 patent under the 'two-way' test."

The one-way test "asks whether the asserted patent claim is obvious over or anticipated by the earlier-issued patent claim," citing In re Hubbell, 709 F.3d 1140, 1149 (Fed. Cir. 2013). Id. at *9.  "The 'two-way' test is a 'narrow exception to the general rule of the one-way test,' and it is only appropriate 'where (1) a second-filed application issues prior to a first-filed application, and (2) the PTO is solely responsible for the delay in the issuance of the first-filed application.'" Id. at *8.

In this case, Judge Reyna found that both the PTO and Roche/Immunex contributed to the delay in prosecution of the patents-in-suit. Roche and Immunex's requests for extensions and Roche's delay in filing the etanercept claims during prosecution of the patents-in-suit "should have, as a matter of law, triggered the application of the one-way test." Id. at *9.  According to Judge Reyna, under the one-way test, the patents-in-suit are patentably indistinct from an earlier expiring Immunex patent and are thus invalid for OTDP.

Take-Away: The "substantial rights" test of ownership has some applicability in the OTDP analysis.  The provisions in assignments and licenses are therefore important in this context.  A failure to show common ownership may sink, as it did here, an alleged infringer's OTDP argument.  

Footnotes

1 This note address OTDP issues in Immunex and not the Federal Circuit's affirmance of the district court's findings on written description and obviousness. 

Originally published July 8, 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.


Mr Mark Feldstein
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
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