02-1516
MCNEIL-PPC, INC.,
Plaintiff-Appellant,
v.
L. PERRIGO COMPANY and PERRIGO COMPANY,
Defendants-Appellees.
Harry J. Roper, Roper & Quigg, of
James A. Mitchell, Price, Heneveld, Cooper, DeWitt & Litton, of
Appealed from:
Judge Berle M. Schiller
02-1516
MCNEIL-PPC, INC.,
Plaintiff-Appellant,
v.
L. PERRIGO COMPANY and PERRIGO COMPANY,
Defendants-Appellees.
_________________________
DECIDED:
_________________________
Before
MICHEL, Circuit Judge, ARCHER, Senior Circuit Judge, and LOURIE, Circuit
Judge.
LOURIE, Circuit Judge.
McNeil-PPC, Inc. (“McNeil”) appeals from the
decision of the United States District Court for the
Eastern District of Pennsylvania holding certain claims of four of McNeil’s
patents invalid and awarding attorney fees to L. Perrigo
Company and Perrigo Company (collectively “Perrigo”). McNeil-PPC,
Inc. v. L. Perrigo Co., 207 F. Supp. 2d 356 (E.D.
Pa. 2002). Because the district court
correctly determined that the asserted claims of McNeil’s patents are invalid,
but clearly erred in finding this to be an exceptional case within the meaning
of 35 U.S.C. § 285 and awarding attorney fees to Perrigo,
we affirm-in-part and reverse-in-part.
BACKGROUND
In the late 1980s, facing
the then-imminent
Further
research with chewable tablets containing a combination of loperamide
and simethicone led to the discovery that the simethicone in those tablets apparently “surrounded” the loperamide over time, decreasing its bioavailability, and
thereby reducing the tablets’ shelf-life.
Perrigo filed an Abbreviated New Drug Application (“ANDA”)
at the United States Food and Drug Administration (“FDA”) in 2000 under 21
U.S.C. § 355(j), seeking approval to market a generic version of ImodiumÒ
Advanced.
On
14. [A method for treating a human suffering from an intestinal disorder characterized by the symptoms of diarrhea and flatulence or gas comprising administering to said human in a combined pharmaceutical composition, an effective amount of an antidiarrheal compound selected from the group consisting of loperamide, bismuth subsalicylate, diphenoxylate, polycarbophil, their pharmaceutically acceptable salts and mixtures thereof; and an antiflatulent effective amount of simethicone,] wherein the amount of simethicone administered is 125 mg per dosage unit and the amount of loperamide administered is 2 mg per dosage unit.[1]
16. A method for treating a human suffering from an intestinal disorder characterized by diarrhea and flatulence and or gas comprising administering to said human in a combined pharmaceutical composition, 4 mg of loperamide and an antiflatulent effective amount of simethicone; thereafter administering to said human in a combined pharmaceutical composition, 2 mg of loperamide and an antiflatulent effective amount of simethicone until the diarrhea is controlled.
The asserted claim of the ’054 patent reads as follows:
15. [A composition for treating a human suffering from an intestinal disorder characterized by the symptoms of diarrhea and flatulence or gas comprising: an effective amount of an antidiarrheal compound selected from the group consisting of loperamide, bismuth subsalicylate, diphenoxylate, polycarbophil, their pharmaceutically acceptable salts and mixtures thereof; and an antiflatulent effective amount of simethicone,] comprising 125 mg of simethicone and 2 mg of loperamide.[2]
The asserted claims of the ’641 patent read as follows:
1. A method of enhancing the dissolution profile of a pharmaceutical from a solid dosage form comprising the pharmaceutical and simethicone, comprising: providing the pharmaceutical in a first portion of said dosage form, said pharmaceutical is selected from the group consisting of diphenoxylate, loperamide and loperamide-N-oxide, pharmaceutically acceptable salts thereof, and combinations thereof; providing the simethicone in a second portion of said dosage form; and separating said first and second portions with a pharmaceutically acceptable polymeric barrier which is impermeable to simethicone and the pharmaceutical.
2. The method of claim 1 wherein the pharmaceutical is selected from the group consisting of loperamide, loperamide-N-oxide, pharmaceutically acceptable salts thereof and combinations thereof.
3. The method of claim 1 wherein the pharmaceutical comprises loperamide HCl.
The asserted claims of the ’376 patent read as follows:
1. A solid oral dosage form for the treatment of gastrointestinal distress comprising a therapeutically effective amount of a pharmaceutical for the treatment of gastric disorders selected from the group consisting of diphenoxylate, loperamide, loperamide-N-oxide, pharmaceutically acceptable salts thereof, and combinations thereof; and a therapeutically effective amount of simethicone wherein the oral dosage form has a first portion containing the pharmaceutical and a second portion containing simethicone and the first and second portions are separated by a pharmaceutically acceptable polymeric barrier, which is impermeable to simethicone and the pharmaceutical.
2. The solid oral dosage form of claim 1 wherein the pharmaceutical comprises loperamide HCl.
Following
a bench trial, the district court concluded that the asserted claims of the Garwin patents were obvious over three prior art
references: an Australian pharmaceutical reference publication entitled “Mims
Annual 1980, Section 1e Antidiarrheals,” which
discloses a product called Diareze that combines the antidiarrheal compound attapulgite
with simethicone “to help relieve the pain and
discomfort of gaseous distention”; French Patent Application 2,565,107, which
discloses the use of simethicone and activated
charcoal, also a known antidiarrheal; and U.S. Patent
4,980,175 (the “Chavkin patent”), which discloses
combinations of various substances, including the antidiarrheal
polycarbophil and simethicone.
The district court
then concluded that the product for which Perrigo was
seeking FDA approval would not infringe the Stevens patents, because that
product directly juxtaposes loperamide and simethicone layers without any impermeable polymeric
barrier between them.
Finally, the district
court awarded attorney fees to Perrigo, stating that
McNeil’s conduct during prosecution of the patents in suit was “careless,
irresponsible, and, at the very least, tantamount to studied and deceptive
ignorance.”
The district court concluded its opinion with a discussion of the constitutional basis for the patent system and what it perceived to be a deviation from the original purposes of that system by business-driven decisions. According to the court:
The patent laws “promote the Progress of Science and useful
Arts” by rewarding innovation with a temporary right to exclusivity.
Acting within this often esoteric area of the law, patent lawyers are called upon to play the roles of chemists, engineers, physicians, and physicists – now, they are also asked to be magicians. That is, patent lawyers are asked to defend – with smoke and incantations when necessary – business-driven decisions having nothing to do with inventing or discovering anything. Consistent with schemes to prolong the legally[ ] protected period of exclusivity, companies hire highly talented attorneys to perform acts of legal legerdemain in order to make modest developments look and feel like inventions, when in reality the purported discovery is nothing more than a creation of an advertising and marketing department. In-house counsel should be cautioned that complicity in patent prosecution for unsanctioned legal purposes may give rise in the future to review of that behavior by the appropriate attorney disciplinary machinery. Advancing a client’s economic interests is not a license to forget one’s ethical responsibilities.
It is not lost on this Court that by
developing (“not inventing”) a combination drug, the law automatically
permitted McNeil a three-year period of exclusivity . . . . However, by concocting multiple patent
applications and litigating their validity, this period of exclusivity has been
extended by two years and, with an appeal, will extend even further,
effectively doubling the initial period of exclusivity. The business-driven decision that it is worth
the investment to “invent an invention” will continue unabated unless a
vigorous PTO or a Court sees this transparent attempt to subvert the patent
laws for what it is. The patent laws are
not the private sandbox of pharmaceutical companies. Regrettably, I am constrained by law to award
only counsel fees for Plaintiff’s behavior, although I am not unmindful of the
fact that while this patent litigation continues, competition in the
marketplace is foreclosed and the public is forced to pay higher prices.
Id. at 374-75.
McNeil now appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
DISCUSSION
McNeil
appeals the district court’s holding that the asserted claims of the Garwin and Stevens patents are invalid for
obviousness. McNeil also appeals the
court’s award of attorney fees to Perrigo.
A. Obviousness
Obviousness
is a legal conclusion based on the factual inquiries set forth in Graham v.
John Deere Co., 383 U.S. 1 (1966):
(1) the scope and content of the prior art; (2) the differences between
the claims and the prior art; (3) the level of ordinary skill in the pertinent
art; and (4) secondary considerations, if any, of nonobviousness. Id. at 17-18. When reviewing a district court’s decision,
we review a district court’s underlying findings of fact for clear error, while
we rule de novo on the ultimate issue of obviousness. Smiths Indus. Med. Sys., Inc. v. Vital
Signs, Inc., 183 F.3d 1347, 1355 (Fed. Cir. 1999).
On appeal, McNeil argues that the district court erred by holding the asserted claims of the Garwin patents invalid for obviousness. In particular, McNeil contends that the prior art failed to provide any disclosure of or motivation to make the claimed combination. According to McNeil, the court committed several legal errors in its obviousness analysis. First, McNeil alleges, the court defined the problem to be solved in terms of its solution. According to McNeil, the problem was not how to “make a combination that treats diarrhea and gas,” but how to treat diarrhea and gas. Second, McNeil argues, the court employed an improper “obviousness of substitution approach,” and judged the invention on the subjective motives of the inventor and his employer, rather than on its merits. Third, with respect to the references cited by the district court, McNeil argues that the Mims reference and the French patent were both before the PTO during prosecution of the Garwin patent application[3] and that the Chavkin patent, the only prior art cited by the court that was not before the PTO, merely describes “liquid carriers for administration of . . . compositions.” Although the Chavkin patent mentions both polycarbophil (termed a “bio-adhesive agent” in the reference) and simethicone, McNeil contends that it does not suggest using both in a single composition. According to McNeil, the court’s conclusion that it would have been obvious to combine loperamide with simethicone because diarrhea is often accompanied by flatulence totally disregards evidence that (1) simethicone was not generally believed to be an antiflatulent; and (2) flatulence and diarrhea were never separately treated before the invention because loperamide itself relieves flatulence by treating the underlying diarrhea. McNeil argues that the court’s finding that simethicone was a known antiflatulent is clearly erroneous, because simethicone was known to be an “antigas” agent only because it stimulates burping and belching, and thereby helps relieve stomach, i.e., gastric, gas. However, flatulence is caused by intestinal gas, McNeil contends, and stimulating the passing of that gas would exacerbate flatulence. Lastly, McNeil asserts that the court also failed to give proper weight to undisputed objective evidence of nonobviousness, including unexpected results and copying, discounting that evidence without any good reason.
Perrigo responds that the district court’s decision is supported by clear and convincing evidence of obviousness. Moreover, according to Perrigo, McNeil does not challenge as clearly erroneous any of the court’s factual findings other than those relating to secondary considerations, but instead attempts to propose on appeal numerous new findings of fact that either are not supported by the record or else are plainly contrary to the court’s findings. Perrigo also points out that Stephen M. Collins, The Irritable Bowel Syndrome, 138 Can. Med. Ass’n J. 309 (1988), an article referenced in Garwin’s laboratory notebook but not cited to the PTO, teaches treatment of irritable bowel syndrome with both loperamide and simethicone.
We agree with Perrigo that the district court’s decision was supported by clear and convincing evidence. The court found, in particular, that the concurrence of diarrhea and flatulence had been noted in more than twenty prior art articles and publications, McNeil, 207 F. Supp. at 361; that a 2-4 mg dose of loperamide was known to be a commercially successful and effective antidiarrheal, and simethicone was a well-known antiflatulent sold in more than twenty-five different products (some including a 125 mg dose), by the time of Garwin’s alleged invention, id. at 362; and that combinations of several other well-known antidiarrheals with simethicone had been described in the prior art, even if they had not been commercialized, id. Thus, the district court found that all of the limitations in the asserted claims of the Garwin patents were known and that there was motivation to combine those elements as of Garwin’s asserted invention date. We see no error in the court’s determination.
We also agree with Perrigo that the district court properly discounted the probative value of McNeil’s asserted evidence of secondary indicia of nonobviousness. The court found that McNeil had launched a massive marketing and advertising campaign in connection with the launch of the ImodiumÒ Advanced product, obscuring any nexus that might have existed between the merits of the product and its commercial success. Id. at 364-65. The court also found that the article cited by McNeil as demonstrating that simethicone did not reduce intestinal gas was based on the results of a study involving only nine participants and thus did not rise to the level of statistical significance. Id. at 362 n.13. Finally, the court found that the results of clinical studies adduced by McNeil were inconsistent, not shown to be reproducible, and did not include comparative data vis-à-vis placebos or other antidiarrheal/antiflatulent combinations necessary to demonstrate unexpected or synergistic effects. On the basis of the district court’s findings, which reflect clear and convincing evidence of obviousness, we affirm the court’s decision holding claims 14 and 16 of the ’505 patent and claim 15 of the ’054 patent invalid.
McNeil next argues that the district court erred by holding the asserted claims of the Stevens patents invalid for obviousness. According to McNeil, the Rider patent described using an impermeable polymeric barrier to prevent inactivation of simethicone by antacids, not to prevent coating of loperamide by simethicone. In concluding that Stevens’s invention would have been obvious, McNeil contends, the court failed to consider that neither the Garwin patents nor the Rider patent identified the problem solved by Stevens, i.e., the short shelf life of loperamide in combination tablets with simethicone. McNeil cites In re Zurko, 111 F.3d 887 (Fed. Cir. 1997), and In re Sponnoble, 405 F.2d 578 (CCPA 1969), for the proposition that an invention may be patentable even if “the remedy may be obvious once the source of the problem is identified.” According to McNeil, the prior art failed to identify the problem, and the claims of the Stevens patents must therefore have been nonobvious. Perrigo responds by arguing that the court’s unchallenged factual findings supports the conclusion of obviousness.
We agree with Perrigo that the evidence clearly and convincingly supports the district court’s conclusion. The district court found that the Garwin patents taught both the combination of loperamide and simethicone, and the separation of those two ingredients into different layers of a tablet. The court also found that the Rider patent taught that simethicone could be kept separated from other active ingredients in combination products using an impermeable polymeric barrier. McNeil does not challenge those factual findings. Although, as McNeil points out, the Rider patent did not disclose the specific interaction of simethicone with loperamide, we see no error in the district court’s finding that the Rider patent provided motivation to include an impermeable polymeric barrier to prevent simethicone migration from one layer to an adjacent pharmaceutical-containing layer. McNeil’s arguments to the contrary are unconvincing. On the basis of those findings, and in view of the lack of any significant objective evidence of nonobviousness, we affirm the court’s conclusion that claims 1-3 of the ’641 patent and claims 1 and 2 of the ’376 patent are invalid for obviousness.
B. Attorney Fees
McNeil argues that the district court abused its discretion by awarding attorney fees to Perrigo. Paraphrasing this court’s precedent, McNeil argues that an award of attorney fees under § 285 to an accused infringer may be based on only two grounds: (1) inequitable conduct in the PTO, and (2) bad faith litigation. Neither of those applies in this case, according to McNeil, and there is no other legally cognizable basis to grant attorney fees to an accused, but prevailing, infringer. McNeil also alleges that the district court erroneously buttressed its award of attorney fees by finding that McNeil had benefited by invoking the Hatch-Waxman Act’s stay provisions codified at 21 U.S.C. § 355(j)(5)(B)(i). According to McNeil, it is undisputed that McNeil did not and has not invoked the stay provisions of that Act. Notwithstanding the fundamental premise of the patent laws that the profit motive provides a critical incentive to invent, McNeil argues, the court characterized McNeil’s legitimate business decisions as an attempt to “subvert the patent laws” and criticized McNeil’s inventions as part of “a scheme.” McNeil also alleges that the court’s “unwarranted attack” on McNeil has encouraged a host of misplaced antitrust actions filed against McNeil.
Perrigo
responds by arguing that McNeil’s attorneys made false representations during
the seven years of prosecution of the Garwin patents,
including assertions that Garwin had discovered the
concurrence of diarrhea and flatulence, that Garwin
was the first to combine an antidiarrheal with simethicone, that simethicone was
believed to be ineffective at treating flatulence, and that the combination of loperamide and simethicone
displayed synergistic effects; and failed to disclose the Chavkin
patent, the Collins article, and the 1980 Mims reference. The court’s finding that McNeil aggressively
prosecuted the Garwin patent applications in “studied
and deceptive ignorance” is well supported, according to Perrigo,
and is not clearly erroneous. McNeil’s
claim of infringement of the Stevens patents, made without McNeil’s having
conducted even the most rudimentary examination of Perrigo’s
product, by itself justifies the award of attorney fees, Perrigo
contends. Finally, Perrigo’s attorney,
during oral argument in this appeal, suggested that attorney fees are warranted
in this case on the ground of “aggressive carelessness” on the part of McNeil
during patent prosecution, and that we should accordingly affirm the district
court’s award of fees to Perrigo.
The court in exceptional
cases may award reasonable attorney fees to a prevailing party. 35 U.S.C. § 285 (2000). “Among the types of conduct which can form a
basis for finding a case exceptional are willful infringement, inequitable
conduct before the P.T.O., misconduct during litigation, vexatious or
unjustified litigation, and frivolous suit.”
Beckman Instruments, Inc. v. LKB Produkter
AB, 892 F.2d 1547, 1551 (Fed. Cir. 1989).
Evidence of such conduct must be supported by clear and convincing
evidence. Id. “In the case of awards to prevailing accused
infringers . . . ‘exceptional cases’ are normally those of bad faith litigation
or those involving fraud or inequitable conduct by the patentee in procuring
the patent.” Cambridge Prods. Ltd. v.
Penn Nutrients Inc., 962 F.2d 1048, 1050-51 (Fed. Cir. 1992). In Revlon,
Inc. v. Carson Products Co., 803 F.2d 676 (Fed. Cir. 1986), this court found clear error, requiring reversal, in a
district court’s finding a case to be “exceptional” within the meaning of 35
U.S.C. § 285 in the absence of inequitable conduct during prosecution of the
patent or misconduct during litigation. Id.
at 679. The court held that, where
the existence of bad faith during proceedings before the PTO fails to rise to
the level of inequitable conduct, no gross injustice is prevented by ordering
payment of attorney fees, and that proper application of the law dictates that
the award of attorney fees be reversed. Id. Although “the trial
judge may exercise his discretion to award attorney fees and costs because of
inequitable conduct during prosecution of the patent or misconduct during
litigation . . . [, a]ttorney fees are not to be
routinely assessed against a losing party in litigation in order to avoid
penalizing a party ‘for merely defending or prosecuting a lawsuit.’” Id. (quoting Fleischmann Distilling
Corp. v. Maier Brewing Co., 386 U.S. 714, 718 (1967)).
We have not previously held
any party liable for attorney fees for either vigorously prosecuting its patent
application or enforcing a presumptively valid patent, even where that patent
was later invalidated, in the absence of clear and convincing evidence of
inequitable conduct or misconduct during litigation. We decline Perrigo’s
invitation to do so on these facts. The
district court did not find that McNeil’s conduct during litigation was
egregious or that its patent prosecution rose to the level of inequitable
conduct, and we find no other basis for finding this to be an “exceptional”
case. A patent owner has the “right to exclude others from making,
using, and selling the invention and to enforce those rights until [its patents
are] held invalid [or expire].” Concrete Unlimited Inc. v. Cementcraft, Inc., 776 F.2d 1537, 1539 (Fed. Cir.
1985). That right is not
unlimited; bad faith litigation, where
a patentee initiates litigation on a patent he knows is invalid or is not
infringed, is conduct offensive to public policy, Loctite
Corp. v. Ultraseal Ltd., 781 F.2d 861, 875-76
(Fed. Cir. 1985), and can provide a basis for granting attorney fees.
Given the existence of patents issued by the PTO with a presumption of validity, the present lawsuit was not found to have been brought in bad faith. It is noteworthy in that regard that Perrigo did not challenge McNeil’s claims of infringement of the Garwin patents, and that, although Perrigo calls McNeil’s claim of infringement of the Stevens patents “outrageous,” the record reflects that McNeil’s experts advanced a plausible theory of infringement of those claims as well. The district court specifically found that “Perrigo’s product does contain polymeric materials,” McNeil, 207 F. Supp. 2d at 367 n.25, but ultimately concluded that that product would not infringe because it does not contain an impermeable barrier as required by the asserted claims. The district court found that the parties “essentially agree[d]” that the question whether Perrigo’s ANDA product would infringe the Stevens patents “turns solely on whether the Perrigo’s [sic] ANDA product employs an impermeable polymeric barrier,” which in turn appears to have turned merely on the court’s construction of that term. Id. at 368. Moreover, although the claims at issue have now been held to be invalid, they had not been held to be invalid at the time that they were asserted against Perrigo. The present fact of their invalidity cannot be used to bootstrap the argument that they were asserted in bad faith, absent clear and convincing evidence that McNeil had reason to believe that the claims were invalid or not infringed.
The district court was notably disturbed that McNeil set out as an objective developing products that extended the life of their basic patent on loperamide. Its concern was with McNeil’s objective to obtain additional patent protection on an invention whose patent was about to expire, more than with its conduct in doing so. Short of inequitable conduct or litigation misconduct, neither of which was found here, however, McNeil was entitled to file patent applications on what it considered to be patentable inventions (in fact, the PTO did grant those patents). While it may be considered more socially desirable for companies to seek truly novel inventions for maladies not yet treatable, the patent laws set the standards of novelty, non-obviousness, and utility as the requirements for patentability, without making value judgments concerning the motives for making and attempting to patent new inventions of lesser medical value. Thus, as no inequitable conduct, or litigation or other misconduct, was found, the exceptional case finding of the district court cannot stand. Accordingly, we reverse the district court’s grant of attorney fees to Perrigo.
CONCLUSION
The
district court did not err in holding the asserted claims of McNeil’s ’505,
’054, ’376, and ’641 patents invalid, but clearly erred in finding this to be
an exceptional case under 35 U.S.C. § 285 and awarding attorney fees to Perrigo. The court’s
decision is therefore
AFFIRMED-IN-PART
and REVERSED-IN-PART.
COSTS
Each party to bear its own
costs.
[1] Claim 14 of the ’505 patent depends from claim 2, which in turn depends from claim 1, and the relevant portions of those independent claims are shown in brackets above.
[2] Claim 15 of the ’054 patent depends from claim 2, which in turn depends from claim 1; the relevant portions of those independent claims are shown in brackets above.
[3] Perrigo points out that McNeil actually cited to the PTO a 1989 Mims reference, not the 1980 Mims reference referred to by the district court. It appears, however, that the relevant portions of the disclosures of those two references are the same.