What Were They Thinking? A Second Look at Lilly v. Sun

As we all learned years ago, when trying to make sense of Lilly v. Barr, if a Fed. Cir. decision wrestles with obviousness-type double patenting, it will be a labor of Hercules to reason it out. But the majority of the Fed. Cir. really blew it in Eli Lilly v. Sun Pharma. Ind., 611 F.3d 1381 (Fed. Cir. 2010), both in the original decision and in denying en banc review. Newman, Rader, Lurie and Linn made up the minority in that vote, and when those four agree on something, attention must be paid.

But I  don’t feel that much attention was paid. Maybe the decision was too close to the holidays. Maybe folks just thought, “Just another case of Lilly trying to evergreen the patent protection on a blockbuster drug [gemcitabine].” I got re-interested in the decision when I read the amicus brief filed by the Washington Legal Foundation in support of Lilly’s petition to the Supreme Court to grant cert. Although I have dipped my toe in the sometimes murky waters of this right-wing think tank in the past- I summarized the Supreme Court’s decision in Pioneer Hi-Bred v. JEM –  they are usually more interested in supporting suits to reverse “Obamacare” or to i.d. illegal immigrants. Whatever your political leanings, its amicus brief was well-written (even if it never used the term “obviousness-type double patenting” and framed the question too broadly). In any case, it got me to re-consider just how bad the panel decision was.

It is a little hard to follow the timeline of the filings of the two patents in question without a timeline, but I will try. To begin with, both patents issued out of pre-GATT filings and so got 17 years from their issue dates. The “oldest patent application” was filed in 1983 claiming gemcitabine (“gem”) and its use as an anti-viral (Of course this was at the beginning of the AIDS epidemic). Lilly subsequently discovered that gem was an effective anti-cancer drug (now Gemzar) but, instead of just filing a CIP of its pending application disclosing, and perhaps claiming, the new use, they ALSO filed an original application on the same day (Dec. 4, 1984) claimed the new use. The “oldest patent application” claiming gem issued as the ‘614 patent on Feb. 28, 1989 and Lilly got PTE, so that it did not expire until May 15, 2010. Lilly did not file a divisional on the use of gem to treat cancer, although this would have been a pre-GATT filing and given Lilly a lot of extra patent term.

Instead, Lilly simply prosecuted the second application until it issued on November 11, 1995,  claiming the use of gem to treat cancer. This pre-GATT filing will not expire until November 7, 2012. Lilly thought it was all set until then. But Sun got the Fed. Cir. to find the second ‘826 patent invalid for obviousness-type double patenting on the basis that the claimed use was disclosed – but never claimed – in the soon to expire ‘614 patent. Somehow the panel found that Lilly’s approach led it into the deadly swamp of obviousness-type double patenting, and would be an improper extension of patent term to let the ‘826 patent expire later than the ‘614 patent.

I am not going to argue the panel’s position. I can’t. But let’s take a quick look at Lilly alternatives. The best one would have been to have never filed the second “cancer” application. The CIP with claims to gem and to two distinct uses would surely have drawn a restriction requirement. If Lilly simply obtained  the  ‘614 patent to gem and then filed a divisional to treating cancer in 1989, the second patent would probably have had the same term as the invalidated ‘826 patent (if it issued on about the same date, November 7, 1995).(Note that it does appear that Lilly might have slowed down the prosecution of the ‘826 patent to get maximum term, but Lilly could have done the same thing with the hypothetical divisional.) The divisional would not have be subjected to an obviousness type double patenting rejection. End of story.

Lilly had yet  another option. Lilly could have not filed a CIP at all (Lilly got nothing useful out of it), but simply obtained the ‘614 patent to gem based on its anti-viral utility. Lilly could have still filed the second application disclosing the cancer treatment in 1984 and prosecuted it to obtain the ‘826 patent. Now there would be no disclosure of the cancer treatment in the ‘614 gem patent, and no basis on which to find the ‘826 patent “guilty” of obviousness-type double patenting.

I can’t speculate on why Lilly chose the course it did, but if 4 of the most scientifically-learned Fed. Cir. judges would not have seen an obviousness-type double patenting defense to infringement coming, Lilly can hardly be blamed. The Washington Legal Foundation framed the question: “Whether the [Fed. Cir.] erred by holding that the mere description of an invention in a patent renders a  subsequently-claimed invention invalid.” That was not the holding below, but WLF was on point in starting out with a quote from Miller v. Eagle Mfg. Co., 151 U.S. 186 (1984): “[A] later patent may be granted where the invention is clearly distinct from, and independent of, one previously patented.”

Ninth Circuit No Friend to Winklevoss Twins: Facebook Settlement Stands

Putting what appears to be an end to a highly publicized legal battle dramatized in the movie The Social Network, the U.S Court of Appeals for the Ninth Circuit has upheld a $65 million settlement agreement made between brothers Cameron and Tyler Winklevoss, their former classmate Divya Narendra, and social-networking website Facebook and its CEO Mark Zuckerberg.  Facebook Inc. v. Divya Narendra et al., Case No. 08-16745 (9th Cir., Apr. 11, 2011) (Kozinski, J.).

In 2004, Cameron Winklevoss, Tyler Winklevoss and Divya Narendra sued Facebook and its CEO Mark Zuckerberg, alleging that Zuckerberg stole from them the idea for Facebook while classmates at Harvard.  Facebook and Zuckerberg countersued the plaintiffs and their competing social networking website Connect U, alleging that the plaintiffs hacked into Facebook and spammed Facebook users. The parties were ordered to mediation in 2008.  After one day of negotiations, the parties signed a handwritten settlement agreement in which the plaintiffs agreed to give up their social networking website ConnectU in exchange for a $20 million payment and $45 million worth of stock in Facebook.

When final settlement negotiations fell apart, Facebook filed a motion asking the district court to enforce the signed settlement agreement and order the Winklevosses to sign more than 130 pages of documents that would finalize the settlement.  The Winklevosses argued that the settlement was unenforceable because it lacked material terms and had been procured by fraud.  Namely, the Winklevosses argued that Facebook had committed securities fraud by providing an incorrect valuation of the company such that the Winklevosses should have received more shares in the settlement.  The district court found the settlement agreement enforceable and ordered the Winklevosses to transfer all ConnectU shares to Facebook.  The Winklevosses appealed.

The Ninth Circuit rejected the Winklevosses argument that the settlement agreement lacked material terms, determined the terms were sufficiently definite for a court to determine whether a breach has occurred and to order specific performance or award damages.  Further, the settlement agreement contained a mutually agreed upon procedure for filling in missing “material” terms, demonstrating that the parties intended to be bound even though some material terms might be resolved later.

In rejecting the Winklevoss brothers’ argument that Facebook procured the settlement by fraud, the court pointed out that the Winklevosses were sophisticated litigants who had obtained extensive information about Facebook through discovery during the long-standing litigation over ownership rights in one of the world’s “fastest-growing companies.”   The court also noted that at mediation the Winklevosses had a “team of lawyers and a financial advisor.”   Namely, the Winklevosses’ father, aformer accounting professor at the Wharton School of Business and an expert in valuation, participated in the mediation.  “A party seeking to rescind a settlement agreement by claiming a Rule 10b-5 violation under these circumstances,” the court warned, “faces a steep uphill battle.”  In any event, the Court determined that the Winklevosses’ securities fraud claims failed on the merits, as the only evidence proffered towards the claims concerning what Facebook allegedly said and did not say during the mediation, which was properly excluded by the district court due to a confidentiality agreement entered into by the parties.  In conclusion, the court stated: “At some point, litigation must come to an end. That point has now been reached.”

The House Enters the Patent Reform Fray

The U.S. House of Representatives March 30 began discussion on a patent reform bill, H.R. 1249, introduced earlier that day. The House bill (known as the America Invents Act) aligned with a Senate bill (S. 23) in a number of ways but also had some differences, as expected.

Throughout the month, a number of changes to the House bill were proposed.  Most of those changes were designed to bring the House bill closer to the closer to the Senate’s bill.  For example, on April 12, 2011 Lamar Smith (R-TX) floated a draft of a manager’s amendment, scheduled to be discussed in an April 14 markup session.  The draft expands an inventor’s options during the one-year grace period before patent application filing, curtails options to use the prior user rights defense and adopts the heightened threshold for inter partes review of the Senate bill.

Another run was made to remove the transition to a first-to-file system.   That effort failed.   However, Rep. Jim Sensenbrenner (R-WI) vowed to try again to remove the first-to-file provision.

One interesting addition to the House bill is the commissioning of a federal study of patent suits by non-practicing entities.

After the intense mark-up session on April 14, the House Judiciary Committee voted 32-3 to report out an amended H.R. 1249, sending the revised legislation to the House floor for further debate and a vote on the long-awaited bill’s final passage.

As passed to the floor, the House bill transitions the United States to a first-to-file system, establishes a new post-grant review process, subjects business method patents to a special ex partereexamination procedure, allows third parties to submit prior art for review, allows the U.S Patent and Trademark Office (USPTO) to set its fee amounts and hang onto the fees it collects and retains a best mode requirement for patent application filings.

Although the House bill largely tracks the Senate version (see IP Update, Vol. 13, No. 2) and both move the United States from a first-to-invent to a first-to-file system (thus harmonizing the U.S. system with the systems in place in most industrialized countries), there are a few differences in terms the post grant opposition systems provided by each.

Post-Grant Oppositions

The post-grant opposition period in H.R. 1249 is longer than that provided in S.23 (12 months as opposed to nine months) and includes, in additional to a showing of a likelihood that at last one claim will be found unpatentable as the threshold basis for acceptance, the existence of important unsettled legal question.

The House bill also provides for an automatic stay of declaratory judgment actions if the declaratory judgment plaintiff is the party in interest petitioning for post-grant review and a discretionary stay in the event of litigation involving a patent involved in post-grant review.