Gnosis Kills Merck Patents; Fed. Cir. Squabble Continues

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By Tony Dutra

Dec. 17 — The internal battle at the Federal Circuit over its place in reviewing America Invents Act proceedings continued in a pair of 2-1 panel decisions Dec. 17 against patents licensed by Merck.

The Patent Trial and Appeal Board cancelled claims of patents assigned to the South Alabama Medical Science Foundation (SAMSF) and exclusively licensed by Merck & Cie, and the question on appeal was how critically the court should review the board's decision.

In favor of patent challenger Gnosis S.P.A., the majority used a deferential “substantial evidence” standard of review.

Judge Pauline Newman dissented, with a view that effectively resulted in no deference at all and a conclusion that Merck's patents should have survived the challenge.

The court has previously split on whether it can review the PTAB's trial institution decisions, what standard the PTAB should use in construing claims, and whether district courts should grant stays while the PTAB does its job.

The U.S. Supreme Court already has one petition before it complaining about the general inclination of the Federal Circuit to defer to the PTAB. This case may result in another.

Underlying Dispute

Merck asserted six patents against Gnosis in Merck & CIE v. Macoven, No. 6:12-cv-00027 (E.D. Tex. Jan. 19, 2012). The case was stayed as Gnosis challenged four of them—U.S. Patent Nos. 5,997,915; 6,011,040; 6,673,381; and 7,172,778—in inter partes review proceedings at the PTAB.

The patents are related to tetrahydrofolates, with compositions marketed by Pamlab Inc. under the brand names Deplin (antidepressant), Metanx (diabetic nerve damage), Cerefolin (memory loss) and Néevo (nutrition).

For each challenged patent claim, the patent owners either cancelled claims on their own, or the board cancelled them as being obvious.

Federal Circuit Dispute

The majority justified the substantial evidence standard for PTAB review based on its precedent in In re Gartside, 203 F.3d 1305, 1313, 53 U.S.P.Q.2d 1769 (Fed. Cir. 2000) (59 PTCJ 599, 2/25/00), updated to address proceedings under the America Invents Act of 2011 by the en banc court—in a 6-5 vote—in In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1280, 115 U.S.P.Q.2d 1425 (Fed. Cir. 2015).

Newman dissented in Cuozzo with the same underlying argument she had in this case: Congress meant the PTAB challenges to be an alternative to a validity challenge in district court, and it is fundamentally at odds with that intent if it's much easier to knock out patent claims at the board.

District courts review validity challenges under the high bar of the clear-and-convincing-evidence standard, but the AIA set the 50-50 preponderance-of-the-evidence standard for PTAB analysis.

To achieve “the legislative balance” Congress intended, then, Newman said, the Federal Circuit should be reviewing “whether the preponderance of the evidence supports the PTAB’s decision.”

Did Review Standard Make the Difference?

The majority and dissent looked over the same evidence the PTAB reviewed and came to different conclusions. The majority affirmed the PTAB's claim cancellations, and Newman would have overturned them.

Newman argued that the standard of review made the difference, and the majority indeed repeatedly said that “substantial evidence supports” the board's judgments. But the majority's analysis was both thorough and dismissive of Merck's counter-arguments, leaving the impression that the court simply arrived at the same result the board did.

The first departure between the two was whether the prior art predicted a reasonable chance that Merck's invention would succeed. The majority tied that question to whether the prior art taught away from the invention. It said either that “the prior art as a whole supports” or “the record amply supports” the board's conclusions.

The second disagreement was on whether the commercial success of the Pamlab products depended on the patented claims—the so-called “nexus analysis” for considering secondary evidence of nonobviousness. The majority agreed with the board that it mattered whether the products were based on specific compositions that were not claimed; the dissent gave no significant weight to the specificity.

Majority Sees One Harmless Error

The SAMSF opinion was published as a precedential companion case, but the arguments were largely the same. The only difference was that this time the majority found fault with one aspect of the PTAB's analysis, albeit not enough to overturn the result.

The question had to do with how licenses should be analyzed for a nexus to the patented claims. The court said that “the patentee is not necessarily required to establish an independent nexus between [the licensee's] products and the claimed invention for the licensing activity to be relevant.”

But since that didn't outweigh all the other evidence in favor of obviousness, the court determined the board's error was harmless.

Judge Todd M. Hughes wrote the court's opinion, which was joined by Judge S. Jay Plager.

Thomas J. Parker of Alston & Bird LLP, New York, represented Merck. Joseph Cwik of Amin Talati & Upadhye, LLC, Chicago, represented Gnosis.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

Merck text at http://src.bna.com/bBj.

SAMSF text at http://src.bna.com/bBt.