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Federal Circuit’s Decision in Pfizer, Inc. v. Apotex, Inc. Will Not Be Reheard or Reviewed En Banc

May 21, 2007

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Last Month at the Federal Circuit - June 2007

Judges: Separate dissents in the denial of a petition for rehearing en banc by Judges Newman, Lourie, and Rader.]

[Appealed from: N.D. Ill., Chief Judge Rosenbaum]

In Pfizer, Inc. v. Apotex, Inc., No. 06-1261 (Fed. Cir. May 21, 2007), the Federal Circuit denied Pfizer, Inc.’s (“Pfizer”) request to rehear the case or review the panel’s decision en banc. Previously, on March 22, 2007, the Federal Circuit had reversed a district court’s holding that Pfizer’s patent covering the hypertension drug Norvasc® was valid and nonobvious. (That March 2007 decision was summarized in the April edition of Last Month at the Federal Circuit.) Pfizer petitioned the Federal Circuit to have the panel rehear the case or to review the reversal en banc. Pfizer argued that the panel should have followed precedent and deferred to the district court’s supported factual findings. Pfizer also argued that the panel’s reversal of the district court’s decision was inconsistent with precedent regarding the law on both nonobviousness and patentability. Five amicus curiae briefs were filed on behalf of large pharmaceutical companies and trade/industry organizations, because of the potential impact of the panel’s decision in the pharmaceutical field. Pfizer’s petitions were denied without comment, but Judges Newman, Lourie, and Rader dissented from the denial for rehearing en banc, each writing a separate dissent.

Judge Newman’s dissent focused on the policy and legal problems generated by the panel’s decision, arguing that the panel’s decision incorrectly applied the “obvious to try” standard, changed the criteria and analysis for patentability, and created inconsistent Federal Circuit law. For example, Judge Newman stated that the panel’s holding that compounds discovered by routine experimentation are not patentable has “particular significance for [its] effect on the conduct of R&D, the costs of drug development, and the balance between generic access to established products and the incentive to development of new products. The amici curiae on both sides of the issue stress different policy considerations: the pharmaceutical research companies point out that diminished access to patenting will affect the kind and direction of product development; the generic producers point out that the sooner they can enter the market for established drugs, the lower the consumer price.” Newman Dissent at 3.

“A primary purpose for which [the Federal Circuit] was formed was to provide the judicial stability that supports commercial investment . . . in recognition of the dependence of technology-based industry on an effective patent system.” Id. at 3-4. “When conflicts arise between panel decisions of the Federal Circuit[,] the ensuing uncertainty is of national scope, contravening the purpose of establishing th[e Federal Circuit].” Id. at 4. The Federal Circuit, Judge Newman argued, has an “obligation to undertake en banc review, both to reestablish consistency in the law and to correct errors in panel decisions.” Id.

Judge Lourie also dissented, similarly stating that “an en banc hearing is warranted . . . in order to maintain uniformity of the court’s decisions and because [the case] presents questions of exceptional importance.” Lourie Dissent at 2. First, Judge Lourie stated that precedent required the panel to defer to the district court’s findings that the new salt had unexpected, superior properties and that there was no reasonable expectation of success, because such findings were supported by a myriad of evidence in the district court record. Instead, the panel improperly substituted its own finding that a reasonable expectation of success existed. Second, Judge Lourie stated that the panel placed too much importance on the therapeutic value of the claimed compound, as opposed to the value of the new salt’s physical properties. Judge Lourie argued that a compound should not be required to possess a specific type of improvement over the prior art to be patentable. “Any useful and unexpected property should be eligible to overcome a prima facie obviousness determination.” Id. at 4.

Third, Judge Lourie pointed out that the panel’s finding that the new salt was not patentable because it was found as the result of “routine experimentation” was against the statutory mandate of 35 U.S.C. § 103(a), which requires that “[p]atentability shall not be negatived by the manner in which the invention was made.” Fourth, Judge Lourie stated that the inventor’s own expectation of success should not be relied upon over the objective unexpectedness of the properties of a compound. An inventor’s optimism about what he or she chooses to experiment with should not necessarily suggest obviousness.

Finally, Judge Lourie stated that this case raised issues of exceptional importance because “general public, innovative companies, and, ultimately, generic companies, depend upon faithful adherence to th[e] principle” that unexpected, commercially important physical properties (not just biologic or therapeutic properties) are relevant to the value of a compound and should be a basis for patentability. Id. at 5.

In Judge Rader’s dissent, he pointed out that three separate district courts had found Pfizer’s patent nonobvious and, because the district courts’ factual findings were not clearly erroneous, the Federal Circuit should have deferred to those factual findings. Judge Rader reiterated that the properties of new pharmaceutical salt forms are entirely unpredictable, that even the reference relied upon by the Federal Circuit panel in its reversal evidenced this unpredictability, and that the superior properties of the new salt over the prior art were indeed unexpected. Judge Rader also stated that the proper analysis here was that the unpredictability of theart rebutted any expectation of success, and that the Court’s apparent “obvious to try” analysis was improper.

Judge Rader also argued, like the other two dissenting judges, that the panel should not have required that the superior characteristics of the salt relate to “therapeutic value” (i.e., in clinical trials), since therapeutic value is just one property of a pharmaceutical and other physical properties, such as solubility, stability, hygroscopicity, and processability, should be considered in the analysis as well.

Finally, Judge Rader agreed with the other two dissenting judges that the panel violated the statutory mandate that “patentability shall not be negatived by manner in which the invention was made” by holding the invention unpatentable because it was made by routine testing or well-known problem solving strategy. 35 U.S.C. § 103(a). Since “[m]any if not most” pharmaceutical inventions are discovered this way, Judge Rader noted that the panel’s decision “calls into question countless pharmaceutical patents, which in turn could have a profoundly negative effect on investments into the design and development of new life-saving pharmaceuticals.” Rader Dissent at 3.