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An Exclusive Licensee Has Standing to Appeal on Its Own If the Patentee Was a Party in the District Court, and Prosecution History Estoppel Bars Application of DOE When a Narrowing Amendment Is Directly Related to the Range of Equivalents Sought to Be Recaptured

07-1074
October 12, 2007

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Last Month at the Federal Circuit - November 2007

Judges: Michel, Lourie (author), Moore

[Appealed from: D. Minn., Judge Montgomery]

In Schwarz Pharma, Inc. v. Paddock Laboratories, Inc., No. 07-1074 (Fed. Cir. Oct. 12, 2007), the Federal Circuit affirmed the district court’s grant of SJ of noninfringement of U.S. Patent No. 4,743,450 (“the ’450 patent”) to Paddock Laboratories, Inc. (“Paddock”), holding that Schwarz Pharma, Inc. and Schwarz Pharma AG (collectively “Schwarz”), the exclusive licensee of the ’450 patent, had standing by themselves to appeal and that prosecution history estoppel barred resort to DOE.

Warner-Lambert Company, LLC (“Warner-Lambert”) owns the ’450 patent relating to pharmaceutical compositions containing Angiotensin Converting Enzyme (“ACE”) inhibitors combined with stabilizers to prevent certain types of degradation. ACE inhibitors are prescribed for the treatment of high blood pressure and without the stabilizers, may degrade through cyclization, discoloration, and hydrolysis.

Paddock filed an ANDA to market generic tablets (“the Paddock drug”) containing, inter alia, magnesium oxide (“MgO”) and certified that the ’450 patent was invalid and/or not infringed. Schwarz and Warner-Lambert sued Paddock, alleging infringement of the ’450 patent. Paddock filed a motion for SJ of noninfringement. Schwarz stipulated that the Paddock drug did not literally infringe the ’450 patent. As to DOE, the district court determined that prosecution history estoppel applied. During prosecution, the original claim elements “a metal containing stabilizer” and “an alkali or alkaline earth-metal salt,” were amended to instead recite “an alkali or alkaline earth metal carbonate.” The district court held that the change in claim language was a narrowing amendment and presumptively surrendered all metal-containing stabilizers and alkali or alkaline earth metal salts except alkali and alkaline earth metal carbonates. The district court also held that Schwartz failed to rebut the presumption of surrender because MgO was a foreseeable equivalent of magnesium carbonate. The district court thus concluded that the Paddock drug could not infringe because Schwartz was estopped from claiming that the MgO used by Paddock was the equivalent of an alkali or alkaline earth metal carbonate. Schwarz appealed.

As a preliminary matter, the Federal Circuit determined whether Schwartz had standing to bring the appeal because Warner-Lambert, the patent owner, did not appeal. The Court recognized that although it has stated the necessity of joining a patent owner in an action for infringement brought by an exclusive licensee a number of times, the particular question presented here was an issue of first impression. It concluded that, “when a patentee joins an exclusive licensee in bringing a patent infringement suit in a district court, the licensee does not lose standing to appeal even though the patentee does not join in the appeal.” Slip op. at 5-6.

In so concluding, the Federal Circuit observed that it has interpreted the requirement to join the patentee as a prudential requirement rather than a constitutional standing one. It noted that one of the reasons for requiring joinder of the patent owner is the possibility that the alleged infringer would be subject to multiple actions. The Court recognized that “[t]here [was] no such danger here, as Warner-Lambert ha[d] already been joined in the infringement action, and, if not joined in the appeal, [would] continue to be bound by the judgment of the trial court” and of the Federal Circuit. Id. at 6. The Court also noted that an additional reason for requiring joinder of a patentee is to ensure that its rights are protected in a suit brought by the licensee and that a patent should not be placed at risk of invalidation by the licensee without the participation of the patentee. The Court reasoned that no such risk existed here because Warner-Lambert was joined in the infringement suit and had an opportunity to protect its interests. In addition, noted the Court, Schwartz was a plaintiff in a suit that was properly joined in the district court by the record patentee and, as a party adversely affected by the district court judgment, Schwartz was entitled to appeal that judgment alone.

The Federal Circuit next concluded that the district court did not err in holding that Schwartz’s claim of infringement under the DOE was barred by prosecution history estoppel. In so concluding, the Court noted that the original independent claims recited a metal-containing stabilizer or an alkaline earth metal salt and that Warner-Lambert presumptively surrendered subject matter encompassed by those terms during amendment. The Court added that the amendment was made in response to an obviousness rejection by the examiner and, thus, was presumed to have been made for reasons of patentability. Accordingly, the Court held that the presumption of surrender applied to MgO because “it clearly [fell] within the territory between the language of the original and the amended claims of the ’450 patent.” Id. at 10-11.

Schwarz argued that even if the presumption of surrender applied, there was a genuine issue of material fact as to whether MgO was a foreseeable equivalent of an alkali or alkaline earth metal carbonate. The Federal Circuit noted that it was Schwartz’s burden to rebut the presumption. Citing its recent decision in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 493 F.3d 1368, 1379 (Fed. Cir. 2007), the Federal Circuit stated that “an alternative is foreseeable if it is known in the field of the invention as reflected in the claim scope before amendment” and that it would be  inappropriate to apply an insubstantial differences or function/way/result test in order to determine foreseeability. Slip op. at 11. The Court observed that Schwarz did not “seriously dispute” that MgO was known as a stabilizer by those of skill in the art at the time of the amendment, but rather insisted that MgO had to have been known as a stabilizer against the specific degradation pathway of cyclization or for the specific drug category of ACE inhibitors. Id. The Court rejected this argument, recognizing that “[w]hile care must be taken not to sweep too broadly in defining the field of an invention, Schwartz attempt[ed] to define the field of invention too narrowly.” Id.

The Court noted that claim 1 recited “[a] pharmaceutical composition” and that this language defined the field within which forseeability may be considered. The Court therefore concluded that, because MgO was known as a stabilizer in the field of pharmaceutical compositions, Schwarz had failed to rebut the presumption of surrender by demonstrating that MgO was not a foreseeable equivalent. With respect to claim 16, which is directed to a process of stabilizing an ACE inhibitor against cyclization, the Federal Circuit stated that “it d[id] not require much of a stretch of the imagination of a person skilled in the art of pharmaceutical formulation to foresee that that stabilizer might be helpful in stabilizing ACE inhibitors.” Id. at 12.

Finally, the Federal Circuit also disagreed with Schwarz that the presumption of surrender was rebutted because the narrowing amendment was no more than tangentially related to the use of MgO. The Court observed that the use of MgO was directly implicated by the amendment of the claim language because the language amended concerned the types of stabilizers covered by the claims and excluded MgO. The Federal Circuit explained that “[t]he fact that the inventors may have thought after the fact that they could have relied on other distinctions in order to defend their claims [was] irrelevant and speculative; . . . .” Id. Indeed, the Court noted that “the narrowing amendment was directly related to the range of equivalents Schwarz now [sought] to recapture.” Id. at 13. Accordingly, it affirmed the district court’s grant of SJ of noninfringement in favor of Paddock.