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Market Need Properly Linked to the Invention Can Be Probative of Long-Felt Need and Supportive of Nonobviousness

January 09, 2012

Decision icon Decision

Last Month at the Federal Circuit - February 2012

Judges: Rader, Gajarsa, Prost

[Appealed from: N.D. Ill., Judge Shadur]

In Celsis In Vitro, Inc. v. CellzDirect, Inc., No. 10-1547 (Fed. Cir. Jan. 9, 2012), the Federal Circuit affirmed the district court’s grant of a preliminary injunction (“PI”) against CellzDirect, Inc. and Invitrogen Corporation, now Life Technologies Corporation (“LTC”).

U.S. Patent No. 7,604,929 (“the ’929 patent”), which is assigned to Celsis In Vitro, Inc. (“Celsis”), relates to a method for preparing multi-cryopreserved hepatocytes. The ’929 patent teaches that human hepatocytes, which are a type of liver cell, are useful in evaluating drug candidates, but have two weaknesses: (1) they have a short lifespan that causes an inconsistent and limited supply; and (2) research is best performed on a pool of hepatocytes from a larger group of different liver donors to minimize the effect of outlier data and best represent the larger population. The ’929 patent intends to solve these problems while retaining substantial hepatocyte cell viability by multi-cryopreserving hepatocyte cells, i.e., preserving hepatocytes using a process involving multiple freezing and thawing cycles.

Celsis sued LTC for infringing the ’929 patent, alleging that LTC sells pooled multi-cryopreserved hepatocyte products that are prepared by performing an infringing process. Celsis also asserted that its LiverPool™ pooled multi-cryopreserved hepatocyte products are covered by the ’929 patent. Celsis moved for a PI, and after a month of discovery, the district court conducted an evidentiary hearing and ruled in favor of Celsis. LTC appealed.

The Federal Circuit reviewed the district court’s analysis of the four equitable PI factors: (1) likelihood of success on the merits, (2) irreparable harm, (3) balance of hardships, and (4) public interest. First, with respect to Celsis’s likelihood of success on the merits, LTC appealed the district court’s findings on only two of its defenses: noninfringement and obviousness. As to infringement, the Federal Circuit found that the district court was within its discretion to credit Celsis’s expert witness, while finding that LTC’s expert did not apply proper claim construction in his analysis. The Federal Circuit also rejected LTC’s argument that language in the asserted claim, stating “without requiring a density gradient step,” meant “prohibiting” a density gradient step. “Instead, ‘without requiring’ means simply that the claim does not require the density gradient step. Thus, performance of that step does not preclude a finding of infringement.” Slip op. at 7. Therefore, the Federal Circuit held that the district court did not abuse its discretion in finding that Celsis established a likelihood of success on infringement.

As to nonobviousness, the Federal Circuit found that the district court did not err by finding Celsis likely to succeed on nonobviousness in view of a single prior art reference—an article by de Sousa (“the de Sousa article”). As an initial matter, the Court noted that (1) the present invention is in an art well-known for its unpredictability; (2) the art was a crowded field for many years and yet there was not one reference to multi-cryopreservation; and (3) the prior art taught away from multiple rounds of freezing due to the likelihood of damaging the cells. Further, LTC was unable to point to any teaching, suggestion, or motivation in the de Sousa article that multiple rounds of freezing would somehow increase rather than decrease cell viability. The Federal Circuit rejected LTC’s argument that Celsis’s invention was simply responding to a “market need” by noting that “[w]ithout more, this reference to ‘market need,’ properly linked to the claimed invention, is actually probative of long felt need under objective criteria analysis and supportive of non-obviousness.” Id. at 11. Thus, the district court did not err by crediting Celsis’s expert testimony over that of LTC’s experts, and the Federal Circuit held that the record supported the district court’s finding that Celsis had shown a likelihood of success on nonobviousness.

Second, the Federal Circuit found that the district court did not err in finding that Celsis would suffer irreparable harm without a PI. The Court noted that Celsis presented unrebutted expert testimony on price erosion, loss of goodwill, damage to reputation, and loss of business opportunities, all of which were valid grounds for finding irreparable harm. Further, the Federal Circuit stated that “the mere possibility of future monetary damages does not defeat a motion for preliminary injunction.” Id. at 14. Thus, in light of the “unrebutted expert testimony,” the Court found “no reason to reverse the district court’s weighing of evidence.” Id. at 16.

Third, the Federal Circuit held that the district court did not clearly err by finding that the balancing of harms favored Celsis. Once again, LTC failed to present any expert testimony to rebut Celsis’s expert testimony. The Court noted that Celsis would lose the value of its patent and suffer irreparable harm, about which its expert witness opined, without a PI. Further, the Federal Circuit agreed with the district court’s rejection of LTC’s argument that it would be forced to shut down its operations because “LTC’s losses were the result of its own calculated risk in selling a product with knowledge of Celsis’[s] patent.” Id. Finally, the Federal Circuit found no abuse of discretion in the district court’s bond amount and noted that LTC failed to present additional evidence to substantiate a higher bond when given an opportunity to do so by the district court.

Lastly, the Federal Circuit held that the district court did not err in concluding that the public interest favored Celsis’s enforcement of its patent rights. The record showed that the public had an interest in having an adequate supply of pooled multi-cryopreserved hepatocyte products, that the incentives provided by patents to invest in drug research and development would be undermined if Celsis’s exclusionary rights were not protected, and that even with an injunction, the public could obtain the products from Celsis.

Accordingly, because the Federal Circuit found no reversible error in the district court’s findings, the Federal Circuit held that the district court did not abuse its discretion in granting Celsis’s motion for PI.

Judge Gajarsa dissented from the majority’s decision to uphold the district court’s “extraordinary and drastic remedy” of a PI because he believed that LTC raised a substantial question as to the validity of the ’929 patent. Gajarsa Dissent at 1. In particular, Judge Gajarsa stated that the majority’s affirmance of the district court’s obviousness analysis incorrectly perpetuates a clear and convincing standard of proof for judging likelihood of success on invalidity at the PI stage and “reinvigorates the pre-KSR standard for obviousness, rigidly requiring an explicit teaching, suggestion, or motivation for multi-cryopreserving hepatocytes.” Id. at 2.

Summary authored by Daniel A. Lev, Ph.D., Esq.