September 2013
In a Fetal Genetic Test Case, Court Provides Additional Guidance to Address Traditional Equitable Factors for a Preliminary Injunction
| Judges: Rader (author), Dyk, Reyna |
| [Appealed from N.D. Cal., Judge Illston] |
In Aria Diagnostics, Inc. v. Sequenom, Inc., No. 12-1531 (Fed. Cir. Aug. 9, 2013), the Federal Circuit vacated and remanded the district court’s decision denying a preliminary injunction against Aria Diagnostics, Inc., now know as Ariosa Diagnostics, Inc. (“Ariosa”), holding that the district court incorrectly interpreted the asserted claims and improperly balanced factors regarding issuance of a preliminary injunction.
U.S. Patent No. 6,258,540 (“the ’540 patent”) is owned by Isis Innovation Limited (“Isis”) and exclusively licensed to Sequenom, Inc. (“Sequenom”). The ’540 patent claims methods to detect fetal genetic characteristics by analyzing non-nucleated free floating fetal DNA (“cffDNA”) obtained from a maternal blood sample. Ariosa filed a DJ action against Sequenom seeking a declaration that its Harmony test did not infringe the ’540 patent. Sequenom counterclaimed for infringement and moved for a preliminary injunction to prevent Ariosa from making, using, or selling its Harmony test. The district court denied Sequenom’s motion, and Sequenom appealed.
On appeal, the parties disputed the proper standard of review for claim construction in the context of a preliminary injunction. The Federal Circuit noted that it recognized some flexibility on that point, but that even under a more relaxed standard, the district court erred in its claim construction, and as a consequence, erred in finding a substantial question of noninfringement.
“While the facts may show that damages would be reparable, this assumption is not sufficient. In the face of that kind of universal assumption, patents would lose their character as an exclusive right as articulated by the Constitution and become at best a judicially imposed and monitored compulsory license.” Slip op. at 13.
The Court reviewed the district court’s construction of the terms “paternally inherited nucleic acid” and “amplifying” in the claims. The district court construed “paternally inherited nucleic acid” to mean “DNA sequence known [in advance] to be received only from the father which is not possessed by the mother.” Slip op. at 5 (alteration in original) (citation omitted). The Federal Circuit held that this construction was incorrect, noting that the term did not incorporate any inherent meaning about the timing or method of detecting the paternal characteristic. Under the district court’s construction, however, infringement could only occur after a user knows the father’s gene sequence. The Court stated that had the applicant wanted to limit the claim to those nucleic acids known in advance to have come from the father, it easily could have done so, but that the applicant did not limit the term in the claim. Reviewing the evidence that the district court relied on, including one sentence from the specification, the examples, and isolated events in the ’540 patent’s prosecution history, the Court found that the record did not support importation into the claims of a “known in advance” limitation.
The Court also disagreed with the district court’s construction of “amplifying” as “increasing the concentration of a paternally inherited nucleic acid relative to the other DNA in the sample,” and that this was “not the same as amplifying . . . all DNA in the sample.” Id. at 10 (citations omitted). The Court disagreed that the term required only paternally inherited nucleic acid to increase, as the claim did not mention an effect on the quantity of other nucleic acid. The Court stated that the claim as written stands infringed without regard to whether or not other nucleic acid is amplified. The Court further found that the specification and prosecution history did not support the district court’s interpretation.
Next, the Court addressed the district court’s finding that there was a substantial question over whether the subject matter of the asserted claims was directed to eligible subject matter. Noting the intervening decision by the Supreme Court in Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013), the Court remanded the case for the district court to examine subject matter eligibility in the first instance. The Court clarified that it offered no opinion as to whether or not there was a substantial question regarding subject matter eligibility, noting that in light of Myriad and the different claim construction, the Court would benefit from the district court’s initial and further consideration.
The Court stated that if the district court found no substantial question of validity or infringement on remand, it must address the traditional equitable factors for a preliminary injunction. The Court held that the district court erred in its brief analysis of these factors. The Court stated that significantly, the district court found that price and market erosion would occur even though the district court denied Sequenom’s motion for four reasons. The Court provided guidance on each of the district court’s four reasons. First, the district court reasoned that the erosion to Sequenom’s price and its loss of market share were not irreparable because Sequenom could recover the market and receive damages to compensate for the infringement. In response, the Court held that “[w]hile the facts may show that damages would be reparable, this assumption is not sufficient.” Slip op. at 13. In the face of that kind of universal assumption, the Court explained that patents would lose their character as an exclusive right as articulated by the U.S. Constitution and become at best a judicially imposed and monitored compulsory license. The district court’s second reason was that in showing the degree of price erosion and market loss, Sequenom’s expert had not examined the “actual market” because he did not consider the impact of another test that was sold by another company. The Court, however, found that the fact that other infringers may be in the marketplace does not negate irreparable harm. Regarding the third reason that a preliminary injunction would put Ariosa out of business, the Court indicated that no comparison of difficulties or losses Ariosa might experience weighed against the harms Sequenom might suffer without protection of its legal exclusive rights. Finally, regarding the district court’s reasoning that the public interest favored denial of the preliminary injunction, the Court took judicial notice that an expert organization had warned that cffDNA tests should not yet be used in low-risk women, and further instructed that on remand, if necessary, the district court should consider this and any other evidence pertaining to the public interest anew.
The Court noted that it considered but found unpersuasive Ariosa’s other arguments, and reversed and remanded this case to the district court for further proceedings consistent with its opinion.
