PATENT CASE OF THE WEEK

ThermoLife Int’l LLC v. GNC Corp., Appeal Nos. 2018-1657, 2018-1666 (Fed. Cir. May 1, 2019)

In an appeal from a district court decision, the Federal Circuit affirmed the district court’s grant of defendants Hi-Tech’s and Vita Pharmaceuticals’ motions for attorney’s fees under 35 U.S.C. § 285. At trial, the court reached judgment only that the asserted claims of the patents-in-suit were invalid; discovery on infringement had been postponed so that validity could be litigated first, and thus infringement was never adjudicated. At issue on appeal was whether, in finding the case exceptional, it was appropriate for the district court to base its decision on plaintiffs’ inadequate pre-suit investigation as opposed to basing it on an assessment of the validity position taken by plaintiffs or how they litigated validity.

Plaintiff ThermoLife, the exclusive licensee of four patents owned by Stanford University (later added as a plaintiff), asserted those patents against 81 different defendants, in 81 separate suits, in the Southern District of California. The district court consolidated all cases. In its complaints, ThermoLife alleged that appellees Hi-Tech and Vital directly and indirectly infringed the patents-in-suit, and supported its allegations with the labels and advertisements of the parties’ accused products.

The asserted claims of the patents-in-suit cover methods and compositions involving certain amino acids that are to be ingested to enhance vascular function and physical performance. The only claim of the patent asserted against Hi-Tech and Vital includes an efficacy requirement—the supplement must include L-arginine or L-arginine hydrochloride in “an amount sufficient to enhance endogenous endothelial NO [nitric oxide].” During claim construction, this term was not construed, nor was any other limitation of any asserted claim regarding the amount of arginine to be administered. During expert discovery, plaintiffs’ validity expert made clear that studies published before the suits were filed showed that amounts of L-arginine less than 1 gram were ineffective to enhance nitric oxide production.

After the patents-in-suit were found invalid by the district court, Hi-Tech and Vital moved for section 285 attorney’s fees on two grounds. First, they argued that plaintiffs did not conduct an adequate pre-suit investigation into alleged infringement by the accused products, which would have revealed that the accused products did not contain 1 gram or more of L-arginine or L-arginine hydrochloride. Second, they argued that plaintiffs filed many suits without adequate investigation, simply to try to extract nuisance-value settlements from the defendants.

In responding to the first argument, plaintiffs did not deny that the accused products were publicly available at the time the complaints were filed, nor did they deny that simple tests existed at that time to determine the accused products’ composition. Nor did they assert that they had conducted such tests. Plaintiffs noted that Hi-Tech and Vital excluded all other patents at issue in their fees arguments, but did not discuss those patents to show why they differed as to the adequacy of the pre-suit investigation. Plaintiffs also denied the accusation that they sued only to extract settlements.

Agreeing with Hi-Tech and Vital that the pre-suit investigation was inadequate, the district court found the case exceptional. Like the parties, it focused entirely on the asserted claim against Hi-Tech and Vital, and specifically held that plaintiffs either had not examined the accused products’ labels before filing, or if they did, they ignored clear label indications of less than 1 gram of L-arginine or its hydrochloride salt. Further, the district court found that aside from labels, plaintiffs relied only on defendants’ advertising statements, which plaintiffs actually disparaged during the litigation by calling them “bombastic.” The district court also found that plaintiffs’ pattern of action of bringing many suits strongly suggested plaintiffs did so without carefully reviewing their claims.

The Federal Circuit affirmed. First, the Court held that procedurally, there was no abuse of discretion in the district court’s basing its exceptional-case determination on an issue, infringement, that was not fully adjudicated or litigated on the merits. While noting it was an “unusual basis” for fees, the Court explained it had not been pointed to any denial of plaintiffs’ procedural rights, and was therefore given no persuasive reason for holding such a basis was legally impermissible. The Court further explained that Hi-Tech and Vital’s failure to give early notice of the defects in plaintiffs’ infringement assertions was not a basis for finding the fee award to be an abuse of discretion because the section 285 standard is a flexible one. Specifically, while lack of such early notice can support a denial of fees, that notice is not rigidly required—especially in cases such as here, where plaintiffs’ suits against 81 defendants reasonably led to a coordination among the defendants and an agreement, for efficiency, to give priority to the common issue of validity and postpone party-specific issues like infringement.

Second, there was also no abuse of discretion in the inadequate investigation determination. As to the reliance only on one claim, since plaintiffs made no argument showing how the basis for their infringement contentions was stronger for the other asserted claims, the Court found it could not fault the district court for not separately assessing the reasonableness of the investigation for those other claims. Moreover, nearly all asserted claims had efficacy requirements similar to that of the one claim; for those without efficacy requirements, plaintiffs made no showing that even if asserting those claims was justified, the burdens of the litigation were materially unaffected by the inclusion of all the other claims.

As to the finding that 1 gram of L-arginine or its hydrochloride salt was required for infringement, there was also no error. While plaintiffs argued that this finding was a matter of claim construction rather than infringement, the Court, noting that the term at issue was not construed, held that the question of infringement of that limitation was simply whether a particular amount being administered sufficed to produce the claimed effect, which is a factual question based on science, rather than one of “what was believed about the body’s operation at the time of issuance of or application for the patent.” Since plaintiffs’ validity expert gave deposition and trial testimony that studies at the time showed 1 gram or less to be ineffective, there was no clear error in finding 1 gram to be necessary for the claimed invention, and thus no abuse of discretion in faulting plaintiffs for failing to learn this public-literature information before bringing suit.

Third, there was no reversible error in determining plaintiffs’ investigation was inadequate because (1) the accused products were publicly available, (2) the test to determine the amounts of ingredients were “simple,” and (3) plaintiffs performed no such test on any accused products. While testing of an accused product is not necessarily required for pre-suit investigations, whether it is necessary depends on the availability of the products at issue, the existence and costs of testing, and whether other sufficiently reliable information exists. Here, since the two alternatives to testing—the product label and product advertising—were deficient, there was no adequate substitute for simple testing of publicly available products.

Finally, the Court found no reversible error in the district court’s determination that plaintiffs’ “pattern of misconduct” in filing suits against numerous defendants to extract nuisance settlements was reason to grant section 285 attorney’s fees. Thus, there was no abuse of discretion.

The opinion can be found here.

ALSO THIS WEEK

Endo Pharmaceuticals, Inc. v. Actavis LLC, Appeal No. 2018-1054 (Fed. Cir. May 3, 2019)

The Federal Circuit affirmed a district court’s claim construction and obviousness determination in an ANDA case involving a patent covering certain pharmaceuticals. Specifically, claim 1 of the asserted patent recited, “A hydrochloride salt of oxymorphone comprising less than 0.001% of 14-hydroxymorphinone.” The last component is referred to as an “ABUK,” or an undesirable intermediate compound created in the production of oxymorphone. The FDA had set a regulatory requirement that ABUK content in oxymorphone products be less than 0.001%. The patents claimed this solution. The district court found the patents non-obvious over three prior art references, and the Federal Circuit agreed.

Judge Stoll dissented. In her opinion, the FDA set the standard that the inventors achieved. Since the claims did not claim how to achieve the patented invention, she would have held the claims invalid over the FDA’s communications on the topic, which, she said “disclose every limitation of claim 1.” Judge Stoll opined that, in finding the claims non-obvious, the district court committed several legal errors, including “conflating enablement and reasonable expectation of success,” and applying a “heightened standard for reasonable expectation of success.” Judge Stoll would have remanded for reconsideration applying a corrected legal standard for obviousness.

The opinion can be found here.

Trading Technologies Int’l v. IBG LLC, Appeal No. 2017-2323 (Fed. Cir. April 30, 2019)

Trading Technologies (TT) appealed a decision of the Patent Trial & Appeal Board (PTAB) in a Covered Business Method (CBM) review finding TT’s patent claims ineligible under § 101. TT’s patent related to displaying financial market information on a screen. TT contended that its claims were patentable because they present price, profit, and loss information on a “particular graphical interface” that enables traders to make faster mental calculations. The Federal Circuit affirmed the PTAB’s rejection of the claims. The Court first affirmed that the claims were CBM eligible because they solved a business problem rather than a technical problem. The Federal Circuit next upheld the PTAB’s ruling that the claims were ineligible for patenting under § 101. Under step one of the Alice framework, the Court agreed that the claims were directed to helping traders process information more quickly, and not on improving computers or technology. The Court then dismissed TT’s arguments on Alice step two, finding that there was nothing in the claim elements, either individually or as an ordered combination, that transformed the claims into a patent eligible application. Finally, the Federal Circuit declined to consider TT’s four-sentence challenge to constitutionality of CBM review, finding the conclusory argument insufficient to preserve the issue for appeal.

The opinion can be found here.

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