January 13, 2010

Intellectual Property Highlights of 2009: Federal Circuit, USPTO and Beyond

The past year heralded a number of events that could directly affect the way medtech companies do business. Among these are the Federal Circuit decision in Prometheus—which may shape the future of medical method claims—as well as possible policy shifts within the U.S. Patent and Trademark Office. The following is an overview of some significant legal, legislative and regulatory developments medtech companies will want to monitor in 2010.

New USPTO Leadership and Legislative Developments (or Lack Thereof)

David Kappos was confirmed as director of the U. S. Patent and Trademark Office (USPTO) on August 7, 2009, and wasted little time in making an impact on the organization. Among his early initiatives, Kappos began several pilot programs designed to expedite patent application examination and encourage serial, rather than parallel, examination of related applications in hopes of reducing the backlog of pending applications.

While it is too early to assess the impact of these developments at the USPTO, any efforts to reduce time to issuance of patent applications will likely benefit medtech companies, which characteristically view their patent portfolios as key strategic and economic assets.

In contrast to the changes within the USPTO, patent reform legislation efforts remain largely where they stood five years ago. House and Senate patent reform bills remain in committee while debate focuses on the potential impact proposed changes would have on the patent system and the economy. Medtech industry stakeholders continue to take issue with various aspects of the draft bills, in particular, the proposals for post-grant review and expanded inter-partes reexamination provisions, which many believe will diminish the value of patent portfolios and increase uncertainty with respect to the strength and scope of protection provided by the portfolios.

Patent-Eligible Subject Matter—Update on Prometheus and Bilski

On September 16, 2009, a unanimous panel of the U.S. Court of Appeals for the Federal Circuit decided Prometheus Laboratories, Inc. v. Mayo Collaborative Services, holding that the patent holder's patent claims to a "method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder" constituted patent-eligible subject matter under the patent statute. Prometheus is the first precedential Federal Circuit decision applying the In re Bilski "machine-or-transformation test" to medical method claims.

Under Bilski, a claimed process is eligible for patent protection if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In interpreting and applying the second prong of the Bilski test, the Prometheus opinion included broad statements supporting the patent eligibility of claims covering methods of treatment—particularly where the method includes administering a drug to treat an undesired physiological condition. At the same time, Prometheus left unanswered the question of whether purely diagnostic methods, such as methods of diagnosing a medical condition by identifying a correlation between patient test data and a disease, would be patent eligible under Bilski.

On November 9, 2009, the Supreme Court heard oral argument in the appeal of the Federal Circuit's Bilski decision. Because Bilski's claims were so-called "business method" claims, much of the Supreme Court questioning centered around the eligibility for patent protection of such claims, and several justices appeared highly skeptical that business-method claims should be eligible for patent protection. The justices' questions, however, shed little light on the Court's view regarding the patent eligibility of medical treatment or diagnostic method.

The Supreme Court has been asked to review the Federal Circuit's Prometheus decision, which would undoubtedly provide a better vehicle than Bilski itself for understanding the future of medical method claims. The Court has not yet decided whether it will review Prometheus, so stay tuned as this issue continues to develop in the coming months.

Protecting Medical Treatment Claims—No Infringement of U.S. Patents Based on Methods Practiced Abroad

One challenge medtech companies face in building an effective international patent portfolio is the general prohibition against patenting methods of medical treatment. While such methods are fair game for patenting in the United States, most other jurisdictions (including Europe) do not allow medical treatment claims. At the same time, new medical devices are sometimes not eligible for patent protection themselves (e.g., where they are very similar to existing products). In such cases, the scope of patent protection may be limited to coverage of methods of treatment using the new device.

Entering 2009, a medtech company's U.S. patent portfolio provided a certain amount of "extraterritorial" protection. Generally, section 271(f) of the U.S. patent law prohibits companies from supplying components of a patented invention from the United States if the components are "especially adapted for use in the invention."

Section 271(f) was enacted in 1984 to close a then-existing loophole, which allowed a company to avoid infringement of a U.S. patent by shipping the components overseas for assembly of the patented invention. In 2005, in Union Carbide v. Shell Oil Co., the Federal Circuit determined that section 271(f) applies to both device and method claims. Thus, under Union Carbide, a medtech company that manufactured a device or drug in the U.S. and exported it to, for example, Europe, faced liability for infringement of a patent claim covering a method of using the device or drug even where no actual use occurred in the United States.

On August 19, 2009, in Cardiac Pacemakers v. St. Jude Medical, the Federal Circuit overturned Union Carbide and ruled that section 271(f) does not apply to method claims. This ruling is consistent with the trend—begun in 2007 by the Supreme Court in Microsoft v. AT&T—toward restricting the extraterritorial applicability of U.S. patents. Specifically, the Court found that section 271(f) only applies to the sale of tangible physical objects. The Court determined that the term "supplies" requires the physical transfer of a tangible object forming a part of the patented invention. An intangible step in a method claim cannot be supplied.

The Cardiac Pacemakers decision arguably has the greatest impact on pending patent litigation involving medical method claims, where damages, or perhaps liability itself, are predicated on uses abroad. Medtech companies currently engaged in U.S. patent litigation in which patentees are asserting medical treatment claims may now have the ability to reduce exposure associated with products sold abroad.

Patent Term Extension: Meaning of First Permitted Use of the Product

The typical enforceable term of a U.S. patent is 20 years, beginning on the date the patent issues and ending 20 years from the earliest filing date of the application family.

Under the Hatch-Waxman Act, enacted in 1984, a patent term may be extended by up to an additional five years where the patent owner was unable to enjoy the full term of its patent dues to delays in obtaining government marketing approval for either a drug or a medical device. In addition, a limited number of one year interim extensions are available in cases where the patent is likely to expire before the drug or medical device receives regulatory approval. Hatch-Waxman's patent term extension provisions balance out, to some extent, other provisions in the act that insulate competitors from patent infringement liability for activities (e.g., clinical trials) undertaken for purposes of obtaining regulatory approval.

A medtech company can request that the USPTO grant an extension of the term of key strategic patents, if certain requirements are satisfied. The company must identify the patent and specific claims for which an extension is sought, along with the recently approved product. The company must also identify key dates relating to the regulatory approval process, which relate to the appropriate length of a term extension. The company must submit the request within 60 days of the product's approval. Some of the requirements for a patent term extension continue to remain somewhat vague. For instance, Hatch-Waxman allows term extension only if the regulatory approval is for a product representing "the first permitted commercial marketing or use of the product."

On October 29, 2009, the USPTO granted a second interim extension for U.S. Patent 5,451,233, which otherwise would have expired on October 29, 2008. The ‘233 patent is directed to a rapid-exchange delivery catheter for interventional cardiology procedures. The USPTO continues to evaluate whether this patent qualifies for a term extension. In particular, the USPTO is considering the length of the regulatory review period—and is also perhaps considering whether the recent approval of a system including a delivery catheter in combination with a drug-coated stent qualifies as the "first permitted commercial marketing," where the patent owner has previously obtained approval for products including the rapid-exchange technology. While at least one district court judge has expressed his opinion that Hatch-Waxman term extension does not apply in this situation, the issue remains murky.

Medtech companies should evaluate whether to apply for term extensions for key strategic patents claiming inventions undergoing regulatory review. And, at least under the current law, patent term extension is arguably available even where the current regulatory review is for a combination product including a previously approved claimed component.

"Soft" Assertions of Patent Right Likely Allow Litigation

In the highly competitive industries of pharmaceuticals and biotechnology, protecting intellectual property is critical to recouping the high costs of research and development. Indeed, pharmaceutical and biotechnology companies may rely upon a small number of blockbuster patents to fuel their overall R&D efforts—and therefore, protecting those assets becomes paramount.

Through the years, companies have used carefully worded letters in an attempt to assert their patent rights without triggering declaratory judgment jurisdiction. On December 4, 2009, the Federal Circuit's holding in Hewlett-Packard v. Acceleron makes clear that patent holders cannot avoid declaratory judgment actions by simply avoiding "magic" words. The Federal Circuit further held that the patentee's subjective intent, e.g., whether the patentee had conducted an infringement analysis or was planning to litigate, was irrelevant to the inquiry and that "conduct that can be reasonably inferred as demonstrating intent to enforce a patent can create declaratory judgment jurisdiction."

In view of HP and the Supreme Court's earlier Medimmune decision, medical technologies companies receiving a letter alleging patent infringement may likely have the ability to launch a declaratory judgment action in a favorable jurisdiction. And, likewise, before sending a letter to a competitor alleging patent infringement, companies should be aware that such a letter may allow your competitor to file suit in its jurisdiction of choice.

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