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July 2001
Vol. 4, No. 7, pp 51–52, 54.
patents and property

Defending against an infringement claim

How one pharmaceutical patent case hinged on law and principles of equity.

Executives in the pharmaceutical industry recognize that patent rights are an important asset in protecting the extensive R&D investment necessary to bring a new drug product to market. On the other hand, patent rights owned by the competition can present a formidable impediment to commercializing a product.

Defending against a claim of patent infringement is not an enviable task. On first glance, it appears that the odds are stacked in favor of the patent owner and against the accused infringer.

After all, the patent owner comes to court with a property grant from the U.S. government providing the exclusive right to make, use, and sell the claimed invention. Invariably, the patent owner tries to present a story that the patent relates to a pioneering invention that solved some previously unsolvable problem. That story is buttressed by the legal presumption that the Patent Office was correct in granting the patent.

Treble damages
It is also common for a patent owner to contend that the accused infringer acted in willful disregard of its patent rights. If willful infringement is found, the accused infringer may face trebling of any proven damages. In defending against a charge of willful infringement, the accused infringer often must decide whether to waive the attorney–client privilege with respect to legal advice it received concerning the noninfringement or invalidity of the patents at issue. Disclosing communications with your lawyers can, of course, present serious risks.

In addition to monetary damages, the patent owner will usually seek an injunction if infringement is proven. An injunction requiring the removal of a product from the market is, at minimum, expensive and inconvenient to a pharmaceutical company. In cases of a one-product company, an injunction can be devastating.

The news for accused infringers, however, is not all bad. Avenues to successfully defending against a patent infringement suit can be found in the patent law, as well as in general principles of equity.

For example, Forest Laboratories, Inc., and ONY, Inc., recently defended a pharmaceutical named Infasurf against an infringement suit brought by Abbott Laboratories and Tokyo Tanabe Co., Ltd. Infasurf is a lung surfactant replacement drug for the treatment of respiratory distress syndrome—a life-threatening disease that often affects premature babies.

The active ingredient in Infasurf is calf lung surfactant extract (CLSE), which was developed in the early 1980s by three physicians from western New York—Edmund Egan and his colleagues Robert Notter and Donald Shapiro. In 1985, Egan formed ONY, Inc., to obtain regulatory approval for Infasurf and commercialize the product. In 1991, ONY entered into an agreement with Forest to market and distribute Infasurf after it received FDA approval.

Abbott and Tokyo Tanabe alleged that Infasurf and CLSE infringed two Tokyo Tanabe patents. Tokyo Tanabe had licensed those patents exclusively to Abbott. After 3-1/2 months of trial proceedings and extensive posttrial briefing, the U.S. District Court in Buffalo, NY, found in favor of Forest and ONY on two separate grounds.

First, the court ruled that Abbott and Tokyo Tanabe were barred under the principles of equitable estoppel from asserting the patents against Forest and ONY. Equitable estoppel is adoctrine based on the principles of fairness. It provides that a patent owner cannot mislead another party into believing that it is free to develop and sell a product and then later leap from the weeds to claim infringement.

Second, the court ruled that Abbott and Tokyo Tanabe failed to meet their burden of proving that the accused product infringed the Abbott/Tokyo Tanabepatents.

While the Court’s decisions were pending, Forest and ONY received all necessary approvals from the FDA to market Infasurf. After the Court found in favor of Forest and ONY, Infasurf was released commercially. It is now being used by doctors throughout the United States.

In February 2001, the Court of Appeals for the Federal Circuit affirmed the District Court’s finding of noninfringement. In light of the noninfringement decision, the Federal Circuit did not reach the issue of equitable estoppel.

It is a fundamental principle of patent law that, to prove infringement, the patentee must show that each and every limitation of the asserted claim is present in the accused product, either literally or equivalently. If the patentee fails to show the presence of even a single claim limitation, that is enough to negate an allegation of infringement of the claim. This is known in patent law as the “all elements rule”.

In the Forest and ONY case, the first claim of both of the patents-in-suit defines a “surface active material”, which is obtained from lung tissue. Each patent also includes other claims that define a “pharmaceutical composition” made from the surface active material of the first claim.

The first claim of the two patents requires that the surface active material have specified amounts of particular chemical components. Those components include phospholipids, cholesterol, free fatty acid, and residual water. The patent claims also set forth requirements for the surface tension–reducing properties of the material when tested on an apparatus known as the Wilhelmy surface balance. At trial, we presented evidence that several of the claimed chemical component limitations and the Wilhelmy balance limitations were not met by the CLSE surface active material that is used to make Infasurf—including residual water.

Plaintiffs, on the other hand, argued that the claims should be construed so that the residual water of the surface active material was merely a reference point for determining the concentration of the other chemical components. According to plaintiffs, the residual water did not need to be measured.

The court found that the residual water was a distinct component of the surface active material and needed to be measured like all other components. Accordingly, the court found that Abbott and Tanabe had failed to prove infringement.

In February 2001, the Federal Circuit affirmed the District Court’s claim construction determination for the “surface active material” limitations and affirmed the District Court’s noninfringement ruling.

The lesson here is that the patentee should not assume that its theory of what the claims mean will prevail. It should, if it can, prove infringement not only under its interpretation of the claim but also under the interpretation advanced by the accused infringer.

Equitable estoppel
The doctrine of equitable estoppel is not limited to a particular factual situation or to simple hard-and-fast rules. Nevertheless, the U.S. Court of Appeals for the Federal Circuit—the appeals court with exclusive jurisdiction over patent cases—has set forth a three-part test for determining whether that doctrine should be applied.

First, the alleged infringer must show that the patentee, through misleading conduct, led the alleged infringer to reasonably infer that the patentee did not intend to enforce its patent against the infringer. Second, the alleged infringer must demonstrate reliance on that conduct. Finally, the alleged infringer must show that it will be materially prejudiced, that is, harmed or disadvantaged, if the patentee is permitted to proceed with an infringement claim against the alleged infringer.

In proving the equitable estoppel defense, we presented evidence that showed that Abbott not only knew about the CLSE for 11 years without ever raising an infringement claim, but in fact encouraged Dr. Egan and his colleagues to continue their work with CLSE.

In light of this evidence, the court ruled that Forest and ONY had proven misleading conduct, reliance, and prejudice. Accordingly, the court ruled in their favor on equitable estoppel.

In making its ruling, the court also rejected Abbott and Tokyo Tanabe’s arguments that a finding of equitable estoppel was not proper because of the “safe harbor” provisions of the patent law, 35 U.S.C. § 271(e)(1). Because ONY was involved in clinical trials of Infasurf for FDA approval proposed during the 1980s and 1990s, Abbott and Tokyo Tanabe contended that the safe harbor provision would have prohibited them from bringing an infringement action against ONY during that time period.

The court disagreed, stating that the defendants did not present any evidence showing that the safe harbor provision actually played a role in their not bringing an infringement claim earlier, and that the argument seemed like an “after-the-fact rationalization”.

As a matter of common sense, a pharmaceutical executive who is on notice of a potentially infringing drug in clinical trials would not wait 11 years to provide some warning or notice of infringement. As a business practice, and as a matter of fairness, that makes no sense. Put differently, if an executive at a pharmaceutical company learns about a possible infringing product, he or she should notify the potential infringer promptly.

Other keys to success
One cannot overemphasize the importance of presenting credible witnesses at a patent infringement trial. In this case, the court specifically commented in its written decisions on the credibility of the testimony given by witnesses called to the stand for the defense—for example, Howard Solomon, the president of Forest Laboratories; Edmund Egan, the president and founder of ONY; and Ronald Albano, a former Forest Laboratories executive. Those witnesses testified about the development of the Infasurf product and their reliance on their long history of interacting with Abbott during which Abbott never alleged infringement.

Competent and dedicated expert witnesses are also critically important to success in court. Here, Egan—in addition to providing firsthand factual testimony—testified as an expert on the biochemistry of surfactant. Robert Notter of the University of Rochester Medical School provided invaluable technical assistance to the legal team and important expert testimony on surface chemistry.

Although defending a patent infringement suit is difficult, all of the odds are not in favor of the patentee. Knowledge of the law and the technical discipline, along with credible witnesses and technical consultants, goes a long way in accomplishing a successful result.

Kenneth B. Herman and Christopher J. Harnett are partners in the law firm of Fish & Neave in New York City. Send your comments or questions regarding this article to mdd@acs.org or the Editorial Office by fax at 202-776-8166 or by post at 1155 16th Street, NW; Washington, DC 20036.

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