CAFC: Pre-AIA 102(g)(2) Captures Reduction in US on Invention Conceived in Russia

On February 12, 2014, the Federal Circuit issued its decision in Solvay S.A. v. Honeywell International. In this case, Solvay S.A. appealed to the United States Court of Appeals for the Federal Circuit from a judgment of the United States District Court for the District of Delaware in favor of defendant Honeywell International. The district court held that asserted claim 1 of Solvay’s U.S. Patent No. 6,730,817 was invalid under pre-AIA 35 U.S.C. § 102(g)(2). The question at the heart of this appeal, as dictated by the specific factual scenario, was whether an invention conceived by a foreign inventor and reduced to practice in the United States qualifies as prior art under § 102(g)(2). This was the operative question because engineers working at the Russian Scientific Center for Applied Chemistry (“RSCAC”) first conceived the invention, which was reduced to practice in this country by Honeywell personnel pursuant to the RSCAC’s instructions, and they did not abandon, suppress, or conceal it.

At trial, Honeywell argued that the invention was conceived by Russian inventors outside the United States and reduced to practice in the United States by Honeywell personnel following the Russian inventors’ instructions before the ’817 patent’s priority date. As a result, Honeywell argued, the invention qualifies as §102(g)(2) prior art. A jury ultimately determined that, as required by § 102(g)(2), the Russian Scientific Center for Applied Chemistry did disclose the invention of claim 1 in the 1994 Russian patent application, which means that they did not abandon, suppress, or conceal the invention. Based on the jury verdict, the district court entered judgment for Honeywell, finding asserted claim 1 invalid under § 102(g)(2).

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The Arbitrary Nature of Obviousness

Obviousness is where the rubber meets the road in terms of patentability, and it seems that the state of the law of obviousness is anything but clear. It has always been difficult to explain the law of obviousness to inventors, business executives and law students alike. Since the United States Supreme Court issued its decision in KSR v. Teleflex, it has become even more difficult to provide a simple, coherent articulation of the law of obviousness that is at all intellectually satisfying. That is in no small part due to the fact that the determination about whether an invention is obvious is now completely subjective.

If you look at the Federal Circuit cases, it seems that there is a lot of post hoc reasoning that simply justifies a conclusion already formed. De novo review of all the facts allows the Federal Circuit to be a super-panel that can simply supplant its own beliefs for the considered beliefs of patent examiners, the Board, a District Court Judge or even a jury. While conceptually it may seem like a good idea to have a fresh look by a reviewing court, this fresh look at all things leads to no predictability, and obviousness law in utter disarray.

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Concrete and Tangible is the Right Test for Patent Eligibility

In 1998, the United States Court of Appeals for the Federal Circuit, in State Street Bank & Trust Co. v. Signature Financial Group, Inc.did away with what had previously been come to be known as the business method exception to patentability. The Federal Circuit, per Judge Giles Sutherland Rich (shown left), pointed out that the business method exception had never been invoked by either the Federal Circuit or its predecessor court, the CCPA. Judge Rich explained that “[s]ince the 1952 Patent Act, business methods have been, and should have been, subject to the same legal requirements for patentability as applied to any other process or method.”

Although the United States Supreme Court did away with that test when it issued its decision in Bilski v. Kappos, it is still nevertheless illustrative and the best test that is out there. Simply stated, in order to have a patentable business method, it is necessary for the invention to accomplish some practical application. In other words, in order for a business method to be patent eligible, it must produce a “useful, concrete and tangible result.” Judge Rich was correct to point this out and the Supreme Court has made a horrible mess of the law as it applies to business methods and computer-implemented innovations because it fails to understand what Judge Rich really meant.

If you really understand what Judge Rich meant by “useful, concrete and tangible result,” you come to the inescapable conclusion that it is the appropriate test. Indeed, those drafting patent application would do well to really target the description of the invention to satisfy the test.

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AstraZeneca Loses at the Federal Circuit on Omeprazole

US Court of Appeals for Fed CircOn December 19, 2013, Hanmi Pharmaceuticals received good news in the form of a decision by the U.S. Court of Appeals for the Federal Circuit (CAFC). Invoking 35 U.S.C. §271(e)(2), AstraZeneca had alleged that a drug Hanmi proposed to market falls within claims of U.S. Patent Nos. 5,714,504 and 5,877,192. After the district court construed the claim terms “alkaline salt” in the ’504 patent and “pharmaceutically acceptable salt” in the ’192 patent, the parties consented to the entry of a final judgment of non-infringement based on the constructions. This case is of particular interest to the industry because omeprazole is the active ingredient in the popular over-the-counter heartburn medication know as Prilosec.

Creating a salt out of omeprazole can enhance stability during storage and transportation, a useful property in pharmaceutical compounds.  AstraZeneca discovered that certain salts of an omeprazole enantiomer have improved pharmacokinetic and metabolic properties which will give an improved therapeutic profile such as a lower degree of interindividual variation. During prosecution, AstraZeneca conducted experiments that led it to conclude that one of the two enantiomers gave particularly good results. The preferred enantiomer became known as “esomeprazole.”

Will the Supreme Court Accept Soverain v. Newegg?

To many, Soverain v. Newegg is just another obviousness dispute; so why would the Supreme Court get involved? It is really more than your typical obviousness dispute, though. Increasingly, patent claims are held valid in a variety of different forums — they are initially granted, they are litigated in district court and at the ITC, and litigated again and again at the USPTO. In some instances, after all that litigation, and even after multiple successful reexaminations in favor of the patentee, the Federal Circuit will find the claims invalid as being obvious.

How is this the case? That is a good question. It stems from the fact that obviousness, which is supposed to be a mixed question of fact and law, is reviewed de novo by the Federal Circuit. It seems the Federal Circuit, which as an appellate court is not well-equipped to deal with determining facts, reviews the underlying facts de novo as well.

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