Patent Portfolio Strategies in the Post-KSR Environment

Bruce D. SunsteinBromberg & Sunstein LLP

Boston

www.bromsun.com© 2009 Bromberg & Sunstein LLP

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KSR v. Teleflex: new rules for non-obviousness (inventive step)

KSR Intern. Co. v. Teleflex Inc., 127 S. Ct. 1727 (April 30, 2007)

Why it matters to Biopharma and Medical Device Companies

Issued patents are now more readily attacked. Patents applied for may be harder to get. Evaluating or managing a patent portfolio requires new approaches.

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Dealing with KSR v. Teleflex

How to determine whether a patentable invention is present How the rules governing obviousness have developed

KSR v. Teleflex What KSR v. Teleflex held in a nutshell Who are the losers and winners under KSR v. Teleflex? New rationale for obviousness Obviousness since KSR in the Federal Circuit: an overview

Strategic implications of KSR v. Teleflex KSR and Inter Partes Reexamination: A Double Blow USPTO Examination Procedure: New Guidelines Writing and prosecuting patents Portfolio management The heightened position of prior art searching

A note on the Bilski case and its impact on diagnostics applicationsTake Home Lessons

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How to determine whether a patentable invention is present

Patent Act, law since 1952, requires an invention to be non-obvious.

“Obviousness” was drafted to be an objective standard.

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The obviousness standard of the law

A patent will be denied for an invention “if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art.”

35 U.S.C. § 103(a).

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How the obviousness standard has been applied

Before KSR v. Teleflex, the Supreme Court last spoke about obviousness in 1966. The 1952 law was intended by Congress to ban the

“flash of creative genius” test for patentable invention articulated by the Supreme Court in 1941.

Graham v. John Deere Co., 383 U.S. 1 (1966)

Over recent decades the Federal Circuit has refined the obviousness standard.

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The Pre-KSR Federal Circuit Standard for Obviousness: “Teaching,

Suggestion, Motivation” (TSM)

An invention would have been obvious only “if ‘some motivation or suggestion to combine the prior art teachings’ can be found in the prior art, the nature of the problem, or the knowledge of a person having ordinary skill in the art.”

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KSR v. Teleflex

Involved a gas pedal assembly with electrical sensor

KSR’s gas pedal assembly similar to that patented and exclusively licensed by Teleflex

Teleflex sued KSR for Infringement

KSR defense: patents invalid for obviousness

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What KSR v. Teleflex held

The Federal Circuit TSM test was applied erroneously

“There is no necessary inconsistency between the idea underlying the TSM test” and the standard for non-obviousness

“But a court errs where, as here, it transforms general principle into a rigid rule limiting the obviousness inquiry.”

The patent licensed to Teleflex was invalidated on basis of prior art not considered by the PTO when the patent was granted

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KSR v. Teleflex cont.

Summary judgment in favor of defendant KSR on the question of obviousness was appropriate, so a trial is not necessary.

“Where, as here, the content of the prior art, the scope of the patent claim, and the level of ordinary skill in the art are not in material dispute, and the obviousness of the claim is apparent in light of these factors, summary judgment is appropriate.”

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Who are the losers and the winners under KSR v. Teleflex?

Losers: patent holders and patent seekers Patent validity challenges in litigation License negotiations Other business transactions, including equity financing Higher standards for non-obviousness = more difficulty

obtaining a patent

Winners: those at risk of infringement or in license negotiations as licensees Easier to challenge validity More favorable litigation settlements, licenses, other

transactions such as equity investments

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KSR v. Teleflex: New rationales for Obviousness

I. Combining prior art elements according to known methods to yield predictable Results

II. Simple substitution of one known element for another to obtain predicable results “A person of ordinary skill is also a person of ordinary

creativity, not an automaton.”

III. Use of known techniques to improve similar devices in same way “… familiar items may have obvious uses beyond their

primary purposes, and in many cases a person of ordinary skill will be able to fit the teachings of multiple patents together like pieces of a puzzle.”

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New Rationales for Obviousness, cont.

IV. Applying known technique to known device ready for improvement to yield predictable results

V. Obvious to try

When design need or market pressure exists to solve problem And finite number of identified, predictable solutions Then a person of ordinary skill has good reason to pursue

known options within technical grasp If anticipated success achieved, success likely not innovative

but merely ordinary skill and common sense. Then, combination that was “obvious to try” might show

invention was obvious.

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New Rationales for Obviousness, cont.

VI. Known work in one field prompts variations for use in same or new field if variations predictable to one or ordinary skill

Variations prompted by design incentives or market forces If person of ordinary skill can implement a predictable

variation, § 103 likely bars patentability If technique used to improve one device, recognized by person

of ordinary skill could improve similar device in same way, using technique is obvious unless actual technique is beyond person’s skill

VII. Teaching, suggestion, motivation (TSM)

Motivation may be implicit Motivation may be found in common knowledge, the prior art

as a whole, or the nature of the problem itself

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Obviousness Since KSR

Supreme Court has raised the standard for non-obviousness.

Patents are easier to invalidate for obviousness. Patents are harder to get.

“Common sense” in the obviousness standard adds subjectivity and unpredictability

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Obviousness in the Federal Circuit Since KSR

Federal Circuit cases in wake of KSR v. Teleflex use modified TSM test DyStar Textilfarben GmbH & Co. Deutschland KG v. C.H. Patrick

Co., 464 F.3d 1356, 1367 (2006) Alza Corp. v. Mylan Labs., Inc., 464 F.3d 1286, 1291 (2006) Ortho-McNeil Pharmaceutical v. Mylan Labs., 520 F.3d 1358

(Fed. Cir. 2008)

Modified TSM means motivation to combine references may be found implicitly in the prior art or nature of problem to be solved.

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Obviousness in Federal Circuit Since KSR, Cont.

Obviousness avoidable when there is not a “finite number” of predictable results Finite number: small in the context of the art

Ortho-McNeil Pharmaceutical v. Mylan Labs., 520 F.3d 1358 (Fed. Cir. 2008). Upholding finding of non-obviousness Cites “secondary considerations”: unexpected results,

skepticism of experts and copying, commercial success Provides road map for proving non-obviousness

Sanofi-Synthelabo v. Apotex, Inc., No. 2007-1438, 2008 WL 5191848 (Fed. Cir. 1-12-2008) Even if a solution is “obvious to try”, a wide range of

possible outcomes and unlikelihood of success make invention non-obvious

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Obviousness in Federal Circuit Since KSR, Cont.

Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348 (Fed.Cir. 2007)

Obviousness of a patent claim cannot be avoided simply by a showing of some degree of unpredictability in the art so long as there was a reasonable (i.e. not absolute) probability of success

Evidence showed a motivation to combine At the other end of the spectrum from Ortho-McNeil

Pharmaceutical v. Mylan Labs., 520 F.3d 1358 (Fed. Cir. 2008).

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Obviousness in Federal Circuit Since KSR, Cont.

Takeda Chem. Indus. V. Alphapharm Pty., Ltd. 492 F.3d 1350 (Fed. Cir. 2007) “in cases involving new chemical compounds, it remains

necessary to identify some reason that would have led a chemist to modify a known compound in a particular manner to establish prima facie obviousness….” Id.,1357

Disclosure of a broad selection of compounds, any one of which could have been selected as the lead compound

Prior art taught away from the invention by “direct[ing] one of ordinary skill in the art away from that compound.” Id. at 1359

If no rationale in prior art to establish a prima facie case of obviousness, then no need to consider objective indicia of nonobviousness Id. at 1360.

Similar holding, Eisai Co. Ltd. v. Dr. Reddy’s Labs., Ltd., 533 F.3d 1353 (Fed. Cir. 2008)

Abbott Laboratories v. Sandoz, Inc., 544 F.3d 1341 (Fed. Cir. 2008) Must look to particular technology for context in determining whether the

claimed technology is an “identified, predictable solution” and “anticipated success”

No error in holding below of nonobviousness of claimed extended release formulation because its behavior could not have been predicted based on the prior art.

Court below: Although prior art references do not need to explicitly teach or suggest the motivation to combine the references, each of the claimed limitations must still be found to exist somewhere in the prior art

Obviousness in Federal Circuit Since KSR, Cont.

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Obviousness in Federal Circuit Since KSR, Cont.

In re John B. Sullivan and Findlay E. Russell, 498 F.3d 1345 (Fed. Cir. 2007)

Improvement of existing technology found in prior art sufficient to establish prima facie case of obviousness

Rebuttal evidence -including inventor’s declaration- sufficient to prove non-obviousness

Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1373 (Fed. Cir. 2008)

Expert’s report may be deficient under Fed. R. Civ. P. 26 if declaration merely lists a number of prior art references and then concludes with a stock phrase that it would have been obvious to one skilled in the art to combine them

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Strategic implications of KSR v. Teleflex:

Weakness arises from prior art not consideredPatents may be strengthened by getting prior art considered, through: Reexamination proceedings

Requires prior art raising substantial new question of patentability

Reissue proceedings Requires showing, typically, that

• the patent claims more or less than patentee had right to claim in the patent, and

• the error arose without deceptive intent

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KSR and Inter Partes Reexamination: A Double Blow

This forum favors the challengerRisk is unavoidable that claims will be narrowed or rejected in inter partes reexamination proceedings Inter Partes Reexamination allows back and forth

among third party requester, patentee, and PTO Statistics strongly favor the requestor See www.reexamination.com

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USPTO Guidelines Adopt KSR Rationales for Finding Obviousness (MPEP § 2143 and passim)

I. Combining prior art elements according to known methods to yield predictable results

II. Simple substitution of one known element for another to obtain predicable results

III. Use of known techniques to improve similar devices in same way

IV. Applying known technique to known device ready for improvement to yield predictable results

V. Obvious to try Precedential Opinion: Ex Parte Kubin, Appeal 2007-0819, Appln

No. 09/667,859, Technology Center 1600 (May 31, 2007)

VI. Known work in one field, variations in same or different field predictable

VII. Teaching, suggestion, motivation (TSM)

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Writing and prosecuting patents—some principles remain intact

Graham v. John Deere Co. analysis still the legal basis for obviousness Scope and content of prior art Differences between claimed invention and prior art Level of skill Secondary considerations (for example, commercial

success, skepticism of experts, failure of others)Examiner must still provide “some articulated reasoning with some rational underpinning to support the legal conclusion of obviousness” MPEP § 2142

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Writing and prosecuting patents—some principles remain intact, cont.

Rebuttal evidence must still be considered, MPEP § 2145. Explicitly sanctioned evidence: Commercial success Long-felt but unsolved needs Failure of others Unexpected results Elements could not have been combined – i.e., for technological

difficulties (a teaching away type rebuttal) Elements in combination do not perform same function each did

individually (an In re Gordon type rebuttal)

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Writing and prosecuting patents—some principles are new, cont.

New rebuttal evidence explicitly mentioned by new USPTO guidelines Actual application of known technique (to improvement of “base”

device) was beyond one of ordinary skill

Rationale for obviousness must be explicitly statedBut, if facts wrong, rationale wrongMajor impact will be at level of appealReversal rate at Board of Patent Appeals and Interferences (BPAI) decreased dramatically since KSR Pre-KSR reversal rate for TC 1600– 70-80%* Post-KSR reversal rate for TC 1600 – 30-40%* Actual post-KSR reversal rate for TC 1600 29%

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Strategic implications of KSR v. Teleflex: Combination drugs particularly vulnerable

When each component of a combination drug contributes properties to the combination that are expected, then the combination will be attacked as obvious.

To resist the attack for obviousness, it is important to show synergistic or unexpected results.

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Strategic implications of KSR v. Teleflex: Combination drugs, cont.

Even when the prior art looks overwhelming, sometimes special claim strategies can make a difference.

When the basic combination may be taught, consider claims to a unit dosage of the combination with specific ranges or ratios that may be novel and unexpected.

Consider method claims that address use of the composition under specific conditions or with specific types of administration that may be novel and unexpected.

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Strategic implications of KSR v. Teleflex: Portfolio management

A good-looking patent portfolio before KSR v. Teleflex may not be a good-looking patent portfolio after KSR v. Teleflex

Evaluate each U.S. patent property in the portfolio for invalidity risk based on obvious combinations of prior art

Weak patent properties should be evaluated for possible Rehabilitation through reexamination or reissue Pruning from the portfolio Licensing or selling

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Strategic implications of KSR v. Teleflex: Portfolio management, cont.

Revisit clearance problems—infringement risks—in light of KSR Heretofore nearly invulnerable patents may be

vulnerable to prior art attacks under KSR v. Teleflex For newly vulnerable patents consider the following

approaches: Renewed licensing negotiations Reexamination proceedings, particularly inter partes

(contested) - outcomes often favorable to attacking party Litigation - declaratory judgment actions are much easier

to maintain after Medimmune v. Genentech (127 S.Ct. 764 (January 9, 2007))

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Prior art searching now critically important

Helps reduce risk of KSR v. Teleflex attack for obviousness on applications in portfolio

Helps efficient claiming of subject matter

Helps identify vulnerabilities in competitors’ patents

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The new regime under KSR v. Teleflex

Issued patents are at greater risk of attack for obviousness, which may be found in summary judgment without trial.Pending applications must contend with the higher and more subjective bar of the new obviousness standard.Strategy is more important in drafting and prosecuting applications and in handling properties in patent portfolios.Early and deep knowledge of prior art is of now of critical importance in formulating and implementing strategy.

A new threat to diagnostics patenting: In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)

Background: a Supreme Court minority would invalidate a diagnostic method claim as involving only a discovery, not an invention. Lab. Corp. v. Metabolite , 126 S.Ct. 2921 (2006)(dissent) Bilski held ineligible, for a patent, a business method that operated outside of a computer, but the dissent included reference to Lab. Corp.Classen Immunotherapies, Inc. v. Biogen Idec, 2008 WL 5273107 (Fed. Cir. Dec. 19 2008) (unpublished) held ineligible, for a patent, claims to a method of evaluating an immunization schedulePrometheus Laboratories, Inc. v. Mayo Collaborative Services, 2008 WL 878910 (S.D. Cal. March 28, 2008)held patent-ineligible claims to a method of optimizing therapeutic efficiency involving adjusting drug dosage based on measured metabolite levels

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Strategies for patenting diagnostics in the new environment

Do not rely merely on patent filings aimed at mechanisms of actionWhere possible, identify and claim physical structures and machines that utilize the mechanisms of action New special purpose diagnostic tools New disposables that respond to the mechanism of action to

provide a new measurement

If structures and machines do not exist, urge your team to develop them!Key to show how the discovery is used either to achieve a “transformation” of data or to be harnessed by a machine—or both

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Strategic implications of KSR v. Teleflex: Writing and prosecuting patents—

further strategic principles

Draft applications bearing in mind prospective downstream rejections based on obviousness. Knowing prior art in detail when drafting application is critical!

Tell a story that includes a convincing showing of unexpected or synergistic results. The story should make good sense in relation to the prior art. Questions of judgment and advocacy affect the extent to which

prior art is discussed explicitly.

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KSR v. Teleflex: Take Home Lessons“obvious to try” may show obviousness

“When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense. In that instance the fact that a combination was obvious to try might show that it was obvious under § 103.”

Patentability of new compounds Seems to hinge on finite number of predictable results – i.e., Are there unexpected results?

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KSR v. Teleflex: Take Home Lessons, cont.

Prior art references can be distinguished on if they “teach away” from the combination cited for obviousness It is critical to study cited prior art references with great

care to understand what they teach. Prior art references do not always actually teach what

they seem to teach Frequently misconstrued by examiners Sometimes not enabling; i.e., do not permit a person of

ordinary skill to practice the subject matter for which the reference is cited

Unexpected results can demonstrate non-obviousness

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KSR v. Teleflex: Take Home Lessons, cont.

Combination or rationale must extend to all the limitations of claimed invention If not, then a prima facie case of obviousness has not been established It is critical to make a rigorous analysis of the rejection to determine

whether all limitations of the claim have been accounted for by the examiner in the rejection

More patent claims – and creative ones – can make a difference Prior art attacks on claims must be mounted separately for each claim A well crafted claim that captures the inventor’s creativity may be just

the one for which a “common sense” combination of prior art references simply does not exist

Learn and deal with the prior art early and often.

Tell a story about the innovation.

Good luck!