Eisai v. Dr. Reddy's Laboratories: Federal Circuit Clarifies Patent Obviousness after KSR

Eisai Co. v. Dr. Reddy's Laboratories, Ltd.

Federal Circuit, July 21, 2008, No. 2007-1397
Slip Opinion

On July 21, the Federal Circuit affirmed the United States District Court for the Southern District of New York’s ruling in favor of plaintiff Eisai Co., holding that the patent-in-suit, U.S. Patent No. 5,045,552, was non-obvious and was not obtained through inequitable conduct.

This case illustrates the Federal Circuit's current test for chemical obviousness since the Supreme Court rejected the Federal Circuit’s application of the “teaching, suggestion, or motivation test” for obviousness in KSR Int’l Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007) as too rigid, mandating a more flexible approach that takes ordinary creativity and skill into account. A brief background on KSR can be found at Patent Docs.

Kevin E. Noonan at Patent Docs welcomes the decision.

The Patent Hawk characterizes the court's opinion as positing a “problem-reasoning-predictability” test for chemical obviousness.

Aaron F. Barkoff at Seeking Alpha makes the observation that patents on chemical compounds are holding up well even after KSR.

The district court granted summary judgment to Eisai on the issue of obviousness and, after a bench trial, found that Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (collectively, “Dr. Reddy’s”) and Teva Pharmaceuticals USA, Inc. (“Teva”) had failed to prove the remaining allegations of inequitable conduct. In an opinion by Judge Rader, joined by Judges Linn and Prost, the Court of Appeals affirmed that the ’552 patent was non-obvious over the proffered prior art and that Eisai’s alleged acts during prosecution did not rise to the level of inequitable conduct.

The patent at issue claimed rabeprazole and its salts, one of which is the active ingredient in Aciphex, a commercially successful pharmaceutical approved for the treatment of ulcers, heartburn, and associated disorders. Dr. Reddy’s and Teva each filed Abbreviated New Drug Applications (“ANDA”s) under the Hatch-Waxman Act, 21 U.S.C. § 355 and 35 U.S.C. § 271(e), seeking to manufacture a generic version of Aciphex before the expiration of the ’552 patent. Because filing an ANDA is “an artificial, but legally cognizable, act of patent infringement,” Eisai filed suit.

Teva asserted that the ’552 patent was invalid for obviousness, and both defendants asserted that it was unenforceable for inequitable conduct.

The Federal Circuit reviewed the district court’s legal conclusion of obviousness de novo, based on four underlying factual determinations, as set out in Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966): 1) the scope and content of the prior art; 2) the level of ordinary skill in the art; 3) the differences between the claimed invention and the prior art; and 4) evidence of secondary factors, also known as objective indicia of non-obviousness. In the case of a chemical compound, the court noted that the third factor would depend largely on structural similarity.

The court reasoned that even post-KSR, “a prima facie case for obviousness for a chemical compound still, in general, begins with the reasoned identification of a lead compound” (a previously known compound). Obviousness based on structural similarity “can be proved by identification of some motivation that would have led one of ordinary skill in the art to select and then modify [the lead compound] in a particular way to achieve the claimed compound,” although that motivation need not be explicit in the art.

Teva's obviousness argument employed lansoprazole, a compound nearly identical to rabeprazole with one structural difference, as the lead compound for rabeprazole. The Federal Circuit concluded that Teva could not create a genuine issue of material fact on obviousness through an unsupported assertion that compounds other than lansoprazole might have served as lead compounds, and combined with the court's finding that the record contained no reason a skilled artisan would have considered modifying lansoprazole in the way that Teva did as “an identifiable, predictable solution,” the record could not support a case of obviousness as a matter of law.

On the inequitable conduct question, the court reviewed the district court’s findings on intent and materiality for clear error, and its ultimate conclusion for abuse of discretion. To find inequitable conduct in a patent prosecution, there must be an affirmative misrepresentation of material fact, a failure to disclose material information, or the submission of false material information, coupled with an intent to deceive. The court found the record devoid of any real suggestion of intent to deceive, much less the clear and convincing evidence required to support a finding of inequitable conduct, which it described as a “high bar.”