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August 10, 2005

Trying To Tie With a Terminal Disclaimer

Par Pharmaceutical filed an application with the FDA to market a generic version of Xalatan, for treating glaucoma, a drug patented by Pharmacia (5,422,368 & 5,296,504). So Pharmacia sued for patent infringement. [ Pharmacia v. Par Pharmaceutical, Fed. Cir. 04-1478, August 10, 2005 ]

At trial, Par admitted infringement of the ’368 and ’504 patents, and did not assert any invalidity defenses based on prior art or 35 U.S.C. § 112. Instead, Par asserted that inequitable conduct rendered the patents unenforceable. Specifically, Par alleged that the patent applicants issued a declaration and terminal disclaimer during prosecution of the ’368 patent with an intent to deceive the Patent Office on a point of material significance. After a bench trial, the district court found only the ’368 patent unenforceable due to inequitable conduct. Thus, the ’504 patent remained enforceable. Pharmacia Corp. v. Par Pharm., Inc., No. 01-6011 (D.N.J. July 6, 2004) (Final Judgment). As noted, Par had conceded that it infringed the ’504 patent. Thus, the district court entered judgment for Pharmacia on the ’504 patent and for Par on the ’368 patent. Id., slip op. at 59. This appeal followed.

'368 & '504 were siblings.

During prosecution of the ’368 patent, the U.S. Patent & Trademark Office (PTO) issued an October 21, 1993 Office Action (the Office Action) including two rejections at the heart of the alleged inequitable conduct.

To overcome a rejection based upon an office-cited prior art patent (5,151,444, the Ueno patent), the applicant made a declaration distinguishing between the prior art and the claimed chemical compound.

This declaration includes inaccurate statements that the district court found highly material.

One of the declarants, Mr. Stjernschantz, had previously written an article that was contradictory to the declaration, a contradiction corroborated by two Japanese articles cited by the Stjernschantz article.

The patent applicants did not bring either the Stjernschantz article or the two Japanese articles to the attention of the PTO.

Pharmacia tried to explain away the discrepancy - blaming it on English as a second language.

Pharmacia acknowledges the inconsistency in paragraph 10, but argues that Stjernschantz, because he was a foreign national, simply used the wrong verb tense in saying that the 20-ethyl compound “does not” reduce IOP. According to Pharmacia, replacing “does not” with “did not” would limit this statement to only those tests actually conducted by Stjernschantz, rather than including conflicting tests by other researchers. The district court rejected this explanation.

Based on the conflict between the declaration in paragraph 10 and prior Stjernschantz article, the district court found that Stjernschantz submitted a declaration to the PTO that he knew or should have known was inaccurate and misleading. The district court held that this misleading declaration was crucial to overcoming the PTO’s rejection over the Ueno patent and thus highly material. Based on these circumstances, the district court inferred intent. Having found Stjernschantz intentionally filed a misleading and highly material declaration, the district court found clear and convincing evidence that the ’368 patent was unenforceable due to inequitable conduct.

Inequitable conduct includes affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive.” Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995).

Par tried to chain the taint of '368 to '504 because they both shared a terminal disclaimer. Par failed to argue that '504 was dirtied by a general "unclean hands" theory, that is, the taint of one sibling applies to another because of a general pattern of inequitable conduct by the applicant. The reason Par didn't argue unclean hands may have been that '504 had already issued prior to the '368 inequitable conduct.

Par also asserted this inequitable conduct tainted the ’504 patent as well as the ’368 patent. The second rejection in the Office Action discussed above forms the basis of Par’s inequitable conduct theory on the ’504 patent... To overcome this rejection, Pharmacia filed terminal disclaimers on these two applications. According to Par, these terminal disclaimers effectively combine the ’368 patent and the ’504 patent. Under this theory, the inequitable conduct on the ’368 patent applies automatically to the ’504 patent as well. The district court rejected this argument, finding instead that “any conduct occurring in connection with the ’368 patent cannot reach the ’504 patent.”

Par has not asserted on appeal that the ’504 patent is unenforceable under a general unclean hands theory; i.e., that a broad pattern of inequitable conduct transfers inequitable conduct from one patent to another. See Consol. Aluminum Corp. v. Foseco Int’l Ltd., 910 F.2d 804, 812 (Fed. Cir. 1990) (discussing an unclean hands theory arising from actions that occurred during prosecution before the PTO). Instead, Par asserts that a terminal disclaimer can bind two related patents together so that inequitable conduct in procuring a later prosecuted patent will automatically infect an earlier issued patent. The district court correctly rejected that assertion.

The district court correctly concluded that the terminal disclaimer alone did not bind the ’368 patent and the ’504 patent together for purposes of unenforceability due to inequitable conduct. Because the record shows no inequitable conduct during prosecution of the ’504 patent itself, the district court did not abuse its discretion in finding the ’504 patent to be valid and enforceable. In fact, the ’504 patent had already issued before the inequitable conduct occurred. The ’504 patent issued on March 22, 1994; Stjernschantz executed his declaration on April 20, 1994. Thus, this court affirms the district court’s decision.

With 20/20 hindsight, Par may have been too judicious in its arguments. In litigation, if you've got cards, play 'em, because sometimes you don't know which one might be the ace.

Inequitable conduct nullifies an entire patent, not just asserted claims, but only the patent for which inequitable conduct is found.

This court has held that a finding of inequitable conduct in the acquisition of even a single claim of a patent renders the remaining claims of that patent unenforceable, even those without the taint of inequitable conduct. See Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 877 (Fed. Cir. 1988) (en banc in pertinent part) (“When a court has finally determined that inequitable conduct occurred in relation to one or more claims during prosecution of the patent application, the entire patent is rendered unenforceable.”); Hewlett-Packard Co. v. Baush & Lomb Inc., 882 F.2d 1556, 1563 (Fed. Cir. 1989) (inequitable conduct that occurs during prosecution of a reissue application renders all the claims of the reissued patent, including the original claims, unenforceable). This case law, however, applies only to claims in one patent.

While a terminal disclaimer does associate patents, it does not tie patents together with regard to enforceability.

Indeed “[a] terminal disclaimer ties the affected patents together; they expire on the same date and are enforceable only during periods in which they are owned by the same person.” Donald S. Chisum, Chisum on Patents, § 9.04[5] at 9-107 (2003); see In re Van Ornum, 686 F.2d 937 (CCPA 1982) (upholding the PTO’s non-alienation requirement). Strong policies dictated the judicial creation of this doctrine governing the co-expiration and co-ownership of sufficiently related patents. In re Griswold, 365 F.2d 834 (CCPA 1966) (noting the co-ownership requirement is a creative solution to potential harassment suits from two separate patents); Ortho Pharm. Corp. v. Smith, 959 F.2d 936 (Fed. Cir. 1992) (discussing the requirement that a patentee disclaim any extension of patent protection for the later filed application of two terminally disclaimed applications). Beyond their shared expiration date, however, two disclaimed patents maintain significant attributes of individuality. Ortho Pharm. Corp. v. Smith, 18 U.S.P.Q.2d 1977, 1990-91 (E.D.Pa. 1990), aff’d 959 F.2d 936 (Fed. Cir. 1992) (noting patents tied by a terminal disclaimer are still independently presumed valid).

Posted by Patent Hawk at August 10, 2005 5:12 PM | Case Law


Wouldn't this holding go against the well established rule that the applicant must be chargeable with knowledge of the existence of the prior art or information? The rule under American Hoist 725 F.2d 1350 and FMC Corp v. Manitowoc C. 835 F.2d 1411, 1415 is that an "Applicant must be chargeable with knowledge of the existence of the prior art or information, for it is impossible to disclose the unknown. Similarly, an applicant must be chargeable with knowledge of the materiality of the art or information . . . ." In this case (Pharmacia) it seems the Fed. Cir. lost sight of this well established rule and assumed that the declarant, Stjernschantz, was not the applicant (as defined by the case law and rule 1.56 an applicant is the prosecuting attorney or inventors or any other person substantively involved in the prosecution of the patent), thus, how can a third party declarant bind the applicant based on knowledge he/she had? Either the Fed. Cir. got it wrong or they omitted pertinent facts in their analysis. Upon some research I found that Stjernschantz was actually an employee of Pharmacia. If the Fed. Cir. had disclosed this in its opinion, it might have made more sense.

Posted by: Arturo Sandoval at November 16, 2005 6:27 PM