The role of healthy sales in IPR

The commercial success of a patented life sciences invention generally fails to persuade the Patent Trial and Appeal Board (PTAB) that it is evidence of non-obviousness in inter partes review (IPR) trials.

US law prohibits patents on inventions that, while not exactly disclosed in the prior art, are no more than obvious extensions of the prior art. The inquiry generally focuses on the differences between the prior art and the claimed invention, and whether a hypothetical person of ordinary skill in the art would have considered it obvious at the time of invention.

A complex body of law has developed over the last 50 years on how to conduct that inquiry, including the evaluation of certain “secondary considerations” tending to refute obviousness. An often-cited secondary consideration is whether the invention caused embodying products to be commercially successful. The theory is “an idea would successfully have been brought to market sooner, in response to market forces, had the idea been obvious to persons skilled in the art”.

A long-standing requirement of commercial success is that it must have a “nexus” with the claims. In other words, the commercial success must be attributable to the invention itself rather than some other feature of the product. This is in keeping with the legal theory that a commercially successful invention would have been made sooner had it been obvious. If something else drove the success besides the invention, then that success is not probative.

A familiar pattern has developed whereby the patent owner claims the commercial success of its own product or the infringer’s, and the accused infringer argues the commercial success is tied to some factor other than the novel part of the patented product.

A new forum

While obviousness and commercial success have been argued in US courts for decades, the America Invents Act created a new forum for such arguments: IPR proceedings before the PTAB. The PTAB is a quasi-judicial tribunal within the US Patent and Trademark Office.

The process begins with a petitioner filing a petition to institute an IPR and a possible preliminary opposition by the patent owner. If the IPR is instituted, which occurs in about half of all cases, the PTAB is required to issue a final written decision within 12 months (approximately 18 months from initial petition). During that time, the patent owner and petitioner engage in additional briefing and oral argument.

Of the final written decisions as of February 2016, 73% have found all instituted claims unpatentable, with 87% finding at least one instituted claim unpatentable. The final written decisions are appealable to the US Court of Appeals for the Federal Circuit. The federal circuit applies a deferential “substantial evidence” standard in reviewing the board’s factual findings. Relatively few opinions have been issued based on final decisions of the PTAB.

In the pharmaceutical and biotechnology sphere, patent owners have continued the traditional commercial success arguments in the new IPR proceedings. The petitioner will cite one or more combinations of prior art references to support a plausible argument that the difference between what is in the prior art and what is claimed is so small that the advancement is unworthy of a patent. The patent owner will then present evidence that an embodiment of the claim has sold well in the market. The petitioner then attempts to diminish the commercial success by attributing it to some aspect of the product that can be found in the prior art rather than the merits of the novel feature of the claims. In deciding these issues, the PTAB has applied a strict interpretation of the law and facts when siding with the petitioner.

We examined approximately 25 PTAB final written decisions in the life sciences sphere addressing commercial success as evidence of non-obviousness. Nearly all sided with the petitioner in finding claims invalid and rejecting commercial success arguments. Certain patterns emerged in the board’s decisions that may help guide practitioners in the future.

General statements and citations

The board faulted patent owners for including only a “general” statement of commercial success in the opposition and substantively relying merely on citations to expert declarations and claim charts. The board found such citations violated its rules prohibiting incorporation by reference, and the general statements either unpersuasive or unsupported. This highlights the tension between length limitations and the requirement for fully developed and specific argument.

While there have been too few life sciences decisions addressing the issue to accurately predict what level of specificity is required, it must be more than a boilerplate statement that a product is covered by the claims and successful. Of course, this does not mean documents and experts should be ignored. Citations to documentary evidence and expert analysis may be necessary to have a persuasive argument. In one case involving immunoconjugates, the board sided with the patent owner on commercial success, noting the patent owner’s citations to documents and a declaration analysing sales and marketing data supporting the substantive arguments.

“The board routinely uses the nexus requirement to reject evidence of commercial success.”

The inclusion of general statements about commercial success being due to a patent may also have an unintended side effect: use in other proceedings. In discounting commercial success arguments in one case relating to surgical technology, the board cited a patent owner’s statements in other IPR proceedings that its commercial success was attributable to the patents at issue in those proceedings. The board further faulted the patent owner for failing to argue that the patents should be considered in the aggregate. In general, it is important for practitioners to consider how statements in one proceeding may be construed (or misconstrued) in other proceedings.

Where the patent owner does not make the product

It should be noted that discovery in IPR proceedings is far more limited than is typically available in US litigation. While not necessarily out of reach for participants, it is considerably harder for a patent owner to obtain the alleged nexus and financial evidence from an accused infringer than to simply access its own records.

Moreover, reliance on third party activity may make it more difficult for the patent owner to show how the alleged invention caused the commercial success in a manner supportive of non-obviousness. In one case involving DNA sequencing technology (Trustees of Columbia University in the City of New York v Illumina), the federal circuit stated in July 2015:

“In addition, Columbia University does not itself sell its patented invention. Although reliance on a defendant’s or third party’s sale of a patented invention to demonstrate commercial success may be probative of non-obviousness in some cases, it is not particularly helpful in the present matter because it is unclear whether any success was attributable to developments in the field that led to simultaneous invention (which would tend to show the invention was obvious) or to copying (which would tend to show the invention was non-obvious).”

Use of the nexus requirement

The board routinely uses the nexus requirement to reject evidence of commercial success. For example, in a case involving dietary supplements which was affirmed by the federal circuit, the board faulted the patent owner for attributing commercial success to a unique formulation (ie, species) where the claims encompass multiple formulations (ie, genus). Put another way, the patent owner needed to show either the commercial success of the genus, or that the other species in the genus would be expected to behave the same way. In a similar vein, the board has faulted patent owners for relying on “unclaimed” limitations.

The underlying issue is how the invention is defined. A basic tenet of US patent law is that the claims define the invention. As a practical matter, a petitioner can seemingly always drill down one level further and attribute the success to some narrower feature within the scope of the claim, or some other unclaimed feature that drives demand. The board has been amenable to such arguments by petitioners, and departures from the claim language by patent owners are viewed with scepticism. A patent owner would do well to present evidence and arguments that the commercial success is connected with a recited claim element.

In a similar vein, the board has faulted patent owners for relying on gross sales without establishing a causal connection to the claims and relative position in the market. In that regard, the board has been receptive to petitioners’ identification of other sources of success, such as exclusivity provided by regulations or market position. Accordingly, the board is likely to seize on poorly linked connections between the success and the claims.

Avoidance of the prior art

Another long-standing requirement of commercial success is that it must be due to the advancement over the prior art. Put another way, commercial success cannot be due to practising what is in the prior art. The board has faulted patent owners for claiming commercial success when such commercial success was due to a limitation of the claims that could be found in the prior art.

For example, the board negated commercial success in a pharmaceutical case by finding that the driver of demand was the dosage form and that the dosage form existed in the prior art. Accordingly, practitioners should be mindful of commercial success arguments that drift from the particular ground of novelty. For example, if the invention is the novel combination of prior art elements A and B, then the patent owner should show how the commercial success is due to the combination of A and B, not merely the benefits attributable to A or B in the prior art.

Just the facts

While many of the arguments used by the board in rejecting commercial success are born out of long-standing US patent law and practice, the board has been particularly aggressive in its application to the facts of a given case. At the outset, a patent owner faced with an obviousness argument needs to consider whether there is a strong and demonstrable basis to argue that the novel feature of the invention causes part of a product’s commercial success.

The patent owner should clearly and concisely explain in its response how the novel feature contributes to the commercial success of the product, focusing on the language of the claim versus the prior art. Indeed, in the rare instance where the board sided with the patent owner, it credited the fact that the patent owner established that the exact combination of components in the claim, versus the prior art, led to the commercial success. The petitioner and board will both seize upon broad statements, departures from the claim language, or other sources of the success as a way to discount commercial success.

The ability of the board to find fault with the patent owner’s case is, however, not without limitations. For example, in February the federal circuit vacated a finding against commercial success. In that case, the federal circuit faulted the board for failing to explain why the product relied upon for commercial success did not embody the invention despite unrebutted evidence to the contrary. The federal circuit also held there was a presumption that commercial success is due to the patented invention, even when the product may include additional unclaimed features.

In discussing the presumption, the federal circuit noted the contested nature of IPR proceedings and that the petitioner has the means to rebut the patent owner’s evidence. The federal circuit also noted that “it would be wrong to conclude that a product with a high market share is not commercially successful solely because it is replacing a similarly successful earlier version of the product produced by the same company”.

While clearly favouring the patent owner, the federal circuit’s decision still provides a great deal of flexibility for the petitioner to provide a rebuttal argument and the board to find against the patent owner, provided the board gives a detailed explanation. Patent owners and petitioners alike would do well not to forget this.

In all instances, it is important to remember that “commercial success” relies on the legal theory that “an idea would successfully have been brought to market sooner in response to market forces, had the idea been obvious to persons skilled in the art”. This consideration focuses on how, if at all, the invention changed the commercial landscape from what came before. Practitioners should pay special attention to ensure the evidence and arguments presented are in keeping with the underlying logic.

This article reflects only the present considerations and views of the authors, which should not be attributed to Kirkland & Ellis or any of its, or their, former or present clients. Each case is different and the considerations here may or may not apply to the particular facts of a given case. Nothing here constitutes legal advice or substitutes for legal advice.

Christopher Jagoe is a partner at  Kirkland & Ellis. James McConnell is a senior associate at Kirkland & Ellis.  They can be contacted at: christopher.jagoe@kirkland.com and james.mcconnell@kirkland.com respectively.