Patent Portfolio Strategies in the Post-KSR Environment Bruce D. Sunstein Bromberg & Sunstein LLP Boston © 2009 Bromberg & Sunstein LLP

2 KSR v. Teleflex: new rules for non- obviousness (inventive step) KSR Intern. Co. v. Teleflex Inc., 127 S. Ct (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.

3 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 applications Take Home Lessons

4 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.

5 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).

6 How the obviousness standard has been applied Before KSR v. Teleflex, the Supreme Court last spoke about obviousness in  The 1952 law was intended by Congress to ban the “flash of creative genius” test for patentable invention articulated by the Supreme Court in  Graham v. John Deere Co., 383 U.S. 1 (1966) Over recent decades the Federal Circuit has refined the obviousness standard.

7 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.”

8 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

9 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

10 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.”

11 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

12 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.”

13 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.

14 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

15 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

16 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.

17 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 , 2008 WL (Fed. Cir )  Even if a solution is “obvious to try”, a wide range of possible outcomes and unlikelihood of success make invention non-obvious

18 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).

19 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 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.

21 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

22 Strategic implications of KSR v. Teleflex: Weakness arises from prior art not considered Patents 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

23 KSR and Inter Partes Reexamination: A Double Blow This forum favors the challenger Risk 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

24 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 , 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)

25 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

26 Writing and prosecuting patents—some principles remain intact, cont. Rebuttal evidence must still be considered, MPEP § 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)

27 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 stated But, if facts wrong, rationale wrong Major impact will be at level of appeal Reversal 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 %

28 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.

29 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.

30 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

31 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))

32 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

33 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 (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 (Fed. Cir. Dec ) (unpublished) held ineligible, for a patent, claims to a method of evaluating an immunization schedule Prometheus Laboratories, Inc. v. Mayo Collaborative Services, 2008 WL (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 34

Strategies for patenting diagnostics in the new environment Do not rely merely on patent filings aimed at mechanisms of action Where 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 35

36 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.

37 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?

38 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

39 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!