1. Building and Maintaining BioPharma Patent Portfolios After KSR v. Teleflex: Strategies Addressing Higher Standards for Patentability Bruce D. Sunstein Barbara J. Carter, Ph.D. Bromberg & Sunstein LLP Boston www.bromsun.com © 2007 Bromberg & Sunstein LLP

2. 2 KSR v. Teleflex KSR Intern. Co. v. Teleflex Inc., 127 S. Ct. 1727 (April 30, 2007) Why it matters to Biopharma 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. 3 Dealing with KSR v. Teleflex The basic rules for determining whether patentable invention is present  How the rules were implemented: TSM What did KSR v. Teleflex hold?  What did KSR v. Teleflex say?  What did KSR v. Teleflex do? Who are the losers and winners under KSR v. Teleflex? Strategic implications of KSR v. Teleflex  Spotting and strengthening weak patents  USPTO Examination Procedure: Post-KSR Impact, Draft Guidelines  Writing and prosecuting patents  Combination drugs  Portfolio management The heightened position of prior art searching Take Home Lessons

4. 4 The basic rules for determining 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. 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. 6 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.

7. 7 The Federal Circuit’s standard for obviousness 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.” Called the “teaching, suggestion or motivation test” (“TSM test”).

8. 8 The beef in KSR v. Teleflex Teleflex had exclusive rights to a patent for a gas pedal and throttle control device which incorporates an electronic pedal position sensor attached to a fixed pivot point of the pedal assembly. KSR made a pedal assembly having features like those patented, and Teleflex sued KSR for patent infringement.  KSR defended on ground that patent was invalid for obviousness  The patent licensed to Teleflex was invalidated on basis of prior art not considered by the PTO when the patent was granted.

9. 9 What did KSR v. Teleflex hold? The TSM test of the Federal Circuit 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.”

10. 10 Pathways to Obviousness: what KSR v. Teleflex said Issue:  How may prior art teachings be permissibly combined to justify obviousness? Supreme Court:  Prior art in different fields may be combined.  If work available in one field, design incentives, other market forces prompt variations in same or different field.  If a person of ordinary skill can implement a predictable variation, § 103 likely bars patentability.  If technique used to improve one device, and recognized by person of ordinary skill in the art that it could improve similar device in same way, using technique is obvious unless actual application is beyond person ’ s skill. ”

11. 11 KSR v. Teleflex: More ways to combine prior art 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.” IV. Applying Known Technique to Known Device Ready for Improvement to Yield Predictable Results

12. 12 KSR v. Teleflex: More ways to combine prior art, cont. 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. VI. Teaching, Suggestion, Motivation (TSM)  Motivation may be implicit  Motivation may be found in any number of sources, including common knowledge, the prior art as a whole, or the nature of the problem itself

13. 13 Before KSR v. Teleflex, factual complexity of obviousness commonly required a trial Obviousness a legal question.  can be decided by a judge in summary judgment  but factual complexity often required a trial to resolve the question In KSR itself, Federal Circuit said trial was necessary to resolve conflicting testimony of expert witnesses bearing on question of obviousness.

14. 14 What did KSR v. Teleflex do? 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.”

15. 15 Who are the losers under KSR v. Teleflex? Those holding patents with close prior art, not considered by the PTO, are at risk in:  Litigation, whether pending, threatened, or unasserted  License negotiations  Other business transactions, including equity financing Those seeking patents  Higher standards for non-obviousness = more difficulty obtaining a patent

16. 16 Who are the winners under KSR v. Teleflex? The Supreme Court decision benefits companies on the receiving end of infringement risk, in:  Litigation, whether pending, threatened, or unasserted  License negotiations  Other business transactions, including equity financing

17. 17 What to expect in the future of the obviousness standard — I Because the Supreme Court has sanctioned additional ways of combining prior art references in reaching a determination that a claimed invention “would have been obvious”, it has raised the standard for non-obviousness.  Patents are easier to invalidate for obviousness.  Patents are harder to get. The notion of “common sense” now in the obviousness standard adds subjectivity and therefore unpredictability to obviousness determinations.

18. 18 The future of the obviousness standard—II Recent Federal Circuit cases in wake of KSR v. Teleflex suggest Federal Circuit using modified TSM test.  DyStar Textilfarben GmbH & Co. Deutschland KG v. C.H. Patrick Co., 464 F.3d 1356, 1367 (2006) Modified TSM means motivation to combine references may be found implicitly in the prior art or nature of problem to be solved.  Alza Corp. v. Mylan Labs., Inc., 464 F.3d 1286, 1291 (2006) Not a return to the good old days.  The modified TSM test is more generous in finding obviousness.  Summary judgment permits obviousness evaluation without a trial in many cases. Expect more obviousness rejections from the Patent and Trademark Office on pending applications.

19. 19 The future of the obviousness standard—III Post-KSR Fed. Cir. Decisions:  Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348 (Fed.Cir. (Ill.) 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  Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157 (Fed.Cir. (Del.),2007)  Even substantial evidence of secondary factors commercial success, praise, and long-felt need inadequate to overcome a final conclusion that claimed invention would have been obvious given strength of the prima facie obviousness showing

20. 20 Strategic implications of KSR v. Teleflex: Spotting weak patents In KSR, the patent was invalidated on basis of prior art not considered by the PTO Patents most vulnerable after KSR are those with close prior art, not considered by the PTO.  Sometimes the close prior art becomes known to patent owner after issuance of the patent.  Otherwise, conduct a thorough search to identify any close prior art not considered by the PTO.  Conversely, if closest prior art has been considered by PTO, the presumption of validity is strengthened.

21. 21 Strategic implications of KSR v. Teleflex: Strengthening weak patents - I Since 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

22. 22 Strategic implications of KSR v. Teleflex: Strengthening weak patents - II Risk is unavoidable that claims will be narrowed or rejected in such proceedings.  91% of Reexamination requests granted  71% result in narrowed/cancelled claims  12% result in all claims cancelled  29% result in all claims intact

23. 23 USPTO Examination Procedure to Date Current USPTO Guidelines for Prima Facie Case of Obviousness: TSM  Suggestion or motivation, either in the references themselves or in the knowledge generally available to one of ordinary skill in the art, to modify the reference or to combine reference teachings  Reasonable Expectation of Success  Prior Art Reference (or references when combined) must teach or suggest all the claim limitations

24. 24 Post-KSR Impact USPTO Draft Guidelines: Implementation Imminent More Rationales for Finding 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  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. Teaching, Suggestion, Motivation (TSM)

25. 25 Post-KSR Impact I. Known Methods = Predictable Results Prior art teaches all claimed elements  Elements need not be in same reference One of ordinary skill could have combined the elements, by known methods, and each element performs same function in combination as did before separately  Suggestion not needed?  Is this element optional? One of skill would have recognized that results of combination were predictable  Suggests this is hindsight (even though official USPTO position is that hindsight is still impermissible)

26. 26 Post-KSR Impact II. Simple Substitution of one known element for another = predictable results Must have been obvious to person of ordinary skill to replace known elements, and that exchanged elements would give predictable results, at time of invention

27. 27 Post-KSR Impact III. Use of Known Techniques to Improve Similar Devices in Same Way Prior art contained “base” device/method/product Invention is improvement of “base” device One of ordinary skill could have applied the known improvement technique in same way to “base” device Results of improvement would have been predictable to one of ordinary skill Additional Graham factors Examiner finds, as needed

28. 28 Post-KSR Impact IV. Applying Known Technique to Known Device for Improvement = Predictable Results Criteria Presumably similar to III Post-KSR Impact V. Obvious to Try Finite number of identified predictable solutions Reasonable expectation of success

29. 29 Post-KSR Impact VI. Teaching, Suggestion, Motivation (TSM) (Still a rationale for obviousness) Must find some teaching, suggestion, motivation in references, knowledge generally available to one of ordinary skill, or nature of problem, to modify or combine reference teachings Reasonable expectation of success Additional Graham factors needed to support rationale

30. 30 Strategic implications of KSR v. Teleflex: Writing and prosecuting patents—some principles remain intact - I Graham Factors Still the Legal Basis for Obviousness  Scope and Content of Prior art  Differences between claimed invention and Prior Art  Level of Skill  Secondary Considerations Examiner must still articulate reason/rationale to support obviousness rejection Rebuttal Evidence must still be considered

31. 31 Strategic implications of KSR v. Teleflex: Writing and prosecuting patents—some principles remain intact - II Rebuttal Evidence Explicitly Mentioned by USPTO Draft Guidelines as Still Valid  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)

32. 32 Strategic implications of KSR v. Teleflex: Writing and prosecuting patents—some principles are new - III Examiner fulfills critical role of Fact finder in Graham Inquiries!  Ultimate determination is Legal, but Graham Inquiries are Factual  Precedential Opinion: Ex Parte Kubin, Appeal 2007-0819, Appln No. 09/667,859, Technology Center 1600 (May 31, 2007)  Written record must include findings of fact by Examiner concerning teachings of references and state of the art.  Examiner may also need:  Explicit findings as to how person of ordinary skill would have understood prior art teachings  What a person of ordinary skill would have known  What a person of ordinary skill could have done

33. 33 Strategic implications of KSR v. Teleflex: Writing and prosecuting patents—some principles are new - IV New Rebuttal Evidence Explicitly Mentioned by USPTO Draft Guidelines  Actual application of known technique (to improvement of “base” device) was beyond one of ordinary skill Major Impact will be at Level of Appeal Reversal Rate at BPAI Decreased Dramatically since KSR  Pre-KSR Reversal Rate – 70-80%  Post-KSR Reversal Rate – 30-40%

34. 34 Strategic implications of KSR v. Teleflex: Combination drugs particularly vulnerable - I 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.

35. 35 Strategic implications of KSR v. Teleflex: Combination drugs—II 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.

36. 36 Limited Court Decisions: FDC Patents at High Risk? McNeil-PPC, Inc. v. L. Perrigo Co. (207 F.Supp.2d 356 (E.D.Pa.2002))  Extremely hostile decision Facts:  Near expiration of patent for Immodium (loperamide), McNeil obtained:  two new FDC patents for loperamide w/ simethicone to treat diarrhea/ gas; AND  two new formulation patents for polymer-coated FDCs  Perrigo filed para. IV certification that McNeil patents invalid and that their products/use would not infringe  McNeil sued Perrigo for infringement All McNeil patents invalid for obviousness  Fed. Cir. Affirmed: 2003, 337 F.3d 1362 (Fed.Cir.(Pa.) Aug 01, 2003)  US Supreme Court Denied Certiorari: 540 U.S. 1107 (U.S. Jan 12, 2004)

37. 37 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. Portfolio managers should evaluate each U.S. patent property (applications and issued patents) 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 out

38. 38 Strategic implications of KSR v. Teleflex: Portfolio management—II Clearance problems—infringement risks—should be revisited in light of KSR v. Teleflex.  Heretofore nearly invulnerable patents may be vulnerable to prior art attacks under KSR v. Teleflex.  For such newly vulnerable patents consider the following approaches:  Renewed licensing negotiations  Reexamination proceedings, particularly inter partes (contested) reexamination proceedings, which have often produced outcomes favorable to the attacking party  Litigation - declaratory judgment actions are much easier to maintain after Medimmune v. Genentech (127 S.Ct. 764 (January 9, 2007))

39. 39 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 under new compact prosecution rules  Without knowledge of prior art, one risks needlessly extending prosecution by claiming more broadly than warranted by prior art, thereby potentially wasting the limited number of continuations and requests for continued examination available under the new rules Helps identify vulnerabilities in competitors’ patents

40. 40 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 critical importance in formulating and implementing strategy.

41. 41 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.

42. 42 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.” Query: what does this language mean for new compounds?!

43. 43 KSR v. Teleflex: Take Home Lessons Writing and prosecuting patents—some principles remain intact - I Prior art references can be distinguished on the basis (when available) that they “teach away” from the combination being urged to reject or invalidate the patent claim.  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.  Sometimes they are misconstrued by examiners.  Sometimes they are not enabling; that is, they fail to contain information sufficient to permit a person of ordinary skill to practice the subject matter for which the reference is cited. Unexpected results can be urged as showing non-obviousness.

44. 44 KSR v. Teleflex: Take Home Lessons Writing and prosecuting patents—some principles remain intact—II Often the combination of prior art references does not extend to all the limitations of the patent claim being considered.  When that is the case, it can be shown that a prima facie case for rejection or invalidation 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.