Print

Please login or register.
1 Hour 1 Day 1 Week 1 Month Forever
Login with username, password and session length

[daisyloo]

i apologize in advance for the rudimentary nature of my questions - i haven't a clue about patents.

given the following scenario:
    a) patent #1 is a method of use patent for a particular drug and is approved by the uspto.
    b) five months later, patent #2, which relates to compound for the same drug, and directly references patent #1, is also approved by uspto.
    c) ten years later, patent #2 gets an extension
    d) six years later, patent #2 is deemed double patenting and found invalid in a paragraph iv certification challenge

here are my questions:

1) is it unusual to apply for (and be granted) both a method of use patent and a compound patent, for the same substance?
2) if a patent is declared invalid as a result of a paragraph iv certification challenge, and the reason for invalidity is deemed to be double patenting as in the above scenario:
    a) is that invalidity retroactive, or is invalidity the status of the patent from that moment going forward?
    b) is the patent holder subjected to any penalty for this finding beyond losing exclusivity prior to the patent's expiration date?
    c) can the patent holder legitimately be accused of having known all along that the patent was invalid?

thanks for any and all assistance
daisy

[Robert K S]

c) ten years later, patent #2 gets an extension

What do you mean by this?

1) is it unusual to apply for (and be granted) both a method of use patent and a compound patent, for the same substance?

I would say no.  In the pharmaceutical industry it is especially common to find a new safe and effective use for an older drug.  Check out patent 5,547,957, for example, which effectively extended the patent-protected life of the compound commonly called finasteride by some seven years over the compound's original patent merely by patenting a previously undiscovered method of its use.  This patent is for a commonly prescribed drug and so it is worth many tens or hundreds of millions of dollars to its owner.

I don't know the answer to your question (a), which seems to really be asking "Can a licensee now go back and recover all the money it paid in license fees on the invalid patent?"  As for (b), the details will depend on the case, but the opposing side may be able to recover attorney's fees in "exceptional cases" (inequitable conduct, etc.).  There can also be criminal penalties for deliberate fraud on the Patent Office in securing a patent, but it's a higher bar to prove that fraud took place.  With (c) the answer is yes inasmuch as anyone can accuse anyone else of anything, but the accuser would do well to have persuasive evidence before making accusations.

Obviously, none of the above is legal advice, I'm not your lawyer, yada yada yada.

[bleedingpen]

I don't know the answer to your question (a), which seems to really be asking "Can a licensee now go back and recover all the money it paid in license fees on the invalid patent?" 

A licensee can only recover previously paid royalties for an invalid patent from the date that they challenge the patent's validity moving forward. 

e.g.,  Robert has a patent and I become a licensee in 2000.  In 2005, I send a letter to Robert protesting the payment of continued royalties because I believe the patent to be invalid.  In 2009, the patent is declared invalid- I can recoup my royalty payments made from 2005 moving forward.  Those paid before 2005 are gone forever.

Note that this rule is the opposite for whether the patent actually covers your licensed product.  In the case of non-coverage by the claims, all previously paid for royalties may be recovered in some instances. 

[DogDayPM 9er9er9er]

A licensee can only recover previously paid royalties for an invalid patent from the date that they challenge the patent's validity moving forward. 

Note that this rule is the opposite for whether the patent actually covers your licensed product.  In the case of non-coverage by the claims, all previously paid for royalties may be recovered in some instances. 

Hi Steve,

Not sure I get the reason for the dichotomy in the two situations, but I'm feeling a bit argumentative, so - for the case of invalidity, if you could show that the patentee had held back some secret "smoking gun" knowledge that their patent was invalid ab initio, then I'd say the licensee could make out a case for disgorgement based on what is essentially a fraud.  Also an argument that they could reach past their state's normal statute of limitations because of the fraud.  But in the normal situation, I do get what you're saying.

But for royalties paid, I don't get why the late knowlege of non-coverage might operate to allow the licensee to recover the royalties.  As between the licensee (producing/selling their product and knowing it intimately, it's construction, etc.) and licensor, who is in the better position to know whether the claims really read on the product?  Not saying your statement about royalties is wrong, since I've never run into this situation... ...would it be because so many licenses have boilerplate that says the licensee is licensing those patent rights for sales of "Product" which "but for the grant of rights" would be an infringing product? 

Thanks.

[bleedingpen]

A licensee can only recover previously paid royalties for an invalid patent from the date that they challenge the patent's validity moving forward. 

Note that this rule is the opposite for whether the patent actually covers your licensed product.  In the case of non-coverage by the claims, all previously paid for royalties may be recovered in some instances. 

Hi Steve,

Not sure I get the reason for the dichotomy in the two situations, but I'm feeling a bit argumentative, so - for the case of invalidity, if you could show that the patentee had held back some secret "smoking gun" knowledge that their patent was invalid ab initio, then I'd say the licensee could make out a case for disgorgement based on what is essentially a fraud.  Also an argument that they could reach past their state's normal statute of limitations because of the fraud.  But in the normal situation, I do get what you're saying.

In the case of fraud, then yes, you may be able to recover for royalties paid before the invalidity challenge. 

But for royalties paid, I don't get why the late knowlege of non-coverage might operate to allow the licensee to recover the royalties.  As between the licensee (producing/selling their product and knowing it intimately, it's construction, etc.) and licensor, who is in the better position to know whether the claims really read on the product?  Not saying your statement about royalties is wrong, since I've never run into this situation... ...would it be because so many licenses have boilerplate that says the licensee is licensing those patent rights for sales of "Product" which "but for the grant of rights" would be an infringing product? 

Thanks.

Non-coverage gets a separate treatment because the licensee really never received any benefit from the license.  The purpose of the license is to isolate the licensee from suit for infringing uses covered by the patent.  If the patent doesn't cover you, then the license agreement has not offered any consideration to the licensee and the licensee shouldn't have to pay royalties under the license agreement.  Licensors and licensees dispute patent coverage all of the time for this reason. 

However, in regards to invalidity, if you don't have the rule that royalties pre-challenge of patent validity aren't recoverable, then licensees would just wait until the end of the license term to challenge patent validity-after they had enjoyed continued protection under the license agreement.  SGK v. Shell. 

So I guess the dichotomy comes from public policy considerations.  Plus, the Courts are always wanting to get invalid patents off of the books, so encouraging early challenges to validity accomplishes that goal. 

[Isaac]

Non-coverage gets a separate treatment because the licensee really never received any benefit from the license.  The purpose of the license is to isolate the licensee from suit for infringing uses covered by the patent.  If the patent doesn't cover you, then the license agreement has not offered any consideration to the licensee and the licensee shouldn't have to pay royalties under the license agreement.  Licensors and licensees dispute patent coverage all of the time for this reason.

If the agreement requires royalties for model X, then a settlement might require royalties for model X as currently constructed even if model X later turns out to be non-infringing.  The agreement would be valid as long as there was an initial legitimate dispute about-non coverage.  The licensee's benefit is avoiding the uncertainties and expenses of litigation exactly as happens in a settlement in any other tort case.

Where the agreement simply sets a royalty for infringing models without specificity, of course there can be future disputes about models not specifically mentioned in the agreement.  But generally the agreement will probably be more specific at least about the models currently subject to litigation.


It is invalidity that is special and doesn't follow the general rules regarding settlements for the public policy reasons.  However, even the SC left open whether the right to contest for invalidity could be contracted away.

[daisyloo]

Thank you all for responding - below i have outlined the real situation about which i am asking since asking generalized questions is clearly not providing enough context.

Robert said: I would say no.  In the pharmaceutical industry it is especially common to find a new safe and effective use for an older drug. 

Apologies for not being clear – I meant compound and method of use for the same actual use – these two patents were applied for and granted within five months of one another. I guess I am referring to the original method of use, and the compound – is it de riguer for a drug to have both patents associated with it?

ok so here is the real context.

Basically a class action lawsuit has been filed against a drug company (Company X) alleging anti-competitive practices. I have read the lawsuit and have been trying to figure out whether it really is as totally absurd as it seems to me to be or whether I am missing something.

Here is the time line of events:

June 1989 - Company X patent #1 approved – original method of use for compound X – expiration June 2006
Dec 1989 - Company X patent #2 approved – compound for compound X – expiration Dec 2006
July 1997 - Company X’s compound X approved by FDA, goes to market, pretty much clobbers rest of market
Dec 1999 - Company X patent #2’s request for an extension of patent term granted, new expiration date in 2011
May 2005 Company Y files ANDA and notifies Company X of a paragraph 4 certification
Aug-ish 2005 Company X files infringement lawsuit on Company Y, triggering 30 month stay (end of stay Feb-ish 2008)
Feb 27, 2008 Company Y’s ANDA is approved
June 2008 – District court finds in favor of company Y – deems patent #2 double patenting
Between June 2008 and now, exact dates unknown, company X appealed district court decision but before decision rendered, settled w/Company Y – according to class action, Company Y’s generic still not on mkt tho long since approved, no other generic approved as yet

I am sure that is not nearly enough information, but I don’t know exactly what is relevant and to what degree, so I am just giving the basics right now.

The class action suit alleges that pretty much everything Company X did was unlawful, and anti-competitive, from applying for patent #2, to listing it in the Orange Book, to suing Company Y for infringement, and on and on, through to and including the settlement.

I am pretty confident in my assessment that everything from the filing of the ANDA to the point at which the settlement was made was by the book, so that leaves the application for patent #2 and then for its extension, and the settlement itself as areas in  which I need to get more info.

So that is the context for my patent questions.

Basically the class action says Company X knew or should have known that patent #2 was invalid and therefore pretty much everything it did from that point on was unlawful.

It seems to me that the validity of a patent at any given moment is determined by whatever the highest authority having most recently evaluated its validity says it is. Thus, up until the point at which it was declared invalid by the district court, which trumps the USPTO, it was valid, per the USPTO. By this interpretation, which could be all wrong for all I know, the class action falls apart.

So, I guess that is my main question - if patent #2 was deemed invalid in 2008 based on double patenting in 1989 (which seems odd in my opinion given the differences between the patents, their proximity temporally, and the second clearly referencing the first, but what do I know) is that invalidity retroactive? i.e., does the class action have a leg to stand on, in this regard?

There is a host of other problems I think I see with this lawsuit, but this one is pretty central.

I understand that nothing I receive in response is legal advice and that no one is my lawyer.

Thanks so much
daisy

[Robert K S]

is it de riguer for a drug to have both patents associated with it?

Again, I would say yes.  Having two related patents on something is pretty typical in every field.  If one is listed as a divisional of the other, it will indicate to you that the examiner issued a restriction requirement, virtually forcing the applicant to pursue two patents on more or less the same thing.  (The fact that they expired at different times indicates to me that such is probably not the case, however.  Still, I don't see anything out of the ordinary here.)

Dec 1999 - Company X patent #2’s request for an extension of patent term granted, new expiration date in 2011

What is the mechanism by which the company was able to get an extension of patent term?  35 U.S.C. 156?

The class action suit alleges that pretty much everything Company X did was unlawful, and anti-competitive, from applying for patent #2, to listing it in the Orange Book, to suing Company Y for infringement, and on and on, through to and including the settlement.

Of course, alleging that everything the other side did was the work of the devil is SOP in a lawsuit complaint.

Basically the class action says Company X knew or should have known that patent #2 was invalid and therefore pretty much everything it did from that point on was unlawful.

"Should have known" is a different threshold than "knew"; the former implies mere negligence whereas the latter implies materiality and intent.

By this interpretation, which could be all wrong for all I know, the class action falls apart.

Based only on the bare minimum facts presented in your post, and without knowing the details of any other evidence which might exist to prove that Company X knew they had a bad patent and tried to enforce it anyway, I agree with this interpretation.

[daisyloo]

thank you! more in a minute....

[daisyloo]

What is the mechanism by which the company was able to get an extension of patent term?  35 U.S.C. 156?

yes

Of course, alleging that everything the other side did was the work of the devil is SOP in a lawsuit complaint.

is there no penalty for filing a lawsuit containing false accusations? i mean, if, in fact, this lawsuit is as absurd as it seems, can people  just run around filing suits like this, willy nilly?

"Should have known" is a different threshold than "knew"; the former implies mere negligence whereas the latter implies materiality and intent.

how can even "should have known" be an option if the patent was approved by the uspto? i mean, why have an approving authority at all, if "should have know" could  ever be applied to an approved patent?

Based only on the bare minimum facts presented in your post, and without knowing the details of any other evidence which might exist to prove that Company X knew they had a bad patent and tried to enforce it anyway, I agree with this interpretation.

as far as i can tell, the extent of the accusation is that Company X "should havee know" they had double patented, though again, i cannot understand why (a) there is a uspto at all if patents that are later termed double are ever approved to begin with and (b) the *uspto* isn't held responsible for any patents getting approved that shouldn't have!

thank you so much, robert.

[Robert K S]

is there no penalty for filing a lawsuit containing false accusations? i mean, if, in fact, this lawsuit is as absurd as it seems, can people  just run around filing suits like this, willy nilly?

I wouldn't say it's willy-nilly, and that wasn't my point.  My point is that when filing a complaint, it behooves the plaintiff's side to paint all the actions of the defendant in the worst possible light, or anyway, some plaintiffs believe so.  But a complaint is only one side of the story, and the beauty of our legal system is that both sides get a chance to have their say.

There's usually no penalty for filing suits that are ultimately found to be meritless, except, in rare cases, attorney's fees, and even more rarely, sanctions.

how can even "should have known" be an option if the patent was approved by the uspto? i mean, why have an approving authority at all, if "should have know" could  ever be applied to an approved patent?

Precisely.

Furthermore, this is exactly the reason why companies like to build "portfolios" of patents, putting minor variations on a theme through the examination process multiple times, hoping to secure multiple patents on the same basic invention.  A judge or jury may buy that the government screwed up once and issued an invalid patent, but it gets progressively more difficult to convince a judge or jury that the government screwed up again and again and again.  (Of course, this strategy is usually through continuations, and I understand that in your particular case it seems not to have been a continuation application that issued and was later ruled to constitute double patenting.)