HZNP Medicines LLC v. Actavis Labs. UT, Inc.

Case Name: HZNP Medicines LLC v. Actavis Labs. UT, Inc., No. 2017-2149, -2152, -2153, -2202, -2203, -2206, 940 F.3d 680 (Fed. Cir. Oct. 10, 2019) (Circuit Judges Prost, Newman, and Reyna presiding; Opinion by Reyna, J.; Opinion Concurring-in-part and Dissenting-in-part by Newman, J.) (Appeal from D.N.J., Hillman, J.) 

Drug Product and Patent(s)-in-Suit: Pennsaid® 2% (topical diclofenac sodium); U.S. Patents Nos. 8,217,078 (“the ’078 patent”), 9,132,110 (“the ’110 patent”), 8,618,164 (“the ’164 patent”), 9,168,304 (“the ’304 patent”), 9,168,305 (“the ’305 patent”), 8,546,450 (“the ’450 patent”), 9,101,591 (“the ’591 patent”), 8,563,613 (“the ’613 patent”), 9,220,784 (“the ’784 patent”), 8,871,809 (“the ’809 patent”), 8,252,838 (“the ’838 patent”), and 9,066,913 (“the ’913 patent”)

Nature of the Case and Issue(s) Presented: Pennsaid 2% is Horizon’s topical non-steroidal anti-inflammatory drug (NSAID) approved for treating pain of osteoarthritis in the knees. Horizon sued Actavis for infringement of various claims of the patents-at-issue based on Actavis’ filing of an ANDA for a generic version of Pennsaid 2%. During claim construction, the district court found three terms in the asserted claims of the formulation patents to be indefinite. At summary judgment, the district court found no induced infringement of the asserted method of use claims. One claim remained at trial: claim 12 of the ’913 patent. Actavis stipulated that if claim 12 were not obvious, then its ANDA product would infringe. After trial, the district court found claim 12 not obvious and enjoined Actavis from launching its ANDA product. Horizon appealed the district court’s findings of indefiniteness and non-infringement. Actavis cross-appealed the district court’s finding that claim 12 of the ’913 patent was not obvious. The Federal Circuit affirmed. Judge Newman concurred in part and dissented in part.

Why Horizon Prevailed: Although the district court invalidated most of the claims or found non-infringement, Horizon ultimately prevailed on claim 12 of the ’913 patent.

Indefiniteness: The district court found the following three terms of the formulation patents indefinite: 1) “the topical formulation produces less than 0.1% impurity A after 6 months at 25 degrees C and 60% humidity”; 2) “the formulation degrades by less than 1% over 6 months”; and 3) “consisting essentially of.” The Federal Circuit agreed with the district court that “impurity A” was indefinite because a POSA would not know with reasonable certainty the identity of the claimed substance. The term “impurity A” only appeared in claim 4 and example 6 of the ’913 patent. Example 6 described a stability study in which the samples were tested for impurities by high performance liquid chromatography (HPLC). One finding of the stability test was that certain formulations showed a lower quantity of “impurity A.” While it was undisputed that “impurity A” was not defined in specification, Horizon argued that “impurity A” referred to USP Related Diclofenac Compound A (“USP Compound A”). Horizon argued that even though the specification did not refer to USP Compound A, a POSA consulting the available pharmacopeias would know “impurity A” refers to a specific impurity of diclofenac sodium. Because the specification referred to “impurity A” as a degradation of diclofenac sodium, a POSA would know the impurity to be USP Compound A.

Actavis argued that the specification did not provide any clues as to the identity of “impurity A” therefore implying that it was an unknown impurity. Actavis’ expert stated that a POSA would infer that “impurity A” referred to an unknown impurity because the specification did not disclose the chemical name of the impurity, used quotation marks to refer to “impurity A,” and justified not conducing additional tests to identify the impurity because it occurred in such low amounts. Additionally, the expert opined that because Example 6 did not disclose the HPLC procedure used (e.g., column type, mobile solvent, and temperature), a POSA would not be able to determine the identity of the impurity. Moreover, Example 6 suggested that more testing was necessary to determine the identity of the impurity.

The Federal Circuit found no clear error in the district court’s conclusion that “impurity A” was indefinite. First, the Federal Circuit held that the claims did not specifically relate “impurity A” to diclofenac sodium, but rather more broadly to the entire claimed topical formulation. Thus, there was no clue in the claim itself that “impurity A” related to diclofenac sodium. The Federal Circuit further explained that beyond the claim language, the other intrinsic evidence provided no clue as to the identity of “impurity A” and the Federal Circuit specifically referenced the lack of information regarding the conditions of the HPLC experiment. Looking at the extrinsic evidence, the Federal Circuit agreed with the district court’s determination that a POSA would not relate Example 6 to the available pharmacopoeias that Horizon’s expert relied on. Next the Federal Circuit considered and affirmed the district courts determination that “degrades” was indefinite. The Federal Circuit explained that because Horizon’s proposed definition of “degrades” referred to “impurity A,” and because “impurity A” was indefinite, it followed that “degrades” which relies upon an indefinite term for its construction, was also indefinite. Finally, the Federal Circuit considered and affirmed the district court’s determination that “consisting essentially of” was indefinite in the context of the patents-at-issue. “Consisting essentially of” signals a partially open claim. The parties’ dispute therefore focused on the basic and novel properties of the formulation patents. The district court found, and the Federal Circuit agreed, that one of the basic and novel properties of patented formulation was “better drying time.” Next, the Federal Circuit addressed whether the Nautilus definiteness standard applies to the basic and novel properties of an invention. In Nautilus, the Supreme Court held that “a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention.” Nautilus, Inc. v. Biosig Instruments, Inc., 572 U.S. 898, 901 (2014). Horizon argued that the Nautilus standard focused on the claims and did not apply to the basic and novel properties of the invention. The Federal Circuit disagreed. The court explained that because the claims were drafted using “consisting essentially of,” the claims were open to the inclusion of any ingredient that did not materially affect the basic and novel properties of the invention. Thus, the Nautilus standard applied.

Next, Horizon argued that the basic and novel properties of an invention were not properly considered at the claim construction stage because they were fact issues. The Federal Circuit rejected Horizon’s argument, and held that courts evaluating claims using the phrase “consisting essentially of” may determine the basic and novel properties of an invention at claim construction, and then may consider whether the intrinsic evidence establishes what constitutes a material effect on those properties. The Federal Circuit reasoned that “the definiteness inquiry focuses on whether a [POSA] is reasonably certain about the scope of the invention. Indeed, if a [POSA] cannot ascertain the bounds of the basic and novel properties of the invention, then there is no basis upon which to ground the analysis of whether an unlisted ingredient has a material effect on the basic and novel properties.” The basic and novel properties must be known and definite, and therefore the district court did not err. Finally the Federal Circuit affirmed the district court’s conclusion that “better drying time” was indefinite because the specification discloses two different methods for evaluating “better drying time” and methods did not provide consistent results at consistent times.

Non-infringement: Horizon premised its induced infringement arguments for the method-of-use patents on the label for Actavis’ ANDA product. The district court found that the asserted claims of the method of use patents required the following steps: (i) application of the medication to the knee; (ii) waiting for the area to dry; and (iii) application of sunscreen, insect repellant, or a second topical medication. The district court further found that to infringe the claimed method, all steps must be completed. Actavis’ label contained a warning to “wait until area is completely dry before covering with clothing or applying sunscreen, insect repellent, cosmetics, topical medications or other substances.” The district court found that Actavis’ label merely permitted, without encouraging, the application of a second topical medication. Thus, the district court held the label was insufficient to show induced infringement. The Federal Circuit agreed, explaining that the warning “operates in an ‘if/then’ manner: if the user wants to cover the treated area with clothing or apply another substance over it, then the patient should wait until the area is dry.” This did not encourage infringement because it did not require application of a second substance, whereas the claim language did. Therefore, the district court did not err in granting summary judgment of non-infringement.

Obviousness: Actavis’s argument regarding obviousness of claim 12 of the ’913 patent was premised on the predecessor product to Pennsaid 2% -- Pennsaid 1.5%. Actavis argued that the changes made to Pennsaid 1.5% to arrive at Pennsaid 2% would have been obvious to a POSA. Actavis further argued that the district court erred in requiring that the prior art predict the “exact formulation” of the claim. The Federal Circuit held that the district court’s factual findings regarding the unpredictability of the formulation were not clearly erroneous, and therefore affirmed.

Dissent by Judge Newman: Judge Newman dissented from the majority’s holdings that “consisting essentially of” was indefinite and that the ANDA label did not induce infringement of the method-of-use patents.

Judge Newman argued that the majority were incorrect in incorporating into the scope of the claims an evaluation of the basic and novel properties of the invention. She further argued that the claims using “consisting essentially of” were definite because they listed the ingredients that the claimed formulation consists essentially of. The majority’s distinction between “consisting of” and “consisting essentially of” did not comport with precedent. She stated that there is no precedent for the majority’s ruling that “’consisting essentially of’ claims are invalid unless they include the properties of the composition in the claims.” Finally, Judge Newman stated that the clear and convincing evidence standard for invalidity was not met in this case as there was no evidence that a POSA would not understand the claims with reasonable certainty. Thus, she asserted that the claims were not invalid for indefiniteness.

Judge Newman also disagreed with the majority that the ANDA product label would not induce infringement. She asserted that the label instructed a method of use that is identical to the claimed method. She further stated, “patients may not always comply with instructions. However, this does not insulate the provider from infringement liability.”