Judges: Lourie (author), Bryson, Dyk (concurring) [Appealed from S.D.N.Y., Judge Cote]

In Takeda Chemical Industries, Ltd. v. Alphapharm Pty., Ltd., No. 06-1329 (Fed. Cir. June 28, 2007), the Federal Circuit affirmed the district court’s judgment that the asserted claims of U.S. Patent No. 4,687,777 (“the ’777 patent”) were not obvious.

Takeda Chemical Industries, Ltd. and Takeda Pharmaceuticals North America, Inc. (collectively “Takeda”) manufacture the Type 2 diabetes drug pioglitazone, sold in the United States under the trade name ACTOS® and the subject of Takeda’s ’777 patent. ACTOS® is a member of a class of drugs known as thiazolidinediones (“TZD”). ACTOS® acts by ameliorating the insulin resistance experienced by patients with Type 2 diabetes.

The generic drug manufacturer Alphapharm Pty., Ltd. and three other generic manufacturers (collectively “Alphapharm”) filed ANDAs pursuant to the Hatch-Waxman Act seeking FDA approval under 21 U.S.C. § 355(j) et seq. to manufacture and sell generic versions of pioglitazone. Because Takeda had listed the ’777 patent in the FDA’s Orange Book as covering ACTOS®, Alphapharm filed pursuant to 21 U.S.C. § 505(j)(2)(B)(ii) a certification with its ANDA, asserting that the relevant claims of Takeda’s ’777 patent were invalid as obvious. In response, Takeda sued Alphapharm, alleging that Alphapharm had infringed or would infringe claims 1, 2, and 5 of the ’777 patent. Claim 2 of the ’777 patent is directed to the compound pioglitazone. In pioglitazone, an ethyl group is attached to the 5-position of a pyridyl ring. Alphapharm argued in the district court that the asserted claims of the ’777 patent were obvious over the prior art “compound b” that was referenced in the ’777 patent. Compound b includes a pyridyl ring with a methyl group attached at the 6-position of the ring. Thus, pioglitazone differs from compound b in that the methyl group of compound b is replaced by an ethyl group in pioglitazone and that group is attached at the 5-position in pioglitazone rather than the 6-position. Following a bench trial, the district court held that the asserted claims of the ’777 patent were not obvious over compound b.

On appeal, the Federal Circuit began by rejecting Alphapharm’s argument that the district court misapplied the law relating to obviousness of chemical compounds. The Federal Circuit acknowledged that a known compound may suggest compounds with similar structure because such compounds often have similar properties and, therefore, chemists of ordinary skill would ordinarily contemplate making them to try to obtain compounds with improved properties. The Court explained, however, that in order to make a prima facie case of unpatentability in such instances, a showing that the prior art would have suggested making the specific molecular modifications necessary to achieve the claimed invention is also required.

That test for prima facie obviousness for chemical compounds, the Court held, is consistent with the legal principles enunciated in KSR International Co. v. Teleflex, Inc., 127 S. Ct. 1727 (2007). The Federal Circuit explained that while the KSR Court rejected a rigid application of the teaching, suggestion, or motivation (“TSM”) test in an obviousness inquiry, “[it] acknowledged the importance of identifying ‘a reason that would have prompted a person of ordinary skill in the relevant field to combine the elements in the way the claimed new invention does’ in an obviousness determination.” Slip op. at 10, quoting KSR, 127 S. Ct. at 1731. Moreover, the Federal Circuit noted that the KSR Court held that the TSM test can provide helpful insight to an obviousness inquiry as long as the test is not applied as a rigid and mandatory formula.

Thus, the Federal Circuit held, “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 of a new claimed compound.” Id.

The Federal Circuit agreed with the district court that Alphapharm failed to make that showing. Alphapharm argued that the prior art would have led one of ordinary skill in the art to select compound b as a lead compound for further investigation. The person of ordinary skill would then have made two obvious chemical changes: replacing a methyl group with an ethyl group, and moving the ethyl group to the 5-position rather than the 6-position. The Federal Circuit rejected Alphapharm’s arguments, noting that the district court found that one of ordinary skill in the art would not have selected compound b as the lead compound. Although compound b was disclosed in Takeda’s prior art U.S. Patent No. 4,287,200 (“the ’200 patent”), that patent also disclosed hundreds of millions of other TZD compounds. Furthermore, although the ’200 patent specifically identified fifty-four TZD compounds, and during prosecution Takeda submitted evidence to the PTO to demonstrate the superiority of nine of them, including compound b, the basis for that superiority was not related to antidiabetic effect.

The Court also pointed to the district court’s findings regarding an article by Sodha et al. (“the Sodha article”). Although the article disclosed compound b as one of 101 TZD compounds relating to hypoglycemic activity and plasma triglyceride lowering activity, compound b was not identified as one of the three most favorable compounds and was singled out as having the undesirable side effects of causing considerable increases in body weight and brown fat weight.

Next, the Court pointed approvingly to the district court’s findings relating to Takeda’s related U.S. Patent No. 4,444,779 (“the ’779 patent”). Compound b is specifically claimed in claim 4 of the ’779 patent and a preliminary amendment in the prosecution history of that patent contained a statement that “the compounds in which these heterocyclic rings are substituted have become important, especially [compound b].” The district court discounted that evidence, however, focusing instead on testimony from experts for both Takeda and Alphapharm, emphasizing that in view of the Sodha article, a person of ordinary skill in the art would not have selected compound b as a lead compound.

The Federal Circuit then rejected Alphapharm’s contention that, under KSR, the claimed compounds would have been obvious because the prior art compound fell within “the objective reach of the claim,” and the evidence demonstrated that using the techniques of homologation and ring-walking would have been “obvious to try.” According to the Court, this was not a situation, as identified in KSR, with a problem having a finite number of identified and predictable solutions. Instead, compound b, the closest prior art, “exhibited negative properties that would have directed one of ordinary skill in the art away from that compound.” Id. at 15. Thus, the Court concluded, “this case fails to present the type of situation contemplated by the [KSR] Court when it stated that an invention may be deemed obvious if it was ‘obvious to try.’” Id.

The Federal Circuit also found that Alphapharm’s reliance on Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348 (Fed. Cir. 2007), fared no better. In contrast to Pfizer, in this case, the district court found nothing in the prior art to narrow the possibilities of a lead compound to compound b. Instead, the district court found that one of ordinary skill in the art would have chosen one of the many compounds disclosed in the Sodha article without toxicity or side effects, rather than to choose compound b as a starting point.

The Federal Circuit went on to state that even if Alphapharm had established that the prior art would have led to the selection of compound b as the lead compound, Alphapharm’s obviousness argument failed on a second ground. Specifically, the district court found nothing in the prior art to suggest making the specific molecular modifications to compound b that would be necessary to achieve the claimed compounds. First, the district court found that the process of modifying lead compounds was not routine at the time of the invention. Second, the district court found that nothing in the prior art provided a reasonable expectation that adding a methyl group to compound b would reduce or eliminate its toxicity. There was also no reasonable expectation in the art that changing the positions of a substituent on a pyridyl ring would result in beneficial changes.

Alphapharm also argued that under In re Wilder, 563 F.2d 457 (C.C.P.A. 1977), differences in a chemical compound’s properties resulting from a small change made to the molecule are reasonably expected to vary by degree and, thus, are insufficient to rebut a prima facie case of obviousness. The Federal Circuit rejected the applicability of Wilder, however, noting that in Wilder, the claimed compound and its analog shared similar properties, whereas pioglitazone was shown to exhibit unexpectedly superior properties over the prior art compound b. Moreover, the district court did not clearly err in finding that there was no reasonable expectation that pioglitazone would possess the desirable property of nontoxicity, particularly in light of the toxicity of compound b. The Court reasoned that Takeda had rebutted any presumed expectation that compound b and pioglitazone would share similar properties.

Finally, the Federal Circuit rejected Alphapharm’s contention that the district court erred in its consideration of the scope of the prior art. The Court observed that even if, as Alphapharm asserted, the district court may have incorrectly implied that prosecution histories are not accessible to the public, the district court nonetheless considered the prosecution history of the ’779 patent in its obviousness analysis and accorded proper weight to the statements contained therein. Accordingly, any error committed by the district court was harmless.

In a concurring opinion, Judge Dyk joined the opinion of the Court in upholding the district court’s judgment that claim 2, limited to pioglitazone, would have been nonobvious over the prior art. Judge Dyk noted, however, that claims 1 and 5 are broader, and in his view likely invalid. In fact, at oral argument, Takeda admitted that the prior art ’200 patent also generically covers a 6-ethyl compound within the scope of claims 1 and 5 of the ’777 patent, and admitted that there is no evidence of unexpected results for the 6-ethyl compound. Nonetheless, this would not have changed the outcome that claim 2 is valid and infringed by Alphapharm’s filing of the ANDA for pioglitazone.