Judges: Newman (concurring in part and dissenting in part), Rader (author), Bryson

[Appealed from S.D.N.Y., Judge Jones]

In re Omeprazole Patent Litigation, Nos. 04-1562, -1563, -1589 (Fed. Cir. Apr. 23, 2007), the Federal Circuit affirmed the district court’s judgment that the asserted claims of U.S. Patent No. 6,013,281 (“the ’281 patent”) were literally infringed but inherently anticipated, thereby permitting a generic alternative to Prilosec®, the “purple pill” for relieving heartburn.

AstraZeneca L.P. and related companies (collectively “Astra”) asserted the claims in the ’281 patent relating to a process for making a formulation of omeprazole (found in Prilosec®) against generic drug manufacturer Andrx Pharmaceuticals, Inc. (“Andrx”). Omeprazole inhibits gastric acid production in cells lining the stomach (parietal cells). Astra’s formulation of omeprazole contains two components allowing the drug to survive gastric acids until it reaches parietal cells: a protective coat and an alkaline reaction component to stabilize the active ingredient in the core. The ’281 patent claimed a process for making that formulation by “forming in situ a separating layer as a water-soluble salt product,” which separates the coating from the core. Andrx asserted counterclaims of invalidity and unenforceability. The district court held that the claims of the ’281 patent were literally infringed but invalid as anticipated or obvious over a Korean patent application. The district court also ruled that certain counterclaims relating to unenforceability were moot in light of invalidity.

On appeal, the Federal Circuit first affirmed that Andrx’s process of formulating omeprazole literally infringed the ’281 patent. Andrx contended that its process did not form a layer of “a water-soluble salt” because its separating layer included talc, which is insoluble in water. Focusing on the ’281 patent specification, the Court determined that the claimed separating layer could include an insoluble material. The “Summary of the Invention” stated that “the separating layer comprises a water soluble salt,” noted the Court, and one example in the ’281 patent included talc. Because Andrx’s separating layer included talc in an otherwise water-soluble separating layer, the Court held that Andrx’s formulation process literally infringed the asserted claims.

Addressing the invalidity counterclaims, the Court held that all but one of the asserted claims in the ’281 patent were anticipated by a Korean patent application assigned to a company that was earlier accused by Astra of infringing Astra’s related Korean patent in a litigation in Korea. That patent claimed a process of manufacturing omeprazole. The Korean application expressly disclosed all limitations but the “forming in situ a separating layer.” In the earlier Korean proceedings, Astra relied on expert testimony and argued that the accused process inherently involved in situ formation of the separating layer.

The Federal Circuit affirmed the district court’s finding that the Korean application inherently anticipated Astra’s patent, emphasizing the expert testimony in the Korean proceeding. The Federal Circuit echoed the district court’s characterization of the testimony as “prior admissions of inherency” and “evidence that in situ formation does result from the [accused] process.” Slip op. at 13. The Court also cited its precedent that artisans of ordinary skill need not recognize the inherent characteristics or functioning of the prior art in order to anticipate.

Here, the Court reasoned, “[t]he record shows formation of the in situ separating layer in the prior art even though that process was not recognized at the time.” Id. at 14. The Court referred to the earlier testimony by Astra’s experts supporting their realization that the “formation of a separating layer [in the accused process] was a natural result flowing from the combination of certain ingredients listed in [the method].” Id. at 14-15. According to the Court, “[t]he new realization alone does not render that necessary prior art patentable.” Id. at 14.

Regarding the one dependent claim that was not anticipated, the Court held that it was obvious. The claim was drawn to the alkaline reaction component of the core as an alkaline salt. In affirming the district court’s determination of obviousness, the Court noted that the prior art (the same Korean patent application) identified the core ingredient, arginine, as “basic” and “alkali.” Further, the Court perceived certain statements made by Astra in the prior Korean proceeding as general admissions of obviousness; for instance, that the claimed alkaline reaction compound and arginine listed in Astra’s Korean patent could act as substitutes. The Court rejected Astra’s argument that its statements in the Korean proceeding should apply only to Astra’s Korean patent, not to the ’281 patent at issue. Nonetheless, the Court found no error in the district court’s finding of obviousness with respect to that claim.

Regarding Andrx’s claims of unclean hands, fraud, and inequitable conduct, the Court held that the district court did not err in declining to find the ’281 patent unenforceable. The district court had refused to fully address Andrx’s fraud and inequitable conduct claims, calling them moot after finding all the asserted claims invalid. The Court disagreed, stating that such claims were technically not moot, since they could render the entire patent unenforceable, rather than just the asserted claims being held invalid. But the Court found that the ruling on mootness did not prejudice Andrx here, as the record failed to show any misrepresentation by the inventors. Indeed, the Court noted, the inventors had disclosed the Korean proceeding to the PTO, and the accused company in that case insisted that its product did not have a separating layer. The inventors then had every reason to believe they had invented the process in the ’281 patent. Thus, the Court found nothing inequitable in their conduct.

The Court also affirmed the denial of attorneys’ fees to Andrx, agreeing with the district court that Andrx was not the prevailing party and, thus, could not assert a claim under 35 U.S.C. § 285. The judgment in this patent case represented but one phase in this four-phase litigation involving multiple patents. In other phases, Astra had prevailed on many of its infringement claims based on related patents. Overall, Astra was the prevailing party, and Andrx therefore could not recover attorneys’ fees.

Judge Newman concurred that the claims of the ’281 patent were literally infringed but disagreed that they were anticipated or obvious. In her dissent, Judge Newman questioned the Court’s “novel theory of ‘inherent anticipation.’” In her view, the Court confused the law governing the patentability of a newly discovered use of a known composition (here achieved by a process claim) with the unpatentability of the known composition itself. Judge Newman also discredited the Korean application as an anticipatory reference, since it neither made public the trade-secret process nor did it enable those skilled in the art to carry out that process.