Apotex Inc. v. UCB, Inc.

After finding that a patent owner had made several misrepresentations to the Patent and Trademark Office (PTO) during prosecution, the U.S. Court of Appeals for the Federal Circuit concluded that the misrepresentations met the “but for” materiality test, and that the “single most reasonable inference” to be drawn from the evidence was that the requisite intent to deceive had been established. Apotex Inc. v. UCB, Inc., Case No 13-1674 (Fed. Cir., Aug. 15, 2014) (Reyna, J).

In its en banc Therasense decision (IP Update, Vol. 14, No. 6), the Federal Circuit explained that the law of inequitable conduct relating to nondisclosure requires two separate showings: specific intent to deceive and materiality. The burden of proof is on the challenger to prove each element by clear and convincing evidence.

The patent in issue in Apotex related to moexipril magnesium, an ACE inhibitor used to treat hypertension.  This compound was known to be “susceptible to degradation and instability.”  To overcome the problem, the inventor claimed that a stabilized formulation could be prepared by reacting moexipril with either magnesium hydroxide or magnesium carbonate in the presence of a solvent, which is later evaporated so that the dry material can be compressed into tablets.  As observed by the Court, the basic process, known as “wet granulation,” has been in use in the pharmaceutical industry for over 30 years.

During prosecution, the PTO asserted three references, two of which were cited in the specification of the asserted patent.  One was a prior art patent that disclosed methods for stabilizing ACE inhibitors using alkaline magnesium compounds and the other was a journal article that compared wet granulation to dry powder mixing for formulating moexipril—and concluded that only wet granulation was able to stabilize moexipril.  The third reference was another patent that disclosed the use of moexipril tablets to treat hypertension.

Through counsel, the inventor (and CEO of Apotex), Dr. Bernard Charles Sherman, argued to the PTO that there was no teaching in the prior art of a reaction—only a disclosure of mixing or combining.  The inventor further instructed his counsel to submit an expert declaration that reinforced his representations that in the prior art, the magnesium stabilizer acted to prevent reactions—and had to remain unreacted itself to do so.

After Apotex agreed to limit the claims by including a “greater than 80% conversion” limitation, the examiner allowed the claims noting in his statement of reasons for allowance (essentially quoting Dr. Sherman’s argument) that:

The primary reason for allowance is that the prior art does not disclose nor fairly suggest a process of making a pharmaceutical composition comprising moexipril magnesium, comprising the step  of re-acting moexipril or an acid addition salt thereof with an alkaline magnesium compound so as to convert greater than 80% of the moexipril or moexipril acid addition salt to moexipril magnesium.  Rather, the prior  art teaches that only  a portion  of  drug  (if   any)   may   be   converted to  the alkaline  salt  and   that  the stable product  results entirely or primarily not from  conversion to alkaline  salts, but from  stabilization of  the moexipril hydrochloride by the presence  of the alkaline stabilizing compound in the final product.

At trial, the district court relied on several pieces of evidence in finding that Dr. Sherman was aware that Univasc, the compound described in the prior art patent cited in the specification, involved a reaction. Dr. Sherman conceded trial that, before filing his application, he had a “strong suspicion” and a “belief” that Univasc was made according to his claimed process.

Also, on the same day the application was filed, Dr. Sherman admitted that he conducted tests comparing Univasc to an Apotex moexipril product with no alkaline stabilizer.  In his hand-written notes, Dr. Sherman concluded that the Apotex product was “much less stable than the magnesium salt.”   About a month later, two Apotex scientists produced a detailed mass spectrometry report on Univasc, concluding that moexipril in Univasc is “mainly present” as moexipril magnesium.

The district court also found that Dr. Sherman was both aware of and involved in all decisions regarding prosecution of the application and that he was very familiar with patent prosecution and patent enforcement litigation.

The district court further found Dr. Sherman’s disclaimers regarding his knowledge of the components of Univasc, of the prior art and of the statements made to the PTO by his counsel to not be credible.

Finally, the district court concluded that Dr. Sherman failed to inform the hired expert, Dr. Lipp,  of the facts about Univasc and shielded him from the truth, which resulted in a declaration that Dr. Sherman  submitted to the PTO to perpetuate his mischaracterizations of the prior art. Dr. Lipp testified that he was specifically asked to limit his discussions to only the documents provided by Apotex, which did not include any information regarding the tests conducted on Univasc or Dr. Sherman’s knowledge of the product.

After the district court ruled the Apotex patent unenforceable for inequitable conduct before the PTO, because of both misrepresentations to the PTO and for withholding material prior art, Apotex appealed.

The Federal Circuit affirmed, concluding that the district findings regarding materiality and intent were “not clearly erroneous” and that the district court’s determination that Dr. Sherman breached the duty of candor owed to the PTO was “not an abuse of discretion.”

As for the district court’s finding on materiality, the Federal Circuit agreed with the district court that Dr. Sherman had made “affirmative misrepresentations” to the PTO as to facts that met the “but for” materiality test, noting Dr. Sherman’s “active involvement” in the prosecution, in the representations made on his behalf by Dr. Lipp and in writing the specification which omitted “important details” regarding prior art known to him.  The Federal Circuit also affirmed that Dr. Sherman’s trial testimony was found to be less than credible.  The Court found no reason to disturb the district court’s finding of clear and convincing evidence of material misconduct.

The Federal Circuit however, noted that a failure to disclose Dr. Sherman’s “suspicions” or “beliefs” concerning the prior art did not violate any duty, so long as he was able to advocate “in good faith, a reasonable interpretation of the prior art.”  Here however, the misconduct went beyond non-disclosure of personal beliefs to “affirmatively and knowingly [misrepresenting] material facts…”

On the issue of intent, the Federal Circuit agreed with the district court findings that Dr. Sherman “knew, or at least had a strong suspicion, that he was seeking to patent the very same process used to obtain an already existing and widely available drug;” that Dr. Sherman knew “some of the assertions made in the specification regarding the prior art were at least misleadingly incomplete, if not plainly inaccurate”;  that Dr. Sherman “never performed the experiments described” even though he “drafted the examples in the specification entirely in past-tense language”; and finally that Dr. Sherman directed his counsel to bolster his own misrepresentations “by procuring and submitting the declaration of an expert who was deliberately shielded from the truth.”  As the Court concluded “[i]n the aggregate, Dr. Sherman’s conduct evidences a pattern of lack of candor” and that “deceptive intent is the single most reasonable inference that can be drawn from the evidence.”