Judges: Newman (dissenting), Bryson (author), Prost

[Appealed from D. Del., Chief Judge Sleet]

In PharmaStem Therapeutics, Inc. v. Viacell, Inc., Nos. 05-1490, -1551 (Fed. Cir. July 9, 2007), the Federal Circuit affirmed the district court’s JMOL orders of non-infringement, while reversing the district court’s refusal to grant JMOL of patent invalidity.

In the district court, PharmaStem Therapeutics, Inc. (“PharmaStem”) alleged that the defendants had infringed two of its patents, U.S. Patent Nos. 5,004,681 (“the ’681 patent”) and 5,192,553 (“the ’553 patent”). These patents relate to the use of hematopoietic stem cells in reconstituting, upon transplantation, a recipient’s entire blood and immune (“hematopoietic”) system that may have been previously ravaged by disease or medical treatment. Hematopoietic stem cells are capable of maturing into the various specialized cells of the blood and immune system, thereby making them suitable for such purpose. The asserted ’681 patent claims cover compositions that contain hematopoietic stem cells “derived from the umbilical cord blood . . . of a single human . . . in which said cells are present in an amount sufficient to effect hematopoietic reconstitution of a human adult; . . . .” The asserted ’553 patent claims were directed to methods for hematopoietic reconstitution of a human, wherein human fetal blood components containing hematopoietic stem cells are isolated, cryopreserved, thawed, and introduced into a suitable human host. Defendants in this case engaged in the business of collecting and cryopreserving umbilical cord blood for possible future therapeutic use.

The district court concluded that PharmaStem failed to prove infringement of either patent. Accordingly, after the jury’s verdict of infringement, the district court granted the defendants’ JMOL motions and entered a noninfringement judgment for both patents. As to the issue of patent validity, the district court upheld the jury’s verdict that the patents were not invalid for obviousness, anticipation, or indefiniteness.

PharmaStem appealed the district court’s JMOL orders of noninfringement, while four of the six defendants below appealed the patent validity judgment. The issue on appeal regarding the ’681 patent infringement focused on the limitation requiring that the claimed composition contain fetal hematopoietic stem cells “in an amount sufficient to effect hematopoietic reconstitution of a human adult.” The Federal Circuit agreed with the trial court that statements in defendants’ advertising and other materials touting the potential therapeutic usefulness of cord blood were not a sufficient basis for finding infringement. The Court noted that none of those statements represented that the stem cells in any of the defendants’ cryopreserved cord blood samples were sufficient in number to effect hematopoietic reconstitution of an adult, as required by the asserted claims. The Court also found that neither defendants’ cord blood testing prior to cryopreservation nor scientific evidence presented at trial addressed whether defendants’ cord blood samples contained sufficient stem cells for adult reconstitution.

The Federal Circuit also held that the district court did not abuse its discretion in excluding the testimony of PharmaStem’s expert witness on infringement. The Court concluded that the expert’s inference of infringement from the marketing materials was unreasonable, given that the materials only represented that cord blood was of potential use for adults, but fell “significantly short of a representation that the individual cryopreserved cord blood samples each contained enough stem cells to reconstitute an adult,” slip op. at 19, as required by the asserted claims.

Regarding the ’553 patent infringement, the issue on appeal concerned the sufficiency of evidence to support the jury’s finding that defendants contributorily infringed by selling or offering to sell cryopreserved cord blood. The Federal Circuit affirmed the district court’s finding that such evidence was insufficient, given that, in light of the legislative background of the contributory infringement statute, section 271(c), the district court properly determined that contributory infringement only applied to a sale of “a material or apparatus for use in practicing a patented process,” and not to the provision of a service for compensation, as was the case with the present defendants. The Court noted that the defendants were never owners of the cord blood. Donors did not sell cord blood to defendants, nor did defendants sell the cord blood to transplant physicians; “[t]he defendants simply transferred the cord blood units to designated transplanters upon direction from the families.” Id. at 27.

As to the patent validity cross-appeal, the Court found that the district court should have granted defendants’ motion for JMOL on obviousness grounds, and then declined to address defendants’ other invalidity arguments based on anticipation and indefiniteness. To establish obviousness, the Court explained, defendants had to show by clear and convincing evidence “that a person of ordinary skill in the art would have had reason to attempt to make the composition or device, or carry out the claimed process, and would have had a reasonable expectation of success in doing so.” Id. at 28-29. The Court found the “reason to attempt” element easily established, while the “reasonable expectation of success” element presented a more difficult question.

In arguing the invention’s nonobviousness, PharmaStem mainly contended that those in the field of hematopoietic reconstitution would not have expected cord blood to be a successful transplant tissue. Here, PharmaStem relied on testimony from its expert, Dr. Irwin Bernstein, who cited to problems with transplant tissues that had been used previously and asserted that it was not known at the time that cord blood contained stem cells. The Federal Circuit, however, found the expert’s testimony inconsistent with the prior art and the inventors’ statements in the patent specification, which strongly suggested or explicitly represented the presence of stem cells in cord blood. Under Federal Circuit law, “[a]dmissions in the specification regarding the prior art are binding on the patentee for purposes of a later inquiry into obviousness.” Id. at 33. The Court thus found that “the inventors merely used routine research methods to prove what was already believed to be the case,” id. at 36, and accordingly concluded that a reasonable jury could not have found the invention nonobvious.

In deciding the obviousness issue, the Court did not find PharmaStem’s secondary considerations persuasive. Evidence regarding the pioneering role of the inventors in the use of cord blood did not establish any inventive contributions they made. Neither was Dr. Bernstein’s surprise at the successful human cord blood transplantation in 1988 probative, given that Dr. Bernstein may have been unaware of pertinent prior art, and that Dr. Bernstein tied the “surprise” to the success of the 1988 transplant, not to the results reported in the patents. The Court also gave little weight to the fact that the patents had survived several examinations by the PTO, finding fault with the PTO’s analysis of the prior art. The Court therefore reversed the denial of JMOL on the obviousness issue and remanded to the district court for entry of judgment in the defendants’ favor.

Writing in dissent, Judge Newman disagreed with the majority’s obviousness holding contrary to the jury’s verdict, citing to “undisputed evidence at trial . . . that these long-sought life-saving inventions were achieved amid general scientific skepticism.” Newman Dissent at 2. She also noted that the majority did not give due deference to the PTO’s review of the prior art. She also took issue with the majority’s interpretation that the inventors themselves conceded in the specification that the prior art disclosed the presence of stem cells in cord blood, citing to Dr. Bernstein’s testimony that no prior art showed that cord blood contained stem cells, and that at the time of the patent application filing, the differences between stem cells and progenitor cells (which arise from stem cells) could not be measured and were not well understood. The jury thus could have reasonably concluded that the prior art did not show that there were stem cells in cord blood, and that one of ordinary skill in this field would not have had a reasonable expectation of successful use of cord blood to reconstitute a human adult.

Judge Newman addressed the anticipation and indefiniteness issues that were appealed, and noted that the majority should have done so as well, in the interest of finality. She concluded that there was substantial evidence to support the jury’s verdict that the patents-in-suit were neither anticipated nor indefinite.

Judge Newman disputed the majority’s and district court’s noninfringement holdings, asserting that these were based on a ruling of law and evidence not presented to the jury. Dr. Hendrix’s expert testimony was also inappropriately rejected, since there was no criticism of the expert’s scientific credentials or her analysis of the prior art and the state of the science.

Judge Newman also found substantial evidence to support the jury’s infringement verdicts, given that defendants tested their cord blood samples to ensure that there was a sufficient amount of stem cell content to be therapeutically useful. With regard to the asserted ’553 patent method claims, there was substantial evidence that each step of the claimed invention was performed by the defendants followed by a transplant surgeon, and “[t]he principles of patent infringement are not negated when the steps of a method claim are performed by more than one entity.” Id. at 30. Judge Newman noted that PharmaStem received special verdicts of both direct joint infringement and contributory infringement, and no objection was raised to the verdict questions. Similarly, no objection was raised to the jury instructions, which did not include an instruction as to the legal impossibility of liability as to the ’553 patent.