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Nov 18, 2011

Federal Circuit Takes Up En Banc Joint Infringement of Method Patents

Oral arguments begin today on two separate cases, which don’t involve biotech firms but will affect the industry.

Federal Circuit Takes Up En Banc Joint Infringement of Method Patents

McKesson and Akamai have support from BIO, PhRMA, and Myriad Genetics, who all take issue with current stipulations of joint infringement. [© Aamon - Fotolia.com]

  • A pair of Federal Circuit cases set for en banc oral arguments today is being closely watched by the biopharma industry. Stakeholders are seeking clearer direction on when patents can be considered jointly infringed.

    McKesson Technologies Inc. v. Epic System Corp. focuses on whether Epic’s MyChart software infringed on McKesson’s method patent for electronic communication between healthcare providers and patients involving personalized web pages. Akamai Technologies, Inc. v. Limelight Networks, Inc. covers whether Akamai’s method patent for hosting web content on multiple servers to enhance a website’s handling of large traffic was infringed by rival Limelight when it signed customers to contracts requiring them to perform several of the steps in the patent claim at issue.

     Earlier this year, separate Federal Circuit panels—one of which threw out a $41.5 million jury verdict for Akamai—held there was no viable legal theory to support findings that the defendants engaged in joint infringement, despite the contractual relationship in Akamai and the doctor/patient relationship in McKesson. In Akamai, the court declared: “There can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.”

    Both Akamai and McKesson have found support from two biopharma groups and one company in amicus curiae filings. Myriad Genetics offered insight into industry thinking: Since the Human Genome Project, the company noted, companies cannot obtain patents for fundamental composition of matter, since almost all of the human genome, all its encoded proteins, and analyses of those molecular markers, are deemed prior art.

    “Claims to diagnostic applications of correlations between such molecular markers and disease characters are usually the only patent claims available to adequately protect the large investment needed to bring a personalized medicine product to market,” Myriad argued. “In practice, such claims must be presented in the form of method claims including a step of detecting a molecular marker and a separate step of applying the detection result. These two steps may be easily divided between two or more parties, making joint infringement a serious problem.”

  • Impact on Biotech

    The answer, said Myriad, is a new rule for analyzing potential infringement of method claims by multiple parties: “When a first party performing one or more steps of a method claim actively causes another party to perform the other steps of the same method claim, or when two parties act in a concerted manner to perform all steps of a method claim, then the first party and the parties acting in concert should each be deemed a direct infringer.

    “This proposed rule will work to discourage collusion, prevent unfair results, and stimulate investment and innovation in personalized medicine and other fields,” Myriad added. By contrast, the company said, the Federal Circuit’s current joint rule “will be devastating to personalized medicine if not reversed.”

    Rewriting the joint infringement standard would mean rewriting court precedent. “It will be very, very difficult to hold anybody liable for infringing that type of a method claim on an invention, because there’s no single person you can point to,” Benjamin L. Volk Jr., a partner with the law firm Thompson Coburn, told GEN.

    “In this industry, you’re going to have several different parties doing different pieces of an invention, which could cause some serious problems,” Volk said. “If you don’t have a direct infringer, the law right now says you cannot have an indirect infringer, which is another problem for a lot of these biopharma companies with these method claims.”

    The Biotechnology Industry Organization (BIO) urged the Federal Circuit to abandon its single-entity rule, requiring that a single party direct or control the infringing acts of all the infringing parties in order to conclude that joint infringement took place.

    “Liability would lie where the accused party actively induced multiple actors to each perform separate claim steps which, together, constitute the infringing method,” BIO argued. “Likewise, liability would lie where the accused party, in addition to actively inducing the performance of claim steps by others, is itself a participant in the practice of the steps of the infringing method.”

    BIO cited the capital spending of biotech companies on costly manufacturing facilities that it said “cannot be re-tooled because they are specifically designed to practice very particular biological or chemical processes.” The plants require establishment licenses tied to process integrity, while specific biological steps are needed to meet product specifications and maintain biologics license applications granted by FDA.

    “Given such large up-front investments and regulatory requirements, a biotechnology company often has to ‘commit’ to a certain process technology from which it cannot afterwards deviate, and without which it could not remain in business,” BIO stated in its amicus brief.

    Pharmaceutical Research & Manufacturers of America (PhRMA) said the Federal Circuit “can and should seize this opportunity to adopt rational and workable standards governing infringement by multiple entities. When multiple entities acting in concert combine to carry out all of the steps of a valid method claim, they cause an infringement that harms the patent owner.

    “All who contribute substantially to the infringement are tortfeasors and jointly and severally liable for damages,” PhRMA argued. “Any other rule will seriously devalue thousands of issued patents and have a highly deleterious impact on the incentives for investing in new technologies that the patent system is intended to foster.”

    Joint and several liability is a venerable concept in many tort categories, such as slip-and-falls, but not in biotech patent law. “The way the case law has evolved is that one of the parties who is accused of infringement needs to exert control or direction over the other party,” Volk said. “A typical arms-length biz transaction between two companies isn’t going to rise to that level. And the way the law has evolved, it’s just very difficult to establish what you need to get joint and several liability.”

    According to BIO, a change to the joint infringement rule wouldn’t only benefit big biopharma: “Even for smaller, development-stage biotechnology companies that do not yet produce a product of their own, process patents on innovative platform technologies may be widely licensed in the industry and constitute the company’s only source of revenue.”

  • Opportunity for Change

    “I don’t think anybody is thinking about the impact in the bio and pharma areas,” said Kara F. Still, a partner with the law firm Finnegan, Henderson, Farabow, Garrett, & Dunner, which represents Akamai.

    The Federal Circuit gave itself an opportunity to do right by biotech, and several other industries, when it agreed to rehear McKesson and Akamai. While the court was bound by precedent to rule against both earlier this year, the three-judge panel in McKesson also indicated a willingness to revisit the topic.

    Precedent may have compelled Circuit Judge William C. Bryson to side against McKesson, yet he pointedly added: “Whether those decisions are correct is another question.” He’s right, and it’s one the court can finally get correct, through a sensible limit on how far users can apply patents before they infringe on them.


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