IP UPDATE
Exploring the Latest in Intellectual Property Law
IP UPDATE
Exploring the Latest in Intellectual Property Law
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New Rx for High Drug Prices? Senate Judiciary Committee Advances Six Bills With Heavy Dose of Options

by | Apr 17, 2025 | ,

The US Senate Judiciary Committee advanced to the full Senate six bills intended to reduce pharmaceutical prices and enhance market competitiveness. The package collectively targets several aspects of the pharmaceutical landscape, including pharmaceutical benefit manager (PBM) pricing practices, next-generation drug releases, patent portfolio assertions, and use of US Food and Drug Administration (FDA) regulatory mechanisms. Many of the bills’ proposals have been proposed before, but it is significant that the six bills were moved to the full Senate with bipartisan support.

The Affordable Prescriptions for Patients Act, if passed, would limit how many patents a reference product sponsor can assert in a Biologics Price Competition and Innovation Act (BPCIA) litigation against a biosimilar applicant, although such limits could be surpassed with court approval. A biologics license holder could assert up to 20 patents in a BPCIA case. Certain patents, such as method of treatment patents, would fall outside the limitation.

Against the backdrop of the Supreme Court’s 2013 holding in FTC v. Watson that certain “pay for delay” agreements are prohibited as anticompetitive, the Preserve Access to Affordable Generics and Biosimilars Act would add precision to the boundaries of permissible settlements in the pharmaceutical industry. The Federal Trade Commission (FTC) would have specific authority to institute a civil action to recover penalties, and certain presumptions would apply. For example, any agreement providing a generic or biosimilar applicant with “anything of value, including an exclusive license,” would be presumptively anticompetitive, with certain exceptions and exclusions. Terms that would remain permissible include a pre-expiration launch date, reasonable litigation expenses, and covenants not to sue for patent infringement.

Targeting the concern that branded small molecule and biologics drug manufacturers release new products with patent protection and withdraw or unfairly disincentivize older products to avoid generic competition, the Drug Competition Enhancement Act would deem the alleged practice of “product hopping” unfair competition subject to enforcement actions. The bill would define a hard switch as when a branded or biologics manufacturer discontinues or withdraws an application and introduces a follow-on product within a certain period relative to generic or biosimilar approval. It would define a soft switch as when the brand manufacturer took actions that “that unfairly disadvantage the listed drug or reference product relative to [a] follow-on product.” The bill would provide specific exclusions and justifications for branded manufacturer actions that would otherwise constitute a hard or soft switch.

Seeking to curb perceived abuses of the FDA citizen petition process, the Stop Significant and Time-Wasting Abuse Limiting Legitimate Innovation of New Generics (Stop STALLING) Act would grant the FTC the authority to bring a civil action against those filing “sham petitions” with the FDA, with penalties up to $50,000 per calendar day of review or the revenue earned by the seller of the branded product, whichever is greater. A petition could be classified as a sham based on its own objective unreasonableness, an intention to delay approval of a generic or biosimilar product, or as part of a series of covered petitions.

Based on [...]

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Hatch-Waxman Litigation Expenses Are Deductible Under Internal Revenue Code § 162(a)

by | Apr 3, 2025 |

The US Court of Appeals for the Federal Circuit upheld a US Court of Federal Claims ruling that Hatch-Waxman Act litigation expenses are ordinary and necessary business expenses under § 162(a) of the Internal Revenue Code, entitling an abbreviated new drug application (ANDA) filer to deduct litigation expenses incurred defending against a patent infringement lawsuit. Actavis Labs. FL, Inc. v. United States, Case No. 23-1320 (Fed. Cir. Mar. 21, 2025) (Chen, Cunningham, Stark, JJ.)

Actavis filed ANDAs with the US Food and Drug Administration (FDA) seeking approval to market and sell a generic version of a drug already offered for sale in the United States. Per the Hatch-Waxman Act, filing an ANDA is an act of patent infringement where the ANDA holder seeks FDA approval prior to the expiration of the new drug application (NDA) holder’s patent. Following Actavis’s filing, the NDA holder brought a patent infringement lawsuit against Actavis.

Actavis subsequently treated litigation expenses incurred in defending the patent infringement lawsuit as ordinary and necessary expenses. Actavis deducted those litigation expenses on its tax returns for that year. However, the Internal Revenue Service (IRS) considered these expenses to be nondeductible capital expenditures since they were incurred “in pursuit of an intangible capital asset: namely, FDA approval to lawfully market a generic drug product in this country.”

Actavis eventually paid its tax liability but then sued the IRS in the Court of Federal Claims to recover what Actavis considered an overpayment of its taxes. The claims court agreed with Actavis, holding that Hatch-Waxman litigation expenses were deductible as ordinary and necessary business expenses. The IRS appealed.

The Federal Circuit affirmed. When determining whether Hatch-Waxman litigation expenses are deductible under Code § 162(a), the Federal Circuit uses two tests to settle the issue: the “origin of the claim” test and the “most significant benefit” test. However, as the Court emphasized, regardless of which test applied, Actavis prevailed.

The Federal Circuit first explained that Actavis prevailed under either test because patent infringement (not the FDA approval process) is what triggers incurring litigation expenses. Further evidence that the “origin of the claim rests in the patentholder’s decision to sue, and not in the ANDA filer’s decision to seek drug approval from the FDA, is the fact that infringement litigation cannot provide the ANDA filer what it wants – only the FDA can,” the Court stated.

Relying on the Third Circuit’s 2023 decision in Mylan v. Comm’r of Internal Revenue, the Federal Circuit delved into the fairness aspect of allowing Hatch-Waxman litigation expenses to be deductible. Citing Mylan, the Court explained that generic manufacturers defending against patent infringement suits “obtain no rights from a successful outcome. They acquire neither the intangible asset of a patent nor an FDA approval.” The Court also noted that brand-name drug companies in Hatch-Waxman lawsuits may deduct litigation expenses incurred while enforcing their patent rights. “[I]mposing very different tax treatment on the warring sides in an ANDA dispute, as the Commissioner advocates, is at odds with the careful statutory [...]

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Specially Convened Rehearing Panel Vacates IPR Institution Denial

by | Mar 21, 2024 | ,

In a rehearing decision issued by a Delegated Rehearing Panel specially convened by the US Patent & Trademark Office (PTO) Director, the Patent Trial & Appeal Board vacated a prior panel decision denying institution, modified the claim construction to account for a “clear and unmistakable” prosecution history disclaimer, and remanded for further proceedings consistent with the modified claim construction. SynAffix B.V. v. Hangzhou DAC Biotech Co., Ltd., No. IPR2022-01531, Paper 23 (PTAB Mar. 4, 2024) (Kim, Acting Deputy Chief APJ; Gongola, Vice Chief APJ; Worth, Acting Senior Lead APJ).

SynAffix filed a petition for inter partes review (IPR) of certain patent claims owned by Hangzhou DAC Biotech. The claims at issue are directed to a hydrophilic linker of formula (I), reproduced below.

A Board panel issued a prior decision denying institution. In the prior decision, the Board noted that it was undisputed that moieties Y or Z enable connection of the linker to a cell-binding agent (Y) or a cytotoxic drug (Z), and that Q and T are one sulfone, sulfoxide or phosphinate. That said, the central issue was whether Y or Z must act independently or whether they can act in concert with an adjoined Q or T compound. The Board concluded that Y and Z must act independently to enable their respective chemical reactions without assistance from an adjoining Q or T compound, because during prosecution the patent owner disclaimed embodiments in which Y or Z was adjoined to a sulfone compound with no additional adjacent sulfone, sulfoxide or phosphinate to overcome a rejection based on a prior art reference (Lees). Thus, the Board denied institution.

SynAffix subsequently sought review by the Director. The Director issued an order delegating director review to a rehearing panel. The rehearing panel reviewed whether the prior decision misapprehended or overlooked any issue raised in the request for director review. In particular, the rehearing panel considered whether, when the hydrophilic linker contains a vinylsulfone group, one of Y and Z may be understood to be a vinyl group with one of Q and T as a sulfone group (i.e., the vinyl group and the sulfone group mapped to separate letters), or instead whether one of Y and Z must be a vinylsulfone group (i.e., the vinyl group and the sulfone group mapped to the same letter).

While the rehearing panel agreed with the first version of the prosecution history disclaimer in the prior decision, it rejected a second under which two sulfone groups would not fall within the scope of the claim. First, the rehearing panel accepted the Board’s prior finding that the patent owner disclaimed embodiments in which Y or Z was adjoined to a sulfone compound with no additional sulfone, sulfoxide or phosphinate. However, the conclusion (in the prior decision) that the challenged independent claim excludes compounds in which the sole terminal group is vinyl sulfone without one or more adjacent Q and [...]

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Optimizing Obviousness: Routine Optimization Can Fill in Prior Art Gaps

by | Mar 14, 2024 | ,

In an appeal from a Patent Trial & Appeal Board finding of invalidity, the US Court of Appeals for the Federal Circuit held that the result-effective variable doctrine can apply even when there is no overlap between a claimed range and a prior art range. The Court also held that before denying a motion to amend, the Board must address every element of proposed claims, and that a party cannot challenge the US Patent & Trademark Office (PTO) Director Review procedure if it cannot show prejudice. Pfizer Inc. v. Sanofi Pasteur, Inc., Case No. 19-1871 (Fed. Cir. Mar. 5, 2024), (Lourie, Bryson, Stark, JJ.)

Sanofi filed five inter partes review (IPR) petitions targeting a patent owned by Pfizer and directed to immunogenic glycoconjugates of Streptococcus antigens (i.e., combinations of sugar molecules found on the surface of Streptococcus bacteria capable of provoking an immune response). The challenged independent claim recited conjugates having a sugar from the 22F Streptococcus serotype and a molecular weight falling within a claimed range. Dependent claims further limited the independent claim by requiring combinations of specific sugars.

Sanofi challenged the claims based on a combination of two references: GSK-711 and Merck-086. GSK-711 described vaccines using sugars from 22F, and Merck-086 described immunogenic compositions using Streptococcus sugar conjugates. While neither reference disclosed the molecular weight of a 22F conjugate, the Board found that the molecular weight of a conjugate was a “result-effective variable” – i.e., a variable that affected the efficacy of the result – and thus it would have been obvious for a person of ordinary skill in the art (POSITA) to optimize the molecular weight of a 22F-based conjugate to achieve the claimed molecular weight range. The Board also found that the dependent claims would have been obvious, as GSK-711 disclosed the additionally claimed sugars. Pfizer filed a motion to amend to add new claims, but the Board denied the motion. Pfizer also requested Director Review of the Board’s decision, but the Director denied the request.

Pfizer appealed to the Federal Circuit alleging that the Board improperly applied the result-effective variable doctrine, that the Board improperly denied Pfizer’s request to amend the claims, and that the Director’s denial of review violated the Administrative Procedure Act (APA). The Federal Circuit affirmed the Board’s finding of invalidity, affirmed in part and remanded in part the issue of the proposed claim amendment, and finally held that any violation of the APA was harmless.

The Federal Circuit started with an analysis of the result-effective variable doctrine. Pfizer argued that the result-effective variable doctrine could not apply when there was no disclosure of an effective range in the prior art. Therefore, because neither GSK-711 nor Merck-086 disclosed an effective molecular weight range for a 22F conjugate, and because the relationship between molecular weight and efficacy was unpredictable, the independent claim was not obvious. The Court disagreed.

The Federal Circuit explained that, when there is a gap between the prior art and the claims, the relevant [...]

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Rules of Evidence Require Weighing Relevance of Evidence Against Potential Prejudice

by | Feb 8, 2024 | ,

The US Court of Appeals for the First Circuit affirmed the exclusion of a drug patent in a medical malpractice case, finding that the highly technical language of the patent would more likely confuse a lay jury than be probative of the issues in the case. Ward v. Schaefer, Case No. 22-1547 (1st Cir. Jan. 29, 2024) (per curiam).

In 2018 Edmund Ward sued his doctor, Ernst Schaefer, claiming that Dr. Schaefer had fraudulently induced Ward to participate in an experimental drug protocol and had otherwise failed to obtain his informed consent. Ward was born with a rare genetic disorder that caused his body to not produce a blood enzyme, lecithin-cholesterol acyltransferase (LCAT), that is critical for cholesterol production. As a result, Ward was at risk of kidney failure and would require either regular dialysis or a kidney transplant. When Ward met Dr. Schaefer, Ward’s condition was deteriorating. Dr. Schaefer suggested that Ward might be a suitable candidate for an experimental enzyme therapy with a drug called ACP-501, and Ward, under an expanded access application, was granted permission to start an experimental protocol.

Ward traveled from his home in Massachusetts to a National Institutes of Health (NIH) facility in Bethesda, Maryland, to receive infusions of ACP-501 and was monitored by Dr. Schaefer in Massachusetts. Unfortunately, Ward’s condition did not improve under the experimental protocol but instead worsened because he was compelled to delay dialysis treatments while using ACP-501. Ward stopped the experimental protocol; began regular dialysis; and sued Dr. Schaefer, the NIH doctors and the drug manufacturer. The district court dismissed the claims against most of the plaintiffs, but the claims of fraud and failure to obtain informed consent against Dr. Schaefer went to trial. Ward’s signed consent form was admitted into evidence at trial, but he claimed he had no memory of discussing it with his doctors or signing it. The jury found in favor of Dr. Schaefer on all claims. Ward appealed.

Ward argued that the court erred in refusing to allow the introduction of the patent for ACP-501 because the patent specified that it was a method for reducing arterial cholesterol in patients not suffering from LCAT deficiency. Ward argued that this language in the patent made clear that the drug was not appropriate for patients like him. The district court ruled that the patent was inadmissible because it had been offered without foundation, and that it had nothing to do with the issues of fraud and informed consent. On appeal, the First Circuit offered a different analysis but arrived at the same outcome, holding that the Fed. R. Evid. 403 balancing test “disposes of the matter.”

The First Circuit noted that the patent’s description of ACT-501 “is of absolutely no relevance to Dr. Schaefer’s alleged failure to apprise Ward of the potential risks and rewards of taking the drug through expanded access.” The Court went on to point out that even if the single sentence in the patent pointing to its exclusion for patients with LCAT [...]

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2023 IP Outlook: What to Watch in Patent, Trademark and Copyright Law

by , , , , , , , , , , , , , and | Feb 7, 2023 | , , , , ,

Coming out of 2022, developments around the globe are shaping the intellectual property (IP) landscape in the new year. We are seeing cases at the intersection of IP law and NFTs, the opening of the Unified Patent Court in Europe, and decisions from the Supreme Court of the United States and the Court of Appeals for the Federal Circuit affecting innovators and brand owners.

McDermott’s 2023 IP Outlook examines the top trends and decisions in IP law from the past year and shares what you and your business should look out for in the year ahead.

The Latest in SEP Licensing

Amol Parikh

The uncertainty surrounding standard essential patent (SEP) licensing persisted in 2022 and shows little sign of clearing in 2023. SEPs must be licensed to technology implementers on fair, reasonable and nondiscriminatory (FRAND) terms. Because there is no formal definition of FRAND terms, however, legal decisions involving FRAND have historically been determined by courts and non-governmental standard-setting organizations (SSOs). Disputes are frequent—especially between patent owners and technology implementers—and are becoming even more so as advanced wireless technologies such as 5G and WiFi 6 proliferate. Read more.

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Improper Inventorship in US Patent Litigations

Mandy H. Kim | Cecilia Choy, Ph.D.

Inventorship issues can have serious implications in patent litigation, leading to invalidation or unenforceability of the patent at issue, as seen in several notable 2022 cases. In the coming year, patent owners should take steps to minimize risks related to improper inventorship challenges. Read more.

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Patent Decisions Affecting Pharma and Biotech Companies

Douglas H. Carsten | Anisa Noorassa

The past year brought many developments in the life sciences patent legal space. Three decisions in particular hold potential ramifications for drug makers and patent holders in 2023. This year, the Supreme Court of the United States is also expected to consider standards patents claiming a genus must meet to withstand a validity challenge under Section 112—a ruling that could have a significant impact on patent holders in the biotech industry. Read more. 

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Trends in the Western District of Texas

Syed K. Fareed | Alexander Piala, Ph.D. | Christian Tatum

Over the past year, two developments infiltrated the Western District of Texas (WDTX) which may decrease the success of venue transfers and keep case volume steady in 2023. These developments could also give plaintiffs more control over where litigation takes place, including more control over having a case tried before Judge Alan Albright in the Waco Division of the WDTX.
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Paris Court of Appeals Rejects Pharmaceutical Supplementary Protection Certificate Applications

by and | Jun 17, 2021 | ,

One of the conditions for obtaining an SPC is that “the product is protected by a basic patent in force”. The Court of Justice of the European Union (CJEU) clarified to what extent a product must be identified by the claims to meet this condition in Teva, Eli Lilly, and Royalty Pharma.

In Eli Lilly, the CJEU notes that an active ingredient which is not identified in the claims of a basic patent by means of a structural or functional definition cannot be considered to be “protected by a basic patent.”

The active ingredient does not, however, have to be identified in the claims by a structural formula. A functional definition of the active ingredient may suffice if it is possible to reach the conclusion on the basis of the claims (interpreted in light of the description of the invention) that they relate “implicitly but necessarily and specifically, to the active ingredient in question.

Click here to read the full article in our latest International News.



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IP Ownership Considerations in Multi-jurisdictional Software Development Agreements

by and | Jun 10, 2021 | , , , ,

As a result of the healthcare sector’s growing dependence on software, health IT companies are increasingly taking advantage of globalisation to engage contractors in low wage jurisdictions to develop their user-facing software applications. This can trigger unforeseen legal risks owing to the differing laws across jurisdictions related to the ownership and transfer of intellectual property (IP) rights.

At the most extreme end, best practices in some jurisdictions are unenforceable or even impermissible in others. In view of these issues, it is strongly recommended that a company looking to take advantage of cross-border contracting for critical development eorts should carefully consider the choice of law provisions in their agreements, and engage with local counsel to ensure proper vesting of intellectual property rights.

An inability to demonstrate proper ownership of such rights can be a substantial obstacle for later financings or in corporate activities. Depending on the jurisdictions involved, a contracting company may need to concern itself with at least three types of IP in the software that is developed on its behalf: copyrights, moral or author’s rights, and patents.

Click here to read the full article in our latest edition of International News.



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Only Human: Broadest Reasonable Interpretation Standard Applies to Intentionally Expired Patent

by | Oct 22, 2020 | ,

Affirming an invalidity finding by the Patent and Trial Appeal Board (PTAB), the US Court of Appeals for the Federal Circuit found that the claims of the now-expired patent should be construed under the broadest reasonable interpretation (BRI) standard, and not under the Phillips standard, because the patent owner intentionally gave up the remainder of the patent term only after the appeal was fully briefed. Immunex Corp. v. Sanofi-Aventis U.S. LLC, Case Nos. 19-1749, -1777 (Fed. Cir. Oct. 13, 2020) (Prost, C.J.).

Immunex owns a patent directed to human antibodies that inhabit certain receptors to treat inflammatory diseases such as arthritis. After being sued for infringement, Sanofi and Regeneron (collectively, Sanofi) requested inter partes review (IPR) of the patent, which the PTAB instituted. Based on the IPR filing date and because the patent was unexpired during the pendency of the IPR proceeding, the PTAB used the BRI standard to construe various claim terms. Had the patent been expired, the PTAB would have used the more stringent Phillips standard to construe the claims. Ultimately, the PTAB found all of the challenged claims unpatentable. Immunex appealed.

After appellate briefing was complete, Immunex filed a terminal disclaimer of its patent. The US Patent and Trademark Office accepted the terminal disclaimer, and as a result the patent term expired approximately two months before oral argument. Immunex then filed a citation of supplemental authority informing the Federal Circuit of the terminal disclaimer and asking the Court to change the applicable claim construction standard from BRI to Phillips.

The Federal Circuit found that the application of the BRI standard to Immunex’s patent was appropriate. Although the PTAB currently applies the Phillips claim construction standard in all newly filed IPRs, at the time that Sanofi filed its IPRs, the PTAB applied the Phillips standard only to expired patents. For unexpired patents, it applied the BRI standard. The Court noted that the use of the Phillips standard in cases where the patent expired during the appellate process should not be an absolute, particularly when the patent term expired at an unexpected early date, such as through the filing of a terminal disclaimer.

The Federal Circuit further affirmed the PTAB’s claim construction under the BRI standard and the invalidity finding predicated on that claim construction. The issue on appeal was whether a “human antibody” must be entirely human (as asserted by Immunex) or whether it may also be “partially human,” including “humanized” (as asserted by Sanofi and construed by the PTAB). The Court agreed with the PTAB and found that the patent’s specification supported the conclusion that the BRI of “human antibody” “includes both fully human and partially human antibodies.” The Court also found that “human antibodies” in the context of the patent-in-suit is a broad category that encompasses both partially and completely human antibodies. The Court therefore affirmed the PTAB’s finding.

The Federal Circuit also commented on the PTAB’s departure from an earlier claim construction ruling by a district court in which “human” was construed to mean “fully [...]

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Inherent Claim Limitation Necessarily Present in the Prior Art Invalidates Patent

by | Jan 29, 2020 | ,

Addressing the issue of obviousness, the US Court of Appeals for the Federal Circuit affirmed the district court’s finding that a patent was invalid based on inherency because the claim limitation was necessarily present in the prior art. Hospira, Inc. v. Fresenius Kabi USA, LLC, Case Nos. 19-1329, -1367 (Fed. Cir. Jan. 9, 2020) (Lourie, J).

The patent at-issue is directed to premixed pharmaceutical compositions of dexmedetomidine that do not require reconstitution or dilution prior to administration and remains stable and active after prolonged storage. Hospira makes and sells dexmedetomidine products, including a ready-to-use product called Precedex Premix covered by the patent at-issue. Fresenius filed an Abbreviated New Drug Application (ANDA) seeking approval by the Food and Drug Administration (FDA) to market a generic ready-to-use dexmedetomidine product. Hospira brought suit alleging infringement under the Hatch-Waxman Act.

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