Abbott Laboratories v. Sandoz, Inc.

United States Court of Appeals for the Federal Circuit
2007-1300

ABBOTT LABORATORIES,

Plaintiff-Appellee,

v.

SANDOZ, INC.,

Defendant-Appellant.

Ted G. Dane, Munger, Tolles & Olson LLP, of Los Angeles, California, argued for
plaintiff-appellee. With him on the brief were Jeffrey I. Weinberger; and Jennifer L.
Polse, Jason Rantanen, and Genevieve A. Cox, of San Francisco, California. Of
counsel was Andrew W. Song, of Los Angeles, California.

Scott B. Feder, Lord, Bissell & Brook LLP, of Chicago, Illinois, argued for
defendant-appellant. With him on the brief were Keith D. Parr, Hugh S. Balsam, and
Kevin M. Nelson. Of counsel on the brief was Shashank Upadhye, Sandoz, Inc., of
Princeton, New Jersey. Of counsel were David B. Abramowitz, Myoka M. Kim, and
James T. Peterka, of Lord, Bissell & Brook LLP, of Chicago, Illinois.

Jeffrey L. Light, Patients Not Patents, Inc., of Washington, DC, for amicus curiae
Patients Not Patents, Inc.

Gregory A. Castanias, Jones Day, of Washington, DC, for amicus curiae United
Inventors Association. With him on the brief was Christopher S. Perry.

Appealed from: United States District Court for the Northern District of Illinois

Judge David H. Coar
United States Court of Appeals for the Federal Circuit

2007-1300

ABBOTT LABORATORIES,

Plaintiff-Appellee,

v.

SANDOZ, INC.,

Defendant-Appellant.

Appeal from the United States District Court for the Northern District of Illinois in case no.
05-CV-5373, Judge David H. Coar.

__________________________

DECIDED: October 21, 2008
__________________________

Before NEWMAN, Circuit Judge, ARCHER, Senior Circuit Judge, and GAJARSA, Circuit
Judge.

Opinion for the court filed by Circuit Judge NEWMAN, in which Circuit Judge ARCHER
concurs in the judgment and joins except as to Parts I and VI. Dissenting opinion filed by
Circuit Judge GAJARSA.

This appeal is from the grant of a preliminary injunction, pending final resolution of

the several challenges raised by Sandoz, Inc. to the validity, enforceability, and

infringement of the Abbott Laboratories patents in suit. 1 We conclude that abuse of

1
Abbott Laboratories v. Sandoz, Inc., 500 F. Supp. 2d 807 (N.D. Ill. 2007)
(grant of preliminary injunction); 500 F. Supp. 2d 846 (N.D. Ill. 2007) (denial of stay pending
appeal); 529 F. Supp. 2d 893 (N.D. Ill. 2007) (grant and denial of various motions for
summary judgment).
discretion has not been shown in the district court's decision to grant the injunction

pendente lite. That decision is affirmed.

BACKGROUND

This suit concerns two Abbott Laboratories patents on extended release formulations

of the antibiotic drug clarithromycin, sold by Abbott with the brand name Biaxin7XL. The

patent on clarithromycin itself expired in 2005; only extended release formulations are at

issue. The purpose of the extended release formulation is to extend the period of drug

effectiveness after ingestion and thereby to reduce the requisite frequency of dosage.

Sandoz filed an Abbreviated New Drug Application (ANDA) for its extended release

formulation of clarithromycin; the Food and Drug Administration approved the ANDA on

August 25, 2005, and on September 16, 2005 Abbott filed suit in the United States District

Court for the Northern District of Illinois, charging Sandoz with infringement of United States

Patent No. 6,010,718 (the '718 patent) and Patent No. 6,551,616 (the '616 patent). Abbott

also charged infringement of Patent No. 6,872,407, but has withdrawn this patent from suit.

The '718 patent claims an extended release pharmaceutical composition comprising

an erythromycin derivative and a pharmaceutically acceptable polymer, whereby after

ingestion certain specified parameters of drug bioavailability are met. Claims 1, 4, and 6 of

the '718 patent are in suit:

1. A pharmaceutical composition for extended release of an erythromycin
derivative in the gastrointestinal environment, comprising an erythromycin
derivative and from about 5 to about 50% by weight of a pharmaceutically
acceptable polymer, so that when ingested orally, the composition induces
statistically significantly lower mean fluctuation index in the plasma than an
immediate release composition of the erythromycin derivative while
maintaining bioavailability substantially equivalent to that of the immediate
release composition of the erythromycin derivative.

2007-1300 2
 4. A pharmaceutical composition for extended release of an erythromycin
derivative in the gastrointestinal environment, comprising an erythromycin
derivative and from about 5 to about 50% by weight of a pharmaceutically
acceptable polymer, so that upon oral ingestion, maximum peak
concentrations of the erythromycin derivative are lower than those produced
by an immediate release pharmaceutical composition, and area under the
concentration-time curve and the minimum plasma concentrations are
substantially equivalent to that of the immediate release pharmaceutical
composition.

6. An extended release pharmaceutical composition comprising an
erythromycin derivative and a pharmaceutically acceptable polymer, the
composition having an improved taste profile as compared to the immediate
release formulation.

The '616 patent is a continuation-in-part of the '718 patent, with claims directed to the

method of reducing gastrointestinal side effects. Claim 2 is in suit, shown with claim 1 from

which it depends:

1. A method of reducing gastrointestinal adverse side effects comprising
administering an effective amount of extended release pharmaceutical
composition comprising an erythromycin derivative and a pharmaceutically
acceptable polymer.

2. The method according to claim 1, wherein the erythromycin derivative is
clarithromycin.

In response to the charge of infringement Sandoz presented the defenses of invalidity

based on anticipation and obviousness, unenforceability based on inequitable conduct, and

noninfringement. This appeal is from the district court’s grant of Abbott’s motion for a

preliminary injunction, preserving the status quo during the pendency of this litigation.

Sandoz challenges the district court’s rulings on all issues.

2007-1300 3
 I

VALIDITY ISSUES

The district court reviewed the factors relevant to the grant or denial of a preliminary

injunction, viz., (1) likelihood of success on the merits of the underlying litigation, (2)

whether irreparable harm is likely if the injunction is not granted, (3) the balance of

hardships as between the litigants, and (4) factors of the public interest. See Oakley, Inc.

v. Sunglass Hut Int'l, 316 F.3d 1331, 1338-39 (Fed. Cir. 2003); H.H. Robertson Co. v.

United Steel Deck, Inc., 820 F.2d 384, 387-88 (Fed. Cir. 1987). At the stage of the

preliminary injunction, before the issues of fact and law have been fully explored and finally

resolved, "[t]he purpose of a preliminary injunction is merely to preserve the relative

positions of the parties until a trial on the merits can be held." University of Texas v.

Camenisch, 451 U.S. 390, 395 (1981).

On appellate review of the grant of a preliminary injunction, the question "is simply

whether the issuance of the injunction constituted an abuse of discretion." Doran v. Salem

Inn, 422 U.S. 922, 932 (1975). "It is well settled that the granting of a temporary injunction,

pending final hearing, is within the sound discretion of the trial court; and that, upon appeal,

an order granting such an injunction will not be disturbed unless contrary to some rule of

equity, or the result of improvident exercise of judicial discretion." Deckert v. Independence

Shares Corp., 311 U.S. 282, 290 (1940). Abuse of discretion is established "by showing

that the court made a clear error of judgment in weighing relevant factors or exercised its

discretion based upon an error of law or clearly erroneous factual findings." Novo Nordisk

of North America, Inc. v. Genentech, Inc., 77 F.3d 1364, 1367 (Fed. Cir. 1996). See Cybor

Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc) (“A district

2007-1300 4
court abuses its discretion when its decision is based on clearly erroneous findings of fact,

is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or

fanciful.”).

Sandoz assigns legal error to the district court's rulings that Abbott is likely to prevail

on the issues of validity, infringement, and inequitable conduct, and states that the district

court abused its discretion in balancing the equities and granting the injunction.

Anticipation

"Anticipation" in patent usage means that the claimed invention was previously

known and described in a printed publication, explicitly or inherently. Anticipation is

established by documentary evidence, and requires that every claim element and limitation

is set forth in a single prior art reference, in the same form and order as in the claim. See

In re Omeprazole Patent Litigation, 483 F.3d 1367, 1373 (Fed. Cir. 2007); Continental Can

Co. v. Monsanto Co., 948 F.2d 1264, 1267 (Fed. Cir. 1991). An anticipating reference

must enable that which it is asserted to anticipate. Omeprazole, 483 F.3d at 1378 (“To

‘anticipate,’ the identical subject matter must not only be previously known, but the

knowledge must be sufficiently enabling to place the information in the possession of the

public.”); Elan Pharmaceuticals, Inc. v. Mayo Found. for Medical Educ. & Research, 346

F.3d 1051, 1054 (Fed. Cir. 2003) (same).

Sandoz argued that the '718 patent is anticipated by European Patent Publication

No. 0,280,571 B1 (the '571 Publication), which describes "a sustained release matrix

formulation in tablet form comprising from 0.1% by weight to 90% by weight of an

antimicrobial agent selected from . . . erythromycin . . . from 5% by weight to 29% by weight

2007-1300 5
of a hydrophilic polymer, and from 0.5% by weight to 25% by weight of an acrylic polymer .

. . ." The '571 Publication states that hydrophilic polymers such as hydroxypropylmethyl

cellulose (HPMC) can be used to form a hydrophilic matrix which "respond[s] to increases

in pH with a corresponding increase in the permeability of the dosage form." Sandoz

argued in the district court that although the '571 Publication does not mention

clarithromycin or the specific pharmacokinetic limitations in the '718 patent claims, the '571

Publication anticipates the '718 claims because clarithromycin is an erythromycin derivative

and the claimed pharmacokinetic limitations are inherent in the extended release

compositions of the '571 Publication. Sandoz also argued that enablement of the

compositions in the ‘571 Publication must be presumed, because the compositions in the

'718 patent are presumed to be enabled and, according to Sandoz, are identical.

Abbott responded that the '571 Publication cannot “anticipate” because it does not

show the elements of the claims of issue; it does not mention clarithromycin, it does not

disclose the pharmacokinetic criteria stated in the '718 claims, and it does not enable these

limitations, either expressly or inherently. Abbott argued that significant experimentation

would be required to ascertain the applicability of any release agent from the large number

of release agents mentioned in the '571 Publication, particularly as applied to a different

biological product having different dissolution and metabolic characteristics. Thus Abbott

argued that the legal criteria of "anticipation" are not met by the '571 Publication.

The district court found that Sandoz did not present evidence sufficient to support its

argument that "the '571 Publication's teachings would enable Abbott to create an extended

release of an erythromycin derivative drug simply based on the structural limitations."

Abbott, 500 F. Supp.2d at 840. The district court observed that the '571 Publication "does

2007-1300 6
not offer any in vivo dissolution data" nor state "the pharmacokinetic profile of its own

formulations." Id. The court concluded that Sandoz would not be likely to succeed in

establishing anticipation by this reference. We discern no clear error in this conclusion, for

the '571 Publication neither describes the product of the ‘718 claims nor enables the

pharmacokinetic properties that are set forth in the '718 claims. See Elan Pharmaceuticals,

346 F.3d at 1057 (an anticipating reference must disclose every element of the claims, and

place a person of ordinary skill in possession of the claimed invention).

Obviousness

Sandoz also argued that the claims of the '781 and '616 patents are invalid on the

ground of obviousness, in view of the combination of the '571 Publication with PCT

Application WO 95/30422 (the PCT or '422 Application) and United States Patent No.

5,705,190 (the '190 patent).

In determining, for preliminary injunction purposes, the likelihood that patent

invalidity would be established at trial, the district court evaluates the factual and legal

arguments in light of the presumptions and burdens that will inhere at trial, viz., that "[a]

patent shall be presumed valid. . . . The burden of establishing invalidity of a patent or any

claim thereof shall rest on the party asserting such invalidity." 35 U.S.C. '282. This burden

"exists at every stage of the litigation." Canon Computer Systems, Inc. v. Nu-Kote Int'l,

Inc., 134 F.3d 1085, 1088 (Fed. Cir. 1998); see Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d

1368, 1374 (Fed. Cir. 2006) (taking into account the applicable presumptions and burdens

in reviewing the grant of a preliminary injunction). Sandoz on this appeal relies on the

Supreme Court's decision in KSR International Co. v. Teleflex, Inc., ___ U.S. ___, 127 S.

2007-1300 7
Ct. 1727 (2007), Sandoz arguing that the law of obviousness has been significantly

changed, and that the district court did not give adequate recognition to the changed law.

The district court had issued its initial decision granting the preliminary injunction shortly

before the Court’s decision in KSR. The court then requested supplemental briefing and

argument, and issued a further opinion discussing the issues in light of KSR and continuing

to conclude that Abbott was likely to prevail on the merits of the question of obviousness.

In its initial decision the district court discussed the references in detail. The court

explained that the PCT Application, entitled "Controlled-Release Dosage Forms of

Azithromycin," describes “[a] dosage form for oral administration comprising azithromycin

and a pharmaceutically acceptable carrier, which releases not more than about 10% of its

incorporated azithromycin into a mammal's stomach, and which releases not more than an

additional 10% during the first 15 minutes after entering said mammal's duodenum," and

exhibits decreased gastrointestinal side effects. The district court explained that the PCT

Application shows hydroxypropylmethylcellulose (HPMC) and other polymers as “a

hydrophilic polymer sufficient to provide a useful degree of control over the azithromycin

dissolution," and contains in vitro data showing the amount and timing of dissolution of

azithromycin in various conditions and sustained dosage forms.

Sandoz argued that these teachings should be combined with those of the ‘571

Publication and the '190 patent entitled "Controlled Release Formulation for Poorly Soluble

Basic Drugs," which describes a "controlled release solid pharmaceutical composition

adapted for oral administration comprising: a therapeutically effective amount of at least

one basic drug having a water solubility of less than 1 part per 30 parts water . . . wherein

the basic drug is a macrolide" and as the release agent a water-soluble alginate salt. The

2007-1300 8
‘190 patent names the macrolides erythromycin, clarithromycin, dirithromycin, azithromycin,

roxithromycin, and ABT-229 for use with the alginate salt release agent. Sandoz argued

that the subject matter of the ‘718 patent would have been obvious in view of the '571

Publication showing extended release formulations of erythromycin derivatives, in

combination with the controlled release formulations and pharmacokinetic properties of

azithromycin in the PCT Application, and the modified release alginate salt formulation of

clarithromycin in the '190 patent. Sandoz argued that a person of ordinary skill in this field

would have desired to improve the administration of clarithromycin by finding an extended

release formulation having optimum release and biological properties, and would have

selected and tested the HPMC from the '571 Publication, in view of the formulation of

azithromycin with HPMC in the PCT Application and the '190 patent’s use of an alginate

salt to modify the release of clarithromycin. Sandoz stressed that the PCT Application

states the known principle of using controlled release formulations to reduce the dosing

frequency for short half-life compounds. Sandoz argued that no more than routine

experimentation was needed to find a controlled release formulation that would meet the

pharmacokinetic requirements stated in the '718 claims.

Sandoz applied similar arguments to the claims of the '616 patent, stating that the

PCT Application teaches that control of azithromycin release reduces gastrointestinal side

effects, and that the '190 patent shows the interchangeability of azithromycin and

clarithromycin in the formulation using an alginate salt. Sandoz argued that this

combination of references renders obvious a clarithromycin formulation with reduced

gastrointestinal side effects as claimed in the ’616 patent. In its supplemental argument

based on KSR, Sandoz argued that Abbott merely “pursue[d] known options” for both the

2007-1300 9
‘718 and ‘616 patents, based on the Court’s exposition that: “When there is a design need

or market pressure to solve a problem and there are a finite number of identified,

predictable solutions, a person of ordinary skill has good reason to pursue the known

options within his or her technical grasp.” KSR, 127 S. Ct. at 1742.

In the district court Abbott disputed the premises presented by Sandoz, challenged

the analysis of the content and significance of the references, and argued that KSR did not

hold, as Sandoz proposed, that the recognition of a problem of itself renders the solution

obvious. Abbott argued that more is needed than recognizing the problem, as this court

discussed in Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 381 F.3d 1371, 1377

(Fed. Cir. 2004) (“Recognition of a need does not render obvious the achievement that

meets that need. . . . Recognition of an unsolved problem does not render the solution

obvious.”) Abbott pointed out that the Court qualified its discussion by explaining that the

“problem” should have “a finite number of identified, predictable solutions,” KSR, 127 S. Ct.

at 1742, to expose its eventual solution to unpatentability as “obvious to try.” Id. Abbott

stressed the difference between new biological compositions whose performance and

effectiveness in combination cannot be confidently predicted but must be made and

evaluated, and new mechanical combinations of known elements each of which predictably

performs its known function in the combination.

Abbott stressed that its choice of extended release components is not shown or

suggested by the prior art to produce the pharmacokinetic properties of Abbott’s claims.

The Court recognized in Dennison Mfg. Co. v. Panduit Corp., 475 U.S. 809 (1986) that the

district court is not to rely on hindsight, and that “in addressing the question of obviousness

a judge must not pick and choose isolated elements from the prior art and combine them so

2007-1300 10
as to yield the invention in question if such a combination would not have been obvious at

the time of the invention.” 475 U.S. at 810. In Graham v. John Deere Co., 383 U.S. 1

(1966) the Court recognized that the obviousness inquiry must “guard against slipping into

use of hindsight and to resist the temptation to read into the prior art the teachings of the

invention in issue.” Id. at 36.

Abbott agreed that the basic principles of pharmacokinetics were known, but argued

that the limitations in the '718 claims, whereby the bioavailability of the product was

characterized, were not shown as achieved in any reference or any combination of

references. Abbott pointed out that the PCT Application is directed specifically to

azithromycin and shows “scores” of possible formulations, all using in vitro data, and does

not contemplate metabolite activity in vivo as is manifested for chlorithromycin. Abbott

stated that “the ‘422 publication discloses more than a dozen possible classes of delivery

devices,” Abbott Brief at 42, that “the ’422 publication merely provides in vitro dissolution

data for a subset of its disclosed compositions,” and that the formulation in the PCT

Application “did not even have equivalent bioavailability as IR [immediate release]

azithromycin.” Id. at 41.

Abbott described in the ‘718 and ‘616 specifications that the '190 patent reference

presents "Cmax values [that] are not statistically significantly different from those of the IR

formulation." '718 patent, col. 2, lines 11-12; ‘616 patent, col. 2, lines 13-14 (referring to

Ser. No. 08/574,877, the '190 patent). Abbott stated that Sandoz concedes that the '190

patent does not describe pharmacokinetic limitations based on clarithromycin plasma

concentrations, and that neither the PCT Application nor the '190 patent discloses the

pharmacokinetic limitations and properties set forth in the '718 and ‘616 claims, and that

2007-1300 11
neither the PCT Application nor any other reference provides guidance as to which

formulation would provide the pharmacokinetic characteristics required by the ‘718 claims.

Thus Abbott argued in the district court that a skilled artisan would not have known

the effect of substituting clarithromycin for azithromycin in any specific formulation that

might be selected from the PCT Application, for it is undisputed that there are significant

differences among erythromycin derivatives. Abbott presented evidence to the district court

that azithromycin and clarithromycin exhibit different properties in four biological processes

of relevance to oral drug administration: absorption, distribution, metabolism, and excretion.

These differences were tabulated by Abbott’s expert, Professor Stanley S. Davis, as

follows:

Azithromycin Clarithromycin

Absolute Bioavailability About 34% from 600 mg dose About 50% from 250 mg
dose
Pharmacokinetics Linear Non-linear

Active Metabolite None reported in the 14-hydroxy clarithromycin
Physicians Desk Reference
Metabolism Metabolites possess little or no Extensively metabolized to
activity an active metabolite
Elimination Half Life About 70 hours 3-4 hours for 250 mg IR dose
(14-OH metabolite, 5-6
hours)
First Pass Effect Not significant Extensive
Volume of Distribution Large-2200 litre 250 litre

2007-1300 12
Supplemental Declaration of Dr. Davis, February 7, 2007. The parties do not dispute that

the PCT Application describes only in vitro data, and that in vitro data are not predictably

transferable to in vivo conditions. Dr. Davis testified that "it simply isn't the case that in vitro

controlled release data will automatically correlate with the pharmacokinetic parameters in

vivo, and in fact, for many of the formulations of the ‘422 application, they affirmatively do

not so correlate." Id.

The district court concluded that a person of ordinary skill in this field would not have

predicted which formulation, that might be selected from the prior art, would provide the

required pharmacokinetics. The district court referred to the dissimilarities in the

pharmacokinetic properties for azithromycin as shown in the PCT Application, considered

the content of the '190 patent, and concluded that the bioavailability of the formulations

claimed in the '718 patent were not predictable from these references. The court referred

to the testimony of another Abbott expert, Dr. Daniel Weiner, that "the '190 patent does not

disclose any clarithromycin-specific PK [pharmacokinetic] data" or "any DFL [degree of

fluctuation] 2 values at all.” Declaration of Daniel Weiner, Ph.D., January 9, 2007. Dr.

Weiner explained that the pK values reported in the '190 patent are based on total antibiotic

activity, which consists of the combined concentrations of clarithromycin and its active

metabolite, while the pharmacokinetic elements of the '718 patent relate specifically to

clarithromycin plasma concentrations. Dr. Weiner concluded, and the district court agreed,

that a skilled artisan would not have had a reasonable expectation of producing effective

2
The variation between maximum and minimum concentration is measured
by the degree of fluctuation, called "DFL", calculated as (Cmax – Cmin)/Cavg , with Cavg the
average concentration over a dosing interval. Appx. 463 &28.

2007-1300 13
compositions based on the mention of clarithromycin along with azithromycin in the '190

patent, because of their different mechanisms of antibiotic activity and the effect of this

activity on pharmacokinetic behavior.

The district court observed that the in vivo azithromycin controlled release

formulations in the PCT Application have less total bioavailability than their immediate

release counterparts, supporting Abbott’s argument that the behavior of differing biological

systems, even when structurally similar, is not predictable. See Alza Corp. v. Mylan

Laboratories, 464 F.3d 1286, 1297 (Fed. Cir. 2006) ("Alza's evidence of in vitro dissolution

rates is irrelevant absent evidence demonstrating that the in vitro system is a good model

of actual in vivo behavior."). The district court concluded that the in vivo extended release

properties claimed in the '718 patent are sufficiently dissimilar to or unpredictable from the

in vitro controlled release data for azithromycin in the PCT Application that a person of

ordinary skill in the field of the invention would not have had the degree of confidence of

success in transferring the PCT Application's azithromycin formulation to the different

metabolic and solubility systems of clarithromycin as would render the '718 claimed

invention unpatentable on the ground of obviousness.

In reaching these conclusions, the district court relied on the Federal Circuit’s

decision on the same patents in Abbott Laboratories v. Andrx Pharmaceuticals, Inc., 473

F.3d 1196 (Fed. Cir. 2007) (herein "Andrx"). This court, sustaining the district court’s grant

of a preliminary injunction, had concluded that obviousness was not likely to be established,

reversing this court’s prior ruling reversing the grant of a preliminary injunction in Abbott

Laboratories v. Andrx Pharmaceuticals, Inc., 452 F.3d 1331 (Fed. Cir. 2006) (herein

2007-1300 14
"Teva"). Sandoz argued to the district court that the Federal Circuit's ruling in Andrx is

incorrect, and on this appeal Sandoz urges us to reject Andrx and reinstate Teva.

In Teva a panel of this court held that the claims of the ‘718 patent were likely to be

held not infringed. This court also stated that there was a substantial likelihood that claim 4

of the '718 patent would be held invalid for obviousness based on the PCT Application

together with the '190 patent. This court held that the preliminary injunction should be

denied, although the panel cautioned that its ruling "in no way resolves the ultimate

question of invalidity." Teva, 452 F.3d at 1347. In Andrx a later panel of this court, on an

enlarged record, rejected the invalidity ruling in Teva and held that the '718 claims were

likely to withstand the attack on validity. Andrx, 473 F.3d at 1203-07.

Reviewing this history as applied to Sandoz’ arguments herein, the district court

explained that this court in Teva had not been made aware of the differences between the

pharmacokinetic criteria described in the '190 patent and those of the '718 patent. The

district court explained that the pharmacokinetic data in the '190 patent were based on

measurements of total antibiotic activity in the body, which includes both clarithromycin and

its active metabolite formed after ingestion, whereas the data in the '718 patent are specific

to clarithromycin alone. The court found that “Abbott has shown . . . that the PK profile of

the clarithromycin-metabolite data of the ‘190 patent formulation was not the same as the

PK profile of the clarithromycin-only data utilized by the ‘718 patent,” Abbott, 500 F.

Supp.2d at 841.

Sandoz argued, in its supplemental briefing in the district court after the KSR

decision, that this court's decision in Andrx does not survive scrutiny under the principles

set forth in KSR, and stressed that application of KSR renders it "obvious to try" the various

2007-1300 15
release agents in the PCT Application, such that any successful composition would be

unpatentable, whether or not the results were predictable. Sandoz argued that the '190

patent shows that clarithromycin and azithromycin have similarities as well as differences,

and that it would be obvious to experiment to determine which formulations were effective

in view of these differences and similarities. Sandoz stressed that the Abbott scientists had

knowledge of the prior art including the PCT Application, and that they developed the

Abbott formulation in only one month of research effort. Sandoz quoted the Court's

admonition in KSR that a court "can take account of the inferences and creative steps that

a person of ordinary skill in the art would employ," 127 S. Ct. at 1741, and that "[t]he

combination of familiar elements according to known methods is likely to be obvious when it

does no more than yield predictable results." Id. at 1739.

The district court, applying KSR, reconsidered its prior determination and framed the

question as "whether an ordinary person skilled in the art would have seen a benefit to

combining an erythromycin derivative with a polymer with the same PK [pharmacokinetic]

limitations as embodied in claims 1 and 4 of the '718 patent given the state of the

pharmaceutical industry at the time." Abbott, 500 F. Supp.2d at 851. The court concluded:

"Based upon what evidence and argument Sandoz offered, the answer was and remains

no." Id. The district court explained that “this Court’s preliminary factual findings . . . found

that Sandoz had not produced evidence indicating that the PK limitations were disclosed in

the prior art or were inherent to the structural limitations of the prior art compositions.” Id.

at 852. The district court observed that "[t]he KSR opinion only focused on the Federal

Circuit's strict use of the TSM [teaching, suggestion, motivation] test in performing the

obviousness analysis; it did not mention or affect the requirement that each and every claim

2007-1300 16
limitation be found present in the combination of the prior art references before the analysis

proceeds." Id. at 852.

We agree that the obviousness of selection of components, when there is no

prediction in the prior art as to the results obtainable from a selected component, differs

from the issue in KSR, where the Court provided guidance that "a court must ask whether

the improvement is more than the predictable use of prior art elements according to their

established functions." 127 S. Ct. at 1740. The Court explained the conditions in which

"obvious to try" may negate patentability, depending on the relation of the prior art teaching

to the later-developed technology. The Court explained that when the problem is known,

the possible approaches to solving the problem are known and finite, and the solution is

predictable through use of a known option, then the pursuit of the known option may be

obvious even absent a “teaching, suggestion, or motivation” concerning that option. Then,

“if this leads to the anticipated success, it is likely the product not of innovation but of

ordinary skill and common sense.” 127 S. Ct. at 1742.

Abbott argued that the "known options" in the prior art were not "finite, identified, and

predictable," the words of KSR, and are identified only with hindsight knowledge of Abbott’s

new formulation and its pharmacokinetic properties. Abbott pointed to the discussion in the

PCT Application of over a dozen possible drug delivery modes, including matrix systems,

membrane-moderated or reservoir systems, osmotic pumps, coated hydrogel tablets and

multiparticulates, sustained release compositions with delayed-release layers, pH-

dependent coated tablets, bursting osmotic core devices, bursting coated swelling core

devices, pH-triggered bursting osmotic core devices, pH-triggered bursting coated swelling

core devices, enzyme-triggered supported liquid membrane devices, bacterially degradable

2007-1300 17
coating devices, and swelling plug devices, all classes of controlled release for drug

delivery systems, each containing sub-classes and variations. PCT App. at 8-38. The

expert witnesses pointed out the difficulties in predicting the behavior of any composition in

any specific biological system.

The evaluation of the choices made by a skilled scientist, when such choices lead to

the desired result, is a challenge to judicial understanding of how technical advance is

achieved in the particular field of science or technology. Such understanding is critical to

judicial implementation of the national policy embodied in the patent statute. In Publication

of Tomlinson, 363 F.2d 928 (CCPA 1966) our predecessor court discussed the role of

"obvious to try" in scientific and technologic research and in patentability:

Slight reflection suggests, we think, that there is usually an element of
"obviousness to try" in any research endeavor, that is not undertaken with
complete blindness but rather with some semblance of a chance of success,
and that patentability determinations based on that as the test would not only
be contrary to statute but result in a marked deterioration of the entire patent
system as an incentive to invest in those efforts and attempts which go by the
name of "research."

Id. at 931. The Court in KSR did not create a presumption that all experimentation in fields

where there is already a background of useful knowledge is "obvious to try," without

considering the nature of the science or technology. The methodology of science and the

advance of technology are founded on the investigator’s educated application of what is

known, to intelligent exploration of what is not known. Each case must be decided in its

particular context, including the characteristics of the science or technology, its state of

advance, the nature of the known choices, the specificity or generality of the prior art, and

the predictability of results in the area of interest.

2007-1300 18
 The district court discussed the differences between the pharmacokinetic properties

shown in the '190 patent reference and the properties in the '718 patent claims, the

differences in the chemical and biological properties of azithromycin and clarithromycin, the

differences between in vitro and in vivo data, and the differences between azithromycin and

clarithromycin. For example, Abbott’s expert Dr. Davis stated that “the absorption of

clarithromycin is affected by a phenomenon know as the ‘first pass effect’ which does not

occur for azithromycin,” and that azithromycin’s “metabolism occurs only post-absorption.”

Dr. Davis also stated that “the half-life for azithromycin is about 70 hours, whereas that for

clarithromycin is about 3-4 hours at low IR doses.” First-pass metabolism was explained as

meaning that a significant amount of the drug is metabolized and converted into another

compound before it enters the circulation; Dr. Davis stated that a person of skill in this field,

having this knowledge, would not have assumed that the two drugs would exhibit similar

behavior if placed in the same formulation. The district court concluded that it was not

predictable, from the in vitro behavior of azithromycin, how any specific clarithromycin

extended release formulation would perform in vivo.

Sandoz presented other arguments, for example, that the FDA regulations state the

requirements for approval of extended release formulations, thereby rendering obvious a

formulation that meets these requirements. However, knowledge of the goal does not

render its achievement obvious. The district court appropriately applied the KSR standard

of whether the patents in suit represented an "identified, predictable solution" and

"anticipated success," the words of KSR, to the problem of producing extended release

formulations having the pharmacokinetic properties in the claims.

On the record of the preliminary injunction proceedings, and considering this court's

2007-1300 19
ruling in Andrx and the guidance of the Court in KSR, we do not discern reversible error in

the district court's ruling that Abbott is likely to prevail on the issues of patent validity based

on anticipation and obviousness.

II

INEQUITABLE CONDUCT

Sandoz also argued that the '718 and '616 patents are unenforceable due to

Abbott’s “inequitable conduct” in the Patent and Trademark Office. Sandoz stated that

Abbott submitted a false declaration to the PTO, and also that Abbott withheld from the

examiner the results of certain tests after the patent applications were filed and that were

inconsistent with information in the patent applications. The district court found that there

was no intent to deceive the examiner, and that the criticized activity did not constitute

inequitable conduct.

The evidentiary standard for determining whether there was inequitable conduct in

obtaining a patent that is otherwise valid was set forth by this court, sitting en banc for the

purpose, in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir.

1988). The court explained that "[t]o be guilty of inequitable conduct, one must have

intended to act inequitably," and held: "Inequitable conduct resides in failure to disclose

material information, or submission of false material information, with an intent to deceive,

and those two elements, materiality and intent, must be proven by clear and convincing

evidence." Id. at 872. Mistake or negligence, even gross negligence, does not support a

ruling of inequitable conduct. The court held:

We adopt the view that a finding that particular conduct amounts to “gross
negligence” does not of itself justify an inference of intent to deceive; the
involved conduct, viewed in light of all the evidence, including evidence

2007-1300 20
 indicative of good faith, must indicate sufficient culpability to require a finding
of intent to deceive.

Id. at 876. When both materiality and deceptive intent have been established the district

court determines, in the court’s discretion, whether inequitable conduct has occurred;

appellate review is on this basis. See id. at 876 (“As an equitable issue, inequitable

conduct is committed to the discretion of the trial court and is reviewed by this court under

an abuse of discretion standard. We, accordingly, will not simply substitute our judgment

for that of the trial court in relation to inequitable conduct.”).

The ‘718 patent

Sandoz first challenges the district court’s findings with respect to a declaration by

an inventor, Dr. Linda Gustavson, comparing the products of the pending '718 application

with the products in a prior art Abbott patent, U.S. Patent No. 4,808,411, directed to a

pediatric clarithromycin suspension that is administered twice daily. Dr. Gustavson

submitted data to the PTO comparing the ‘718 and the ‘411 formulations, and stated that

“the ER [extended release] formulation as claimed, is supported by the above results,

namely, Cmax of clarithromycin in plasma is statistically significantly lower than that for IR

[immediate release] formulation given twice daily.” The declaration also stated that “AUC is

maintained over 24 hours; and Cmin is substantially equivalent to that of the IR

suspension”. 3 However, in this litigation Dr. Gustavson testified that she had not analyzed

statistical significance, and that "it could not definitively be concluded from the data that the

difference between the ER Cmax and the Cmax for a twice-a-day dosed suspension would

2007-1300 21
have been statistically significantly different." Based on this admission, Sandoz argued that

the Gustavson submission to the PTO was a material misrepresentation, that intent to

deceive is presumed, and that inequitable conduct was thereby established.

Abbott did not dispute that Dr. Gustavson did not analyze statistical significance, but

argued that it was not material to patentability and that a reasonable examiner would not

have found otherwise. Abbott pointed out that the actual data were before the PTO, and

that the results did show a numerically lower Cmax value. Sandoz pointed out to the district

court that Abbott’s patent attorney argued nonobviousness to the PTO based on the

Gustavson declaration, and Abbott responded that the declaration correctly stated that the

pharmacokinetic properties of the product in the '411 patent are markedly different from

those of the product of the '718 patent. We have been directed to no evidence of deceptive

intent, or “bad faith or intentional misconduct”, in the words of PTO Rule 56; on this appeal

Sandoz repeats that deceptive intent should be inferred from the misstatement.

The district court cited Impax Labs., Inc. v. Aventis Pharm., Inc., 468 F.3d 1366,

1374 (Fed. Cir. 2006) for its summary that a ruling of inequitable conduct requires clear and

convincing evidence that the applicant while prosecuting the patent “(1) made an affirmative

misrepresentation of material fact, failed to disclose material information, or submitted false

material information, and (2) intended to deceive the [PTO].” In determining materiality, the

district court applied the standard that “[u]ndisclosed information is material if it satisfies 37

C.F.R. '1.56 and if there is a substantial likelihood that a reasonable examiner would have

3
The AUC is a calculation of the “area under a curve” when drug concentration
is plotted over time, and is a measure of bioavailability of the drug. Cmin is the minimum rug
concentration over a dosing interval.

2007-1300 22
considered the undisclosed information important in deciding whether to allow the patent to

issue.” Although the Federal Circuit has not always been consistent in defining “materiality”

in accordance with the PTO Rules, the principles are consistently directed to deceptive

actions by patent applicants. In Digital Control, Inc. v. Charles Machine Works, 437 F.3d

1309 (Fed. Cir. 2006) the court observed that four separate tests have been applied for

materiality.

The district court, applying the tests of materiality to the Gustavson statement about

statistical significance, stated that it was "obviously troublesome that Gustavson made her

assertion without having actually performed the statistical test." The district court

concluded that the Gustavson statement was not material to patentability, "despite the fact

that it satisfies the definition of 'material' provided by 37 C.F.R. '1.56(b)." The court stated

that:

Since 1) no claim of the '718 patent requires the extended release
formulation to have a statistically significant lower Cmax than the immediate
release formulation; 2) the data in fact shows the Cmax of the extended
release formulation to be lower (albeit not statistically significantly lower) than
the Cmax of the immediate release formulation; and 3) the extended release
formulation was in fact pharmacokinetically different from the immediate
release suspension formulation, it is more likely than not that the PTO would
not have found the “statistically significantly lower” statement to be important.

500 F.Supp.2d at 822. Relevant is the ruling in Regents of the Univ. of Cal. v. Eli Lilly &

Co., 119 F.3d 1559, 1570 (Fed. Cir. 1997) (that “Information is material if a reasonable

examiner would have considered it important to the patentability of a claim”).

The district court also found that there was no evidence of intent to deceive the

examiner. The court rejected Sandoz's argument that deceptive intent is inferred from

materiality alone, for precedent requires independent proof of deceptive intent. See

2007-1300 23
Kingsdown, 863 F.2d at 872 (intent to deceive the examiner into granting the patent is a

separate and essential element of inequitable conduct in the PTO); Baker Oil Tools, Inc. v.

Geo Vann, Inc., 828 F.2d 1558, 1565 (Fed. Cir. 1987) ("The material facts upon which a

holding of inequitable conduct rests relate to both the intent of the actor and the materiality

of the information."). Weighing the materiality of the statement and the absence of

evidence of intent to deceive, we do not discern an abuse of discretion in the district court's

conclusion that inequitable conduct was not established by the statement concerning

statistical significance.

Sandoz next challenged the fact that Abbott did not provide to the patent examiner

the results of some clinical tests conducted after the '718 patent application was filed, that

were reported to the FDA and included on the Biaxin® XL product label. The test results

relate to taste perversion 4 results in a later clinical trial, and a study comparing

clarithromycin with azithromycin. Sandoz stated that Abbott should have provided the

patent examiners with these results and the product label, which report tests wherein the

immediate release formulation has a lower incidence of taste perversion than the extended

release formulation, contrary to the information in the '718 patent. Sandoz argued that the

inventors knew or should have known of this discrepancy, and thus that intent to deceive is

established. Abbott responded that the challenged taste tests were from dosages that

were not directly comparable, and that they did not change the correctness of the data in

the patent application. Abbott presented the expert testimony of Dr. Davis that "the

4
"Taste perversion" is defined in the '718 patent as "the perception of a bitter
metallic taste normally associated with erythromycin derivatives, particularly, with
clarithromycin." Col 3, lines 53-55.

2007-1300 24
comparison between the taste perversion incidence rate for Biaxin7 IR and Biaxin7 XL in

the label does not relate to the invention disclosed and claimed in the '407 patent, which is

for a reduction in taste perversion for the same total dose.” Supplemental Declaration of

Professor Stanley S. Davis, February 7, 2007(emphases in original).

The district court concluded that the taste results met the materiality criteria of Rule

56 but that a reasonable examiner would not consider the information important in deciding

whether to grant the patent. The court explained that a reasonable examiner would

compare data at comparable dosages, and that the data were not comparable. Although

Abbott and Sandoz argued about whether the inventors knew or should have known of this

discrepancy between this taste data from the Phase III clinical trial, and the taste data in

the patent application, the district court observed that there was no evidence of deliberate

withholding of this information in order to deceive the patent examiner. "Intent to deceive

can not be inferred solely from the fact that information was not disclosed; there must be a

factual basis for a finding of deceptive intent." Hebert v. Lisle Corp., 99 F.3d 1109, 1115,

1116 (Fed. Cir. 1996) ("To establish inequitable conduct the information that is known to

the applicant and not provided to the PTO must be both material to patentability, and

withheld in order to deceive or mislead the examiner."); Molins PLC v. Textron, Inc., 48

F.3d 1172, 1181 (Fed. Cir. 1995) ("While intent to deceive the PTO may be found as a

matter of inference from circumstantial evidence, circumstantial evidence cannot indicate

merely gross negligence.").

Materiality is not evidence of intent, which must be established as a separate factual

element of a discretionary ruling of inequitable conduct. The district court finding that the

2007-1300 25
factual premises of both materiality and intent to deceive were not established in

connection with the taste data, did not abuse its discretion in declining to find inequitable

conduct on this ground.

Finally, Sandoz criticized Abbott's failure to provide the PTO with a study designated

W98-268, done after the patent application was filed, which compared the pharmacokinetic

values of clarithromycin upon administration under various conditions. The district court

described the issue as: “Abbott claimed that the mean DFL values for a modified release

version of clarithromycin claimed by a prior patent, the ‘190 patent, were substantially equal

to the mean DFL values for the immediate release version of clarithromycin” but “[t]he final

report of Study W98-268 states that the modified release formulation exhibited a statistically

significantly lower mean DFL than that for the immediate release formulation.” 500 F.

Supp.2d at 823. Sandoz stated that Abbott committed inequitable conduct by failing to

disclose these results to the PTO.

Dr. Weiner stated in his January 9 Declaration that “the ‘190 patent does not

disclose any clarithromycin-specific PK data,” and “the ‘190 patent does not disclose any

DFL values at all,” and explained that ”subsequent studies conducted by Abbott indicate

that the commercial embodiment of the invention of the ‘190 patent does not have a

statistically significantly lower DFL than the IR formulation. . . . Before the present litigation,

Abbott had conducted five crossover studies in which the pharmacokinetic parameters for

clarithromycin (i.e., clarithromycin specifically, not clarithromycin combined with its

metabolite) were measured for both the MR [modified release] and IR formulations: W95-

914, W95-195, W95-197, W98-268 [the study that Sandoz accuses Abbott of withholding],

and TAI-99-001.” The mean DFL values in Table VII in the ‘718 patent are

2007-1300 26
based on Study W95-195. See Supplemental Declaration of Dr. Ronald Sawchuk,

February 7, 2007 (“Table VII reflects data from a multiple dose study involving MR

formulation and an IR formulation that was conducted in Germany in 1995. See Ex. 12,

Study W95-195.”). The studies conducted before the '718 patent application was filed

showed the data reported in the specification.

Many details were explained to the district court, as to all the studies, their context,

and their relationship. The district court found that "contrary to Sandoz's assertion, Study

W98-268 does not demonstrate that the prior art MR formulation has the same PK

properties as that claimed for the ER formulation. Therefore, Study W98-268 is not

material to the patentability of the '718 patent." Abbott, 500 F. Supp.2d at 824. The district

court found that the '718 patent "speaks of the PK relationship of extended release and

immediate release formulations, not of modified release and immediate release

formulations. . . . [and] there is no evidence showing the DFL of the ER formulation to be

anything but consistently statistically significantly lower than the DFL of the IR formulation."

Id. The district court found that the W98-268 study was not material under either Rule 56

or the reasonable examiner standard. Clear error has not been shown in this finding.

On the preliminary injunction record, the district court did not abuse its discretion in

ruling that Sandoz was not likely to succeed in establishing inequitable conduct in Abbott’s

prosecution of the '718 patent application. We agree with the district court that the scales

do not "tilt towards finding inequitable conduct." Id. at 829.

The ‘616 patent

2007-1300 27
 Sandoz argued that inequitable conduct as to the taste perversion claim in the ‘718

patent taints the ‘616 patent because a taste perversion claim was included in the '616

application when it was filed, although that claim was cancelled before any PTO

examination on the merits. The district court declined to hold the '616 patent unenforceable

based on a withdrawn claim, citing 37 C.F.R. §1.56(a):

Rule 56(a). The duty to disclose information exists with respect to each
pending claim until the claim is cancelled or withdrawn from consideration, or
the application becomes abandoned. Information material to the patentability
of a claim that is cancelled or withdrawn from consideration need not be
submitted if the information is not material to the patentability of any claim
remaining under consideration in the application.

The district court deemed it "wholly inequitable to hold a patent to be invalid for fraudulent

conduct in the prosecution of a claim that was withdrawn before actual prosecution had

even begun." Abbott, 500 F. Supp.2d at 829. This court held in Scripps Clinic & Research

Found. v. Genentech, Inc., 927 F.2d 1565, 1583 (Fed. Cir. 1991) that "[a] reference that is

material only to withdrawn claims can not be the basis of a holding of inequitable conduct."

Rule 56 is in accord.

Sandoz also argued as to the '616 patent that Abbott did not report to the PTO the

results of clinical trials conducted before the continuation in-part ‘616 application was filed.

Sandoz’ expert Dr. Marcello Pagano, in his Declaration dated January 25, 2007, stated: “I

have reviewed the bronchitis and sinusitis studies [and] the claims of the ‘616 patent for a

method of reducing gastrointestinal adverse side effects are not supported by the data from

those two clinical studies.” The results of these studies were provided to the FDA, but not

to the PTO. Dr. Pagano stated: “Since neither the sinusitis nor the bronchitis studies

produced favorable results to support a claimed reduction in gastrointestinal adverse side

2007-1300 28
effects, Abbott had to manipulate its data and report the number of discontinuations due to

gastrointestinal adverse side effects to the PTO . . .” The district court found that the

information from these clinical trials was not material to patentability, stating that: "it is clear

from both Table VI and Table VIII [of the '616 patent] that some data demonstrating no

change in the subcategories of GI adverse side effects of abdominal pain, constipation,

diarrhea, dyspepsia, flatulence and nausea were in fact disclosed to the PTO." Abbott, 500

F. Supp.2d at 828. These findings have not been shown to be clearly erroneous.

There was no evidence of intent to deceive with respect to the results of these

clinical trials. Materiality, even if found, does not establish intent. This is not a case of new

information that affects the fundamental invention; this is a case of challenging every action

or inaction of the “conduct” of patent solicitation, although patentability is unaffected. The

purpose of Kingsdown was to bring patent practice into the mainstream of the law and

administrative practice. The law severely punishes fraudulent practices, and the patent

practice includes recognition that the inventor usually knows more about the field than does

the “expert” patent examiner. However, routine actions that do not affect patentability and

that are devoid of fraudulent intent are not subject to a different standard than other

inquiries into fraudulent procurement. The Administrative Procedure Act governs patent

examination, see Dickinson v. Zurko, 527 US 150 (1999), and actions of patent examiners

are reviewed with recognition of examiner expertise so well as recognition of the

occasionally imperfect examination process. “It was to mitigate the ‘plague’ whereby every

patentee’s imperfections were promoted to ‘inequitable conduct’ that this court reaffirmed

that both materiality and culpable intent must be established.” Allied Colloids, Inc. v.

American Cyanamid Co., 64 F.3d 1570, 1578 (Fed. Cir. 1995).

2007-1300 29
 We conclude that the district court did not abuse its discretion in holding that the '718

and '616 patents were not likely to be held unenforceable based on inequitable conduct in

obtaining the patents.

III

INFRINGEMENT

The first step in most infringement suits is the procedure called ‘claim construction,”

where the scope of the claim is defined by the court. At the preliminary injunction stage the

district court’s claim construction is reviewed, as for other legal issues, for the likelihood of

correctness of the ruling. This likelihood is based on the underlying facts as found at this

stage of the proceedings, recognizing that "the burdens at the preliminary injunction stage

track the burdens at trial." Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal,

546 U.S. 418, 429 (2006).

For the patents here in suit, the issue of infringement was resolved, at this preliminary

injunction stage, as a matter of claim construction. The dispositive question was whether

the term "pharmaceutically acceptable polymer" is limited to the polymers named in the

specification, or can include other pharmaceutically acceptable polymers. If so limited, it is

likely that there would not be literal infringement; if not so limited, then literal infringement

would be possible. (Infringement under the doctrine of equivalents was not addressed by

the district court, although Sandoz argues the issue “in an abundance of caution.”).

The meaning and scope of "pharmaceutically acceptable polymer" as used in these

patents has been litigated in other cases, none of which had been finally decided, but some

of which had been appealed to the Federal Circuit based on the grant of a preliminary

injunction. The district court now construed "pharmaceutically acceptable polymer" in

2007-1300 30
accordance with the construction by the Federal Circuit in Andrx, supra. Sandoz argues on

this appeal that the correct construction is that of the Federal Circuit’s earlier decision in

Teva, supra. Sandoz argues that because Teva was the earlier ruling, it could not be

overturned by the later Andrx panel, citing Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.2d

757, 765 (Fed. Cir. 1988) ("Where there is a direct conflict [between Federal Circuit panels],

the precedential decision is the first.").

Abbott responds that the decision in Andrx was properly followed by this district

court, for in Teva the "construction" of "pharmaceutically acceptable polymer" was not at

issue, and this court's comment thereon was dictum. The court in Andrx recognized the

non-binding nature of that comment in Teva. Indeed, the district court in Teva had stated

that "[a]t this early stage of the proceedings, the parties have raised no issue as to claim

construction". Abbott Laboratories v. Andrx Pharmaceuticals, Inc., No. 05 C 1490, 2005

WL 1323435, at *3, *4 (N.D. Ill. June 03, 2005) (Teva conceding literal infringement but

challenging validity).

The panel in Andrx decided the questions now raised by Sandoz concerning the

“construction” of "pharmaceutically acceptable polymer" and the pharmacokinetic

requirements in the claims. The Andrx panel also explained its departure from the panel

decision in Teva. The district court herein, applying Andrx, held that a person of ordinary

skill in this field would interpret "pharmaceutically acceptable polymer" in terms of the

following description in the '718 specification:

"Pharmaceutically acceptable" as used herein, means those compounds,
which are, within the scope of sound medical judgment, suitable for use in
contact with the tissues of humans and lower animals without undue toxicity,
irritation, allergic response, and the like, in keeping with a reasonable

2007-1300 31
 benefit/risk ratio, and effective for their intended use in the chemotherapy and
prophylaxis of antimicrobial infections.

'718 patent, col. 3 lines 40-47. The district court referred to the '718 specification's listing of

pharmaceutically acceptable polymers, but applied the Andrx ruling that the polymers are

not limited to those that are named in the following paragraph:

The pharmaceutically acceptable polymer is a water-soluble hydrophilic
polymer selected from the group consisting of polyvinylpyrrolidine,
hydroxypropyl cellulose, hydroxypropyl methyl cellulose, methyl cellulose,
vinyl acetate/crotonic acid copolymers, methacrylic acid copolymers, maleic
anhydride/methyl vinyl ether copolymers and derivatives and mixtures
thereof.

‘718 patent, col. 3 line 65 to col. 4 line 4. The district court construed "pharmaceutically

acceptable polymer" as:

[A]ny polymer, which within the scope of sound medical judgment is suitable
for use in pharmaceutical compositions for use in contact with the tissues of
humans and lower animals without undue toxicity, irritation, allergic response,
and the like, in keeping with a reasonable benefit/risk ratio, and effective for
their intended use in the chemotherapy and prophylaxis of antimicrobial
infections, and is capable of forming a matrix to extend drug release into the
bloodstream. Such a "pharmaceutically acceptable polymer" must constitute
5 to 50% by weight of the product.

Abbott, 500 F. Supp.2d at 834. The district court, following Andrx, held that the

usage "from the group consisting of" in the specification is not exclusive, as it would

be in a Markush-form claim, and did not negate the broader description that is also

contained in the specification, as quoted above.

This aspect was debated in the district court, and again on this appeal. Sandoz

argues that since "pharmaceutically acceptable polymer" is limited by the specification to

water-soluble hydrophilic polymers, and that since the listed methacrylic acid copolymers

are known to include water-insoluble as well as water-soluble polymers, the term

2007-1300 32
"pharmaceutically acceptable polymer" must be construed to mean that the formulation

cannot include any water-insoluble methacrylic acid or other polymer. The district court,

receiving this argument, reasoned that "the existence of water-insoluble polymers from the

specifically-mentioned methacrylic acid co-polymer subset actually militates towards a

broader construction urged by Abbott that would encompass water-insoluble methacrylic

acid co-polymers." Abbott, 500 F. Supp.2d at 834. Sandoz argues that this reasoning is

flawed, and that this court in Andrx erred in rejecting this argument. However, we are not

persuaded that the Andrx panel's ruling warrants rejection on this argument, for we agree

with the district court that the fact that some methacrylic acid copolymers are water-

insoluble does not require limiting "pharmaceutically acceptable polymer" to the named

polymers.

We conclude that the district court’s claim construction, which is that of Andrx, is

correct, and that the district court properly declined to follow Teva. Sandoz’ argument that

Teva was the correct construction and should be revived by the Federal Circuit is hard to

square with Sandoz’ statement to the district court that “a very important point to make here

is Sandoz does not rely on the Federal Circuit opinion in the Teva case. . . . Sandoz agrees

with Abbott.” Statement at the February 12, 2007 preliminary injunction hearing, transcript

at A11085.

Sandoz further argues that the district court erred by using the word "matrix" in its

definition of “pharmaceutically acceptable polymer,” quoted above, pointing out that this

word does not appear in the claims or specification. However, claim construction often

calls upon words other than those of the patent, lest the claim simply define itself. “Claim

construction” is for the purpose of explaining and defining terms in the claims, and usually

2007-1300 33
requires use of words other than the words that are being defined. See Multiform

Desiccants, Inc. v. Medzam, Ltd., 133 F.3d 1473, 1477 (Fed. Cir. 1998) (claims are

construed as an aid to the decision-maker, by restating the claims in non-technical terms).

Abbott's expert Dr. Davis had used the word “matrix” in his explanation of the

technology of extended release. He explained that a “pharmaceutically acceptable

polymer. . . alone or in combination with other polymers, is capable of forming a matrix

when mixed with the drug to control and extend drug release into the GI tract and thence to

the bloodstream." Declaration of Professor Davis, January 10, 2007. Sandoz does not

dispute that this explanation comports with the description in the specification. Also, Abbott

cites several scientific publications that use the word "matrix" in this context, and Sandoz

does not argue that the word has a different meaning from that with which it was used by

the district court. There is no ground for discarding the district court's claim construction

based on the word “matrix.”

Sandoz also argued that the claims must be construed so that the "pharmaceutically

acceptable polymer" is the only release agent in the composition, argued that the presence

of any other agent that affects release of the drug removes the composition from the scope

of the ‘718 claims. Abbott pointed out that the claims use the conventional signal

"comprising," which means that other ingredients may be present in the composition, in

addition to those explicitly set forth. See CIAS, Inc. v. Alliance Gaming Corp., 504 F.3d

1356, 1360 (Fed. Cir. 2007) ("In the patent claim context the term 'comprising' is well

understood to mean 'including but not limited to'."); Georgia-Pacific Corp. v. United States

Gypsum Co., 195 F.3d 1322, 1327-28 (Fed. Cir. 1999) ("'comprising' . . . is inclusive or

open-ended and does not exclude additional unrecited elements or method steps").

2007-1300 34
 Sandoz argues that the district court's claim construction is incorrect because it

ignores the distinction between "pharmaceutically acceptable polymers" and

"pharmaceutically acceptable excipients." We discern no support for this challenge. Abbott

points out that the distinction between “polymer” and “excipient” lies in its role in the

composition, as the patent states: "The compositions of the invention further comprise

pharmaceutically acceptable excipients and/or fillers and extenders, such as lactose . . .".

'718 patent, col. 4, lines 21-23. We discern no flawed judicial understanding of the term

“excipient.”

Sandoz also argued that the components of its accused formulation are merely

“excipients” in that they do not extend the release of the clarithromycin, while Abbott

pointed out that Sandoz described its product to the FDA as "extended release." Sandoz

stated that the extension of release for its product is achieved not by the polymer that is

present in its composition, but by other components. The district court considered the

arguments concerning the role of the maltodextrin and the silicified microcrystalline

cellulose in the Sandoz product. The court discussed the evidence of release rates and

amounts released, including the information in Sandoz' approved ANDA, the comparative

data presented by both sides, and various technical articles provided by both sides on the

physical and chemical characteristics of the components of the Sandoz formulation. The

court found that “Abbott has demonstrated a substantial likelihood that maltodextrin is a

polymer that alone or in combination with other polymers, is capable of forming a matrix to

extend drug release." Abbott, 500 F. Supp.2d at 837.

Sandoz argues that the district court erred in its evaluation of the evidence, stating

that Abbott did not show by direct testing that any of the polymers in the Sandoz product

2007-1300 35
actually extends the release of clarithromycin. Sandoz argues that the district court erred in

finding unpersuasive certain laboratory tests conducted by Sandoz to show that

maltodextrin has no significant impact on the dissolution rate of clarithromycin. Abbott

responds that the district court did not err, and that Sandoz must be deemed to have

admitted that maltodextrin and silicified microcrystalline cellulose are polymers that, alone

or in combination with other components, are capable of extending drug release. Abbott

pointed out to the district court that the developer of the Sandoz formulation, Dr. Nirmal

Mulye, in his patent application (US 2004/0224017 A1) entitled "Process for Preparing

Sustained Release Tablets," stated that "the present inventor has found that the addition of

maltodextrin in effective amounts provides the desired release profile," that “maltodextrin

also tends to slow down the release of a medicament in a controlled release formulation[,]”

and that “the maltodextrin used in the present invention is to counteract the accelerated

rate of release of the drug . . .” We have not been directed to clear error in the district

court’s findings on this question.

Sandoz raises additional arguments, some discussed by the district court, and some

newly presented on this appeal. All have been considered. We conclude that the district

court’s findings and rulings at this stage of the proceedings have not been shown to

constitute reversible error. The ruling that Abbott had shown a reasonable likelihood of

proving infringement is sustained.

IV

THE EQUITABLE FACTORS

Sandoz states that the district court incorrectly resolved and weighed the equitable

factors relevant to the grant of a preliminary injunction. Sandoz states that the factors of

2007-1300 36
irreparable harm, the balance of harms, and the public interest, all weigh in its favor, and

outweigh any finding that Abbott is likely to prevail on the issues of validity or enforceability

and infringement. The district court considered these factors, and explained its reasoning

in exercising its discretion to grant the preliminary injunction.

Irreparable Harm

Sandoz argued that any harm to Abbott is not irreparable, for damages are available

for infringement, if the eventual final judgment is adverse to Sandoz. Sandoz pointed out

that the generic producers Teva and Ranbaxy are already in this market, by settlement with

Abbott, such that any price erosion due to generic competition is already occurring. The

district court considered these relationships, and concluded that they do not negate the

market share and revenue loss upon Sandoz’ entry while the litigation proceeds.

Precedent supports this conclusion. See, e.g., Purdue Pharma L.P. v. Boehringer

Ingelheim GmbH, 237 F.3d 1359, 1368 (Fed. Cir. 2001) (likelihood of price erosion and loss

of market position are evidence of irreparable harm); Bio-Technology Gen. Corp. v.

Genentech, Inc., 80 F.3d 1553, 1566 (Fed. Cir. 1996) (loss of revenue, goodwill, and

research and development support constitute irreparable harm); Polymer Technologies,

Inc. v. Bridwell, 103 F.3d 970, 975-76 (Fed. Cir. 1996) (loss of market opportunities cannot

be quantified or adequately compensated, and is evidence of irreparable harm).

The Balance of Hardships

The district court discussed and weighed the hardships argued by both parties, and

found that the balance of hardships tipped in favor of Abbott. The court found that

preserving the status quo preserves the current market structure, recognizing that Abbott

2007-1300 37
has licensed other generic producers. The district court concluded that "Abbott will lose

much more if this Court did not enjoin Sandoz's infringing conduct than if the Court enjoins

Sandoz and it is subsequently found that the '718 patent is invalid or unenforceable."

Abbott, 500 F. Supp.2d at 845.

We agree that the fact that a patentee has licensed others under its patents does not

mean that unlicensed infringement must also be permitted while the patents are litigated.

Precedent illustrates that when the patentee is simply interested in obtaining licenses,

without itself engaging in commerce, equity may add weight to permitting infringing activity

to continue during litigation, on the premise that the patentee is readily made whole if

infringement is found. In this case the district court received Abbott’s argument that it could

not be made whole if it prevails in this litigation, for the added erosion of markets,

customers, and prices, is rarely reversible. See Sanofi-Synthelabo, 470 F.3d at 1383

(rejecting hardship claim of generic challenger whose “harms were almost entirely

preventable’ and were the result of its own calculated risk to launch its product pre-

judgment”).

Clear error has not been shown in the district court’s finding that the harm to Sandoz

of delay in entering this market while this case is litigated, is outweighed by the harm to

Abbott in view of the likelihood that Abbott will succeed in sustaining the validity and

enforceability of its patents.

The Public Interest

Sandoz argues that the public interest favors the availability of less expensive forms

of successful medicines. The district court considered this argument, and stated:

2007-1300 38
 The Court recognizes the public interest in competition in the pharmaceutical
market. It also recognizes, however, the public interest in creating beneficial
and useful products and the cost involved in that process. To the extent that
this Court has found a substantial likelihood that the ‘718 patent is valid and
enforceable, there can be no serious argument that public interest is not best
served by enforcing it.

500 F. Supp.2d at 846. The district court appreciated that the public interest includes

consideration of whether, by shifting market benefits to the infringer while litigation is

pending for patents that are likely to withstand the attack, the incentive for discovery and

development of new products is adversely affected. The statutory period of exclusivity

reflects the congressional balance of interests, and warrants weight in considering the

public interest. In Sanofi-Synthelabo, 470 F.3d at 1383, this court referred to the significant

“public interest in encouraging investment in drug development and protecting the

exclusionary rights conveyed in valid pharmaceutical patents.” As the Court explained in

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974): “The patent laws promote this

progress by offering a right of exclusion for a limited period as an incentive to inventors to

risk the often enormous costs in terms of time, research, and development.” Id. at 480.

Sandoz states that the Court’s recent decision in eBay Inc. v. MercExchange, L.L.C.,

547 U.S. 388 (2006) negates any presumption of entitlement to an injunction upon a finding

of likelihood that a patent will be sustained and found infringed. The district court did not

apply such a presumption, but fully considered all of the legal and equitable factors. At the

preliminary injunction stage, the legal and equitable factors may be of different weight when

the patentee is itself engaged in commerce, as contrasted with a patentee that is seeking to

license its patent to others. We need not resolve this aspect for all possible situations, for

as between Abbott and Sandoz the district court objectively weighed the legal probabilities

2007-1300 39
and the equities, and exercised its discretionary judgment as to the entirety of the cause.

We have been shown no basis for believing that the district court abused its discretion.

V

THE INJUNCTION BOND

Sandoz also appeals the amount of the injunction bond, which the district court set

at $40 million. Sandoz provides no substance for appellate review of the amount of the

bond, simply stating in its brief that it "presented [to the district court] at least colorable

evidence that its losses from the injunction and recall would be $200 million," but not

describing the evidence or arguing its merits. Sandoz simply states that its proposed

number should have been accepted, in the event that the $40 million is later shown to be

inadequate.

This aspect has not been presented in reviewable substance. On this appeal, abuse

of discretion has been shown in the district court’s setting of the terms of the injunction.

See Russell v. Farley, 105 U.S. 433, 441 (1881) (the court's discretion in setting the terms

of an injunction is rooted in equity).

VI

THE ISSUE OF CONFLICTING PRECEDENT

The district court found the likelihood that the patentee would succeed on the merits

and that the equities favored the patentee, and exercised its discretion to enjoin

infringement during the litigation. The dissent states that the district court applied the

incorrect standard, and that if the infringer “raises a substantial question concerning either

infringement or validity,” diss. op. at 2, it is an abuse of discretion to enjoin infringement

pendente lite. The dissent quotes with approval a past panel statement that “In resisting a

2007-1300 40
preliminary injunction, however, one need not make out a case of actual validity.

Vulnerability is the issue at the preliminary injunction stages, while validity is the issue at

trial.” Id. Indeed, this court’s precedent makes this statement, in direct conflict with other,

earlier statements that the standard is not vulnerability, but likelihood of success on the

merits.

In response to the arguments expounded in the dissenting opinion, I summarize the

law governing the grant of a preliminary injunction. The criteria relied on in the dissent are

not the criteria of any other circuit, nor of the Supreme Court. The correct standard is not

whether a substantial question has been raised, but whether the patentee is likely to

succeed on the merits, upon application of the standards of proof that will prevail at trial.

The question is not whether the patent is vulnerable; the question is who is likely to prevail

in the end, considered with equitable factors that relate to whether the status quo should or

should not be preserved while the trial is ongoing. The presentation of sufficient evidence

to show the likelihood of prevailing on the merits is quite different from the presentation of

substantial evidence to show vulnerability.

Thus the evidence that favors the patent must be considered in deciding a motion for

a preliminary injunction, as well as the evidence against the patent. The trial court then

decides which side is likely ultimately to prevail. The dissent presents only the case against

the patent, apparently on the theory that this is all that is needed to raise a “substantial

question”.

Indeed, a showing of a substantial question concerning validity or infringement can

serve to avert judgment on the pleadings, or to avoid the grant of summary judgment, but it

is not the same as showing likelihood of eventual success on the merits. The dissent

2007-1300 41
recognizes that it is not the same and that it “requires less proof”, but errs in stating that this

is sufficient to defeat the grant of a preliminary injunction. Precedent is clear that the

standard is the likelihood of success of the plaintiff at trial, with recognition of the

presumptions and burdens. See, e.g., Gillette Co. v. Energizer Holdings, Inc., 405 F.3d

1367, 1370 (Fed.Cir.2005); Ranbaxy Pharmaceuticals., Inc. v. Apotex, Inc., 350 F.3d 1235,

1239 (Fed.Cir.2003); Reebok Int’l Ltd. v. J. Baker, Inc., 32 F.3d 1552, 1555 (Fed. Cir.

1994); Smith Int’l, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1579 (Fed.Cir.1983).

Supreme Court precedent, every regional circuit, and controlling Federal Circuit

precedent, apply to the preliminary injunction the combination of criteria that includes

likelihood of success on the merits and equitable considerations. No other court has held

that when the attacker has presented a “substantial question” on its side of the dispute –

that is, more than a scintilla but less than a preponderance of evidence in support of its side

– no injunction pendente lite is available. Further, equitable factors are of particular

significance at the preliminary stage, where the question is whether to change the position

of the parties during the litigation. See Camenisch, 451 U.S. at 395 (the preliminary

injunction preserves the position of the parties during the litigation). The dissent does not

mention the equitable factors that were considered by the district court, as required by

precedent; the dissent simply states that the injunction must be denied if the attacker has

raised a substantial question.

Supreme Court precedent is clear in stating that the same burdens and standards of

proof apply in deciding the merits for preliminary injunction purposes, as in deciding the

same questions upon full litigation. See, e.g., Gonzales, 546 U.S. at 429 (placing the

burdens of proof for showing likelihood of success at the preliminary injunction stage). The

2007-1300 42
Court explained in Amoco Production Co. v. Village of Gambell, AK, 480 U.S. 531, 546 n.2

(1987) that: “The standard for a preliminary injunction is essentially the same as for a

permanent injunction with the exception that the plaintiff must show a likelihood of success

on the merits rather than actual success.”

There is no reason why patent cases require unique treatment. See eBay Inc. v.

MercExchange, L.L.C., 547 U.S. 388. 394 (2006) (“[T]he decision whether to grant or deny

injunctive relief rests within the equitable discretion of the district courts, and that such

discretion must be exercised consistent with traditional principles of equity, in patent

disputes no less than in other cases governed by such standards.”). The general criterion

of likelihood of success on the merits, in the context of the equities of the particular case,

are uniform throughout the regional circuits. All are consistent with the rulings of the

Supreme Court, and, although the words vary, all refer to the likelihood of the eventual

outcome, not whether a substantial question has been raised. In brief sampling, starting

with the First Circuit, the court summarized the standard in Wine and Spirits Retailers, Inc.

v. Rhode Island, 418 F.3d 36 (1st Cir. 2005):

The sine qua non of this four-part inquiry is likelihood of
success on the merits: if the moving party cannot demonstrate
that he is likely to succeed in his quest, the remaining factors
become matter of idle curiosity.

Id. at 46 (citation omitted). The referenced “four-part inquiry” is “(1) the likelihood of

success on the merits; (2) the potential for irreparable harm [to the movant] if the injunction

is denied; (3) the balance of relevant impositions, i.e., the hardship to the nonmovant if

enjoined as contrasted with the hardship to the movant if no injunction issues; and (4) the

effect (if any) of the court's ruling on the public interest.” Id. (alteration in original) (citations

2007-1300 43
omitted).

The Second Circuit also applies the standard four factors. I cite a case that

emphasized the equitable considerations; in Laureyssens v. Idea Group, Inc., 964 F.2d

131, 135-36 (2nd Cir. 1992) (emphasis in original) the court stated: “A party seeking a

preliminary injunction must establish (1) irreparable injury and (2) a likelihood of success on

the merits or a sufficiently serious question going to the merits and a balance of hardships

tipping decidedly in the moving party's favor.”

The Third Circuit also stated that the district court must consider four factors: “[A] the

likelihood that the applicant will prevail on the merits at final hearing; [B] the extent to which

the plaintiffs are being irreparably harmed by the conduct complained of; [C] the extent to

which the defendants will suffer irreparable harm if the preliminary injunction is issued; and

[D] the public interest.” Opticians Ass’n of Am. v. Independent Opticians of Am., 920 F.2d

187, 191-92 (3rd Cir.1990) (alterations in original) (citation omitted). In Eli Lilly & Co. v.

Premo Pharmaceutical Laboratories, Inc., 630 F.2d 120 (3rd Cir. 1980) the court explained

that when analyzing a preliminary injunction:

the moving party must generally show (1) a reasonable
probability of eventual success in the litigation and (2) that the
movant will be irreparably injured pendente lite if relief is not
granted. . . . Moreover, while the burden rests upon the moving
party to make these two requisite showings, the district court
“should take into account, when they are relevant, (3) the
possibility of harm to other interested persons from the grant or
denial of the injunction, and (4) the public interest.” . . . While
these factors structure the inquiry, however, no one aspect will
necessarily determine its outcome. Rather, proper judgment
entails a ‘delicate balancing’ of all elements. On the basis of
the data before it, the district court must attempt to minimize
the probable harm to legally protected interests between the
time that the motion for a preliminary injunction is filed and the
time of the final hearing.

2007-1300 44
Id. at 136. Indeed, rulings of the Federal Circuit, along with requiring this “reasonable

probability of eventual success,” have recognized the “’delicate balancing’ of all elements.”

See H.H. Robertson Co. v. United Steel Deck, Inc., 820 F.2d 384, 387-88 (Fed. Cir. 1987).

Similarly in the Fourth Circuit the inquiry is: “1) Has the petitioner made a strong

showing that it is likely to prevail upon the merits? 2) Has the petitioner shown that without

such relief it will suffer irreparable injury? 3) Would the issuance of the injunction

substantially harm other interested parties? 4) Wherein lies the public interest?”

Blackwelder Furniture Co. of Statesville, Inc. v. Seiling Mfg. Co., 550 F.2d 189, 193 (4th

Cir. 1977) (when reviewing the grant of denial of interim injunctive relief “our review of the

lower court’s application of the law is not limited by the same ‘clearly erroneous’ rule which

restricts our review of its findings of fact under Rule 52(a)”); see First-Citizens Bank & Trust

Co. v. Camp, 432 F.2d 481, 484 (4th Cir. 1970) (applying the four-factors and reversing the

district court’s grant of a preliminary injunction).

In the Fifth Circuit the four factors are recited as “(1) a substantial likelihood that

plaintiff will prevail on the merits, (2) a substantial threat that plaintiff will suffer irreparable

injury if the injunction is not granted, (3) that the threatened injury to plaintiff outweighs the

threatened harm the injunction may do to defendant, and (4) that granting the preliminary

injunction will not disserve the public interest.” Canal Authority of State of Florida v.

Callaway, 489 F.2d 567, 573 (5th Cir. 1974). The “substantial likelihood of prevailing” is not

the same as raising a substantial question.

Again for the Sixth Circuit, the “well-established” factors are: “(1) the likelihood that

the party seeking the preliminary injunction will succeed on the merits of the claim; (2)

2007-1300 45
whether the party seeking the injunction will suffer irreparable harm without the grant of the

extraordinary relief; (3) the probability that granting the injunction will cause substantial

harm to others; and (4) whether the public interest is advanced by the issuance of the

injunction,” Six Clinics Holding Corp. II v. Cafcomp Systems, Inc., 119 F.3d 393, 399 (6th

Cir. 1997). The court recognized that “a finding that the movant has not established a

strong probability of success on the merits will not preclude a court from exercising its

discretion to issue a preliminary injunction if the movant has, at minimum, ‘show[n] serious

questions going to the merits and irreparable harm which decidedly outweighs any potential

harm to the defendant if the injunction is issued.’” Id. at 400 (alteration in original). This

ruling gave weight to the court’s discretion to preserve the status quo during the litigation,

when the equitable factors warrant such discretion.

In the Seventh Circuit:

As a threshold matter, a party seeking a preliminary injunction
must demonstrate (1) some likelihood of succeeding on the
merits, and (2) that it has “no adequate remedy at law” and will
suffer “irreparable harm” if preliminary relief is denied. If the
moving party cannot establish either of these prerequisites, a
court's inquiry is over and the injunction must be denied. If,
however, the moving party clears both thresholds, the court
must then consider: (3) the irreparable harm the non-moving
party will suffer if preliminary relief is granted, balancing that
harm against the irreparable harm to the moving party if relief
is denied; and (4) the public interest, meaning the
consequences of granting or denying the injunction to non-
parties.

Abbott Laboratories v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992). This court has

observed that the standard for granting or denying a motion for a preliminary injunction is

not unique to patent law, and has ruled that the standard of the regional circuit should

apply, here the Seventh Circuit. See Mikohn Gaming Corp. v. Acres Gaming, Inc., 165

2007-1300 46
F.3d 891, 894 (Fed. Cir. 1998) (“The Federal Circuit has generally viewed the grant of a

preliminary injunction as a matter of procedural law not unique to the exclusive jurisdiction

of the Federal Circuit, and on appellate review has applied the procedural law of the

regional circuit in which the case was brought.”).

In the Eighth Circuit, “The relevant factors on a motion for a preliminary injunction

are: (1) the probability of success on the merits; (2) the threat of irreparable harm to the

movant; (3) the balance between this harm and the injury that granting the injunction will

inflict on other interested parties; and (4) whether the issuance of an injunction is in the

public interest.” Entergy, Arakansa, Inc. v. Nebraska, 210 F.3d 887, 898 (8th Cir. 2000). In

Shrink Missouri Government PAC v. Adams, 151 F.3d 763, 764 (8th Cir. 1998) the court

stressed that “[t]he most important of the [preliminary injunction] factors is the appellants'

likelihood of success on the merits.”

The Ninth Circuit stressed the importance of the equitable factors: “Preliminary

injunctive relief is available to a party who demonstrates either: (1) a combination of

probable success on the merits and the possibility of irreparable harm; or (2) that serious

questions are raised and the balance of hardships tips in its favor. These two formulations

represent two points on a sliding scale in which the required degree of irreparable harm

increases as the probability of success decreases.” Perfect 10, Inc. v. Amazon.com, Inc.,

487 F.3d 701, 713-14 (9th Cir. 2007).

In the Tenth Circuit, “To obtain a preliminary injunction, the moving party must

establish that (1) the moving party will suffer irreparable injury unless the injunction issues;

(2) the threatened injury to the moving party outweighs whatever damage the proposed

injunction may cause the opposing party; (3) the injunction, if issued, would not be adverse

2007-1300 47
to the public interest; and (4) there is a substantial likelihood that the moving party will

eventually prevail on the merits.” Resolution Trust Corp. v. Cruce, 972 F.2d 1195, 1199

(10th Cir. 1992) (“When a party seeking a preliminary injunction satisfies the first three

requirements, the standard for meeting the fourth ‘probability of success’ prerequisite

becomes more lenient. The movant need only show ‘questions going to the merits so

serious, substantial, difficult and doubtful, as to make them a fair ground for litigation.’”).

In the Eleventh Circuit, “A district court may grant injunctive relief if the movant

shows (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be

suffered unless the injunction issues; (3) that the threatened injury to the movant outweighs

whatever damage the proposed injunction may cause the opposing party, and (4) that if

issued the injunction would not be adverse to the public interest.” All Care Nursing Service,

Inc. v. Bethesda Memorial Hosp. Inc., 887 F.2d 1535, 1537 (11th Cir. 1989).

In the District of Columbia Circuit, “In considering whether to grant preliminary

injunctive relief, the court must consider whether: (1) the party seeking the injunction has a

substantial likelihood of success on the merits; (2) the party seeking the injunction will be

irreparably injured if relief is withheld; (3) an injunction will not substantially harm other

parties; and (4) an injunction would further the public interest.” CSX Transp. Inc. v.

Williams, 406 F.3d 667, 670 (D.C. Cir. 2005).

All of the circuits have placed the preliminary injunction in terms of the likelihood of

success on the merits and equitable factors. No circuit has held that it suffices simply to

raise a “substantial question.” Raising a substantial question achieves the threshold

requirement of the well-pleaded complaint; it does not demonstrate a likelihood of

prevailing. See Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 808-809

2007-1300 48
(1988) (“A district court's federal-question jurisdiction, we recently explained, extends over

‘only those cases in which a well-pleaded complaint establishes either that federal law

creates the cause of action or that the plaintiff's right to relief necessarily depends on

resolution of a substantial question of federal law [.]’”) (citation omitted); Litecubes, LLC v.

Northern Light Products, Inc., 523 F.3d 1353, 1360 (Fed. Cir. 2008) (“Under what is known

as the ‘well-pleaded complaint rule,’ subject matter jurisdiction exists if a ‘well-pleaded

complaint establishes either that federal patent law creates the cause of action or that the

plaintiff's right to relief necessarily depends on resolution of a substantial question of

federal patent law, in that patent law is a necessary element of one of the well-pleaded

claims.’”) (citations omitted).

Federal Circuit precedent developed to match the rest of the nation. See Hybritech

Inc. v. Abbott Laboratories, 849 F.2d 1446, 1451 (Fed. Cir. 1988) (“The first factor required

to be established by a party seeking a preliminary injunction is that it stands to have a

reasonable likelihood of success on the merits when the trial court finally adjudicates the

dispute. In seeking a preliminary injunction pursuant to section 283, a patent holder must

establish a likelihood of success on the merits both with respect to validity of its patent and

with respect to infringement of its patent.”); H.H. Robertson Co., 820 F.2d at 387 (observing

that the preliminary injunction in the Third Circuit “is substantially the same standard

enunciated by this court,” and that “[t]he standards applied to the grant of a preliminary

injunction are no more nor less stringent in patent cases than in other areas of the law”);

Roper Corp. v. Litton Systems Inc., 757 F.2d 1266, 1270-73 (Fed. Cir. 1985) (reviewing

denial of a preliminary injunction by assessing likelihood of success and irreparable injury);

Pretty Punch Shoppettes, Inc. v. Hauk, 844 F.2d 782, 783 (Fed. Cir. 1988) (determining

2007-1300 49
likelihood of success on the merits); Nutrition 21 v. United States, 930 F.2d 867, 869 (Fed.

Cir. 1991) (applying the four-factor test including likelihood of success on the merits); Texas

Instruments Inc. v. Tessera, Inc., 231 F.3d 1325, 1329 (Fed. Cir. 2000) (in an ITC

proceeding, applying the traditional four-factor test including likelihood of success on the

merits); Hoop v. Hoop, 279 F.3d 1004, 1007 (Fed. Cir. 2002) (applying the traditional four

factor test including likelihood of success); Ranbaxy, 350 F.3d at 1239 (applying the four

factors of “(1) a reasonable likelihood of success on the merits; (2) irreparable harm if the

injunction were not granted; (3) the balance of the hardships and (4) the impact of the

injunction on the public interest” and holding that the showing of a reasonable likelihood of

success on the merits must be “in light of the presumptions and burdens that will inhere at

trial on the merits”).

Summary

To summarize my concern for the conflict that is here continued, I again point out

that the dissenting opinion, despite its initial recitation of the correct four-part criteria for

deciding the grant or denial of a preliminary injunction, then applies the different and

incorrect criterion of whether the defendant raised a “substantial question” that may

render the patent “vulnerable”. That standard conflicts with precedent of the Supreme

Court and all of the regional circuits, all of which require that likelihood of success on

the merits be determined and weighed along with the equitable factors. It is not the law

that raising a “substantial question” will “negate the patentee’s likelihood of success.”

Diss. op. at 3. Raising a substantial question may avoid dismissal on the pleadings,

2007-1300 50
but contrary to the view of the dissent, establishing that there is an issue for trial is not

the same as establishing the likelihood of prevailing at trial.

The district court analyzed the positions of both sides as well as the equitable

factors, decided that Abbott was likely to prevail on the merits and that the equitable

factors weighed in favor of Abbott, and exercised its discretion to grant the preliminary

injunction. The dissent states that a showing of “vulnerability” shows that the defendant

is likely to prevail on the merits; that is facially incorrect. The dissent also relies on

some recent (2008) Federal Circuit decisions; these decisions are not “clearly

established precedent,” for they cannot overcome earlier rulings of this court. Further,

until today no opinion has equated the raising of a “substantial question” with a showing

of likelihood of success on the merits. The following additional cases of the Federal

Circuit are cited to show the established law: Jeneric/Pentron, Inc. v. Dillon Co., Inc.,

205 F.3d 1377, 1380 (Fed. Cir. 2000) (“A preliminary injunction requires the movant to

show four factors . . . [and] ‘[c]entral to the movant’s burden are the likelihood of

success and irreparable harm factors.’”); Intergraph Corp. v. Intel Corp., 195 F.3d 1346,

1352 (Fed. Cir. 1999) (applying 11th Circuit law for a preliminary injunction, the criteria

are “(1) the party seeking the injunction has shown a substantial likelihood of success

on the merits, (2) there is a substantial threat of irreparable injury in absence of the

injunction, (3) the balance of harms favors the party seeking the injunction, and (4) entry

of the injunction does not disserve the public interest.”); Mentor Graphics Corp. v.

Quickturn Design Systems, Inc., 150 F.3d 1374, 1377 (Fed. Cir. 1998) (“A preliminary

injunction requires the assessment of four factors: the likelihood of movant's success on

the merits, the irreparability of harm to the movant without an injunction, the balance of

2007-1300 51
hardships between the parties, and the demands of the public interest.”); Polymer

Technologies, Inc. v. Bridwell, 103 F.3d 970, 973 (Fed. Cir. 1996) (“As the moving party,

Polymer had to establish its right to a preliminary injunction in light of four factors: (1) a

reasonable likelihood of success on the merits; (2) irreparable harm if the injunction

were not granted; (3) the balance of the hardships and (4) the impact of the injunction

on the public interest.”); Bio-Technology Gen. Corp. v. Genentech, Inc., 80 F.3d 1553,

1558 (Fed. Cir. 1996) (“As the moving party, Genentech had to establish a right to a

preliminary injunction in light of four factors: (1) a reasonable likelihood of success on

the merits; (2) irreparable harm if the injunction were not granted; (3) the balance of

hardships tipping in its favor; and (4) the impact of the injunction on the public

interest.”); Rosemount, Inc. v. Int’l Trade Comm’n, 910 F.2d 819, 821 (Fed. Cir. 1990)

(“To grant the equitable relief of an injunction prior to trial, a district court traditionally

considers and balances the factors of: (1) the movant's likelihood of success on the

merits; (2) whether or not the movant will suffer irreparable injury during the pendency

of the litigation if the preliminary injunction is not granted; (3) whether or not that injury

outweighs the harm to other parties if the preliminary injunction is issued; and (4)

whether the grant or denial of the preliminary injunction is in the public interest.”); Katz

v. Lear Siegler, Inc., 909 F.2d 1459, 1462-63 (Fed. Cir. 1990) (applying 1st Circuit law

for a preliminary injunction, the criteria are “(1) that plaintiff will suffer irreparable injury if

the injunction is not granted; (2) that such injury outweighs any harm which granting

injunctive*1463 relief would inflict on the defendant; (3) that plaintiff has exhibited a

likelihood of success on the merits; and (4) that the public interest will not be adversely

affected by the granting of the injunction.”); Cicena Ltd. v. Columbia

2007-1300 52
Telecommunications Group, 900 F.2d 1546, 1548 (Fed. Cir. 1990) (applying 2nd Circuit

law for a preliminary injunction which requires that the movant must establish “both

possible irreparable injury and either (1) a likelihood of success on the merits or (2)

sufficiently serious questions going to the merits to make them a fair ground for litigation

and a balance of hardships tipping decidedly in the movant's favor.”); Xeta, Inc. v. Atex,

Inc., 852 F.2d 1280, 1282 (Fed. Cir. 1988) (applying 1st Circuit law for a preliminary

injunction, the criteria are that “as in other causes of action, the plaintiff must show that

there is no adequate remedy at law, that the plaintiff will suffer irreparable injury absent

the requested injunction, that such irreparable injury outweighs the harm an injunction

would inflict on the defendant, that the plaintiff has shown a likelihood of success on the

merits, and that the public interest will not be adversely affected by the grant of the

requested injunction.”); Matsushita Electric Industrial Co. v. United State, 823 F.2d 505,

(Fed. Cir. 1987) (“The preliminary injunction issued by the Court of International Trade

must be upheld if that court properly found that [the movant] had shown (1) that it will be

immediately and irreparably injured; (2) that there is a likelihood of success on the

merits; (3) that the public interest would be better served by the relief requested; and (4)

that the balance of hardship on all the parties favors [the movant].”); T.J. Smith and

Nephew Ltd. v. Consol. Medical Equipment, Inc., 821 F.2d 646, 647 (Fed. Cir. 1987)

(“To obtain a preliminary injunction in a patent infringement action pursuant to 35 U.S.C.

§ 283, a party must establish a right thereto in light of four factors: (a) reasonable

likelihood of success on the merits; (b) irreparable harm; (c) a balance of hardships

tipping in its favor; and (d) that the issuance of the injunction is in the public interest.”);

S. J. Stile Associates Ltd. v. Snyder, 646 F.2d 522, 525 (CCPA 1981) (“The trial court

2007-1300 53
must be upheld if it examined the appropriate factors and properly concluded that any

one of these requisites for a preliminary injunction had not been established by the

[movant]: (1) a threat of immediate irreparable harm; (2) that the public interest would

be better served by issuing than by denying the injunction; (3) a likelihood of success on

the merits; and (4) that the balance of hardship on the parties favored [the movant].”);

Jacobsen v. Katzer, 535 F.3d 1373, 1378 (Fed. Cir. 2008) (applying 9th circuit law for

preliminary injunction in a copyright infringement claim which requires the showing of

“(1) a combination of probability of success on the merits and the possibility of

irreparable harm or (2) serious questions going to the merits where the balance of

hardships tips sharply in the moving party’s favor.”).

These rulings of the Federal Circuit accord with the principles of eBay, 547 U.S. at

394, that “the decision whether to grant or deny injunctive relief rests within the equitable

discretion of the district courts, and that such discretion must be exercised consistent with

traditional principles of equity, in patent disputes no less than in other cases governed by

such standards.” This court’s contrary opinions stand alone. If in fact this court believes

that there should be a different rule in patent cases, this court nonetheless has the rule that

in the event of conflict between panels the earlier holding prevails until overturned en banc.

Newell Companies v. Kenney Mfg. Corp., 864 F.2d 757, 765 (Fed. Cir. 1988) (“This court

has adopted the rule that prior decisions of a panel of the court are binding precedent on

subsequent panels unless and until overturned in banc. . . . Where there is a direct conflict,

the precedential decision is the first.”). If there is to be a change from this court’s prior

rulings, it must be done en banc.

As it stands, neither district courts, nor litigants, nor panels of this court, are provided

2007-1300 54
with clear guidance, or any reason to reject the stricture of eBay, 547 U.S. at 393, that

“[n]othing in the patent Act indicates that Congress intended such a departure” from “the

long tradition of equity practice”.

CONCLUSION

Abuse of discretion has not been shown in the district court’s grant of the preliminary

injunction, adhered to after additional consideration in view of the Court’s decision of KSR.

The district court's findings of fact underlying the legal and equitable considerations are

supported, and the judicial balancing of these considerations shows no abuse of discretion.

The grant of the injunction is affirmed. The case is remanded for further proceedings.5

AFFIRMED

5
Sandoz requests that we instruct that on remand this case should be
assigned to a different judge, in order to "further the interests of judicial economy". We
discern no basis for this request; it is denied.

2007-1300 55
 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

2007-1300

ABBOTT LABORATORIES,

Plaintiff-Appellee,

v.

SANDOZ, INC.,

Defendant-Appellant.

Appeal from the United States District Court for the Northern District of Illinois in case
no. 05-CV-5373, Judge David H. Coar.

GAJARSA, Circuit Judge, dissenting.

I respectfully dissent from the court’s opinion. There is no legal basis for the

granting of a preliminary injunction, and its issuance is an abuse of discretion. Although

generally the denial or issuance of a preliminary injunction is within the broad discretion

of the district court, the decision of the district court must be reversed when it abuses its

discretion. See Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448, 1460 (Fed. Cir.

1998) (en banc) (“A district court abuses its discretion when its decision is based on

clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is

clearly unreasonable, arbitrary or fanciful.”).

“A preliminary injunction requires the movant to show four factors: (1) a

reasonable likelihood of success on the merits, (2) the prospect of irreparable harm, (3)

a balance of the parties’ hardships in favor of injunction, and (4) no potential injury to an
important public interest.” See Jeneric/Pentron, Inc. v. Dillon Co., 205 F.3d 1377, 1380

(Fed. Cir. 2000). When the district court considers the four factors, “the likelihood of

success factor plays a key role,” id., and that is the factor I will focus on in my dissent.

Because of “the extraordinary nature of the relief, the patentee carries the burden of

showing likelihood of success on the merits,” in light of the presumptions and burdens

that will inhere at trial, with respect to the patent’s validity, enforceability, and

infringement. Nutrition 21 v. United States, 930 F.2d 867, 869 (Fed. Cir. 1991)

(emphasis in original); see also Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239

F.3d 1343, 1350 (Fed. Cir. 2001). If the defendant “raises a substantial question

concerning either infringement or validity, i.e., asserts an infringement or invalidity

defense that the patentee cannot prove ‘lacks substantial merit,’ the preliminary

injunction should not issue.” Amazon.com, 239 F.3d at 1350-51. This court has

explained that:

In resisting a preliminary injunction, however, one need not make out a
case of actual invalidity. Vulnerability is the issue at the preliminary
injunction stages, while validity is the issue at trial. The showing of a
substantial question as to invalidity thus requires less proof than the clear
and convincing showing necessary to establish invalidity itself.

Abbott Labs. v. Andrx Pharms., Inc., 452 F.3d 1331, 1335 (Fed. Cir. 2006) (herein

“Andrx”) (quoting Amazon.com, 239 F.3d at 1359).

The majority opinion postulates that the findings of the district court are correct.

It is error to so conclude because the district court failed to properly consider and weigh

the ample evidence produced by Sandoz that clearly established a substantial question

of invalidity and rendered the patent vulnerable to an invalidity challenge at trial.

Instead, the district court erroneously required proof of clear and convincing evidence of

2
2007-1300
invalidity at the preliminary stages of the proceedings. As I explain below, this conflicts

with our clearly established precedent.

Under our precedent, the likelihood of success factor is properly analyzed by

considering whether the alleged infringer raises a substantial question as to validity.

See, e.g., E.I. du Pont de Nemours & Co. v. MacDermid Printing Solutions, L.L.C., 525

F.3d 1353, 1358 (Fed. Cir. 2008) (“[I]f the accused infringer raises a substantial

question regarding validity, the district court should find that the patentee has not shown

a likelihood of success on the merits.” (internal quotation marks omitted)). Indeed, this

court has consistently held that an alleged infringer can negate the patentee’s likelihood

of success on the merits—and thus defeat a preliminary injunction—by raising a

substantial question as to validity. For example, in Genentech, this court explained:

In order to demonstrate that it has a likelihood of success, [the patentee]
must show that, in light of the presumptions and burdens that will inhere at
trial on the merits, (1) it will likely prove that [the alleged infringer] infringes
the [] patent and (2) its infringement claim will likely withstand [the alleged
infringer’s] challenges to the validity and enforceability of the [] patent. In
other words, if [the alleged infringer] raises a “substantial question”
concerning validity, enforceability, or infringement (i.e., asserts a defense
that [the patentee] cannot show “lacks substantial merit”) the preliminary
injunction should not issue. More specifically, with regard to [the alleged
infringer’s] validity defenses, the question on appeal is whether there is
substantial merit to [the alleged infringer’s] assertion that the [] patent
claim [is invalid].

Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997). Our

subsequent cases consistently applied the law as it was explained in Genentech. See,

e.g., Tate Access Floors v. Interface Architectural Res., 279 F.3d 1357, 1365 (Fed. Cir.

2002) (“In order to demonstrate likely success on the merits, [the patentee] must show

that, in light of the presumptions and burdens applicable at trial, it will likely prove that

3
2007-1300
[the alleged infringer] infringes the asserted claims of the [] patent and that the patent

will likely withstand [the alleged infringer’s] challenges to its validity. If [the alleged

infringer] raises a substantial question concerning infringement or validity, meaning that

it asserts a defense that [the patentee] cannot prove ‘lacks substantial merit,’ the

preliminary injunction issued improperly.” (internal citations omitted; citing Genentech,

108 F.3d at 1364 and Amazon.com, 239 F.3d at 1350-51)).

Our most recent cases continue to adhere to the law as it was explained in

Genentech. See, e.g., Erico Int'l Corp. v. Vutec Corp., 516 F.3d 1350, 1352, 1354 (Fed.

Cir. 2008) (stating that “[the alleged infringer] must show a substantial question of

invalidity to avoid a showing of likelihood of success” and vacating the preliminary

injunction “[b]ecause this court finds that [the alleged infringer] has raised a substantial

question as to the validity of the patent at issue”); PHG Techs., LLC v. St. John Cos.,

469 F.3d 1361, 1365, 1369 (Fed. Cir. 2006) (explaining that “in order to defeat the

injunction on grounds of potential invalidity, [the alleged infringer], as the party bearing

the burden of proof on the issue at trial, must establish a substantial question of

invalidity” and holding the district court clearly erred in finding the patentee was likely to

succeed “because [the alleged infringer] has satisfied its burden of raising a substantial

question of invalidity”). Thus, under our clearly established precedent, when the alleged

infringer raises a substantial question regarding validity, a preliminary injunction cannot

issue because the patentee has failed to demonstrate a likelihood of success on the

merits.

While Section VI of the opinion contains a superfluity of citations, it does not state

the law relevant to this case. It is a pleasant, ambulatory, and meandering discussion;

4
2007-1300
but it is not required to decide this case, is not part of the majority opinion, and is clearly

dicta. Although Section VI discusses the relevant four-factor test and properly

emphasizes the likelihood of success factor, it ignores the way this court has

consistently analyzed whether or not a patentee has demonstrated it will likely succeed

at trial. The real question before us in this case, as our precedent clearly explains, is

whether the district court erred in finding that Sandoz had not established a substantial

question as to the obviousness of the ’718 patent. See, e.g., Genentech, 108 F.3d at

1364 (“[T]he question on appeal is whether there is substantial merit to [the alleged

infringer’s] assertion that the [] patent claim [is invalid].”). Sandoz has, in fact, raised

and substantially established that the validity of the ’718 patent is vulnerable, and on the

record before us, Abbott failed to prove the invalidity defense “lacks substantial merit.”

See Amazon.com, 239 F.3d at 1350-51 (“If [the alleged infringer] raises a substantial

question concerning either infringement or validity, i.e., asserts an infringement or

invalidity defense that the patentee cannot prove ‘lacks substantial merit,’ the

preliminary injunction should not issue.”). Thus, the district court committed reversible

error when it analyzed the likelihood of success factor and determined that Abbott had

established it would likely succeed on the merits. In light of that error, I would vacate

the preliminary injunction and remand for reconsideration and reweighing of the

injunctive factors. Moreover, various additional legal errors taint the district court’s

decision.

I.

The district court’s grant of a preliminary injunction rested on only two claims,

claims 1 and 4 of the ’718 patent. Claim 1 reads:

5
2007-1300
 a pharmaceutical composition for extended release of an erythromycin
derivative in the gastrointestinal environment, comprising

an erythromycin derivative and

from about 5[%] to about 50% by weight of a pharmaceutically acceptable
polymer[ 1 ], so that when ingested orally, the composition induces
statistically significantly lower mean fluctuation index [DFL] in the plasma
than an immediate release composition of the erythromycin derivative
while maintaining bioavailability substantially equivalent to that of the
immediate release composition of the erythromycin derivative.

’718 Patent, col.11 ll.28-38. Claim 4 similarly claims an erythromycin derivative and

“from about 5[%] to about 50% by weight of a pharmaceutically acceptable polymer” but

has different PK parameters. Id. col.11 ll.48-58. Claim 2 and claim 3 are dependant

claims of claim 1. Claim 2 claims “the pharmaceutical composition of claim 1, wherein

the polymer is a hydrophilic water-soluble polymer.” Id. col.11 ll.39-40. Claim 3 claims

“the pharmaceutical composition of claim 2, wherein the polymer is selected from the

group consisting of polyvinylpyrrolidine, hydroxypropyl cellulose, hydroxypropylmethyl

cellulose, methyl cellulose, vinyl acetate/crotonic acid copolymers, methacrylic acid

copolymers, maleic anhydride/methyl vinyl ether copolymers and derivatives and

mixtures thereof.” Id. col.11 ll.41-47.

Claims 1 and 4 of the ’718 patent have three basic limitations: (a) an

erythromycin derivative; (b) 5% to 50% by weight of a pharmaceutically acceptable

1
The specification of the ’718 patent states, in a list of definitions, that
“‘pharmaceutically acceptable’ as used herein, means those compounds which are,
within the scope of sound medical judgment, suitable for use in contact with the tissues
of humans and lower animals without undue toxicity, irritation, allergic response, and the
like, in keeping with a reasonable benefit/risk ratio, and effective for their intended use
in the chemotherapy and prophylaxis of antimicrobial infections.” In my judgment the
district court’s claim construction is ambiguous as to whether the pharmaceutically
acceptable polymer must extend release or whether it can be part of a matrix in which
other components extend the release. Sandoz is correct that there needs to be some
showing that the polymer acts to extend release.
6
2007-1300
polymer; and (c) various PK parameters. In the preferred embodiment, the

erythromycin derivative is clarithromycin and the pharmaceutically acceptable polymer

is HPMC at 10% to 30% by weight of the composition. Claim 4 requires PK parameters

be such that “upon oral ingestion, maximum peak concentrations of the erythromycin

derivative are lower than those produced by an immediate release pharmaceutical

composition, and [AUC] and the minimum plasma concentration are substantially

equivalent to that of the immediate release pharmaceutical composition.” Id. col.11

ll.52-58. Claim 1 achieves similar results with slightly different parameters. For claim 1,

the composition must have a “statistically significantly lower mean fluctuation index,”

DFL, which is defined in the specification as DFL=(Cmax-Cmin/CAv), id. col.3 ll.29-30, and

substantially equivalent bioavailability, which the district court found meant that the

“[ER] AUC values must be between 80% to 125% within a 90% confidence level as

compared to the immediate release composition AUC values.” 2 Abbott Labs. v.

Sandoz, Inc., 500 F. Supp. 2d 807, 831 (N.D. Ill. 2007) (herein “Sandoz I”).

II.

Sandoz based its obviousness arguments primarily on three prior art references,

which it argues combined with common sense and the ordinary skill of the art at the

time make the ’718 patent anticipated or obvious. First, Sandoz argues that the PTC

Application WO 95/30422 (“the ’422 publication”) filed by Pfizer, discloses a controlled

release dosage form of azithromycin, which like clarithromycin is an erythromycin

derivative. 3 According to the disclosure, these controlled released compositions

2
These figures are based on FDA definitions.
3
Abbott specifically carved out azithromycin from its definition of an
erythromycin derivative in the ’718 patent. See Andrx, 452 F.3d at 1337.
7
2007-1300
operate to release the drug substantially slower than the immediate release versions to

reduce GI side effects. And, as Sandoz points out, the controlled release compositions

disclosed in the ’422 publication include a hydrophilic polymer composition of

azithromycin, with a preferred embodiment being a matrix tablet containing 15% to 35%

HPMC. Second, Sandoz noted that the ’190 patent owned by Abbott discloses and

claims controlled release compositions of clarithromycin in an (non-polymer) alginate

matrix which are administered once a day and have slowed absorption such that they

are bioequivalent with the current immediate release twice-a-day compositions and

maintain therapeutic levels at 24 hours after ingestion. Claim 14 of the ’190 patent also

claims other marolides including azithromycin. 4 Third, Sandoz argues that the ’571

4
In Andrx, this court relied primarily on the ’190 patent, as combined with
the ’422 publication to find that there was a substantial question as to the obviousness
of the ’718 patent claims. 452 F.3d at 1340-41. First, we concluded that “Teva makes
substantial arguments that the ’190 patent discloses a clarithromycin composition . . .
that arguably has the pharmacokinetic parameters required in claim 4 of the ’718
patent.” Id. at 1340. And we explained:
Because the ’190 patent explicitly discloses only clarithromycin controlled
release compositions, yet claims azithromycin compositions, . . . Abbott
has represented to the [PTO] that the differences between clarithromycin
and azithromycin were such that azithromycin could be substituted into a
controlled release clarithromycin composition by a person of ordinary skill
in the art without undue experimentation . . . . As a result, based on
Abbott’s own ’190 patent, there exists a substantial argument that a
person of ordinary skill in the art would be motivated to combine the ’422
publication, namely the use of HPMC in extended release macrolide
compositions, with the ’190 patent with a reasonable expectation of
success.
Id. at 1341. In this case, Abbott presented evidence at trial suggesting that this court
was scientifically incorrect to find that the ’190 patent disclosed compounds that
arguably had the same PK values as the asserted claims. Sandoz, based on this new
evidence, disclaimed any reliance on the scientific evidence of the ’190 patent
disclosing compounds with the same PK values as the ’718 patent. However, contrary
to the majority opinion, Sandoz can rely on Andrx’s conclusion that it would have been
obvious for a person skilled in the art to substitute clarithromycin for azithromycin in an
8
2007-1300
publication, filed by Eli Lilly, discloses sustained release formulations for antimicrobial

agents including clarithromycin, which contain an active agent, namely a hydrophilic

polymer such as HPMC, and an acrylic polymer. According to the specification, these

formulations differ from the prior art that uses just hydrophilic polymers in that they are

designed to allow a constant rate of release throughout the GI tract. In particular, the

’571 publication disclosed using from about 5% to about 29% by weight hydrophilic

polymer, and about 0.5% to about 25% by weight acrylic polymer, with the total weight

of the two polymers not exceeding 30% by weight.

In addition to challenging the validity of the ’718 patent based on the ’190 patent,

the ’422 publication and the ’571 publication, Sandoz also relies on various evidence

that the PK parameters specified in the ’718 patent were well known in the art and

would have been sought by anyone designing a controlled release formulation. Most

strikingly, the testimony of one of the inventors named on the ’718 patent, Linda

Gustavson, an Abbott employee, supports the Sandoz position. In particular,

Gustavson testified as follows:

Q: Did you tell [the formulations department] what pharmacokinetic
parameters there should be?
A: I mean, not specific numbers, but relative to the IR, yes. I told at
least Sue that what we needed was a lower Cmax, an AUC that met
FDA requirements for bioequivalence and a Cmin that was at least
comparable to the IR.

Q: And where did you get these parameters?
...
A: A few years of experience, I guess. They’re the—I mean certainly
the Cmax and AUC are very basic PK parameters determined in
virtually every study that has pharmacokinetics. Cmin [] might or
might not be important depending upon the drug you were talking

extended release formula with the anticipation of success without undue
experimentation.
9
2007-1300
 about and what part of the pharmacokinetics you though might be
associated with efficacy or safety. For clarithromycin, there was
some thought that keeping the concentrations above some
minimum level might be at least in part important to maintaining
effectiveness efficacy.

Q: Would you say that these PK parameters were pretty much known
in the art?

A: Absolutely, yes.

Furthermore, Sandoz submitted references from 1983 (over a decade before the

’718 application was submitted), which explained, inter alia, that the “objectives and

possible advantages of controlled release dosage” forms included “maintain[ing]

therapeutic drug levels,” “reduc[ing] dosing frequency,” “reduc[ing] fluctuations in drug

levels,” and “reduc[ing] side effects.” And the reference explained that the “essence of

controlled drug release” was to “obtain prolonged circulating drug levels with less

fluctuation compared to conventional dosage forms, and to achieve these with less

frequent drug administration.” They also submitted references showing that HPMC was

considered the “controlled release agent of choice” in the field.

The district court, writing prior to KSR, found that, despite this Court’s decision in

Andrx to the contrary, claims 1 and 4 of the ’718 patent were not obvious (at least based

on the preliminary record). The trial court’s finding rested on the fact that, contrary to

this court’s conclusion in Andrx, new evidence established that the ’190 patent, the ’571

publication, and the WO ’422 publication did not disclose the specific PK limitations of

the ’718 patent. The court recognized that “[g]enerally, a showing that there is an

established structural relationship between a prior art composition and the claimed

composition demonstrates a prima facie case of obviousness.” Sandoz I, 500 F. Supp.

2d at 840. See In re Dillon, 919 F.2d 688, 692 (Fed. Cir. 1990) (en banc) (“[S]tructural

10
2007-1300
similarity between claimed and prior art subject matter, proved by combining references

or otherwise, where the prior art gives reason or motivation to make the claimed

compositions, creates a prima facie case of obviousness.”). Still, the court concluded

that Abbott had preliminarily rebutted this showing by showing the specific PK

properties embodied in the claims were unobvious. The trial court found that “[t]o

succeed on its obvious[ness] claim, Sandoz must produce evidence indicating that the

PK limitations were disclosed in the prior art or were at the very least inherent to the

structural limitations of the prior art compositions.” Sandoz I, 500 F. Supp. 2d at 840.

Sandoz, the court found, had not done so. Id. Moreover, the trial court found that

“because the ’190 prior art does not disclose the [specific] PK profile of the ’718 patent,

a person skilled in the art would not be motivated to look at the WO ’422 publication and

interchange clarithromycin for azithromycin.” Id. at 841.

Subsequently, the district court denied Sandoz’s motion for a stay of the

preliminary injunction pending appellate review in light of the just issued KSR opinion.

The court held that under KSR it was still necessary to “demonstrate the presence of all

claim limitations in the prior art” and that Sandoz had not produced evidence indicating

that the PK limitations were disclosed in the prior art or inherent to the structural

limitations of the prior art compositions. Abbott Labs. v. Sandoz, 500 F. Supp. 2d 846,

851-53 (N.D. Ill. 2007). According to the district court, it thus had not and did not need

to reach the TSM test (or any change in the application of this test brought on by KSR).

Id. at 853.

On appeal, there is no real dispute that the ’571 publication expressly discloses a

“sustained release matrix formulation in tablet form comprising . . . erythromycin” and

11
2007-1300
containing from about 5% by weight to about 29% by weight of a hydrophilic polymer,

thus meeting all of the structural limitations of the ’718 claims. Moreover, the prior art

clearly disclosed sustained release versions of clarithromycin and creating extended

release formulations of erythromycin derivatives using polymers, preferably HPMC.

And evidence shows that the desirability of the PK parameters claimed were well known

in the art.

In light of this evidence, Sandoz raised a substantial question as to the

obviousness of the ’718 patent. The district court’s decision to the contrary constituted

an abuse of discretion. First, it was clearly error to find, as a matter of law, that since

none of the prior art references cited by Sandoz explicitly disclosed a composition that

had the PK limitations of the ’718 patent, it had failed to demonstrate “the presence of

all claim limitations in the prior art,” and therefore that the ’718 invention could not be

obvious. Contrary to the majority, this holding relies on an improperly limited view of

what types of references can be combined to show obviousness and an impermissibly

cramped view of the Supreme Court’s holding in KSR. There is no absolute

requirement that each claim limitation be disclosed in a prior art reference. See, e.g.,

Takeda Chem. Indus. v. Alphapharm Pty., Ltd., 492 F.3d 1350, 1356 (Fed. Cir. 2007)

(“We have held that structural similarity between claimed and prior art subject matter,

proved by combining references or otherwise, where the prior art gives reason or

motivation to make the claimed compositions, creates a prima facie case of

obviousness.” (emphasis added)); Tegal Corp. v. Tokyo Electron Am., Inc., 257 F.3d

1331, 1349 (Fed. Cir. 2001) (acknowledging that a claim could be obvious over a single

prior art reference that does not disclose one of the limitations in the claim). Rather, in

12
2007-1300
all cases, the touchstone of the analysis is whether the “differences between the subject

matter sought to be patented and the prior art are such that the subject matter as a

whole would have been obvious at the time the invention was made to a person having

ordinary skill in the art to which said subject matter pertains.” 35 U.S.C. § 103; KSR Int’l

Co. v. Teleflex Inc., 127 S. Ct. 1727, 1734 (2007); see also Takeda, 492 F.3d at 1357

(explaining that “in cases involving new chemical compounds” to show a prima facie

case of obviousness one must “identify some reason that would have led a chemist to

modify a known compound in a particular manner” (emphasis added)). Thus, a given

claim limitation may be obvious over the prior art even if no single reference had

specifically disclosed that limitation. Moreover, even assuming an absolute rule that to

be obvious a claim must be a combination of elements disclosed in the prior art, that

standard was met here. As the Supreme Court reiterated in KSR, “inventions in most, if

not all, instances rely upon building blocks long since uncovered, and claimed

discoveries almost of necessity will be combinations of what, in some sense, is already

known.” 127 S. Ct. at 1741. In other words, it is the rare invention that is not a

combination of prior art elements. 5 And this is not one of such rare cases. Whether or

not the prior art disclosed compounds displaying the particular PK parameters in the

5
Given KSR’s broad understanding of nearly all or perhaps all inventions
being combinations of elements in the prior art, the parties’ dispute about whether KSR
should be limited to such inventions becomes largely irrelevant. In any event, while
KSR’s holding is directed particularly at the TSM test, it certainly appears that the Court
intended to expound principles of obviousness jurisprudence that were generally
applicable. And particularly relevant to the case at bar, this court has already applied
KSR’s teachings to the question of whether new chemical compositions are obvious in
light of the fact that chemists of ordinary skill would attempt to modify known substances
in certain ways to “obtain compounds with improved properties.” Takeda, 492 F.3d at
1356. Accordingly, I think the district court clearly erred in concluding that KSR was not
relevant to the question of obviousness here.
13
2007-1300
’718 patent, Sandoz did provide evidence suggesting that the PK parameters disclosed

in the ’718 patent were absolutely known in the art and that the prior art established that

they were desirable in an extended release formula (and indeed, that at least the AUC

equivalence and lower Cmax were most likely essential to an extended release formula,

at least one that would be approved by the FDA). This is sufficient to show that the

claims might be a combination of elements previously known in the art. The prior art on

record disclosing the PK limitations is of course further removed from the invention than,

for example, a patent that disclosed a related drug formulation with the same PK

limitations as the ’718 patent. But while this may well make the former less likely than

the latter to make the ’718 patent claims obvious, there is nothing as a matter of law that

prevents the invention from being considered an obvious combination of the prior art

teachings contained in the current preliminary record. Cf. Aventis Pharma Deutschland

GmbH v. Lupin, Ltd., 499 F.3d 1293, 1301 (Fed. Cir. 2007) (explaining that while it is

necessary for there to be “some articulated reasoning with some rational underpinning

to support the legal conclusion of obviousness . . . such reasoning need not seek out

precise teachings directed to the specific subject matter of the challenged claim”

(internal quotation marks omitted)). 6

Second, it is not dispositive that Abbott was not absolutely certain that using the

formulations disclosed in the ’422 patent would create a formulation with the desired PK

6
See also Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1362 (Fed. Cir. 2007)
(“[It] is irrelevant [to the question of obviousness] that none of the anions specifically
listed in the ’909 patent have a cyclic structure, because the motivation to make
amlodipine besylate here is gleaned not only from the prior art as a whole rather than
the ’909 patent alone, but also from the nature of the problems encountered with the
amlodipine maleate tablet formulations sought to be solved by the inventors of the ’303
patent.”).
14
2007-1300
parameters. Even before KSR, this court’s “case law [was] clear that obviousness

cannot be avoided simply by a showing of some degree of unpredictability in the art so

long as there was a reasonable probability of success.” Pfizer, 480 F.3d at 1364. And

as the Supreme Court stated in KSR, “[w]hen there is a design need or market pressure

to solve a problem and there are a finite number of identified, predictable solutions, a

person of ordinary skill has good reason to pursue the known options within his or her

technical grasp. If this leads to the anticipated success, it is likely the product not of

innovation but of ordinary skill and common sense.” 127 S. Ct. at 1742 (“One of the

ways in which a patent’s subject matter can be proved obvious is by noting that there

existed at the time of invention a known problem for which there was an obvious

solution encompassed by the patent claims.”).

Third, the long standing precedent of this court and our predecessor, recently

highlighted and relied upon in Pfizer is that “discovery of an optimum value of a

variable” in a known process or composition is “usually obvious.” 480 F.3d at 1368

(citing In re Peterson, 315 F.3d 1325, 1330 (Fed. Cir. 2003); In re Boesch, 617 F.2d

272, 276 (CCPA 1980); In re Aller, 220 F.2d 454, 456 (CCPA 1955)). Accordingly, in

Pfizer, for example, the court found that the optimization of a pharmaceutical compound

to determine which acid salt was best was obvious, where “the prior art heavily

suggests the particular anion used to form the salt.” Id. Similarly, here, if the PK

parameters claimed were well known, and only routine experimentation by someone

skilled in the art would have been necessary, in light of the HPMC formulations

disclosed by the ’422 publication and ’571 publication, to create an ER clarithromycin-

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HPMC formulation with the claimed PK parameters, this would be sufficient to create a

prima facie case of obviousness.

Accordingly, the district court erred in concluding that the fact that the ’422

publication and ’190 patent did not disclose the PK limitations of the asserted claims

precluded a finding of obviousness. This legal error constitutes an abuse of discretion.

And contrary to the holding of the district court, Sandoz has raised a “substantial

question concerning” the obviousness of the asserted claims. On this basis, I would

reverse the decision of the district court.

III.

Sandoz also argues that several acts by Abbott during the prosecution of its

patent application constitute inequitable conduct and, thus, show that the district court

abused its discretion in not rejecting the motion for a preliminary injunction based on the

likelihood that the patents would be declared unenforceable.

The Patent Examiner initially rejected the claims of the ’718 application and

requested that Abbott show that one of its prior art compositions of clarithromycin, which

was described as an immediate release pediatric suspension formula, did not have the

same extended release properties as Abbott’s claimed invention. In response, Abbott

submitted a declaration by Linda Gustavson stating that the Cmax of the ER

clarithromycin “is statistically significantly lower than that for IR formulation given twice

daily.” J.A. 10015. Abbott now admits that this statement was incorrect—that the data

Gustavson relied on did not show a statistically significant lowering of the Cmax—but

only a non-statistically significant apparent lowering, and Gustavson herself admits that

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she never performed any statistical analysis of the data and would not have known how

to do it.

The district court found that the concededly false statement was immaterial since

all the Examiner asked was whether the two products have the same PK properties.

According to the district court, “[g]iven the accuracy of the ultimate conclusion—that the

extended release formulation was indeed different from the immediate release

suspension formulation, Gustavson’s declaration of a ‘statistically significantly lower’

Cmax is immaterial despite the fact that it satisfies the definition of ‘material’ provided by

37 C.F.R. § 1.56(b).” Sandoz I, 500 F. Supp. 2d at 822. The district court reasoned

that despite meeting the standard for materiality of § 1.56(b) a reasonable examiner

would not have considered the statement important. Moreover, the district court

emphasized that no claim of the ’718 patent requires the extended release formulation

to have a statistically significant lower Cmax than the immediate release formulation.

The Gustavson statement was material, or more to the point, there is substantial

likelihood that Sandoz would be able to so establish at the merits stage. First, contrary

to the erroneous conclusion of the district court, we have held that “all misstatements or

admissions that satisfy [37 C.F.R. § 1.56(b)] are considered material.” Monsanto Co. v.

Bayer Bioscience N.V., 514 F.3d 1229, 1237 n.11 (Fed. Cir. 2008). In addition, while no

claim element in the ’718 patent specifically states that the Cmax value must be

statistically significantly lower, it does require Cmax values that are “lower” than in the

immediate release formulation. Despite the fact that in other claim elements Abbott

uses the term “statistically significantly lower,” it is far from clear that one can establish

that the Cmax value is lower if the data does not show a statistically significant difference,

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which by definition, as ordinarily understood, means that the data cannot conclusively

establish that there is a real difference. This court previously recognized that “there is

little in the [’718] patent itself that establishes the differences (if any) between

parameters that are simply ‘lower’ rather than ‘statistically significantly lower.’” Andrx,

452 F.3d at 1339 n.4. Moreover, regardless of the claim construction, it would be

important (if not dispositive) to a reasonable examiner to know that Abbott did not have

data which showed a lower Cmax to any statistical significance over the structurally

similar prior art suspension formulas in deciding whether to allow the claim over this

prior art.

On this basis alone, the district court abused its discretion because it created

such a high bar for materiality that in essence no statement or withholding of information

would be material if it would not change the ultimate outcome of allowing the patent.

This is inconsistent with our precedent. See, e.g., Hoffmann-La Roche, Inc. v. Promega

Corp., 323 F.3d 1354, 1368 (Fed. Cir. 2003) (“The fact that the examiner did not have to

rely on the purity representations in issuing the patent is not inconsistent with a finding

of materiality. Although the inventors’ statements regarding purity were not the principal

focus of the office action response, they were clearly an important aspect of it. Under

the circumstances, a reasonable examiner would have wanted to know that the

patentability argument based on purity was unsupported by the experimental results

cited by the inventors.” (internal citation omitted)); Merck & Co. v. Danbury Pharmacal,

Inc., 873 F.2d 1418, 1421 (Fed. Cir. 1989) (rejecting a “but for” standard of materiality).

In addition, while the district court did not reach the issue of intent, the fact that

Gustavson submitted a declaration to the PTO in which she claimed to have found a

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statistically significant lowering of Cmax despite now admitting to never having done any

statistical analysis is sufficient circumstantial evidence of intent to raise a substantial

question of inequitable conduct, if not necessarily to prove inequitable conduct on the

merits.

The district court also found that the failure by Abbott to disclose a new study 7

was immaterial because Abbott simply “chose to rely on the results of several other

studies that showed differing mean DFL values” and the totality of the evidence

demonstrates that the prior art formulation did not have the “same broad PK properties

as those claimed for the ER formulation.” Sandoz I, 500 F. Supp. 2d at 824. The test is

not whether the Examiner would have refused to allow the patent to issue without the

information, but just whether it would have been “important” to her consideration. Here

the extent the PK parameters of the ER formulation differed from the clarithromycin

formulations in the prior art was the primary focus of the examiner’s concerns regarding

patentability, and Abbott’s ability to establish sufficient differences was the basis for

allowing the claims. It was not for Abbott to decide unilaterally that it preferred the

results of one set of studies that supported patentability and therefore could ignore

studies reaching the opposite result. Cf. Paragon Podiatry Lab. v. KLM Labs., 984 F.2d

7
The written description of the ’718 patent states that “The mean DFL
values for the controlled release formulation [another Abbott prior art reference
disclosing a clarithromycin formulation] and for the IR are substantially equal in
value. . . .” ’718 Patent, col.11 ll.18-19. And it explains that lower DFL values for the
ER formulation of the ’718 patent show that it provides “less variable clarithromycin
concentrations throughout the day than the IR and the sustained release compositions.”
’718 Patent, col.11 ll.25-26. These statements were correct based on three studies that
had been done prior to filing the application. However, a new study W98-268, which
Gustavson had knowledge of, and which issued while the application was pending,
found that there was a statistically significant lower DFL value for the sustained release
formulas than the IR formulas. Gustavson, however, failed to disclose the results of this
new study.
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1182, 1193 (Fed. Cir. 1993) (finding inequitable conduct for failure to disclose sales

data and noting that “where the decision of whether or not to disclose sales before the

critical date is close, the case should be resolved by disclosure, not by the applicant's

unilateral decision.”).

Accordingly, I would also vacate the preliminary injunction based on the

allegations of inequitable conduct. The evidence raises a substantial question of

unenforceability that makes the patents vulnerable to being found unenforceable at trial.

Thus, the district court erred when it concluded that Abbott had shown it would likely

succeed on the merits.

Because of the reasons stated above, I would reverse the district court on the

basis that there are substantial questions of both validity and enforceability of the ’718

patent preventing a finding of likelihood of success on the merits.

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