HZNP Medicines LLC v. Actavis Labs. Ut, Inc.

• Decision Date: 10 October 2019
• Docket Number: 2017-2149, 2017-2152, 2017-2153, 2017-2202, 2017-2203, 2017-2206
• Citation: 940 F.3d 680
• Parties: HZNP MEDICINES LLC, Horizon Pharma USA, Inc., Plaintiffs-Appellants v. ACTAVIS LABORATORIES UT, INC., Defendant-Cross-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

940 F.3d 680

HZNP MEDICINES LLC, Horizon Pharma USA, Inc., Plaintiffs-Appellants

v.ACTAVIS LABORATORIES UT, INC., Defendant-Cross-Appellant

2017-2149, 2017-2152, 2017-2153, 2017-2202, 2017-2203, 2017-2206

United States Court of Appeals, Federal Circuit.

Decided: October 10, 2019

Caryn Borg-Breen, Green, Griffith & Borg-Breen LLP, Chicago, IL, argued for all plaintiffs-appellants. Also represented by Robert Fritz Green, Jessica Mackay.

Michael E. Joffre, Sterne Kessler Goldstein & Fox, PLLC, Washington, DC, argued for defendant-cross-appellant. Also represented by John Christopher Rozendaal, Kristina Caggiano Kelly, William H. Milliken.

Before Prost, Chief Judge, Newman and Reyna, Circuit Judges.

Opinion concurring in part and dissenting in part filed by Circuit Judge Newman.

Reyna, Circuit Judge.

HZNP Medicines LLC and Horizon Pharma USA, Inc. ("Horizon") appeal from the U.S. District Court for the District of New Jersey’s judgment of invalidity and noninfringement. Actavis Laboratories UT, Inc. ("Actavis") cross-appeals the district court’s judgment of nonobviousness. We affirm.

BACKGROUND

Horizon¹ is the assignee of U.S. Patent Nos. 8,217,078 ("the ’078 patent") ; 9,132,110 ("the ’110 patent") ; 8,618,164 ("the ’164 patent") ; 9,168,304 ("the ’304 patent") ; 9,168,305 ("the ’305 patent") ; 8,546,450 ("the ’450 patent") ; 9,101,591 ("the ’591 patent") ; 8,563,613 ("the ’613 patent") ; 9,220,784 ("the ’784 patent") ; 8,871,809 ("the ’809 patent") ; 8,252,838 ("the ’838 patent") ; and 9,066,913 ("the ’913 patent") (collectively, "the patents-at-issue" or "Horizon’s patents"). The patents-at-issue generally relate to methods and compositions for treating osteoarthritis

and can be divided into two groups, with the patents in each group sharing a substantially similar specification.

The first group of patents consists of method-of-use patents, including the ’450, ’078, ’110, and ’164 patents. (the "method-of-use patents"). Claim 10 of the ’450 patent is illustrative of the asserted claims of the method-of-use patents:

10. A method for applying topical agents to a knee of a patient with pain, said method comprising:

applying a first medication consisting of a topical diclofenac

preparation to an area of the knee of said patient to treat osteoarthritis of the knee of said patient, wherein the topical diclofenac preparation comprises a therapeutically effective amount of a diclofenac salt and 40–50% w/w dimethyl sulfoxide ;

waiting for the treated area to dry;

subsequently applying a sunscreen, or an insect repellant to said treated area after said treated area is dry, wherein said step of applying a first medication does not enhance the systemic absorption of the subsequently applied sunscreen, or insect repellant; and

wherein said subsequent application occurs during a course of treatment of said patient with said topical diclofenac preparation.

’450 patent col. 73 l. 35–col. 74 l. 11.

The second group of patents consists of formulation patents, including the ’838, ’591, ’304, ’305, ’784, ’613, ’809, and ’913 patents. (the "formulation patents"). Claim 49 of the ’838 patent is illustrative of the asserted claims of the formulation patents:

49. A topical formulation consisting essentially of:

1–2% w/w diclofenac

sodium;

40–50% w/w DMSO;

23–29% w/w ethanol;

10–12% w/w propylene glycol;

hydroxypropyl cellulose; and

water to make 100% w/w, wherein the topical formulation has a viscosity of 500–5000 centipoise.

’838 patent col. 30 ll. 60–67.

Both groups of patents are listed in the U.S. Food and Drug Administration’s ("FDA") Approved Drug Products with Therapeutic Equivalence Evaluations ("Orange Book") for Horizon’s PENNSAID® 2% product. PENNSAID® 2% is a nonsteroidal anti-inflammatory drug ("NSAID") and the first FDA-approved twice-daily topical diclofenac

sodium formulation for the treatment of pain of osteoarthritis of the knees.

Relevant to the development of PENNSAID® 2% is prior art PENNSAID® 1.5%. PENNSAID® 1.5% also treats osteoarthritis knee

pain but differs from PENNSAID® 2% both in formulation and recommended dosage. As to dosage, PENNSAID® 1.5% directs the user to administer the formulation by applying 40 drops of PENNSAID® 1.5% on each painful knee, four times a day. J.A. 6923. PENNSAID® 2% improved upon this dosing regimen by reducing the frequency of application to a recommended dose of 40 mg of the formulation, applied through "2 pump actuations on each painful knee, 2 times a day." J.A. 6649–51.

Actavis sought to market a generic version of PENNSAID 2% and filed Abbreviated New Drug Application ("ANDA") No. 207238.² The ANDA included a certification under 21 U.S.C. § 355(j)(2)(A)(vii)(IV) ("Paragraph IV certification"), stating that the patents-at-issue were invalid or would not be infringed by Actavis’s generic product. The filing of an ANDA with a Paragraph IV certification constitutes an act of artificial patent infringement under 35 U.S.C. § 271(e)(2)(A), which allows litigation to commence before actual sale of an accused product has occurred. Vanda Pharm. Inc. v. West-Ward Pharm. Int’l Ltd. , 887 F.3d 1117, 1126 (Fed. Cir. 2018).

On December 23, 2014, after receiving notice of Actavis’s Paragraph IV certification, Horizon filed suit in the District of New Jersey, alleging infringement of the patents-at-issue under § 271(e)(2)(A).

I. Claim Construction

At the district court, the parties disputed the construction of various terms in the asserted claims. Both sides filed claim construction briefs. The district court conducted Markman hearings on March 3, 2016, and June 7, 2016. On August 17, 2016, the district court issued its Markman order, finding three terms in the asserted claims of the formulation patents to be indefinite.

First, the district court found that the term "the topical formulation produces less than 0.1% impurity A after 6 months at 25°C and 60% humidity" was indefinite because the identity of "impurity A" is unknowable to a person of ordinary skill in the art ("POSITA").

Second, the district court found that the term "the formulation degrades by less than 1% over 6 months" was indefinite because neither the claims nor the specification disclose the means to evaluate degradation.

Third, the district court found that the term "consisting essentially of" was indefinite. In that regard, the district court began by recognizing that the phrase "consisting essentially of," when used in a formulation patent, reflects that the recited formulation includes (a) the listed ingredients that follow the phrase, and (b) unlisted ingredients that do not materially affect the basic and novel properties of the invention. See J.A. 14–15 (citing PPG Indus. v. Guardian Indus. Corp. , 156 F.3d 1351, 1354 (Fed. Cir. 1998) ). Because the parties disputed the basic and novel properties, the district court determined that in this case identification of those properties was required. The district court therefore concluded that "[b]ecause the basic and novel properties of an invention are part of the construction of a claim containing the phrase ‘consisting essentially of,’ the Nautilus standard applies to the assessment of an invention’s basic and novel properties." J.A. 22–23 (citing Nautilus, Inc. v. Biosig Instruments, Inc. , 572 U.S. 898, 910, 134 S.Ct. 2120, 189 L.Ed.2d 37 (2014) ).

Turning to the basic and novel properties of the invention, the district court noted that the specification identified five properties: (1) better drying time; (2) higher viscosity; (3) increased transdermal flux; (4) greater pharmacokinetic absorption; and (5) favorable stability. The district court focused on the "better drying time" property and held that this basic and novel property was indefinite. In doing so, the district court emphasized that the specification described two different methods for evaluating "better drying time." Those two methods, however, did not provide consistent results at consistent times. Faced with this inconsistency, the district court was persuaded by expert testimony that a POSITA would not know under which standard to evaluate the drying rate of the claimed invention. According to the district court, this prevented a POSITA from being able to have "reasonable certainty" about the scope of the basic and novel properties of the invention, thereby rendering the term "consisting essentially of" indefinite. J.A. 27.

On August 30, 2016, Horizon filed a motion for reconsideration of the claim construction. Horizon argued that the district court erred by failing to consider indefiniteness on a claim-by-claim basis. Horizon also contended that it had been prevented from fully developing the record in relation to the "better drying time" property. On January 4, 2017, the district court conducted a hearing on the motion for reconsideration, and on January 6, 2017, it issued an opinion denying Horizon’s motion for reconsideration and maintaining its initial claim constructions and indefiniteness determinations.

The district court concluded that Horizon’s arguments on reconsideration lacked merit. As to the claim-by-claim argument, the district court noted that Horizon chose to address the issue in relation to the formulation patents as a whole, and that this was a new argument raised for the first time in a motion for reconsideration, which is improper. The district court also found that Horizon had ample notice and opportunity to present evidence and develop the record during the two Markman hearings, the supplemental briefing in between those hearings, and during the ten weeks between the second hearing and the Markman order.

The district court bolstered its conclusion that the basic and novel properties were indefinite by analyzing the "favorable stability" property, which had not been addressed in the initial Markman order. Because the specification failed to provide the requisite guidance for a POSITA to evaluate stability, the district court found that the "favorable stability" property was indefinite which in this case,...