Altaire Pharm., Inc. v. Paragon Bioteck, Inc.

• Decision Date: 02 May 2018
• Docket Number: 2017-1487
• Citation: 889 F.3d 1274
• Parties: ALTAIRE PHARMACEUTICALS, INC., Appellant v. PARAGON BIOTECK, INC., Appellee
• Court: U.S. Court of Appeals — Federal Circuit

889 F.3d 1274

ALTAIRE PHARMACEUTICALS, INC., Appellant

v.PARAGON BIOTECK, INC., Appellee

2017-1487

United States Court of Appeals, Federal Circuit.

Decided: May 2, 2018

Craig E. Countryman, Fish & Richardson, PC, San Diego, CA, argued for appellant. Also represented by Oliver Richards; Charles W. Saber, Dipu A. Doshi, Jonathan W.S. England, Mark J. Thronson, Blank Rome LLP, Washington, DC.

Richard Torczon, Wilson, Sonsini, Goodrich & Rosati, PC, Washington, DC, argued for appellee. Also represented by Michael T. Rosato, Andrew Swanson Brown, Sonja Rochelle Gerrard, Steven William Parmelee, Seattle, WA; Douglas H. Carsten, San Diego, CA.

Before O'Malley, Schall, and Wallach, Circuit Judges.

Dissenting opinion filed by Circuit Judge Schall.

Wallach, Circuit Judge.

Appellant Altaire Pharmaceuticals, Inc. ("Altaire") sought post-grant review of claims 1–13 ("the Asserted Claims") of Appellee Paragon Bioteck, Inc.'s ("Paragon") U.S. Patent No. 8,859,623 ("the '623 patent"). The U.S. Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB") issued a final written decision determining that Altaire failed to prove that the Asserted Claims were unpatentable for obviousness over two production lots of Altaire's phenylephrine

hydrochloride ophthalmic solution products, Lots #11578 and #11581,¹ which are used to dilate patients' pupils. See

Altaire Pharm., Inc. v. Paragon Bioteck, Inc. , No. PGR2015-00011 (P.T.A.B. Nov. 14, 2016) (J.A. 1–21).

Altaire appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(4)(A) (2012). We reverse-in-part, vacate-in-part, and remand.

BACKGROUND

I. The Relevant Facts

Phenylephrine

contains a chiral center with two enantiomers known as R- and S-phenylephrine hydrochloride. J.A. 2; see J.A. 1150. The R-phenylephrine hydrochloride, but not the S-phenylephrine hydrochloride, is useful to dilate pupils. See '623 patent col. 6 ll. 21–30; see also J.A. 737. To determine the phenylephrine hydrochloride products' effectiveness, industry members measure the products' "chiral purity," which is the relative amount of each enantiomer expressed as a percentage. See '623 patent col. 1 ll. 15–20, col. 3 ll. 43–48; see also J.A. 750.

By 2000, Altaire was manufacturing R-phenylephrine hydrochloride products, including products containing 2.5% and 10% phenylephrine

hydrochloride ophthalmic solution. J.A. 733. In 2011, Altaire and Paragon entered into an agreement to pursue U.S. Food and Drug Administration ("FDA") approval for Altaire's products. See J.A. 1909–13 ("the Agreement"). Pursuant to the Agreement, "Paragon shall be responsible for preparing and submitting the [new drug] applications [ (‘NDAs’) ] in support of the products," and "Altaire will provide and bear the costs for the chemistry, manufacturing, and controls ... in support of an NDA filing for the products." J.A. 1910 (capitalization modified).

Paragon submitted an NDA, and the FDA responded by recommending that Paragon, inter alia, "[c]onsider adding a chiral purity test to the d[r]ug product specification or provide a justification for not doing so." J.A. 773. In response, Altaire measured the optical rotation of Lot #11578, a 2.5% phenylephrine

hydrochloride ophthalmic solution product, and Lot #11582, a 10% phenylephrine hydrochloride ophthalmic solution product, see J.A. 783–91; see also '623 patent col. 4 ll. 33–34 ("[I]t is known in the art chiral purity can be determined by optical rotation."). Altaire provided a summary of these optical rotation test results to Paragon, and Paragon submitted a supplementary NDA filing to the FDA, which approved Paragon's NDA in March 2013. J.A. 739; see J.A. 783–91. In addition to the optical rotation tests, Altaire conducted high performance liquid chromatography ("HPLC") testing on Lots #11578 and #11582, which it internally refers to as "TMQC-247." J.A. 11, 802.

In June 2013, Paragon's counsel proposed an amendment to the Agreement "to address [a] new patent application filing ... discussed with Altaire." J.A. 1840. Altaire responded that: "the formulation, processes[,] and controls applicable to the ... product[s] were developed solely by [Altaire's Chief Executive Mr.] Al Sawaya and Altaire[ ] and are ... the proprietary and confidential information of Altaire"; the Agreement "does not contemplate Paragon using such information to support a patent application"; and "any such patent application should identify either [Mr.] Al Sawaya or Altaire as the sole inventor." J.A. 1839. Although Paragon's counsel responded that they "look[ed] forward to further discussions," J.A. 1839, there is no indication in the record that Paragon's counsel responded to the substantive comments raised by Altaire.

In November 2013, Paragon filed a drug patent application that issued as the '623 patent. J.A. 22. Entitled "Methods and Compositions of Stable Phenylephrine Formulations," the '623 patent includes thirteen claims. '623 patent col. 12 l. 39–col. 13 l. 14. Independent claim 1 is illustrative and recites:

A method of using an ophthalmic composition for pupil dilation, the composition comprising R-phenylephrine hydrochloride having an initial chiral purity of at least 95% and an aqueous buffer, wherein the chiral purity of R-phenylephrine hydrochloride is at least 95% of the initial chiral purity after 6 months, the method comprising:

administering the composition into an eye of an individual in need thereof, wherein the composition is stored between -10 to 10 degree Celsius prior to administration, and wherein the composition comprises R-phenylephrine hydrochloride having a chiral purity of at least 95% when administered after storage.

Id. col. 12 ll. 39–50. Dependent claims 2–13 depend from independent claim 1, either directly or indirectly. See id. col. 12 l. 51–col. 13 l. 14.

In March 2014, while the application that led to the '623 patent was being prosecuted, Paragon requested "all the work [Altaire] ha[s] on chiral purity" for its annual report to the FDA. J.A. 1606. In response, Altaire sent Paragon a report purporting to confirm that Altaire's TMQC-247 methodology accurately measures relative quantities of R- or S-phenylephrine hydrochloride. J.A. 1602; see J.A. 1536–601, 1603–05.

In April 2015, Altaire filed a complaint against Paragon in the U.S. District Court for the Eastern District of New York ("Eastern District"), alleging that Paragon breached a nondisclosure clause of the Agreement between the parties, see Appellant's Br. viii; Appellee's Br. vii, and Paragon responded by alleging that Altaire materially breached the nondisclosure clause and seeking the right to terminate the Agreement, J.A. 1012, 1020; see J.A. 1911–12 (Non–Disclosure Clause). In April 2017, Altaire filed another complaint against Paragon in the Eastern District, seeking a declaratory judgment of invalidity of the '623 patent. See Appellant's Br. viii; Appellee's Br. vii, 22–23. At the time of argument, both of these actions were pending.

II. Procedural History

In May 2015, Altaire filed a petition for post-grant review of the '623 patent, arguing that the Asserted Claims would have been obvious over Lots #11578 and #11581, see J.A. 37–114, and attaching the supporting declaration of Mr. Al Sawaya² ("First Al Sawaya Declaration"), see J.A. 732–61. As relevant here, Altaire contended that: the product labeling of Lots #11578 and #11581 instructed that the products should be stored between 2 and 8 degrees Celsius, see J.A. 50–52, 733–35, which is within the -10 to 10 degrees Celsius range required by the Asserted Claims, see '623 patent col. 12 l. 47; and the TMQC-247 test results demonstrated that Lots #11578 and #11581 remained at 99.99% chiral purity, see J.A. 65–69, 745–51, 796–99, 802–03, which exceeds the 95% chiral purity minimum of the Asserted Claims, see '623 patent col. 12 l. 50.

Paragon filed a preliminary response. See J.A. 804–47. As relevant here, Paragon argued that: Mr. Al Sawaya "is not an expert or even [a person having] ordinary skill in the art [ (‘PHOSITA’) ], but rather, a fact witness," J.A. 824; see J.A. 824–26; and "the techniques upon which the petition relies—i.e. , (1) a [United States Pharmacopeia (‘USP’) ] standard HPLC protocol" that does not measure relative quantities of R- or S-phenylephrine hydrochloride; and "(2) an optical rotation comparison—cannot reliably determine chiral purity," J.A. 818; see J.A. 818–24.

The PTAB determined that "it is more likely than not that [the Asserted Claims] of the '623 patent are unpatentable as obvious over Altaire's [p]roduct[s]" and instituted post-grant review. J.A. 1079; see J.A. 1061–81. In its patent owner response, Paragon, inter alia, reiterated its challenge to the First Al Sawaya Declaration, see J.A. 1112–15, and contended that the tests Altaire performed on Lots #11578 and #11581 do not satisfy the requirements of 37 C.F.R. § 42.65(b) (2016), see J.A. 1115–22, which requires parties "rel[ying] on a technical test or data from such a test" to

provide an affidavit explaining: (1) [w]hy the test or data is being used; (2) [h]ow the test was performed and the data was generated; (3) [h]ow the data is used to determine a value; (4) [h]ow the test is regarded in the relevant art; and (5) [a]ny other information necessary for the [PTAB] to evaluate the test and data.

37 C.F.R. § 42.65(b).

In its reply, Altaire included a second declaration of Mr. Al Sawaya ("Second Al Sawaya Declaration"), discussing his experience in the pharmaceutical industry. See J.A. 1418–25. Altaire contended that its TMQC-247 test differs from the standard HPLC test in the USP, see J.A. 1393–99, and provided additional information regarding how the TMQC-247 test is performed, see J.A. 1505–601, as well as evidence that this test data previously had been shared with Paragon during the FDA approval process, see J.A. 1602–06.³ Finally, Altaire argued that Paragon previously acknowledged the validity of optical rotation test data by submitting them to the FDA and discussing optical...