Medichem: A New Standard of Review for Patent Interference Practice

Background

The volume of patent applications considered by the US Patent and Trademark Office (PTO) continues to increase, suggesting that it will become increasingly common for multiple patent applications or issued patents to claim the same or very similar subject matter. As a first-to-invent rather than first-to-file country, the United States resolves these conflicts through 'interferences' to determine inventorship priority. Thus, patent interference proceedings

"are designed to determine whether two patent applications (or a patent application and an issued patent [or multiple patents]) are drawn to the 'same patentable invention' and, if so, which of the competing parties was first to invent the duplicative subject matter." (1)

Research suggests that the vast majority of what has become known as interference practice takes place within the PTO,(2) but if two interfering patents actually issue, original jurisdiction is granted to the US federal district courts under 35 United States Code Section 291:

"The owner of an interfering patent may have relief against the owner of another by civil action, and the court may adjudge the question of the validity of any of the interfering patents, in whole or in part."

As a necessary predicate to this jurisdiction, however, the district court must determine that the allegedly interfering patents do, in fact, interfere.(3) As defined by 37 Code of Federal Regulations Section 1.601(j), an "interference-in-fact exists when at least one claim of a party...and at least one claim of an opponent...define the same patentable invention".

Since 1984, the PTO has based findings of interference-in-fact on the so-called 'two-way' test.(4) Under the PTO's two-way test, an interference-in-fact arises only when (i) invention A anticipates or renders obvious invention B, and (ii) invention B anticipates or renders obvious invention A.(5) While the US federal courts are not bound by the procedures of the PTO, the two-way test generally has been adopted for use in district court interference actions.(6) Although on one occasion the US Court of Appeals for the Federal Circuit apparently reviewed a district court's finding of no interference-in-fact under a "clearly erroneous" standard, the court had not announced a standard under which it would review district court interference-in-fact determinations until recently.(7)

Decision

On December 23 2003 the Federal Circuit conducted its first analysis of a district court's interference decision in Medichem, SA v Rolabo.(8) Medichem marks the first time that the Federal Circuit has established a standard of review for interference-in-fact determinations made at the district court level. Thus, the Medichem decision offers a crucial precedent for future interference practice.

The Medichem litigation concerns an interference proceeding between the claimed inventions of two issued US patents, relating to processes for the preparation of loratadine, the active pharmaceutical ingredient in the popular allergy medication Claritin, belonging to Medichem and Rolabo respectively. At the district court level, priority was awarded to Medichem, but the court found that "one leg of the two-way test was not satisfied and, as a result, there could be no interference-in-fact".(9) Medichem appealed.

On appeal, the Federal Circuit decided that the district court had not properly applied the two-way test. To reach this decision, the court developed and announced a new standard of review, which will continue to apply in future appellate proceedings. Rather than creating its analysis from whole cloth, the Federal Circuit looked to the basic inquiries underlying the two-way test. The court determined that "the standards of review for an interference-in-fact should mirror the standards of review employed in anticipation and obviousness inquiries".(10)

Therefore:

• the claim construction predicating a finding of either obviousness or anticipation will be reviewed de novo (ie, anew);
   
• the district court's legal determinations of obviousness will be reviewed de novo, with underlying questions of fact reviewed for clear error; and
   
• the district court's factual determinations of anticipation will be reviewed for clear error.(11)
  Despite the apparent complexity of this new standard, as a whole, it appears the Federal Circuit will review district court interference-in-fact determinations de novo, with deference to underlying findings of fact.

Applying this standard of review, the Federal Circuit reversed the district court's finding under the two-way test, vacated the lower court's priority determination and denial of attorney fees, and remanded the case with an order to stay further proceedings pending interference proceedings within the PTO.

Comment

As interference proceedings become increasingly common, practitioners should be aware of the Federal Circuit's new standard of review for district court interference-in-fact determinations. At a minimum, the Medichem decision suggests that the Federal Circuit may take a more active role in reviewing district court interference-in-fact determinations in the future, especially as the issue of claim construction, now reviewed de novo, is likely to be critical in this analysis.

Endnotes

(1) Eli Lilly & Co v Bd of Regents of the Univ of Wash, 334 F 3d 1264, 1267 (Fed Cir 2003), citing Conservolite, Inc vWidmayer, 21 F 3d 1098, 1100-01 (Fed Cir 1994).

(2) Interference practice before the PTO is guided by 37 Code of Federal Regulations Sections 1.601 to 1.690.

(3) A district court "has no jurisdiction under Section 291 unless interference is established". Albert v Kevex Corp, 729 F 2d 757, 760-61 (Fed Cir 1984).

(4) The PTO has proposed a new Section 41.203(a), which would clarify the interference-in-fact standard. See Rules of Practice Before the Board of Patent Appeals and Interferences, 68 Fed Reg 66,664, 66,664-65 (2003).

(5) The two-way test was recently explained in some detail and upheld by the Court of Appeals for the Federal Circuit in Eli Lilly, 334 F 3d at 1270.

(6) See Slip Track Sys, Inc v Metal-Lite, Inc, 304 F 3d 1256, 1263-64 (Fed Cir 2002).

(7) Advance Transformer Co v Levinson, 837 F 2d 1081, 1083-84 (Fed Cir 1988).

(8) SL, 2003 US App LEXIS 26236, 02-1461 (Fed Cir December 23 2003).

(9) Medichem at *6.

(10) Medichem at *10-11.

(11) Medichem at *11.