Obviousness-type double patenting (“ODP”) is a judicially-created doctrine designed to prevent a party from extending its right to exclude by enforcing claims in a later-filed patent that are patentably indistinct from claims in a “commonly-owned” earlier filed patent. In re Longi, 759 F.2d 887, 892 (Fed. Cir. 1985). This doctrine applies to all commonly-owned patents regardless of whether the claims at issue were invented by different inventors. Id. at 895.
One way to effectively extend the patent term of a patent would be to obtain a license for another application that expressly or inherently discloses overlapping subject matter, and then amending the licensed application to claim the same subject matter as the patent. Because the licensee (as opposed to an assignee) is not considered to be a “common owner” of the licensed patent, the licensee could theoretically enforce two patents having the same claimed subject matter and covering different patent terms.
An opinion recently issued by the Federal Circuit (“Court”) highlights that a licensing agreement granting an exclusive right to prosecute a patent application can actually create an effective assignment for the purposes of double patenting – unless the licensing agreement further limits the substantial rights of the licensee.
On July 1, 2020, the Court issued a precedential opinion in Immunex Corp. v. Sandoz Inc. affirming inter alia that an exclusive license granted to Immunex Corporation (“Immunex”) did not render it a “common owner” of the licensed patent for the purpose of obviousness-type double patenting. As explained below, the enforcement and alienation rights retained by the licensor under the agreement in question were critical to the Court’s determination that Immunex was not effectively an assignee.
By 1990, both Hoffman-La Roche Inc. (“Roche”) and Immunex were separately researching tumor necrosis factor (“TNF”) as a therapeutic to treat autoimmune inflammatory diseases such as rheumatoid arthritis. In 1990, Roche filed several patent applications that ultimately led to U.S. Patent Nos. 8,063,182 (`182 patent) and 8,163,522 (`522 patent). In 1998, Immunex obtained FDA approval of Enbrel® – a biologic drug indicated for treating active rheumatoid arthritis and covered by several patents owned by Immunex.
Shortly after Enbrel® obtained FDA approval, Immunex obtained a license to several of Roche’s TNF-related applications and all patents issuing therefrom. Under the first license agreement, Immunex agreed to pay Roche royalties on the sales of Enbrel®. Later in 2004, Immunex and Roche (along with Amgen and Wyeth) entered into an “Accord & Satisfaction” agreement concerning the same patent family.
Under the terms of the Accord & Satisfaction agreement, Immunex was granted, inter alia, an exclusive right to prosecute Roche’s TNF-related applications that were the subject of the first license agreement. Immunex was also granted a “first right” to enforce any suspected infringement of the licensed patent family, as well as the right to an assignment of the patent family upon a request and payment of $50,000. Roche retained, inter alia, a “secondary right” to enforce if Immunex failed to take action, as well as the right to veto any assignment of Immunex’s interest.
In 2016, Immunex and Roche sued Sandoz, Inc. (“Sandoz”) for patent infringement of the `182 and `522 patents. Sandoz did not contest infringement of these patents, but argued, inter alia, that the patents were invalid for ODP. At trial, Sandoz asserted that the patents-in-suit were invalid for ODP over several patents filed by Immunex in the years leading up to and shortly after the approval of Enbrel®. The district court rejected this argument, finding that the Roche patents and Immunex patents were not commonly owned for purposes of ODP.
In affirming the district court’s finding that the Roche and Immunex patents were not commonly owned, the Court’s analysis is helpful in assessing how license agreements should be drafted to avoid being construed as “effective assignments” for the purpose of double patenting.
The Court agreed with Sandoz that the “all substantial rights” test can be informative in determining common ownership in the obviousness-type double patenting context. Immunex Corp. at 11, 14. Under this test, an agreement that conveys “all substantive rights” in a patent is tantamount to an assignment of ownership. Id. at 10 (citing Morrow v. Microsoft Corp., 499 F.3d 1332, 1340 (Fed. Cir. 2007)).
The Court concluded that applying the “all substantial rights” test, to assess whether a purported licensee is actually an effective patentee, is informative where one of the rights transferred is the “right to prosecute” the patent applications at issue. As explained by the Court:
By contrast, Sandoz’s proposed test for common ownership—determining whether a party controlling prosecution was the “effective patentee” under the “all substantial rights” test—appears consistent with both principles underlying obviousness-type double patenting, namely, preventing unjustified patent term extensions and preventing harassment from multiple suits. Applying Sandoz’s test would prevent an effective patentee from unjustifiably extending its patent term by using the nominal label of licensee. The second consideration underlying obviousness-type double patenting—preventing harassment through multiple infringement suits by different assignees asserting essentially the same patented invention—also undergirds our 35 U.S.C. § 281 jurisprudence. See Hubbell, 709 F.3d at 1145; see also Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225, 1233 (Fed. Cir. 2019).
We are mindful, however, of the existing complexities in applying the equitable doctrine of obviousness-type double patenting and see no reason to import into this judicially-created doctrine the entirety of our body of law analyzing who is a statutory “patentee” pursuant to 35 U.S.C. § 281. We conclude only that where one of the rights transferred is the right to prosecute the patent at issue, identification of the effective “patentee” is informative in evaluating whether the patents are “commonly owned” for purposes of obviousness-type double patenting. Where, as here, a party ultimately controls prosecution of both sets of patents, the “all substantial rights” test aids in preventing the unjustifiable issuance of claims that are patentably in-distinct from claims already owned by that party. Under these circumstances, looking to the “all substantial rights” test achieves the proper balance between deterring gamesmanship in prosecution, on the one hand, and avoiding any chilling effect on routine collaborations and licensing be-tween parties working in the same field of research, on the other.
Id. at 14-15 (underlining added) (italics in original).
Based on the substantial rights retained by Roche under the terms of the Accord & Satisfaction agreement, the Court affirmed the district court’s finding that Immunex was not a “common owner” for the purposes of double patenting. Two factors were especially important in the Court’s holding.
First, Roche retained a “secondary right” to enforce the patents if Immunex failed to take action. The Court explained that once Roche’s secondary right to sue vests, the ability to rectify infringement is ‘solely’ with Roche and may not pass to Immunex. In the Court’s words, “Retention of ‘such broad right[s]’ is ‘thoroughly inconsistent’ with a conclusion that the patents-in-suit were effectively assigned to Immunex.” Id. at 18-19 (quoting Alfred E. Mann Found. for Sci. Research v. Cochlear Corp., 604 F.3d 1354, 1362 (Fed. Cir. 2010)).
Second, Roche retained a right to veto any assignment of Immunex’s interest in the patents-in-suit. As explained by the Court, “[w]e have previously made clear that restrictions on the ability to transfer patent rights are inconsistent with a transfer of all substantial rights.” Id. at 20 (citing Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225 (Fed. Cir. 2019)).
The Court was also not persuaded by Sandoz’s argument that Immunex’s right to convert the license into an assignment upon payment of $50,000 rendered the Accord & Satisfaction agreement an “effective assignment.” The Court found that this provision, viewed in the context of the entire agreement, did not transfer all substantial rights to Immunex. Id. at 20-21, n.7.
In a dissenting opinion, Judge Reyna argued that the majority misapplied the “all substantial rights” test, because the Accord & Satisfaction agreement “permits the type of gamesmanship it should to prevent—gamesmanship in prosecution which could result in unjustified extension of patent rights.” Dissenting Opinion at 3. As explained below, Judge Reyna argued that the exclusive right to prosecute the Roche applications allowed Immunex to effectively extend its right to enforce the patented invention to 2029.
When under Roche’s control for almost ten years, the applications from which the patents-in-suit issued did not claim the etanercept fusion protein, but rather a different fusion protein and a mutated version of etanercept. However, once Immunex retained control of prosecution, Immunex amended the applications to claim etanercept, which Immunex itself had claimed in its own patents and which was an active ingredient in Immunex’s Enbrel® product. Thus, thanks to its prosecution efforts, Immunex has effectively extended to 2029 its right to exclude public use of the etanercept fusion protein via the patents-in-suit (which Immunex effectively owns in all material respects). Given this backdrop, I would hold that Immunex effectively owns the patents-in-suit for ODP purposes.
Dissent. Op. 3-4 (emphasis added).
Judge Reyna also argued that the two rights retained by Roche—i.e., the secondary right to sue and the right to veto an Immunex-initiated assignment—are illusory because these rights do not limit Immunex’s use of the patents in any meaningful way. Specifically, the ability of Immunex to convert the licensee into an assignment upon payment of $50,000 was merely a “self-executing formality.” Dissent. Op. 4-5.
Takeaway: When a licensing agreement grants the licensee an exclusive right to prosecute the patent application(s) being licensed, the terms of the licensing agreement should be carefully considered to ensure that the licensee’s enforcement and alienation rights are substantially limited.
Circuit Judges: K.M. O’MALLEY, J.V. REYNA and R.T. CHEN (Opinion by O’MALLEY, Dissenting Opinion by REYNA)
