Tuesday, November 9, 2010

Teva To Seek En Banc Rehearing of Merck's Temodar® '291 Patent "Inequitable Conduct" Appeal?

It is important to keep today's panel opinion in perspective -- this is what three (and actually, only two!) of a required nine federal appellate judges think. [Some background here.]

In settings where the question of law decided is not particularly novel, in order to reduce the "decision burden" on the full appelate calendar, sub-groupings, or three judge "panels" hear argument and author opinions. As even the erstwhile Cardozo lecturer hints, the intellectual rigor of the dissent in today's opinion makes an en banc reharing pretty likely. So -- in short -- it is half-time in the Court of Appeals for the Federal Circuit. True, Merck is up, call it 14 to 7, over Teva. . . but there is still a full half of football left to play. And Teva won at the trial level, where many facts were decided by a live judge, after hearing testimony from live witnesses, during a four day trial. In general, appelate courts are loathe to substitute factual findings from a cold paper record, for those of the the trial judge -- here the very able Sue L. Robinson.

My prediction? Some time in the middle of 2011, this case will be reargued, in front of all nine judges, sitting en banc. Then we will see who is quick, and who is dead.

Recall that Merck's Temodar® "pay to delay" deal currently provides that if Teva ultimately prevails on appeal, it may begin selling a generic version of Temodar immediately (Merck's SEC Form 10-Q, at page 25). Let us hope that is a 2011 event.

In any event, to the dissenting opinion of the very clever Judge Prost, then (page 20, et seq.):

. . . .In my view, the majority opinion [of only two judges, actually] seriously errs in reversing the district court’s findings and conclusions that U.S. Patent No. 5,260,291 (the "291 patent") is unenforceable on the grounds of both prosecution laches and inequitable conduct.

In doing so, the majority propounds a new and unsupportable legal standard for prosecution laches. With regard to inequitable conduct, the majority not only creates a new evidentiary standard, but it also ignores virtually unassailable credibility findings made by the district court after a four-day bench trial. . . .

First, I think the district court got it right because I do not agree with the majority that a showing of interven-ing rights, i.e. prejudice, is compelled by our precedent. Moreover, even if one could construe the case law as requiring prejudice, there is no basis, in the relevant case law or otherwise, for the majority’s further temporal limitation that the prejudice exists during the period of delay.

Shifting the inquiry regarding prosecution laches from Cancer Research’s own conduct to the conduct of the party invoking the defense ignores that prosecution laches is an equitable defense. Neither the Supreme Court nor this court has required a defendant to establish prejudice to assert prosecution laches. . . .

[W]e have specifically indicated that "repetitive refilings that demonstrate a pattern of unjustifiably delayed prosecution" "for the business purpose of delaying . . . issuance [of the patent]" -- an apt description of Cancer Research’s behavior during the prosecution of the ’291 patent -- supports a finding of laches. . . .

By requiring this particularized prejudice, the majority sidesteps the real harm at issue in this case. The Supreme Court has explicitly recognized that delaying a patentee’s monopoly period harms the public by delaying its free use of the patented invention. . . .

I'll stop there. Do go read the whole dissent. It will be, almost verbatim, in my estimation, the majority opinion when the en banc decision is published -- sometime in late 2011, or early 2012. By then, it will be approaching four decades that legacy Schering-Plough/New Merck will have kept their monopoly pricing power on this truly extraordinary cancer drug. And during those four decades, we -- the public, will have overpaid for the drug, for perhaps three of them. Said another way, had the usual patent rules applied, we would have seen generic pricing, almost ten years ago.

Is it possible that an en banc hearing will ultimately not be granted? Of course. But it is not probable.

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