Judge Gorton of the U.S. District Court of Massachusetts recently entered an order granting a motion by Amphastar Pharmaceuticals (Amphastar) that bars Momenta Pharmaceuticals, Inc. (Momenta) from enforcing a patent against certain drug manufacturing control processes based on the equitable doctrines of waiver and estoppel that arose form Momenta’s failure to disclose a pending patent application to the standard setting organization (SSO) United States Pharmacopeia (USP) when deliberating on a USP National Formulary (USP-NF) standard. This case found a duty to disclose a pending patent application that “reasonably might be necessary” to practice the standard based on the participants’ understanding of the SSO’s ambiguous conflict of interest policy that required participants to disclose financial or other interests “that may result in a conflict of interest or the appearance of interest.” This case also provides insight on tailoring equitable relief when waiver or estoppel are found: the court ruled that the patent was unenforceable against two infringing processes used by the infringed that practiced the standard, but the patent was enforceable against a third process that fell outside the standard (if the patent otherwise is valid and infringed).
This case involves Momenta’s U.S. Patent No. 7,575,886 (the ‘886 Patent) directed to manufacturing quality control processes that ensure each batch of a generic enoxaparin blood clotting drug includes the individual sugar chains characteristic of Lovenox™ (the brand name of the drug).
In 2008, while the application for the ‘886 Patent was pending, the ‘886 Patent inventor participated in an advisory panel of USP that looked for a standard method to test a compound’s 1, 6-anhydro rings, which test would be incorporated into the enoxaparin monograph (a monograph is a detailed compilation of information about the drug, such as how to package, store and label it as well as test procedures to ensure it meets certain criteria). Relevant USP policies (“the Rules and Procedures of the USP Council of Experts” or “the USP Expert Rules”) include the following:
No member of the Council of Experts, an Expert Committee or ad hoc Advisory Panel who has a financial or other interest that may conflict, or may appear to conflict, with his or her duties and responsibilities with respect to a particular matter, shall vote on such matter. An employee’s interest shall be presumed to coincide with that of his or her employer.
[Advisory panel members] shall submit to USP a statement of all employment, professional research, organizational memberships, and financial interests that relate either directly or indirectly to his or her duties and responsibilities.
The USP Expert Rules conflict of interest statement reminds participants that they cannot vote on matters in which they have a financial interest and requires identification of:
- Current employer.
- Sources of funding for research.
- Companies the participant knows that may be affected by USP standards.
- A catch-all disclosure of other professional or financial interests, including intellectual property rights, “that may result in a conflict of interest or the appearance of interest.”
USP also had another written policy, the USP Guidelines, that was revised in 2009 to include the following:
USP requests Sponsors to disclose in their Request for Revision whether any portion of the methods or procedures submitted are subject to patent or other IP rights.
The inventor submitted his conflict of interest form to USP in 2008 that identified Momenta as his employer, but did not disclose the pending patent application. Momenta opposed using a proposed 1, 6-anhydro test as the standard for Chapter <207> of the USP-NF (USP <207>), arguing that other alternative methods should be allowed. USP ultimately approved USP <207> based on the 1,6-anhydro test as the official test, but also said it would allow manufacturers to use other alternative tests. The inventor abstained from voting on it.
In 2011, Momenta sued Amphastar for infringing the ‘886 Patent after Amphastar received approval from the Federal Drug Administration (FDA) to market generic enoxaparin. Momenta asserted that three manufacturing control processes used by Amphastar infringed the patent:
- the Disaccharide Building Block (DBB) procedure
- the 15-25% procedure (which Amphastar practiced when it received FDA approval)
- the revised 15-25% procedure
Amphastar argued that the equitable defenses of waiver and estoppel barred enforcement of the patent based on Momenta’s failure to disclose it to USP when USP<207> was adopted. In 2017, a jury returned a Verdict that Amphastar infringed the patent, but that the claims were invalid because they did not satisfy the enablement and written description requirements. The jury also provided a non-binding advisory verdict on waiver and estoppel that the court would consider in deciding those equitable issues, the jury finding that:
- All three of Amphastar’s procedures complied with USP ;
- Amphastar proved by clear and convincing evidence that Momenta waived its right to recover for infringement for each procedure; and
- Amphastar proved by a preponderance of the evidence that Momenta was estopped from enforcing its patent against each procedure.
Amphastar moved the court to adopt the jury’s advisory verdict, which the court granted in part as discussed below.
Judge Gorton first considered Amphastar’s waiver defense and then considered the equitable estoppel defense.
Judge Gorton ruled that waiver (either express or implied) must be proven by clear and convincing evidence. Express waiver requires a showing that a plaintiff intentionally waived its right to enforce a patent. Implied waiver occurs if the patent owner’s behavior “was so inconsistent with an intent to enforce its patent rights as to induce a reasonable belief that such right has been relinquished.” [Order at 6] In the standard setting context, implied waiver occurs if the patent owner breaches a duty to disclose information to a standard-setting organization (SSO). Such a duty exists in one of two ways:
- The SSO’s policies unambiguously impose on participants a duty to disclose; or
- SSO participants understood that the SSO’s policies imposed a duty to disclose. [Order at 7]
The court uses an objective test of whether disclosure of the patent “reasonably might be necessary” to comply with the standard. [Order at 7]
Judge Gorton ruled that that the disclosure obligations under USP’s written policies were ambiguous, but trial testimony showed that USP participants “understood the policies as imposing a duty to disclose” and further found that Momenta breached that duty.
Specifically, the inventor did disclose his employment by Momenta and abstained from voting on USP<207>, which was consistent with the USP Expert Guide and certificate of interest form. But the catchall provision of the USP’s certificate of interest required disclosure of interest with the “appearance of a conflict of interest” that “indicates an expectation of broad and thorough disclosure, including any interest in intellectual property.” [Order at 11]. Judge Gorton found this ultimately was “ambiguous” as to whether the inventor “had a duty to disclose the ‘886 patent application.”
Judge Gorton, therefore, turned to trial testimony and evidence of the participants’ understandings of the USP disclosure policies. A former USP employee testified that USP participants understood that the policy required disclosing pending patents, participants were individually responsible for making the disclosure, and abstention from voting was not an adequate disclosure of potential conflicts. Further, during the effort leading to USP<207>, someone stated that another company was going to let a patent that could cover USP <207> lapse and Momenta later asked USP to request that the company affirmatively abandon the patent, rather than simply allowing it to lapse; that company complied. This indicated that Momenta knew it should disclose its patents:
Momenta’s expectation that another pharmaceutical company should abandon a patent that potentially covered USP <207> indicates that Momenta itself, a participant in the USP, acknowledged its own obligation to disclose and abandon like patents. [Order at 13]
Judge Gorton gave no weight to testimony from a rebuttal expert witness who had experience with SSO policies generally, because the expert “never dealt with anything related to the USP before he testified at trial in this case.”
Judge Gorton also rejected Momenta’s argument that there was no duty to disclose because USP <207> permitted alternative tests and, thus, was not a mandatory test. He credited testimony of the former USP employee that “USP standards are intended to be public standards available for the use and benefit of all parties.” Thus, Momenta would be expected to disclose a patent application that might cover the standard.
Judge Gorton also rejected Momenta’s argument that it did not have a duty here because it opposed adoption of USP <207>. He found that Momenta “had a financial interest in opposing the mandatory adoption of USP <207> because it uses a different test” than the one identified in USP <207>. Regardless of that opposition, Momenta had a duty to disclose. [Order at 14]
Judge Gorton also rejected Momenta’s argument that there could be no concern about trapping an industry into the standard by its undiclosed patent, because the adopted standard USP <207> was not mandatory. But the jury’s finding that the 15-25% procedure–“which is almost identical to USP <207>”–infringes the ‘886 patent supports an inference that disclosure was required because use of the patented invention “reasonably might be necessary” to comply with USP <207>.
Based on his ruling that there was a duty to disclose the patent application and the undisputed fact that the patent application was not disclosed, Judge Gorton found that the inventor breached his duty to disclose a potential conflict of interest. [Order at 16].
Judge Gorton then turned to the remedy for such breach, stating that the “unenforceability remedy is properly limited in relation to the underlying breach.” In this case, it depends on whether Amphastar’s three infringing procedures comply with USP <207>:
If a court renders a patent unenforceable due to waiver it must ensure that the unenforceability remedy is properly limited in relation to the underlying breach. In the SSO context, a remedy is properly limited in scope if it applies to products that comply with the standard at issue that also have an obvious connection with the allegedly infringing patent. Thus, to determine the appropriate scope of the remedy in this case, the Court must determine whether the [two] 15-25% procedures and DBB procedure comply with USP <207>. [Order at 16 (internal citations omitted)]
Judge Gorton found that Amphastar’s 15-25% procedure and its revised 15-25% procedure both were identical to USP <207> except for differences that are “minor parts of an elaborate laboratory procedure that is otherwise identical.” [Order at 17]. He therefore found that those two procedures “comply with USP <2087>” and ruled that “Momenta may not enforce the ‘886 patent” against them.
Conversely, Judge Gorton found that Amphastar’s DBB procedure “is distinct from USP <207>.” He declined to follow the jury’s advisory verdict and found that “the DBB procedure does not comply with USP <207>” and ruled that “therefore Momenta has not waived its right to enforce the ‘886 patent with respect to the DBB procedure” used by Amphastar that was found to infringe the patent. [Order at 18]
Judge Gorton then considered Amphastar’s equitable estoppel defense, which required a showing that:
- Misleading conduct that resulted in the reasonable inference that the patentee did not intend to enforce its patent against the alleged infringer, which can include “silence where there was an obligation to speak.”
- The alleged infringer relied on that conduct; and
- The alleged infringer would be materially prejudiced if the patent owner’s infringement claim is allowed. [Order at 18-19]
A patent owner’s breach of a standard-setting obligation to disclose a patent may constitute misleading conduct that supports an inference that the patent owner does not intend to enforce the patent. And reliance on such conduct “may be shown if the alleged infringer then adopts the standard that has been set with the understanding that it is available for public use.” [Order at 19].
Judge Gorton found that, based on his findings and rulings regarding waiver, Momenta had a duty to disclose the patent to USP and breached that duty through silence. [Order at 19]. But “[w]hether Amphastar then relied on the standard that was set, USP <207>, is a close question.” There was competing testimony that ultimately became an issue of witness credibility that the jury advisory verdict apparently favored Amphastar. Amphastar started using its original 15-25% procedure in 2006 and Amphastar became aware of USP <207> in 2009. The original and revised 15-25% procedures were close to USP <207>. But there was conflicting testimony of whether Amphastar thought that FDA required it to use the test identified in USP <207>. Judge Gorton ultimately found that, consistent with the jury advisory verdict, “there was credible testimony supporting the inference that Amphastar relied on USP <207> for its continued use of the 15-25% procedure.”
Judge Gorton found that Amphastar would be materially prejudiced if Momenta’s infringement claim were allowed because Amphastar, “relying on its ability to use methods that comply with USP <207>, substantially invested in developing its capacity to manufacture, produce and market enoxaparin.” [Order at 22]
Judge Gorton then crafted a remedy similar to his waiver remedy, ruling that “Momenta is only equitably estopped from enforcing its patent against the 15-25% procedures,” because the DBB procedure does not comply with USP <207>.