What’s Mine is Mine, What’s Yours is Mine: Ownership, Licensing, and Double Patenting

Patents can be invalid for double patenting, even if a party owns only one patent, and licenses “all substantial rights” of the other patent, based on a Federal Circuit Court of Appeals decision last week.

Obviousness-type double patenting (“ODP”) is a judicially created doctrine designed to prevent extension of the life of patent protection and to prevent multiple infringement suits by different assignees. The Federal Circuit’s decision in Immunex Corp. v. Sandoz Inc. incorporates the “all substantial rights” test into ODP analysis.

The patents at issue claim etanercept and methods of making it, thus covering Immunex’s drug, Enbrel®. Sandoz filed an abbreviated Biologics License Application to market its biosimilar version, which resulted in the present infringement suit under the Biologics Price Competition and Innovation Act.

Immunex had an exclusive license to a family of patents owned by Roche. Roche and Immunex entered into an “Accord & Satisfaction” agreement, which gave Immunex an exclusive right to control prosecution of the applications in the family of patents. At the district court, Sandoz unsuccessfully argued that the asserted claims are: (1) invalid for ODP, (2) invalid for lack of written description and enablement, and (3) obvious. On appeal, Sandoz argued that the patents at issue are invalid for ODP over several other patents originally filed and owned by Immunex. Sandoz asserted that even though the patents at issue are assigned to Roche, Immunex effectively owns them, because all substantial rights in the patents transferred to Immunex pursuant to the Accord & Satisfaction agreement.

Prior to the present case, this “all substantial rights” test was applied only to determine who may sue for infringement. Sandoz asserted that if a party is the effective patentee to bring an infringement action, then it is also an effective patentee for ODP. Otherwise, parties could circumvent limitations on patent term simply by classifying an assignment as a license. Immunex countered that common-ownership based ODP arises only where the inventions were actually owned by the same entity at the time of the invention, regardless of licensing activity.

The Federal Circuit ultimately adopted Sandoz’s proposed test because it upheld the principles underlying ODP. The court specifically provided the following recitation of the test:

…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.

Having decided the standard to apply, the court then evaluated the facts of the agreement to determine whether it was effectively an assignment, transferring all substantial rights in the patents at issue. To do this, the court evaluated the entirety of the agreement to determine whether Immunex was effectively a patent owner. Enforcement (the patent owner’s right to sue for infringement) and alienation (the patent owner’s right to sell the patent) are important in this analysis.

In evaluating the agreement, the court determined that not “all substantial rights” were transferred because:

• Roche’s secondary right to sue, if Roche used it, gave Roche sole control over deciding whether and when to bring an infringement suit.

• If Roche sued for infringement, then the agreement prohibited Immunex from granting a royalty-free sublicense to the defendant. Roche also would retain any and all damages from such a suit.

• Roche has a right to veto any assignment of Immunex’s interest in the patents at issue. 

• The purpose of the agreement was to eliminate the continuation of obligations to pay royalties to Roche.

In a dissenting opinion, Judge Reyna essentially agrees that the “all substantial rights” test should control this situation. However, the dissenting opinion disagrees with the way that the majority applied this test to the facts in this case.

Because the majority of the court held that there was not a transfer of all substantial rights in the patents at issue, they were not subject to ODP. The court also was not persuaded by Sandoz’s arguments regarding written description and obviousness.