Objective indicia of nonobviousness Whose burden is it?

Patents are presumed valid, and a defendant challenging validity has the burden of establishing invalidity by clear and convincing evidence. Did the Federal Circuit panel majority abide by this framework in Galderma Laboratories, L.P. v. Tolmar, Inc.?

No, concluded Judge Newman. In her dissent Judge Newman criticized the panel majority's approach as presuming the prior art established invalidity and placing on the patentee the burden of establishing patentability based on objective indicia. The majority's decision in Galderma may serve as a hurdle in cases where branded pharmaceutical companies rely on objective indicia of nonobviousness to support patent validity.

The Galderma District Court Decision

Galderma was a Hatch-Waxman case based on Tolmar's filing of an ANDA seeking approval to market a generic version of Galderma's Differin Gel, 0.3%, a topical medication containing 0.3% adapalene for the treatment of acne. Adapalene is in a class of compounds that were generally known to have dose-dependent tolerability issues, with higher doses resulting in unacceptable levels of side effects. Prior to launching the 0.3% product, Galderma had marketed a 0.1% adapalene product for the treatment of acne. Galderma's 0.3% product was shown to improve acne compared to the 0.1% product while at the same time maintaining comparable tolerability.

After a bench trial, the district court ruled in favor of Galderma on several issues, including finding that the asserted claims were not invalid due to obviousness. In so doing, the district court concluded that the prior art did not disclose 0.3% adapalene would be appropriate for treating acne and, moreover, that the art taught away from the use of 0.3% adapalene because the art suggested a dose-dependent increase in side effects. The district court further found that unexpected results (in particular, the comparable tolerability of 0.1% and 0.3% adapalene) and commercial success (impressive sales of Galderma's 0.3% product while facing competition from generic 0.1% adapalene products) further demonstrated the invention was not obvious.

The Galderma Panel Majority Decision

On appeal, Tolmar's obviousness argument was based primarily on three pieces of prior art: two of Galderma's patents (the "Shroot '720 patent" and "Shroot '440 patent") and Galderma's Data Sheet for its earlier-launched 0.1% adapalene product, Differin 0.1% Gel. According to the panel majority, the Shroot '720 patent disclosed adapalene along with other compounds, and provided examples with adapalene as an active ingredient in concentrations of 0.001%, 0.1%, and 1%. The specification also mentioned that the compounds of the invention were useful for the treatment of acne and further stated that compounds of the invention could be used in concentrations preferably between 0.01% and 1%. The Shroot '440 patent contained a claim which recited a preferred range of 0.01% to 1% for cosmetic compositions which included the compounds of the invention (e.g., adapalene) as the active ingredient. Both of the Shroot patents had been listed in FDA's Orange Book as covering Galderma's Differin 0.1% Gel as well as Differin Gel, 0.3%.

The Federal Circuit panel majority found that "the prior art Shroot patents disclose topical adapalene compositions for the purpose of treating acne in a preferred range of 0.01%-1%" and that "the Shroot patents disclose all of the limitations of the asserted claims, except for a precise teaching of 0.3% adapalene and the specific inactive ingredients of the asserted claims." The panel majority proceeded to announce the following burden-shifting approach:

where there is a range disclosed in the prior art, and the claimed invention falls within that range, the burden of production falls upon the patentee to come forward with evidence that (1) the prior art taught away from the claimed invention; (2) there were new or unexpected results relative to the prior art; or (3) there are other pertinent secondary considerations

Against this framework, the panel majority evaluated the patentee's evidence. Although the panel majority left undisturbed the district court's factual finding that increasing the dose of adapalene beyond 0.1% would result in a concomitant increase in side effects, the majority found that the district court erred in concluding the prior art taught away from increasing adapalene concentration. The majority concluded that the unexpected result was merely a difference in degree, and not a difference in kind, and was therefore not probative of non-obviousness. And although the panel majority left undisturbed the district court's finding that Differin Gel, 0.3% was a commercial success, the majority found this fact to be of minimal probative value because market entry of competitor 0.3% adapalene products had been precluded due to blocking patents.

Judge Newman's Dissent

Judge Newman began her dissent acknowledging that the obviousness question was close. Particularly because it was a close call, and because of the biological and medicinal subject matter of the dispute, Judge Newman faulted the majority for failing to give proper deference to the district court's analysis and in failing to apply a proper obviousness analysis where the burden remains on the defendant:

My colleagues on this panel give scant attention to the district court's analysis, instead making their own findings, and applying flawed procedural and substantive law. My colleagues do not identify clear error in the district court's findings; instead they distort the burdens of proof and production, ignore the applicable standard of proof and rely on their own factual determinations and creative theories of law, and eradicate the patent.

Judge Newman analyzed the district court's opinion, explained how the district court received evidence and expert testimony from both sides on the obviousness issues, and determined that clear error had not been shown for the district court's teaching away, unexpected results, and commercial success findings. Judge Newman emphasized that in response to Tolmar's arguments that the claimed inventions were prima facie obvious, the district court unlike the panel majority correctly applied In re Cyclobenzaprine Hydrochloride Litigation, 676 F.3d 1063 (Fed. Cir. 2012) and explained that "the proper analysis of obviousness under 35 U.S.C. 103 requires that 'all evidence relevant to obviousness or nonobviousness be considered, and be considered collectively,' without resort to presumptions of prima facie obviousness or burden-shifting." Judge Newman criticized the panel majority for placing the burden on the patentee to establish patentability, explaining the majority opinion "presumes that the prior art establishes invalidity, and places on the patentee the burden of establishing patentability based on 'secondary considerations.'"

Potential Impact of the Galderma Panel Majority

Hatch-Waxman litigation often involves patents related to novel delivery systems, new amounts of the active ingredient or excipients, new forms of the active compound, novel controlled release formulations, and novel combinations of active ingredients. These patents often represent some improvement over what was already known in the art. Judge Newman cautioned that the majority's approach would create a barrier to improvement patents. She proclaimed "[i]n refusing to credit any of the demonstrated 'secondary considerations' my colleagues foreclose patentability to a vast body of improvement patents. . . . the court places new obstacles in the path of improvement patents, a change of law that is particularly pernicious in the arts where small differences may have large consequences or benefits."