CAFC Flexes It's Muscle on Obviousness, Infringement

PharmaStem Therapeutics, Inc. v. Viacell, Inc. (05-1490) July 9, 2007

PharmaStem sued Viacell and 5 other defendants over broad patents related to stem cell medical treatment for persons having compromised blood and immune systems. After a 3 week jury trial, the jury returned a verdict in favor of PharmaStem, finding that the patents were not obvious and infringed. After the defendants filed JMOL motions to overturn the verdicts, the district court reversed the finding of infringement, but maintained that the patents were not invalid. Prior to, and during, the litigation, PharmaStem's patents survived 3 reexamination requests.

In a controversial split opinion, the CAFC upheld the JMOL on infringement and sua sponte held that the patents were invalid for obviousness.

Infringement:

One of the sticking points in the litigation was language in the claims that required that the recited composition contained stem cells "in an amount sufficient to effect hematopoietic reconstitution of a human adult."

Each of the defendants are in the business of servicing families with newborn infants in which blood from the infant's umbilical cord is collected and cryopreserved for possible later use. The problem was that PharmaStem could not show enough evidence that the defendants' cord blood contained a "sufficient" supply of stem cells to effect successful reconstitution of an adult. An expert provided testimony based on the defendants' marketing materials, but did not consider any data regarding the composition of the cord blood units. Accordingly, the expert's testimony was excluded.

In a more interesting move, the CAFC also determined that the method claims could not be infringed because all the steps were not performed by the same party - the defendants were responsible for collecting and cryopreserving cord blood samples, while transplant physicians unrelated to the defendants thawed the cord blood and used it for transplanting. Also, since the defendants never "owned" the blood, there was no contributory infringement:

While cord blood is certainly a product, the transaction between the defendants and their clients is plainly not the sale of "a material or apparatus for use in practicing a patented process," as is required by section 271(c) with respect to method patents. The evidence at trial showed that the cord blood remained the property of the families throughout the period in which the defendants stored it. The defendants were never owners of the blood, but instead were merely bailees; they were not free to dispose of the blood as they chose, but were contractually obligated to preserve it pending the families’ need for it at some point in the future. On those occasions when the cord blood was needed, the defendants provided the blood to transplanters in satisfaction of their contractual obligation to ship the families’ cord blood samples to a transplanter upon direction. Neither that transaction nor any earlier transaction between the families and the defendants constituted a "sale" of the cord blood.

Obviousness:

The CAFC came out of the gate framing the obviousness issue as one revolving around the "reasonable expectation of success":

The idea of using cryopreserved cord blood to effect hematopoietic reconstitution was not new at the time the inventors filed the applications that matured into the ’681 and ’553 patents . . . Accordingly, this is not a case in which there is any serious question whether there was a suggestion or motivation to devise the patented composition or process.

The more difficult question is whether the prior art would have given rise to a reasonable expectation of success in creating the process claimed in the ’553 patent and the composition claimed in the ’681 patent. In addressing that question, the parties focus on whether the inventors had a reasonable expectation that cord blood could be successfully used in transplants for hematopoietic reconstitution.

PharmaStem brought forward testimony asserting that those working in the transplant field did not believe blood would be suitable as a transplant tissue. However, the CAFC dismissed this evidence in light of statements made in the patentees own specification:

The problem with Dr. Bernstein’s testimony about the prior art references is that it cannot be reconciled with statements made by the inventors in the joint specification and with the prior art references themselves . . . [In the patentee's specification], the inventors acknowledged that it was previously known that the properties of cord blood are quite different from those of adult blood and that hematopoietic stem cells had been found in cord blood in much greater concentrations than in adult blood.

[C]ontrary to Dr. Bernstein’s contention that the prior art did not disclose the presence of stem cells in cord blood, the inventors cited several prior art references and stated flatly that "hematopoietic stem cells have been demonstrated in human umbilical cord blood." Moreover, the inventors noted that the prior art references showed that the concentration of stem cells in cord blood was "at a much higher level than in the adult." Nor can those statements in the specification be dismissed as
reflecting a careless use of the term "hematopoietic stem cell."

* * *

Accordingly, PharmaStem’s argument that stem cells had not been proved to exist in cord blood prior to the experiments described in the patents is contrary to the representation in the specification that the prior art disclosed stem cells in cord blood. Admissions in the specification regarding the prior art are binding on the patentee for purposes of a later inquiry into obviousness . . . Nor is there any unfairness in holding the inventors to the consequences of their admissions, as their characterization of the prior art as showing the presence of stem cells in cord blood is hardly unreasonable.

And then, the CAFC dropped the big one:

While the inventors may have proved conclusively what was strongly suspected before—that umbilical cord blood is capable of hematopoietic reconstitution—and while their work may have significantly advanced the state of the science of hematopoietic transplantations by eliminating any doubt as to the presence of stem cells in cord blood, the mouse experiments and the conclusions drawn from them were not inventive in nature. Instead, the inventors merely used routine research methods to prove what was already believed to be the case. Scientific confirmation of what was already believed to be true may be a valuable contribution, but it does not give rise to a patentable invention . . . Good science and useful contributions do not necessarily result in patentability.

PharmaStem also put forward secondary considerations in support of non-obviousness, but the CAFC was not receptive, stating that "there was no indication that the praise for the inventors’ work was based on any inventive contribution they made, as opposed to their proof, through laboratory work, that fetal blood contains large numbers of stem cells. As noted, the former is a basis for patentability; the latter is not. "

With regard to the reexamination, the CAFC viewed the analysis in the reexamination certificate as "flawed," based on similar reasons used to reverse the jury verdict.

Judge Newman's dissent: in a 31 page opinion (!!) Judge Newman took the majority to task over most every issue, stating that, while there was room to disagree over the jury's verdict, the majority opinion went too far in reversing infringement and non-obviousness. Also, Judge Newman came close to accusing the majority of exceeding its appellate authority by re-trying the case on appeal. Some notable quotes follow:

The discoveries of these inventors were met with universal acclaim and widespread utilization, including the founding of many commercial enterprises, all of which are reported to have licensed the patents except for these defendants. Unimpressed by these considerations, my colleagues on this panel now reconstruct these inventions by selection and inference, with perfect hindsight of the discoveries.

* * *

The panel majority scours the prior art for clues that could fit the eventual achievement, and then rules that the achievement was obvious, no matter that it eluded the others whose work is now compiled by this court so as to invalidate these patents.

* * *

My colleagues ignore not only the scientific experts who testified at the trial, but also the PTO examiners who conducted the three reexaminations . . . My colleagues do not explain where the PTO went wrong; instead, they rearrange the past, criticize the acclaim heaped on these inventors, and propose that if the people in this field knew what this court knows, they would not have been so impressed.

* * *

The question is whether the jury's verdict is sustainable on the evidence presented, not whether we could have or would have gone the other way on the evidence presented.

* * *

It is often far easier to recognize the problem than to find and demonstrate the solution. The patent law recognizes that advances of great power may be based as much on persistent and skilled investigation as on the flash of creative genius, for both serve to transcend that which was previously achieved . . . Scientific methodology usually starts with a hypothesis based on what is already known; the record shows that several scientists mentioned the idea of rebuilding destroyed blood cells. However, none achieved this long-sought goal, and the record shows the extreme skepticism concerning even the possibility of this achievement.

* * *

The district court ruled that PharmaStem had not proved infringement because PharmaStem did not separately analyze the stem cell content of each sample of cord blood . . . Every defendant testified that the blood it collected and stored was analyzed for cell content at the time of collection. The jury was not instructed that such evidence was inadequate and inadmissible -- as the district court ruled post-trial. On the evidence presented, this is not a sound basis for rejecting the jury's verdict. The tardy rejection of the testimony of PharmaStem's expert witness, Dr. Hendrix, is an inappropriate application of Daubert and its succeeding cases, on which the panel majority relies, for there was no criticism of the expert's scientific credentials or her analysis of the prior art and the state of the science.

* * *

The principles of patent infringement are not negated when the steps of a method claim are performed by more than one entity. There was no instruction as to legal impossibility of liability as to the '553 patent, and no objection was raised to the verdict questions. We are not told whether the legal theory of sale or rent was aired at the trial, but it is apparent that the jury was fully apprised of the nature of the accused activities, as reflected in the jury questions . . . It is irrelevant whether any steps of a method claim can be viewed as a "service;" infringement requires only that the steps be performed.