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Kyle Bass Was 3 Years Too Early on Acorda Short

There ain't no joy in pharmatown today. The Federal Circuit (and U.S. District Judge Leonard Stark) have done what Kyle Bass and Erich Spangenberg couldn't: Drive a stake through the patents on Acorda Therapeutics' Ampyra treatment for multiple sclerosis.

Today's decision in Acorda Therapeutics v. Roxane Laboratories opened the door for generic companies to market competing versions of Ampyra, made new law on “blocking patents” and their impact on the obviousness analysis, and wiped 25 percent—more than $200 million—off of Acorda's market cap.

I'll bet Bass wishes he'd been short Acorda today!

This is not going to sit well with Pharmaceutical Research and Manufactures of America, which filed an amicus brief attacking the “blocking” patent argument. “If left uncorrected, this ruling could stifle innovation in the pharmaceutical industry, particularly research and development that builds on previously patented discoveries,” Covington & Burling of counsel Scott Kamholz had warned.

The Federal Circuit not only left it uncorrected, it elevated it to circuit precedent in a 56-page, 2-1 opinion from Judge Richard Taranto.

Here's the background: Researchers have been experimenting for decades with the potassium channel blocker 4-Aminopyridine, known as 4-AP, to treat MS symptoms. Elan Corp. patented a broad range of compounds, including 4-AP in 1996, to be administered once or twice daily in a sustained-release formula. But the company abandoned efforts to commercialize a product in 1998 due to side effects, primarily seizures.

Acorda licensed the patent from Elan and began experimenting with lower dosages. Eventually it found that 10 mg administered twice daily helped with one symptom—walking—without the risk of seizures. Acorda received its first patent on that formulation in 2011. Ampyra rung up $1.7 billion in sales in its first five years. The Elan patent expired earlier this year.

Teva Pharmaceuticals, Mylan Pharmaceuticals and Roxane Laboratories decided they wanted to market generic versions of Ampyra. Acorda sued them for patent infringement. Judge Stark ruled that the Acorda patents were obvious in light of previous published research showing that 4-AP helped with walking at 20 mg a day, but caused seizures at 37.5 mg.

Acorda argued that if the Ampyra dosing had been so obvious, why hadn't anyone developed anything else like it? Ampyra has enjoyed major commercial success and met a long-felt need. Those secondary considerations point strongly to non-obviousness, the company argued.

But Stark ruled, and the Federal Circuit agreed, that Elan's broad patent had “blocked” anyone else from developing an alternative treatment. Taranto emphasized the fact-specific nature of the inquiry into a blocking patent, but agreed with Stark that these facts favored the generics. “There is no evidence that Elan sought to license the Elan patent to any entity other than Acorda, or that Acorda sought to sublicense the Elan patent, either of which would dilute the power of the blocking patent,” Taranto wrote. “And what Elan granted Acorda was an exclusive license, suggesting the significance of the Elan patent's blocking power.”

Judge Timothy Dyk concurred.

Taranto's ruling hands a win to Winston & Strawn partner Charles Klein, who argued the appeal for Teva and Roxane. Paul Hastings' Bruce Wexler argued the appeal for Acorda.

Dissenting Judge Pauline Newman sounded incredulous. “The court today holds that the new Acorda treatment for multiple sclerosis, Ampyra, achieved after decades of failed research, was obvious,” is how she began her opinion.

“Commercial success is measured against the products available for the same purpose, not against infringing copies of the patented product,” she added. “Defendants do not contend that they are precluded from providing or developing other treatments for multiple sclerosis.”

This reminds me of Taranto's opinion in Gilead Sciences v. Merck, upholding U.S. District Judge Beth Labson Freeman's finding of unclean hands that rendered Merck's HCV patents unenforceable. It's causing a lot of heartburn in the pharma community, and Merck's cert petition is due next week. But Taranto has painstakingly grounded each opinion in the facts of the case, and carefully explained his reasons for deferring to an experienced trial judge.

It'll be interesting to see where each case goes from here.

More Judges Stake Out Positions on Real Parties

RPX Corp. on Friday filed its petition for rehearing of the July Federal Circuit ruling on real parties in interest at the Patent Trial and Appeal Board. RPX and new counsel Latham & Watkins argue the panel that decided their case “adopted an unprecedentedly broad test for determining who qualifies as a 'real party in interest'” in the context of inter partes review.

The petition, signed by Latham partner Gregory Garre, points out that there was no consensus on the panel that decided Applications in Internet Time v. RPX. Judge Kathleen O'Malley wrote the lead opinion, Judge Jimmie Reyna wrote a separate concurrence, and Judge Todd Hughes concurred in the judgment only. And the decision conflicts with a May opinion from a different panel that took a narrower view of real parties, Garre argues.

“The panel's decision will have a significant chilling effect on potential IPR petititioners—contrary to Congress's intent to allow anyone to challenge bad patents,” Garre writes.

One problem for RPX: The same day Latham was filing its en banc petition, the Federal Circuit was issuing yet another opinion on real parties. In Worlds v. Bungie, a panel including Chief Judge Sharon Prost, Judge Richard Taranto and O'Malley cited Applications in Internet Time with approval, as I noted Monday.

By my count, that's now at least four of the court's 12 members siding with the more expansive approach. In theory, RPX will need the votes of seven of the court's remaining eight members to prevail in an en banc decision.

Who Got the Work?

Groupon has brought aboard Weil Gotshal & Manges partner Ed Reines and Gibson, Dunn & Crutcher partner Mark Perry to attack the $83 million patent infringement verdict IBM obtained in July before U.S. District Judge Leonard Stark. IBM, which was represented at trial by Desmarais' John Desmarais and Potter Anderson & Corroon, has already served notice that it intends to seek attorneys fees and treble damages. Groupon was represented by Fenwick & West and Ashby & Geddes. With Reines and Perry on board, Groupon is promising to seek JMOL or a new trial on infringement, patent validity, patent eligibility and damages. It's also asked Stark to postpone entering judgment until the Federal Circuit hears IBM's fully briefed appeal of a PTAB decision that invalidated one of the patent claims supporting the verdict.

Perry, Reines and Groupon are facing an uphill battle. Stark has told the parties his inclination is to deny most of Groupon's post-trial motions, though he indicated he's not inclined to award enhanced damages.

Quinn Wins CRISPR Appeal

Quinn Emanuel Urquhart & Sullivan scored a big win at the Federal Circuit Monday as the appellate court backed a PTAB finding of no interference between CRISPR-Cas9 patents held by the Broad Institute and the University of California. Quinn partner Raymond Nimrod argued the appeal for the Broad, which is operated by Harvard and MIT. Jenner & Block also represented the Broad in the appeal.

Monday's ruling settles an initial clash over foundational patents to gene editing technology that can be used on human, animals and plants. The University of California, which was represented by Munger, Tolles & Olson, promised that this is only the end of the beginning. More details in my article here.

That's all from Skilled in the Art for this week. I'll see you all again Friday.