Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. Here's what I'm looking at today:

• A case of alleged tax evasion has unwound a $44 million antitrust judgment.

• Glaxo and Teva set to battle over off-label use of patented drugs.

• Federal Circuit says you can't patent a method of non-treatment.

As always, you can email me your own thoughts and follow me on Twitter.

Photo by AlenKadr/Shutterstock

It's Splitsville for $44 Million Cigarillo Award

You can't blame U.S. District Judge James Selna for being a little chafed at Trendsettah USA.

First, the marketer of the Splitarillos brand of cigarillos persuaded the Ninth Circuit to reinstate a $44 million antitrust award that Selna had thrown out. Then, the CEO of Trendsettah, also known as TSI, got himself indicted for allegedly conspiring to evade $5 million in federal tobacco excise taxes.

Now Trendsettah's former supplier Swisher International argues, and last week Selna agreed, that the $44 million award has to go—again. Although the indictment itself isn't evidence, CEO Akrum Alrahib's video-recorded admission to federal agents is, Selna ruled in Trendsettah USA v. Swisher International.

"Based on the foregoing, TSI presented to the jury and the Court a theory of 'lost profits' premised on inaccurate data which was a product of a fraudulent tax evasion scheme," Selna wrote in an Aug. 19 order. "Therefore, TSI's conduct tainted the integrity of the trial and interfered with the judicial process, and the judgment must be set aside."

Swisher was represented by Gibson Dunn & Crutcher and Akerman. Trendsettah, which had been seeking $11 million in attorneys fees, was represented by Gaw Poe.

Trendsettah first entered into a supply agreement with Swisher, a competitor, to produce its Splitarillos in 2011. At trial Trendsettah proved that Swisher reneged on delivering 200 million Splitarillos as the brand posed a growing competitive threat. Jurors awarded all of the damages Trendsettah sought: $9 million in lost profits and $5 million in future profits, trebled.

The April indictment alleges that Alrahib conspired with an with an alternate supplier named Tony Bryant to under-report $9 million in sales between 2013 and 2015. According to Selna's order, Alrahib told federal agents, "I rode Tony's train because his scheme was already moving. … When I saw his scheme, I said, wait a minute, I need to benefit from your scheme."

Trendsettah argued to Selna the allegations amount to only a "private conspiracy" that had no effect on the damage calculations. Selna disagreed. "TSI had no rights to the 'profits' that were, by Alrahib's admission, stolen from the government," he wrote.

Swisher's team featured Gibson partners Ted Boutrous Jr., Daniel Swanson and Cynthia Richman and associates Minae Yu and Julian Kleinbrodt; and Akerman partners Joshua Mandell, Michael Marsh and Ryan Roman.

Fish & Richardson's Juanita Brooks and Goodwin Procter's Willy Jay.

Who's Arguing?

The Federal Circuit holds a holiday-shortened calendar next week. Here are a couple of arguments that jumped off the page:

➤ GlaxoSmithKline v. Teva Pharmaceuticals USA. Glaxo will try to revive a $235 million jury award at a Sept. 4 hearing that it's framing as a referendum on Hatch-Waxman's application to method patents. Delaware jurors imposed the massive award after finding infringement of Glaxo's method of using its Coreg drug to treat congestive heart failure. But U.S. District Judge Leonard Stark said no reasonable juror could have found infringement because Teva had "carved out" the infringing use from the label for its Coreg generic, pursuant to Section VIII of Hatch-Waxman. Sure, Teva had touted its drug as identical to Coreg, but that didn't prove that the company actually induced doctors to prescribe off-label uses, Stark concluded. Fish & Richardson partner Juanita Brooks will represent Glaxo, which had told Stark that his decision will cause "the entire Hatch-Waxman framework [to] come[] crashing down." Goodwin Procter partner Willy Jay will argue for Teva that the law doesn't require generics to affirmatively disclaim off-label uses.

➤ Columbia Sportswear North America v. Seirus Innovative Accessories. It's hard to believe it's been almost three years since the Supreme Court issued its design patent ruling in Samsung v. Apple. The high court ruled that under Section 289 of the Patent Act, an infringing "article of manufacture" can be a product sold to a consumer (like a smartphone) or just a component of that product (like the phone's rounded corners). The justices left it to the lower courts to figure out the rest, but Apple and Samsung settled, so we're none the wiser.

Now the Federal Circuit will get a shot at explaining it. A jury awarded $3 million for infringement of Columbia's patent on an ornamental design for heat-reflective material. Seirus' Heatwave brand socks, hats and gloves infringed the design—a series of wavy lines that Columbia says is meant to evoke the impression of heat rising off a desert floor—and jurors awarded all of the profit. Fish & Richardson partner Seth Sproul will argue for Seirus on Sept. 5 that the article of manufacture is the fabric on or inside the clothing items only—not, for example, entire gloves that also include buckles, straps, pockets and zippers. Seirus further argues that U.S. District Judge Marco Hernandez improperly shifted the burden to Seirus to prove that the article of manufacture is a component. Nika Aldrich Jr. of Schwabe, Williamson & Wyatt will argue that many of the Seirus products consist entirely of the infringing fabric, that design is a "top-line differentiator" of Seirus' products, and that Seirus refused to provide discovery into profits for individual components.

Patenting a Method of (Non) Treatment

I'm not a patent expert. I just play one in a newsletter. I usually leave the shaming of stupid patents to Mark Cuban and the Electronic Frontier Foundation.

But in Tuesday's case of INO Therapeutics v. Mallinckrodt Hospital Products, I can't resist. The Federal Circuit affirmed former U.S. District Judge Gregory Sleet's decision that Mallinckrodt's 8,795,741 patent is ineligible under Section 101.

The '741 claims a method for treating infants experiencing hypoxic respiratory failure with nitric oxide gas, while minimizing the risk of pulmonary edema. The entire representative claim comprises:

(a)identifying a plurality of term or near-term neonatal patients who have hypoxic respiratory failure and are candidates for 20 ppm inhaled nitric oxide treatment;

(b)determining that a first patient of the plurality does not have left ventricular dysfunction;

(c)that a second patient of the plurality has left ventricular dysfunction, so is at particular risk of increased PCWP leading to pulmonary edema upon treatment with inhaled nitric oxide;

(d)administering 20 ppm inhaled nitric oxide treatment to the first patient; and

(e) excluding the second patient from treatment with inhaled nitric oxide, based on the determination that the second patient has left ventricular dysfunction, so is at particular risk of increased PCWP leading to pulmonary edema upon treatment with inhaled nitric oxide.

Mallinckrodt, which is represented by Wilmer Cutler Pickering Hale and Dorr, argued that this is a patentable method of treatment known as selective administration.

Two Federal Circuit judges disagreed, saying the patent is directed to a natural phenomenon. "Mallinckrodt did not develop a new use for an old drug that provides a therapeutic benefit," Chief Judge Sharon Prost wrote for the majority. "The claimed method here recites an old use of an old drug. Then it proposes no use."

Judge Timothy Dyk concurred.

Judge Pauline Newman dissented, saying it was INO and Mallinckrodt scientists who discovered the relationship of inhaled nitric oxide to pulmonary edema in certain infants. "The method that is described and claimed does not exist in nature; it was designed by and is administered by humans," she wrote.

I'm with the majority on this one. Morgan, Lewis & Bockius partner William Peterson had the winning argument for Praxair.

That's all from Skilled in the Art this week. Enjoy the holiday and see you all again on Tuesday.