The US Court of Appeals for the Federal Circuit endorsed for the first time the “all substantial rights” test to determine whether inventions are commonly owned for purposes of obviousness-type double patenting validity analysis of a later patent. Immunex Corp. v. Sandoz, Inc., Case No. 20-1037 (Fed. Cir. July 1, 2020) (O’Malley, J.) (Reyna, J., dissenting). The Court determined that patents were not commonly owned—and therefore a later patent was not invalid for obviousness-type double patenting—when the patentee retained a secondary right to sue for infringement and the right to “veto” further assignment of the patents by the grantee.
Roche licensed a family of patent applications to Immunex. Under the license agreement, Immunex agreed to pay a running royalty to Roche based on sales of products incorporating the patented technology. Non-party Amgen subsequently acquired Immunex. Amgen, Immunex and Roche entered into an agreement to eliminate the continuing royalties to Roche. The agreement granted to Immunex a paid-up, irrevocable, exclusive license to the US patent family for the patents-in-suit and gave Immunex the sole right to sublicense. It further granted Immunex the exclusive right to prosecute applications in the US patent family. Critically, Roche retained the secondary right to assert the patents if Immunex did not assert them in litigation after being informed of potential infringement, and the right to veto any downstream assignment by Immunex to a third party.
Immunex and Roche later sued Sandoz for infringing a patent included in the license agreement. At trial, Sandoz argued that the patents-in-suit were invalid for obviousness-type double patenting over several patents filed by Immunex.
The judicially created doctrine of obviousness-type double patenting prohibits claims in a second patent that, while not for the same invention, are so similar to the claims of a commonly owned earlier patent that granting both patents exclusive rights would “effectively extend the life of patent protection.” This doctrine rests primarily on two justifications: preventing unjustified extension of the time of the right to exclude, and preventing multiple infringement suits by different assignees. The doctrine applies to all commonly owned patents, including cases in which the obvious variant inventions have different inventors.
Urging a novel theory of common ownership, Sandoz argued that although the patents-in-suit were assigned to Roche, Immunex effectively owned both the Immunex patents and the patents-in-suit. Sandoz asserted that the agreement between Amgen, Immunex and Roche conveyed “all substantial rights” in the patents-in-suit, which was tantamount to an assignment of ownership. Thus, Sandoz argued that the “all substantial rights” test, which previously had only been used to determine who had standing to sue for infringement as a “patentee” under 35 USC § 281, should apply in the context of obviousness-type double patenting.
Immunex argued that the “common ownership” analysis should take into account ownership at the time of invention, such that common-ownership-based obviousness-type double patenting arises only where the relevant inventions were owned by the same entity.
The Federal Circuit agreed with Sandoz, endorsing for the first time the all substantial rights test to determine common ownership for the purpose of obviousness-type double patenting. The Court found that determining whether a party controlling patent prosecution was the “effective patentee” under the all substantial rights test is consistent with the underlying rationales for obviousness-type double patenting: preventing unjustified patent term extensions and preventing harassment from multiple suits. However, the Court limited its holding, expressly stating that it was not importing into the doctrine of obviousness-type double patenting the entire body of 35 USC § 281 law regarding who is a statutory patentee. “We conclude only that 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.”
The Federal Circuit rejected the “time of the invention” test, noting that it “might lead to the absurd result where, even if originally applied for by inventors working under an obligation of future assignment to an employer, patents may not be considered ‘commonly owned’ because at the ‘time of invention,’ the assignment had not been effectuated.”
Ultimately, however, the Federal Circuit disagreed with Sandoz that the all substantial rights test was satisfied by the agreement between Amgen, Immunex and Roche. The Court primarily focused on Roche’s retention of specific enforcement and alienation rights. First, the Court found that Roche’s retention of a secondary right to sue “at its sole expense and under its sole control and direction” if Immunex failed to assert the patents was “inconsistent” with a conclusion that the patents-in-suit were effectively assigned to Immunex. Second, the Court found that Roche’s retention of a right to veto any assignment of Immunex’s interest in the patents-in-suit indicated that all substantial rights were not transferred.
Accordingly, the Court affirmed the trial court, holding that the patents-in-suit were not invalid for obviousness-type double patenting.
Judge Reyna, while agreeing with the majority’s adoption of the all substantial rights test, argued in dissent that in applying the test here, the “majority permits the type of gamesmanship it sought to prevent—gamesmanship in prosecution which could result in unjustified extension of patent rights.” Reyna noted that “[w]hen under Roche’s control for almost ten years, the applications from which the patents-in-suit issued did not claim the etanercept fusion protein, but rather a different fusion protein and a mutated version of etanercept. However, once Immunex retained control of prosecution, Immunex amended the applications to claim etanercept, which Immunex itself had claimed in its own patents and which was an active ingredient in Immunex’s Enbrel® product.”