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Angiotech Pharmaceuticals Inc. v. Lee

United States District Court, E.D. Virginia, Alexandria Division

June 9, 2016

ANGIOTECH PHARMACEUTICALS INC., Plaintiff,
v.
MICHELLE K. LEE, 9 Defendants.

          MEMORANDUM OPINION

          T. S. Ellis, III United States District Judge.

         In this Administrative Procedure Act ("APA")[1] case, plaintiff Angiotech Pharmaceuticals Inc., the exclusive licensee of U.S. Patent No. 5, 811, 447 ("the '447 patent") and the agent of the '447 patent's owner for purposes of this action, challenges the United States Patent and Trademark Office's ("PTO")[2] final decision denying a patent term extension for the '447 patent. In addition to holding the rights to the '447 patent, plaintiff also manufactures the ZILVER® PTX Drug Eluting Peripheral Stent ("Zilver PTX"), a medical device that physically and biologically stents arteries. The '447 patent claims a method of biological stenting to prevent the narrowing of mammalian arteries, and in plaintiffs view, the '447 patent claims a method of biological stenting using the Zilver PTX. Because the Zilver PTX could not be marketed until the completion of a lengthy review and approval process by the Food and Drug Administration ("FDA"), plaintiff seeks a patent term extension for the '447 patent pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch- Waxman Act.[3] The PTO denied plaintiffs application for a term extension on the ground that the '447 patent does not claim a method of using the Zilver PTX and therefore does not qualify for a term extension under the Hatch-Waxman Act. This action followed.

         The parties filed cross-motions for summary judgment, which have now been fully briefed and argued. Accordingly, the motions are now ripe for disposition.

         I.

         A.

         At the outset, a brief overview of the pertinent statutory and regulatory framework is useful. The FDA oversees the review and market approval of new drugs and medical devices pursuant to the Federal Food, Drug, and Cosmetic Act ("FDCA").[4] The nature of FDA review of a new drug or medical device depends on the nature of the product; for example, a new drug receives a review that differs from the review of a new medical device. See 21U.S.C.§355 (new drugs), § 360e (certain medical devices). Yet, some products-known as combination products-have therapeutic attributes "that are physically, chemically, or otherwise combined or mixed and produced as a single entity." 21 C.F.R. § 3.2(e). When reviewing a combination product, the FDA first determines the product's "primary mode of action, " which refers to the one means by which the product achieves its intended therapeutic effect that makes the greatest contribution to the product's overall therapeutic effect. See 21 U.S.C. § 353(g)(1) (regulation of combination products); 21 C.F.R. § 3.2(k) (defining "mode of action"), § 3.2(m) (defining "primary mode of action"). A combination product can have one of three primary modes of action-drug, device, or biological product-and the FDA reviews a combination product in accordance with the product's primary mode of action. See 21 U.S.C. § 353(g)(1). For example, a combination product with the primary mode of action of a device is reviewed by the FDA as if the product were a device, whereas a combination product with the primary mode of action of a drug is reviewed by the FDA as if the product were a drug. See id.

         FDA review of a new drug or medical device is often a lengthy process, not uncommonly requiring years to complete. The time-consuming nature of this process can impose certain significant costs on the holders of patents claiming new drugs or medical devices. Specifically, federal law generally provides a twenty-year term for a patent, starting from the date on which the patent application is filed. See 35 U.S.C. § 154(a)(2). This general rule places patents claiming FDA-regulated drugs or medical devices (or methods of using or manufacturing such drugs or medical devices) at a disadvantage, as many years of the patent's term can pass while the product awaits FDA approval. Because the patent owner cannot market the claimed product commercially without FDA approval, several years of the patent monopoly can be entirely unprofitable. See, e.g., Glaxo Operations UK Ltd. v. Quigg, 706 F.Supp. 1224, 1225 (E.D. Va. 1989) (observing that FDA review and approval "often require[s] years to complete, thereby diminishing the commercial rights provided by the patent"), qff'd, 894 F.2d 392 (Fed. Cir. 1990). Thus, an important policy concern in this area is that inventors may well not have sufficient incentive to expend the resources necessary to develop new drugs and medical devices, as patents claiming medical innovations subject to FDA review may have an effective life of less than the standard twenty years owing to the time consumed by the FDA review and approval process.

         Title II of the Hatch-Waxman Act represents Congress's solution to this problem by seeking to ease the tension between ensuring safe drugs and medical devices on the one hand and incentivizing the development of new drugs and medical devices on the other. The mechanism for doing so involves extending the terms of certain patents claiming products (or methods of using or manufacturing products) subject to FDA review and approval. See Glaxo Operations UK Ltd v. Quigg, 894 F.2d 392, 396 (Fed. Cir. 1990) (The Hatch-Waxman Act "encourage[s] new drug research by restoring some of the patent term lost while drug products undergo testing and await FDA pre-market approval."). Thus, once the FDA's regulatory review of a product has concluded, the owner of a patent "which claims [the] product, a method of using [the] product, or a method of manufacturing [the] product" can apply to the PTO for an extension of the patent's term pursuant to the Hatch-Waxman Act. See 35 U.S.C. § 156(a). If the product and the patent meet certain statutory criteria, the PTO "shall" extend the term of the patent. Id. In other words, term extensions are mandatory for patents that qualify under § 156.

         The PTO's final decision on a patent term extension application is an "agency action" subject to judicial review under the APA. As such, the PTO's final decision on whether to grant or to deny a patent term extension application may be "set aside" if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A).

         B.[5]

         The '447 patent-titled "Therapeutic Inhibitor of Vascular Smooth Muscle Cells"- issued on September 22, 1998. See U.S. Patent No. 5, 811, 447, at [45], [54] (filed May 25, 1995). As relevant here, claim 12 of the '447 patent recites "[a] method for biologically stenting a mammalian blood vessel, which method comprises administering to the blood vessel of a mammal a cytoskeletal inhibitor in an amount and for a period of time effective to inhibit the contraction or migration of the vascular smooth muscle cells." Id. col. 76, 11. 41-46.

         In addition to being the exclusive licensee of the '447 patent, plaintiff also manufactures the Zilver PTX, which performs both physical and biological stenting of blood vessels. Specifically, the Zilver PTX is a self-expanding nitinol[6] stent coated with the drug paclitaxel; the physical aspect of the stent imparts outward force on the vascular wall and supports the paclitaxel coating, maintaining the drug in direct contact with the vascular wall. This physical support allows the administration of the paclitaxel, which inhibits the contraction or migration of smooth muscle cells in the vascular wall and prevents restenosis, the narrowing of arteries over time.

         In June 2010, plaintiff applied for FDA approval to market the Zilver PTX commercially. The Zilver PTX is a combination product in that it comprises device and drug components, and the FDA determined that its primary mode of action is that of a device. Accordingly, the FDA agency center charged with premarket review of devices had primary jurisdiction to review the Zilver PTX. See 21 U.S.C. § 353(g)(1)(B). The FDA granted the premarket approval application for the Zilver PTX on November 14, 2012.

         On December 7, 2012, shortly after FDA approval of the Zilver PTX, plaintiff filed with the PTO an application for a patent term extension for the '447 patent.[7] This application sought a five-year term extension, the maximum amount allowed by statute, [8] on the basis that the '447 patent claims a method of using the Zilver PTX. Thereafter, in March 2015, the PTO issued plaintiff a Requirement for Information directing plaintiff to provide additional information necessary to the PTO's determination of the '447 patent's eligibility for a patent term extension.[9]Specifically, the PTO sought to discover from plaintiff how the '447 patent "claims...a method of using" the Zilver PTX consistent with the Hatch-Waxman Act. 35 U.S.C. § 156(a). In June 2015, plaintiff responded to the PTO's request by identifying claim 12 of the '447 patent as claiming a method of using the Zilver PTX. As noted, claim 12 recites "[a] method for biologically stenting a mammalian blood vessel, which method comprises administering to the blood vessel of a mammal a cytoskeletal inhibitor in an amount and for a period of time effective to inhibit the contraction or migration of the vascular smooth muscle cells." Col. 76, 11. 41-46.

         In October 2015, the PTO issued an initial decision denying plaintiffs application for a patent term extension. Thereafter, plaintiff unsuccessfully sought reconsideration of the initial decision, and the PTO issued its final decision denying plaintiffs application on December 11, 2015. The PTO's final decision explained that the Zilver PTX was reviewed and approved by the FDA as a medical device, and hence, in the PTO's view, in order for a patent to claim a method of using the medical device, the patent must recite one or more structural elements of the device. The PTO reached this conclusion by referencing the definition of "device" in the FDCA, which focuses on structural features to the exclusion of chemical features.[10] Because claim 12 focuses on biological rather than physical stenting, it does not recite the structural elements of the Zilver PTX as required under the PTO's interpretation of § 156(a), and accordingly the PTO concluded that claim 12 of the '447 patent does not claim a method of using the Zilver PTX.

         On December 21, 2015, plaintiff filed the instant action seeking judicial review of the PTO's final decision denying the application for a patent term extension.

         II.

         As this case involves a federal agency's interpretation of a federal statute, an important threshold consideration is whether the PTO's interpretation of the Hatch-Waxman Act, which in relevant part amended the Patent Act, is entitled to any deference. Judicial deference to administrative interpretations of federal law manifests in two separate doctrines, namely Skidmore deference[11] and Chevron deference.[12] The older of these doctrines, Skidmore deference, emerged over seventy years ago and instructs that the appropriate level of deference to an agency's statutory interpretation depends on the interpretation's "power to persuade, " which in turn depends on, inter alia, "the thoroughness evident in its consideration, the validity of its reasoning, [and] its consistency with earlier and later pronouncements." Skidmore, 323 U.S. at 140. Forty years after the birth of Skidmore, the Supreme Court established a stronger form of deference, Chevron deference, under which "administrative implementation of a particular statutory provision qualifies for...deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority." United States v. Mead Corp., 533 U.S. 218, 226-27 (2001).

         The PTO correctly does not request Chevron deference for the statutory interpretation advanced in the final decision denying plaintiff's patent term extension application. Indeed, "Chevron deference is generally reserved for agency interpretations set forth after notice-and-comment rulemaking or a formal adjudication, " and patent term extension decisions are mere "informal adjudications." Meds. Co. v. Kappos, 731 F.Supp.2d 470, 475 (E.D. Va. 2010) (applying, inter alia, Mead Corp., 533 U.S. at 231-34, and concluding that patent term extension decisions are not entitled to Chevron deference). The informal nature of the PTO's patent term extension decisions is sufficient, standing alone, to preclude Chevron deference. See Id. But on an even broader level, "[b]ecause Congress has not vested the [PTO] with any general substantive rulemaking power...the rule of controlling deference set forth in Chevron does not apply." Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996).

         Yet, the PTO argues that its interpretation is entitled to the weaker form of deference under Skidmore. This argument must be welcome news for Skidmore, which has had a rough go of it ever since the birth of Chevron. Like the figurative older child neglected in the wake of a new sibling's arrival, in 1984 Skidmore was relegated to the status of an administrative law sideshow while the federal courts fawned over Chevron. Indeed, by the age of just three and a half years, courts had cited Chevron over six hundred times, [13] and by the time Chevron turned sixteen, some were ready to declare Skidmore dead altogether.[14] To be sure, Skidmore gets a little attention from time to time, in essence just enough tips of the hat from the Supreme Court to assure us that Skidmore is still breathing. See, e.g., Mead Corp., 533 U.S. at 234-39; Met. Stevedore Co. v. Rambo, 521 U.S. 121, 136 (1997). Still, the fact remains that Skidmore is in large part an afterthought, shunted into Chevron's shadow, invoked only after Chevron has been deemed inapplicable in a given case, and afforded perhaps a day's worth of lecture time in administrative law courses.

         But Skidmore still has at least one friend-the Federal Circuit-where "Skidmore deference carries more force than in other circuits." Exelixis, Inc. v. Kappos, 906 F.Supp.2d 474, 483 n.21 (E.D. Va. 2012), vacated and remanded on other grounds sub nom., Exelixis, Inc. v. Lee, 550 F.App'x 894 (Fed. Cir. 2014). Indeed, although the Supreme Court has not provided much guidance on the application of Skidmore other than to suggest that "some deference" or "respect" is due to any reasonable agency interpretation of a statute the agency administers, [15] the Federal Circuit has made the effort to put some meat on the bones of the Supreme Court's "general statements" about Skidmore deference by articulating three criteria that, if present, require deference.[16] See Cathedral Candle, 400 F.3d at 1366. Specifically, (i) the agency must have "conducted a careful analysis of the statutory issue, " (ii) the agency's position must be "consistent" with past practice and "reflect[] agency-wide policy, " and (iii) the agency's position must be "a reasonable conclusion as to the proper construction of the statute." Id.

         Yet, even under the Federal Circuit's approach to Skidmore deference, the PTO's interpretation of the Hatch-Waxman Act here is entitled to no deference for at least two reasons. First, the PTO's interpretation of § 156(a) in this case does not qualify for Skidmore deference under the Federal Circuit's Cathedral Candle decision. To begin with, on this record it is unclear that the PTO's position represents an "agency-wide policy" rather than a determination limited to this case. Cf. Meds. Co., 731 F.Supp.2d at 477 (observing that patent term extension decisions are non-precedential). Without such an assurance, Skidmore deference is inappropriate under Cathedral Candle, 400 F.3d at 1366. Moreover, the PTO's statutory interpretation here cannot fairly be characterized as "careful, " which the Federal Circuit also requires before Skidmore deference is appropriate. Id. The PTO's analysis of § 156 makes at least two critical assumptions, namely (i) that the FDA's determination of a product's primary mode of action is relevant to whether a product is a drug or a device for purposes of § 156 and (ii) that the FDCA's definition of "device" applies to § 156. Regardless whether these assumptions are right or wrong-and as Part III, infra, shows, they are mistaken-the PTO's analysis is not "careful" because the PTO never sought to justify these critical assumptions. See Id. Rather, the PTO's final decision merely asserts the assumptions as foregone conclusions. See A872 ("Because the review of the [Zilver PTX] was under section 515 of the [FDCA] and not section 505 of the [FDCA], the method of using the approved product (medical device) must be a method of using [a device as defined in the FDCA]."). Thus, no Skidmore deference is due under Cathedral Candle.

         But more fundamentally, even assuming that the PTO's interpretation satisfied Cathedral Candle, it is doubtful that the PTO should be afforded Skidmore deference for an interpretation of a substantive provision of the Patent Act, such as § 156. Indeed, the Federal Circuit in Cathedral Candle discussed deference to the U.S. International Trade Commission's interpretation of a statute, not the PTO's interpretation of the Patent Act. Id. at 1366-67. To be sure, there are cases in which courts have suggested that Skidmore deference may apply to PTO interpretations of the Patent Act in some instances, [17] but courts would be prudent to treat the PTO's requests for Skidmore deference with skepticism.[18] Put simply, the logic of deference to agency interpretations of statutes is rooted in the broader logic of the administrative state, namely that agencies possess expertise that warrants respect as to interpretations of statutes that the agency administers.[19] The nation's patent law regime, however, is not a creature of the modern administrative state, and there is good reason therefore to reject the reflexive application of administrative law doctrines in the patent law context.[20]

         To elucidate this point, although the Supreme Court has acknowledged that Skidmore may well apply "where statutory circumstances indicate no intent to delegate general authority to make rules with force of law, or where such authority was not invoked, " this observation was made in the context of an agency's administration of a "regulatory scheme" characteristic of the administrative state. See Mead Corp., 533 U.S. at 235, 237. Yet, the nation's patent law regime is not a regulatory scheme in the typical administrative law sense; rather, the Patent Act operates much more like a traditional common law unilateral contract offer by Congress. Specifically, Congress has offered that if an inventor makes a discovery meeting certain criteria, then the United States will grant the inventor an intangible property right in that discovery. See 35 U.S.C. §§ 101-03 (criteria for patentability). Importantly, it is Congress that has stated the terms of the offer, and the PTO's job is merely to determine whether any given inventor purporting to have accepted the offer has, in fact, done so. In this respect, the PTO is not engaged in a regulatory function, but instead serves as Congress's agent in what functionally amounts to a contract negotiation. Indeed, if an inventor and the PTO disagree about the terms of Congress's offer or about any other provision of the "contract" embodied in the Patent Act, the dispute is resolved the same as any common law contract dispute, namely by invoking a neutral third party to determine the objective meaning of the disputed term and to enforce the contract according to that meaning. See 35 U.S.C. §§ 141, 145 (providing for judicial review). And § 156 is surely part of Congress's offer and the terms of the Patent Act's contract, insofar as § 156(a) represents a mandatory benefit to which certain inventors who accept Congress's offer are entitled.

         In light of the foregoing, when the PTO litigates a dispute under the Patent Act like the instant case, the PTO essentially stands as an offeror's agent in a contract dispute. In the law of unilateral contracts, which provides a conceptually helpful analogy, there is no background rule that an offeror (or an offeror's agent) receives a thumb on scale on interpretative matters merely by advancing a "careful, " "consistent, " and "reasonable" argument about the contract's meaning. See Cathedral Candle, 400 F.3d at 1366 (interpreting Skidmore as requiring deference where these criteria are present). Nor is there a background presumption that a party to a contract is more likely to understand the contract's terms by virtue of having been a party to many similar contracts in the past. In short, Skidmore deference-or something akin to such deference-is never due to an offeror in a contract dispute merely by virtue of his status as offeror or as a repeat player with a certain type of contract. And there is no compelling, rational reason to conclude that the PTO should be treated any differently from an ordinary contract litigant merely by virtue of the fact that the PTO is an agency. In other words, what should matter for purposes of judicial deference under Skidmore is the substance of what an agency does. Where, as here, the agency is more fairly viewed as a contracting party's agent than a regulator, this must surely be a relevant "factor" bearing on the PTO's "power to persuade." Skidmore, 323 U.S. at 140. To conclude otherwise would be to accept a form of categorical administrative agency exceptionalism in which anything reasonable that an agency says about a statute relevant to its work is entitled to some respect simply because the agency says it. At bare minimum, such respect should be limited to agencies functioning in a regulatory capacity, as the status as regulator is at least arguably reflective of the agency's specialized expertise.

         Nothing stated here should be understood as an attack on the authority of Chevron or Skidmore when applied in the proper circumstances. To the contrary, the purpose of this discussion has been to suggest that federal courts should not decouple deferential doctrines from the justifications for those doctrines. There is no dispute that Chevron and Skidmore are limited to "an agency's construction of a statute it is charged with administering." Cathedral Candle, 400 F.3d at 1365. The conclusion here is simply that, properly understood, the PTO is not "charged with administering" the Patent Act in a regulatory sense. Id. Thus, the logic of Skidmore does not fit comfortably with the functions of the PTO. Specifically, because the PTO's functions, as relevant here, are more analogous to those of an agent engaged in the ordinary private law task of complying with contract-like agreements affecting the disposition of property rather than those of a public law entity engaged in regulation, the indicia of expertise that warrant Skidmore deference are not present here. Put more simply, given the PTO's function in this context, there is no compelling reason to believe that the PTO's positions on the meaning of the Patent Act are "wise and correct" in a manner that justifies deference under an administrative law doctrine like Skidmore. See Pierce, supra note 19, § 6.4 at 334. Like any party attempting to enforce the terms of a contract, the PTO is entitled to no special deference in assessing the meaning of the terms.

         In sum, (i) because the PTO's interpretation of § 156 here is neither carefully reasoned nor constitutes agency-wide policy and (ii) because the logic of Skidmore does not apply to PTO interpretations of substantive provisions of the Patent Act like ยง 156, no deference is due here to the PTO's ...


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