IP Law Daily Patent Act fee-shifting provision does not apply to Patent Office proceedings
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Thursday, June 4, 2020

Patent Act fee-shifting provision does not apply to Patent Office proceedings

By Cheryl Beise, J.D.

Pharmaceutical manufacturer could not obtain attorney fees under 35 U.S.C. § 285 for work done in connection with an inter partes review proceeding.

The U.S. Court of Appeals for the Federal Circuit has denied pharmaceutical manufacturer Almirall’s request for an award of attorney fees and costs incurred in connection with an inter partes review of a patent associated with its ACZONE® acne treatment gel. In a case of first impression, the Federal Circuit held that Section 285 of the Patent Act—authorizing a "court" in exceptional cases to award reasonable attorney fees to the prevailing party—does not apply to Patent Office administrative proceedings. Although Almirall also had requested an award of fees incurred on appeal, the Federal Circuit denied that request—without deciding whether Section 285 applies to judicial appeals of Patent Office proceedings—because there was no evidence that generic drug manufacturer Amneal Pharmaceuticals had engaged in any misconduct during the appellate proceedings (Amneal Pharmaceuticals LLC v. Almirall, LLC, June 4, 2020, Dyk, T.).

Almirall, LLC markets ACZONE® (dapsone) 7.5% topical gel, a prescription medication used to treat acne. The Food and Drug Administration (FDA) lists two patents owned by Almirall in the Orange Book as claiming ACZONE: U.S. Patent No. 9,161,926 (the ’926 patent) and U.S. Patent No. 9,517,219 (the ’219 patent). In 2018, Amneal Pharmaceuticals LLC and Amneal Pharmaceuticals of New York, LLC (collectively, "Amneal" filed petitions for inter partes review of both patents. The Patent Trial and Appeal Board instituted review of the ’926 patent. In February 2019, Amneal filed its Abbreviated New Drug Application with the FDA.

Almirall subsequently sued Amneal in district court, alleging infringement of only the ’219 patent. Amneal filed a counterclaim seeking declaratory judgment that the ’926 patent is invalid and not infringed. Shortly after that suit was filed, the parties engaged in settlement discussions. Almirall offered to enter into a covenant-not-to-sue on the ’926 patent, contingent on dismissal of the IPR of the ’926 patent. The parties were unable to reach a settlement, and the underlying IPR on the ’926 patent proceeded to trial in June 2019. The Board ultimately found claims 1–6 of the ’926 patent are not unpatentable. Amneal appealed, but on March 30, 2020, Amneal filed a motion to voluntarily dismiss its appeal. Almirall agreed that the appeal should be dismissed, but asked the court to award its reasonable attorney fees and costs pursuant to 35 U.S.C. § 285 and Rules 39 and 42. Specifically, Almirall sought reimbursement of fees and costs incurred for work on the IPR and in preparing its opposition to the present motion.

Scope of Patent Act fee shifting. Section 285 of the Patent Act provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." The Federal Circuit observed that this case appears to be the first occasion the court has had to consider the extent to which Section 285 applies to IPR appeals.

Almirall argued that the Federal Circuit is a "court" authorized by Section 285 to award fees in exceptional cases and that the award may include fees incurred during the entirety of the case, including for work during the Board proceeding. The court disagreed. "Whether or not this court can award fees for work on appeal from a decision in an IPR, section 285 does not authorize this court to award fees for work that was done before the agency on appeal from an IPR," the Federal Circuit said.

The Federal Circuit acknowledged that in Therasense, it instructed that "a case should be viewed more as an ‘inclusive whole’ rather than as a piecemeal process when analyzing fee-shifting under § 285." Therasense, Inc. v. Becton, Dickinson & Co., 745 F.3d 513, 516–17 (Fed. Cir. 2014) (citation omitted). However, the Therasense court was clearly only referring to district court and appellate court proceedings. "Appeals from the Board are a different matter," the court said. The Federal Circuit noted that that its predecessor court, the Court of Customs and Patent Appeals (CCPA), had refused to read Section 285 as pertaining to Patent Office proceedings. CCPA decisions are binding on the Federal Circuit.

In PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565, 1569 (Fed. Cir. 1988), the Federal Circuit allowed for the award of fees where Patent Office "proceedings substituted for the district court litigation on all issues considered by the PTO and the Board." However, it did so only with respect to fees incurred after the filing of a civil action, and the fees were awarded in the district court proceeding, the court explained. The district court in PPG, found that the Patent Office proceedings were intimately tied to the resolution of that action. Such was not the case here.

The Federal Circuit also distinguished a Supreme Court case cited by Almirall—Sullivan v. Hudson, 490 U.S. 877 (1989). In that case, the Court said that fees could be awarded for administrative proceedings that are "intimately tied to the resolution of the judicial action." However, Hudson was referring to a "narrow class" of qualifying administrative proceedings "where ‘a suit has been brought in a court,’ and where ‘a formal complaint within the jurisdiction of a court of law’ remains pending and depends for its resolution upon the outcome of the administrative proceedings." Melkonyan v. Sullivan, 501 U.S. 89, 97 (1991) (quoting Hudson, 490 U.S. at 892).

The Federal Circuit further said that even if it were to accept the premise that Section 285 is not restricted to district court proceedings, "the plain meaning of section 285’s reference to ‘[t]he court’ speaks only to awarding fees that were incurred during, in close relation to, or as a direct result of, judicial proceedings." According to the Federal Circuit, this language is "simply inconsistent with Almirall’s position that we can award fees incurred for work in Patent Office proceedings before this court has ever asserted its jurisdiction." The Federal Circuit also noted that this interpretation of Section 285 accords with the interpretation of similar fee shifting provisions contained in other statutes.

Because Almirall was seeking fees for work done before the Patent Office, and it alleged no behavior on the part of Amneal that possibly could justify fees incurred in connection with the appeal, the Federal Circuit rejected Almirall’s request for fees under Section 285. The court also found no basis for awarding costs. Amneal’s motion to dismiss was granted.

This case is No. 20-1106.

Attorneys: Dennies Varughese (Sterne, Kessler, Goldstein & Fox PLLC) for Amneal Pharmaceuticals LLC and Amneal Pharmaceuticals of New York, LLC. James Trainor (Fenwick & West LLP) for Almirall, LLC.

Companies: Amneal Pharmaceuticals LLC; Amneal Pharmaceuticals of New York, LLC; Almirall, LLC

MainStory: TopStory Patent GCNNews FedCirNews

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