Dangers May Lurk in an Acquired IP Portfolio

In life sciences the purchase of products and related IP rights is common as is the acquisition of companies for their IP. Do a thorough due diligence on the IP to ascertain if all rights can be effectively transferred. This requires considering not only express licenses, but also implied licenses created because of prior licensing of related applications. In a recent Delaware case, Horizon Medicines, LL. v. Apotex Inc., Civ 22-640-CB, Horizon discovered that it had not acquired all the IP rights to the product PENNSAID® it had purchased from Nuvo Research Inc. In settling litigation with Apotex, Nuvo signed a settlement agreement granting Apotex a license under U.S.P patents 8,217,078 (‘078) and 8,252,838 (‘838). The settlement agreement provided for Apotex to obtain the right to sell its current product, a 1.5% PENNSAID®, and a future license to a 2.0% PENNSAID® product upon a future event. The ‘838 patent was defined as the ‘838 patent “and any patents that issue from any divisions, continuations, reissues or reexaminations thereof.” The ‘838 patent generated three continuation applications with the third filed September 2014 issuing as U.S. Patent 9,066,913 (‘913), expiring in October 2027. In October 2014, Horizon acquired the PENNSAID 2.0% product and all related patent rights. In May 2022 the future event triggering Apotex’s right to sell the 2.0% product occurred when Apotex received FDA approval for its product.  Horizon immediately sued and Apotex responded with a motion for summary judgment that the 2013 settlement licensed its activities.

The issue was could a licensor grant a license to a future patent when that patent did not issue to the licensor. Horizon argued that Nuvo never owned the ‘913 patent. Apotex argued the 2013 agreement bound Horizon. The court relied on the decision in Intel Corp. v. Negotiated Data Solutions, Inc., 703 F.3d 1360 (Fed. Cir. 2012) to resolve the dispute. Intel indicates that, at least in certain circumstances, a licensor can issue a license to a future-issued patent, even if that patent issues to one other than the licensor.  In Intel, Intel and National Semiconductor had signed a cross-licensing agreement. Subsequently National sold its patents to Vertical Networks.  Vertical filed broadening reissue applications increasing the number of claims in the three patents in suit to 378 from the original 77. The broadening reissue applications issued to Vertical.  Subsequently Vertical sued Dell, an Intel customer, for infringing the three patents. The Federal Circuit noted that “the key question in this case is not whether the Reissue Patents are National Patents under the definition set forth in the Agreement, but whether the Agreement evinces an intent on the part of the parties that Reissue Patents should be treated as National Patents under the Agreement.” Intel cited two earlier cases for the proposition that patents issuing from applications subject to an earlier license agreement were considered absent language to the contrary to be subject to the original license. In concluding this, the Federal Circuit at 1366-7 stated:

Specifically, in General Protecht we observed that ‘the newly asserted continuations are based on the same disclosure as the previously licensed patents and that, by definition, the continuations can claim no new invention not already supported in the earlier issued patents.” 651 F.3d at 1361 (emphasis added). The ‘same inventive subject matter was disclosed’ in the continuation patents as in the licensed patents, and “[i]f Leviton did not intend its license of these products to extend to claims presented in continuation patents, it had an obligation to make that clear.’ Id.

TransCore and General Protecht recognized that allowing the patent holder to sue on subsequent patents, when those later patents contain the same inventive subject matter that was licensed, risks derogating rights for which the licensee had paid consideration. In situations where the full extent of an invention disclosed in a patent is licensed, the concerns raised in General Protecht and TransCore are equally relevant, regardless of whether the case involves reissue patents or continuation patents.

The Court stated at 1367 that:

The Agreement thus evinces the parties' intent that the license so granted extend not only to the claims then in existence but also to the full scope of any coverage available by way of reissue for the invention disclosed. To interpret the Agreement otherwise would allow the unilateral act of the licensor to place the licensee, which sought to eliminate any infringement risk and effect a global peace with the licensor for all claims in all patents, in a position of being exposed to further risk relating to the exact same inventions subject to the license.

The district court then looked to the Agreement to determine whether it evinces “the intent of the parties to that agreement ‘that the license so granted extend not only to the claims then in existence but also to the full scope of any coverage available by way of [continuation patents] for the invention disclosed[?]’ Intel, 703 F.3d at 1367. Here, the Agreement specifically stated “any patents that issue from any divisions, continuations, reissues or reexaminations thereof.” After dismissing other arguments, the court entered summary judgment for Apotex.

 The takeaway is that when acquiring patent rights, one must carefully analyze the licenses granted but also whether that license implicitly to extends to other later issued patents.