Patent Law | Expert Legal Commentary

March 16, 2012

Celsis In Vitro, Inc. v. Cellzdirect, Inc.: Federal Circuit Disagrees on Obviousness Analysis Post-KSR

Celsis In Vitro, Inc. v. Cellzdirect, Inc.

By Jeff Zuber of Zuber Lawler & Del Duca and Sarah S. Brooks of Stradling Yocca Carlson & Rauth

Celsis In Vitro, Inc. v. Cellzdirect, Inc.: Federal Circuit Disagrees on Obviousness Analysis Post-KSR

The Federal Circuit recently affirmed a preliminary injunction after analyzing patent for obviousness in light of KSR. In Celsis In Vitro, Inc. v. Cellzdirect, Inc., 664 F.3d 922 (Fed. Cir. 2012), the majority of the Court found no clear error in the district court’s record, which found all four preliminary injunction factors in favor of Celsis. Specifically, the Court closely examined the record on the issue of patent validity on non-obviousness. While the majority framed the patent’s claims as a whole and thus novel, the dissent considered the patent’s claims individually and found evidence of each being present in prior art.

Background

Celsis is the assignee of the ‘929 patent, which claims a process to preserve hepatocytes, a type of liver cell, by freezing it multiple times.  Specifically, the hepatocytes are frozen, put through a density gradient fractionation process to separate the viable hepatocytes, and then re-frozen and thawed without having to repeat the density gradient step.  The ‘929 patent is useful in the market because it allows these liver cells to be preserved and used when needed in research.  Previously, hepatocytes could not be viably preserved and researchers relied on fresh cells from unused but unpredictable liver donations.  Thus, researchers needed a way to properly preserve hepatocytes to create predictable and diverse supply. Id. at 925.

Celsis manifested the ‘929 patent with its LiverPool multi-cryopreserved hepatocyte products.  Celsis’ competitor, LTC, also sold multi-cryopreserved hepatocyte products.  In June, 2010, Celsis sued LTC for infringement of the ‘929 patent.  The district court granted a preliminary injunction against LTC.  LTC appealed the preliminary injunction and moved for a stay pending appeal.  Id.

Majority Views Patent Claims as a Whole; Upholds Injunction

The Federal Circuit reviewed the district court’s decision for clear error of judgment in weighing the relevant factors or discretion based on error of law. Id. at 926.  The Court analyzed the four factors of a preliminary injunction: (1) likelihood of success on the merits; (2) irreparable harm; (3) balance of hardships; and (4) public interest. Id.

On likelihood of success, the Court examined LTC’s two defenses of non-infringement and obviousness in light of Celsis’ strong evidence of infringement.  The Court found no clear error in the district court’s finding in favor of Celsis demonstrating success on the merits or in finding against LTC’s defense of non-infringement. Id. at 926.  In doing so, the Court rejected LTC’s argument that language in a ‘929 claim, which stated “without requiring”, should be interpreted as “prohibited.” Id.

The Court focused instead on whether Celsis is likely to succeed on the issue of non-obviousness.  The Court cited the obviousness analysis factors, including (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the claimed invention and the prior art; and (4) the objective evidence of nonobviousness.” Id. at 928.

The Court cited several factors from the record that weighed in favor of Celsis’ demonstrating a likelihood of success on non-obviousness.  First, the district court found that the scholarship in the area of hepatocyte preservation by freezing was “crowded for many years” but that “there was not one reference to multi-cryopreservation.”  Id.  Thus, the Court found a significant distinction between previous research on hepatocyte freezing, which advised against multiple freezing steps due to the damage such practices usually caused versus the ‘929 patent, which claimed viable hepatocytes using two freezing steps. 

Second, the district court found LTC’s expert testimony unpersuasive as they could not explain why previous articles and research, which all concluded that a single round of freezing decreases hepatocyte viability, somehow made the ‘929 claims obvious. Id. at 929.  Contrary to prior art, the ‘929 patent claims multiple rounds of freezing with increased cell viability. 

In sum, the district court found that “LTC’s experts did not predict the results of the claimed methods at the time of the invention, nor could they find any reference in the prior art suggesting that any other scientist had.” Id.  Thus, the Court found that the record supported the district court’s holding that a person of ordinary skill in the art would not have considered the claims obvious at the time of the invention. Id.

On irreparable harm, the Court found no error in the district court’s finding that Celsis would suffer irreparable harm absent a preliminary injunction.  “Price erosion, loss of goodwill, damage to reputation, and loss of business opportunities are all valid grounds for finding irreparable harm.” Id. at 930.  In front of the district court, Celsis pointed to evidence of price erosion due to LTC’s discounted prices and specific examples of Celsis losing customers to LTC. Id. at 930.  Celsis then pointed to how price erosion could lead to unquantifiable effects on Celsis’ marketing, reputation, customer base, and other business factors.  LTC did not offer expert testimony as rebuttal. Id. at 931. 

LTC did put forth a new argument on appeal, saying that those factors are quantifiable in a two-person market, which LTC alleged, but the Court declined to hear that argument because LTC failed to raise the issue before the district court. Id.  Thus, the Court declined to reverse the district court’s finding in favor of Celsis on the factor of irreparable harm. Id.

On the balance of harms, the Court found no clear error in the district court’s finding in favor of Celsis. Id.  The Court noted that without a preliminary injunction, Celsis would “lose the value of its patent as well as suffer the irreparable harms opined on by its expert.”  Conversely, the Court found that the “record suggests that LTC’s losses were the result of its own calculated risk in selling a product with knowledge of Celsis’ patent.” Id.

On public interest, the Court cited its previous cases in finding for Celsis.  The Court cited the interest in upholding patent rights, as well as the importance of encouraging drug research and development through the patent system. Id. at 932. 

In sum, the Court found no reversible error after examining the district court’s record, which found all four preliminary injunction factors in favor of Celsis.  Thus, the Court affirmed the preliminary injunction. Id.

Dissent Views Process as a Combination of Steps Found in Prior Art

Dissenting Judge Gajarsa disputed the majority’s decision, calling the district court’s obviousness analysis “legally deficient.”  Id. at 932.  Specifically, Judge Gajarsa framed the ‘929 patent as simply using known techniques (freezing) and then repeating them.  Under this understanding, the dissent argues that all of the claimed elements were present in the prior art – freezing, gradient fractionation, and freezing again. Id. at 933.  “This ‘invention’ is a patent for a combination which only unites old elements with no change in their respective functions and obviously withdraws what already is known into the field of its monopoly, which is a principal reason for finding a patent obvious.” Id. (citing Great Atl. & Pac. Tea Co. v. Supermarket Equip. Corp., 340 U.S. 147, 152-153 (1950); KSR Int’l. Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007))

The dissent also disagrees with the majority’s understanding of KSR.  The dissent points out that “the majority…faults LTC for failing to point out an explicit teaching, suggestion, or motivation to multi-cryopreserve hepatocytes.” Id. at 934.  However, the dissent argues that “the analysis need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ.” Id. In the instant case, the dissent argues that determining the viability of frozen hepatocytes “was simply to pursue it.” Id.  The dissent again references KSR for the rule: “[w]hen there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill in the art has good reason to purse the known options within his or her technical grasp, the invention is likely obvious.” Id.  (citing KSR, 550 U.S. at 421).  Thus, the dissent deems the process “is not entitled to be deemed an invention.”  Id.

The dissent then took issue with the evidentiary standard for LTC to avoid a preliminary injunction.  The dissent argues that “LTC needed only to offer proof that the ‘929 patent was vulnerable, as opposed to clear and convincing evidence of its invalidity.” Id.  The dissent goes on to press that the record “raises a substantial question on that issue…By relying on the patent and admissions from Celsis’ expert, LTC demonstrated that all of the claim elements were present in the prior art.” Id. at 935.  Thus, the dissent thought the district court abused its discretion in issuing a preliminary injunction in favor of Celsis. Id. 

Conclusion

The Court’s division in Celsis points to ongoing disagreement about obviousness analysis in light of KSR.  Parties involved in patent prosecution and litigation should contact experienced patent counsel to see how the ambiguity highlighted in Celsis may affect your ability to protect your intellectual property.

About the Authors

Jeff Zuber is a Partner of Zuber Lawler & Del Duca, focusing on intellectual property litigation and arbitration.

Sarah S. Brooks is an Associate of Stradling Yocca Carlson & Rauth, focusing on intellectual property litigation.

Image Credit: ©iStockphoto.com/malerapaso

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Jeff Zuber
Sarah S. Brooks

Companies Mentioned

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