Federal Circuit Addresses Standing in Decision on Appeal from PTAB

Last week, the Federal Circuit issued a decision in Altaire Pharmaceuticals, Inc. v. Paragon Bioteck, in which the court held that Altaire had standing to appeal the PTAB’s final written decision in a post-grant review (“PGR”) of Paragon’s U.S. Patent No. 8,859,623 and reversed-in-part and vacated-in-part the PTAB’s Final Written Decision.

In the Final Written Decision, the PTAB held that Altaire had failed to prove that the ’623 patent was invalid for obviousness.  Altaire appealed the PTAB’s decision and Paragon challenged Altaire’s standing to bring the appeal on the basis that Altaire was not “now engaging in infringing activities and any future plans it may have to engage in infringing activities are, at most, contingent.”  Of note, Altaire had argued that it intended to file an ANDA seeking approval of its own product.

Meanwhile, prior to the PTAB’s decision, two declaratory judgment actions were pending between the parties.  Altaire had filed a suit against Paragon seeking a declaratory judgment that Paragon had breached a non-disclosure agreement between the two companies by filing the application for the ’623 patent.  Paragon had responded by alleging that Altaire had breached the agreement and seeking the right to terminate the agreement early.  Altaire later filed a second suit seeking a declaratory judgment that the ’623 patent is invalid for, among other things, failing to name Altaire’s Chief Executive as an inventor and seeking to correct the inventorship.

The Federal Circuit held that Altaire had standing to bring the appeal under Article III of the U.S. Constitution.  The court found that Altaire had sufficiently demonstrated “imminent harm” to satisfy the requirement for “injury in fact” for standing, while noting that “all the normal standards for redressability and immediacy” of the injury do not apply when a statue provides an appellant with a right to appeal, as with PTAB proceedings.  In particular, in the declaratory judgment action, Paragon was actively seeking a declaratory judgment that it could terminate the agreement between the parties and Paragon had refused to stipulate that it would not sue Altaire for infringement of the ’623 patent.  And even if Paragon was not successful in terminating the agreement, it would expire in 2021, thus subjecting Altaire to the threat of an infringement suit at that point anyhow.  Furthermore, Altaire planned to file its own ANDA and Altaire had previously “demonstrated its production and marketing capabilities [by manufacturing and marketing its proprietary formulation as Paragon’s NDA product], such that it will be able to resume operations without difficulty.” The Federal Circuit concluded that in view of the specific circumstances at issue in this case, Altaire had sufficiently demonstrated imminent harm based on Altaire’s belief that “Paragon will inevitably sue Altaire for patent infringement” when Altaire files its ANDA and that invalidating the ’623 patent in the PGR was imperative to removing the patent as an obstacle to the filing and approval of the ANDA.  The court explained that “the threat of future injury may be sufficient to establish injury in fact if the threat was real and imminent.”

The court also found that the harm to Altaire was “concrete and particular” because the patent is “an obstacle to the filing and approval of Altaire’s ANDA for its proprietary product, which was [allegedly] misappropriated in the ’623 patent by Paragon.” The court also found that, based on the specific facts at issue here, the injury to Altaire was compounded by the risk that it would be estopped from asserting certain arguments about the ’623 patent in future infringement litigation by the adverse decision by the PTAB.

On the substance of the appeal, the Federal Circuit held that the PTAB improperly refused to consider data from experimental tests and technical testimony of Altaire’s Chief Executive because Altaire had “failed to timely qualify [the CEO] as an expert.”  In reversing the PTAB decision, the Federal Circuit noted that the regulation governing use of technical data in a PGR does not require the corroborating testimony to be delivered by an expert, and that Altaire had responded to Paragon’s arguments about the CEO’s qualifications and the applicability of the data at the earliest opportunity to do so.