Medical Device Link.

Originally Published MX January/February 2004

GOVERNMENTAL & LEGAL AFFAIRS

The evolving Festo case underscores the importance of protecting core technology.

Mark D. Barrish and Scott M. Smith

In September, the U.S. Court of Appeals for the Federal Circuit handed down the latest in a series of decisions in the patent infringement case Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd. and SMC Pneumatics Inc., commonly referred to as Festo.¹ The Festo decisions have been followed closely by patent attorneys, who are challenged to decipher the sometimes obscure and arguably inconsistent language of the courts' holdings in order to determine how best to protect their clients' inventions.

At the same time, medical technology company executives have probably at least heard of Festo.² Many of them are wondering what practical implications the evolving case may have for the security of the intellectual property (IP) that is an important element of the value of a medtech enterprise. Although the Festo decisions are difficult to understand, a few practical strategies nevertheless are suggested by the latest ruling.

Previous Festo Decisions

Festo emerged as a concern in November 2000, when the Federal Circuit handed down a decision that had large ramifications for patent holders.³ Essentially, that Festo decision held that patentees could not use the doctrine of equivalents as a ground for proving infringement of patent claims if those claims had been amended during patent prosecution. The doctrine of equivalents allows a patent holder to argue that even though a competitor's product does not exactly infringe its own patent claims—that is, does not encroach upon the claims in terms of their literal meaning—the product should nevertheless be judged to infringe the patent because it differs only insignificantly from the claimed invention.

The severe restriction placed on the doctrine of equivalents by the Federal Circuit's Festo decision would have allowed companies, in some cases, to manufacture and sell copycat devices as long as they did not literally infringe the claims of an issued patent. That would have made it more difficult for patent holders to enforce their patents.

The U.S. Supreme Court intervened in the case in 2002. It essentially held that the appeals court decision was too harsh and declared that there should be exceptions to its bar against applying the doctrine of equivalents for amended claims.⁴ The Supreme Court established three exceptions. The doctrine of equivalents could be used to defend a patent if:

• The need to demonstrate equivalence was unforeseeable at the time of the patent-claim amendment.
• The rationale underlying the argument bears no more than a tangential relation to the equivalent.
• For any other reason, the patentee could not reasonably have been expected to describe the insubstantial equivalent in question.

The Supreme Court then sent Festo back to the U.S. Court of Appeals for the Federal Circuit for it to decide whether the patent holder in the case had satisfied the terms of any of the three exceptions.

New Challenges for Patent Holders

How much light the latest court decision sheds on the meaning of the three exceptions established by the Supreme Court, and how those exceptions should apply in practice, are debatable points. A case could be made that the Federal Circuit court of appeals, being forced to accept a set of exceptions with which it did not philosophically agree, tried to keep the exceptions within very narrow boundaries and so make it difficult for patentees to qualify for them. What seems certain, however, is that the latest interpretation of law in Festo again makes it very difficult for a patent holder to assert patent infringement based on the doctrine of equivalents whenever amendments to patent claims have been made.

Another important outcome of the recent Festo decision is that judges, not juries, now will decide whether a patent holder may use the doctrine of equivalents. Decision of this issue by judges rather than juries will probably further limit the doctrine's use. That is because judges can be expected to be less likely swayed than juries by a doctrine of equivalents argument.

The latest Festo decision has several practical consequences for medtech companies, both those that hold patents and those intending to compete in an area where technology is patented. In fact, the various Festo decisions, taken all together, have reduced the scope of many existing patents. Because claims are quite commonly amended during patent prosecution, the law limits a huge number of presently existing claims to their literal language, and patent holders will not be able to enforce them under the equivalents principle. This is generally bad for patent holders and good for a medical device company hoping to enter a product field that presents a landscape of existing patents. Also, medtech company executives may want to review their licensing agreements in order to determine whether patents once believed to be a threat no longer seem so after Festo.

Looking to the future, medtech executives might want to consider a few basic strategies for IP development in light of Festo. These are:

• To concentrate on patenting core technology.
• To maximize awareness of prior art in crafting a patent strategy.
• To craft narrow patent claims not requiring amendments.

Core Coverage

One basic approach to IP protection post-Festo is to focus on quality rather than quantity in building a patent portfolio.

Some medical technology companies have focused instead on acquiring as many patents as possible as quickly as possible, almost regardless of how well the patents were written or what they actually protected. Such a strategy may be fueled by a perceived need to display an impressive stack of patents to potential funding sources as a show of IP strength. A related strategy is to apply for as many stand-alone patents as possible. These are patents that are not related to other patents in the portfolio. Again, the intent is to satisfy potential investors. Under the circumstances of an extremely limited doctrine of equivalents, however, it may be advisable to focus on a smaller number of core patents, and to plan on developing patent families around each of those core filings, rather than holding many unrelated patents.

The company could begin to create its IP portfolio by concentrating on one or two core patents that would be thoroughly and carefully prepared by knowledgeable medical device patent counsel so as to cover the company's most essential technologies. These core patents, once issued, can then be used as a foundation for building families of related patents. Continuing patent prosecution and follow-on applications would serve to keep the original core patents alive as long as possible. Pursuing the goal of generating strong, growing families of high-quality patents centered around a core technology base would enable the medtech company to protect its essential IP base and retain the ability to write new claims based on the original filing. By thus keeping its core patents alive, the company would not be forced to rely on the doctrine of equivalents to squeeze an infringement argument out of a poorly drafted patent claim.

Such a quality-over-quantity approach to patent portfolio building is particularly apt for the medical device industry owing to the significant time lag between the invention of a medical device and its introduction into the market. A copycat competitor typically will be developing products in a cycle lagging at least slightly behind that of the innovator. Therefore, when the innovating company's core patents start to issue, it will have plenty of time to enforce them.

Prior Art

Medical technology company executives and their patent lawyers should have a deep understanding of the patent landscape within which their company is operating (or hopes to operate), as well as their company's core technologies. Budding device companies have sometimes filed patent applications with nothing more than a general idea of what's out there, or even with their eyes purposely shut to the prior art, in hopes that they could be issued a few patents and worry about enforcement later. After Festo, however, this is a dangerous course.

Because any amendments of a claim during prosecution will usually make a doctrine of equivalents argument for that claim nearly impossible to uphold, amended patent claims may lose much value. Therefore, an experienced patent attorney should work with the device company to learn as much as possible about the company's core technology, as well as the prior art, before drafting the first patent application. The patents that result not only will cover the core technologies effectively but will also be freer of amendments and the concomitant loss of doctrine of equivalents support.

Device company executives, therefore, should ask their patent counsel to perform prior art searches, preferably employing a patent searcher with considerable experience in the medical device field. Although some types of searches are more extensive—and expensive—than others, a search of reasonable scope that is conducted by someone knowledgeable in the field can be invaluable in preparing and prosecuting a patent application.

In addition, medtech executives should work closely with their patent counsel to describe not only what improvements innovative devices and methods provide but also why the improvements were made. When company leaders and the patent attorney understand what problem the new device overcomes and why the device was improved in the way it was rather than some other way, they will also better understand the company's core technologies and thus will be able to draft patent claims that require fewer amendments.

Narrow the Field

Another post-Festo strategy for medtech companies to consider is to work with patent counsel to craft as many narrow claims as possible. Again, this will involve educating the attorney about the many subtle improvements provided by the innovative device. During prosecution of the patent application, it may be advantageous to allow some of these narrower claims to issue while dropping one or more of the broader claims. The broader claims can then be pursued in continuing applications.

If the device has already been approved by FDA and the patent issues with a number of narrow claims, a competitor at an earlier stage of the regulatory process confronts a dilemma: either it compares its device closely with the approved device in order to streamline its own approval process and thus risks infringing the narrow issued claims, or else it contrasts its product with the patent claims and thus invites FDA to regard it as a more distinctive device requiring closer, and time-consuming, scrutiny.

It is best, of course, to avoid amending claims when a patent is being prosecuted. While it is typically the patent attorney's job to draft responses to U.S. Patent and Trademark Office (PTO) challenges regarding claims, device company executives, again, should work closely with the attorney to devise arguments for a particular device or method being patentable as claimed and without amendment.

In light of the foregoing, it is worth emphasizing that company executives should take particular care to choose the right patent counsel for their needs. This is especially important given the profusion of medical device patents issuing from the PTO and the ever-increasing volume of medical device patent litigation. General patent practitioners were perfectly capable of representing medical device companies at one time, but this may no longer be the case. A medtech company that is building its patent portfolio is better off finding a patent attorney with sound knowledge of the medical device industry, of specific technology fields within the industry, and of the best medical device patent searchers. In fact, counsel with such expertise may be essential.

Conclusion

The Festo decisions are likely to be reviewed and analyzed and picked over for years to come, and the case is not even over yet. (The most recent decision involved sending the case back to a lower court for a "final decision.") From the confusion of this long series of decisions, however, medical technology companies can glean a few practical pointers.

Festo suggests that medtech companies would do well to focus on quality instead of quantity in constructing their patent portfolios. They should work to build large patent families and keep core patents alive. Device company leaders should learn as much as they can about the prior art in relevant fields and craft patents to carve out a segment of the available territory. Also, when choosing patent counsel, medtech executives should shop wisely. They should at least consider hiring a lawyer with extensive medical device patent experience, and they should work closely with that lawyer to prepare and prosecute high-quality patents that will discourage infringement, or at least make it unrewarding.

References

1. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd., 344 F3d 1359 (Fed Cir 2003).

2. EK Karich, "The Effects of Festo on Medical Device Patents," MX (July/August 2001): 68–71.

3. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd., 95-1066, 234 F3d 558, 56 USPQ2d BNA 1865 (Fed Cir 2000).

4. Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co. Ltd., 535 US 722 (2002).

Mark D. Barrish is a partner and practice group leader and Scott M. Smith, MD, is an associate in the mechanical and medical device practice group of Townsend and Townsend and Crew LLP (Palo Alto, CA).

Illustration by JOHN LABBE/The Image Bank

Copyright ©2004 MX