Geron Corporation v. Viacyte, Inc.

Filing 54

ORDER DEFINING SCOPE OF CASE AND DISCOVERY by Judge William H. Orrick re 48 Motion for More Definite Statement. (jmdS, COURT STAFF) (Filed on 1/9/2014)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ASTERIAS BIOTHERAPEUTICS, INC, Case No. 12-cv-04813-WHO Plaintiff, 8 v. ORDER DEFINING SCOPE OF CASE AND DISCOVERY 9 10 VIACYTE, INC., Re: Dkt. No. 48 Defendant. United States District Court Northern District of California 11 12 13 INTRODUCTION 14 The present action is an appeal of an interference proceeding held before the Patent and 15 Trademark Office (“PTO”). Defendant ViaCyte Inc. has moved to define the scope of the case 16 and discovery in the appeal. After consideration of the memoranda and argument of counsel, the 17 Court defines the scope of the case and discovery as set forth below. 18 19 BACKGROUND Plaintiff Asterias Biotherapeutics, Inc. is the assignee of two patent applications filed by 20 Gregory Fisk, the ‘447 application and the ‘875 application (collectively, the “Fisk Applications”). 21 The Fisk Applications relate to a method for turning human stem cells into populations of cells 22 capable of differentiating into insulin-producing cells normally found in the pancreas. The 23 inventions disclosed in the then-pending Fisk Applications were published to the public on June 24 19, 2003. 25 Several months later, a patent application relating to the same invention was filed by an 26 inventor named D’Amour. That application issued in 2009 as U.S. Patent No. 7,510,876 (the 27 “D’Amour Patent”), while the Fisk Applications were still pending. The D’Amour Patent was 28 subsequently assigned to defendant ViaCyte. 1 After seeing that the D’Amour Patent had been issued and covered the same invention 2 disclosed in his pending applications, Fisk instituted an interference proceeding with the Board of 3 Patent Appeals and Interferences of the PTO (the “Board”), seeking to demonstrate that he 4 invented the common subject matter of the Fisk Applications and the D’Amour Patent first. An 5 interference proceeding determines which invention has priority. Before reaching the priority 6 phase, the Board may address preliminary motions raising issues of patentability of the 7 applications and patents involved in the interference, such as lack of enablement, insufficient 8 written description, and inequitable conduct. If a decision on a preliminary motion determines that 9 one of the applications or patents is not patentable, the priority phase will not be reached. 10 Two separate interference proceedings were instituted by the Board: one between the ‘447 United States District Court Northern District of California 11 Application and the D’Amour Patent, in December 2009 (the “‘734 interference”), and one 12 between the ‘875 Application and the D’Amour Patent, in October 2011 (the “’827 interference”). 13 Because the Fisk Applications were filed earlier than the application for the D’Amour Patent, Fisk 14 was declared the senior party in the interference proceeding and accorded a presumption of 15 priority (first inventor of the common subject matter). 16 17 18 Asterias asserts that the following motions filed by the parties were fully briefed and addressed by the Board in the interference between the ‘477 application and the D’Amour Patent. 1. Enablement 19 D’Amour filed a motion arguing that the claims of Fisk’s ‘477 application were not 20 enabled, meaning that the application did not teach or “enable” a person of skill in the 21 art how to make and use the invention. On July 16, 2012, the Board granted 22 D’Amour’s motion, finding that the claims of the ‘477 application were not enabled. 23 Dkt. No. 48-3. 24 2. Inequitable conduct 25 Fisk filed a motion a seeking to take discovery regarding D’Amour’s alleged 26 inequitable conduct, beyond the limited discovery permitted in interference 27 proceedings. Dkt. No. 48-4. Fisk sought production of documents and to depose five 28 individuals: two of the inventors of the D’Amour patent, a ViaCyte employee who, 2 1 Fisk alleges, submitted a misleading declaration to the PTO during the prosecution of 2 the D’Amour patent, a ViaCyte employee who consulted regarding the declaration, and 3 the patent prosecutor that represented D’Amour during the prosecution. Id. at 9-10. 4 The Board denied Fisk’s motion for additional discovery. Dkt. No. 48-5. The Board 6 surmised that Fisk did not have a prima facie case of inequitable conduct (if he had, he 7 would not be seeking deposition testimony of D’Amour witnesses). Consequently, 8 “[g]iven the Board’s current backlog, it would not be the most efficient use of Board 9 resources from an overall docket management point of view to spend those resources 10 conducting trials to take live cross-examination testimony.” Id. at 4. The Board noted 11 United States District Court Northern District of California 5 that its “decision declining to get into inequitable conduct in this interference does not 12 foreclose consideration of the issue in the event D’Amour ultimately prevails in the 13 interference and thereafter files an infringement action against Fisk. Inequitable 14 conduct can be raised in the infringement action, where Fed. R Civ. P. discovery is 15 available and the same clear and convincing standard of proof would be applicable.” 16 Id. at 6. 3. Anticipation 17 18 Fisk filed a motion arguing that his ‘477 application anticipated1 the claims of the 19 D’Amour patent, rendering the D’Amour patent invalid. The Board denied Fisk’s 20 motion. 4. Obviousness 21 22 Fisk filed a motion asserting that the claims of the D’Amour patent are obvious 23 combinations of the ‘477 Application and other prior art references. The Board denied 24 Fisk’s motion. 25 26 27 28 1 If a single item of prior art describes a claim, that item of prior art “anticipates” the claim and the claim must be rejected under 35 U.S.C. Section 102. Sometimes, however, a claim is not described in a single item of prior art, but instead is an obvious combination of two or more items of prior art. In that case, the claim must be rejected under 35 U.S.C. Section 103 on “obviousness” grounds. 3 5. Definiteness 1 2 Fisk filed a motion asserting that the D’Amour patent fails to particularly point out and 3 describe the bounds of the subject matter of the invention, as required under 35 U.S.C. 4 Section 112, paragraph 2 (often called the definiteness requirement). The Board denied 5 Fisk’s motion. 6. Exclusion of D’Amour’s expert witness 6 7 Fisk filed a motion to exclude the testimony of D’Amour’s expert witness, Dr. Wells. 8 The Board denied Fisk’s motion. 9 Two additional motions fully briefed by the parties but not addressed by the Board are at 10 United States District Court Northern District of California 11 12 issue: 7. Earlier priority dates 13 The parties filed various motions arguing that they were entitled to earlier priority 14 dates. Asterias asserts that these motions were mooted when ViaCyte conceded 15 priority. Dkt. No. 49 at 9. Asterias notes that “ViaCyte appears to continue to concede 16 priority in this Section 146 action as well.” Id. 17 8. Amendment of claims of the Fisk applications 18 Fisk filed a motion to amend the claims of his ‘875 application. The Board did not 19 address this motion. 20 21 In January 2012, ViaCyte withdrew its challenge to the Fisk Applications’ priority, but it 22 continued to argue that the applications were not enabled. On July 16, 2012, the Board granted 23 ViaCyte’s motion for judgment on the grounds that the Fisk Applications do not provide an 24 enabling disclosure so that a person of skill in the art would be able to make and use the subject 25 matter of the Fisk claims (Motion No. 1 listed above). The Board determined that the Fisk 26 application does not enable the creation of the type of cells (definitive endoderm cells, or DE 27 cells) required by the invention. Dkt. No. 48-3 at 13 (“D’Amour has demonstrated by a 28 preponderance that HNF4α is not a marker for DE cells, thus demonstrating that the cells 4 1 2 produced in Example 4 of the Fisk ‘477 Application are not the cells required by claim 15.”). The Board also found that Fisk’s ‘477 application and his ‘875 application were not 3 patentably distinct and granted a motion filed by D’Amour to bind the parties in the ’827 4 interference—between the ‘875 application and the D’Amour Patent—to the Board’s enablement 5 decision in the ’734 interference—between the ‘477 application and the D’Amour Patent. Dkt. 6 No. 48-6. The Board found that since the claims of the ‘477 application were not enabled, neither 7 were the claims of the ‘875 application. The Board granted judgment for ViaCyte, after which 8 Asterias filed the present action before this Court. LEGAL STANDARD 10 A party dissatisfied with an adverse decision in an interference proceeding before the 11 United States District Court Northern District of California 9 Board may file a complaint in a district court. 35 U.S.C. § 146. Unlike a direct appeal to the 12 Federal Circuit under 35 U.S.C. Section 141, the parties in a Section 146 action before a district 13 court are not limited to the evidentiary record before the Board. “Because the record before the 14 district court may include the evidence before the Board as well as evidence that was not before 15 the Board,” the Federal Circuit has described a Section 146 action as “a hybrid of an appeal and a 16 trial de novo.” Winner Int’l Royalty Corp. v. Wang, 202 F.3d 1340, 1345 (Fed. Cir. 2000) (citation 17 omitted). 18 A district court in a Section 146 action may only consider issues which were adequately 19 raised in the interference proceeding. “In order for an issue to have been raised adequately so that 20 it qualifies for consideration in a § 146 proceeding, the issue should have been raised as specified 21 in the PTO’s interference rules, for example, through preliminary motions, motions to correct 22 inventorship, miscellaneous motions, belated motions delayed for good cause, or opposition to 23 these motions.” Conservolite, Inc. v. Widmayer, 21 F.3d 1098, 1102 (Fed. Cir. 1994). 24 25 DISCUSSION Asterias’s Complaint requests that the Court overturn the Board’s decisions or find for 26 Asterias on each of the eight motions listed above. See Dkt. No. 49 at 11 (citing Compl. at 6:15- 27 21). Asterias also seeks to take discovery concerning the issues raised in each of those motions. 28 In contrast, ViaCyte argues that the Court’s review should be limited to four issues decided by the 5 1 Board: the enablement motion filed by ViaCyte and granted by the Board, and the anticipation, 2 obviousness, and indefiniteness motions filed by Fisk (Asterias), which the Board denied. ViaCyte argues that the Court should not review the issue of inequitable conduct because 4 that issue was not addressed by the Board, Asterias’s assertion notwithstanding, and because it is 5 irrelevant to enablement, which will control the outcome of this matter. ViaCyte likewise argues 6 that the motions regarding earlier priority dates and amendment of the Fisk claims should not be 7 considered by the Court because they were not addressed by the Board and are irrelevant. 8 ViaCyte concedes that Fisk’s motion to exclude ViaCyte’s expert, Dr. Wells, was addressed by the 9 Board. But ViaCyte argues that the motion is moot because “just like Asterias, ViaCyte is entitled 10 to present live testimony to supplement the record. If Dr. Wells testifies on ViaCyte’s behalf, then 11 United States District Court Northern District of California 3 this Court will be able to judge for itself what weight to give Dr. Wells’ testimony. If a different 12 expert testifies on ViaCyte’s behalf, then the weight the Board gave to Dr. Wells’ testimony is 13 irrelevant.” Dkt. No. 50 at 7 n.3. 14 In sum, the parties dispute whether this action should include the issues of inequitable 15 conduct, exclusion of ViaCyte’s expert witness, amendment of the Fisk pleadings, priority of 16 invention, and the appropriate scope of discovery. 17 The Court finds that the public interest and judicial economy are best served if the Court 18 limits its review to the Board’s decisions on enablement, anticipation, obviousness, and 19 indefiniteness. If the issues not reached by the Board remain relevant after the Court’s review, the 20 Court will remand them to the Board for initial determination of the complex factual and legal 21 questions involved. It is central to the Court’s analysis that if the Court agrees with the Board that 22 the Fisk applications are not enabled, then the central dispute between the parties—which party 23 may claim the common subject matter of the D’Amour Patent and the Fisk Applications—is 24 resolved. 25 26 A. Scope of district courts’ review in Section 146 Cases The Federal Circuit has explained that the “public interest in ensuring that only those 27 patents that claim patentable subject matter are issued and maintained is best served when a 28 district court considering review of a decision of the Board resolves all issues of priority and 6 1 patentability that have been raised and fully developed.” Rexam, 182 F.3d at 1370 (emphasis 2 added). District courts may limit their review on Section 146 actions to those matters actually 3 decided by the Board and refrain from addressing matters not decided by the Board. To the extent 4 the unaddressed matters remain relevant after the district court’s review of the Board’s decision, 5 those matter may be remanded to the Board. See, e.g., Plumley v. Mockett, No. 98-cv-6117, slip 6 op. at 9 (C.D. Cal. June 4, 1999); Enzo Therapeutics, Inc. v. Yeda Research & Dev. Co. of 7 Weizmann Inst. of Sci., 477 F. Supp. 2d 699, 711 (E.D. Va. 2007); Bio-Tech. Gen. Corp. v. Novo 8 Nordisk Pharm., Inc., 2004 WL 1739722, *37-38 (D. Del. Aug. 3, 2004), Goliath Hundertzehnte 9 Vermoegensverwaltungsgesellschaft mbH v. Yeda Research & Dev. Co., Ltd., 2003 WL 10 United States District Court Northern District of California 11 22830014, *1 (D.D.C. Oct. 6, 2003). Remanding issues not addressed by the Board is “consistent with the modern scheme of 12 administrative law in which specialized agencies are responsible for initial decisions on complex 13 factual and legal matters but are accountable on review to Article III judges.” Plumley, No. 98-cv- 14 6117, slip op. at 9. Any party can then appeal the Board’s decision in a further Section 146 action. 15 B. Inequitable conduct 16 Asterias moved the Board for permission to take discovery to establish that D’Amour 17 committed inequitable conduct by withholding material information and misleading the PTO 18 during the prosecution of the D’Amour Patent. The motion did not seek to invalidate the 19 D’Amour patent based on inequitable conduct; presumably that would have been the next step if 20 Asterias obtained the discovery it hoped for. Recognizing as much, the Board noted that Asterias 21 sought discovery because it lacked a prima facie case. The Board concluded that it did “not 22 believe it is the interest of judgment to prolong this interference with yet another motion—a 23 motion for “judgment” based on alleged in equitable conduct.” Dkt. No. 48-5 at 6 (emphasis in 24 original). Nonetheless, it appears that Asterias asks the Court not only to overturn the denial of its 25 motion to take discovery regarding inequitable conduct, but also to include the presumably 26 subsequent allegations of inequitable conduct within the boundaries of this Section 146 action. 27 This the Court declines to do. If the Court affirms the Board’s finding of lack of 28 enablement, the dispute between the parties will be resolved because Asterias will no longer have 7 1 a valid pending patent application. On the other hand, as ViaCyte notes, “[i]f this Court reverses 2 the Board’s decision, then the proceeding before this Court is over because ViaCyte does not 3 contest priority of invention.” Dkt. No. 50 at 6. As the Board noted, Asterias can still raise the 4 inequitable conduct issue if ViaCyte ultimately prevails in the interference and files an 5 infringement action against Asterias. 6 At oral argument, counsel for Asterias argued that in Rexam, the Federal Circuit instructed 7 that public interest is served by district courts addressing all issues of priority and patentability 8 raised in the interference proceeding, even where one issue resolves the dispute between the 9 parties. The Court does not agree that Rexam compels the Court to reach the issue of inequitable 10 United States District Court Northern District of California 11 conduct. In Rexam, the Board declared an interference between Kodak and Rexam. The Board 12 entered judgment deciding the priority issue in favor of Kodak. Rexam, 182 F.3d at 1368. Rexam 13 then challenged the Board’s decision in a Section 146 action in district court. While the Section 14 146 action was pending, the Board declared an interference between Kodak and Avery, involving 15 the same Kodak claims at issue in the interference with Rexam. Kodak and Avery executed an 16 agreement that neither party would challenge the Board’s priority decision in the interference. 17 The Board entered judgment deciding priority in favor of Avery. Pursuant to its agreement with 18 Avery, Kodak allowed the Board’s decision to become final. As a result, Kodak’s claims—the 19 same claims which had been awarded priority in Kodak’s interference with Rexam—became 20 unpatentable to Kodak. 21 Even though Kodak’s claims had become unpatentable through the interference with 22 Avery, the Federal Circuit allowed Kodak to defend its award of priority against Rexam in the 23 Section 146 action. As the Federal Circuit explained, “[t]he reasoning is that, if Kodak has been 24 determined by the Board to have priority over Rexam, then Avery, which has similarly been 25 determined to have priority over Kodak, must have priority over Rexam, and Rexam should not 26 retain its patent.” Rexam, 182 F.3d at 1370. In other words, the Board had already determined 27 that Avery’s application invalidated Kodak’s application, and Kodak’s application invalidated 28 Rexam’s application, rendering Rexam’s application antedated (and invalidated) by both Avery’s 8 1 application (which was still patentable) and Kodak’s application. Accordingly, allowing Kodak to 2 defend its award of priority against Rexam in the Section 146 action was in the public interest as it 3 prevented Rexam from “retaining an invalid patent.” Rexam, 182 F.3d at 1371 (“Inasmuch as 4 Kodak’s award of judgment of priority by the Board prevents Rexam from retaining an invalid 5 patent, Kodak’s ability to defend its judgment reflects public policy.”). 6 Rexam is fundamentally different than this case and has no bearing on it. Unlike Rexam, in this case there has been no determination by the Board that ViaCyte “should not retain its patent,” 8 because of inequitable conduct or otherwise. Id. at 1370. Unlike Rexam, limiting the scope of this 9 matter does not allow ViaCyte to “retain[ ] an invalid patent.” Id. at 1371. On the other hand, as 10 noted above, remanding the inequitable conduct issue to the Board if that issue becomes relevant 11 United States District Court Northern District of California 7 is “consistent with the modern scheme of administrative law in which specialized agencies are 12 responsible for initial decisions on complex factual and legal matters but are accountable on 13 review to Article III judges.” Plumley, No. 98-cv-6117, slip op. at 9; see also Enzo, 477 F. Supp. 14 2d at 711 (“To the extent that any of the parties' claims relating to issues not yet resolved by the 15 Board remain after this proceeding, they will be remanded for further review by the Board.”); Bio- 16 Tech., 2004 WL 1739722, *37-38; Goliath, 2003 WL 22830014, *1. 17 For the reasons stated, this action shall not encompass allegations of inequitable conduct 18 and Asterias shall not be permitted to take discovery regarding ViaCyte’s alleged inequitable 19 conduct. 20 C. Exclusion of Dr. Wells’ testimony 21 A ruling on the admissibility of Dr. Wells’ testimony is premature, as Asterias conceded at 22 oral argument. To the extent that ViaCyte intends to rely on Dr. Wells in the course of this action, 23 Asterias can raise objections to that testimony at that time. ViaCyte may also elect not to use Dr. 24 Wells. The Court presumes that both parties will seek to supplement the record, as they are 25 entitled to do. The Court will rule on evidentiary objections at the time that evidence is presented. 26 27 28 D. Priority of invention ViaCyte has conceded priority. Accordingly, priority shall not be raised in this action and discovery relating to priority of invention is precluded as it is irrelevant to this matter. 9 1 2 E. Amendment of claims Asterias concedes that “the Board never reached this issue of amendment of the Fisk claims.” Dkt. No. 49 at 17. The Court declines to reach it here. Rather, if necessary, the Court 3 will remand the issue to the Board to allow the Court to benefit from the PTO’s specialized 4 knowledge of the complex factual and legal matters at issue. 5 6 F. Scope of discovery The question of the appropriate scope of discovery remains. ViaCyte argues that discovery 7 regarding prosecution of the D’Amour Patent and enablement, conception and reduction to 8 practice of the invention described in the D’Amour Patent is irrelevant to determining whether the 9 Fisk applications are enabled. Dkt. No. 48 at 14 (“Because it is the specification of Plaintiff’s 10 patent applications that is relevant to the question of enablement in this case, discovery related to United States District Court Northern District of California 11 the invention, or prosecution, of the D’Amour ‘876 patent serves no purpose.”). ViaCyte argues 12 that discovery regarding the D’Amour patent is also irrelevant to the obviousness, anticipation and 13 14 indefiniteness questions because “relevant evidence is limited to the prior art and the four corners of the D’Amour ‘876 patent.” Id. at 15. According to ViaCyte, “any information possessed by 15 ViaCyte, or its employees, is completely irrelevant to the questions of both enablement and 16 17 invalidity that have been decided by the Board.” Asterias counters that discovery from ViaCyte is relevant because “it is probative of the 18 knowledge and activities of skilled artisans in the field at the time of the Fisk invention, and 19 whether undue experimentation is required to practice the Fisk invention.” Dkt. No. 49 at 23. 20 In its Reply, ViaCyte responds that its internal development documents and other 21 confidential material are irrelevant to the issues of enablement, indefiniteness, obviousness and 22 anticipation, because those issues are measured against the knowledge of a person of ordinary skill 23 24 in the art at the time, and its confidential materials “do not constitute part of the knowledge of a person of ordinary skill in the art.” Dkt. No. 50 at 16. ViaCyte also notes that it invented its 25 claimed subject matter after the Fisk application was filed and, consequently, its knowledge is not 26 knowledge at the time of the Fisk application. 27 At oral argument, Asterias’s counsel urged that if ViaCyte was practicing the invention as 28 10 1 disclosed in the Fisk Applications, that would suggest that the Fisk Applications were enabled, 2 contrary to the Board’s finding of lack of enablement. 3 Both parties raise legitimate points. ViaCyte is correct that its confidential information is 4 not relevant to the knowledge of a person of ordinary skill in the art. See, e.g., Custom 5 Accessories, Inc. v. Jeffrey-Allan Indus., Inc., 807 F.2d 955, 962 (Fed. Cir. 1986) (“The person of 6 ordinary skill is a hypothetical person who is presumed to be aware of all the pertinent prior art.”); 7 Kimberly-Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 1453 (Fed. Cir. 1984) (prior art is 8 “knowledge that is available, including what would be obvious from it, at a given time, to a person 9 of ordinary skill in an art”). But Asterias is correct that if ViaCyte employees successfully practiced the Fisk Applications, that would be probative of the Fisk Applications’ enablement. 11 United States District Court Northern District of California 10 Accordingly, Asterias may seek discovery directly from ViaCyte relating to ViaCyte’s 12 practice or use of the Fisk Applications, but not with respect to the broader category of 13 confidential material it sought. There are other sources for evidence demonstrating what a person 14 of ordinary skill in the art would have known besides a competitor’s employees who were working 15 with proprietary information on a different patent. CONCLUSION 16 17 The scope of this case shall be limited to whether the Fisk applications have sufficient 18 enabling support for the subject matter claimed, whether the claims of the D’Amour Patent are 19 invalid as anticipated or obvious, and whether the claims of the D’Amour Patent are indefinite. 20 The scope of discovery in this case from ViaCyte shall be limited to enablement, specifically 21 ViaCyte’s practice or use of the Fisk Applications. 22 23 24 25 IT IS SO ORDERED. Dated: January 9, 2014 ______________________________________ WILLIAM H. ORRICK United States District Judge 26 27 28 11

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