The Federal Circuit grappled with whether Moderna’s arguments that the risk of future infringement suits over its Covid vaccine gives it the right to appeal agency decisions upholding two drug-delivery patents.
The Patent Trial and Appeals Board upheld Arbutus Biopharma Corp.'s U.S. Patent No. 8,058,069 and parts of U.S. Patent No. 9,364,435 on lipid nanoparticles that protect messenger RNA in vaccines. Arbutus argues
Judges Alan D. Lourie, Kathleen M. O’Malley, and Kara F. Stoll seemed more willing to find standing in the latter appeal on the ‘069 patent, filed while Moderna was seeking emergency authorization of the Covid vaccine. The earlier appeal was filed before Moderna began development of the vaccine because the Covid-19 outbreak had not yet begun.
Moderna says Arbutus could demand patent royalties on its Covid vaccines if patents are affirmed.
Arbutus shares whipsawed as investors struggled to predict how the panel would rule. Arbutus had been up as much as 10% before the hearing began, only to drop 6.8% from yesterday’s close amid harsh questioning from the judges on the first of two arguments and then recovered during the second round of arguments. Shares were up 4.5% after the 75-minute hearings ended.
Standing for a petitioner to appeal a PTAB ruling requires active infringement litigation or the substantial risk that such a suit is imminent or other contractual rights will be affected.
Lourie made it clear he wanted to focus on standing. He joked with Moderna attorney Amy Wigmore of Wilmer Cutler Pickering Hale and Dorr LLP at the start of her first argument, “I don’t want to tell you how to argue your case but I assume you’ll begin with standing, which you’re doing in front of us right now.”
For the appeal filed before the pandemic broke out, Moderna relied on its agreements with Arbutus to license the patents to develop other drugs. Moderna’s contractual rights will be affected by a determination of whether the patents are valid, Wigmore said.
“If you’re licensed, what’s the threat of infringement?” Lourie asked.
Wigmore answered that it’s enough for its royalty payment obligations to be affected.
Arbutus attorney David I. Berl of Williams & Connolly LLP stressed that Moderna hasn’t presented evidence that invalidation of the patents it was challenging would change its royalty obligations under the license, which covers numerous patents.
Wigmore also argued that even though Covid hadn’t hit when Moderna filed this appeal, later development of the vaccine, which could lead to an infringement suit, shows there is still a live controversy between the parties.
The threat “can’t be so remote,” O’Malley said. “You can’t say that we had a license to do a bicycle and then we later did a car and so therefore we’re concerned about an infringement claim,” she said. “I understand what you’re saying, but I think you’re taking it too far.”
Appeal During Pandemic
It seems more likely the judges might find standing on the appeal filed after Covid broke out.
By that time Moderna’s vaccine was in clinical trials and the company had a contract with the government to distribute it, Wigmore said. “This is more than enough to establish a concrete injury,” she said. She also pointed to statements by Arbutus that its patent portfolio covers virtually all lipid particle delivery systems.
Burl called those statements “entirely stale” because they were made years before Covid-19 even existed.
Stoll asked Burl why Arbutus didn’t agree to Moderna’s request for a covenant not to sue over these patents. “I recognize it puts you in a really awkward position, but I think we do have to take into account that there isn’t a covenant not to sue here,” she said.
Burl said a refusal to grant a covenant not to sue isn’t enough to trigger jurisdiction under the court’s precedents. “They point to no evidence at all that we made any threat with respect to the COVID vaccine, which is the only product on which they are relying for jurisdiction,” he said.
If the court determines Moderna didn’t have standing to appeal, it won’t reach the merits of the board’s rulings.
On the issue of the validity of the patents, questions by the judges “were fairly technical, suggesting to us the panel wants to understand the details of the case, and they might take their time to come to a decision,” Jefferies analyst Kelechi Chikere said in a note to clients.
The cases are ModernaTX, Inc. v. Arbutus Biopharma Corp., Fed. Cir., No. 20-1184, argued 10/7/21 and ModernaTX, Inc. v. Arbutus Biopharma Corp., Fed. Cir., No. 20-2329, argued 10/7/21.
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