by Dennis Crouch
Celsis In Vitro v. CellzDirect and Invitrogen (Fed. Cir. 2012)
This case is important because it provides an important incremental analysis of when a validity challenge is sufficiently substantial to lead a court to reject a motion for preliminary injunctive relief.
Majority opinion by Chief Judge Rader (author) and Judge Prost. Dissent by Senior Judge Gajarsa.
Celsis owns Patent No. 7,604,929 — claiming as its invention a method and system of freezing and preserving human liver cells using multi-cryopreservation. In a split opinion, the Federal Circuit affirmed the lower court's preliminary injunction order stopping the defendants from practicing the invention.
When appealed, a preliminary injunction is reviewed for abuse of discretion that requires clear error, either in “judgment in weighing relevant factors” or in the exercise of “discretion based upon an error of law.” A decision on preliminary relief is immediately appealable.
Dissent on Substantial Question of Obviousness: Writing in dissent, Judge Gajarsa argued that this case is not amenable to the “extraordinary and drastic remedy of a preliminary injunction” because the defendants “raised a substantial question as to the validity” of the asserted patent. Focusing on the burden of proof, Judge Gajarsa noted that a preponderance of the evidence is sufficient to prove the “substantial question” and that “it is unnecessary to prove a substantial question of invalidity by clear and convincing evidence.”
The the key dispute between the majority and dissent was on the issue of obviousness. Judge Gajarsa wrote:
In my judgment, the district court abused its discretion in finding that Celsis had demonstrated a likelihood of success on the merits because the claimed invention is nothing more than a repetition of steps already known in the art. Moreover, the majority perpetuates this error, and in so doing applies the wrong standard for obviousness and rationalizes the issuance of the preliminary injunction because it would prevent competition with a patented process which may be proven to be invalid.
In particular, Judge Gajarsa argued that the district court and majority improperly rejected the obviousness argument by seeking some teaching or suggestion (TSM) in the prior art that would lead someone to attempt to combine the known elements of the claimed invention.
In particular, the majority wrote that the key prior art does not disclose “micro-cryopreservation” as claimed nor does it suggest this step as a solution to problems known in the art. Chief Judge Rader wrote “This court has not seen [the Defendants] identify any teaching, suggestion, or motivation in the [prior art] that multiple rounds of freezing would somehow increase rather than decrease cell viability.” The majority agreed with the lower court that the obviousness argument lacked credibility because "not a single one of that astonishingly large body of literature was devoted to the subject of multi-cryopreservation of hepatocytes." Judge Gajarsa felt this fact was inconsequential because multi-cryopreservation simply involved repeating steps that were already known.
DDC Comment: The TSM test for combining prior art was eliminated by the Supreme Court KSR v Teleflex in much the same way that the MOT test for patentable subject matter was eliminated in Bilski. In both cases, the strict tests remain probative, if inconclusive, tools. However, in the context of a preliminary injunction a defendant's failure to provide a motivation to combine prior art may well be sufficient find a patent “likely nonobvious.”
Although identified as a “factor”, the likelihood of success factor turns out to be a necessary element of a successful motion for preliminary relief. In other words, if the plaintiff is unable to prove that it has a sufficient likelihood of success on the merits of the case then the district court will deny the preliminary injunction motion. This case provides some assistance in determining when that threshold has been met.
Motivation versus Long Felt Need: Chief Judge Rader is known for playing logical games with the secondary indicators of nonobviousness. Here, the accused infringers provided evidence of a “market need” for the solution and argued that those market forces would prompt the variation found in the patent. That argument follows the statement in KSR that “market forces can prompt variations” of known design elements. Judge Rader flipped the argument and instead noted that such market need is when “properly linked to the claimed invention, is actually probative of long felt need under objective criteria analysis and supportive of non-obviousness.”
Preliminary Injunction Standards: A preliminary injunction is decided on a four-factor test that is almost identical to the test outlined for permanent injunctions in eBay v. MercExchange. Namely, a court must consider (1) likelihood of success on the merits, (2) irreparable harm, (3) balance of hardships, and (4) public interest. In the context of permanent relief, the likelihood of success on the merits is no longer a factor because permanent relief is only determined after the patentee wins on the merits. In eBay, the Supreme Court included an additional factor – that monetary damages are insufficient. However, that factor is likely wholly subsumed by the “irreparable harm” factor.
Here irreparable harm was shown by expert testimony and evidence of "price erosion, damage to ongoing customer relationships, loss of customer goodwill (e.g., when an effort is later made to restore the original price), and loss of business opportunities." And, the public interest factor is normally presumed to be met in patent cases because the public interest favors enforcement of valid patents.