Knowing a patent’s worth means knowing if and how it will perform its intended role. It means knowing what conduct the patent can and cannot preclude. It also means knowing how vulnerable its claims are to an invalidity challenge. As we will see, one can approach such knowledge only asymptotically.
What is possible, though, is a limited understanding of a patent’s strengths and weaknesses—a finite grasp of its worth. It is the attorney who provides this limited understanding in the form of a patent-related legal opinion, or patent opinion. Providing patent opinions is one of the most vital things attorneys do for their clients. Clients rely on them to make important and risky decisions. For instance, companies seek patent opinions before commencing infringement litigation, launching new products, or acquiring other companies. Venture capital firms seek them before investing in start-ups. The list goes on.
This chapter presents some of the most common types of patent opinion, their benefits, and their risks.
A patent opinion is a prognostication. It is not a statement of what is known or can be proven. Far from it. A patent opinion requires the attorney to predict how a given event, like a patent infringement suit, will transpire at a future date. It is simply counsel’s informed belief as to a future patent-related event.
Given the uncertainty inherent in preparing and relying on patent opinions, there are certain minimum standards that an opinion must meet to be considered “competent.” For example, it must be prepared by a qualified attorney, such as a patent attorney having a background in the relevant science. Depending on the facts, it also typically describes at least the following: the opinion’s purpose and limitations; the supporting analysis, including the materials and documents analyzed; the product or method at issue; any factual assumptions made; the relevant law, such as the law of claim construction, infringement, or patentability; the claim construction that, in counsel’s opinion, a court is most likely to adopt; and the ruling (e.g., infringement or invalidity) that, in counsel’s opinion, is most likely, given the available facts and predicted claim construction.
Patent opinions are the fruits of careful legal and factual analysis. They are usually written documents. Depending on the circumstances, though, an oral patent opinion can be delivered instead of, or in addition to, its written counterpart. In either case, patent opinions require considerable attorney time at costs often reaching tens of thousands of dollars.
These opinions vary widely in the nature and scope of legal questions they answer. Having said that, though, questions of infringement, invalidity, and freedom-to-operate tend to make up the lion’s share of patent opinion topics.
A noninfringement opinion explains why certain conduct would not likely infringe a given patent or at least one or more of its claims. These opinions are routinely sought by parties such as those planning to market a certain product or contemplating investing in a company based on a certain technology.
EXAMPLE 11.1
Biotech X owns a U.S. patent to certain single-chain antibodies. Claim 1 provides a single-chain antibody comprising amino acid sequence X1. Claim 2, the only other independent claim, provides a single-chain antibody comprising amino acid sequence X2. Sequences X1 and X2 share 80 percent homology.
Biotech Y develops modified single-chain antibodies having improved bioavailability.
Biotech Y has developed BY1, a carbohydrate-modified single-chain antibody. BY1 is a deletion mutant of sequence X1, in that it lacks amino acid residues 20–30. In addition, BY1’s sequence differs from sequence X2. Biotech Y plans to make and sell BY1 in the United States.
PEX, a private equity firm, wishes to invest in Biotech Y. As part of its due diligence, it seeks a noninfringement opinion from its patent attorney with respect to BY1 and claims 1 and 2 of Biotech X’s patent. Specifically, PEX requests a letter opining that Biotech Y’s manufacture and sale of BY1 in the United States (Biotech Y’s “contemplated conduct”) would not infringe claim 1 or claim 2 literally or under the doctrine of equivalents.
From her analysis of Biotech X’s patent, its prosecution history, and certain other relevant documents, PEX’s attorney arrives at what she believes is the most likely construction of claims 1 and 2.
Based on the construction of claim 1, she opines that Biotech Y’s contemplated conduct would not literally infringe it, given the absence of residues 20–30 in BY1. In this example, we assume that the deletion mutation confers a bioavailability on BY1 that is significantly greater than that of the claimed antibody. Accordingly, PEX’s attorney also opines that Biotech Y’s contemplated conduct would not infringe claim 1 under the doctrine of equivalents.
Regarding claim 2, and for this example, we assume that BY1 has both a bioavailability and stability that are significantly greater than those of the claimed antibody. Based on the construction of claim 2, and for at least the reasons given here, PEX’s attorney further opines that Biotech Y’s contemplated conduct would not infringe that claim literally or under the doctrine of equivalents.
EXAMPLE 11.2
Here, though, PEX seeks a noninfringement opinion from its patent attorney with respect only to claim 1, since BY1 is more similar in sequence to the antibody of claim 1 than to the antibody of claim 2.
From her analysis of Biotech X’s patent, its prosecution history, and certain other relevant documents, PEX’s attorney arrives at what she believes is the most likely construction of claim 1. Based on this construction, and for the reasons in example 11.1, she opines that Biotech Y’s contemplated conduct would not infringe claim 1 literally or under the doctrine of equivalents.
This more limited opinion is silent as to claim 2 and whether Biotech Y’s contemplated conduct would infringe it.
EXAMPLE 11.3
Here, though, Biotech Y has also invented BY2, another carbohydrate-modified single-chain antibody. Like BY1, BY2 is a deletion mutant of sequence X1. Yet, in BY2, amino acid residues 25–35 are absent. Biotech Y plans to make and sell both BY1 and BY2 in the United States.
As part of its due diligence, PEX now seeks a noninfringement opinion from its patent attorney with respect to BY1 and BY2 regarding claim 1. That is, PEX requests a letter opining that (i) Biotech Y’s manufacture and sale of BY1 in the United States would not infringe claim 1 of Biotech X’s patent literally or under the doctrine of equivalents, and (ii) Biotech Y’s manufacture and sale of BY2 in the United States would not do so either.
After construing claim 1, and for the reasons discussed in example 11.1, PEX’s attorney opines that Biotech Y’s contemplated conduct regarding BY1 would not infringe it literally or under the doctrine of equivalents.
Regarding BY2, she opines that Biotech Y’s contemplated conduct would not literally infringe claim 1, given the absence of residues 25–35 in that antibody. As with BY1, we assume here that this mutation confers superior bioavailability on BY2. Thus, PEX’s attorney also opines that Biotech Y’s contemplated conduct regarding BY2 would not infringe claim 1 under the doctrine of equivalents.
Noninfringement opinions are also useful for those trying to “design around” a third-party patent.
Here, though, Biotech Y has invented BY3, another carbohydrate-modified single-chain antibody. BY3 is a deletion mutant of sequence X1 lacking only amino acid residues 20–22.
Biotech Y plans to make and sell BY3 in the United States.
As part of its pre-investment due diligence, PEX seeks a written noninfringement opinion from its patent attorney with respect to BY3 and claims 1 and 2 of Biotech X’s patent. PEX’s attorney believes that Biotech Y’s contemplated conduct would not infringe claim 2 literally or under the doctrine of equivalents, and she provides a written opinion to PEX to that effect.
Although PEX’s attorney believes that this conduct would not literally infringe claim 1 either, she does not believe that the facts support a noninfringement opinion for that claim under the doctrine of equivalents. PEX’s attorney orally informs PEX of this unfavorable outcome, and PEX, in turn, orally informs Biotech Y.
To design around claim 1, Biotech Y develops BY3*, a modified form of BY3. BY3* lacks amino acid residues 20–22 and 50–60 of sequence X1. The second mutation, which is not present in BY3, renders BY3* superior to the antibody of claim 1.
PEX now seeks a written noninfringement opinion for Biotech Y’s design-around product BY3* with respect to claim 1. Given this product’s features, it is possible for PEX’s attorney to do so. That is, based on the construction of claim 1, PEX’s attorney opines that Biotech Y’s contemplated conduct would not literally infringe that claim, given BY3*’s lack of residues 20–22 and 50–60. She also opines that, given BY3*’s superiority, the contemplated conduct would not infringe that claim under the doctrine of equivalents.
An infringement opinion explains why a given product or method would likely infringe at least one claim of a given patent. Infringement opinions are typically prepared for patentees prior to bringing an infringement suit and for parties contemplating acquiring patent rights.
EXAMPLE 11.5
Start-Up X is developing a kit for use in testing certain human fetal abnormalities. These abnormalities correlate with defined fetal DNA mutations. In relevant part, the kit includes synthetic nucleic acids 1 and 2 (SNA1 and SNA2), which permit accurately detecting these mutations in cffDNA present in maternal blood.
Start-Up X owns a U.S. patent. Claim 1 of the patent, the sole independent claim, provides a genus of synthetic nucleic acids that encompasses SNA1 and SNA2, as well as many others. The claimed genus is defined by a consensus nucleic acid sequence.
PEX, a private equity firm, wishes to invest in Start-Up X. PEX is aware that Start-Up Y, a competing company, is also developing a nucleic acid–based diagnostic product for testing fetal cffDNA mutations. Specifically, Start-Up Y’s contemplated diagnostic kit includes synthetic nucleic acid 3 (SNA3). SNA3 is homologous to SNA1, binds to the same DNA sequence as SNA1, and does so with the same affinity as SNA1.
As part of its due diligence, PEX seeks an infringement opinion from its patent attorney with respect to SNA3 and claim 1 of the patent. Specifically, PEX requests a letter opining that Start-Up Y’s manufacture and sale of SNA3 in the United States (Start-Up Y’s “contemplated conduct”) would infringe claim 1, either literally or under the doctrine of equivalents.
From her analysis of the patent, its prosecution history, and certain other relevant documents, PEX’s attorney arrives at what she believes is the most likely construction of claim 1.
Based on this, she believes that Start-Up Y’s contemplated conduct would not literally infringe claim 1, given a single nucleotide difference between SNA3 and the required consensus sequence. However, given the absence of significant differences between SNA1 and SNA3 in the context of claim 1, she opines that Start-Up Y’s contemplated conduct would infringe that claim under the doctrine of equivalents.
In this example, PEX’s due diligence, and this infringement opinion in part, aim to establish that in a patent infringement suit against Start-Up Y, Start-Up X would likely prove infringement of claim 1.
As we learned in chapter 10, an accused infringer can avoid liability for infringing a patent claim by proving that the claim is invalid. For this reason, a party contemplating an activity believed to be infringing would first seek an invalidity opinion. An invalidity opinion gives one or more reasons, such as obviousness or lack of novelty, why a court would likely hold certain patent claims invalid. A company, investor, or other party contemplating an activity that might infringe a third-party patent would seek an invalidity opinion to assure itself that the infringed claims would likely be invalidated.
EXAMPLE 11.6
Pharma A owns a U.S. patent directed to a formulation of Drug X, a known off-patent compound for treating certain tumors. Claim 1, the sole independent claim, provides a pharmaceutical composition comprising Drug X and a known liposomal complex.
The claimed formulation has an antitumor efficacy 1.2-fold greater than that of Drug X in a non-liposomal carrier.
Pharma B plans to make and sell a liposome formulation of Drug X in the United States. In an oral opinion, and after construing claim 1, Pharma B’s patent counsel informs Pharma B that its contemplated product would likely infringe that claim, at least under the doctrine of equivalents. She also informs Pharma B that the product would not likely infringe any other claim in the patent.
In view of two prior-art references, Pharma B has its counsel prepare an invalidity opinion with respect to claim 1.
Based on her construction of claim 1, Pharma B’s counsel opines that the formulation of claim 1 would have been obvious over the combination of prior-art references 1 and 2. Reference 1 teaches Drug X and its use for treating certain tumors. Reference 2 teaches liposome formulations of antitumor drugs generally. Importantly, reference 2 teaches that several liposome formulations of antitumor drugs have efficacies “at least 20 percent greater” than those of the drugs in non-liposomal formulations.
In her opinion, Pharma B’s counsel concludes that one of ordinary skill in the field of antitumor liposomal formulations would have reasonably expected a liposomal formulation of Drug X to have a 20 percent improvement in efficacy over its non-liposomal formulation. She also concludes that nothing in the patent, its prosecution history, or the prior art suggests otherwise.
Based on this invalidity opinion, Pharma B can proceed to make and sell its product with a reasonable belief that doing so would not likely infringe any valid claim of Pharma A’s patent.
EXAMPLE 11.7
Pharma A owns a U.S. patent to certain therapeutic compounds. Claim 1, the sole independent claim, provides a genus of structurally defined compounds “for treating rheumatoid arthritis.” The genus has various substituents represented by R1, R2, and so forth, each of which has numerous possible identities.
The claimed genus encompasses more than one million individual compounds (i.e., species). However, the dependent claims and the patent specification fail to identify a single species, let alone one effective for treating rheumatoid arthritis.
Pharma B plans to make and sell PB1 in the United States. PB1 is a compound effective for treating rheumatoid arthritis and having a structure falling within claim 1’s scope. Accordingly, in an oral opinion, Pharma B’s patent counsel informs Pharma B that PB1 would likely literally infringe claim 1. She also informs Pharma B that PB1 would not likely infringe any other claim in the patent.
Pharma B has its counsel prepare an invalidity opinion with respect to claim 1.
Based on her construction of claim 1, and the patent’s failure to identify a single compound effective against rheumatoid arthritis, Pharma B’s counsel opines that claim 1 fails to satisfy the enablement and written-description requirements. Specifically, counsel concludes that as of the patent’s filing date, and based on the patent document itself, one skilled in the field of rheumatoid arthritis drug design would not have known how to make or use the claimed invention without undue experimentation. Thus, in her opinion, claim 1 is not enabled. She also concludes that based on the patent document, the inventors have not demonstrated possession of the invention. Rather, the inventors have loosely described and claimed a category of compounds yet to be invented. Thus, in her opinion, claim 1 also fails to satisfy the written-description requirement.
Based on this invalidity opinion, Pharma B can proceed to make and sell PB1 with a reasonable belief that doing so would not likely infringe any valid claim of Pharma A’s patent.
A patent claim is presumed valid unless proven otherwise by clear and convincing evidence. Accordingly, a validity opinion explains why a court would not likely invalidate one or more claims in a given patent. A validity opinion would be appropriate, for example, before a patent owner sues an accused infringer or before a company acquires patent rights from a third party.
EXAMPLE 11.8
Here, though, PEX seeks a validity opinion from its patent attorney with respect to claim 1 of Start-Up X’s patent. Specifically, PEX requests a letter opining that the two most relevant prior-art references of which it is aware—references 1 and 2—would not likely render claim 1 invalid because of obviousness.
Reference 1 teaches a nucleic acid genus that encompasses the genus of claim 1. However, reference 1 does not disclose the genus of claim 1 or any of its many species. Reference 2 teaches synthetic nucleic acid Z (SNAZ). SNAZ is not encompassed by claim 1 but shares homology with Start-Up X’s SNA1, which is encompassed by that claim. Reference 2 also teaches the use of SNAZ in detecting certain mutations present in Caenorhabditis elegans DNA.
PEX’s attorney arrives at the most likely construction of claim 1, as per example 11.5. Based on this construction, she opines that claim 1 would not likely be held invalid as obvious over the combination of references 1 and 2. Specifically, she determines that as of the patent’s filing date, and based on references 1 and 2 combined, one of ordinary skill in the field of nucleic acid–based disease detection would not have arrived at the claimed nucleic acids.
(Note: This validity opinion is a limited one. It takes into account only two prior-art references, without addressing other prior art or other grounds of invalidity.)
Ideally, before selling a product or service, a party determines that no third-party patent would preclude it from doing so. In short, the party must believe that it is free to operate.
Toward that end, the party would obtain a freedom-to-operate (FTO) opinion. An FTO opinion establishes that the party is free to operate, in that there is no known third-party patent having a valid claim that would be infringed by the contemplated activity. This opinion is usually a hybrid in that it typically includes both a noninfringement opinion and, for claims that are likely to be infringed, an invalidity opinion. The scope of an FTO opinion is seldom as sweeping as its name would suggest. Most often, such opinions focus on one or a few patents rather than many.
Biotech X is developing Antibody Fragment X (AbFX), a VEGF-A inhibitor for treating macular degeneration. AbFX is a derivative of ranibizumab. Owing to certain point mutations relative to ranibizumab, AbFX has unexpectedly high efficacy. Biotech X intends to sell AbFX in the United States.
As part of its due diligence, the company, through a patent search firm, has identified one U.S. patent owned by its competitor, Biotech Y. Of the U.S. patents analyzed by the search firm, this is the only one warranting concern by Biotech X.
Biotech Y’s patent has two claims. Claim 1, the sole independent claim, provides a broad, structurally defined genus of ranibizumab derivatives. Claim 2, which depends from claim 1, provides a particular ranibizumab derivative having a defined amino acid sequence.
Biotech X seeks an FTO opinion from its patent counsel with respect to Biotech Y’s patent.
From her analysis of Biotech Y’s patent, its prosecution history, and certain other relevant documents, Biotech X’s counsel arrives at what she believes is the most likely construction of claims 1 and 2.
First, based on the construction of dependent claim 2, she opines that AbFX would not literally infringe it, since AbFX has a different amino acid sequence than the claimed derivative. We assume as fact in this example that when administered, AbFX has far greater efficacy than the claimed derivative. Accordingly, Biotech X’s counsel also opines that AbFX would not infringe claim 2 under the doctrine of equivalents.
Second, based on the construction of independent claim 1, Biotech X’s counsel believes that AbFX falls within its scope and therefore would literally infringe it. Fortunately, however, she is able to opine that the claimed genus of ranibizumab derivatives lacks novelty over prior-art reference 1. Reference 1 teaches a single ranibizumab derivative, other than AbFX, that falls within claim 1’s scope and is therefore a species of the claimed genus.
Based on this FTO opinion, Biotech X can proceed to make and sell AbFX with the reasonable belief that doing so would not likely infringe any valid claim of Biotech Y’s patent.
It is important to remember that example 11.9 discusses only one of many situations in which an FTO opinion would be sought. It also describes only one of many levels of breadth and depth such an opinion could take. For example, instead of only one patent, the opinion might have focused on twenty patents owned by five of Biotech X’s competitors. Similarly, instead of obtaining a single written opinion addressing both claims of Biotech Y’s patent, Biotech X might have obtained an opinion addressing only claim 1. Or, Biotech X might have obtained an oral opinion preliminarily addressing both claims of that patent, with the expectation of following up later with a rigorous written opinion.
As we know, a patent opinion is a forward-looking document. An attorney prepares it in a finite amount of time, based on limited facts, and with virtual certainty that the facts and law will change over time. So, no matter how rigorous an opinion, there is always risk involved. Assume, for example, that in contemplation of her client’s selling a new product, an attorney prepares a competent noninfringement opinion regarding a patent owned by her client’s competitor. Three years later, the competitor sues her client for patent infringement. During the litigation, and despite the opinion of noninfringement, the court might instead find infringement. This contrary outcome could result from any number of factors. For example, the judge might be unpredictable. There may have been a change in the law of claim construction or infringement. A new and problematic patent may have issued to the competitor after the opinion was written. Technical information may exist that was unknown when the opinion was written. Or, the court might rely on a claim construction not considered in the opinion. Given this uncertainty, clients often secure redundant opinions from different counsel as a precaution, especially for high-stakes matters.
Generally speaking—and despite all of their risks—patent opinions help. When a client relies on a legal opinion before making a patent-related decision, the decision is more likely to be sound. And it is less likely that an adverse infringement or invalidity ruling will result.
In addition, one can use a patent opinion for exculpatory reasons. Under U.S. law, the act of willfully infringing a patent can subject the infringer to enhanced damages and attorney fees. A party contemplating an activity and wishing to avoid liability for willful infringement can rely on a noninfringement, invalidity, or FTO opinion before proceeding. At a minimum, if infringement is found, this reliance will reduce the risk of a court’s finding willful infringement and awarding enhanced damages and attorney fees to the patentee.