Medicines Company v. Hospira, Inc. , 881 F.3d 1347 ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
THE MEDICINES COMPANY
Plaintiff-Appellant
v.
HOSPIRA, INC.,
Defendant-Cross-Appellant
______________________
2014-1469, 2014-1504
______________________
Appeals from the United States District Court for the
District of Delaware in No. 09-CV-750-RGA, Judge Rich-
ard G. Andrews.
______________________
Decided: February 6, 2018
______________________
EDGAR HAUG, Haug Partners LLP, New York, NY, ar-
gued for plaintiff-appellant. Also represented by PORTER
F. FLEMING, ANGUS CHEN, JASON ARI KANTER, LAURA
KRAWCZYK, CATALIN SEBASTIAN ZONTE, DAMON MARCUS
LEWIS.
BRADFORD PETER LYERLA, Jenner & Block LLP, Chi-
cago, IL, argued for defendant-cross-appellant. Also
represented by AARON A. BARLOW, SARA TONNIES HORTON.
______________________
Before DYK, WALLACH, and HUGHES, Circuit Judges.
2 THE MEDICINES COMPANY v. HOSPIRA, INC.
HUGHES, Circuit Judge.
The Medicines Company appeals findings of no in-
fringement made by the United States District Court for
the District of Delaware. Hospira cross-appeals the
district court’s finding that a distribution agreement did
not constitute an invalidating “offer for sale” under 35
U.S.C. § 102(b). We affirm the district court’s nonin-
fringement findings and remand the case for the district
court to determine whether the on-sale bar applies.
I
The Medicines Company owns U.S. Patent Nos.
7,582,727 and 7,598,343. Both patent applications were
filed on July 27, 2008. The patents cover an improved
process for manufacturing a drug product of bivalirudin, a
synthetic peptide used as an anti-coagulant. For almost
twenty years, The Medicines Company has marketed its
bivalirudin product under the brand name Angiomax.
Sales of Angiomax represent over 90% of The Medicines
Company’s revenues. J.A. 16050 at 70:15–22.
The Medicines Company’s original manufacturing
process occasionally produced batches of Angiomax with
unacceptably high levels of the impurity Asp9-bivalirudin.
To solve this problem, The Medicines Company developed
a new mixing method, which it incorporated in the master
batch record on October 25, 2006. The Medicines Compa-
ny’s contract manufacturer, Ben Venue Laboratories,
used this patented mixing method for all Angiomax
batches manufactured since October 31, 2006. By using
this process, Ben Venue consistently manufactures Angi-
omax batches with a maximum Asp9-bivalirudin impurity
level of 0.6%. The overriding majority of Angiomax
batches produced using The Medicines Company’s origi-
nal manufacturing method had impurity levels below
0.6%.
THE MEDICINES COMPANY v. HOSPIRA, INC. 3
On February 27, 2007, The Medicines Company en-
tered into a Distribution Agreement with Integrated
Commercialization Solutions, Inc. (ICS). That agreement
stated that The Medicines Company “now desire[d] to sell
the Product” to ICS and ICS “desire[d] to purchase and
distribute the Product.” J.A. 14674. Accordingly, title
passed to ICS “upon receipt of Product at the distribution
center.” J.A. 14678 ¶ 4.1. The Distribution Agreement
forbade The Medicines Company from selling Angiomax
to any other party in the United States for the three-year
duration of the contract. Notably, ICS had been providing
distribution for The Medicines Company since September
2002, but ICS did not take title to the product under the
previous distribution agreement.
The Distribution Agreement included a “Commercial
Price List” dictating the price of the product, J.A. 14697,
and required ICS to place weekly orders “for such quanti-
ties of Product as are necessary to maintain an appropri-
ate level of inventory based on customers’ historical
purchase volumes.” J.A. 14676 ¶ 3.1. The Medicines
Company agreed to “use its commercially reasonable
efforts” to fill ICS’s product orders within two days of
order receipt. J.A. 14678 ¶ 4.2. ICS’s orders were deemed
accepted unless The Medicines Company rejected the
order within two business days. ICS first received batch-
es of Angiomax produced by the improved process in
August 2007.
Seeking to market a generic version of Angiomax,
Hospira submitted an Abbreviated New Drug Application
to the Food and Drug Administration. In Hospira’s mix-
ing process, the pH-adjusting solution is added to the
bivalirudin solution in three equivalent portions. The
first two portions are “added rapidly with about 2-minute
mixing time,” and the third portion is “added gradually
over a period of approximately 10 minutes.” J.A. 13958.
Hospira mixes the batches using a paddle mixer at 560
rpm.
4 THE MEDICINES COMPANY v. HOSPIRA, INC.
The Medicines Company filed suit in the District of
Delaware alleging infringement of the ’727 and ’343
patents under 35 U.S.C. § 271(e)(2). In response, Hospira
asserted that the patents are invalid. After a bench trial,
the district court concluded that the patents were neither
infringed nor invalid. The district court found that the
invention was ready for patenting but was not sold or
offered for sale before the critical date of July 27, 2008.
The court concluded that the Distribution Agreement was
only an agreement for ICS to be the U.S. distributor of
Angiomax and was not an offer to sell Angiomax. Based
on the holding that “there was no offer to sell,” the court
did not reach “whether the Distribution Agreement con-
cerned Angiomax made by the new method as opposed to
Angiomax made by the original method.” J.A. 26 n.14.
Both parties appealed. This case is on remand from
Medicines Co. v. Hospira, Inc. (Medicines I), 827 F.3d
1363 (Fed. Cir. 2016) (en banc). We have jurisdiction
under 28 U.S.C. § 1295(a)(1).
II
We review the district court’s legal determinations de
novo and factual findings for clear error. Braintree Labs.,
Inc. v. Novel Labs., Inc., 749 F.3d 1349, 1358 (Fed. Cir.
2014). Infringement is a question of fact. WMS Gaming,
Inc. v. Int’l Game Tech., 184 F.3d 1339, 1346 (Fed. Cir.
1999). Invalidity under the on-sale bar is a question of
law with underlying questions of fact. Robotic Vision
Sys., Inc. v. View Eng’g, Inc., 249 F.3d 1307, 1310 (Fed.
Cir. 2001). Contract interpretation is a question of law
that we review de novo. Intel Corp. v. ULSI Sys. Tech.,
Inc., 995 F.2d 1566, 1569 (Fed. Cir. 1993).
A
“Because claim language defines claim scope, the first
step in an infringement analysis is to construe the
claims.” Amgen Inc. v. Hoechst Marion Roussel, Inc., 314
THE MEDICINES COMPANY v. HOSPIRA, INC. 5
F.3d 1313, 1324 (Fed. Cir. 2003). In Medicines Co. v.
Mylan, Inc., 853 F.3d 1296 (Fed. Cir. 2017), we analyzed
the claims of the ’727 and ’343 patents and determined
that both patents require “efficient mixing” as defined by
Example 5 of the specification:
The pH-adjusting solution was added to the
bivalirudin solution at a controlled rate of 2 L/min
using a peristaltic pump. A homogenizer was
used to provide a high shear mixing environment
(between about 1000 rpm and 1300 rpm) within
the bivalirudin solution as the pH-adjusting solu-
tion was added[.] A feed tube extended from the
peristaltic pump to an inlet in the homogenizer, so
that the pH-adjusting solution was added to the
bivalirudin solution at a site adjacent to the
blades of the homogenizer. Simultaneously, a
paddle mixer was used for mixing (mixing rate of
between 300 rpm and 700 rpm) near the surface of
the bivalirudin solution.
’727 patent, col. 22 ll. 47–58; ’343 patent, col. 23 ll. 21–31.
Under our analysis, Hospira clearly does not infringe
the patented method because it does not perform “efficient
mixing.” Hospira adds the pH-adjusting solution in three
portions, rather than at a controlled rate. Hospira also
uses a single paddle mixer at 560 rpm, but the claimed
method requires using a paddle mixer in conjunction with
a homogenizer. Because Hospira’s mixing process does
not satisfy the “efficient mixing” limitation, we affirm the
district court’s finding of noninfringement.
B
A patent is invalid under the on-sale bar if, before the
critical date, 1) the product is the subject of a commercial
offer for sale, and 2) the invention is ready for patenting.
Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998). In
Medicines I, we provided a framework for determining
6 THE MEDICINES COMPANY v. HOSPIRA, INC.
whether there is an offer for sale. We apply Federal
Circuit law and analyze the issue “under the law of con-
tracts as generally understood,” focusing “on those activi-
ties that would be understood to be commercial sales and
offers for sale ‘in the commercial community.’” Medi-
cines I, 827 F.3d at 1373 (quoting Grp. One, Ltd. v. Hall-
mark Cards, Inc., 254 F.3d 1041, 1047 (Fed. Cir. 2001)).
Although the Uniform Commercial Code (UCC) is not
dispositive, it is a useful guide for defining whether “a
communication or series of communications rises to the
level of a commercial offer for sale.” Id. (quoting Grp.
One, 254 F.3d at 1047). A commercial sale “is a contract
between parties to give and to pass rights of property for
consideration which the buyer pays or promises to pay the
seller for the thing bought or sold.” Id. (quoting Trading
Techs. Int’l, Inc. v. eSpeed, Inc., 595 F.3d 1340, 1361 (Fed.
Cir. 2010)). An offer for sale is “one which the other party
could make into a binding contract by simple acceptance.”
Grp. One, 254 F.3d at 1048.
Under the standards established by Medicines I, the
terms of the Distribution Agreement make clear that the
Medicines Company and ICS entered into an agreement
to sell and purchase the product. See J.A. 14674. Those
relevant terms include: a statement that The Medicines
Company “now desire[d] to sell the Product” to ICS and
ICS “desire[d] to purchase and distribute the Product,”
J.A. 14674; the price of the product, J.A. 14697; the pur-
chase schedule, J.A. 14676 ¶ 3.1; and the passage of title
from The Medicines Company to ICS, J.A. 14678 ¶ 4.1.
Despite the specific requirements of the Distribution
Agreement, The Medicines Company nevertheless con-
tends that the Distribution Agreement does not constitute
an offer for sale because the agreement permitted The
Medicines Company to reject all purchase orders submit-
ted by ICS. This argument fails for two reasons.
THE MEDICINES COMPANY v. HOSPIRA, INC. 7
First, as discussed above, the terms of the Distribu-
tion Agreement show it was an offer for sale. To support
its claim that the Distribution Agreement was not a
commercial offer for sale, The Medicines Company relies
on Group One, Ltd. v. Hallmark Cards, Inc., 254 F.3d
1041 (Fed. Cir. 2001), and Linear Technology Corp. v.
Micrel, Inc., 275 F.3d 1040 (Fed. Cir. 2001). The facts of
Group One and Linear Technology are not analogous to
this case. In both cases, the patent owner marketed the
product but never reached any sale agreement. Here, The
Medicines Company agreed to sell Angiomax to ICS, and
ICS agreed to purchase it. Further, The Medicines Com-
pany and ICS explicitly and purposefully changed their
previous distribution services relationship to let ICS take
title to the product upon receipt at the distribution center.
As we noted in Medicines I, the UCC “describes a ‘sale’ as
‘the passing of title from the seller to the buyer for a
price.’” 827 F.3d at 1375 (quoting UCC § 2-106(1)).
Therefore, the passage of title here “is a helpful indicator”
that Angiomax was subject to an offer for sale. See id.
Second, the Distribution Agreement required The
Medicines Company to use “commercially reasonable
efforts” to fill the purchase orders. J.A. 14678 ¶ 4.2.
Thus, despite The Medicines Company’s reliance on its
apparent blanket ability to reject all purchase orders, the
agreement actually required it to make reasonable efforts.
Further, under UCC § 2-306(2), an exclusive distribution
agreement “imposes unless otherwise agreed an obliga-
tion by the seller to use best efforts to supply the goods.”
Moreover, as a factual matter, the district court spe-
cifically found that “rejecting an order would be unlikely
given the parties’ course of dealing.” J.A. 26 n.13. The
Medicines Company had to fill the orders because sales of
Angiomax provide the vast majority of The Medicines
Company’s revenues, J.A. 16050 at 70:15–22, and the
Distribution Agreement designates ICS as The Medicines
Company’s sole purchaser within the United States and
8 THE MEDICINES COMPANY v. HOSPIRA, INC.
its territories for a three-year period. Therefore, The
Medicines Company could not simply reject ICS’s orders
for any reason, but instead was required to fill them
unless it was commercially unfeasible to do so. The
Medicines Company, therefore, did not enter into the type
of optional sales arrangement with ICS that might not
qualify as an offer for sale. It, instead, entered into an
exclusive distribution agreement that provided all of the
necessary terms and conditions to constitute a commercial
offer for sale.
The Distribution Agreement here is very similar to
the agreement in Helsinn Healthcare S.A. v. Teva Phar-
maceuticals USA, Inc., 855 F.3d 1356 (Fed. Cir. 2017).
That agreement designated Helsinn as the sole supplier of
the product and “[bore] all the hallmarks of a commercial
contract for sale,” including “price, method of payment,
and method of delivery.” Id. at 1364–65. Even though
the orders were subject to written acceptance and confir-
mation, the agreement was an offer for sale because it
obligated Helsinn to meet the purchase orders. Id. at
1365.
Likewise, in Enzo Biochem, Inc. v. Gen-Probe Inc., 424
F.3d 1276 (Fed. Cir. 2005), we held that a contractual
provision concerning the supply “of worldwide require-
ments at reasonable times and prices . . . constitutes an
offer to sell that has been accepted.” Id. at 1282. Similar
to the Distribution Agreement, the Enzo contract did not
dictate the amount of product to be sold. Unlike the
Distribution Agreement, however, the Enzo contract did
not include specific details regarding the nature of the
sale, omitting the purchase price and an obligation to
follow a purchase schedule. The Enzo contract also explic-
itly limited the purchaser’s obligation to purchase ingre-
dients “at prices and time schedules which are reasonably
competitive with those of other sources.” Id. at 1279.
Nonetheless, we found the agreement sufficient to consti-
tute a commercial offer for sale. Given that the Distribu-
THE MEDICINES COMPANY v. HOSPIRA, INC. 9
tion Agreement here contains more details than the
contract at issue in Enzo—including the purchase price, a
weekly purchase schedule, and a requirement that The
Medicines Company fill ICS’s orders unless commercially
unfeasible—it constitutes a commercial offer for sale.
Moreover, in Medicines I, we further defined the con-
tours of the on-sale bar and we apply that framework
here. We note the stark differences between the Distribu-
tion Agreement with ICS in this case, and the arrange-
ment with Ben Venue in Medicines I, which we held was
not a sale. In Medicines I, The Medicines Company “paid
Ben Venue $347,500 to manufacture three batches of
bivalirudin according to the patents-at-issue.” 827 F.3d at
1367. That transaction did not constitute a commercial
offer for sale because: (1) the invoices issued by Ben
Venue covered manufacturing charges; (2) The Medicines
Company paid Ben Venue only about 1% of the market
value of the product; and (3) title to the pharmaceutical
batches did not transfer to Ben Venue. Id. at 1375.
Accordingly, we concluded that “Ben Venue sold contract
manufacturing services—not the patented invention—to
[The Medicines Company].” Id. In contrast, the terms of
the Distribution Agreement dictate a sale of product
between The Medicines Company and ICS, including the
“commercial price” of the product and the transfer of title
to ICS. J.A. 14697.
Furthermore, the on-sale bar does not exempt com-
mercial agreements between a patentee and its supplier
or distributor. In re Caveney, 761 F.2d 671, 676 (Fed. Cir.
1985) (“The mere fact that a product is delivered to a
distributor does not exempt the transaction from 35
U.S.C. § 102(b).”). We affirmed this principle in Medi-
cines I:
Where the supplier has title to the patented prod-
uct or process, the supplier receives blanket au-
thority to market the product or disclose the
10 THE MEDICINES COMPANY v. HOSPIRA, INC.
process for manufacturing the product to others,
or the transaction is a sale of product at full mar-
ket value, even a transfer of product to the inven-
tor may constitute a commercial sale under
§ 102(b). The focus must be on the commercial
character of the transaction, not solely on the
identity of the participants.
827 F.3d at 1380. Here, the terms of the Distribution
Agreement clearly demonstrate the “commercial charac-
ter” of the transaction. Therefore, the Distribution
Agreement was a commercial offer for sale.
Of course, the question remains whether the Distribu-
tion Agreement covered the patented product. For the on-
sale bar to apply, the invention, as defined by the patent’s
claims, must be on sale. Id. at 1374–75. Because the
district court incorrectly concluded that the Distribution
Agreement was not a commercial offer for sale, it did not
reach the question of whether the Distribution Agreement
covered the Angiomax created by the new, patented
process. We leave this question for the district court to
consider on remand.
C
An invention is ready for patenting when it is reduced
to practice or is “depicted in drawings or described in
writings of sufficient nature to enable a person of ordinary
skill in the art to practice the invention.” Hamilton Beach
Brands, Inc. v. Sunbeam Prods., Inc., 726 F.3d 1370, 1375
(Fed. Cir. 2013).
The district court found that the invention was ready
for patenting before the critical date because the master
batch record “disclose[d] how to use the process according
to the invention.” J.A. 23. We agree. Ben Venue used
the master batch record to produce batches of Angiomax
using the patented process. Furthermore, Ben Venue
reduced the invention to practice by following the master
THE MEDICINES COMPANY v. HOSPIRA, INC. 11
batch record. Although Medicines I did not decide the
question of whether the invention was ready for patent-
ing, we noted that “Ben Venue acted as a pair of ‘laborato-
ry hands’ to reduce MedCo’s invention to practice.” 827
F.3d at 1375. The district court correctly determined that
the invention was ready for patenting before the critical
date.
III
Because the district court erred in concluding that the
Distribution Agreement was not a commercial offer for
sale, we reverse and remand for the court to determine
whether the offer to sell covered the patented invention.
We affirm the district court’s finding that Hospira’s
process does not infringe the asserted patents, and do not
reach the remaining issues on appeal.
REVERSED IN PART, AFFIRMED IN PART,
AND REMANDED