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IP Alert: Federal Circuit Finds No Alternative Holding in District Court Opinion and Rejects Appeal

April 26, 2021

On April 20, in Sebela Ireland v. Prinston Pharmaceutical, the Federal Circuit held that Sebela’s appeal challenged only contingent patent invalidity findings and dismissed the appeal for lack of constitutional standing. In doing so, the court highlighted the difference between alternative and contingent invalidity findings, and it held that a contingent invalidity finding, unlike an alternative invalidity finding, cannot have claim preclusive effect and therefore cannot be appealed.

The plaintiff, Sebela Ireland Limited, brought a patent infringement action against Prinston Pharmaceutical Inc. and several related defendants. The asserted patents were directed to methods of using a drug to treat thermoregulatory dysfunction associated with menopause. The district court held that the patents were invalid as obvious over prior art. The district court further noted that “if [the court] had found the method of treatment patents nonobvious, [it] would have concluded that the asserted claims are invalid for lack of credible utility.” The district court further noted that “were [the court] to find the claimed methods are [nonobvious], it would instead find the patents invalid for lack of credible utility." Lastly, the court stated that had it not found the claimed methods to be obvious, then it “would instead find the patents invalid for lack of credible utility.” The district court used similar language in its contingent finding of invalidity based on lack of written description.

In the appeal, Sebela did not challenge the invalidity holding based on prior art. Instead, it sought a Federal Circuit ruling that would summarily affirm the unchallenged obviousness ruling while at the same time making clear that the Federal Circuit was not addressing the district court's findings as to utility and written description. Sebela was concerned that the utility and written description findings would be given preclusive effect against similar patent claims that Sebela had asserted in a separate patent infringement action regarding a different patent.

The Federal Circuit noted that the district court’s “contingent and inconclusive language” is distinct from language typically used to signal an alternative holding, going on to distinguish language signaling alternative holdings such as “even if the employee had produced evidence of an oral contract” or “even were there error that was plain.” The court then explained that a contingent finding does not amount to an alternative holding, and therefore could not have preclusive effect.

Regarding alternative holdings, the Federal Circuit noted that on matters of preclusion law, it would follow Third Circuit law in which alternative holdings may have preclusive effect. The Federal Circuit also noted Supreme Court authority pointing out that when an appellee successfully defends a judgment on an alternative ground, issue preclusion no longer attaches to the ground decided by the trial court and instead attaches to the alternative ground on which the appellate court affirms the judgment.

The Federal Circuit went on to hold that because the contingent findings of invalidity challenged by Sebela on appeal cannot have preclusive effect, Sebela did not have constitutional standing to appeal those findings and the appeal must be dismissed for lack of constitutional standing.

This decision is significant because it emphasizes that a contingent finding of invalidity, as distinguished from an alternative finding of invalidity, can have no preclusive effect, and therefore appeal of a contingent finding to the Federal Circuit must be dismissed for lack of standing. While not precedential, this decision would suggest that a “contingent” finding of invalidity based on lack of written description or utility (as distinguished from an “alternative” finding of such invalidity) is not binding regarding related patents having the same written description.

For more information regarding this decision, please contact Fitch Even partner Karl R. Fink, author of this alert.

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