Federal Circuit Treatment of ‘Commercial Success’ in Hatch-Waxman Cases

When conducting an obviousness analysis, courts examine the scope and content of the prior art; the differences between the patent claims at issue and the prior art; the level of ordinary skill in the art; and relevant secondary considerations that may shed further light on the inquiry. Graham v. John Deere Co. Of Kansas City, 383 U.S. 1 17-18 (1966). One such so-called secondary consideration is the degree to which one or more commercial embodiments of the claimed invention has enjoyed success in the marketplace. Id. The rationale behind taking into account commercial success is, to the extent the claimed invention has been commercially successful (as reflected, for example, by strong sales and profits, gains in market share, and meeting and exceeding sales projections), the associated market demand would have led to development and marketing of the claimed invention sooner if the subject matter was in fact obvious (or so the thinking goes). Merck & Co., Inc. v. Teva Pharms. USA, Inc., 395 F.3d 1364, 1376 (Fed. Cir. 2005).

In order to establish that the commercial success factor supports a non-obviousness finding, the patentee must establish that a connection (or nexus) exists between the novel aspects of the patent claim(s) and the alleged commercial success. Id.; WesternGeco LLC v. ION Geophysical Corp., 889 F.3d 1308, 1330 (Fed. Cir. 2018). In other words, the patentee must show that the novel aspects of the claim(s) are driving sales and not aspects of the claim(s) that were known in the prior art. In re Huai-Hung Kao, 639 F.3d 1057, 1069 (Fed. Cir. 2011); WesternGeco, 889 F.3d at 1330. In cases brought pursuant to the Hatch-Waxman Act, while there are exceptions, it is most common that patent challengers’ arguments focus predominantly or entirely on an alleged lack of nexus given the substantial sales typically enjoyed by the brand-name drug products that are the subject of such litigation. Though it bears noting that the mere fact that a company is pursuing a generic version of a brand-name drug, by itself, does not support a “commercial success” finding. Galderma Labs., Inc. v. Tolmar, Inc., 737 F.3d 737, 740 (Fed. Cir. 2013).

To help illustrate the nexus requirement, in In re Huai-Hung Kao, the court held that the evidence of record did not sufficiently resolve whether or not there existed a nexus between the commercial success exhibited by the commercial product at issue, Opana® ER, and the novel aspects of the claims. In re Huai-Hung Kao, 639 F.3d at 1069-70. The claims at issue were drawn to analgesically effective controlled release oxymorphone tablets with a twelve-hour dosing interval and recited specific dissolution parameters. Id. at 1062. The court reasoned that controlled release oxymorphone formulations were known in the prior art and that the patentee had not established that the unexpected in vivo concentrations exhibited by the claimed formulations were what was driving sales. Id. at 1069-70. In Cubist the Federal Circuit held that the patentee failed to establish the required nexus between the commercial success of the commercial embodiment (an antiobiotic formulation comprising daptomycin, brand name Cubicin®), and the novel aspects of the patent claims at issue. Cubist Pharms., Inc. v. Hospira, Inc., 805 F.3d 1112, 1126 (Fed. Cir. 2015). The relevant claims were directed to certain dosing regimens for the administration of daptomycin-containing formulations. Id. at 1114-15. The Federal Circuit affirmed the district court’s holding that the commercial success of Cubicin® was due primarily to the inherent properties of daptomycin itself and not the dosing regimens recited in the claims. Id. at 1126.

Delving deeper into the Federal Circuit case law in this area, three issues in particular capture the Federal Circuit’s focus more than others in Hatch-Waxman cases where the court is analyzing commercial success and associated nexus arguments: (1) whether the novel aspects of the claims contributed to obtaining FDA approval and, if so, the significance of that fact to the nexus analysis; (2) the role that blocking patents, regulatory exclusivities, and/or other barriers to entry may have played in driving sales of the patented product; and (3) whether the commercial success is commensurate in scope with the claims and, if it is not, the significance of such a finding.

The Role of FDA Approval in the Nexus Analysis

The Federal Circuit will, where appropriate, consider whether and to what extent the novel aspects of the claims have impacted FDA approval of the commercial embodiment. The case law on this issue though is murky to say the least. For example, in Millennium Pharms., the court found there to be sufficient nexus between the commercial success of Velcade® and the novel aspect of the claims. Millennium Pharms., Inc. v. Sandoz Inc., 862 F.3d 1356, 1369 (Fed. Cir. 2017). The novel aspect of the claims was attachment of a d-mannitol moiety to bortezomib, a compound that was known in the prior art. Id. at 1361-62. The court highlighted that the improved stability and solubility imparted by attachment of this moiety was the critical factor in obtaining FDA approval of Velcade® and, therefore, the driver of the product’s commercial success. Id. at 1369. The court reasoned similarly in Leo Pharms., Inc. v. Rea, 726 F.3d 1346 (Fed. Cir. 2013). There the patent claims were drawn to pharmaceutical compositions comprising, generally, a vitamin D analog, a corticosteroid, and a solvent. Id. at 1349. The claims further recited that such formulations were “storage stable.” Id. The court opined as follows: “[T[he commercial success of … Taclonex® ointment is a testament to the improved properties of the ‘013 patent’s claimed invention. Taclonex® is the first FDA-approved drug to combine vitamin D and corticosteroids into a single formulation for topical application. While FDA approval is not determinative of nonobviousness, it can be relevant in evaluating the objective indicia of nonobviousness. Here, FDA approval highlights that [Taclonex®] is truly storage stable, something that the prior art formulations did not achieve.” Id. at 1358 (internal citations omitted).

In other instances, however, the Federal Circuit has found that while the novel aspects of the claims were responsible for obtaining FDA approval, there was nonetheless insufficient nexus because those novel aspects did not correspond to product attributes that were driving sales. For example, in AstraZeneca, the novel aspects of the claims concerned the sterility of certain nebulized pharmaceutical formulations comprising the active pharmaceutical ingredient (“API”) budesonide, useful in treating asthma in children. AstraZeneca LP v. Breath, Ltd., 603 F. App’x 999, 1001-02 (Fed. Cir. 2015). While the Federal Circuit acknowledged that the sterility of the compositions was necessary to obtaining FDA approval of the commercial product Pulmicort Respules®, the court nonetheless held that there was insufficient nexus because, according to the opinion, it was the safety, efficacy, and nebulized delivery of the budesonide that was driving sales, not the sterility. Id. at 1002. In Novartis, the Federal Circuit rejected the patentee Novartis’ argument that there was sufficient nexus between the commercial success of its commercial product Gilenya® and the novel aspects of the claims. Novartis AG v. Torrent Pharms. Ltd., 853 F.3d 1316, 1330 (Fed. Cir. 2017). Novartis’ nexus argument focused exclusively on the fact that Gilenya® represented the first solid oral dosage form of a multiple sclerosis drug to receive FDA approval. Id. In rejecting this argument as a basis for the alleged nexus, the Federal Circuit reasoned that there were nonetheless solid oral dosage forms of MS drugs disclosed in the prior art and FDA approval is not determinative of the nexus issue. Id.

Barriers to Market Entry Other than the Patent(s) at Issue that May Be Impacting Sales

The Federal Circuit also often focuses its analysis on the issue of blocking patents and other barriers to entry when analyzing nexus issues in Hatch-Waxman cases. In what might be considered the seminal case on this issue, in Merck, the Federal Circuit held that there was insufficient nexus between the commercial success of Fosamax and the novel aspects of the claims at issue, which concerned weekly-dosing of the API (alendronate) to treat osteoporosis. Merck & Co., 395 F.3d at 1376-77. The court based its insufficient nexus holding on the existence of a prior art patent teaching the use of alendronate to treat osteoporosis as well as New Chemical Entity exclusivity for all dosing regimens for a period of five years from approval of Fosamax. Id. at 1377. These barriers to market entry, the court held, weakened any inference that might otherwise exist that the commercial success of Fosamax was due to the weekly dosing of the drug. Id. In Galderma, the Federal Circuit likewise hinged its finding of insufficient nexus on the existence of a blocking patent. The patent claims at issue were directed to pharmaceutical formulations comprising 0.3% of adalapene. Galderma Labs., 737 F.3d at 736. The 0.3% adalapene concentration fell within a range that was disclosed in the prior art Shroot patents. Id. The Federal Circuit held as follows: “The now expired Shroot patents blocked the market entry of 0.3% adapalene products until their expiration in 2010, long after Galderma invented 0.3% adapalene compositions of the asserted claims. As such, no entity other than Galderma could have successfully brought 0.3% to market prior to 2010. Like the commercial success described in Merck & Co., the commercial success of Differin® Gel, 0.3% is of ‘minimal probative value.’” Id. (internal citations omitted). Interestingly, the court took a step back from its insufficient nexus jurisprudence relating to blocking patents and other barriers to entry more recently in Hospira. In Hospira, the Federal Circuit cautioned that the existence of other patents directed to the same technology is not necessarily determinative of the nexus issue.  The court held as follows:

[D]evelopers of new compounds often obtain a package of patents protecting the product, including compound, formulation, use, and process patents. Often such patents result from Patent Office restriction requirements relating to the technicalities of patent classifications and rulings that various aspects of claiming an invention cannot be claimed in the same patent. Or they may result from continuing improvements in a product or process. Thus, multiple patents do not necessarily detract from evidence of commercial success of a product or process, which speaks to the merits of the invention, not to how many patents are owned by a patentee. Commercial success is thus a fact-specific inquiry that may be relevant to an inference of nonobviousness, even given the existence of other relevant patents.

Merck Sharp & Dohme Corp. v. Hospira, Inc., 874 F.3d 724, 730-31 (Fed. Cir 2017).

Whether or Not any Commercial Success is Commensurate in Scope with the Claims and the Significance of Such Determination

Finally, the Federal Circuit has on multiple occasions examined whether or not the commercial success of the product involved can be said to be commensurate in scope with the claims at issue together with the impact of such determination. As a blackletter principle of law, it is fairly settled on some level at least, that to be probative of nonobviousness, evidence of secondary considerations, including evidence of commercial success, must be commensurate in scope with the patent claims under consideration. Asyst Techs., Inc. v. Emtrak, Inc., 544 F.3d 1310, 1316 (Fed. Cir. 2008). In fact, however, the case law examining commercial success in Hatch-Waxman cases, is unclear on this issue. For example, consistent with the general notion that commercial success must be commensurate in scope with the claims, in Gnosis, the court found insufficient nexus where the claims under consideration recited formulations comprising L-5-MTHF and at least one B-vitamin whereas the commercial embodiments, while containing L-5-MTHF and at least one B-vitamin, as characterized by the court, “contain a specific combination of specific forms of B-vitamins and other active ingredients.” Merck & Cie v. Gnosis S.P.A., 808 F.3d 829, 837 (Fed. Cir. 2015). In In re Huai-Hung Kao, however, the court commented that it seems odd that a company would commercialize multiple embodiments within the scope of the same patent claim and that a patentee may properly rely upon evidence of commercial success “so long as what was sold was within the scope of the claims.” In re Huai-Hung Kao, 639 F.3d at 1069 (internal quotations and citations omitted). To this author at least, it seems that the In re Huai-Hung Kao reasoning makes more sense; otherwise, it is unclear under what circumstances commercial success could ever be said to be commensurate in scope with, merely by way of example, a broad claim covering a genus of molecules.


In cases brought pursuant to the Hatch-Waxman Act, the parties’ disputes relating to the secondary consideration of “commercial success” most often concern whether or not there exists sufficient nexus between the novel aspect(s) of the claim(s) and product sales. Federal Circuit case law seems to be inconsistent with regard to the significance of FDA approval to this analysis and the answer will likely depend on the court’s view of the particular product attribute that constitutes the novel aspect of the claim that was key to obtaining FDA approval (e.g., improved stability, solubility, sterility) and the significance the court attaches to it. Federal Circuit case law regarding the significance of patents other than those under consideration relating to the same technology (i.e., blocking patents) to the nexus analysis is straightforward with regard to prior art patents but in Hospira the Federal Circuit distinguished between prior art blocking patents on the one hand and related patents that emanate from a restriction requirement on the other hand. At the end of the day, however, the bottom line still seems to be apportionment; i.e., whether apportioning between the percentage of sales attributable to the novel aspect(s) of the claim(s) versus a prior art blocking patent or versus a related patent that issued from a divisional application within the same patent family. Lastly, while the oft-repeated principle that secondary considerations, including commercial success, must be commensurate in scope with the claims persists, a patent challenger in Hatch-Waxman litigation would be hard-pressed to rely on any such argument, at least with respect to the commercial success factor, because there is also Federal Circuit case law to the effect that all that is required in order for the commercial success to be probative of nonobviousness is that the successful product constitute an embodiment within the scope of the claims. It is this latter reasoning that seems to appeal more to common sense.


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One comment so far.

  • [Avatar for Jianqing Wu]
    Jianqing Wu
    August 22, 2018 10:38 am

    Based upon my experience in software, it would be extremely difficult to prove this connection between commercial success and the novel aspects of claims. If one succeeds, it must be a result of a fight of options procured at massive spending. For example, a new software-driven system has a new feature. Without massive promotion efforts, the system could fail. However, the same become a huge success only if a massive marketing efforts have been made together a great number of other refinements in the system. What can you say?

    Commercial success must be a result of all practical activities, but the nexus analysis must be only a theoretical concept: the court must find one or a few from tens to hundreds of causes. Judges are the least capable persons in making such findings. A higher standard would make this statutory evidence unavailable.

    If the circuit judges understood the big differences between theories and practices, they should have found a more relaxing method to honor this statutory right for inventors and patent owners. When the court is so incompetent, it can only create a bad game-like litigation culture where patent case results would depend upon bought opinions, spending, false declaration, manipulation of evidence, technicalities, and game-play. None of results can truly reflect nexus (right is wrong, but wrong is actually right). They should think what they should do to end litigation lottery which is about to destroy the patent system.

    It is just another line of bad decisions.