Moderna Strikes Out at CAFC on Challenges to Arbutus Patents that May Pose a Risk to COVID Vaccines

The U.S. Court of Appeals for the Federal Circuit (CAFC) ruled yesterday in two precedential decisions that Moderna’s challenges to decisions of the Patent Trial and Appeal Board (PTAB) in favor of Arbutus both failed. The CAFC dismissed one ruling for lack of standing and in the other said Moderna’s arguments that the PTAB erred in its finding that Arbutus’ patent was not unpatentable as obvious were unpersuasive.

Nonobviousness Finding Supported by Substantial Evidence

The first appeal relates to Arbutus’ U.S. Patent 8,058,069, titled “Lipid Formulations for Nucleic Acid Delivery,” which Moderna challenged via inter partes review (IPR) at the PTAB, asserting three grounds for invalidation. Moderna’s vaccines use lipid nanoparticles in delivery of mRNA to cells.

First, Moderna said that all claims of the patent would have been anticipated by and/or obvious over International Pat. Publ. WO 2005/007196 (“the ’196 PCT”) or U.S. Pat. Publ. 2006/0134189 (“the ’189 publication”). Next, Moderna alleged that all claims would have been obvious over a combination of the ’196 PCT, the ’189 publication, and two other publications. And lastly, Moderna said that all claims of the ’069 patent were anticipated by U.S. Pat. Publ. 2006/0240554 (“the ’554 publication”), and alternatively that the claims would have been obvious over the ’554 publication.

The Board held that Moderna failed to meet its burden with respect to its challenges based on the ’196 PCT and the ’189 publication. In its Final Written Decision, the PTAB said the two publications “do not anticipate or otherwise render obvious a nucleic acid-lipid particle containing each of the recited lipid components within the claimed ranges, including specifically a phospholipid range of 4–10%.”

While the CAFC said that Moderna succeeded in proving that it has a “substantial risk that Arbutus will assert the ’069 patent in an infringement suit targeting Moderna’s COVID-19 vaccine,” and thus had standing to appeal, the court ultimately said that Moderna’s obviousness theory was “an oversimplification based on unfounded assumptions.”

With respect to standing, the court said that a combination of Moderna’s own activities in developing its COVID-19 vaccine, Arbutus’s broad public statements about its extensive patent coverage in this area, and Arbutus’s refusal to grant a covenant not to sue demonstrated enough of a risk to meet the requisite burden for standing. The CAFC also said it was loath to dismiss the appeal for lack of standing for fear of incentivizing future infringement litigation:

It also bears noting that, if we were to dismiss this appeal for lack of standing, Arbutus could sue Moderna for infringement immediately thereafter. That possibility is easy to envision based on the record, and Arbutus has done nothing to dispel it. We seek to avoid such a result, which would perversely incentivize a future similarly situated patent owner to remain silent regarding its intentions during the pendency of an appeal and wait to sue for infringement until after the appeal has been dismissed for lack of standing.

As to the PTAB’s nonobviousness finding, however, the CAFC said that the Board’s holding that Moderna had not demonstrated that a presumption of obviousness should apply because the prior art does not disclose a range for the phospholipid component was correct. The court also said that the Board’s finding that the evidence Moderna provided was insufficient to establish that the phospholipid range was a result-effective variable was supported by substantial evidence.

No Standing

In the second decision issued by the CAFC yesterday, the court dismissed Moderna’s appeal relating to Arbutus’ U.S. Patent 9,364,435, also titled “Lipid Formulations for Nucleic Acid Delivery,” for lack of standing, holding that Moderna had “failed to meet its burden of demonstrating that it suffers an injury from the existence of the ’435 patent, or that any such injury would be redressed by invalidation of that patent.” However, it upheld the PTAB’s ruling that certain claims of the ‘435 patent were unpatentable as anticipated with respect to Arbutus’ cross-appeal.

The court found that Moderna had failed to prove standing because it originally based its standing argument on the fact that it was a sublicensee of Arbutus’ patent, rather than on the risk of infringement in the future. At the time of filing the IPR, in a pre-COVID world, Moderna’s sublicense was granted to practice the patented technology for four viral targets, including Respiratory Syncytial Virus (“RSV”). Then, in March 2021, Moderna filed a motion to supplement the record with additional evidence of standing, specifically the company’s development of the COVID-19 vaccines and Arbutus’ public statements in 2017 alleging the “extensive scope” of its patents. The CAFC found in this case that Moderna did not have standing at the time the appeal was initially filed because Moderna’s evidence of financial burdens as a sublicensee from the validity of the patent was “too speculative.” The court explained:

Notwithstanding Moderna’s counsel’s repeated characterization of the RSV development program as “active” at the time this appeal was filed, Moderna concedes that the last milestone payment it made under the Acuitas sublicenses was approximately five years earlier, and Mr. Ryan’s declaration states only that Moderna would have to make an additional milestone payment “if and when” a future milestone is reached. On this evidence, Moderna falls short of its burden to demonstrate that at the time it filed this appeal, it had suffered or was suffering a “concrete” injury from the existence of the ’435 patent.

The CAFC further found that Moderna had failed to demonstrate continuous standing because it had not shown “an approximate date when the RSV development program was terminated,” making it impossible for the court to determine “whether, by the time the RSV development program was terminated, Moderna was already sufficiently underway with its development of a COVID-19 vaccine to ‘create[] a substantial risk of future infringement or likely cause the patentee to assert a claim of infringement.’”

According to Reuters, shares of Moderna fell nearly 10% following the decisions.