Judge Hughes Again Calls Out CAFC’s Overly Rigid Article III Analysis for Pharmaceutical Cases

Today, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision in Incyte Corp. v. Sun Pharmaceutical Industries, Ltd. dismissing Incyte’s appeal from post-grant review (PGR) proceedings at the Patent Trial and Appeal Board (PTAB) for lack of Article III standing. While the Federal Circuit majority deciding the case found that Incyte couldn’t establish a sufficient injury in fact, Circuit Judge Todd Hughes authored a concurrence echoing his previous concerns regarding the appellate court’s overly rigid and narrow standard for analyzing standing in PTAB appeals.

The present appeal stems from PGR proceedings petitioned by Incyte to challenge Sun’s U.S. Patent No. 10561659, Treatment of Hair Loss Disorders with Deuterated JAK Inhibitors. The ‘659 patent claims a method of treating alopecia by administering a Janus kinase (JAK) inhibitor, here ruxolitinib, having a deuterium modulation, which reduces the speed of drug metabolism and reduces toxic byproducts. Incyte appealed to the CAFC following the PTAB’s determination that the challenged claims of the ‘659 patent were not invalid for obviousness.

No Concrete Plans to Sell Drug at Claimed Dosage Level Destroys Incyte’s Appellate Standing

The Federal Circuit’s ruling began by noting the three components of Article III standing, a threshold jurisdictional issue. Incyte argued that its appeal satisfied the first of these components, an injury in fact suffered by the appellant, both due to its potential infringement liability under the ‘659 patent and under the competitor standing doctrine, which finds an injury in fact when government action increases competition or aids a plaintiff’s competitors.

Addressing Incyte’s potential infringement liability, the Federal Circuit first found that a supplemental declaration from the head of Incyte’s Inflammation and Autoimmune Group wasn’t timely filed. Previous CAFC rulings on standing have followed the D.C. Circuit’s reasoning from Sierra Club v. Environmental Protection Agency (2002), holding that appellants must identify evidence of standing “at the first appropriate” time when their appellate standing is not self-evident. Litigants who don’t advance evidence on Article III standing at their first opportunity must show good cause to submit such evidence at a later point.

The CAFC found that Incyte was on notice that its Article III standing was not self-evident following Sun’s docketing statement indicating intent to challenge standing. Therefore, Incyte’s earliest opportunity to address standing was in its opening brief, which didn’t include the supplemental declaration from its inflammation director. Incyte provided no justification for its delay, and the Federal Circuit held that the supplemental declaration inserts new theories on Incyte’s infringement liability based on dosage while failing to make standing patently obvious.

Further, the appellate court ruled that Incyte didn’t establish concrete plans for future activity creating a substantial risk of infringement. Incyte’s original declaration from its inflammation director identified Incyte’s investments in developing and obtaining market approval for ruxolitinib-based drugs, and stated that Incyte had allocated funding to develop a deuterated ruxolitinib treatment for hair loss. The Federal Circuit majority found that this “expression of intent,” including allocation of “a small amount of funds one month before filing this appeal,” was too speculative to show concrete plans to develop a deuterated ruxolitinib at Sun’s claimed dosage level. Although Incyte anticipates significant expenditures in the coming years, the Federal Circuit noted that ruxolitinib in general was not the claimed subject matter of the ‘659 patent.

Moving on to Incyte’s competitor standing doctrine arguments, the Federal Circuit noted that nonspeculative economic injury is typically found when government regulatory action results in price-lowering or sales-limiting effects on the plaintiff’s sales. In the patent context, the government’s upholding of specific patent claims, which don’t address prices or introduce new competition, only confers a concrete injury when the challenger nonspeculatively plans to use the claimed features. “In other words, it is not enough to show a benefit to a competitor to establish injury in fact,” the Federal Circuit majority found, concluding that appellate case law clearly resolved the competitor standing issue and dismissing Incyte’s appeal for lack of standing.

Judge Hughes: CAFC Case Law ‘Dictates Outcome Inconsistent with Spirit of Standing’

In his concurrence, Judge Hughes agreed that today’s decision was compelled by precedent, but he wrote separately to echo concerns he previously raised about the CAFC’s standing analysis for appeals from inter partes review. Extending that view to post-grant proceedings generally, Judge Hughes argued that the appellate court’s restrictive, patent-specific standing rule “dictates an outcome inconsistent with the spirit of Article III standing.”

Judge Hughes found it “difficult to imagine a more compelling set of facts” meeting the Supreme Court’s constitutional minimum for standing from Lujan v. Defenders of Wildlife (1992) than Incyte’s appeal. Further, Judge Hughes noted that the CAFC’s case law more often finds no sufficient injury in fact in cases implicating pharmaceutical patents, including Allgenesis Biotherapeutics v. Cloudbreak Therapeutics (2023) where the patent challenger had completed Phase II clinical trials of an allegedly infringing drug.

Although Incyte was uncertain about the dosage of its final product, “unpredictability in the development of drugs in the pharmaceutical space should cut both ways,” Judge Hughes wrote. Requiring pharmaceutical companies to essentially be “on the eve of FDA approval or launch” asks more than Lujan’s standard requires of Incyte, which “clearly has a sufficient personal stake in the outcome of this appeal,” Judge Hughes argued.

Party representations in this case established that deuteration is the smallest structural change Incyte can make to ruxolitinib, and that the entire business model of Sun’s predecessor-in-interest was the deuteration of known drugs. “As far as drug development goes, the facts of this case… present perhaps the least uncertain version of drug development there could be,” Judge Hughes wrote, adding his view that Incyte’s funding allocation on the eve of appeal was an attempt to meet the Federal Circuit’s stricter standing requirement rather than an attempt to manufacture sham standing.

In a separate precedential opinion also issued today concerning Incyte’s U.S. Patent No. 9,662,335, the CAFC held that tthe U.S. District Court for the District of New Jersey clearly erred in finding that Incyte established irreparable harm and reverse the district court’s grant of a preliminary injunction.