We will be discussing one Seventh Circuit case and one Federal Circuit case during our weekly SoCal IP Institute meeting on Monday, April 30, 2012. Brief synopses are presented below.

Fail-Safe, LLC. v. A.O. Smith Corp., Case No. 11-1354 (7th Cir. Mar. 29, 2012) (attached).

Fail-Safe manufactures anti-entrapment devices for pool drains.  A.O. Smith manufactures motors for pool and spa pumps.  The two companies entered into a project to develop a pump motor for pool suction entrapment prevention technology.  No formal agreement was signed, nor did the parties discuss confidentiality.  Eventually, the relationship fell apart and later A.O. Smith introduced two pump motors that Fail-Safe claims incorporated its trade secrets.

A trade secret is any information that gives a business a competitive advantage over others who do not know that information.  In order to claim that such information has been wrongfully used or disclosed, the owner must be able to show that it took reasonable steps to protect its secrecy.

The appeals court found that since the plaintiff, Fail-Safe, failed to take reasonable steps to protect its information, that information was not protected as a trade secret, and further, since the material conveyed to A.O. Smith was without any intellectual property protection or contractual agreement for confidentiality, A.O. Smith could not profit unjustly from the use of that voluntarily disclosed information. The court looked at the following facts: 1) the plaintiff never mentioned confidentiality in its oral or written communications with the defendant; 2) the plaintiff did not require defendant to sign a confidentiality agreement, even though defendant had plaintiff sign a one-way confidentiality agreement, and despite the fact that plaintiff had used confidentiality agreements in the past; and 3) plaintiff did not designate as confidential any information provided.

Fail-Safe was decided under Wisconsin state law, but the principles are broadly applicable.  Like California, Wisconsin has adopted the Uniform Trade Secret Act, and adheres to the same fundamental concepts with respect to the protection of trade secrets. 

Bayer Schering Pharma v. Lupin, Case No. 2011-1143 (Fed. Cir. April 16, 2012) (attached).

The Hatch-Waxman Act makes it an act of infringement to file an abbreviated new drug application (ANDA) for a drug or for a use of the drug that is claimed in a patent.  That “artificial” act of infringement creates jurisdiction for a court to entertain an action by the patentee against the ANDA applicant.

When an applicant files an ANDA seeking FDA permission to market a generic drug, it is required to address each patent that relates to that drug.  One way that the ANDA application can address the patent is to include a statement, known as a “section viii statement,” that the applicant is not seeking approval for the method of use that is claimed in the patent.  The ANDA applicant must include a proposed label that removes or “carves out” the claimed method of use.  The FDA will approve an ANDA with a section viii statement only if (1) there is no overlap between the proposed label submitted by the ANDA applicant and the claimed use, and (2) removing the information about the claimed method of use from the label does not render the drug less safe or effective.

In consolidated patent infringement actions brought by pharmaceutical manufacturer Bayer against defendants who filed ANDAs with the FDA to market generic versions of the Bayer’s contraception drug Yasmin, the district court’s judgments of noninfringement were affirmed, where: 1) the defendants’ ANDAs sought approval to market the generic form of the drug solely for contraceptive use, and there was no valid patent on the use of the drug for that purpose alone; 2) the FDA-approved label for the generic drug did not indicate to physicians that the generic drug was safe and effective for the claimed use, so the defendants could not be held liable for infringement of the patent.

The Court stated that Bayer failed to persuade the Court that the FDA had approved the generic for the claimed use or that the generic was otherwise inducing physicians to prescribe for the claimed use:

“[T]he fact that certain of the effects of a drug are described in the Clinical Pharmacology section of the label does not mean that the FDA has approved the use of the drug to produce those effects; it only ensures that physicians are aware of the full range of the drug’s pharmacological effects (especially those that might be considered adverse effects) when prescribing the drug for a purpose set forth in the Indications and Usage section and under the conditions described in other parts of the label.”

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, April 30, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Elisha Manzur by 9 am Monday morning.