PTAB Year in Review – The PTAB Continues to Shape Application of the Lead-Compound Analysis in Chemical Obviousness Cases

The so-called “Lead Compound Analysis” is the primary legal framework for assessing chemical obviousness. For years, patent owners have enjoyed largely favorable outcomes in cases related to chemical obviousness due to the Patent Trial and Appeal Board’s (PTAB) dutiful application of the lead compound analysis as the primary legal framework. But the decisions we have seen from the PTAB in 2023-2024 appear to continue the trend, started a few years ago, where the PTAB is willing to deviate from the lead compound framework, exposing vulnerability of chemical compound claims in AIA proceedings.

The Lead Compound Analysis (LCA) for assessing obvious-ness of a chemical compound was first articulated by the Federal Circuit 24 years ago.¹ Under this approach, there must be a reason for a POSA to select a prior art compound as a “lead,” and a reason to modify the prior art compound with a reasonable expectation of success.² A key distinction between the previous “Dillon” approach and the LCA was that to qualify as a “lead,” the compound must possess some beneficial property that somehow distinguish it from other prior art compounds.³ Thus, by focusing on the most promising prior art compound(s) rather than the closest prior art compound (the practice under Dillon), the LCA imposed a much higher burden for showing obviousness in chemical arts.

While the PTAB was slow to adopt the LCA in ex parte appeals,⁴ the PTAB’s approach to chemical obviousness in inter partes post-grant proceedings was a surprising (and swift) deviation from its ex parte practice. As one panel explained, “Dillion [sic] relates to the rejection-and-response regime of patent examination, rather than the adjudicatory process of an inter partes review” and “the burden shifting analysis applied in prosecution ‘does not apply in the adjudicatory context of an IPR.’”⁵ As such, from the inception of AIA proceedings in 2012, the PTAB started to adhere to a strict LCA framework in post-grant proceedings, leading to a nearly universal survival of compound claims.⁶

After a nearly 10-year stretch⁷ of the strict application of the lead compound framework, the PTAB surprised us in 2021 with an expressly-articulated refusal to rely on the LCA in NOF Corporation v. Nektar Therapeutics.⁸ The NOF panel “decline[d] to apply the lead compound analysis as the exclusive test for obviousness,” looking instead “to the general law of obviousness for guidance.”⁹ Similarly, in Alzheon Inc. v. Risen (Suzhou) Pharma Tech Co., Ltd., the PTAB concluded that “the standard set forth in In re Dillon appears to be the closest applicable standard to apply in this case,” which dealt with a question of whether a deuterated drug is prima facie obvious over its non-deuterated isotopolog. ¹⁰

The PTAB’s treatment of chemical obviousness cases since NOF and Alzheon appears to support the notion that the PTAB has become more selective about applying the LCA framework. Among the 2023-2024 chemical obviousness cases we surveyed, the PTAB applied the lead compound framework in two, and rejected it in two.

Cases where the PTAB applied the lead compound analysis:

Mylan Pharms et al. v. Bausch Health Ireland Ltd., IPR2022-00722, Paper 78 (P.T.A.B. Sep. 8, 2023)

Mylan petitioned the PTAB seeking review of U.S. Patent No. 7,041,786 (“the ’786 patent”) assigned to Bausch.¹¹ The ’786 patent relates to new agonists of guanylate cyclase receptor that are analogs of uroguanylin, with the challenged claims directed to a peptide having SEQ ID NO: 20, compositions comprising the peptide, and a PEGylated version of the peptide.¹²

Mylan asserted multiple grounds of unpatentability based on obviousness.¹³ In a straight-forward application of the LCA, the PTAB found that a POSA would have had a reason to select the identified lead compound, and to modify the lead to arrive at the claimed peptide agonist.¹⁴ Bausch did successfully argue that the particular features of the claimed peptide provided unexpected and superior results compared to human uroguanylin.¹⁵ While Mylan was ultimately unsuccessful in invalidating the ’786 patent claims in view of the strong evidence of unexpected results, this case is an example of the PTAB’s adherence to the lead compound framework.

Mylan Pharms., Inc. v. Novo Nordisk A/S, IPR2023-00722, Paper 9 (P.T.A.B. Oct. 2, 2023)

This is another example of the PTAB’s willingness to follow a straight-forward application of the lead compound framework. Mylan filed a petition challenging claims of U.S. Patent No. 8,536,122, directed to modified analogs of glucagon-like peptide 1 (GLP-1).¹⁶ One such analog, known as semaglutide, is the active ingredient in Novo Nordisk’s popular Ozempic®, Rybelsus®, and Wegovy® products.¹⁷

In this case, both parties agreed that the lead compound analysis should apply, and the PTAB readily accepted both parties’ approach. In the petition, Mylan argued that a POSA would have selected liraglutide as a lead compound for further development.¹⁸ The PTAB, in the Institution Decision, found that Mylan “has sufficiently established that liraglutide would have been, at a minimum, one of the best candidates for further development” in view of liraglutide’s promising phase 2 trials and potentially other beneficial uses beyond the treatment of diabetes.¹⁹ Ultimately, however, the PTAB denied institution and found that Mylan failed to adequately explain why a POSA would have opted to make three separate modifications with a reasonable expectation of success.²⁰

Cases where the PTAB rejected the lead compound analysis:

Shanghai Hongene Biotech Corp. v. Chemgenes Corp., IPR2023-00490, Paper 35 (P.T.A.B. July 18, 2024)

Petitioner Shanghai Hongene Biotech Corp. challenged claims 1-5 of U.S. Patent No. 9,884,885 (“the ’885 patent”) directed to N-2 acetyl protected nucleosides and phorphoroamidites useful for synthesizing RNA oligonucleotides.²¹ Petitioner used Dillon’s “structural similarity” rather than the lead compound framework and argued that the challenged claims would have been obvious because the “only difference between” compound x of the prior art “and the molecule recited in challenged claim 2 of the ’885 patent” is that compound x “has an isobutyryl group, while the latter [claimed compound] has an acetyl group.”²² Patent owner, in turn, insisted that petitioner had to explain the selection of compound x as “a lead,” which it failed to do.²³

The PTAB was “not persuaded that the lead compound analysis is an appropriate one for [this] case” because guanosine is “a natural, obvious starting place for any artisan seeking to build oligonucleotides.”²⁴ During the oral argument, Judge John New questioned whether the lead compound analysis was appropriate because “swapping out one known protecting group from another” was a “fairly simple substitution, and in view of KSR” did not “seem to be a terribly big jump to get to obviousness.”²⁵ Judge New also pointed out that unlike in Takeda,²⁶ petitioner was not “plucking this particular molecule, compound X, out of a long, long list of undifferentiated chemicals.”²⁷ Rather, petitioner was “simply substituting one known substituent group for another known substituent group,” which “generally lead[s] to obviousness.”²⁸ The PTAB ultimately concluded that, “to a person of ordinary skill, Crooke’s compound x would have been an obvious starting point for modification.”²⁹

Sarepta Therapeutics, Inc. v. The Trustees of the Univ. of Penn., IPR2024-00580, Paper 9, (P.T.A.B. Aug. 22, 2024)

Petitioner Sarepta Therapeutics filed a petition challenging claims 1, 3-6, and 8 of U.S. Patent No. 11,680,274, directed to a recombinant adeno-associated virus comprising an AAV capsid comprising various AAV proteins and amino acid sequences.³⁰ Without explaining the selection of the AAVrh.10 capsid as “a lead,” petitioner argued that “it would have been obvious to a POSA to make substitutions from AAV8 into AAVrh.10, in an attempt to confer the uniquely favorable properties of AAV8 onto AAVrh.10.”³¹ Patent owner argued that petitioner had to apply the lead compound framework and “identify a motivation to modify a known compound (i.e. a lead compound) in a particular way to achieve the claimed compound.”³²

Without resorting to a strict application of the lead compound framework, the PTAB found that based on the disclosure of the prior art and the unrebutted testimony of petitioner’s expert, “petitioner has sufficiently shown on the record before us that a POSA would have been motivated to select the promising AAVrh.10 as a starting point” to arrive at the claimed recombinant AAV.³³ In instituting trial, the PTAB also noted that “Petitioner has sufficiently shown that a POSA would be motivated to modify AAVrh.10 based on a comparison with AAV8” to improve efficiency of gene transfer to liver.³⁴ Indeed, the Board credited the opinion of Dr. Shaffer that a POSA would have been motivated to make “four variants of AAVrh.10, each containing a single substitution of a non-phosphorylatable amino acid for a phosphorylatable amino acid, and using those sequences to make rAAV vectors,” including the claimed rAAV vector.³⁵ The PTAB concluded that “Petitioner has shown sufficiently for purposes of institution that a POSA would have been motivated to make the substitution at the 665 position with a reasonable expectation of success.”³⁶

Similar to Shanghai v. Chemgenes, the PTAB here opted to forgo a lead compound analysis for a simple, easy-to-understand, KSR-type obviousness argument.

Recently, the Federal Circuit in Cytiva BioProcess R&D AB v. JSR Corp provided additional clarity on the application of the lead-compound analysis in chemical compound cases.³⁷ In this case, Cytiva appealed the final written decisions of unpatentability from six inter partes reviews.³⁸ Cytiva argued that the Board “erred by failing to conduct this lead-compound analysis.”³⁹

The Federal Circuit held that “our case law has not suggested that lead compound analysis is always required. Instead, we have explained that the lead compound analysis is an ordinary or generally applicable test that assists courts in assessing obviousness for new compounds.”⁴⁰ The Court further held that a “lead-compound analysis is not required where the prior-art references expressly suggest the proposed modification.”⁴¹

The PTAB’s recent decisions in both Sarepta and Shanghai seem to be in compliance with the reasoning from the Federal Circuit in Cytiva. The PTAB has been willing to forgo a strict application of the lead compound analysis in situations where the art provides “an obvious starting point for modification”⁴² or a reason for a POSA to make a simple substitution to arrive at the claimed compound.⁴³

With the Federal Circuit’s most recent weigh-in, the PTAB is likely to continue with the trend of selectively applying the lead-compound analysis in the chemical obviousness space. The recent cases show that patent owners who rely heavily on the lead compound analysis have been unsuccessful in convincing the PTAB to confirm patentability. On the other hand, petitioners who are more flexible in their obviousness arguments have recently been successful at invalidating chemical claims. Both parties should consider these recent decisions in determining whether to insist on a strict application of the lead-compound analysis at the PTAB.

[1] Yamanouchi Pharm. Co., Ltd. v. Danbury Pharmacal, Inc., 231 F.3d 1339 (Fed. Cir. 2000).
[2] Otsuka Pharm. Co. Ltd. v. Sandoz Inc., 678 F.3d 1280, 1291 (Fed. Cir. 2012).
[3] In re Dillon, 919 F.2d 688 (Fed. Cir. 1990).
[4] See, e.g., Ex parte Cao, Appeal 2010-004081 (BPAI Sept. 19, 2011); Ex parte Mayorga, Appeal 2010-012157 (BPAI Sept. 29, 2011); Ex parte Gaul, Appeal 2011-010047, at 6 (BPAI Jan. 28, 2013); Ex parte Dong, Appeal 2011-010047, at 6-7 (PTAB Jan. 28, 2013)).
[5] Sawai Inc. v. Astellas Pharma Inc., IPR2018-00079 (PTAB May 4, 2018) (Paper 7).
[6] See, e.g., Mylan Pharmaceuticals v. Gilead Sciences, IPR2014-00887 (PTAB Dec. 9, 2014) (Paper 16) (Rehearing Denied; Paper 22); Torrent Pharms. Ltd. v. Merck Frosst Canada & Co., IPR2014-00559, slip op. 7 (PTAB Jan. 7, 2015) (Paper 10) (Petitioner’s request for rehearing denied); Apotex v. Merck Sharp & Dohme, IPR2015-00419 (PTAB Oct. 27, 2015) (Paper 18) (Rehearing Denied; Paper 22); Sawai USA, Inc. v. Nissan Chemical Industries, IPR2015-01647 (PTAB Feb. 4, 2016) (Paper 9); Mylan Pharmaceuticals v. Astrazeneca AB, IPR2015-01340 (PTAB Aug. 18, 2017) (Paper 79); Par Pharmaceuticals v. Novartis AG, IPR2016-00084 (PTAB June 23, 2017) (Paper 19); Argentum Pharmaceuticals v. Research Corporations Technologies, IPR2016-00204 (PTAB May 23, 2016) (Paper 19); Mylan Pharmaceuticals, Inc. v. UCB Pharma GMBH, IPR2016-00512 (PTAB July 19, 2017) (Paper 37); Mylan Laboratories Limited v. Aventis Pharma, IPR2016-00627 (PTAB Aug. 23, 2016) (Paper 10) (rehearing denied, Paper 12); Fustibal v. Bayer healthcare LLC, IPR2016-01490, (PTAB Feb. 8, 2017) (Paper 9); Micro Labs v. Santen, IPR2017-01434 (PTAB Nov. 29, 2017) (Paper 11); Sawai Inc. v. Astellas Pharma Inc., IPR2018-00079 (PTAB May 4, 2018) (Paper 7); Initiative for Medicines v. Gilead Pharmasset, IPR2018-00122 (PTAB May 21, 2018) (Paper 10); SFC Co. v. LG Chem LTD, IPR2020-00178.
[7] Admittedly, the PTAB has not always applied the LCA in chemical AIA cases. For example, the PTAB also did not apply the lead compound analysis in assessing obviousness of a chemical genus in IPR2017-02005. There, the PTAB did not agree with the petitioner that the modified prior art subgenus would be “almost entirely within the scope of” the claimed genus, and declined to institute trial. Gilead Sciences v. Regents of the University of Minnesota, IPR2017-02005, 17 (PTAB May 29, 2020) (Paper 40).
[8] NOF Corporation v. Nektar Therapeutics, IPR2019-01397, 3 (PTAB Aug. 5, 2021) (Paper 70).
[9] Id.
[10] Alzheon Inc. v. Risen (Suzhou) Pharma Tech Co., Ltd., IPR2021-00347, 65 (PTAB July 12, 2022) (Paper 53).
[11] Mylan Pharms et al. v. Bausch Health Ireland Ltd., IPR2022-00722, Paper 1 at 1 (PTAB Mar. 21, 2022).
[12] Id. at 11-12.
[13] Id. at 4.
[14] IPR2022-00722, Paper 78 at 16-37.
[15] Id. at 37-60.
[16] Mylan Pharms., Inc. v. Novo Nordisk A/S, IPR2023-00722, Paper 1 at 10-15 (PTAB Mar. 16, 2023).
[17] IPR2023-00722, Paper 9 at 7.
[18] IPR2023-00722, Paper 1 at 6-7, 30-34.
[19] IPR2023-00722, Paper 9 at 28.
[20] Id. at 29-44.
[21] Shanghai Hongene Biotech Corp. v. Chemgenes Corp., IPR2023-00490, Paper 1 at 1-2 (PTAB Jan. 19, 2023).
[22] Id. at 33-34.
[23] IPR2023-00490, Paper 16 at 22-24.
[24] IPR2023-00490, Paper 35 at 37.
[25] IPR2023-00490, Paper 36 at 29:10-18.
[26] Takeda Chem. Indus. v. Alphapharm Pty., Ltd., 492 F.3d 1350 (Fed. Cir. 2007).
[27] IPR2023-00490, Paper 36 at 30:15-20.
[28] Id. at 30:20-24.
[29] IPR2023-00490, Paper 35 at 37-38.
[30] Sarepta Therapeutics, Inc. v. The Trustees of the Univ. of Penn., IPR2024-00580, Paper 1 at 1-2, (PTAB Feb. 21, 2024).
[31] Id. at 3.
[32] IPR2024-00580, Paper 8 at 25.
[33] IPR2024-00580, Paper 9 at 23-24.
[34] Id. at 24-25.
[35] Id. at 26-27.
[36] Id. at 27.
[37] Cytiva Bioprocess R&D AB v. JSR Corp., No. 23-2074 (Fed. Cir. 2024).
[38] Id. at 2.
[39] Id.
[40] Id. at 11.
[41] Id. at 12.
[42] IPR2023-00490, Paper 35 at 37.
[43] IPR2024-00580, Paper 9 at 27.

This article appeared in the 2024 PTAB Year in Review: Analysis & Trends report.