By
Robert J. Ambrogi
Bulletin Newsletter: July 2007
Expert testimony based largely on the opponents' marketing
and advertising materials provided no proof of infringement of stem-cell
patents and should have been excluded from trial, a divided three-judge
panel of the Federal Circuit Court of Appeals ruled June 9th.
The stem-cell biologist's testimony – which consisted almost entirely
of quotations from the defendants' promotional and investment materials – was
neither appropriate for an expert, nor helpful to the jury, the court
concluded in affirming the trial court's post-trial order striking the
testimony.
"The district court did not abuse its discretion in concluding that the
jury was fully capable of understanding those materials without expert assistance
and that [the expert's] testimony should have been excluded," Circuit
Judge William C. Bryson wrote for the majority, in which Circuit Judge Sharon
Prost joined.
But a dissenting opinion by Circuit Judge Pauline Newman argued
that exclusion of the expert's testimony was without legal basis under
Daubert v. Merrell Dow Pharmaceuticals.
"[I]t is clear that the district court's (and my colleagues') exclusion
of the entire testimony of this eminent scientist on this ground is not what
the Daubert ruling is about," Judge Newman wrote. "There was no testimony
contrary to the view of [the expert] of the scope of the representations made
in the marketing materials, and no challenge to the accuracy of her statements."
STEM-CELL PATENTS
The ruling came in a patent infringement action brought
by PharmaStem Therapeutics against six defendants alleging infringement
of two U.S. patents (B1 5,004,681 and 5,192,553). The two patents cover
a procedure that uses stem cells taken from a newborn's umbilical cord
to treat persons with compromised blood and immune systems.
Each of the defendants offers a service to families of newborns
in which they collect blood from the umbilical cord and preserve it for
possible later use. The defendants represent in their promotional literature
that the preserved blood may be useful for reconstituting the donor's
hematopoietic system if it is ever damaged by disease or other causes.
At the conclusion of the trial, the jury returned a verdict in
favor of PharmaStem finding infringement of both patents. On defendants'
motions for judgment as a matter of law, the district court lifted the
verdict and entered judgments of non-infringement with respect to both
patents.
In so doing, the district court found that PharmaStem had failed
to provide evidence proving a critical requirement of its patent. The
two patents covered compositions containing stem cells "in an amount
sufficient to effect hematopoietic reconstitution of a human adult." Therefore,
to prove infringement, PharmaStem had to show that the blood defendants
collected had a sufficient supply of stem cells to meet this purpose,
the court said.
PharmaStem's expert, a stem cell biologist, based her infringement
opinion entirely on her analysis of the defendants' marketing materials,
"without ever considering any data regarding the composition of
the defendants’ cord blood units," the district court found.
Given that she was not an expert in marketing or advertising and that
her analysis was well within the jury's common knowledge, the district
court ruled that it should not have allowed her to testify at trial. "[H]er
opinion of infringement is no more than a lay-person’s interpretation
of the defendants’
marketing materials,” the district court said.
Without its expert's testimony, PharmaStem had no evidence that
at least some of the cord blood samples collected by defendants met the
stem-cell sufficiency requirement covered by its patents. Without this
evidence, there was no proof of infringement, the district court concluded.
TESTIMONY WAS ERROR
On appeal, the Federal Circuit concluded that the lower
court was correct in ruling that the evidence of the defendants’
marketing materials did not provide a sufficient basis for a finding
of infringement. There is no prohibition against using the admissions
of a party – whether in the form of marketing materials or otherwise – as
evidence in an infringement action, the court said. The problem here,
however, was that the materials did not establish the fact in contention.
"[W]hile the defendants’ statements touted the possible therapeutic
uses the cord blood might have for the child and members of the child’s
family in the future, none of the statements represented that the stem cells
in any of the cryopreserved cord blood samples were sufficient in number to
effect hematopoietic reconstitution of an adult," the court explained.
The Federal Circuit agreed with the district court that PharmaStem's
expert's testimony as to her interpretation of the defendants' marketing
materials should not have been admitted and provided no proof of infringement.
"[B]ecause her testimony was almost entirely based on an interpretation
of the defendants’ marketing materials and materials directed to investors,
any expertise on [her] part as a cell biologist was of no apparent help to
the jury," the court reasoned. "Whether or not the materials constituted
admissions by the defendants that some or all of the preserved samples contained
enough stem cells to reconstitute an adult was not a matter as to which [her]
expertise was of any apparent use."
In addition to being unnecessary, the expert's interpretation was
also unreasonable, the court said. It found that the representations
defendants made in their marketing materials fell "significantly
short" of the conclusions the expert derived from them.
"In short," said the court, "we agree with the trial court that
the defendants' materials did not constitute sufficient proof of infringement … and
that those materials did not become proof of infringement when [the expert]
read those materials back to the jury from the witness stand."
NEWMAN'S DISSENT
In her dissent, Circuit Judge Newman takes issue with "the
tardy rejection of the testimony of PharmaStem's expert witness." This
was a misapplication of Daubert, she says, "for there was no criticism
of the expert's scientific credentials or her analysis of the prior art
and the state of the science."
Given that the expert made no error of law or scientific fact,
the court was wrong to exclude her testimony simply because she also
gave her opinion of defendants' marketing statements, Judge Newman asserted.
"There was no testimony contrary to the view of [the expert] of the scope
of the representations made in the marketing materials, and no challenge to
the accuracy of her statements," she wrote.
"Presentation of expert testimony was in compliance with the general
rule that 'typically expert testimony will be necessary in cases involving
complex technology,' … and this expert's testimony did not cross
the boundaries of admissibility."
The case is PharmaStem Therapeutics Inc. v. Viacell Inc., Case
Nos. 05-1490, 05-1551 (Fed. Cir., July 9, 2007).
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