Justia Patents Opinion Summaries

Actavis Laboratories FL, Inc. ("Actavis") filed Abbreviated New Drug Applications (ANDAs) with the FDA to market generic versions of branded drugs. The manufacturers of these branded drugs, who hold New Drug Applications (NDAs) and patents, sued Actavis for patent infringement under the Hatch-Waxman Act. This Act considers the submission of an ANDA with a Paragraph IV certification as an act of patent infringement if it seeks FDA approval before the expiration of the patents. Actavis incurred significant litigation expenses defending these suits and deducted these expenses as ordinary business expenses on its tax returns.The IRS disagreed, treating these expenses as capital expenditures related to the acquisition of an intangible asset (FDA approval) and issued Notices of Deficiency. Actavis paid the assessed taxes and sued in the Court of Federal Claims for a refund, arguing that the litigation expenses were deductible. The Court of Federal Claims ruled in favor of Actavis, holding that the litigation expenses were deductible as ordinary business expenses.The United States Court of Appeals for the Federal Circuit reviewed the case. The court considered whether the litigation expenses were ordinary business expenses or capital expenditures. Applying both the "origin of the claim" test and the IRS regulation under C.F.R. § 1.263, the court concluded that the expenses were deductible. The court found that the origin of the claim was the patent infringement suit, not the pursuit of FDA approval, and that the litigation did not facilitate the acquisition of the FDA-approved ANDA. Therefore, the court affirmed the decision of the Court of Federal Claims, allowing Actavis to deduct the litigation expenses as ordinary business expenses. View "ACTAVIS LABORATORIES FL, INC. v. US " on Justia Law

Spireas earned $40 million in technology license royalties in 2007-2008s. Royalties paid under a license agreement are usually taxed as ordinary income at 35 percent but Spireas claimed capital gains treatment (15 percent) under 26 U.S.C. 1235(a), which applies to money received “in consideration of” “[a] transfer . . . of property consisting of all substantial rights to a patent.” The IRS disagreed and gave Spireas notice of a $5.8 million deficiency for the two tax years. The Tax Court and Third Circuit affirmed. To qualify for automatic capital-gains treatment, income must be paid in exchange for a “transfer of property” that consists of “all substantial rights” to a “patent.” Not every transfer of “rights” qualifies because the statute grants capital gains treatment only to transfers of property. Spireas’s original theory was that he reduced the formulation to practice in 2000, giving him the required property interest, and later assigned his interest. Spireas later abandoned that theory, arguing that he transferred his rights prospectively in 1998. Because that was two years before the invention of the formulation, Spireas’s second position cannot depend on the legal standard of reduction to actual practice to establish that he held a property right at the time of transfer. Spireas’s sole claim on appeal was, therefore, waived. View "Spireas v. Commissioner of Internal Revenue" on Justia Law

Bancorp owns the 792 and 037 patents, for tracking value of life insurance policies in separate accounts, under which the policy owner pays a premium beyond that required for the death benefit and specifies types of assets in which additional funds are invested. Corporations use the policies to insure employees’ lives and fund retirement benefits on a tax-advantaged basis. The value of a separate account policy fluctuates; owners must report the value of their policies. The patents provide a computerized means for tracking book and market values and calculating stable value guarantee. Bancorp sued Sun Life for infringement. In another suit, the court invalidated the 792 patent for indefiniteness. Bancorp and Sun Life stipulated to conditional dismissal on collateral estoppel. The Federal Circuit reversed the other case. The district court vacated dismissal then granted summary judgment of invalidity under section 101 (ineligible abstract ideas) without addressing claim construction and analyzing each claim as a process claim. Applying “the machine-or-transformation test,” specified computer components are only objects on which claimed methods operate, and the central processor is a general purpose computer programmed in an unspecified manner for a process that can be completed manually. The claims “do not transform the raw data into anything other than more data and are not representations of any physically existing objects.” The Federal Circuit affirmed. View "Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Canada" on Justia Law