Zenith Laboratories, Inc. v. Bristol-Myers Squibb Co., BRISTOL-MYERS

• Citation: 19 F.3d 1418,30 USPQ2d 1285
• Decision Date: 24 March 1994
• Docket Number: No. 92-1527,BRISTOL-MYERS,92-1527
• Parties: , 30 U.S.P.Q.2d 1285 ZENITH LABORATORIES, INC., Plaintiff-Appellant, v.SQUIBB COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1418

19 F.3d 1418

62 USLW 2640, 30 U.S.P.Q.2d 1285

ZENITH LABORATORIES, INC., Plaintiff-Appellant, v. BRISTOL-MYERS SQUIBB COMPANY, Defendant-Appellee.

No. 92-1527.

United States Court of Appeals Federal Circuit.

March 24, 1994.

Rehearing Denied; Suggestion for Rehearing In Banc Declined

May 26, 1994.

Stephen N. Shulman, Cadwalader, Wickersham & Taft, Washington, DC, argued for plaintiff-appellant. With him on the brief was Mark C. Ellenberg. Also on the brief were William L. Mentlik and Arnold H. Krumholz, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, NJ.

S. Leslie Misrock, Pennie & Edmonds, New York City, argued for defendant-appellee. Of counsel were Brian D. Coggio, Jennifer Gordon and Kent H. Cheng, Pennie & Edmonds, New York City. Also on the brief was Frederick B. Lacey, LeBoeuf, Lamb, Leiby & MacRae, Newark, NJ.

Before PLAGER, CLEVENGER, and SCHALL, Circuit Judges.

PLAGER, Circuit Judge.

The question in this declaratory judgment action is whether a drug compound, which in its manufactured state does not infringe the patent in suit, becomes infringing as a result of transitory chemical changes that occur in vivo, that is, as a result of ingestion by the patient. There are fact issues--what changes actually occur when the drug is ingested, and how do we know; there are legal issues--does a compound that changes in the human body into the patented product on its way to becoming the active ingredient in the drug (the original patent on the active ingredient having earlier expired) literally infringe, infringe under the doctrine of equivalents, or infringe by inducement.

The District Court for the District of New Jersey, Civil Action No. 91-3423, entered judgment, following a bench trial, that plaintiff/appellant Zenith Laboratories, Inc.'s (Zenith) commercial sale of cefadroxil DC induces infringement of U.S. Patent 4,504,657 (the '657 patent), ¹ the patent at issue. Zenith Lab. Inc. v. Bristol-Myers Squibb Co., 24 USPQ2d 1652, 1992 WL 340761 (D.N.J.1992) (Zenith II ). The '657 patent is owned by Bristol-Myers Squibb Co. (Bristol). For the reasons set forth, we reverse.

BACKGROUND

The chemical compound cefadroxil, an antibiotic of the cephalosporin family effective against bacteria that are resistant to penicillin, was described and claimed in United States Patent No. 3,489,752 (the '752 patent), which issued in 1970; the owner was Bristol. The claims of the '752 patent covered any and all forms of cefadroxil--they described the chemical compound per se. The '752 patent expired in 1987.

In the meantime, Bristol set to work to find a commercially useful crystalline form of the compound that would overcome problems related to manufacture of the product so that it would be usable by humans. The task of developing a commercial production process was assigned to certain of Bristol's chemists. They developed what became known as the Bouzard monohydrate, named after one of the discoverers--a new crystalline form of cefadroxil. Unlike prior forms of cefadroxil, Bouzard monohydrate possesses certain characteristics in its pre-ingested, powdered form, related to bulk density, solubility, and stability (manufacturing-related characteristics), which make it particularly suitable for packaging into capsules.

The Bouzard monohydrate was the subject of the single claim in the '657 patent:

1. Crystalline 7-[D--amino--(p-hydroxyphenyl-)acetamido]-3-methyl-3-cephem-4-carboxylic acid monohydrate exhibiting essentially the following x-ray diffraction properties: [a 37-line table of relative intensities exhibited by Bouzard monohydrate at various scan angles].

In July 1988, Zenith, the plaintiff in this declaratory judgment action, contracted with a Spanish company, Gema, S.A. of Barcelona (Gema), to become the exclusive United States distributor of the form of cefadroxil manufactured by Gema and known as cefadroxil DC. Cefadroxil DC is a hemihydrate form of cefadroxil and thus differs structurally from Bouzard monohydrate. ² Zenith and Gema then undertook to obtain approval from the Food and Drug Administration (FDA) for commercial marketing in the United States of cefadroxil DC. Pursuant to FDA regulations, Zenith and Gema sought abbreviated approval on the grounds that cefadroxil DC was bioequivalent to a form of cefadroxil monohydrate (other than Bouzard monohydrate) which had already been approved by the FDA for commercial sale. In October 1990, the FDA granted approval. ³

In June 1991, after learning of Zenith's and Gema's efforts to obtain FDA approval, Bristol filed suit against Gema (and Gema's affiliates) in the District Court for the District of Maryland, Civil Action No. HAR 91-1765 (the Maryland action), alleging infringement of the '657 patent. Subsequently, when Gema announced it was abandoning its plans to manufacture cefadroxil DC, that suit was dismissed upon stipulation of the parties.

Zenith then, in August 1991, filed the present declaratory judgment action against Bristol in the District Court for the District of New Jersey. Zenith's complaint contained four counts. In count one, Zenith sought a declaration that cefadroxil DC does not infringe the '657 patent, and in count two, a declaration that Bristol is equitably estopped from asserting that cefadroxil DC infringes the '657 patent. In count three, Zenith alleged that Bristol, by initiating the Maryland action, violated a consent decree previously entered in settlement of prior litigation between the parties; and in count four, that Bristol had engaged in unfair competition. (Zenith subsequently added a fifth and still pending count alleging that Bristol had committed antitrust violations.)

Bristol then moved to dismiss counts one and two, and for summary judgment on counts three and four. Zenith filed cross-motions for summary judgment on these counts. On December 12, 1991, the trial court granted Bristol's motion to dismiss count three (concerning the prior consent decree) on the ground that the count was moot in view of the previous dismissal of the Maryland action. Zenith Lab. Inc. v. Bristol-Myers Squibb Co., 24 USPQ2d 1641, 1651, 1991 WL 267892 (D.N.J.1991) (Zenith I ). As to Zenith's motion for summary judgment on count one (the infringement count), the court stayed that motion pending an oral hearing. Id. at 1648. The court denied all other motions. Id. at 1648, 1650-51.

At the hearing on the infringement count, Bristol conceded that cefadroxil DC, being a hemihydrate, did not literally infringe the '657 patent in its pre-ingested form. Bristol nevertheless argued that Zenith was liable under the patent on two grounds: Zenith's product infringed under the doctrine of equivalents; and Zenith's product converted into the patented compound in the patient's stomach, and thus the sale of cefadroxil DC would induce infringement of the '657 patent under 35 U.S.C. Sec. 271(b) (1988). The trial court concluded that summary judgment was appropriate since Bristol had not raised a genuine factual dispute on these issues; and on March 4, 1992, the court granted Zenith's motion for summary judgment on count one.

However, subsequently, on April 16, 1992, upon Bristol's motion for reconsideration, the court vacated its March 4, 1992 decision. The court denied Zenith's motion for summary judgment on count one on the basis that Bristol, through two declarations submitted with its motion for reconsideration, had demonstrated a genuine dispute on the in vivo conversion issue. Consequently, it ordered that that count be severed from the remaining counts and tried separately.

From May 26, 1992 through June 5, 1992, the court conducted a bench trial on count one. Following the trial, the court rejected Bristol's theory of infringement under the doctrine of equivalents. It found that Bristol, through prosecution history estoppel, had relinquished coverage of cefadroxil DC. However, the court found that cefadroxil DC converts to Bouzard monohydrate in the patient's stomach. Since an act of literal infringement thus occurs in the patient's stomach as a result of ingestion of cefadroxil DC, the court concluded that Zenith's sale of cefadroxil DC would induce infringement of the '657 patent.

On August 6, 1992, the court, in accordance with its findings and conclusions, entered judgment for Bristol. Zenith II, 24 USPQ2d 1652. The court, pursuant to 35 U.S.C. Sec. 271(e)(4)(A) (1988), ordered that the effective date of any approval by the FDA of cefadroxil DC for commercial distribution and sale by Zenith could be no earlier than March 12, 2002, the expiration date of the '657 patent. Id. at 1676. It subsequently certified the finality of that judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. Zenith then filed this appeal.

DISCUSSION

Zenith presents five separate grounds on which the judgment of the trial court should be reversed. First, the claim of the '657 patent, properly construed, does not cover Bouzard crystals which might form momentarily in a patient's stomach. Second, even assuming conversion in vivo is within the scope of the claim, there was a failure of proof as to whether any crystals, formed in the stomach from ingested cefadroxil DC, literally infringe the '657 patent. Third, even if such crystals formed, there would be no infringing "use" within the meaning of 35 U.S.C. Sec. 271(a) (1988). Fourth, the doctrine of equivalents, applied in reverse, precludes a judgment of literal infringement. And fifth, the court erroneously declined to grant summary judgment that Bristol was equitably estopped from asserting that cefadroxil DC infringed the Bouzard patent.

1.

We begin with claim construction: whether the claim of the '657 patent, properly construed, covers Bouzard crystals which might form momentarily in a patient's stomach. Zenith argues that, due to statements made by Bristol during the '657 prosecution, the '657 claim is limited to the pre-ingested, powdered form of Bouzard monohydrate....