Eli Lilly and Company v. Generix Drug Sales, Inc.

• Decision Date: 18 May 1972
• Docket Number: 71-2642 and 71-2771.,No. 71-1797,71-1797
• Citation: 460 F.2d 1096
• Parties: ELI LILLY AND COMPANY, INC., et al., Plaintiffs-Appellees, v. GENERIX DRUG SALES, INC., et al., Defendants-Appellees, Caribe Chemical Company, Inc., Ellencee Pharmaceutical Laboratories, Inc., et al., Defendants-Appellants (three cases).
• Court: U.S. Court of Appeals — Fifth Circuit

460 F.2d 1096 (1972)

ELI LILLY AND COMPANY, INC., et al., Plaintiffs-Appellees, v. GENERIX DRUG SALES, INC., et al., Defendants-Appellees,

Caribe Chemical Company, Inc., Ellencee Pharmaceutical Laboratories, Inc., et al., Defendants-Appellants (three cases).

Nos. 71-1797, 71-2642 and 71-2771.

United States Court of Appeals, Fifth Circuit.

May 18, 1972.

COPYRIGHT MATERIAL OMITTED

George W. Wright, Jr., Miami, Fla., Lilling & Siegel, James E. Siegel, New York City, Herbert I. Cantor, Washington, D.C., Burton L. Lilling, New York City, Henry A. Marzullo, Jr., Princeton, N.J., Philip Furgang, New York City, for defendants-appellants; Mershon, Sawyer, Johnston, Dunwoody & Cole, Miami, Fla., of counsel.

Smathers & Thompson, James L. Armstrong, III, Miami, Fla., Dewey, Ballantine, Bushby, Palmer & Wood, Edward N. Sherry, New York City, Robert A. Meister, Keith E. McClintock, Jr., New York City, Richard Leben, Hollywood, Fla., Robert W. Smiley, Pittsburgh, Pa., Dugald S. McDougall, Chicago, Ill., Patricia A. Nelson, New York City, for appellees; McDougall, Hersh & Scott, Chicago, Ill., of counsel.

Ralph & Boyd, Miami, Fla., for Eli Lilly in Nos. 71-2642 and 71-2771.

John H. Lewis, Miami, Fla., for Dubin and Generix in Nos. 71-2642 and 71-2771.

Before WISDOM, GOLDBERG and CLARK, Circuit Judges.

CLARK, Circuit Judge:

Apropos of most patent litigation, the instant claims of infringement—countered by the invalidity defenses of anticipation, obviousness and a failure of complete disclosure to the patent office (coupled with a denial of infringing use, and a claim for anti-trust relief)—present this court with problems which are difficult to resolve. Our task is further complicated by the subject matter of the patent, which is a drug useful for human medication composed of a complex organic molecule bearing the convenient, "brief" name, propoxyphene hydrochloride. As though this were not enough, the Gordian knot we must judicially sever is completed by intertwined objections to the procedures followed by the lower court, which defendants-appellants claim moved the preliminary hearing along too erratically and then erroneously resulted in the entry of a final judgment in derogation of their demands for a trial by jury, after a hearing they thought was restricted to consideration of preliminary injunctive relief.

The chemical compound here involved is widely distributed by the present patent holder, Eli Lilly & Company, Inc. (Lilly) under the registered trade name Darvon. It is a synthetic analgesic of the morphine type which acts on the central nervous system and is claimed to be the most efficacious non-addictive pain reliever. A patent for this compound was applied for by Dr. Albert Pohland, on December 3, 1952; and on December 27, 1955, Patent No. 2728779 was granted to Lilly's parent corporation as the assignee of Dr. Pohland, its employee. The drug proved to be a prompt and sustained commercial success. It has been classified as the most often prescribed drug dispensed in retail pharmacies in the United States, and enjoys a current annual rate of sale exceeding 65,000,000 dollars. No manufacturer other than Lilly has ever produced or sold the drug in the United States. Consent judgments have been entered against two companies who previously proposed to import propoxyphene hydrochloride for sale in this country.

The present litigation was instituted by Lilly's complaint seeking preliminary and final injunctive and declaratory relief, damages and attorney's fees against the appealing drug companies and one of their top officials. These defendants not only contested Lilly's right to any relief sought, but counterclaimed for injunctive relief in their favor as well as monopoly damages. In their response the defendants demanded a jury trial on all issues arising from the complaint and the counter-claims. After a lengthy evidentiary hearing on the motion for preliminary injunction, the district judge entered detailed and highly technical findings of fact and conclusions of law, D.C.Fla.1971, 324 F.Supp. 715. These were followed by the entry of a preliminary injunction, from which the defendants took an initial appeal to this court. Shortly after that appeal was taken, the district judge, acting sua sponte, set the matter down for hearing on final judgment and permanent injunction. Subsequent to a chambers conference with counsel for all parties, whereat Lilly renounced its claim for damages, the court concluded that no triable issue of fact remained in the action and thereupon permanently enjoined the manufacture and sale operations contemplated by defendants, and dismissed the counterclaim.

THE PRELIMINARY INJUNCTION

Standards of Review

The burden is ordinarily on the party seeking preliminary injunctive protection in a patent infringement suit to demonstrate beyond question that the patent he sues on is valid and infringed, as well as showing that other equitable grounds are present. Hoeme v. Jeoffrey, 100 F.2d 225 (5th Cir.1938). However, this rule is ameliorated where the patent at issue has been the subject of long acquiescence or has been adjudicated to be valid. Rosenberg v. Groov-Pin Corp., 81 F.2d 46 (2nd Cir.1936); See also Carter-Wallace, Inc. v. Davis-Edwards Pharmacal Corp., 443 F.2d 867 (2nd Cir.1971).

The trial court's determination to flex the injunctive strong-arm of equity is a matter committed to the discretion of that court. The exercise of this discretion can only be reversed upon an appellate determination that such discretion has been abused. The test is one that must be applied in terms of the district court's right to make the determination it did, and not by any subtle substitution of this court's discretion for that of the tribunal which weighed the equities and made the choice. See Bayless v. Martine, 430 F.2d 873 (5th Cir.1970) and Detroit Football Company v. Robinson, 283 F.2d 657 (5th Cir.1960).

Both sides submitted proposed findings to the district court which adopted verbatim the findings of fact suggested by the plaintiff. While acceptance of a party's findings after a decision has been reached (a condition not present here) is the subject of judicial criticism, all findings of fact and conclusions of law upon which a district court bases its actions are to be reviewed on an identical standard regardless of whether such findings are court-originated or party-suggested. That standard is: Are such findings clearly erroneous? We have recently analyzed this exact point in a patent context. See Part II of Railex Corp. v. Speed Check Co., 457 F.2d 1040 (5th Cir.1972).

From a detailed examination of the record, we conclude that the critical findings of fact by the district court were not clearly erroneous. Cf. Graver Tank & Mfg. Co. v. Linde Air Products Co., 336 U.S. 271, 274, 69 S.Ct. 535, 93 L.Ed. 672 (1949), modified on other grounds 339 U.S. 605, 70 S.Ct. 854, 94 L.Ed. 1097 (1950). In view of the age of the patent and the wide, commercially successful distribution enjoyed by the patented product, these findings are legally sufficient to answer the basic factual inquiries necessary to demonstrate beyond question that the patent was both valid and infringed. If the legal question of patent validity may be answered in the affirmative, then it was within the ambit of the federal chancellor's discretion to grant preliminary injunctive relief. Graham v. John Deere Co., 383 U.S. 1, 17, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966).

Patent Validity and Infringement

The district court's findings, D.C.Fla., 1971, 324 F.Supp. 715, make it unnecessary for us to treat extensively with the background details of the inventor's claimed process of discovery or with the factual issues involved in the disputes between the parties, in reasoning our decision whether, as a matter of law, the preliminary order must be affirmed. However, before launching into a discussion of the chemical controversy about which the merits and procedural issues revolve, a foreword of an unusual sort seems appropriate. Since most readers will be unfamiliar with organic chemistry, the following lexicon—drawn largely from the stipulation of the parties and tailored to this particular controversy—should facilitate the understanding of both the district court's findings and our reasoning here.

analogue—one of a series of slightly varied molecules which all have a similar basic structure of atoms.

homologue—one of a series of similar molecules which vary by a regular difference in atomic structure, especially the members of a series which vary by only one carbon and two hydrogen atoms.

stereoisomerism—a long known and predictable condition of certain chemical compounds in which two identical groups of atoms are linked in the same order, but differ in their arrangement in space. Simple analogies may be drawn to the left and right hand gloves from a single pair or to an object and its image in a mirror. The stereoisomers pertinent here are optical isomers, which means that one of the separate atomic groups, or isomers, will rotate a straight beam of light to the left and the other will rotate it to the right. The right rotating isomer is called the dextro or disomer, and its opposite is designated the levo or l-isomer.

diastereoisomer—a compound containing more than one set of stereoisomers. In the case at bar we are concerned with a compound in which two such sets are involved. The distinction between the sets of isomers or the stereoisomers in such a compound is based upon a difference in the solubility of each set. The less soluble pair here is designated by the Greek letter alpha, which is written a; and the more soluble pair by the letter beta, written ß.

racemate—a name coined by Pasteur for a compound consisting of equal parts of a dextro and a levo isomer, also referred to as a racemic mixture.

ester—a product which results when an organic acid is mixed with an alcohol. More importantly to the problems at hand, esters

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