Merial Ltd. v. Cipla Ltd.

• Decision Date: 31 May 2012
• Docket Number: 2011–1472.,Nos. 2011–1471,s. 2011–1471
• Parties: MERIAL LIMITED and Merial Sas, Plaintiffs–Appellees, and BASF Agro B.V., Plaintiff, v. CIPLA LIMITED, Defendant–Appellant, and Velcera, Inc. and Fidopharm, Inc., Defendants–Appellants, and Archipelago Suppliers, Arrowtarget Enterprises Ltd., Generic Petmeds, Inhouse Drugstore, Lisa Perko, Petcare Pharmacy, and Petmeds R Us, Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

681 F.3d 1283

82 Fed.R.Serv.3d 959

103 U.S.P.Q.2d 1001

MERIAL LIMITED and Merial Sas, Plaintiffs–Appellees,

and

BASF Agro B.V., Plaintiff,

v.CIPLA LIMITED, Defendant–Appellant,andVelcera, Inc. and Fidopharm, Inc., Defendants–Appellants,

and

Archipelago Suppliers, Arrowtarget Enterprises Ltd., Generic Petmeds, Inhouse Drugstore, Lisa Perko, Petcare Pharmacy, and Petmeds R Us, Defendants.

Nos. 2011–1471, 2011–1472.

United States Court of Appeals,Federal Circuit.

May 31, 2012.

Gregory A. Castanias, Jones Day, of Washington, DC, argued for the plaintiffs-appellees. With him on the brief were Damon M. Lewis; and J. Patrick Elsevier, of San Diego, CA. Of counsel on the brief were Judy Jarecki–Black, Merial Limited, of Duluth, Georgia, Frank G. Smith, III, Alston & Bird, LLP, of Atlanta, GA, and Edward Donald Tolley, Cook, Noell, Tolley, Bates & Michael, LLP, of Athens, GA.

Nagendra Setty, Sheppard, Mullin, Richter & Hampton LLP, of San Francisco, CA, argued for defendant-appellant Cipla Limited. Of counsel were Paul Wendell Garrity and Mark Edward McGrath, of New York, NY.

Jonathan G. Graves, Cooley LLP, of Reston, VA, argued for defendants-appellants FidoPharm, Inc., et al. With him on the brief were Phillip E. Morton; and Tryn T. Stimart, of Washington, DC. Of counsel was Lori R. Mason, of Palo Alto, CA. Of counsel on the brief were George C. Lombardi, Winston & Strawn LLP, of Chicago, IL; and Elizabeth P. Papez, of Washington, DC.

Before LOURIE, SCHALL, and REYNA, Circuit Judges.

Opinion for the court filed by Circuit Judge LOURIE.

Dissenting opinion filed by Circuit Judge SCHALL.

LOURIE, Circuit Judge.

Cipla Ltd. (“Cipla”) joins with Velcera, Inc. and FidoPharm, Inc. (collectively, “Velcera”) in appealing from a judgment entered by the United States District Court for the Middle District of Georgia in favor of Merial Ltd. and Merial SAS (collectively, “Merial”) holding Cipla in contempt for violating an earlier injunction and holding Velcera in contempt for acting in concert with Cipla to violate that injunction. Merial Ltd. v. Cipla Ltd., No. 3:07–CV–125 (CDL), 2011 U.S. Dist. LEXIS 65639, 2011 WL 2489753 (M.D.Ga. June 21, 2011) (“Contempt Order ”). For reasons set forth below, we affirm the district court's judgment.

Background

The Patented Pest Control Technology

This appeal concerns patented compositions for protecting domestic dogs and cats from infestation with ectoparasites, e.g., fleas and ticks. In particular, the dispute centers on topically applied or “spot on” veterinary compositions containing pesticidal N-phenylpyrazole derivatives, such as fipronil, applied directly to the skin of an animal. BASF's U.S. Patent 5,232,940 (“the '940 patent”), now expired, claimed fipronil and fipronil-based compositions as well as methods of using such compositions for pest control. Merial, as the exclusive licensee of the '940 patent, developed commercially successful spot-on fipronil compositions sold under the brand name Frontline.

In addition to producing fipronil-only products, Merial devised dual-acting pest control compositions covered by U.S. Patent 6,096,329 (“the '329 patent”). In particular, the '329 patent claims spot-on compositions containing fipronil combined with a second active ingredient—specifically, an insect growth regulator (“IGR”). In contrast to pesticides, which work through direct toxicity, IGRs act not by killing individual parasites but rather by interrupting the life cycle within a parasite population. The '329 patent discloses numerous IGRs—such as methoprene, for example—that mimic natural insect hormones to prevent immature or juvenile-stage parasites from reaching reproductive maturity, thereby limiting and eventually depleting an infestation. In the pesticideplus-IGR compositions disclosed in the '329 patent, the paired active ingredients complement one another through their distinct methods of action to achieve improved pest protection relative to either agent administered alone. Merial markets compositions combining fipronil and methoprene as Frontline Plus, the leading veterinary flea and tick treatment in the United States.

The 2008 Default Judgment

Cipla is a pharmaceutical company incorporated under the laws of India with its principal place of business in Mumbai, India. In November 2007, Merial filed suit against Cipla and various internet retailers in the United States District Court for the Middle District of Georgia alleging infringement of the '940 and '329 patents (“the 2007 complaint”). Merial alleged that Cipla was subject to personal jurisdiction in the district court by virtue of Cipla's alleged contacts with and conduct within the state of Georgia, and Merial provided Cipla with service of process in Mumbai by courier and registered mail. According to the 2007 complaint, Cipla and the defendant online retailers sold throughout the United States spot-on veterinary pesticide products known as “Cipla Protektor” and “Cipla Protektor Plus” that constituted infringing formulations of fipronil or fipronil and methoprene, respectively.

Neither Cipla nor any of the other defendants responded to the 2007 complaint or entered an appearance in the district court. Merial therefore moved to hold the defendants in default pursuant to Federal Rule of Civil Procedure 55, and the district court granted that motion on March 6, 2008. In relevant part, the district court found that the '940 and '329 patents were not invalid, found that Cipla had infringed each patent, and entered a permanent injunction barring Cipla from directly or indirectly infringing the '940 or '329 patents in the future:

[Cipla], as well as those persons and entities in active concert with [Cipla] who have notice of this order, are herewith permanently enjoined from committing any act that infringes or causes or induces infringement of any claim of the '940 or '329 patents, including but not limited to making, having made, using, causing to be used, selling, causing to be sold, offering for sale, and causing to be offered for sale in the United States, and importing and causing to be imported into the United States, any product that infringes any claim of the '940 or '329 patents, including but not limited to the veterinary products denominated CIPLA PROTEKTOR that contain fipronil and the products denominated CIPLA PROTEKTOR PLUS that contain fipronil and methoprene.

BASF Agro B.V. v. Cipla Ltd., No. 3:07–CV–125 (CDL) (M.D.Ga. Mar. 6, 2008), ECF No. 18, slip op. at 2–3 (“ Default Order ”). On April 14, 2008, Cipla filed in the court an “informal” communication that referenced the default proceedings but was “not intended to constitute an appearance,” in which Cipla denied infringing or having “any presence in the United States and in this judicial district” and requested dismissal of the action. J.A. 1130–31. The district court denied Cipla's request for such “informal equitable assistance” and entered final judgment on April 15, 2008. BASF Agro B.V. v. Cipla Ltd., No. 3:07–CV–125 (CDL) (M.D.Ga. Apr. 15, 2008), ECF Nos. 22, 23.

The PetArmor Plus Venture

Velcera was formed in 2004 to develop veterinary pharmaceuticals for companion animals such as dogs and cats, beginning with products for inhalation-based drug delivery. Led by former Merial executives, Velcera later began preparations to enter the market for flea and tick control products. In particular, Velcera intended to introduce products that would “directly compete” with Merial's Frontline series “at a substantially lower price.” J.A. 2222. Through its relationship with a two-person British company known as Omnipharm Ltd. (“Omnipharm”), Velcera engaged with Cipla to develop, test, manufacture, and distribute such products, and by April 2011 those efforts culminated in U.S. sales of spot-on pest control compositions containing fipronil and methoprene—sold as PetArmor Plus and Velcera Fipronil Plus (collectively, “PetArmor Plus”)—that prompted the contempt proceedings at issue in this appeal. See J.A. 2222–27. We now briefly recount the roles played by each of the principal entities, and their many subsidiaries, in the development and production of PetArmor Plus.

In February 2008, Velcera established FidoPharm as its wholly owned subsidiary, and, on the same day, FidoPharm executed a license and development agreement with Omnipharm under which Omnipharm would develop the PetArmor Plus formulations and license those formulations exclusively to FidoPharm for sale in the United States. J.A. 2225–26. In addition, the license and development agreement between FidoPharm and Omnipharm identified Cipla as the intended manufacturer of PetArmor Plus. Id. FidoPharm simultaneously entered into a separate manufacture and supply agreement with QEDetal Ltd. (“QEDetal”)—an Irish entity held entirelyby the director of Omnipharm and established through a collaboration between Omnipharm and Cipla. J.A. 2225; 4859–60. Under that agreement, QEDetal would supply FidoPharm with finished PetArmor Plus products for importation and sale within the United States. FidoPharm was to submit orders and payments to QEDetal, QEDetal would then direct Cipla to produce and deliver sufficient product to fulfill FidoPharm's order, and finally QEDetal would transfer the finished PetArmor Plus to FidoPharm. J.A. 2225–26.

Like Velcera, Cipla entered into its own set of parallel development and supply agreements with Omnipharm and QEDetal, respectively, in April 2008. Under its development agreement with Omnipharm, Cipla agreed to conduct laboratory testing and otherwise assist in the development and regulatory approval of the PetArmor Plus formulations. J.A. 2226. In addition, Cipla's manufacture and supply agreement with QEDetal specified that Cipla would satisfy QEDetal's requirements for fulfilling PetArmor Plus orders placed by FidoPharm pursuant to the FidoPharm/QEDetal manufacture and supply agreement. Id.

In practice, the parties' interrelated web of agreements and intermediaries...