Asahi Glass Co., Ltd. v. Pentech Pharmaceuticals

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: Posner
• Citation: Asahi Glass Co., Ltd. v. Pentech Pharmaceuticals, 289 F.Supp.2d 986 (N.D. Ill. 2003)
• Decision Date: 29 October 2003
• Docket Number: No. 03 C 3646.,03 C 3646.
• Parties: ASAHI GLASS CO., LTD., Plaintiff, v. PENTECH PHARMACEUTICALS, INC., Par Pharmaceutical, Inc., SmithKline Beecham Corp., Beecham Group PLC, GlaxoSmithKline PLC, and SmithKline Beecham PLC, Defendants.

289 F.Supp.2d 986

ASAHI GLASS CO., LTD., Plaintiff, v. PENTECH PHARMACEUTICALS, INC., Par Pharmaceutical, Inc., SmithKline Beecham Corp., Beecham Group PLC, GlaxoSmithKline PLC, and SmithKline Beecham PLC, Defendants.

No. 03 C 3646.

United States District Court, N.D. Illinois, Eastern Division.

October 29, 2003.

COPYRIGHT MATERIAL OMITTED

David C. Bohan, Michael David Richman, Jonathan Stephen Polish, Sachnoff & Weaver, Ltd., Chicago, IL, William T. Enos, Richard D. Kelly, Stephen G. Baxter, Frank J. West, Robert C. Nissen, John D. Dellinger, Aarti J. Shah, Oblon, Spivak, McClelland, Maier & Neustadt, P.C., Alexandria, VA, for Plaintiff.

John W. Treece, Robert N. Hochman, Sidley Austin Brown & Wood LLP, Chicago, IL, Richard A. Edlin, Greenberg Taurig, LLP, New York, NY, Joseph A. Tate, George M Gowen, III, Dechert, Price & Rhoads, Philadelphia, PA, Ford F. Farabow, Richard B. Racine, York M. Faulkner, Robert D. Bajefsky, Jason R Buratti, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, for Defendants.

OPINION

POSNER, Circuit Judge, sitting by designation.

The plaintiff, Asahi, brought this patent and antitrust suit against two groups of affiliated entities (collectively "Glaxo" and "Pentech"); it was assigned to me under the authority of 28 U.S.C. § 291(b) because of its close relation to two previous patent infringement suits that had been assigned to and decided by me. SmithKline Beecham Corp. v. Apotex Corp., 247 F.Supp.2d 1011 (N.D.Ill.2003), and SmithKline Beecham Corp. v. Pentech Pharmaceuticals Inc., 261 F.Supp.2d 1002 (N.D.Ill. 2003). The defendants have moved to dismiss the complaint.

Glaxo owns the patent (U.S. patent 4,721,723 — "723" for short) for crystalline paroxetine hydrochloride hemihydrate, a crystal of paroxetine (an organic molecule that has antidepressant properties) that Glaxo manufactures into pills and sells under the trade name Paxil. In 2000 Glaxo sued Pentech, a manufacturer of generic pharmaceutical drugs that was producing — though not yet selling in the United States because it hadn't obtained the Food and Drug Administration's approval of its Abbreviated New Drug Application — an amorphous (that is, noncrystalline) paroxetine hydrochloride in capsule form. The suit charged that Pentech's product infringed patent 723. The active ingredient — that is, the amorphous paroxetine hydrochloride, as distinct from the finished pill sold to the public, which includes inactive ingredients ("excipients") to bulk it up, improve its solubility, etc. — was made by Asahi and sold to Pentech pursuant to a contract between the two firms that has since expired. Glaxo named Asahi as an additional defendant, charging that it had induced Pentech's infringement of patent 723 in violation of 35 U.S.C. § 271(b).

After extensive discovery, Glaxo and Pentech decided to settle their case and in the Pentech decision cited above I granted Glaxo's motion to dismiss the case in its entirety — which is to say against Asahi as well as Pentech. By the settlement (the reasonableness of which I did not attempt to determine, for reasons explained in the Pentech opinion), Glaxo licensed Pentech to sell Paxil, though not under the Paxil trade name, in Puerto Rico beginning immediately and in the rest of the United States as soon as any other generic version of paroxetine hydrochloride came on the market, though Pentech would have to leave the U.S. market if the other generic left. The "other generic" to which the license implicitly but unmistakably referred was a version of paroxetine hydrochloride manufactured by Apotex, the defendant in SmithKline Beecham Corp. v. Apotex Corp., supra, because everyone knew that Apotex would be the first manufacturer of a generic paroxetine product to obtain FDA approval. SmithKline Beecham Corp. v. Apotex Corp. was a patent infringement suit by Glaxo, based on patent 723, and if Glaxo won that suit Apotex would have to leave the market, and Pentech, in all likelihood, with it. I ruled that the patent was valid but not infringed; Glaxo has appealed to the U.S. Court of Appeals for the Federal Circuit, and its appeal is pending.

In September of this year, Apotex began marketing its paroxetine hydrochloride, which is anhydrous, like Pentech's—that is, it does not contain a bound water molecule, which would make it a hydrate — though unlike Pentech's product it is not amorphous. Pursuant to the license, Pentech is now selling its unbranded Paxil in competition with Glaxo and Apotex throughout the United States, without protest by Glaxo. Glaxo does not charge Pentech for the Paxil that Pentech relabels and sells, but it does receive a hefty royalty on Pentech's sales of the drug. The license does not require Pentech to obtain product from Glaxo — the license leaves it free to buy anything it wants from anyone, including bulk material from Asahi — but it has no incentive to buy bulk material from anyone, since it is being supplied with Paxil, the finished product, free of charge and would have to pay Glaxo the same royalty regardless of where it was getting paroxetine. And because Pentech has not obtained the FDA's approval to sell its anhydrous paroxetine, it couldn't sell product manufactured from paroxetine sold to it by Asahi even if it wanted to. It may be quite content with reselling Paxil pursuant to its license from Glaxo rather than pushing for the FDA's approval of its own product and purchasing the bulk material from Asahi and manufacturing it into capsules for sale to the public.

In the patent phase of the present suit, Asahi seeks a declaration that patent 723 is invalid. Asahi is concerned that unless and until that patent is invalidated, no one will dare buy paroxetine from Asahi, fearing that if it does so it will be sued, just as Apotex and Pentech were sued. It is apparent, however, that Asahi is seeking an advisory opinion, which a federal court is not empowered to issue. E.g., Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 22 L.Ed.2d 113 (1969). It thinks, though the experience of Apotex and Pentech makes one doubt that it is correct, that the threat of being sued by Glaxo for patent infringement will deter other generic manufacturers from trying to make a paroxetine-based antidepressant, thus preventing Asahi from obtaining a market for its bulk paroxetine in the United States. But the existence of legal uncertainty is not a ground for bringing a lawsuit in a judicial system, such as the federal court system, in which judges are not authorized to issue legal advice. Legal uncertainty is pervasive, and the responsibility for dispelling it rests in the first instance on lawyers rather than judges. A lawsuit must be predicated on the violation of a right. No right of Asahi's is being infringed by Glaxo's readiness to enforce a patent.

It would be different if Glaxo were on the verge of suing Asahi for patent infringement (whether direct or indirect). The declaratory-judgment procedure permits a prospective defendant in effect to precipitate the plaintiff's suit. (See, with reference to declaratory judgments challenging the validity of a patent, Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed.Cir.1999); Arrowhead Industrial Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 737-38 (Fed.Cir.1988); Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953, 955-56 (Fed.Cir. 1987).) But that is provided the plaintiff's suit is imminent. In contrast to the last two cases cited, Glaxo is not on the verge of suing Asahi. It has no incentive to do so. Asahi not only acknowledges having no customers for its bulk paroxetine product; it contends, remember, that prospective customers are deterred by Glaxo's threat to sue them. If so, they can seek declaratory relief against Glaxo, but Glaxo has no incentive to sue Asahi; and so not being under a serious, palpable, foreseeable, imminent threat of being sued, Asahi cannot obtain a judicial declaration that the patent is invalid or if valid not infringed (that is, would not be infringed) by sale of the amorphous product. (See, in addition to the cases cited earlier, Spectronics Corp. v. H.B. Fuller Co., 940 F.2d 631, 634 (Fed.Cir.1991).) Its patent claim must therefore be dismissed for want of federal subject-matter jurisdiction, and I turn to the other claims.

The principal antitrust claim is that the settlement agreement between Glaxo and Pentech restrains trade in violation of the Sherman Act because it amounts to a division of the market between the two firms. The market allegedly divided is the market for the sale of paroxetine as an antidepressant drug. But Asahi is not in that market. It does not sell an antidepressant drug; it sells the active ingredient of such a drug to firms that use the active ingredient as an input into the manufacture of the finished pill or capsule. The general rule is that suppliers do not have "standing" (a word that is used in this context to denote the right to sue rather than the existence of jurisdiction) to complain about a violation of the antitrust laws at the customer level. E.g., Serfecz v. Jewel Food Stores, 67 F.3d 591, 597-99 (7th Cir.1995); Southwest Suburban Board of Realtors, Inc. v. Beverly Area Planning Ass'n, 830 F.2d 1374, 1379-80 (7th Cir.1987); SAS of Puerto Rico, Inc. v. Puerto Rico Telephone Co., 48 F.3d 39, 44-46 (1st Cir.1995); South Dakota v. Kansas City Southern Industries, Inc., 880 F.2d 40, 47-49 (8th Cir.1989); Associated Radio Service Co. v. Page Airways, Inc., 624 F.2d 1342, 1362-63 (5th Cir.1980). A supplier of excipients to Pentech could not complain about the settlement agreement even if it was injured by it because Pentech no longer bought excipients, instead obtaining finished pills, excipients and all, for nothing from Glaxo pursuant to the settlement. If suppliers of targets of antitrust violators or other tortfeasors were allowed to sue, potential plaintiffs would be stumbling over each other and the...