Bayer AG v. Housey Pharmaceuticals, Inc., Civ. No. 01-148-SLR (D. Del. 12/4/2003)

• Court: U.S. District Court — District of Delaware
• Writing for the Court: Sue Robinson
• Decision Date: 04 December 2003
• Docket Number: Civ. No. 01-148-SLR.
• Citation: Bayer AG v. Housey Pharmaceuticals, Inc., Civ. No. 01-148-SLR (D. Del. 12/4/2003) (D. Del. 2003)
• Parties: BAYER AG and BAYER CORPORATION, Plaintiffs, v. HOUSEY PHARMACEUTICALS, INC., Defendant.

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BAYER AG and BAYER CORPORATION, Plaintiffs, v. HOUSEY PHARMACEUTICALS, INC., Defendant.

Civ. No. 01-148-SLR.

United States District Court, D. Delaware.

December 4, 2003.

Rudolf E. Hutz, Esquire, Jeffery B. Bove, Esquire and Mary W. Bourke, Esquire of Connolly Bove Lodge & Hutz LLP, Wilmington, Delaware, for Plaintiff.

Thomas F. Poche, Esquire, of Connolly Bove Lodge & Hutz LLP, Wilmington, Delaware, for Plaintiff.

M. Duncan Grant, Esquire and Joseph S. Naylor, Esquire of Pepper, Hamilton LLP, Wilmington Delaware, for Defendant.

Rolf Stadheim, Esquire, Joseph A. Grear, Esquire and George C. Summerfield, Esquire of Stadheim & Grear, LTD., Chicago, Illinois, for Defendant.

OPINION

SUE ROBINSON, Chief District Judge.

I. INTRODUCTION

The court tried the single issue of inequitable conduct by Housey Pharmaceuticals, Inc.¹ ("Housey") in a four day trial, commencing on December 3, 2002 and ending December 9, 2002. The court has jurisdiction over this action pursuant to 28 U.S.C. § 1331, 1338(a) and 2201(a). Having considered the documentary evidence and testimony, the court makes the following findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

II. FINDINGS OF FACT

A. Procedural History

1. Bayer AG is a holding corporation organized and existing under the laws of the Republic of Germany and having its principal place of business in Leverkusen, Germany. Bayer Corporation is a corporation organized under the laws of the State of Indiana, with its principal place of business in Pittsburgh, Pennsylvania. Bayer AG and Bayer Corporation, (jointly referred to as "Bayer") are principally engaged in the development and manufacture of chemicals and pharmaceuticals.

2. Housey is a corporation organized and existing under the laws of Delaware and having its principal place of business in Troy, Michigan. Housey engages in the research, development, and licensing of pharmaceutical products.

3. Bayer filed this action on March 6, 2001 seeking a declaratory judgment of invalidity, noninfringement, and unenforceability due to inequitable conduct against four patents assigned to defendant Housey by Dr. Gerard M. Housey, M.D., Ph.D. (D.I. 1) The patents in suit are U.S. Patent Nos. 4,980,281 (issued Dec. 25, 1990, the "`281 patent"), 5,266,464 (issued Nov. 30, 1993, the "`464 patent"), 5,688,655 (issued Nov. 18, 1997, the "`655 patent"), and 5,877,007 (issued March 2, 1999, the "`007 patent") (collectively, the "Housey patents").

4. Housey counterclaimed against Bayer alleging direct infringement, contributory infringement, inducement of others to infringe, and infringement pursuant to 25 U.S.C. § 271(g). (D.I. 5)

5. The court dismissed Housey's claim for infringement under § 271(g) on the basis that a "plain reading of the statute . . . addresses only products derived from patented manufacturing processes." Bayer AG v. Housey Pharms., Inc., 169 F. Supp.2d 328, 330 (D. Del. 2001), aff'd 340 F.3d 1367 (Fed. Cir. 2003).

6. On November 12, 2002, the court entered an order construing the claims of the Housey patents. (D.I. 254) That order was certified pursuant to Rule 54 and is on appeal to the Federal Circuit.

7. The parties subsequently entered into a stipulation, contingent upon claim construction, that the Housey patents are invalid and unenforceable. (D.I. 269) Notwithstanding, the parties sought to proceeed with a bench trial on the issue of inequitable conduct.

B. Technological Background

8. The Housey patents, each entitled "Method of Screening for Protein Inhibitors and Activators," generally relate to research methods used by pharmaceutical companies for discovering drugs. (D.I. 1)

9. Pharmacological research assays may be classified into three general categories. The first are biochemical assays, in which whole cells are broken down and proteins are separated, purified and test substances applied. (D.I. 280 at 52-54) Biochemical assays are the primary starting point for most pharmacological research. (Id.) The second approach, cellular assays, in contrast, involve the application of test substances to whole cells to determine the cellular response. (Id. at 55) Finally, pharmacological researchers will employ the use of animal studies and eventually human studies in their development of new pharmacological products. (Id. at 53)

10. Cellular assays can test for a variety of cellular responses to tested substances, from simple toxicity to various phenotypic responses such as an increase in the rate of growth. (Id. at 55-56)

11. The Housey patents are directed to a cellular assay described as a "method for screening for substances which specifically inhibit or activate a particular protein affecting the cultural or morphological characteristics of the cell expressing the protein." (JTX 2, `281 patent, col. 1, 11. 10-13) The expression of the "particular protein" (referred to as the "protein of interest") results in a change in one or more identifiable characteristics of the cells expressing it. The patented methods enable researchers to screen substances for active compounds that indicate a potential for development as pharmaceuticals through the use of a whole cell assay. (D.I. 280 at 67)

12. The claimed method states that a cell line is produced that is characterized by a higher production of the protein of interest relative to an original cell line. (Col. 4, 11. 40-50) By applying substances ("agents") to both cell lines, it is possible to determine whether the agent is an activator or inhibitor of protein activity.²

13. At the time of Dr. Housey's invention, it was believed that whole cell assays could not be used to identify a specific activator or inhibitor of a particular protein in a cell. (D.I. 280 at 70) This is because within a whole cell there are multiple protein enzymes which may interact with the test substance, or each other, precluding a conclusion as to whether a specific protein is activated or inhibited. (D.I. 280 at 67)

14. As embodied in claim 1 of the `281 patent, the method requires two cell lines, one cell line which overexpresses a given target protein and shows a phenotypic response that is evoked by the target protein, relative to the second cell line. (Col. 24, 11. 51-53; D.I. 280 at 60-61)

15. The phenotypic response must be observable prior to the addition of test substances to the cell. (D.I. 254) Substances are then incubated with, or added to, these cells, and the phenotype of the cells is studied for further changes. (Col. 24, 11.59-63; D.I. 280 at 61)

16. Table 2 of the Housey patents contains numerical data that illustrate the invention as applied to activators. (Col. 20, 11. 28-44) Table 3 of the Housey patents contain numerical data that show the invention as applied to inhibitors. (Col. 20, 11. 46-70 to col. 21, 11. 1-7) Both of these tables utilize protein kinase C ("PKC") overexpressing cell line. (D.I, 280 at 63) Dr. Housey specifically relied on this data to overcome the examiner's rejection of the claims in the `281 patent. (JTX 6 at B5000111)

C. Events Preceding the Submission of the `281 patent

17. Dr. I. Bernard Weinstein is an accomplished professor and researcher at Columbia University. He has co-authored over 550 publications and has been the recipient of numerous awards and research grants. (PTX 228) Dr. Weinstein joined the Columbia University faculty to pursue a career in clinical oncology. (D.I. 281 at 595, 597, 600)

18. Dr. Weinstein's work has focused on the development of cancer fighting drugs, including the identification of tamoxifen as an inhibitor of PKC. (Id. at 600-01)

19. Dr. Weinstein's research has involved the screening of compounds using cell-based assays. In 1978, he was involved in introducing genes into cells, altering their phenotype and showing that exposure of these cells to a drug would give exaggerated or altered responses. (Id. at 601)

20. In 1984 and 1986, Dr. Weinstein co-authored papers with Dr. Wendy Hsiao on the use of c-Harvey-ras ("c-Ha-ras") oncongene overexpressing cells as a screening assay for new tumor promoters. (PTX 312-13) These experiments showed that c-Ha-ras expression in cells induces a phenotypic change in the cells, and that this method may be used as a tool to screen for compounds that would modulate this change.

21. On January 20, 1984, Dr. Weinstein applied for a grant that focused on tumor promotion and PKC (the "1984 Grant"). (D.I. 281 at 627-28; PTX 113A) That application included the plan to clone the PKC gene, overexpress the protein in the cells, and test those cells with compounds. The 1984 Grant application suggested that cloning the PKC gene and its overproduction in cells would phenotypically alter or transform the cells. (D.I. 281 at 669-71; PTX 113A at C000798)

22. The 1984 Grant application states that these engineered cells would be analyzed for altered responsiveness to substances (TPC or teleocidin) and it refers to Dr. Weinstein's interest in developing new methods of detecting tumor promoters and strategies for cancer treatment. (D.I. 281 at 673-74; PTX 113A at C000751-799)

23. The 1984 Grant application refers to establishing screening tests for tumor promoters and tumor blocking agents based on the information that was expected to be provided under the Grant. (D.I. 281 at 674-75; PTX 113A at C000771)

24. Dr. Weinstein is and was, during the relevant time period, responsible for overseeing grants and for setting the direction of research at the Columbia University laboratory (the "Weinstein laboratory"). (D.I. 281 at 604; D.I. 283 at 785, 816, 845) He routinely provides guidance and instruction to graduate students as part of these responsibilities. (D.I. 281 at 605; D.I. 283 at 785, 816, 845)

25. Dr. Housey is the sole named inventor of the Housey patents and currently serves as President and CEO of Housey, the defendant and patent assignee.

26. Dr. Housey attended the University of Michigan from 1977 to 1981 where, as an undergraduate...