Bayer Healthcare LLC v. Baxalta Inc.

• Citation: 989 F.3d 964
• Decision Date: 01 March 2021
• Docket Number: 2019-2418, 2020-1017
• Parties: BAYER HEALTHCARE LLC, Plaintiff-Cross-Appellant v. BAXALTA INC., Baxalta US Inc., Defendants-Appellants Nektar Therapeutics, Defendant-Appellee
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

989 F.3d 964

BAYER HEALTHCARE LLC, Plaintiff-Cross-Appellant

v. BAXALTA INC., Baxalta US Inc., Defendants-AppellantsNektar Therapeutics, Defendant-Appellee

2019-2418, 2020-1017

United States Court of Appeals, Federal Circuit.

Decided: March 1, 2021

Bradford J. Badke, Sidley Austin LLP, New York, NY, argued for plaintiff-cross-appellant. Also represented by Sona De, Ching-Lee Fukuda ; Joshua John Fougere, Ryan C. Morris, Paul Zegger, Washington, DC.

Edgar Haug, Haug Partners LLP, New York, NY, argued for defendants-appellants and defendant-appellee. Also represented by Kaitlin Abrams, Nicholas F. Giove, Jonathan Herstoff, Erika Selli.

Before Newman, Linn, and Stoll, Circuit Judges.

Stoll, Circuit Judge.

This patent infringement case presents various issues of claim scope, infringement, validity, and damages. Bayer HealthCare LLC sued Baxalta Inc. and Baxalta US Inc. (collectively, "Baxalta") and Nektar Therapeutics, alleging that Baxalta's biologic product Adynovate^® infringes certain claims of Bayer's U.S. Patent No. 9,364,520. The jury found that the asserted claims were enabled and infringed, and that Bayer was entitled to reasonable-royalty damages. The district court did not, however, send the question of willful infringement to the jury, instead holding as a matter of law that Baxalta's conduct did not meet the requirements for willfulness. Baxalta now appeals the district court's denial of its motions for judgment as a matter of law or a new trial on the issues of infringement, enablement, and damages, along with the court's award of pre-verdict supplemental damages. Bayer cross-appeals, challenging the district court's denial of its motion for a new trial on willfulness. We affirm.

BACKGROUND

I

The ’520 patent is directed to recombinant forms of human factor VIII (or FVIII). FVIII is a protein that is produced, and released into the bloodstream, by the liver. FVIII comprises 2,332 amino acids and has six different structural domains: A1-A2-B-A3-C1-C2. Most relevant to this case is the domain of FVIII known as the "B-domain."

As "a critical component of the intrinsic pathway of blood coagulation," FVIII is useful in the treatment of hemophilia A. ’520 patent col. 1 ll. 29–30. Hemophilia A is the "most common hereditary coagulation disorder" and is "caused by deficiency or structural defects in" naturally occurring FVIII. Id. at col. 1 ll. 27–29. Because FVIII has a "short half-life" of "only about 11 hours," as a therapeutic it "must be administered frequently." Id. at col. 1 ll. 52–55. The ’520 patent recognizes that "[t]he need for frequent intravenous injection creates tremendous barriers to patient compliance" and, thus, "[i]t would be more convenient for the patients if a FVIII product could be developed that had a longer half-life and therefore required less frequent administration." Id. at col. 1 ll. 56–60; see id. at col. 2 ll. 47–49. Moreover, "the cost of treatment could be reduced if the half-life were increased because fewer dosages may then be required." Id. at col. 1 ll. 60–62.

The patent explains that a process called "PEGylation" has "been demonstrated to increase the in vivo half-life of a protein." Id. at col. 3 ll. 34–35. PEGylation is the conjugation (or attachment) of a polymer called polyethylene glycol (PEG) to a protein such as FVIII. See id. at col. 3 ll. 35–37; see also id. at col. 9 ll. 12–14. PEG is a type of polyalkylene oxide. See id. at col. 8 ll. 41–43.

The patent further teaches that "random" modification of FVIII by PEGylation was known and that certain randomly PEGylated proteins had been approved as therapeutics. The inventors sought, however, "a more specific method for PEGylating FVIII" because the prior-art "random" approach had several drawbacks:

Random modification of FVIII by targeting primary amines (N-terminus and lysines) with large polymers such as PEG and dextran has been attempted with varying degree[s] of success ....

This random approach ... is much more problematic for the heterodimeric FVIII. FVIII has hundreds of potential PEGylation sites, including the 158 lysines, the two N-termini, and multiple histidines, serines, threonines, and tyrosines, all of which could potentially be PEGylated with reagents primarily targeting primary amines.

Id. at col. 3 l. 50–col. 4 l. 1, col. 4 ll. 19–20.

The patent identifies as an "additional drawback to not controlling the site of PEGylation on FVIII" the "potential activity reduction if the PEG were to be attached at or near critical active sites, especially if more than one PEG or a single large PEG is conjugated to FVIII." Id. at col. 4 ll. 7–11. Furthermore, "[b]ecause random PEGylation will invariably produce large amounts of multiply PEGylated products, purification to obtain only mono-PEGylated products will drastically lower overall yield." Id. at col. 4 ll. 11–14. Finally, the patent explains that "the enormous heterogeneity in product profile will make consistent synthesis and characterization of each lot nearly impossible" and constitutes "a barrier to commercialization," since "good manufacturing requires a consistent, well-characterized product." Id. at col. 4 ll. 14–19; see id. at col. 4 ll. 4–7 ("[H]eterogeneous processing of full length FVIII can lead to a mixture of starting material that leads to further complexity in the PEGylated products.").

Thus, the inventors recognized "a need for an improved FVIII variant that possesses greater duration of action in vivo ... while retaining functional activity," and that is desirably "produced as a homogeneous product in a consistent manner." Id. at col. 4 l. 65–col. 5 l. 3. The patent purports to overcome the drawbacks of "random" PEGylation by using "site-directed" PEGylation at the B-domain of FVIII:

The present invention is based on the discovery that polypeptides having FVIII activity can be covalently attached at a predefined site to a biocompatible polymer that is not at an N-terminal amine, and that such polypeptides substantially retain their coagulant activity. Furthermore, these polypeptide conjugates have improved circulation time and reduced antigenicity. The conjugates of the invention are advantageous over the prior art conjugates that had random polymer attachments to FVIII or attachments at an N-terminal. Site-directed attachment allows one to design modifications that avoid the regions required for biological activity and thereby to maintain substantial FVIII activity. ... Site-directed attachment also allows for a uniform product rather than the heterogeneous conjugates produced in the art by random polymer coupling.

Id. at col. 8 ll. 15–30; see id. at col. 15 ll. 9–13 (explaining that the "retained activity" of the claimed conjugates was "surprising" given "the problems with past polymeric conjugates causing nonspecific addition and reduced activity").

Claim 1 is the only asserted independent claim and recites:

1. An isolated polypeptide conjugate comprising a functional factor VIII polypeptide and one or more biocompatible polymers, wherein the functional factor VIII polypeptide comprises the amino acid sequence of SEQ ID NO: 4 or an allelic variant thereof and has a B-domain, and further wherein the biocompatible polymer comprises polyalkylene oxide and is covalently attached to the functional factor VIII polypeptide at the B-domain .

Id. at col. 61 ll. 9–16 (emphases added to the disputed claim terms).

II

Bayer sued Baxalta and Nektar, Baxalta's collaborator on its Adynovate^® product, for patent infringement. Adynovate^® is a recombinant PEGylated FVIII product used to treat hemophilia A. Adynovate^® is made by PEGylating to amino acids in FVIII that have amine groups, including the amino acid lysine. We hereafter refer to this process as "amine/lysine" PEGylation.

The district court construed the claim term "an isolated polypeptide conjugate" in claim 1 to mean "a polypeptide conjugate where conjugation was not random." Bayer Healthcare LLC v. Baxalta Inc. , No. 16-cv-1122, 2018 WL 3212425, at *2 (D. Del. June 29, 2018) ( Claim Construction Op. ). The district court determined that, during prosecution of the ’520 patent, Bayer had "clearly and unmistakably disclaimed any ‘polypeptide conjugate where conjugation was random.’ " Id. at *4.

In addition, the district court construed the claim term "at the B-domain" in claim 1 to mean "attachment at the B-domain such that the resulting conjugate retains functional factor VIII activity." Id. at *8. The district court rejected Baxalta's proposed construction of the term to mean "at a site that is not any amine or carboxy site in factor VIII and is in the B-domain," finding that Bayer did not disclaim PEGylation at amine or carboxy sites. Id. at *8–9.

Baxalta moved for summary judgment of noninfringement and invalidity for lack of enablement. The district court denied Baxalta's motions due to genuine factual disputes. See Bayer HealthCare LLC v. Baxalta Inc. , No. 16-cv-1122, 2018 WL 6727054, at *3–7 (D. Del. Dec. 21, 2018) ( Summ. J. Op. ). Baxalta also moved in limine requesting that the district court clarify the meaning of "random" in its construction of "an isolated polypeptide conjugate." The district court denied Baxalta's motion, "again reject[ing] [Baxalta's] argument that [Bayer] defined ‘random’ conjugation as ‘any conjugation at amines or carboxy sites.’ " Bayer HealthCare LLC v. Baxalta Inc. , No. 16-cv-1122, 2019 WL 10890386, at *1 (D. Del. Jan. 3, 2019) ( Mot. in Lim. Order ).

Prior to trial, Baxalta moved to exclude the testimony of Bayer's damages expert, Dr. Addanki, regarding his proposed reasonable-royalty rate. In his expert report, Dr. Addanki opined that Bayer was entitled to a royalty rate of 23.75%—the midpoint of the bargaining range of 5.1% to 42.4%—based on the Nash Bargaining Solution. The district court concluded that the expert failed to tie his 50/50 split to the facts of the case, and thus excluded his "opinion that a reasonable royalty rate is ‘the mid-point of the bargaining...