Cygnus Therapeutics Systems v. ALZA Corp., 95-1367

• Decision Date: 06 August 1996
• Docket Number: No. 95-1367,95-1367
• Citation: 39 USPQ2d 1666,92 F.3d 1153
• Parties: 1996-2 Trade Cases P 71,514, 39 U.S.P.Q.2d 1666 CYGNUS THERAPEUTICS SYSTEMS, Plaintiff-Appellant, v. ALZA CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1153

92 F.3d 1153

1996-2 Trade Cases P 71,514, 39 U.S.P.Q.2d 1666

CYGNUS THERAPEUTICS SYSTEMS, Plaintiff-Appellant, v. ALZA CORPORATION, Defendant-Appellee.

No. 95-1367.

United States Court of Appeals, Federal Circuit.

Aug. 6, 1996.

Lynn H. Pasahow, McCutchen, Doyle, Brown & Enersen, San Francisco, California, argued, for plaintiff-appellant. With her on the brief, was Beth H. Parker. Of counsel was Carolyn L. Reid.

Herbert H. Mintz, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., Washington, D.C., argued, for defendant-appellee. With him on the brief, was Barbara Clarke McCurdy. Also on the brief were Robert T. Haslam and Sarah W. Anderson, Heller, Ehrman, White & McAuliffe, Palo Alto, California.

Before CLEVENGER, SCHALL, and BRYSON, Circuit Judges.

SCHALL, Circuit Judge.

Cygnus Therapeutics Systems ("Cygnus") appeals from the May 25, 1995 judgment of the United States District Court for the Northern District of California in favor of ALZA Corporation ("ALZA") in Cygnus Therapeutic Systems v. ALZA Corporation, Docket No. C-94-0174 EFL, 1995 WL 312093. Judgment was entered following the district court's Order of May 17, 1995, granting summary judgment for ALZA on Cygnus's claim against ALZA under the antitrust laws and dismissing for lack of jurisdiction, because of the absence of an actual controversy, Cygnus's claim against ALZA for a declaratory judgment under the patent laws. Cygnus had brought an action against ALZA stating two claims for relief. In its first claim, Cygnus sought damages and injunctive relief on the ground that ALZA was using United States Patent No. 4,588,580 ("the '580 patent") to engage in attempted and actual illegal monopolization under Section 2 of the Sherman Act, 15 U.S.C. § 2. In its second claim, Cygnus sought a declaratory judgment of invalidity and unenforceability with respect to the '580 patent, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201. We affirm.

BACKGROUND

I.

The pertinent facts are not in dispute. Both Cygnus and ALZA are engaged in the development and production of transdermal delivery systems for the pharmaceutical industry. Such systems deliver drugs through the skin at a controlled rate. Typically, a transdermal system is composed of a flexible membrane and a reservoir containing the drug in question. The system is sometimes referred to as a "patch." When the membrane is applied to the skin, the drug is transferred from the system into the skin where it is absorbed into the bloodstream to produce its systemic analgesic effect.

ALZA is the assignee of the '580 patent, which was issued on May 13, 1986. The patent teaches the use of a transdermal delivery system for fentanyl, an analgesic used for pain management in chronic cancer patients. Cygnus has been developing its own transdermal fentanyl patch since 1986. In 1987, both ALZA and Cygnus requested reexamination of the '580 patent by the United States Patent and Trademark Office ("PTO"), pursuant to 35 U.S.C. §§ 302-07. On January 3, 1989, the PTO issued a reexamination certificate for the '580 patent.

Claim 1 of the reexamined patent is representative of the invention:

1. A process for inducing and maintaining analgesia in a human being by the transdermal administration of a material selected from the group consisting of fentanyl and its analgesically effective derivatives which comprises transdermally administering to said human being through an area of intact skin, a skin permeable form of said material at an analgesically effective rate and continuing the administration of said material to said human being at said rate for an extended period of time at least sufficient to induce analgesia.

On January 6, 1989, just after the reexamination certificate had issued, Dr. Gary Cleary, Chairman of Cygnus, had a luncheon meeting with Dr. Jane E. Shaw, the President and Chief Operating Officer of ALZA. According to Dr. Cleary, Dr. Shaw brought up the subject of the Cygnus fentanyl patch and suggested that, in view of the '580 patent, it made no sense for Cygnus to continue investing in its fentanyl patch project. Dr. Cleary stated that he hoped Cygnus and ALZA could find a way to work together on a fentanyl delivery system. Dr. Shaw explained that this was not possible in view of ALZA's existing relationship with Janssen Pharmaceutica, a subsidiary of Johnson & Johnson ("Janssen"). In his notes of the meeting, Dr. Cleary stated that, with respect to fentanyl, ALZA "[w]ant[s] to maintain dialogue with us." Dr. Cleary also wrote in his notes that Dr. Shaw indicated that

[p]erhaps we could get together to discuss [fentanyl] at a later time.... [Shaw] says that they don't want to be in litigation nor should we want to go through the resource crunch that will happen if it does go to court. She didn't want us to spend a lot of time and $$ only to get into some rocky legal hassels [sic] later.

In February of 1989, Dr. Shaw sent a letter to Robert Lippert, Director of Licensing and Medical Development for the Anaquest Division of BOC, Inc. ("Anaquest"). Pursuant to an agreement with Cygnus, Anaquest was collaborating with Cygnus in connection with the development of a transdermal delivery system for fentanyl. It also was engaged in discussions with ALZA relating to fentanyl. Dr. Shaw informed Mr. Lippert that the '580 patent had survived reexamination and referred to the fact that ALZA and Anaquest had not been able to reach an agreement relating to the marketing of a fentanyl patch. Dr. Shaw wrote:

[Y]ou may not be aware of the outcome of the reexamination proceedings that had been instituted by Cygnus Corporation against ALZA's U.S. patent relating to the transdermal fentanyl dosage form.

I thought you would be interested to know that the proceedings have been resolved in a manner which we consider to be quite favorable....

Although we were unable to reach an agreement relating to the marketing of the transdermal fentanyl product and ALZA has entered into an exclusive arrangement with another company, I want to assure you that I remain optimistic that there will be an opportunity for us to collaborate on some other projects.

The next event that is pertinent to the dispute occurred in January of 1991 at the Hambrecht and Quist Healthcare Conference. Dr. Cleary described the conference as "a highly visible private investment conference geared toward bringing together CEOs of bioscience companies and institutional investors." While giving a presentation at the conference, Martin Gerstel, Chief Executive Officer of ALZA, stated, in response to a question from the audience:

The question is that I mentioned a number of companies are developing products that are covered by our patents, what is our policy.

They won't market the products because we're not going to give them licenses and the patents are valid. In many cases, they've already been challenged and have been upheld. And our policy will be that we have spent a great deal of money developing this technology and we have a very strong proprietary position.

The collaborative relationship that existed between Cygnus and Anaquest continued after the PTO issued its reexamination certificate As you may be aware, Anaquest's transdermal fentanyl patch product is currently being reviewed by the FDA for an indication in the treatment of postoperative pain. Following a diligent and complete clinical development program and discussions with the FDA, Anaquest is confident in its abilities to demonstrate that our fentanyl patch is a safe and effective treatment for acute postoperative pain.

                for the '580 patent.  Cygnus looked to Anaquest "and/or others" as sources of "funds and other assistance ... for the final testing of the Cygnus transdermal fentanyl system."   In October of 1992, Paul G. Thomas, Vice President for Marketing and Business Development at Anaquest, wrote Dr. Shaw.  The letter read as follows
                

The transdermal fentanyl patch product has been designed by Cygnus as a 24 hour duration patch with attributes that make it particularly useful in the postoperative setting. The patch differs from the current Alza [sic] patch with respect to its design, indication, clinical use and targeted market.

In light of the complementary nature of the two fentanyl patch products, i.e., each designed and indicated for different uses, I am interested in arranging a meeting with you to discuss potential areas for commercial cooperation that may benefit both Alza [sic] and Anaquest. With your concurrence, I would like to schedule a meeting sometime over the next few weeks to discuss these areas more specifically. I will call you later this week and attempt to arrange a time for such a meeting.

Following Mr. Thomas's letter to Dr. Shaw, there were various discussions between ALZA and Anaquest. In this setting, Dr. Shaw told Mr. Thomas that ALZA's already-existing distribution arrangement for its fentanyl product with Janssen had to be taken into account in any discussions with Anaquest.

Eventually, after getting no "definitive response" from Dr. Shaw with regard to Mr. Thomas's efforts to continue licensing discussions with ALZA, Anaquest wrote ALZA on February 4, and May 6, 1993, repeating its request for such discussions. Enclosed with the May 6 letter was a draft complaint against ALZA seeking declaratory relief of patent invalidity and unenforceability with respect to the '580 patent. In the letter, Martin M. McGlynn, the president of Anaquest, stated that, "[i]n the event we cannot resolve matters through discussions, we feel we have no option but to commence legal action to remove [the '580] patent as an obstacle to our going forward with our plans."

On May 12, 1993, Edward L. Mandell, ALZA's vice president for legal matters, responded to Mr. McGlynn's letter. In his letter, Mr. Mandell referred to ALZA's "existing relationship with Johnson & Johnson that would be affected by ALZA's granting a license to Anaquest under the subject...