Eli Lilly and Co. v. American Cyanamid Co.
| Decision Date | 10 May 1996 |
| Docket Number | No. 95-1489,95-1489 |
| Citation | 82 F.3d 1568,38 USPQ2d 1705 |
| Parties | ELI LILLY AND COMPANY, Plaintiff-Appellant, v. AMERICAN CYANAMID COMPANY, Defendant-Appellee, and Biocraft Laboratories, Inc., Defendant-Appellee, and Zenith Laboratories, Inc., Defendant-Appellee, and Biochimica Opos, S.p.A., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Appealed from: United States District Court Southern District of Indiana, Sarah Evans Barker, Chief Judge.
Paul H. Berghoff, Banner & Allegretti, Ltd., Chicago, Illinois, argued for plaintiff-appellant. With him on the brief were Edward W. Remus and James C. Gumina. Of counsel were Edward P. Gray and Richard B. Murphy, Eli Lilly and Company, Indianapolis, Indiana.
Robert L. Baechtold, Fitzpatrick, Cella, Harper & Scinto, New York City, argued for defendant-appellee American Cyanamid Company. With him on the brief were Thomas H. Beck and David F. Ryan. Of counsel was Lawrence Alaburda, American Home Products Corporation, Madison, New Jersey.
William L. Mentlik, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, New Jersey, argued for defendant-appellee Zenith Laboratories, Inc. With him on the brief were Arnold H. Krumholz and Roy H. Wepner. Of counsel was Jay B. Shapiro, Ivax Corporation, Miami, Florida.
James Galbraith and Maria Luisa Palmese, Kenyon & Kenyon, New York City, were on the brief, for defendant-appellee Biochimica Opos, S.p.A.
Before CLEVENGER, RADER, and BRYSON, Circuit Judges.
Opinion for the court filed by Circuit Judge BRYSON. Concurring opinion filed by Circuit Judge RADER.
The ongoing struggle between "pioneer" drug manufacturers and generic drug distributors has once more come before our court. Eli Lilly and Company (Lilly), the "pioneer" drug manufacturer in this case, has filed suit for patent infringement against the appellees, who are involved in various ways in the distribution of a particular generic drug. Lilly sought a preliminary injunction, arguing that the importation and sale of the generic drug in this country infringed Lilly's patent on a process for making a related compound. After a hearing, the United States District Court for the Southern District of Indiana denied Lilly's request for a preliminary injunction. The court found that Lilly had failed to show that it was likely to prevail on the merits of its infringement claim and had failed to show that it would suffer irreparable harm in the absence of preliminary injunctive relief. Eli Lilly & Co. v. American Cyanamid Co., 896 F.Supp. 851, 36 USPQ2d 1011 (S.D.Ind.1995). Because Lilly has failed to overcome the substantial hurdle faced by a party seeking to overturn the denial of a preliminary injunction, we affirm.
The pharmaceutical product at issue in this case is a broad-spectrum antibiotic known as "cefaclor." Cefaclor is a member of the class of cephalosporin antibiotics, all of which are based on the cephem nucleus. Although there are many different cephem compounds, only a few have utility as antibiotic drugs. Each of the known commercial methods for producing cefaclor requires the production of an intermediate cephem compound known as an enol. Once the desired enol cephem intermediate is obtained, it is then subjected to several processing steps in order to produce cefaclor.
Lilly developed cefaclor and patented it in 1975. Until recently, Lilly has been the exclusive manufacturer and distributor of cefaclor in this country. In addition to its product patent on cefaclor, Lilly obtained several patents covering different aspects of the manufacture of cefaclor, including processes for producing enol cephem intermediates. Many of those patents have now expired.
In 1995, Lilly purchased the patent at issue in this case, U.S. Patent No. 4,160,085 (the '085 patent). Claim 5 of that patent defines a method of producing enol cephem compounds, including what is called "compound 6," an enol cephem similar to the one Lilly uses in its process for manufacturing cefaclor. The '085 patent will expire on July 3, 1996.
Compound 6 differs from cefaclor in three respects. Although both compound 6 and cefaclor are based on the cephem nucleus, compound 6 has a hydroxy group at the 3-position on the cephem nucleus, a para-nitrobenzyl carboxylate ester at the 4-position, and a phenylacetyl group at the 7-position. Cefaclor has different groups at each of those positions: it has a chlorine atom at the 3-position, a free carboxyl group at the 4-position, and a phenylglycyl group at the 7-position. Each of those differences between compound 6 and cefaclor contributes to the effectiveness of cefaclor as an orally administered antibiotic drug. The free carboxyl group at the 4-position is believed important for antibacterial activity; the chlorine increases cefaclor's antibiotic potency; and the phenylglycyl group enables cefaclor to be effective when taken orally.
To produce cefaclor from compound 6 requires four distinct steps. First, the hydroxy group is removed from the 3-position and is replaced by a chlorine atom, which results in the creation of "compound 7." Second, compound 7 is subjected to a reaction that removes the phenylacetyl group at the 7-position, which results in the creation of "compound 8." Third, a phenylglycyl group is added at the 7-position, which results in the creation of "compound 9." Fourth, the para-nitrobenzyl carboxylate ester is removed from the 4-position, which results in the creation of cefaclor.
On April 27, 1995, defendants Zenith Laboratories, Inc., (Zenith) and American Cyanamid Company (Cyanamid) obtained permission from the Food and Drug Administration to distribute cefaclor in this country. Defendant Biocraft Laboratories, Inc., (Biocraft) had applied for FDA approval to manufacture and sell cefaclor in the United States but had not yet obtained that approval. All three have obtained large quantities of cefaclor that were manufactured in Italy by defendant Biochimica Opos, S.p.A. (Opos).
On the same day that Zenith and Cyanamid obtained FDA approval to sell cefaclor in this country, Lilly obtained the rights to the '085 patent and filed suit against Zenith, Cyanamid, Biocraft, and Opos. In its complaint, Lilly sought a declaration that the domestic defendants' importation of cefaclor manufactured by Opos infringed Lilly's rights under several patents, including the '085 patent. Lilly also requested a preliminary injunction, based on the alleged infringement of claim 5 of the '085 patent, to bar the defendants from importing or inducing the importation of cefaclor manufactured by Opos.
The district court held a three-day hearing on the motion for a preliminary injunction. Following the hearing, the court denied the motion in a comprehensive opinion. The court devoted most of its attention to the question whether Lilly had met its burden of showing that it was likely to prevail on the merits of its claim that the defendants were liable for infringing claim 5 of the '085 patent.
Based on the evidence presented at the hearing, the district court concluded that Lilly had shown that it was likely to prevail on the issue of the validity of the '085 patent. With respect to the infringement issue, however, the court held that Lilly had not met its burden of showing that it was likely to prevail.
The district court correctly framed the issue as whether, under the Process Patent Amendments Act of 1988, Pub.L. No. 100-418, §§ 9001-07, the importers of cefaclor infringed claim 5 of the '085 patent, which granted U.S. patent protection to the process that Opos used to make compound 6. The Process Patent Amendments Act makes it an act of infringement to import, sell, offer to sell, or use in this country a product that was made abroad by a process protected by a U.S. patent. 35 U.S.C. § 271(g). The Act, however, does not apply if the product made by the patented process is "materially changed by subsequent processes" before it is imported. 35 U.S.C. § 271(g)(1).
The district court found that compound 6 and cefaclor differ significantly in their structure and properties, including their biological activity. Citing the Senate Report on the Process Patent Amendments Act, the district court found that, because the processing steps necessary to convert compound 6 to cefaclor " 'change the physical or chemical properties of the product in a manner which changes the basic utility of the product,' " 896 F.Supp. at 857, 36 USPQ2d at 1016 (citing S.Rep. No. 83, 100th Cong., 1st Sess. 50 (1987)), Lilly was not likely to succeed on its claim that the defendants infringed Lilly's rights under claim 5 of the '085 patent by importing and selling cefaclor.
The district court also found that Lilly had failed to prove that it would suffer irreparable harm in the absence of a preliminary injunction. The presumption of irreparable harm that is available when a patentee makes a strong showing of likelihood of success on the merits was not available here, the court held, because of Lilly's failure to make such a showing on the issue of infringement. In addition, the court was not persuaded by Lilly's arguments that it faced irreparable economic injury if it were not granted immediate equitable relief. Under the circumstances of this case, the district court found that an award of money damages would be an adequate remedy in the event that Lilly ultimately proves that the importation of cefaclor made by the Opos process infringes the '085 patent. In light of Lilly's failure to establish either a likelihood of success on the merits or irreparable harm, the court found it unnecessary to articulate findings regarding the other factors bearing on the propriety of preliminary injunctive relief--the balance of the hardships and the effect of the court's action on the public interest.
The Process Patent Amendments Act of 1988 was enacted to...
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