Eli Lilly and Co. v. American Cyanamid Co.

• Decision Date: 25 August 1995
• Docket Number: No. IP 95-536C B/S.,IP 95-536C B/S.
• Citation: 896 F. Supp. 851
• Parties: ELI LILLY AND COMPANY, Plaintiff, v. AMERICAN CYANAMID COMPANY, Biocraft Laboratories, Inc., Zenith Laboratories, Inc., and Biochimica Opos, S.p.A., Defendants.
• Court: U.S. District Court — Southern District of Indiana

896 F. Supp. 851

ELI LILLY AND COMPANY, Plaintiff, v. AMERICAN CYANAMID COMPANY, Biocraft Laboratories, Inc., Zenith Laboratories, Inc., and Biochimica Opos, S.p.A., Defendants.

No. IP 95-536C B/S.

United States District Court, S.D. Indiana, Indianapolis Division.

August 4, 1995.

As Corrected August 25, 1995.

John R. Schaibley, III, Nancy G. Bollinger, Baker & Daniels, Indianapolis, IN, Paul H. Berghoff, Jon O. Nelson, Edward W. Remus, James C. Gumina, Banner & Allegretti, Ltd., Chicago, IL, for plaintiff.

Jay G. Taylor, Ice Miller Donadio & Ryan, Indianapolis, IN, Hugh E. Reynolds, Jr., Locke Reynolds Boyd & Weisell, Indianapolis, IN, Stephen E. Arthur, Ronald E. Elberger, Bose McKinney & Evans, Indianapolis, IN, Henry J. Price, Price & Barker, Indianapolis, IN, Robert L. Baechtold, Thomas H. Beck, Fitzpatrick, Cella, Harper & Scinto, New York City, James Galbraith, Maria Luis Palmese, Kenyon & Kenyon, New York City, Arnold H. Krumholz, William L. Mentlik, Roy H. Wepner, Lerner David Littenberg Krumholz & Mentlik, Westfield, NJ, Marc S. Gross, Arthur Mann, Robert E. Hanlon, Bryan Cave, New York City, Jay B. Shapiro, Associate Gen. Counsel, IVAX Corp., Miami, FL, for defendants.

ENTRY

BARKER, Chief Judge.

This matter is presently before the Court on plaintiff Eli Lilly and Company's ("Lilly") motion seeking a preliminary injunction. For the reasons set forth below, the Court denies the motion.

I. FACTUAL BACKGROUND.

This is an action for patent infringement against three New Jersey drug companies — American Cyanamid Co. ("Cyanamid"), Zenith Laboratories, Inc. ("Zenith") and Biocraft Laboratories, Inc. ("Biocraft") — who have been sued in connection with their importation and sale of a drug known as cefaclor, and the Italian drug company — Biochimica Opos, S.p.A. ("Opos") — which manufactures and supplies bulk cefaclor to them. Plaintiff Lilly is a corporation engaged in the business of researching, developing, manufacturing and selling prescription pharmaceutical products. Defendant Cyanamid, a subsidiary of American Home Products Corporation, markets generic pharmaceutical products through its Lederle division.¹ Defendants Zenith, a subsidiary of the IVAX Corporation, and Biocraft are also is in the business of manufacturing and marketing generic pharmaceutical products. Defendant Opos is organized under the laws of the country of Italy. Opos is a wholly owned subsidiary of Roussel UCLAF and is in the business of manufacturing pharmaceutical products for generic drug companies.

The patent in suit describes a method for manufacturing a compound used in synthesizing an antibiotic known as cefaclor. Cefaclor, which is currently one of the largest selling antibiotics in the United States, is the generic name of a broad-spectrum antibiotic sold by Lilly under the branded name Ceclor®. Mr. Robert Chauvette, a Lilly scientist, first discovered and synthesized cefaclor in the early 1970's. Cefaclor was subsequently patented by Lilly in 1975 and has been exclusively marketed by it since 1979. Lilly's patent on cefaclor, U.S. Patent No. 3,925,372 ("the '372 patent"), expired on December 9, 1992.

Cefaclor is a complex molecule that is derived from forms of penicillin. It is a member of the general class of cephalosporin antibiotics, all of which have as a common core the so-called "cephalosporin" or "cephem nucleus." There are hundreds or thousands of cephalosporin compounds, all of which differ from one another by the presence of different atom groups at the so-called 3-, 4- and 7-positions on the cephalosporin nucleus. Nevertheless, only a few such compounds have any utility as antibiotic drugs and only a handful of those have been commercially marketed.

There are at least two different process routes for making cefaclor. A process used by Lilly ("the Lilly process") represents one of those routes. In the Lilly process, an intermediate compound known as exomethylene is converted into a compound referred to as the enol cephem.² This enol cephem intermediate is then chlorinated and subjected to several processing steps in order to create cefaclor. Lilly has subsequently obtained at least three patents describing different aspects of this process; in addition to the '372 patent, which described Lilly's rights in the cefaclor molecule per se, Lilly obtained U.S. Patent Nos. 3,917,587 and 4,064,343, which claimed intermediate compounds used to make cefaclor. By the end of 1994, however, all of these patents had expired.

The patent involved in this case, U.S. Patent No. 4,160,085 ("the '085 patent" or "the Shionogi process"),³ signifies a second route for making cefaclor. At one time, the '085 patent rights were held by Shionogi & Co., Ltd., of Osaka, Japan. Lilly is the current owner of the patent, however, having purchased it from Shionogi on April 27, 1995, the date this lawsuit was filed. Neither Lilly nor Shionogi has utilized the processes claimed in the '085 patent to manufacture cefaclor for commercial sale in the United States or anywhere else. The seventeen year term of the '085 patent will expire on July 3, 1996.

Opos manufactures bulk cefaclor in a nine-step process with a starting material "compound 1," eight chemically distinct intermediates (compounds 2-9), and a final end product (cefaclor). Claim 5 of the '085 patent purports to cover the part of Opos' process which converts intermediate compound 5 into compound 6 ("step 5"). Both claim 5 of the '085 patent and step 5 of the Opos process describe a cyclization reaction whereby a non-cephem compound is transformed into an enol cephem, which is a cephalosporin intermediate that is useful in creating a variety of cephem antibiotic substances.

Once compound 6 is created, it is then subjected to four sequential process steps in order to convert it to cefaclor. First, the hydroxy (OH) group is removed from the 3-position and is replaced with chlorine (Cl). It is the addition of this chlorine atom that distinguishes cefaclor from a related antibiotic cephalosporin known as cephalexin. Second, the resulting compound (compound 7) is subjected to a reaction to remove the phenylacetyl side chain from the 7-position group, creating compound 8. Lilly's patent on compound 8, U.S. Patent 4,064,343, expired on December 20, 1994. From there, a phenylglycine side chain is added to create compound 9. Finally, the p-nitrobenzyl protecting group is removed from the 4-position, thus creating cefaclor.

In June, 1994, Lilly established STC Pharmaceuticals, Incorporated ("STC") to market generic pharmaceutical products. STC is a wholly owned subsidiary of Lilly, having a principal place of business at Lilly Corporate Center, Indianapolis, Indiana. In October of 1994, STC concluded agreements with Mylan Pharmaceuticals, Incorporated ("Mylan") whereby Mylan would market cefaclor products manufactured by Lilly. By April 27, 1995, the Mylan/Lilly generic cefaclor product comprised about two-thirds of Lilly's domestic cefaclor sales.

On April 27, 1995, Zenith and Cyanamid obtained approval from the Food and Drug Administration ("FDA") to sell generic cefaclor in the United States. Both Zenith and Cyanamid are currently selling cefaclor in the United States. Biocraft has also applied for FDA approval to manufacture dosage forms of cefaclor and to sell those dosage forms in the U.S., but has not yet obtained such approval. All three have purchased bulk cefaclor through the Roussel Corporation, which in turn obtains bulk cefaclor from Opos.

On April 27, 1995, Lilly filed this action, seeking inter alia (1) a declaration that the domestic defendants' importation of cefaclor manufactured by Opos infringes the Lilly/Shionogi patents, and (2) a preliminary injunction enjoining the defendants from importing or inducing the importation of cefaclor manufactured by Opos into the United States. On July 17-19, 1995, the Court conducted a three-day evidentiary hearing on Plaintiff's motion for preliminary injunction, at which a number of witnesses testified and hundreds of exhibits were entered into the record. On the basis of this record, the Court now denies Plaintiff's motion for preliminary injunction.

II. PRELIMINARY INJUNCTION STANDARDS.

Injunctive relief in patent cases is authorized by 35 U.S.C. § 283. Whether a preliminary injunction should issue turns on four factors:

(1) the movant's reasonable likelihood of success on the merits;

(2) the irreparable harm the movant will suffer if preliminary relief is not granted;

(3) the balance of hardships tipping in the movant's favor; and

(4) the impact of the injunction on the public interest.

Reebok Int'l Ltd. v. Baker, 32 F.3d 1552, 1555 (Fed.Cir.1994); Hybritech Inc. v. Abbott Laboratories, 849 F.2d 1446, 1451 (Fed.Cir. 1988). The burden is always on the movant to show entitlement to a preliminary injunction, the issuance of which is a matter of discretion for a district court. Intel Corp. v. ULSI System Technology, Inc., 995 F.2d 1566, 1568 (Fed.Cir.1993). The Federal Circuit has cautioned, however, that "a preliminary injunction is a drastic and extraordinary remedy that is not to be routinely granted." Id.

A. Likelihood of Success on the Merits

In a patent infringement case, a reasonable likelihood of success requires a showing of (1) validity and (2) infringement of the patents. Reebok, 32 F.3d at 1555.

(1) Validity

Generally, the party asserting invalidity bears the burden of persuasion and must establish by clear and convincing evidence a prima facie case of invalidity before the patent holder will be required to come forward with evidence to the contrary. Buildex, Inc. v. Kason Indus., Inc., 849 F.2d 1461 (Fed.Cir.1988); 35 U.S.C. § 282 (1984). At the preliminary injunction stage, however, the patentee carries the burden of showing a likelihood of success on the merits of the substantive issues relating to validity and enforceability of patents. Nutrition 21 v. United States, 930 F.2d 867, 869 (Fed.Cir. 1991)....