Eli Lilly and Co. v. Zenith Goldline Pharm.

• Decision Date: 15 May 2003
• Docket Number: Cause No. IP99-0038-C-H/K.
• Citation: 264 F.Supp.2d 753
• Parties: ELI LILLY AND COMPANY and Reliant Pharmaceuticals, LLC, Plaintiffs, v. ZENITH GOLDLINE PHARMACEUTICALS, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

264 F.Supp.2d 753

ELI LILLY AND COMPANY and Reliant Pharmaceuticals, LLC, Plaintiffs, v. ZENITH GOLDLINE PHARMACEUTICALS, INC., Defendant.

Cause No. IP99-0038-C-H/K.

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

May 15, 2003.

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Jan M. Carroll, Barnes & Thornburg, Indianapolis, IN, Ronald L. Grudziecki, R. Danny Huntington, Burns, Doane, Swecker & Mathis, Alexandria, VA, David A. Nelson, Latham & Watkins, Chicago, IL, for Plaintiffs.

Stephen E. Arthur, Harrison & Moberly, Indianapolis, IN, William L. Mentlik, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, NJ, for Defendant.

HAMILTON, District Judge.

ENTRY ON FEE PETITION

This patent case is now before the court on plaintiffs petition for an award of attorney fees and costs under 35 U.S.C. § 285. As explained below, the court awards attorney fees of $1,523,580.85 and costs of $101,576.34.

United States Patent No. 4,375,547 claimed the invention of the drug nizatidine, which plaintiff Eli Lilly and Company has marketed as Axid®. Defendant Zenith Goldline Pharmaceuticals, Inc. infringed the '547 patent by filing an amended Abbreviated New Drug Application seeking FDA permission to manufacture and sell nizatidine before the patent expired. Zenith filed its amended application under the Drug Price Competition and Patent Term Restoration Act of 1984, better known as the Hatch-Waxman Act. Zenith's amended application included a "Paragraph IV" certification asserting that the '547 patent was invalid as obvious from the prior art. See 21 U.S.C. § 355(j)(2)(A)(vii)(IV). Plaintiff Lilly then filed this action for patent infringement, pursuant to 21 U.S.C. § 355(j)(5)(B)(iii).

After a trial to the court, the court found that the '547 patent was valid and infringed. In a patent case, the court "in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The court also found that defendant Zenith's invalidity defense was so weak as to render the case "exceptional" within the meaning of 35 U.S.C. § 285, so that plaintiff Lilly should recover its reasonable attorney fees as well as its costs. Eli Lilly & Co. v. Zenith Goldline Pharmaceuticals, Inc., 2001 WL 1397304 (S.D.Ind. Oct.29, 2001).

In Hensley v. Eckerhart, the Supreme Court expressed the hope that a "request for attorney's fees should not result in a second major litigation." 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). That hope has not been realized in this case. Lilly's request for fees and expenses exceeds $5 million. That sum is more than the amount in controversy on the merits in all but a small fraction of the cases on this court's docket. The parties have conducted discovery and submitted extensive submissions on paper. Neither party accepted the court's invitation to request a hearing, so the court has decided the matters on the paper record.

I. The Law Governing Attorney Fees Under Section 285

Federal Circuit law governs the court's determination as to whether a case is "exceptional" under 35 U.S.C. § 285 so as to authorize an award of attorney fees and expenses, and the Federal Circuit has held that its law also applies to the calculation of fees and expenses under § 285. See Special Devices, Inc. v. OEA Inc., 269 F.3d 1340, 1343 (Fed.Cir.2001) ("the awarding of attorney fees pursuant to 35 U.S.C. § 285 is an issue unique to patent law and therefore subject to Federal Circuit law"); Pharmacia & Upjohn Co. v. Mylan Pharm., Inc., 182 F.3d 1356, 1359 (Fed.Cir.1999) ("Our precedent governs the substantive interpretation of 35 U.S.C. § 285, which is unique to patent law."). Accordingly, the court applies Federal Circuit law but also looks to Seventh Circuit law on points the Federal Circuit has not addressed.¹

Section 285 authorizes "reasonable attorney fees." The standard method for determining a reasonable fee under § 285 is the "lodestar" method that federal courts also apply under a host of fee-shifting statutes. Under the lodestar method, the amount of attorney fees is determined by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate. See Blanchard v. Bergeron, 489 U.S. 87, 94, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989); Hensley v. Eckerhart, 461 U.S. at 433, 103 S.Ct. 1933. The court should then exclude from this initial fee calculation any hours that were not "reasonably expended on the litigation." Hensley, 461 U.S. at 434, 103 S.Ct. 1933. As the Supreme Court cautioned:

Cases may be overstaffed, and the skill and experience of lawyers vary widely. Counsel for the prevailing party should make a good faith effort to exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary, just as a lawyer in private practice ethically is obligated to exclude such hours from his fee submission. "In the private sector, `billing judgment' is an important component in fee setting. It is no less important here. Hours that are not properly billed to one's client also are not properly billed to one's adversary pursuant to statutory authority."

Id. (emphasis in original). In applying these standards, the trial court may draw on its experience and judgment to eliminate unreasonable hours and charges from a fee request. See, e.g., Saxton v. Secretary of Dept. of Health and Human Services, 3 F.3d 1517, 1521 (Fed.Cir.1993).

II. A Fee Award Is Warranted

Notwithstanding the court's finding that this is an "exceptional case" under 35 U.S.C. § 285, Zenith contends at the outset that no fee award should be made in this case. The Federal Circuit has taught:

Even an exceptional case does not require in all circumstances the award of attorney fees. Many factors could affect this result. The trial judge is in the best position to weigh considerations such as the closeness of the case, the tactics of counsel, the conduct of the parties, and any other factors that may contribute to a fair allocation of the burdens of litigation as between winner and loser.

S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201 (Fed.Cir.1986) (vacating denial of fees to require explanation of decision); accord, National Presto Industries, Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed.Cir.1996) (affirming denial of fees; trial judge has discretion "to weigh intangible as well as tangible factors: the degree of culpability of the infringer, the closeness of the question, litigation behavior, and any other factors whereby fee shifting may serve as an instrument of justice").

The court will not repeat here all of its detailed findings on Zenith's willful infringement and its lack of a reasonable foundation for believing the nizatidine patnet was invalid. In summary, the case on the merits was not close. In light of the lack of a foundation for the invalidity defense and the financial incentives for Zenith if it won, it appears that Zenith was simply taking a calculated longshot gamble. If Zenith had won in court, its payoff would have been measured in the tens of millions of dollars. Before a party like Zenith forces a drug patent holder to defend its patent, at considerable expense, it is reasonable to expect the party filing the notice under the Hatch-Waxman Act to have something more solid than hope on its side. Awarding reasonable fees here should further the policies of the patent laws and the Hatch-Waxman Act by helping to discourage baseless claims of invalidity.

In finding willful infringement and an exceptional case under § 285, the court recognized, and recognizes now, the "concern that awards of increased damages and attorney fees not be allowed to thwart efforts to challenge the validity of patents believed in good faith to be invalid." Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565, 1581 (Fed.Cir.1986). In this case, however, that concern is outweighed by Zenith's weak invalidity case and its groundless reliance upon an unreliable oral opinion from counsel. The prospect of a fee award under § 285 plays an important deterrent role under these circumstances.

Zenith's strongest argument for denying a fee award here is that Lilly submitted such an excessive and inflated petition for fees and costs that the court should simply deny it outright. As explained in detail below, the court agrees that Lilly's petition is extravagant and inflated. Case law supports a complete denial of such petitions, at least in extreme cases. See Brown v. Stockier, 612 F.2d 1057, 1059 (7th Cir.1980) (affirming denial of fee request for "an intolerably inflated" 800 hours where attorney merely filed complaint and then filed motions for extensions of time to await outcome of pending, controlling Supreme Court case); see also Scham v. District Courts Trying Criminal Cases, 148 F.3d 554, 557 (5th Cir.1998) (affirming denial of fees where request was so "excessive it `shock[s] the conscience of the court'"); Fair Housing Council of Greater Washington v. Landow, 999 F.2d 92, 98 (4th Cir.1993) (denying all fees where request was "outrageously excessive"); Lewis v. Kendrick, 944 F.2d 949, 958 (1st Cir.1991) (finding that unreasonably high fee demand in civil rights case forfeited all rights to a fee); Sun Publishing Co. v. Mecklenburg News, Inc., 823 F.2d 818, 820 (4th Cir.1987) (affirming summary denial of fee petition so "exorbitant and unreasonable as to shock the conscience"); cf. Lewis v. Kendrick, 944 F.2d at 959 (Breyer, J., dissenting in part) (excessive fee request should allow but not require district court to deny fees in entirety).

The prospect of completely denying this excessive and unreasonable fee petition has considerable appeal in this case. Even the cases approving such complete denial of fee requests have acknowledged, however, that complete denial is an "extreme" response, Scham, 148 F.3d at 559, or "strong medicine," Lewis, 944 F.2d at 958, that should be used to discourage such...