Eon Laboratories, Inc. v. Smithkline Beecham Corp.

• Decision Date: 23 December 2003
• Docket Number: No. CIV.A. 03-10506-WGY.,CIV.A. 03-10506-WGY.
• Citation: 298 F.Supp.2d 175
• Parties: EON LABORATORIES, INCORPORATED, Plaintiffs, v. SMITHKLINE BEECHAM CORPORATION d/b/a Glaxosmithkline, Beecham Group PLC, Glaxosmithkline PLC, Carl J. Rose, and Richard K. Anderson Defendants.
• Court: U.S. District Court — District of Massachusetts

298 F.Supp.2d 175

EON LABORATORIES, INCORPORATED, Plaintiffs, v. SMITHKLINE BEECHAM CORPORATION d/b/a Glaxosmithkline, Beecham Group PLC, Glaxosmithkline PLC, Carl J. Rose, and Richard K. Anderson Defendants.

No. CIV.A. 03-10506-WGY.

United States District Court, D. Massachusetts.

December 23, 2003.

COPYRIGHT MATERIAL OMITTED

Bernard J. Bonn, III, Dechert LLP, Boston, MA, George G. Gordon, Dechert LLP, Philadelphia, PA, Timothy C. Hester, Covington & Burling, Washington, DC, Kevin T. Kerns, Dechert LLP, Philadelphia, PA, Matthew A. Porter, Dechert LLP, Boston, MA, Christopher N. Sipes, Covington & Burling, Washington, DC, Joseph A. Tate, Dechert LLP, Philadelphia, PA, for Beecham Group PLC, Defendant.

Thane D. Scott, Palmer & Dodge, LLP, Boston, MA, for Eon Labs, Inc., Plaintiff.

MEMORANDUM AND ORDER

YOUNG, Chief Judge.

I. INTRODUCTION

After hearing oral argument on October 23, 2003, this Court stated its intent to dismiss the federal antitrust claims asserted by the plaintiff, Eon Laboratories, Inc. ("Eon"), as compulsory counterclaims that were not raised in the underlying patent infringement action. See Hr'g Tr. of 10/23/03, at 8. This memorandum and order sets forth the Court's analysis and clarifies its decision.

II. BACKGROUND

This is a consolidated action against SmithKline Beecham Corporation, Beecham Group PLC, and GlaxoSmithKline PLC (collectively "SmithKline") for violations of the antitrust laws related to its patent for the chemical compound nabumetone, which it sells commercially as "Relafen." After successfully defending against SmithKline's action to enforce its patent, Eon, a manufacturer of generic nabumetone, initiated suit against SmithKline, asserting violations of federal and state antitrust laws, violation of the Massachusetts Consumer Protection Act, tortious interference with contractual and business relationships, and malicious prosecution. Am. Compl. [Doc. No. 1]. SmithKline here moves to dismiss Eon's claims as barred by the doctrine governing compulsory counterclaims, and the relevant statutes of limitations. [Doc. No. 5].

A. Factual Background¹

On December 13, 1983, SmithKline received U.S. Patent No. 4,420,639 (the "'639 patent") for the compound nabumetone, a non-steroidal anti-inflammatory drug. SmithKline commenced commercial sales of nabumetone under the brand name Relafen in February, 1992. In August, and December, 1997, generic drug manufacturers Copley Pharmaceutical, Inc. ("Copley"), Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals USA ("Teva"), and Eon sought approval from the Food and Drug Administration (the "FDA") to market generic nabumetone. Upon commencement of SmithKline's lawsuits to enforce its '639 patent, however, the FDA stayed approval of the generic drugs for thirty months. On August 8, and December 24, 1998, the FDA issued tentative approval to Teva's and Eon's generic nabumetone products, but withheld final approval until the conclusion of the thirty-month stay period. That stay period terminated in May, 2000.

SmithKline filed the patent suits in question on October 27, 1997 (against Copley), November 13, 1997 (against Teva), and February 17, 1998 (against Eon). After a bench trial, Judge Lindsay of this district issued a sixty-seven-page opinion, which found, inter alia, that (1) claims 2 and 4 of the '639 patent were invalid as anticipated by prior art; and (2) the '639 patent was unenforceable because of SmithKline's inequitable conduct before the Patent Office. In re '639 Patent Litig., 154 F.Supp.2d 157, 194-95 (D.Mass.2001) (Lindsay, J.). On August 15, 2002, the Federal Circuit affirmed the district court's decision as to the validity of the '639 patent but did not reach the issue of inequitable conduct. SmithKline Beecham Corp. v. Copley Pharm., Inc., 45 Fed. Appx. 915, 917 (Fed.Cir.2002) (unpublished).

Essentially, Eon asserts that but for SmithKline's wrongful filing of patent lawsuits, it could have entered the market for generic nabumetone as early as June, 1999, six months after Teva, the first generic applicant, received tentative approval from the FDA. Pl.'s Opp'n [Doc. No. 12] at 1. Because of the pending litigation, however, Teva and Eon could not begin marketing their generic products until after the stay period terminated and SmithKline's patent was invalidated. Teva² began marketing its generic products in August, 2001, with Eon following suit in February, 2002.

B. Procedural Background

On March 18, 2003, Eon initiated suit against SmithKline, claiming violations of federal and state law that excluded competing manufacturers from the market for nabumetone. [Doc. No. 1]. More specifically, Eon alleges that SmithKline engaged in a course of anticompetitive conduct that included fraudulently procuring the '639 patent, listing it with the FDA, and prosecuting sham litigation to enforce it. Am. Compl. ¶¶ 158, 171. Eon asserts claims for violation of the Sherman Act (Claims I and II), violations of the antitrust and unfair trade practices statutes of forty-one states (Claim III), violation of the Massachusetts Consumer Protection Act (Claim IV), tortious interference with contractual and business relationships (Claim V), malicious prosecution (Claim VI), and unjust enrichment (Claim VII).

In a Memorandum and Order issued October 1, 2003, this Court addressed and denied SmithKline's motions to dismiss the claims of plaintiff purchasers. In re Relafen Antitrust Litig., 286 F.Supp.2d 56 (D.Mass.2003). SmithKline here moves to dismiss the claims of Eon, a plaintiff competitor and party to the underlying patent infringement action. [Doc. No. 5]. At the oral hearing on the present motion, the Court suggested that Eon's different situation required a different analysis. See Hr'g Tr. of 10/23/03, at 2. The Court concluded that under this analysis, Eon's federal antitrust claims were likely barred as compulsory counterclaims not raised in the underlying infringement action. Id. at 8.

II. DISCUSSION

SmithKline asserts two "independent bases" for its motion to dismiss: the doctrine governing compulsory counterclaims, and the relevant statutes of limitations. Def.'s Mot. at 1. Finding the first of these bases persuasive, the Court begins its analysis there.

A. Eon's Federal Claims as Compulsory Counterclaims

Under Rule 13(a) of the Federal Rules of Civil Procedure, "[a] pleading shall state as a counterclaim any claim [that] arises out of the transaction or occurrence that is the subject matter of the opposing party's claim ...." Fed.R.Civ.P. 13(a). The First Circuit has outlined four tests to determine whether a counterclaim is compulsory under Rule 13(a):

(1) Are the issues of fact and law raised by the claim and counterclaim largely the same?

(2) Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule?

(3) Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counterclaim?

(4) Is there any logical relation between the claim and the counterclaim?

Iglesias v. Mutual Life Ins. Co., 156 F.3d 237, 241 (1st Cir.1998). If a counterclaim satisfies one of these tests "but is not brought," it is "thereafter barred." Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 41 L.Ed.2d 243 (1974).

The fourth test described above, the "logical relationship" test, "enjoys `by far the widest acceptance among the courts.'" McCaffrey v. Rex Motor Transp., Inc. 672 F.2d 246, 248 (1st Cir. 1982) (quoting 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1410 (1971)). A counterclaim has a logical relationship to the original claim if "it arises out of the same aggregate of operative facts as the original claim" in the sense that "the same aggregate of operative facts serves as the basis of both claims"; or "the aggregate core of facts upon which the original claim rests activates additional legal rights in a party defendant that would otherwise remain dormant." McCaffrey, 672 F.2d at 249 (quoting Revere Copper & Brass Inc. v. Aetna Casualty & Surety Co., 426 F.2d 709, 715 (5th Cir.1970)). Here, Eon does not dispute that its claims—alleging the procurement and enforcement of the invalid '639 patent—have some logical relation to SmithKline's original claim of infringement of the same patent. See Pl.'s Opp'n at 18. Rather, Eon argues that its claims fall within an exception to Rule 13(a). Id. at 16-18.

1. Mercoid Exception

a. Mercoid Corp. v. Mid-Continent Investment Co.

In Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 64 S.Ct. 268, 88 L.Ed. 376 (1944), the Supreme Court characterized a claim for antitrust damages as a permissive, not compulsory, counterclaim to a prior claim of patent infringement. There, the Supreme Court allowed the Mercoid Corporation ("Mercoid") to raise an antitrust counterclaim that it had failed to assert in a prior patent infringement suit brought by the patentee, Mid-Continent Investment Corporation ("Mid-Continent"). Mercoid, 320 U.S. at 671, 64 S.Ct. 268. Arguing for the dismissal of this claim, Mid-Continent asserted that Mercoid knew of the challenged conduct when the earlier patent infringement suit was initiated, and although Mercoid was not made a party to that earlier suit, it provided the defense. Id. at 669, 64 S.Ct. 268.

The Supreme Court rejected Mid-Continent's argument, stating:

Though Mercoid were barred in the present case from asserting any defense which might have been interposed in the earlier litigation, it would not follow that its counterclaim for damages would likewise be barred. That claim for damages is more than a defense; it is a separate statutory cause of action. The fact that it might have been asserted as a counterclaim in the prior suit by reason of Rule 13(b) of the Rules of Civil Procedure does not mean that the failure to do so renders the prior judgment res judicata as respects it.

Id. at 671, 64 S.Ct. 268...