In re Cambridge Biotech Corp.
| Decision Date | 15 August 1997 |
| Docket Number | Adversary No. 95-04074.,No. 94-43054-JFQ,Bankruptcy No. 95-40188-NMG,95-40189-NMG and 96-40025-NMG,94-43054-JFQ |
| Citation | 212 BR 10 |
| Parties | In re CAMBRIDGE BIOTECH CORPORATION, Debtor. INSTITUT PASTEUR and Genetic Systems Corporation, Appellants, v. CAMBRIDGE BIOTECH CORPORATION, Appellee. |
| Court | U.S. District Court — District of Massachusetts |
COPYRIGHT MATERIAL OMITTED
Jeffrey L. Jonas, James E. McGuire, Brown, Rudnick, Freed & Gesmer, Boston, MA, Joseph F. Ryan, Lyne, Woodworth & Evarts, Boston, MA, for Cambridge Biotech Corp. in No. 95-40188.
Jeffrey D. Sternklar, Michael R. Gottfried, Burns & Levinson, Boston, MA, for Institut Pasteur, Genetic Systems Corp. in Nos. 95-40188, 95-40189.
Jeffrey L. Jonas, James E. McGuire, Anthony L. Gray, Brown, Rudnick, Freed & Gesmer, Boston, MA, William J.T. Brown, Donovan, Leisure, Newton & Irvine, New York City, Joseph F. Ryan, Lyne, Woodworth & Evarts, Boston, MA, for Cambridge Biotech Corp. in Nos. 95-40189, 96-40025.
Richard S. Gresalfi, Paul H. Heller, Kenyon & Kenyon, New York City, Jeffrey D. Sternklar, Michael R. Gottfried, Burns & Levinson, Boston, MA, for Institut Pasteur, Genetic Systems Corp. in No. 96-40025.
These appeals involve three patents owned by Institut Pasteur: Patent Nos. 5,055,391 (" '391 patent"), 5,051,496 (" '496 patent") and 5,217,861 (" '861 patent"). In Appeal Nos. 95-CV-40189 and 96-CV-40025, Institut Pasteur ("IP") and Genetic Systems Corporation ("Genetic"), collectively referred to as "Pasteur," appeal from 1) an Order of the United States Bankruptcy Court granting summary judgment against Pasteur on Counts 2 and 3 (Patents '391 and '496) and 2) that same court's determination that a) Pasteur is entitled to damages of only 1% for defendant's infringement of its '861 patent and b) a third party (Pasteur Sanofi Diagnostics, "PSD") is not an indispensable party to the Claim (Count 1) related to that patent.
In Appeal No. 95-CV-40188, defendant/appellee, Cambridge Biotech Corporation ("CBC") appeals from the allowance by the Bankruptcy Court in the same order of Pasteur's motion for summary judgment against CBC on Count 1 for infringement of the '861 Patent. This Court has jurisdiction over the appeals pursuant to 28 U.S.C. § 158(a).
On July 7, 1994, CBC, a biotechnology company with facilities in Worcester; Massachusetts and Rockville, Maryland, filed a voluntary petition for relief pursuant to Chapter 11 of the United States Bankruptcy Code. IP, a French foundation, had previously discovered and was granted certain patents related to the HIV virus. Three of those patents are subjects of these appeals. Genetic, originally an independent, U.S. corporation, has been authorized to exploit certain patent rights of IP since 1984 and was acquired by PSD, which is owned in part by IP, in 1990.
On March 26, 1981, IP granted to PSD (its subsidiary) a right of first refusal to use all of IP's existing and future patents, know-how, processes and models in the diagnostics field. In 1986, the same two parties entered into an agreement specifically covering the HIV technology. In 1990 that agreement was superseded by one which requires payment by PSD to IP of an annual research contribution of approximately $2 million, a minimum royalty of approximately $3.5 million, a 6% royalty on sales made by PSD and Genetic (IP's exclusive U.S. licensee) of the licensed technology and 50% of all royalties received from other sublicensees. Pursuant to that agreement, IP has licensed the '861 Patent () to PSD and Genetic.
In November, 1984, PSD and Genetic entered into an agreement ("the 1984 BVD Agreement") approved by IP, whereby PSD and Genetic entered into a joint venture and formed a corporate entity known as Blood Virus Diagnostics, Inc. ("BVD"). By virtue of that agreement, PSD licensed to BVD, on a world-wide exclusive basis, the intellectual property rights it had obtained from IP, and Genetic, in turn, licensed to BVD its diagnostic testing technology, on a world-wide exclusive basis, and invested $1 million up front in BVD. In addition, Genetic committed to spending at least $3.5 million on HIV research over the following three and one-half years. BVD itself then granted to Genetic exclusive rights to exploit the pooled technology in the United States (and certain other countries) and to PSD the rights to exploit such technology elsewhere throughout the world. Both licenses included the right to sublicense, subject to the terms of the basic agreement between IP and PSD.
In 1987, the then leaders of HIV technology: IP, the United States Department of Health and Human Services ("HHS") and the National Technical Information Service ("NTIS"), entered into an agreement (the "Settlement Agreement") in an effort to make HIV technology more widely available. Under the terms of the Settlement Agreement, the patent rights of the parties, including improvement technology, are to be made available to all of their respective licensees. IP's '861 patent was a continuation of a patent listed in the Settlement Agreement as improvement technology and, therefore, was subject to the provision of that Agreement that made it available to all licensees of each party "at a royalty rate and under conditions no less favorable than those offered to IP's own licensees." See Settlement Agreement at p. 17.
CBC has a license with NTIS under which it pays NTIS a 5% royalty for the use of certain HIV-1 technology and 6% on other HIV-1 technology. As a licensee of NTIS, CBC is entitled to a license on the '861 Patent as improvement technology.
In October, 1989, PSD entered into certain cross-license agreements with CBC. The interpretation of one of those cross-licenses is at issue in Appeal No. 95-40189 and will be discussed more fully infra.
Pursuant to separate appeals, this Court confirmed the Plan of Reorganization ordered by Bankruptcy Judge Queenan and that confirmation was subsequently affirmed by the First Circuit Court of Appeals.
As a result of the Plan of Reorganization, CBC sold its stock to bioMérieux Vitek, a subsidiary of bioMérieux S.A. The parent corporation is a large, French biotechnology corporation with sales of nearly $500 million in 1995 and a significant market share in the infectious disease diagnostic market outside of the United States.
PSD has previously granted to bioMérieux S.A. a worldwide license (except in the United States and several other countries) to test for HIV Type 2, but only as part of a specific, limited system used by bioMérieux. Thus the license is limited both in territory and application. In consideration for that license, bioMérieux S.A. paid IP a lump sum of 3,250,000 French francs (approximately $650,000) and agreed to pay a 15% royalty on net sales.
As a normal business practice, PSD acquires rights to technology owned by its licensees in consideration for and as part of any license it grants for use of its HIV-2 patents. The extent of the technology it receives and the royalties it pays for the exchange of technology depends upon the scope of the HIV-2 license it negotiates in good faith and at arms length. On occasion, the HIV-2 licenses that PSD grants are limited in scope, both in the applications to which the patented technology may be practiced and in territory, and license terms may also depend upon the size and relative competitive advantage of the prospective licensee. PSD, therefore, attaches great significance to bioMérieux, S.A.'s obtaining of a license to sell HIV-2 products through its acquisition of CBC which was accomplished through CBC's Plan of Reorganization earlier in these bankruptcy proceedings.
The Bankruptcy Court's findings of fact are reviewed under the "clearly erroneous" standard and its conclusions of law are reviewed de novo. Fed.R.Bankr.P. 8013; In re Winthrop Old Farm Nurseries, Inc., 50 F.3d 72, 73 (1st Cir.1995).
In Appeal No. 95-40188, CBC appeals from Bankruptcy Judge Queenan's Order granting summary judgment in favor of the appellee Pasteur for infringement of IP's '861 Patent. IP is the owner and Genetic the exclusive United States licensee of that patent.
While researching AIDS, Professor Montagnier of IP discovered, among other things, several proteins in HIV-1 which are "antigenic," including the protein known as p18. That protein and its use is the subject matter of the claims of the '861 patent at issue. "Antigenic" proteins ("antigens") like p18 are proteins that cause an immune response in the body, i.e. cause antibodies to be produced. If infected with HIV-1, an individual is likely to develop antibodies to some or all of the antigens in the virus. Because that is so, the presence of p18 is an indicator that an individual is HIV-1 positive.
Judge Queenan found that CBC infringed Claims 1-4 of the '861 patent which teach methods of how to use p18 and the characteristics of the product itself.
CBC argues that the Bankruptcy Court misinterpreted the '861 patent method claims (1-3) and did not consider relevant file history. CBC asserts that the Bankruptcy Court erred when it, in effect, enlarged the claims of the patent by stating that "the absence of p18, together with the absence of the other antibodies discussed above, is indicative the individual does not have HIV-1 or AIDS." 186 B.R. at 21 (emphasis added). Moreover, CBC claims that by including the term "HIV-1" with the term "AIDS" the Bankruptcy Court further broadened the claim.
According to CSC, scientific evidence shows that p18's presence...
To continue reading
Request your trial