Merckle GmbH v. Johnson & Johnson, Civil Action No. 94-56.

• Decision Date: 15 April 1997
• Docket Number: Civil Action No. 94-56.
• Parties: MERCKLE GmbH, Plaintiff, v. JOHNSON & JOHNSON, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

961 F.Supp. 721

MERCKLE GmbH, Plaintiff, v. JOHNSON & JOHNSON, et al., Defendants.

Civil Action No. 94-56.

United States District Court, D. New Jersey.

April 15, 1997.

John M. Agnello, Jan Alan Brody, Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, Roseland, NJ, Kenneth J. Jurek, Roseanne J. Faraci, McDermott, Will & Emery, Chicago, IL, for Plaintiff.

Francis X. Dee, Carpenter, Bennett & Morrissey, Newark, NJ, Robert P. LoBue Jeffrey I.D. Lewis, Patterson, Belknap, Webb & Tyler, New York City, for Defendants.

OPINION

WOLIN, District Judge.

Before the Court today is the motion brought by defendants Johnson & Johnson, Inc. ("J & J"), a New Jersey corporation, Johnson & Johnson International, a New Jersey corporation, Ortho Pharmaceutical Corp. ("Ortho"), a Delaware corporation, and R.W. Johnson Pharmaceutical Research Institute ("PRI"), an unincorporated division of Ortho (collectively, "defendants" or "Ortho") for summary judgment against plaintiff Merckle GmbH ("Merckle"), a German corporation. Merckle alleges that defendants misappropriated Merckle's trade secrets. Pursuant to Federal Rule of Civil Procedure 78, the Court decides this motion based on the written submissions of the parties. For the reasons expressed below, the Court finds that this case involves genuine issues of material fact that must be resolved at trial; the Court, therefore, will deny defendants' motion for summary judgment.

I. BACKGROUND

A. The Product, Parties and Patents

This case centers on the respective information used by Ortho and Merckle to manufacture a laboratory version of erythropoietin ("EPO"), a protein that is naturally produced by the healthy human body. EPO functions as a hormone that stimulates the formation of red blood cells. As with all proteins, EPO is constructed of amino acids that are strung together in a defined sequence based upon coding instructions found in the body's deoxyribonucleic acid ("DNA"). This string of amino acids forms the backbone of the protein to which carbohydrates and sialic acid attach through a process sometimes referred to as glycosylation. The pattern of substances that attach to the amino acids is important in determining how effective the EPO is in causing the body to make red blood cells. See Defs.' Statement of Undisputed Facts ("DSUF") ¶¶ A.3-A.5.

While human EPO is produced naturally in healthy humans, it also can be manufactured by splicing the DNA's EPO code sequence into a host cell's DNA. This genetically engineered EPO is known as recombinant human EPO, or "rHuEPO." Medicinal products containing rHuEPO may be used to treat anemia related to chronic renal failure, infections, immune deficiencies, and other ailments.

The commercial manufacturing of rHuEPO occurs from the use of Chinese hamster ovary ("CHO") host cells, which J & J and its licensor Amgen, Inc. ("Amgen") use, or baby hamster kidney ("BHK") host cells, which Merckle's licensor Elanex Pharmaceuticals, Inc. ("Elanex") uses. See id. ¶¶ A.6-A.7.

Once the genetic engineering process is completed (i.e., the string of amino acids is established and the glycosylation process occurs), the rHuEPO produced by the host cell is purified and formulated for human use. To formulate a medicinal product from the purified bulk rHuEPO it generally must be mixed with other items, "excipients," which perform various functions to make the product usable in humans. See id. ¶ A.11. The rHuEPO and the particular formulation through which it is prepared for human administration determine the biological activity of the medicinal product (e.g., its potency (number of red blood cells created per unit of the product), the speed with which it acts and is cleared from the body, and its side effects)

The full processes by which Merckle's rHuEPO is made cannot be discerned from the final product. See id. ¶ A.12. Those processes can only be ascertained and measured by extended in vivo and clinical studies. See id. Ortho avers that "any comparison between Merckle's and Ortho's rHuEPO would require a head-to-head clinical trial, which has never been completed." Defs.' Br. in Support of Motion for Summary Judgment ("Defs.' Br.") at 5; DSUF ¶ F.3.

Both Ortho and Merckle claim the right to manufacture and sell rHuEPO pursuant to licenses granted to them by Amgen and Elanex, respectively. Amgen and a related venture, Kirin-Amgen (collectively, "Amgen"), hold international rights to a series of EPO patents issued to Fu-Kuen Lin (the "Lin Patents").¹ See DSUF ¶ B.1. The principal Lin Patent identifies the amino acid sequence of human EPO.² See id. In the United States, both Amgen and Ortho sell rHuEPO manufactured by Amgen. Outside the United States, Ortho separately manufactures and sells rHuEPO. See id. ¶ C.1-C.4. Through its affiliates, Ortho sells rHuEPO in Germany under the principal brand name Eprex.³ See id. ¶ C.2.

Elanex, Merckle's licensor, acquired the rights to a European patent issued in the name of J. Powell and assigned to the University of Washington (the "Powell Patent"). See Pl.'s Br. in Opposition to Motion for Summary Judgment ("Pl.'s Br.") at 5. The license obtained by Elanex from the University of Washington relates to BHK host cells. See id. Merckle obtained a license from Elanex to use its bulk EPO and to develop and distribute a BHK cells-based rHuEPO in Germany, Switzerland and Austria. See id. at 6. The license agreement required Merckle to obtain bulk EPO from Opregen GmbH ("Opregen"), a German company designated by Elanex. See id. Merckle did not obtain any rights to Elanex's cell line — the amino acid "backbone" technology underlying the bulk EPO — nor does Merckle have specific knowledge of the technology used to prepare Elanex's BHK host cells. See DSUF ¶¶ C.10-C.18 (citing various written submissions of Merckle in Amgen, Inc. v. Elanex Pharmaceuticals, Inc., 160 F.R.D. 134 (W.D.Wa.1994) ("Amgen v. Elanex"), a prior patent infringement litigation between Amgen and Elanex in which Merckle was sued for contributory infringement, but from which Merckle won dismissal).⁴ Merckle, however, was involved in Germany in the work of Opregen and contends that it had its own plans regarding the development of pharmaceutical EPO, presumably with respect to the glycosylation process and the formulation of the rHuEPO, which did not require knowledge of the underlying host cells. See PSUF ¶¶ C.13-C.14. Merckle asserts it expended great resources in its attempts to develop the bulk EPO obtained from Opregen so as to obtain registration of a BHK cells-based rHuEPO. See Pl.'s Br. at 6-7. At about the same time as Merckle was finally ready to begin clinical studies, the European Lin Patent was published. See id. at 7.

B. The History of Litigation

In 1990, Ortho learned that Merckle may have been conducting clinical trials involving rHuEPO. See DSUF ¶ E.2; PSUF ¶ E.2. In the United States, preclinical work and even clinical studies conducted in furtherance of registration are not acts of patent infringement. See 35 U.S.C. § 271(e)(1). German law, however, currently provides otherwise.

On October 2, 1990, Robert Minier of the J & J patent law department wrote a memo to Peter Tattle, a J & J executive directly involved in rHuEPO patent litigation. See DSUF ¶ E.3; Pl.'s Ex. 37 (copy of memo).⁵ Minier's memo advised that "we are proceeding with preparing a cease and desist' letter to send to Merckle" and asked Tattle to develop evidence in the event Merckle failed to cease its activity. Pl.'s Ex. 37. Specifically, Minier requested: (1) documentation that Merckle was a licensee of Elanex; (2) further evidence of Merckle's activities and where in Germany they were taking place; (3) continuing surveillance to catch any filing by Merckle for registration to market rHuEPO, which "would be clear evidence of infringement;" and (4) a sample of Merckle's product so as to have the product independently analyzed. See id. (emphasis added).

Minier's requests were passed along to J & J's German affiliates, and samples of Merckle's product were shipped to defendants in late October 1990. See DSUF ¶ 4 E.6-E.13. That shipment was lost in transit and, as defendants assert, was never recovered. See id. ¶ E.13.⁶ On March 11, 1991, a sample of Merckle rHuEPO arrived at Ortho's PRI lab, a lab which analyzes pharmaceutical products believed to infringe Ortho patents. See id. ¶ E.15-E.16; PSUF ¶ E.16. The record does not disclose the source of the Merckle rHuEPO. After initial tests were performed on the Merckle sample, Ortho filed suit for patent infringement against Merckle on May 16, 1991, in Germany. See DSUF ¶¶ E.18-E.19; PSUF ¶ E.18.

In February 1992, PRI issued a report describing the Merckle rHuEPO as "indistinguishable" from and "equivalent to" the rHuEPO in HEMAX, the commercially available Elanex rHuEPO that PRI had previously analyzed. See Pl.'s Ex. 11 at 1; Pl.'s Ex. 83. On February 17, 1992, an Ortho executive distributed the PRI report to various foreign affiliates with a cover memo, which emphasized the equivalence of Merckle's rHuEPO and HEMAX and identified certain disadvantages of the Merckle/HEMAX rHuEPO when compared to Eprex, Ortho's rHuEPO. See Pl.'s Ex. 13. The cover memo, however, indicated that the formulations of the Merckle product and HEMAX differed. See id.; see also PSUF ¶ E.22 (stating that the only similarity between HEMAX and Merckle EPO was that both derived from a BHK cell). The memo also advised: "Copies of this report are not to be shown or distributed to others outside the company, without written permission from PRI, though the findings are certainly available for you to use." See Pl.'s Ex. 13.

Merckle contends that this memo evidences defendants' distribution of the PRI report for competitive purposes. See PSUF ¶ E.20. Ortho, however, avers that there is no evidence that the PRI report was used for any commercial purpose: "Given the serious questions raised by the PRI report and [the cover memo] as...