Yamanouchi Pharmaceutical v. Danbury Pharmaceutical

• Decision Date: 03 November 2000
• Citation: 231 F.3d 1339,56 USPQ2d 1641
• Parties: (Fed. Cir. 2000) YAMANOUCHI PHARMACEUTICAL CO., LTD. Plaintiff-Appellee, and MERCK & CO., INC., Plaintiff-Appellee, v. DANBURY PHARMACAL, INC., SCHEIN PHARMACEUTICAL, INC., and MARSAM PHARMACEUTICALS, INC., Defendants-Appellants. 99-1521 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1339

231 F.3d 1339 (Fed. Cir. 2000)

YAMANOUCHI PHARMACEUTICAL CO., LTD. Plaintiff-Appellee, and MERCK & CO., INC., Plaintiff-Appellee, v. DANBURY PHARMACAL, INC., SCHEIN PHARMACEUTICAL, INC., and MARSAM PHARMACEUTICALS, INC., Defendants-Appellants.

99-1521

United States Court of Appeals for the Federal Circuit

DECIDED: November 3, 2000

Appealed from: United States District Court for the Southern District of New York

Senior Judge Richard Owen

Robert L. Baechtold, Fitzpatrick, Cella, Harper & Scinto, of New York, New York, argued for plaintiff-appellees. With him on the brief were Hugh C. Barrett, Brian V. Slater, William E. Solander, and Amr O. Aly. On the brief for Merck & Co., Inc., were Paul D. Matukaitis and William Krovatin, of Merck & Co., Inc., of Rahway, New Jersey. Also on the brief for Merck & Co., Inc., were John F. Lynch, Nicolas G. Barzoukas, and Gerard M. Devlin, Jr., Arnold, White & Durkee, of Houston, Texas.

William A. Alper, Cohen, Pontani, Lieberman & Pavane, of New York, New

York, argued for defendants-appellants. With him on the brief were Thomas C. Pontani, Michael C. Stuart, Myron Cohen, Julia S. Kim, and Martin B. Pavane.

James F. Hurst, Winston & Strawn, of Chicago, Illinois, for amicus curiae National Pharmaceutical Alliance. Of counsel

Before NEWMAN, RADER, and GAJARSA, Circuit Judges.

RADER, Circuit Judge.

On a motion for judgment as a matter of law (JMOL), the United States District Court for the Southern District of New York upheld the validity of claim 4 of U.S. Patent No. 4,283,408 (the '408 patent) in favor of Yamanouchi Pharmaceutical Co., Ltd. and Merck & Co., Inc. (collectively, Yamanouchi). See Yamanouchi Pharm. Co. v. Danbury Pharmacal, Inc., 21 F. Supp. 2d 366, 370, 48 USPQ2d 1741, 1744 (S.D.N.Y. 1998). The district court also found that defendants Danbury Pharmacal, Inc. (Danbury), Schein Pharmaceutical, Inc. (Schein), and Marsam Pharmaceuticals, Inc. (Marsam) willfully infringed the '408 patent and awarded attorney fees to Yamanouchi. See id. at 378. Because the district court correctly upheld the validity of the '408 patent and did not abuse its discretion in awarding attorney fees, this court affirms.

I.

The '408 patent, issued to Yamanouchi on August 11, 1981, relates to inhibitors of gastric acid secretion. Claim 4 of the '408 patent, the only claim at issue, claims famotidine for treating heartburn and ulcers. Famotidine belongs to a class of compounds known as histamine2 antagonists (H2 antagonists), which inhibit production of stomach acid. As Figure 1 illustrates, the general chemical structure of H2 antagonists includes a "substituted heterocycle" group, a "alkyl containing" chain (called a "bridge"), and a "polar tail," connected in that order:

[Tabular or Graphical Material Omitted]

Figure 1 - Famotidine

During the 1960s and 70s, drug manufacturers searched for H2 antagonists with improved pharmacological properties, including low toxicity, high activity, and lack of side effects. Research revealed hundreds of thousands of potential compounds. Indeed, pharmaceutical companies synthesized more than 11,000 H2 antagonist compounds. See Yamanouchi, 21 F. Supp. 2d at 371. Very rarely, however, were these compounds pharmacologically suitable H2 antagonists. Notable failures include tiotidine, which caused cancer in rats; burimamide, which was ineffective for oral dosing; metiamide, which caused white blood cell loss; lupitidine, which caused pre-cancerous lesions in rats; and oxmetidine, which caused hepatitis.

Of the 11,000 candidates for suitable compounds, fewer than fifty showed enough promise to warrant human clinical trials. Ultimately, the FDA approved only four for consumer use: cimetidine,¹ ranitidine,² famotidine,³ and nizatidine.⁴ Famotidine, the claimed compound at issue, has been extremely successful. In 1996, for example, prescription sales of famotidine in the United States alone reached over 690 million dollars.

Danbury is a subsidiary of Schein, which produces and markets generic drugs. In January 1997, Danbury filed an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA) seeking approval to market generic famotidine. Under the ANDA procedure, an applicant seeks FDA approval to market a generic drug. The Hatch-Waxman Act, also known as The Drug Price Competition and Patent Term Restoration Act, Pub. L. No. 98-417, 98 Stat. 1585 (1984) (codified as amended at 21 U.S.C. 355 and 35 U.S.C. 271(e) (1994)), amended the Federal Food, Drug, and Cosmetic Act (FDCA), Pub. L. No. 52-675, 52 Stat. 1040 (1938) (codified as amended at 21 U.S.C. 301-397 (1994)), to permit filing of an ANDA to expedite FDA approval of a generic version of a drug previously approved by the FDA. See, e.g., Bayer AG v. Elan Pharm. Research Corp., 212 F.3d 1241, 1244, 54 USPQ2d 1711, 1712 (Fed. Cir. 2000).

Under the FDCA, an ANDA filer must certify one of the following four statements concerning the previously approved drug: it is not patented (paragraph I certification), its patent has expired (paragraph II certification), its patent soon will expire on a specified date (paragraph III certification), or its patent "is invalid or will not be infringed by the manufacture, use, or sale of the new drug" covered by the ANDA (paragraph IV certification). See 21 U.S.C. 355(j)(2)(A)(vii)(I)-(IV). To obtain approval of an ANDA, the FDCA requires only that the generic drug is the "bioequivalent" of the previously approved drug. See 21 U.S.C. 355(j)(2)(A)(iv).

In Danbury's ANDA for famotidine, Danbury made a paragraph IV certification that claim 4 of the '408 patent is invalid. See 21 U.S.C. 355(j)(2)(A)(vii)(IV). As the statute requires, Danbury, on March 26, 1997, sent Yamanouchi a Patent Certification Notice Letter. This certification letter informed Yamanouchi of Danbury's paragraph IV ANDA filing. Accompanying the certification letter were affidavits from Drs. Bernard Loev and John K. Siepler supporting Danbury's invalidity certification. The Notice Letter contained, as the statute requires, an analysis of the prior art and the reasons for the asserted invalidity.

Within forty-five days of receiving the certification letter, Yamanouchi filed suit against Danbury alleging infringement of the '408 patent under 35 U.S.C. 271(e)(2)(A), and willful infringement under 35 U.S.C. 285 (1994). See 35 U.S.C. 271(e)(4). During this period, Marsam filed a number of paragraph IV ANDAs seeking FDA approval to market injectable versions of famotidine. Yamanouchi then filed suit against Marsam, and the two suits were consolidated (Danbury, Schein, and Marsam are hereinafter collectively referred to as Danbury). The parties agreed to a bench trial.

After Danbury presented its last witness on obviousness, Yamanouchi moved for JMOL under Fed. R. Civ. P. 52(c) (Rule 52(c)). With that motion, Yamanouchi argued that Danbury had not shown by clear and convincing evidence that claim 4 of the '408 patent would have been obvious at the time of invention. The district court granted Yamanouchi's JMOL motion. See Yamanouchi, 21 F. Supp. 2d at 370. Specifically, the district court found that Danbury had not shown any motivation to combine selected portions of various prior art compounds to create the specific compound famotidine and to obtain its extraordinary properties. See id. at 373. The district court characterized Danbury's case for obviousness as largely hindsight, speculation, and argument without an adequate foundation. See id. at 370, 373, 376. Based on those findings, the district court determined that Danbury willfully infringed the '408 patent. The district court thus found the case "exceptional" and awarded attorney fees and costs to Yamanouchi. See id. at 378.

II.

To grant a JMOL under Rule 52(c), a district judge must weigh the evidence and resolve credibility. See Fed. R. Civ. P. 52(a) and (c); Lemelson v. United States, 752 F.2d 1538, 1547, 224 USPQ 526, 530-31 (Fed. Cir. 1985). Therefore, this court reviews the district court's JMOL findings as if entered at the conclusion of all the evidence. See Lemelson, 752 F.2d at 1547; Woods v. North Am. Rockwell Corp., 480 F.2d 644, 645-46 (10th Cir. 1973). This court reviews the conclusion on obviousness, a question of law, without deference, and the underlying findings of fact for clear error. See Univ. of Colo. Found., Inc. v. Am. Cyanamid Co., 196 F.3d 1366, 1370, 52 USPQ2d 1801, 1803 (Fed. Cir. 1999).

A.

Obviousness rests on several critical factual underpinnings: (1) the scope and content of the prior art, (2) the differences between the prior art and the claimed invention, (3) the level of skill in the art, and (4) the objective indicia of nonobviousness. See Panduit Corp. v. Dennison Mfg. Co., 810 F.2d 1561, 1566-67, 1 USPQ2d 1593, 1595-96 (Fed. Cir. 1987); Graham v. John Deere Co., 383 U.S. 1, 17 (1966). For a chemical compound, a prima facie case of obviousness requires "structural similarity between claimed and prior art subject matter . . . where the prior art gives reason or motivation to make the claimed compositions." In re Dillon, 919 F.2d 688, 692, 16 USPQ2d 1897, 1901 (Fed. Cir. 1990) (en banc). "[A] reasonable expectation of success, not absolute predictability" supports a conclusion of obviousness. In re Longi, 759 F.2d 887, 896, 225 USPQ 645, 651-52 (Fed. Cir. 1985).

As noted earlier, the district court discerned that Danbury had not proven any motivation to combine prior art references to produce the claimed invention. This court has recently reemphasized the importance of the motivation to combine:

As this court has stated, "virtually all [inventions] are combinations of old elements." Therefore, an examiner [or accused infringer] may often find every element of a claimed invention in the prior art. If identification of each claimed element in the prior art were sufficient to negate patentability, very few patents would ever issue. Furthermore, rejecting patents solely by...