Yamanouchi Pharmaceutical v. Danbury Pharmacal

• Decision Date: 01 October 1998
• Docket Number: No. 97 Civ. 3403(RO).,No. 97 Civ. 8357(RO).,97 Civ. 3403(RO).,97 Civ. 8357(RO).
• Citation: 21 F.Supp.2d 366
• Parties: YAMANOUCHI PHARMACEUTICAL CO., LTD., and Merck & Co., Inc., Plaintiffs, v. DANBURY PHARMACAL, INC., and Schein Pharmaceutical, Inc., Defendants. YAMANOUCHI PHARMACEUTICAL CO., LTD., and Merck & Co., Inc., Plaintiffs, v. MARSAM PHARMACEUTICALS, INC., and Schein Pharmaceutical, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

21 F.Supp.2d 366

YAMANOUCHI PHARMACEUTICAL CO., LTD., and Merck & Co., Inc., Plaintiffs, v. DANBURY PHARMACAL, INC., and Schein Pharmaceutical, Inc., Defendants.

YAMANOUCHI PHARMACEUTICAL CO., LTD., and Merck & Co., Inc., Plaintiffs, v. MARSAM PHARMACEUTICALS, INC., and Schein Pharmaceutical, Inc., Defendants.

No. 97 Civ. 3403(RO).

No. 97 Civ. 8357(RO).

United States District Court, S.D. New York.

October 1, 1998.

COPYRIGHT MATERIAL OMITTED

Fitzpatrick, Cella, Harper & Scinto, Robert L. Baechtold, Hugh C. Barrett, Brian V. Slater, New York, NY, for Plaintiff Yamanouchi Pharmaceutical Co.

William Krovatin, Rahway, NJ, Arnold White & Durkee, John F. Lynch, Houston, TX, for Plaintiff Merck & Co., Inc.

Cummings & Lockwood, Barry Kramer, Steven J. Moore, James Jakobsen, Stamford, CT, for Defendants.

OPINION

OWEN, District Judge.

Plaintiffs Yamanouchi Pharmaceutical Co., Ltd. and Merck & Co., Inc. have brought suit against defendant Schein Pharmaceutical, Inc. and its subsidiaries Danbury Pharmacal, Inc. and Marsam Pharmaceutical, Inc.,¹ for patent infringement under certain provisions of the Hatch-Waxman Act (the Act).²

Under the Act, generic drug producers can target a patented drug for future generic development upon the targeted drug's patent expiration. The Act serves to expedite both FDA approval and the subsequent production and marketing of the generic drug. First, the Act allows generic producers to rely upon the previous safety and efficacy testing conducted by the patent holder for the targeted drug, thus eliminating an earlier requirement that generic companies conduct their own testing prior to marketing a once-patented drug. See Merck & Co. v. Kessler, 80 F.3d 1543, 38 U.S.P.Q.2d 1347, 1349 (Fed. Cir.1996) (citing 21 U.S.C. § 355(j)(7)(B); H.R.Rep. No. 857, 98th Cong.2d Sess. Pt. 1, at 16-17 (1984)). Second, although generic producers, in order to avoid infringement, were previously required to await a targeted drug's patent expiration before using a patented drug in any manner to acquire FDA approval for commercial purposes, see Roche Prod., Inc. v. Bolar Pharm. Co., 733 F.2d 858 (Fed.Cir.1984), now a generic producer may seek expedited FDA approval for generic marketing by submitting an Abbreviated New Drug Application (ANDA) prior to the targeted drug's patent expiration. See 21 U.S.C. § 355(j). See also Bristol-Myers Squibb Co. v. Royce Labs., Inc., 69 F.3d 1130, 1131 (Fed.Cir.1995).

One of the grounds that can be asserted in an ANDA is that the targeted drug's patent is invalid. 21 U.S.C. § 355(j)(2)(A)(vii)(IV). This claim, if successful, enables the generic producer to proceed and commence marketing prior to the targeted drug's theretofore patent expiration. 35 U.S.C. § 271(e)(1). However, when the generic producer makes a paragraph IV certification, the patent holder must receive notice of the ANDA's filing and the filing is deemed an infringement of the targeted drug's patent. See 21 U.S.C. § 355(j)(2)(B), 35 U.S.C. § 271(e)(2)(A).

This, obviously, forces the holder of the targeted drug's patent to litigate in order to protect its rights. After receiving notice of the ANDA filing, the patent holder has 45 days in which to sue the generic producer for infringement; otherwise the ANDA becomes "effective immediately", allowing for FDA approval and commercial exploitation of the generic drug prior to the targeted drug's patent expiration. 21 U.S.C. § 355(j)(4)(B)(iii). But, if the patent holder does timely bring suit, basically the FDA must suspend approval of the ANDA until either (1) a court ruling that the patent is invalid, or (2) the patent, if found by the court to be valid, expires. 21 U.S.C. § 355(j)(5)(B)(iii).

If the court after resolution of the infringement issues finds the targeted drug's patent to be valid, and the generic producer has not yet begun the "manufacture, use, offer to sell, [] sale ... or importation into the United States" of the drug, the statute limits the patent holder's remedies for infringement to (1) a court order directing that FDA approval issue no earlier than the patent's expiration, (2) injunctive relief, and (3) an award to the infringed patent holder of its attorneys' fees in defending. 35 U.S.C. § 271(e)(4). See also 35 U.S.C. § 285; Bristol-Myers Squibb Co., 69 F.3d at 1132.

Here, Yamanouchi is the inventor and sole licensor of famotidine, holding U.S. Patent No. 4,283,408 which expires October 15, 2000.³ Merck, the exclusive licensee for famotidine, received FDA approval to market the compound in 1986 and has marketed it in the United States since that time under the trademark PEPCID ®. Defendant Schein Pharmaceutical, Inc. produces and markets generic drugs developed upon the expiration or defeat of existing patents held by other producers. To this end, it had a written contract with an attorney, Alfred B. Engelberg, Esq., to comb patents to develop arguably attackable subjects.

On approximately January 27, 1997, Schein, through its subsidiary Danbury, received an opinion of invalidity from Engelberg, though slightly hedged, see infra, as to PEPCID ®. Schein thereupon filed an ANDA for tablet and injectable versions of famotidine along with a paragraph IV certification that claim 4 of Yamanouchi's '408 patent covering famotidine was invalid for obviousness.⁴ Yamanouchi and Merck were sent notice of the certification on or about March 26, 1997, along with supporting affidavits of two experts hired by Schein, Drs. Bernard Loev and John K. Siepler.

As compelled by the Act, Yamanouchi and Merck thereafter filed suit in this court on May 8, 1997, seeking a judgment that 1) Schein had willfully infringed the '408 patent by its ANDA filing under paragraph IV; 2) a permanent injunction under 35 U.S.C. § 271(e)(4)(B) barring defendants and all associated therewith from commercial exploitation of famotidine; 3) an order pursuant to 35 U.S.C. § 271(e)(4)(A) that FDA approval of Schein's ANDA proceed no earlier than October 15, 2000; and 4) an award of costs and attorney's fees as allowed for under 35 U.S.C. § 285 as referenced in 35 U.S.C. § 271(e)(4). In their answer, the defendants acknowledged the ANDA's filing as a statutory infringement, but denied that the infringement was willful and challenged the validity of Yamanouchi's '408 patent.⁵

Accordingly, over several days, starting on April 8, 1998, I tried the issue of the validity of Yamanouchi's '408 patent. Schein, having the burden of proving the patent's invalidity by clear and convincing evidence, presented its case first. At the end of Schein's case, Yamanouchi moved for partial judgment on the issue of obviousness, see Fed.R.Civ.P. 52(c). I ruled from the bench that Schein had failed to meet its burden and found that claim 4 of Yamanouchi's '408 patent regarding famotidine was valid and nonobvious.

While Schein had concentrated on its claim that the famotidine patent was structurally obvious, and contended that famotidine's properties were irrelevant to my analysis, I concluded then, and reiterate, that neither is the case. In the first instance, I noted from the bench that I could not credit Schein's main scientific witness, and ruled that, in any event,

I find that [Schein] has utterly failed to meet its burden by clear and convincing evidence that this was structurally obvious. There are several critical changes, switches, substitutions, and so on that have taken place here between various products that are out there or were considered or were written up, and it [the case here] has all the earmarks of somebody looking at this from hindsight and saying, if we do this and we do that and we do the other and we've got a nice chart and we come back, there it is — it is obvious. I reject that.

Tr. (Apr. 8, 1998), p. 559. Moreover, I concluded that — even if famotidine were structurally obvious, its patentability was clearly supported by famotidine's after-discovered superior properties. Id. at 560. In so ruling, I cited several rulings to identical effect.⁶ Accordingly, my conclusions at the close of Schein's case find support within the following findings of fact and conclusions of law:

The basis for Schein's Paragraph IV certification is that famotidine's structure was obvious at the time it was patented, as prohibited under 35 U.S.C. § 103.⁷ There is, however, a presumption of validity, and Schein had the burden of proof to establish invalidity by clear and convincing evidence. Avia Group Int'l, Inc. v. L.A. Gear California, Inc., 853 F.2d 1557, 1562 (Fed.Cir.1988) The test for obviousness is "whether the claim at issue would have been obvious to one of ordinary skill in the art at the time of patent", Avia Group Int'l, Inc., 853 F.2d at 1563, not whether the claim was "`obvious to try'". Hybritech Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1380 (Fed.Cir. 1986) (citing Jones v. Hardy, 727 F.2d 1524, 1530 (Fed.Cir.1984)). In adjudicating obviousness, four factors must be considered:

(1) the scope and content of prior art;

(2) the differences between prior art and claims at issue;

(3) the level of ordinary skill in the art at time the invention was made; and

(4) secondary considerations, such as commercial success, the failure of other producers to develop similar patents, the long-standing need for the patent's subject matter, and any unexpected results inherent to the patent at issue, as well as the wide acceptance and recognition of the claimed invention.

See, e.g., Orthopedic Equip. Co., Inc. v. United States, 702 F.2d 1005, 1008 (Fed.Cir.1983) (citing Graham v. John Deere Co., 383 U.S. 1, 17-18, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966)); Kloster Speedsteel, AB v. Crucible Inc., 793 F.2d 1565, 1572-1575 (Fed.Cir.1986).

Finally, and of major importance due to the contentions at trial, obviousness is not determined as if the designer had hindsight knowledge of the patented design.⁸ L.A. Gear, Inc. v. Thom McAn Shoe Company, 988 F.2d 1117, 1124 (Fed.Cir.1993).

During...