Zeneca Ltd. v. Novopharm Ltd.

• Decision Date: 14 March 1996
• Docket Number: Civil Action No. S 95-163.
• Citation: 919 F. Supp. 193
• Parties: ZENECA LIMITED, Plaintiff, v. NOVOPHARM LIMITED, Defendant.
• Court: U.S. District Court — District of Maryland

919 F. Supp. 193

ZENECA LIMITED, Plaintiff, v. NOVOPHARM LIMITED, Defendant.

Civil Action No. S 95-163.

United States District Court, D. Maryland, Northern Division.

March 14, 1996.

Charles M. Kerr, David B. Irwin, Irwin, Kerr, Green, McDonald & Dexter, Baltimore, MD, James E. Gray, Baltimore, MD, Robert D. Litowitz, Herbert H. Mintz, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, for plaintiff.

James P. Ulwick, Kramon & Graham, Baltimore, MD, Jeffrey S. Ward, John E. Rosenquist, Robert F. Green, Gordon R. Coons, Bruce M. Gagala, Regina M. Anderson, Leydig, Voit & Mayer, Chicago, IL, for defendant.

MEMORANDUM AND ORDER

SMALKIN, District Judge.

This action is brought by Zeneca Limited Zeneca against Novopharm Limited Novapharm, alleging patent infringement under 35 U.S.C. § 271(e). The case is currently before the Court on motions for partial summary judgment. This Memorandum Opinion only addresses Novopharm's motion for partial summary judgment. The Court will issue a separate opinion with respect to Zeneca's motion for partial summary judgment at a later date. Both motions have been fully briefed, and no oral hearing is necessary. Loc.R. 105.6, D.Md.

I. Factual and Procedural Background

Zeneca is the patent holder of United States Patent No. 4,536,516 the '516 patent for the breast cancer drug tamoxifen, which is manufactured under the brand name Nolvadex. Novopharm is a generic drug manufacturer that filed an Abbreviated New Drug Application with the Food and Drug Administration FDA for approval to market a generic version of tamoxifen. Novopharm claims that it has the right to manufacture a generic form of tamoxifen free of patent constraints because the '516 patent is invalid and/or unenforceable.

On January 18, 1995, Zeneca filed this action against Novopharm, alleging statutory patent infringement of the '516 patent. Zeneca seeks both a judgment prohibiting the approval of Novopharm's generic tamoxifen and an injunction enjoining Novopharm from manufacturing its generic tamoxifen until Zeneca's patent expires.

Prior to discovery, Novopharm moved for summary judgment. The basis of the motion was Novopharm's claim that Zeneca should be collaterally estopped from litigating the validity of the '516 patent because the patent had already been held to be invalid and unenforceable in a prior case, Imperial Chemical Industries PLC v. Barr Laboratories, 795 F.Supp. 619 (S.D.N.Y) Barr, vacated, Imperial Chemical Industries, PLC v. Heumann Pharma GmbH & Co., 991 F.2d 811 (Fed.Cir.1993). In Barr, Imperial Chemical Industries ICI, Zeneca's former parent and the former holder of the '516 patent, sued Barr Laboratories for alleged patent infringement of the '516 patent. After a full trial on the merits, the District Court for the Southern District of New York held that the '516 patent was invalid and unenforceable because ICI had deliberately and knowingly withheld material information from the United States Patent and Trademark Office. Barr, 795 F.Supp. at 624-627.

ICI appealed the decision to the United States Court of Appeals for the Federal Circuit. After the parties had fully briefed the issues, but before argument, ICI and Barr negotiated a settlement in which Barr received $21 million dollars and a non-exclusive distributorship to market tamoxifen. At the time of settlement, "ICI and Barr explicitly advised the Federal Circuit Court that their settlement agreement was contingent on the Court ... vacating the district court's judgment so that the unreviewed judgment ... would have no precedential, preclusive, or collateral estoppel effect." (Pl's opp. mem. at 5). The Federal Circuit Court, in accordance with both the parties' settlement agreement and its own practice at the time, vacated the district court's opinion. Imperial Chemical Industries, PLC, 991 F.2d at 811. One and a half years after the Federal Circuit vacated the Barr judgment, the Supreme Court decided U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, ___ U.S. ___, ___, 115 S.Ct. 386, 393, 130 L.Ed.2d 233 (1994), which repudiated the practice of vacating judgments, as part of a settlement while the case was under appellate review. The Supreme Court held that "mootness by reason of settlement does not, except under exceptional circumstances, justify vacatur of a judgment under review." Id. The Court further held that "exceptional circumstances do not include the mere fact that the settlement agreement provides for vacatur." Id. In its first motion for summary judgment, Novapharm urged this Court to ignore the Federal Circuit Court's vacatur of the Barr decision and collaterally estop Zeneca from pursuing its patent infringement action against Novopharm. (Def's Mar. 17, 1995, rep. mem. at 3, 7-10). Specifically, Novopharm asked this Court to retroactively apply the holding in U.S. Bancorp to render the Federal Circuit's vacatur void. (Def's Mar. 17, 1995 rep. mem. at 7-9). To support its position that U.S. Bancorp should be retroactively applied in this case, Novopharm relied on a line of cases culminating in Harper v. Virginia Dept. of Taxation, 509 U.S. 86, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993). Novopharm's reliance on Harper, however, was unjustified. In Harper, the Supreme Court held that "the controlling interpretations of federal law must be given full retroactive effect in cases still open on direct review." Id. at ___, 113 S.Ct. at 2517. In this case, the Federal Circuit's decision to vacate Barr was not still open on direct review when U.S. Bancorp was issued, and the Court, therefore, could not void the Federal Circuit's vacatur by giving retroactive effect to U.S. Bancorp. The Barr vacatur was final when U.S. Bancorp was issued, and nothing in Harper or U.S. Bancorp, or in any other case for that matter, suggests that this Court could review or sustain a collateral attack upon a finally-decided vacatur. See U.S. Philips Corp. v. Sears Roebuck & Co., 55 F.3d 592, 598 (Fed.Cir.), cert. denied, ___ U.S. ___, 116 S.Ct. 567, 133 L.Ed.2d 492 (1995) (refusing to reconsider the propriety of a vacatur that was final when the decision in U.S. Bancorp was issued). The Court (per Young, J.), therefore, correctly refused to give retroactive effect to U.S. Bancorp, in a Memorandum Opinion dated September 11, 1995.

This Court also correctly rejected Novopharm's argument that it should ignore the Federal Circuit's vacatur order because of the public's interest in patent rights. Sept. 11, 1995 Mem.Op. at 10. It is true that the public, the judiciary and private litigants, like Novopharm, all have a significant interest in preventing patent owners from relitigating the validity and enforceability of a patent that another court has held to be invalid and unenforceable. See Blonder-Tongue Laboratories Inc. v. University of Illinois Foundation, 402 U.S. 313, 330-350, 91 S.Ct. 1434, 1443-1453, 28 L.Ed.2d 788 (1971). The public and the judiciary, however, also have an interest in encouraging settlement and in upholding private bargains between parties, especially in a case like this, where the conditions of the settlement were expressly sanctioned by a court. Jill E. Fisch, Rewriting History: The Propriety of Eradicating Prior Decisional Law Through Settlement and Vacatur, 76 Cornell L.Rev. 589, 619 (1991) hereinafter Settlement and Vacatur. Judge Young weighed these competing interests in his September 11, 1995, Memorandum Opinion and correctly held that "in light of ... ICI's expectation that the ... Barr case would have no precedential value following settlement, it would be inappropriate to ... ignore the Federal Circuit's vacatur." Sept. 11, 1995, Mem.Op. at 4.

After the Court's denial of Novopharm's motion for summary judgment, discovery commenced. After the completion of discovery, the case was transferred from Judge Young to the undersigned. On February 9, 1996, Novopharm filed the motion for partial summary judgment which is currently before this Court.

II. Legal Analysis

In its motion, Novopharm does not challenge the Court's September 11, 1995, order refusing to ignore the vacatur of the Barr decision, but, rather, urges this Court to adopt, under the doctrine of issue preclusion,¹ two of the vacated Barr decision's factual findings. Novopharm asserts that the Barr Court's factual findings with respect to: "(a) the materiality of the mouse test data admittedly withheld by ICI and Dr. Walpole from the USPTO, and (b) the intent by ICI and Dr. Walpole to mislead and deceive the USPTO into granting the claims in the '516 patent," (Def's mem. at 11), were fully litigated in the Barr case and decided adversely to Zeneca. Novopharm argues that Zeneca, therefore, should be prevented from relitigating these factual issues even though the Barr judgment was vacated.

As a general rule, a vacated judgment and the factual findings underlying it have no preclusive effect; the judgment is a legal nullity. S-1 By and Through P-1 v. State Bd. of Educ., 6 F.3d 160, 169 (4th Cir.1993) (Wilkinson, J., dissenting), vacated, 21 F.3d 49 (4th Cir.), cert. denied, ___ U.S. ___, 115 S.Ct. 205, 130 L.Ed.2d 135 (1994); Baltimore Luggage Co. v. Samsonite Corp., 727 F.Supp. 202, 209 (D.Md.1989). See also United States v. Munsingwear, 340 U.S. 36, 40, 71 S.Ct. 104, 107, 95 L.Ed. 36 (1950) (vacating a judgment "clears the path for future relitigation of the issues between the parties and eliminates a judgment"); Settlement and Vacatur, supra, at 616. Novopharm nonetheless asserts that "the factual findings underlying a procedurally vacated judgment may be the basis for issue preclusion to prevent relitigating those same factual issues in a subsequent case." (Def's mot. at 13). To support its position, Novopharm relies on Chemetron Corp. v. Business Funds, Inc., 682 F.2d 1149 (5th Cir.1982), vacated on other grounds, 460 U.S. 1007, 103 S.Ct. 1245, 75 L.Ed.2d 476 (1983).

In Chemetron, the Fifth Circuit held that the defendant could be...