Bayer Pharma AG et al v. Watson Laboratories Inc.

Filing 165

MEMORANDUM OPINION. Signed by Judge Leonard P. Stark on 12/28/16. (etg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
BAYER PHARMA AG, BAYER
INTELLECTUAL PROPERTY GMBH,
and BAYER HEALTHCARE
PHARMACEUTICALS INC.,
Plaintiffs,
Civil Action No. 12-1726-LPS

v.
WATSON LABORATORIES, INC.,
Defendant.

Jack B. Blumenfeld, Derek J. Fahnestock, MORRIS, NICHOLS, ARSHT & TUNNELL, LLP,
Wilmington, DE
Adam K. Mortara, J. Scott McBride, Cindy L. Sobel, BARTLIT BECK HERMAN
PALENCHAR & SCOTT LLP, Chicago, IL
Attorneys for Plaintiff.

Dominick T. Gattuso, PROCTOR HEYMAN ENERIO LLP, Wilmington, DE
George C. Lombardi, Michael K. Nutter, James M. Hilmert, WINSTON & STRAWN LLP,
Chicago, IL
Attorneys for Defendant.

MEMORANDUM OPINION

December 28, 2016
Wilmington, Delaware

In this patent litigation brought by Plaintiffs Bayer Pharma AG, Bayer Intellectual
Property GmbH, and Bayer HealthCare Pharmaceuticals Inc. ("Bayer" or "Plaintiffs") pursuant to
the Hatch-Waxman Act, 21 U.S.C. § 355(j), the Court held a bench trial, thereafter ruling that the
generic drug product1 proposed to be marketed by Defendant Watson Laboratories, Inc.
("Watson" or "Defendant") would infringe Bayer's valid U.S. Patent No. 8,071,577 ("the '577
patent"). (See D.I. 153, 154) After issuing an extensive post-trial Opinion, the Court directed the
parties to file a proposed final judgment order. (D .I. 154) In response, the parties advised the
Court that they disagreed as to whether the relief the Court would be awarding Plaintiffs should
include a permanent injunction against Defendant and its employees making, selling, using, or
offering for sale its generic product. (See D.I. 156) Thereafter, the Court ordered (see D.I. 157,
159) and received additional briefing directed to this dispute. (See D.I. 160, 161, 162, 163)
Having reviewed the parties' submissions, the Court has determined that Plaintiffs have failed to
show that the requested permanent injunction is warranted.
The parties agree that (in light of the Court's Opinion) the Court must enter judgment for
Plaintiffs and against Defendant. The parties further agree that the relief the Court provides
Plaintiffs must include an order that the United States Food and Drug Administration ("FDA")
reset the approval date of Defendant's Abbreviated New Drug Application ("ANDA") until after
the expiration of the '577 patent. 2 See 35 U.S.C. § 271(e)(4)(A). The parties disagree as to

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Watson's proposed generic drug product is a generic version of Plaintiffs' Natazia®, a
comprehensive oral contraceptive.
2

The parties "agreements" that are noted in this paragraph are without prejudice to the
parties' rights to appeal the Court's rulings.
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whether the Court should additionally enter an order enjoining Defendant from infringing the
patent-in-suit before it expires. See 35 U.S.C. § 271(e)(4)(B). 3
Plaintiffs seek the additional injunctive relief against Defendant "because otherwise there
is no Court Order preventing [Defendant] from infringing the [patent-in-suit] before it expires."
(D .I. 156 at 1) In the absence of an injunction, Plaintiffs fear they may "have to undertake
additional, duplicative infringement litigation in order to enforce a patent that has already been
found valid and infringed" by Defendant's generic product. (Id.)
Defendant counters that an injunction is discretionary, not mandatory, and that Plaintiffs
have failed to meet their burden to show it should be imposed here. (See id. at 2) Defendant
further asserts that an injunction would be redundant, as it would not preclude any commercial
activity that is not otherwise already precluded by the agreed-upon order the Court will direct to
the FDA. (See D.I. 163 at 3)
Effectively, the parties' dispute seems to be whether to limit Defendant solely to research
activities that are within the Hatch-Waxman Act's "safe harbor," 35 U.S.C. § 271(e)(l), or

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The specific additional remedial language proposed by Bayer and opposed by Watson is
as follows:
Pursuant to 35 U.S.C. § 271(e)(4)(B), Watson and its officers,
agents, servants, employees, and attorneys, and those persons in
active concert or participation with them who receive actual notice
of this Final Judgment by personal service or otherwise, are hereby
permanently enjoined from manufacturing, using, offering to sell,
or selling within the United States, or importing into the United
States, Watson's proposed generic version of Bayer HealthCare's
Natazia® combined oral contraceptive that is the subject of
Watson's ANDA No. 202349 during the term of the '577 patent.
(D.I. 156 Ex. A at i-f 4)
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whether instead to allow Defendant to engage in all research and pre-commercialization activity
that could precede a launch of a generic product. While there may be valid reasons to limit
Defendant's activities to the extent Plaintiffs request, here Plaintiffs have failed to create a record
which would justify such relief.
In order to obtain a permanent injunction, a party with a valid and infringed patent must
show that the following factors favor the requested relief: (i) the patent holder has suffered or
will suffer irreparable injury or harm, (ii) legal remedies are inadequate to compensate that
injury, (iii) balance of hardships, and (iv) the public interest. See eBay Inc. v. MercExchange,

L.L.C., 547 U.S. 388, 391 (2006); see also Alcon, Inc. v. Teva Pharm. USA, Inc., 2010 WL
3081327, at *2 (D. Del. Aug. 5, 2010) (explaining that prevailing patentee in ANDA case is not
automatically entitled to§ 271(e)(4)(B) injunction but, instead, must demonstrate that eBay
factors warrant such relief and persuade Court to exercise discretion to grant it).
Bayer has failed to show that it will suffer irreparable harm in the absence of its requested
additional injunctive relief. Bayer's position largely relies on a series of speculations as to
"illegal activity" Watson might undertake if the Court does not grant Bayer its full requested
relief, such as "manufacture, importation, offers to sell, or the use of its generic ANDA product"
and "working with and licensing with a third party for purposes of facilitating a second ANDA
filing behind the veil of the third party company." (D.I. 160 at 3) Bayer further speculates that to
detect and deter such "illegal activity" it will be forced to undertake "extensive monitoring" and
"future litigation to relitigate issues already decided." (Id.) Plaintiffs also submit that they have
already suffered irreparable harm because, "as a direct consequence of Watson's ANDA filing, it
became economically irrational for Bayer to promote Natazia." (D.I. 162 at 2) The Court is not

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persuaded.
It is true, as Bayer contends, that Watson seeks to be a direct competitor of Bayer in the

market for Natazia® and has committed an "act of infringement" (albeit an "artificial" act) by
filing an ANDA. (D.I. 162 at 1-2) But these facts alone are insufficient to establish irreparable
harm in all ANDA cases. See generally Alcon, 2010 WL 3081327, at *2. Bayer presents little
evidence to support its claim that it will be irreparably harmed in the absence of an injunction.
As Watson correctly observes, "Bayer does not submit any data to explain the general magnitude
of potential lost revenues or establish any harm to itself as a company." (D.I. 161 at 4) Although
Bayer suggests that it has already been harmed due to changing its marketing plans for Natazia®,
Bayer has not proven that Watson's ANDA filing caused those changes. See Apple Inc. v.

Samsung Elecs. Co., 735 F.3d 1352, 1363 (Fed. Cir. 2013) ("[T]he purpose of the causal nexus
requirement is to show that the patentee is irreparably harmed by the infringement."). Indeed, the
testimony Bayer relies on suggests that other factors, such as the timing of FDA approval of
indications, played a significant role in Bayer's marketing decisions. (See D.I. 160 Ex. A at 337)
While Defendant's launch of a generic product during the life of the patent is the type of activity
that could result in irreparable harm to Bayer, Plaintiffs' speculation that Defendant will risk
criminal sanctions by launching its generic product into the market without FDA approval strikes
the Court as entirely unfounded, and FDA approval will not happen until after the expiration of
the patent. Moreover, the possible necessity of future litigation with Defendants is slight, and
litigation costs cannot support a finding of irreparable harm. See Active Video Networks, Inc. v.

Verizon Comm., Inc., 694 F.3d 1312, 1337 (Fed. Cir. 2012) ("Reliance on litigation costs to
support a determination of irreparable harm [is] legal error."). Further support for the conclusion

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that Bayer has failed to prove irreparable harm is the evidence of the relatively small sales of
Natazia®, and the drug's seemingly close-to-inconsequential place in Bayer's overall portfolio of
corporate activities. (See generally id. at 1-2) (summarizing evidence) Generally, the record
lacks evidence of irreparable harm. 4
Bayer has also failed to show that the remedies available to it at law are inadequate. The
costs oflitigation, including any future litigation, are quantifiable and can be compensated by
money damages. As with the irreparable harm factor, Bayer hypothesizes there could be "a
premature product launch," by which Watson would "flood the market with lower priced
generics" before FDA approval. (D.I. 160 at 3) However, as Bayer acknowledges, this would
subject Watson "to significant penalties." (Id. at 3 n.1) Watson contends, without contradiction,
that such penalties would be both civil and criminal. (D.I. 161 at 3) It seems unlikely that if
Watson-which is in the business of developing and marketing drug products in the United
States, all of which require FDA approval - proves willing to risk its relationship with the FDA
in order to prematurely and unlawfully launch its generic version of this one product, Natazia®,
that an additional order from this Court would prove to be the dispositive deterrent to such
unlawful conduct. Thus, Plaintiffs have not demonstrated that legal remedies are inadequate.

See also Alcon, 2010 WL 3081327, at *3 (explaining that § 271 (e)(4)(A) relief, delaying FDA
approval of ANDA, "effectively precludes practice of the [patent-in-suit] outside the context of
experimentation ... until after the patent's expiration," supporting a finding that adequate legal
remedies for harm to patentee do exist).

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It is notable that Bayer, after failing to make a record of irreparable harm at trial, also
chose not to take advantage of the additional opportunity the Court provided the parties - after
issuing its Opinion-to present additional evidence. (See D.I. 157, 159)
5

Bayer has succeeded in showing that the balance of hardships favors its requested
additional injunctive relief. Bayer stands to lose some of the value of its patent if "infringing
activity" is permitted to occur during the life of the patent. By contrast, there would be little, if
any, harm to Watson were the Court to grant Bayer's requested injunction. Watson suggests that
the requested injunction would "prevent[] Watson from making or using or experimenting with
its ANDA product," which could "chill further experimentation on the product." (D.I. 161 at 45) But Watson does not address whether some of these activities would fall within the safe
harbor of§ 271 (e)(1 ). Also, the record contains no evidence as to how much more quickly, if at
all, Watson could launch its proposed generic product (following FDA approval) without the
injunction as compared to with the injunction in place. Thus, while there is little evidence of
harm on either side of the balance, the Court concludes from the record that the balance of
hardships slightly favors Bayer.
Finally, the public interest also appears, slightly, to favor Bayer. Here, the public has an
interest in having what could be a somewhat earlier launch of a generic drug, which favors
Watson, but the public also has an interest in protecting valid patents and encouraging
investment in new pharmaceutical products. Neither side presented evidence on these points.
However, given that the FDA already must delay approval of the product until after the
expiration of the patent, the Court finds that the public interest would not be disserved by an
additional injunction of equal duration being directed to Watson.
In sum, Bayer has failed to show irreparable harm or that the remedies available at law
are inadequate, although Bayer has succeeded in showing that the balance of harms and the
public interest do support the additional requested injunction. Weighing all of the pertinent

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considerations, the Court has determined that the most reasonable exercise of its discretion is to
deny the requested permanent injunction.
Accordingly, the Court will sign and docket the final judgment order proposed by
Watson.

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