BASF AGRO B.V. et al v. CIPLA Limited et al
Filing
75
ORDER granting 24 Motion for Contempt; granting 30 Motion for Order to Show Cause; denying 33 Motion to Vacate; denying 60 Motion for Leave to File; denying 61 Motion for Leave to File; denying 62 Motion for Leave to File; denying 72 Motion for Leave to File. Ordered by Judge Clay D. Land on 06/21/2011 (ajp)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ATHENS DIVISION
MERIAL LIMITED and
MERIAL SAS,
*
*
Plaintiffs,
*
vs.
CASE NO. 3:07-CV-125 (CDL)
*
CIPLA LIMITED,
*
Defendant,
*
VELCERA,
INC.,
INC.
and
FIDOPHARM,
*
Intervenors.
*
*
O R D E R
Plaintiffs
Merial
Limited
and
Merial
SAS
(collectively
“Merial”) contend that Defendant Cipla Limited (“Cipla”) violated
the Court‟s Order entered in this action on March 6, 2008 (“March
6, 2008 Order” or “2008 Order”), and that Intervenors Velcera,
Inc. (“Velcera”) and FidoPharm, Inc. (“FidoPharm”) (collectively
“Velcera”) acted in concert with Cipla to violate that order.
Merial seeks contempt sanctions against both Cipla and Velcera.1
Cipla responded with a motion to vacate the Court‟s March 6, 2008
1
Merial initially filed a Motion for Contempt (ECF No. 24) against
Cipla, and then after Velcera intervened, Merial filed a Motion for
Order to Show Cause (ECF No. 30) against Velcera.
The Court found
Merial‟s allegations sufficient to warrant an evidentiary hearing to
determine whether contempt sanctions should be imposed against Cipla
and/or Velcera. That hearing was held on May 16 and 17, 2011.
Order (ECF No. 33) claiming that it was void as to Cipla because
Cipla was not subject to the personal jurisdiction of the Court
at the time the Order was entered.
In the alternative, Cipla
argues that its conduct does not violate the 2008 Order.
Velcera
contends that it is not a party to the 2008 Order; that its
conduct does not violate the Order; that if Cipla did not violate
the Order, Velcera could not have acted in concert with Cipla to
violate the Order; and even if Cipla violated the Order, Velcera
did not act in concert with Cipla to violate the Order.
After an evidentiary hearing, written briefing, and oral
argument by counsel, the Court finds that Cipla was subject to
the jurisdiction of this Court in the action giving rise to
Merial‟s
contempt
motion,
that
Cipla
violated
the
Court‟s
March 6, 2008 Order, and that Velcera acted in concert with Cipla
in the violation of the Court‟s Order.2
2
Accordingly, Cipla‟s
The Court held an evidentiary hearing on May 16 and 17, 2011. At the
conclusion of the hearing, the parties agreed that the evidentiary
record was closed. The Court scheduled final oral argument for June 8,
2011 and requested that the parties, prior to final argument, submit
proposed findings of fact and conclusions of law based upon the
evidence admitted at the May 16-17 evidentiary hearing. Subsequent to
the evidentiary hearing and even after final argument, the parties
have not only sought to amend their proposed findings and conclusions
but have sought to supplement the evidentiary record. The Court finds
that the parties had a fair opportunity to present evidence at the May
16-17 evidentiary hearing, and if they did not believe they had an
adequate opportunity at that time, they had an opportunity to file a
motion to continue the evidentiary hearing prior to the final
arguments on June 8, 2011. No such motions were filed. To allow
continuing supplementation of the evidentiary record after the final
arguments have been made and after the evidentiary record has been
closed would eliminate finality and be unjust to parties who have no
opportunity to respond to endless supplementation and counter-
2
motion to vacate the March 6, 2008 Order (ECF No. 33) is denied,
and Merial‟s motions seeking contempt sanctions (ECF Nos. 24 &
30) are granted to the extent described in this Order.
The
Court‟s rulings are based upon the following Findings of Fact and
Conclusions of Law.3
supplementation. Accordingly, the Court denies the pending motions for
leave to file supplemental findings of fact and conclusions of law
(ECF Nos. 60, 61, 62 & 72).
3
Preliminarily, the Court addresses two issues raised tangentially in
these proceedings.
First, Velcera has filed a declaratory judgment
action in Delaware seeking a declaration that Merial‟s „329 patent,
which is the subject of this Court‟s March 6, 2008 Order, is invalid.
Velcera maintains that the present action should be stayed pending a
determination of the validity of the patent in the Delaware action.
The Court finds that this action should not be stayed and specifically
holds that the “first-to-file rule” and principles of comity do not
support a stay. The Court notes that the present action was in fact
the first one filed.
Moreover, while both actions share some issues
and parties, the precise issues to be resolved in this action are
different from those in the Delaware action, and one of the central
parties in this action is not a party to that action.
Second, counsel for Velcera and Cipla have commented that the
expedited nature of these proceedings has been unusual and presented
challenges. To the extent that any party raises this issue on appeal,
the Court finds it appropriate to make the following observations.
When Merial first filed its contempt-related motions, it sought
expedited review based on its contention that without immediate
judicial intervention it faced irreparable injury. Consequently, the
Court, consistent with its standard practice, scheduled an expedited
hearing.
At the hearing, the issue arose as to whether the Court‟s
ruling would be in the nature of a preliminary injunction that would
maintain the status quo until the matter was finally decided on the
merits, or whether the Court had sufficient evidence after the hearing
to decide the matter finally on the merits.
At the close of the
evidentiary hearing, the Court sought input from the parties as to
which alternative they preferred.
Merial stated that it preferred
treating the matter as one seeking preliminary injunctive relief,
while Cipla and Velcera informed the Court that they preferred for the
Court to make a final ruling on the merits. The Court found Cipla‟s
and Velcera‟s position to be sound, and determined that the
evidentiary hearing, briefing, and thorough argument provided a
sufficient basis for deciding the matter on the merits with a final
order.
3
FINDINGS OF FACT
I.
The Allegations in the Original Action and Default Judgment
1.
In the action giving rise to the Court‟s March 6, 2008
Order, Merial alleged that Cipla sold in the United States two
veterinary products designed to treat dogs and cats for fleas
and ticks, and that these two products, “CIPLA PROTEKTOR” and
“CIPLA PROTEKTOR PLUS,” infringed two of Merial‟s patents—United
States Patent No. 5,232,940 (“„940 Patent”), of which Merial was
the exclusive licensee, and United States Patent No. 6,096,329
(“„329 Patent”), assigned to Merial.
2.
The „940 Patent included claims for a pesticide product
that
eliminated
fleas
and
ticks
on
dogs
and
cats
using
a
chemical formulation containing the active ingredient fipronil.
Using
the
„940
“Frontline.”
Patent,
Merial
developed
a
product
called
The „940 Patent has since expired, and Merial does
not rely upon it in support of its contempt motions.
3.
The „329 Patent included claims for a pesticide product
that
eliminated
chemical
fleas
formulation
and
ticks
consisting
on
of
dogs
two
and
active
cats
using
a
ingredients,
fipronil and methoprene, and inactive ingredients that served as
an
adjuvant
for
the
effective
4
delivery
of
the
active
ingredients.
Using
the
„329
Patent
formulation,
Merial
developed a financially successful product known as “Frontline
Plus.”
4.
In the original Complaint in this action, Merial alleged
that CIPLA PROTEKTOR infringed at least one claim of the „940
Patent and CIPLA PROTEKTOR PLUS infringed at least one claim of
the „329 Patent.
Merial sought a judgment that Cipla infringed
the „940 and „329 Patents and requested injunctive relief to
prevent Cipla from selling or causing to be sold in the United
States products that infringed
the
„940 Patent and the „329
Patent.
5.
Cipla failed to respond to Plaintiffs‟ Complaint, and the
Court made an entry of default on March 6, 2008.
In that Order,
the Court found in relevant part that the „940 Patent and the
„329 Patent were valid and enforceable.
2008, ECF No. 18.
Order ¶ a, Mar. 6,
The Court concluded that Cipla, having made
and sold in the United States veterinary products containing the
active
ingredients
fipronil
and
methoprene
and
containing
inactive ingredients that served as an adjuvant for effective
delivery of the active ingredients, infringed at least one claim
of the „329 Patent.
Id. ¶ c.
The Court also found that Cipla,
having made and sold in the United States veterinary products
5
that contain fipronil, infringed at least one claim of the „940
Patent.
Id.
¶
b.
Based
on
the
Court‟s
findings
of
infringement, the Court ordered the following injunctive relief:
[Cipla], as well as those persons and entities in
active concert with [Cipla] who have notice of this
order,
are
herewith
permanently
enjoined
from
committing any act that infringes or causes or induces
infringement of any claim of the „940 or „329 patents,
including but not limited to making, having made,
using, causing to be used, selling, causing to be
sold, offering for sale, and causing to be offered for
sale in the United States, and importing and causing
to be imported into the United States, any product
that infringes any claim of the „940 or „329 patents,
including but not limited to the veterinary products
denominated CIPLA PROTEKTOR that contain fipronil and
the veterinary products denominated CIPLA PROTEKTOR
PLUS that contain fipronil and methoprene[.]
Id. ¶ e.
The Court subsequently entered a default judgment
against Cipla.
II.
Jurisdictional Facts4
6.
At the time that this patent action was filed and served on
Cipla, Cipla manufactured the alleged infringing products CIPLA
4
Cipla seeks to avoid the consequences of the default judgment by
having the default judgment vacated based upon a lack of personal
jurisdiction. Since some of the facts on which jurisdiction are based
are contested, the Court must make findings of fact related to the
exercise of personal jurisdiction over Cipla. The Court notes that at
the time Merial filed its original complaint in this action, it relied
upon the Georgia long-arm statute as the basis for personal
jurisdiction over Cipla; however, during the pendency of the present
proceedings, Cipla has denied any contacts with the State of Georgia.
Since no discovery has been conducted to test Cipla‟s denial and based
on evidence that Cipla has consistently denied significant contacts
with any state, Merial now shifts its jurisdictional focus to Fed. R.
Civ. P. 4(k)(2).
6
PROTEKTOR
Indian
and
CIPLA
corporation
PROTECKTOR
with
its
PLUS
in
principal
India.
place
Cipla
of
is
an
business
in
Mumbai, India.
7.
CIPLA PROTEKTOR was designed to be a generic formulation of
Merial‟s Frontline product.
CIPLA PROTEKTOR PLUS was designed
to be a generic version of Merial‟s Frontline Plus product,
containing the same chemical formulation.
As established in the
Court‟s March 6, 2008 Order, these products infringed the „940
and „329 Patents, respectively.
8.
Cipla‟s
PROTEKTOR
products
are
offered
for
sale
through
internet retailers, including www.Petmedsrus.com (“Petmedsrus”).
The Petmedsrus website lists Cipla as the manufacturer of the
product “PROTEKTOR Spot On” and acknowledges that it sources its
products
from
circumstantial
Indian
evidence,
companies.
Merial
points
Notwithstanding
to
no
direct
this
evidence
showing how Petmedsrus got the PROTEKTOR products or whether any
agreement or relationship existed between Cipla and Petmedsrus
for the sale of the PROTEKTOR products.
9.
CIPLA PROTEKTOR Spot On was available for purchase over the
internet in the United States through Petmedsrus and was sold
via
the
internet
in
the
United
7
States
and
in
the
State
of
Georgia. CIPLA PROTEKTOR Spot On was delivered in the State of
Georgia.
Petmedsrus offered PROTEKTOR Spot On for sale as a
generic form of Frontline Plus.
10.
Merial has its principal place of business for the United
States in the State of Georgia.
11.
Cipla, a foreign entity, transacted substantial business
across the United States.
of
its
products
to
the
It exported a substantial percentage
United
States,
applied
for
numerous
patents and filed documents with the United States Environmental
Protection Agency (“EPA”) and the United States Food and Drug
Administration (“FDA”).
12.
Although it denies any meaningful contacts with the State
of Georgia, Cipla contends that it would have been subject to
the jurisdiction of courts in Illinois for the claims raised in
the present action.
the
following
The Court rejects that contention based on
factual
findings.
Although
Cipla
made
three
shipments of some type of product to Illinois prior to the entry
of the Court‟s default judgment, those shipments were all made
after this action was filed.
Cipla pointed the Court to no
evidence of any shipments to Illinois prior to, or at the time
this action was filed.
Although evidence exists that Cipla had
8
a relationship with Watson Laboratories, Inc., an entity located
in Illinois, prior to the filing of the action, there is no
evidence
regarding
the
details
of
Cipla‟s
relationship
with
Watson relating to the state of Illinois prior to the filing of
this action.
would
have
been
inconsistent
litigation
Furthermore, Cipla‟s newfound position that it
subject
to
with
previous
positions
and
in
litigation,
Cipla
jurisdiction
in
litigation
has
the
jurisdiction
in
maintained
United
it
has
it
and
has
Illinois
is
taken
is
in
this
Throughout
Illinois.
that
States
in
this
not
subject
minimal,
if
contacts with the United States, including Illinois.
to
any,
Shortly
after Cipla fell into default in this action, Cipla‟s counsel
wrote
the
States.
Court
a
letter
denying
a
presence
in
the
United
Letter from R. Green, Counsel for Cipla, to the Court,
Apr. 14, 2008, ECF No. 20.
Cipla has also represented to the
Court in its briefing that:
“Cipla is incorporated and has its
principal place of business in India, and, in fact, all of its
offices are located there.
in the United States.
process
in
the
Cipla is not licensed to do business
In fact Cipla has no agent for service of
United
States.
Cipla
does
not
maintain
any
offices, facilities, employees, equipment, inventory, or records
in the United States.”
Def. Cipla Ltd.‟s Mem. of Law in Supp.
of its Mot. to Vacate the Default J. 3, ECF No. 33-1 (citations
omitted).
To further refute Cipla‟s position that it would have
9
been subject to personal jurisdiction in Illinois, the Court
relies on pleadings filed in an action in Illinois in which
Cipla expressly denied that it had sufficient connection to the
state
of
Illinois
for
personal
jurisdiction
purposes,
though in that action it voluntarily consented
even
to submit to
jurisdiction.
Pl.‟s Tr. Ex. 104, Defs.‟ Am. Answer, Affirmative
Defenses
Countercls.
and
to
Pl.‟s
Am.
Compl.
for
Patent
Infringement ¶ 11, Connetics Corp. v. Pentech Pharms., Inc.,
Civil
Action
Finally,
documents
the
No. 1:07-CV-06297,
Court
that
finds
it
has
that
ECF
Cipla
structured
No.
has
116
(N.D.
boasted
in
relationships
Ill.).
its
with
own
other
entities for the express purpose of attempting to avoid the
application of the United States‟ patent laws to its conduct.
Pl.‟s Tr. Ex. 77, Cipla‟s Fin. Profile 1 (“The future will see
more litigations on this major issue that will, unfortunately,
also extend to India in due course.
However, your Company‟s
approach in forming strategic alliances and partnerships in all
overseas markets has protected the Company from the high cost of
patent litigation.”).
The Court finds that all of the foregoing
evidence outweighs the conclusory declaration of Dr. Mehta filed
on behalf of Cipla prior to the final hearing.
Reply
in
Supp.
of
its
Mot.
to
Vacate
for
Lack
Def. Cipla‟s
of
Jurisdiction Attach. 1, Mehta Decl., ECF No. 49-1.
Personal
In that
declaration, Dr. Mehta claims that Cipla would have consented to
10
personal jurisdiction in Illinois if it had been sued in the
Northern District of Illinois in October 2007 or in 2008.
Dr.
Mehta also states in her declaration that Cipla made systematic
shipments to Watson Laboratories in Illinois during this time
frame.
As
previously
explained,
this
declaration
is
inconsistent with the position Cipla has taken in pleadings in
an
Illinois
action
where
it
voluntarily
submitted
to
jurisdiction but denied continuous and systematic contacts with
Illinois.
Moreover,
the
declaration
contains
no
specific
evidence as to the nature of the contacts so that the Court can
evaluate whether they were sufficiently systematic to warrant
the exercise of personal jurisdiction under Illinois law.5
13.
Based on the foregoing, the Court finds: (1) due to its
limited transaction of business in Georgia as indicated by the
present record, it is doubtful that Cipla is subject to the
jurisdiction of the Georgia courts under the Georgia long-arm
5
The Court notes that Dr. Mehta attended the final hearing in the
present action, and no request was made at that time or prior to the
close of the record that she be allowed to supplement her declaration
with testimony about specific facts supporting her conclusion that
systematic contacts existed with the State of Illinois.
It was only
after the final hearing had been concluded and the record closed that
Cipla sought to supplement the record.
The Court rejects any
suggestion by Cipla that it did not have time to provide adequate
facts supporting jurisdiction in Illinois.
It clearly knew of
Merial‟s Rule 4(k)(2) position at the evidentiary hearing on May 16,
and it made no attempt to provide any additional supplementation
during the approximately three week period between the evidentiary
hearing and the final arguments on June 8.
11
statute; (2) no other court of general jurisdiction in any other
state, including the State of Illinois, would be authorized to
exercise personal jurisdiction over Cipla for the claims arising
in this action; and (3) Cipla does have sufficient contacts with
the United States such that the exercise of jurisdiction over it
in Georgia for the claims asserted in this action would not
offend the Constitution or laws of the United States.
III. The Cipla/Velcera Venture
14.
Merial‟s Frontline Plus product is the leading veterinary
pesticide
active
product
ingredient
methoprene,
in
the
United
formulation,
Frontline
Plus
States.
Due
consisting
offers
dog
of
and
to
its
unique
fipronil
cat
owners
and
an
effective and safe “spot on” treatment for the elimination of
fleas and ticks.6
15.
The potential market in the United States for a generic
spot
on
fipronil/methoprene
financially seductive.
combination
pet
pesticide
is
Cipla attempted to enter it but was
temporarily deterred by the patent infringement action giving
rise to the Court‟s March 6, 2008 Order.
6
Velcera, along with
“Spot on” refers to the method of application which allows the pet owner to
dispense the liquid product to the area around the nape of the neck of the
pet, where the solution is effectively absorbed through the skin into the
bloodstream.
12
Cipla, designed a strategy to enter that potentially lucrative
market.
That strategy required Velcera to navigate numerous
obstacles, a process Velcera‟s chief executive officer described
as “threading a needle.”
The primary obstacle, as highlighted
by the present litigation, was to obtain regulatory approval
from
the
EPA
for
a
generic
product
that
was
substantially
similar and/or identical to Merial‟s Frontline Plus while not
infringing
Merial‟s
patents
for
the
Frontline
Plus
product.
Merial had two patents related to its Frontline Plus product.
The „329 Patent, the one directly involved in this litigation,
included in relevant part claims related to the formulation of
the two active ingredients, fipronil and methoprene.
Another
Merial patent, which the parties refer to as the „229 Patent,
involved
the
formulation
of
the
inactive
ingredients.
In
addition to the patents, the Court‟s March 6, 2008 injunction
Order made it clear that neither Cipla nor anyone in concert
with Cipla could sell in the United States or cause to be sold
in the United States any product that infringed the „329 Patent.
16.
Both Cipla and Velcera were aware of these obstacles, and
both were aware of this Court‟s March 6, 2008 Order.
Undeterred
and encouraged by the prospect of significant profits from a
generic spot on fipronil/methoprene product, Velcera through its
wholly
owned
subsidiary,
FidoPharm,
13
set
out
to
“thread
the
needle.”
FidoPharm began development of a product that would
later be marketed as PetArmor Plus, through its relationship
with a consulting company known as OmniPharm—which formed joint
ventures with Cipla to sell the product to FidoPharm.
Although
FidoPharm had the proprietary rights to the product, it used
Cipla‟s laboratory facilities in India to formulate and test the
product.
included
LoradoChem—a
data
submissions
from
to
wholly
the
the
owned
tests
EPA.
FidoPharm
performed
FidoPharm
by
also
subsidiary—
Cipla
used
in
its
Cipla
to
manufacture and package the final product for distribution to
the United States.
Cipla‟s EPA establishment number—identifying
Cipla as the final producer of the product—is included on the
back
of
the
establishment
PetArmor
number,
Plus
the
package.
product
Without
could
not
have
that
EPA
been
sold
legally in the United States.
17.
In
its
application
to
the
EPA,
LoradoChem
successfully
convinced the EPA that PetArmor Plus was substantially similar
and/or
identical
registration
to
included
Frontline
Cipla‟s
Plus.7
The
establishment
PetArmor
Plus
EPA
number,
which
is
required for any product registration with the EPA.
7
The EPA
This process is known as the “me too” process that allows a prospective
pharmaceutical registrant to tag along with the previous approval of a
“pioneer” product and have a generic product approved in an expedited fashion
if it is determined to be substantially similar and/or identical to the
previously approved pioneer product.
14
gave
regulatory
approval
to
the
product.
Thus,
Velcera
had
effectively threaded this part of the needle.
18.
Velcera‟s
next
challenge
infringement issues.
was
to
avoid
any
patent
It recognized the validity of Merial‟s
„229 Patent regarding the inactive ingredients.
Therefore, it
was
the
faced
with
developing
a
formulation
for
inactive
ingredients that did not infringe the Merial patent but that was
still equally as efficacious as Frontline Plus in delivering the
active ingredients without side effects for the pet.
Velcera
developed this formulation, using in part the Cipla laboratories
in India.
Thus, Velcera thought it had successfully threaded
the next part of the needle.
19.
The next obstacle, which appears to have been looming over
the entire process, was Merial‟s „329 Patent.
Velcera could not
find a way to develop a formulation for the active ingredient
combination
of
fipronil
and
methoprene
without
least one claim of the Merial „329 Patent.
infringing
at
Unable to complete
its threading of the proverbial needle, Velcera abandoned any
further attempt to proceed delicately in a careful manner but
instead
charged
ahead,
consciously
ignoring
the
„329
Patent.
Velcera took the subjective position that the „329 Patent was
15
not
valid,
and
therefore,
it
could
simply
ignore
the
„329
Patent, which it did.
20.
The final obstacle was devising a set of relationships and
arrangements to use Cipla as its manufacturer and final producer
without
running
afoul
of
the
Court‟s
March
6,
2008
Order.
Notwithstanding the multiple layers of arrangements that were
constructed
to
get
the
product
to
the
United
substance of the various transactions is clear.
States,
the
Cipla played
the critical and essential roles of manufacturing, packaging,
and assisting in the development of the PetArmor Plus product
for
Velcera
to
sell
in
the
United
States.
Cipla
knew
the
product was to be sold in the United States, even though the
product
traveled
from
its
facility
in
final
consumer-ready
condition through various other layers before it actually ended
up on U.S. soil.
21.
Both Cipla and Velcera knew at the time that the PetArmor
Plus
product
infringed
the
„329
Patent.
Notwithstanding
the
Court‟s March 6, 2008 Order, of which both Cipla and Velcera
were
aware,
Velcera
sold
the
product
in
the
United
touting it as the same as Frontline Plus but cheaper.
16
States,
IV.
Infringement of Merial’s ‘329 Patent and Violation of the
Court’s Order
22.
Velcera acknowledges that PetArmor Plus infringes at least
one claim of Merial‟s „329 Patent, and Cipla makes no credible
argument
to
the
conclusion.
formulation
PetArmor
contrary.
The
is
Plus
The
evidence
fipronil/methoprene
essentially
also
contains
identical
a
supports
active
in
customary
the
no
other
ingredient
two
spot-on
products.
formulation
adjuvant. In its application for regulatory approval, Velcera
described PetArmor Plus as substantially similar and identical
to Merial‟s Frontline Plus.
Velcera‟s marketing strategy is
based on persuading the consumer that PetArmor Plus is the same
as Frontline Plus, except it is cheaper.
They are the same.
23.
The Court also finds persuasive the expert testimony given
at
the
evidentiary
hearing
that
there
are
not
more
than
colorable differences between PetArmor Plus and the infringing
product described in the Court‟s March 6, 2008 Order.
The 2008
Order found the infringing product to be one that violated the
„329 Patent.
effective
The claims of the patent require: (1) synergistic
amounts
of
fipronil;
17
(2)
synergistic
amount
of
a
compound which mimics juvenile hormones (e.g., methoprene); and
(3) at least one customary spot-on formulation adjuvant.
The
specific Cipla product mentioned in the Court‟s Order, PROTEKTOR
PLUS, contained 9.7 % fipronil liquid and 11.8 % methoprene.
The percentages admittedly, by virtue of the default, existed in
the product in “synergistic amounts.”
necessarily—by
virtue
of
the
Moreover, PROTEKTOR PLUS
default—contained
customary spot-on formulation adjuvant.”
allegations in the
“at
least
one
Based on the admitted
Complaint due to Cipla‟s default and the
expert testimony presented by Merial at the evidentiary hearing,
the Court finds that it is clear that not more than colorable
differences exist between the PetArmor Plus product and Cipla‟s
product that the Court found in its March 6, 2008 Order violated
the „329 Patent.
24.
In summary, the Velcera PetArmor Plus product, which is
manufactured
and
packaged
for
sale
in
the
United
States
by
Cipla, is not more than colorably different from the product
that
the
Court
found
Merial‟s „329 Patent.
infringement
and
in
its
March
6,
2008
Order
violated
That patent was valid at the time of the
remains
valid
today.
It
is
delusional
to
suggest that no infringement occurred because the infringer held
the subjective opinion that the patent was not valid.
Cipla,
through its conduct in the development, manufacture, and sale of
18
the PetArmor Plus product, has clearly infringed and/or caused
to be infringed Merial‟s „329 Patent.
This Court‟s March 6,
2008
prohibited
Order
clearly
and
engaging in such conduct.
unequivocally
Cipla
from
In fact, the purpose of the Order was
to prevent the very conduct engaged in here by Cipla.
Clever
lawyers cannot shield the true substance of the contumacious
conduct,
no
matter
how
many
different
entities
attempt
to
Cipla did not act alone in violating the Court‟s Order.
It
launder Cipla‟s fingerprints off the product.
25.
needed someone to aid and abet it—someone who could facilitate
the sale of the product in the United States.
Cipla surely knew
that it could not sell the product directly into the United
States given its previous unsuccessful attempt to do so and the
Court‟s Order prohibiting it from doing so.
blinded
by
potential
riches,
was
the
ideal
Velcera, perhaps
partner—it
was
willing to bet its entire existence on its subjective conclusion
that a patent it
knowingly
intended
to
violate was invalid.
Velcera‟s willingness to be the front man was essential to the
success of the product launch, and the „329 Patent would not
have
been
infringed
absent
Velcera‟s
contributory
conduct.
Velcera and Cipla acted in concert to bring a product to the
United
States
that
each
knew
infringed
Merial‟s
consequently knew violated the Court‟s Order.
19
patent
and
CONCLUSIONS OF LAW
1.
The
law
of
the
Federal
Circuit
shall
apply
to
the
substantive patent issues presented by Merial‟s contempt motion.
See Midwest Inds., Inc v. Karavan Trailers, Inc., 175 F.3d 1356,
1359 (Fed. Cir. 1999) (noting the Federal Circuit “appl[ies] our
own
law
with
respect
to
patent
law
issues”).
The
Federal
Circuit reviews procedural matters not unique to patent issues
under the law of the regional circuit where appeals from the
district court normally lie.
E.g., Ashland Oil, Inc. v. Delta
Oil Prods. Corp., 806 F.2d 1031, 1033 (Fed. Cir. 1986).
2.
Merial has the burden of proving by clear and convincing
evidence that Cipla violated the Court‟s March 6, 2008 Order and
that Velcera acted in concert with Cipla in the violation of the
Order.
Int’l Rectifier Corp. v. Samsung Elecs. Co., 361 F.3d
1355, 1359 (Fed. Cir. 2004).
default,
admits
the
However, “[a] defendant, by his
plaintiff‟s
well-pleaded
allegations
of
fact, is concluded on those facts by the judgment, and is barred
from contesting on appeal the facts thus established.”
Eagle
Hosp. Physicians, LLC v. SRG Consulting, Inc., 561 F.3d 1298,
1307 (11th Cir. 2009) (internal quotation marks omitted).
20
“A
default judgment is unassailable on the merits, but only so far
as it is supported by well-pleaded allegations.”
quotation marks omitted).
Id. (internal
Accordingly, Cipla, by virtue of its
default, admits the well-pleaded allegations in the Complaint,
and
to
the
extent
that
they
support
the
non-jurisdictional
merits of Merial‟s contempt motion, no further evidence of those
factual allegations is necessary.
3.
Regarding Cipla‟s motion to vacate the Court‟s Order due to
lack of personal jurisdiction, Merial also has the burden of
proving
personal
jurisdiction.
The
facts
alleged
in
the
defaulted complaint are not admitted for purposes of determining
jurisdiction.
See Iowa State Univ. Research Found., Inc. v.
Greater Continents Inc., 81 F. App‟x 344, 349 (Fed. Cir. 2003)
(citing Eighth Circuit rule placing burden of proof on Plaintiff
where defendant challenged personal jurisdiction in motion to
set aside entry of default judgment); see also Synthes (U.S.A.)
v. G.M. Dos Reis Jr. Ind. Com. De Equip. Medico, 563 F.3d 1285,
1294 (Fed. Cir. 2009) (noting general rule that “the plaintiff
bears the burden of proof as to whether the defendant is subject
to personal jurisdiction.”); accord Oldfield v. Pueblo de Bahia
Lora,
S.A.,
558
F.3d
1210,
1217
(11th
Cir.
2009)
(“It
goes
without saying that, where the defendant challenges the court‟s
exercise of jurisdiction over its person, the plaintiff bears
21
the ultimate burden of establishing that personal jurisdiction
is present.”).
law
of
the
personal
The law of the Federal Circuit, rather than the
Eleventh
Circuit,
jurisdiction
infringer.
can
be
applies
to
exercised
determine
over
an
whether
out-of-state
Akro Corp. v. Luker, 45 F.3d 1541, 1543 (Fed. Cir.
1995).
4.
An intervenor is required to accept the case in the posture
in which it found it.
See Knowles v. Bd. of Pub. Instruction of
Leon County, Fla., 405 F.2d 1206, 1207 (5th Cir. 1969) (per
curiam).8
Therefore, Velcera cannot contest the facts previously
established in this action prior to its intervention.
that
Cipla
Merial‟s
did
not
patent
in
contest
the
infringement
underlying
or
action
contempt proceeding inappropriate here.
the
does
The fact
validity
not
make
of
a
See Additive Controls &
Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d 1345, 1350
(Fed. Cir. 1998) [hereinafter Additive Controls II] (rejecting
non-party‟s
argument
that
contempt
proceedings
were
inappropriate because the defendant in the original proceeding
did not contest infringement of the original device or validity
of
the
patent).
defendant]. . . establishe[s]
“The
for
8
judgment
the
against
purposes
of
[the
this
The Eleventh Circuit adopted as binding precedent all decisions of
the former Fifth Circuit handed down prior to October 1, 1981. Bonner
v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
22
litigation that [the plaintiff‟s] patent was valid and that the
[defendant‟s
product]
infringed
the
patent.”
Id.
“In
a
contempt proceeding to enforce the injunction entered as a part
of that judgment, the only available defense for anyone bound by
the injunction was that [its modified product] did not infringe
or that it was more than a colorable variation of the [original
product].”
original
Id.
product
proceedings.
I.
Validity of the patent and infringement of the
are
not
open
to
challenge
in
the
contempt
Id.
Jurisdiction
5.
Cipla argues that it cannot be found to be in contempt of
the Court‟s March 6, 2008 Order because it was not subject to the
personal jurisdiction of the Court when the Order was entered.
Therefore, it maintains that the Order is void as to it and has
no legal effect. Velcera joins in Cipla‟s argument, contending
that if Cipla did not violate the Court‟s Order, then Velcera
certainly could not have acted in concert with and/or aided and
abetted Cipla in the violation of the Order.
Plaintiffs originally maintained that personal jurisdiction
existed over Cipla in the defaulted action pursuant to Georgia‟s
long-arm statute.
that
it
has
specifically
However, upon learning of Cipla‟s position
limited
including
contacts
the
State
23
with
of
the
Georgia,
United
States,
Plaintiffs
now
maintain that Cipla was subject to the personal jurisdiction of
this Court under Federal Rule of Civil Procedure 4(k)(2).9
Under
Rule 4(k)(2):
For a claim that arises under federal law, serving a
summons or filing a waiver of service establishes
personal jurisdiction over a defendant if: (A) the
defendant is not subject to jurisdiction in any
state‟s courts of general jurisdiction; and (B)
exercising jurisdiction is consistent with the United
States Constitution and laws.
Fed.
R.
personal
Civ.
P.
4(k)(2).
jurisdiction
over
“Thus,
a
for
defendant
a
court
under
to
that
exercise
rule,
the
plaintiff‟s claim must arise under federal law, the defendant
must not be subject to jurisdiction in any state‟s court of
general jurisdiction, and exercise of jurisdiction must comport
with due process.”
Touchcom, Inc. v. Bereskin & Parr, 574 F.3d
1403, 1412 (Fed. Cir. 2009).
6.
Merial‟s Complaint against Cipla for patent infringement
arises under federal law—the patent laws of the United States,
35 U.S.C. § 1 et seq.
9
The Court agrees that the present record does not support a finding
that Cipla had sufficient contacts with the state of Georgia for it to
be subject to personal jurisdiction under the Georgia long-arm statute
for the present action.
Accordingly, it is appropriate to determine
whether general federal long-arm jurisdiction applies pursuant to Fed.
R. Civ. P. 4(k)(2). See Touchcom, Inc. v. Bereskin & Parr, 574 F.3d
1403, 1415 n.5 (Fed. Cir. 2009) (“Because [the plaintiff] argued both
[R]ule 4(k)(1)(A) and Rule 4(k)(2), and because we have dealt with
both of those rules, we need not decide whether a Rule 4(k)(2)
analysis can only be conducted after a 4(k)(1)(A) analysis.”).
24
7.
Under the second requirement of Rule 4(k)(2), a defendant
may
“avoid
the
application
of
[Rule
4(k)(2)]
only
when
it
designates a suitable forum in which the plaintiff could have
brought suit.”
Touchcom, Inc., 574 F.3d at 1415.
Cipla did not
designate a suitable forum in which it could have been sued
prior to default judgment being entered against it.
Moreover,
it did not designate a suitable substitute forum when it first
filed its motion to vacate the default judgment due to lack of
personal
jurisdiction.
Cipla
first
designated
the
state
of
Illinois as a suitable substitute forum in its reply brief on
its motion to vacate after Merial raised Rule 4(k)(2) as a basis
for personal jurisdiction for the first time in its response to
Cipla‟s motion to vacate.
Cipla maintains that this action could have been brought in
the state of Illinois, where general jurisdiction existed under
Illinois
law.
Under
the
Illinois
long-arm
statute,
general
jurisdiction can be exercised over “a corporation doing business
within” Illinois.
“„doing
business‟
735
Ill. Comp. Stat.
standard
is
very
5/2-209(b)(4).
high
and
requires
The
the
nonresident corporation‟s business activity in Illinois to be
carried
on,
not
casually
or
occasionally,
measure of permanence and continuity.”
25
but
with
a
fair
Morgan, Lewis & Bockius,
LLP, v. City of E. Chicago, 401 Ill. App. 3d 947, 953 (2010).
The “requirement means that in effect, the foreign corporation
has taken up residence in Illinois and, therefore, may be sued
on causes of action both related and unrelated to its activities
in Illinois.”
Id. (internal quotation marks omitted).
There
is no exact test to determine whether a corporation is doing
business in Illinois, but most “Illinois cases determining the
existence
of
personal
jurisdiction
over
foreign
corporations
have based their findings upon the existence of factors such as
offices
or
sales
activities
in
Illinois.”
Id.
(internal
quotation marks omitted).
Cipla argues that general personal jurisdiction could have
been exercised over it in Illinois under Illinois law and that
it now consents to submit to jurisdiction in Illinois.
The
Court finds that Cipla‟s “after the fact” willingness to consent
to jurisdiction in Illinois so that it may vacate a previously
entered default judgment is not sufficient to support a finding
that it could have been sued in another state and thus avoid
Rule 4(k)(2) jurisdiction.
Instead, the Court finds that Rule
4(k)(2) requires a determination of whether an Illinois court
could have exercised general jurisdiction over Cipla at the time
the
Complaint
in
this
action
jurisdiction by Cipla.
26
was
filed
absent
consent
to
Cipla‟s
reliance
upon
Touchcom,
Inc.
in
support
of
its
contention that it simply may consent today to a transfer of
this action to Illinois and avoid Rule 4(k)(2) jurisdiction is
misplaced.
The Federal Circuit in Touchcom, Inc. did not hold
that a defendant‟s consent alone to jurisdiction in a specific
state, regardless of the circumstances, was sufficient to avoid
Rule 4(k)(2) jurisdiction.
The court did not have to reach that
issue in its holding because the defendant in Touchcom, Inc. had
not designated a state where jurisdiction would be appropriate.
The Court narrowly held that a defendant had that burden, and if
the
defendant
failed
to
designate
such
a
state,
then
the
plaintiff asserting Rule 4(k)(2) jurisdiction would be deemed to
have satisfied its burden of demonstrating that no other state
had general jurisdiction over the defendant.
hold
that
a
defendant
could
avoid
The Court did not
personal
jurisdiction
for
default purposes by simply stating after the fact that it would
now consent to jurisdiction in a particular state to avoid the
default.
Allowing a defendant to avoid the consequences of a default
after the fact simply by professing that it will now consent to
jurisdiction if the default is lifted creates an opportunity for
mischief and manipulation of the courts.
case,
it
is
clear
that
Cipla
would
For example, in this
not
have
consented
to
jurisdiction in Illinois for the claims asserted in the present
27
action at the time the action was filed.
default
in
this
action,
Cipla
denied
After it was placed in
any
contacts
with
the
United States and never mentioned the State of Illinois as a
place where jurisdiction would be appropriate.
Moreover, in its
motion to vacate the default, Cipla certainly suggested that its
ties with the United States were so limited that no state would
have jurisdiction over the claims in this action.
in
its
litigation
in
other
matters
in
Furthermore,
Illinois,
Cipla
has
selectively consented to jurisdiction while never admitting that
its contacts were sufficient to sustain jurisdiction without its
consent.
Similar facts and circumstances were not present in
Touchcom, Inc., nor were they necessary to the court‟s holding
there, as previously explained.
The Court finds that the proper inquiry in a case where a
defendant
seeks
to
avoid
a
default
judgment
due
to
lack
of
personal jurisdiction by designating a forum where it is subject
to jurisdiction pursuant to Rule 4(k)(2) is to determine whether
the defaulted action could have been brought in that designated
forum
in
the
jurisdiction.
first
In
this
place
under
case,
the
that
Court
forum‟s
finds
that
long-arm
personal
jurisdiction would not have existed under Illinois law for the
claims asserted in this action against Cipla.
Cipla‟s
only
contacts with Illinois were three shipments of goods during the
time
frame
surrounding
the
filing
28
of
the
Complaint.
Cipla
pointed to no evidence regarding the quantity of the shipments
or the revenue or sales generated by the shipments.
repeatedly
maintained
that
it
has
no
offices,
Cipla has
inventory,
records in the United States, including Illinois.
or
It also has
consistently denied that it is licensed to do business in any
state, including Illinois.
Although Cipla asserts that it has a
relationship with another corporation located in Illinois, the
evidence
provides
no
details
regarding
the
extent
of
the
contacts in Illinois resulting from that relationship at the
time the action was filed.
The Court finds that three shipments
to Illinois and an undefined relationship with another entity
located in Illinois does not demonstrate that Cipla is “doing
business”
in
Illinois.
concludes
that
For
jurisdiction
the
does
same
not
reasons,
exist
the
under
Court
Section
2-209(c) of the Illinois long-arm statute, which provides that
an Illinois Court “may also exercise jurisdiction on any other
basis now or hereafter permitted by the Illinois Constitution
and the Constitution of the United States.”
735 Ill. Comp.
Stat. 5/2-209(c); see Bolger v. Nautica Int’l, Inc., 369 Ill.
App. 3d 947, 951 (2007) (noting that “Illinois limits general
jurisdiction
over
nonresidents
to
instances
in
which
the
nonresident was present and doing business in the forum” and
applying the same “doing business test” applied under Section
2-209(b)(4)).
The
Court
finds
29
that
Plaintiffs
have
carried
their burden of demonstrating that Cipla would not have been
subject to personal jurisdiction in November 2007 in Illinois
under Illinois law.
Accordingly, the Court finds that Cipla
was not subject to any state‟s courts of general jurisdiction
under Rule 4(k)(2).
8.
To determine whether due process has been met under Rule
4(k)(2), the Rule “contemplates a defendant‟s contacts with the
entire
United
district
States,
court
as
sits.”
opposed
Touchcom,
to
the
Inc.,
(internal quotation marks omitted).
jurisdiction,
a
defendant
state
in
which
the
574
F.3d
at
1416
“To be subject to general
business
entity
must
maintain
„continuous and systematic general business contacts‟ with the
forum, even when the cause of action has no relation to those
contacts.”
Synthes (U.S.A.), 563 F.3d at 1297.
The evidence presented demonstrates that Cipla transacted
substantial
business
in
the
United
States
and
voluntarily
engaged in commercial activity that would place it on notice
that it may be haled into court here.
Cipla had substantial
exports into the United States, registered numerous patents with
the United States Patent Office, and made EPA and FDA filings,
so that
Cipla
United States.
had
continuous and systematic contacts in the
Cipla does not strongly contest this conclusion.
9.
30
Once
the
Court
finds
a
defendant‟s
activities
establish
minimum contacts, the Court must determine whether the exercise
of jurisdiction is reasonable and fair.
of
unreasonableness
is
a
Id. at 1299. The test
multi-factored
balancing
test
evaluating “(1) the burden on the defendant, (2) the forum‟s
interest
in
adjudicating
the
dispute,
(3)
the
plaintiff‟s
interest in obtaining convenient and effective relief, (4) the
interstate
judicial
system‟s
interest
in
obtaining
the
most
efficient resolution of the controversies, and (5) the shared
interest
of
the
social policies.”
states
in
furthering
fundamental
substantive
Id.
The United States “has an interest in discouraging injuries
that occur within its boundaries, including injuries resulting
from patent infringement.”
Id.
The United States also has an
interest in enforcing federal patent laws.
“„progress
in
communications
and
Id.
transportation
Further, the
has
made
the
defense of a lawsuit in a foreign tribunal less burdensome.‟”
Id. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S.
286, 294 (1980)).
The exercise of jurisdiction in this case is particularly
compelling
because
Cipla
has
taken
advantage
of
lucrative
business opportunities in the United States while purposefully
attempting
to
manner
avoid
to
structure
the
jurisdiction
form
here
31
of
its
and
relationships
evade
compliance
in
a
with
certain United States patent laws.
Pl.‟s Tr. Ex. 77, Cipla‟s
Fin. Profile 1 (“The future will see more litigations on this
major issue that will, unfortunately, also extend to India in
due
course.
However,
your
Company‟s
approach
in
forming
strategic alliances and partnerships in all overseas markets has
protected
the
Company
from
litigation.”).
The
Court
jurisdiction
the
United
in
the
high
concludes
States,
that
and
cost
the
of
patent
exercise
particularly
in
of
the
United States District Court for the Middle District of Georgia,
is reasonable and fair.
In summary, the Court finds that in
November 2007, when this action was filed, Cipla had sufficient
contacts
with
the
United
States
such
that
the
exercise
of
jurisdiction over Cipla in this country would not offend the
United States Constitution or laws.
10.
Based on the foregoing, Cipla was subject to the personal
jurisdiction of this Court under Rule 4(k)(2).
Accordingly,
Cipla‟s motion to vacate the default judgment (ECF No. 33) is
denied.
II.
Violation of the Court’s Order
11.
“The criteria for adjudicating a violation of a prohibition
against continued infringement by a party whose products have
already been adjudged to be infringing is a matter of Federal
32
Circuit law.”
TiVo Inc. v. Echostar Corp., -- F.3d ----, 2011
WL 1486162, at *7 (Fed. Cir. Apr. 20, 2011) (en banc).
“[T]he
party seeking to enforce the injunction must prove both that the
newly accused product is not more than colorably different from
the product found to infringe and that the newly accused product
actually infringes.”
Id.
proving
the
violation
evidence,
a
of
burden
“The patentee bears the burden of
injunction
that
colorable differences.”
applies
by
to
clear
both
and
convincing
infringement
and
Id. at *8.
12.
The test for colorable difference is “one that requires
determining
whether
substantial
open
infringement to be tried exist.”
marks omitted).
issues
with
respect
to
Id. at *7 (internal quotation
“[T]he contempt analysis must focus initially
on the differences between the features relied upon to establish
infringement
products.”
accused
and
the
Id.
product
modified
features
of
the
newly
accused
The primary question is “whether the newly
is
so
different
from
the
product
previously
found to infringe that it raises a fair ground of doubt as to
the wrongfulness of the defendant‟s conduct.”
Id. (internal
quotation
focus
marks
differences
omitted).
between
randomly
“The
analysis
chosen
must
features
of
the
not
on
product
found to infringe in the earlier infringement trial and the
newly
accused
product,
but
on
33
those
aspects
of
the
accused
product that were previously alleged to be, and were a basis
for,
the
features
prior
of
finding
the
newly
of
infringement,
accused
and
product.”
the
Id.
modified
(citations
omitted).
13.
Validity of the patent and infringement of the original
product are not open to challenge.
Additive Controls II, 154
F.3d at 1350.
14.
PetArmor Plus is not more than colorably different from the
product
adjudged
March 6,
2008
infringing
infringing
Order.
in
its
The
previous
the
„329
Patent
product
order
the
by
the
Court
necessarily
Court‟s
found
to
included
be
the
components and ingredients described in the claims of the „329
Patent
which
fipronil;
juvenile
(2)
require:
(1)
synergistic
hormones;
and
formulation adjuvant.
synergistic
amount
(3)
at
of
a
least
effective
compound
one
amounts
which
customary
of
mimics
spot-on
PROTEKTOR PLUS contained 9.7% fipronil
liquid and 11.8% methoprene and the percentages admittedly, by
virtue
of
the
default,
existed
in
“synergistic”
amounts.
Moreover, PROTEKTOR PLUS necessarily—by virtue of the default—
contained “at least one customary spot-on formulation adjuvant.”
15.
34
Based
upon
the
evidence
presented,
including
the
expert
testimony presented by Merial, which the Court found persuasive,
the PetArmor Plus product is not more than colorably different
than
the
CIPLA
PROTEKTOR
PLUS
product
that
the
Court
found
infringes in the March 6, 2008 Order.
They are essentially the
same for purposes of this analysis.
Both contain synergistic
effective
compound
amounts
that
of
mimics
fipronil;
juvenile
a
synergistic
hormones
amount
(methoprene);
of
and
a
at
least one spot-on adjuvant formulation that effectively delivers
the
active
ingredients
fipronil
and
methoprene.
The
Court
further finds that the allegedly unique formulation of inactive
ingredients in PetArmor Plus does not make it so different that
it raises a fair ground of doubt as to the wrongfulness of
Defendants‟ conduct.
16.
The Court concludes for purposes of the present action and
pending motions that the PetArmor Plus product infringes the
„329 Patent.
For purposes of these proceedings, the validity of
the „329 Patent is an established fact due to Cipla‟s default
and the Court‟s finding in its previous order.
if
that
fact
were
not
established
by
Moreover, even
default,
no
credible
evidence has been presented to establish that the „329 Patent is
not valid.
Velcera‟s chief executive officer readily admitted
at the hearing that if the „329 Patent is valid, then PetArmor
35
Plus
violates
that
Patent.
To
corroborate
that
evidence,
Merial‟s expert presented credible testimony that PetArmor Plus
infringes Merial‟s „329 Patent.
As explained above, PetArmor
Plus for cats contains 9.8% fipronil and 11.8% methoprene, and
PetArmor
Plus
for
dogs
contains
9.8%
fipronil
and
8.8%
methoprene, which are the same as the percentages in Frontline
Plus—Merial‟s
product
using
the
„329
Patent
formulation.
PetArmor Plus contains at least one customary spot on adjuvant.
Velcera submitted “me too” applications with the EPA claiming
PetArmor Plus is essentially the same as Frontline Plus.
The
Court concludes that PetArmor Plus continues to infringe the
relevant claims of Merial‟s „329 Patent.
III. Cipla’s Contumacious Conduct
17.
To find a party specifically named in an injunction in
contempt for violating the injunction, the Court must find by
clear
and
demonstrates
convincing
that
Court‟s Order.
it
evidence
knowingly
that
and
the
party‟s
voluntarily
conduct
violated
the
Int’l Rectifier Corp., 361 F.3d at 1359.
18.
A finding of contempt of an injunction by infringement is
determined using Federal Circuit law.
19.
36
Id.
The
injunction
in
this
case
permanently
enjoined
Cipla
from:
Committing any act that infringes or causes or induces
infringement of any claim of the . . . „329 patent[],
including but not limited to making, having made,
using, causing to be used, selling, causing to be
sold, offering for sale, and causing to be offered for
sale in the United States, and importing and causing
to be imported into the United States, any product
that infringes any claim of the . . . „329 patent[][.]
Order ¶ e, March 6, 2008.
20.
It is clear that Cipla knew that it was prohibited from
participating in the development and manufacture of any product
for the treatment of ticks and fleas in dogs and cats containing
the
active
ingredients
ingredients
that
acted
fipronil
as
and
methoprene
an adjuvant
to
and
deliver
inactive
the
active
ingredients, which product it knew was being offered for sale in
the United States, and which U.S. sales its conduct facilitated.
It is likewise clear that Cipla knew that it was prohibited from
participating
in
any
venture
that
was
designed
to
sell
any
product in the United States that violated Merial‟s „329 Patent.
Merial established by clear and convincing evidence that Cipla
knowingly manufactured PetArmor Plus, that it knew PetArmor Plus
was to be sold in the United States, that PetArmor Plus violated
Merial‟s
„329
identical
to
Patent,
and
not
that
PetArmor
more than
37
Plus
colorably
was
essentially
different
from
the
infringing product described in the Court‟s March 6, 2008 Order,
and that Cipla‟s role and participation in the sale of PetArmor
Plus in the United States was indispensible and essential for the
sale of the product in the United States.
Thus, Cipla caused an
infringing product to be sold in the United States, in direct
violation of the Court‟s March 6, 2008 Order.
21.
Cipla relies on International Rectifier Corp. v. Samsung
Electronics Co., Ltd., 361 F.3d 1355 (Fed. Cir. 2004), to assert
that it cannot be found in contempt because Cipla conducted no
activity within the United States.
Cipla argues that it cannot
be held in contempt for actions of an unaffiliated entity that
sells infringing products in the United States over which Cipla
has no control.
International Rectifier Corp. is distinguishable
from this case.
First, the defendant in International Rectifier
Corp.
delivered
unfinished
devices
to
a
foreign
non-party
overseas, and the foreign non-party sold the products in the
United States.
and
the
The fabrication agreement between the defendant
non-party
pertained
only
to
devices outside of the United States.
the
manufacture
of
the
The agreement did not
contemplate that the non-party could then import the products
into the United States.
in
market-ready
States.
Here, Cipla manufactured PetArmor Plus
condition
explicitly
for
sale
in
the
United
Cipla sold PetArmor Plus to FidoPharm—a United States
38
company.
Cipla‟s
attempts
to
disguise
the
nature
of
the
transactions by creating joint relationships for the purpose of
selling PetArmor Plus to FidoPharm, a United States company, are
unavailing.
Cipla‟s contention that its conduct occurred wholly
in India, completely unconnected to the United States, is not
supported by the credible evidence in this case.
Further, in
International Rectifier Corp., there was no evidence that the
defendant
participated
in
any
activities
of
the
non-party
following
the
of
the
unfinished
products
overseas.
delivery
Although Cipla and Velcera attempted to create some distance
between
themselves
by
structuring
their
venture
with
layers, the substance of their relationship is clear.
several
Without
Cipla, PetArmor Plus would not have been brought to market in the
United States as it was.
Their relationship was not merely that
of an arms-length third party manufacturer.
in
the
product.
development,
U.S.
approval,
and
Cipla participated
manufacture
of
the
Moreover, even if Cipla was not literally the final
seller of the product to the United States, it was an integral
partner of the venture that sold the product to FidoPharm, such
that Cipla caused the infringing product to be sold in the United
States, which is prohibited by the 2008 Order.
22.
Cipla claims that the language in the Order enjoining Cipla
from “causing” the products to be sold in the United States is
39
overbroad because it regulates Cipla‟s conduct outside of the
United States.
As previously explained, Cipla‟s conduct was in
no way wholly unrelated to the United States.
See Forest Labs.,
Inc. v. Ivax Pharm., Inc., 501 F.3d 1263, 1272 (Fed. Cir. 2007)
(rejecting
argument
similar
to
Cipla‟s
that
injunction
impermissibly prohibited conduct outside of the United States
where plan to manufacture, import, market and sell the infringing
products “was undoubtedly a cooperative venture”).
Moreover,
although not the dispositive basis for the Court‟s findings or
conclusions today, it is doubtful that Cipla can now contest the
breadth of the 2008 Order given the fact that it allowed this
action to fall into default.
IV.
Velcera’s Contumacious Conduct
23.
An injunction order “binds only the following who receive
actual notice of it by personal service or otherwise: (A) the
parties; (B) the parties‟ officers, agents, servants, employees,
and attorneys; and (C) other persons who are in active concert
or participation with anyone described in Rule 65(d)(2)(A) or
(B).”
Fed. R. Civ. P. 65(d)(2)(A)-(C).
It is undisputed that
Velcera was not specifically named in the Court‟s March 6, 2008
Order.
40
24.
Velcera admits that it had actual knowledge of this Court‟s
injunction against Cipla.
25.
A party who is not specifically named as a party to an
injunction generally may not be found in contempt of that order.
See
Additive
Controls
&
Measurement
Sys.,
Inc.
v.
Flowdata,
Inc., 96 F.3d 1390, 1394 (Fed. Cir. 1996) [hereinafter Additive
Controls I] (noting it is improper “for the district court „to
make punishable as a contempt the conduct of persons who act
independently and whose rights have not been adjudged according
to law.” (quoting Chase Nat’l Bank v. City of Norwalk, 291 U.S.
431, 436 (1934))).
The Court, however, may hold the defendant
in contempt and may hold in contempt “those identified with [the
defendant]
in
interest,
in
„privity‟
with
[the
defendant],
represented by [the defendant] or subject to [the defendant‟s]
control.”
Regal Knitwear Co. v. Nat’l Labor Relations Bd., 324
U.S. 9, 14 (1945).
“In essence it is that defendants may not
nullify a decree by carrying out prohibited acts through aiders
and abettors, although they were not parties to the original
proceeding.”
Id.
26.
It is clear that Velcera acted in concert with Cipla to
violate the Court‟s March 6, 2008 Order.
41
It knew that Cipla was
prevented
from
participating
in
the
development
and
manufacturing of a product to be sold in the United States that
violated Merial‟s „329 Patent.
Yet Velcera worked hand in hand
with Cipla to accomplish just that.
It cannot hide behind the
multilayered
to
market.
relationships
designed
get
the
product
to
The substance of the arrangements clearly disclose that
there were two primary and essential parties in getting the
PetArmor
Plus
product
to
the
U.S.
Market—Velcera
and
Cipla.
Without Velcera‟s contributions to the enterprise, Cipla would
have been unable to violate the Court‟s Order.
Seduced by the
allure of future financial rewards, Velcera enabled Cipla to
participate in the development, manufacture, and sale of the
infringing
conduct,
product
combined
in
the
with
that
United
of
States,
Cipla,
knowing
violated
that
the
its
Court‟s
Order.
V.
Permanent Injunction
27.
“According
to
well-established
principles
of
equity,
a
plaintiff seeking a permanent injunction must satisfy a fourfactor test before a court may grant such relief.”
eBay Inc. v.
MercExchange, L.L.C., 547 U.S. 388, 390 (2006).
“A plaintiff
must
demonstrate:
(1)
that
it
has
suffered
an
irreparable
injury; (2) that remedies available at law, such as monetary
damages, are inadequate to compensate for that injury; (3) that,
42
considering the balancing of the hardships between the plaintiff
and the defendant, a remedy in equity is warranted; and (4) that
the
public
interest
injunction.”
would
not
be
disserved
by
a
permanent
Id.
The Court finds that Merial has demonstrated that it has
suffered an irreparable injury.
The introduction of a generic
fipronil and methoprene product like PetArmor Plus will result
in
considerable
Velcera
and
loss
Cipla‟s
Frontline
Plus
by
Frontline
Plus
only
of
market
marketing
touting
share
to
Merial.
Further,
strategy—specifically
PetArmor
cheaper—makes
the
Plus
as
targeting
exactly
irreparable
like
injury
to
Merial by the introduction of the product more obvious.
The
strategy
for
the
packaging
of
the
packaging
Frontline
Plus
of
PetArmor
will
result
Plus
to
mimic
in
loss
of
brand
recognition for Merial.
Velcera argues that Merial has not shown irreparable harm
because Merial‟s expert allegedly concluded that the loss of
market share would be about the same regardless of the number of
generics
that
enter
generics
that
have
the
market,
already
and
the
existence
entered
the
market
of
along
other
with
PetArmor Plus demonstrates that a permanent injunction would not
prevent any injury to Merial.
argument persuasive.
The Court does not find Velcera‟s
While the introduction of PetArmor Plus
into the market may not account for the entire percentage of
43
eroded
market
share,
that
does
not
overcome
PetArmor Plus is contributing to the erosion.
that
the
Plus,
marketing
the
lower
strategy
cost
of
specifically
the
PetArmor
the
fact
The Court finds
targeting
Plus
that
Frontline
product,
and
the
branding of PetArmor Plus as nearly identical to Frontline Plus
demonstrate that Velcera and Cipla‟s obvious goal is to erode
Merial‟s market share.
Based on the foregoing, the Court finds
that Merial has suffered irreparable injury.
Merial has also demonstrated that there is not an adequate
remedy at law.
difficult
damages
to
is
Losses in market share and brand recognition are
quantify,
evidence
and
difficulty
that
remedies
in
at
estimating
law
are
monetary
inadequate.
Broadcom Corp. v Qualcomm Inc., 543 F.3d 683, 703 (Fed. Cir.
2008).
The balance of hardships also favors permanent injunctive
relief.
Although Merial is a large global company, Frontline
Plus is Merial‟s flagship product.
picture
economic
of
itself
survival
as
the
against
Velcera attempts to paint a
proverbial
the
David
Goliathan
fighting
for
pharmaceutical
its
bully
Merial. While perhaps superficially appealing, the Court must
resist sympathetic inclinations and remain moored to the law,
which
does
not
countenance
favoring
the
legal
Davids
simply
because they may be the underdog or disfavoring the Goliaths
because they need less help.
The law must treat them both as
44
equals; there is no size exemption from obeying lawful court
orders.
In this case, the law requires the Court to issue a
ruling with potentially devastating economic consequences for
Velcera.
To fail to follow the law, however, and favor Velcera
because of personal sympathy toward the plight of a fledgling
company, would be exponentially more tragic.10
Finally, the Court finds that the public interest factor
favors the granting of injunctive relief.
Although the public
may benefit from a lower priced fipronil/methoprene product if
Cipla
and
Velcera
were
allowed
to
continue
to
violate
the
Court‟s Order and infringe on Merial‟s patent, the public is
also served by enforced compliance with lawful court orders and
the United States patent laws.
Such compliance is necessary for
the stability of a system that provides limited protection to
individual creativity and inventiveness; thus allowing for the
development of products that will benefit the public.
Based
on
the
foregoing
factors,
the
Court
finds
the
following relief to be appropriate and necessary.
10
As explained by the Federal Circuit, “[o]ne who elects to build a
business on a product found to infringe cannot be heard to complain if
an injunction against continuing infringement destroys the business so
elected.”
Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 704 (Fed.
Cir.
2008)
(internal
quotation
marks
omitted)
(alteration
in
original).
45
RELIEF
1.
The Court orders seizure of any existing inventory in the
United States of the products at issue manufactured by Cipla.
The Court orders Cipla and Velcera to produce to Merial for
destruction all inventory existing in the United States of any
veterinary products manufactured by Cipla that contain fipronil
and
methoprene,
including
but
not
limited
to
the
veterinary
products that contain fipronil and methoprene sold under the
brand names Protektor Plus, PetArmor Plus, TrustGard Plus, and
Velcera Fipronil Plus.
with
the
Court
within
The parties shall file a joint report
sixty
(60)
days
of
today‟s
Order
describing the progress that has been made regarding compliance
with this aspect of the Court‟s Order.
2.
The Court will conduct a hearing to determine an award to
Merial for damages relating to all sales committed in violation
of the Court‟s Order, including lost profits or a reasonable
royalty for all sales. Within sixty (60) days of today‟s Order,
Cipla and Velcera
sales
of
any
shall
provide a
veterinary
product
written
accounting of all
containing
fipronil
and
methoprene manufactured by Cipla, or any of its subsidiaries or
related companies, occurring after the date of the Court‟s March
46
6, 2008 Order, including, but not limited to, the products sold
under the Protektor Plus, PetArmor Plus, TrustGard Plus, and
Velcera Fipronil Plus brands.
3.
The Court will schedule a hearing to determine the amount
of monetary sanctions, including attorney‟s fees and costs, that
may be appropriate based upon Cipla‟s and Velcera‟s violation of
this Court‟s Order.
4.
INJUNCTION
Based on the foregoing, the Court orders the following:
Cipla, as well as those in active concert with it who
have notice of this Order, are herewith permanently
enjoined from making, having made, using, causing to
be used, selling, causing to be sold, offering for
sale, and causing to be offered for sale in the United
States and importing and causing to be imported into
the United States veterinary products that contain
fipronil and methoprene, regardless of brand name,
including but not limited to the veterinary products
that contain fipronil and methoprene denominated
Protektor Plus, PetArmor Plus, TrustGard Plus, and
Velcera Fipronil Plus.
Velcera is herewith permanently enjoined from selling,
causing to be sold, offering for sale, and causing to
be offered for sale in the United States veterinary
products
for
which
Cipla
participated
in
the
development, manufacture, and/or packaging, which
products contain fipronil and methoprene, regardless
of brand name, including but not limited to the
47
veterinary products Protektor Plus, PetArmor
TrustGard Plus, and Velcera Fipronil Plus.11
Plus,
FINAL JUDGMENT AND TEMPORARY STAY
To facilitate an immediate appeal of this Order, the Court
directs that final judgment shall be entered pursuant to Fed. R.
Civ. P. 54(b) as to the claims decided in today‟s Order.
The
Court finds that there is no just reason for delay.
Given the potential immediate and serious impact of this
Order on Cipla and Velcera and the Court‟s desire that they have
an
opportunity
for
meaningful
review,
the
Court
stays
the
enforcement of this Order for sixty (60) days from the entry of
it.
IT IS SO ORDERED, this 21st day of June, 2011.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE
11
The Court intends to limit the specific injunctive relief against
Velcera to its conduct in concert with Cipla. See Additive Controls I,
96 F.3d at 1395-96.
48
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