Celltrion Healthcare Co., Ltd. et al v. Janssen Biotech, Inc.
Filing
47
Judge Mark L. Wolf: ORDER entered. MEMORANDUM AND ORDER. Associated Cases: 1:15-cv-10698-MLW, 1:14-cv-11613-MLW, 1:16-cv-11117-MLW (Bono, Christine)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
JANSSEN BIOTECH, INC. ET AL,
Plaintiffs,
C.A. No. 15-10698-MLW
V.
16-11117-MLW
CELLTRION HEALTHCARE CO. INC.,
ET AL.,
Defendants.
MEMORANDUM AND ORDER
WOLF, D.J.
At
the
March 2, 2017
January
18
and
February
14,
2016
scheduling
conferences, the parties requested the court's guidance on the
appropriate measure of damages to which plaintiff Janssen Biotech,
Inc.
("Janssen")
would
be
entitled
if
defendants
Celltrion
Healthcare, Co. and Celltrion, Inc. (together, "Celltrion") and
Hospira, Inc. ("Hospira") are found to have infringed U.S. Patent
No. 7,598,083 (the "'083 Patent"). The parties represented that
such guidance would facilitate informed settlement discussions. A
hearing on issues concerning the standards for determining damages
was held on February 23 and 24, 2017.
For the reasons explained
in detail at those hearings, the court provided the following
guidance to the parties.
1.
A plaintiff is entitled to compensation for reasonably
foreseeable lost profits that it would not have suffered "but for"
the defendant's infringement. See Rite-Hite Corp. v. Kelley Co.,
Inc., 56 F. 3d 1538, 1545 (Fed. Cir. 1995). "A fair and accurate
reconstruction of the 'but for' market...must take into account,
where
relevant,
alternative
actions
the
infringer
foreseeably
would have undertaken had he not infringed" and, therefore, "takes
into
account
any
[adequate]
alternatives
available
to
the
infringer." Grain Processing Corp. v. American Maize, 185 F. 3d
1341, 1350-51 (Fed. Cir. 1999). Accordingly, if Celltrion could,
as
a
practical
matter,
have
made
the
Remicade
biosimilar,
Inflectra, that it began marketing in the United States on about
January 1, 2017—at a
competitive
price and
on
a
comparable
schedule--without infringing the '083 Patent, Janssen would not be
entitled to
recover any profits on
Remicade that it lost to
Inflectra. It would, instead, be limited to a reasonable royalty.
2.
The fact that Celltrion produces Inflectra abroad would
not prevent Janssen from recovering lost profits relating to sales
of Inflectra in the United States if those sales could not have
been made without the production and sale of the infringing media
powders in the United States.
In Power Integrations v. Fairchild Semiconductor, the Federal
Circuit held that the presumption against the extraterritorial
application of the United States Patent laws prevented a patentee
from recovering damages measured by its foreign sales. 711 F. 3d
1348, 1371-72 (Fed. Cir. 2013). It held that "where the direct
measure of damages was foreign activity, i.e., making, using,
selling outside the United States, it was not enough, given the
required strength of the presumption against extraterritoriality,
that the damages measuring foreign activity have been factually
caused, in the ordinary sense, by domestic activity constituting
infringement under [35 U.S.C.] Section 271(a)." Carnegie Mellon
Univ. V. Marvell Tech. Group, 807 F. 3d 1283, 1307 (Fed. Cir.
2015).
In the instant case, it is alleged that Celltrion's agent,
HyClone Laboratories, Inc. ("HyClone"), infringed the '083 Patent
by making and selling its powder in the United States. In contrast
to Power Integrations, however, the resulting sale of the damages-
measuring product, Inflectra, also occurred in the United States.
In
these
circumstances,
extraterritoriality would
the
presumption
against
not overcome the principle of full
compensation, and the usual "but-for" causation test would apply.
The fact that Remicade is not now itself patented because
this court has found the patent on which it is based invalid, see
August 19, 2016 Memorandum and Order (Docket No. 226), does not
affect plaintiff's entitlement to damages, including lost profits,
for any proven infringement of the '083 Patent. A patentee may
recover damages in the form of lost profits to compensate for sales
of an unpatented product (i.e., Remicade) lost to an infringer's
non-infringing product (i.e., Inflectra), if the infringer could
only have captured the patentee's sales by infringing the patent
by, in this case, using an infringing powder. See Micro-Chem. Inc.
V. Lextron, Inc., 318 F, 3d 1119, 1125-26 {Fed. Cir. 2003). More
specifically, a
patentee is entitled to lost profits, even on
unpatented products, if a competitor makes the sales-capturing
end-product
using
an
infringing
method
or
product,
where the
competitor could have only captured the sales by infringing the
patent. See Minco Inc. v. Combustion Eng'g, 95 F. 3d 1109, 1119
(Fed. Cir. 1996).
3.
To decide whether it was feasible for Celltrion to have
used a non-infringing media powder to produce Inflectra, it must
be determined whether, starting on the date of first infringement,
Celltrion
could
have
switched
to
using
a
non-infringing
alternative. The fact-finder must consider how the market would
have
developed
"absent
the
infringing
product,"
if
the
infringement had not occurred. Grain Processing, 185 F. 3d at 135051. "A proper reconstruction of the 'but for' world that would
have
existed
infringer
absent
would
have
infringement
taken
to
must
avoid
consider
actions
the
infringement—including
designing around the patented intellectual property—starting on
the date of first infringement and not on some later date, such as
the
date of first notice" or the date the infringement began
generating lost profits. Apple Inc. v. Samsung Electronics Co.
Ltd., 2013 WL 5958172, *2-3 (N.D. Cal. 2013). Before the date of
sales that cause the patentee to lose profits, any infringement
would justify damages in the amount of a reasonable royalty.
4.
If the pending cases are dismissed without prejudice for
lack of standing because all owners if the '083 Patent are not
joined
as
plaintiffs
and
a
new
case
is
brought,
35
U.S.C.
§271(e)(6) will not limit Janssen's damages to a reasonable royalty
for any proven infringement of the *083 Patent. Celltrion initiated
the process prescribed by the Biologies Price Competition and
Innovation
Act
{the "BPCIA"),
42
U.S.C. §262(1),
but
did
not
properly complete it as required to obtain the limitation of
damages to a reasonable royalty provided by §271(e)(6).
"The
Biologies
Act lays
out
a
step-by-step
process
for
exchanging information and channeling litigation about patents
relevant to the application." Amgen Inc. v. Apotex Inc., 827 F.3d
1052, 1054 (Fed. Cir. 2016). Section 271(e)(6) limits a patentee's
damages to a reasonable royalty if it proves infringement of a
patent identified under 42 U.S.C. §§262(1)(4) and (5)(B) in a suit
filed more than 30 days after the end of the process prescribed by
the BPCIA.
As one step in that process, §262(1)(4).requires that
each party negotiate in good faith in an attempt to agree on a
list of patents that will be subject to an immediate infringement
action. Section 262(1)(5) provides a particular dispute resolution
procedure for identifying such patents if good faith negotiations
fail. It is only the patents that emerge from this negotiation
and, if necessary, dispute resolution procedure that are subject
to a reasonable royalty damages limitation if the patentee does
not sue within 30 days of the end of this process.
See 35 U.S.C.
§271{e)(6).
More specifically, §§262(1)(4) and (5) state that the parties
"shall" engage in "good-faith negotiations" and "shall" engage in
the specified dispute resolution procedure if those negotiations
fail.
42 U.S.C. §§262(1)(4) & (5).
"The word 'shall' generally
indicates that [a] directive is mandatory."
Apotex, 827 F.3d at
1061; see also Amqen Inc. v. Sandoz Inc., 794 F.3d 1347, 1359 (Fed.
Cir. 2015) ("[T]he word 'shall' . . . presumptively signals a
statutory requirement."). The court construes the term "shall" in
§§262(1)(4) and (5) to mean that the alleged infringer must comply
with each step of the BPCIA process in order to limit the patentee
to a reasonable royalty if it does not sue within 30 days of the
end of that process. Requiring the good faith completion of the
prescribed process gives the term "shall" its usual meaning. It
also serves the BPCIA's purpose of "avert[ing] and [] expedit[ing]
litigation." See Sandoz, 794 F.3d at 1365 (Newman, J., concurring
in part and dissenting in part).
On the present record, a reasonable fact-finder could not
conclude that Celltrion engaged in the good-faith negotiations
required by the BPCIA or in the dispute resolution procedure that
is required if no agreement was reached through those negotiations.
It is only the list of patents that emerge from the properly
completed BPCIA procedure that are potentially subject to the
reasonable royalty damages limitation.
On the present record, it
could not be found that the six patents originally subject to
litigation in this case emerged from a properly completed statutory
process.
As stated at the scheduling conference on February 24, 2017,
it is hereby ORDERED that:
1.
The parties shall, by March 17, 2017, confer to discuss
the possible settlement of these cases. Such discussions shall
include, among other things, the implications of the court's
guidance regarding the appropriate measure of damages and the
possibility of a settlement involving forms of relief other than
the payment of money damages.
2.
The parties shall, by March 17, 2017, report, jointly
if possible but separately if necessary, concerning:
a.
The
status
of
their
discussions
regarding
b.
Whether they wish to engage in mediation with a
settlement.
private mediator, a magistrate judge, or this court.
c. If necessary, their positions regarding how this
case should proceed, including whether the issues of liability and
damages should continue to be bifurcated for trial.
d. Dates
on
which
the
parties,
including
representatives with full settlement authority, are available for
a hearing on defendants' Motion to Dismiss for lack of standing.
UNITED STATES DISTRICT JUDGE
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