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