United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund et al v. Novartis Pharmaceuticals Corporation et al
Judge Allison D. Burroughs: MEMORANDUM AND ORDER entered granting (111) Motion to Dismiss for Failure to State a Claim; granting (111) Motion to Dismiss for Lack of Jurisdiction; denying (135) End Payer Plaintiffs' Motion for a Rule 26(f) Conference in case 1:15-cv-12732-ADB Associated Cases: 1:15-cv-12732-ADB, 1:15-cv-13461-ADB, 1:15-cv-13724-ADB, 1:15-cv-13725-ADB, 1:15-cv-13726-ADB(Montes, Mariliz)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
UNITED FOOD AND COMMERCIAL WORKERS
UNIONS AND EMPLOYERS MIDWEST HEALTH
BENEFITS FUND and LABORERS HEALTH AND
WELFARE TRUST FUND FOR NORTHERN
CALIFORNIA, on behalf of themselves and others
NOVARTIS PHARMACEUTICALS CORP.,
NOVARTIS AG, and NOVARTIS CORPORATION,
LOUISIANA HEALTH SERVICE AND INDEMNITY
COMPANY d/b/a BLUE CROSS AND BLUE SHIELD
OF LOUISIANA, on behalf of themselves and others
NOVARTIS PHARMACEUTICALS CORP.,
NOVARTIS AG, and NOVARTIS CORPORATION,
AFSCME HEALTH AND WELFARE FUND, on
behalf of themselves and others similarly situated,
NOVARTIS PHARMACEUTICALS CORP.,
NOVARTIS AG, and NOVARTIS CORPORATION,
Civil Action No. 15-cv-12732
Civil Action No. 15-cv-13461
Civil Action No. 15-cv-13724
MINNESOTA LABORERS HEALTH AND
WELFARE FUND, on behalf of themselves and others
NOVARTIS PHARMACEUTICALS CORP.,
NOVARTIS AG, and NOVARTIS CORPORATION,
PENNSYLVANIA EMPLOYEES BENEFIT TRUST
FUND, on behalf of themselves and others similarly
NOVARTIS PHARMACEUTICALS CORP.,
NOVARTIS AG, and NOVARTIS CORPORATION,
Civil Action No. 15-cv-13725
Civil Action No. 15-cv-13726
MEMORANDUM AND ORDER GRANTING MOTION TO DISMISS
In this putative class action, Laborers Health and Welfare Trust Fund for Northern
California and Louisiana Health Service and Indemnity Company d/b/a Blue Cross and Blue
Shield of Louisiana (“Plaintiffs”) bring state-law claims against Defendants Novartis
Pharmaceuticals Corporation, Novartis AG, and Novartis Corporation (collectively, “Novartis”),
on behalf of themselves and all others similarly situated, for engaging in an alleged
“monopolistic scheme” in connection with Gleevec®, a brand-name prescription drug used to
treat certain types of chronic myeloid leukemia and acute lymphoblastic leukemia. Specifically,
Plaintiffs allege that Novartis, which held the patent rights to Gleevec, engaged in illegal,
anticompetitive conduct designed to delay the entry of generic forms of the drug into the U.S.
market. Presently before the Court is Novartis’ Motion to Dismiss pursuant to Federal Rules of
Civil Procedure 12(b)(6) and 12(b)(1) [ECF No. 111] and End Payer Plaintiffs’ Motion for a
Rule 26(f) Conference [ECF No. 135]. For the reasons set forth below, the motion to dismiss is
GRANTED, and the motion for a conference is DENIED.
Plaintiffs filed their original Class Action Complaint on June 22, 2015, seeking only
declaratory and injunctive relief under federal antitrust law. [ECF No. 1]. In July and August
2015, Novartis filed motions to dismiss. [ECF Nos. 53, 60]. On February 1, 2016, while the
motions were pending, a generic form of Gleevec was introduced into the market, thus mooting
the request for injunctive relief. On March 24, 2016, the Court denied the motions to dismiss as
moot and gave Plaintiffs leave to amend their complaint. [ECF No. 104]. In addition, the Court
consolidated the action for pretrial purposes with four other cases involving similar claims
against Novartis. On April 8, 2016, Plaintiffs filed the operative Consolidated Amended Class
Action Complaint (“CAC”). [ECF No. 105]. The parties stipulated that the CAC would
supersede all other complaints filed by any plaintiff in any of the consolidated actions. In
contrast to the original complaint, the CAC does not contain any claims arising out of federal
antitrust law; instead, it asserts only state-law antitrust and unfair trade practices claims, under
the laws of 23 states and the District of Columbia. This Court appears to have diversity
jurisdiction pursuant to 28 U.S.C. § 1332.
On May 10, 2016, Novartis filed a motion to dismiss for failure to state a claim and lack
of jurisdiction [ECF Nos. 111, 112] and a supporting declaration [ECF No. 113]. Plaintiffs
opposed the motion [ECF No. 120] and Novartis filed a reply [ECF No. 121]. On August 1,
2016, the Court held a hearing on the motion. [ECF No. 126].
ALLEGATIONS IN THE CONSOLIDATED CLASS ACTION COMPLAINT
The CAC alleges a single claim for relief on behalf of the putative class—that Novartis’
conduct amounted to “monopolization and [a] monopolistic scheme” in violation of the laws of
23 states and the District of Columbia. Specifically, Plaintiffs allege that Novartis “engaged in an
exclusionary, anticompetitive scheme designed to create and maintain a monopoly for Gleevec
and its generic substitutes,” and that “as part of this scheme, Novartis: (1) [w]ith intent to
mislead or deceive, failed to disclose to the PTO [U.S. Patent and Trademark Office] material
information known to it and made material misrepresentations to the PTO, but for which the ‘051
patent would not have issued; (2) [i]mproperly listed the ‘051, ‘799, and RE’923 patents in the
Orange Book; and (3) [p]rosecuted sham patent litigation lawsuits against generic
manufacturers.” Plaintiffs further allege that at all relevant times, Novartis intended to, and did,
maintain and extend its monopoly power, which allowed it to continue charging supracompetitive prices for Gleevec without a substantial loss in sales, and that as a direct and
proximate result of this conduct, Plaintiffs and other members of the putative class were injured,
in that they paid more for the drug than they would have if a generic had been allowed onto the
The following facts are derived from the CAC unless otherwise noted.
Prosecution of the Polymorph Patents
Defendant Novartis Pharmaceuticals Corporation (a subsidiary of Defendant Novartis
AG), with FDA approval, markets and distributes Gleevec in the United States. Defendant
Novartis Corporation is the assignee of U.S. Patent No. 5,521,184 (“the ‘184 Patent”), which is
the basic compound patent claiming Gleevec’s active ingredient, commonly known as
“imatinib.” In addition to claiming the imatinib compound in its “free base” form, the ‘184
Patent also claims certain “salts” of the imatinib compound and their use as tumor-inhibiting
agents.1 The ‘184 Patent issued on May 28, 1996, and expired on July 4, 2015.
Prior to the expiration of the ‘184 Patent, Novartis obtained two follow-on patents that
claim particular crystalline (“polymorphic”) “non-needle” forms of the mesylate salt of
imatinib:2 (1) U.S. Patent No. 6,894,051 (“the ‘051 Patent”) issued on May 17, 2005, and (2)
U.S. Patent No. 7,554,799 (“the ‘799 Patent) issued on June 9, 2009, which was subsequently
surrendered and reissued as RE43’932 (“the RE’932 Patent”)3 (collectively, the “Polymorph
Because the “free base” forms of many pharmaceutical compounds often do not exhibit the
range of physical properties that are suitable for drug development, chemists sometimes modify
the characteristics of the compound by adding an acid to form an “acid addition salt.” One
common acid addition salt is a salt of methanesulfonic acid, also known as “mesylate.” Novartis
sells Gleevec with imatinib mesylate in a tablet form.
Once a salt is selected, a drug manufacturer can also select a polymorphic form of the salt. Salts
crystallize in a variety of different shapes, depending on conditions like temperature, solvent, and
degree of supersaturation. When a salt is to be used in pharmaceutical drugs, some crystalline
forms are preferable to others, as the form of the salt can affect drug qualities such as stability,
dissolution, and bioavilability. In addition, certain crystalline forms may not be ideal for massscale production, in light of the form’s flow properties, compressibility, bulk density, and
particle sizes. Plaintiffs allege that “[n]eedle-shaped crystals, which are long and very thin . . .
are very difficult to handle both in the laboratory and in commercial production.” Id. ¶ 41.
Accordingly, it is preferable to use a non-needle crystalline form when developing a salt for use
in prescription drugs. Id. ¶ 42.
The ‘051 Patent is alleged to expire November 23, 2019. CAC ¶ 262. The CAC alleges that the
‘799 Patent, due to the terminal disclaimer, would expire the same day, id. ¶ 293, but Novartis
represents that the RE’932 Patent expires on July 16, 2019 [ECF No. 112 at 4 n.6].
Patents”). The CAC alleges that the Polymorph Patents are invalid, although Plaintiffs do not
contest the validity of the original ‘184 Patent.
The application for the ‘051 Patent, filed in January 2000, purported to disclose and claim
the methanesulfonate salt of imatinib, along with a particular polymorphism—namely, the nonneedle form, which Novartis referred to as the “β-crystalline” form.4 In September 2000, the
patent examiner issued a non-final rejection of Novartis’ claims, concluding that the claims were
both anticipated and rendered obvious by the ‘184 Patent. Specifically, the examiner rejected the
claims as anticipated by the ‘184 Patent’s disclosure of the “free form” of imatinib and a “list of
intended salts, including the methanesulfonate [mesylate] salt.” She also held that the burden was
on the applicant to show that the claimed β-crystalline form would not be inherently produced
using routine procedures described in the ‘184 Patent. Although Novartis responded to the
examiner’s rejections, the examiner nonetheless issued a final office action on July 5, 2001 in
which she found that Novartis’ patent claims were anticipated and rendered obvious by the ‘184
Novartis appealed this rejection to the Patent Board. On November 24, 2003, the Patent
Board reversed the examiner’s decision. The Patent Board’s decision assumed, without deciding,
that the original ‘184 Patent described the mesylate salt of imatinib. The Patent Board
nevertheless held that the ‘184 Patent “contains insufficient disclosure to support a finding of
anticipation of the appealed claims which recite a non-hygroscopic or β-crystalline form of the
methanesulfonic acid addition [mesylate] salt of imatinib.” See Declaration of Wyley S. Proctor
The Court understands the term “methanesulfonate salt” to be identical to “mesylate salt” in
this case, and thus uses them interchangeably.
[ECF No. 113] (“Proctor Decl.”), Ex. D.5 Further, the Patent Board held that the examiner had
erred in shifting the burden of persuasion to Novartis “to establish that the β-crystalline form
recited in their claims ‘cannot be made following routine conditions.’” Id. This, the Patent Board
explained, was reversible error, because “before an applicant can be put to this burdensome task,
the examiner must provide some evidence or scientific reasoning to establish the reasonableness
of the examiner’s belief that the functional limitation is an inherent characteristic of the prior
art.” Id. (internal quotations and citation omitted). Because no such evidence or reasoning
appeared in the record, the Patent Board reversed the examiner’s rejections based on
Similarly, the Patent Board reversed the examiner’s rejections based on obviousness.
Again, the Patent Board assumed, arguendo, that the ‘184 Patent described the mesylate salt of
imatinib. Id. The Patent Board, however, disagreed with the examiner that this disclosure would
render obvious the claims in the ‘051 Patent. The Board found that the examiner had not
adequately explained how a person having ordinary skill in the art “would have been led from
‘here to there,’ i.e., from the methanesulfonic acid addition [mesylate] salt of imatinib to the . . .
β-crystalline form of that compound recited in the appealed claims.” Id.; see also CAC ¶ 244.
On December 31, 2003, six weeks after the Patent Board reversed the examiner’s
rejections and without conducting any further proceedings, the examiner issued a notice of
allowance.6 Plaintiffs allege that the file wrapper reflects no further developments to the record
Although the Patent Board’s decision is not attached to the CAC, it is cited at length therein.
Moreover, because documents in the patent’s prosecution history are public records, the Court
may take judicial notice of their contents. See Beddall v. State St. Bank & Trust Co., 137 F.3d
12, 16–17 (1st Cir. 1998).
“If, on examination, it appears that the applicant is entitled to a patent under the law, a notice of
allowance will be sent to the applicant . . . .” 37 C.F.R. § 1.311(a).
following the Board’s decision, except a notice that the patent term would be extended by 311
days due to the pendency of the appeal to the Board. In Plaintiffs’ view, the Board’s decision
was based on an incomplete prior art record and that the examiner’s subsequent decision
allowing the patent to issue was not on the merits.
The CAC alleges that Novartis specifically withheld five prior art references—
publications by its own scientists—that disclosed the earlier use of the mesylate salt form of
imatinib to inhibit the growth of tumor cells:
(1) A 1996 article published in Cancer Research by Novartis scientists Buchdunger,
Zimmerman, Lydon, Druker, and others entitled “Inhibition of the Ab1 ProteinTyrosine Kinase in vitro and in vivo by a 2-Phenylaminopyrimidine Derivative.” The
article allegedly disclosed that the scientists had made a series of compounds that
inhibited tyrosine kinases, and described a single compound (imatinib) that showed
potent inhibition of the Abl kinase associated with chronic myeloid leukemia. The
article explained that the scientists had also synthesized a methanesulfonate salt form
of the compound, and that they did so well before the article was submitted on July
31, 1995. The Court will refer to this article as the “1996 Buchdunger Article.” See
CAC ¶¶ 159–64.
(2) A 1997 article published in Bioorganic & Medicinal Chemistry Letters by
Zimmerman, Buchdunger, and others from Novartis’ Oncology Research
Department, entitled “Potent and Selective Inhibitors of the Abl-Kinase:
Phenylamino-Pyrimidine (PAP) Derivatives.” The article, which was submitted for
publication on August 21, 1996, described development and optimization of a new
class of phenylamino-pyramidine derivatives that yielded highly potent and selective
Bcr-Abl kinase inhibitors. The article advised that in one particular series of the PAP
derivatives, “improvement of the aqueous solubility can be accomplished by
attachment of a salt forming group on the indole side chain.” Thus, the article
suggested that the compound might be a development candidate for use in treatment
of certain leukemias. The Court will refer to this article as the “1997 Zimmerman
Article.” See id. ¶¶ 178–80.
(3) A 1996 Article published in Nature Medicine by Druker, Buchdunger, Zimmerman,
Lydon, and others entitled “Effects of a Selective Inhibitor of the Abl Tyrosine
Kinase on the Growth of Bcr-Ab1 Positive Cells.” The article allegedly detailed the
design of imatinib and its effect of selectively inhibiting proliferation of Bcr-Abl
expressing cells in vitro and in vivo. The Court will refer to this article as the “1996
Druker Article.” See id. ¶ 172.
(4) A 1995 presentation that Druker gave at the American Society of Hematology’s
annual meeting in Seattle, entitled “Preclinical evaluation of a selective inhibitor of
the Abl tyrosine kinase as a therapeutical agent for chronic myelogenous leukemia.”
The presentation abstract allegedly disclosed the imatinib compound as a potent and
specific inhibitor of the ABL protein tyrosine kinase, and concluded that the
compound may be useful in the treatment of certain leukemias. The Court will refer
to this as the “1995 Druker Presentation.” See id. ¶¶ 157–58.
(5) A 1996 Article published in Bioorganic & Medicinal Chemistry Letters by
Zimmerman, Buchdunger, Lydon, and others entitled “Phenylamino-Pyrimidine
(PAP) – Derivatives: A New Class of Potent and Highly Selective PDGF-Receptor
Autophosphorylation Inhibitors.” In that article, Zimmerman noted that the
phenylamino-pyramidine compounds at issue “show poor solubility in water . . . but
are soluble under acidic conditions.” In a footnote, the authors described a “typical
synthesis” of the compounds, which involved filtration, evaporation, and
crystallization. The Court will refer to this as the “1996 Zimmerman Article.” See
id. ¶¶ 165–67.
On March 26, 2004, Novartis submitted a Continued Prosecution Application Request
and a supplemental Information Disclosure Statement (“IDS”) that disclosed, for the first time,
two of these prior art references (the 1996 Buchdunger Article and 1997 Zimmerman Article).
See id. ¶ 252. Other prior art—the 1995 Druker Presentation, 1996 Zimmerman Article, and
1996 Druker Article—was allegedly never disclosed. Id. ¶¶ 252, 271, 272. Along with the IDS,
Novartis filed “remarks,” in which it argued that because the Patent Board had presumed that the
mesylate salt of imatinib was described in the prior art, yet still reversed the examiner’s
rejections, principles of res judicata required that the patent claims be allowed, even assuming
that the prior art disclosed the mesylate salt. Id. ¶ 253; Proctor Decl. Ex. G.
Plaintiffs further allege that during the prosecution of the ‘051 Patent before the PTO,
Novartis made intentional false statements and material omissions, including
(i) misrepresenting that the mesylate salt of imatinib was not actually prepared in
Zimmermann [the ‘184 Patent], (ii) misrepresenting that obviousness and
anticipation depend on whether the salt form compound was actually made in
Zimmermann [the ‘184 Patent] (when the relevant question is whether its
preparation is within the knowledge of those of ordinary skill in light of
Zimmerman [the ‘184 Patent]), (iii) failing to disclose that the specific salt, imatinib
mesylate, had been publicly disclosed in publications authored by Novartis’s own
scientists, (iv) withholding relevant prior art until after the PTO sent a notice of
allowability, thereby failing to disclose information material to patentability during
the prosecution of the patent, (v) misrepresenting, when it did finally disclose some
material prior art, that the Board had already decided that prior art disclosing the
mesylate salt form would not invalidate the patent (when the Board did not consider
whether other prior art disclosed the mesylate salt, in part because Novartis had not
provided the relevant prior art).
CAC ¶ 265.
Plaintiffs additionally claim that Novartis misrepresented in its patent application that the
non-needle, β-crystalline form of imatinib mesylate was a recent and “surprising” discovery
when, in fact, Novartis scientists had been using the β-crystalline form since August 1993 and
anyone skilled in the art would have been both motivated and easily able to formulate a nonneedle, crystalline form using routine laboratory procedures.
The PTO ultimately issued the ’051 Patent on May 17, 2005. In 2006, Novartis filed and
obtained the second follow-on patent, the ‘799 Patent, which purportedly disclosed the
methanesulfonate salt of imatinib and its β-crystalline form. According to Plaintiffs, parts of the
‘799 Patent application were identical to the ‘051 Patent application. Novartis again stated that it
was “surprised” to find the β-crystalline form in the methanesulfonate salt of the compound,
even though the form had been known to have advantageous properties since July 31, 1995 and
was the basis of the ‘051 Patent. Plaintiffs allege that the ‘799 Patent was broader than the ‘051
Patent, which claimed the β-crystalline form, because the ‘799 Patent ultimately also claimed the
non-needle crystal of imatinib mesylate. The ‘799 Patent eventually issued on June 9, 2009.
Plaintiffs argue that it is invalid for the same reasons that the ‘051 Patent is invalid. The ‘799
Patent was eventually reissued as the RE’932 Patent.
The Orange Book Listing
The Orange Book lists FDA-approved drug products along with the corresponding
patents that cover the drugs. One objective of the Orange Book is to provide would-be generic
manufacturers with notice of any patent rights that are implicated by a brand-name drug. The
information published in the Orange Book, however, is based on drug manufacturers’
submissions and representations to the FDA. The FDA does not independently determine
whether a particular drug product actually reads on a particular patent claim, and it does not
examine the asserted patents to ensure their validity.7
Novartis submitted all three patents—the original ‘184 Patent, the ‘051 Patent, and the
‘799 Patent—to the FDA to be listed in the Orange Book as covering Gleevec. CAC ¶ 295.
Plaintiffs allege that Novartis did so knowing that the Polymorph Patents had “no realistic
Under the Federal Food, Drug, and Cosmetic Act (“FDCA”), a drug manufacturer must obtain
FDA approval to market a drug product by filing a New Drug Application (“NDA”). The FDA
will approve the NDA if the drug applicant is able to demonstrate that the drug is safe and
effective to treat a particular condition. Within thirty days after the FDA approves an NDA, the
drug applicant must submit a “Form 3542” to the FDA, in which the sponsor discloses all patents
that it believes are implicated by its new drug. Specifically, FDA regulations require the
applicant to disclose
each patent that claims the drug or a method of using the drug that is the subject of
the [new drug application] . . . and with respect to which a claim of patent
infringement could reasonably be asserted if a person not licensed by the owner of
the patent engaged in the manufacture, use, or sale of the drug product.
21 C.F.R. § 314.53(b)(1). If, however, there are no relevant patents that could reasonably be
asserted, the applicant is also required to disclose this information. The regulation provides that
[i]f the applicant believes that there are no relevant patents that claim the drug
substance . . . drug product . . . or the method(s) of use for which the applicant has
received approval, and with respect to which a claim of patent infringement could
reasonably be asserted if a person not licensed by the owner of the patent engaged
in the manufacture, use, or sale of the drug product, the applicant will verify this
information in the appropriate forms.
Id. § 314.53(c)(3). The FDA publishes the patent information provided by the drug applicant in a
compendium called Approved Drug Products with Therapeutic Equivalence Evaluations (the
likelihood” of ever being able to stand up in court as valid patents, and that those patents would
pose an impediment to the launch of generic imatinib mesylate. Id.
Litigation and Settlement Between Sun Pharma and Novartis
On June 16, 2006, Sun Pharma (“Sun”) filed an abbreviated new drug application
(“ANDA”), pursuant to the Hatch-Waxman amendments to the Federal Food, Drug, and
Cosmetic Act, with the FDA, seeking approval to market 100mg and 400mg generic imatinib
mesylate tablets, with Gleevec as the brand-name reference.8 In its ANDA, Sun told the FDA
that it would wait until the ‘184 Patent expired in July 2015 before marketing its drug, but that
the follow-on ‘051 Patent was invalid and would not be infringed. Accordingly, Sun sought FDA
approval to market its generic no later than July 5, 2015.
Novartis did not file a Hatch-Waxman infringement suit with respect to the ‘051 Patent
within the period set forth in the statute. Accordingly, no 30-month stay of FDA approval ever
The CAC explains the Hatch-Waxman amendments as follows. See CAC ¶¶ 58–64. In 1984,
Congress passed the “Hatch-Waxman” amendments to the FDCA, which were designed to speed
the introduction of low-cost generic drugs into the market by permitting generic manufactures to
file abbreviated new drug applications. The FDA will approve an ANDA as long as the applicant
can show that the proposed generic is therapeutically equivalent to an existing brand-name drug
on the market. The Hatch-Waxman amendments also created a mechanism to resolve potential
patent disputes between would-be generic manufacturers and brand-name manufacturers before
the launch of a generic product. When filing an ANDA, the generic manufacturer must certify, in
one of four ways, that its proposed drug will not infringe any patents listed in the Orange Book
for the brand-name drug. See 21 U.S.C. § 355(j)(2)(A)(vii). If the generic drug sponsor files a
“Paragraph IV Certification,” a brand-name manufacturer can sue the ANDA applicant for patent
infringement (notwithstanding the fact that the applicant is not yet infringing). The resulting
lawsuit, which is commonly known as “Hatch-Waxman Litigation,” has the effect of staying the
FDA’s final approval of the ANDA until the earlier of (1) the passage of 30 months or (2) a court
entering final judgment finding that the patent is invalid or not infringed by the generic. Until
one of those conditions occurs, the FDA cannot authorize the generic manufacturer to go to
market with its product. In addition, the Hatch-Waxman amendments provide that the first
ANDA drug applicant to challenge a patent through a Paragraph IV Certification is eligible for
six months of marketing exclusivity after it brings its drug to market.
went into effect for the Sun ANDA, and on November 13, 2009, the FDA granted tentative
approval to Sun’s ANDA for a generic version of Gleevec.
On June 7, 2013, while Sun was preparing for the timely entry of its generic into the
marketplace, Sun filed an action against Novartis in the United States District Court for the
District of New Jersey, seeking a declaratory judgment that Sun would not be infringing the ‘051
Patent and/or that the ‘051 Patent was invalid or unenforceable. Novartis counterclaimed,
alleging infringement of the ‘051 Patent and seeking a declaration that the ‘051 Patent was valid
and enforceable.9 Plaintiffs allege that at the time Novartis filed its counterclaims, Novartis knew
that the ‘051 Patent was invalid for obviousness or anticipation and that “Novartis also knew that
it had very likely committed inequitable conduct before the PTO during the prosecution of the
’051 Patent.” CAC ¶ 306.
Sun and Novartis settled the case on May 15, 2014, less than one year after the litigation
was filed and before the court issued any substantive rulings in the action. Shortly after the
settlement, both parties announced that under their settlement agreement, Sun would be
permitted to launch its generic version of Gleevec on February 1, 2016.
Litigation And Settlement With Other Generic Manufacturers
In or around 2014, several other generic manufacturers filed ANDAs for generic Gleevec,
which included Paragraph IV Certifications as to some or all of the Orange Book-listed patents
for Gleevec. In contrast to its approach in the Sun litigation, Novartis immediately filed HatchWaxman infringement suits against each of these generics, resulting in 30-month stays of FDA
approval as to those ANDAs.
Novartis did not assert the ‘799 Patent or the RE’932 Patent against Sun.
Two of those cases, one involving Dr. Reddy’s Laboratories and the other involving
Ranbaxy, have already resulted in settlements, the terms of which are not disclosed in the CAC.
Plaintiffs represent that Novartis is still actively pursuing litigation as to six other ANDA filers,
including Breckenridge, Roxane/Boehringer Ingelheim, Natco, Amneal, Shilpa Medicare Ltd.,
and Wockhardt Bio AG. These suits are currently pending in the District Courts for the District
of Delaware and the Southern District of New York, with 30-month stays that expire between
December 2017 and June 2018.
Under the Federal Rules of Civil Procedure, a complaint “must provide ‘a short and plain
statement of the claim showing that the pleader is entitled to relief.’” Cardigan Mountain Sch. v.
N.H. Ins. Co., 787 F.3d 82, 84 (1st Cir. 2015) (quoting Fed. R. Civ. P. 8(a)(2)). This pleading
standard requires “more than labels and conclusions,” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007), and “[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice,” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Rather, a
complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’” Id. at 678 (quoting Twombly, 550 U.S. at 570).
When evaluating the sufficiency of a complaint, the Court “first must ‘distinguish the
complaint’s factual allegations (which must be accepted as true) from its conclusory legal
allegations (which need not be credited).’” Cardigan Mountain Sch., 787 F.3d at 84 (quoting
García-Catalán v. United States, 734 F.3d 100, 103 (1st Cir. 2013)) (further internal quotations
and citation omitted). “Second, the court must determine whether the factual allegations are
sufficient to support the reasonable inference that the defendant is liable for the misconduct
alleged.” García-Catalán, 734 F.3d at 103 (internal quotations and citation omitted). In
conducting this analysis, the Court must accept all well-pleaded facts as true and analyze those
facts in the light most favorable to the plaintiff’s theory, drawing all reasonable inferences in
favor of the plaintiff. U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st
“When considering a motion to dismiss under subsection 12(b)(1) of the Federal Rules of
Civil Procedure, the Court should apply a standard of review ‘similar to that accorded a dismissal
for failure to state a claim’ under subsection 12(b)(6).” Menge v. N. Am. Specialty Ins. Co., 905
F. Supp. 2d 414, 416 (D.R.I. 2012) (quoting Murphy v. United States, 45 F.3d 520, 522 (1st Cir.
When faced with motions to dismiss under both 12(b)(1) and 12(b)(6), a district
court, absent good reason to do otherwise, should ordinarily decide the 12(b)(1)
motion first . . . . It is not simply formalistic to decide the jurisdictional issue when
the case would be dismissed in any event for failure to state a claim. Different
consequences flow from dismissals under 12(b)(1) and 12(b)(6): for example,
dismissal under the former, not being on the merits, is without res judicata effect.
Ne. Erectors Ass’n of the BTEA v. Sec’y of Labor, Occupational Safety & Health Admin., 62
F.3d 37, 39 (1st Cir. 1995).
Although Plaintiffs’ monopolization claims are based solely on state law, Plaintiffs and
Novartis have both raised legal arguments that rely heavily on doctrines developed in federal
antitrust cases—specifically, the Noerr-Pennington doctrine, as set forth in E. R. R. Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers of Am.
v. Pennington, 381 U.S. 657 (1965)—and on the related grounds for antitrust liability—a
“Walker Process” theory, as described in Walker Process Equip., Inc. v. Food Mach. & Chem.
Corp., 382 U.S. 172 (1965), and a sham litigation theory.
The Noerr-Pennington doctrine, which arose in antitrust cases under the Sherman Act,
holds that a party petitioning the government for redress is generally immune from antitrust
liability based on that conduct. See Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus.,
Inc., 508 U.S. 49, 56 (1993) (hereinafter, “PRE”). Although it appears that the doctrine
developed, at least in part, out of First Amendment concerns, see PRE, 508 U.S. at 56 (citing
Noerr, 365 U.S. at 138); In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. 14-md02503-DJC, 2015 WL 5458570, at *11 (D. Mass. Sept. 16, 2015); Hamilton v. Accu-tek, 935 F.
Supp. 1307, 1316 (E.D.N.Y. 1996), the Supreme Court has confirmed that Noerr-Pennington
immunity extends to “petitioning” activities before the courts (i.e., litigation), see Cal. Motor
Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972).
There are exceptions to Noerr-Pennington immunity, however, including when a
defendant engages in sham litigation or Walker Process fraud on the PTO, both of which
Plaintiffs allege here. The Federal Circuit has held that the sham litigation and Walker Process
exceptions “provide alternative legal grounds on which a patentee may be stripped of its
immunity from the antitrust laws,” and that “either or both may be applicable to a particular
party’s conduct in obtaining and enforcing a patent.” Nobelpharma AB v. Implant Innovations,
Inc., 141 F.3d 1059, 1071 (Fed. Cir. 1998); see also Handgards, Inc. v. Ethicon, Inc., 601 F.2d
986, 994 (9th Cir. 1979) (distinguishing sham litigation from Walker Process).
In this case, Plaintiffs’ state-law monopolization claims, which closely track the sham
litigation and Walker Process exceptions, are based on allegations that Novartis (1) made
misrepresentations and omissions when prosecuting the ‘051 Patent before the PTO; (2)
wrongfully submitted the Polymorph Patents for publication in the Orange Book; and (3)
initiated alleged sham litigation against Sun and other generic manufacturers. Novartis has
moved to dismiss, asserting that Plaintiffs fail to allege facts supporting either a sham litigation
or Walker-Process-type claim. Plaintiffs’ opposition brief argues the contrary. Thus, it appears
that both parties have presumed that (1) Noerr-Pennington shields parties from liability under all
of the state antitrust and unfair competition laws cited in the CAC; and that (2) in order to plead
viable claims under these state laws, the Plaintiffs must plausibly allege sham litigation and/or
Walker-Process theories of antitrust liability.
The First Circuit has not decided whether the Noerr-Pennington doctrine is applicable to
state law claims as a matter of federal law. See Davric Me. Corp. v. Rancourt, 216 F.3d 143, 148
n.7 (1st Cir. 2000). The majority of circuits, however, have recognized that Noerr-Pennington
emanated, at least in part, from First Amendment concerns and therefore can apply to certain
state law claims as well as federal claims. See, e.g., Coll v. First Am. Title Ins. Co., 642 F.3d
876, 895 (10th Cir. 2011) (“[T]he Noerr-Pennington doctrine is based upon the First
Amendment, which applies to [the states] through the Fourteenth Amendment . . . .”); see also
VIBO Corp. v. Conway, 669 F.3d 675, 683–84 (6th Cir. 2012) (“Where private actors petition
the government for action that would violate antitrust law, the Petition Clause [of the First
Amendment] immunizes the actors from litigation in connection with their petitioning.”); Kottle
v. Nw. Kidney Centers, 146 F.3d 1056, 1059 (9th Cir. 1998) (noting that the Noerr-Pennington
doctrine “sweeps broadly and is implicated by both state and federal antitrust claims that allege
anticompetitive activity in the form of lobbying or advocacy before any branch of either federal
or state government”); John J. Miles, Health Care and Antitrust Law, § 7:8 n.7 (2017) (collecting
cases). Further, many states have actually adopted the Noerr-Pennington doctrine and applied it
to certain state-law claims. See Coll, 642 F.3d at 895 (noting that “many other states have
adopted and apply the Noerr–Pennington doctrine to state antitrust claims, as well as other state-
law claims,” collecting cases, and anticipating that the Noerr-Pennington doctrine would be
applied to the New Mexico Antitrust Act); Apple, Inc. v. Motorola Mobility, Inc., 886 F. Supp.
2d 1061, 1077 (W.D. Wis. 2012) (applying Noerr-Pennington immunity to bar state-law unfair
competition claim); Bayou Fleet, Inc. v. Alexander, 26 F. Supp. 2d 894, 897 (E.D. La. 1998)
(dismissing claim under Louisiana Unfair Trade Practices Act as barred by Noerr-Pennington).
Accordingly, as both parties have already done, albeit without explicitly addressing the issue, the
Court applies the Noerr-Pennington doctrine to Plaintiffs’ state-law claims in this case.
In addition to arguing that Plaintiffs fail to allege plausible sham litigation or Walker
Process claims, Novartis argues that Plaintiffs lack standing to assert these claims and that their
Walker Process claims are preempted by federal patent law.
Novartis argues, first, that Plaintiffs lack standing to challenge the validity of the patents
and can therefore not pursue sham litigation claims based on invalidity, and second, that
Plaintiffs do not have standing to bring Walker Process claims because they are indirect
purchasers. Plaintiffs argue that they have standing to pursue both state-law antitrust claims that
involve issues of patent invalidity and Walker Process fraud despite the fact that they are indirect
Article III of the U.S. Constitution requires that three conditions be satisfied in order for a
plaintiff to have standing. U.S. Const. art. III, § 2, cl. 1. “First and foremost, there must be
alleged (and ultimately proved) an ‘injury in fact.’” Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 103 (1998) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155 (1990)). This injury
“must be concrete in both a qualitative and temporal sense,” “distinct and palpable” as opposed
to “abstract,” and “actual or imminent” as opposed to “conjectural or hypothetical.” Whitmore,
495 U.S. at 155 (internal quotations and citations omitted). Second, standing requires causation,
defined as a “fairly traceable connection between the plaintiff’s injury and the complained-of
conduct of the defendant.” Steel Co., 523 U.S. at 103. Finally, standing requires
“redressability—a likelihood that the requested relief will redress the alleged injury.” Id.
In addition to the Article III standing requirements, plaintiffs pleading federal antitrust
claims must meet two other requirements: “the plaintiff must also allege antitrust injury and must
demonstrate, through a series of related factors, that its injuries are more than speculative and
that it is well-situated to serve as an ‘efficient enforcer’ of the antitrust laws.” William B.
Rubenstein, Newberg on Class Actions § 20:3 (5th ed. 2017); see also Associated Gen.
Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 535–38 (1983)
(establishing factors to consider in assessing antitrust standing). Antitrust standing is generally
justified on prudential, rather than on constitutional, grounds. Sullivan v. Tagliabue, 25 F.3d 43,
45 n.5 (1st Cir. 1994) (“It is unquestioned that the requirements of antitrust standing exceed
those of standing in a constitutional sense.”); see also In re Modafinil Antitrust Litig., 837 F.3d
238, 264 n.30 (3d Cir. 2016), as amended (Sept. 29, 2016) (“Antitrust standing, unlike Article III
standing, is not a jurisdictional requirement.”); Ethypharm S.A. Fr. v. Abbott Labs., 707 F.3d
223, 232 (3d Cir. 2013).
Although the arguments are somewhat unclear, Novartis seems to challenge Plaintiffs’
standing based on antitrust and patent prudential considerations, which relate to Plaintiffs’ ability
to meet non-Article III standing requirements, rather than challenging their constitutional
standing. In any event, the Court finds the Article III standing requirements met here.10
Although the Court need not reach the antitrust standing issue because the claims are
dismissed on other grounds, it notes that whether Plaintiffs, as indirect purchasers, have antitrust
standing to recover under state antitrust statutes in federal court is a question of state law, see
Sham Litigation Claims
Relevant Legal Standard
In order to bring a sham litigation claim, a plaintiff must plausibly plead that the litigation
(1) ‘objectively baseless in the sense that no reasonable litigant could realistically
expect success on the merits’; and (2) subjectively motivated by a desire to
‘interfere directly with the business relationships of a competitor, through the use
of the governmental process—as opposed to the outcome of that process—as an
Solodyn, 2015 WL 5458570, at * 11 (quoting PRE, 508 U.S. at 60–61). “The existence of
probable cause to institute legal proceedings precludes a finding that an antitrust defendant has
engaged in sham litigation.” PRE, 508 U.S. at 62. The Court addresses the two PRE prongs
sequentially because “[o]nly if challenged litigation is objectively meritless may a court examine
the litigant’s subjective motivation.” Id. at 60.
“Objectively Baseless” Prong
Novartis argues that Plaintiffs have not plausibly alleged that the Sun infringement
litigation was “objectively baseless,” as required to satisfy the first prong of the PRE test.
Salveson v. JP Morgan Chase & Co., 166 F. Supp. 3d 242, 256 (E.D.N.Y.), aff’d, 663 F. App’x
71 (2d Cir. 2016), cert. denied 137 S.Ct. 1826, (Apr. 24, 2017); see also In re Lithium Ion
Batteries Antitrust Litig., No. 13-MD-2420 YGR, 2014 WL 4955377, at *7 (N.D. Cal. Oct. 2,
2014) (“[A]ntitrust standing under state law is just that, a matter of state law.”); D.R. Ward
Constr. Co. v. Rohm & Haas Co., 470 F. Supp. 2d 485, 494 (E.D. Pa. 2006), that the parties
failed to adequately brief. Furthermore, the Court does not understand Novartis’ challenge to
Plaintiffs’ standing to assert claims in states where they do not reside and have not been injured
to raise an Article III standing issue that must be addressed now. See Newberg on Class Actions
§ 2:3; In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 307 (3d
Cir. 1998) (“The absentee class members are not required to make a similar [Article III]
showing, because once the named parties have demonstrated they are properly before the court,
‘the issue [becomes] one of compliance with the provisions of Rule 23, not one of Article III
standing.’” (quoting Goodman v. Lukens Steel Co., 777 F.2d 113, 122 (3d Cir. 1985), aff’d, 482
U.S. 656 (1987))).
Novartis asserts that in order to plead a plausible case for “objective baselessness,” Plaintiffs
need to allege that the patent was either (1) declared invalid by some other court; or (2) that its
validity was “tarnished” by an adverse Markman ruling or some other judicial ruling that calls its
validity into question. Plaintiffs aver that a prior invalidity finding is not a pre-condition to a
sham litigation claim, and that by alleging the patent’s invalidity here, they have sufficiently
pleaded sham litigation. The Court declines to adopt a bright-line rule requiring that a patent be
invalidated or tarnished before a plaintiff can allege a sham litigation claim, but notes that it is
difficult to conceive of a scenario in which a sham litigation claim would go forward without the
patent having been invalidated or otherwise tarnished.
In support of the “objectively baseless” prong, Plaintiffs argue that the ‘051 Patent is
invalid because it would have been obvious to an ordinary person skilled in the art or inherently
anticipated in the prior art and thus not patentable. Specifically, Plaintiffs aver that the prior
art—the ‘184 Patent and at least two articles—disclosed that Novartis had made mesylate salt of
imatinib, that an ordinary person with the requisite skill would have been motivated to create a
usable crystal form, and that the β-crystal form would have been an obvious choice. Further,
Plaintiffs assert that the fact that Novartis failed to sue Sun within the requisite time period to
obtain a mandatory 30-month stay, and then agreed to a settlement very favorable to Sun,
allowing Sun to share in $7.5 billion in potential Gleevec sales that it otherwise would not have
been entitled to unless it succeeded in litigation, all shows that Novartis did not believe that it
could win on the merits.
Here, Plaintiffs have not alleged a plausible sham litigation claim. The possible invalidity
of a patent does not, in and of itself, establish that the litigation asserting it was objectively
baseless. “A firm that has received a patent from the patent office (and not by fraud . . . ), and
thus enjoys the presumption of validity that attaches to an issued patent, 35 U.S.C. § 282, is
entitled to defend the patent’s validity in court, to sue alleged infringers, and to settle with them,
whatever its private doubts, unless a neutral observer would reasonably think either that the
patent was almost certain to be declared invalid, or the defendants were almost certain to be
found not to have infringed it, if the suit went to judgment.” Asahi Glass Co. v. Pentech Pharm.,
Inc., 289 F. Supp. 2d 986, 992–93 (N.D. Ill. 2003). Absent meeting the PRE criteria, “[n]either
the bringing of an unsuccessful suit to enforce patent rights, nor the effort to enforce a patent that
falls to invalidity, subjects the suitor to antitrust liability.” C.R. Bard, Inc. v. M3 Sys., Inc., 157
F.3d 1340, 1369 (Fed. Cir. 1998). In other words, even if a patent is ultimately found to be
invalid, that does not necessarily prove that the relevant claims, without a prior invalidity
finding, were “so baseless that no reasonable litigant could realistically expect to secure
favorable relief.” PRE, 508 U.S. at 62. Thus, a merely plausible patent invalidity claim is not
enough to support a plausible sham litigation claim.
“[T]he determination of whether such a suit is a sham depends not on what the patentee
believes but ‘on the nature of and the underlying merits of the patentee’s case.’” Asahi Glass
Co., 289 F. Supp. 2d at 995 (quoting FilmTec Corp. v. Hydranautics, 67 F.3d 931, 936 (Fed. Cir.
1995)). Even on the facts alleged in the CAC, Novartis had a colorable claim that the ‘051 Patent
was valid and enforceable by arguing that it was neither inherently anticipated by nor obvious in
the prior art, which is consistent with both the patent examiner’s and PTO Board of Appeal’s
To prove invalidity by anticipation, a party must show that “every element and limitation
of the claim was previously described in a single prior art reference, either expressly or
inherently, so as to place a person of ordinary skill in possession of the invention.” Sanofi–
Synthelabo v. Apotex, Inc., 550 F.3d 1075, 1082 (Fed. Cir. 2008). The prior art, identified by
Plaintiffs as belatedly presented or withheld completely from the patent examiner, neither
describes the β-crystalline form of the imatinib mesylate salt nor a method to produce it. The
prior art only mentions imatinib mesylate itself, CAC ¶ 140, which has many different crystalline
forms, CAC ¶¶ 35–36. “[D]ifferences between the prior art reference and a claimed invention,
however slight, invoke the question of obviousness, not anticipation.” Net MoneyIN, Inc. v.
VeriSign, Inc., 545 F.3d 1359, 1371 (Fed. Cir. 2008). Furthermore, not only did the PTO assume
that the prior art disclosed the imatinib mesylate, but the patent examiner also received some of
the prior art identified in the CAC, initialed it, and still issued the ‘051 Patent. Thus, the facts in
the CAC show that Novartis had a colorable argument that the ‘051 Patent was not inherently
anticipated by prior art, and Plaintiffs cannot, without more, plausibly allege that the Sun
litigation was objectively baseless on that theory of patent invalidity.
With respect to Plaintiffs’ theory of patent invalidity based on obviousness, the CAC also
establishes that Novartis had a colorable claim that the ‘051 Patent was not obvious. Section 103
of the Patent Act provides that subject matter cannot be patented if “the differences between the
subject matter sought to be patented and the prior art are such that the subject matter as a whole
would have been obvious at the time the invention was made to a person having ordinary skill in
the art to which said subject matter pertains.” 35 U.S.C. § 103. The Supreme Court explained
how to apply § 103 as follows:
the scope and content of the prior art are . . . determined; differences between the
prior art and the claims at issue are . . . ascertained; and the level of ordinary skill
in the pertinent art resolved. Against this background, the obviousness or
nonobviousness of the subject matter is determined. Such secondary considerations
as commercial success, long felt but unsolved needs, failure of others, etc., might
be utilized to give light to the circumstances surrounding the origin of the subject
matter sought to be patented.
Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 17–18 (1966); see also KSR Int’l Co. v.
Teleflex Inc., 550 U.S. 398, 406–07 (2007) (explaining that Graham “set out a framework for
applying the statutory language of § 103” and controls inquiries of whether claimed subject
matter is obvious). Furthermore, “[t]he combination of familiar elements according to known
methods is likely to be obvious when it does no more than yield predictable results,” KSR Int’l
Co., 550 U.S. at 416, however, a patent “is not proved obvious merely by demonstrating that
each of its elements was, independently, known in the prior art,” id. at 418. “Often, it will be
necessary for a court to look to interrelated teachings of multiple patents; the effects of demands
known to the design community or present in the marketplace; and the background knowledge
possessed by a person having ordinary skill in the art, all in order to determine whether there was
an apparent reason to combine the known elements in the fashion claimed by the patent at issue.”
The CAC alleges that any person skilled in the art at the time would have tried to find a
crystalline form that was suitable for commercial pharmaceutical production, and thus would
have been motivated to find a more stable, less hygroscopic (i.e., one that absorbed less moisture
from the air) form. CAC ¶¶ 206–07. It further claims that anyone skilled in the art at the time
would have known that the needle-shaped, α-crystalline form of mesylate salt was not suitable
for pharmaceutical production and would have tried to find a non-needle form (such as the βcrystalline form). CAC ¶ 208. It also alleges that the two techniques Novartis described in its
patent application, which produced the β-crystalline form, were commonly known methods for
developing alternate crystalline forms at the time. CAC ¶ 211.
The fact that someone might have been “motivated” to discover a crystalline form of a
compound that would be more suitable for pharmaceutical production does not on its own
establish that the subject matter was obvious. See In re Armodafinil Patent Litig. Inc., 939 F.
Supp. 2d 456, 487 (D. Del. 2013) (explaining that obviousness “requires ‘a reasonable
expectation of success’” (quoting Medichem, S.A. v. Rolabo, S.L., 437 F.3d 1157, 1165 (Fed.
Cir. 2006))). Even following extensive presentation of evidence in trial, analogous arguments
involving the obviousness of polymorphic forms have failed to invalidate patents. See id. at 494.
Here, the prior art did not disclose the existence or properties of the β-crystalline form or the
method by which it could be derived.11 The CAC largely contains conclusory allegations that
deriving the β-crystalline form would have been predictable based on the mere disclosure of the
mesylate salt and that the methods used to derive it were routine. Even if this were enough to
allege a plausible invalidity claim, it is not enough to show that Novartis’ litigation based on the
‘051 Patent was objectively baseless.
Moreover, the patent examiner considered much of the prior art at issue in the CAC
before eventually issuing the patent, and it is not clear that the prior undisclosed art would have
altered the examiner’s obviousness analysis. Further, it is noteworthy that the ‘051 Patent had
never been previously invalidated or tarnished in any way. See Solodyn, 2015 WL 5458570, at
Finally, the fact that Novartis has obtained settlements involving challenges to the
validity of the Polymorph Patents and that these patents have never actually been called into
question by a judicial authority, while not dispositive, further undercuts Plaintiffs’ ability to
Plaintiffs alleged that the Buchdunger and Druker articles disclosed that scientists used the βcrystalline form of the mesylate salt. CAC ¶ 183. The actual description of these articles calls
that allegation into question. The 1996 Buchdunger Article apparently discussed “crystalline
derivatives” without describing any specific crystalline form. See CAC ¶¶ 165–67. The 1996
Druker Article only seems to discuss mesylate salt generally, not its crystalline forms. See CAC
¶¶ 159–64. In any event, both were disclosed prior to the issuance of the ‘051 Patent.
allege objective baselessness, particularly where Plaintiffs have not called the settlements
themselves into question. See Asahi Glass Co., 289 F. Supp. 2d at 992 (“If, however, there is
nothing suspicious about the circumstances of a patent settlement, then to prevent a cloud from
being cast over the settlement process a third party should not be permitted to haul the parties to
the settlement over the hot coals of antitrust litigation.”). Although the ‘051 Patent could
ultimately be invalid, that issue is not directly before this Court. Accordingly, Plaintiffs have
failed to allege a plausible claim that litigation based on the ‘051 Patent, and therefore the other
Polymorph Patent, was “objectively baseless.”
Walker Process Fraud Claims
Relevant Legal Standard
In Walker Process, the Supreme Court held that if a party obtains a patent “by knowingly
and willfully misrepresenting facts to the Patent Office,” this is “sufficient to strip [the party] of
its exemption from the antitrust laws.” 382 U.S. at 177. To adequately allege Walker Process
fraud, Plaintiffs must claim “(1) a false representation or deliberate omission of a fact material to
patentability, (2) made with the intent to deceive the patent examiner, (3) on which the examiner
justifiably relied in granting the patent, and (4) but for which misrepresentation or deliberate
omission the patent would not have been granted.”12 C.R. Bard, 157 F.3d at 1364; see also
The Federal Circuit has described Walker Process fraud as distinct from inequitable conduct
because “[t]he heightened standard of materiality in a Walker Process case requires that the
patent would not have issued but for the patent examiner’s justifiable reliance on the patentee’s
misrepresentation or omission.” Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337, 1346–47 (Fed. Cir.
2007); see also C.R. Bard, 157 F.3d at 1365 (explaining that “an equitable defense . . . may be
satisfied when material information is withheld with the intent to deceive the examiner, whether
or not the examiner is shown to have relied thereon”); SanDisk Corp. v. STMicroelectronics,
Inc., No. C 04-4379 JF (RS), 2008 WL 4615605, at *5 n.5 (N.D. Cal. Oct. 17, 2008) (“Walker
Process fraud essentially is a more egregious version of inequitable conduct.”). In Metris U.S.A.,
Inc. v. Faro Techs., Inc., the court observed that, following a Federal Circuit decision in 2011
that heightened the standard for inequitable conduct, “it appears that Walker Process fraud is
Nobelpharma, 141 F.3d at 1070–71. The fraud must be “knowing and willful.” C.R. Bard, 157
F.3d at 1364 (quoting Walker Process, 382 U.S. at 177). Where the fraud is based on omission,
“there must be evidence of intent separable from the simple fact of omission.” Dippin’ Dots, Inc.
v. Mosey, 476 F.3d 1337, 1347 (Fed. Cir. 2007).
In addition, a plaintiff must plausibly allege all other required elements of an antitrust
claim—causation, antitrust injury, and market power. See Spectrum Sports, Inc. v. McQuillan,
506 U.S. 447, 459 (1993); see also Ritz Camera & Image, LLC, v. SanDisk Corp., 700 F.3d 503,
506 (Fed. Cir. 2012) (explaining that Walker Process fraud claim requires showing “all the
elements otherwise necessary to establish a Sherman Act monopolization charge”); C.R. Bard,
157 F.3d at 1368 (“Unless the patent had been obtained by fraud such that the market position
had been gained illegally, the patent right to exclude does not constitute monopoly power
prohibited by the Sherman Act.”). Finally, plaintiffs alleging Walker Process fraud must comply
with the heightened pleading requirements of Rule 9(b) as applied by the Federal Circuit.
Medimmune, Inc. v. Genentech, Inc., 427 F.3d 958, 967 (Fed. Cir. 2005), rev’d and remanded on
other grounds, 549 U.S. 118 (2007); see also Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d
1312, 1326–28 (Fed. Cir. 2009) (explaining that Rule 9(b) particularity requirement entails
alleging the specific “who, what, when, where, and how”).
Misrepresentation/Omission and Materiality
Plaintiffs base their state-law Walker Process fraud claims on the following: (1) the
withholding of prior art publications by Novartis’ own scientists “that explicitly disclosed the
now largely coextensive with the new inequitable conduct doctrine.” 882 F. Supp. 2d 160, 174
(D. Mass. 2011). Thus, although the Federal Circuit has not clarified how coextensive Walker
Process fraud is with inequitable conduct, it seems to remain the case that a plaintiff that fails to
allege inequitable conduct, necessarily fails to allege Walker Process fraud. Dippin’ Dots, 476
F.3d at 1346–47.
mesylate salt form imatinib that had the desired qualities of kinase inhibition;” (2) that “Novartis
misrepresented that the non-needle form of the compound was a recent, ‘surprising’ discovery,
despite the fact that Ciba-Geigy scientists had been using it for years,” that “anyone skilled in the
art would have been both motivated and easily able to formulate a non-needle crystal form using
routine laboratory procedures,” and that Novartis’ scientists did in fact do that; and (3) that
Novartis improperly argued to the patent examiner that the PTO Board of Appeals decision had
res judicata effect. CAC ¶¶ 5–7.
Novartis argues that three of the five prior art references at issue were not withheld from
the PTO and that the remaining two references were cumulative or immaterial. The two prior art
references that were ultimately disclosed to the PTO in an IDS and which the examiner herself
initialed, see Proctor Decl., Exs. G–H, indicating that she considered them, cannot form the basis
of a plausible Walker Process fraud claim, where they were disclosed prior to issuance. See
Fiskars, Inc. v. Hunt Mfg. Co., 221 F.3d 1318, 1327 (Fed. Cir. 2000) (“An applicant cannot be
guilty of inequitable conduct if the reference was cited to the examiner, whether or not it was a
ground of rejection by the examiner.”). Further, Plaintiffs failed to show how a third prior art
reference (the 1996 Druker Article) that was actually cited in the ‘051 Patent’s specification, see
Proctor Decl., Ex. A, can support a fraud allegation. See Oracle Corp. v. Drug Logic, Inc., No.
11-00910, 2011 WL 5576267, at *11 (N.D. Cal. Nov. 16, 2011) (holding that, where prior art
references were disclosed in patent’s specifications, allegations did not support inference that
applicant deliberately withheld material information).
Novartis’ res judicata argument to the patent examiner regarding the prior art that was
disclosed post-appeal also cannot support a Walker Process fraud claim because it does not
qualify as a material misrepresentation and the patent examiner was not bound by it. See
Rothman v. Target Corp., 556 F.3d 1310, 1328–29 (Fed. Cir. 2009) (“While the law prohibits
genuine misrepresentations of material fact, a prosecuting attorney is free to present argument in
favor of patentability without fear of committing inequitable conduct.”); Environ Prods., Inc. v.
Total Containment, Inc., 951 F. Supp. 57, 61 (E.D. Pa. 1996) (“[T]here is no policy reason which
would support the unprecedented expansion of the interpretation of ‘material information’ to
include legal arguments.”). Plaintiffs make no argument to the contrary in their opposition brief.
Furthermore, the two prior art references that Novartis admits were withheld—the 1995
Druker Presentation and the 1996 Zimmerman Article—also do not support a Walker Process
fraud claim in this case. Plaintiffs’ allegations of materiality with respect to the undisclosed prior
art do not reach the plausibility threshold. In their brief, they explain that the prior art is relevant
as to “whether the mesylate salt had been made or disclosed earlier,” but the PTO, on appeal,
specifically assumed the mesylate salt of imatinib had been disclosed and, moreover, Novartis
did ultimately provide prior art that disclosed mesylate salt to the patent examiner. Plaintiffs also
argue that the prior art is relevant as to “whether the β-crystal form could be made following
routine conditions.” Yet Plaintiffs fail to allege how either the 1995 Druker Presentation or the
1996 Zimmerman Article are material in that respect and, as required by Rule 9(b), how they are
material to any particular claim in the ‘051 Patent. See Exergen Corp., 575 F.3d at 1329 (“[T]he
pleading fails to identify which claims, and which limitations in those claims, the withheld
references are relevant to, and where in those references the material information is found—i.e.,
the ‘what’ and ‘where’ of the material omissions.”). Moreover, the Court cannot infer that they
plausibly are material where they neither discuss the β-crystalline form of the mesylate salt
specifically nor mention methods for creating it.
Finally, Novartis’ statement that the discovery of the β-crystalline form was “surprising”
does not support a plausible fraud claim. Firstly, it is unclear whether such a statement qualifies
as a misrepresentation, particularly where the examiner was free to reach her own opinion about
whether such a discovery was in fact “surprising” based on the prior art that was available to her
before the patent issued. Cf. LifeScan, Inc. v. Home Diagnostics, Inc., 103 F. Supp. 2d 379, 386
(D. Del. 2000) (“As the Federal Circuit has recognized, the mere fact that a patent applicant
attempts to distinguish its patent from the prior art does not constitute a material omission or
misrepresentation where the patent examiner has the prior art before him or her, and therefore, is
free to make his or her own conclusions regarding the claimed invention.”). Further, Plaintiffs
have not sufficiently alleged that if Novartis had avoided using the word “surprising,” the patent
would not have issued in light of the relevant prior art.
Accordingly, Plaintiffs have failed to sufficiently allege that the claimed
misrepresentations or omissions were material to the patent examiner’s determination.
iii. Fraudulent Intent
“Although ‘knowledge’ and ‘intent’ may be averred generally, . . . the pleadings [must]
allege sufficient underlying facts from which a court may reasonably infer that a party acted with
the requisite state of mind.” Exergen Corp., 575 F.3d at 1327 (citing Fed. R. Civ. P. 9(b)). The
facts alleged, even construed generously, do not support a plausible inference of fraudulent
intent. In their opposition brief, Plaintiffs point to no specific factual allegations in the CAC that
would permit such an inference, and argue only that “no other inference . . . can be drawn from
the facts alleged in the complaint.” [ECF No. 120 at 29]. “[T]he simple fact of omission” is
insufficient. Dippin’ Dots v. Mosey, 476 F.3d 1337, 1347 (Fed. Cir. 2007). Further, Plaintiffs’
belated disclosure of certain prior art does not permit this Court, without more, to plausibly infer
that Novartis acted with fraudulent intent. At best, the allegation that the prior art was disclosed
after an initial notice of allowance cuts equally in favor of and against Plaintiffs, in that it
suggests that Novartis did not intend to hide information as evidenced by the fact that it did, in
fact, disclose it. Where the prior art at issue was largely disclosed and the remaining undisclosed
prior art is not clearly material in light of the disclosed prior art, the fact that Novartis’ scientists
authored the prior art does not demonstrate deceptive intent. Lastly, based on all of the above,
there are insufficient factual allegations that would allow the Court to infer that the
characterization of the β-crystal as “surprising” was intended to deceive the PTO.
Accordingly, the Court concludes that Plaintiffs have failed to adequately plead a statelaw Walker Process fraud claim.13 Moreover, where Plaintiffs have failed to state a claim based
on sham litigation or Walker-Process fraud, Plaintiffs’ Orange Book listing allegations cannot
form a separate basis for liability and therefore fail as well. See Daiichi Sankyo, Inc. v. Apotex,
Inc., No. CIVA.030937(SDW-MCA), 2009 WL 1437815, at *9 (D.N.J. May 19, 2009) (noting
that “the Orange Book listing was only wrongful if the patent was obtained through fraud or was
‘objectively baseless’”); see also Solodyn, 2015 WL 5458570, at *12. Because Plaintiffs have
Novartis also argues that the state-law Walker Process fraud claims should be dismissed
because they are preempted by federal patent law. When determining whether state-law claims
are preempted by federal patent law, Federal Circuit law controls. Dominant Semiconductors
Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008). In Hunter Douglas, Inc. v.
Harmonic Design, Inc., the Federal Circuit considered whether federal patent law preempted
state law claims for, inter alia, state unfair competition law that prohibited tortious activities in
the marketplace. 153 F.3d 1318 (Fed. Cir. 1998), overruled on other grounds, Midwest
Industries, Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1358–59 (Fed. Cir. 1999). It held that
there was no field preemption of state unfair competition law by federal patent law. Hunter
Douglas, 153 F.3d at 1334–35. With respect to conflict preemption, Hunter Douglas held that
state-law claims were preempted by federal patent law only“[i]f a plaintiff bases its tort action on
conduct that is protected or governed by federal patent law.” Id. at 1335. Because Novartis’
preemption argument does not implicate this Court’s jurisdiction, the Court need not address it
here. This Court also need not address Defendants’ state law-specific arguments for dismissal.
failed to adequately allege claims sufficient to avoid the bar of Noerr-Pennington immunity, their
state-law claims must be dismissed.
Accordingly, Novartis’ motion to dismiss [ECF No. 111] is GRANTED. In light of this
ruling, there is no need for a Rule 26(f) conference and that motion [ECF No. 135] is DENIED
Dated: June 30, 2017
/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT JUDGE
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