ASTRAZENECA LP et al v.BREATH LIMITED et al

Filing 1052

MEMORANDUM ORDER granting Defts' 1029 Motion to Strike the expert report of Hugh D.C. Smyth, Ph.D. The Court will RESERVE decision as to Defts' motion to strike the reply expert report of Peter R. Mathers. By 10/3/2014 AstraZeneca shall SHOW CAUSE why AstraZeneca should not be judicially estopped from taking a position that appears to be directly contradicted by AstraZeneca's prior position before this Court. Signed by Judge Renee Marie Bumb on 9/26/2014. (drw)

[Docket No. 1029]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
ASTRAZENECA LP and ASTRAZENECA
AB,
Plaintiffs,
v.

Consolidated Civil Action No.
08-1512 (RMB/AMD)

BREATH LIMITED,
Defendant.
ASTRAZENECA LP and ASTRAZENECA
AB,
Plaintiffs,
v.
APOTEX, INC. and APOTEX CORP.,
Defendants.
ASTRAZENECA LP and ASTRAZENECA
AB,
Plaintiffs,
v.
SANDOZ, INC.,
Defendant.
ASTRAZENECA LP and ASTRAZENECA
AB,
Plaintiffs,
v.
WATSON LABORATORIES, INC.,
Defendant.

MEMORANDUM ORDER

Defendants Sandoz, Inc., Apotex, Inc. and Apotex Corp., and
Breath Limited and Watson Laboratories, Inc. (collectively
“Defendants”) filed a motion to strike the expert report of Hugh
D.C. Smyth, Ph.D. and the reply expert report of Peter R.
Mathers. Defendants contend that these reports are not only
untimely but permitting them at this late stage of the
proceedings would prejudice and unduly burden both Defendants and
the Court. For the reasons set forth below, the Court GRANTS
Defendants’ motion to strike the expert report of Hugh D.C.
Smyth, Ph.D., and RESERVES decision as to Defendants’ motion to
strike the reply expert report of Peter R. Mathers.
This case involves Plaintiffs’ invention of a once-daily
inhaled corticosteroid under the name PULMICORT RESPULES®.
Following remand for further proceedings related to U.S. Patent
No. 7,524,834 (the “‘834 Patent”), AstraZeneca LP and AstraZeneca
AB (the “Plaintiffs” or “AstraZeneca”) filed a motion for
preliminary injunction. (Dkt. Ent. 889.) In connection with that
motion, Defendants submitted inter alia the Declaration of Jeanne
Moldenhauer (“Moldenhauer Decl.”), a new expert, who opined that
the relevant claims of the ‘834 Patent are invalid as obvious in
light of several prior art references. (Dkt. Ents. 908-22.) Those
references include U.S. Patent No. 3,962,430 to Joseph L. O’Neill
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(“O’Neill”) and U.S. Patent No. 5,858,998 to Maria Leuschner
(“Leuschner”). 1 (See Moldenhauer Decl., dated February 13, 2014,

1

In reference to O’Neill, Moldenhauer stated:
50. O’Neill issued on June 8, 1976. See Ex. 32, O’Neill
(Breath(Bud) 018210-17). O’Neill discloses the
sterilization of non-electrolyte corticosteroids,
including dexamethasone. Id. at col.1 ll.15-21
(Breath(Bud) 018211). O’Neill states that “aqueous
suspensions are customarily sterilized in several ways,
such as by aseptic crystallization, exposure to gases,
for example ethylene oxide; . . . and by dry heat
sterilization.” Id. at col.1 ll.34-40. O’Neill also
teaches that the corticosteroids “may be sterilized by
autoclaving (steam under pressure) the suspended drug
in an aqueous mixture of sodium chloride . . . .” Id.
at col.2 ll.14-17.
51. Before providing specific examples, O’Neill states
that “[a]s one skilled in the art would appreciate, the
amount of active ingredients which can be employed in
the invention will depend on the specific therapeutic
agent employed and the desired dosage of said
therapeutic agent.” Id. at col.3 ll.62-66 (Breath(Bud)
018212). O’Neill then continues to provide an example
of a formulation containing dexamethasone acetate that
is sterilized by moist heat (steam) sterilization. Id.
at col.4 ll.5-63.”
*

*

*

132. . . . O’Neill even provides an example of a
formulation containing dexamethasone acetate—a
corticosteroid—that is sterilized by moist heat (steam)
sterilization. Id. at col.4 ll.5-63 (Breath(Bud)
018212).
133. A person of ordinary skill in the art would
understand that a budesonide product sterilized
according to the methods disclosed in O’Neil [sic]
would be sterile . . . .
With respect to Leuschner, Moldenhauer explained:
53. Leuschner discloses pharmaceutical compositions
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attached as Ex. 1 to the Declaration of Heinz J. Salmen (“Salmen
Decl.”), Dkt. Ent. 1030.)
After it heard argument on Plaintiffs’ preliminary
injunction, the Court issued a decision consolidating the motion
hearing with the trial on the merits. (June 4, 2014 Opinion, Dkt.

containing corticosteroids, including budesonide, for
the treatment of hepatic diseases. Id. at col.1 ll.1519; col.2 ll.1-27 (SANBUD500017). Leuschner also
discloses oral preparations of the pharmaceutical
compositions, including “suspensions, solutions or
emulsions.” Id. at col.3 ll.12-15, 20-23
(SANBUD500018).
54. Example 3 of Leuschner is a budesonide injectable
formulation. Id. at col.6 ll.25-36 (SANBUD500019).
Although Leuschner calls the formulation a “solution,”
(id. at col.6 l.35), the budesonide injectable solution
is created using an Ultraturrax, (id. at col.6 ll.3335), which is used to create suspensions, thereby
teaching a person skilled in the art that the
formulation in Example 3 of Leuschner is, in actuality,
a suspension, not a solution. The suspension is then
sterilized for 20 minutes at 121°C. Id. at col.6 ll.3536.
*

*

*

161. A person of ordinary skill in the art would
understand that Leuschner’s disclosed method for
sterilizing corticosteroid drug products would
inherently pass a USP <71> test. . . .
162. . . . [A] person of ordinary skill in the art
would have been motivated to use the sterilization
method disclosed in Leuschner to create a sterile
budesonide suspension, and that person would have had a
reasonable expectation that the Leuschner process would
successfully sterilize budesonide.
(Moldenhauer Decl. ¶¶ 50-51, 53-54, 132-33, 161-62.)
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Ent. 980.) The Opinion addressed both the O’Neill and Leuschner
prior art references raised by Defendants, noting that the record
would need to be further developed. (Id. at 39-40, 41 n.25.) The
Court concluded that the remaining question “is whether a POSA
would have had a reasonable expectation of using well-known
solutions to these traditional [sterilization] processes to
produce a pharmaceutically acceptable product that met the
criteria of sterility.” (Id. at 43.)
According to the Scheduling Order entered on June 13, 2014,
opening expert reports were due on July 3, 2014, responsive
expert reports on August 1, 2014, and reply expert reports
addressing issues raised in the responsive expert reports were
due on August 29, 2014. (Dkt. Ent. 991.)
On July 3, 2014, Defendants submitted the Opening Expert
Report of Jeanne Moldenhauer (the “Moldenhauer Opening Report”),
in which Moldenhauer explained – in language nearly identical to
her February Declaration - that O’Neill discloses types of
sterilization for non-electrolyte corticosteroids and provides
“an example of a formulation containing dexamethasone acetate and
sodium chloride (amongst other ingredients) that is sterilized by
moist heat (steam) sterilization.” (Moldenhauer Opening Report,
Dkt. Ent. 1047, ¶ 58.) The example to which she refers in this
paragraph of her Declaration is Example 1 of O’Neill. (Id.)
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Moldenhauer also explained that Leuschner discloses
pharmaceutical compositions such as suspensions and that Example
3 of Leuschner is a budesonide injectable formulation. (Id. at
¶¶60-62.) 2 [As discussed below, Example 1 of O’Neill and Example
3 of Leuschner are the subjects of Smyth’s testing data.]
On August 1, 2014, AstraZeneca’s second round of experts
included reports of Drs. Robert O. Williams, III, James Akers,
and George Zhanel, who responded to the Moldenhauer Opening
Report and specifically addressed Leuschner and O’Neill. (Defs.’
Br. at 8.) In particular, Drs. William and Akers concluded that
neither Example 3 of Leuschner nor Example 1 of O’Neill discloses
a pharmaceutically acceptable inhalation product. (Salmen Decl.,
Exs. 9 & 10.) None of the experts’ reports mentioned Smyth.
a. Smyth Report
On August 29, 2014, AstraZeneca served upon Defendants the
expert report of Smyth (the “Smyth Report”), who had never
previously been mentioned as an expert. Attached to the Smyth
Report is a declaration purporting to replicate Example 3 of
Leuschner and Example 1 of O’Neill. (See Ex. 1, attached to the

2

In addition, Defendants submitted the Second Opening Report of
Paul B. Myrdal, Ph.D., which refers to the Moldenhauer Opening
Report and the prior art references cited therein. (Salmen Decl.,
Ex. 4.) He opines that a POSA would have a reasonable expectation
of successfully preparing a sterile budesonide powder and
suspension in light of these prior art references.
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Declaration of Jay I. Alexander (“Alexander Decl.”), Dkt. Ent.
1037.) Smyth concludes that “[t]he Leuschner method clearly
results in a visibly uneven, clumpy mixture that would not be
pharmaceutically acceptable, with or without autoclaving.” (Id.
at ¶ 30.) As to O’Neill, Smyth concludes that the method “results
in a significant increase in particle size of the raw budesonide
that would not be pharmaceutically acceptable.” (Id. at ¶ 49.)
Interestingly, the Smyth Report does not purport to be responsive
to any of Defendants’ expert reports.
Defendants argue that the Smyth Report should be stricken as
untimely and outside the scope of discovery contemplated by the
Scheduling Order. In response, AstraZeneca argues that the Smyth
Report is timely as it was submitted in reply to the Responsive
Expert Report of Moldenhauer served on August 1, 2014. (Alexander
Decl., Ex. 8.) The Responsive Report addresses the opinions
contained within AstraZeneca’s opening expert reports regarding
the objective indicia of non-obviousness, on which AstraZeneca
bears the burden of presenting evidence. In the Responsive
Report, Moldenhauer opined:
As I explained in my Opening Report (¶¶ 145-46), I am
not aware of any evidence that anyone outside of
AstraZeneca was skeptical that it would be possible to
attempt to make a sterile budesonide suspension. To the
contrary, the prior art references discussed in my
Opening Report, particularly O’Neill . . . [and]
Leuschner . . . indicate the opposite: a person of
ordinary skill in the art would have had a reasonable
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expectation of creating a sterile budesonide
composition (powder or suspension) and would not have
been skeptical of his/her success.
(Alexander Decl., Ex. 8 ¶ 36.) She similarly concluded that
AstraZeneca’s sterilization results were not unexpected because
of the teachings of these references. (Id. ¶¶ 53, 57.)
Moldenhauer further opined that there is no evidence that others
had tried and failed to create a sterile budesonide suspension;
rather, “[o]thers in the art made sterile corticosteroids and
corticosteroid suspensions (O’Neill), including budesonide
suspensions (Leuschner, Clark, Harris).” (Id. at ¶¶ 46, 48.)
According to AstraZeneca, Moldenhauer’s Responsive Report –
apparently for the first time - “squarely put at issue whether
Leuschner and O’Neill had actually achieved the results alleged
to have been made in their patent disclosure.” (Pl.’s Opp. at 3.)
It is clear to the Court that the Moldenhauer Opening Report
preemptively addressed the indicia of non-obviousness and
contains nearly identical opinions regarding the impact of
Leuschner and O’Neill on the unexpected results (Dkt. Ent. 1047
¶¶ 136-148) and industry skepticism (id. at ¶ 146). Moldenhauer
also opined in her Opening Report that she was unaware of
evidence that others had tried to create a sterile budesonide
suspension but failed. (Id. at ¶ 144.) Moldenhauer refers to the
O’Neill and Leuschner references throughout these opinions, and
8

concludes that in light of these references a POSA would have
expected to successfully create a sterile BIS product. Notably,
the Moldenhauer Opening Report specifically discusses Example 1
of O’Neill and Example 3 of Leuschner – the very examples that
Smyth purports to have recreated. Thus, setting aside the fact
that AstraZeneca has been aware of the importance of the
Leuschner and O’Neill prior art references (including the
examples that are the subject of Smyth’s testing) since
Moldenhauer’s February 2014 Declaration, the scope of her
opinions regarding these references was fully disclosed to
AstraZeneca in Moldenhauer’s Opening Report served on July 3
pursuant to the Scheduling Order, not in her Responsive Report.
Indeed, her Responsive Report merely reiterates and refers to
portions of her Opening Report. Even more significantly, while
Smyth does not provide any dates for his experiments, Exhibit 22
to his Declaration suggests they were conducted sometime in midJuly – weeks before Moldenhauer’s Responsive Report that
supposedly put this data at issue. (Salmen Decl., Ex. 12 at Ex.
22.) Hence, AstraZeneca only feigns surprise.
AstraZeneca’s failure to disclose Smyth until the third
round of expert reports and just a few weeks prior to the close
of expert discovery and commencement of trial is untimely and
violates the Scheduling Order. Expert disclosures are governed by
9

Federal Rule of Civil Procedure 26, which requires parties to
disclose the identity of potential expert witnesses and to
provide a written report containing the experts’ opinions as well
as the facts and data relied upon to form those opinions. Fed. R.
Civ. P. 26(a)(2)(B). Rule 26 further provides “A party must make
these disclosures at the times and in the sequence that the court
orders. Absent a stipulation or a court order, the disclosures
must be made: . . . (ii) if the evidence is intended solely to
contradict or rebut evidence on the same subject matter
identified by another party under Rule 26(a)(2)(B) or (C), within
30 days after the other party’s disclosure.” Fed. R. Civ. P.
26(a)(2)(D). Under the Scheduling Order in place, responsive
expert reports were due on August 1, 2014, while reply expert
reports “addressing issues raised in responsive expert reports”
were due on August 29, 2014. (Dkt. Ent. 991.)
In deciding whether to exclude evidence, the Third Circuit
instructs courts to consider the following factors:
(1) “the prejudice or surprise in fact of the party
against whom the excluded witnesses would have
testified” or the excluded evidence would have been
offered; (2) “the ability of that party to cure the
prejudice”; (3) the extent to which allowing such
witnesses or evidence would “disrupt the orderly and
efficient trial of the case or of other cases in the
court”; (4) any “bad faith or willfulness in failing to
comply with the court’s order”; and (5) the importance
of the excluded evidence.
ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 298 (3d Cir. 2012)
10

(quoting Meyers v. Pennypack Woods Home Ownership Ass’n, 559 F.2d
894, 905 (3d Cir. 1977), overruled on other grounds by Goodman v.
Lukens Steel Co., 777 F.2d 113 (3d Cir. 1985)).
The Court finds that permitting the Smyth Report would inure
to the prejudice of Defendants. The Report attempts to rebut the
teachings of prior art references, and corresponding expert
opinions, that were known to AstraZeneca in February 2014 and
certainly no later than the exchange of expert reports on July 3,
2014. Rather than respond to Moldenhauer’s opinions by August 1,
2014, pursuant to the applicable Scheduling Order, AstraZeneca
waited until August 29, 2014 – just weeks before the close of
discovery and the commencement of trial - before suddenly
springing upon Defendants new experimental data. In the three
weeks prior to the close of discovery, the parties have deposed
numerous experts and have been preparing for an October 6, 2014
trial date, leaving Defendants insufficient time to address the
new experimental data proffered by a previously-undisclosed
expert.
Although AstraZeneca contends that any prejudice to
Defendants can be cured by permitting Defendants to depose Smyth
prior to his trial testimony, this suggestion does not adequately
address the harm to Defendants if the Smyth Report is permitted.
At this late juncture, after the close of expert discovery,
11

Defendants are unable to hire an expert of their own to conduct
the tests, or to otherwise adequately rebut Smyth’s results.
Providing Defendants with sufficient time to address Smyth’s new
evidence would require delaying the trial in a case that has
already spanned years. In addition, while AstraZeneca is
prejudiced by the exclusion of evidence seemingly helpful to it,
such prejudice was of its own making and could easily have been
avoided by the timely disclosure of Smyth.
AstraZeneca’s late disclosure of Smyth is simply
inexcusable, and AstraZeneca’s reasons for such lateness are
disingenuous. Smyth addresses issues that were laid out
explicitly in the Moldenhauer Opening Report – not issues raised
for the first time in the Responsive Report as AstraZeneca
contends. It is clear to this Court from a review of both of
Moldenhauer’s reports that she addresses the secondary indicia of
non-obviousness in almost identical form. Moreover, in her
Opening Report, she discusses the teachings of O’Neill Example 1
and Leuschner Example 3 that AstraZeneca now attempts to rebut
through reliance on the Smyth Report. AstraZeneca’s argument that
the second report entitles it to a rebuttal is unacceptable.
Furthermore, it appears from the record that Smyth may have been
engaged to conduct these experiments as early as mid-July – prior
to receiving the Responsive Report that AstraZeneca cites as the
12

basis for Smyth’s retention. It is thus quite suspect that Smyth
began these experiments only a few weeks after receiving the
Moldenhauer Opening Report that addresses the methods Smyth
purportedly employed in conducting his experiments. At the very
least, AstraZeneca should have disclosed its intention to rely
upon Smyth, as well as the scope of his experiments, in response
to Moldenhauer’s Opening Report.
As to the last factor, the purported results of Smyth’s
experiment clearly constitute important evidence for AstraZeneca
and may support its argument regarding the objective indicia of
non-obviousness. See Mintz v. Dietz & Watson, Inc., 679 F.3d
1372, 1378 (Fed. Cir. 2012) (noting objective indicia “are
powerful tools for courts faced with the difficult task of
avoiding subconscious reliance on hindsight”) (citations
omitted). However, this factor alone does not save AstraZeneca.
Notably, the Smyth Report does not constitute the only such
evidence of non-obviousness, nor even the only rebuttal evidence
to Moldenhauer’s opinions. Accordingly, there is no fundamental
unfairness in excluding Smyth’s Report as AstraZeneca will still
have the opportunity to proffer other rebuttal evidence
addressing Moldenhauer’s opinions, including the testimony of
Drs. Williams and Akers, who opined at length upon the Leuschner
and O’Neill references. (See Salmen Decl., Exs. 8 & 9); cf. ABB
13

Air Preheater, Inc. v. Regenerative Envt’l. Equip. Co., Inc., 167
F.R.D. 668, 672 (D.N.J. 1996) (“‘Notwithstanding Rule 37(c), the
district court may be found to have abused its discretion if
[its] exclusion of testimony results in fundamental unfairness in
the trial of the case.’”) (citations omitted). Therefore, the
Court finds that the factors set forth in Pennypack justify
exclusion of the Smyth Report.
b. Mathers Reply
Defendants also seek to strike the Reply Expert Report of
Peter R. Mathers (“Mathers Reply”) (Salmen Decl., Ex. 13).
AstraZeneca disclosed Mathers for the first time on August 11,
2014, and served his expert report on August 29, 2014. The
Court’s decision as to Defendants’ motion to strike this report
is reserved and will require further briefing by AstraZeneca. In
particular, AstraZeneca shall address why it should not be
judicially estopped from taking a position that appears to
contradict its earlier position in this litigation. Indeed, the
Court believed that the issue of the FDA moving towards requiring
the sterilization of suspensions was undisputed. 3 The Mathers’

3

May 9, 2014 Tr. at 36-37 (“THE COURT: And am I right that the
regulation, that the proposed regulation in 1991 dealt with
solutions but there is no disagreement in the industry that
everyone expected it to apply to suspensions eventually? MR.
RAKOCZY: Correct, your Honor. It used the term ‘solution’
originally, but Dr. Muhvich testified that everyone in the
industry knew that that meant all aqueous based inhalation
14

Reply, however, seems to contradict what AstraZeneca represented
to the Court in its submissions. 4 (See Dkt. Ent. 890 at 20 (“Due
to recalls of other drugs, however, the FDA was moving toward
requiring sterilization for solutions and inhaled suspensions.”)
(citations omitted); Dkt. Ent. 977 at 5 (“At the time of the
invention, there were well-known reasons to try to make a sterile
budesonide suspension. In the 1980s, contaminated inhalation
products had caused widely publicized patient deaths, ultimately
prompting the FDA to demand that all new inhalation products be
manufactured sterile.”).)
Accordingly,
IT IS ON THIS 26th day of September 2014,

products. THE COURT: Is that disputed in this record? MR.
RAKOCZY: No one has rebutted that from Astra. There was no
document rebutting that, and I don't know if there could be given
the fact that we have in the file history FDA's statement saying
you better make this sterile. It was known in the industry to
skilled persons. And as a matter of law, your Honor, motivation
doesn't have to be in a publication; it can be, but it can come
from just the general knowledge of the skilled person, and I
don't think there is a serious dispute that everybody knew that
you would have to make it sterile. I mean, Dr. Williams didn't
fight on that at all, he agreed that motivation had been around
for awhile. I think he said ten years before the patent. So I
don't think it's in serious dispute. THE COURT: Okay.”). At no
time during the forgoing colloquy did AstraZeneca disabuse the
Court of its understanding.
4

This is not the first time this Court has had to “address[] the
ever-shifting arguments made by AstraZeneca.” (June 4, 2014
Opinion at 20.)
15

ORDERED that Defendants’ motion to strike the expert report
of Hugh D.C. Smyth, Ph.D. is hereby GRANTED; and it is further
ORDERED that the Court will RESERVE decision as to
Defendants’ motion to strike the reply expert report of Peter R.
Mathers; and it is further
ORDERED that on or before October 3, 2014, AstraZeneca shall
SHOW CAUSE why AstraZeneca should not be judicially estopped from
taking a position that appears to be directly contradicted by
AstraZeneca’s prior position before this Court (and which this
Court believed to be undisputed).

s/Renée Marie Bumb
RENÉE MARIE BUMB
UNITED STATES DISTRICT JUDGE

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