APOTEX, INC. v. CEPHALON, INC. et al

Filing 513

MEMORANDUM. ( SIGNED BY HONORABLE MITCHELL S. GOLDBERG ON 10/31/11. ) 10/31/11 ENTERED AND COPIES E-MAILED.(gn, ) (Additional attachment(s) added on 11/7/2011: #1 memo) (gn, ).

IN THE UNITED STAn:s DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CIVIL ACTlOl\

J\POTEX INC.,

Plaintiff,

v.

No.2:06-cv-2768

CEPHALON, INC., l:.t al.,
Defendants.

f·"~·D
, ..' :" i

.._ _ _ _ ~_ .._ _ _ __"""'" _-'.
..

-'

Goldberg, J,

,ili\
(,\;1 •

..

October 31, 20: 1

MEMORANDUM OPINIQN
At issue in this

CIlSt'

i:::; the validity and enforceability of Defendant, Ccph$llon, Inc. s,

RE' 516 patent for ProvlgihID. a drug commonly prescribed for sleep disorders. Aftercnreful rev!( w

and consideration ofthe evidence presented at a bench trial, I find that Plaintiff, Apotex, Inc" h'lS
met its burden in proving the invalidity of this patent. SpecificaIly, Tfind that: (1) The invention
claimed was on sale more than one year prior to the date ofthe application for the patent, 35 U's.C.
§ l02{b); (2) The claimed invention was actually invented by a French company, Lahoratoire __ '"

Lafon (hercinatler,

Lafon)~

(3) The subject matter at issue as a whole would havt;': been obvious 3.t

the time the invention was made tu a person having ordinary skill in the art, 35lJ,$,C. § 103(a); ar d
(4) The palent is invalid for failing the \\>Tltten description requirement 01'35 U.S.c. § 112.1 I aJ~o
filld that the patent is unenforceable due to illcquitabk conduct on the part of Cephalon. Th s
O)inion explains the basis for these conclusions.

Apotex has vvlthdrawn its claims for invalidity based on pubHc use and enablement. Therefon:,
those claims \viIJ not be addressed. (Apotex Post,Triat Memo., p. 1 n. I,)
j

1. Introdnction
Apotex, a generic drug manufacturer, commenced this declaratory action in June 2U06,
eBeging non-infringement, invalidity and unenforceability of Cephalon's RF.>5!6 patent br

Provigi1@, This lawsuit is a result of Apotex's continuing efforts to gain approval of

it~

Abbreviated New Drug Application (hereinafter "ANDA") 77-677 and enter (he market with a
generic version of Provigil®.
After completion of discovery, the Court hifurcated for trial Apotex's invalidity and
1.lnenforceability claims from its non-infringement claim. (~doc. no. 426.) A bench trial on
Apotex's invalidity and unforccabmty claims was held first from March 29 - April 7, 2011. A

subsequent bench trial on Apotex's non-infringement claims was held July 12 - 20.2011, and 1he
Court's decision on that issue is forthcoming.

Both the invalidity and infringement disputes revolve around a claimed invention for smaller
partic1e size of the primary chemical compound, modafinil. that positively affected Ihe

f,ioavailability and dissolution of the drug. The pertinent portion (If the claim states:
A pharmaceutical composition comprising a substantially homQgeneou::o mixture of
modafinil particles, wherein at lea:;t about 95% of the cumulative tota' of modafinH
particles in said composition have a diameter ofless than about 200 microns (!lm).

While Aputex pressed numerous theories. at the invalidity trial, its primary argument \, ai>
flat the RE'S16 patent is invalid and unenforceable because Lafon invented the claimed subjt!ct
natter. Apotex stresses that Lafon was consistently manufacturing and then selling modafinU with

smaller particle size. Apotex further urges: that Cephalon's claim regarding tht: discovery of the
significance of smaller particle size as it relates to the issues ofbioavai1ability and dissolution is

i nmaterial because "unexpected results" arc irrelevant to detennioiog derivation. Finally. Apolex
2

daims invalidity through an "on~salc bar" and further raises issue~ regarding alleged matc:'iai
misrepresentations to the United States Patent and Trademark Oilice {hereinafter '''PTe '),
obviousness and inadequate written description.
Cephalon does not dispute that it received smaller particle size modafinil from Lafon tnd
that such particle si:lc fell within the claims of the RE' 516 patent. Cephalon al!io tmequivoc211y
!:oncedes thnt it did not change, modify or manipulate the modHfinil it received from Lafon. Ratht:r,
CephaloD rests almost its entire case on the proposition that its "invention" is the appreciation of
the significance of smaner particle size, Cephalan also expJains that the rnodafinil it received from
Lafon was not ·'on :;ale" because it was used for clinical testing, and thus,
According to CephaJon, during these clinical

te~ts,

Wa!i

experimenlal.

it discovered the significance of Jmpro\ed

t,ioavailabiHty and dissolution achieved from smaller particle size, which is a significance Lafon
rever appreciated.
Prior to setting forth my reasoning in finding in favor of Apotex, I note that many of the
underlying facts in this case ate undisputed. 1 MUfoover. most ofthe testimony presented at trial v.as
through expert witnesses:, Thus, to the extcnt that some of {he following "'findings of facf' may
appear to be more "legal" than "factual:' those findings reflect the Court's acceplance of tne
experts~

opinions,

21 recognize that Counsel had previously been advised that the Court's ruling would be deHvend
thl'ough an opinion, without findings of fact and \.-'.QJlclusions of1aw and thus, proposed submissio lS

from the parties along those lines would not be received. Upon further consideration, I ha·;e
detennmed that it is dearer to communicate my reasoning through fInding:s of fact. Because me St
of these facts are uncontested, it remains my view that proposed factual findings submissions by t]lC
parties are unntXessar)'.
3

II.

~'indin...

of Fact

A. Back&round
1.

Plaintiff Apotex Inc. is a corporation organized and existing under the laws of Canada.

with its principal place of business at 150 Signet Dr.• Weston. Ontario M9Ll T9. (Stip.•
doc. no.

::.

43~.)

Defendant Cephaloo, Inc, i5 a corporation organized and existing under the laws ofthe st tte
ofDelaware, with its principal place ofbusiness at 41 Moores Road, Frazer, Pennsylvania
19355. (Stip., doc. no. 438.)

':'.

Laboratoire L. Lafon was a French company founded by Louis Lafon that was

purcha~ed

by Cephalon on December 28,2001, and is now known as Cephalon France. (Stip., d,,,,.
no. 438.)
".

Lafon discovered modafinil in 1976, and as of 1993, Lafon had a stable and bioavai1able
dosage fom1 ofmodafinil that was approved fot

~ale

in Europe. (N.T. 4/lill. pp. 42, Lj_

46.)
:"

The '290 patent was issued to Louis Lafon and assigned to Lafon on December 4, 1979, -br

the chemical modafiniL (N. r. 3/29111. p. 121.)
/"

The '290 patent claimed 200 mg as the do.<age for humans. (N.T. 3129/11, p. 122.)

I.

Laron'~

'290 patent on mudafinil

dut:~

not include any references to particle size, (N 1'.

3/30/1 L p. 10; PTX 5.)
~.

Cephalon filed an Investigational New Drug Application for mooafinil tablets on June ::0,
1993. Cephalou filed a New Drug Application ("NOAH), No. 20,711, for Provigil® on
December 26, 1996. The U.S. Food and Drug Administration ("FDA") approved the NDA
4

on Deoember24, 1998, and Cephalon began marketing Provigil® in February 1999. (Sti 1"

9.

Cephalan med t:.S. Patent Application "0.081319,124 with the PTO on October 6. 199t
Thut application issued on April 8, 1997 as
with

~ix

u.s. Patent No. 5,618,845 ("the '845 paten,")

claims, The '845 patent is titled "Acetamide derivative having defined partie Ie

size)" and names inventors Peter E, Grebow, Vincent Corvari and David Stong. {Stip., dc,c.

no. 438.}
10.

On April 1, 1999, Cephalon filed U.S. Patent Application No. 09/285) 166 seekjngareis~ue
oflhe '845 palent The PTO issued u.s. Reissue Patent No. 37,516 ('·the RE'SI6 patent")
on January 15, 2002. with twenty~six claims.} The RE'516 patent is titled "Acemmiie
derivatlv;;;havingdefined particle size," and also names inventors Peter E. Grebow. Vincent

Corvari and David Stong. In pertinent parI, the RE'S16 patent clabos:

[a] phannaceutical composition comprising a substantially homogeneous
mixture ufmodaiinil particles, wherein at least 95~/n of the cumulative total
of modatinH panicles in said composition have a diameter less than about
2(~l microns (~m).
(Slip., doc. no. 438; JTX I.)
11.

The RE'S16 patent was listed to tht: "Approved Drug Products With Therapeu1ic

Equivalence Evaluations," an FDA publiealion mOre commonly known as the

"Oran;~e

Book." (Stip., doc. no. 438.)

) A reissue patent application is made by someone who already has a patent, but has then deciuI:d
that it does not cover the claims the way it should. The claims are either too narrow or too brood.
The reissue h> a mechanism to correct those errors. Filing a reissue patent application pul~ the entire
patent, including the original claims, at risk. If the reissue patent is: granted, then the patentee O11.:5t
surrender the original patent, However. the patent tcrmcontinues to nul from the date oflhe original
application. ("l.T. 4i6111, pp. 1I7-19.)

5

12.

On March 30. 2005, Apotex fikd ANDA No. 77-667, seeking FDA approval for its gcneric

version of Provigil@, That ANDA included a Paragraph III ce11ification to the RE '516
patent (Stip., doc. no. 438.) Under the Hatch Waxman Act, a Paragraph JII eertificati,m
is a statement by a generic drug manufacturer that a name brand drug exists, has a val id

patent, and that the generic drug manufacturer \vill not sell its product until the- pattnt
expires. 21 U.S.c, § 3SS(j)(2)(A)(vii).
13,

On March 9, 2006, Apotex changed ifs Paragraph III certification to a Paragraph ,V

certification. A Paragraph IV certification is a technical act ofinfringemcnt by the genedc
drug: manufacturer, which alleges that the patent is invalid and/or that the generic drug v. ill
not infringe on the patent A Paragraph (V certification allows the name brand manufactuJ er

to sue the generic manufacturer for infringement. GlaxQ Groyp. Ltd. v, Apotex, Inc .. 376
FJd 1339, 1351 (Fed, eiL 2004); see glso (Stip" doc. no. 438).
14.

Apotex filed its original declaratory judgment complaint on June 26, 2006 and subsequenlly

filed amcndt:d and second

am~ndl.Ai

complaints, which seek, inter alia, declaratcry

Judgmertts that the RE' 516 patent is not infringed. invalid and unenfon;cablt:, 4 (Stip., duct
no, 438,)

B.
15.

Experts

Lk David Beac-h, who testified for Apote-x, is an expert in phannaceutical

and pharmaceutical fumulalion. (N,T, 3/29111, pp. 99·100,)

4

This matter was reassigned to me on April 28, 2009. (Doc, no, 82,)

6

manufact~lri)g

16.

Atthe sub,equent infringement trial,' Dr. Beach acknowledged that between 1994 and 2(04
he was the President and tit member of the Board of Directors at Torphann, a subsidiary of

Apotex, In 2004, when Torphann was absorbed by Aptoex, Dr. Beach entered into a
separation agreement with Aploex that called for him to transition out of his role at

tlC

company. Dr. Beach eventually left Apotex altogetherin 2006. (NT. 7!l9!II, pp. 129·13 .)
The sepamtion agreement also provided that Apotex would pay Dr. Beaeh $1 million in
severance pay. and buy his equity interest in the company, Additionally, if Apotex were to

be sold anytime prior tathe end of2012, Dr. Beach would be paid the dilIcrcncc bctwe.m
the value of his ownership interest at the time of the sale and what he was paid for ttat
interest when he left thecompany. (N.T. 7i19l1l, pp. 130·31.)
17.

A finding that the RE'516 patent is invalid will al1mv Apotex to enter the market and cou,d
result in an increased valuation ofApotex, If Apotex were sold before the end of2012, trat

could also

re~u1t j"

an i11<:reased payout for Dr. Beach under the separation agreement

describt:d above. While I have considered that this scenario provides a financial incenti'..'e
for DT. Reach to testifY in favor of Apotcx, his credibility is nol essential to my
detennination, which. as set out infra, re~ts almost entirely upon documents: agreed-upon
facts and lay \\1tness testimony.
I ft

Dr. Oavid Peifel, an Apotcx wItness. is an expert on narcolepsy., pharmacological profil;1$
of drugs and analyzing the results ofpre.eHnical and clinical trials. (NT. 3/30ill. pp. 86,
102.)

The parties agreed that. lo the extent it is relevant, evidence elicited at the infringement trial may
be considered in the invalidity triaL

5

7

Dr. Palmieri, an Apotex witness, is an expert in the Held of pharmaceutics, which indudz:s

1 <).

the production and cxaminatlon ofphannaceutical dosage forms. (NT. 3/3ll1l, pp, 28~29,

49-50; PTX 109)
2:},

George Gerstman; an Apotex witness, is an expert on the PTO's practices and procedUrt s,
and patent prosecution. (NT. 411/11, pp. 97-124.)

2L

Dr. Eugene Cooper, a Cephalon witness. is an expert in the field of pharmaceutical
fonnulation and phannaceutical dosage fonns. (NT. 416/11, Pl'. 5-18; DTX 155.)

22.

Dr, Baranski, a Cephalon witness:, is an expert on the physical and p~ychological effects )1'
modafinil on humans and the interpretation ofrcsults of testing involving modafiniL (N. r.

414/11, pp. 40-41, 54, 61.)
23.

Cephalon's expert on the PTO's practices and proct;'uures is Bruce H, Stoner, who al.;o
testified as an expert in patent law and what types of information would be important in the
prosecution of patents. IN.T. 4/6111, pp. 98,110; DTX 157.)

C. Lafon's WurWDerivatioD
24.

Consideration of' particle s17c by Lafon occurred a'l tar hack as 19&6, when Lafon
intentionally crushed modafinil partlc1es in order to better compress the loose powder into
tablet form. Lafon knew that they were ;"'TuiJhing thl;; particles to a median uf90 micron ,.
Lafon then retested once they were able to increase compression and decided to remain at

the 200 micron size. (Leyder Depo.• 3130/04, pp, 41-43.)
25.

Priorto 199:i; T.nfon conducted 125 total studies on modafini1~ involving over2,OOOpatjerts
and using 9 dHlt.'Tent 101S of tablets made from 30 diff<.'J'cnt batches of rnodafiniL (N. r.

4/1 III , Pl'. 73-77; PTX 65.)

8

26.

Lafonaiso conducted a number ofstudics in 1979, 1981, 1989, 1990, and 1992 on the emet
of modafillil on narcoplesy, All of these tests were conducted before Lafon shipp':d
modafinil to Cephalon in 1993, The articles published about these studies detailed the

results from the testing of50 to 700 mg of modafinil and evaluakd issues such as dosage,

abuse potentialaod side cfibets. (N.T. 3/29/11, pp. 124-26; I":.T. 31301l1, pp. 115-25; Jl X
1, cot I; PTX 17; PTX 31; PTX 43.)

27.

Lafon conducted extensive clinical studies and received French regulatory approval [or the
treatment of narcolepsy with modalinil in February, 1992, 0',T. 31291 II, pp. 128-29; PTX
64A, Bates CPH·PLD 00001869.)

2:\,

r,afon manufactured and tested se·veral different active pharmaceutical ingredient ("API ')
batches and tablet lots over the course ofits development ofmodafinil. The fullowing chait
sets forth ditTerrnt rnodafinil API hatches and tablet lots produced by Lafon and shipped

Cephalon from 1986 to

1993~

,0

and notes tbe relevant particle size c·haracteristics found n

each bat<hllol. (PDX 2.)

, 12975

9

2,.

From October 1989 to June 1991. Lafon used Batch 5/2435 in clinical study MOD-25.
which evaluated the effect of small particle modafinil on narcoleptic patients. (N. r,

312911 L pp. 154-56: PTX 104.)

:N.

In May~June 1991 ,Lafon used BatchSl24J5 in another dinical study, MOD-29.evaluatiug

the predictive effects ofabuse IiabiJity in modafinH as compared to amphetamine. caffeine

and placebo. The fact that Lafon was usLng this material in clinical studies establishes thlt
they were awareit was an etTeetive drug. (!'i.T. J129111. pp. 150-51. 160-61: N. T. 3/30111,

pp. I J 3-24; PTX 65, Bates CPH-FTC 00036028; PTX 79; PTX 96b, Bat'"
CPH]LD_OO039070; PTX 104, Bates CPH]LD_00071298.)

:1 [,

The particle size of several batches shipped trom Lalon

(0

Ccphalon betwccn 1989 aed

1993 rell squarely within the claims oCthe RE' 516 patent. Batch 5/2435 had 99.8 perce ,t
ofthe particles less than 206.36 microns and a median particle si;r.e of49.56 microns, wht( h
also falls within the RE'516 claiJus. Batch 003 had 98.62 percent of it:, p<.«tidcs It::S5 iliUl
20636 miuons. The median of that lot was 37.2 microns. and tbus that entire lot falls

within CLaim, 1-14 and 16 oftbe RE'SI6 patent.
32.

Tn a memo from Jacquelyn Naduad at Lafon dated November 10,

1993~ to Dr, Grebow, tl.e

alleged inventor at Cephalon~ Lafon conveyed its particle size analysis ofdifferent batche:"

TIlis information was commtulicateu to Grebow prior to Lafon shipping Batch 003 10
CephaJon. Additionally, Batch 005 had 99.8 percent of the particles less than 206.36
microns, with a median of 30.7 microns, This is also within the claimed runge of tre
RE'SI6 patent (N.T. 3/29/11 ,pp. 138-47; PTX 83, BatesCPH-FTC00032133, 00032136­
37,00032140.)

10

33,

Cephalon concedes, as they must, that Lafon mude batches ofmodaflnil tablets that feU
within the RE' 516 patent claims, (2'1, T, 3/29/11, pp, 58-59,)

3,k

The trend in the data from Lafon's test retmlts on modafinil API

batche~

establishes thJ:t

Lafon was purposefully decreasIng particle Si7i!. From January 1989 tu July 1993, six OJt
of the seven modaftnil API batches produced by Lafon fell within claim I ofthe patental!d
four out of,ovcn batches leU within claim 2 of the patent, (XT, 3/29/11, pp, 162·67; PDX

2, PDX 6; PTX 7; Moachan Depo" 5/27/04, pp, 278·19; Moisan Dopa" 411104, PI', 46·4; ,)
35,

Lafoli and Cephalon started meeting in 1992 to discuss Ccphaionas a licensee ofmodafinil
in the United States. Prior to the fonnali7.ation of their relationship, and as part oftho;e
meetings) Lafon supplied technical infonnation about its mQdafinH to Cephal on. (N,T.

4!41l1,p, 174,)
35,

Lafon pro,ided Ceph.lon with data from 1989 tests which slwwed that Lafoll achiev<!d
better dissolution rates with modalinil that was groulld into smaller particles than wiihnon­
ground, (2'I,T, 3/29!ll, pp, 168·70; PTX 20a; PTX 13Ib,)

37.

After a visit to Laton in October 1992. Dr. Grebow noted that there had been a change in
the formuJation of the modafinil during development which involved decreasing particle
size, (NT 4/5111, pp, 141-42; PTX 36,)

38.

In October 1992, Lafon conveyed to Cephalon that they decreased the particle size :>f
modafinil and conducted all clinical trials with small particle modnfiniL Laton aim
cOllvt..-)'cd that their recommended dosage was early morning and early aficmoon for a t01ill
of300 mg, which they had found to be successful in treating nmcolepsy in clinical studies,
(NT 3l29111,pp, 172·74;N,T. 3130111, Pl', 115-1 R, PTX36,llatesCPH]LD~ 00046185;

PTX 43, Bates Al 0000604,)

1I

3~.

In November 1992, Lafon conveyed to Cephalon that they knew particle size related to
solubility and that they would be measuring the particle size of the bulk API to be supplied
for Cephalon's clinical studies, (N.T. 3/29111, pp. 175-77; PTX 37, Bates CPH]LD
_00050278-80.)

43.

On February 26, 1993, Cephalon sent Lafon a fax requesting particle size informatioL

T,afon responded that 300-315 microns was their specification for the rnodafinil API, whi(:h
was the range approved by the French regulatory agency. (N.T. 4/4111, pp. 201-10, 21 S;
PTX 197, CPH-FTC 00023337; DTX 52; DTX 54.)
41.

In March 1993, I.afon conveyed to Cephalon that the recommended dosage was a range ,)f
200 to 400 mg a day with 300 mg being the most used. Lafon also acknowledged that it had
conducted various particle size tests in accordance with the United States and Europe:m
Pharmacopedia. (N.T. 3/29111,pp. 177-79; PDX 19; PTX56, Bates CPIl]LD_0001879t,
97.)

42,

A Phase I study is a study conducted in nonnal volunteers to assess maximum tolerakd
do~age,

drug inleraction, effecl of food on the medil:ation, etc.

Thi~

study provides a

baseline for the drug so it can be studied in patients. (N. T. 4/4111, p. 230.)
43.

Lafon conducted a Phase I study where increasing dosages of modafinil wcre administcn:d
to patients. That study revealed that modafinil, particularly at high dosages of 800 ar:d
1,000 mg, increased heart rate and blood prcssure. Despite having received this informaticn
from Lafon, Cephalon subsequently infonned the PTO that there were "no statistical.y
significant changes in heart rate or blood pressure." (N.T. 3/30111, pp.13S-52; JlX 4, Baks
CPH]LD_00000331; PDX 20; PTX 53.)

44.

In meetings held on March 29 and 30, 1993, Lafon communicated to Cephalon that its
12

clinical investigations showed that the maximum tolerable dosage was 600 mg. (N.l'.
3130!l1, pp. 154-56; N.T. 414111, pp. 109, 137-40; PDX 19; PTX 51, Bat",
CPH.PLD.0005U336-37; PTX 56. Bates CPH.'pLD_OOOI8795.)
45.

On April 19, 1993, Lafon $;ent Cephalon a memorandum advising that side effect'> fro n

modafinil could be seen in IWrmal healthy patients, (N.T, 4/4/11, pp. 125-27; PTX 60.)
4,5.

Lafon's P-1421 study showed statistically significant changes in bJood pressure wi--h
increased dosages of modafinH. and a report on that study \vas sent to Cephalon in May

1993. (N.T. 414111, pp. 143-55; PTX 193, Bates CPH-FTC 00028364.)
41,

Cephalon learned about the safety and efficacy of modafinil from T..afon's French clinicll

studies. (N.T. 414/11, p. 194.)
48.

Ccphalon received and reviewed aU ofLafon's clinical trial data from January to June 199:i.

(N. T. 414/11, p. 219; N.T. 4/5111, p. 15.)
49,

Dr. Grebow noted Lafon's clinical test results as set f~lrth in a June 14, 1993, investigative

brochure, which is one of the documents filed with an Investigational New Dn_g
Application (hereinafter "IND").' (N.T. J/29111, pp. 156-57: PTX 62.)
50.

All (lfthe characteristics of the mooafinil claimed in the patent were already present

Whi n

it was manufactured by Lafon and shipped to Cephaloll in July 1993. (N.T. 415111, p. 135 )

5 i.

Lafon ob;;erved the regutar decrease in the median value for particle size, except for die
rccfysUlllized batch, and conveyed that infonnation to Cephalon in October 1993. (XT.

4/5/11, pp. 98-99: PTX 83, Bntes CPH-FTC 00032133.)

(\ An IND seeks approval from the FDA to ship a drug which has not yet been approved fi)r
maketing across state fines to conductcllnical trials, See Integra Lifesciences 1. Ltd. v, Merck KGh..
495 FJd 1334, 1336 (Fed. Cif. 2007).

13

5:2.

Lafon supplied Cepha!on with particle size measurements for all ofits batches on Novemb"
15,1993. (N.T. 415111, p. 101.)

53.

Lafon recommended Batch 5/2236 (early Lot C) 10 Cephalon on Novel11ber 25. 1993. as Ute

reference lot having the approprlate spl..>;cifications for use in manufacturing Ccpna[on's
proposed version ofthe drug. (NT, 4/5111, pp. 54-58; DTX 106.)
54,

Cc:phalon responded on November 29, 1993, noting that they wished to use a spedficati('n

more similar to Batch 003 - 005, not 5/2236. That W'd~ the specii1cation latt'T agreed upon.
(N.T. 415/11. PI'. 62-64; DTX 107; Shek Depo., 8/5104, PI'. 196-97.)
5:5,

Lafon latcr admitted that lheirrecommendation to use Batch 5/2236 as the reference lot was
strictly a business decision in an attempt to n01 jeoplJrdize their French regulatory filing~ ..

IIowever, Lafon was using Batch 003 as their good manufacturing practices standard batch.
(N.T. 4/5111, pp.114-118; PTX 63B. 84.)
%.

Mr, Michel Moisan from Lafon acknowledged that Lafon measured the particle sizes of
modafinil in the scaled~up lots, wherein the particle size ofrnodafinil had been decreaser:l.
and found that there was a demonstrated relationship between particle size ar d
bioavailability. (NT 3!30!11, pp. 71-77; Moisan {lcpo., 411104, pp. 46-50.)

D. Licen•• and Supply AllreomcntlOn-Salc Bar

-., .

)

On January 2Q, 1993, Cephalon entered into Supply and License Agreements with Lafor .
(Stip., doc. no. 438; .'I.T 3/29111, pp. 129-30; PTX 48, Bate, CPH PLlJ _00023471; PT){
49.)

5lL

In a letter from a senior regulatory affairs director at Ccphalon to the FDA, Ccphalcn
advised that it received a license from Lafon to develop and market modafinil in the Unit€:d
Slales. (N.T. 3/29/11. pp. 128-29; PTX 64A, Bates CPH_PLD_00001869.)
14

59.

Pursuant to the Supply Agreement, on luly 13, 1993, Lafon sen! Cephalon 2S kg of Bateh

003 modafinil API and 50,000 tablets from Lot MOOG. The API and tablets we,e reocived
by Cephalon on July 23, 1993. (Stip.. doc. no. 438.)
60.

The Supply Agreement states that Lafon will supply Cephalon ¥tim modafinil iree of char~ e

in exchange for Cephalon paying for cllnical testing in the U.S. In

~xchange

for the '''me

supply," Cephalol1 would pay Lafon II % o!'thene"alcs. (1\.T. 3/29/1 1, PI'. 130-33; N ...·.
414111,1'1'.1&5-87; PTX48:DTX 71.)

6 L.

Pursuant to the Supply Agreement, Lafon began sending Ccphalon commercialized
shipments of modafinil in 1999, and Cephaion paid for those shipments. (Heacock Dcpc",

1127104, PI'. 25-26.)
62.

The License Agreement provided that Cephalon would lise reasonabJe efforts to file the IN [)
for modafinil in the United States and that they would work to do

thi~

as expeditiously as

possible. (N. T. 4i4ill, pp. 1&8-89: PTX 49; DTX 72.)

63.

The on-sale bar critical date is October 6. 1993, one year prior to the filing of the '8L.5
patent. (N.T. 3/29111, p. 109; N.T. 416/1 1, p. 133.)

E. Cepbalon's Workll;nexpected Results
64.

Cephaion concedes that the API and tahlets it tested wt.'Tc manuHtctured by Lafon, (N.T.

4i5/11, pp. 93-94.)
65.

Cephalon measured the panicle s17.e of modafinil from the APl. not the tablet. (N.

r.

3129ftl, p. 107; N.T. 41511 1, p. 144.)

65.

The clinical testing necessary to hring modafinU to market in the United States

Wi::;

estimated to cost over a million dollars, (N.T. 4/5/11, p. 124.)
67,

In 1993, CephaloncQoducted a Phase J study, CRP-21 01, wherein it administered increasing

IS

dosages of modafinil to patients.

Cephalon concluded that because of advene

cardiovascular effects seen in one patient at the 800 mg dosage, the study had to be stopped

and th;:tl the maximum tolerable dosage wa.'; 600 mg. In the patent, Ccpha]on claims thaI
the

"elevatjon~

in heart rate [in this study] were totaUy unexpected," (N.T. 3/30111, pp.

152-59; NT 414111, pp. 92-93; PTX lOla, Bates AI 0005820; DTX 99, Balt's

6:5,

Cephalan's Phase I study was conducted in August 1993 in healthy males, ages 21-30.

nc

study was a d.ouble blind study so neither tbe voJunteers nor the administrators knew wi" 0

wa, getting placebo or medication. (N.T. 41411 L p. 235.)
69.

Cephalon' s Phast: r study was. stopped two to three days after the volunteers received

&( 0

mg of modafinii when one patient's blood pressure and heart rate were elevated for a
sustained period oftime after the dose administration. (N,T, 415111, pp. 8-12; PTX

191~

DTX 99.)
70,

Ccphalon conveyed to Lafon the results of the patient with elevated heart rate and blo(,d
pressure in a fax, where it was noted that Cephalon "anticipated these eflccts" based on ule
extensive Lafon database. (N.T. 4I51t I, pp. 21-24; PTX 69.)

7},

Ccphalon first noted that it wanted to investigate particle size distrihution on October 8,
1993. (N.T. 4ISi11, pp. 29-30.)
In October 1993, Cephalon began to conduct a number of experiments, int.:ludillg
dissolution testing and photogrflphing of particle size, Cepha]on also conducted a test on
the effects ofmodafinil of different particle sizes on the blood plasma levels in dogs, C'J.T.
415111, pp. 46-50.)

73.

In its ANDA. Ccphalon represented to the FDA that "the variation in the median particle
16

size from 50.18 microns to 94.05 microns did not affect oral absorption of modaftnilln
dogs," while conversely stating to the PTO in the RE'516 patent that there is increas(d
potency with smaller particles because the "median particle size of 50.18 microns resulted
in a highcr peak plasma concentration than with larger particles." (N.T. 3/30111, pp. 12l:­
36; JTX I, Bates Al 0005271; PDX 21; PTX 96" Bates CPH-FTC 00045337.)
74.

On October 20, 1993, Cephalon wrote to Lafon advising that they had confirmed the effed
of particle size on intrinsic dissolution. (N.T. 4/5/11, pp. 41-46; PTX 72.)

7:;.

On October 26, 1993, twenty days after stopping its clinical trial, Cepahlon claims to hme
done its particle size analysis with a IIiaclRoyko. I Iowever, the summary of that analys.s
does not include any actual particle size measurements. (N.T. 4/5/11, pp. 153-57; DTX 9a,
Bates CPH]LD_17817-17823.)

76.

The first time Cephalon conductcd Hiac/Royko testing to measure the particle size of
modafioi1 was

n.

00

February 16, 1994. (NT. 4/5/11, p. 126.)

On October 5, 1994, Cephalon's patent attorney noted that one of Cephalon's scientis.s
reanalyzed the modafinillots so that they would not have to rely on Lafon's data. (P'lX 91.)

7f:.

Dr. Grebow claims to have made the discovery, which is the basis for the patent, in tl:e
fourth quarter of 1993. (N.T. 4/5111, p. 74.)

79.

Dr. Grebow described the invention as modafinil with a threshold particle size of about 200
microns resulting in reproducible dissolution results and consistent bioavailability. (N.r.
4/4111, pp. 173-74; N.T. 4/5111, p. 134.)

loW.

The claimed "invention" was very simple - modafinil with 95 percent ufits particles smalkr
than about 200 microns. Modafinil with those characteristics was manufactured by Lafon
and used by Cephlaon without change or improvement. (N.T. 4/6111, pp. 20-22, 48-49;
17

Shek Dopa., 815104, pp. 196-97,250-51.)

8:,.

Lafon was surprised that Cephalon patented the particle size because Lafon was the "ownel Of

of the molecule and Cephalon was its client for use of the molecule in the United Stale;;,
(:Vloisan Depo., 411104, pp. 171-72.)

F. Prior ArtlObviUWAeSS
82.

A person of ordinary skill in the art is a person with a bachelor's degree in chemistry, either
in chemical engineering Qc pharmaceutical sciences, Such person would also most likely
have a Ph.D. in phummceuticru sciences or a related field and would be larniliar wilh
prefonnulation, formulation and the FDA and other regulutory bodies. A person skilled in
the art would also have lab experience, would be familiar with particle size, and wou;d

know why measuring particle size is important. and how particle size affects dissolution ar d
bioavailability. That person would also be a medical doctor who has treated conditions sw.h
as narcolepsy, which mooafinil is known to affect. (N.T. J131111, pp. 79-80; l\.T. 4/6111,

p.27.)
8:1.

The obviousness inquiry considers materials publically available one year prior to the dati!

(lfthe . 845 patent application - October 6, 1993, and earlier. Modailnil was known to tre.)t
narcolepsy in October 1993. (N.T. 416111,pp. 73-74.)
84.

A person of skill in the art would have known that modaflnH was effective to treat tLe
conditions listed in the RE'SI6 patent in the early 199{l's. (N.T. 3131111, p. 81.)

85.

There were articles pubHshcd in the earty 19905 which showed thllt drugs cowd he
reformulated to have a !':maUer particle size and achieve better therapeutic resultii and/or d_c
same results with .,maller dosage. (N.T. 3131!11. pp. 126-29; PTX 32; PTX 41.)

86,

Once API is past the Jaboratory stage, particle size analysjs is typically one of the first tcs:s

18

undertaken because it plays a key role in performance of the drug and distlolution rate,
Literature available in the early 19903 suggested that new drugs be ground to a diameter of
30 microns, or at lea'<t between 1010 40 microns, a<,T, 3129111, pp, 101-04, N,T, 3/3111 I,
pp, 93-96; PTX 6, Bate, AlO088870,)

87 ,

A person skil1ed in the art 'wtmtd have known, as early as 1966, that reducing particle sit,e
im."!'eases surface area, which increases the dissolution rate ofpharmaceutks, (N, T. 313111 !,

pp 85-92; PTX L)

88.

The unique relationship between particle size and dissolution is an inherent propcrt:y. ard
is therefore an inherent property ofmodafiniL (Shek Dcpa" 8/5104, pp, 22-23,)

IN.

rt was known to people skilled in the art in 199311994 that reducingpaTticle size increasl,;d
bioavailability,

90.

MT, 4/6/11, pp, 30-32,)

Increasing bioavailability is not always positive and does not always lead to the desirtd
result. Decreasing particle siz.e, and, thus, increasing bioavaHabilily, can lead to toxicit{,
the purtkles could dissolve too fast to be absorbed into the body, and static electridI}' mI.'>
agreatcrimpacl on smaller particle" (KT 4i61l1, pp, J4-38; PTX 6, Rates AI0088870,)

9,

A person skilled in the art in the early 1990's would have known thai reducing the partie e
sizcofmodafinil wuuldaHow for increased potency andior reduced dosage. (N.T.3/31/11,

pp, 81, 128,)
92,

Based on the information available in the early 19903, a person of crdjnary skill in the art

would have ground modafinil and would have arrived at a particle size that jell within tl.e
claim limitation, of the RE'516 patent. (N,T, 3/3111 L pp, 108-09; PTX 6,)
9:1,

Figure 6 in the RE' 516 patent is a classical dissolution cutve where the dissolution rates of
one early lot with large parricle modafinil and one lale lot with small partic.le modafinil are
19

represented, Figure 7 in the RE'S J6 patent is a classical dissolution curve representing tre
dissolution rates of two carly 10t:1 of large particle modafinH and one late lot of small

particle modafilliL The graphs are exactly what someone skilled in the rut prior to Octohf~r
6, 1994, would expect in that smaller particles dissolve taster than larger particles. (N...

3/31/11, pp. 55·57, 62,132; JTX I, Bates AI 0005265.)
9'·.

Anyone skilled ill the art who had the capability of measuring particle ,17'< on July 26, 199:;.
would have been able to detennine that Batch 003 had a 95 cumulative value under 220

mircron;s. (N.T. 4/5/11, p, 122.)
9';

A 1987 FDA publication recognized that particle size is important in tenns of dissolution
and bioavailability of poorly water soluble dmgs such as rnodafmil. (N.T. 3131ill, pp. 1E'­
22; PTX 16, Bate< AIO089407, 89457.58.)

96.

A person skilled in the art would have known that modafinil was poorly water soluble in the
early 1990s and would have sought to reduce its particle size ifit received the chemical with
a median particle sin! 5ubqtantially larger than 40 microns, (N',T, 3/31111, pp. 82-84.9:;;

N.T. 4!liII, pp. 54·55; PTX 6 at Bates AI88870; PTX 27.)

9"
"

A person sk.il1ed in the art would have known the clinically effective dosages of modafinil

in the earty 1990•. C'i.T. 3/31111, pp. 81·82; PDX 42.)
9~:,

The prior art 5ho\\'3 that 100 to 200 rng ofmodafillil is safe aJJd effective to treat narcoteps).

(N.T. 4/4/11, p. 121.)
9\'.

The 1990 U.S. Pharmacopedia, which is lhe compendium for drug standards in the U.S.,
allowed 85 to t 15 percent weight variation from the amount claimed. For example, a 100
mg tablet could actually have 85 mg to 115 mg of the claimed ingredient. (NT. 313111'
pp. 113-16; PTX 26, Bates Al0088717.)

20

100, The claim of an additional 10 to 15 percent ofmodatinil as stated in claims 13 and 14 ofthe
RE'516 patent would have been obvious to one skilled in the art in the early 19908.

~.T.

3/31!l1, p. 117; N.T. 4/5111, p. 146.)
G. Written Descriptiop
101. The patent only describes the particle size measurement of the modafinil API, not the

measurement ofmodafinil in the finished tablel. (ITX I; N.T. 3130/11, pp. 57-60; Heacock
Depo., 1127/04, pp. 87-88.)
102, One of ordinary skill in the art would not know if the particle size in the finisht"d

Provigil~

tablet was the same as the measurement of the modafinil API, prc-tabletting. (JTX 1~ N.T

3/30111, pp. 57-60; Heawck Depo.. 1127/04. pp. 87-88.)

H. Tbe Patent Office
103. The :\fanua1 of Patent Examining Procedure (MPEP) sets out rules for both patent

examiners and patent practitioners. (N.T. 411!11, p. 103; PTX 142; PTX 239.)
H 4. After a patent is filed, it is c1a<;sified by subject matter. New patent applications

w!

iypically reviewed chronologically. Once a patent comes up for examination. which could

take up to two years, the examiner searches through previous patents within the appropriat~
classes of subject matter. Il"!e examiner looks for prior art in previously filed patents dU:1
meets the language of the patenl up fOr review, (N.T. 4/111l, pp. 143-44.)
lOS.

In a memo to various executives on October 5, 1994, regarding Cephalon's pate-It
application, Cephalon's in-house patent attorney stated, «this applkation is 'unusuaF in the
sense that we did not want to include any of Lafon's data so as to avoid disclosing the r
'confidential' infonnation; thus, the task of'disclosure' ofthe invention was unique." 0\,1'.

4/5/11 ,p. 84; PTX 91, BatesCPH·FTC 000451 17; Burgoon Depo., WI27/1 0,pp. 237-38.)
21

lO6.

Cephalo. never disclosed to the PTO that: Lafon was the manufacturer of Batch 003; Ihzt
Lafon had measured the particle size of that hatch prior to providing it to Cephalon; tlut

Lafon had manula(;tured and tcsted several modafinil lots that feU within the clain
limitations: or that the two companies had both supply and license agr.eements, (N,].
3129111. pp. 1RI-83; N.Y. 411/11, pp. 116, 146-47; PIX 239, pp. 2100-27; Burgoon Depo ,
7123104, pp. 159-60.)
1(17.

On June 27.1995, the PTO issued an office action (an offk'iall'ommunication from th.::

PTO), rejecting all of the claims under 35 U.S.C. § 103 as obvious. The examiner

concluded that there were references to the smaller particle sizes in cOlmection with the 01 j
modafinil, and that while the early lots had larger particles, it would have been obvious t J
make them $maller. The examiner further concluded that it was obvious that if particle size
is reduced, potency, bioavailability and dissolution rate are increased, and there are hight!
peak plasma levels. (NT 411111, pp. 23-27,146; JTX 4, Bates CPH]LD 00000245-47.)
1(18.

After receiving the office action rejecting the patent for obviousness, Cephalon's patert
attorneys requested an

in~person

jnterview with the exarniner. In an attempt to rebut the

obvioU$ness rejection, Cephalon filed a pre-interview submission \",hleh included a
declaration by Dr. Shck. (N.T. 411111, pp. 153-54; JTX 4, Bates CPH_PLD _00000253:,
109,

Cephalon also filed a fomlat response wherein they asserted that "it is probative of nOfl­
obviousness that the mah:nals which are the lrubject oC the invenlion and had long bee1
kno\,;ll, but had never before been modified as the inventors had done." (N.T. 411111, Pi"
157-58; JTX 4. Bales CPH]LD_OOOO0343.) As noted previously (Fact 80). Cephalor
never modified the modafinil it received from Lafon,

22

110. In respmlse to subsequent office actions wherein the patent was again rejected as obviou "
Cephalon asserted ihat prior foreign studies on modaflnil's biQftvailahility do not suggc,t
that one of ordinary skin in the art would be motivated

Qf

expected to manipulate ttc

particle size ofmodafiniL (N.T. 411/11, pp. 160-61; JTX 4. Bates CPH_PLD_0000043 7,
441.)

Ill. On September S, 1995, approximately II months after Cephalan applied for the patent. it
suhmitted another declaration by Dr, Shek. This declaration contained a graph representillg
the dissolution rates of large particle, early lot, modafinil and small particle. late 101,
modafinil. When compared to the dissolution data present in the patent itself(Figures 6 and

7}) only two of the data points on the Shek declaration graph can be considered because t lC
other infonnalion is not disclosed in the data or is from a recrystallized lot. Those two d;;:.ta
points, E-B and L-l. do not allow one skilled in the art to come to the conclusion that abcut
200 micron~ was the critical breakpoint for particle si7,e ofmodafinil. eN.T. 3131 Ill, pp. t 3­
65,68-77; JTX 4a, Dates CPH I'TC 00021653; lTX 4C,)
12.

In Dr. Shek's third declaration to the patent office, Cephalon also represented that it had

"manipulate[d I the pattide size ofthe drug substance." (N.T. 411111, pp. 157. 160; JTX 4,

113. Cephalon did not modify, manipulate or improve any aspect of the product they recei\ed
from Lafon, which is in direct contradiction to uleir representation to the patent office.
(N.TA/lI11, pp. 158, 160, 162; N.T. 4!6fll, p. 75; Clark Depa., 12121104, pp. 207-08; SLek
Depo., 815/04, pp. 196-97,250-51.)

1l4, The patent docs not contain any data that the claimed small panicle mQdafinil is safer Qr
more effective than large particle mooafinil. (N,T, 3/30/11, pp. 150-52; JTX 1.)

23

J 15.

The RE' 516 patent does not contain claims regarding solubility or bioavailability, and on
December 5, 1995, the inventors specifically disavowed to the PTO that they were claimUlg
such properties,

(N,j',

3129111, pp, 99-10 I, 118-19; JTX 4B, Bates CPR_FLD _ 00000398,;

116. The Supply Agreement between Cephalan and Lafon was not disclosed to the PTa.

~~

reasonahle examiner '.".'Quid want to know if the product being claimed was the subject o(
a supply agreement because the examiner would need to evaluate that agreement fo:'
anticipation and the on-sale bar,

(N, T, 4i1ill, p, 151; PTX 142, Bat« CPH-fTC

000l8917,)

Ill, Legal Analysi,
A.

~.@.t~nt

Invalidity

Patents are presumed to be valid. 35 U.S,C. § 282. The burden of establishing invaliditt

by dear and convincing evidence is on the party asserting such invalidity. }vficrQ§oftCorp. v. 141
L1d. P'shir;:, 131 S.Ct 2238, 2242 (2011). "[T]he ultimate question of patent invalidity is one o:~
law",:' Gnlham v, John Deer. Co, ofK;msas Qity, 383 U,S, 1, 17 (1966) (citations ormttoo),

As noted prcvious1y, Apotex has challenged the validity ofCcph.alon's RE'S16 patent 01
the grounds 1hat: it '.vas on sale more than one year before the patent application; Cephalon did not
i::vent the claimed suhject matter; the claimed suhject matter of the invention was obvious: and it
lacked a written description.

L On-Sale Bar
"A person shaH be entitled to a patent unlesl! .. , the invention ... was on sale in th,s

c')untry more Than one year prior to the, date of tile application for patent jn the United States." :: 5
C.S.C. § l02(b). An invention is on sale within the meaning of § 102(b) if it \vas sold, or the

24

subject of a commercial offer for sale, and ready for patenting prior to the critical date.? Pfaff".:.
Wells Elecs., Inc., 525 U.S. 55,67-68 (1998).
Apotex posits that the claimed invention was on sale when Lafon and Cephaloo entered iotl)
lkense and supply agreements in 1993, resulting in Lafon shipping modafinil to Cephalon startin~
in July 1993. Cephalon counters that its claimed invention was not on sale prior to the on-sale bar
dne because Lafon supplicd Cephalon with modafinil for free in 1993 for experimental purposes

a. On Sale
As § 102(b) only requires that the invention be on sale, not actually sold, a contract to se:l
satisfies the on-sale requirement. Buildex Inc v. Kason Indus., Inc., 849 F.2d 1461, 1464 (Fed. Cil'.
1988). Additionally, there is no requirement that the invention be delivered and/or money chang,)
htlnds prior to the critical date. Weatherchem Corn. v. J.L. Clark, Inc., 163 F.3d 1326, 1333 (Fec.
C.r. 1998).
In determining whether a particular transaction is commercial or, as Cephalan

claim~:,

c)_pcrimental in nature, the relevant inquiry is "whether the primary purpose of the inventor at the
time ofthe sale, as determined from an objective evaluation ofthe facts surrounding the transaction,
WiS

to conduct experimentation." Allen Eng'g Com. v. Bartell Indus., Inc., 299 F.3d 1336, 1352

(Fed. Cir. 2002). The entire transaction must be considered, and a transaction will not be found tJ
bt for experimental use simply because the "invention was under development,
OJ

su~ject

to testinf:,

otherwise still in its experimental stage at the time of the asserted sale." Id.
Three cases from the United States Court of Appeals, Federal Circuit, decided between 2002

and 2005, provide further guidance as to when an agreement to sell satisfies the on-sale

The critical date is one year prior to the application date for patent. Scaltech. Inc. v. Retec/Tetnl..
L.L.C., 269 f.3d 1321, 1327 (Fed. Cir. 2001).

7

25

tc:quiremem. These cases generally instruct that the on-sale bar inquiry is very fact specific.
In the first case, In re Kollar, 286 F3d 1326, 1330-31 (Fe-d. elL 2002), the court concludE d
that the parties' agreement did not constitute a sale because it focused on potential products.
r1:sulting from the potential commercialization of a claimed process. In Kollar, the parties entertd
into a "definitive agreement" whereby in exchange for technical infonnation about the claimed
process and a license to commercialize that process, the porentiallicensor, Celanese, would pay
Kollar royalties. While the process at issue had been reduced to practice, and thus, was ready br
{:atenting, the court focused on the agreement's language and noted that its primary purpose was
t,) "conduct research amI

development in the [fJield" with the goal of achieving a commercial plant

within five years. Id. at 1329-30. The court focused on the contjngency that if, and when,

t 1C

(ommercial phase was n;ached, Celanese would receive an exclusive license to operate the plmt
using the claimed process to

sen resultant products.

l4..

In ruling that there was no sale, the conn

gave little credence to the plans to sell potential products in the future and concluded that tnc
agreement did not provide for a sale of the claimed process. Id. at 1331.

In Elan COrp·lAru!\X Pharms" Inc, 366 F.3d 1336 (Fed. Cir. 2004), the court also found
1bat there was no sale for the purposes ufIhe on-sale bar. The alleged offer for sale in Elan was a
;etter from Elan to Ledcrle Laboratories wherein Elan expressed their plan to file an ND. lhe
following year. The letter also expressed an interest in seeking a licensing partner in exchange for
,;ertain fees and concluded, "we would value having Ledede as a partner in this project, and [\/e]

look fonvard to having [Lederle's] decision lIl1his marter." Id. at 1337~3J:t The com1 found t'llit
thiS letter was not a c.ontrad for sale, or offer for sale, because of its speculative nature and lad of
details commonly found in commercial olfers. Id. at 1341, In fInding tl:.at the letter lacked the
necessary material terms to be considered an offer for sale, the court noted the lack of"any mention

26

of quantities, time of delivery, place of delivery, or product specifications," and the fact that the
monetary amount discussed was not intended a'> payment for a product but a licensing fee,

14.:.

Finally, in 2005, the Federal Circuit jssued E~zo Biochem.~. Gen~.probe Inc" 424 F.3d
1276 (Fed. Cir. 20(5). which is most analogous to the case at hand. In Enzo, the court did find that
there was

il

commercial offer for sale.

14:. at

127&. The contract language at issue stated that,

"ENZO shall supply to ORTHO and ORTHO shall purchase from ENZO for use in Licensed
Pf(lduct~ no less

than ninety percent (90%)ofORTHO's United States requiremenlS Qr seventy-five

per:ent (75%) of ORTHO's worldwide requirements uf Active Ingredients." Id. at 1279. The
cuntract further staled that "ENZO shall supply ORTHO at ENZO's fully allocatcd cost with all
qu;mtities of any Licensed Product reasonably required by ORTHO or any Affiliate for its own
research, development, and test marking, including that required to pcrfonn all preclinical a.rJd

c1hical studies." Id.
While the court recognized that the contract provided for the "free" supply of product

fOl

c1 i nical testing, which in and of ilsclf was not Ii commercial offer for sale, it found that the other
laLguagc unequivocally provided for arequirements r.'ontract once the product was commercialized.
Id. at 1281-82. The court reasoned that this requirements contract was not illusory or speculativi:
because the parties had a duty under general contract law to act reasonably and in good faith to se[
pr:ces and order goods. Td. The facts presented in ~ were distinguished from those in K.ill..W~
in that KoHar: involved the alleged sale ofa process to make a product, whereas the contract in Enzq
ccncemed the sale of an actual, tangible product Id. at 1282, Accordingly, the court concluded
that, when rcad as a whole, the contractual language provided for a requirements contract that was
a ·:.ommercial ofter for sale under § l02(b). L<t at 1281-82.
With this precedent in mind, for the foUo·wing reason5, I conclude that the Supply
27

Agreement

betw~en

Apotex and Ccphalon constituted a commercial offer tor sale.

Ll:llon and Cephalon entered into a Supply Agreement on January 20,1993. That agreement
was signed in conjunction with a license agreement wherein Cephalon received "a license to make,
ha·;c made, market and otherwise sell pharmaceutical products containing the compound
modafiniL" Following an acknow1edgmentoftbe r.icenseAgreement, the Supply Agreement state~,
"LAro~ is prepared and has the right to sell modafinil) a pharmaceutically active compound ...

and CEPHAI,ON wishes to purchase the Compound from LAFON:' Under the category "product
supply" the agreement states. that "LAFON ... will sell such Compound to CEPHALON."
The pertinent terms of this agreement regarding pricing state:

a)

All quanlitiesofCompound and matching pl.ceoo necessary to CEPHALOJ\
for carrying clinical test'> in calendar year 1993 and thereafter up to the date ofthc
Hrst FDA approval in the U.S.A ofaLioonsed Product including the Compound a.s
an active ingredient, shaJl be supplied free of charge. The specifications for the
Compound and matching placebo in finished tablet form shall be agreed to by the
parties in 'Writing,
b)
All quantities oClhe Compound other lhan those mentioned under Cal aoove
shall be supplied at a priee equal to cleven percent (11 %) of CEPHALON' s Net
SaicB of Licensed Productions in the Territory, pmvided that if CEPHALON's
finishing costs (including fonnulation, tabletting and packaging costs), exceed 3 %
of Net Sales, CEPHALON and LAFON shall meet to determine whether an
adjustment in the price of the Compound under tms Agreement is appropriate.
(PTX 48.)
Pursuant to the Supply Agreement, Lafon suppHed Cephalon with both API and tablets for
Cephalon to conduct clinical testing starting in 1993. (Fact 59,) Tn 1999. Lafon began suppJying
the compound to Cephalon for the commercial sale of Provigil® in return for payment in ihe
llmOunlS

specified above. (Fact 60,) The Supply Agreement also includes a process for placing

Finn orders and addressc!) shipping, warranties, and the right of rejection. (PTX 48.)

28

While Kollar, EIgtn and Enzo addressed factual scenarios involving the sale of a product ir
th{:

future, it is the contractual language itself that was outcome determinative. Here, the parties'

Supply Agreement starts out with language indicating that this is a contract "'10 sell" and "tr.
purchase" mooaftnjL The remainder of the contract language at issue most closely mirrors tha:
fOIJnd in ~ 424 F .3d 1276. Both the Enzo contract and the LafoniCephalon contract providi~

fo,' a 'free" supply of product for clinical testing, rd. at 1279. Both agreement$; also contaiu
language akin 10 a requirements contract, wherein one party provides the acrual transi~r of mone:r
for product under the requirements contract portion of the agreement, as opposed to the '·frec"
provbion ofdlC product for research and development that might occur in the future, ostensib1:,
after the on-sale bar date. While the contracl.$ may contemplate some clinical or experimenrnl
te:;ting by Cephal on, that testing is incidental to the primary commercial purpose of the contract tl)
provide for the sale of a modafinil product in the U.S. market. The fact that CephalaD agreed \»

cc'nduct the testing necessary for approval of the drug by the FDA in no way demonstrdtes that the
«primary purpose" of the contract was experimentaL Given the striking similarities between the
C(lntracruallanguage in the Supply Agreement here and that in El1Z0, and the Federal Circuit's cle;;r
stltement that a requirements contract for a future product can satisfY the on-sale bar rt'quircmen:.
1 :1nd that there was a commercial offer for sale in Cephalon and Lafon's Supply Agreement. 8

T al~o note that in addition to the C03crete tenns related to quantity and price, the Supp;:
Agreement includes material terms such as the process for ordering, shipping information, warramit,s
anj the right of rejection, which are material terms the c-ourt in Elan, 366 F .3d 1336, noted we! e
relevant to determining whether an offer constituted a commercial offer for sale under § 102(b). !!L.
at 1341.
t

29

b. Ready for Patentine
\0 addition to the requirement that there be a commercial offL"f for sale, the subjeci ofthal
offer must b.: ready for patenting in order for the on-sale bar to apply, £fif[, 525 U.S. at 67-68. Ar

invention is ready for patenting when it has been reduced to practice. Ahbott Labs. v, GencVi.
f!Jarms, Inc., 182 F.3d 1315,1318 (fed. Cir. 1999). An invention has been reduced to prootic,'
when the subject matter of the sale erebodies all of the claims of the patent and it has heeL

determined that the invention works for its intended purpose. In Ie OmeprazoJe Patent Litig. , 53l;
F.ld 1361, 1373 (Fed. Cir, 2008) (citations omitted), There is no requirement that there be proof
of conception for the claimed invention, as "there is no requirement t11at a sales oHer specificall::

id!ntif)f all the characteristics of an invention offered for sale or that the panie;; recognizt' th:
si:~nitlcaru;e

of all of {hese characteristics at the time of the offer," Abbott, 182 F,3d at 1319.

Rather, "[i]f a product that is offered for sale inherently possesses each of the limitations of th:

chims, then the invention i5 on sale,"

Id.~

also S",ltec1!, 269 F.3d at 1329,

Lafon shipped modafinil APT and tablets to Ccpha100 in 1993, which were then used by
C~phalon

for clinical testing. (Facts 27, 60.) It was from these tests that Cephalon claims to have

arrived at their invention. However, a:; noted previously, nothing was done to the product shipped

tc Ccphalon by J ,afon, (Facts 54. 80.) While there was no rnodit1carlon or manipulation ofthe AT'I
o:'tahlets shipped, Cephalon nonetheless claims that it appreciated a characteristic. namely the 220
rricron threshold, that Lafon did not appreciate. However, this is irrelevant to an on-sale bar
analysis. Scaliech, 269 F .3d at 1330 ("appreciation of the invention is not a requirement to trigga
the statutory bar:

j
),

Regardless of appreciation or conception, the fact that Cephalon used tl- e

ulodafinil it received from Lafon as the basis for its patent application, wHhout any change or
modification whatsoever, demonstrates that the product shipped to CephaloD in 1993 inherenLy

30

possessed each of the claim limitations. (Facts 32, 33.) Further, the "invention" had been reduced
to J:'ractice atthe time ofthe sale because Lafon was manufacturing and selling it in France. (Facts
40,41.) Batch 003, some of which was shipped to Ccphalon, was Lafon's good manufacturing
practices standard batch. (Fact 55.) Modafinil was known to be effective in the treatment of

nrucolepsy long before Cephalon emered into the Supply Agreement with Lafon, and Lafon hed
hetm selling it commercially in France for that purpose. (Facts 26, 27.) It was well known thatthe
compound shipped to CephalaD worked for its intended purpose. Accordingly, becausethcAPI ane
tablets shipped to Cephalon in 1993 inherently possessed all of the claim limitations and had beer
reduced to practice by Lafon, (he "invention" was ready for patenting whcn it was shipped to

for the reasons set forth above, I conclude [hat there was a commercial offer for sak on
January 20. 1993, when Cephalon and Lafon entered into their Supply Agreement. I further
cc·nclude that t.'1e invention wa" ready for patenting when it was shipped. Accordingly, Apotex has
ptOved by clear and convincing evidence that the modafinil Cephalon claims a~ its invention M S
011

sale before the critical date of October 6, 1993, one year prior to the filing of the '845 patent

Pursuant to § 102(1), it patent is invalid if the inventors named in the patent did not actual y
invent the claimed invention. 35 U.S.C. § 102(f). One cannot claim or reproduce the invenlion nf

" I note that the experimental use exception to the on~sale bar is not applicable here becau ,e
C:phalon's claimed "invention" had been reduced to practice by Lafon. Clock Spring. t·P. y..
\\mpma"er, Inc" 560 FJd 1317, 1327 (Fed, Cir, 2009), The experimental use doctrine is intend"d
only to allow the inventor to perfect his discovery through testing without losing his right tu obt:lin
a patent Id. Cephalon entered into the supply and license agreements with Lafon in order to
clJnduct testing in the United States for FDA approval. Cephalon was not perfecting the produ:t,
and in fact, did nothing to change il.s compo:;ition,:-;o the experimental useexceptlon is inapplicable.

31

another and obtain a patent on that "invention,;; QddzQl1- Prods .. Inc. y, Just Tovs, Inc., 122 F3j

1396. 1401 ~02 (Ped. Cir. 1997). To invalidate the RE'516 patent by derivation, Apotex must sho'v
b:! clear and convincing evidence that the claimed subject matter was conceived by someone che
and there was communication of that conception to CephaloD. ~Millan l{"Moffcn, 432 F.2d

123i, 1239 (C,C.PA 19iO),
Apotex maintains that Cephalon derived its claimed invention from Lafon because Laf( n

sdentists conceived small particle modafinil and communicated that infonnation to Cephalor:.
Cephalon responds that its claimed invention was not derived from Lafon because the Lari:·n
$l:.ientists did not appreciate the significance of the smaller particle, 220 micron threshold.

a. Conception
Conception is the fonnation in the inventor's mind ofa definite and pennanent idea which
constitutes the complete and operative invention as 11 is then to be applied in practice. Solvay S.A,

L,Honeywell InCl, Inc" 622 F3d 1367, 1377 (Fed. eiL 2010).

Conceplioo requires fle

contemporaneous recognition and appreciation of the invention. (N. T 4/6/1 ! > p. 132; PTX 239,
section 2138.04.) Accidental and unappreciated duplication of an invention does not (,'.onstin_te

,oneeplion uodC'r § 102(1), Invitrogen Corp, v, Clontech Labs .. Inc" 429 FJd 1052, 1063 (Fed. CiL
::005),
The question of conception focuses on whether the alleged original inventor appreciat;:d
\Vhal he had made. Dow Chern, Co, v, Astro~Valcour\ rnc., 267 f.3d 1334, 1341. The original
inventor must have understood the features of his invention, however, the original inventor need
not recognize hhi '>invention in the same tenus as those recited in the [claims

r as the inveotior IS

not the c1aim language, but, rathtT. thc subject mntterofthosc claims. Invitrogen, 429 f .3d at 10{>4;

Silvestri v, Grant, 4% F.2d 593. 599 (C.C.P,A. 1974). The inventor must have "recognized .nd

32

aJ>prec-iated . a compound corresponding to the compound defined by the [claims]. , .. Teva Pharo'.:.
Indus, Ltd, v, AstralcnecaPharms, LP, 748 f.Supp,2d 453, 466 (RD,Pa. 2010) (quoting Silvetli
496 F.2d at 599). It n.,uows that "the discovery of a previously unappreciated property of a prier

art composition, or ora scientific explanation for the prior art's functioning, does not render the oU
C(lmpositjon patentably new to the discoYerer"" Atlas PQwder Ce:. y. IRECQ Inc., 190 F.3d 134::,

!347 (Fed. CiL 1999);

w: also AbbQ1t Lags.,

182 F.3d at 1368. Therefore, a pharmaceutic,,!

composition is conceived when one knows of its specific chemical structure. has a method

f(lf

tT"aking it, and appreciates that it has a utility. Burroughs Wellcorne Co. v. Bar Labs.. Inc., 40 F.3d
1223,1229 (Fed. Cir. 1994).
Ccphalon concedes that Lafon manufactured and shipped smaUer particle modafinil API ar d
",blets starting in July 1993, (Fact 29.) The API and lllblets shipped to Cephalon

,n 1993 can,e

finm Batch 003, whlch h1;ld been measured by Lafon to have 98.62 percent of its particles small!:r
than 20636 microns_ (Facts 29, 32,) The mooian particle size of that lot was 37.2 microns, Laf<rn
had measured the particle size of Batch 003 and all of the others it produced l and those re-:ults
r,~t1ected thaI Lafon wasconsistently decreasing the particle ;:ji:te of its APt

(Fact 34.) \vnile Lafou

was manufacturing and commercially seUing pills from Batch 5/2236, which had a 95% cumutati'/c
\ alue ofapproximatdy 260 microlLr:; (and was the batch whkh received Prenchregulatory approva :),
Lafon used Batch (J03 as their good manufacturing practices standard, (Facts 28, 31,55,59.) Lafim
(,1150

conducted numerous tests with batches of API that feU within the claim limits, and found d" at

those batches, specifically 5/2435, were ellectivc in the treatment of narcolepsy. (Facts 30, 31.)

These undisputed facts establish that Lafon was aware of the compound's $pecific structure aId
particle Si7..e, that Lafon had developed a manufacturing method for the compound, and that LaLm
~!}Jpreciatt:d

the compound·s utility.
33

Teva Phann. Indus. Ltd., 748 F.Supp.2d 453, supports my conclusion that Lafon was the

true inventor and presents a similar factual scenario. In TeYEL the Plaintiff, Teva Phannaceutical
Industries, claimed that its invention was not anticipated by Defendant. Astrazeneca
Pharmaceuticals. because there was no evidence that

Astrazene~'a

appreciated the "!>tabilizing

nature" of one of the chemicals in the claimed formulation, Id. at 465. Despite the fact that
Astrazeneca conceded that its researchers did not appreciate the specific attributes of on(' of the
chemicals in the formulation, the court held that the formulation had been conceived first by
As:.razcneca because it had appreciated that the formulation as a whole was stable, Id, The court
emphasized that recognizing 'Which chemical in {he formulation created stability was not necessary

for conception because the fQnnuIation as a whole was &table. rd.. The COUI1 furtherrca,>oned thaI
the stabilizing nature of one chemical in the formulation was an inheent characteristic which. onct:
di~covered,

did not render an old fonnulation newly patentable. Id. at 469. Consequently

A~trazeneca was found to

have conceived the fonnulation when they made it, as Astrazencca kne¥'

of the compound's chemical structure and re(:ognized its use as a pharmaceutical drug. Id.
In so ruling, the TevJ! OO\lrt relied heavily upon Titanium MetaJs Corn. of Anwrica v,
B,~,

778 F.2d 775 (Fed. Cir, 1985), which is also instructive, The claims at issuc there defined

titanium base alloys consisting of nickel and molybdenum in specified proportions, the resultin ~

allOY being "characterizeu by good corrosion resistance in hot brine environments,"

.tiL. 718 F.2 j

at 776, An appeal was taken after the PTO Board of Appeals denied Titanium Metals's pater,t

application on the grounds that a prior article disclosed anoy;;; falling within the patent claims.

i\lthough the article in quc-stion did not mention the "good corrosion resistance in hot brin:
environments" of the alloy, the PTO affim1ed the denial of a patcnt, holding that the "fac: that a

34

plrticular property or the end usc for this alloy as contemplated by {Titanium rv1era]s] '-vas
n:cognized by the article is of no consequence."

flo)t

l.4.. at 777.

Ailer the district court r~w~sl~d and ordered issuance of the patent, the PTO Commis::;ion,::r
a ;>pealed. The United States Court of Appeals, Federdl Circuit, reversed, holding the propost'd
claims unpatentable,

Th~

court emphasized that "'patent law imposes certain fundamenul

c::mditions for patentability, paramount among them being the condition that what is sought to he
patented. as detennined by the claims, be new." Id. at 780. Thw;, "it is immaterial. on the isslle
of their novelty, what inherem properties the alloys have or whether these applicams discovered
certain irulcrent properties," lrl; at 782.
Here, Cephalon claims- it is the inventor as Lafon did not appreciate that $maller particle 51::e
produces better dis~olution and bioavailability. Had Lafon not measured particle si7:e, Cephalon '5
argument may carry mQre weight

However~

Lafon perfonned most' meaSUfer:1Cnts and was aware

that the API and tablets it manufactured and sent to Cephaloncontained more than 95% ofparticl!S
v.ith a diameter less than 220 microns. (Facts 29. 32,) Cephalon's argument ignores the fact tnat
t

1e exact product Dr. Grebow claim$ he invented had been previuusly tested. manufactured and

t ~d hy Lafon

for the treatment of narcolepsy. In short, Lafon manufactured modafinil that met t le

claim limltations) was aware ofthe compound) s chemical structure and particle size, and recogniz,~d

1:5 use as a pharmaceutical drug.
As in Teva. someone other than the patent applicant had previously conceived the claim?d
ilVention when the applicant manufactured it. Cephalon's alleged "discovery" of the 220 micrnn
t:rreshold is more akin to an inherent property, Of scientific explanat:on, ofthe compound Lafon h 1(i
previously conceived. As the court in Teva n01ed1 "the Federal Circuit ha$ held invalid for
zntidpation numerous patents claiming what amount to newly discovered properties

35

ur prior art

compositions, where the missing characteristic wa.<; necessarily present. or inherent, in the prior art,
ev(!'n though ther~ was no recognition of the missing characteristics in the prior art.":c I thus
coni.~lude

that Lafon's development; manufacture and tr..msmittal of the late-lot modafinil to

Cephalon is enough to meet the conception and corrununication requirements, (N.T, 4/1111, pp.
179-80,183-84.)
Ccphalonrches upon Silve_~tri v, GI:~, 496 F,2d 593 (c'c'P.A.1974), to press the pointthat
appreciation of the invention) specifically the importance ofthe 220 micron threshold, is require,
to prove derivation. In Silvestri, the court found that there was no apprecial10n of the invcntior

;0 ~~~e Abbott Labs., 471 F.3d at 1368~69 (patent disclosing a comp(isition of watcr-samratec
sevoflurane anticipated later patent disclosing a composition comprising sevoflurane mixed with
waler or another Lewis acid inhibitor in an amount effeetiveto preventdegradatjon by a le\vis acid,
even though earlier paknt did not teach that the mixture would prevenl sevotlurane from degrading
in tt1epresence of Lewis acids); f.~,fI GrQupK Am.. Inc. v.~ Cypress Semiconducto[~, 268 F.3d
1342, 1349-50 (Fed, Cir. 2001 } (patents claiming a structure for a metallic fuse for semi-conducto~
chip~> and a method for fabric.ating and blowing such a fuse, both of which reclted a theoretical
explosive mechanism lor blowing the fuse, were anticipated by e~rlier patents that disclosed fh,~
sa~1e fuse structure but not the explosive mechanism where explosive mechanism was ",a scientifi,;
explanation for the process of blowing; the claimed fuse structure" that was inherent in fuses ofth!
sane structure); Atl!ls Ppwcl~, 190 F. 3d at 1348-49 (patents disclosing blasting compo ..;;hiom
were anticipated by earlier patents disclosing compositions containing the same ingredients i.)
oVI!r1apping amounts. not\vithstanding that earlier patents lacked limitation that there be "sufficiert
aeIation. , ' entrapped to enhance &ensitivity lOa substantial degree": "'[b]ecause 'sufficient aeration'
was inherent in the prior art, it is irrelevant that the pri-or art did not recognize thc key aspect for Dr.
Clais invention - that air may act as the sole sensitizer of the explosive composItion"); .!!~co@ II
K.!)meprazol. Patent Litig., 483 F.3d 1364, 1371-73 (Fed. Cir. 2007) (patent reciting a proce.. fcr
me king a pharmaceutical formu}ation composed of an omeprazole cor~, a water soluble separating
la)er, and an enteric coating layer, wherein the separating layer was created by causing an in sit'A
rCkcllon involving the other two layers, was anticipated by an earlier patent application thd
contained all elements of the Jarer patent except the in situ fOlmation oflhe separating layer ~ anj
thu expressly disavowed a subcoating ~ where the in situ formation wa~ inherent); Verdcgaal Bros...
Inc. v. l!nion Oil. Co. of Cal., 814 F.2d 628, 633 (Fed. Cir. 1987)(patent disclosing n process 1(·,
mt!king certainknovm urea-sulfuric add liquid fertilizer product::., in which a previously made batch
of liquid fertilizer known as a "heeF r served as a "heat sink" to absorb the h.::at of the reaction. WL~
anticipated by an earHer patent disclosing the same process, even though earlier patent did not
recognize that the heel functioned as a heat sink).

36

when the inventors made a new fonn of a chemical compound but dId not know that they had mude
a new form until a later date. Id. at 597 (citing Beard v. Burnm, 333 F.2d 239, (C.C.PA 19(4);
and LaDser v. Kaufinann, 465 F2d 915 (C.C.PA 1972)). Silveslri is entirely distinguishable
be\:ause, as explained above, Lafon knew the chemical structure and particle

Si7£

of the late·lol

tncJdafrnii based upon its uwn measurements. Further. Cephalon did not make a new form of the
chemical compound, and in fact, did nothing to it at alL
Finally, I note that the evidence reflects that l,afon did appreciate the significance of smaller
pa:ticle size and the 220 micron threshold for the 95% cumulative value,l1 However, whether
Lafon had this appreciatIon is immaterial. It is sufficient that the compound Lafon manufacture(,
and shipped to Cepha:lon in July 1993 was of the same chemical structure as that claimed it;
CE:·phalon's patent, and Lafon was aware of that chemical structure, including particle si:r:e.

h. Cummunication

A party al1eging invalidity for derivation must also prove by clear and convine-jng evidl.~nel.;
that the invention conceived was communicated to the patentee prior 10 date Df the patent
application. M.acMillan. 432 F.2d at1239. The communication must be sufficient to enable on·!

of skill in the art to make the patented invention, GambrQ Lunq.i~ AS v. Baxter Healthcare Corp.,
J 10 F.3d J573, 1578 (Fed. Cir. 1997).

Becall!>e the modafinil received by Cephnlon on June 23, 1993, hud the exact chemical
properties as that which Cephalon patented, the shipping of the compound itself is more than

;I

~;ce e.g., PTX-036-October 6, 1992, Grehow memo regarding meeting with Lafon research staif

which acknowledges the Lafon fonnulations changed through "decreasing the particle size;" Apr I
1.2004 deposition of Michel Moisan. Lafon scientist, acknowledging that Lafon measured particle
size and thelrobjective was to achieve smaller particle size; PTX-OS7, Grebow, April 2. 1993, ema l
surnmari7ing meeting with Lafon noting "faster dissolution in smaller particle size."
37

sufficient to constitute a communication. Anyone skilled in the art ofphannaceutical compositions
w<)uld have been ahle to measure the particle size of the modafinil API shipped from Lafon to
C"phalon, and thus, would have been capable oj'making that compound, (Fact 94,)
In addition to Cephalon actually recclving several lots that fell squarely within the claim,
ot numerous occasions Lafon provided Cephalon with additional infonnatjot) which establishe:;
"c:.>rnmunication." I ,afoo started providing Cephalon 'With technical information about its rnodafinil
in 1992. (Facts 35, 38.) Specifically, Cephalon was advised that Lafon's 1989 tests showed that
gr.)und modaflnil. having smaller particles, produced better dissolution rates than

non~grolmd

particles, and this grinding was part ofthe manufacturing process. (Facts 35~ 36, 37.) Lafon also
told Cephalon in October 1992 that

an of their clinical trials were conducted ,""ith small particle

m{)daHnil, and that the recommended dosage was 300 mg, (Fact 38.) A month later, Lafon advised
CEphaJon that thc.y knev,i particle size related to solubilily. (Fact 39,) In March 1993, Lafon again
su:?,gcsted the most common dosage of 300' mg, with a range of 200 to 400 mg, and a maXimUt1'l
tolerable dosage of 600 mg. (Facts 41, 56,) In June 1993, Cephalon shared Lafon's clinical tes:
re~ults

in an investigative brochure. (Fact 56.)
\Vhile all ofthe above-referenced communications omit any direct reference to a 220 micror

threshold. they nonetheless clearly demonstrate that Lafon had manufactured and tested modafini:
API meeting that threshold and shared that information with Cephalon. The provision of detailed
pal1icie size measurements and dosage rec.ornmendatioo5 to Cephalan by Lafon (mly serves tc
bo:stcr my finding that the shipping of the modafinil API to Ccphalon in July of ! 993 sati$fies the
corrununication requirement under § 102(t).
Accordingly, the conception of the chemical compound possessing the properties claimed
in ~he patent by Lafon., and Lafon's communication of that chemical compound and its spwitic

38

pro}"erties to Cephaton no later than July 1993, invalidates the patent under § 102(f}

3. Qbviousness
A patent is invalid under 35 L:.S.C, § 103(a) for obviousness if'"the difference;; between the
s.ubject matter sought to be patented and the prior art arc such that lhe subject matter as a whole

would have neen ubvious at the lime the invention was made to a person having ordinary skill in
'he Ht." 35 U.S.C. § 103(a). This is a legal dctenninatiun based on four factors: (I) the scope and
content uflhe prior art; (2) the level of ordinary skill in the art; (3) the differences between Ihc
clairned invention and the prior art; and (4) any secondary considerations such as unexpected results
or commercial success." Gr4hilm v. John Deere Co., 383 U.S. I, 17-18 (1966). The patent
chal_engermust prove obviousness by clear and convincing evidence and faces the enhanced burden
of o·;ercoming deference to the PTa when the obviousness inquiry is based (In the same evidence
pres,:!nted to the PTO. Taka! Corp. v. Easton Enterprises.Jnc., 632 FJd 1358. 1367 (Fed. Cir,
201:). Apotex alleges that the claimed inventil)n is invalid for obviousnt:ss because it is identical
to the prior art, Cepbalon responds that its claimed invention was not obvious becamc Cephalan
idcnlilit:u the 220 micron threshold as significant given unexpected dissolution and bioavailability
data they discovered in clinical and laboratory te::;ts.

a. Scope of the Prior Art
"Prior art hRS been defined as follows: '[t]he existing state ofknow!edge in a partJcular art
at th;;: time an invention is made. It includes the issued patents

* * *,

publications, and all other

knowledge deemed to be cornmon thereto i)uch as trade skiils, trade practices, and the like,'"
available a year or more before the patent filing date. Trio. Process Corp. v, L. Goldstein's Sons,
Inc., 461 F.2d 66, 69 n.3 (3d CiT. 1972l(quoling A. Smith, PATENT LAW. CASES, COMMENTS ."D
MA1ERIALS 2 (1964»;

~m

(NT 4IMI. pp. IIO-tl),

39

Under the tvfPEP, section 2112,01, 3 prima facie case of either anticipation or obviousness
is established when the material supplied to the pafty claiming the invention is identical to that cf
the claimed invention. Section 2112 states that a product that
b,~ome

'WaS

previously known does nt;t

patentable upon the discovery of a new property< (N.L 4/1111, PP< 147·48; PTX 239, r <

2100·27.)
Here, modafinil was widely known as a chemical compound effective in the treatment of
nHcolepsy prior to 1994. (Fa<:ts 84, 85.) The extensive information detailed in Seclion II, A, 2.
supra. regarding Lafon's communications to Ccphalon about modafinil, can he considered fL,) prior

arc. See also (Facts 34, 35, 36, 37, 3R, 39, 41, 44, 47, 48,) Indeed, the API that was shipped fron
u;fon to Cephalon is also prior art. QddzOn, 122 F 3d at 1401-02. With Cephalon's actual rccci~t
and possession of the compound, and all of the communications from Lafon to Cephalon detailin;;

lh: compound, a person skilled in the art would have heen motivated to measure the particle siz,:
of the modafini1 as part of the FDA process, which requires such information for approval of m~\l
dr~g

substances. (Fact 95, 96.) Accordingly, the communications, as detailed above. and th!

inherent properties of the modafinil, which would have and could have been tested by someOll1;
skilled in the alt, establish that the scope of the prior art was: a pharmaccutil.:.al composition of
moda.finiJ API having 95% of its particles with a diameter less than 220 microns.
I further note that publications available prior to 1994 made it knmvn to those skilled in the
art that modafinil was poorly water soluble. (Facts 95, 96.) Thus, ifone skilled in the art receive([
modafitlit and intended to fonnulate it into a pharmaceutical compo~1tion, one skiUcd in the ar.
wc·uJd have measured the particle Sil.e of the mcdafinil API. (Facts 95, 96.) That person waul<

ha1e then sought to teduce the median particle size of the modafinil to approximately 10 to 4(

40

mkrons: ifit was not already that size, resulting in a drug wherein 95% oftht: particles would have
a Jiar:leter of less than 220 microns. Therefor<'l, even if Cephalon's claimed invention

\'laS

not

der ived directly 11um prior art, and thus also rendered obviolL"j for trun same- reason, additional prior

art publications demonstrate that one skilled in the an would have sought

~mall

particles of

modafinil prior to fonnulating a pharmaceutical composition,

b. Person of Qrdinary Sl;.ill in the Arl
A person of ordinary skill in the art would be- a person with a hachelor'sdegree in chemistry.
eitherinchemicai engineering orphannaceutical sciences. That person would also most likely have
a Ph..D. in pharmaceutical sciences or a related field and would certainly be familiar with
prefonnulation, fonnulation and the FDA and other regulatory hodies. A person skilled in the art
WQL:ld have lab experience and would know about particle size, why measuring particle size is
important, and how particle size affects dissolution and bioavaHability, Alternatively. a person
skilled in the art could he a medical doctor who has treated conditions such as narcolepsy, which
mocafinil is known to effect (Fact 82,)

c. piffercnces Between Invention and Prior Art
Without belaboring the pOint, as :set forth under Section II, A. 2 - D~rlVatiOIl, and briefly
addressed above in Section IT, A. 3, a

Scope of the Prior Art, infra, there are no differences

between Cephalon's claimed invention and the information communicated to Ccphalon by Lafon.,
whkh constitutes prior art.

d. Secondan Considerations
Secondary considerations sueh as commercial success and unexpected results can be offered
to re')utobviousncss, KSRlnrefft Co. VI Te1eJJex Inc., 550 U.S. 398,406 (2007} The proponent

of n(ll1~obviousm:ss must establish a cormection between the merits. of the ctaim("-d invention and

41

evidence of secondary con:=.iderations in order for them to be afforded any ::lubstantial weight. In
TO

(:PAC Inc" 57 F.3d 1573.1580 (Fed. CiT. 1995).
Cephalon argues Lhat

tWO

different secondary considerations support non-obviousness.

First, Cephalon posits thallhe Shek declaration which was submitted to the PTO to initially thwart
anobviou~mess

rejection demonstrate::; unexpected results. For the reasons explained in Section II,

B - tJnenforceahility, infra, I ueciine to credit the Shek declaration and the unexpected results it
purports to represent. Second. Cephalonnrgues that Lafon's inability to appreciate the significance
of the 220 micron threshold renders the patent non-obvious. While J cannot determine which
appropTlate § 103 test this argument is made under, it nonethelcss fails for the reasons set forth in

n, A, 2 -

Seclion

Derivation., sum~.

While not argued in its post-trial brief, Cephalan pressed at trial that the one negative
cardiovascular event in its Phase f cHnical trial was unexpected and thus probative or non­
obviomness, (Facts 67, 68, 69, 70.) 1 decline to find that this evidence 1S probative of nonobvio:lSness becau.<:oe Lafon had told Ccphalan which dosages wcre appropriate for use in humans,
and that cardiovascular side effects could be seen at high dosages. Moreover, after the clinicallrial,
C..~pha1on noted in acommunicfttion to Lafun that these results were "expected." (Facts 43, 44, 45,
46, 70.)
Accordingly, given the lack of secondary considerations and the-lack of any differences
bemeen the prior art and the invention claimed by Cephalon, I find that Apotex has proven by clear
and convincing evidence that the patent is invalid for obviousness under

A patent may be invalid under 35 U.S.C

~

S 103.

112 for lack ofa v.'ritten description. "'[Tlhe te~'t

for \\ritten desi.cliption i~ 'whether the disclosure of the appJication _. , reasonably conveys to those

42

skilled in the art that thO'inventorhad possession ofthe claimed subject matter as orthe filing date,"
Ph Lillv & Co. v. Teva Pharms, USA. Inc., 619 F.3d 1329, 1345 (Fed. Cir. 2010) (Citing

Aita~

Ph'f1!IS., Inc, v, Eli ~illy & Co" 598 F,3d 1336, 1351 (Fed. Cir, 2010)). Possession is more
ac(,urate1y defined as requiring the specification to "describe an invention understandable to [a
person of ordinary skill in the rut] and show that the inventor actually invented the invention
claimed," Aira4, 598 F "3d at 1351, This is a fact based inquiry, and the party seeking to invalidate

the patent"must!ihow that the claims lack a written description by dear and convincing evidence."
);;l: llyni, SemjconduclQr, Inc. v. Rambus. Inc" 645 F.3d 1336,1351 (Fed. Cil'. 2011).

Apotex argues that the RE'516 patent is invalid for lack of written description because the
pat:nt does not specify the claimed particle size ofthe modafinil in tablet form Cephalon responds

th;:l": there is no requirement that a measurement of mooatlnil posHabletting be described in the

pat·;nt. and it is sufficient that the patent included particle size measurement techniques that could
be applied post-tahletting. (Ccphalon Post-Tria! 'I1cmo., pp, 36-38.)
In Eli Lil!L~ CO,LTev. Pharrus, USA, In". 619 F.3d 1329, 1345 (Fed, Cif. 2010), the
court upheld the district court's lInding that the potent \.vas invalid for failure to comply with the

wrden description rcqulNmenL The patent at issue only disclosed the particle size of the I:ndk
che:nkal, and did not disclose the particle SIZe of the chemical once composed in piH form. !d, In
cett:mlining that the patent did not have an adequate 'written description, the district eourt rdied
upon. in part, expert testimony that a person of skill in the art reading the patent would not know
whether the particle size increased, decreased or remained the same in the final pharmaceutical
corr position, Id, While noting that there generally 15 no requirement that a patent describe all of
the ::;teps that may be used to prove infringement, such as a test for measuring particle size in the
finh:hed composition, the United States Court of Appeals

43

tor the Federal

Circuit concluded that

there was no clear error in the district court's decision based on tht: lack of ~uch fI description. Id.
Here, I first note that only a fev.' minutes of testimony were presented on the is;:;lIt: ofwritte~
d('scription, During thIs bricf testimony, Dr. Beach testified that the parent did not describe a
measurement of the mouafinil particle size once formulated into a tablet. {JTX 1; Facts iI, 101,:­
H<' also noted that while it may be possible to conduct tests to determine the particle size of
mJuafinil in the finished tablet, based on a review of the patent alone, om: of ordinary skiH in th-:­
art would not know whether the particle size was the fiarne pre and post-tabletting. (JTX 1; Fact
M

102,)

Dr. Beach further stated that because the patent did not :;pecify, and it was impossible tn

know based on the infonnation disclosed therein, he bad to assume that the particle size wa" the
same pre and post-tabletting in his analysis of the rcs.JXX:tive test results reviewed at trial. (N.T
3/:,0111, pp. 57-60.) Without any evidence to the contrary in the record, I condude that the patcn
dOl!S

not specify the particle size of the rnodafinil po;;H:abletting and does 110t contain sufficien'

inimmation to allow someone skilled in the art to make such n determination. In addition to Dr.
Be,~ch's

testimony, the four comers of the patent also demonstrate that it docs not specifY the

particle tlize ofmodafinH in the ftnished pharmaceutical composition. (JTX 1); Airad, 598 F.3d
at J 351. As in Eli Ullv, the patent docs provide suft1cicnt information to allow a person skilled in
the art to determine the particle size in the finished pharmaceutical composition as claimed, and the
patt:nt is invalid for failing the v.Titten description requirement of § 112.

To prevail on a claim of inequitable conduct, it must be demonstrated that the patent
applicant: t 1) misrepresented or omitted certain iniormation in applying for the palent; (2) that
infcnnation was material; and (3) the misrepresentation or omission was made with the :;pecific
intent to deceive the PTO. American (:akar, Inc. \\ American Honda Mqtor Co., JU£., 651 F.3d

44

1:18,1334 (Fed. Clr. 2011). Earlier (hi, year, the Court of Appeals for the Federal Circuit mftd,

it more difficult lor an accused infringer to prove inequitable conduct, Sec
Becton.

I?ickin§9IL~.!,

Th~ras~nse,

Inc,

\~

649 F,3d 1276 (Fed. CiT. 2011). Recognizing that such claim:: hav1;

become prolific and burdensome on the courts, ha\'e discouraged settlement and expanded
di~;covery>

and have inspired patent applicants to

~'bury

PTO examiners \\'ith a deluge of prior ar;

references, most of which have marginal value." the court adjusted both the intent and material]1)
standards.

M.. at

1289~92.

A party alleging inequitable conduct must now demonstrate that thE

pa1ent applicant acted with the specific intent to deceive the PTO. and lhat but for its omission 01
mi,;represcntation the PTO \vould not have issued the patent.

L4.:

Intent to deceive must be ShO~l1 by dear and convincing evidence, but in assessing
materiality, "the cou:t should apply the preponderance of the evidence standard and give claims
their hroadest

reasor-.abl~

construction," hL. If a threshold showing of materiality and intent has

been made, the court mll!:}t balance the equities to determine whether the fraudulent conduct justifies
bar'ing enforcement of the patent Cargill. Inc. v. Canbra Foods, I.td., 476 F.3d 1359, ! 364 (Fed.
Cir.200?).
In evaluating whether conduct wa<; inequitable, I note that the PTO imposes a duty ofcandor
on (: 11 individuals associated "Vith the filing of a patent. 37 C.ER § 1.56(8). This duty includes an
obligation to disclose all material infonnation knO\\l1 at the time of filing. 37 C.P.R. § 156(b); i)ee
alSQ (NT 4/1111, pp. 134-35; N.T. 4/6!11, pp. 149-50; Burgoon Depo., !Oi2?!1 0, pp. 129-30; PTX

142. Bates CPH,FTC 00018915).

Based on the same facts supporting the

on~sale

bar and derivatiun findings, Apotex

maintains that Cephalon committed inequitable conduct in its application to the PTO. Ccphakm
responds that the information regarding Lafon's manufacturing of modafinH and

45

re~earch

on that

product '\vas not material because that modafiniI was not prior art, Cephalon also argues that eVetl

if Apoiex establishes the materiality of Lafon's involvement. Apotex

hn~ failed to Shf)W tha:

Cephaion intended to deceive the PTO by not dise-losing this information.

t. Failure to Disclose Material Inform!ltion
Following Therasellsc, the materiality requirement is met only if the party challenging (ht
pu"ent is able to demonstrate that "the PTO would have allowed the claim if it had been aware 0:'

till: undisclosed reference." TIle court recognized that, in certain circumstances, this determinatior

wi:t be "\:ongruent" with that of the validity of the patent It noted that "if a claim is: propert)
invalidated in district court based on the deliberately withheld reference, then that reference i~
necessarily material because a finding ofinvalidty ill a district coun requires clear and convincing
evidence, a higher evidentiary burden than that USCl.1 in prosecution at the PTO." Therasenw, 649
FJd at 129:<.
Materiality is not limited to prior an, but includes any intbnnatlon a reasonable patent
ex~,miner

would be substantially likely to co:t'l~ider important in deciding to issue a patent. Brislpl­

1Yb:'ers Squibb CQ, V, Rhune-I:Qylenc Rorer. Inc .• 326 f.3d 1226, 1233 (Fed. eir. 2003); see al®.
(N.T. 411 III, p. 135). Material infoonatioll subject to the mandatory disclosure umler 37 C.F.R.
1.55 includes. but is not limited to. information on j.')()ssible prior public uses., sales 1 offers to seU,
derlvedknowledge, prior invention byanother,and inventorship conflicts. Atlanta Altachm~nt Co.
V. I~ggett

&. Platt. Inc", 516 F.3d 1361, 1368 (Fed. Clr, 2008);.'l!<£ 01'0 (N.T. 4(1 !II, p. 136; PTX

142, Bates CPII-FTC 00018917)."
:2 lr fomlation is also material to patentability when:
(b) ... lIlt is not cumulative to infonnalion already ofrecord or being made of record in the
application, and
(I) It establishes. by it<;etf or in combination \-"ith Other information, a prima facie
ca~ of unpatentability of a claim; or

46

The duty of disclosure continues from the dale of filing to the date of issuance, and also
through a reissue application. (N.T. 4/1111, pp. 141-42; PTX 142.) While a patent applicant is not
req .lired to go out and do a !\earch for material infonnntion l the applicant is required to disclose

ma1erial infonnation it is aware ofthatrelates to the matter before the PTO. (N.T. 4/6/11, pp. 111~
15~

PTX 142. Bates CPII~rTC 00018915.) The applicant can disclose material information to the

PTU in several different ways. The applicant can tile an information disclosure statement. which
j5 essentially a letter listing

the references. The applicant can also file a Fonn J 449~ include the

infnnnation in the specification of the application, or include the information as part ofan affidavit
or declaration. (N. T. 4/6/11, pp,

115~16.)

Here. Cephnlon never disclosed to the PTO that: (1) Lafon was the manufacturer of Batch
003; (2) Lafon had measured the particle size of that batch prior to providing it to Cephal on; (3)

Labnhad rnanufactured and tested several modafinH API batclles and tablet lots that feJJ within the
claim limitations; or (4) that the two companies had both supply and license agreement:) (Fact
106.) As discussed~. Lafon' S l$maU particle modafinil. specificaJly Batch 003 and Lot 006, was
prior art which should have been" but was not, disclosed to thePTO. The Supply Agreement should
ais(! have been disclosed to the PTO because, as discussed supra, it establishes both anticipation and

the on-sale bar. Atlanttl, 516 F.3d at 1368; ,ee also (Fact 116,) Additionaily, all of Lafon's test

results and data regarding smaIl particle modafinil that were shared with Cephalon demonstrated
derivatil)n. As disl:ussed earlier. these withheld references estahlish the invalidity of the RE '516

(2) It refule~, or is inconsistent with, a po5ition the application takes in:
(0 Opposing ;:tn argument of unpatentability relied on by the Office, or
(ii) Asserting an argument of patentability.
37 C.F,R, § 1.56.

47

patent, Our tinding of invalidity ba",ed on those references also establishes their materiality.
Ill!"asCDse, 649 FJd at 1292,

It is also probativc of materiality that the infonnation which Cephalon failed to disclose
related to obviuusness, an issue that was repeatedly raised by the patent examiner. Cargill; 476 F3d
at 1366. Cephalon failed to disdose to the PTO any of the inionnation relating to Lafon's
substantial role in Cephalon's claimed invention. Had the PTO been aware of this infonnation; it
\YO Jld

not have allo\ved the patent to issue.
2. Intent to Deceive
As noted previonsly, a party daiming inequitable conduct must also demonstrate by clear

and convincing evidence that the patentee acted with the specific intent to deceive the PTO.
lhl,rasensc, 649 F.3d at 1290 (citing Star Scientific, Inc, v, RJ, Reynolds Tobacco Co" 537 FJd
13':: 7> 1366 (Fed. Cir. 2008)). As patent applicants rarely admit lntentionallymisleading the patent
6ft1ce, intent to deceive c-an be inferred from the facts and circumstances surrounding the conduct
at i;sue, Merck

"""Co" Inc, v, Danhury Pham:m£al, Inc" 873 F,2d 1418, 1422 (Fcd, Cir, 1989);

Cargil.!. 476 F.3d gt t 364. Where inlc:r.t is inferred irom indirect and circumstantial evidence, the
clear and convincing standard is met only when the intent to deceive is "the single most reasonable
inft~rence

able to be drawn from the evidence." Iherasense, 649 F.3d at 1290 (quoting Star. 537

F.3,j a(1366). Said another \vay, the evidence "must be sufficient to require a finding of de<:eitfu]
intent in light ofthe circumstances." 14.. (quoting KingsdoVtl1 Medical Consultant<;,J. .td. v. Hollister

Inc" 863 F.2d 867 (Fed, Cir, 1988) (emphasis added)),
Here, Cephaton failed to inform the PTO about Lafon's role

11.<:;

manufacturer, supplier of

product and years of technical data behind that product, and proiil beneficiary. (Fact 106.) 1 find
that the complete Goncealment of another company's extensive involvement in the product \vhieh

48

is the subject of the claimed invention definitively establishes CephaJon's deception by ch:ar and
convincing evidence. Further, in addition to concealing Lafon's role as manufacturer and suppliel

of:he product being claimed in the patent, CephaloD afflnnativelytold the PTO that it had modHiee
partjde size when in fact it had d-one nothing: whatsoever to change, modifY

Dr

improve the

modafini11t received from Lafun. (Facts Ill. 112.)

The claim history with the PTO is also probative of Cephalon's intent. The PTO initially
rejected Cephalon's patent application as

obviou~,

(Fact 107.) The examiner concluded that tht~

prior art included smaller particle modafinil, and the scientific references in the field sugge~teJ lha:
it would have been obvious to reduce particle size to achieve bettef bioavailahility, dissolution,
potency, and higher peak plasma levels. (Fact 107,) In re:::;ponsc to that office action, and
subsequent office actions continuously rejecting the application as obvious, Ccphalon asserted that
the prior art and 5tudies on that art would not have motivated one of ordinary skill in the art to
modify or manipulate the particle size of the drug substance like Cephalon's inventors had done,

(flets 109, 110, 112.) This response not only served to further conceal Lafon's role, despite the fact
thilt it was central to the examiner's challenge, but was an affirmative misrepresentation in that, a5

has been mentioned previously, CephaloJl did not modify, manipulate

Or'

improve any of

th~

m,Jdafinil it received from Laton. (Fact 11),) Without a logical expbmatiun for making Sue:1
ITI

srepresentatlons, Tconclude that Cephalon made those unsupported claims with the intention of

convincing the- pan:;nt examiner to change his mind and issue the patent. See Cargill. 476 F 3d
1266. Thus, Cephalon acted with the intent to deceive when it

repre~nted

that it undertook

[it
i

ccurse of action which never in fact occurred,1)
~~.~.---~

U [further note that the Shek declaration submitted to the PTO to rebut an obviousness rejectio 1
presented data whicl: had not in fact been disclosed to the PTO and there-fore \'vas misleading in its
conclus.ion. (Fact 1 J },} This further contributes to our finding that Cephalon acted with the inter t

49

I further note that even Cephalon's in~housc patent attorney stated that "this application b
'UIlU:>Ual'

in the sense that we did not want to include any of Lafon's data so as to avoid disclosin!:

th<:ir 'confidential' infonnation; thus, the task of'disclosure' of the invention '-vas unique." (Fae:

105,) While there may have been some concern Qver the confidentiality aftufon 's manufacturing
process, th.frt docs not explain Cephalon's decision to omit any mention of Lafun's roJc in it:,
application.

Vv'hen viewed in conjunction with the enormity and materiality of Cephalon ':,

omissions, and the misleading statements made to the PTO, this statement is probative of
Ct::phalon's intent to deceive. FinallYl aside irom challenging the materiality of the information at
issue. Cephalon has not offered any alternative explanation for these misrepresentations and
omissions. See CargiJI, 476 F.3d at 1366. I conclude that Apotcx has proven that Cephalon acte<l

with tht:: specific intent to deceive the PTO.
As the Federal Circuit has noted, a finding of inequitable conduct calTies seriom
consequences. which 1 have carefully considered, Thcrascnsc, 649 F.3d at 1288-89. Unlike

,1

finding of invalidity or non~jnfringement) inequitable conduct "renders the entire patent
ut: enforceable," "cannot be cured by reissue ... or reexamination," may "spawn antitrust and unfai:
competition claims" and can lead potentially to an award of attorneys' fees. rd, Noncthele-ss; give:l
the unmistakahle importance of the Lafon information. the inexplicable concealment of th2t
information from the PTO, even after the examiner's: obviousness challenge unequivocally alerted

C':phalon to its importance, as well as the direct mi:.repreSt"'lltations made by Cephalon to the PTe.
the only reasonable inference to be drm,yn is that Cephalon made a deliberate choice to deo.:-ive th~
p~:o

about the origin of its claimed invention. Such conduct warrants a finding of inequitabl;:

ccnduct and ju!>liiles rendering the palent unenforceable,
to decelve as it related to the PTO's obviousness inquiry.
50

IV, Conclusion

Forme reasons set forth above, Ctphalon's RE'516 patent is invalid pursuant to the on-salt
ba', for derivation, for obviousness, and for lack of...-vritten description, Furthermore, Cephalan'!,
RF 516 patent is unenforceable due to Ccphnlon'$ inequitable conduct in its prosecution of the

patent
An appropriate Order follows,

51