WILLIAM J. MARTINI, District Judge.
This patent action is brought by Plaintiffs Graceway, LLC ("Graceway") founded in 2006, and Plaintiff 3M Innovative Products Co. ("3M IPC") against Defendant Nycomed U.S. Inc. ("Nycomed") for allegedly infringing Graceway's '672 Patent (Patent No. 7,655,672) which was approved on February 2, 2010. Suit was filed February 23, 2010. Nycomed launched its allegedly infringing product on February 25, 2010, and a temporary restraining order ("TRO") was sought by Plaintiffs on February 28, 2010 based on a limited evidentiary record. On March 8, 2010, 697 F.Supp.2d 600 (D.N.J.2010), this Court denied Plaintiffs' motion for a temporary restraining order.
Plaintiffs have now sought a preliminary injunction after limited discovery. For the reasons elaborated below, the Court will
As the facts are well known to the parties, the Court refers the reader to the facts as developed in this Court's March 8, 2010 opinion. See Doc. No. 40. Since that time Defendants Perrigo Company and Perrigo Israel Pharmaceuticals Ltd. have been dismissed from this suit; Nycomed has filed a Motion to Dismiss Pursuant to Rule 11, and Graceway has filed the instant motion for a preliminary injunction.
The legal standard for granting a preliminary injunction is well-settled. See Fed. R. Civ. P. 65(a). "The four factors relevant to the district court's decision to grant or deny a preliminary injunction are (1) the likelihood of the patentee's success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest." Abbott Labs. v. Andrx Pharms., Inc., 473 F.3d 1196, 1200-01 (Fed.Cir.2007). The adequacy of money damages is a factor to be considered in deciding whether or not harm is irreparable. Furthermore, in reaching a determination under this standard, the Court applies well-established equitable principles and standards. Cf. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (precluding, in the permanent injunction context, the use of "expansive principles" to "broad swath[es] of cases" or the use of "general rule[s] . . . unique to patent disputes," apart from the four-factor test).
This opinion discusses the four factor test for granting a preliminary injunction and certain threshold defenses.
A legal right against infringement, even where established, does not, without more, establish a right to injunctive relief. Injunctive relief, particularly where a party seeks preliminary relief, based on a limited record, is, as all authorities acknowledge, not a matter of mere legal right, that is, injunctive relief is not a "standard remedy;" rather it is a form of "extraordinary" relief. Eli Lilly & Co. v. Am. Cyanamid Co., 82 F.3d 1568, 1578 (Fed.Cir.1996). Such a remedy will not be granted "whenever the plaintiff has shown a likelihood of success on the merits," id., nor will it be granted in the face of a movant's inequitable conduct, including unjustified delay or dilatory conduct. See, e.g., Intirtool, Ltd. v. Texar Corp., 369 F.3d 1289, 1290 (Fed.Cir.2004). An otherwise valid infringement claim seeking injunctive relief may not succeed in the face of plaintiff's unjustified, unreasonable, or unexplained delay. A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1033 (Fed.Cir.1992) ("Economic prejudice may arise where a defendant and possibly others will suffer the loss of monetary investments or incur damages which likely would have been prevented by earlier suit." (emphasis added)).
In 2007, Defendant Nycomed sent Plaintiff Graceway a notice letter in regard to Nycomed's ANDA application for its product, a proposed bioequivalent to Graceway's Aldara. Graceway received this notice letter after Graceway had applied for the '672 Patent. At that time, Graceway took no concrete action putting Nycomed on notice of litigation risk and, again, took no such action, including filing a complaint, in immediate consequence of actual approval of the '672 Patent on February 2, 2010. Instead, Plaintiff filed its complaint on February 23, 2010, and the TRO was filed on February 28, 2010. Plaintiffs' TRO briefing was void of substantial explanation in regard to Plaintiffs' failure to contact Nycomed and in regard to why Plaintiffs' failed to put Nycomed on express notice of its litigation risk prior to February 23, i.e., that Graceway would sue to enjoin exploitation of the '672 Patent, a
On further reflection, in view of a better developed record, it is clear that both parties could have acted more diligently. It is also reasonable to conclude that Nycomed knew of the '672 Patent not only prior to its launch, but also prior to Plaintiffs' filing this suit. Each party knew or had substantial knowledge of what the other party was doing in terms of the ANDA filing and the '672 Patent. And although each party could have exercised more caution, by putting the other party on express notice of the concrete litigation risks involved, the parties here are sophisticated and knew or should have known of those risks. The equities here are close and the Court is now unwilling to conclude that Plaintiffs' conduct was dilatory. Moreover, in order to establish laches, a defendant must make a showing in regard to material prejudice. Intirtool, Ltd. v. Texar Corp., 369 F.3d 1289, 1290 (Fed.Cir. 2004) ("The laches defense has two underlying elements: first, the patentee's delay in bringing suit must be unreasonable and inexcusable, and second, the alleged infringer must have suffered material prejudice attributable to the delay." (quotation marks omitted)). At this preliminary injunction stage, Plaintiff now presses the argument that Defendant Nycomed was not substantially prejudiced by Plaintiffs' delay. Nycomed's opposition filings do not meaningfully respond to this argument with substantial supporting evidence (as opposed to mere attorney argument appearing in its brief). Thus, even if this Court were to conclude that Plaintiffs' conduct had been dilatory, this by itself is insufficient to establish a laches defense. Based on the post-discovery expanded record in these proceedings, the fact that Graceway brought suit (although not its TRO motion) prior to Nycomed's launch, and, most importantly, Nycomed's failure to meaningfully respond to Plaintiffs' argument with evidence, the Court determines that Nycomed's argument for laches (and, likewise, estoppel
Nycomed argues that because Plaintiff 3M recently granted (former Defendant) Perrigo a license under the '672 Patent, Graceway no longer holds an exclusive license and therefore lacks standing to sue. Graceway responds that the licensing agreement is between Graceway and Perrigo, with the latter as sublicensee of the former. Graceway therefore holds an exclusive license from 3M and it (Graceway) has sublicensed to Perrigo. This is a factor militating in favor of Graceway as an exclusive licensee, which therefore continues to have standing. See Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 977 (Fed.Cir.2005) ("We are further troubled by the fact that the agreement gives Prima Tek I virtually no control over the ability to sub-license the patents.").
Moreover, the Court notes that neither party has put forward the license agreement at issue. See Sicom Sys., 427 F.3d
Nycomed argues that Graceway has taken inconsistent positions in these proceedings and before the FDA in regard to Nycomed's Product. Nycomed's position—apparently akin to judicial estoppel—comes absent any supporting legal authority. Arguments absent substantial development are waived. See Conroy v. Leone, 316 Fed.Appx. 140, 144 n. 5 (3d Cir.2009) ("We find this undeveloped argument has been waived."); Clay v. Holy Cross Hosp., 253 F.3d 1000, 1002 n. 1 (7th Cir.2001).
Likewise, Nycomed argues that Graceway refused to provide it with the procedures Graceway followed to duplicate or test its (Nycomed's) product. But what particular information Nycomed lacked is left unexplained. Nycomed has had access to discovery. If it had an entitlement to such information during these proceedings, there was (and yet remains) in place a process by which it could seek this information. If Graceway failed to produce such sought after information, Nycomed could move to compel. No such motion has been brought to this Court's attention. If Nycomed has not availed itself of these discovery procedures, it has no cause for complaint.
Finally, Nycomed argues that no injunction should issue to keep new technology off the market facilitating an important public need where the patent holder does not practice the patent. As a mere abstract point of law, there is case law supporting Nycomed's position. However, Nycomed does not put forward any concrete evidence tending to establish that its product fills just such a public need not already filled by Aldara, Graceway's product.
Defendant does not actively contest Plaintiffs' claim construction. Likewise, Defendant only makes scattershot arguments in regard to infringement. For example Nycomed makes the argument that: "All of the '672 Patent claims [have a] limitation . . . [requiring] "at least about 80% oleic acid by weight as a fatty acid. . . . Nycomed intends to make its product with oleic acid that does not have the claims' requirement of `at least about 80% oleic acid.'" Opposition Br. 25 (emphasis added). Nycomed's argument comes absent legal authority and comes absent specificity as to what percentage of oleic acid or superrefined oleic acid Nycomed currently and intends to use in its product. Indeed, Nycomed's use of the future tense leaves unclear what percentage of oleic acid it currently uses and if that percentage squarely falls within the ambit of Graceway's claims. Moreover, Graceway has offered persuasive evidence that a cream not using "at least about 80% oleic acid by weight" as a fatty acid would not be stable. Nycomed fails to respond to Plaintiffs' evidence.
The gravamen of Nycomed's defense does not relate to non-infringement; rather, it relates to validity, obviousness, enablement, and the written description requirement.
Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1377, 1379-80 (Fed. Cir.2009) (emphasis added).
As explained in greater detail below, Plaintiffs are not likely to succeed on the merits because Nycomed has shown a substantial question regarding the validity of the '672 Patent due to obviousness. A claimed invention including a combination of elements is not patentable if it differs from the prior art in a manner "such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art." 35 U.S.C. § 103(a); Pfizer, Inc. v. Apotex, Inc., 480 F.3d 1348, 1361 (Fed. Cir.2007). Once a patent examiner has concluded that the combination of elements is obvious, that is, once the patent examiner makes a finding in regard to the prima facie case, the applicant may rebut this presumption with evidence of unexpected results. However, such evidence is only a part of the "totality of the evidence"
Before issuing the '672 Patent, the United States Patent and Trademark Office ("USPTO") rejected Plaintiffs' application three times
The rejection was finally overcome by a showing of unexpected results in the decreased level of imiquimod-related impurities after combining imiquimod with SROA. But the Examiner offered no explanation, reasoned or otherwise, as to why this showing outweighed the obviousness of the combination using the invention described in the '994 Patent and SROA product specification. See Brown Aff. Ex. O. Where an examiner does not offer a principled reason for allowance after prior rejections by explaining the balance between the obviousness rejection and the unexpected result described in the allowance, the Court will give less deference to the decision of the USPTO because the Court's ability to understand the examiner's decision is limited to the record and reasoning the examiner provides. Here, no reasoning is offered, and as a result, there is little to which the Court can defer.
Nycomed has offered arguments and affidavits in addition to the Examiner's reasons for initial rejection, to demonstrate the obviousness of the '672 Patent. Nycomed relies primarily on the combination of the Chollet Article, ("Chollet") (Banker Aff. Ex. C) and an extant SROA product specification, (id. Ex. D) to arrive at the claimed invention. Chollet specifically teaches that oleic acid is the best solubilizing agent of imiquimod, but oleic acid oxidizes in the air, becomes discolored, and turns rancid when heated. Isostearic acid, however, is not as susceptible to oxidation, color change, and rancidity, and isostearic acid has solubilizing properties similar to those of oleic acid. (Banker Aff. Ex. C 39.) Nycomed asserts that SROA's properties render it an obvious alternative to lessen the disadvantages of regular oleic acid. This is supported by expert testimony tending to establish SROA's improved stability over oleic acid. (Banker Decl. ¶ 33.)
Furthermore, Nycomed has provided testimony that "it is standard practice in the field of pharmaceutical sciences to use the highest grade or purest form of an ingredient when formulating a pharmaceutical product." (Palmieri Decl. ¶ 5(d).) This position seems sensible. While Plaintiffs argue that the Chollet reference teaches away from the use of oleic acid (because of its inferior properties in relation to oxidation, discoloration, and rancidity),
In rebuttal to Nycomed's obviousness arguments, Plaintiffs have provided evidence of unexpected results. The specification of the '672 Patent states generally that, with the use of SROA, "[s]urprisingly, the stability of such formulations is substantially greater." See Patent No. 7,655,672, col. 7, lines 56-58. Nycomed argues that an increase in the stability of the formulation would be expected, especially since oleic acid constitutes the largest component of the formulation other than water. Plaintiffs have clarified that the unexpected result is not a reduction of impurities in general, but a reduction in impurities specific to imiquimod, as shown in Table 2 of the '672 Patent. Plaintiffs support finding unexpectedness by arguing that the reason for the result is unknown. (Brown I Decl. ¶ 17.)
The parties have had a substantial dispute as to the meaning of Table 2 and whether it is indicative of imiquimod impurities alone or impurities of the formulation in general. The statistical reliability of the results is also contested by Nycomed. The Court does not take a position on these issues. For the purpose of this analysis, the Court assumes Plaintiffs are correct, that is, that the results are unexpected. This assumption is consistent with the findings of the Examiner. Additionally, as the Examiner never veered from the finding that the combination of elements itself, considering the '994 Wick Patent and the SROA product specification, would have been obvious, the Court's finding of obviousness in regard to the combination of elements analysis is also consistent with that of the Examiner.
Where there is a strong enough showing of obviousness on the record, expert testimony regarding unexpected results may be insufficient to overcome a prima facie case of obviousness. Pfizer, 480 F.3d at 1372 (explaining that a patent initially rejected for obviousness and then allowed on testimony of unexpected results may be invalidated where the showing of unexpected superior properties is insufficient to overcome the prior art's suggestion of the combination, even if the art did not address the expectation of particular benefits discovered by the inventor). In
As in In re Eli Lilly, the prior art here invites experimentation. This is shown in the Chollet article which sought to stabilize imiquimod formulations using solubilizing agents and which also noted that oleic acid was the best solvent discussed. It is highly likely that SROA, as a new, purer product on the market, would have been tested with imiquimod as part of standard industry practice to determine the stability of the formulation. (Palmieri Decl. ¶ 5(d).) As Nycomed has pointed out, one would have expected the use of SROA to increase the overall level of formulation purity.
In this case, as in Pfizer, there is a strong showing of obviousness, supported
Nycomed also challenges validity based on the written description and enablement requirements. Graceway argues that the '672 Patent meets the written description requirement for validity. "To satisfy the written description requirement, the applicant does not have to utilize any particular form of disclosure to describe the subject matter claimed, but the description must clearly allow persons of ordinary skill in the art to recognize that he or she invented what is claimed. In other words, the applicant must convey with reasonable clarity to those skilled in the art that, as of the filing date sought, he or she was in possession of the invention . . . and demonstrate that by disclosure in the specification of the patent." Carnegie Mellon Univ. v. Hoffmann-La Roche Inc., 541 F.3d 1115, 1122 (Fed.Cir.2008). Plaintiffs again make the argument, much as they did in their reply brief at the TRO stage, that the patent is "replete with descriptions of the claimed invention." Based on the more developed record, and the fact that Graceway now buttresses its argument with a declaration by an expert
Lost Sales and Lost Profits. The Court also notes that in the leading case
Plaintiffs argue that damages associated with unit-by-unit lost sales do not compensate for irreparable harm. Indeed, in terms of lost revenue connected to lost sales, determining damages (should it come to that) can be done with greater ease here than in other patent contexts. In the instant litigation, there are only two competitors. A sale captured by Nycomed is likely to be a sale lost to Graceway. See Eli Lilly & Co. v. Am. Cyanamid Co., 82 F.3d 1568, 1578 (Fed.Cir.1996) (noting approvingly that "[i]n light of the [two distributor] structure of the cefaclor market, the court found that calculating lost profits would be a relatively simple task") In other contexts, with multiple players, a sale by an alleged infringer might have otherwise gone to the patentee or to some third-party with a non-infringing product. That complexity is not at play here. Plaintiff Graceway also recites loss of exclusive market share, current and future price erosion from an entry of a generic, loss of jobs, loss of good will, and impairment of research and development. Specifically, Graceway states it suffered a loss of 85% of Aldara sales, sales captured by Nycomed, implemented a 60% cut in its employment and development budget, and cut 40% of its work force. Finally, it has hired a restructuring consultant.
Price. Graceway claims current and future price erosion. Opening Br. 25 ("Unless enjoined from further infringement, Nycomed will continue to erode the price of Aldara. . . . This price erosion would be avoided if Nycomed were enjoined and Graceway would be able to begin moving back to the pre-infringement price point." (emphasis added)). The inference to be drawn from this passage is that Aldara's price dropped in response to competition. In support of the position stated in its brief, id., Plaintiffs offered the First Moccia Affidavit. But the paragraphs cited in the Moccia Affidavit do not offer any support in regard to Graceway's price erosion claim. See Opening Br. 24-25.
Nycomed calls Graceway's representations a "shocking deception" and supplies evidence that Aldara's price increased. Spadea Aff. ¶ 23 & n. 32 (noting increase in Aldara price from $568 on February 1, 2010 to $738 on April 1, 2010, where Nycomed entered the market on February 25, 2010). Spadea also suggests that this would account for lost unit sales by Graceway. Graceway's only reply is in a footnote: "Nycomed's argument that Graceway's routine annual price increase
Market Share. Nycomed makes several unsupportable arguments. It claims that Graceway could not have expected exclusive market share at this time because "the '338 [P]atent [covering imiquimod] and its FDA exclusivity expired on February 25, 2010." But Graceway's position is that Nycomed's rival product making use of the '338 Patent, also infringes on the '672 Patent, thereby wrongfully competing with Aldara (a product based on the '944 Patent). The expiration of the '338 Patent is not relevant unless Nycomed's product does not infringe the other two patents— owned by Plaintiffs. Nycomed also argues that Graceway had no reasonable expectation of exclusivity because "generic Aldara substitutes will be permitted" in the not so distant future. The '944 Patent protecting Aldara does not expire until February 2011. Graceway is entitled to exclusivity in regard to the '944 Patent until its lawful right to exclude—based on whatever patents it holds—ends. See Rite-Hite Corp., 56 F.3d at 1546-48. Nycomed also argues, as explained in the section discussing price above, that Aldara sales dropped in part because Graceway raised its prices. Although this argument addresses (some) lost sales, it does not address lost market share. Nycomed also argues that Graceway intended to sell authorized generic and Zyclara (a new Graceway product) during the briefing process. Again, this may be true, but it does not impinge on Graceway's statutory right to exclude other parties from the Aldara market if those parties are in violation of Graceway's patents. Graceway is allowed to put its own products on the market without opening the market up to competition from third parties.
In Automated Merch. Sys. v. Crane Co., 357 Fed.Appx. 297 (Fed.Cir.2009) (NOT PRECEDENTIAL), the Federal Circuit explained that even when supported by competent evidence, "loss of revenue, loss of market share, and price erosion" do not establish irreparable harm. Id. at 300-01. Automated suggests a preliminary injunction should issue for lost market share where "failing to grant [the] preliminary injunction would permit [the alleged infringer] to drop its prices in order to drive [the patentee] out of the market entirely." Id. at 301 (emphasis added). This is not the situation here. Automated also suggests that the loss of third-party distributors to an alleged infringer in the context of lost market share may lead to a finding of irreparable harm. Id. at 300-01. But again, there is no evidence establishing such facts here.
Loss of Jobs. Graceway puts forward an affidavit stating that "approximately 130 people are being let go." Musick Aff. ¶ 4; Reply Br. 4 (noting that "more than 40% of Graceway's 323 employees
Adequacy of Money Damages.
Am. Cyanamid Co., 82 F.3d at 1578.
In sum, the Court does not find that Plaintiffs have made a sufficient showing in regard to irreparable harm.
The Court again notes it now has a better developed record.
Plaintiffs repeat much of their irreparable harm argument: unit-by-unit competition and sales loss, loss of its exclusive market share, price erosion (now disputed by the parties), loss of jobs, loss of goodwill, and impairment of future projects. For all these reasons, Plaintiffs argue that money damages are inadequate or "incalculable." Graceway argues that Nycomed sales far exceed Graceway's and so Nycomed is better positioned to "absorb temporary loss."
Nycomed will lose its 180 day period of exclusivity should it not be allowed to continue on the market. But Graceway argues that Nycomed moved forward voluntarily and knowingly after Graceway filed its complaint and so the harm to Nycomed is self-inflicted. Moreover, Nycomed had a seventy-five day post-approval grace period in which to move forward and could have begun negotiations (or arbitration, mediation, or, even, litigation) with Graceway prior to moving ahead. (Nycomed suggests in a footnote that exercising the 75 day grace period would not have been prudent—and may have led to the loss of the 180 exclusivity period—but no evidence or legal authority for this position is put forward.) Nycomed also argues, as the prior opinion stated, that an injunction now would put at risk its "reputation, its commercial relationships, and, no doubt, on its own employees' moral[e]." Opposition Br. 26. Nycomed claims it invested heavily to ready launch, but does not specify launch costs apart from more general development costs incurred prior to the approval of the '672 Patent. Id. It claims it would have to lay off employees, but no number is specified. Nycomed's brief states that its new product is its "biggest generic dermatological product." Id. But there does not appear to be any evidentiary support for this claim. Nycomed has not been forthcoming.
Although the record on both sides remains somewhat (and surprisingly) vague on these points—Graceway has the better developed record. On balance, this factor leans to Plaintiff Graceway.
The public interest is enhanced by enforcing valid patents: encouraging the development of new drugs through incentives connected to future profits from limited temporal monopolies. The public interest is also enhanced by competition: encouraging generic drugs to come onto the market the moment legal patent protection ends. Both interests are at stake here. These two interests are in equipoise. (The parties' conduct is also in equipoise.)
For the reasons elaborated above, and having weighed the four factors, the Court
