Genentech, Inc. v. Eli Lilly and Company

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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11 GENENTECH, INC., a Delaware Case No.: 18-CV-1518 JLS (JLB)

corporation,

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ORDER DENYING DEFENDANT’S

Plaintiff,

13 MOTION FOR ATTORNEYS’ FEES

v. UNDER 25 U.S.C. § 285

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ELI LILLY AND COMPANY, an Indiana

15 (ECF No. 80)

corporation,

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Defendant.

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18 Presently before the Court is Defendant Eli Lilly and Company’s Motion for

19 Attorneys’ Fees Under 25 U.S.C. Section 285 (“Mot.,” ECF No. 80-1). Plaintiff

20 Genentech, Inc. filed a Response in Opposition to (“Opp’n,” ECF No. 82) and Defendant

21 filed a Reply in Support of (“Reply,” ECF No. 83) the Motion. The Court took the matter

22 under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). See ECF

23 No. 84. After considering the Parties’ arguments and the law, the Court DENIES

24 Defendant’s Motion.

25 BACKGROUND

26 Plaintiff Genentech, Inc. is the owner of U.S. Patent No. 10,011,654 (the “’654

27 patent”), entitled “Antibodies Directed to IL-17A/IL-17F Heterodimers.” First Amended

28 Complaint (“FAC”) ¶¶ 3, 18, ECF No. 29. The ’654 patent claims “methods of making

1 antibodies, including humanized antibodies, to the newly discovered IL-17A/F antigen.”

2 Opp’n at 2 (citing Ex. A, ECF No. 80-14 at 66:34-79:6, Example 1). Presently, Plaintiff

3 does not have a product covered by the ’654 patent. See Mot. at 7.

4 On July 2, 2018, simultaneous with the issuance of the ’654 patent, Plaintiff

5 commenced this action alleging Defendant Eli Lilly and Company infringed the ’654

6 patent. FAC ¶¶ 3, 5, 26–43. Defendant markets a formulation of an antibody called

7 ixekizumab as a treatment for moderate to severe plaque psoriasis and psoriatic arthritis in

8 adults under the trademark Taltz. Id. ¶ 3. Plaintiff alleged that the ixekizumab antibody

9 in Defendant’s Taltz falls within the scope of protection of the ’654 patent. Id. ¶ 26.

10 This action is part of a global dispute between Plaintiff and Defendant over the rights

11 to this discovery. The Parties have litigated numerous international actions over Plaintiff’s

12 European patents related to the ’654 patent, and foreign courts have examined the validity

13 of Plaintiff’s European patents. See, e.g., Eli Lilly & Co. v. Genentech, Inc, [2019] EWHC

14 387 (Pat), Ex. Y, ECF No. 80-38 (finding Plaintiff’s EP 1,641,822 B1, a European

15 counterpart related to the ’654 patent, invalid for obviousness); Eli Lilly & Co. v.

16 Genentech, Inc, [2020] EWHC 261 (Pat), Ex. Z, ECF No. 80-39 (finding Plaintiff estopped

17 from arguing EP 2,784,084 B1 claims are valid based on findings related to EP ’822

18 patent). The findings of the UK courts are on appeal. Opp’n at 17.

19 After Plaintiff filed the present action, Defendant filed a motion to dismiss the

20 original complaint and strike allegations therein. ECF No. 24. Before Plaintiff filed a

21 response, the Parties jointly moved for leave to file an amended complaint, ECF No. 27,

22 which the Court granted, ECF No. 28. Plaintiff then filed its FAC on October 17, 2018.

23 ECF No. 29. On November 13, 2018, Defendant filed a second motion to dismiss alleging

24 failure to state a claim and improper venue and moving to strike portions of Plaintiff’s

25 FAC. ECF No. 30. Shortly after Defendant filed the second motion to dismiss, Plaintiff

26 filed an ex parte application for leave to seek expedited discovery related to Defendant’s

27 contentions that venue was improper in this District. ECF No. 34. The Court granted the

28 motion and allowed limited discovery on the issue of venue. ECF No. 39. On September

1 12, 2019, the Court granted in part and denied in part Defendant’s motion to dismiss,

2 declining to strike portions of the FAC and finding venue was proper in this District, but

3 also finding that Plaintiff’s allegations as pleaded in the FAC were insufficient to support

4 a claim for willful infringement. ECF No. 59. On October 4, 2019, Defendant filed its

5 Answer and Affirmative Defense, pleading that the “asserted claims of the ’654 patent are

6 invalid under 35 U.S.C. § 112 for a lack of written description.” ECF No. 63 at 7.

7 On April 2, 2019, Defendant filed a petition for Post Grant Review (“PGR”) before

8 the Patent Trial and Appeal Board (“PTAB”), challenging the patentability of all claims of

9 the ’654 patent as unsupported by written description and enablement under 35 U.S.C.

10 § 112 and as anticipated under 35 U.S.C. § 102. See generally Ex. B, ECF No 80-15. On

11 October 7, 2019, the PTAB issued an Institution Decision finding that it is more likely than

12 not that the ’654 patent claims are unpatentable based on a lack of written description. See

13 Ex. E, ECF No. 80-18 at 11–12, 22–25.

14 On November 21, 2019, the Parties jointly moved to stay the instant case, ECF No.

15 69, and this Court granted the stay on November 26, 2019 pending a decision by the PTAB

16 regarding the patentability of patent ’654, ECF No. 72. Plaintiff requested four extensions

17 on the deadline to file its Patent Owner Response before the PTAB, and Plaintiff ultimately

18 never filed a response. Declaration of Katherine Helm (“Helm Decl.”) ¶ 10, ECF No. 80-

19 2. Plaintiff moved for an adverse judgement in the PTAB proceeding without ever making

20 substantive arguments in favor of patent ’654’s validity before this Court or before the

21 PTAB. Mot. at 1.

22 On February 26, 2020, Plaintiff moved for voluntary dismissal of this case with

23 prejudice. ECF No. 73. On March 16, 2020, this Court granted Plaintiff’s motion and

24 declared Defendant the prevailing party. ECF No. 77. On March 30, 2020, the Parties

25 filed a joint motion to bifurcate the “exceptional case” determination and attorneys’ fees

26 motion under Federal Rule of Civil Procedure 54(d)(2). ECF. No. 78. The Court granted

27 the joint motion, ECF No. 79, and Defendant subsequently filed the instant Motion seeking

28 a determination that this case is exceptional, ECF No. 80-1.

1 LEGAL STANDARD

2 Under 35 U.S.C. § 285, the court “in exceptional cases may award reasonable

3 attorneys’ fees to the prevailing party” in a patent infringement lawsuit. The Supreme

4 Court construed this language in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572

5 U.S. 545, 553–54 (2014). Specifically, the Octane Court rejected the Federal Circuit’s pre-

6 Octane interpretation of the “exceptional case” language as “rigid and mechanical,”

7 holding that the prior method “impermissibly encumber[ed] the statutory grant of

8 discretion to district courts.” Id. at 553. Octane established a flexible approach: “[A]

9 district court may award fees in the rare case in which a party’s unreasonable conduct—

10 while not necessarily independently sanctionable—is nonetheless so ‘exceptional’ as to

11 justify an award of fees.” Id. at 555.

12 Under Octane, a case may warrant a fee award if the litigation is objectively baseless,

13 or if the litigation is brought in subjective bad faith. Id. In particular, a case is

14 “exceptional” when it “stands out from others with respect to the substantive strength of a

15 party’s litigating position (considering both the governing law and the facts of the case) or

16 the unreasonable manner in which the case was litigated.” Id. at 554. Courts may look to

17 pre-Octane case law for guidance on whether a case was litigated in an unreasonable

18 manner. SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1349 (Fed. Cir. 2015). District

19 courts “may determine whether a case is ‘exceptional’ in the case-by-case exercise of their

20 discretion, considering the totality of the circumstances.” Octane Fitness, LLC, 572 U.S.

21 at 554. To guide its discretion, a court may consider a non-exclusive list of factors,

22 including: “frivolousness, motivation, objective unreasonableness (both in the factual and

23 legal components of the case) and the need in particular circumstances to advance

24 considerations of compensation and deterrence.” Id. at n.6 (citing Fogerty v. Fantasy, Inc.,

25 510 U.S. 517, 534 n.19 (1994)). Additionally, Octane rejected the former requirement that

26 patent litigants establish their entitlements to attorneys’ fees by “clear and convincing

27 evidence” in favor of a lower, preponderance of the evidence standard. Id. at 557–58.

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1 Finally, Octane does not mandate attorneys’-fee awards in all exceptional cases; i.e.,

2 even if a court determines that a case is “exceptional,” the court still has discretion to deny

3 attorneys’ fees. See Ion Health & Fitness, Inc. v. Octane Fitness, LLC, Nos. 2011–1521,

4 2011–1636, 2014 WL 4194609, at *3 (Fed. Cir. 2014) (“The Supreme Court’s decision in

5 Octane did not, however, revoke the discretion of a district court to deny fee awards even

6 in exceptional cases.”); see also S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d

7 198, 201 (Fed. Cir. 1986) (“Even an exceptional case does not require in all circumstances

8 the award of attorney fees.”).

9 ANALYSIS

10 The parties do not dispute that Defendant is a prevailing party as required by § 285.

11 Therefore, the award of attorneys’ fees turns on whether Defendant has carried its burden

12 to establish this case is exceptional.

13 Defendant raises several arguments why this case is exceptional. Defendant argues

14 that this case is exceptional because (1) Plaintiff’s case was objectively baseless because

15 the ’654 patent claims are facially invalid; and (2) Plaintiff acted with subjective bad faith

16 in initiating and persisting in these proceedings. See Mot. at 12–22. The Court discusses

17 Defendant’s arguments in turn, addressing Plaintiff’s counterarguments where relevant.

18 I. Substantive Strength of Litigation Position

19 Defendant argues that Plaintiff’s case was baseless because the ’654 patent claims

20 are facially invalid under controlling law. Mot. at 13–14. “To be objectively baseless, the

21 infringement allegations must be such that no reasonable litigant could reasonably expect

22 success on the merits.” Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d

23 1254, 1260 (Fed. Cir. 2008) (citation omitted). Defendant contends that functional genus

24 claims like those claimed in the ’654 patent “have been specifically repudiated by both the

25 Federal Circuit and corresponding PTO Guidance.” Mot. at 4. Specifically, the Federal

26 Circuit in Amgen Inc. v. Sanofi rejected the “newly characterized antigen test” as

27 “flout[ing] basic principles of the written description requirement.” 872 F.3d 1367, 1378

28 (Fed. Cir. 2017), cert. denied, 139 S. Ct. 787 (2019). Defendant argues that the patent

1 examiner applied the rejected newly characterized antigen standard to Plaintiff’s

2 application for the ’654 patent, and mistakenly issued the patent on this basis. Mot. at 4–

3 5.

4 Plaintiff argues that the ’654 patent was issued by the United States Patent and

5 Trademark Office (“USPTO” or “PTO”), and therefore it is presumed valid. Opp’n at 5.

6 Plaintiff states that Defendant “points to no authority finding the presumption of validity

7 is reduced by subsequent case law developments,” and it is Defendant’s burden to prove

8 invalidity. Id. at 6 (citing Microsoft Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 95 (2011)).

9 The Federal Circuit decided Amgen on October 5, 2017, while prosecution of the

10 ’654 patent was still ongoing. In response to Amgen, the USPTO issued a Memorandum

11 on February 22, 2018 that instructed examiners not to allow claims based on the newly

12 characterized antigen test:

13 In view of the Amgen decision, adequate written description of a

newly characterized antigen alone should not be considered

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adequate written description of a claimed antibody to that newly

15 characterized antigen, even when preparation of such an

antibody is routine and conventional.

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The [earlier] training materials [utilizing the newly characterized

19 antigen test] are outdated and should not be relied upon as

reflecting the current state of the law regarding 35 U.S.C. §§ 101

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and 112.

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22 Ex. X. at 2–3, ECF No. 80-37 (emphasis in original).

23 It cannot be reasonably disputed that Plaintiff was aware of the Amgen decision

24 while prosecution of the ’654 patent was ongoing. In addition to Amgen being “widely

25 publicized and discussed in the patent law community,” Mot. at 6, Plaintiff’s Assistant

26 General Counsel sat on a panel on April 11, 2018, that described how “[t]he Federal

27 Circuit’s decision in Amgen Inc. v. Sanofi eliminated the ‘well-characterized antigen’ test

28 for compliance with the written description requirement for antibodies[,]” Ex. 7 at 10, ECF

1 No. 80-9. Moreover, Plaintiff argued in another action that a patent covering antibodies

2 lacked sufficient written description. See Baxalta Inc. v. Genentech, Inc., No. CV 17-509-

3 TBD, 2018 WL 3742610, at *7 (D. Del. Aug. 7, 2018).

4 Therefore, the question before the Court is whether the Amgen decision affected the

5 validity of the ’654 patent and placed Plaintiff in an exceptionally weak litigation position.

6 A. Presumption of Validity

7 Section 282(a) of the Patent Act provides that “[a] patent shall be presumed valid,”

8 and that “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest

9 on the party asserting such invalidity.” 35 U.S.C. § 282(a). The party asserting invalidity

10 “has the added burden of overcoming the deference that is due to a qualified government

11 agency presumed to have properly done its job, which includes one or more examiners . . .

12 whose duty it is to issue only valid patents.” PowerOasis, Inc. v. T-Mobile USA, Inc., 522

13 F.3d 1299, 1304 (Fed. Cir. 2008) (quoting Am. Hoist & Derrick Co. v. Sowa & Sons, 725

14 F.2d 1350, 1359 (Fed. Cir. 1984)); see also Hyatt v. Kappos, 625 F.3d 1320, 1334 (Fed.

15 Cir. 2010) (en banc) (recognizing the deference owed to the USPTO as “the knowledgeable

16 agency charged with assessing patentability”). “The party supporting validity has no initial

17 burden to prove validity, having been given a procedural advantage requiring that he come

18 forward only after a prima-facie case of invalidity has been made.” Stratoflex, Inc. v.

19 Aeroquip Corp., 713 F.2d 1530, 1534 (Fed. Cir. 1983).

20 Defendant argues that Plaintiff “ignored controlling law and relied on what it knew

21 to be a rejected legal standard . . . as the basis to overcome written description rejections

22 by the PTO.” Mot. at 4. Therefore, Plaintiff “repeatedly evaded its duty to notify the

23 Examiner,” and as a result, the “Examiner mistakenly allowed the patent on this rejected

24 standard[.]” Id. at 4–5. Plaintiff counters that Defendant “has never alleged that the ’654

25 patent is unenforceable due to inequitable conduct . . . [and Defendant] cites no authority

26 that [Plaintiff] had a duty to disclose the Amgen decision during prosecution.” Opp’n at

27 16. Defendant argues that the Court need not determine whether Plaintiff’s actions during

28 patent prosecution amount to inequitable conduct to find that this case is exceptional. See

1 Reply at 5–6. While Defendant correctly states that the “exceptional case analysis . . .

2 considers whether a plaintiff’s conduct is unreasonable with respect to the factual and legal

3 components of the case,” id. at 6, Defendant argues that Plaintiff’s litigation was baseless

4 from its inception, see id. at 20. Given that Plaintiff initiated litigation immediately upon

5 issuance of the ’654 patent, it is reasonable for Plaintiff to rely on the ’654 patent’s

6 presumption of validity unless the patent was invalid. Therefore, the Court will examine

7 whether inequitable conduct invalidated the ’654 patent, which would render Plaintiff’s

8 initiating this action objectively unreasonable. Otherwise, the presumption of validity

9 provides Plaintiff with some basis for suing Defendant for patent infringement.

10 An otherwise valid patent may be rendered unenforceable by virtue of inequitable

11 conduct committed during the prosecution of the patent application before the USPTO.

12 Glaverbel Societe Anonyme v. Northlake Marketing & Supply, Inc., 45 F.3d 1550, 1556

13 (Fed. Cir. 1995). Patent applicants “have a duty to prosecute patent applications in the

14 [USPTO] with candor, good faith, and honesty.” Honeywell Int’l Inc. v. Universal Avionics

15 Sys. Corp., 488 F.3d 982, 999 (Fed. Cir. 2007). “A party asserting inequitable conduct

16 must prove by clear and convincing evidence that a patent applicant breached that duty by

17 (1) ‘fail[ing] to disclose material information or submit[ting] materially false information

18 to the PTO’ with (2) ‘intent to mislead or deceive the examiner.’” Advanced Magnetic

19 Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 829 (Fed. Cir. 2010) (quoting

20 McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 913 (Fed. Cir. 2007))

21 (alterations in original). The nondisclosure or misrepresentation must meet threshold

22 levels of both materiality and intent. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178

23 (Fed. Cir. 1995). Because a patent is presumed valid under 35 U.S.C. § 282, inequitable

24 conduct requires proof by clear and convincing evidence. Manville Sales Corp. v.

25 Paramount Sys., Inc., 917 F.2d 544, 551 (Fed. Cir. 1990).

26 Materiality is not limited to prior art, but instead embraces any information that a

27 reasonable examiner would be substantially likely to consider important in deciding

28 whether to allow an application to issue as a patent. GFI, Inc. v. Franklin Corp., 265 F.3d

1 1268, 1274 (Fed. Cir. 2001) (citing Akron Polymer Container Corp. v. Exxel Container,

2 Inc., 148 F.3d 1380, 1382 (Fed. Cir. 1998)). Pursuant to 37 C.F.R. § 1.56(b),

3 information is material to patentability when it is not cumulative

to information already of record or being made of record in the

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application, and

5 (1) It establishes, by itself or in combination with other

information, a prima facie case of unpatentability of a

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claim, or

7 (2) It refutes, or is inconsistent with, a position the

applicant takes in

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(i) Opposing an argument of unpatentability relied on by

9 the Office, or

(ii) Asserting an argument of patentability . . .

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11 Here, the patent examiner previously rejected claims of the ’654 patent for failure to

12 comply with the written description requirement. Ex. O at 6, ECF No. 80-28. In August

13 2016, Plaintiff argued the ’654 patent claims were supported by adequate written

14 description and overcame the examiner’s rejection by explicitly relying on the newly

15 characterized antigen test. Id. at 6–7 (citing Ex. W at Example 13, page 46, ECF No. 80-

16 36). Therefore, it appears the patent examiner would not have found the claims patentable

17 but for the application of the newly characterized antigen test. After the Amgen court

18 rejected the newly characterized antigen test in October 2017, it stands to reason that the

19 patent examiner should have reexamined these claims for their validity under the written

20 description standard articulated in Amgen. It is unclear from the evidence before the Court

21 whether the patent examiner did reevaluate the ’654 patent claims in light of Amgen.

22 Defendant argues Plaintiff failed to disclose the change in law to the patent

23 examiner, despite having numerous opportunities to do so before the patent was issued on

24 July 3, 2018. Mot. at 7–8. Plaintiff had interviews with the examiner on December 12,

25 2017 and January 2, 2018. Exs. Q, R, ECF Nos. 80-30, 80-31. Plaintiff had further contact

26 with the examiner after the USPTO issued the February Memorandum on Amgen, including

27 filing corrected application papers. See Exs. S, T, U, V, ECF Nos. 80-30–80-35.

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1 The patent examiner, whose “duty it is to issue only valid patents,” PowerOasis,

2 Inc., 522 F.3d at 1304, already should have been aware of Amgen during prosecution of

3 the ’654 patent because of the USPTO’s memorandum on the subject. Indeed, other courts

4 have found that it was reasonable for a patent applicant to assume that the examiner was

5 aware of important legal decisions issued while the patent was still undergoing prosecution,

6 and therefore “it was not unreasonable for [the plaintiff] to begin its litigation analysis with

7 the presumption of validity that initially attached to such patents.” CertusView Techs.,

8 LLC v. S & N Locating Servs., LLC, 287 F. Supp. 3d 580, 586 (E.D. Va. 2018); see also

9 DietGoal Innovations LLC v. Chipotle Mexican Grill, Inc., No. 2:12-CV-00764-WCB,

10 2015 WL 1284826, at *2 (E.D. Tex. Mar. 20, 2015) (finding that patent “issued well after

11 [relevant Supreme Court] decisions came down is prima facie evidence against” position

12 that patent was “obviously invalid”). Here, the patent was undergoing prosecution for eight

13 months after the Federal Circuit issued its decision in Amgen and four months after the

14 USPTO issued the memorandum advising examiners not to use the newly characterized

15 antigen test. This refutes Defendant’s assertion that the litigation was “baseless.” It was

16 not unreasonable for Plaintiff to assume its patent was valid because the examiner

17 presumably examined and issued the patent under Amgen.

18 Defendant has not met the threshold burden of showing materiality, and there is no

19 evidence before the Court that Plaintiff intended to deceive the examiner. In light of the

20 memorandum on Amgen issued by the USPTO, Plaintiff’s disclosure of the Amgen decision

21 would have been cumulative under 37 C.F.R. § 1.56(b). Therefore, Plaintiff was not

22 required to disclose the Amgen decision to the patent examiner because such a disclosure

23 would have been cumulative and therefore immaterial.

24 To overcome the presumption of validity, Defendant must prove by clear and

25 convincing evidence that Plaintiff committed inequitable conduct. Here, Defendant has

26 not carried its burden. Accordingly, the Court finds that Plaintiff could rely on the ’654

27 patent’s presumption of validity and there was a reasonable basis to bring this infringement

28 action.

1 When the newly characterized antigen test was rejected in Amgen, Plaintiff was on

2 notice that the ’654 patent claims were susceptible to attack under the written description

3 requirement. However, the Court finds Plaintiff’s position immediately after the issuance

4 of ’654 patent was not exceptionally weak because the ’654 patent was presumptively

5 valid. See CertusView Techs., LLC, 287 F. Supp. 3d at 587 (finding that infringement

6 claims were not “objectively unreasonable” where “there were no governing precedents to

7 guide [the plaintiff] that found nearly identical claims invalid”). It was not “clear that the

8 case should never have been brought from the outset.” Effective Expl., LLC v. BlueStone

9 Nat. Res. II, LLC, No. 216CV00607JRGRSP, 2018 WL 466246, at *2 (E.D. Tex. Jan. 18,

10 2018). Therefore, it was reasonable for Plaintiff to initiate the present action based on the

11 ’654 patent.

12 B. Developments After Patent Issuance

13 Having found that Plaintiff’s patent was not invalid for inequitable conduct, Plaintiff

14 “ha[d] the right to vigorously enforce its presumptively valid patent.” Homeland

15 Housewares LLC v. Sorensen Research & Dev. Trust, 581 Fed. Appx. 877, 881 (Fed. Cir.

16 2014). With this presumption in mind, Defendant next argues that Plaintiff persisting in

17 this litigation was objectively unreasonable because the ’654 patent was invalid under

18 Amgen. See Mot. at 13–14.

19 While Plaintiff is afforded a presumption of validity in the ’654 patent, Plaintiff

20 “must continually assess the soundness of pending infringement claims.” Taurus IP, LLC

21 v. DaimlerChrysler Corp., 726 F.3d 1306, 1328 (Fed. Cir. 2013). The statutory

22 presumption of validity does not relieve Plaintiff of its obligation under Federal Rule of

23 Civil Procedure 11 to certify that the claims set forth in its First Amended Complaint are

24 warranted by existing law. Indeed, “all plaintiffs have a duty to critically assess the merits

25 of their case prior to suit. . . . The issuance of a patent cannot and should not be a license

26 to sue with abandon.” Finnavations LLC v. Payoneer, Inc., No. 1:18-CV-00444-RGA,

27 2019 WL 1236358, at *2 (D. Del. Mar. 18, 2019) (granting attorneys’ fees because the

28 plaintiff asserted “clearly patent ineligible claims”).

1 Cases where subsequent changes in the legal landscape called into question the

2 validity of a patent are instructive here. In Inventor Holdings, the district court granted

3 attorneys’ fees based on the weakness of the plaintiff’s patent after the Supreme Court

4 decision in Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), and the need to

5 deter future “wasteful litigation.” Inventor Holdings, LLC v. Bed Bath & Beyond Inc., No.

6 CV 14-448-GMS, 2016 WL 3090633, at *3 (D. Del. May 31, 2016), aff’d, 876 F.3d 1372

7 (Fed. Cir. 2017). The Inventor Holdings district court held that “by the time of the Alice

8 decision, [the plaintiff] was on notice that its claims, much like the claims in Bilski [v.

9 Kappos, 561 U.S. 593 (2010),] and Alice, covered an abstract idea and that the introduction

10 of a computer into these claims did not alter the analysis,” meaning that the business

11 method claims were objectively ineligible under 35 U.S.C. § 101 by the time of Alice. Id.

12 at *4–5. The Federal Circuit concluded that the claims at issue were “manifestly directed

13 to an abstract idea” and agreed with the district court that the “asserted claims were plainly

14 invalid in view of Alice and its reasoning.” Inventor Holdings, LLC, 876 F.3d at 1378–79.

15 The Federal Circuit affirmed the district court’s award of attorneys’ fees and held that “[i]t

16 was [the plaintiff]’s responsibility to reassess its case in view of new controlling law.” Id.

17 Here, Plaintiff argues that the Amgen court did not establish a bright-line rule

18 invalidating all functional antibody genus claims, so Plaintiff was monitoring multiple

19 developments to assess the continuing soundness of its infringement claims. See Opp’n at

20 6–7, 13–14. First, Plaintiff claims that it was waiting for the outcome of the Amgen remand

21 trial and renewed motion for judgment as a matter of law. See id. at 13–14. The Amgen

22 remand trial concluded in February 2019, and the jury found Amgen’s patent claims, by

23 Plaintiff’s own admission “the claims most similar to the ’654 patent claims,” lacked

24 written description support and were invalid. Opp’n at 13; see Amgen Inc. v. Sanofi, No.

25 CV 14-1317-RGA, 2019 WL 4058927, at *1 (D. Del. Aug. 28, 2019), aff’d sub nom.

26 Amgen Inc. v. Sanofi, Aventisub LLC, 987 F.3d 1080 (Fed. Cir. 2021). Plaintiff contends

27 it also was waiting for the district court’s decision on Amgen’s renewed motion for

28 judgment as a matter of law as to the written description support for the broader claims.

1 Opp’n at 13–14. The district court dismissed the JMOL motion as moot on August 28,

2 2019. See generally Amgen, 2019 WL 4058927.

3 Second, Plaintiff claims it was “monitoring the Federal Circuit’s general trend

4 toward requiring a higher level of disclosure to satisfy the written description requirement.”

5 Opp’n at 14. Plaintiff cites to three cases that demonstrate this “general trend.” Opp’n at

6 14 (citing Idenix Pharm. LLC v. Gilead Scis. Inc., 941 F.3d 1149 (Fed. Cir. 2019); Purdue

7 Pharma L.P. v. Iancu, 767 F. App’x 918 (Fed. Cir. 2019); Quake v. Lo, 928 F.3d 1365

8 (Fed. Cir. 2019)). These cases invalidated patent claims based on lack of written

9 description support. Idenix Pharm. LLC, 941 F.3d at 1165–66; Purdue Pharma L.P., 767

10 F. App’x at 923–25; Quake, 928 F.3d at 1367, 1374. Defendant points out that these post-

11 Amgen cases are consistent with the law that existed at the time Plaintiff initiated the

12 present action. Reply at 2. Additionally, the decisions Plaintiff cites were issued months

13 before Plaintiff voluntarily dismissed this action. The Federal Circuit decided Purdue in

14 April 2019, Quake in July 2019, and Idenix in October 2019.

15 Finally, when the PTAB instituted the PGR, Plaintiff was faced with defending the

16 ’654 patent at a lower standard of proof than before a jury. Opp’n at 14–15. Although

17 Defendant would have needed to prove invalidity by clear and convincing evidence in this

18 Court, Defendant would only need to meet the preponderance of the evidence standard in

19 the PGR. Opp’n at 15 (citing 35 U.S.C. § 326(e); Microsoft Corp., 564 U.S. at 95).

20 Plaintiff claims this “changed the calculus considerably.” Id.

21 Plaintiff admits that these subsequent developments “cast considerable doubt over

22 whether [Plaintiff] would succeed in defending the validity of the ’654 patent claims.”

23 Opp’n at 14. By Plaintiff’s own admissions, Plaintiff was aware of its weakened litigating

24 position by August 2019 at the latest. This was almost six months before Plaintiff moved

25 to voluntarily dismiss this action. Plaintiff persisted litigating a case it had “considerable

26 doubt” over for months, during which time this Court decided Defendant’s second motion

27 to dismiss, Defendant filed an answer, the PTAB issued its institution decision, the parties

28 ///

1 moved to stay the present action, and Plaintiff requested four extensions to file its Patent

2 Owner Response before the PTAB.

3 This case is unusual because the significant change in the law that weakened

4 Plaintiff’s patent occurred during prosecution instead of after issuance. Therefore, the ’654

5 patent’s presumption of validity is in tension with Defendant’s assertion that the ’654

6 patent is clearly invalid for lack of written description. Ultimately, the Court has made

7 very little in the way of substantive findings in this case. See Munchkin, Inc. v. Luv n’

8 Care, Ltd., 960 F.3d 1373, 1375 (Fed. Cir. 2020) (reversing district court grant of attorneys’

9 fees where the merits of certain arguments were never fully adjudicated before the court).

10 The Court has not undertaken claim construction or examined the validity of Plaintiff’s

11 patent in light of Amgen. A significant body of law has developed around Alice, whereas

12 the same is not yet true for Amgen. The Amgen court held that “[a]n adequate written

13 description must contain enough information about the actual makeup of the claimed

14 products—‘a precise definition, such as by structure, formula, chemical name, physical

15 properties, or other properties, of species falling within the genus sufficient to distinguish

16 the genus from other materials,’ which may be present in ‘functional’ terminology ‘when

17 the art has established a correlation between structure and function.’” Amgen Inc., 872

18 F.3d at 1378 (quoting Ariad Pharm., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1350 (Fed. Cir.

19 2010)). Further, the Amgen court reminds us that “[a] determination that a patent is invalid

20 for failure to meet the written description requirement of 35 U.S.C. § 112, ¶ 1 is a question

21 of fact[.]” Id. at 1379 (quoting Ariad, 598 F.3d at 1355). The Court did not undertake this

22 fact-based inquiry on the ’654 patent, and it does not endeavor to do so here. While the

23 facts tend to indicate Plaintiff’s litigation position was weakened, the Court cannot go so

24 far as to find that the patent was facially invalid, as Defendant claims. Unlike the issuance

25 of Alice in Inventor Holdings, no single event after issuance “plainly invalid[ed]” the ’654

26 patent’s asserted claims. See Inventor Holdings, LLC, 876 F.3d at 1378–79. Therefore,

27 the Court does not attempt to draw lines as to when it became unreasonable to continue

28 ///

1 litigating the present action when Plaintiff’s case was founded on a presumptively valid

2 patent.

3 Additionally, Defendant is seeking an estimated $10 million in attorneys’ fees. Mot.

4 at 25. Plaintiff argues that Defendant “incurred such high costs for the PGR precisely

5 because the written description issues and the science in the case are complex.” Opp’n at

6 5. Defendant claims that, contrary to Plaintiff’s assertion, the expense of the PGR petition

7 “reflect[s] how important Taltz® is to [Defendant] and the patients it serves, and the high

8 stakes associated with a petition that . . . requires a single presentation of all of the

9 evidentiary and legal arguments up front.” Reply at 5 (citation omitted). The Court agrees

10 with Plaintiff. Although it is true that the PGR petition must be comprehensive, the length

11 and cost tend to show that this is not so straightforward a case as Defendant would have

12 this Court believe. It would be speculative for the Court to find Plaintiff’s patent clearly

13 invalid under Amgen when the Court has not undertaken the fact-intensive examination

14 necessary to support such a finding.

15 Although it appears that Plaintiff likely should have terminated this action sooner,

16 Plaintiff was not unreasonable in instituting the instant litigation because the ’654 patent is

17 afforded the presumption of validity. Although Plaintiff’s litigation position was weak

18 after Amgen, without more from Defendant, “[s]uch a superficial case cannot support a

19 finding of exceptionality.” Munchkin, Inc., 960 F.3d at 1380. Accordingly, this factor

20 weighs against an exceptional case finding.

21 II. Manner of Litigation

22 Turning to the second factor, the manner in which the case was litigated, Defendant

23 argues that Plaintiff acted in subjective bad faith in prosecuting the ’654 patent, initiating

24 this litigation, and then maintaining what Plaintiff knew was an “unwinnable” case. Reply

25 at 1.

26 The Federal Circuit has affirmed findings of litigation misconduct based on the

27 patentee’s destruction of relevant documents and lodging of incomplete and misleading

28 extrinsic evidence. Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1324–25. (Fed. Cir.

1 2011). Other factors tending to show the case was litigated in an unreasonable manner

2 include “a pattern of litigation abuses characterized by the repeated filing of patent

3 infringement actions for the sole purpose of forcing settlements, with no intention of testing

4 the merits of one’s claims,” SFA Sys., LLC, 793 F.3d at 1350, and “an overall vexatious

5 litigation strategy and numerous instances of litigation misconduct,” Monolithic Power

6 Sys., Inc. v. O2 Micro Int’l Ltd., 726 F.3d 1359, 1366 (Fed. Cir. 2013).

7 First, Defendant argues that Plaintiff engaged in bad faith conduct in procuring the

8 ’654 patent. Mot. at 5. Defendant contends that Plaintiff “made no mention of the binding

9 legal precedent that eviscerated its patentability arguments to the Examiner.” Id. at 7. In

10 response, Plaintiff maintains that “[i]t properly obtained the ’654 patent in good faith.”

11 Opp’n at 19.

12 Although the Court found that Plaintiff was not required to disclose the Amgen

13 decision to the USPTO, see supra Section I.A., Plaintiff’s failure to do so was not in the

14 spirit of good faith patent prosecution. Amgen was a highly relevant legal development

15 that explicitly invalidated Plaintiff’s previous arguments. Although the Court presumes

16 that the patent examiner reexamined Plaintiff’s claims under Amgen based on the USPTO’s

17 memorandum, the ’654 patent’s prosecution history indicates that but for the application

18 of the newly characterized antigen test, the patent examiner would have found the claims

19 unpatentable for lack of written description. Therefore, a patent applicant acting in good

20 faith would have updated the examiner about a subsequent legal development that

21 invalidated its previous argument. Waiting to see if the patent examiner made the

22 connection between Amgen and Plaintiff’s previous position does not demonstrate candor

23 before the USPTO. See, e.g., Kingsland v. Dorsey, 338 U.S. 318, 319 (1949) (“[T]he

24 relationship of attorneys to the [USPTO] requires the highest degree of candor and good

25 faith.” (quotations omitted)). The Court does not condone Plaintiff’s behavior. Although

26 Plaintiff’s patent was presumptively valid, Plaintiff’s actions before the USPTO were

27 unreasonable.

28 ///

1 Second, Defendant argues that Plaintiff engaged in bad faith conduct by initiating

2 the ’654 patent dispute before this Court when it had notice from Defendant that the claims

3 of the ’654 patent would be held invalid under controlling law. Mot. at 14. Defendant

4 argues that the PTAB PGR institution decision confirmed that the claims of the ’654 patent

5 were more likely than not unpatentable under Amgen for lack of written description, but

6 Plaintiff continued to pursue this infringement action. Id. at 16–17. In response, Plaintiff

7 responds that its “litigation positions were not unreasonable, as evidenced by the

8 substantial effort required to mount an invalidity challenge at the PGR and the hard-fought

9 battle between the parties in the UK on related patents.” Opp’n at 19.

10 As an initial matter, the Court is not persuaded by Plaintiff’s argument that the “hard

11 fought battle between the parties in the UK on related patents” is evidence of good faith

12 litigation before this Court. Opp’n at 19. The ’654 patent is subject to different standards

13 of patentability than Plaintiff’s European patents. Therefore, while Plaintiff may have

14 stated a feasible claim in a foreign jurisdiction, Plaintiff still had a duty to litigate in good

15 faith before this Court. Part of Plaintiff’s duty includes ensuring that its claims are viable

16 under the law of this jurisdiction. See Taurus IP, LLC, 726 F.3d at 1328. However, the

17 Court has already determined that Plaintiff was entitled to a presumption of validity in the

18 ’654 patent because the patent was issued by the USPTO immediately before Plaintiff

19 initiated this litigation. See supra Section I.A. Therefore, Plaintiff did not have an

20 improper motive to bring this action. See Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 858

21 F.3d 1371, 1375 (Fed. Cir. 2017) (“[M]otivation to implement the statutory patent right by

22 bringing suit based on a reasonable belief in infringement is not an improper motive.”).

23 As further evidence of Plaintiff’s bad faith, Defendant points to Plaintiff never

24 litigating any substantive aspect of the ’654 patent before this Court or the PTAB. Mot. at

25 15. Plaintiff did not offer a preliminary response to Defendant’s PGR petition on the

26 merits, and Plaintiff did not file a patent owner response or any substantive paper defending

27 the patentability of the ’654 patent claims. Id. at 17–18. Defendant argues that Plaintiff’s

28 “posturing and tactical maneuvering” was a tactic to hide that Plaintiff’s positions were

1 “unreasonable and untenable.” Id. at 18. Defendant claims Plaintiff’s avoidance of

2 litigating on the merits “was part of an unceasing worldwide strategy to extract a royalty”

3 from Defendant’s sales of Taltz. Id. at 1. Plaintiff argues that “[a]t the PGR institution

4 stage, the patent owner is not even required to file a preliminary response.” Opp’n at 8.

5 It does not appear that Plaintiff’s motivation in bringing this action was “to harass

6 or burden an opponent[.]” Checkpoint Sys., Inc., 858 F.3d at 1375. Those cases that courts

7 have found exceptional include “fil[ing] over fifty other lawsuits in the District Court to

8 exploit the high cost to defend complex litigation to extract nuisance value settlements

9 from various defendants.” Rothschild Connected Devices Innovations, LLC v. Guardian

10 Prot. Servs., Inc., 858 F.3d 1383, 1386 (Fed. Cir. 2017) (internal quotation marks and

11 citations omitted); see also Shipping & Transit, LLC v. Hall Enterprises, Inc., No. CV 16-

12 06535-AG-AFM, 2017 WL 3485782, at *7 (C.D. Cal. July 5, 2017) (granting attorneys’

13 fees where the plaintiff “repeatedly dismissed its own lawsuits to evade a ruling on the

14 merits and yet persists in filing new lawsuits advancing the same claims”). Although there

15 are multiple international actions between Plaintiff and Defendant, the Parties have

16 zealously litigated those foreign actions on the merits. In a 142-page judgment, the UK

17 judge stated the case concerning Plaintiff’s European counterpart to the ’654 patent was

18 “one of the most complex patent cases I have ever tried (and I have considerable experience

19 of trying complex patent cases).” Ex. Y at 639 (¶ 3). This observation does not imply a

20 series of nuisance cases, but instead suggests two juggernauts battling over the international

21 rights to this invention. It does not appear that Plaintiff has a pattern of filing baseless

22 lawsuits and then dismissing before litigating on the merits. While a pattern of repeatedly

23 dismissing could suggest Plaintiff was leveraging the high cost of litigation to extract a

24 royalty from Defendant, the Parties’ litigation history does not support this finding.

25 Although the Court does find it concerning that Plaintiff did not test the merits of its

26 infringement claims, it is not clear that it brought this action to harass Defendant.

27 Additionally, a substantive response from Plaintiff was not required until the Patent Owner

28 Response was due before the PTAB.

1 Next, Defendant points to contrary litigation positions Plaintiff took as early as May

2 2018—before the present action was filed—wherein Plaintiff argued that a patent’s

3 functional genus claims were invalid for lack of written description. Mot. at 16 n.6 (quoting

4 Brief for Defendant at 21-22, Baxalta Inc., 2018 WL 3742610, (May 15, 2018)). Plaintiff

5 concedes that Defendant “correctly notes [Plaintiff] was taking a defensive position on the

6 written description issue in other litigation.” Opp’n at 15 n.4 (citations omitted). Plaintiff

7 argues its “awareness of potential issue conflicts provides another good-faith reason for

8 [Plaintiff]’s decision to terminate this case.” Id.

9 Judicial estoppel “prevents a party from prevailing in one phase of a case on an

10 argument and then relying on a contradictory argument to prevail in another phase.”

11 Pegram v. Herdrich, 530 U.S. 211, 227 n.8 (2000). To find judicial estoppel, “a party’s

12 later position must be ‘clearly inconsistent’ with its earlier position.” New Hampshire v.

13 Maine, 532 U.S. 742, 750 (2001). In Baxalta, Plaintiff argued that “the patent lacks

14 sufficient written description to support the breadth of claim 1 under 35 U.S.C. § 112”

15 because the patent “fails to disclose a species representative of the structural breadth” and

16 “fails to disclose species representative in terms of diversity of functional effect.” 2018

17 WL 3742610, at *7–8. However, “[a] determination that a patent is invalid for failure to

18 meet the written description requirement of 35 U.S.C. § 112, ¶ 1 is a question of fact[.]”

19 Amgen Inc., 872 F.3d at 1379 (quoting Ariad, 598 F.3d at 1355). It is not clear that

20 Plaintiff’s position in this litigation would be “clearly inconsistent” with its arguments in

21 Baxalta, as the written description requirement is a fact-intensive inquiry specific to a

22 particular patent. Because the Court did not reach the merits of Plaintiff’s ’654 patent, it

23 is not clear how similar the ’654 patent is to the patent at issue in Baxalta. Therefore, the

24 Court does not find Plaintiff necessarily took contradictory positions in this litigation and

25 Baxalta.

26 Finally, Defendant argues that Plaintiff’s seeking of an adverse judgment against

27 itself in the PGR and the proceedings before this Court does not excuse Plaintiff’s bad faith

28 conduct. Id. at 19. Defendant contends Plaintiff seeking an adverse judgement was merely

1 result of Defendant “forcing [Plaintiff]’s hand” after Defendant incurred substantial

2 ||costs. Jd. Plaintiff pursued this action and participated in the PGR for twenty months

3 “before coming to an abrupt stop, without notice[.]” Jd. In response, Plaintiff contends it

4 ||“honored its duty to reassess its case and acted in good faith to withdraw from the

5 || proceedings and minimize litigation expenses for all involved.” Opp’n at 19.

6 The Court finds that staying the present action pending proceedings before the PTAB

7 || and moving to dismiss the case based on the findings of the PTAB was not, in light of the

8 ||record before this Court, unreasonable. See Pathway Innovations & Techs., Inc. v. IPEVO

9 || Inc., No. 17-CV-312-CAB-BLM, 2020 WL 1983485, at *2 (S.D. Cal. Apr. 24, 2020)

10 || (finding the plaintiff “agreeing to a stay while proceedings before the [United States

11 || International Trade Commission (“|ITC[”)] and PTAB were ongoing, and then dismissing

12 || the case based on the outcome of those proceedings—was not unreasonable”). Rather, the

13 || facts tend to indicate Plaintiff reevaluated its claims and rightfully moved to dismiss the

14 || case based on the PTAB’s institution decision, which the Court encourages when a party

15 || finds its litigation position is weakened.

16 While Plaintiff acted unreasonably in aspects of this litigation, most notably before

17 ||the USPTO during patent prosecution, the Court does not find these actions rise to an

18 || overall level of unreasonableness or bad faith such to warrant an exceptional case finding.

19 || Therefore, this factor weighs against an exceptional case finding.

20 CONCLUSION

21 Based on the foregoing, the Court concludes that under the totality of the

22 ||circumstances, Defendant has not shown that this case is exceptional such that an award of

23 |/attorneys’ fees is justified. The Court therefore DENIES Defendant’s Motion for

24 || Exceptional Case Finding and Attorneys’ Fees.

25 IT IS SO ORDERED.

26 ||Dated: March 23, 2021 . tt

27 pee Janis L. Sammartino

28 United States District Judge