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BAYER AG v. SCHEIN PHARMACEUTICAL

February 9, 2001

BAYER AG AND BAYER CORP., PLAINTIFFS,
v.
SCHEIN PHARMACEUTICAL, INC., DANBURY PHARMACAL, INC., AND REDDY-CHEMINOR, INC. DEFENDANTS/COUNTER-CLAIMANTS.



The opinion of the court was delivered by: Brown, District Judge

OPINION

This matter comes before the Court upon the motion for summary judgment of defendants/counter-claimants Schein Pharmaceutical, Inc., Danbury Pharmacal, Inc. and Reddy-Cheminor, Inc. (collectively "Schein"), the cross-motion for summary judgment of plaintiffs Bayer AG and Bayer Corporation (collectively "Bayer"), and upon Bayer's motion to strike certain arguments raised in Schein's reply brief in the two related actions Bayer AG v. Schein Pharmaceutical, Inc., 99-2181 and Bayer AG v. Schein Pharmaceutical, Inc., 99-5093; and upon the motion for summary judgment of Mylan Pharmaceuticals Inc. and Mylan Laboratories Inc. ("Mylan") and the cross-motion for summary judgment of Bayer in Bayer AG v. Mylan Pharmaceuticals Inc., 99-4659. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1338(a). For the reasons discussed below, Schein and Mylan's motions for summary judgment are denied, Bayer's motion to strike certain arguments raised in Schein's reply brief is granted in part and denied in part, and Bayer's cross-motions for summary judgment are granted.
I. PROCEDURAL HISTORY
Schein and Mylan filed Abbreviated New Drug Applications ("ANDAs") with the United States Food and Drug Administration ("FDA") pursuant to 21 U.S.C. § 355(j) seeking approval to market generic drug products containing the antibiotic ciprofloxacin. Bayer alleges in its three complaints that the ANDAs infringe Bayer's United States Patent 4,670,444 (the "`444 patent") under 35 U.S.C. § 271(e)(2), which provides that it is an act of infringement to file certain applications with the FDA seeking approval to market drugs claimed in a patent. The defendants counter that the `444 patent is invalid, but otherwise concede that if the patent is not invalid, the marketing of generic products containing ciprofloxacin would infringe the `444 patent. Pursuant to 21 U.S.C. § 355(j)(5)(B)(iii), Bayer's initiation of these actions has stayed the ANDAs pending before the FDA.
Schein argues in its motion for summary judgment that the `444 patent is invalid under 35 U.S.C. § 102(d) because Bayer filed a foreign patent application claiming ciprofloxacin more than twelve months before it filed its United States patent application claiming the same drug and the foreign patent issued before Bayer filed its United States application. Schein further argues that Bayer cannot rely on the filing date of the earlier United States Application No. 292,560 (the "`560 application") pursuant to 35 U.S.C. § 120 because the `560 application does not satisfy the "best mode" requirement of 35 U.S.C. § 112, ¶ 1. Bayer argues in opposition and in support if its cross-motion that the `444 patent is not invalid because it can rely on the earlier filing date of the `560 application pursuant to 35 U.S.C. § 120 and that application satisfies the best mode requirement of 35 U.S.C. § 112, ¶ 1. Bayer also raises three alternative arguments. First, it claims that if the `560 application violates § 112's best mode requirements, then so does the foreign application relied upon by Schein in its § 102(d) argument, thus disqualifying that foreign application as a § 102(d) bar as a matter of law. Second, Bayer argues in the alternative that Schein's § 102(d) defense fails as a matter of law because Bayer is entitled to rely on an earlier filed German patent application pursuant to 35 U.S.C. § 119 and 120. Finally, Bayer argues that Schein cannot rely upon a foreign South African patent as a § 102(d) bar because Bayer did not have the right to enforce that patent under South African law until after it filed the relevant United States counterpart application. Mylan raises substantially the same arguments in support of its motion for summary judgment as Schein raised, but Mylan relies on three additional foreign patent applications filed in Chile, Spain and Argentina in support of its § 102(d) arguments.
Two days after the parties submitted their motion package in accordance with Appendix N of the local rules of civil procedure, the United States Court of Appeals for the Federal Circuit decided Eli Lilly and Co. v. Barr Laboratories, Inc., 222 F.3d 973 (Fed. Cir. 2000). For obvious reasons, the Court instructed the parties to submit supplemental briefing on Lilly's impact on the best mode issues presently pending before the Court. The parties submitted additional briefing on the Lilly decision and the Court thereafter heard the arguments of counsel.*fn1
Before hearing the arguments of counsel, the Court asked the parties why these three actions should not be consolidated for all purposes pursuant to Fed.R.Civ.P. 42(a). All counsel agreed to consolidation, and the Court entered an order consolidating Bayer AG v. Schein Pharmaceutical, Inc., 99-2181, Bayer AG v. Schein Pharmaceutical, Inc., 99-5093, and Bayer AG v. Mylan Pharmaceuticals Inc., 99-4659 under lead docket number 99-2181.
After the Court heard the arguments of counsel and while the matter was under consideration, the Court received from counsel for Mylan and counsel for Bayer a series of correspondence addressing Mylan's voluntarily withdrawal of certain of its counterclaims. By letter dated January 23, 2001, the Court received from Bayer's counsel a Joint Stipulation and Order of Dismissal dismissing with prejudice Counts I, II, III, that portion of Count IV relating to unenforceability, and Count V of Mylan's counterclaims. The Court signed and entered the Joint Stipulation and Order on January 24, 2001.
II. BACKGROUND

The compound at issue here that is the subject of the defendants' ANDAs and covered by Bayer's `444 patent is known as ciprofloxacin.*fn2 Ciprofloxacin is a powerful antibiotic that can be administered orally and is effective against a broad range of bacteria. Thus, the drug is widely prescribed and used. The ciprofloxacin molecule as disclosed in the `444 patent is illustrated as follows:

Between the mid-1970's and 1980, a group of Bayer scientists, including Dr. Klaus Grohe, were involved in a project whose purpose was to synthesize derivatives of known antibacterial agents and develop broad spectrum antibiotics. During the course of this research, Dr. Grohe and his colleagues discovered that certain molecules that had a cyclopropyl group at the 1-position had particularly potent antibacterial properties.
On September 13, 1980, Bayer filed a German patent application P 30 33 157.8 naming Drs. Grohe, Zeiler and Metzger as inventors. The defendants claim that the first German application's claims were broad enough to cover generically certain compounds within the naphthyridine and quinolone classes of compounds, but that the application contained only examples of naphthyridines. Bayer, on the other hand, states that the disclosures of the application were broad enough to include both naphthyridine and quinolene compounds generally but each claim indicated that the claimed compound is a naphthyridine.
In December 1980, Dr. Grohe experimented with methods to create intermediate materials needed to synthesize ciprofloxacin. Dr. Grohe used his previously published cycloaracylation method in an attempt to make 6-fluoroquinolonic acid ("6-FQA"), the intermediate compound that when combined with piperazine yields ciprofloxacin. Schein claims that Dr. Grohe first experimented with 5-nitrobenzoyl halide as a starting compound, but failed to achieve the desired result, and then attempted to synthesize 6-FQA using 6-nitrobenzoyl halide as a starting material, which also proved unsuccessful. Schein claims that in early 1981 Dr. Grohe again attempted to make 6-FQA and ciprofloxacin using the cycloaracylation method, but this time used 5-fluorobenzoyl halide as the cycloaracylation starting compound. Bayer, on the other hand, claims that Dr. Grohe planned from the outset to use the cycloaracylation method with a 5-fluoro starting compound. According to Bayer, Dr. Grohe learned from a process known as retrosynthesis that he should begin the process of making 6-FQA with a starting compound that had a fluorine atom in the 5-position. Dr. Grohe did not have such a compound available to him. He, therefore, attempted to make 6-FQA using a nitro starting compound that was available in his lab, but this starting material did not have a fluorine atom in the 5-position. Dr. Grohe's efforts yielded a starting material, but not the 6-FQA he needed, that is 6-FQA with a fluorine atom in the 5-position. The nitro starting material that Dr. Grohe first used is illustrated as follows:
To make 6-FQA, Dr. Grohe tried to substitute a fluorine group for the nitro group in his intermediate compound using a procedure known as the Balz-Schiemann reaction, but was not successful. Dr. Grohe then asked another Bayer chemist, Dr. Klauke, to provide him with a starting compound that had a fluorine atom in the 5-position and leaving groups in the 2- and 4-positions. The starting material that Dr. Grohe requested from Dr. Klauke is illustrated as follows:

Pursuant to Dr. Grohe's request, Dr. Klauke synthesized 2,4-dichloro-5-fluorobenzoyl chloride (the "Klauke compound"). The Klauke compound is illustrated as follows:

Using the Klauke compound, Dr. Grohe synthesized 6-FQA using the cycloaracylation method, which, when combined with piperazine, yielded ciprofloxacin. Graphically, the synthesis of ciprofloxacin is as follows:
On August 13, 1981, Bayer filed the `560 application in the United States, which was the foreign counterpart to its first German application. The most significant difference between the first German application and the `560 application was that Bayer included ciprofloxacin as an example in the `560 application, although it claims that the structure of ciprofloxacin was within the generic description in the first German application.
On July 17, 1981, Dr. Grohe wrote to Dr. Simon, who was Bayer's in-house patent agent, to inform Simon that the Roger-Bellon method of synthesizing the disclosed antibiotics described in the first German application could not be used to synthesize ciprofloxacin. Bayer claims that this communication was the result of Simon asking Grohe to confirm that the manufacture and use of ciprofloxacin would not infringe the patent rights of others. To that end, according to Bayer, Dr. Simon asked Dr. Grohe to confirm that ciprofloxacin could not be made using the known Gould-Jacobs and Roger-Bellon methods as of the dates of the prior art references. The parties dispute whether Bayer failed to disclose in the `560 application a method of synthesizing ciprofloxacin. According to Bayer, the `560 application disclosed the combination of a class of compounds that included 6-FQA with piperazine, which, according to Bayer is an operable method of making ciprofloxacin.
According to Schein, the `560 application disclosed only the Roger-Bellon method of synthesis, which cannot be used to make 6-FQA and ciprofloxacin. Bayer, however, argues that the cycloaracylation and Roger-Bellon methods are not used to make ciprofloxacin at all. Rather, those methods are used to make the intermediate compound necessary to make ciprofloxacin — 6-FQA — which Dr. Grohe disclosed in the`560 application. Bayer further argues that the cycloaracylation method of making 6-FQA and the requisite starting material was known in the prior art.
In addition to filing patent applications in Germany and the United States, Bayer also filed related applications in Chile on August 12, 1981, in Spain on September 2, 1981, in Argentina on September 3, 1981 and in South Africa on September 2, 1981. The Chilean patent issued on May 7, 1982; the Spanish patent issued on April 29, 1982; the Argentine patent issued on September 2, 1982; and the South African patent issued on August 25, 1982, however, Bayer argues that while the South African patent issued on August 25, 1982, its rights were not "fixed and determined" under South African law and the patent was thus unenforceable until May 25, 1983.
On October 29, 1981, Bayer filed a second German application in which it described the synthesis of ciprofloxacin using the cycloaracylation method using the Klauke compound as a starting material. On October 22, 1982, Bayer filed a United States counterpart to the second German application, United States Application No. 636,112 (the "`112 application"). On May 24, 1984, Bayer filed United States Application No. 614,923 (the "`923 application") as a continuation-in-part of the `560 and `112 applications. The `923 application issued as the `444 patent on June 2, 1987.
In or about 1992, Bayer brought an infringement action on the `444 patent against another generic drug manufacturer, Barr Laboratories Inc. ("Barr"), alleging that Barr's ANDA seeking FDA approval to market generic products containing ciprofloxacin was an act of infringement. See Bayer AG v. Barr Laboratories Inc., 92-0381 (WK), 39 U.S.P.Q.2d 1862, 1863, 1996 WL 304544 (S.D.N Y June 5, 1996). In that case, the parties each moved for partial summary judgment, Barr seeking to sustain its invalidity defense asserted pursuant to 35 U.S.C. § 102(d), and Bayer seeking to strike that defense arguing that 35 U.S.C. § 119 entitled it to rely on a foreign filing date. See id. The court denied both parties' motions and in doing so rejected Bayer's § 119 argument and found that fact issues precluded summary judgment on Barr's § 102(d) defense. See id. In or about January 1997, the parties to that action entered into a consent judgment. See Appendix of Exhibits in Support of Bayer's Memorandum in Opposition to Mylan's Motion for Summary Judgment and in Support of Bayer's Cross-Motion for Summary Judgment at Exh. D. According to the express terms of the consent judgment, the parties agreed that the `444 patent "is valid and enforceable as to Barr Laboratories, Inc. in all respects." Id. The judgment further provided that judgment is entered in favor of the plaintiffs, Bayer, and that all claims and counter-claims are dismissed. Id.
On July 25, 1997, Bayer filed a request for reexamination of the `444 patent with the United States Patent and Trademark Office ("PTO"). In connection with its request for reexamination, Bayer submitted to the PTO certain litigation papers from the Bayer AG v. Barr Laboratories Inc. action, including documents related to Barr's invalidity defense asserted under 35 U.S.C. § 102(d). On February 9, 1999, the PTO issued a Reexamination Certificate essentially affirming the validity of the `444 patent. See Declaration of Elizabeth A. Leff, Esquire at Exhibit A-1. III. DISCUSSION

The Court will first set forth the applicable standards it is applying to the instant motions, and then address Bayer's motion to strike portions of Schein's reply brief before turning to the substantive issues raised with respect to the defendants' § 102(d) claim of invalidity.

A. Summary Judgment Standard in Patent Cases
A party seeking summary judgment must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996).
In deciding whether there is a disputed issue of material fact, the Court must view the underlying facts and draw all reasonable inferences in favor of the non-moving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995). The threshold inquiry is whether there are "any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) ...

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