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In re Gabapentin Patent Litigation

August 27, 2009


The opinion of the court was delivered by: Hon. Faith S. Hochberg, U.S.D.J.


MDL Docket No. 1384


This Filing Applies To: Purepac Defendants C.A. No. 00-CV-2931 (FSH) C.A. No. 00-CV-3522 (FSH)

HOCHBERG, District Judge

This matter comes before the Court upon Plaintiffs' (collectively, "Warner-Lambert") Motion to Strike Certain Affirmative Defenses and to Dismiss Certain Counterclaims of Purepac Defendants (Docket # 431), pursuant to Fed. R. Civ. P. 12(b) and 12(f).*fn1 The Court has considered the briefs of the parties, and oral argument held on April 22, 2009.

I. Background And Procedural Posture

A detailed account of the factual and procedural backdrop to this case is set forth in the Opinion issued by this Court today, deciding Plaintiffs' separate, though similar, Motion to Strike Certain Affirmative Defenses of the Teva, IVAX and Eon Defendants (the "Teva Opinion"). Background information concerning Warner-Lambert's gabapentin patents, Neurontin products and related Orange Book listings need not be reiterated in full for purposes of the instant motion, and is incorporated herein by reference.*fn2 To the extent that there are facts unique to Purepac and specifically relevant to the resolution of the present motion, they are set forth below.

Purepac was the first generic drug manufacturer to file ANDAs seeking FDA approval to market generic gabapentin products after the expiration of the '544 Patent (and its pediatric extension). Purepac filed two ANDAs: No. 75-370 for gabapentin capsules on March 30, 1998 and No. 75-694 for gabapentin tablets on September 3, 1999. When Purepac initially filed ANDAs, it submitted a Paragraph IV Certification concerning the '476 Patent and a section viii statement concerning the '479 Patent.

Relying on the Paragraph IV Certifications in these ANDAs, Warner-Lambert sued Purepac for infringement of the '476 and '479 Patents.*fn3 Purepac filed counterclaims alleging, in pertinent part, violation of the antitrust laws and unfair competition.*fn4 In a motion similar to that now pending before this Court, Warner-Lambert moved to dismiss Purepac's antitrust counterclaims. Warner-Lambert argued that Purepac lacked standing to bring a claim for antitrust injury and that its infringement actions were protected by the Noerr-Pennington doctrine and were therefore immune from antitrust liability. Judge Lifland denied Warner-Lambert's motion on December 22, 2000. Warner-Lambert Co. v. Purepac Pharm. Co., Nos. 98-2749, 99-5948, 00-2053, 2000 WL 34213890 (D.N.J. Dec. 22, 2000) (the "December 22 Opinion").*fn5

Judge Lifland ultimately granted summary judgment in Purepac's favor in May 2003. Warner-Lambert Co. v. Purepac Pharm. Co., et al., Nos. 98-2749, 99-5948, 2003 WL 21698310 (D.N.J. May 22, 2003) (the "May 22 Opinion").*fn6 As discussed in greater detail below, Purepac now alleges that the Tablet and Capsule Lawsuits were sham litigation pursued by Warner-Lambert purely for anticompetitive purposes.*fn7

Once the '482 Patent was issued and listed in the Orange Book, Purepac amended its ANDAs to include Paragraph IV Certifications concerning that patent. This second certification forms the basis for the current patent infringement litigation. Like the Teva, IVAX and Eon Defendants, Purepac launched its gabapentin capsules and tablets despite the pending litigation, first offering its gabapentin capsules for sale in October 2004, and its gabapentin tablets in December 2004.

Purepac filed an Answer to Plaintiffs' Amended Complaint on April 21, 2008. In addition to the affirmative defenses and counterclaims raised by its co-Defendants, Purepac has also requested declarations of unenforceability of the '482 Patent on grounds of patent misuse and unclean hands, and has raised counterclaims asserting (1) monopolization and attempted monopolization in violation of Section 2 of the Sherman Act and (2) common-law unfair competition.*fn8 Purepac bases these counterclaims on allegations that Warner-Lambert engaged in an "overall scheme to forestall, preclude, and delay generic competition" for Neurontin. Amended Answer and Amended and Supplemental Counterclaims ¶ 104, In re Gabapentin Patent Litig., No. 00-2931 (D.N.J. Apr. 21, 2008) ("Purepac Answer").

According to Purepac, Warner-Lambert perpetrated this scheme by: (1) intentionally withholding material prior art from the Patent Office during prosecution of the '482 Patent, resulting in a delayed issuance of the patent and ultimately allowing Warner-Lambert to obtain a successive 30-month stay of FDA approval for Purepac's products; (2) abusing FDA regulations by certifying that the '476 and '479 Patents covered the approved compounds in and uses of Neurontin, while knowing that such certifications were false; and (3) filing objectively baseless patent-infringement lawsuits asserting the '476 and '479 Patents against Purepac.Purepac alleges that Warner-Lambert's objective was to obtain more market exclusivity for Neurontin than the patent laws and regulatory system allow.

On June 16, 2008, Warner-Lambert moved to strike Purepac's unclean hands and patent misuse defenses and moved to dismiss Purepac's counterclaims for declaratory relief, monopolization, attempted monopolization and unfair competition, claiming that they are not viable as a matter of law.

II. Standard of Review

Warner-Lambert moves to strike certain of Purepac's affirmative defenses pursuant to Fed. R. Civ. P. 12(f) and moves to dismiss certain of Purepac's counterclaims pursuant to Fed. R. Civ. P. 12(b)(6). As discussed in the Teva Opinion, Fed. R. Civ. P. 12(f), which allows the Court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter," offers the primary opportunity for plaintiffs to object to affirmative defenses. An affirmative defense is insufficient as a matter of law if it cannot succeed under any circumstances. Eisai Co., Ltd. v. Teva Pharm. USA, Inc., 557 F. Supp. 2d 490, 493 (D.N.J. 2008) (citing In re Sunrise Sec. Litig., 818 F. Supp. 830, 840 (E.D. Pa. 1993)).

As also discussed in the Teva Opinion, striking an affirmative defense "is a drastic remedy, to be resorted to only when required for the purposes of justice." North Penn Transfer, Inc. v. Victaulic Co. of America, 859 F. Supp. 154, 158 (E.D. Pa. 1994). Courts have, however, "recognized that such motions may serve to hasten resolution of cases by eliminating the need for discovery which in turn saves time and litigation expenses." Resolution Trust Corp. v. Moskowitz, No. 93-2080, 1994 WL 229812, at *13 (D.N.J. May 24, 1994). Motions to strike will, therefore, be granted "when a defense is legally insufficient under any set of facts which may be inferred from the allegations of the pleading." Glenside West Corp. v. Exxon Co. U.S.A., 761 F. Supp. 1100, 1115 (D.N.J. 1991).

To survive a motion to dismiss filed under Rule 12(b)(6), "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true," even if doubtful in fact. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007) ("Twombly"). According to the Third Circuit, "stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest the required element. This does not impose a probability requirement at the pleading stage, but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (internal quotations omitted) (citing Twombly, 550 U.S. at 555-56). The same standards are applied to a court's analysis of the sufficiency of counterclaims. See e.g., Organon Inc. v. Mylan Pharm., 293 F. Supp. 2d 453, 456-57 (D.N.J. 2003) ("Organon").

Although a court does not need to credit "bald assertions" or "legal conclusions," it must view all of the allegations in the counterclaim as well as all reasonable inferences that can be drawn therefrom in the light most favorable to the counterclaimant. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (citing Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989)); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir. 1997).*fn9 The Supreme Court recently held that "once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 546.*fn10

Antitrust complaints, in particular, are to be liberally construed at this stage of the proceeding. See In re Hypodermic Prods. Antitrust Litig., MDL No. 1730, 2007 WL 1959224, at *5 (D.N.J. June 29, 2007) (citing Commonwealth of Pa. ex rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 179 (3d Cir. 1988)). "[I]n antitrust cases, where 'the proof is largely in the hands of the alleged conspirators,' dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746 (1976) (quoting Poller v. Colombia Broad., 368 U.S. 464, 473 (1962)). "The liberal approach to the consideration of antitrust complaints is important because inherent in such an action is the fact that all details and specific facts relied upon cannot properly be set forth as part of the pleadings." Lucas Indus., Inc. v. Kendiesel, Inc., No. 93-4480, 1995 WL 350050, at *3 (D.N.J. June 9, 1995). Nevertheless, courts have determined that "the heavy costs of modern federal litigation, especially antitrust litigation, and the mounting caseload pressure on the federal courts, militate in favor of requiring some reasonable particularity in pleading violations of the federal antitrust laws." Garshman v. Universal Res. Holding, Inc., 641 F. Supp. 1359, 1367 (D.N.J. 1986) (internal quotations and citations omitted).

III. Discussion

The instant motion raises issues of both patent and antitrust law. For the sake of clarity, the Court will address the patent issues first and then turn to the antitrust issues separately.

A. Purepac's Unclean Hands And Patent Misuse Affirmative Defenses

Purepac has asserted affirmative defenses of unclean hands and patent misuse on the same facts relied upon by its co-Defendants. Warner-Lambert has, as a result, raised arguments in support of its motion to strike those defenses that are virtually identical to those asserted against Teva, IVAX and Eon. Warner-Lambert again argues that there is no connection between its alleged off-label marketing misconduct and its current efforts to enforce the '482 Patent, and again stresses that Purepac has asserted nothing more than a shift in the 17-year patent term, which does not constitute an actionable temporal expansion of the patent. For the reasons set forth by this Court in the Teva Opinion, Warner-Lambert's motion to strike Purepac's affirmative defense of unclean hands is granted and its motion to strike Purepac's affirmative defense of patent misuse is denied.

B. Purepac's Counterclaims For Declaratory Judgment Of Unenforceability

Purepac, unlike its co-Defendants, has also requested affirmative relief on the basis of unclean hands and patent misuse, by seeking a declaration that the '482 Patent is unenforceable on either, or both, of those grounds. Warner-Lambert has moved to dismiss these counterclaims, arguing that neither allegations of unclean hands nor allegations of patent misuse can form the basis for affirmative relief. This motion will be granted in part and denied in part.

First, the Court notes that because Purepac's affirmative defense of unclean hands has been stricken, Purepac's claim for declaratory relief on the basis of unclean hands necessarily fails as well. See Reid-Ashman Mfg, Inc. v. Swanson Semiconductor Serv., L.L.C., No. 06-4693, 2007 WL 1394427, at *8 (N.D. Cal. May 10, 2007) (dismissing a declaratory relief counterclaim "to the extent that the affirmative defenses on which it is based fail," because "if any affirmative defense is stricken, then the counterclaim cannot state a claim based on that defense.") (citing Advanced Cardiovascular Sys., Inc. v. Medtronic, Inc., No. 96-0942, 1996 WL 467273, at *6 (N.D. Cal. July 24, 1996)); Precimed S.A. v. Orthogenesis, Inc., No. 04-1842, 2005 WL 991277, at *2 (E.D. Pa. Apr. 25, 2005) (dismissing a counterclaim because defendant incorporated all affirmative defenses, which were then stricken, into such counterclaim and provided no other factual allegations upon which the counterclaim might be based). Counsel for Purepac conceded as much during oral argument before this Court on April 22, 2009. Transcript of Motion Hearing at 74-75, In re Gabapentin Patent Litig., No. 00-2931 (FSH) (Apr. 22, 2009) ("April 22 Transcript").

Moreover, Warner-Lambert has correctly argued that, as a matter of law, unclean hands cannot form the basis for a declaration of unenforceability of a patent. Aptix Corp. v. Quickturn Design Sys., Inc., a case upon which Plaintiffs rely, establishes that a patent cannot be invalidated by the patentee's unclean hands. 269 F.3d 1369, 1378 (Fed. Cir. 2001) ("Nor does the doctrine of unclean hands provide a suitable basis for the trial court's judgment, as this equitable doctrine is not a source of power to punish. In declaring the '069 patent unenforceable based solely on misconduct during litigation, the trial court clearly exceeded the bounds of Keystone I and the doctrine of unclean hands.").

The Aptix Court found substantial evidence of litigation misconduct, which supported the district court's finding of unclean hands and thereby barred the plaintiff patentee from suing to enforce the patent in question. However, the court also held that "[t]he doctrine of unclean hands does not reach out to extinguish a property right based on misconduct during litigation to enforce the right." Id. at 1375. While misconduct will prevent a litigant from suing in a particular instance, "[t]he property right itself remains independent of the conduct of the litigant." Id. The Aptix Court concluded, therefore, that the patent should not be declared completely invalid or unenforceable due to the patentee's unclean hands.*fn11

Purepac's counterclaim for declaratory relief on the basis of patent misuse, however, survives. As noted in the Teva Opinion, successfully pleading a patent misuse defense at this stage of the litigation requires only allegations of conduct that had the effect of impermissibly extending the limited protection from competition afforded by the '482 Patent. Purepac, like its co-Defendants, has made such allegations. Furthermore, courts have found patent misuse, unlike unclean hands, to be a proper basis for declaratory relief. See Glitsch, Inc. v. Koch Eng'g Co., 216 F.3d 1382, 1386 (Fed. Cir. 2000) (noting that the Supreme Court has made "clear that a party that did not raise the issue of patent misuse in one action may raise that issue in another action based on a separate assertion of infringement, whether as a defense against the claim of infringement or in a request for declaratory relief."); Linzer Products Corp. v. Sekar, 499 F. Supp. 2d 540, 552-53 (S.D.N.Y. 2007) (observing that "Braun did not proscribe claims seeking a declaratory judgment of patent misuse. Indeed, in later actions, the Federal Circuit has allowed such claims without comment."); see also Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1362 (Fed. Cir. 2001); Competitive Techs., Inc. v. Fujitsu Ltd., 374 F.3d 1098, 1101 (Fed. Cir. 2004); Marchon Eyewear, Inc. v. Tura LP, No. 98-1932, 2002 WL 31253199, at *9 (E.D.N.Y. Sept. 30, 2002).

Indeed, the Aptix Court indicated this conclusion, noting that "[i]nequitable conduct in the process of procuring a patent taints the property right itself. ... Upon a showing of inequitable conduct during acquisition of the patent, courts declare the patent unenforceable because the property right is tainted ab initio." Aptix Corp., 269 F.3d at 1376. Because Purepac's allegations of patent misuse rest on Warner-Lambert's allegedly inequitable conduct during the prosecution and procurement of the '482 Patent, if Purepac ultimately ...

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