REMICADE® Cell Powder Trial Postponed While Court Addresses Standing and BPCIA Remedies

by Fish & Richardson
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A jury trial originally scheduled for February 13, 2017 in the District of Massachusetts (Janssen v. Celltrion, C.A. No. 1:15-cv-10698) has been postponed while the parties address standing and damages.  Judge Wolf has set a briefing schedule on standing extending through March 22nd, therefore a new trial date is unlikely to be set before late March 2017.  At issue in this case is U.S. Patent No. 7,598,083 (“the ‘083 patent”), which is alleged to cover a cell media powder used by Celltrion during production of its REMICADE® biosimilar, INFLECTRA®.  Below, we summarize the key issues that the court faces in advance of setting a new trial date, and the court’s recent rulings that affect future BPCIA participants.

Can the case be dismissed for lack of standing?

Celltrion claims that “Janssen is scrambling” because it cannot establish standing to sue.  First, Celltrion claims that Janssen omitted a named inventor who still held ownership rights when Janssen filed suit in March 2015.  According to Celltrion, the inventor had agreed to assign his patent rights in the future but no rights vested at the time the complaint was filed.  Janssen argues that this can be cured by joining the inventor as a plaintiff now, but in a Motion to Dismiss filed last week, Celltrion maintains that joinder would not relate back in time to the initial complaint.  The court found questions surrounding Janssen’s standing serious enough to postpone trial, and to consider reopening discovery. (Mem. Ord. dated 2/24/17).

Celltrion also raises standing issues with respect to four other named inventors, who did assign their rights before the 2015 complaint but who many not have assigned their rights solely to Janssen.  The parties dispute whether the assignments gave rights to a “family of companies”—which would require all of the companies to be part of the suit—or whether the assignment only gave patent rights to Janssen’s predecessor. (Dkt. 508 at 6-7).  Janssen has taken the position that interpreting the assignments to give rights to multiple companies would be “absurd,” since Janssen would face a potentially insurmountable burden of joining over 250 Johnson & Johnson subsidiaries, including some that have been divested since the assignments were executed. (Dkt. 445 at 7-8).  This indicates that, if Janssen’s loses on its interpretation of the assignments, it may have difficulty joining all necessary parties, and thus may be unable to maintain suit or refile.

Will dismissal for lack of standing bar certain remedies?

The issue of standing is important for the case to proceed, and it bears on how the court will interpret provisions of the Biologics Price Competition and Incentive Act (“BPCIA”), which set forth a 30-day window at 42 U.S.C. § 262(l)(6)(A) for filing a complaint.  Celltrion alleged that dismissal of the current suit would place Janssen outside the statutory 30-day window under the BPCIA.  According to Celltrion, dismissal could thus bar an award of lost profits and injunctive relief under 35 U.S.C. § 271(e)(6)(B), which states that if a suit is brought later than 30 days or dismissed without prejudice, then “the sole and exclusive remedy” is a reasonable royalty.  Janssen countered that the 30-day clock never began ticking, since Celltrion did not properly participate in the BPCIA process.

On March 2, the court made key rulings that align with Janssen’s position—i.e., that the 30-day clock was never triggered.  The court clarified that it is only the list of patents that emerge from the properly completed BPCIA process “that are potentially subject to the reasonable royalty damages limitation.” (Dkt. 518 at 7-8).  Agreeing with Janssen, the court explained that the six patents originally subject to litigation in the case did not arise from a properly completed statutory process because Celltrion did not engage is the good-faith negotiations required by the BPCIA.  Specifically, Celltrion had agreed that all patents listed by Janssen would be subject to the first wave of BPCIA litigation without completing the negotiation steps outlined at 42 U.S.C. § 262(l)(4)(A) and (5).  Thus, according to the court, 35 U.S.C. §271(e)(6) will not limit Janssen’s damages to a reasonable royalty for any proven infringement of the ‘083 Patent.  The court’s ruling will have implications for other parties who wish to short circuit the BPCIA’s “patent dance.”

Based on the court’s recent order, the standing issue may have less significance because Janssen could potentially cure the standing defect and continue to seek lost profits and an injunction without running afoul of 35 U.S.C. § 271(e)(6)(B).  Janssen would still, however, need to convince the court to adopt its interpretation of the assignments (i.e., that the assignments only gave rights to Janssen’s predecessor, not a “family of companies”), given the difficulties Janssen may face in joining all Johnson & Johnson subsidiaries existing at the time of the assignments. (Dkt. 445 at 7-8).

How are remedies impacted when a biosimilar manufacturer switches to production overseas?

Monetary Compensation

While the court continues to entertain briefing on the standing, the parties requested further guidance on remedies. (Mem. Ord. dated 2/24/17).  Even if the court finds that Janssen is able to seek lost profits as a matter of law under the BPCIA and § 271, Celltrion argued that Janssen would not be entitled to these based on its “entirely extraterritorial use” of the asserted media powder, with manufacturing of INFLECTRA® currently taking place in South Korea using cell media sourced from HyClone’s Singapore facility. (Dkt. 441 at 8 and 10).  Janssen responded with a series of arguments for why the damages it seeks have sufficient territorial connection to U.S. patent laws.

Yesterday, the court clarified that lost profits could be available for media powder manufactured in the U.S., even if media was made, cells were cultured, and the drug was obtained outside the U.S.  While the presumption against the extraterritorial application of U.S. patent laws prevented a patentee from recovering damages measured by its foreign sales in Power Integrations v. Fairchild Semiconductor, 711 F.3d 1348 (Fed. Cir. 2013), the instant facts are distinct because the resulting sale of the damages-measuring product—INFLECTRA®—also occurred in the U.S.  Thus, the presumption against extraterritoriality would not overcome the principle of full compensation, and “the usual ‘but-for’ causation test would apply.” (Dkt. 518 at 2-3).

The court also addressed the fact that REMICADE® itself is now no longer patented, U.S. Patent No. 6,284,471 having been held invalid in August 2016.  The court explained that if an infringer could only have captured a patentee’s sales by using an infringing powder, then the patentee may still recover damages in the form of lost profits, even if the product itself (i.e., REMICADE®) was unpatented, and sales were lost to the infringer’s non-infringing product (i.e., INFLECTRA®). (Dkt. 518 at 3).

Injunctive Relief

The parties also dispute the availability and scope of injunctive relief in this case.  Central to this issue is whether there is a sufficient nexus between the infringing media powder sourced in the U.S. and the final biosimilar product.

In addition to the above issues, before a trial commences, the court will likely need to address the numerous other outstanding issues briefed in motions in limine and Daubert motions, including the admissibility of core evidence needed to prove Janssen’s doctrine of equivalents case, its only infringement theory.  We will continue to monitor this case and report on developments.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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