Transfer denied.
All Justices concur.
olpadronate into ibandronate and the strategies employed in the prior art research overshadow the similarities. The chief difference is the relative location on the molecule: the prior art varied the length of the single alkyl chain that connected directly to the PCP core, whereas transforming olpadronate into ibandronate involves lengthening one of two alkyl chains that connect to the nitrogen atom, but not to the PCP core. Olpadronate and ibandronate have two carbon atoms that connect in series to the PCP core, which then connect to the nitrogen atom. The nitrogen atom then connects to two alkyl groups. It is by lengthening one of these two alkyl chains on the outside of the nitrogen atom that olpadronate becomes ibandronate. The prior art strategies are not the same strategy that transformed olpadronate into ibandronate.
Moreover, the prior art optimization research varied the length of a single alkyl chain. Olpadronate and ibandronate have two alkyl groups on the outside of the nitrogen atom. How is the skilled artisan to apply a single-chain technique to a double-chain situation? Cobalt did not deal with this issue at all. While this Court has no expertise in pharmaceutical chemistry, it would appear that having two alkyl chains raises new questions: should the chains be symmetrical or asymmetrical, for instance? It is difficult to see, on this record, how this does not require innovation.
Furthermore, having two alkyl chains substantially increases the number of potential configurations. Cobalt has not even attempted to suggest that the skilled artisan would have had some reason to select the methyl/pentyl configuration that characterizes ibandronate.
In KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398, 421 (2007), the Supreme Court stated the basic principles of the relevant obviousness inquiry:
When there is a design need or market pressure to solve a problem and there are a finite number of identified, predictable solutions, a person of ordinary skill has good reason to pursue the known options within his or her technical grasp. If this
leads to the anticipated success, it is likely the product not of innovation but of ordinary skill and common sense.
Cobalt's obviousness argument depends on the proposition that the investigative strategy of varying the length of olpadronate's exterior alkyl chains was one of a finite number of identified, predictable solutions. On this record, this Court finds scant evidence that suggests this to be the case. Cobalt's evidence suggests that, if anything was a recognized solution, it was the strategy of varying the single alkyl chain that connected directly to the PCP core. The technique of varying the two alkyl chains that connected only to the nitrogen atom, and not to the PCP core, appears on this record to have been novel. An artisan who applied the investigative strategy suggested by Cobalt's prior art research would have modified olpadronate by lengthening the single alkyl chain between the PCP core and the nitrogen atom. Such a strategy would not have produced ibandronate. Applying KSR, the applicant's use of the strategy of lengthening one of the two alkyl chains connected to the nitrogen atom and not directly connected to the PCP core appears to be innovation — not the application of ordinary skill and common sense.
At the hearing, the experts referred to this alkyl chain as the "spacer" or the "lozenge." (See, e.g., 11/1/10 Hrg. Tr. 98:16.)
Dr. McKenna pointed this out: had the skilled artisan followed the strategy suggested by Dr. Rosini's research, the molecule would have been modified by lengthening the "spacer." (11/1/10 Hrg. Tr. 99:18-25.)
This conclusion finds support in Dr. Rosini's testimony that neither Boonekamp, who disclosed the superior potency of olpadronate in 1985, nor anyone on his research team, ever attempted to explore homologation of this compound. (Rosini Dep. Tr. 185:12-17.) If it would have been common sense to the skilled artisan in 1986 to optimize olpadronate by varying the length of the alkyl chains in 1986, why didn't Boonekamp's team do so?
Furthermore, since the Schmidt-Dunker `432 patent disclosed olpadronate in 1976, one might wonder why no one had thought to modify olpadronate earlier. Cobalt explains that the 1976 Schmidt-Dunker patent disclosed olpadronate, but that olpadronate's value in inhibiting bone resorption was not recognized until Bijvoet's work in 1985. (Cobalt Opp. Br. 19.)
Roche contends that Cobalt's argument must be considered in light of the lead compound inquiry most recently set forth by the Federal Circuit in Daiichi Sankyo Co., Ltd. v. Matrix Labs., Ltd., 619 F.3d 1346 (Fed. Cir. 2010). In Daiichi, the Federal Circuit stated:
When a patent claims a chemical compound, a prima facie case of obviousness under the third Graham factor frequently turns on the structural similarities and differences between the compounds claimed and those in the prior art. Proof of obviousness based on structural similarity requires clear and convincing evidence that a medicinal chemist of ordinary skill would have been motivated to select and then to modify a prior art compound (e.g., a lead compound) to arrive at a claimed compound with a reasonable expectation that the new compound would have similar or improved properties compared with the old.
Id. Roche observes that, in the instant case, like in
Daiichi, Cobalt advances an argument based on the structural similarity between the claimed compound (ibandronate) and a prior art compound (olpadronate). Applying this analysis leads to two principal questions: 1) would the skilled artisan have been motivated to select olpadronate as the lead compound; and 2) would the skilled artisan have had a reasonable expectation that the new compound would have had similar or improved properties compared with the old? On this record, Cobalt has not persuaded that either question should be answered in the affirmative.
As to the first question, as Roche observes, two important pieces of evidence undercut Cobalt's lead compound case. First, Dr. Rosini testified that, in 1986, he believed alendronate to be the strongest compound in the literature for inhibiting bone resorption. (Rosini Dep. Tr. 149:2-8.) Thus, Dr. Rosini testified that he did not attempt to work with olpadronate until 1991. (11/1/10 Hrg. Tr. 241:17-21.) Furthermore, Dr. Rosini testified that, even though he was aware of olpadronate from Boonekamp's 1985 work at the time, he chose to do his research during that time period on alendronate. (Rosini Dep. Tr. 174:5-23.) This evidence raises serious questions about the assertion that the skilled artisan would have been motivated to select olpadronate as the lead compound in 1986.
Moreover, Dr. Rosini testified that it was not until "years later" that he considered substituting the amino group with alkyl groups. (Rosini Dep. Tr. 173:18-22.)
It is on the second question that Cobalt's obviousness case really breaks down: the evidence that the skilled artisan would have had a reasonable expectation that ibandronate would have had similar or superior properties to olpadronate. Cobalt's theory is that the skilled artisan would have had a reasonable expectation that varying alkyl chain length would have led to results that conformed to a Hansch curve. Even if true, that means that the skilled artisan would have expected only that the effectiveness of ibandronate would fall somewhere on that curve — and that somewhere could just have easily been under the effectiveness of olpadronate as equal to it or superior. Thus, the Hansch curve theory actually backfires for Cobalt, since it makes clear that the skilled artisan would have had no expectation of where ibandronate would fall on the curve. The Hansch curve theory makes clear that, in 1986, the skilled artisan would not have had any particular expectation for the performance of ibandronate relative to that of olpadronate. Absent evidence that a skilled artisan would have had a reasonable expectation that ibandronate would have had similar or improved properties compared with the prior art olpadronate, Cobalt cannot prove obviousness with this theory.
Cobalt's expert Dr. Newton summarized the theory as follows: "As you homologate, so you get an increase in activity up to maximum and then a decrease again." (11/1/10 Hrg. Tr. 185:3-5.) The skilled artisan homologating olpadronate, then, would not have been able to predict whether ibandronate would have shown increased or decreased activity. Dr. Newton conceded this in discussing the investigation into lengthening the alkyl chains on olpadronate: "it wasn't predictable that the best compound would be C5." (Id. at 192:2-3.) In discussing homologues with varying chain lengths, Dr. Rosini made the same concession: "We cannot predict which one is the most effective." (Id. at 232:15-16.) These concessions that the properties of ibandronate were unpredictable are devastating to Cobalt's obvious optimization theory, which depends on proving the opposite.
This inference is supported by Dr. Russell's testimony that, before ibandronate was made and tested, the skilled artisan would have had no expectation of what its potency would be. (11/1/10 Hrg. Tr. 172:9-10.)
Cobalt's optimization theory does not pass muster under KSR, for at least two reasons. First, the evidence does not show that either the optimization strategy itself or the set of results likely to fall on the Hansch curve qualify as "identified, predictable solutions." KSR, 550 U.S. at 421. Rather, as Drs. Newton and Rosini conceded, the strategy was not predictable, since no one could predict where any particular compound would fall on the Hansch curve. Nor does the evidence demonstrate that the user of the strategy would have anticipated success with any particular compound. What Cobalt did not demonstrate was that the skilled artisan, applying the optimization strategy to olpadronate, would have had reason to anticipate success with ibandronate. Rather, Cobalt's experts conceded that the artisan would have had no prediction of success for any particular compound. To look at the results of the optimization and say that the success of ibandronate was anticipated, when it clearly was not, is a great example of the distorting effect of hindsight: "A factfinder should be aware, of course, of the distortion caused by hindsight bias and must be cautious of arguments reliant upon ex post reasoning." Id. Cobalt's contention that the success of ibandronate would have been anticipated relies upon just such ex post reasoning.
On this record, it does not appear that it is more likely than not that, at trial, Cobalt will be able to prove the `814 patent invalid as obvious by clear and convincing evidence.
C. Cobalt's inequitable conduct challenge to the `814 patent
Cobalt contends that, even if valid, this Court should refuse to enforce the `814 patent because of inequitable conduct on the part of the applicant. Cobalt's inequitable conduct case is quite complex, but, in brief, the most troubling accusation is that, to overcome the examiner's obviousness rejection, Dr. Bosies submitted a declaration which, in various ways, misrepresented the superiority of the claimed compounds over the prior art.
The Federal Circuit has set forth the fundamental law of an inequitable conduct claim as follows:
To successfully prove inequitable conduct, the accused infringer must present evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO]. Further, at least a threshold level of each element — i.e., both materiality and intent to deceive — must be proven by clear and convincing evidence. And even if this elevated evidentiary burden is met as to both elements, the district court must still balance the equities to determine whether the applicant's conduct before the PTO was egregious enough to warrant holding the entire patent unenforceable.
Star Sci., Inc. v. R.J. Reynolds Tobacco Co.,
537 F.3d 1357, 1365 (Fed. Cir. 2008) (citations omitted).
The factual underpinnings of this claim are extraordinarily complicated, but this Court is not persuaded that Cobalt is likely to be able to prove the requisite scienter. The Court observes that, while there is no dispute that the data in the Bosies Declaration for Example 6 was incorrect, the patent application contained the correct data. While the Bosies Declaration did not contain data for Compound F, data for Compound F was submitted to the PTO in a companion application, submitted on the same day as the application at issue, and before the same examiner. One of Cobalt's weightiest accusations alleges substantial overstatements of the dosage data for Compounds D and E in the Bosies Declaration. Roche counters that Cobalt is misinterpreting what is a typo in the report received from Dr. Fleisch, and points to testimony from Dr. Bauss, who conducted research with Dr. Fleisch, in support. Roche also notes that use of "mg P/kg" units was a key element of the design protocol that Dr. Fleisch used, that Dr. Fleisch tested large numbers of compounds, reported dosing using the "mg P/kg" units in all other cases, and was unlikely to have used completely different units for these few compounds. Clearly, this is a material factual issue, but, on this record, this Court cannot conclude that Cobalt is likely to be able to prove that Dr. Bosies intended to deceive the PTO as to Compounds D and E.
Viewed as a whole, this evidence weighs against finding the requisite intent to deceive the PTO. Cobalt has not persuaded this Court that it is more likely than not to be able to prove by clear and convincing evidence that Dr. Bosies submitted his declaration with the requisite intent to deceive the PTO. The evidence before the Court at this time is simply not clear and convincing.
Moreover, this Court is not persuaded on this record that, even if Cobalt did prove the elements of inequitable conduct by clear and convincing evidence, the balancing of the equities would lead to a refusal to enforce the patent. The problem for Cobalt is that, even if it succeeded in showing that the Bosies Declaration contains the false statements that Cobalt asserts, the evidence still supports the conclusion that ibandronate is superior to the prior art. Especially persuasive is Dr. Russell's review of the substantial body of research which supports this. (Russell Supp. Rpt. ¶¶ 207-209, 252, 253.) Given this body of evidence that ibandronate, a claimed compound, was truly superior to the prior art compounds, even if Cobalt succeeded in proving the factual prerequisites to a jury by clear and convincing evidence — no small feat —, this Court has substantial doubts that it would find the misconduct egregious enough to warrant holding the patent unenforceable. Absent that, Cobalt's equitable conduct defense cannot succeed.
D. Cobalt's inventorship challenge to the `814 patent
Cobalt also argues that the `814 patent is invalid for improper inventorship. In response, Roche disagrees, but argues that, even if true, 35 U.S.C. § 256 allows for the correction of inventorship, as long as the error arose in the absence of deceptive intent. Cobalt has not made a persuasive case that the inventors on the `814 patent have been incorrectly identified. More significantly, this Court agrees that Cobalt appears unlikely to be able to prove that any errors in inventorship arose due to deceptive intent, and thus is unlikely to succeed in invalidating the patent with its inventorship challenge.
Having examined the record and considered the arguments on both sides regarding Cobalt's challenges to the validity and enforceability of the `814 patent, this Court does not find it more likely than not that Cobalt will be able to prove by clear and convincing evidence at trial that the `814 patent is invalid or unenforceable. This Court has previously ruled that Cobalt's generic product infringes claim 4 of the `814 patent. Roche has shown that, in light of the burdens and presumptions that will inhere at trial, it will likely withstand Cobalt's challenges to the validity and enforceability of the `814 patent.
Because Roche has shown a likelihood of success on the merits in regard to the `814 patent, this Court need not reach the issues regarding the `957 patent. Even if this Court were to conclude that Cobalt was more likely than not to prove the `957 patent invalid at trial, this would not negate Roche's entitlement to the rights adhering to the `814 patent.
II. Roche has demonstrated that it is likely to suffer irreparable harm in the absence of injunctive relief.
Roche contends that it will suffer irreparable harm if an injunction is not granted, for several reasons. First, the entry of a generic competitor into the marketplace will cause it to lose market share and sales; Roche estimates losses in the range of 50% to 90% of sales. Roche contends that the losses would be irreversible, in that Boniva® would not be able to regain its status in the formularies of third-party payors. Second, Roche would be harmed by significant price erosion, which would be irreparable, because Roche could never increase the price of Boniva® to pre-generic levels. Third, Roche contends that the harm it will suffer will not be susceptible to calculation: the osteoporosis treatment market has been in such flux, and will continue to be so in the near future, that it will not be possible to accurately ascertain and quantify the damage done to Roche's business by Cobalt's entry of its product into the marketplace. Fourth, Roche's goodwill and reputation will be damaged.
At the hearing, Roche offered the testimony of John Lyons, brand director for Boniva®. Lyons testified that Roche expected to have net revenue of $500 million from Boniva® in the current year, and that Boniva® had a market share of 15% of the market for prescription oral bisphosphonates. (11/1/10 Hrg. Tr. 21:7-8, 21.) Lyons stated that Roche expected that a new branded competitor, Atelvia, would enter the market in the next several months. (Id. at 23:1-7.) Sales of Boniva® are also likely to be influenced in the near future by the launch of a new competitor in the marketplace, Prolia. (Id. at 22:16-19.)
Lyons explained the formulary tier structure used by major third-party payors, and its consequences for Roche in this matter. (Id. at 23:11-31:9.) Boniva® currently enjoys a favorable tier placement which was the result of a complex series of negotiated interactions. (Id. at 25:18-24.) Generic competition would likely result in a less favorable tier placement, and Roche would likely never be able to regain the favorable tier placement even if the generic product left the market. (Id. at 28:21-29:13, 29:24-30:13.) Based on Roche's experience with its branded drug Fosamax®, Lyons anticipated that generic competition would likely cause Roche to lose 50% of its market share within weeks, and up to 90% within months. (Id. at 28:2-6.) This severe drop in market share would result in having to cut the Boniva® sales force to zero. (Id. at 34:15-23.)
At the hearing, Roche also presented the testimony of an economist, Dr. Vellturo. Dr. Vellturo explained the erosion of Boniva's® price that is likely to occur with the entry of a generic product into the marketplace. (11/1/10 Hrg. Tr. 68:21-25.) Dr. Vellturo stated that, should Cobalt's generic product enter the marketplace, it will be very difficult to distinguish the damage done to Boniva® sales by generic competition from the effects of the other competitors in the marketplace. (Id. at 72:10-13, 77:1-78:11.)
Roche has persuaded this Court that it is likely to suffer irreparable harm if an injunction does not issue. Clearly, the entry of a generic competitor into the marketplace will hurt Roche's sales of Boniva®. The phenomenon of price erosion in the pharmaceutical industry is well-known. The question is only whether the harm will be irreparable, and Roche has persuaded that it will be. This Court finds especially persuasive Roche's contention that third-party payors control a substantial portion of its sales, and that a generic entrant into the marketplace has the potential to irreversibly alter the reimbursement relationship, producing an irreparable impact on Roche's business. Roche has also persuaded that the marketplace is likely to be reshaped by a number of factors in the coming year — including the entry of Prolia and Atelvia into the marketplace — that will make it extremely difficult, if not impossible, to ascertain with certainty the losses attributable to Cobalt's entry of its generic product. Thus, while it is true that Roche's licensing agreement with Genentech for Boniva® specifies the decrease in Roche's royalty due to the start of generic competition, the change in royalty rates is likely not to fully capture Roche's actual damages. Lastly, this Court credit's Roche's prediction that it would have to eliminate much of its sales force. These are irreparable harms.
For an example of a similar case:
Sanofi would suffer irreversible price erosion in light of a complex pricing scheme that is directly affected by the presence of the generic product in the market. In particular, the court found that since Apotex's generic product entered the market, Sanofi has been forced to offer discounted rates and price concessions to third-party payors, such as health maintenance organizations, in order to keep Plavix® on a favorable pricing tier, which governs what consumers pay for that drug.
Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1382 (Fed. Cir. 2006).
Lyons stated that, under the terms of Roche's licensing agreement with Genentech, Roche's royalty rate would decrease from 15% to 5% if generic ibandronate enters the market. (11/1/10 Hrg. Tr. 40:24-41:2.)
Cobalt's rebuttal to Roche's claim of likely irreparable harm is unpersuasive. Cobalt points to Roche's size and profitability, and the small impact the likely harms would have on Roche's overall profitability. That says nothing about whether such harms are irreparable. The rest of Cobalt's rebuttal is largely bluster: the fact that businesses routinely make economic forecasts does not show that all damages are readily quantified with accuracy.
Cobalt argues that, because there is no dispute that Roche does not sell any 2.5mg ibandronate product, Roche cannot be harmed by Cobalt's sale of a generic product at that dose. Roche counters, persuasively, that a daily dose generic product would cannibalize sales of its monthly product because third-party payors would place the daily generic on a tier which gives it a preference over a branded monthly dose, which would discourage sales of Boniva®. (11/1/10 Hrg. Tr. 33:15-34:8.)
Having heard the evidence offered by the parties, this Court finds that Roche has demonstrated that it is likely to suffer irreparable harm in the absence of a grant of injunctive relief. Not granting the injunction will cause Roche substantial, irreversible lost profits, price erosion, loss of market share, lost jobs, and loss of goodwill. The Federal Circuit has recognized that such injuries may constitute irreparable harms.See, e.g., Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1362 (Fed. Cir. 2008).
Price erosion is most likely to occur in cases like this one, in which no generic competitors have yet entered the marketplace, placing the patentee in an exclusive position. This Court rejects Cobalt's contention that money damages could adequately redress any injury to Roche. As the Federal Circuit explained in Polymer Techs. v. Bridwell, 103 F.3d 970, 975 (Fed. Cir. 1996):
Competitors change the marketplace. Years after infringement has begun, it may be impossible to restore a patentee's (or an exclusive licensee's) exclusive position by an award of damages and a permanent injunction. Customers may have established relationships with infringers. The market is rarely the same when a market of multiple sellers is suddenly converted to one with a single seller by legal fiat. Requiring purchasers to pay higher prices after years of paying lower prices to infringers is not a reliable business option.
Cobalt contends that Roche's asserted injuries are all reducible to calculable money damages. This Court does not agree: Roche has persuaded this Court that allowing a generic competitor to enter the marketplace will damage its position in the bisphosphonate market in a way that cannot be undone, and that such damage will not be readily and accurately quantified, such that it may be fully redressed by money damages. This factor weighs in favor of granting the preliminary injunction.
III. Roche has demonstrated that the balance of hardships and the public interest weigh in favor of granting the preliminary injunction.
Cobalt argues that it will be harmed by the grant of an injunction by the loss of the market opportunity it has at this point in time: it can now be the first and only generic in the marketplace. While this is a genuine and significant harm, on balance, the harm to Roche in terms of damage to its existing business appears far more significant. The balance of hardships weighs in favor of granting the injunction.
Lastly, as to the public interest, the parties take the traditional positions of branded and generic pharmaceutical manufacturers. Roche contends that the public interest favors the enforcement of valid patents, while Cobalt argues that the public interest favors the availability of low cost drugs. This Court finds, on this record, that the public interest favors encouraging investment in drug development by protecting and enforcing a valid pharmaceutical patent. Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1384 (Fed. Cir. 2006).
CONCLUSION
For the reasons stated above, this Court finds that all four factors in the preliminary injunction analysis weigh in favor of granting Roche's motion for a preliminary injunction. Roche has shown that it is likely to succeed on the merits at trial, that it is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in its favor, and that an injunction is in the public interest. Because all four factors weigh in favor of granting the injunction, Roche's motion for a preliminary injunction, pursuant to 35 U.S.C. § 283, is granted.
The parties disagree as to the amount of the bond that Roche should provide. Cobalt asks for $557 million; Roche asks for $5 million. In view of the fact that this case is now well into the summary judgment phase, and will be heading for plenary trial in the very near future, this Court does not see any need for the sizable bond that Cobalt seeks. Roche shall provide a bond in the amount of $10 million.
Dated: November 10, 2010