DocketNumber: Case No. 17–cv–05572–EMC
Citation Numbers: 298 F. Supp. 3d 1241
Judges: Chen
Filed Date: 2/7/2018
Status: Precedential
Modified Date: 7/25/2022
Plaintiff Medical Diagnostics Labs alleges that Defendant Protagonist Therapeutics, Inc.'s development of a drug called PTG-200 infringes on its patent for polypeptides that bind to IL-23 receptors. These polypeptides, including PTG-200, have therapeutic potential to treat inflammatory and autoimmune diseases. Protagonist has entered into a multi-million dollar agreement with third-party pharmaceutical company Janssen, Inc. to develop the drug, perform testing necessary for regulatory approval, seek regulatory approval, and, if regulatory approval is obtained, to manufacture and commercialize the drug.
Defendant moves to dismiss, arguing that the activities alleged in the complaint all fall under the safe harbor provided by
I FACTUAL BACKGROUND
Plaintiff Medical Diagnostic Labs ("MDL"), a reference laboratory, alleges patent infringement by Defendant Protagonist Therapeutics ("Protagonist"), a pharmaceutical company that develops peptide-based chemicals for therapeutic purposes.
MDL owns
In 2011, MDL filed provisional application No. 61/520,710 ("the '710 application") "covering its IL-23 receptor inhibitor technology."
*1246On July 17, 2014, Defendant Protagonist filed provisional application No. 62/025,899 ("the '899 application"), called "Oral Peptide Inhibitors of Interleukin-23 Receptor and Their Use to Treat Inflammatory Bowel Diseases." The '899 application references MDL's '907 publication.
A few months later, in October 2014, scientists from both companies met, during which time MDL shared information about its IL-23 polypeptide research with Protagonist.
Between July 15, 2015 and October 13, 2015, the parties attempted but failed to negotiate a licensing agreement for Protagonist under MDL's patent.
Then things took off for Protagonist. After an initial public offering in 2016, Protagonist began publicly announcing in early 2017 its research into PTG-200, a polypeptide hoped to have inhibiting effects on IL-23 receptors.
The Janssen Agreement is phased. Under the Agreement, Janssen made an initial payment of $50 million to Protagonist to fund the research. See Compl., Ex. J. Protagonist is responsible for Phase 1 clinical trials of PTG-200 at its own expense, while Janssen is responsible for the Phase 2 clinical trial, with Janssen shouldering 80% of the costs.
At a couple of critical junctures, Janssen has the option to keep on or drop out. For example, following the completion of Phase 2A of the Phase 2 clinical trial, Janssen must pay Protagonist an additional $125 million if it elects to maintain its license rights and continue the development of PTG-200 in Phase 2B of the clinical trial.
As of this date, PTG-200 is still in pre-clinical trials and no regulatory approval has been obtained or even sought. Thus, the parties agree that Protagonist may not commercialize or market the drug at this time.
Though MDL generally alleges that Protagonist has "attempted to advance and sell" MDL's patented technologies,
Additionally, MDL alleges that Protagonist has "booked millions of dollars of revenue from sales and/or use of MDL's patented IL-23 receptor inhibitor technology," and that "such sales and/or use are not reasonably related to the development and submission of information to the FDA for regulatory approval, and therefore are not exempted from infringement by the safe-harbor provision of Section 273(e)(1)."
II. DISCUSSION
Defendant moves to dismiss on the basis that all the alleged activities fall within
A. Whether Section 271(e) Requires Dismissal
1. Merck KGaA v. Integra Lifesciences, I. Ltd.
Congress has created a safe harbor for certain acts that might otherwise constitute infringement:
It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention ... solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.
In Merck KGaA v. Integra Lifesciences, I. Ltd. ,
Significantly, the Supreme Court held that the safe harbor's protections were broad enough to protect research performed in relation to drugs for which no application or information is ultimately submitted to the Food and Drug Administration. Because "scientific testing is a process of trial and error," the Supreme Court concluded that "[p]roperly construed, § 271(e)(1) leaves adequate space for experimentation and failure on the road to regulatory approval."
Thus, the question for determining whether the safe harbor applies is not whether regulatory approval is ultimately sought from the FDA. Rather, the protection applies "[a]t least where a drugmaker has a reasonable basis for believing that a patented compound may work, through a *1248particular biological process, to produce a particular physiological effect, and uses the compound in research that, if successful, would be appropriate to include in a submission to the FDA."
2. All Non-Commercialization Activities Fall Within the Safe Harbor
Merck makes clear that the safe harbor applies broadly to protect research and development reasonably related to the development of information that may be submitted to the FDA in connection with regulatory approval. Here, MDL's allegations leave no doubt that the purpose of the Janssen Agreement is to explore the viability of PTG-200 as a therapeutic drug to treat certain anti-inflammatory conditions. Indeed, the key pre-commercialization terms relate to the division of financial and oversight responsibilities between Protagonist and Janssen with respect to pre-clinical research, Phase 1 and Phase 2 clinical trials, and the regulatory approval process. At this juncture, the only payment made under the Janssen Agreement is $50 million to fund research.
Although MDL broadly alleges that Protagonist has "attempted to advance and sell IL-23 receptor inhibitor compounds," the only specific examples alleged are the sales to Janssen under the Agreement in connection with clinical trials. Compl. ¶ 43. In the absence of a factual allegation that Protagonist has made sales to a party other than Janssen under the Agreement, or to Janssen for a specific use unrelated to research for the regulatory approval process, MDL's vague allegation of attempted sales fails to support a plausible inference that Protagonist has engaged in activities outside the safe harbor. Indeed, MDL has not identified any specific use, sale, or offer to sell the patented technology outside the context of the Janssen Agreement.
At the hearing, MDL advocated a new, more focused argument that was not briefed and therefore was arguably waived. In particular, MDL claimed that, at the very least, Protagonist lacked a "reasonable belief that the compound will cause the sort of physiological effect the research intends to induce," Merck ,
MDL's "Eureka!" theory is flawed. First, MDL does not allege anywhere in its complaint that Protagonist lacked a reasonable belief regarding the potential of the drugs it was researching (including the PTG-200), nor does it allege facts that would support that inference. Thus, the complaint, as pled, does not support MDL's theory.
Second, even assuming that Protagonist lacked a reasonable belief before the May 2015 meeting with MDL, that "Eureka!" moment would, by definition, have then endowed it with a reasonable belief in the *1249drug's potential. That epiphany precedes the Janssen Agreement, and therefore any sales or uses pursuant to the Agreement, by two years; MDL has not alleged any infringing sales or uses prior to the Janssen Agreement. Thus, the "Eureka!" theory now advanced by MDL would, if anything, immunize under Section 271(e)(1) Protagonist's conduct pursuant to the Janssen Agreement.
Third, as a matter of fact, it is highly unlikely that Protagonist lacked a reasonable belief prior to the May 2015 meeting with MDL. As Protagonist's counsel pointed out and MDL's complaint acknowledges, Protagonist had already been developing and researching polypeptides with the specific purpose of locating the four-leaf clover that would inhibit IL-23 receptors, as indicated by Protagonist's July 17, 2014 provisional '899 application. Thus, in light of MDL's own allegations, it is implausible to suggest that, at least as of July 17, 2014, Protagonist lacked a "reasonable belief that the compound will cause the sort of physiological effect the research intends to induce." Merck ,
Plaintiff has therefore failed to plausibly plead that the narrow exception to the safe harbor provision applies here.
3. Plaintiff Fails to Plead That the Allegedly Infringing Activities Were Not Reasonably Related to the FDA Approval Process
Plaintiff also argues that its complaint should survive dismissal because it creates a factual dispute by pleading that "[o]n information and belief, such sales and/or use are not reasonably related to the development and submission of information to the FDA for regulatory approval, and therefore are not exempted from infringement." Compl. ¶ 47. MDL argues in its supplemental brief, "there is a dispute regarding MDL's factual allegations about whether certain of Protagonist's infringing activities are in fact reasonably related to obtaining FDA approval." Docket No. 42 at 1 (emphasis in original).
The problem here is that MDL has not alleged any specific sales or uses to begin with, as explained above, except those pursuant to the Janssen Agreement, which occurred years after the "Eureka!" moment that MDL says gave Protagonist a reasonable belief about the therapeutic potential of PTG-200. Moreover, MDL's revised position that it "has alleged infringement in its complaint based on Protagonist's making and using activities occurring between issuance of the '150 patent on February 3, 2015 and approximately five months later, on July 15, 2015, when Protagonist filed its patent application that led to the '268 patent," Docket No. 42 at 4, is not supported by the complaint because MDL does not identify any "making and using activities" occurring during that time period.
Although whether challenged activity is reasonably related to the development and submission of information for FDA approval may in some circumstances be a fact question, there must be specific facts alleged to create a plausible claim to the contrary in order to escape dismissal under the safe harbor provision. Ashcroft v. Iqbal ,
The cases relied on by Plaintiff are inapposite because in those cases there was a factual foundation to challenge whether the uses were reasonably related. See , e.g. , ISIS Pharms., Inc. v. Santaris Pharma A/S Corp. ,
4. Protagonist's Business Motivations and Janssen's Payments Do Not Deprive Protagonist of Safe Harbor Protection
MDL argues that Protagonist's activities fall outside of the safe harbor because Protagonist has received (or will receive at a later juncture) a large sum of money from Janssen and has used the results from its testing to generate investor interest and to present its findings at various conferences or in press releases, activities not tied directly to research and FDA approval. See , e.g. , Compl. ¶¶ 31-35, 47. For instance, some of the funds that may be paid in the future arguably reflect consideration for licensing rights in addition to funding research and clinical trials.
In its reply, Protagonist relies on AbTox, Inc. v. Exitron Corp. ,
*1251In its supplemental brief, MDL does not dispute that AbTox remains good law, but now claims that "because the parties dispute whether certain of Protagonist's infringing activities are reasonably related to obtaining FDA approval, it is inappropriate under AbTox to look to the 'underlying purposes or attendant consequences of the activity.' " Docket No. 42 at 1 (emphasis in original). To a certain extent, MDL's argument creates an irony; it is MDL-not Protagonist-that suggested the Court look to Protagonist's business motivations to determine whether the safe harbor applies. See Opp. at 9 (arguing that "the substantial payments from Janssen to Defendant" were not reasonably related to providing information to the FDA). Indeed, MDL now goes so far as to argue that "the plain language of § 271(e)(1), as interpreted by AbTox , precludes consideration of the 'underlying purposes or attendant consequences of [Protagonist's] activit[ies] when making a factual determination about the activities' reasonable relation to obtaining FDA approval." Docket No. 42 at 4 (emphasis added). The Court agrees, but that is a reason for granting, at least in part, not denying, Protagonist's motion.
The only activity alleged to have already taken place so far, however, is Janssen's payment of $50 million to Protagonist to fund the research and initiate the clinical trial process. Compl., Ex. J at 3. This is clearly reasonably related to the development and submission of information for the FDA approval process. Whether Protagonist is ultimately motivated to use that research (or the money) to promote or commercialize the drug is immaterial under AbTox.
To the extent MDL alleges that future payments under the Janssen Agreement are not protected by the safe harbor, the Court notes that the clear purpose of the agreement with Janssen revolves around obtaining FDA approval of PTG-200. The agreement is explicitly structured around the stages of FDA approval. Protagonist and Janssen are betting on PTG-200's success as a therapeutic drug, and they are also betting on FDA approval to manufacture and market the drug. Janssen funds Protagonist's research to pave the road to regulatory approval and, in exchange, Protagonist offers Janssen the future option to exercise an exclusive license to Protagonist's patent over PTG-200.
That future contingent payments to Protagonist by Janssen for licensing rights may be characterized as creating an incentive to Janssen to assume risks and incur costs in the development and obtaining FDA approval does not necessarily deprive Protagonist of the safe harbor protection. The activities provided in the Janssen Agreement include, inter alia , completion of the Phase 2A and Phase 2B portions of the clinical trials, and Janssen's election at both junctures whether to pursue the agreement, including whether to maintain license rights for sums in the range of $125 and $200 million. See Compl., Ex. J at 3. Though the question is not yet ripe for review for the reasons stated below, it is by no means clear that the size of those payments or Protagonist's subsequent use of the money to invest in other research unrelated to PTG-200 is relevant to the safe harbor analysis. As the Intermedics court explained, "Congress clearly intended ... to create a legal environment in which the potential competitors of patent holders would be free, through non-infringing activities like raising capital, to position themselves to enter the market in *1252a commercially significant way just as soon as the relevant patents expired." Intermedics ,
In any event, as explained above, the only uses or sales allegedly covered by MDL's patented technology that have already transpired concern the research phases of the Janssen Agreement following the initial $50 million payment but preceding the completion of Phase 2A and Phase 2B. Defendant's motion is GRANTED with respect to those allegations because Plaintiff fails to allege any current activity that falls outside of the Section 271(e)(1) safe harbor. As to Plaintiff's allegation that the safe harbor would not apply to further payments made after the successful completion of future clinical trials if Janssen elects to maintain its licensing rights, and to Janssen's and Protagonist's plan to actually manufacture, market, and commercialize PTG-200, Compl. ¶ 48, the Court need not reach the question whether the safe harbor applies. As explained below, because this and other future activity have not yet happened, the Court must first analyze whether the question is ripe.
B. Whether a Case-or-Controversy Exists
The Declaratory Judgment Act provides that "[i]n a case of actual controversy within its jurisdiction ... any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought."
The possibility of future payments under the Janssen Agreement and ultimately commercialization of PTG-200 is too speculative and contingent to create a case or controversy under Article III. Payments beyond the already committed $50 million are contingent on favorable clinical trial results, approvals by the FDA, and discretionary decisions by Janssen to continue moving forward at various phases of the clinical testing process. See , e.g. , Compl. Ex. J at 3 (Janssen has the right to opt-out of the agreement either after Phase 2A or Phase 2B of the clinical testing process, before regulatory approval let alone commercialization). No case or controversy arises from such speculative and multiple uncertain contingencies. See , e.g. , Benitec Austl., Ltd. v. Nucleonics, Inc. ,
Because there is no case-or-controversy Article III standing, there is no occasion for the Court to exercise its discretion whether entertaining the action would be appropriate as a matter of prudential standing. See Gov't Employees Ins. Co. v. Dizol ,
Plaintiff has cited no case-law to the contrary. The Court GRANTS Defendant's motion to dismiss the request for declaratory judgment based on future payments or commercialization as not presenting a case-or-controversy at this juncture. Dismissal is without prejudice to re-filing if and when the challenged conduct which MDL contends falls outside the safe harbor becomes imminent or concrete.
III. CONCLUSION
The Court GRANTS Defendant's motion to dismiss.
Plaintiff has not adequately pled that Defendant is currently engaging, or has engaged, in any infringing activities that are not protected by the Section 271(e)(1) safe harbor provision. Though Plaintiff did not identify other facts at the hearing or in its supplemental brief pertaining to activities outside of the safe harbor, the Court will grant Plaintiff leave to amend only if it can allege specific sales or uses outside of the Janssen Agreement, or specific uses under the Agreement but which are not reasonably related to seeking FDA approval, with an articulation why they are not consistent with this Order. If Plaintiff opts to do so, Plaintiff must file the amended complaint within 30 days.
To the extent Plaintiff claims that future payments or commercialization of PTG-200 would fall outside the safe harbor and infringe its patent, that claim is at present too speculative to create a case or controversy under Article III. Nor does it warrant the Court's exercise of its discretion to exercise jurisdiction to issue declaratory relief. Plaintiff does not have leave to amend that claim but may re-file in the future if commercialization becomes imminent or concrete.
This order disposes of Docket No. 25.
IT IS SO ORDERED .
The analysis in Intermedics has been expressly endorsed by the Federal Circuit. See Telectronics Pacing Sys., Inc. v. Ventritex, Inc. ,
Further, Protagonist's press releases and conference presentations regarding its development of PTG-200 do not deprive the underlying testing activity of protection; Merck also involved the publication and presentation of data at conferences, and AbTox similarly involved the sharing of test results to promote sales to clients. See also Integra Lifesciences I, Ltd. v. Merck KGaA ,
As explained above, even if the significantly larger payments Janssen is to make to Protagonist after Phase 2A and Phase 2B somehow transform Protagonist's use of Plaintiff's patented technology into having less of a reasonable relationship with the FDA process (which the Court doubts), that question is still not sufficiently imminent to merit review. It is yet unknown if and when Phase 2A will be completed, let alone whether Janssen will at that point opt to pursue the collaboration and make the payments to Protagonist. Similarly, it is unknown whether Janssen will continue after Phase 2B.