United Food & Commercial Workers Unions & Emp'rs Midwest Health Benefits Fund v. Novartis Pharm. Corp.
U.S. Court of Appeals8/21/2018
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Full Opinion
United States Court of Appeals
For the First Circuit
No. 17-1714
UNITED FOOD AND COMMERCIAL WORKERS UNIONS AND EMPLOYERS MIDWEST
HEALTH BENEFITS FUND; LABORERS HEALTH AND WELFARE TRUST FUND FOR
NORTHERN CALIFORNIA, on behalf of themselves and others
similarly situated; AFSCME HEALTH AND WELFARE FUND, on behalf of
themselves and others similarly situated; MINNESOTA LABORERS
HEALTH AND WELFARE FUND, on behalf of themselves and others
similarly situated; PENNSYLVANIA EMPLOYEES BENEFIT TRUST FUND,
on behalf of themselves and others similarly situated; LOUISIANA
HEALTH SERVICE & INDEMNITY COMPANY, d/b/a Blue Cross and Blue
Shield of Louisiana, on behalf of themselves and others
similarly situated,
Plaintiffs, Appellants,
v.
NOVARTIS PHARMACEUTICALS CORPORATION;
NOVARTIS CORPORATION; NOVARTIS AG,
Defendants, Appellees.
No. 17-1776
RXDN, INC., on behalf of itself and
on behalf of the Direct Purchaser Class,
Plaintiff, Appellant,
v.
NOVARTIS PHARMACEUTICALS CORPORATION;
NOVARTIS CORPORATION; NOVARTIS AG,
Defendants, Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Allison D. Burroughs, U.S. District Judge]
Before
Lynch, Kayatta, and Barron,
Circuit Judges.
Thomas M. Sobol, with whom Hannah W. Brennan, Hagens Berman
Sobol Shapiro LLP, John D. Radice, Radice Law Firm, P.C., Noah
Rosmarin, Adkins, Kelston & Zavez, P.C. were on brief, for
appellants.
Saul P. Morgenstern, with whom David K. Barr, Mark D. Godler,
Laura S. Shores, Arnold & Porter Kaye Scholer LLP, William A.
Zucker, Wyley S. Proctor, McCarter & English LLP, Grant J.
Esposito, Jessica Kaufman, and Morrison & Foerster LLP were on
brief, for appellees.
August 21, 2018
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BARRON, Circuit Judge. In these consolidated appeals
from orders dismissing two putative antitrust class actions,
purchasers of a brand-name, prescription drug allege that the drug
maker unlawfully delayed the entry of generic versions of the drug
into the United States market. Specifically, the plaintiffs allege
that the drug maker committed antitrust violations by obtaining
through a fraud on the United States Patent and Trademark Office
("Patent Office") a patent for a particular form of a component
necessary to manufacture a drug to treat leukemia and by then
seeking to enforce that patent through "sham" infringement
litigation against manufacturers trying to enter the market with
generic versions of that drug.
The drug maker moved to dismiss the antitrust actions on
the ground that there was no fraud and that it was immune from
antitrust liability for merely enforcing its patent through
litigation. The drug maker claimed this immunity based on the
Noerr-Pennington doctrine. See United Mine Workers of Am. v.
Pennington, 381 U.S. 657, 669 (1965); E. R.R. Presidents Conference
v. Noerr Motor Freight, Inc., 365 U.S. 127, 136 (1961). That
doctrine provides a party immunity from antitrust liability for
petitioning the government for redress, in light of the First
Amendment right to petition the government. And it is clear that
the petitioning activity within this doctrine's protection
includes enforcing one's intellectual property rights in court.
- 3 -
See Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus.,
Inc. ("PREI"), 508 U.S. 49, 63-65 (1993) (applying Noerr-
Pennington immunity to copyright infringement litigation);
Amphastar Pharm. Inc. v. Momenta Pharm., Inc., 850 F.3d 52, 56-58
(1st Cir. 2017) (applying Noerr-Pennington immunity to patent
infringement litigation).
The District Court agreed with the drug maker that Noerr-
Pennington immunity applied to its alleged conduct and, on that
basis, dismissed the putative class actions under Rule 12(b)(6) of
the Federal Rules of Civil Procedure for failure to state a claim.
The District Court acknowledged that Noerr-Pennington immunity has
two exceptions. An antitrust defendant may not enjoy the immunity
in enforcing its patent if it obtained that patent through a fraud
on the Patent Office, Walker Process Equip., Inc. v. Food Mach. &
Chem. Corp., 382 U.S. 172, 177-78 (1965), or if its suit to enforce
the patent is a "sham" for impermissible anti-competitive conduct,
PREI, 508 U.S. at 51. The District Court held, however, that the
purchasers had not plausibly alleged that either exception applies
here. We now affirm.
I.
The putative class actions at issue in these
consolidated appeals were brought against Novartis, which
distributes and holds the patents for Gleevec, a prescription drug
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for treating leukemia.1 Health plans that purchased Gleevec on
behalf of their beneficiaries -- so-called end payers -- are the
plaintiffs in the first action. A party standing in the shoes of
a direct purchaser of the drug is the named plaintiff in the other
action.
The suits arise from the following events. In 1996,
Novartis obtained the original patent for Gleevec, or Patent No.
5,521,184 ("Patent '184"). This patent claimed Gleevec's active
ingredient -- a compound called "imatinib" -- as well as the
compound's "corresponding salts." That patent's expiration date
was July 4, 2015.
Four years after obtaining that patent, Novartis filed
an application for another one. This application sought a patent
that pertained to one of the compound's "corresponding salts," the
"mesylate" salt of imatinib. Specifically, Novartis's patent
application claimed a particular crystalline form of that salt
-- namely, the non-needle or "β-crystalline" form.
According to the complaints filed in each of the
antitrust actions against Novartis, chemists commonly modify
compounds from "free base" to "salt" form during the pharmaceutical
process in order to enhance the drug's properties, such as its
1 "Novartis" refers collectively to all three Novartis
entities that are defendants: Novartis Pharmaceuticals
Corporation, Novartis Corporation, and Novartis AG.
- 5 -
solubility. The complaints further point out that, although a
salt can be left amorphous, chemists often crystallize salts in
various shapes to further select for favorable properties. For
this reason, a patent for a particular crystalline form of one of
imatinib's corresponding salts, such as the one Novartis claimed,
could be quite valuable.
The patent examiner rejected Novartis's patent
application for the β-crystalline form of imatinib mesylate. The
examiner concluded that this form of imatinib mesylate was not
patentable in consequence of the requirements set forth in 35
U.S.C. § 102, which provides that an invention is not patentable
if it is entirely anticipated by a single item of prior art, and
35 U.S.C. § 103, which provides that an invention is not patentable
if, from a body of prior art, "the differences between the claimed
invention and the prior art are such that the claimed invention as
a whole would have been obvious . . . to a person having ordinary
skill in the art to which the claimed invention pertains."
With reference to § 102, the patent examiner ruled that
the β-crystalline form of imatinib mesylate was "anticipated" by
Patent '184. With reference to § 103, the patent examiner ruled
that Novartis failed to carry its burden to "show that employing
routine procedures" would not produce the β-crystalline form of
the salt.
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Novartis appealed the patent examiner's ruling to the
Patent Trial and Appeal Board ("Board"), which reversed. With
respect to § 102, the Board "assume[d] arguendo, without
deciding," that Patent '184, which was set to expire in 2015,
anticipated the mesylate salt of imatinib. But, the Board ruled,
Patent '184 "contains insufficient disclosure to support a finding
of anticipation" of the β-crystalline form of imatinib mesylate
that Novartis claimed in its application for the new patent. With
respect to § 103, the Board concluded that the patent examiner had
erroneously "shift[ed] the burden of persuasion to applicants to
establish that the β-crystalline form recited in their claim
'cannot be made following routine conditions.'" Moreover, the
Board explained, "on this record, the examiner has not adequately
explained how a person having ordinary skill would have been led
from 'here to there,' i.e., from [imatinib mesylate] to the . . .
β-crystalline form of that compound."
The next month, the patent examiner issued a "notice of
allowance," which issues "[i]f, on examination, it appears that
the applicant is entitled to a patent" and which specifies the
fees that must be paid to obtain the patent. 37 C.F.R. § 1.311.
Thereafter, Novartis made a supplemental disclosure of two prior
art references that disclosed the mesylate salt of imatinib (but
not the β-crystalline form of imatinib mesylate for which Novartis
sought the patent).
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The Patent Office finally issued Novartis's patent for
the β-crystalline form of imatinib mesylate, or Patent No.
6,894,051 ("Patent '051"), on May 17, 2005, with an expiration
date in 2019.2 Novartis then submitted that patent to the Food
and Drug Administration ("FDA") for inclusion in what is known as
the "Orange Book" -- which lists FDA-approved drugs along with
their corresponding patents -- as one of the patents, along with
the as-yet-unexpired original '184 patent, that covers Gleevec.
In 2006, a generic drug manufacturer named Sun Pharma
filed an abbreviated new drug application ("ANDA") with the FDA.
Sun Pharma's ANDA sought to market a generic version of Gleevec in
the United States. In its ANDA, Sun Pharma certified that
Novartis's second patent for Gleevec, Patent '051, was invalid.
Sun Pharma thus sought the FDA's approval for marketing generic
Gleevec as soon as the original Gleevec patent, Patent '184,
expired on July 4, 2015, even though Novartis's second Gleevec
patent, Patent '051, would not expire until 2019.
Several years later, in 2013, while waiting for Patent
'184 to expire, Sun Pharma sued Novartis in federal court seeking
a declaratory judgment that the second Gleevec patent, Patent '051,
2Novartis also applied for and obtained a third patent for
Gleevec -- Patent No. 7,554,799, later reissued as Patent No. RE
43,932 -- which the complaints allege is invalid for the same
reasons that Patent '051 is invalid. The plaintiffs discuss only
Patent '051, however, on appeal.
- 8 -
was indeed invalid. Novartis counterclaimed, alleging
infringement of Patent '051 and seeking a declaratory judgment
that the patent was valid.
In May of 2014, before any substantive rulings in that
litigation, Sun Pharma and Novartis settled. The parties to that
settlement did not disclose its terms, except to announce that Sun
Pharma would be permitted to launch its generic version of Gleevec
on February 1, 2016, some seven months after the expiration of the
original Gleevec patent, Patent '184.3
The two putative class actions at issue here were filed
in the wake of that settlement in the United States District Court
for the District of Massachusetts. Each action alleged that
Novartis had "engaged in an exclusionary, anticompetitive scheme
designed to create and maintain a monopoly for Gleevec and its
generic substitutes" in the United States market. The complaints
in each case alleged that Novartis carried out this monopolistic
3The plaintiffs allege that other generic drug manufacturers
also filed ANDAs for generic versions of Gleevec, each of which
certified that Novartis's second patent for the drug, Patent '051,
is invalid. Because Novartis sued each of these generic drug
manufacturers for patent infringement within forty-five days of
receiving notice of such certifications, Novartis obtained
automatic thirty-month stays of FDA approval as to each of those
ANDAs. See 21 U.S.C. § 355(j)(5)(B)(iii). The plaintiffs
represent on appeal that all of these additional infringement suits
have been dismissed without prejudice.
- 9 -
scheme in the following way in order to delay generic Gleevec's
entry into the United States market.
First, the complaints alleged that Novartis fraudulently
procured Patent '051 from the Patent Office by falsely representing
that the prior art did not disclose imatinib mesylate and that the
discovery of its β-crystalline form was "surprising[]." Second,
the complaints alleged that Novartis listed Patent '051 in the
Orange Book.4 And, third, the complaints alleged that Novartis
then pursued infringement litigation against manufacturers of
generic versions of Gleevec to enforce Patent '051 that was a
"sham" for anticompetitive conduct -- given that Novartis could
not reasonably expect the patent to withstand an invalidity
defense.
The direct purchaser alleged its monopolization claim in
its suit under the federal Sherman Act, 15 U.S.C. § 2, while the
end payers alleged their monopolization claim under the antitrust
laws of twenty-three states and the District of Columbia. See
Ill. Brick Co. v. Illinois, 431 U.S. 720, 730 (1977) (holding that
indirect purchasers generally lack standing to enforce federal
antitrust laws). The plaintiffs in both actions sought monetary
4The plaintiffs clarified in their papers below that they
"do not assert the Orange Book listings as a basis for antitrust
liability." They explained that they instead asserted them as the
basis of a third exception to Noerr-Pennington immunity. However,
they have not pressed this argument on appeal.
- 10 -
damages as well as class certification on behalf of similarly
situated direct purchasers and end payers respectively.
Novartis moved to dismiss the end-payers complaint under
Rule 12(b)(6). Proceedings in the direct-purchaser action were
stayed pending adjudication of Novartis's motion to dismiss.
Novartis contended in that motion that, under Noerr-Pennington, it
could not incur antitrust liability for exercising its right to
enforce Patent '051 in court against an infringer. Novartis did
acknowledge that there are "two relevant exceptions" to Noerr-
Pennington immunity -- namely, the exceptions based on a showing
of Walker Process fraud and "sham" litigation. But, Novartis
argued in its motion that the plaintiffs had failed plausibly to
allege that either exception applied.
In their opposition to the motion to dismiss, the
plaintiffs accepted that Novartis would be entitled to Noerr-
Pennington immunity unless at least one exception to that immunity
applied. The plaintiffs asserted, however, that they had plausibly
alleged that both exceptions did apply. The plaintiffs contended
that their suit should therefore proceed to discovery, given that
Novartis was not entitled to Noerr-Pennington immunity and that
Novartis had not otherwise contested their allegations of "the
traditional elements of an antitrust claim: causation, antitrust
injury, and market power."
- 11 -
The District Court rejected the plaintiffs' arguments
about the application of the exceptions and agreed with Novartis
that it was entitled to Noerr-Pennington immunity. On that basis,
the District Court granted Novartis's motion to dismiss the end-
payers action. The direct-purchaser plaintiff next moved for entry
of a judgment of dismissal in its own action "in accordance with
the orders entered in the end payors' case," which the District
Court granted.
The plaintiffs in both actions then appealed.5 In
pressing these appeals, the plaintiffs contend that the District
Court erred in holding that they had not plausibly alleged that
Novartis had engaged in either fraud within the meaning of Walker
Process in obtaining Patent '051 or "sham" litigation in enforcing
that patent and thus that the District Court erred in dismissing
their suits on the ground that Novartis was immune from antitrust
liability for enforcing Patent '051. Novartis counters that the
District Court's ruling with respect to Noerr-Pennington immunity
was correct, though Novartis does not dispute the plaintiffs'
assertion that they have otherwise plausibly alleged the elements
of an antitrust claim. We thus now address the plaintiffs'
position against Noerr-Pennington immunity by considering the
5 The end-payer plaintiffs have filed an unopposed motion to
amend their notice of appeal, which we provisionally granted and
now finally grant.
- 12 -
strength of their arguments pertaining to whether Novartis had
engaged in fraud within the meaning of Walker Process in obtaining
the patent at issue or in "sham" litigation in enforcing that
patent.
II.
In Walker Process, the Supreme Court held that "the
enforcement of a patent procured by fraud on the Patent Office may
be violative of [federal antitrust law] provided the other elements
necessary to a[n] [antitrust] case are present." Walker Process,
382 U.S. at 174.6 The plaintiffs rely on the following alleged
misrepresentations in Novartis's patent application to support
their contention that Novartis fraudulently obtained Patent '051
from the Patent Office: (1) that the prior art did not disclose
imatinib mesylate and (2) that Novartis's manufacture of the non-
needle or β-crystalline form of imatinib mesylate was
"surprising[]."
6 Walker Process concerned antitrust liability under the
federal Sherman Act. 382 U.S. at 173. The parties assume that
the Walker Process doctrine applies to the state antitrust laws at
issue in the end-payers action as well.
We note that the Supreme Court has, since Walker Process,
reserved the question "whether and, if so, to what extent Noerr
permits the imposition of antitrust liability for a litigant's
fraud or other misrepresentations." PREI, 508 U.S. at 61 n.6
(citing Walker Process, 382 U.S. at 176-77). Neither party
suggests to us, however, that, in light of PREI, Walker Process is
not an available exception to Noerr-Pennington. So we proceed on
the assumption that it is.
- 13 -
The plaintiffs' complaints allege that Novartis made
these allegedly false representations "[w]ith intent to mislead or
deceive" the Patent Office, "but for which the '051 patent would
not have issued." Accordingly, the plaintiffs contend that they
have sufficiently alleged the elements of intent and materiality
in asserting that they are entitled to take advantage of the Walker
Process-based fraud exception to the usual rule that a patent
holder cannot incur antitrust liability for enforcing its patent.
See Dippin' Dots, Inc. v. Mosey, 476 F.3d 1337, 1346-47 (Fed. Cir.
2007); C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1364-
65 (Fed. Cir. 1998).
Novartis counters that the District Court rightly
concluded that the plaintiffs have failed plausibly to allege that
either of these allegedly false representations by Novartis in its
application for Patent '051 was material to the issuance of that
patent or that Novartis made either of these representations with
the requisite intent to deceive the Patent Office. Accordingly,
Novartis contends that the plaintiffs have failed plausibly to
allege Walker Process fraud.
We do not need to reach the issue of whether the
plaintiffs have plausibly alleged that Novartis made either of the
representations at issue with the requisite fraudulent intent.
And that is because we agree with Novartis and the District Court
that the plaintiffs have failed plausibly to allege that either
- 14 -
representation, even if false, was material to the issuance of the
patent. Our review of whether the plaintiffs have sufficiently
alleged materiality is de novo. SEC v. Tambone, 597 F.3d 436, 441
(1st Cir. 2010) (en banc).
A.
The materiality requirement is a meaningful one. "The
heightened standard of materiality in a Walker Process case
requires that the patent would not have issued but for the patent
examiner's justifiable reliance on the patentee's
misrepresentation or omission." Dippin' Dots, 476 F.3d at 1347
(emphasis added) (citing C.R. Bard, 157 F.3d at 1364).
In addition, "[l]ike all fraud-based claims, Walker
Process allegations are subject to the pleading requirements of
Fed. R. Civ. P. 9(b)." MedImmune, Inc. v. Genentech, Inc., 427
F.3d 958, 967 (Fed. Cir. 2005), rev'd on other grounds, 549 U.S.
118 (2007). That means that the party alleging the fraud, with
respect to elements not bearing on the "conditions of a person's
mind," "must state with particularity the circumstances
constituting fraud." Fed. R. Civ. P. 9(b).
B.
We consider first the plaintiffs' allegations regarding
Novartis's representation in its patent application that the prior
art did not disclose the mesylate salt of the imatinib compound.
Novartis does not dispute that this representation was false. But,
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Novartis contends, the plaintiffs have failed plausibly to allege
that this representation was material to the Patent Office's
decision to issue Patent '051 and so cannot provide the predicate
for their allegations of fraud under Walker Process. We agree.
Cutting against the alleged materiality of this
statement in the patent application is the fact that Patent '051
covers only a particular form of imatinib mesylate, the β-
crystalline form, and not the mesylate salt itself. That feature
of the patent application is significant to our assessment of the
plaintiffs' allegations concerning materiality because the Board
reversed the patent examiner's initial rejection of Novartis's
claim to the β-crystalline form even though the Board appears to
have assumed that the mesylate salt of the imatinib compound had
been previously prepared. In such circumstances, we find it
difficult to conclude that, but for Novartis's inaccurate
representation that the prior art did not disclose the mesylate
salt of the imatinib compound, the patent would not have issued.
But there is also another reason to reach that
conclusion, which, at least when combined with the one that we
have just given, is fatal to the plaintiffs' claim that they have
plausibly alleged the materiality of the representation at issue.
And that reason is that, as the District Court observed and as
even the plaintiffs accept, Novartis eventually actually did
submit prior art to the Patent Office that disclosed imatinib
- 16 -
mesylate, although Novartis did so -- to use the plaintiffs' word
-- "belatedly."
Specifically, Novartis submitted this prior art to the
Patent Office via form PTO-1449. And there is no basis for
disputing that the patent examiner, in issuing Patent '051, then
considered this subsequently submitted prior art. The patent
examiner initialed and signed form PTO-1449, and these "initials
when placed adjacent to the considered citations . . . on a form
PTO-1449 . . . provide a clear record of which citations have been
considered by the Office." U.S. Patent and Trademark Office,
Manual of Patent Examining Procedure § 609 (8th ed. May 2004). In
addition, Patent '051 itself lists the publications referencing
the prior art disclosing imatinib mesylate among the publications
that the examiner considered in issuing the patent. See id.
§ 1302.12 ("All references which have been cited by the examiner
during the prosecution . . . will be printed in the patent.").7
It is true that the patent examiner had already issued
the notice of allowance for Patent '051 by the time that Novartis
7 The complaints allege that there was additional prior art
disclosing imatinib mesylate that was never provided to the Patent
Office. But, the plaintiffs do not contend that these references
disclosed anything of relevance to Novartis's patent application
other than the mesylate salt of imatinib that the submitted
references had already disclosed. See Rothman v. Target Corp.,
556 F.3d 1310, 1326 (Fed. Cir. 2009) ("A piece of prior art is not
material to patent prosecution when it is cumulative of information
already before the examiner." (citing 37 C.F.R. § 1.56(b))).
- 17 -
had submitted this prior art. But, the plaintiffs make no argument
that the examiner could not have withdrawn this allowance in light
of the submission of this prior art and the disclosure of the
corresponding salt that it made. In fact, the notice of allowance
stated, while citing to 37 C.F.R. § 1.313, that "this application
is subject to withdrawal from issue at the initiative of the office
or upon petition by the applicant."
Simply put, the record shows that the patent covers only
a particular form of imatinib mesylate, that the Board reversed
the patent examiner's initial ruling denying the patent even after
assuming that the mesylate salt of the imatinib compound had been
previously prepared, that Novartis ultimately did submit prior art
disclosing that salt, and that the patent examiner considered that
prior art in ultimately issuing the patent for a particular form
of that salt. In light of these features of the record, we do not
see how Novartis's earlier allegedly false representation that the
prior art did not disclose imatinib mesylate to the Patent Office
could plausibly be said to be material to the Patent Office's
ultimate decision to issue the patent for the particular
crystalline form of the salt.
C.
We next turn to the plaintiffs' allegations concerning
a section of Novartis's patent application titled "BACKGROUND TO
THE INVENTION," in which Novartis stated that "[i]t has now been
- 18 -
surprisingly found that a crystal form may under certain conditions
be found in the [mesylate] salt of [the imatinib] compound, which
is described hereinafter as β-crystal form" (emphasis added). The
plaintiffs contend that Novartis's description of its manufacture
of the β-crystalline form of imatinib mesylate as "surprising[]"
was false. The plaintiffs further contend that Novartis made the
statement "in order to avoid the inevitable conclusion that the
non-needle form of imatinib mesylate was obvious" and that the
statement was material to the Patent Office's decision to issue
Patent '051.8
The District Court disagreed. The District Court noted
that it is "unclear whether such a statement qualifies as a
misrepresentation." The District Court explained in this regard
8 At oral argument, the plaintiffs asserted that Novartis's
representation in this portion of its patent application from 2000
as to the timing of the β-crystalline discovery -- namely, that it
had just "now" been made and that it was thus a "new" crystalline
form -- also effected a fraud on the Patent Office, independent of
the use of the word "surprisingly." The plaintiffs argue that the
use of the words "now" and "new" meant Novartis was presenting a
false chronology, given the complaints' allegation that the β-
crystalline form, "upon information and belief, was used by
Novartis from August 1993 forward." But, although the plaintiffs'
opposition brief below did allude to that allegation, the
plaintiffs did not sufficiently raise below a Walker Process
argument that, but for Novartis's use of the words "now" and "new,"
the patent would not have issued. See United States v. Slade, 980
F.2d 27, 30 (1st Cir. 1992) (explaining that "[p]assing allusions
are not adequate to preserve an argument"). Nor was this argument
developed in their briefs to us. See Shell Co. (P.R.) Ltd. v. Los
Frailes Serv. Station, Inc., 605 F.3d 10, 19 (1st Cir. 2010)
(holding that an argument developed at oral argument but not in a
party's briefs is deemed waived).
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that "[t]he examiner was free to reach [her] own opinion about
whether such a discovery was in fact 'surprising' based on the
prior art that was available to her before the patent issued."
The District Court went on to explain that the plaintiffs "have
not sufficiently alleged that if Novartis had avoided using the
word 'surprising,' the patent would not have issued in light of
the relevant prior art."
In arguing on appeal that the District Court erred in
finding that Novartis's use of the word "surprising" was not
material to the patent's issuance, the plaintiffs assert that it
would have been obvious to any pharmaceutical chemist of ordinary
skill how to convert the mesylate salt from its non-needle to
needle form through "routine" steps and that the process might
even occur naturally. The plaintiffs thus suggest that Novartis's
representation misled the Patent Office into concluding that the
crystalline form of the salt at issue was not obvious, when it
was.
But, the plaintiffs have not shown that Novartis's
characterization of the existence of the crystalline form of that
salt as "surprising" was anything more than an assertion of non-
obviousness. And the bare assertion that an invention is not
obvious -- which, of course, is implicit in any patent application
-- is not in and of itself a material misrepresentation for
purposes of Walker Process. Rather, it is merely a legal assertion
- 20 -
that the patent examiner is free to assess in light of the prior
art that is available to the examiner. See Akzo N.V. v. U.S. Int'l
Trade Comm'n, 808 F.2d 1471, 1482 (Fed. Cir. 1986) ("The mere fact
that [a patent applicant] attempted to distinguish [its claim]
from the prior art does not constitute a material omission or
misrepresentation. The examiner was free to reach his own
conclusion regarding the [claim] based on the art in front of
him.").
The case on which the plaintiffs rely to contend that
the use of the word "surprising" was more than a standard assertion
of non-obviousness, Purdue Pharma L.P. v. Endo Pharms., Inc., 438
F.3d 1123 (Fed. Cir. 2006), is readily distinguishable. For one
thing, that case concerned a claim that a patent was invalid
because it was obtained through "inequitable conduct" in violation
of a patent applicant's "duty to prosecute patents in the [Patent
Office] with candor and good faith." Id. at 1128. And, at that
time, the materiality standard for an inequitable-conduct claim
was lower than the but-for standard that we must apply here. See
id. at 1129, 1132.
In addition, Purdue Pharma did not purport to hold that
a patent application's isolated description of a drug's new form
as "surprising[]" could, standing alone, constitute a material
misrepresentation under circumstances like those at issue here.
The patent application at issue in Purdue Pharma described the
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improved effects of a drug's new dosage-release mechanism, where
those effects constituted "a prominent, and at times, the only,
argument in favor of [the drug's] patentability." Id. at 1130
(internal quotation marks omitted). The Federal Circuit explained
that, in the context of a patent application of that sort, the
applicant, by consistently representing to the Patent Office that
the effects were a "surprising discovery," was clearly
representing that the alleged effects were "based on the results
of clinical studies," when that was not in fact true. Id. at 1131.
In fact, in finding no clear error in the trial court's conclusion
that these representations were therefore material to
patentability, id., the Federal Circuit emphasized that Purdue
Pharma was an "unusual" case, in which -- by "repeatedly rel[ying]
on that discovery to distinguish its invention from other prior
art . . . while using language that suggested the existence of
clinical results" -- the patent applicant "did much more than
characterize [its invention] as a surprising discovery." Id. at
1133.
Here, by contrast, Novartis's use of the word
"surprising" gives rise to no similarly misleading implication.
The representation at issue in Novartis's application concerns
only the existence of the salt's crystalline form; it does not
concern the form's "effects." Thus, Novartis's use of the word
"surprising," in this context, does not suggest the presence of
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underlying clinical data in the way that the use of that word, in
the Purdue Pharma context, was found to have falsely implied the
same.
For these reasons, the plaintiffs' second Walker Process
argument, like their first one, fails to provide a basis from which
we could conclude that the plaintiffs have satisfied the but-for
materiality standard. And thus, this Walker Process argument fails
as well.
D.
In a final attempt to challenge the District Court's
Walker Process ruling, the plaintiffs contend that Novartis's
inclusion in its patent application of each of the alleged
misrepresentations that we have just addressed amounted to the
type of "egregious misconduct" that, like "the filing of an
unmistakably false affidavit," makes the inclusion of such
representations per se material to a patent's issuance.
Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1292
(Fed. Cir. 2011) (en banc); see also Intellect Wireless, Inc. v.
HTC Corp., 732 F.3d 1339, 1342 (Fed. Cir. 2013) (explaining that
an "unmistakably false" declaration "alone establishes
materiality" if not cured). But, we do not agree.
Novartis correctly points out that the plaintiffs
forfeited this argument by not making it to the District Court,
and the plaintiffs do not contend that the issue was preserved or
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that the District Court plainly erred. See Chestnut v. City of
Lowell, 305 F.3d 18, 20 (1st Cir. 2002) (en banc) (per curiam)
(describing the four prongs of plain error: "error, plainness,
prejudice, and miscarriage of justice or something akin to it").
Moreover, the alleged misrepresentations here, which the
complaints allege to be merely "misleading, if not false," do not
rise to the level of an "unmistakably false" affidavit or
declaration. Intellect Wireless, 732 F.3d at 1342; Therasense,
649 F.3d at 1292. And so, for this reason, too, we reject this
attempt by the plaintiffs to show that they have plausibly alleged
the element of materiality in alleging Walker Process fraud.
III.
Independent of Walker Process, the plaintiffs separately
contend that Novartis is subject to antitrust scrutiny for
enforcing Patent '051 on the ground that its patent infringement
litigation was "a mere sham to cover what is actually nothing more
than an attempt to interfere directly with the business
relationships of a competitor." Noerr, 365 U.S. at 144 (emphasis
added). But, we do not agree.
A.
The Supreme Court has announced a two-part test for
determining whether a suit to enforce intellectual property rights
is a "sham" that is not entitled to Noerr-Pennington immunity from
antitrust scrutiny. PREI, 508 U.S. at 60. First, "the lawsuit
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must be objectively baseless in the sense that no reasonable
litigant could realistically expect success on the merits." Id.
If the challenged suit is objectively baseless, a court then
proceeds to consider the alleged monopolist's "subjective
motivation" under the second part of the test. Id. Under this
second prong, "the court should focus on whether the baseless
lawsuit conceals 'an attempt to interfere directly with the
business relationships of a competitor' through the 'use [of] the
governmental process -- as opposed to the outcome of that process
-- as an anticompetitive weapon.'" Id. at 60-61 (quoting Noerr,
365 U.S. at 144; City of Columbia v. Omni Outdoor Advert., Inc.,
499 U.S. 365, 380 (1991)).
In order to make a "sham" showing with respect to a
suit to enforce an intellectual property right, a plaintiff must
allege that both prongs of the test are met. Id. Novartis's
motion to dismiss the plaintiffs' antitrust claim challenged the
plaintiffs' "sham" litigation argument by contending only that the
plaintiffs had failed to plausibly allege that Novartis's
litigation to enforce Patent '051 was "objectively baseless." We
thus focus on the plausibility of the plaintiffs' allegations with
respect to the "objectively baseless" prong, as the parties agree
that, at least under PREI, the antitrust actions cannot go forward
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unless the plaintiffs have plausibly alleged that Novartis's
litigation to enforce Patent '051 was objectively baseless.9
B.
Wholly apart from their allegations concerning Walker
Process fraud, the plaintiffs argue, for the following reasons,
that the only reasonably foreseeable outcome of Novartis's
infringement litigation was dismissal on patent-invalidity grounds
and thus that the infringement litigation was "objectively
baseless." The plaintiffs contend that Novartis's patent was
clearly invalid on either anticipation or obviousness grounds
because "the non-needle crystal was an inherent characteristic of
imatinib mesylate or else entirely obvious." See 35 U.S.C. §§ 102,
103. In this regard, the plaintiffs point to their complaints'
"key factual allegation," as described by the District Court: "that
the two techniques Novartis described in its patent application,
In addition to invoking this "objectively baseless" test
9
from PREI, the plaintiffs also urge us to apply the test from
California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508
(1972), which they argue is a different test that applies to
allegations that a pattern of petitioning activity, as opposed to
a single petition, was a "sham." The plaintiffs contend that this
case involves such a pattern because their complaint alleges that
Novartis sued not only Sun Pharma but also other generic
manufacturers that had filed ANDAs for generic versions of Gleevec.
However, the plaintiffs concede in their reply brief that "Novartis
rightly points out that the end payers did not argue below that
California Motor should apply." And, contrary to their assertion
otherwise, our recent decision in Puerto Rico Telephone Co. v. San
Juan Cable LLC, 874 F.3d 767 (1st Cir. 2017), does not excuse the
forfeiture of that argument, which was no less available to them
to make before that decision.
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which produced the β-crystalline form, were commonly known methods
for developing alternate crystalline forms at the time."
Our review of whether the plaintiffs have plausibly
alleged "sham" litigation is de novo. Tambone, 597 F.3d at 441.
We proceed on the understanding that a suit to enforce a patent,
like a suit to enforce any intellectual property right, could be
"objectively baseless." See PREI, 508 U.S. at 63-65 (considering
whether the underlying copyright infringement litigation in the
case was potentially a "sham" because it was "objectively
baseless"). But, here, the only ground that the plaintiffs assert
to support their contention that Novartis's infringement
litigation to enforce Patent '051 was "objectively baseless" is
that the patent was invalid on anticipation or obviousness grounds.
And that presents a problem for the plaintiffs.
A patent is "presumed valid" and thus its validity can
be challenged only with clear and convincing evidence. Microsoft
Corp. v. i4i Ltd., 564 U.S. 91, 95 (2011) (quoting 35 U.S.C.
§ 282). Against that background, we do not see how on this record
plaintiffs can satisfy the "objectively baseless" prong in light
of the fact that the Patent Office issued the patent following the
Board's earlier ruling reversing the patent examiner's rulings as
to anticipation and obviousness.
Although the Board did not have all of the prior art
before it at the time of its decision reversing the decision of
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the patent examiner, the Board had assumed what the subsequently
disclosed prior art showed: that imatinib mesylate was known prior
to Novartis's claim to the development of its β-crystalline form.
And, in ruling for Novartis notwithstanding that assumption, the
Board indicated that it was not clear on the face of the prior art
either that the β-crystalline form of imatinib mesylate was
inherently anticipated or that it was obvious how to get "from
here to there" in terms of developing it. That ruling was
significant for purposes of determining whether Novartis could
have reasonably expected success in its patent infringement
litigation, insofar as any defense to that infringement litigation
was based on the invalidity of Novartis's patent.
After all, invalidation of a patent on anticipation
grounds "requires that every element and limitation of the claim
was previously described in a single prior art reference, either
expressly or inherently, so as to place a person of ordinary skill
in possession of the invention." Sanofi-Synthelabo v. Apotex,
Inc., 550 F.3d 1075, 1082 (Fed. Cir. 2008). And the plaintiffs do
not dispute the District Court's conclusion that the prior art
"neither describes the β-crystalline form of the imatinib mesylate
salt nor a method to produce it. The prior art only mentions
imatinib mesylate itself, . . . which has many different
crystalline forms."
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Moreover, with respect to obviousness, the analysis
involves "several basic factual inquiries":
[T]he scope and content of the prior art are
to be determined; differences between the
prior art and the claims at issue are to be
ascertained; and the level of ordinary skill
in the pertinent art resolved. Against this
background, the obviousness or nonobviousness
of the subject matter is determined. Such
secondary considerations as commercial
success, long felt but unsolved needs, failure
of others, etc., might be utilized to give
light to the circumstances surrounding the
origin of the subject matter sought to be
patented.
Graham v. John Deere Co. of Kan. City, 383 U.S. 1, 17-18 (1966).
And, in the face of the Board's ruling and the patent's subsequent
issuance, the complaints' mere allegations that "the two
techniques Novartis described in its patent application, which
produced the β-crystalline form, were commonly known methods for
developing alternate crystalline forms at the time" and that a
pharmaceutical chemist of ordinary skill would have been motivated
to develop an advantageous crystalline form of imatinib mesylate
are insufficient to allege plausibly that Novartis was
unreasonable in expecting that Patent '051's presumed validity
could withstand an obviousness challenge.10 Rather, those
10The plaintiffs do point to the Supreme Court of India's
2013 decision not to issue what they describe as Novartis's "Indian
equivalent" of Patent '051. But, this effort fails. As indicated
by a copy of that decision in the record, the India Supreme Court
was applying a different patentability standard than under United
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allegations merely demonstrate that Novartis would have been
subject to a serious defense to its infringement litigation, as
Novartis would have had to demonstrate that, despite those
allegations, it was not obvious how, as the Board had put it in
reversing the patent examiner's ruling as to obviousness, to get
"from here to there," i.e., from the mesylate salt of imatinib to
its β-crystalline form.
Nor have the plaintiffs identified any authority to
support their contention that their allegations are sufficient to
plausibly allege that, despite the Board's ruling and the patent's
issuance, Novartis's litigation to enforce that patent was a sham.
In fact, the plaintiffs have not identified a single precedent
that permitted an antitrust "sham" litigation claim to go forward
based on an allegation that the infringement litigation was
objectively baseless because the underlying patent was alleged to
be invalid due to anticipation or obviousness.
We therefore reject the plaintiffs' contentions that
they have plausibly alleged that they may take advantage of the
"sham" litigation exception to Noerr-Pennington immunity
States law. As the court explained there, under Indian law, "the
mere discovery of a new form of a known substance" is not a "new
product" "unless they differ significantly in properties with
regard to efficacy." By contrast, under our law, a patent may be
obtained so long as the differences between the claimed invention
and the prior art were not so minimal that the invention was
"obvious . . . to a person having ordinary skill in the art to
which the claimed invention pertains." 35 U.S.C. § 103.
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recognized in PREI. And thus, in light of our rejection of the
plaintiffs' Walker Process-based arguments for subjecting Novartis
to antitrust scrutiny, we see no reason to disturb the District
Court's ruling dismissing the plaintiffs' antitrust suits for
failure to state a claim.
IV.
For the foregoing reasons, the judgments of the District
Court in both actions are affirmed.
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