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Sanofi-Aventis U.S. LLC v. Merck Sharp & Dohme Corp.

United States District Court, D. Delaware

May 16, 2018

SANOFI-AVENTIS U.S. LLC, SANOFI-AVENTIS DEUTSCHLAND GMBH, and SANOFI WINTHROP INDUSTRIE, Plaintiffs,
v.
MERCK SHARP & DOHME CORP., Defendant.

          MEMORANDUM ORDER

         Pending before the Court are Defendant's Motion for Summary Judgment of Noninfringement (D.I. 180) and Plaintiffs' Motion to Strike or, in the Alternative, for Leave to File a Sur-Reply (D.I. 219). The issues have been fully briefed. (D.I. 181, 197, 213, 219, 232, 235). For the reasons stated herein, Defendant's Motion for Summary Judgment (D.I. 180) is DENIED. Plaintiffs' motion to strike (D.I. 219) is DISMISSED AS MOOT.

         I. BACKGROUND

         On September 16, 2016, Plaintiffs sued Defendant for patent infringement. (D.I. 1). Plaintiffs' second amended complaint accuses Defendant of infringing eleven patents[1] that relate to insulin drug formulations and insulin injection pen devices. (D.I. 93, pp. 3-5; D.I. 181, p. 1).

         At issue here are the '044, '486, '069, '844, '105, and '005 patents, which the parties refer to as "the OB Pen Patents."[2] (D.I. 181, p. 1; D.I. 197, p. 1). Third-party Ypsomed AG ("Ypsomed") supplies Defendant with components for Defendant's injection pen devices. (D.I. 181, p. 1). Defendant contends that it does not infringe the OB Pen Patents as a matter of law because in February 2009, Sanofi-Aventis Deutschland GmbH ("Sanofi") and Ypsomed signed an agreement granting Ypsomed a license to the rights under Plaintiffs' European patent EP 1603 611 ("EP 611") and its "equivalent patents" to manufacture and produce components of the OB Pen Patents and sell them to third parties. (Id.). Since Ypsomed has a license to the disputed patents, Defendant argues, the doctrines of patent exhaustion and implied license preclude a finding that Defendant infringes. (Id. pp. 10-13). Plaintiffs disagree with Defendant's interpretation of "equivalent patents" and Defendant's conclusion that the OB Pen Patents are licensed. (D.I. 197, pp. 1-2). Plaintiffs assert, among other things, that the license is invalid because it fails to specify which patents are licensed and fails to specify a price term, both of which Plaintiffs maintain are essential under German law. (Id. p. 11).

         Prior to the February 2009 agreement, Ypsomed and Sanofi had entered into other patent license agreements. In April 2008, Ypsomed and Sanofi settled a patent dispute, entering into a settlement agreement that also contained a provision under which Ypsomed would supply Sanofi with components for Plaintiffs' SoloSTAR® pen injector product. (D.I. 181, p. 3; D.I. 197, p. 2). The April 2008 "supply agreement" granted Ypsomed a "non-exclusive, worldwide, non-sublicensable and royalty free right to use [Sanofi's] Intellectual Property Rights to the extent strictly necessary for [Ypsomed] to carry out its obligations" to supply components to Sanofi. (D.I. 201-2 at 11). Sanofi and Ypsomed entered into another agreement in December 2008 to settle an opposition Sanofi had filed against European patent EP 1 568 388 Bl ("EP 388"), owned by Ypsomed.[3] (D.I. 181, p. 4; D.I. 197, p. 3). The December 2008 agreement granted Sanofi:

a non-exclusive, irrevocable and free of charge license under TecPharma's Patent EP 1568 388 Bl and all world-wide equivalents claiming the same priority (hereinafter referred to as "Patent", Annex listing all Patent application numbers) to manufacture, use, sell, promote and/or distribute drug delivery devices to administer pharmaceutical substances in the fields of diabetes and thrombosis or any components or subassemblies thereof (hereinafter referred to as "Device/s").

(D.I. 201-3 at 3).[4] During negotiations for the December 2008 license, Ypsomed's initial proposal recited a license to EP 388 only. (D.I. 182 at 343-45). Plaintiffs counter-proposed expanding the license to include "all world-wide equivalents claiming the same priority." (Id. at 332-35, 338).

         On December 23, 2008, Ypsomed informed Sanofi that it intended to file an opposition proceeding against EP 611 unless Ypsomed and Sanofi could agree to a license. (D.I. 201-4 at 2). At that time Ypsomed provided a proposed license modeled on the EP 388 agreement. (Id. at 2-4). On February 3, 2009, Sanofi responded, proposing an agreement under which Ypsomed would agree not to challenge EP6ll and Sanofi would grant Ypsomed immunity from a patent infringement suit by Plaintiff. (D.I. 201-6 at 2, 4-5). Two days later, Sanofi offered a second proposal which would grant Ypsomed a royalty-free license to EP 611 and an option for a license on "all world-wide equivalent patents claiming the same priority as [EP 611], " specifying that, "The Parties shall in good faith negotiations determine the scope, terms and conditions of such a license." (D.I. 201-7 at 2, 4-5). Ypsomed responded the next day by proposing a revised version of the agreement; one of the proposed revisions was to convert the option to an irrevocable nonexclusive license. (D.I. 201-8). In its response, Ypsomed commented on some of the changes in its proposal, stating that, "It is crucial for Ypsomed to include the right to sell the Device to third parties, and to have a final understanding on equivalent patents." (Id. at 2). Sanofi indicated that it was "willing to accept most of [Ypsomed's] proposed changes, " but that it was "important for [Sanofi] to point out that the [provision] in Art. 1(2) shall not include competitors of Sanofi-Aventis." (D.I. 201-9). Therefore, Sanofi proposed a modification to § l(2)[5] of the agreement so that § 1(2) would read, "The license rights granted under § 1(1) shall include the right to have manufactured the Device by Affiliates of Ypsomed or by a third party contractor." (Id. at 4; D.I. 182 at 381). Ypsomed did not explicitly take issue with Sanofi's proposed restriction that the license not cover sales by Ypsomed to competitors of Sanofi-Aventis. (See D.I. 201-10). Ypsomed did, however, take issue with the word "contractor, " insisting that it be deleted because, "If the patent lapses in the opposition [Ypsomed] would not face any kind of a restriction of the distribution rights to third party contractors." (Id.). It thus appears as though Ypsomed opposed Sanofi's proposed restriction, and any restriction that would limit the entities to which Ypsomed could sell.

         By February 9, 2009, Sanofi and Ypsomed had both signed the agreement. The agreement ultimately granted Ypsomed a non-exclusive royalty-free license to EP 611 and a non-exclusive royalty-bearing license to "all world-wide equivalent patents claiming the same priority as [EP 611] (hereinafter referred to as 'Equivalent/s')." (D.I. 182 at 381-82). Section 1(2), which deals with the royalty-free license to EP 611, does not include a restriction relating to third party "contractors." (Id. at 381 ("The license rights granted under § 1(1) shall include the right to have manufactured the Device by Affiliates of Ypsomed or by a third party and shall include the right to have sold, promoted and/or distributed the Device by Affiliates of Ypsomed or by a third party.") (emphasis omitted)). Section 2(2) of the February 2009 agreement reflects that the parties did not reach agreement on the details of the license to equivalent patents, leaving "further details of such a license on Equivalents" to subsequent "good faith negotiations." (Id. at 382). The February 2009 agreement contains a provision selecting German law to govern disputes arising under the agreement. (Id. at 383). Despite this choice of law provision, the agreements appear to have initially been drafted in English.[6]

         After concluding the February 2009 agreement, Sanofi and Ypsomed engaged in subsequent negotiations for a proposed cross-license agreement in September 2011 (D.I. 201-13) and a proposed license agreement in February 2015 (D.I. 201-12). Ypsomed's September 2011 proposal contemplated a cross-license to the WO2003075985 ("WO 985") and WO2007115424 ("WO 424") patents and all of their "world-wide equivalent patents and counterparts claiming the same priority, including all existing and future divisions, continuations, continuations in part, reissues, re-examinations and utility models claiming the same priority." (D.I. 201-13 at 8). Ypsomed's February 2015 proposal would have granted a "non-transferable, world-wide and free of charge license under EP [2 600 922 ("EP 922")] and all its equivalent patents, patent applications, reissues, re-examinations, extensions, divisions and continuations claiming the same priorities as EP 922 (all together the 'Patent')." (D.I. 201-12 at 3).

         Defendant asserts that the "equivalent patents" provision of the February 2009 agreement grants Ypsomed a license to the OB Pen Patents because the agreement "defines 'equivalent patents' as patents 'claiming the same priority as [EP 611], '" and the OB Pen Patents claim the same priority as EP 611. (D.I. 181, pp. 8-9). Therefore, Defendant contends, summary judgment is appropriate because Ypsomed's sale to Defendant of injection pen device components manufactured under that license exhausts Plaintiffs' patent rights in the components sold. (Id. pp. 10-11). Plaintiffs submit that I should deny summary judgment, arguing that the "equivalent patents" in the license do not cover the OB Pen Patents, and that the license is invalid under German law. (D.I. 197, pp. 11, 14-15).

         II. APPLICABLE LAW

         A. Legal Standard

         "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party has the initial burden of proving the absence of a genuinely disputed material fact relative to the claims in question. Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). Material facts are those "that could affect the outcome" of the proceeding, and "a dispute about a material fact is 'genuine' if the evidence is sufficient to permit a reasonable jury to return a verdict for the nonmoving party." Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011) (quoting Anderson v. Liberty Lobby Inc., Ml U.S. 242, 248 (1986)). The burden on the moving party may be discharged by pointing out to the district court that there is an absence of evidence supporting the non-moving party's case. Celotex, 477 U.S. at 323.

         The burden then shifts to the non-movant to demonstrate the existence of a genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,475 U.S. 574, 586-87 (1986); Williams v. Borough of West Chester, Pa.,891 F.2d 458, 460-61 (3d Cir. 1989). A non-moving party asserting that a fact is genuinely disputed must support such an assertion by: "(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials; or (B) ...


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