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Bayer Healthcare LLC v. Baxalta Inc.

United States District Court, D. Delaware

January 23, 2019



         Presently before the Court are Plaintiffs motions to strike. (D.I. 214, 240). I have reviewed the parties' briefing. (D.I. 215, 221, 224, 241, 273, 277).

         I. BACKGROUND

         Plaintiff asserts claims 1-9 of U.S. Patent No. 9, 364, 520 ("the '520 patent"). (D.I. 1). The '520 patent is directed to forms of factor VIII, "a protein necessary for normal blood clotting in response to injury." (D.I. 99 at 1). The patent claims factor VIII conjugates not found in nature, made up of recombinant factor VIII and one or more biocompatible polymers chemically bonded to factor VIII at the protein region known as the "B-domain." (Id. at 1, 3). The claimed factor VIII conjugates are formed through a process called pegylation, which is the conjugation of recombinant factor VIII with polyethylene glycol ("PEG"), a biocompatible polymer. (Id. at 5). Claims 1 and 9 are independent claims. Claims 2-8 depend from claim 1.

         The accused product is Adynovate, a pegylated factor VIII used to treat hemophilia A. (D.I. 28 ¶ 25; D.I. 247 at 1). Hemophilia A is a congenital bleeding disorder caused by deficient or defective factor VIII. '520 patent at 1:25-32.

         Plaintiff has filed two motions to strike portions of Defendants' expert testimony. In the first motion, Plaintiff moves to strike (1) Dr. Rausser's opinions in his reply expert report based on allegedly late-disclosed foreign profits documents, and (2) Dr. Tuddenham's opinions in his reply expert report based on allegedly new indefiniteness and noninfringement theories.[1] (D.I. 214, 215). In the second motion, Plaintiff moves to strike Dr. Zalipsky's opinions in his reply expert report based on allegedly new indefiniteness and lack of written description theories. (D.I. 240, 241).


         Federal Rule of Civil Procedure 37(c)(1) provides that "[i]f a party fails to provide information ... as required by Rule 26(a) or (e), the party is not allowed to use that information . .. to supply evidence on a motion, at a hearing, or at trial, unless the failure was substantially justified or is harmless." To determine whether a failure to disclose was harmless, courts in the Third Circuit consider the Pennypack factors: (1) the prejudice or surprise to the party against whom the evidence is offered; (2) the possibility of curing the prejudice; (3) the potential disruption of an orderly and efficient trial; (4) the presence of bad faith or willfulness in failing to disclose the evidence; and (5) the importance of the information withheld. Konstantopoulas v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997) (citing Meyers v. Pennypack Woods Home Ownership Ass 'n, 559 F.2d 894, 904-05 (3d Cir. 1977)). "[T]he exclusion of critical evidence is an 'extreme' sanction, not normally to be imposed absent a showing of willful deception or 'flagrant disregard' of a court order by the proponent of the evidence." Id. The determination of whether to exclude evidence is within the discretion of the district court. Id.

         III. ANALYSIS

         A. Dr. Rausser's Testimony Based on Foreign Profits

         Dr. Rausser, in his reply expert report, relies on supplemental forecasts of Adynovate's worldwide operating costs, including research, development, regulatory, and royalty costs. (D.I. 216, Ex. J ¶¶ 70-74; D.I. 215 at 5-6). Defendants produced the forecasts in August 2018, after the close of fact discovery. (D.I. 215 at 5-6). Notably, Dr. Rausser criticizes Plaintiffs expert, Dr. Addanki, for inflating his figures by relying on Adynovate's gross profits rather than specific operating profits. (D.I. 216, Ex. J¶¶ 11, 13, 17, 26, 146, 167, 170, 171, 179). Plaintiff argues that Dr. Rausser's testimony should be stricken because the forecasts were late-disclosed and Defendants' witnesses indicated that such forecasts did not exist. (D.I. 215 at 9). Defendants assert that the forecasts did not become relevant until Plaintiff revealed its "surprise" Nash Bargaining theory of damages in Dr. Addanki's opening expert report. (D.I. 221 at 11-13). As a preliminary matter, I do not think Dr. Addanki's report is relevant.[2] The record shows that Plaintiff made several requests for Defendants' worldwide fmancials. (See D.I. 216, Ex. B). Defendants were aware of those requests by June 2018, at the latest, when Plaintiff submitted a letter to the Court outlining the parties' related discovery dispute. (D.I. 172 at 1). Plaintiff specifically indicated that Defendants had failed to produce "units, costs, profitability, and forecast data" for "all factor VIII products, including exports for sale in Europe and Asia."

         (D.I. 172 at 2). At the subsequent discovery hearing, Defendants dropped their objections and agreed to a document swap. (D.I. 180 at 39:11-40:13). Defendants then produced updated financials reflecting Adynovate and Advate's worldwide sales and forecast information, which did not include the supplemental operating costs. (D.I. 215 at 4).

         Based on the updated financials, Plaintiff deposed Baxalta's Rule 30(b)(6) witness for financial topics, Wolfgang Hackel, who is Baxalta's Head of Finance in Research and Development. (D.I. 215 at 4). Mr. Hackel indicated that full profit and loss statements, which would include specific categories of operating costs, were not available for Adynovate or Advate, because that information is not broken down at the product level. (See, e.g., D.I. 216, Ex. Eat 107:12-108:24). Other Baxalta witnesses agreed. (D.I. 221 at 5). Defendants do not dispute that its "witnesses testified that [Baxalta] did not have product-specific profit and loss ('P&L') statements, and that the financial documents that Bayer marked [for deposition] lacked certain cost information." (D.I. 221 at 2). Instead, Defendants argue that Plaintiff is at fault because it "never asked the witnesses nor Defendants whether such cost information existed." (Id.).

         Defendants' argument is illogical. Plaintiff, having been told that no such statements exist, would have no reason to probe further or suspect that Defendants were withholding information. Therefore, I find that the record shows Defendants engaged in bad faith or willfulness in failing to disclose the supplemental financials during fact discovery. Thus, the fourth Pennypack factor weighs in favor of exclusion.

         In contrast, the first two Pennypack factors weigh against exclusion. Plaintiff argues that it has spent hours deposing fact witnesses on Baxalta's costs, and "[a]llowing Defendants to use [the] belatedly produced and likely fabricated profitability information at this late stage to call into question Dr. Addanki's damages analysis would be prejudicial to [Plaintiff.]" (D.I. 215 at 13). Dr. Addanki, however, was able to consider the supplemental forecasts and Dr. Rausser's reply report before submitting his own reply report. (D.I. 215 at 16). Defendants also offered Plaintiff an opportunity to depose the relevant witnesses on the supplemental forecasts, including an extension for Dr. Addanki's reply report, which Plaintiff refused. (Id. at 15). I do not think Plaintiff has identified any substantial prejudice. Plaintiff will have the opportunity to address the validity of the supplemental forecasts at trial through deposition testimony, testimony from Dr. Addanki, and cross-examination of Dr. Rausser.

         The third Pennypack factor is neutral. I do not anticipate that either allowing or excluding Dr. Rausser's testimony will impact the trial schedule ...

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