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Bayer Healthcare LLC v. Baxalta Inc.

United States District Court, D. Delaware

January 25, 2019

BAYER HEALTHCARE LLC, Plaintiff,
v.
BAXALTA INC., BAXALTA U.S. INC., and NEKTAR THERAPEUTICS, Defendants.

          MEMORANDUM ORDER

         Presently before the Court are the parties' Daubert motions. (D.I. 243, 250). I have reviewed the parties' briefing. (D.I. 244, 251, 270, 271, 279, 283).

         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.

         The parties previously moved for summary judgment. I granted Plaintiffs motion with respect to Defendants' invalidity defense of lack of utility. (D.I. 319).

         The parties now each move to exclude expert opinions on reasonable royalties for failure to meet Daubert standards. Plaintiff moves to exclude the testimony of Dr. Gordon Rausser (D.I. 243), and Defendants move to exclude the testimony of Dr. Sumanth Addanki (D.I. 250).

         II. LEGAL STANDARD

         Rule 702 provides that an expert witness may offer opinion testimony if (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. Fed.R.Evid. 702.

         The Rules also "assign to the trial judge the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand." Daubert v. Merrell Dow Pharms. Inc., 509 U.S. 579, 594, 597 (1993). "The relevance prong [of Daubert] requires the proponent [of the expert testimony] to demonstrate that the expert's 'reasoning or methodology can be properly applied to the facts in issue.'" Johnson v. Arkema, Inc., 685 F.3d 452, 459 (5th Cir. 2012) (quoting Curtis v. M & SPetroleum, Inc., 174 F.3d 661, 668 (5th Cir. 1999)). "The reliability prong [of Daubert] mandates that expert opinion 'be grounded in the methods and procedures of science and ... be more than unsupported speculation or subjective belief" Johnson, 685 F.3d at 459 (quoting Curtis, 174 F.3d at 668).

         In assessing the "reliability" of an expert's opinion, the trial court may consider a list of factors including: "whether a theory or technique . .. can be (and has been) tested," "whether the theory or technique has been subjected to peer review and publication," "the known or potential rate of error," "the existence and maintenance of standards," and "general acceptance" of a theory in the "relevant scientific community." Daubert, 509 U.S. at 593-94; see also Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 150 (1999) ("Daubert makes clear that the factors it mentions do not constitute a 'definitive checklist or test.'"); U.S. v. Valencia, 600 F.3d 389, 424 (5th Cir. 2010). "The proponent need not prove to the judge that the expert's testimony is correct, but she must prove by a preponderance of the evidence that the testimony is reliable." Johnson, 685 F.3d at 459 (quoting Moore v. Ashland Chem., Inc., 151 F.3d 269, 276 (5th Cir. 1998) (en banc)). At base, "the question of whether the expert is credible or the opinion is correct is generally a question for the fact finder, not the court." Summit 6, LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1296 (Fed. Cir. 2015). Indeed, "[v]igorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are the traditional and appropriate means of attacking shaky but admissible evidence." Daubert, 509 U.S. at 596.

         III. ANALYSIS

         A. Dr. Rausser's Reasonable Royalty Testimony

         Plaintiff argues that Dr. Rausser's reasonable royalty opinion should be excluded for three reasons.

         First, Plaintiff argues that Dr. Rausser's analysis is inconsistent with the assumption that the '520 patent is valid and infringed. Plaintiff asserts that Dr. Rausser improperly relies on the anticipation, non-utility, and noninfringement analyses of Defendants' technical experts to apportion minimal value to the '520 patent in the hypothetical negotiation. (D.I. 244 at 4-11). Plaintiff further argues that, in doing so, Dr. Rausser opines on technical issues beyond his expertise. (Id. at 11-12).

         I do not find Dr. Rausser's testimony inconsistent with the assumption that the '520 patent is valid. Dr. Rausser opines that the '520 patent adds little to Adynovate's value because, among other reasons, Adynovate's extended half-life is largely derived from the prior art. (D.I. 245, Ex. B ¶ 104). Relying on Dr. Zalipsky's anticipation testimony, Dr. Rausser concludes that the patent "makes at most a small 'improvement' to the prior art," and thus the parties to the hypothetical negotiation "would have accorded little or no value to the '520 patent compared to the prior art." (Id., Ex. B ¶¶ 126-28).[1]Plaintiff argues that Dr. Rausser wrongly imports a risk of anticipation into his hypothetical negotiation. (D.I. 244 at 5-7). I disagree. Validity does not define a patent's economic value-a patent can be valid yet offer little economic value over existing inventions. Thus, like anticipation, damages may require technical comparisons between the claimed invention and the prior art, albeit for different purposes. To make those comparisons, Dr. Rausser properly relies on Dr. Zalipksy's technical analyses of the claimed invention and the prior art. I do not think Dr. Rausser's testimony is tainted by Dr. Zalipsky's ultimate conclusion that the '520 patent is invalid.

         Similarly, I find that Dr. Rausser properly relies on Dr. Thakker's invalidity testimony. (D.I. 244 at 7-9). Plaintiff argues that Dr. Rausser improperly relies on Dr. Thakker's finding that the '520 patent fails to demonstrate extended factor VIII half-life. (D.I. 245, Ex. B ¶ 127). As discussed in my summary judgment opinion, utility can be met without showing extended half-life. (D.I. 319 at 20). Therefore, although the parties to the hypothetical negotiation would assume that the '520 patent meets § 101 utility, they would not necessarily assume that the claimed invention extends half-life. Plaintiffs remaining arguments relate to whether Dr. Thakker is factually incorrect and should be addressed during cross-examination.[2]

         In contrast, I do find portions of Dr. Rausser's testimony inconsistent with the assumption of infringement. (D.I. 244 at 9-11). Dr. Rausser opines that the parties to the hypothetical negotiation would assign little value to the '520 patent in part because the patent disparaged random pegylation, a characteristic of Adynovate. (D.I. 245, Ex. B ¶¶ 130-31). I construed the "isolated polypeptide conjugate" limitation in claim 1 of the '520 patent as "a polypeptide conjugate where conjugation was not random." Therefore, if Adynovate is assumed to have infringed claim 1, it cannot have been the product of random pegylation.[3]'[4] Dr. Rausser's opinions based on the erroneous assumption that Adynovate is the product of random pegylation are excluded.

         Second, Plaintiff argues that Dr. Rausser's apportionment calculation lacks economic foundation. (D.I. 244 at 12-14). Dr. Rausser initially finds that a maximum of 20% of Adynovate's value may be attributed to the '520 patent.[5] Plaintiff asserts that Dr. Rausser then arbitrarily reduces the apportionment from 20% to 2-4%. (Id.).

         As discussed, Dr. Rausser relies on Dr. Zalipsky and Dr. Thakker's technical opinions to opine that much of Adynovate's value can be attributed to the prior art as opposed to the '520 patent. (D.I. 245, Ex. B ¶¶ 126-28, 133; D.I. 271 at 13-14). Dr. Rausser also finds, based on Dr. Zalipsky's testimony, that less than 10% of Adynovate factor VIII conjugates could infringe any of the '520 patent claims. (D.I. 245, Ex. B ¶ 132 (finding less than 10% of factor VIII in Adynovate meets the SEQ ID NO. 4 claim limitation)). Dr. Rausser explained during deposition that he reached the 2% apportionment floor by multiplying his 20% starting point by the 10% of Adynovate conjugates that infringe. (D.I. 271 at 14; D.I. 272-1, Ex. 2 at 289:21-290:12). Defendants assert that Dr. Rausser ultimately reached a conservative estimate of 2-4% based on the totality of the evidence. (D.I. 271 at 14).

         Dr. Rausser provides an alternative apportionment rate for claim 9. Plaintiff argues that Dr. Rausser improperly relies on his claim 9 analysis to support the 2-4% range for claims 1-8. (D.I. 244 at 13). Claim 9 is the only '520 patent claim that requires the conjugates to be "monopegylated." Dr. Rausser opines that the reasonable royalty rate would be "very low" based on claim 9 alone, because only about 0.2% of Adynovate is monopegylated. (D.I. 245, Ex. B ¶¶ 132, 135). Defendants argue that, applying the same analysis as for claims 1-8, a 0.2% monopegylation frequency would result in an apportionment rate of 0.04% (20% starting point x 0.2% of Adynovate conjugates that infringe claim 9). (D.I. 271 at 14-15). It appears that Dr. Rausser made a calculation error during deposition to reach a result of 4% rather than 0.04%. (D.I. 272-1, Ex. 2 at 253:12-20). Plaintiff argues that the deposition testimony shows that Dr. Rausser inappropriately conflates the apportionment analyses for claims 1-8 and claim 9. (D.I. 244 at 13-14). Dr. Rausser has since corrected himself. (D.I. 272-1, Ex. 4 (Rausser deposition errata)).

         I find that Dr. Rausser has provided sufficient evidence to show that he applies reliable methods to the facts of this case to support his apportionment opinion. Plaintiffs arguments go to the weight and credibility of Dr. Rausser's testimony, which should be addressed in cross-examination.

         Third, Plaintiff argues that Dr. Rausser fails to show the licenses he relied on are technologically or economically comparable to the ...


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