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Takeda Pharmaceuticals U.S.A., Inc. v. Genentech, Inc.

Court of Chancery of Delaware

March 26, 2019

TAKEDA PHARMACEUTICALS U.S.A., INC., TAKEDA PHARMACEUTICALS AMERICA, INC.,
v.
GENENTECH, INC., Defendant. and MILLENNIUM PHARMACEUTICALS, INC., Plaintiffs,

          Date Submitted: December 7, 2018

          Philip A. Rovner & Jonathan A. Choa, POTTER ANDERSON CORROON LLP, Wilmington, Delaware; William F. Cavanaugh, Irena Royzman, Jacob F. Siegel, Eric B. LaPre, & Sara A. Arrow, PATTERSON BELKNAP WEBB & TYLER LLP, New York, New York, Attorneys for Plaintiffs Takeda Pharmaceuticals U.S.A., Inc., Takeda Pharmaceuticals America, Inc., and Millennium Pharmaceuticals, Inc.

          Kelly E. Farnan & Blake Rohrbacher, RICHARDS, LAYTON & FINGER, P.A., Wilmington, Delaware; Robert W. Trenchard, Jane M. Love, & Mark H. Mixon, Jr., GIBSON, DUNN & CRUTCHER LLP, New York, New York, Attorneys for Defendant Genentech, Inc.

          MEMORANDUM OPINION

          ZURN, VICE CHANCELLOR

         Two biotechnology companies are engaged in patent litigation in multiple European jurisdictions. In those cases, the alleged infringer has asserted a defense that it holds a license based on an agreement with a third company. In hopes of ending the foreign patent litigation, the alleged infringer then came to Delaware and sued that third company, which is a subsidiary of the patentholder. The alleged infringer seeks a declaratory judgment that it has a license and an anti-suit injunction against the third company and anyone acting in active concert or participation with it. Because the alleged infringer has an adequate remedy at law in the form of its license defense in the foreign patent litigation, this Court does not have subject matter jurisdiction over the alleged infringer's request for declaratory relief. The case is therefore dismissed.

         I. BACKGROUND

         A. The Parties' Corporate and Contractual Relationships

         In 1997, defendant Genentech, Inc. ("Genentech") and LeukoSite, Inc. ("LeukoSite") entered into a Development Collaboration and License Agreement, dated December 18, 1997 (the "License Agreement").[1] LeukoSite was "the owner or exclusive licensee of certain technology and other proprietary know-how" for certain identified products, which Genentech desired to use.[2] LeukoSite and Genentech agreed to collaborate to develop LDP-02, a monoclonal antibody.[3]

         Plaintiff Millennium Pharmaceuticals, Inc. ("Millennium") is the surviving entity of a 1999 merger with LeukoSite.[4] In 2004, Genentech and Millennium agreed to terminate the License Agreement through a Termination Agreement dated May 12, 2004 (the "Termination Agreement").[5] In the Termination Agreement, the parties cross-licensed intellectual property from their work related to LDP-02, and Genentech returned the rights to make, use, and sell LDP-02 to Millennium.[6] Genentech granted Millennium, among other things, "a non- exclusive, paid-up, royalty free, world-wide license" for "GNE Patents."[7] GNE Patents are defined as

any United States patent or patent application, including any division, continuation, or continuation-in-part thereof and any foreign patent or patent application or equivalent corresponding thereto and any letters patent or the equivalent thereof issuing thereon or reissue, re-examination, supplemental protection certificate or extension thereof, (i) which is owned or controlled by GNE or to which GNE has a transferable or sublicensable interest and (ii) which is necessary for the research, development or commercialization of LDP-02, Derivatives or Antibody Products, including without limitation GNE's interest in Joint Patents. Notwithstanding the foregoing, "GNE Patents" shall not include (a) the Excluded GNE Patents, or (b) any claim of a GNE Patent directed to a use of LDP-02, a Derivative or an Antibody Product in the Field for a disease indication other than an inflammatory bowel disease, which use is conceived and reduced to practice after the Effective Date.[8]

         The Termination Agreement defined "Excluded GNE Patents" as several identified patents not relevant here, as well as "any other patents or intellectual property owned by a Third Party for which direct licenses are generally available from such Third Party."[9] A "Third Party" is defined as "a person or entity who or which is not a party" to the License Agreement.[10]

         In 2008, plaintiff Takeda Pharmaceuticals U.S.A., Inc. acquired Millennium. Millennium and plaintiff Takeda Pharmaceuticals America, Inc. are wholly owned subsidiaries of Takeda Pharmaceuticals U.S.A.[11]

         Between 1990 and 2009, Roche was a majority stockholder of Genentech.[12] In 2009, Roche acquired the rest of Genentech's stock, and Genentech became a wholly owned subsidiary of Roche.[13] Takeda alleges that after Genentech became a wholly owned subsidiary of Roche, Roche "consolidated all of its U.S pharmaceutical operations" in Genentech.[14] Genentech's campus is now allegedly Roche's headquarters for its United States pharmaceutical operations, and the two companies share office space at Roche's principal place of business in New Jersey.[15]

         The parties worked to develop the LDP-02 antibody, which eventually became an active ingredient in ENTYVIO.[16] ENTYVIO treats adult ulcerative colitis and adult Crohn's disease, and was first approved by the FDA in 2014.[17]Takeda's fiscal year 2017 sales of ENTYVIO were nearly $1.8 billion.[18]

         B. Roche Files For Patent Rights Related To Antibody Technology.

         In 2006, Roche filed patent applications in the United States and Europe, including United States Patent Application 14/195, 066 (the "'066 Application").[19] For each application, the applicant and assignee were Roche entities, not Genentech.[20] European Patent No. 2, 007, 809 (the "'809 Patent") is a foreign counterpart of the '066 Application.[21] The European Patent Office granted the '809 Patent in September 2012.[22]

         The '066 Application included a power of attorney ("the Power of Attorney") through which Roche authorized several agents to prosecute that application.[23] A Genentech Vice President of Intellectual Property signed the Power of Attorney on Roche's behalf.[24] Roche gave prosecution authority to six Genentech in-house attorneys and one Genentech patent agent, among others.[25]Takeda asserts that these Genentech employees "have responsibility for and control the prosecution of the '066 Application on behalf of Genentech," while no Roche "patent attorneys or agents are identified."[26]

         The '066 Application was pending with the United States Patent and Trademark Office when Takeda filed its complaint here.[27] On August 6, 2018, the Patent and Trademark Office allowed the '066 Application.[28] Roche then paid the required fees and disclosed relevant documents, though Takeda disputes the scope and sufficiency of that disclosure.[29]

         C. Roche Sues Takeda Alleging ENTYVIO Infringes the '809 Patent, And Takeda Asserts It Has A License.

         In February 2018, Roche sued Takeda in Germany on the basis that ENTYVIO infringes the '809 Patent.[30] In June 2018, Roche sued Takeda in Italy as well.[31]

         As a defense against Roche's infringement claims, Takeda has asserted it has a license. Takeda contends that under the Termination Agreement, Takeda has a "non-exclusive, paid-up, royalty free, world-wide license" to use "GNE Patents." Takeda claims the '066 Application is a "GNE Patent" as defined in the Termination Agreement because Genentech "controls" the Application, and that Takeda has equal rights to the '809 Patent because it is a counterpart to the '066 Application. Takeda asserted a license defense against Roche in the German litigation, [32] and filed invalidity proceedings for the '809 Patent against Roche in the United Kingdom in which Takeda also asserted that it has a license.[33]

         On May 30, 2018, Takeda brought the dispute across the Atlantic by suing Genentech in this case. Takeda seeks a declaratory judgment that Genentech granted Takeda a license to the '066 Application and its foreign counterparts.[34]Takeda also seeks an anti-suit injunction against Genentech, and anyone in active concert or participation with it, in hopes of precluding or resolving Roche's infringement claims under the '066 Application and its foreign counterparts.[35]

         In Takeda's words, the relief it seeks in Delaware "will terminate the controversy between the parties" and prevent "Genentech and its affiliates" from continuing "to assert infringement claims against Takeda."[36] Even though Roche is not a party to the License or Termination Agreements, Takeda asserts the relief it seeks is appropriate and effective against Roche "[g]iven Genentech's relationship within" Roche.[37]

         On July 23, 2018, Genentech moved to dismiss for lack of subject matter jurisdiction, for failure to join Roche as an indispensable party, and for failure to state a claim under the Termination Agreement. Takeda opposed the motion on August 22. Genentech replied in support of its motion on September 7. The case was reassigned to me on October 17, and I heard oral argument on December 7.

         II. ANALYSIS

         Genentech claims this case must be dismissed because this Court lacks jurisdiction over Takeda's claim, Roche has not been joined as a party, and Takeda has failed to state a claim. I address subject matter jurisdiction first, as I can only substantively review the pleadings if I have jurisdiction to do so.[38]

         "When considering a motion to dismiss under Court of Chancery Rule 12(b)(1), the Court's first task, when appropriate, is to assess whether the fundamental predicates to subject matter jurisdiction exist."[39] "The Court then turns its focus to the 'nature of the wrong alleged' to determine whether Chancery's limited jurisdiction has been invoked."[40] "The plaintiff 'bears the burden of establishing this Court's jurisdiction,' and when determining whether that burden has been met, the Court may consider the pleadings and matters 'extrinsic to the pleadings.'"[41]

         "The Court of Chancery can exercise subject matter jurisdiction only when a case falls into one of three buckets."[42] Those buckets contain cases in which (i) "a plaintiff states an equitable claim," (ii) "a plaintiff requests equitable relief and there is no adequate remedy at law," and (iii) "jurisdiction exists by statute."[43]Takeda alleges its claims fall into the second bucket.[44] Genentech responds that Takeda has no controversy with Genentech, and that Takeda has an adequate remedy at law.[45] I find that while Takeda has an actual controversy with Genentech that could justify a declaratory judgment, the relief Takeda seeks (which is ultimately from Roche) can be adequately obtained at law. Therefore, this Court lacks subject matter jurisdiction, and the case must be dismissed.

         A. There Is An Actual Controversy Between Takeda And Genentech.

         "Delaware courts are statutorily authorized to entertain an action for a declaratory judgment, provided that an 'actual controversy' exists between the parties."[46] To show an "actual controversy," a party must show four factors:

(1) It must be a controversy involving the rights or other legal relations of the party seeking declaratory relief; (2) it must be a controversy in which the claim of right or other legal interest is asserted against one who has an interest in contesting the claim; (3) the controversy must be between parties whose interests are real and adverse; (4) the issue involved in the controversy must be ripe for judicial determination.[47]

         Takeda has satisfied these elements. First, the controversy involves Takeda's rights under the Termination Agreement. Second, Takeda seeks a declaration against Genentech, which has an interest in contesting that claim. Genentech might contest such a claim to preserve its own rights to use the patent without competition. Assuming Genentech did not have the authority to grant a license, Genentech also may have an interest in avoiding a ruling that it granted Takeda that license. Third, the controversy is real and adverse. Takeda and Genentech disagree over Takeda's legal rights under the Termination Agreement; Genentech's argument that Takeda has failed to state a claim to Roche's patents makes that clear.[48]

         Finally, the issue is ripe for judicial determination. "Generally, a dispute will be deemed ripe if 'litigation sooner or later appears to be unavoidable and where the material facts are static.'"[49] Roche has sued Takeda for infringing patents for which Takeda believes Genentech granted Takeda a license. Genentech has argued the Termination Agreement did not give Takeda that license.[50]

         But the fact that Takeda has satisfied the elements for obtaining a declaratory judgment does not mean this Court has jurisdiction. "It is well settled that the Declaratory Judgment Act does not independently confer jurisdiction on this court."[51] I must therefore analyze whether there is an equitable basis for jurisdiction.

         B. Takeda Has An Adequate Remedy At Law That Prevents This Court From Exercising Jurisdiction.

         This Court does not "have jurisdiction to determine any matter wherein sufficient remedy may be had by common law, or statute, before any other court or jurisdiction of this State."[52] "The question is whether the remedy available at law will afford the plaintiffs full, fair, and complete relief."[53]

         Genentech asserts Takeda has an adequate remedy at law in asserting the license as a defense against Roche in the ongoing infringement litigation, as Takeda has already done. Generally, "the ability of a party to obtain the equivalent of injunctive relief by raising its contentions as a defense in an action at law[] constitutes an adequate remedy that precludes injunctive relief in equity."[54] Said differently, "[w]here there is a defense cognizable at law ...


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