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Bayer Healthcare LLC v. Baxalta Inc.

United States District Court, D. Delaware

August 26, 2019

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

          Rodger D. Smith II, Michael J. Flynn, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, DE; Bradford J. Badke, Sona De, Ching-Lee Fukuda, Caroline Bercier, Julie L. Hsia, SIDLEY AUSTIN LLP, New York, NY; Kevin O'Brien, Sue Wang, Saurabh Prabhakar, SIDLEY AUSTIN LLP, San Francisco, CA; Gwen Hochman Stewart, Grace L.W. St. Vincent, SIDLEY AUSTIN LLP, Chicago, IL. Attorneys for Plaintiff.

          Frederick L. Cottrell, III, Kelly E. Farnan, Nicole K. Pedi, RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; Edgar H. Haug, Angus Chen, Porter F. Fleming, Richard F. Kurz, Erika V. Selli, Elizabeth Murphy, HAUG PARTNERS LLP, New York, NY. Attorneys for Defendants.

          MEMORANDUM OPINION

          ANDREWS, U.S. DISTRICT JUDGE.

         Presently before the Court are Plaintiffs motion for attorneys' fees (D.I. 420) and Defendants' related motion to strike (D.I. 473), and Plaintiffs motion pursuant to Federal Rule of Civil Procedure 59 (D.I. 437). I have reviewed the parties' briefing. (D.I. 421, 438, 440, 450, 457, 459, 473, 480, 481). For the following reasons, Plaintiffs motion for attorneys' fees is DENIED, Defendants' motion to strike is DISMISSED as moot, and Plaintiffs motion pursuant to Rule 59 is GRANTED with respect to supplemental damages, pre-judgment interest, and post-judgment interest, and DENIED with respect to indirect and willful infringement.

         I. BACKGROUND

         On December 5, 2016, Plaintiff Bayer Healthcare LLC filed suit against Defendants Baxalta Inc. and Baxalta U.S. Inc. (collectively, "Baxalta") and Nektar Therapeutics for infringement of U.S. Patent No. 9, 364, 520 ("the '520 patent"). (D.I. 1). I held a jury trial from January 25 to February 1, 2019.[1] The jury found each asserted claim valid and infringed and that Bayer was entitled to $155, 190, 264 in damages, based on a 17.78% royalty rate and $872, 836, 128 royalty base. (Id.). I granted judgment as a matter of law with respect to induced, contributory, and willful infringement by Nektar, and willful infringement by Baxalta. Tr. at 1134:24-1135:3; (D.I. 412 ¶¶ 2-3). Bayer has no remaining claims against Nektar.

         II. ATTORNEYS' FEES

         "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. "[A]n 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is 'exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014). In assessing the totality of the circumstances, the Court may consider "frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. at 554 n.6. The party seeking fees must show that a case is exceptional by a preponderance of the evidence. Id. at 557-58.

         For the following reasons, Bayer's motion for attorneys' fees is DENIED. Thus, Baxalta's motion to strike a portion of Bayer's corresponding reply brief is DISMISSED as moot.

         A. Fair Estimate of Fees

         Baxalta argues that Bayer's motion is barred because it fails to provide a fee estimate as required under Federal Rule of Civil Procedure 54(d). (D.I. 440 at 2-3). Rule 54(d)(2)(B)(iii) provides that a motion for attorney's fees must, among other things, "state the amount sought or provide a fair estimate of it."

         The time to provide a fee estimate has not run. (See D.I. 457 at 9). Rule 54(d)(2)(B)(i) requires a motion for fees to be filed within "14 days after the entry of judgment." Rule 54(a) defines "judgment" as "a decree and any order from which an appeal lies." Where there are multiple claims:

[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.

Fed. R. Civ. P. 54(b). The judgment entered on February 8, 2019 did not adjudicate the parties' post-trial claims under Rules 50(b) and 59(a). Therefore, I have yet to enter a final judgment that would trigger the deadline on Bayer's motion for fees. See Fed. R. App. P. 4(a)(4)(A)(i), (v). Had I granted Bayer's present motion, Bayer would have had ample opportunity to provide an accounting of fees consistent with Rule 54(d).[2] (D.I. 457 at 10).

         B. Violation of the Markman Order

         Bayer argues that Baxalta repeatedly disregarded the Markman order, which indicates the unreasonable manner in which Baxalta litigated this case. (D.I. 421 at 4-8).

         Bayer points to several actions leading up to trial. (Id. at 4-6). During claim construction, Bayer relied on the phrase "[a]ny conjugation with [amines] is random" in the prosecution history to argue that the patentees defined any conjugation with amines as random. I rejected that theory in my Markman opinion, but in the context of finding no clear and unmistakable disclaimer. (D.I. 195 at 16). Baxalta raised a variation of the same argument on summary judgment. I clarified that the argument failed on claim construction and again on summary judgment because Baxalta was reading the phrase out of context. (D.I. 319 at 7-8). Although Baxalta raised the same argument on motions in limine, those motions were prepared and exchanged before I issued the summary judgment opinion. (D.I. 440 at 5). I explicitly stated in my order on the motions in limine that "Defendants should not raise this argument again in their filings or at trial." (D.I. 335 at 2).

         I do not think Baxalta's pretrial behavior amounts to "unreasonable" litigation conduct. I did not clearly reject Baxalta's interpretation of my claim construction until resolving the motions for summary judgment. (See D.I. 440 at 4-5). Therefore, the fact that Baxalta continued to raise the "[a]ny conjugation" argument after claim construction does not make this an exceptional case.

         Bayer also argues that Baxalta presented evidence at trial based on the rejected claim construction argument. (D.I. 421 at 7-8).

         First, Bayer asserts that Baxalta tried to elicit testimony from '520 patent inventor Dr. Pan that random conjugation is equivalent to amine pegylation. (D.I. 421 at 7). I disagree. Dr. Pan was a fact witness. Baxalta focused on the pegylation done by Nektar and Bayer that Dr. Pan was involved in, not pegylation generally. E.g., Tr. at 959:16-960:1, 969:12-970:5.[3] I overruled Bayer's objection that Baxalta was "coming very close to violating" the Markman order. Id. at 980:6-982:5.

         Second, Bayer asserts that Baxalta's experts, Drs. Walensky and Zalipsky, testified contrary to the Markman order. (D.I. 421 at 7-8). Bayer did not object to any of the cited testimony at trial. Regardless, I do not think either expert violated the Markman order. Both discussed the lysine pegylation described in the '520 patent, which the patent characterizes as a "random approach." Tr. at 1041:7-17, 1199:5-10. Dr. Walensky also discussed the lysine pegylation used to make Adynovate and determined that it was random. Id. at 1047:11-1048:7, 1058:13-1059:8. Neither expert opined on amine conjugation generally. Rather, both limited their testimony to discussion of particular reactions described in the '520 patent or in making Adynovate.[4]

         Therefore, I do not think Baxalta violated the Markman order. Baxalta was sometimes "close to the line," but that does not make its litigation conduct unreasonable.

         C. Bad Faith in Disclosure of Supplemental Financials

         Baxalta originally produced worldwide financials showing about 80% profits. (D.I. 421 at 9). About two months after the close of fact discovery, Baxalta produced supplemental financials showing lower profits and including additional costs. (D.I. 440 at 7).

         I addressed the late-disclosed financials in relation to Bayer's motion to strike. (D.I. 362 at 4). I found that Baxalta engaged in bad faith or willfulness in failing to disclose the supplemental financials during fact discovery, but that, on balance, the Pennypack factors weighed against exclusion. (Id. at 4-5). I also noted that it was unclear if the supplemental financials were "litigation-inspired documents," as Bayer had suggested. (Id. at 6).

         Bayer continues to argue that Baxalta falsified the supplemental financials. (D.I. 421 at 9-10). I do not think Bayer's argument is supported by the record. The original profit figures were based on the "cost of goods" ("COGs"), which included manufacturing costs and royalties. Tr. at 773:18-774:3. Baxalta's Rule 30(b)(6) witness, Mr. Hackel, testified that "other costs of sales" ("OCOS") were not included because Baxalta did not track those costs on the product level. Id. at 717:15-25. Baxalta asserts that the supplemental financials incorporated additional costs obtained from its parent company, Shire. (D.I. 440 at 7). Shire's employee, Mr. Dewan, testified that Shire keeps such records on an internal system, which is accurate and maintained in the ordinary course of business. Tr. at 1182:22-1184:10. There is no evidence that Baxalta altered or falsified the Shire data when producing the supplemental financials.

         Bayer has only shown that Baxalta acted in bad faith by its late disclosure of the supplemental financials. As discussed in my order denying Bayer's motion to strike, Bayer was not substantially prejudiced by the late disclosure and the supplemental financials had a limited scope of relevance. (D.I. 362 at ...


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