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Esoterix Genetic Laboratories, LLC v. Qiagen Inc.

United States District Court, D. Massachusetts

August 31, 2016

ESOTERIX GENETIC LABORATORIES LLC, Plaintiff/Counterclaim Defendant,
v.
QIAGEN INC. and QIAGEN MANCHESTER, LTD., Defendants/Counterclaim-Plaintiffs. and LABORATORY CORPORATION OF AMERICA HOLDINGS, Counterclaim Defendant,

          MEMORANDUM AND ORDER

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         I. INTRODUCTION

         Plaintiff Esoterix Genetic Laboratories LLC (“Esoterix”) filed this action against Defendants Qiagen Inc. and Qiagen Manchester, LTD. (collectively, “Qiagen”), alleging that Qiagen exceeded the scope of the parties' License Agreement, and thereby infringed upon Esoterix's patent rights. Esoterix's operative Complaint [ECF No. 7] (“Compl.”), alleged claims for patent infringement (Count I); violation of Massachusetts General Laws Ch. 93A (Count II); breach of contract (Count III); and breach of the duty of good faith and fair dealing (Count IV).

         Qiagen moved to dismiss the Complaint, arguing that the patent-in-suit, U.S. Patent No. 7, 294, 468 (the “'468 Patent”), was invalid because it was directed to a “law of nature, ” which is not eligible for patent protection under 35 U.S.C. § 101. In a Memorandum and Order dated September 25, 2015, the Court found that the '468 Patent claims were drawn to ineligible subject matter, and that the '468 Patent was therefore invalid. See Esoterix Genetic Labs. LLC v. Qiagen Inc., 133 F.Supp.3d 349 (D. Mass. 2015) (hereinafter, “Qiagen I”). Accordingly, the Court dismissed Count I of Esoterix's Complaint, which alleged infringement of the '468 Patent. Id. at 360-61. The Court, however, declined to dismiss Esoterix's state-law claims alleged in Counts II, III, and IV. Id. at 363-64.[1]

         Qiagen filed an Amended Answer to the remaining claims. [ECF No. 109]. Qiagen also asserted counterclaims against Esoterix and Esoterix's parent company, Laboratory Corporation of America Holdings (“LabCorp”). See id. (“Counterclaims”). Specifically, Qiagen seeks a declaratory judgment of invalidity with respect to four additional patents, which are related to the '468 Patent; namely, U.S. Patent Nos. 7, 964, 349 (“the '349 Patent”); 8, 105, 769 (“the '769 Patent”); 8, 465, 916 (“the '916 Patent”); and 9, 035, 036 (“the '036 Patent”).[2] See Counterclaims, Counts II-V). In addition, Qiagen seeks a declaratory judgment of non-infringement with respect to the four additional patents (Count VI), and a declaratory judgment regarding the parties' respective contractual rights under the operative License Agreement - specifically, that Qiagen does not owe Esoterix any royalties, due to the invalidity of the underlying Licensed Patents. Id. (Count I). Qiagen also seeks restitution of all royalties it paid to Esoterix under the Licensing Agreement after the date that Qiagen first challenged the validity of the '468 Patent. Id. (Count VII). Finally, Qiagen alleges claims against Esoterix and LabCorp for tortious interference with contractual relationships (Count VIII), and tortious interference with prospective business relationships (Count IX).

         Presently before the Court are (1) Qiagen's Motion for Judgment on the Pleadings with respect to its Counterclaims [ECF No. 88]; and (2) Esoterix and LabCorp's Cross-Motion to Dismiss Qiagen's Counterclaims. [ECF No. 98]. Qiagen asks the Court to find that the four additional patents-in-suit are ineligible for patent protection under 35 U.S.C. § 101 for essentially the same reasons that this Court invalidated the '468 Patent. Esoterix and LabCorp, however, have moved to dismiss all of Qiagen's Counterclaims, on the grounds that this Court lacks subject matter jurisdiction over them. In the alternative, Esoterix and LabCorp oppose Qiagen's Motion for Judgment on the Pleadings, arguing that the four additional patents-in-suit are drawn to patentable subject matter under § 101.

         For the reasons set forth in this Memorandum and Order, Esoterix and LabCorp's Motion to Dismiss is DENIED, and Qiagen's Motion for Judgment on the Pleadings is ALLOWED.

         II. BACKGROUND

         The Court briefly reviews the factual background of this case, which is set forth in greater detail in the Court's prior Memorandum and Order. See Qiagen I, 133 F.Supp.3d 349.

         The '468 Patent, which is titled “Method to Determine Responsiveness of Cancer to Epidermal Growth Factor Receptor Targeting Treatments, ” claims a method for determining whether particular types of pharmaceutical compounds are likely to be effective in treating non-small cell lung cancer in a patient, based on the presence or absence of certain nucleotide variances in the patient's genes. See '468 Patent; Compl. ¶¶ 21-24. More specifically, the inventors discovered that there is a positive correlation between the existence of particular naturally-occurring nucleotide variations on a person's epidermal growth factor receptor (“EGFR”) gene, and the likelihood that specific pharmaceutical compounds (namely, gefitinib or erlotinib) will be effective in treating non-small lung cancers in that person. See '468 Patent, 519:44-520:49. The patent application was filed on December 4, 2005, and the U.S. Patent and Trademark Office issued the '468 Patent on November 13, 2007.

         Previously, all right, title, and interest in the '468 Patent was owned by non-party Genzyme Corporation (“Genzyme”). In 2008, Genzyme entered into a License Agreement (the “License Agreement”) with non-party DxS, Ltd. (“DxS”). The License Agreement granted DxS a non-exclusive license to manufacture and sell certain products practicing the claims of specific patents set forth in Schedule A to the License Agreement, including but not limited to the '468 Patent.[3] In exchange for this license, DxS would pay royalties on sales of its products, among other terms and conditions. Compl. ¶¶ 18, 25-32. In or around September 2009, DxS was acquired by a Qiagen entity, and Qiagen therefore assumed DxS's rights and obligations as licensee under the License Agreement. Id. ¶ 20. In December 2010, Genzyme sold certain assets (including all its rights to the '468 Patent, as well as its rights as licensor under the License Agreement) to LabCorp. Id. ¶¶ 2, 21. LabCorp, in turn, created Esoterix as a wholly-owned subsidiary, to control the purchased assets. Thus, at all relevant times, Esoterix held all right, title, and interest in the '468 Patent and served as licensor under the License Agreement. Id. ¶¶ 23-24.

         In its Amended Complaint, Esoterix alleges that Qiagen exceeded the scope of the license and breached certain promises made in the License Agreement. The License Agreement only allowed Qiagen to sell certain types of products at certain times, and it drew a key distinction between “Licensed Products” and “Licensed Research Products.” Id. ¶¶ 26-29. Licensed Products included diagnostic kits (for determining the presence of EGFR mutations) that would be marketed and sold for commercial use. Id. ¶ 27. Licensed Research Products were limited to diagnostic kits that would be sold for non-commercial, research use only. Id. ¶¶ 28-29. Under the terms of the License Agreement, Qiagen could only sell Licensed Research Products for noncommercial use until regulatory approval was obtained for commercial use. Id. ¶ 30. Regulatory approval for the test kits was not obtained until July 2013. Id. ¶ 37. Prior to regulatory approval and during the term of the License Agreement, Qiagen paid Esoterix royalties for its purported sales of Licensed Research Products. Id. ¶¶ 34-35. Esoterix, however, alleges that a substantial number of those sales were impermissibly made for commercial use, rather than solely for research purposes, as required by the License Agreement and the non-exclusive patent rights it granted to Qiagen. Id. ¶¶ 36, 38. Thus, Esoterix's Complaint asserts claims against Qiagen for, inter alia, breach of the License Agreement, infringement of the '468 Patent, violations of Massachusetts General Laws Chapter 93A, and violations of the duty of good faith and fair dealing.

         On September 25, 2015, the Court granted in part Qiagen's Motion to Dismiss, holding that the claims of the '468 Patent were not directed to eligible subject matter under the standard set forth in Alice Corp. v. CLS Bank International, 134 S.Ct. 2347 (2014) and Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289 (2012). See Qiagen I, 133 F.Supp.3d at 359-60. The Court held that the method claimed in the '468 Patent was directed to a “law of nature, ” because it “describes the correlation between a naturally-occurring mutation in a cancer cell, and the likelihood that a particular type of known pharmaceutical compound will be effective in treating that type of cancer.” Id. at 358. The Court also held that there was nothing “transformative” in the claims of the '468 Patent that amounted to a novel application of the natural law, or that otherwise warranted patent protection. Id. at 359. Instead, the Court held that the method claimed in the '468 Patent (1) identifies a law of nature that explains why a known cancer treatment is more effective in treating a certain population of patients, and (2) tells scientists and doctors that they can “apply” that law of nature by testing for the relevant gene mutations using methods well-known in the art. Id. at 359. Thus, the Court concluded that the '468 Patent was invalid, and dismissed Esoterix's corresponding claim for infringement. Id. at 360-61. The Court declined, however, to dismiss Esoterix's claims for breach of the License Agreement, breach of the duty of good faith and fair dealing, and violations of Chapter 93A, holding that those claims did not depend on the validity of the '468 Patent. See Id. at 363-64.

         Qiagen, through its Counterclaims, now seeks a declaratory judgment that four additional Licensed Patents are invalid, for the same reasons the Court invalidated the '468 Patent. See Counterclaims, ¶¶ 42-60. Qiagen asserts that the four new patents-in-suit also fall within the Patent Rights licensed in the 2008 License Agreement, because they all claim priority to the patent application that issued the'468 Patent. Qiagen also notes that all of the Licensed Patents share “virtually identical specifications, ” and that three out of the four additional patents (i.e., the '349, the '769, and the '916 Patents) claim the same method recited in the '468 Patent, “albeit using slightly broader or narrower (though equally ineligible) language.” Qiagen further argues that the fourth, '036 Patent, is equally ineligible because it merely claims “a kit for practicing the methods of the invention, ” and is thus directed to the same natural law as the '468 Patent.

         Qiagen also seeks a declaratory judgment regarding the parties' respective rights under the Licensing Agreement - specifically, that because the Licensed Patents are all invalid, Qiagen is not contractually obligated to pay royalties under the terms of the License Agreement, and is entitled to recoup all royalties that it paid (under protest), after the date Qiagen first challenged the validity of the '468 Patent. See Counterclaims, ¶¶ 35-41, 65-74.

         Qiagen also asserts a claim for declaratory judgment of non-infringement, arguing that “even absent Qiagen's rights under the License Agreement, ” its test kits do not infringe the claims of the four additional patents-in-suit. Id. ¶¶ 61-64.

         Finally, Qiagen alleges that Esoterix and LabCorp wrongfully interfered with Qiagen's customer relations. Id. ¶¶ 75-90. Specifically, Qiagen alleges that Esoterix and LabCorp sent letters to third parties who had purchased test kits from Qiagen, informing them that Esoterix and LabCorp held the patent rights to the Licensed Patents, and instructing the third parties to contact LabCorp to discuss the matter. Id. ¶¶ 30-32. These letters allegedly failed to mention that LabCorp knew the customer had purchased the test kits from Qiagen, a licensee. Further, LabCorp and Esoterix allegedly continued to send these letters even after the FDA granted regulatory approval for commercial sales of the test kits in July 2013, which gave Qiagen the right to sell the kits for all licensed uses. Id. ¶ 32. Qiagen alleges that these letters were improper in motive or means, in that they did not mention Qiagen's license, and were designed to deter third parties from doing business with Qiagen. Id. ¶ 33.

         III. MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

         As a threshold matter, Esoterix and LabCorp argue that this Court lacks subject matter jurisdiction over Qiagen's Counterclaims and should therefore decline to reach the invalidity issue raised in Qiagen's Motion for Judgment on the Pleadings. Specifically, Esoterix and LabCorp contend that in January 2016, they gave Qiagen a “covenant not to sue on the Patents, ” which had the effect of eliminating any case or controversy between the parties concerning the patents-in-suit, and depriving the Court of Article III jurisdiction over Qiagen's Counterclaims.

         Article III, Section 2 of the United States Constitution “limits the exercise of judicial power to ‘cases' and ‘controversies.'” Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239 (1937). In this case, Qiagen's counterclaims for declaratory judgment arise out of the Declaratory Judgment Act, which provides that:

[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such ...

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