United States District Court, D. Massachusetts
JANSSEN BIOTECH, INC. ET AL, Plaintiffs,
CELLTRION HEALTHCARE CO. INC., ET AL., Defendants.
MEMORANDUM AND ORDER
January 18 and February 14, 2016 scheduling conferences, the
parties requested the court's guidance on the appropriate
measure of damages to which plaintiff Janssen Biotech, Inc.
("Janssen") would be entitled if defendants
Celltrion Healthcare, Co. and Celltrion, Inc. (together,
"Celltrion") and Hospira, Inc.
("Hospira") are found to have infringed U.S. Patent
No. 7, 598, 083 (the "'083 Patent"). The
parties represented that such guidance would facilitate
informed settlement discussions. A hearing on issues
concerning the standards for determining damages was held on
February 23 and 24, 2017. For the reasons explained in detail
at those hearings, the court provided the following guidance
to the parties.
plaintiff is entitled to compensation for reasonably
foreseeable lost profits that it would not have suffered
"but for" the defendant's infringement. See
Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1545
(Fed. Cir. 1995). "A fair and accurate reconstruction of
the 'but for1 market...must take into account, where
relevant, alternative actions the infringer foreseeably would
have undertaken had he not infringed" and, therefore,
"takes into account any [adequate] alternatives
available to the infringer." Grain Processing Corp.
v. American Maize, 185 F.3d 1341, 1350-51 (Fed. Cir.
1999). Accordingly, if Celltrion could, as a practical
matter, have made the Remicade biosimilar, Inflectra, that it
began marketing in the United States on about January 1,
2017-at a competitive price and on a comparable
schedule-without infringing the '083 Patent, Janssen
would not be entitled to recover any profits on Remicade that
it lost to Inflectra. It would, instead, be limited to a
fact that Celltrion produces Inflectra abroad would not
prevent Janssen from recovering lost profits relating to
sales of Inflectra in the United States if those sales could
not have been made without the production and sale of the
infringing media powders in the United States.
Power Integrations v. Fairchild Semiconductor, the
Federal Circuit held that the presumption against the
extraterritorial application of the United States Patent laws
prevented a patentee from recovering damages measured by its
foreign sales. 711 F.3d 1348, 1371-72 (Fed. Cir. 2013) . It
held that "where the direct measure of damages was
foreign activity, i.e., making, using, selling outside the
United States, it was not enough, given the required strength
of the presumption against extraterritoriality, that the
damages measuring foreign activity have been factually
caused, in the ordinary sense, by domestic activity
constituting infringement under [35 U.S.C.] Section
271(a)." Carnegie Mellon Univ. v. Marvell Tech.
Group, 807 F.3d 1283, 1307 (Fed. Cir. 2015).
instant case, it is alleged that Celltrion's agent,
HyClone Laboratories, Inc. ("HyClone"), infringed
the '083 Patent by making and selling its powder in the
United States. In contrast to Power Integrations,
however, the resulting sale of the damages-measuring product,
Inflectra, also occurred in the United States. In these
circumstances, the presumption against extraterritoriality
would not overcome the principle of full compensation, and
the usual "but-for" causation test would apply.
fact that Remicade is not now itself patented because this
court has found the patent on which it is based invalid,
see August 19, 2016 Memorandum and Order (Docket No.
226), does not affect plaintiff's entitlement to damages,
including lost profits, for any proven infringement of the
'083 Patent. A patentee may recover damages in the form
of lost profits to compensate for sales of an unpatented
product (i.e., Remicade) lost to an infringer's
non-infringing product (i.e., Inflectra), if the infringer
could only have captured the patentee's sales by
infringing the patent by, in this case, using an infringing
powder. See Micro-Chem. Inc. v. Lextron, Inc., 318
F.3d 1119, 1125-26 (Fed. Cir. 2003). More specifically, a
patentee is entitled to lost profits, even on unpatented
products, if a competitor makes the sales-capturing
end-product using an infringing method or product, where the
competitor could have only captured the sales by infringing
the patent. See Minco Inc. v. Combustion Eng'g,
95 F.3d 1109, 1119 (Fed. Cir. 1996).
decide whether it was feasible for Celltrion to have used a
non-infringing media powder to produce Inflectra, it must be
determined whether, starting on the date of first
infringement, Celltrion could have switched to using a
non-infringing alternative. The fact-finder must consider how
the market would have developed "absent the infringing
product, " if the infringement had not occurred.
Grain Processing, 185 F.3d at 1350-51. "A
proper reconstruction of the 'but for' world that
would have existed absent infringement must consider actions
the infringer would have taken to avoid
infringement-including designing around the patented
intellectual property-starting on the date of first
infringement and not on some later date, such as the date of
first notice" or the date the infringement began
generating lost profits. Apple Inc. v. Samsung
Electronics Co. Ltd., 2013 WL 5958172, *2-3 (N.D. Cal.
2013). Before the date of sales that cause the patentee to
lose profits, any infringement would justify damages in the
amount of a reasonable royalty.
the pending cases are dismissed without prejudice for lack of
standing because all owners if the '083 Patent are not
joined as plaintiffs and a new case is brought, 35 U.S.C.
§271(e) (6) will not limit Janssen's damages to a
reasonable royalty for any proven infringement of the
'083 Patent. Celltrion initiated the process prescribed
by the Biologies Price Competition and Innovation Act (the
"BPCIA"), 42 U.S.C. §262(1), but did not
properly complete it as required to obtain the limitation of
damages to a reasonable royalty provided by §271(e)(6).
Biologies Act lays out a step-by-step process for exchanging
information and channeling litigation about patents relevant
to the application." Amgen Inc. v. Apotex Inc.,
827 F.3d 1052, 1054 (Fed. Cir. 2016). Section 271(e) (6)
limits a patentee's damages to a reasonable royalty if it
proves infringement of a patent identified under 42 U.S.C.
§§262(1)(4) and (5)(B) in a suit filed more than 30
days after the end of the process prescribed by the BPCIA. As
one step in that process, §262(1)(4).requires that each
party negotiate in good faith in an attempt to agree on a
list of patents that will be subject to an immediate
infringement action. Section 262(1)(5) provides a particular
dispute resolution procedure for identifying such patents if
good faith negotiations fail. It is only the patents that
emerge from this negotiation and, if necessary, dispute
resolution procedure that are subject to a reasonable royalty
damages limitation if the patentee does not sue within 30
days of the end of this process. See 35 U.S.C.
specifically, §§262(1)(4) and (5) state that the
parties "shall" engage in "good-faith
negotiations" and "shall" engage in the
specified dispute resolution procedure if those negotiations
fail. 42 U.S.C. §§262(1)(4) & (5). "The
word 'shall' generally indicates that [a] directive
is mandatory." Apotex, 827 F.3d at 1061;
see also Amgen Inc. v. Sandoz Inc., 794 F.3d 1347,
1359 (Fed. Cir. 2015) ("[T]he word 'shall* . . .
presumptively signals a statutory requirement."). The
court construes the term "shall" in
§§262(1) (4) and (5) to mean that the alleged
infringer must comply with each step of the BPCIA process in
order to limit the patentee to a reasonable royalty if it
does not sue within 30 days of the end of that process.
Requiring the good faith completion of the prescribed process
gives the term "shall" its usual meaning. It also
serves the BPCIA's purpose of "avert[ing] and 
expedit[ing] litigation." See Sandoz, 794 F.3d
at 1365 (Newman, J., concurring in part and dissenting in
present record, a reasonable fact-finder could not conclude
that Celltrion engaged in the good-faith negotiations
required by the BPCIA or in the dispute resolution procedure
that is required if no agreement was reached through those
negotiations. It is only the list of patents that emerge from
the properly completed BPCIA procedure that are potentially
subject to the reasonable royalty damages limitation. On the
present record, it could not be found that the six patents
originally subject to litigation in this case emerged from a
properly completed statutory process.
stated at the scheduling conference on February 24, 2017, it
is hereby ORDERED that:
parties shall, by March 17, 2017, confer to discuss the
possible settlement of these cases. Such discussions shall
include, among other things, the implications of the
court's guidance regarding the appropriate measure of
damages and the possibility of ...