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June 28, 2000


The opinion of the court was delivered by: Kennelly, District Judge.


In this patent case, Tokyo Tanabe Company, Ltd., now known as Mitsubishi-Tokyo Pharmaceuticals, Inc., and its exclusive United States licensee, Abbott Laboratories, have sued Dey, L.P. and Dey, Inc., for infringement of U.S. Patent No. 4,338,301 (the '301 patent) and U.S. Patent No. 4,397,839 (the '839 patent), which cover respectively an extract from mammalian lung tissue useful for treating hyaline-membrane disease and a method for producing the extract and a surface active material and process for preparing the material. Under the licensing agreement with Tanabe, Abbott used the technology covered in the patents to make Survanta®, a surfactant*fn1 product used to treat Respiratory Distress Syndrome in premature babies. Abbott received FDA approval to market and distribute Survanta® in 1991 and has marketed and distributed the product since that time. In November 1999, the FDA granted Dey approval to market and distribute Curosurf®, a surfactant replacement product also derived from mammalian lungs. In this action, Tanabe and Abbott allege that Curosurf® and its components fall within the scope of at least one claim of the '301 patent and at least one claim of the '839 patent. The plaintiffs have moved for a preliminary injunction prohibiting Dey from making, using, selling, offering to sell, or importing Curosurf® until the '839 patent expires on June 1, 2005.*fn2 The Court has scheduled a hearing on the preliminary injunction motion for July 6, 2000.

The purpose of this Order is to address and resolve two preliminary issues. The first issue involves the effect, if any, of a 1998 decision issued by Judge Richard Arcara in Forest Laboratories, Inc. and ONY, Inc. v. Abbott Laboratories and Tokyo Tanabe Company, Ltd., No. 96 CV-159A, in the Western District of New York concerning the construction of certain claims of the '301 and '839 patents. The second issue involves whether the plaintiffs are entitled to rely on the doctrine of equivalents to prove that Dey's product infringes the claims of the patents in suit or whether Tokyo Tanabe relinquished the right to pursue infringement under that doctrine in the way it prosecuted the patent.

The Effect of Judge Arcara's Decision

Defendants argue that Judge Arcara construed the same claim language that is disputed in this case and that his construction should carry the day here as well; they contend that the doctrine of issue preclusion bars plaintiffs from relitigating those claim construction issues. Plaintiffs argue that the Court should not apply issue preclusion in this case because to do so would be unfair to them.

The doctrine of issue preclusion compels a court to honor the first actual decision of a matter that has been litigated. See Chicago Truck Drivers v. Century Motor Freight, 125 F.3d 526, 530 (7th Cir. 1997) (citing 18 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 4416, at 136 (1981 & Supp. 1997)).*fn3 Generally, issue preclusion is appropriate if: (1) the issue sought to be litigated is identical to one decided in a prior action; (2) that issue was actually litigated in the first action; (3) the determination of the issue was essential to the final judgment in the first action; and (4) the party against whom estoppel is invoked had a full and fair opportunity to litigate the issue in the first action. Century, 125 F.3d at 530 (citing La Preferida, Inc. v. Cerveceria Modelo, S.A. de C.V., 914 F.2d 900, 906 (7th Cir. 1990)); A.B. Dick Co. v. Burroughs Corp., 713 F.2d 700, 702 (Fed.Cir. 1983), cert. denied, 464 U.S. 1042, 104 S.Ct. 707, 79 L.Ed.2d 171 (1984). All of these conditions are met here. The claim construction issues disputed in this case are the same issues litigated in the Forest case; Abbott and Tokyo Tanabe briefed and argued the issues before Judge Arcara, and the judge's claim construction ruling was necessary to the final judgment in the case concerning infringement.

But that does not end the inquiry. In some circumstances, even when these conditions are met, the court may decline to apply issue preclusion. The United States Supreme Court, the Seventh Circuit and the Federal Circuit have all said that courts should not apply non-mutual offensive collateral estoppel (or issue preclusion), which is what this is, if it would be unfair to the defendant. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979); Century, 125 F.3d at 531; A.B. Dick, 713 F.2d at 702. The court should refuse to apply issue preclusion if, for example, the defendant had little incentive to defend vigorously in the first suit because he was sued for small or nominal damages, or if the first judgment is inconsistent with one or more previous judgments in the defendant's favor, or if the second action affords the defendant procedural opportunities (e.g., discovery procedures) unavailable in the first action that could cause a different result. See Parklane, 439 U.S. at 330-31, 99 S.Ct. 645, cited in Century, 125 F.3d at 531. Nor should the doctrine be applied "when the issue is of general interest and has not been resolved by the highest appellate court that can resolve it." Century, 125 F.3d at 531 (citing Restatement § 29 Comment i; United States v. Alcan Aluminum Corp., 990 F.2d 711, 719 (2d Cir. 1993)). The Seventh Circuit has held that "determining `whether or not application of [issue preclusion] is fair depends upon a case by case analysis,' and that courts should be sensitive to the `practical realities which surround the parties.'" Century, 125 F.3d at 531 (quoting Butler v. Stover Brothers Trucking Co., 546 F.2d 544, 551 (7th Cir. 1977)). Thus, in Century, where the issue involved the validity of the PBGC's regulation delaying withdrawal liability payments when an employer has filed for arbitration, the court refused to apply the doctrine to prevent the employer from relitigating the regulation's validity because the issue decided was an unmixed question of law that was likely to arise again, all other courts to consider the issue had come out the other way, and the district court failed to distinguish any of those cases. Id. at 532.

This case does not appear to fall within any of these exceptions. The record suggests that Abbott and Tokyo Tanabe defended the Forest case with vigor, there are no judgments concerning the Tanabe patents that are inconsistent with Judge Arcara's, and the discovery procedures available in this Court are likely the same as those available in the Forest case. Although it is true that the Federal Circuit has not yet ruled on whether Judge Arcara correctly construed the patent claims in the Forest case, this issue is not a matter of general interest; indeed, the universe of parties who have an interest in how these claims are construed is quite small. And although claim construction presents a purely legal question, see Markman v. Westview Instruments, Inc., 52 F.3d 967, 977-78 (Fed.Cir. 1995) (en banc), aff'd 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996), the issue of how these particular claims should be construed is unlikely to arise again.

There appear to be only two reported decisions in which the court was asked to consider the preclusive effect to be given the claim construction decision of a prior court involving the same patents and the same patent holders but not the same opposing party. Sadly, the courts deciding those two cases reached opposite results. In TM Patents, L.P. v. International Business Machines Corp., 72 F. Supp.2d 370 (S.D.N.Y. 1999), the district court held that issue preclusion foreclosed the patent holder from relitigating the meaning of certain claim limitations that had already been raised and litigated in a prior infringement action. In deciding to apply the doctrine, the court analyzed precedent — not only Markman v. Westview Instruments, Inc., 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996), which emphasized the need to promote uniformity in the meaning to be given a particular patent's claims and to that end took the question of claim construction away from the jury and handed it to the judge — but the cases leading up to that decision as well:

Even prior to Markman, the Federal Circuit had held that determination of the scope of a patent claim in a prior infringement action could have [issue preclusive] effect against the patentee in a subsequent case. See Pfaff v. Wells Elec. Inc., 5 F.3d 514, 517-18 (1993). After Markman, with its requirement that the Court construe the patent for the jury as a matter of law, it is inconceivable that a fully-litigated determination after a first Markman hearing would not be preclusive in subsequent actions involving the same disputed claims under the same patent. The nature of the Markman proceeding is such that finality is its aim. Id. at 377, 116 S.Ct. 1384.

By contrast, in Graco Children's Products, Inc. v. Regalo International, LLC, 77 F. Supp.2d 660 (E.D.Pa. 1999), the court concluded that issue preclusion did not apply to bar relitigation of claim construction issues. In so doing, the court recognized that "by instructing courts to decide issues of claim construction in patent cases, the Court in Markman recognized the importance of uniformity in the treatment of a given patent." Id. at 663. But, the court reasoned, even Markman did not require courts to apply issue preclusion in every case; "circumstances may exist where . . . despite a previous court having held a hearing on the claim construction of a patent pursuant to Markman, [issue preclusion] will not apply to such decisions." Id. at 663, 665. Given the particular circumstances of the Graco case (Graco lost on the claim construction issues but won on the ultimate infringement issues and so could not have appealed the claim construction decision), this Court does not necessarily disagree with the outcome reached in that case. But such circumstances are not present in this case. Unlike Graco, Abbott and Tokyo Tanabe lost on both the claim construction issues and the infringement issue, and they can and have appealed. Although that appeal has not yet been decided, the law in the Seventh Circuit is clear that exhaustion of appellate remedies is not a normal requirement of issue preclusion, and a final judgment by a district court has preclusive effect even though judgment is pending on appeal. See, e.g., Amcast Industrial Corp. v. Detrex Corp., 45 F.3d 155, 160 (7th Cir. 1995); Prymer v. Ogden, 29 F.3d 1208, 1213 n. 2 (7th Cir.), cert. denied, 513 U.S. 1057, 115 S.Ct. 665, 130 L.Ed.2d 599 (1994).

Additionally, in Graco the claim construction was not the reason for the loss; here it was. Because of the way he construed the claims, Judge Arcara found that no reasonable trier of fact could find that Forest's product infringed the Tanabe patents. For these reasons, the Court does not believe it would be unfair to apply the doctrine of issue preclusion in this case. The Court finds that Judge Arcara's construction of "surface active material" and "based on dry weight" are binding on this Court.

The Court notes that even if it were not bound to follow Judge Arcara's ruling, it would nonetheless apply the same claim construction — at least with respect to the meaning of the phrases "surface active material" and "based on the dry weight of the material." Judge Arcara's reasoning on these points is persuasive. The plaintiffs argue that Judge Arcara's construction of these claim terms was "plainly wrong" for several reasons, and that they should therefore be permitted to relitigate the claim construction issues anew in this Court. There is some authority for the proposition that a "plainly wrong" determination may not be entitled to preclusive effect, see Restatement 2d of Judgments § 29(8) and cmt. j (1980), but the Court does not believe that exception would cover the situation presented here. Section 29(8) instructs that a court need not apply issue preclusion if "other circumstances justify affording [the losing party] an opportunity to relitigate the issue"; comment j instructs that the "other circumstances" that may be important include "disclosure that the prior determination was plainly wrong or that new evidence has become available that could likely lead to a difference result." The fact that these two circumstances are linked in the same comment suggests that the "disclosure that the prior determination was plainly wrong" would not come from a second court revisiting the merits of the first court's decision, but from new evidence or a change in facts or circumstances. The Restatement does not seem to contemplate a second court being able to revisit the merits of the prior determination, as the plaintiffs urge here. Indeed, such an exception would make no sense in light of the purpose behind the doctrine of issue preclusion, which is to place the first judgment beyond question by subsequent courts; if the second court is going to examine the first court's decision to decide if it was right or wrong, what is the point of having issue preclusion to begin with?

Moreover, the Court does not believe Judge Arcara's decision was "plainly wrong." In support of its argument in this regard, the plaintiffs first argue that Judge Arcara should not have read a temporal limit into the term "surface active material" because the claims do not limit that term to dry powder or impose a temporal element on that material. The Court disagrees. The claims clearly contemplate that the "surface active material" exists first, and then, after a "pharmaceutically acceptable carrier" is added to the surface active material, the surface active material ceases to exist and becomes a "pharmaceutical composition." See, e.g., U.S. Patent No. 4,397,839, at col. 18, lines 15-19. As Judge Arcara noted, it was undisputed that the chemical composition of the lung surfactant extract material changes when it is added to water (one of the claimed elements of the "pharmaceutically acceptable carriers," see id., col. 18, lines 26-28). If that is the case — and ...

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