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Abbott Laboratories v. Sandoz

May 12, 2010

ABBOTT LABORATORIES, ABBOTT LABORATORIES, INC., AND ABBOTT PHARMACEUTICALS PR LTD, PLAINTIFFS,
v.
SANDOZ, INC., DEFENDANT.



The opinion of the court was delivered by: Judge David H. Coar

MEMORANDUM OPINION AND ORDER

Defendant Sandoz, Inc. ("Defendant" or "Sandoz") moves this Court to dismiss Plaintiffs Abbott Pharmaceuticals PR LTD ("APL") and Abbott Laboratories, Inc. ("ALI") for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(h)(3). Sandoz claims that neither APL nor ALI has standing to bring a patent infringement claim. In the alternative, Sandoz moves in limine for the exclusion of evidence relating to ALI's and APL's alleged lost profits at trial. For the reasons stated below, both of Sandoz's motions are DENIED.

BACKGROUND

Abbott Laboratories ("Abbott Labs") filed suit against Sandoz on September 16, 2005, seeking a declaratory judgment that Sandoz's extended-release clarithromycin formulation would infringe its patents related to Biaxin XL. The complaint sought only declaratory relief because, at the time that it was filed, Sandoz had not yet begun selling its product. Once Sandoz began selling its product in December 2006, Abbott Labs moved to preliminarily enjoin these sales. The Court granted Abbott Labs's motion on April 16, 2007. Abbott Labs. v. Sandoz, Inc., 500 F.Supp.2d 807 (N.D. Ill. 2007).

Abbott Labs then sought leave to amend its complaint by adding claims for damages related to Sandoz's sale of its product between December 2006 and April 2007. The Court granted Abbott Labs's motion for leave to amend its complaint on June 13, 2007, and on July 25, 2007, the Court also granted Abbott Labs's subsequent motion for leave to amend its complaint to add ALI and APL as co-plaintiffs.

On May 7, 2008, Sandoz filed the instant motion to dismiss ALI and APL for lack of standing, or in the alternative, to exclude evidence of either Plaintiff's alleged lost profits at trial.

LEGAL STANDARD

Under Fed. R. Civ. P. 12(h)(3), "[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." The question of standing is jurisdictional, Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1551 (Fed. Cir. 1995), and it may be raised by the parties or the court at any stage in the litigation. Pandrol USA, LP v. Airboss Ry. Prods., Inc., 320 F.3d 1354, 1367 (Fed. Cir. 2003).

ANALYSIS

Sandoz argues that neither ALI nor APL is an exclusive licensee of the patents at issue, and therefore neither has standing to collect damages for patent infringement. Standing to sue for patent infringement derives from the Patent Act, which provides that the patentee, or his successors in interest, "shall have remedy by civil action for infringement of his patent." 35 U.S.C. § 100(d). Under some circumstances, courts have held that a licensee's interest in a patent is sufficient to confer standing on the licensee to sue for infringement. Rite-Hite Corp., 56 F.3d at 1552. To acquire standing, a licensee usually must be an "exclusive" licensee, meaning that it "received, not only the right to practice the invention within a given territory, but also the patentee's express or implied promise that others shall be excluded from practicing the invention within that territory as well." Id. In contrast to "exclusive" licensees, "bare" licensees have no standing to bring patent infringement claims. Textile Prod., Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998). The legal categorization of a licensee as "exclusive" or "bare" depends on "the intent of the parties to the license as manifested by the terms of their agreement and examining the substance of the grant. The use of the word 'exclusive' is not controlling; what matters is the substance of the arrangement." Id.

Sandoz contends that neither ALI nor APL has standing to sue because neither is an exclusive licensee of the patents-in-suit. It is undisputed that Abbott Labs is the assignee of the '718 and '616 patents, which relate to its product, Biaxin XL. The crux of Sandoz's argument, however, is that Abbott Labs appointed ALI exclusive distributor of Biaxin XL eight years before it conferred the same right to APL, and therefore neither possesses an exclusive license. Sandoz also contends that Abbott Labs entered into another license agreement involving the same patents with Teva Pharmaceuticals U.S.A., Inc. ("Teva"), further demonstrating that ALI's and APL's licenses are non-exclusive.

Sandoz is incorrect, both legally and factually. As an initial matter, Sandoz glosses over the nuances in the relationship between Abbott Labs, ALI, and APL, and it therefore misconstrues each entity's rights to the patents-in-suit for the purposes of standing. In its motion, Sandoz focuses entirely on two agreements: (1) the 1998 Distribution Agreement between Abbott Labs and ALI (Def. Mem., Ex. F) and (2) the 2004 License and Sublicense Agreement between Abbott Labs and APL (Def. Mem., Ex. I). Sandoz argues that the 1998 agreement gave ALI the exclusive right to sell Biaxin XL under the '718 and '616 patents in the United States, and the 2004 agreement purported to give the same "exclusive" right to APL. According to Sandoz, the 2004 agreement could not have provided APL with an exclusive license to sell Biaxin XL in the United States since Abbott Labs had already granted that same right to ALI.

In fact, three agreements govern the relationship between Abbott Labs, ALI, and APL. Contrary to Sandoz's assertion, the 1998 agreement between Abbott Labs and ALI did not explicitly provide ALI with exclusive distribution rights for Biaxin XL. Nor did the agreement expressly license any patent rights at all. Through this agreement, Abbott Labs appointed ALI, its wholly-owned subsidiary, as its exclusive United States distributor for certain "products," which are defined broadly as "such quantities of products requested by [Abbott Labs]" for sale to ALI. (Def. Mem., Ex. F at ABBOTT295677.) When Abbott Labs and ALI executed this agreement in January 1998, Biaxin XL was not yet available for sale, and neither of the patents-in-suit had issued. According to Plaintiffs, Abbott Labs began distributing Biaxin XL in the United States through ALI in 2000.

When APL was formed in 2004, Abbott Labs and APL entered into two contemporaneous agreements. In its motion, Sandoz addresses only one of these agreements: the "License and Sublicense Agreement," which was executed by Abbott Labs and APL on December 1, 2004. (Def. Mem., Ex. I.) Through this agreement, Abbott Labs granted APL an "exclusive license under the Abbott Patents to make, have made, use and sell the Products" in the United States. (Id. ΒΆ 2.01(a) at ABBOTT341612.) The license defines the "Abbott Patents" to include the patents-in-suit and "Products" to include Biaxin XL. (Id. at ...


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