Baxalta Inc. v. Bayer Healthcare LLC

BAXALTA INCORPORATED, BAXALTA US INC., andNEKTAR THERAPEUTICS, Plaintiffs and Counterclaim Defendants, v. BAYER HEALTHCARE LLC, Defendant and Counterclaim Plaintiff.

Civil Action No. 17-1316-RGA-SRF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

July 13, 2020

REPORT AND RECOMMENDATION

I. INTRODUCTION

Presently before the court in this patent infringement action is the motion of plaintiffs Baxalta Incorporated, Baxalta US Inc. (together, "Baxalta"), and Nektar Therapeutics ("Nektar") (collectively, "Plaintiffs") to dismiss and strike certain counterclaims and affirmative defenses in defendant Bayer Healthcare LLC's ("Bayer") amended answers and counterclaims or, in the alternative, to bifurcate those issues.¹ (D.I. 383) For the following reasons, I recommend that the court GRANT Plaintiffs' motion to dismiss and strike.

II. BACKGROUND

Hemophilia A is a congenital bleeding disorder characterized by defective coagulation of the blood resulting from a deficiency in factor VIII protein. (D.I. 281 at ¶ 63) Plaintiffs and Bayer have developed and launched a number of factor VIII replacement therapies in the United States to treat hemophilia A. Baxalta manufactures and sells ADYNOVATE®, which is "ahuman antihemophilic factor indicated in children and adults with hemophilia A (congenital factor VIII deficiency) for on-demand treatment and control of bleeding episodes, perioperative management, and routine prophylaxis to reduce the frequency of bleeding episodes." (Id. at ¶ 65) ADYNOVATE® is an extended half-life ("EHL") factor VIII replacement product comprising PEGylated² factor VIII that was launched in 2015. (Id.) Bayer manufactures and sells Jivi®, which is a factor VIII replacement therapy for the treatment of hemophilia A which was approved by the Food and Drug Administration ("FDA") on August 29, 2018. (D.I. 333 at ¶ 62) Jivi® comprises PEGylated factor VIII with an extended half-life designed to prolong the duration of the factor VIII effect. (Id.)

Nektar is a developer of PEGylation technology that supplies PEG reagents to pharmaceutical companies to use in the development of new products. (D.I. 333 at ¶ 34) Bayer entered into a Research Agreement (the "Agreement") with Nektar in December 2003. (D.I. 333 at ¶ 51) Pursuant to the Agreement, Bayer and Nektar agreed to work together to increase the half-life of factor VIII while simultaneously preserving its coagulation activity levels. (Id.) Bayer sent Nektar batches of Bayer's recombinant factor VIII in early 2004.³ (Id. at ¶ 54) These batches included both BDD factor VIII and full-length factor VIII.⁴ (Id.) Nektar subsequently informed Bayer on February 26, 2004 that the PEGylation of Bayer's factor VIII was not effective in binding a large PEG molecule to the amino acid cysteine of factor VIII. (Id. at ¶ 55)On the same day, Nektar filed Patent Application No. 10/789,956 (the "Bossard Non-Provisional Application") which was directed to the use of a large PEG molecule on factor VIII. (Id.) Bayer contends that the Bossard Non-Provisional Application is based on discoveries that Nektar learned from Bayer regarding the use of fewer large PEG molecules to pegylate factor VIII. (Id. at ¶ 56)

Nektar is the assignee of U.S. Patent Nos. 7,026,440 ("the '440 patent");⁵ 7,872,072; 8,273,833; 8,809,453; and 9,187,569 (collectively, the "Bentley Patents"), and Baxalta licenses the Bentley Patents from Nektar. (D.I. 381 at ¶ 139) The Bentley Patents are generally directed to certain branched reactive polymers possessing a defined chemical structure and biologically active conjugates containing such polymers. Nektar is also the assignee of U.S. Patent Nos. 7,199,223 ("the '223 patent"); 7,863,421; 8,143,378; 8,247,536; 8,519,102; 8,618,259; 8,889,831; and 9,999,657 (collectively, the "Bossard Patents"), and Baxalta licenses the Bossard Patents from Nektar. (D.I. 333 at ¶ 66; D.I. 381 at ¶ 69) The Bossard Patents are generally directed to certain novel conjugates of PEG bound to factor VIII, as well as compositions containing such conjugates.

On September 4, 2019, Plaintiffs filed the operative second amended complaint against Bayer, alleging that Bayer's Jivi® product infringes the Bossard Patents. (D.I. 281) On August 31, 2018, Plaintiffs filed another complaint against Bayer, alleging that Bayer's Jivi® product infringes the Bentley Patents. (C.A. No. 18-1355-RGA, D.I. 1) Bayer filed its third amended answer, affirmative defenses, and counterclaims to both complaints in the consolidated action onOctober 11, 2019, asserting Walker Process fraud and antitrust allegations in addition to allegations of inequitable conduct and unclean hands. (D.I. 333; D.I. 381)

The parties subsequently filed their motions for summary judgment and Daubert motions, which are fully briefed. (D.I. 447; D.I. 450) On June 30, 2020, Bayer filed a motion to correct inventorship pursuant to 35 U.S.C. § 256 and a Rule 12(b)(1) motion to dismiss. (D.I. 483) Plaintiffs filed a motion to strike Bayer's motion to correct inventorship and motion to dismiss. (D.I. 490) Briefing is not yet complete on the motion to correct inventorship and the motion to strike. (D.I. 493) A jury trial is currently scheduled to begin on the liability issues on September 21, 2020. (D.I. 446)

III. LEGAL STANDARDS

A. Rule 12(b)(6)

Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. See Umland v. Planco Fin. Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008). "Courts use the same standard in ruling on a motion to dismiss a counterclaim under Rule 12(b)(6) as they do in assessing a claim in a complaint." Goddard Sys., Inc. v. Gondal, C.A. No. 17-1003-CJB, 2018 WL 1513018, at *4 (D. Del. Mar. 27, 2018).

To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief thatis plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.

The court's determination is not whether the non-moving party "will ultimately prevail," but whether that party is "entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (internal citations and quotation marks omitted). This "does not impose a probability requirement at the pleading stage," but instead "simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of [the necessary element]." Phillips v. Cty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). The court's analysis is a context-specific task requiring the court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. 663-64.

Allegations of fraud are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). U.S. ex rel. Whatley v. Eastwick Coll., 657 F. App'x 89, 93 (3d Cir. 2016). Under Rule 9(b), a plaintiff must "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). This heightened pleading standard was meant to "place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of . . . fraudulent behavior." Seville Indus. Mach. Corp. v. Southmost Mack Corp., 742 F.2d 786, 791 (3d Cir. 1984). Accordingly, the complaint must provide "all of the essential factual background that would accompany 'the first paragraph of any newspaper story'—that is, the 'who, what, when, where, and how' of the events at issue."Whatley, 657 F. App'x at 93 (quoting In re Rockefeller Ctr. Prop., Inc. Sec. Litig., 311 F.3d 198, 215 (3d Cir. 2002)). "The use of boiler plate and conclusory allegations will not suffice." Kuhn Constr. Co. v. Ocean & Coastal Consultants, Inc., 844 F. Supp. 2d 519, 530 (D. Del. 2012) (internal quotation marks and citations omitted). The heightened pleading requirements of Rule 9(b) apply to causes of action for inequitable conduct, unclean hands, and Walker Process claims. See Senju Pharm., 921 F. Supp. 2d at 306 (applying Rule 9(b) standard to inequitable conduct); Cephalon, Inc. v. Slayback Pharma Ltd. Liab. Co., C.A. No. 17-1154-CFC, 2019 WL 3497105, at *1 (D. Del. Aug. 1, 2019) (applying Rule 9(b) standard to causes of action for unclean hands based on allegations of inequitable conduct); MedImmune, Inc. v. Genentech, Inc., 427 F.3d 958, (Fed. Cir. 2005), rev'd on other grounds, 549 U.S. 118 (2007) ("Like all fraud-based claims, Walker Process allegations are subject to the pleading requirements of Fed. R. Civ. P. 9(b).").

B. Rule 12(f)

Plaintiffs move to strike Bayer's affirmative defenses for inequitable conduct, unclean hands, and Walker Process fraud based on the same allegations made in support of their counterclaims. The sufficiency of the affirmative defenses is evaluated under Rule 12(f), which provides that the court "may strike from a pleading any insufficient defense." Fed. R. Civ. P. 12(f). When a party fails to state a corresponding claim under Rule 12(b)(6), the court may strike the associated affirmative defense under Rule 12(f). See Wyeth Holdings Corp. v. Sandoz, Inc., C.A. No. 09-955-LPS-CJB, 2012 WL 600715, at *4 (D. Del. Feb. 3, 2012) (citi...