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BIO-TECHNOLOGY GEN. CORP. v. GENENTECH

May 15, 1995

Bio-Technology General Corp., Plaintiff,
v.
Genentech, Inc., Rogers & Wells, and John E. Kidd, Defendants.



The opinion of the court was delivered by: CONSTANCE BAKER MOTLEY

 DEFENDANTS' MOTION TO DISMISS CLAIMS 2 AND 5-12 OF THE COMPLAINT

 This is a related case to Novo Nordisk v. Genentech which also involves some of the same patents on human growth hormone. In this case, plaintiff seeks a declaratory judgment that United States Patent Nos. 4,342,832 (the '832 patent), 4,601,980 (the '980 patent), and 5,221,619 (the '619 patent) are invalid and not infringed by plaintiff. This also is an action for unfair competition, malicious prosecution, abuse of process, antitrust violations and prima facie tort under New York Law. This action arises under the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202, and the patent laws of the United States, Title 35, United States Code. Jurisdiction is based on 28 U.S.C. § 1331-32, 1337-8, while venue is based on 28 U.S.C. 1391 (b) and (c).

 The parties in this case are involved in the business of genetically-engineered pharmaceutical products. Plaintiff BTG is a corporation organized and existing under the laws of Delaware with its principal place of business in New Jersey. Defendant Genentech is a corporation organized to do business in the state of Delaware having its principal place of business in South San Francisco, California, and doing business in the Southern District of New York. Rogers & Wells is a law partnership organized and existing in New York state and its principal place of business is New York City. John Kidd is a partner with the firm and is admitted to practice in New York. He is the principal attorney representing Genentech in a variety of patent law suits brought by Genentech.

 Plaintiff is waiting to gain the approval of the Food and Drug Administration ("FDA") to sell Bio-tropin, genetically-engineered human growth hormone, inside of the United States. Plaintiff intends to import Bio-tropin for commercial distribution in the United States following approval by the FDA.

 In March 1993, defendant Genentech brought an action against plaintiff in the U.S. International Trade Commission (ITC) alleging that plaintiff's product, Bio-tropin, infringed two of its patents: the '832 and '980 patents. The Administrative Law Judge ("ALJ"), after a hearing, dismissed Genentech's complaint with prejudice due to what the ALJ deemed extreme misconduct of defendant Genentech and its lawyers at Rogers & Wells with respect to the production of documents. The next day, on December 1, 1994, defendant Genentech commenced a law suit against plaintiff in Delaware for patent infringement of the same two patents involved in the ITC proceedings. Thereafter, plaintiff moved to transfer the Delaware action to this court and defendant Genentech has not opposed the motion. On January 6, 1995 plaintiff brought the instant action for declaratory judgment of invalidity and non-infringement of the patents on its part.

 In it's motion to dismiss, Genentech has moved to dismiss counts 2 and 5-12 of the complaint and Genentech's attorneys have moved to dismiss counts 5-7 and 12 of the complaint. *fn1"

 I. The Standard For Dismissal Under Rule 12(b)(6).

 A motion to dismiss pursuant to Rule 12(b)(6) should be granted only if it appears beyond doubt that plaintiff can prove no set of facts in support of their claims which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985); Seagoing Uniform Corp. v. Texaco, Inc., 705 F. Supp. 918, 927 (S.D.N.Y. 1989). Therefore, on a motion to dismiss, all factual allegations of the complaint must be accepted as true, Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); Frasier v. General Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991), and all reasonable inferences must be made in plaintiff's favor. Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); Meilke v. Constellation Bancorp, 1992 U.S. Dist. LEXIS 2368, No. 90-3915, 1992 WL 47342, at *1 (S.D.N.Y. Mar. 4, 1992). "The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d at 1067 (citation omitted).

 A. Plaintiffs' standing to assert antitrust claims.

 Defendant argues that plaintiff lacks standing to assert an antitrust claim because without FDA marketing approval, plaintiff is in no position to allege any interference by defendant with plaintiff's ability to receive income from prospective sales of its human growth hormone product. Defendants cite National Ass'n of Pharmaceutical Mfrs., Inc. v. Ayerst Lab., 850 F.2d 904, 913 (2d Cir. 1988) for this proposition.

 In its complaint, plaintiff alleges that defendants have violated the Sherman and Clayton Antitrust Acts in that Genentech has approximately 70% of total sales in the market for products treating human growth hormone deficiency in the United States, has used this advantage to control prices and create high profits, and has blocked the efforts of others and plaintiff to enter the market as reported in The New York Times on January 6, 1995.

 In addition, plaintiff alleges that Genentech has brought numerous law suits and counterclaims against plaintiff seeking temporary and permanent exclusion orders even though plaintiff does not have FDA approval to sell Bio-tropin within the United States.

 Furthermore, the complaint alleges as an antitrust injury the costs incurred in connection with defending a litigation in which Genentech lacked probable cause to pursue plaintiff before the ITC and the Delaware District Court because plaintiff lacks FDA approval to sell its drug in this country. This is a well recognized type of antitrust injury which compromises the costs incurred in defending a "sham" litigation filed in violation of the antitrust laws. Rickards v. Canine Eye Registration Foundation, 783 F.2d 1329, 1334-35 (9th Cir.), cert. denied, 479 U.S. 851, 93 L. Ed. 2d 115, 107 S. Ct. 180 (1986). In the patent field, this principle was established in the Handgards I and Handgards II cases, Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, cert. denied, 444 U.S. 1025, 62 L. Ed. 2d 659, 100 S. Ct. 688, 100 S. Ct. 689 (1980), on remand, 552 F. Supp. 820, aff'd, 743 F.2d 1282 (9th Cir.), cert. denied, 469 U.S. 1190, 105 S. Ct. 963, 83 L. Ed. 2d 968 (1985). These cases established the recoverability of damages by victims of bad faith patent infringement suits. The Ninth Circuit explicitly held that pleading the costs of defending such suits alleges a cognizable antitrust injury.

 
Plaintiff must show that the injury for which it seeks to recover is "the type the antitrust laws were intended to prevent" and "flows from that which makes defendant's acts unlawful." In a suit alleging antitrust injury based upon a bad faith prosecution theory it is obvious that the costs incurred in defense of the ...

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