United States District Court, S.D. New York
June 18, 2004.
NOVARTIS PHARMACEUTICALS CORPORATION, NOVARTIS AG, NOVARTIS PHARMA AG and NOVARTIS INTERNATIONAL PHARMACEUTICAL LTD., Plaintiffs,
APOTEX CORPORATION and NOVEX PHARMA, Defendants.
The opinion of the court was delivered by: HENRY PITMAN, Magistrate Judge
OPINION AND ORDER
Defendants in this patent infringement action move for a
separate trial on the issue of willfulness and to defer discovery
concerning willfulness until the conclusion of the trial of
liability issues. For the reasons set forth below, defendants'
motion is denied in all respects.
Plaintiff Novartis AG is the owner of United States Patent No.
5,733,569 ("the '569 Patent") which describes and claims, among
other things, liquid pharmaceutical compositions for the nasal
administration of calcitonin, a hormone known to participate in
calcium and phosphorus metabolism. The '569 Patent claims
compositions that contain benzalkonium chloride to enhance bioavailability as well as an application device and
method for administering the compositions.
Novartis AG is also the owner of United States Patent No.
5,759,565 ("the '565 Patent") which claims liquid pharmaceutical
compositions for the nasal administration of calcitonin which
contain benzalkonium chloride.
In or about September 2002, defendants filed an abbreviated new
drug application with the United States Food and Drug
Administration for approval of the commercial manufacture, use
and sale of a salmon calcitonin nasal spray. As required by
21 U.S.C. § 355 (j)(2) (vii), defendants submitted with their
application an opinion letter from the firm of Caesar, Rivise,
Berstein, Cohen & Pokotilow, Ltd., ("Caesar, Rivise") opining
that the '569 and '565 Patents were invalid on the grounds of
obviousness and prosecution laches. If plaintiffs' patents are
valid and defendants' products are within the scope of the
patents' claims, defendants' abbreviated new drug application
constitutes an act of infringement. 35 U.S.C. § 271 (e)(2).
Plaintiffs commenced the pending infringement action in
November 2002. Plaintiffs allege that defendants have willfully
infringed the '569 and '565 Patents and seek an injunction,
damages and other relief. In the course of discovery, defendants
have admitted that the subject of their abbreviated new drug
application is within the scope of the claims of the '569 and
'565 Patents (Defendants Supplemental Responses to Plaintiffs'
First Set of Requests for Admission, dated November 7, 2003, Nos. 20-22; Defendants' Responses to Plaintiffs' Second Set of
Requests for Admissions, dated December 1, 2003, Nos. 60-67).
Thus, the principal issues at trial will be the validity of the
'569 and '565 Patents and, if the patents are valid, whether
defendants' infringement was willful.
In October 2003, defendants advised plaintiffs that they would
rely on an advice-of-counsel defense to plaintiffs' claim of
willful infringement and produced 75 pages of documents that had
previously been withheld on the ground of privilege. Because
plaintiffs believe that the documents produced by defendants are
incomplete, and in order to explore further the advice-of-counsel
defense, plaintiffs seek additional documents and deposition
testimony from Caesar, Rivise and to depose defendants'
principals concerning the advice of counsel. Defendants oppose
this discovery, claiming that trying validity and willfulness
together will lead to confusion, delay and unfairly prejudice
defendants by forcing a premature waiver of the attorney-client
The factors to be considered in resolving a motion for separate
trials were succinctly and cogently summarized by the Honorable
Laura Taylor Swain, United States District Judge, in Dallas v.
Goldberg, 143 F. Supp.2d 312, 315 (S.D.N.Y. 2001):
Under Rule 42(b) of the Federal Rules of Civil
Procedure the Court, in its discretion, can bifurcate
the trial of an action for "convenience or to avoid
prejudice, or when separate trials will be conducive to expedition and
economy." Fed.R.Civ.P. 42(b). The decision to
bifurcate a trial rests within the sound discretion
of the trial court. See Simpson v. Pittsburgh
Corning Corp., 901 F.2d 277, 283 (2d Cir. 1990);
Agron v. Trustees of Columbia Univ., No. 88 Civ.
6294, 1997 WL 399667 at *1 (S.D.N.Y. July 15, 1997).
Although bifurcation of trials is not unusual and may
under appropriate circumstances be the preferred
method, bifurcation remains the exception rather than
the rule. See Lewis v. Triborough Bridge, No. 97
CIV. 0607, 2000 WL 423517 at *2 (S.D.N.Y. Apr. 19,
2000); Agron, 1997 WL 399667 at *1; Kerman v. City
of New York, No. 96 Civ. 7865, 1997 WL 666261 at *5
(S.D.N.Y. Oct. 24, 1997).
The application of Rule 42(b) does not lend itself to
a bright-line test but, rather, requires case-by-case
analysis. See Monaghan v. SZS 33 Associates,
827 F. Supp. 233, 245 (S.D.N.Y. 1993). Factors that courts
consider in determining whether bifurcation is
appropriate include: (1) whether the issues are
significantly different from one another; (2) whether
the issues are to be tried before a jury or to the
court; (3) whether the posture of discovery on the
issues favors a single trial or bifurcation; (4)
whether the documentary and testimonial evidence on
the issues overlap; and (5) whether the party
opposing bifurcation will be prejudiced if it is
granted. See Lewis, 2000 WL 423517 at *2;
Reading Indus., Inc. v. Kennecott Copper Corp.,
61 F.R.D. 662, 664 (S.D.N.Y. 1974). The party seeking
bifurcation bears the burden of establishing that
bifurcation is warranted. See Lewis, 2000 WL
423517 at *2.
See also Kos Pharm., Inc. v. Barr Labs., Inc.,
218 F.R.D. 387, 390-91 (S.D.N.Y. 2003).
Application of relevant factors to this case leads to the
conclusion that separate trials are not appropriate here. A. Overlap of Issues
Although defendants state that there is no overlap between the
issues of willfulness and validity, their argument does not
"In order to find willful infringement, [a] district court
`[is] required to find by clear and convincing evidence in view
of the totality of the circumstances that [the infringer] acted
in disregard of the [patentee's] patent and lacked a reasonable
basis for believing it had a right to do what it did.'" WMS
Gaming, Inc. v. International Game Tech., 184 F.3d 1339, 1354
(Fed. Cir. 1999), quoting Amsted Indus., Inc. v. Buckeye Steel
Castings Co., 24 F.3d 178, 181 (Fed. Cir. 1994). Accord
Golight, Inc. v. Wal-Mart Stores, Inc., 355 F.3d 1327, 1339
(Fed. Cir. 2004); Crystal Semiconcductor Corp. v. TriTech
Microelectronics Int'l, Inc., 246 F.3d 1336, 1346 (Fed. Cir.
2001). Although "[i]t is well settled that an important factor in
determining whether willful infringement has been shown is
whether or not the infringer obtained the opinion of counsel,"
Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182,
1191 (Fed. Cir. 1998), the mere fact that an infringer has
received the advice of counsel is not the end of the analysis.
Amsted Indus. Inc. v. Buckeye Steel Castings Co., supra, 24
F.3d at 182; Kori Corp. v. Wilco Marsh Buggies & Draglines,
Inc., 761 F.2d 649, 656-57 (Fed. Cir. 1985). The fact finder
must still assess the reasonableness of an accused infringer's
reliance on the advice of counsel. Stryker Corp. v. Davol Inc.,
234 F.3d 1252, 1259 (Fed. Cir. 2000); Graco, Inc. v. Binks Mfg. Co.,
60 F.3d 785, 793 (Fed. Cir. 1995).
Evaluation of the reasonableness of an infringer's reliance can
involve the subject matter of the patent. Home Elevators, Inc.
v. Millar Elevator Serv. Co., 933 F. Supp. 1090, 1092 (N.D. Ga.
1996); THK America, Inc. v. NSK Co., 151 F.R.D. 625, 629-30
(N.D. Ill. 1993). For example, the infringer's failure to
disclose all material information, or the "best information," to
counsel can vitiate the advice-of-counsel defense. Comark
Communications, Inc. v. Harris Corp., supra, 156 F.3d at 1191.
Resolving what information is material or constitutes the "best
information" necessarily implicates the subject matter of the
patent because it is impossible to determine what information is
material or constitutes the "best information" without
understanding the subject matter of the patent. See generally
Amsted Indus. Inc. v. Buckeye Steel Castings Co., supra, 24
F.3d at 183 (affirming jury's rejection of advice-of-counsel
defense where there was evidence that counsel did not fully
understand the invention).
Similarly, where obviousness or anticipation are argued, as
they are here, an opinion's failure to relate the prior art to
the specific claims or claim elements or to explain how the prior
art anticipates the claims or renders them obvious may defeat an
advice-of-counsel defense. As the Court of Appeals for the
Federal Circuit explained in affirming a finding of willfulness notwithstanding counsel's opinion that the patent in
suit was invalid:
Substantial evidence supports the district court's
conclusion that a reasonable jury could have
concluded that the opinion letters were not adequate
to defeat a finding of willfulness. Kiley, the
CellPro representative who procured the opinion
letters from Bloomberg, was highly sophisticated in
matters of patent law and in the involved technology.
Kiley had worked as a patent examiner and later was a
partner at the law firm of Lyon & Lyon, where he
handled patent prosecution and patent litigation.
See Hopkins II, 978 F. Supp. at 187. It is
therefore reasonable to conclude that Kiley should
have been on notice concerning the opinions' obvious
shortcomings and accordingly of the impropriety of
CellPro's course of action. See, e. g.,
Underwater Devices, Inc. v. Morrison-Knudsen Co.,
717 F.2d 1380, 1390, 219 USPQ 569, 576 (Fed. Cir.
1983). The opinions did not attempt to link the
disclosures of the prior art references relied upon
to establish anticipation or obviousness with the
limitations of the claims of the patents. For
example, and as the district court recognized, none
of the allegedly anticipatory references cited in the
'680 opinion letter even refers to a cell suspension.
See Hopkins II, 978 F. Supp. at 194. The '204
opinion letter concluded that CellPro did not
infringe claims 2, 3, 5, and 6 of the '204 patent,
but conspicuously omitted any reference to claims 1
and 4, the claims asserted by Hopkins in this action.
. . . Such shortcomings should have been especially
troublesome to a knowledgeable practitioner like
Kiley, especially considering that the opinions did
not express an opinion concerning infringement of the
broadest claims. . . . Under the circumstances, we
cannot say that a reasonable jury could not have
concluded that the opinion letters were ineffective
to instill in CellPro, through Kiley, reasonable
confidence that its activities did not infringe valid
Johns Hopkins Univ. v. Cellpro, Inc., 152 F.3d 1342, 1364 (Fed.
Finally, defendants' second invalidity argument prosecution
laches will require analysis of the prosecution histories of
the '569 and '565 Patents. See generally Symbol Tech., Inc.
v. Lemelson Med., Educ. & Research Found., L.P., 277 F.3d 1361,
1364-65 (Fed. Cir. 2002). The same prosecution histories will
need to be examined to determine the reasonableness of
defendants' reliance on counsel's opinion concerning prosecution
I am not suggesting that the vitality of an advice-of-counsel
defense turns on the correctness of counsel's advice; it clearly
does not. Johns Hopkins Univ. v. Cellpro, Inc., supra, 152
F.3d at 1364 ("Our case law makes clear that legal opinions that
conclude (even if ultimately incorrectly) that an infringer would
not be liable for infringement may insulate an infringer from a
charge of willful infringement if such opinions are competent
(and followed)."). Nevertheless, whether the opinion, and the
defendants' reliance on the opinion, falls with the arc of
reasonableness frequently cannot be determined without resort to
the underlying technology.
Since defendants have not met their burden of demonstrating the
separability of the technology from the issue of reasonableness,
the first Rule 42(b) factor weighs against separate trials. B. Mode of Trial
This action is to be tried to the Court without a jury. Since
the case will be tried without a jury, there is no chance that
the fact finder will be confused by trying liability and
willfulness in a single action.
C. Does the Posture of Discovery Favor a Single Trial or
Fact discovery in this matter closed on December 9, 2003.
However, claim construction proceedings are still pending and no
trial date has been set. In light of the need to complete claim
construction proceedings before the merits of the case can be
resolved, granting a modest extension of fact discovery to permit
plaintiff to complete discovery concerning willfulness will not
delay the ultimate resolution of this matter.
D. Evidentiary Overlap
As discussed at pages 5-8, there is a substantial overlap of
evidence concerning willfulness and liability.
Denial of defendants' motion for separate trials will not
result in prejudice to defendants. Granting the motion would,
however, result in prejudice to plaintiffs.
Although the Court of Appeals for the Federal Circuit has
cautioned that "[a]n accused infringer . . . should not, without the trial court's careful consideration, be forced to
choose between waiving the [attorney-client] privilege in order
to protect itself from a willfulness finding, . . . and
maintaining the privilege, in which case it may risk being found
to be a willful infringer . . .," Ouantum Corp. v. Tandon
Corp., 940 F.2d 642, 643-44 (Fed. Cir. 1991), none of the
concerns cited by the Federal Circuit are present here.
First, defendants have already chosen to rely on an
advice-of-counsel defense. The substance of counsel's opinion has
already been voluntarily disclosed to plaintiffs; the only
remaining issue is whether discovery concerning the issue should
be completed now.
Second, assuming that counsel's opinion was honestly formed,
permitting the completion of discovery concerning the advice of
counsel, will not prejudice defendants on any liability issue. I
have reviewed the documents defendants have already produced
concerning the advice-of-counsel defense, and these documents
demonstrate that counsel concluded that the '569 and '565 Patents
were invalid for substantially the same reasons defendants are
asserting in this action. Since counsel's analysis appears to be
entirely consistent with defendants' position in this litigation,
it is difficult to understand how disclosure could prejudice
defendants on the merits.
Finally, defendants contend that denial of their motion for
separate trials may prejudice them because it may result in the
disqualification of Caesar, Rivise. There are several responses to this argument. First, plaintiffs have committed not
to seek the disqualification of counsel. Second, even if the
Court were to determine sua sponte that Caesar, Rivise should
be disqualified, defendants are represented by both Caesar,
Rivise and the firm of Amster, Rothstein & Ebenstein. The Amster
firm specializes intellectual property work and has taken the
"laboring oar" in all of defendants' court appearances before me.
There is every reason to believe that the Amster firm would
continue to provide excellent representation for defendants
should it become necessary to disqualify Caesar, Rivise. Finally,
to the extent that any hardship to defendants would result from
the possible disqualification of Caesar, Rivise, that hardship
will be the result of defendants' unilateral choice to retain
Caesar, Rivise as counsel in this infringement action. The
possibility that Caesar, Rivise would be a witness and might have
to be disqualified was foreseeable from the outset of these
proceedings. Having unilaterally created the situation in which
disqualification was a possibility, it is only fair that
defendants unilaterally bear the consequences. See Real v.
Bunn-O-Matic Corp., 195 F.R.D. 618, 626 (N.D. Ill. 2000).
Granting defendants' motion, on the other hand, will result in
prejudice to plaintiffs. Plaintiffs will be prejudiced because
the proceedings will be multiplied into two trials instead of
one, and the final resolution of this matter will be further
delayed. IV. Conclusion
For all the foregoing reasons, defendants' motion for a
separate trial on the issue of willfulness is denied in all
respects. Since defendants' application to stay discovery on the
issue of willfulness is entirely derivative of its motion for a
separate trial, their motion to stay discovery on willfulness is
also denied. Plaintiffs shall complete all discovery on the issue
of willfulness within sixty (60) days of the date of this Order.
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