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Sanofi-Synthelabo v. Apotex

November 2, 2006


The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge.


Defendants Apotex Inc. and Apotex Corp. (collectively, "Apotex") move pursuant to Fed. R. Civ. P. 15(a) and 15(d) to amend and supplement their Third Amended Answer, resulting in a Fourth Amended Answer, in this action.*fn1 The motion is denied to the extent Apotex seeks to add the defense of unclean hands and the counterclaim for breach of contract on the grounds that adding those claims would unduly prejudice plaintiffs. The motion is granted, however, insofar as it seeks to amend and supplement the answer with additional antitrust counterclaims. In addition, those antitrust counterclaims are severed pursuant to Fed. R. Civ. P. 21 and stayed pending resolution of the issues scheduled for trial commencing January 22, 2007.


On March 21, 2002, plaintiffs Sanofi-Synthelabo, Sanofi-Synthelabo, Inc., and Bristol-Myers Squibb Sanofi Pharmaceuticals Holding Partnership (collectively, "Sanofi") filed this patent infringement suit against Apotex. The history of this litigation is recounted in the Opinion dated August 31, 2006 granting Sanofi's motion for a preliminary injunction, and familiarity with that opinion is assumed. See Sanofi-Syntholabo v. Apotex Inc., No. 02 Civ. 2255, 2006 U.S. Dist. LEXIS 65127, at *5-16 (S.D.N.Y. Aug. 31, 2006).

On April 12, 2005, the Court denied a motion by Apotex to amend its Third Amended Answer. Apotex now moves a second time to amend its Third Amended Answer. Specifically, Apotex seeks to assert the equitable defense of unclean hands (Defendant's Proposed Answer ("Prop. Ans.") at 6-9, ¶ 8) and counterclaims for breach of contract relating to the March 17, 2006 settlement agreement between the parties (Prop. Ans. ¶¶ 97-109) and additional antitrust violations (Prop. Ans. ¶¶ 70-97). In addition, Apotex seeks a declaration that any infringement damages awarded to Sanofi be subject to the cap on damages set forth in the May 25, 2006 settlement agreement.*fn2

II.Legal Standard

The decision to grant or deny a motion to amend a pleading rests within "the sound discretion" of the district court. Krumme v. Westpoint Stevens Inc., 143 F.3d 71, 88 (2d Cir. 1998). While leave to amend should be given freely, the district court "plainly has discretion to deny leave to amend 'where the motion is made after inordinate delay, no satisfactory explanation is made for the delay, and the amendment would prejudice the defendant.'" MacDraw, Inc. v. The CIT Group Equip. Fin., Inc., 157 F.3d 956, 962 (2d Cir. 1998) (quoting Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir. 1990)). Additional factors that a court may consider include repeated failure to cure deficiencies by previous amendments or futility of the proposed amendments. Foman v Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed. 2d 222 (1962). The court also has discretion to deny leave to amend "where the belated motion would unduly delay the course of proceedings by, for example, introducing new issues for discovery." Grace v. Rosenstock, 228 F.3d 40, 42 (2d Cir. 2000) (citing Ansam Associates v. Cola Petroleum, Ltd., 760 F.2d 442, 446 (2d Cir. 1985). As to prejudice, the Court considers factors including whether the new claim would "require the opponent to expend significant additional resources to conduct discovery and prepare for trial" or would "significantly delay the resolution of the dispute." Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993). See also Krumme, 143 F.3d at 88 (quoting H.L. Hayden Co. v. Siemens Medical Systems, 112 F.R.D. 417, 419 (S.D.N.Y. 1986) ("One of the most important considerations . is the degree to which [allowing amendment] would delay the final disposition of the action.")).


A. "Unclean Hands" Defense and Counterclaim for Breach of Contract

Sanofi asserts that Apotex's proposed unclean hands defense and counterclaim for breach of contract (together, the "Settlement Allegations") "relate exclusively to the settlement agreements executed by the parties in 2006 and the ensuing review of those agreements by government regulators." (Pl. Mem. in Opp. dated Oct. 13, 2006 ("Pl. Mem.") at 6.) Sanofi further contends that "the utter lack of any relationship" between the Settlement Allegations and the issues ready for trial on January 22, 2007-namely, whether U.S. Patent No. 4,847,265 (the "'265 patent") is valid and enforceable-requires the Court to deny Apotex's motion as it relates to those proposed amendments. Apotex replies that Sanofi's conduct during settlement negotiations relates directly to the validity and enforceability of the '265 patent and should therefore be included in the January trial. Specifically, Apotex alleges that Sanofi engaged in misconduct during the settlement process in order to "perpetrate a fraud on government regulators." (Def. Reply Mem. at 5.)

Apotex cites Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 65 S. Ct. 993, 89 L.Ed. 1381 (1945), to support its contention that "the doctrine of 'unclean hands' bars the enforcement of a patent by a party who has abused the settlement process as a way to shield the patent from judicial scrutiny." (Def. Reply Mem. at 5.) However, as this Court has written previously, Precision Instrument stands for the proposition that unclean hands may bar equitable relief when parties "committed perjury before the PTO, or litigation misconduct or fraud on the court," but the decision does not support denial of equitable relief on the basis of "alleged wrongdoing during the course of settlement negotiations." Sanofi-Syntholabo, 2006 U.S. Dist. LEXIS 65127, at *88. See, e.g., Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 244-46, 54 S. Ct. 146, 78 L.Ed. 293 (1933) (fraud on the court); Aptix Corp. v. Quickturn Design Sys., Inc., 269 F.3d 1369, 1374 (Fed. Cir. 2001) (litigation misconduct); see also Republic Molding Corp. v. B.W. Photo Utilities, 319 F.2d 347, 351 (9th Cir. 1963). The wrongdoing during the course of settlement negotiations alleged here is unrelated to the procurement of the patent itself and will not be part of the January trial on the validity and enforceability of the patent.

Defendants' reliance on Morton Salt v. G.S. Suppiger, 314 U.S. 488, 62 S. Ct. 402, 86 L.Ed. 363 (1942) is also unavailing. In Morton Salt, the patentee used its patent to restrain competition in related articles on which it did not hold patent rights. Id. at 491. Because the patentee's infringement suit was deemed an effort to further its unlawful monopoly over an unpatented article, the Supreme Court determined that the district court had rightly dismissed the complaint for patent misuse "for want of equity." Id. at 494. Morton Salt, however, is inapposite to Apotex's position. First, the continued validity of Morton Salt is suspect in light of the Supreme Court's recent opinion in Illinois Tool Works Inc. v. Independent Ink, Inc., __ U.S. __, 126 S. Ct. 1281, 1288 164 L.Ed. 2d 26 (2006). Second, the facts of Morton Salt, which deal specifically with the misuse of a patent to restrain trade beyond the scope of the patent, differ substantially from allegations of misconduct arising out of the negotiation of an agreement between patentee and potential licensee.

The Court has previously written in this litigation that "[t]he conduct of the parties during settlement negotiations does not affect the validity of the patent or the veracity of submissions to this Court." Sanofi-Syntholabo, 2006 U.S. Dist. LEXIS 65127, at *89. That statement holds true today. Exclusion of the unclean hands defense that Apotex seeks to introduce into this action does not prevent Apotex from arguing at trial that Sanofi engaged in inequitable conduct during the prosecution of its application for the '265 patent before the PTO, to the extent Apotex has already alleged that inequitable conduct. In contrast, whether Sanofi attempted to conceal inequitable conduct dating to its application to the PTO in the late 1980s by entering into settlement negotiations with Apotex in 2006 is an unnecessary and inappropriate diversion from the question presented for trial: whether the '265 patent is valid and enforceable.

Indeed, the lack of connection between the Settlement Allegations on the one hand and the issue of the validity and enforceability of the '265 patent on the other suggests why inclusion of the Settlement Allegations at this stage would unduly prejudice Sanofi. The Settlement Allegations would of necessity require the reopening of discovery since the negotiations surrounding the settlements were not part of the prior discovery proceedings. Apotex asserts that additional discovery would be feasible between now and the trial date-a period of less than three months-but the history of time-consuming discovery in these litigations demonstrates that permitting discovery on new issues at this late date would risk further delay and expense in this four year-old litigation.*fn3 Under these circumstances, allowing the proposed amendments would prejudice Sanofi. See, e.g., Zubulake v. UBS Warburg LLC, UBS, 231 F.R.D. 159, 162-63 (S.D.N.Y. 2005); ...

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