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Bristol-Myers Squibb Co. v. Matrix Laboratories Ltd.

United States District Court, S.D. New York

May 13, 2015

BRISTOL-MYERS SQUIBB COMPANY, Plaintiff,
v.
MATRIX LABORATORIES LIMITED, now known as Mylan Laboratories Limited, Defendant.

OPINION & ORDER

PAUL A. ENGELMAYER, District Judge.

In this case, now on remand from the Second Circuit, plaintiff Bristol-Myers Squibb Company ("BMS") brings breach of contract claims against defendant Matrix Laboratories Limited ("MLL"). MLL moves to dismiss the Second Amended Complaint ("SAC") under Federal Rule of Civil Procedure 12(b)(6), arguing that the SAC fails to state a claim.

The motion turns on a discrete provision in the parties' agreement. In relevant part, the agreement prohibited MLL from selling certain prescription drugs to "third parties it reasonably believe[d] may export the [drugs] outside" of a specified territory (India and parts of sub-Saharan Africa). MLL concedes that it sold covered drugs to a third party for distribution outside of that territory. The disputed issue is whether that third party, as opposed to MLL or a common carrier, "exported" the drugs from inside to outside the territory. For the following reasons, the Court holds that the SAC does not adequately so allege. Accordingly, the Court finds that the SAC fails to state a claim and grants MLL's motion to dismiss.

I. Background

The Court assumes familiarity with its August 12, 2013 decision, Dkt. 30, reported at Bristol-Myers Squibb Co. v. Matrix Labs. Ltd, 964 F.Supp.2d 287 (S.D.N.Y. 2013), and the Second Circuit's October 7, 2014 decision, reported at Bristol-Myers Squibb Co. v. Matrix Labs, Ltd., 586 F.Appx. 747 (2d Cir. 2014) (summary order). The facts and procedural history relevant to the motion now pending before the Court are summarized below.

A. Factual Background[1]

BMS is a Delaware corporation with its principal place of business in New York. SAC 20. It sells the well-known HIV/AIDS drug atazanavir under the brand name Reyataz. Id. ¶ 1. It has patents or pending patent applications related to atazanavir in more than 50 countries. Id. ¶ n.1. MLL is an Indian corporation with its principal place of business in India. Id. ¶ 21. It is in the business of manufacturing, marketing, and selling generic pharmaceutical products throughout the world, including in the United States. Id.

On April 17, 2011, BMS and MLL entered into an "immunity from suit" agreement. Id. ¶ 2; see also id. Ex. 1 (the "Agreement"). Under the Agreement, patent holder BMS gave MLL the right to manufacture, distribute, and sell generic atazanavir in certain underdeveloped countries without fear of patent litigation by BMS. Id. ¶¶ 2, 30. BMS also agreed to forego any royalties or profits associated with MLL's sale of generic atazanavir and to give MLL the "proprietary know-how" necessary to enable it to produce the drug on its own. Id. ¶¶ 2-3. The Agreement's purpose was to facilitate broad, low-cost distribution of generic atazanavir to areas in dire need of HIV/AIDS treatment and prevention. Id. ¶ 2.

The Agreement immunized from patent litigation MLL's sale of generic atazanavir only in the specified "Territory, " which was defined to include India and 44 countries in sub-Saharan Africa. See Agreement § 1.10 & App'x C. Accordingly, under the Agreement, BMS retained its existing rights to sue MLL for patent infringement if MLL sold atazanavir outside the Territory in countries where BMS has patents or pending patent applications. Id . § 3.1(a). The Agreement also provided in its § 3.1(d)-the provision at issue here-that MLL "shall not sell, distribute, or otherwise transfer Products manufactured hereunder to any third parties it reasonably believes may export the Products outside the Territory where Patents exist."

The issue in this case involves sales of atazanavir in Venezuela, which falls outside the Territory as defined in the Agreement. See Agreement App'x C; SAC ¶¶ 4, 31. In November 2011, MLL asked BMS to consent to MLL's selling generic atazanavir there. SAC ¶¶ 6, 33. BMS did not consent because, at the time of MLL's request, it had supplied Reyataz, its brand-name atazanavir, to Venezuela for several years; it anticipated selling Reyataz to Venezuela in 2012; and it had two patent applications related to atazanavir pending in Venezuela. Id. ¶¶ 6, 31, 34; Agreement App'x A. Twice more in early 2012, MLL sought a "special waiver" to engage in such sales; BMS again declined to consent. SAC ¶¶ 7-9.

Nevertheless, in February 2012, BMS alleges, MLL sold a significant amount (an estimated six-month supply for Venezuela) of atazanavir to the Pan American Health Organization ("PAHO"), knowing that PAHO would then distribute this atazanavir in Venezuela. Id. ¶¶ 10-11, 36. The atazanavir was later shipped to the Venezuelan Ministry of Health and distribute throughout Venezuela. Id. ¶¶ 11-12, 36-37.

On March 1, 2012, after BMS learned about MLL's sale to PAHO, BMS contacted the general counsel of Mylan, MLL's "ultimate parent, requesting that Mylan take immediate steps to retrieve the atazanavir that was shipped to Venezuela." Id. ¶ 13. Although the general counsel responded that Mylan would attempt to prevent the distribution of the atazanavir, MLL "took no further steps to claw back the generic atazanavir" that it had sold to PAHO. Id. ¶ 14. To the contrary, BMS alleges, in 2014, MLL sold another 50, 000 units of atazanavir, estimated as a five-month supply for Venezuela, to PAHO and shipped the units to the Venezuelan Ministry of Health. Id. ¶¶ 15, 42-43. As of November 25, 2014, BMS believed that MLL was continuing to sell atazanavir to PAHO for distribution in Venezuela. Id. ¶ 17.

B. The Court's August 12, 2013 Opinion

On July 30, 2012, BMS filed an original Complaint, Dkt. 1, and on April 16, 2013, a First Amended Complaint, Dkt. 17 ("FAC"). The FAC brought a single claim, for breach of contract.

The FAC's theory of liability was that any sales by MLL that resulted in the distribution of atazanavir in Venezuela would themselves breach the Agreement. The FAC alleged that MLL "sold a significant amount of atazanavir to [PAHO] and shipped said atazanavir to the Venezuelan Ministry of Health." FAC ¶ 9. This breached the Agreement, according to the FAC, because the Agreement "expressly prohibit[ed] [MLL] from selling or distributing atazanavir, either directly or indirectly, into countries where BMS maintains a patent or, as here, where it has a patent pending." Id. ¶ 13. Thus, MLL's sale violated § 3.1(d) of the Agreement because MLL "knew ...


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