Auxilium Pharms., Inc. v. FCB I LLC

Case Name: Auxilium Pharms., Inc. v. FCB I LLC, Civ. No. 20-16456, 2021 WL 2802537 (D.N.J. July 6, 2021) (Vazquez, J.) 

Drug Product and Patent(s)-in-Suit: Testim® (testosterone gel); U.S. Patents Nos. 7,320,968 (“the ’968 patent”), 7,608,605 (“the ’605 patent”), 7,608,606 (“the ’606 patent”), 7,608,608 (“the ’608 patent”), 7,608,609 (“the ’609 patent”), 7,608,610 (“the ’610 patent”), 7,935,690 (“the ’690 patent”), 8,063,029 (“the ’029 patent”), 8,178,518 (“the ’518 patent”), and 7,608,607 (“the ’607 patent”)

Nature of the Case and Issue(s) Presented: FCB is the current assignee of the patents-in-suit and Auxilium is the current exclusive licensee. The patents-in-suit are related, share a common specification, and every claim “requires a composition that includes testosterone, a Hsieh enhancer such as oxacyclohexadecan-2-one, and a thickening agent.” Auxilium and FCB, as co-plaintiffs, previously filed suit against Watson Labs alleging infringing of the patents-in-suit, in an attempt to prevent generic market entry. During that litigation, the parties narrowed their asserted claims by stipulating that “[W]hether Watson's ANDA infringes any valid and enforceable claim of ... the ’968 patent, the ’605 patent, the ’606 patent, the ’608 patent, the ’609 patent, the ’610 patent, the ’690 patent, the ’029 patent, and the ’518 patent, and ... claims 1, 2, and 4-15 of the ’607 patent will be determined by the outcome of the trial and appeal with respect to claim 3 of the ’607 patent.” After a six-day bench trial, the court held claim 3 of the ‘607 patent invalid under 35 U.S.C. § 101 for improper inventorship, under 35 U.S.C. § 102(f) for derivation, and under 35 U.S.C. § 103 for obviousness. On the issue of inventorship, the court found that Dr. Dean Hsieh conceived of the three main elements of claim 3 of the ‘607, not the sole named inventor, Robert Gyurik. The court further found that Mr. Gyurik derived the subject matter of claim 3 of the ‘607 patent from Dr. Hsieh by reviewing his laboratory notebooks and other materials. Finally, the court found that claim 3 of the ‘607 patent was obvious over the prior art “because the suitability of testosterone for transdermal delivery was well known, and a person of ordinary skill in the art would have had a reasonable expectation for success in developing the claimed pharmaceutical formulation for use in the claimed methods.” No appeal was taken.

On March 27, 2015, Auxilium notified FCB that it would no longer pay it royalties for Auxilium’s sales of Testim pursuant to the license agreement for the patents-in-suit. Auxilium claimed that, based on the district court’s decision as to claim 3 of the ‘607 patent, the remaining patents-in-suit were no longer enforceable. But FCB maintains that the patents-in-suit are valid. Auxilium filed the instant complaint seeking a declaratory judgment that the prior decision has a collateral and preclusive effect that similarly renders invalid the other claims of the ‘607 patent, as well as each of the claims of the patents-in-suit.. Auxilium filed an unopposed motion for default judgment against FCB, which the court denied.

Why FCB Prevailed: The court considered whether: (i) it had jurisdiction; (ii) FCB was properly served; (iii) the complaint included sufficiently plead causes of action; and (iv) Auxilium proved damages. The court has subject matter jurisdiction because the case arises under the patent law. It has personal jurisdiction because FCB’s principal place of business is in Mahwah, NJ. Service on FCB was proper because Auxilium served the summons and complaint on FCB’s registered agent for service.

Regarding a well-pled cause of action, the court found that the complaint asserts one count for a declaratory judgment that the patents-in-suit are invalid based on improper inventorship, derivation, and obviousness (i.e. the findings from the previous litigation). But it is “unclear whether Auxilium is proceeding under a contract-based theory or a preclusion-based theory.” That is because it relies principally on the Watson stipulation from the previous litigation, which was unsigned and does not indicate that the previous decision as to claim 3 of the ’607 patent resolved the validity of the other patents-in-suit as between Auxilium and FCB. Thus, Auxilium’s contract-based theory is not sufficiently alleged. If, on the other hand, Auxilium was trying to make a preclusive argument, then it failed to: (i) indicate the type of preclusion (issue or claim preclusion) it is seeking to employ; (ii) provide the relevant legal standards; and (iii) conduct any analysis.