Opinion · Court of Appeals for the Federal Circuit

Bayer Healthcare LLC v. Baxalta Inc.

989 F.3d 964

Type: Opinion
Court: Court of Appeals for the Federal Circuit
Jurisdiction: Federal
Date: 2021-03-01
Topic: bankruptcy

holding that evidence knowledge of the patents-at-issue and evidence the defendant infringed is sufficient but not necessary to establishing willful infringement | explaining that “the jury was in the best position to determine” the persuasive- ness of expert testimony | rejecting Seventh Amendment argument to find “the district court acted within its discretion in awarding supplemental damages” when it calculated pre-verdict supplemental damages by applying the jury’s royalty rate to the actual infringing sales base | infringement and knowledge of the patent does not create a jury issue | affirming district court’s denial of defendant’s motion for JMOL or a new trial on damages where defendant cross-examined opposing expert’s opinions regarding reasonable royalty rate and presented testimony of its own damages expert suggesting a much lower royalty rate | “[T]he specification need not include a working example of every possible embodiment to enable the full scope of the claims.” | “Knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness.” | “To establish willfulness, the patentee must show the accused infringer had a specific intent to infringe at the time of the challenged conduct.” | willful infringement requires knowledge of the patents and infringement, as well as deliberate or intentional infringement | “To establish 23 willfulness, the patentee must show the accused infringer had a specific intent to 24 infringe at the time of the challenged conduct.” | “Bayer merely ‘assume[d] that [Baxalta] knew [the accused product] infringed because it involved pegylation at the B-domain of factor VIII.’” | “Knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness. Rather, willfulness requires deliberate or intentional infringement.”

Citator

Cited by: 25 opinions

Case: 19-2418     Document: 67    Page: 1   Filed: 03/01/2021




   United States Court of Appeals
       for the Federal Circuit
                   ______________________

                BAYER HEALTHCARE LLC,
                  Plaintiff-Cross-Appellant

                             v.

          BAXALTA INC., BAXALTA US INC.,
               Defendants-Appellants

                NEKTAR THERAPEUTICS,
                    Defendant-Appellee
                  ______________________

                    2019-2418, 2020-1017
                   ______________________

     Appeals from the United States District Court for the
 District of Delaware in No. 1:16-cv-01122-RGA, Judge
 Richard G. Andrews.
                 ______________________

                   Decided: March 1, 2021
                   ______________________

     BRADFORD J. BADKE, Sidley Austin LLP, New York,
 NY, argued for plaintiff-cross-appellant. Also represented
 by SONA DE, CHING-LEE FUKUDA; JOSHUA JOHN FOUGERE,
 RYAN C. MORRIS, PAUL ZEGGER, Washington, DC.

     EDGAR HAUG, Haug Partners LLP, New York, NY, ar-
 gued for defendants-appellants and defendant-appellee.
 Also represented by KAITLIN ABRAMS, NICHOLAS F. GIOVE,
 JONATHAN HERSTOFF, ERIKA SELLI.
Case: 19-2418    Document: 67     Page: 2    Filed: 03/01/2021




2                      BAYER HEALTHCARE LLC   v. BAXALTA INC.



                  ______________________

     Before NEWMAN, LINN, and STOLL, Circuit Judges.
 STOLL, Circuit Judge.
      This patent infringement case presents various issues
 of claim scope, infringement, validity, and damages. Bayer
 HealthCare LLC sued Baxalta Inc. and Baxalta US Inc.
 (collectively, “Baxalta”) and Nektar Therapeutics, alleging
 that Baxalta’s biologic product Adynovate® infringes cer-
 tain claims of Bayer’s

U.S. Patent No. 9,364,520

. The jury
 found that the asserted claims were enabled and infringed,
 and that Bayer was entitled to reasonable-royalty dam-
 ages. The district court did not, however, send the question
 of willful infringement to the jury, instead holding as a
 matter of law that Baxalta’s conduct did not meet the re-
 quirements for willfulness. Baxalta now appeals the dis-
 trict court’s denial of its motions for judgment as a matter
 of law or a new trial on the issues of infringement, enable-
 ment, and damages, along with the court’s award of pre-
 verdict supplemental damages. Bayer cross-appeals, chal-
 lenging the district court’s denial of its motion for a new
 trial on willfulness. We affirm.
                         BACKGROUND
                              I
     The ’520 patent is directed to recombinant forms of hu-
 man factor VIII (or FVIII). FVIII is a protein that is pro-
 duced, and released into the bloodstream, by the liver.
 FVIII comprises 2,332 amino acids and has six different
 structural domains: A1-A2-B-A3-C1-C2. Most relevant to
 this case is the domain of FVIII known as the “B-domain.”
     As “a critical component of the intrinsic pathway of
 blood coagulation,” FVIII is useful in the treatment of he-
 mophilia A. ’520 patent col. 1 ll. 29–30. Hemophilia A is
 the “most common hereditary coagulation disorder” and is
 “caused by deficiency or structural defects in” naturally
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 BAYER HEALTHCARE LLC   v. BAXALTA INC.                      3



 occurring FVIII.

Id.

 at col. 1 ll. 27–29. Because FVIII has
 a “short half-life” of “only about 11 hours,” as a therapeutic
 it “must be administered frequently.”

Id.

 at col. 1 ll. 52–55.
 The ’520 patent recognizes that “[t]he need for frequent in-
 travenous injection creates tremendous barriers to patient
 compliance” and, thus, “[i]t would be more convenient for
 the patients if a FVIII product could be developed that had
 a longer half-life and therefore required less frequent ad-
 ministration.”

Id.

 at col. 1 ll. 56–60; see

id.

 at col. 2
 ll. 47–49. Moreover, “the cost of treatment could be re-
 duced if the half-life were increased because fewer dosages
 may then be required.”

Id.

 at col. 1 ll. 60–62.
      The patent explains that a process called “PEGylation”
 has “been demonstrated to increase the in vivo half-life of
 a protein.”

Id.

 at col. 3 ll. 34–35. PEGylation is the conju-
 gation (or attachment) of a polymer called polyethylene gly-
 col (PEG) to a protein such as FVIII. See

id.

 at col. 3
 ll. 35–37; see also

id.

 at col. 9 ll. 12–14. PEG is a type of
 polyalkylene oxide. See

id.

 at col. 8 ll. 41–43.
      The patent further teaches that “random” modification
 of FVIII by PEGylation was known and that certain ran-
 domly PEGylated proteins had been approved as therapeu-
 tics. The inventors sought, however, “a more specific
 method for PEGylating FVIII” because the prior-art “ran-
 dom” approach had several drawbacks:
     Random modification of FVIII by targeting pri-
     mary amines (N-terminus and lysines) with large
     polymers such as PEG and dextran has been at-
     tempted with varying degree[s] of success . . . .
     This random approach . . . is much more problem-
     atic for the heterodimeric FVIII. FVIII has hun-
     dreds of potential PEGylation sites, including the
     158 lysines, the two N-termini, and multiple histi-
     dines, serines, threonines, and tyrosines, all of
     which could potentially be PEGylated with rea-
     gents primarily targeting primary amines.
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4                         BAYER HEALTHCARE LLC        v. BAXALTA INC.

Id.

 at col. 3 l. 50–col. 4 l. 1, col. 4 ll. 19–20.
      The patent identifies as an “additional drawback to not
 controlling the site of PEGylation on FVIII” the “potential
 activity reduction if the PEG were to be attached at or near
 critical active sites, especially if more than one PEG or a
 single large PEG is conjugated to FVIII.”

Id.

 at col. 4
 ll. 7–11. Furthermore, “[b]ecause random PEGylation will
 invariably produce large amounts of multiply PEGylated
 products, purification to obtain only mono-PEGylated
 products will drastically lower overall yield.”

Id.

 at col. 4
 ll. 11–14. Finally, the patent explains that “the enormous
 heterogeneity in product profile will make consistent syn-
 thesis and characterization of each lot nearly impossible”
 and constitutes “a barrier to commercialization,” since
 “good manufacturing requires a consistent, well-character-
 ized product.”

Id.

 at col. 4 ll. 14–19; see

id.

 at col. 4 ll. 4–7
 (“[H]eterogeneous processing of full length FVIII can lead
 to a mixture of starting material that leads to further com-
 plexity in the PEGylated products.”).
     Thus, the inventors recognized “a need for an improved
 FVIII variant that possesses greater duration of action in
 vivo . . . while retaining functional activity,” and that is de-
 sirably “produced as a homogeneous product in a consistent
 manner.”

Id.

 at col. 4 l. 65–col. 5 l. 3. The patent purports
 to overcome the drawbacks of “random” PEGylation by us-
 ing “site-directed” PEGylation at the B-domain of FVIII:
     The present invention is based on the discovery
     that polypeptides having FVIII activity can be co-
     valently attached at a predefined site to a biocom-
     patible polymer that is not at an N-terminal amine,
     and that such polypeptides substantially retain
     their coagulant activity. Furthermore, these poly-
     peptide conjugates have improved circulation time
     and reduced antigenicity. The conjugates of the in-
     vention are advantageous over the prior art conju-
     gates that had random polymer attachments to
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 BAYER HEALTHCARE LLC    v. BAXALTA INC.                       5



     FVIII or attachments at an N-terminal. Site-di-
     rected attachment allows one to design modifica-
     tions that avoid the regions required for biological
     activity and thereby to maintain substantial FVIII
     activity. . . . Site-directed attachment also allows
     for a uniform product rather than the heterogene-
     ous conjugates produced in the art by random pol-
     ymer coupling.

Id.

 at col. 8 ll. 15–30; see

id.

 at col. 15 ll. 9–13 (explaining
 that the “retained activity” of the claimed conjugates was
 “surprising” given “the problems with past polymeric con-
 jugates causing nonspecific addition and reduced activity”).
     Claim 1 is the only asserted independent claim and re-
 cites:
     1. An isolated polypeptide conjugate comprising a
     functional factor VIII polypeptide and one or more
     biocompatible polymers, wherein the functional
     factor VIII polypeptide comprises the amino acid
     sequence of SEQ ID NO: 4 or an allelic variant
     thereof and has a B-domain, and further wherein
     the biocompatible polymer comprises polyalkylene
     oxide and is covalently attached to the functional
     factor VIII polypeptide at the B-domain.

Id.

 at col. 61 ll. 9–16 (emphases added to the disputed claim
 terms).
                                II
     Bayer sued Baxalta and Nektar, Baxalta’s collaborator
 on its Adynovate® product, for patent infringement. Ady-
 novate® is a recombinant PEGylated FVIII product used to
 treat hemophilia A. Adynovate® is made by PEGylating to
 amino acids in FVIII that have amine groups, including the
 amino acid lysine. We hereafter refer to this process as
 “amine/lysine” PEGylation.
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6                       BAYER HEALTHCARE LLC    v. BAXALTA INC.



     The district court construed the claim term “an isolated
 polypeptide conjugate” in claim 1 to mean “a polypeptide
 conjugate where conjugation was not random.” Bayer
 Healthcare LLC v. Baxalta Inc., No. 16-cv-1122,

2018 WL 3212425

, at *2 (D. Del. June 29, 2018) (Claim Construction
 Op.). The district court determined that, during prosecu-
 tion of the ’520 patent, Bayer had “clearly and unmistaka-
 bly disclaimed any ‘polypeptide conjugate where
 conjugation was random.’”

Id. at *4

.
     In addition, the district court construed the claim term
 “at the B-domain” in claim 1 to mean “attachment at the
 B-domain such that the resulting conjugate retains func-
 tional factor VIII activity.”

Id. at *8

. The district court re-
 jected Baxalta’s proposed construction of the term to mean
 “at a site that is not any amine or carboxy site in factor VIII
 and is in the B-domain,” finding that Bayer did not dis-
 claim PEGylation at amine or carboxy sites.

Id.

 at *8–9.
     Baxalta moved for summary judgment of noninfringe-
 ment and invalidity for lack of enablement. The district
 court denied Baxalta’s motions due to genuine factual dis-
 putes.    See Bayer HealthCare LLC v. Baxalta Inc.,
 No. 16-cv-1122,

2018 WL 6727054

, at *3–7 (D. Del. Dec. 21,
 2018) (Summ. J. Op.). Baxalta also moved in limine re-
 questing that the district court clarify the meaning of “ran-
 dom” in its construction of “an isolated polypeptide
 conjugate.” The district court denied Baxalta’s motion,
 “again reject[ing] [Baxalta’s] argument that [Bayer] de-
 fined ‘random’ conjugation as ‘any conjugation at amines or
 carboxy sites.’” Bayer HealthCare LLC v. Baxalta Inc.,
 No. 16-cv-1122,

2019 WL 10890386

, at *1 (D. Del. Jan. 3,
 2019) (Mot. in Lim. Order).
     Prior to trial, Baxalta moved to exclude the testimony
 of Bayer’s damages expert, Dr. Addanki, regarding his pro-
 posed reasonable-royalty rate. In his expert report, Dr. Ad-
 danki opined that Bayer was entitled to a royalty rate of
 23.75%—the midpoint of the bargaining range of 5.1% to
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 BAYER HEALTHCARE LLC   v. BAXALTA INC.                      7



 42.4%—based on the Nash Bargaining Solution. The dis-
 trict court concluded that the expert failed to tie his 50/50
 split to the facts of the case, and thus excluded his “opinion
 that a reasonable royalty rate is ‘the mid-point of the bar-
 gaining range’ . . . , including any subsequent opinions that
 rely on that mid-point rate.” Bayer HealthCare LLC v. Bax-
 alta Inc., No. 16-cv-1122,

2019 WL 330149

, at *8 (D. Del.
 Jan. 25, 2019) (Daubert Order). The district court denied,
 however, Baxalta’s request to prohibit Dr. Addanki from
 testifying as to his proposed bargaining range of 5.1% to
 42.4%.
     The case then proceeded to a jury trial. The district
 court granted Baxalta’s pre-verdict motion for JMOL of no
 willful infringement. Thereafter, the jury found that Bax-
 alta infringed asserted claims 1–3 and 8 of the ’520 patent,
 and that none of those claims were invalid for lack of ena-
 blement. J.A. 1889–90, 1892. The jury also found that
 Bayer was entitled to $155,190,264 in reasonable-royalty
 damages for the time period from June 14, 2016 through
 November 30, 2018 based on a 17.78% royalty rate applied
 to a $872,836,128 royalty base. J.A. 1893.
     Following the verdict, Baxalta moved for JMOL or a
 new trial on the issues of infringement, enablement, and
 damages. The district court denied Baxalta’s motions. See
 generally Bayer Healthcare LLC v. Baxalta Inc.,

407 F. Supp. 3d 462

 (D. Del. 2019) (JMOL Op.). For its
 part, Bayer moved under Rule 59 of the Federal Rules of
 Civil Procedure for an award of pre-verdict supplemental
 damages for the time period from December 1, 2018
 through February 8, 2019, the date of the district court’s
 judgment. The district court granted Bayer’s motion and
 awarded Bayer supplemental damages in the amount of
 $18,324,562 based on the actual sales data for that period
 and the jury’s 17.78% royalty rate. Bayer Healthcare LLC
 v. Baxalta Inc., No. 16-cv-1122,

2019 WL 4016235

, at *6
 (D. Del. Aug. 26, 2019) (Rule 59 Op.); Final Judgment at 2,
 Bayer Healthcare LLC v. Baxalta Inc., No. 16-cv-1122
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8                      BAYER HEALTHCARE LLC    v. BAXALTA INC.



 (D. Del. Sept. 10, 2019), ECF No. 507. Bayer also moved
 for a new trial under Rule 59(a) on the issue of willfulness,
 but the district court denied its motion. Rule 59 Op.,

2019 WL 4016235

, at *8–9.
    Bayer and Baxalta appeal. We have jurisdiction pur-
 suant to

28 U.S.C. § 1295

(a)(1).
                         DISCUSSION
      This case presents various issues on appeal and cross-
 appeal. We start by addressing Baxalta’s challenges to the
 district court’s construction of the claim term “at the B-do-
 main” and its interpretation of the word “random” in its
 construction of the claim term “an isolated polypeptide con-
 jugate.” We then turn to Baxalta’s challenges to the dis-
 trict court’s judgments of infringement and enablement,
 along with the court’s awards of damages and pre-verdict
 supplemental damages. Finally, we address Bayer’s chal-
 lenge to the district court’s judgment of no willful infringe-
 ment.
                               I
      We first address Baxalta’s challenge to the district
 court’s construction of the disputed term “at the B-domain”
 in claim 1. Baxalta contends that the district court erred
 in failing to construe the term to exclude amine/lysine con-
 jugation. Neither the parties nor the district court consid-
 ered extrinsic evidence in construing this claim term.
 “Claim construction based on the intrinsic evidence is a
 question of law that this court reviews de novo.” Hologic,
 Inc. v. Minerva Surgical, Inc.,

957 F.3d 1256

, 1269
 (Fed. Cir. 2020) (citing Trs. of Columbia Univ. v. Symantec
 Corp.,

811 F.3d 1359, 1362

 (Fed. Cir. 2016)). “The con-
 struction of claim terms based on the claim language, the
 specification, and the prosecution history are legal deter-
 minations.”