Eli Lilly Blasts 'New Type of Forum Shopping' in Patent Scrap
When Eli Lilly sued Genentech this year over patents used for cancer treatment, Genentech quickly moved to transfer the case from Oakland to Los Angeles.
After all, Genentech argued, U.S. District Judge Mariana Pfaelzer in L.A. has already presided over four cases involving the core patent — even going so far as to refer to herself as "a student of Cabilly II," as the Genentech patent is known.
Eli Lilly opposed the move, invoking a clause in its license agreement with Genentech providing that any disputes be litigated in the Northern District of California.
Nevertheless, Judge Yvonne Gonzalez Rogers sent the case to the Central District on Aug. 13, where it was promptly assigned to Judge Pfaelzer. "The court concludes that the likely gains to judicial economy outweigh the presence of the license agreement's forum selection clause," Gonzalez Rogers wrote. "In highly technical cases such as this one, judicial economy favors transfer to a court that has a working familiarity with the background technology or science."
Now Lilly is crying foul to the U.S. Court of Appeals for the Federal Circuit, arguing Gonzalez Rogers' ruling represents "judicial sanction of a new type of forum shopping."
Patent litigators have long debated whether a system of specialized jurists would be preferable to the current one where complicated and highly technical cases are randomly assigned to the same judges who preside in all varieties of criminal and civil cases. Two years ago curiosity over creating a corps of judges with specialized patent expertise led to the federal Patent Pilot Project, where participating judges volunteered to accept patent cases from their colleagues.
Though the Cabilly venue dispute involves patent expertise that is centered on a particular technology or family of patents, it raises similar questions of how to balance judicial economy and court efficiency with other traditional values of the justice system.
"Judicial economy is an important interest," writes Morgan Lewis & Bockius partner Daniel Johnson Jr. in a petition filed Aug. 26. "But ours is not a system of specialized district court judges. Life tenure does not mean that a judge who first presides over a patent case becomes a magnet for all future cases with a subject matter touching on the prior patent or suit."
Forum selection clauses, in patent suits and litigation generally, have been attracting scrutiny lately in federal appellate courts. The U.S. Supreme Court is set to hear oral arguments Oct. 9 in Atlantic Marine Construction Co v. U.S. District Court, 12-929, which asks whether forum selection clauses trump statutory factors for deciding venue. The Federal Circuit issued a non-precedential opinion in April declining to enforce a forum selection clause in a patent case involving Bluetooth standards, but noted a split among the circuits and the impending U.S. Supreme Court decision.
"This has been a hot issue," said Edward Reines, a patent litigator at Weil, Gotshal & Manges.
In the Supreme Court case, the plaintiff filed in one venue and the defendant invoked a forum selection clause to try to move it. Eli Lilly v. Genentech, 13-00919, is different in that plaintiff Lilly is the party invoking the clause. "Plaintiffs sued in the Northern District," Johnson writes in his petition to the Federal Circuit. "They prefer to stay there."
HUGELY SUCCESSFUL PATENT
The suit centers around Eli Lilly's anti-cancer drug Erbitux. Lilly is suing to establish that Erbitux does not infringe two patents owned by Genentech and the City of Hope, known as Cabilly II and Cabilly III. Cabilly II, which is said to have generated nearly $500 million in licensing revenue, sparked a seven-year interference fight, litigation over the interference proceeding, and then several years of substantive examination by the U.S. Patent and Trade Office.
Since 2003 Pfaelzer has presided over four suits by Medimmune, Centocor, Glaxo and Human Genome Sciences related to the Cabilly II patent and those all settled. A fifth suit, by Bristol-Myers Squibb, is currently before her. Two of the five suits originated in the Northern District and were transferred to Pfaelzer on Genentech's motion. WWBy Genentech's count, Pfaelzer has issued 26 substantive rulings relating to the Cabilly patents. She's heard 14 summary judgment motions and presided over three Markman hearings. The company argues that judicial efficiency and uniformity of claims construction favored sending the Lilly case to Pfaelzer. "Genentech is willing to forgo its home turf in favor of Judge Pfaelzer's expertise," Durie Tangri's Daralyn Durie and Irell & Manella's David Gindler wrote in their motion to transfer. "This court need not spend its time poring over a lengthy record that Judge Pfaelzer has mastered already."
Gonzalez Rogers agreed. Although the forum selection clause applies to both parties, it was "obviously designed to benefit Genentech, who is based within the Northern District, rather than plaintiffs, who are based in Indiana and New Jersey," she reasoned. Therefore, the forum selection clause carries less weight.
Pfaelzer's experience, meanwhile, was decisive. "These earlier experiences provide a bank of experience on which Judge Pfaelzer may draw if she presides over the instant litigation," she wrote.
Morgan Lewis' Johnson disputed the notion that the forum selection clause was meant as a home-town provision for Genentech. Rather, he argued, it was a bilateral agreement designed to put disputes before "patent savvy judges … under a prescribed set of patent rules."
"That may be so," Gonzalez Rogers wrote, "but the description fits the Central District as well."
The judge seemed annoyed with an additional argument Johnson raised at a July 23 hearing — that Pfaelzer's status as a senior judge should weigh against transfer. Pfaelzer, an appointee of Jimmy Carter, is 87.
A judge's senior status "is not an appropriate consideration at all," Gonzalez Rogers wrote. "The court has no reason to believe that a transfer to a senior judge would be inappropriate here."
If Morgan Lewis and Eli Lilly persuade the Federal Circuit to send the case back to Gonzalez Rogers, they may not receive the warmest of welcomes. The company's 31-page petition for writ of mandamus is at times withering in its critique of her order. "With due respect," Johnson writes at one point, "the district court's conclusion is as illogical as it is unsupported."