Merial obtains across-the-board Federal Circuit affirmance of contempt judgment in veterinary pharmaceutical patent case
Clients Merial Limited and Merial SAS
Jones Day represented Merial Limited and Merial SAS ("Merial") in an appeal to the United States Court of Appeals for the Federal Circuit involving patent infringement, jurisdiction over a foreign defendant, and contumacious conduct. Merial is the producer of the popular and innovative Frontline® and Frontline Plus® “spot-on” flea and tick products for dogs and cats for which it has received numerous patents. In 2007, Merial sued Cipla, an India-based, global pharmaceutical company, for infringing two of its patents by importing into the United States or causing such importation of generic Frontline and Frontline Plus. When Cipla failed to appear before the Middle District of Georgia, Merial sought and was granted a default judgment of validity and infringement of the patents. The Court further enjoined Cipla, and those acting in concert with Cipla who have notice of the injunction order, from infringing or inducing the infringement of the patents.
Subsequently, Velcera, a company formed by former Merial executives, began preparations to enter the United States market with generic flea and tick products that would "directly compete" with Merial's Frontline Plus products. Velcera engaged with Cipla to develop, test, obtain regulatory approval for, manufacture, and distribute such products for sale in American stores. Once regulatory approval was obtained for the generic products in 2011, Velcera sued Merial in the District of Delaware seeking a declaratory judgment of noninfringement and invalidity.
Upon discovering Velcera's ties to the enjoined Cipla, Merial moved in the Middle District of Georgia to find Cipla in contempt of its injunction order. Velcera intervened, and Cipla made its first appearance, both arguing that the Georgia court lacked jurisdiction over the Indian company, and that the default judgment was, therefore, void. The Court disagreed, holding that under Federal Rule of Civil Procedure 4(k)(2), the Court held jurisdiction over Cipla both then and at the time the 2007 complaint was filed, because Cipla was a foreign entity sued pursuant to a claim arising under federal law, Cipla was not subject to the jurisdiction in any state's courts of general jurisdiction, but Cipla does have sufficient contacts with the nation as a whole to be consistent with the United States Constitution and laws. Despite Cipla's 2011 declaration that it would have consented to suit in the Northern District of Illinois in 2007 had Merial sued them there at that time, the Court found that Illinois was not a place in which the case could have been brought, and denied Cipla's pleas. The Court then found Cipla in contempt, and additionally found Velcera in contempt for acting in concert with Cipla, for selling in the United States products that were not more than colorably different from the previously enjoined product and which infringed Merial's patent. Cipla and Velcera appealed to the Federal Circuit.
In a comprehensive opinion, the Federal Circuit agreed with Merial on all counts and affirmed the District Court's ruling of contempt. Key in its decision was an analysis of the application of jurisdiction pursuant to Rule 4(k)(2) in a default judgment case, a matter of first impression. Cipla and Velcera argued that courts have held that in Rule 4(k)(2) cases, the instant a defendant states that it would consent to jurisdiction in another district, jurisdiction under Rule 4(k)(2) is divested, and the case must be transferred to the consented to jurisdiction. However, Merial successfully argued that when the defendant seeks to avoid a default judgment by declaring consent in a another forum, the proper inquiry is whether the other forum is one where the defaulted action could have been originally brought under that district's jurisdiction. The Federal Circuit agreed with Merial, and further noted that the incentives for gamesmanship under a contrary rule would be particularly acute in such cases where the defaulting party can unilaterally undo an adverse final judgment for a chance to relitigate from a clean slate. The Federal Circuit also agreed with Merial that the District Court had committed no error in finding that the new products were not more than colorably different than the enjoined product and infringed Merial's patent, that Velcera acted in concert with Cipla to violate the injunction, and that Cipla's extraterritorial actions nonetheless constituted inducement of infringement within the boundaries of United States patent laws.
Gregory A. Castanias argued for the plaintiffs-appellees. With him on the brief were Damon M. Lewis and J. Patrick Elsevier, Ph.D.
Merial Ltd. v. Cipla Ltd., No. 2011-1471, -1472 (Fed. Cir. 2012)