4-19.Sanofi Licensee's Standing to Sue 4-19.Sanofi Licensee's Standing to Sue

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Sanofi, S.A., et al., v. Med-Tech Veterinarian Products,Inc. et al. No. 83-2198

District Court for the District Kansas

1983 U.S. Dist. LEXIS 13684; 222 U.S.P.Q. (BNA) 143

September 16, 1983

PROCEDURAL POSTURE: Plaintiff moved for a preliminary injunction in a patent infringement and business tort action, where plaintiff was a licensee of product patented by a foreign drug manufacturer. Defendant countered that plaintiff lacked standing for the action.

OVERVIEW: Plaintiff sought a preliminary injunction in a patent infringement and business tort action. A foreign-based drug manufacturer held a U.S. patent in a drug which it licensed to plaintiff, U.S.-based drug manufacturer, to produce and sell in the U.S. and Canada. Defendant was granted approval to use the drug by the FDA with the intent to use the drug to manufacture it into a finished product. Defendant contended that the plaintiff could not maintain the action alone and the foreign-based manufacturer was not entitled to injunction based on the sale of the drug to another U.S.-based defendant by its subsidiary. The court granted the preliminary injunction holding that a licensee who has acquired the exclusive right to make, use and sell a product has standing to sue for patent infringement in its own name and to join the patent holder in an infringement suit.

OUTCOME: Motion for preliminary injunction granted. The court held that a licensee who has acquired the exclusive right to make, use and sell a product has standing to join the patent holder in an infringement suit and to sue for patent infringement in its own name.

O'Connor, Chief Judge.

Memorandum and Order

This matter is presently before the court on plaintiff American Home Products Corporation's application for a preliminary injunction.

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This case is an extension of litigation which is continuing in the United States District Court for the District of New Jersey. In that case, the plaintiffs, American Home Products Corporation and SANOFI, S.A., brought an identical action arising out of the same facts against two distributors who handled the alleged infringing drug, acepromazine maleate. Medico Industries, Inc., a defendant here, was originally a defendant in the New Jersey suit, however it was dismissed for lack of personal jurisdiction. The New Jersey court granted a preliminary injunction [*2] on behalf of American Home Products against the distributors enjoining them from selling the drug; SANOFI, S.A., however, was denied any injunctive relief. SANOFI, S.A. v. Med-Tech Veterinarian Products, 26 BNA's Patent, Trademark and Copyright Journal 195 (6/15/83). Plaintiff urges this court to grant a similar preliminary injunction against the defendant manufacturer, Medico Industries, and the defendant marketer, Med-Tech Veterinarian Products, of acepromazine maleate.

The plaintiffs filed this action on June 6, 1983, alleging that the defendants had infringed one of their patents and engaged in other activities constituting business torts. n1 After denying plaintiff's motion for a temporary injunction, the court permitted American Home Products to present its motion for preliminary injunction at a hearing held on August 19, 1983. After reviewing the evidence, the arguments, and the suggestions of counsel, the court makes the following findings of fact and conclusions of law.

n1 This motion for preliminary injunction is based solely upon the patent infringement claim.

Findings of Fact

Although the parties have little disagreement over the following facts, these findings[*3] are made solely on the basis of the evidence presented with respect to the request for preliminary injunction.They are not in any manner intended to presage this court's ultimate findings as to the merits of plaintiffs' claims.

1. Plaintiff, SANOFI, S.A., (hereafter Sanofi), is a French corporation that manufactures pharmaceutical products. It is the largest pharmaceutical company in France, and thirty-fourth largest in the world. Sanofi holds the United States patent for the drug acepromazine maleate.

2. Plaintiff, American Home Products Corporation (hereafter American Home), is incorporated under the laws of Delaware, with its principal place of business in New York. American Home manufactures and markets a variety of well known products including ethical and propriety drugs.

3. Defendant, Medico Industries, Inc., (hereafter Medico), a Delaware corporation with its principal place of business in Kansas, manufactures and processes drugs for the veterinary market.

4. Defendant Med-Tech Veterinarian Products, Inc., (hereafter Med-Tech), is incorporated under the laws of Missouri has its principal place of business in Kansas. Med-Tech is engaged in marketing drugs[*4] for the veterinary field. Both defendants Med-Tech and Medico are wholly-owned subsidiaries of Tech America Group, Inc.

5. Acepromazine maleae is a generic drug used for tranquilizer and antemetic purposes in the veterinary field. An American patent was issued to a French company named Establishments Clin-Byla, S.A., on July 11, 1967. This patent, No. 3,330,826, through a series of mergers and business transactions has been transferred to the present plaintiff Sanofi. These transactions have been duly recorded in the U.S. Patent and Trademark Office. Acepromazine maleate also was covered by a Canadian patent. That patent, however, has expired. The only patent remaining in the world is the United States patent held by Sanofi.

6. In September 1959 Blin-Byla, S.A., Sanofi's predecessor, entered into an agreement with plaintiff American Home to confer upon the latter company.

The right to manufacturer, sell or use in Canada [acepromazine maleate] and pharmaceutical products containing [acepromazine maleate], either alone or associated with other active products in injection or oral form for veterinary use.

The contract further provided:

This right to manufacture, [*5] use or sell [acepromazine maleate] said pharmaceutical products containing [acepromazine maleate], in Canada will be an exclusive right and limited to products for veterinary use.

In January 1963 a letter agreement was entered into by the parties, which extended to American Home "the right to sell [acepromazine maleate] in the veterinary field in the United States under the same contractual conditions as exists for the Canadian sales." Since that time, American Home has purchased acepromazine maleate in bulk form from the plaintiff Sanofi's manufacturing subsidiary, Sempa-Chimie, and processed it into its finished product.

7. In 1978, defendant Med-Tech filed a New Animal Drug Application [NADA] with the United States Food and Drug Administration (hereafter FDA). On September 4, 1981, the FDA granted approval for Med-Tech's use of acepromazine maleate. 46 Fed.Reg. 44,443 (1981) (codified at 21 C.F.R. § 520.23).

8. In July 1981 and September 1981, Medico placed two separate orders with the chemical broker, Flavine International, Inc., of New Jersey (hereinafter Flavine International), for the purchase of acepromazine maleate in bulk form. Flavine International[*6] subsequently contacted Flavine GmbH, a German drug broker. Although an agent for Flavine International represented that Flavine GmbH and Flavine International were sister companies, this court has not been presented sufficient evidence to establish the exact relationship between them. Flavine GmbH subsequently contacted Sempa-Chimie to procure acepromazine maleat.

9. Sempa-Chimie is a French wholly-owned subsidiary of Clin Midy, S.A., which is in turn a wholly-owned subsidiary of the plaintiff Sanofi. Sempa-Chimie manufacturers acepromazine maleate.

10. After receiving the order, Sempa-Chimie informed Flavine GmbH that there was a patent on the material in the United States and inquired of its ultimate destination. Sempa-Chimie had a policy not to sell any acepromazine maleate to a purchaser for use in the United States. Flavine GmbH represented a telex to Sempa-Chimie that the chemical was bound for South America, where there was no patent. Sempa-Chimie sold

Seg. 4, item 19 (2007) 4 0729fed889810f5ac061dc413bb2045d.doc0729fed889810f5ac061dc413bb2045d.doc the chemical to Flavine GmgH without placing any written restrictions upon its use. The chemical was actually delivered to the defendant Medico in Kansas.

11. Upon receiving the bulk chemical, Medico[*7] began processing the acepromazine maleate into its finished form. On September 6, 1981, two days after receiving government approval, defendants began marketing their product.

12. On October 2, 1981, Sanofi notified the defendant Med-Tech by letter that acepromazine maleate was patented and that it was the owner of the patent. At that time, American Home advised the defendants that it was the exclusive licensee of acepromazine maleate for the veterinary field in the United States. Both of these letters were sent prior to the receipt of the second order of acepromazine maleate by Medico on December 2, 1981. On December 11, 1981, American Home sent a letter to all the distributors of Med-Tech informing them of the patent and their exclusive license.

13. Plaintiff American Home has marketed its acepromazine maleate through two of its divisions, Ayerst and Fort Dodge. Since 1979, all acepromazine containers sold by American Home have included the patent numbre. Plaintiffs have proviced samples from pharmaceutical trade research sources showing that patent information is available on this product. Furthermore, the defendants have provided an affidavit prepared after a patent[*8] search was conducted showing all patent rights in Sanofi.

Conclusions of Law

Plaintiff American Home seeks a preliminary injuction granting the following relief:

(1) Enjoining defendants from activities relating to the manufacture and sale of the drug acepromazine maleate;

(2) Requiring the defendants to deliver up to the court their exisiting stocks of acepromazine maleate and material used in the marketing and sale of acepromazine maleate;

(3) Requiring defendant Med-Tech to recall stocks of acepromazine maleate from its distributors throughout the United States;

(4) Requiring defendant Med-Tech to make a public statement regarding (1), (2) and (3) above; and

(5) Requiring defendants to filed with the court and serve on plaintiffs written statements regarding compliance with (1), (2), (3) and (4) above.

(a) Standing

Before discussing the merits, the court will examine defendants' contention that the plaintiffs lack standing to bring this action. Their argument is that American Home is not an exclusive licensee and therefore cannot sue on its own behalf. We disagree.

Sanofi, in the January 1963 letter, agreed to give American Home "the right to sell [acepromazine maleate] in the veterinary field in the United States under the same conractual conditions as exist for the Canadian sales." American Home conceded at oral argument that its rights consisted solely of the rights to sell and not to manufacture or use. American Home characterizes this right as a "limited exclusive licensee."

The law is well-settled that the patentee or one who has acquired the exclusive right to make, use and sell the product has standing to sue for patent infringement in its own name. Waterman v. MacKenzie, 138 U.S. 252 (1891); Hook v. Hook & Ackerman, Inc., 187 F.2d 52, 57-58, (3d Cir. 1951). "On the other hand, if the transfer by the patentee, or his assigns, creates merely a bare license to make or use or vend the patented product, or all three, and this right is not exclusive[*15] as to the rest of the world, the patentee included, then * * * this bare license has not real proprietary interest in the patent. Thus, he cannot sue on the patent at all, but is relegated to his rights to enforce his license agreement as a contract [against the licensor]." Philadelphia Briefcase Co. v. Specialty Leather Products Co., 145 F. Supp. 425 (D. N.J. 1956), aff'd, 242 F.2d 511, (3d Cir. 1957).

We view American Home as being more than a nonexclusive licensee. By virtue of its contract with Sanofi, American Home has the exclusive right to sell acepromazine maleate in the United States for veterinary use. An exclusive licensee has the power to join the patent holder in a suit for infringement, either as a willing or unwilling plaintiff

Seg. 4, item 19 (2007) 6 0729fed889810f5ac061dc413bb2045d.doc0729fed889810f5ac061dc413bb2045d.doc or defendant, in order to enforce the right granted in the license. Independent Wireless Tel. Co. v. Radio Corp. of America, 269 U.S. 459 (1926).

We need not decide whether American Home could bring the action in its own name without joining Sanofi as a party. When, as here, the patent holder is a co-plaintiff, an exclusive licensee has the right to join in maintaining an action for infringement. Independent Wireless Tel. Co. v. Radio[*16] Corp. of America, supra; Philadelphia Briefcase Co. v. Specialty Leather Products co. v. Patent Reproducer Corp. 42 F.2d 116, (2d Cir. 1930). Sanofi and American Home together own all rights to acepromazine maleate in the United States.

The defendants urge, however, that Amerian Home could not alone maintain an action, and that Sanofi is not entitled , as the New Jersey court found, to an injunction based upon Sempa-Chimie's actvities in the sale of acepromazine maleate. Therefore, they argue that it this court concludes that Sanofi is not entitld to the injunciton, as did the New Jersey court, Sanofi should not be allowed "to launder its disentitlement to enforce the patent against defendants by the simple process of joining its distributor licensee, American Home, and then obtaining an injunction in its distributor's name." This argument must fail.

This court is not bound by, nor do we necessarily accept, the New Jersey court's conclusion that plaintiff Sanofi should be barred from receiving a prliminary injunction in ths case. For the reason already discussed, we conclude that American Home has standing to litigate its right under the license.

(b) American Home's probable[*17] success on the merits.

In order to determine the rights that American Home possesses, we must first analyze the contract. When read together, the January 1963 letter agreement and the September 1959 agreement between Sanofi and American Home make clear that American Home has the exclusive right to sell acepromazine maleate in the United States for veterinary use.The defendants concede that unless they have an implied license from Sanofi, they do not have any right to sell acepromazine maleate in the United States for veterinary use.

This court agrees with the New Jesey court and finds that Sanofi could not grant an implied license in derogation of American Home's rights. American Home has the

Seg. 4, item 19 (2007) 7 0729fed889810f5ac061dc413bb2045d.doc0729fed889810f5ac061dc413bb2045d.doc exclusive right to sell the drug. Even Sanofi does not have the right to sell the drug in this country for veterinary purposes. Furthermore, Sempa-Chimie, as subsidiary of Sanofi, was not the holder of the patent rights and therefore could not grant a license to anyone.

The defendnats would have us hold that acquiring the patented product from the subsidiary of the patent holder in the normal course of business is sufficient to grant an implied license. We cannot accept[*18] such an argument. First, we have not been presented with sufficient evidence to disregard the corporate separateness of Sempa- Chimie and Sanofi.

Second, were we to hold the defendants suggest, we would throw the current licensing system into a state of chaos. Anytime someone acquired a patented product from a seller in privity with the patentee, they would have an implied license. A licensing agreement in intentional patent situations such as this, however, requires more than just the possession of the patented article. See Griffin v. Keystone Mushroom Farm, Inc., 453 F.Supp. 1283, (E.D. Pa. 1974). Words and conduct sufficient to indicate a contractual relationship are required to form a licensor-licensee relationship. In this case, for example, if the defendnts had brought the acepromazine maleate from a European licensee of Sanofi, defendants contend that they would have an implied license to sell the drug in the United States. This situation would make the United States licensing agreement worthless.

As the New Jersey court found, even if we were to accept the defendant's theory on the implied license to resell, that license would still be the subject to the outstanding[*19] licenses. The general rule is that the first license prevails "even though the taker of the second had no notice of the existence of the first." SANOFI, S.A. v. Medico, supra at 20 (and authorities cited therein). Clearly under these facts, Sanofi did not grant Medico an implied license to sell acepromazine maleate in the United States.

The plaintiff has shown that there are substantial questions which will require litigation and more deliberate investigation. In fact, the plaintiff has deomonstrated a substantial likelihood of success on the merits. Thus, this requirement for the granting of a preliminary injunction has been satisfied.

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