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Advertised Use of Patented Product Supports Rule 11 Basis for Suit

March 08, 2004

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Last Month at the Federal Circuit - April 2004

Judges: Lourie (author), Archer, and Clevenger

In Q-Pharma, Inc. v. Andrew Jergens Co., No. 03- 1184 (Fed. Cir. Mar. 8, 2004), the Federal Circuit affirmed the district court’s denial of motions by The Andrew Jergens Company (“Jergens”) for sanctions against Q-Pharma, Inc. (“Q-Pharma”).

Q-Pharma owns U.S. Patent No. 4,654,373 (“the ‘373 patent”), which covers methods of treating damaged tissue in humans and animals by administering therapeutically effective amounts of Coenzyme Q10 (“Q10”) in admixture with a pharmaceutically acceptable carrier. Prior to filing suit, Q-Pharma acquired a sample of a Jergens lotion advertised as having the “natural power of Q10.” The lotion’s label prominently displayed the term “Q10” and touted its benefits. Although no one at Q-Pharma conducted a chemical analysis of the Jergens lotion, Q-Pharma believed—based on its attorneys’ claim construction and the lotion’s advertising and labeling—that it had a viable infringement claim.

During discovery, Q-Pharma requested information from Jergens about the contents of its lotion. Jergens refused to produce that information and instead filed a motion for SJ of noninfringement, in which it revealed that its lotion contained only 0.00005% Q10 by weight. Upon learning that information, Q-Pharma voluntarily dismissed its infringement suit.

Jergens brought motions for sanctions under Rule 11 and for attorneys’ fees under 35 U.S.C. § 285, which the district court denied. The district court concluded that although Q-Pharma had not chemically analyzed the Jergens lotion before filing suit, Q-Pharma’s presuit investigation was nevertheless sufficient. The district court reached that conclusion because Q-Pharma’s attorneys had construed the ‘373 patent claims and compared them to the Jergens lotion by relying on Jergens’s label and advertising statements, which suggested that the lotion contained a therapeutically effective amount of Q10. The district court rejected Jergens’s argument that Q-Pharma was on notice that the ‘373 patent claims were invalid in view of previous invalidity challenges, because several companies had taken licenses under the patent. The district court also concluded that Q-Pharma’s suit was not objectively baseless and, therefore, granted SJ dismissing Jergens’s antitrust counterclaim, which had been based on Jergens’s allegation of “sham” litigation. The district court denied Jergens’s requests for additional discovery related to the antitrust counterclaim.

The Federal Circuit affirmed the district court’s decision not to impose sanctions under Rule 11. The Court rejected Jergens’s alternative arguments that Q-Pharma either had not construed the ‘373 patent claims or had construed them frivolously. Q-Pharma’s attorney’s declaration rebutted the first argument, and the ‘373 patent’s intrinsic evidence refuted the second. The Federal Circuit noted that Q-Pharma’s presuit investigation could have been more thorough by including a chemical analysis of the Jergens lotion, but nevertheless found the investigation sufficient because Q-Pharma had performed an adequate infringement analysis. The Federal Circuit also found unpersuasive Jergens’s argument that Q-Pharma should have known the ‘373 patent was invalid, citing the statutory presumption of validity and the fact that several companies had taken licenses under the patent.

Similar reasons supported the Federal Circuit’s affirmance of the denial of attorneys’ fees. The Court concluded that Q-Pharma’s infringement suit was neither frivolous nor unjustified. Jergens argued on appeal that Q-Pharma had litigated in bad faith by changing its legal theory of infringement after Jergens filed its motion for SJ and by threatening to “blackmail” Jergens with a falseadvertising action before the Federal Trade Commission. But the Federal Circuit found the former accusation irrelevant and the latter unsupported by the record.

The Federal Circuit also affirmed the SJ dismissal of Jergens’s antitrust counterclaim. The Court considered Q-Pharma’s infringement suit not to have been objectively baseless, which precluded application of the “sham” exception to patentee antitrust immunity. The Federal Circuit also affirmed the district court’s decision to deny Jergens’s requests for discovery on the issue. That discovery would have only been relevant to QPharma’s subjective motivation for bringing suit, which became irrelevant as a matter of law once the suit was determined not to have been objectively baseless.