`
`IN THE UNITED STATES DISTRICT COURT
`IN AND FOR THE DISTRICT OF DELAWARE
`- - -
`
`CIVIL ACTION
`
`(Consolidated)
`
`NO. 13-1206-LPS
`
`:
`:
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`::
`
`:
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`::
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`::
`
`UCB, INC., UCB PHARMA GMBH,
`RESEARCH CORPORATION
`TECHNOLOGIES, INC., and
`HARRIS FRC CORPORATION,
`Plaintiffs,
`
`v
`ACCORD HEALTHCARE, INC., et al.,
`Defendants.
`
`- - -
`Wilmington, Delaware
`Friday, November 13, 2015
`Bench Trial - Volume D
`- - -
`HONORABLE LEONARD P. STARK, Chief Judge
`BEFORE:
`- - -
`APPEARANCES:
`MORRIS NICHOLS ARSHT & TUNNELL, LLP
`BY: JACK B. BLUMENFELD, ESQ.,
`MARYELLEN NOREIKA, ESQ.,
`DEREK J. FAHNESTOCK, ESQ.,
`ETHAN HALLER TOWNSEND, ESQ.,
`MEGAN E. DELLINGER, ESQ., and
`ANTHONY D. RAUCCI, EQ.
`and
`COVINGTON & BURLING
`BY: GEORGE F. PAPPAS, ESQ.,
`PAUL J. BERMAN, ESQ.,
`JEFFREY B. ELIKAN, ESQ.,
`PRICILLA DODSON, ESQ., and
`MICHAEL A. CHAJON, ESQ.
`(Washington, District of Columbia)
`and
`
`Dale Hawkins
`Registered Merit Reporter
`
`Brian P. Gaffigan
`Registered Merit Reporter
`
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`ARGENTUM Exhibit 1170
`Argentum Pharmaceuticals LLC v. Research Corporation Technologies, inc.
`IPR2016-00204
`
`Page 00001
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`
`
`APPEARANCES: (Continued)
`
`867
`
`COVINGTON & BURLING
`BY: ALEXA R. HANSEN, ESQ., and
`TED TOROUS, ESQ.
`(San Francisco, California)
`Counsel for Plaintiff
`SHAW KELLER, LLP
`BY: DAVID FRY, ESQ.
`and
`COHEN & GRESSER, LLP
`BY:
`RICHARD G. GRECO, ESQ., and
`GURPREET (RAY) SINGH WALIA, ESQ.
`(New York, New York)
`Counsel for Accord Healthcare, Inc.,
`and Intas Pharmaceuticals, Ltd.
`BAYARD, P.A.
`BY:
`SARA BUSSIERE, ESQ.
`and
`CARLSON CASPERS VANDENBURGH LINDQUIST & SHUMAN
`BY: JEFFER ALI, ESQ., and
`SARAH M. STENSLAND, ESQ.
`(Minneapolis, Minnesota)
`Counsel for Alembic Pharmaceuticals Ltd.
`and Alembic Limited in Civil Action
`No. 13cv1207-LPS
`PHILIPS GOLDMAN & SPENCE, P.C.
`BY: JOHN C. PHILLIPS, JR., ESQ.
`and
`WINSTON & STRAWN, LLP
`BY: GEORGE C. LOMBARDI, ESQ., and
`MAUREEN L. RURKA, ESQ., and
`JOHN R. McNAIR, ESQ.
`(Chicago, Illinois)
`and
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`Page 00002
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`
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`APPEARANCES: (Continued)
`
`868
`
`WINSTON & STRAWN, LLP
`BY: CHARLES B. KLEIN, ESQ., and
`EIMERIC REIG-PLESSIS, ESQ.
`(Washington, District of Columbia)
`Counsel for Amneal Pharmaceuticals, LLC,
`Amneal Pharmaceuticals of New York, LLC,
`Aurobindo Pharma Ltd., Aurobindo Pharma
`USA, Inc., Breckenridge Pharmaceutical,
`Inc., Vennoot Pharmaceuticals, LLC,
`Sun Pharma Global FZE, Sun Pharmaceutical
`Industries, Ltd., Watson Laboratories,
`Inc. – Florida (n/k/a Actavis
`Laboratories FL, Inc.), Watson Pharma,
`Inc. (n/k/a Actavis Pharma, Inc.) and
`Actavis, Inc
`
`MORRIS JAMES, LLP
`BY: KENNETH L. DORSNEY, ESQ.
`and
`TAFT STETTINIUS & HOLLISTER, LLP
`BY: RICHARD T. RUZICH, ESQ., and
`IAN SCOTT, ESQ.
`(Chicago, Illinois)
`Counsel on behalf of Apotex Corp. and
`Apotex Inc.
`
`YOUNG CONAWAY STARGATT & TAYLOR, LLP
`BY: ADAM W. POFF, ESQ.
`and
`WILSON SONSINI GOODRICH ROSATI, P.C.
`BY: DAVID S. STEUER, ESQ.
`(Palo Alto, California)
`and
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`Page 00003
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`
`
`APPEARANCES: (Continued)
`
`869
`
`WILSON SONSINI GOODRICH ROSATI, P.C.
`BY: NICOLE STAFFORD, ESQ., and
`ADEN ALLEN, ESQ.
`(Austin, Texas)
`and
`WILSON SONSINI GOODRICH ROSATI, P.C.
`BY: YONGDAN LI, ESQ.
`(Los Angeles, California)
`Counsel for Mylan Pharmaceuticals Inc.
`and Mylan Inc.
`
`MURPHY & LANDON
`BY: FRANCIS J. MURPHY, ESQ.
`and
`LOCKE LORD, LLP
`BY: MICHAEL J. GAERTNER, ESQ., and
`DAVID B. ABRAMOWITZ, ESQ.
`(Chicago, Illinois)
`Counsel for Zydus Pharmaceuticals (USA)
`Inc. and Cadila Healthcare Limited
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`Page 00004
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`
`
`McDuff - direct
`be okay with Your Honor.
`MS. STAFFORD: No objection, Your Honor.
`THE COURT: That's fine. Doctor, you may step
`
`1053
`
`down.
`
`And defendants, I think you had another witness;
`is that correct?
`MS. STAFFORD: Yes, Your Honor.
`THE COURT: Call him or her when you are ready.
`MR. SCOTT: Good afternoon, Your Honor. Ian
`Scott of Taft representing Apotex.
`THE COURT: And is your witness here?
`MR. SCOTT: We will be calling Deforest McDuff
`on behalf of the defendants.
`THE COURT: Thank you.
`... DEFOREST MCDUFF, having first duly sworn,
`was examined and testified as follows ...
`THE COURT: Good afternoon. Welcome,
`
`Dr. McDuff.
`
`THE WITNESS: Thank you.
`THE COURT: Mr. Scott, you may proceed when
`you're ready.
`MR. SCOTT: Thank you.
`DIRECT EXAMINATION
`
`BY MR. SCOTT:
`Q.
`Good afternoon, Dr. McDuff.
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`Page 00005
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`1060
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`McDuff - direct
`skepticism with regard to lacosamide on a broad case basis.
`Q.
`Do you generally have an understanding of the basis
`for Dr. Vellturo's conclusions with regard to economic
`scepticism?
`A.
`Yes. Primarily this comes from the review of license
`offers and rejections of companies considering whether to
`take a license. In the mid 1980s, the early 1990s and over
`twenty-eight offers in the late 1990s.
`Q.
`Do you agree with Dr. Vellturo's conclusions with
`regard to widespread economic skepticism with regard to
`lacosamide?
`A.
`Yes, I reviewed the same evidence he has and I have
`the same conclusion.
`Q.
`What evidence did you look at?
`A.
`Those can be seen on the next slide here, DDX-402.
`Excuse me, DDX-404. Thank you. This is a timeline from
`1985 to 1999 and provides a depiction of when those license
`offers occurred. There were eleven offers in the mid 1980s
`and there was a period of time from 1986 to 1991 where there
`was a license with Eli Lilly. There were nine offers in the
`early 1990s and then there were twenty-eight offers in the
`late 1990s. And there were more offers but these are the
`ones that Dr. Vellturo highlighted and I reviewed as well.
`Q.
`How did licensing attempts inform one with regard to
`material incentives for development?
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`Page 00006
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`1061
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`McDuff - direct
`Well, because companies were uninterested in taking a
`A.
`license around this time, it indicates in essence a lack of
`commercial opportunity and a lack of commercial interest.
`Q.
`And does that have an impact on the relevance of
`commercial success?
`A.
`Yes, it does, because what it says is any sales or
`potential commercial success that might exist down the line
`isn't informative above and beyond the direct evidence that
`we know that at the time of alleged development there were
`no material economic incentives.
`Q.
`Going back to license offers here. As an economist,
`what do these license actions tell you about the
`expectations for Vimpat's commercial success?
`A.
`Well, there was no expected commercial success and no
`material economic incentives for development.
`Q.
`Did you examine anything else with regard to the
`license offers?
`A.
`Yes. We can see that on the next slide. DDX-405.
`This provides an overview of some of the reasons why
`companies decided not to pursue the opportunity.
`Q.
`And what were some of those reasons?
`A.
`Well, there were a variety of reasons, but many of
`them related to a lack of commercial interest. So we can
`see some of these up here on the screen. Lack of commercial
`interest. Would not offer a significant market advantage
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`Page 00007
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`1062
`
`McDuff - direct
`relative to current treatments. We consulted with our
`marketing and development groups, we must decline the
`opportunity. Generally speaking, a lack of commercial
`interest from business prospective.
`Q.
`Dr. Vellturo testified that there was still market
`demand in spite of these license rejections. Do you agree
`with him?
`A.
`No, I don't.
`Q.
`Why is that?
`A.
`Well, in particular it's really all of the letters
`together and all of the rejections that indicate a lack of
`expected success. But in particular, it's these letters
`that occur after the '551 patent was filed, so that there is
`-- there is really no misunderstanding about what compound
`they're talking about here. Even at that point in time,
`there was still no interest in taking that compound to
`market.
`So looking at this slide, DDX-405, Dr. Vellturo
`Q.
`testified today that he disagreed with your opinions with
`regard to the rejected licenses. Do you recall that?
`A.
`Yes, I do.
`Q.
`Do you agree with Dr. Vellturo's analysis?
`A.
`No. Based on my review of the letters, I don't come
`to the same conclusion that he does. He reviewed these
`letters and many of them indicate a lack of commercial
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`Page 00008
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`
`1065
`
`McDuff - direct
`this week. In particular, the '301 patent was listed in the
`FDA Orange Book for lacosamide. Both of these patents claim
`priority back to 1985 and were issued in the mid-to-late
`1990s.
`
`Below also we have two European patent
`applications which had application publication dates in the
`late 1980s and grants in the early 1990s. And those precede
`the priority of the '551 patent.
`Q.
`So you mentioned the FDA Orange Book. Could you
`briefly describe what that is?
`A.
`Sure. The FDA Orange Book is a place where companies
`like UCB or companies that are supplying drug products can
`assert what patents are alleged to cover, you know, their
`particular drug they're selling.
`Q.
`Why would IP rights cause development disincentives?
`A.
`Well, if we're thinking about whether a particular
`invention would be developed or whether there were incentives
`to develop a particular invention, companies are going to
`look at what other IP rights exist. And if there are other
`IP rights that would block them from other commercialization,
`they're going to be non-incentivized to perform that
`development.
`Q.
`Okay. Did you consider any other factors when you
`evaluated development disincentives?
`A.
`Yes. Next slide, please.
`
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`Page 00009
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`McDuff - direct
`So this is slide DDX-408.
`Q.
`Thank you. So this provides some more information
`A.
`about licensing activities over the period of time after the
`'729 patent and the '301 patent were filed but before they
`issued. So even over this period of time where the patents
`hadn't issued yet, there were licensing offers, there was
`even the license with Eli Lilly. In essence, a lot of
`licensing activity with the expectation that they would
`issue down the line.
`Q.
`You cited JTX No. 1 here which is the patent at
`issue. Do you see that?
`A.
`Yes, I do.
`Q.
`Do you see that in your book?
`A.
`Yes. That's the '551 patent.
`Q.
`Thank you. So why wouldn't an exclusive license
`cause development disincentives?
`A.
`An exclusive license can cause development
`disincentives for several reasons.
`No. 1, there is, of course, the period of time
`of exclusivity. So one company has rights during that
`period of time. But, in addition, it shows the rest of the
`market that the company that is licensing the technology,
`the licensor will assert its claimed technology, and it
`makes it so that it doesn't, there is no widespread
`availability of the patents. It's more of they make certain
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`1067
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`McDuff - direct
`offers at certain times and only one company ultimately is
`going to be able to license that technology.
`Q.
`Okay. Did you examine any evidence relating to RCT's
`specific offers with regard to the patent applications?
`A.
`Yes, I did. If we turn to the next slide, DDX-409.
`This is one example of RCT's licensing in late
`1985. So this is just months after the '729 patent and the
`'301 patent had been filed. You can see here that they're
`representing that they have a compound covered by the patent
`rights and they're seeing if there is any interest there.
`Q.
`And slide DDX-409 cites you to JTX-133. Do you see
`that?
`Yes, I do.
`A.
`Would you check that in your book?
`Q.
`Yes, that's the letter.
`A.
`And just to go back. We were talking about the
`Q.
`licenses. Did you review all the license offers that were
`identified in Dr. Vellturo's expert report?
`A.
`Yes, I did. I reviewed all of them.
`Q.
`Thank you. So with regard to the patents here, is
`there a term that economists would use for this kind of
`patent?
`So this is referred to as a blocking patent.
`A.
`Is it your understanding that Dr. Vellturo testified
`Q.
`that prior IP would not represent a blocking issue?
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`Page 00011
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`1068
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`McDuff - direct
`Yes. I disagree with Dr. Vellturo there. So he
`A.
`testified, and I understand his opinion to be that over the
`period of time where the patents hadn't issued yet, that
`there would be no blocking issue, but we know they were
`being represented as covering the products and ultimately
`that they did issue so there was an expectation that they
`would issue.
`
`No. 2, he testified that the licensing rates
`were widely available, yet as I indicated earlier, the
`exclusive nature of the licensing which indicates they're
`not widely available, they're available to one entity at a
`time in a licensing, you know, specific license offer.
`Q.
`And would somebody in the field have an expectation
`that the patent applications would ultimately be granted as
`patents?
`A.
`Yes, that's right. I know, we also heard testimony
`from Dr. Heathcock this week that those patents cover
`lacosamide and we also heard testimony from Dr. Roush this
`week of the same nature.
`Q.
`Based on your economic evaluations, did you reach
`conclusions with regard to development disincentives?
`A.
`Yes. In essence, there were development disincentives
`for Vimpat and it makes sales down the line, whatever they
`are, not relevant for determination of nonobviousness.
`Q.
`Let's go to the next slide, DDX-4010. This is your
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`Page 00012
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`1071
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`McDuff - direct
`In addition, on the positive side of things, if
`you think about what is my opportunity in terms of sales and
`profits, we have an AED market where there are a number of
`drugs that are already issued, that are already on the
`market in the 1990s and a number of other drugs that are in
`the pipeline and are going to come out very soon.
`So if you think about a market entity back in
`the 1990s, thinking about whether they want to pursue a
`lacosamide product, you can understand why they might not be
`interested from an economic perspective. That material
`incentive just isn't there.
`Q.
`If there were such economic skepticism, why would UCB
`want to commercialize Vimpat?
`A.
`We can see that on the next slide, DDX-413.
`Q.
`So DDX-413, and you cite to DTX-2003, DTX-2315,
`DTX-2406. If you can just confirm that in your binder?
`A.
`Of course.
`Yes, those are the documents.
`Thank you.
`Q.
`So aside from a lack of general market interest, UCB
`A.
`had a unique interest in the epilepsy market. And when I
`reviewed a lot of their internal documents, there was a
`common theme. They were focused on becoming the epilepsy
`company. So UCB has another epilepsy drug we heard about
`this week, Keppra, and Keppra preceded Vimpat in terms of
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`1072
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`McDuff - direct
`timing. So UCB was interested in essentially leveraging its
`position in Keppra, leveraging the economics of scale,
`leveraging the connections they had with drug sales reps in
`bringing Vimpat to market.
`Second, I examined UCB predictions of what they
`expected for Vimpat sales and they were optimistic. So what
`they expected for sales weren't actually what the sales
`realized.
`Q.
`Did you examine anything else in assessing the
`commercial success of Vimpat?
`A.
`Yes. We can look the next slide. DDX-414.
`Q.
`So DDX-414 that cites to DTX-2194. Do you have that
`in your binder?
`A.
`Yes. These are the attachments to my expert report
`of Section E.
`Q.
`Thank you.
`A.
`So this provides what in my opinion is an apples to
`apples comparison of lacosamide share within epilepsy
`prescriptions. So you can see here the compounds lined up
`on the X axis from greatest number to least number from left
`to right. And you can see that lacosamide ranks No. 10 and
`has an overall market share of less than three percent over
`this period of time.
`Q.
`What does that tell you with regard to commercial
`success or otherwise of Vimpat?
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`1073
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`McDuff - direct
`Well, in essence that a number of other compounds
`A.
`have more prescriptions than lacosamide such as phenytoin,
`carbamazepine, valproate, some of the older drugs we heard
`about this week and, in essence, it is not a commercial
`success. This kind of market share doesn't warrant that
`conclusion.
`Q.
`Did you examine Vimpat's use in all uses rather than
`just in the field of epilepsy?
`A.
`Yes. On the next slide, DDX-415, which is the same
`underlying material, in terms of my attachments, this
`provides a chart, a similar chart but it's not restricted to
`epilepsy prescriptions only. It's for all uses.
`So it's known that AEDs are used outside of
`epilepsy, for neuropathic pain, bipolar uses, other psych
`disorders. So this provides an overall measure relative to
`other compounds, and you can see that lacosamide is still
`ranked No. 10 but has a market share of less than one
`percent.
`Q.
`What does that tell you about the commercial success
`of Vimpat?
`A.
`Again, there are a number of other compounds that are
`prescribed much more widely than Vimpat. And even after
`five years of being on the market, it still has a market
`share that doesn't warrant the conclusion of commercial
`success.
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`
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`1091
`
`McDuff - cross
`Did you say that IP rights offer disincentives
`for companies to enter the market?
`A.
`Yes.
`Q.
`Now, there were offers that were put out for licenses
`to the patent applications and later the patents from 1991
`to 1998; right?
`A.
`Yes, there were. I discussed those.
`Q.
`And to the extent you said that an exclusive license
`offers a disincentive, that didn't disincentivize Lilly from
`taking a license; right?
`A.
`No. But the point is that there can only be one
`licensee at a time.
`Q.
`And the fact that there was an exclusive license
`offer didn't disincentivize Schwarz from taking a license;
`right?
`No, but again, same point.
`A.
`Now, you mentioned contributions that were provided
`Q.
`by two of Dr. Kohn's other patents, the '729 patent and the
`'301 patent. Do you recall that?
`A.
`Yes.
`Q.
`And you heard testimony over the last week that those
`patents cover millions and millions of compounds; right?
`A.
`I have heard testimony in that regard.
`Q.
`And in that large group of compounds, the only
`compound that's ever been commercialized is lacosamide;
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`Page 00016