Paper No. ___
`Filed: December 22, 2017
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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`ACRUX DDS PTY LTD., ACRUX LIMITED, and
`ARGENTUM PHARMACEUTICALS LLC,
`Petitioners,
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`v.
`
`KAKEN PHARMACEUTICAL CO., LTD. and
`VALEANT PHARMACEUTICALS INTERNATIONAL, INC.,
`Patent Owner.
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`
`
`Case: IPR2017-001901
`U.S. Patent No. 7,214,506
`
`
`
`PATENT OWNER’S MOTION FOR OBSERVATIONS ON THE
`CROSS-EXAMINATION OF JOHN C. STAINES, JR.
`
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`1 Case IPR2017-01429 has been joined with the instant proceeding.
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`Filed: December 22, 2017
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`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`
`ACRUX DDS PTY LTD., ACRUX LIMITED, and
`ARGENTUM PHARMACEUTICALS LLC,
`Petitioners,
`
`v.
`
`KAKEN PHARMACEUTICAL CO., LTD. and
`VALEANT PHARMACEUTICALS INTERNATIONAL, INC.,
`Patent Owner.
`
`
`
`Case: IPR2017-001901
`U.S. Patent No. 7,214,506
`
`
`
`PATENT OWNER’S MOTION FOR OBSERVATIONS ON THE
`CROSS-EXAMINATION OF JOHN C. STAINES, JR.
`
`
`1 Case IPR2017-01429 has been joined with the instant proceeding.
`
`
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`
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`Pursuant to the Scheduling Order (Paper No. 13), Patent Owner submits this
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`Motion for Observations on the Cross-Examination of Petitioner’s expert John C.
`
`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
`
`Staines, Jr.
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`
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`Observation #1: In Exhibit 2116 at 15:21-20:1, particularly 18:12-19, Mr.
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`Staines testified that the materials he cited to contend that Valeant secretly owned
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`Philidor “does not say that.” This is relevant to Mr. Staines’s evaluation of
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`Jublia’s commercial success in his declaration, specifically his statements and
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`conclusions regarding the effects of fulfillment practices through Philidor on
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`Jublia’s sales revenue. (Ex. 1511 at ¶¶ 12 and 20-54; see also Petitioner’s Reply,
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`Paper No. 37 (“Reply”) at 21-22.) The testimony speaks to the weight and
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`credibility the Board should afford to Mr. Staines’s conclusions about Philidor’s
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`impact on revenue because it raises concerns about his source material.
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`
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`Observation #2: In Exhibit 2116 at 20:7-21:11, Mr. Staines testified that his
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`declaration cites to articles reporting on investigations into Philidor’s fulfillment
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`practices but he is not aware of an outcome from any investigation. This testimony
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`is relevant to the statements in Mr. Staines’s declaration and in the Reply regarding
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`the commercial success of Jublia, specifically the impact of Philidor on Jublia’s
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`sales volumes. (Ex. 1511 at ¶¶ 7, 12-17, and 20-54; see also Reply at 21-22). The
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`1
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`testimony speaks to the weight and credibility the Board should afford to Mr.
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`Staines’s statements and conclusions about Philidor and its alleged conduct, as it
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`raises concerns about whether those statements are speculative and
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`unsubstantiated.
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`Observation #3: In Exhibit 2116 at 22:16-23:20, 27:12-29:22, and 142:2-7,
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`Mr. Staines testified that fulfillment through Philidor involved actual supply of
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`Jublia prescriptions to patients but it was appropriate to remove or discount those
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`sales in his declaration even though he had “seen no document” showing Philidor
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`sales were unprofitable. Mr. Staines also testified that he was not sure whether the
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`sales and prescription data he evaluated in his declaration included or excluded
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`fulfillment through Philidor. (Id. at 150:8-12.) This testimony is relevant to the
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`statements in Mr. Staines’s declaration regarding the commercial success of Jublia,
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`specifically the impact of Philidor sales on revenue and profit. (Ex. 1511 at ¶ 53.)
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`It speaks to the weight the Board should afford Mr. Staines’s statements and
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`conclusions about the number and profitability of Philidor sales to the extent he
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`lacked supporting evidence for those statements.
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`Observation #4: Mr. Staines testified in Exhibit 2116 at 89:7-94:17 that he
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`created Staines Exhibit 7a by assuming that the Jublia data he reviewed included
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`2
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`Philidor sales, estimating how much revenue those sales generated, and then
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`replacing them with an average number generated from sales in other years. Using
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`his estimated numbers, Mr. Staines testified that he calculated net sales of 343
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`million dollars. (Id. at 95:3-8 and 95:17-96:8.) This is relevant to statements and
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`conclusions in Mr. Staines’s declaration about commercial success, specifically
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`Jublia’s profitability with and without Philidor sales. (Ex. 1511 at ¶¶ 12, 15, 44,
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`53, Staines Exs. 7a, 7b, 9a and 9b; see also Reply at 21-22). The testimony speaks
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`to the weight the Board should afford Mr. Staines’s economic analysis because it is
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`based on assumptions about the impact of Philidor sales on financial results.
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`Observation #5: In Exhibit 2116 at 98:18-100:14 and 102:12-21, Mr. Staines
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`testified that a profit analysis was needed to evaluate the commercial success of
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`Jublia. However, Mr. Staines also testified that he applied a commercial success
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`test, looking at sales volume, in his declaration. Ex. 2116 at 32:3-33:3; see also
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`30:7-13. This is relevant to statements and conclusions in Mr. Staines’s
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`declaration explaining the tests he used to evaluate commercial success. (Ex. 1511
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`at ¶¶ 18, 25, and 36; see also Reply at 22). The testimony speaks to the weight and
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`credibility the Board should afford to Mr. Staines’s conclusions because it raises
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`concerns about what legal standard should apply when evaluating commercial
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`3
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`success, or even which standard he chose to use at different points in his
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`declaration.
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`Observation #6: In Exhibit 2116 at 34:13-38:3 and 79:2-80:2, Mr. Staines
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`testified that generic and other competitor products were available when Jublia
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`launched but he was not sure whether sales of 500 million dollars in a market
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`facing generic competition was “significant” or “high.” This is relevant to the
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`statements and conclusions in Mr. Staines’s declaration evaluating commercial
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`success, specifically his assertion that Jublia benefited from a lack of competition
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`in the onychomycosis market and did not produce high revenue. (Ex. 1511 at
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`¶¶ 21 and 22). The testimony speaks to the weight and credibility the Board
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`should afford to Mr. Staines’ conclusions about whether Jublia generated sufficient
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`revenue to demonstrate commercial success, as it raises concern as to whether Mr.
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`Staines provided a proper market comparison.
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`Observation #7: In Ex. 2116 at 41:10-46:2 and 60:5-17. Mr. Staines testified
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`that among the competition Jublia faced was Kerydin, a drug which he stated did
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`not have comparable sales revenue or market share despite offering similar sales
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`discounts to Jublia. Mr. Staines also testified that he compared Jublia sales to
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`those of another competitor, Lamisil, during a time period when that drug did not
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`4
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`face market competition. (Id. at 71:9-16.) This is relevant to the discussion in Mr.
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`Staines’s declaration and in the Reply of Jublia’s price and comparisons to those of
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`competitors in the market. (Ex. 1511 at ¶¶ 11, 22-24; see also Reply at 21). The
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`testimony speaks to the weight and credibility the Board should afford Mr.
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`Staines’s market comparisons, as it raises concerns about whether he conducted a
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`valid comparison of sales data across different time periods and market conditions.
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`Observation #8: In Exhibit 2116 at 46:14-49:7 and 76:13-78:13, Mr. Staines
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`testified that he created charts accompanying his declaration showing that Jublia
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`had high gross revenue, even after the switch from fulfillment through Philidor to a
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`new fulfillment agreement with Walgreens. This is relevant to the evaluation in
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`Mr. Staines’s declaration and in the Reply of Jublia’s revenue and whether it was
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`large enough to qualify as a commercial success. (Ex. 1511 at Staines Ex. 4 and 6
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`and Reply at 21-22.) The testimony speaks to the weight and credibility the Board
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`should afford to Mr. Staines’ conclusions and Petitioner’s argument about whether
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`Jublia generated sufficient revenue to be a commercial success.
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`Observation #9: Mr. Staines testified in Exhibit 2116 at 51:18-53:17 that the
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`IMS data he and Mr. Thomas evaluated “underreports” Jublia revenue. (See also
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`id. at 74:16-75:21; and 76:13-78:13.) This is relevant to statements in Mr.
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`5
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`Staines’s declaration and the Reply regarding Jublia sales in the data from IMS.
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`(Ex. 1511 at ¶¶ 26-30, Staines Exs. 4 and 6; see also Reply at 21-22.) The
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`testimony speak to the weight and credibility the Board should place on Mr
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`Staines’s characterization of the IMS data.
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`Observation #10: In Exhibit 2116 at 53:11-54:20, Mr. Staines testified that a
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`drug does not need to be in the top 100 best-selling drugs to be a commercial
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`success, but rather Jublia should be compared to direct competitors in the
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`onychomycosis market. This is relevant to statements in Mr. Staines’s declaration
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`comparing Jublia to the top-selling drugs in the 2014-15 time period. (Ex. 1511 at
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`¶ 23 and Staines Ex. 5). This raises concerns about whether Mr. Staines’s
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`comparison of Jublia to the top-selling drugs in the 2014-15 time period is an
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`appropriate comparison.
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`Observation #11: In Exhibit 2116 at 64:7-67:22 and 71:17-72:7, Mr.
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`Staines testified that he evaluated gross revenue for other drugs he compared to
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`Jublia, including lamisil, and did not search for information on rebates or other
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`discounts offered by those drugs. This is relevant to statements in Mr. Staines’s
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`declaration and in the Reply regarding the alleged importance of analyzing net
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`revenue, rather than gross revenue, for Jublia. (Ex. 1511 at ¶¶ 25-35; see also
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`6
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`Reply at 22). The testimony is relevant because it speaks to the weight and
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`credibility the Board should place on those statements in Mr. Staines’s declaration
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`and the Reply given that a net revenue analysis was not provided for any other
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`comparator drugs.
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`Observation #12: In Ex. 2116 at 80:3-82:5, Mr. Staines testified that profit
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`rather than net revenue should be the appropriate measure for considering
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`commercial success. This is relevant to statements in his declaration and in the
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`Reply discussing the use of net revenue to evaluate commercial success. (Ex. 1511
`
`at ¶¶ 25-35; see also Reply at 22). This is relevant to the weight the Board should
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`afford Mr. Staines’s net revenue analysis as it raises uncertainty about what
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`standard Mr. Staines applied to reach his conclusions.
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`Observation #13: In Exhibit 2116 at 82:6-88:12, 97:9-98:6, and 150:13-
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`152:10, Mr. Staines testified that difficulties obtaining reimbursement for Jublia
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`through Walgreens were temporary and he had no data on whether those sales were
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`unprofitable. This testimony is relevant to statements in his declaration suggesting
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`that Jublia fulfillment through Walgreens was not profitable. (Ex. 1511 at ¶¶ 32,
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`45, 47, and 53.) It is therefore relevant to the weight and credibility the Board
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`should place on the statements in Mr. Staines’s declaration evaluating the impact
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`7
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`of a switch to fulfillment through Walgreens on Jublia’s profitability as compared
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`to prior fulfillment through Philidor.
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`Observation #14: In Exhibit 2116 at 104:11-109:11, Mr. Staines testified
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`that he treated royalty payments to Kaken for rights under the ’506 patent as a cost
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`to discount commercial success without knowing what these payments covered.
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`This is relevant to statements in Mr. Staines’s declaration and in the Reply
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`accounting for a series of costs that allegedly detract from Jublia’s profitability.
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`(See, e.g., Ex. 1511 at ¶¶ 36-45, and Staines Ex. 9a and 9b; see also Reply at 22-
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`23.) The testimony is relevant to the weight and credibility the Board should place
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`on the accounting because it raises concerns that the conclusions reflect
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`speculation.
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`Observation #15: In Exhibit 2116 at 111:1-116:9, 116:21-120:12 and 130:1-
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`136:17, Mr. Staines testified that he did not know how much Valeant spent on
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`advertising or salesforce for Jublia or whether that advertising emphasized the
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`novel features claimed in the ’506 patent. This is relevant to statements in Mr.
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`Staines’s declaration and in the Reply accounting for a series of costs that allegedly
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`detract from Jublia’s profitability. (See, e.g., Ex. 1511 at ¶¶ 36-45, and Staines Ex.
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`9a and 9b; see also Reply at 22-23.) The testimony is relevant to the weight and
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`8
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`credibility the Board should place on the accounting because it raises concern
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`about speculation.
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`Observation #16: In Exhibit 2116 at 120:13-124:11, Mr. Staines testified
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`that he treated the cost of researching and developing Jublia as a factor to discount
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`commercial success but he did not know how much was actually spent. This
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`testimony is relevant to the analysis of commercial success in Mr. Staines’s
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`declaration and the Reply, specifically the calculation of Jublia’s profitability. (Ex.
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`1511 at ¶¶ 36-45 and 61-71, and Staines Ex. 9a and 9b; see also Reply at 22-23).
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`The testimony is relevant to the weight and credibility the Board should afford to
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`Mr. Staines’s profitability calculations as Mr. Staines acknowledged that he lacked
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`supporting data on Jublia’s estimated costs.
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`Observation #17: In Exhibit 2116 at 127:10-128:6 and 137:1-139:17, Mr.
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`Staines testified that did not have information about the scope of a settlement
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`Valeant reached with Anacor but subtracted that settlement from Jublia’s revenue
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`anyway. (See also id. at 125:10-126:22 and 137:1-139:17.) This testimony is
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`relevant to the analysis of commercial success in Mr. Staines’s declaration and the
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`Reply, specifically the calculation of Jublia’s profitability. (Ex. 1511 at ¶¶ 36-45
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`and 61-71, and Staines Ex. 9a and 9b; see also Reply at 22-23). The testimony is
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`9
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`relevant to the weight and credibility the Board should afford to Mr. Staines’s
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`profitability calculations because Mr. Staines acknowledged that he lacked
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`supporting data on Jublia’s estimated costs.
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`Observation #18: In Exhibit 2116 at 139:18-140:17 and 142:2-148:2, Mr.
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`Staines testified that he replaced actual Jublia sales data with estimates about how
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`revenue would have looked without Philidor and also modified certain but not all
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`costs accordingly when preparing the graphs and charts accompanying his
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`declaration. This testimony is relevant to Mr. Staines’s discussion of the charts in
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`his declaration. (Ex. 1511 at Staines Exs. 6, 7a, 7b, 9a, and 9b; see also Reply at
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`22-23.) The testimony speaks to the weight and credibility the Board should place
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`on Mr. Staines’s conclusions about commercial success because Mr. Staines relied
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`on estimates to produce his revenue and profit calculations.
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`
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`Observation #19: In Exhibit 2116 at 15:8-19, 34:6-11, 152:16-159:7, and
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`159:9-164:10, Mr. Staines testified that he could not describe the structure of an
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`azole, what the terms mycosis and onychomycosis meant, what features of the ’506
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`patent were novel, or how those terms contributed to differences between the ’506
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`patent and earlier patents held by the Patent Owner. This testimony is relevant to
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`the discussion of nexus in Mr. Staines’s declaration and in the Reply, specifically
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`10
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`the impact of earlier blocking patents on a finding of nexus between the claims of
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`the ’506 patent and the commercial success of Jublia. (Ex. 1511 at ¶ 57 and Reply
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`at 19.) The testimony is relevant to the weight and credibility the Board should
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`place on Mr. Staines’s conclusions because they raise concerns whether he
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`adequately understood the scope of the ’506 patent and the earlier patents he cited
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`before concluding that they blocked a finding of nexus.
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`Observation #20: In Exhibit 2116 at 165:1-3 and 165:10-172:12, Mr.
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`Staines testified that he did not survey patients to determine why they chose Jublia,
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`nor did he investigate how advertising or price discounts impacted their decision.
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`This testimony is relevant to the discussion in his declaration and the Reply
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`regarding nexus, specifically statements about how Jublia’s advertising influenced
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`patient treatment decisions. (Ex. 1511 at ¶¶ 58-66 and 72-76 and Reply at 23.)
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`The testimony relates to the weight the Board should place on Petitioner’s nexus
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`analysis as it raises concerns about lack of evidentiary support.
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`Observation #21: In Exhibit 2116 at 173:7-175:11, Mr. Staines testified that
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`salesforce efforts to market Jublia to specialist doctors did not primarily drive
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`Jublia’s sales. This testimony is relevant to Mr. Staines discussion of nexus in his
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`declaration, specifically his statements about the role of salesforce marketing. (Ex.
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`11
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
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`1511 at ¶¶ 67-71.) The testimony is relevant to the weight the Board should place
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`on Mr. Staines’s conclusions about the importance of salesforce marketing to
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`nexus because it raises concerns about the basis for those conclusions.
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`Respectfully submitted,
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`Dated: December 22, 2017
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`By: /John D. Livingstone/
`John D. Livingstone, Reg. No. 59, 613
`FINNEGAN, HENDERSON, FARABOW,
`
`GARRETT & DUNNER, LLP
`901 New York Avenue, NW
`Washington, DC 20001-4413
`(202) 408-4000
`
`Counsel for Patent Owner in
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`IPR2017-00190
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`12
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`
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`Case: IPR2017-00190
`U.S. Patent No. 7,214,506
`
`CERTIFICATE OF SERVICE
`
`The undersigned certifies that a copy of the foregoing Patent Owner’s
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`Motion for Observations on the Cross-Examination of John C. Staines, Jr.
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`was served electronically via email on December 22, 2017, in its entirety on the
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`following:
`
`E. Anthony Figg
`Aydin H. Harston
`Lisa N. Phillips
`Rothwell, Figg, Ernst & Manbeck, P.C.
`607 14th Street, N.W., Suite 800
`Washington, DC 20005
`efigg@rothwellfigg.com
`aharston@rothwellfigg.com
`lphillips@rothwellfigg.com
`litigationparalegals@rothwellfigg.com
`
`Teresa Stanek Rea
`Shannon M. Lentz
`Crowell & Moring LLP
`Intellectual Property Group
`1001 Pennsylvania Ave., NW
`Washington, DC 20004-2595
`trea@crowell.com
`slentz@crowell.com
`
`Tyler C. Liu
`Argentum Pharmaceuticals, LLC
`tliu@agpharm.com
`
`
`
`
`
`
`
`By: /John D. Livingstone/
`John D. Livingstone
`Reg. No. 59,613
`
`
`
`
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