`Case 1:15-cv-00164-LPS Document 243 Filed 06/27/17 Page 1 of 71 PageID #: 8518
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`IN THE UNITED STATES DISTRICT COURT
`IN AND FOR THE DISTRICT OF DELAWARE
`- - -
`COSMO TECHNOLOGIES LIMITED, VALEANT
`PHARMACEUTICALS INTERNATIONAL, and
`VALEANT PHARMACEUTICALS LUXEMBOURG
`S.A.R.L.,
`Plaintiffs,
`v
`ACTAVIS LABORATORIES FL, INC.,
`Defendant.
`-------------------------------------
`COSMO TECHNOLOGIES LIMITED, VALEANT
`PHARMACEUTICALS INTERNATIONAL, and
`VALEANT PHARMACEUTICALS LUXEMBOURG
`S.A.R.L.,
`Plaintiffs,
`v
`ALVOGEN PINE BROOK, LLC,
`Defendant.
`
`CIVIL ACTION
`
`NO. 15-164-LPS
`
`CIVIL ACTION
`
`NO. 15-193-LPS
`
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`- - -
`Wilmington, Delaware
`Tuesday, May 23, 2017
`Bench Trial - Volume B
`- - -
`HONORABLE LEONARD P. STARK, Chief Judge
`- - -
`
`BEFORE:
`APPEARANCES:
`
`MORRIS NICHOLS ARSHT & TUNNELL, LLP
`BY:
`MARYELLEN NORIEKA, ESQ.
`and
`
`Valerie G. Gunning
`Official Court Reporter
`
`Brian P. Gaffigan
`Official Court Reporter
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`APPEARANCES: (Continued)
`PAUL HASTINGS, LLP
`BY:
`MELANIE R. RUPERT, ESQ.,
`DAVID M. CONCA, ESQ.,
`NICHOLAS A. TYMOCZKO, ESQ.,
`JOSEPH O'MALLEY, ESQ.,
`SCOTT F. PEACHMAN, ESQ.,
`ANDREW J. COCHRAN, ESQ., and
`MI ZHOU, ESQ.
`(New York, New York)
`Counsel for Plaintiffs Valeant
`Pharmaceuticals International, and
`Valeant Pharmaceuticals Luxembourg S.A.R.L.
`MORRIS NICHOLS ARSHT & TUNNELL, LLP
`BY:
`MARYELLEN NORIEKA, ESQ.
`and
`IRELL & MANELLA, LLP
`BY: GARY FRISCHLING, ESQ., and
`YITE JOHN LU, ESQ.
`(Los Angeles, California)
`Counsel for Plaintiff Cosmo
`Technologies Limited
`PHILLIPS GOLDMAN McLAUGHLIN & HALL, P.A.
`BY:
`JOHN C. PHILLIPS, JR., ESQ., and
`DAVID A. BILSON, ESQ.
`and
`GOODWIN PROCTOR, LLP
`BY:
`JOHN T. BENNETT, ESQ.,
`SAMUEL SHERRY, ESQ., and
`SHAOBO ZHU, ESQ.
`(Boston, Massachusetts)
`and
`GOODWIN PROCTOR, LLP
`BY: ELIZABETH J. HOLLAND, ESQ.,
`NAOMI BIRBACH, ESQ.
`(New York, New York)
`Counsel for Defendant
`Actavis Laboratories FL, Inc.
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`APPEARANCES: (Continued)
`
`SHAW KELLER, LLP
`BY: DAVID E. FRY, ESQ., and
`KAREN E. KELLER, ESQ.
`and
`AXINN, VELTROP & HARKRIDER, LLP
`BY: MATTHEW J. BECKER, ESQ., and
`JASON MURATA, ESQ.
`(Hartford, Connecticut)
`and
`AXINN, VELTROP & HARKRIDER, LLP
`BY: TODD MARABELLA, ESQ.
`(Boston, Massachusetts)
`and
`AXINN, VELTROP & HARKRIDER, LLP
`BY: BRETT GARRISON, ESQ.
`(Washington, District of Columbia)
`Counsel for Defendant
`Alvogen Pine Brook, LLC
`
`- oOo -
`P R O C E E D I N G S
`(REPORTER'S NOTE: The following bench trial was
`held in open court, beginning at 8:35 a.m.)
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`THE COURT: Good morning, everyone.
`(The attorneys respond, "Good morning, Your
`
`Honor.")
`
`THE COURT: So where are we on the plaintiffs'
`side in terms of if there is any more evidence on
`infringement? Can you come up to the podium and let me
`know?
`
`Good morning.
`MS. RUPERT: Good morning, Your Honor.
`So I'm pleased to report that the parties have
`reached agreement on Dr. Sandborn's proposed testimony and
`in the infringement case. We have a stipulation proposed
`order here for the Court to enter, and I can read its terms
`to you right now.
`THE COURT: Okay.
`MS. RUPERT: Okay. So, Stipulation and Proposed
`
`Order.
`
`It is hereby stipulated by the parties, subject
`to approval of the Court that, (1), Alvogen's ANDA product
`meets the claim limitation "budesonide in amount effective
`to treat intestinal inflammatory disease" of claim 6 of the
`'888 patent. And, (2), Actavis's ANDA product meets the
`claim limitation "in an amount effective to treat intestinal
`inflammatory disease" of claim 9 of the '888 patent and
`"budesonide in an amount effective for treatment of
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`inflammatory bowel disease in the gastrointestinal tract" of
`claim 3 of the '273 patent.
`The stipulation goes on to state: Exhibits
`PTX-630, PTX-416, and PTX-251 may be admitted at trial as if
`testified to by Dr. Sandborn and if the Court so allows.
`Nothing in this stipulation is with prejudice or affects
`the rights of plaintiffs to call Dr. Sandborn as a witness
`in connection with validity of the patents-in-suit and
`plaintiffs' infringement case is closed upon entry of the
`stipulation.
`
`So the only outstanding issue is whether the
`Court would be amenable to the entry of those three exhibits
`because Dr. Sandborn would have served as the sponsoring
`witness to get their admission, and we understand the Court
`requires a sponsoring witness. Those three exhibits are the
`package label for Uceris and the package labels for the two
`respective ANDA products.
`THE COURT: Okay. I think under the
`circumstances, I'm willing to agree to accept admission of
`those provided I simply confirm the stipulation is as it
`sounds and agreed to by both defendants; correct?
`MS. HOLLAND: Yes, Your Honor.
`MR. BECKER: Yes, Your Honor.
`THE COURT: All right. You may pass that up, if
`
`you wish.
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`MS. RUPERT: Thank you, Your Honor.
`May I approach?
`THE COURT: Yes.
`(Document passed forward.)
`THE COURT: All right. So I have signed the
`stipulation. I take it that the plaintiff is resting its
`infringement case; is that correct?
`MR. CONCA: Plaintiffs rest their infringement
`case, Your Honor.
`THE COURT: Okay. Do the defendants wish to
`make a motion?
`MS. HOLLAND: Yes, Your Honor. Defendant is
`moving for judgment under Rule 52(c).
`THE COURT: Did you want to argue the motion?
`MS. HOLLAND: We have a couple of slides to
`support the motion, Your Honor.
`I'm going to be speaking on behalf of both
`Actavis and Alvogen as it pertains to the '888 patent,
`although Mr. Becker may have some additional comments when
`I'm done.
`
`So Actavis seeks judgment of noninfringement on
`claim 9 of the '888 patent and claim 3 of the '273 patent.
`Alvogen seeks judgment of noninfringement on
`claim 6 of the '888 patent.
`Our grounds is that plaintiff has failed to
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`offer evidence sufficient to meet their burden of proof on
`the issue of infringement.
`Just very briefly, the standard under Rule 52(c)
`is as it would be at the close of the evidence. The Court
`does not view the evidence through a particular lens or draw
`inferences favorable to either party.
`Now, the crux of the issue on the '888 patent,
`Your Honor, is that according to the Court's claim
`construction, which plaintiffs actually proposed, there is a
`very specific test required in order to prove infringement.
`The test to prove "macroscopically homogenous
`composition" is "a composition of uniform structure
`throughout," and importantly, "as observed by the naked
`eye."
`
`So the construction requires a very specific
`test, observation of the tablet core by the naked eye.
`THE COURT: And is it the naked eye of the
`person of skill in the art or is it my naked eye?
`MS. HOLLAND: We would submit it is the naked
`eye of the person of ordinary skill in the art, Your Honor.
`As I believe it was discussed yesterday during
`perhaps Mr. Becker's opening statement, when you look at
`these tablet cores, it may, you know, look one way to a
`person of ordinary -- to a layperson, but a person of
`ordinary skill in the art who understands how these are
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`supposed to look and what homogenous looks as opposed to
`heterogenous, that is the standard to use in determining
`whether there is infringement.
`Dr. Davis admitted it on cross-examination.
`Here, we have some testimony first on the Actavis cross from
`the transcript at 143, 4-13.
`The question was:
`"Question: You understand that in the claim
`construction of 'macroscopically homogenous' ... the test to
`determine whether something is macroscopically homogenous is
`observation with the naked eye; correct?
`"Answer: That is correct.
`"Question: And you did not perform that test;
`
`correct?
`
`"Answer: Correct.
`So Dr. Davis essentially has not of offered any
`evidence in support of infringement of that limitation
`according to the Court's claim construction.
`Similarly, with respect to the Alvogen tablets,
`he was asked:
`"Question: You didn't perform the naked eye
`test; is that correct?"
`Similar answer:
`"Answer: I did not have any tablets, so I could
`perform no tests on them."
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`Obviously, Your Honor, plaintiffs had tablets.
`They sent them to Dr. Luk. They told Dr. Luk cut them open
`and don't do anything else. Don't look at the tablets.
`They didn't give the tablets to Dr. Davis who was going to
`be supportive of an infringement decision. It was a
`calculated decision to not provide the evidence that they
`could have provided to support their claim of infringement.
`So we have two Federal Circuit cases. I can
`hand them up to the Court, if you would like, but there are
`two cases that really are on the same point which is if you
`have a claim like we have a claim here, which requires a
`specific test for infringement. You cannot prove
`infringement by a proxy. You have to use the test in the
`claim.
`
`The first one is the Rhodia Chimie v PPG case.
`The District Court found that one of the elements had to
`be proven by measurements by a specific industry standard.
`There was summary judgment because there was a failure to
`present test results using that required standard, and the
`Federal Circuit affirmed that decision.
`Similarly, in the Genentech v Wellcome case,
`there was another claim limitation that had to be measured,
`but using the specific test, plaintiffs relied on the
`results of a different test so the results were not
`probative evidence of infringement.
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`It's the exact same situation here. We have a
`very specific test. There was no evidence put in on the
`record yesterday to support infringement. Under that test,
`there is a failure of proof. And we submit we are entitled
`to judgment of noninfringement under Rule 52(c).
`Now, I don't think you have to go further than
`that, but even if we were going to look at this kind of
`proxy evidence that Dr. Davis put into the record, it still
`doesn't answer the question that needs to be answered here
`which is: Is there a composition with a uniform structure
`throughout in the tablet core?
`So the principal kind of proxy evidence that Dr.
`Davis put in was this uniformity testing that is performed.
`And as we discussed yesterday and as Dr. Davis admitted on
`the date of testimony, there is a very specific meaning to
`uniformity, and it is not the same meaning as in the claim
`here.
`
`So Dr. Davis was asked:
`"Question: I want you to focus just on the test
`that you testified about. You testified about a uniform, a
`blend uniformity test and a content uniformity test;
`correct?
`
`"Answer: Yes.
`"Question: And we already established that both
`of these tests are tests for the amount of the active
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`ingredient; correct?"
`He answered:
`"Answer: That is correct."
`"Question: They don't test for how the
`particles of the active ingredient are arranged within the
`sample; right?"
`Answer: No, they don't.
`So even this proxy evidence doesn't get to the
`issue of infringement here which is the structure of the
`composition of the tablet core.
`Even further than that, Your Honor, when
`Dr. Davis was explaining how these uniformity tests are
`performed, he agreed that the API, the active of budesonide
`goes into solution. There is absolutely no way to look at
`a solution, a liquid form with the API dispersed in it and
`figure out how that had been arranged within a tablet.
`And that was as well admitted by Dr. Davis. The
`question was:
`"Question: So actually there would be no way to
`determine from this test how the API looks in the sample
`because when you find it, it is in solution; right?
`"Answer: You have dissolved it. That's
`
`correct.
`
`"Question: And, again, once you have the
`active, it is no longer in the form of a tablet; right?
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`It's in the form of a liquid?"
`Significantly here, Your Honor:
`"Answer: You wouldn't know where it had come
`
`from."
`
`So Dr. Davis is admitting these tests cannot
`answer the question of what the structure was within the
`tablet.
`
`I'm going to move on to the '273, claim 3, Your
`Honor, unless you have any questions on the '888.
`THE COURT: You can move on.
`MS. HOLLAND: Thank you, Your Honor.
`So as you know, Your Honor, the '273, claim 3
`was asserted against Actavis but not Alvogen. And, again,
`we have a situation where there is a failure of proof.
`There was no testing of the magnesium stearate in Actavis's
`ANDA product to determine whether or not there was stearic
`acid. And this was an easy test to do, a test that could
`have been done by the experts for plaintiffs, but, again, a
`calculated decision not to do that.
`And we know that it was a calculated decision
`from the testimony yesterday. So if you look at Dr. Davis's
`testimony, again:
`"Question: You are aware, are you not, that
`there were a battery of tests performed on Actavis's
`magnesium stearate on the issue of melting point?
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`"Answer: I was, yes.
`"Question: So one way or another, other experts
`in the case were given access to the magnesium stearate used
`in Actavis's product; is that correct?
`"Answer: Correct.
`"Question: And you were not; is that correct?
`"Answer: I was not given magnesium stearate,
`
`no."
`
`So obviously a calculated decision here to not
`perform the one test that could easily have been performed
`if they actually intended to prove infringement in this
`case.
`
`With respect to how easily this test could have
`been done, Dr. Davis was asked:
`Question: Content of stearic acid is not an
`unusual test; right? That's a test that an analytical lab
`could run?
`
`"Answer: Yes, could have."
`And then if you recall, Your Honor, the one
`piece of evidence that was put in the evidence on this was
`this Rotzsche 1991 paper, but that paper only reports a test
`on a different sample of magnesium stearate that Dr. Davis
`could have performed on the actual magnesium stearate in
`this case but he didn't.
`"Question: And you could have done that same
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`test; right? Same test that Rotzsche did in 1991?
`"Answer: If I had been sent a sample and found
`an analytical laboratory to do the work?
`"Question: Yes.
`"Answer: Yes."
`Dr. Davis's testimony also made clear that you
`cannot answer the question about whether there was stearic
`acid in Actavis's magnesium stearate without actually doing
`the test.
`
`The question was:
`Question: Do you agree that commercially
`available batches of magnesium stearate vary in their
`chemical and physical properties (sic)?
`"Answer: That's what it says here.
`"Question: Okay. And you don't disagree with
`
`that?
`
`"Answer: That would be my expectation as to
`what the purpose one was going to apply the magnesium
`stearate for.
`"And this, again, is referring to the Rotzsche
`
`reference.
`
`"Question: And this testing was necessary
`because there was -- there is variability in terms of the
`chemical and physical characteristics in samples of
`magnesium stearate; right?"
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`Again, significantly, Your Honor, the answer
`
`was:
`
`"Answer: Correct."
`He acknowledged that because of these
`variabilities and the content, you can't just make
`assumptions for one sample of magnesium stearate based on
`another sample that, different origin, different grade,
`obtained from a different supplier.
`So, Your Honor, we believe based on the evidence
`that went in yesterday plaintiffs have failed to meet their
`burden of proving infringement on either the two asserted
`claims from the '888 or the asserted claim against Actavis
`from the '273 patent.
`THE COURT: All right. If you have copies of
`the Federal Circuit cases and your slides, I would like to
`get those.
`
`MS. HOLLAND: Yes, Your Honor.
`(Ms. Holland handed slides to the Court.)
`MS. HOLLAND: Thank you. Slides.
`THE COURT: Thank you.
`Mr. Becker, do you have anything to add?
`MR. BECKER: I would just like to briefly add on
`the '888 patent that the evidence as to Alvogen on blending
`uniformity is the same.
`If we could go to slide 9. Dr. Davis testified
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`he would have to look at the tablet as part of that
`assessment, so blend uniformity does not establish the test
`in the claim. The same is true for content uniformity. He
`gave similar testimony at 160, 14 to 21, for Alvogen, as Ms.
`Holland referred to. It's also undisputed that our product
`has two distinct structures. PTX-176 makes that very clear.
`We have the separate layer beads and then the outer core
`material.
`
`There's no evidence in the record whatsoever of
`the arrangement of these distinct structures in the Alvogen
`tablet. So for those reasons, in addition, we believe we're
`entitled to judgment.
`THE COURT: All right. Thank you.
`MR. BECKER: Thank you.
`THE COURT: I will hear from plaintiff.
`MR. CONCA: Thank you, Your Honor. Before we
`get started, I would like to make a preliminary request that
`Dr. Fassihi, who is in the gallery, be asked to step out of
`the courtroom while we make this quick argument.
`THE COURT: Any objection?
`MR. BECKER: No objection.
`THE COURT: Any objection?
`MS. HOLLAND: No, Your Honor.
`THE COURT: Okay. All right. Thank you, Dr.
`Fassihi. He's stepping out of the courtroom.
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`(Dr. Fassihi left the courtroom.)
`MR. CONCA: Thank you, Your Honor.
`THE COURT: Okay.
`MR. CONCA: Your Honor, defendants' motion for
`judgment under 52(c) should be denied because it suffers
`from several fundamental flaws.
`First, it ignores the extensive affirmative
`documentary evidence that the defendants' products are
`macroscopically homogeneous, which includes numerous ANDA
`product development documents reflecting the substantial
`efforts that defendants made to design their products and
`their manufacturing process for making them so that the
`blended excipients will be homogeneous throughout the
`manufacturing process, and so that the resulting tablets
`will likewise remain homogeneous. These documents,
`including defendants' own extensive use of internal active
`ingredient uniformity testing, including express admissions
`in these documents that the defendants themselves use active
`ingredient uniformity testing with results routinely close
`to a hundred percent as a surrogate to demonstrate excipient
`homogeneity in the product blend.
`For example, PTX-230 at page 4 states, "In
`addition, the final blend was also found to be homogeneous
`based on the results of blend uniformity studies and had
`good compressibility."
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`PTX-228 at 193. "To assess homogeneity of
`the blend, blend uniformity sampling will still be
`performed."
`
`Further, both defendants' documents establish
`that the tablet compression was designed to minimize
`segregation of the homogeneous product blends created during
`their respective manufacturing processes, during those
`mixing processes.
`Alvogen's PTX-228 at 170, "The compression
`process must provide the desired dose in each tablet by
`avoiding segregation of the uniform blend." And Actavis'
`PTX-230. "This process of blending in a series of steps
`ensured homogeneous mixing of nine milligrams of active
`ingredient in 300 milligrams of blend as evidenced by blend
`uniformity data and content uniformity data from the core
`tablet."
`
`These ANDA documents are legal representations
`to FDA and defendants can't deviate from them without
`amending their ANDAs.
`THE COURT: Where is the documentary evidence
`that it is macroscopically homogeneous as viewed by the
`naked eye?
`
`MR. CONCA: The documentary evidence includes
`defendants' witness testimony, but the documentary evidence
`itself is the photographs that the defendants' experts took
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`of their own products and this evidence, Your Honor,
`specifically was prepared by the defendants' experts, and we
`heard from Actavis' witness yesterday, those photos are
`representative of what he saw with his naked eye, and
`Dr. Davis said he relied on those photos. So to the extent
`that the defendants are arguing that there's a failure of
`proof because Dr. Davis didn't consider what these tablets
`looked like from the perspective of a naked eye, he has
`considered the photos that Dr. Mullen has already admitted
`were representative, and that we expect Dr. Fassihi to admit
`because he admitted at his deposition the same.
`THE COURT: You can't rely on Dr. Fassihi to
`make out your burden at this stage; correct?
`MR. CONCA: We can rely on the photographs that
`Dr. Davis relied on in his testimony.
`THE COURT: Did Dr. Davis opine that based on
`the photos, the tablets are macroscopically homogeneous to
`the naked eye?
`MR. CONCA: Dr. Davis did provide those
`opinions. He specifically testified that he could see no
`non-uniformity in those photos, and that they appeared to
`him to be macroscopically homogeneous. The trial transcript
`cite is page 96, 9 to 12. 96, 11 to 12 for Alvogen.
`"Question: Do you see in those photos any
`non-homogeneous dispersion of drug layer beads or any other
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`excipients?
`
`"Answer: I do not see a non-homogeneous
`distribution in these photographs."
`The second citation, trial transcript 115, 18,
`to 116, 2, for Actavis:
`"Question: Looking at this picture, do you see
`a non-homogeneous dispersion of yellow specs in a tablet
`cross-section?
`"Answer: No. I can't see those in this picture.
`"Question: What does this picture show?
`"Answer: It shows a homogeneous structure
`
`throughout."
`
`THE COURT: What were those latter pages? I got
`96 to 97. You said something else, I think.
`MR. CONCA: The first cite was Alvogen 96, 9
`through 12, and then 96 -- no, sorry. It's 96, 9 through
`12, and then the second cite was Actavis trial transcript,
`115, 18, to 116, 2.
`THE COURT: Do you agree that the test for
`infringement is whether a person of ordinary skill in
`the art using their naked eye would see macroscopic
`homogeneity?
`
`MR. CONCA: No, Your Honor. Plaintiffs do not
`agree that the test for macroscopic homogeneity is limited
`to what a person of ordinary skill in the art would see from
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`a cross-section of these tablets.
`First of all, the claim term is macroscopically
`homogeneous. We know that that is a uniform structure
`throughout, and a cross-section of the tablet is one piece
`of evidence that helps a person come to that conclusion.
`But let's remember how we got here. And I will point out,
`it was not plaintiffs' -- it was the defendants who sought
`construction of this term initially, I would like to make
`that clear, not plaintiffs, who, when plaintiffs explained
`at the Markman hearing, We understood macroscopic to mean
`"not microscopic." That's a quote, not microscopic.
`Another quote is, "Large enough to be observed by the naked
`eye,"
`or "observable in terms of large units or elements."
`And those are all at page 25 of the Markman transcript in
`this case.
`
`So it's consistent that that understanding, that
`the naked eye construction describes the size scale of the
`features that satisfy the claim, i.e., not microscopic, it
`was never intended to be an exclusive methodology for
`determining macroscopic homogeneity, nor should it be
`adopted as one, especially given the robust evidence that we
`have available to us in the defendants' FDA documents, their
`witness testimony, all about the products that defendants
`seek to sell if they get FDA approval.
`THE COURT: It is the construction that you all
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`proposed; correct?
`MR. CONCA: It is the construction that we
`proposed. Actually, what the plaintiffs said was we think
`it's plain and ordinary meaning. The defendants had
`proposed a much narrower construction that looked at
`specific elements and was more akin to a microscopic
`homogeneity. So what we said was, it's not that. It's
`something more akin to a naked eye. And that made sense.
`And I believe Your Honor understood that in the context of
`the prior art that was being cited in this case, which were
`formulations like Savastano that had a layered formulation,
`and the layered formulation was being distinguished from the
`matrix-type composition of the invention, which involved a
`single uniform tablet core. And that's consistent with what
`the example in the specification says, Your Honor. The
`specific mixing of different excipients, including
`excipients of different sizes, granules and powders, mixing
`them, blending them, and compressing them into
`macroscopically homogeneous tablets.
`So the idea that the naked eye test is th