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`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`_____________________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________________
`
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`ELI LILLY AND COMPANY,
`Petitioner,
`
`v.
`
`TEVA PHARMACEUTICALS INTERNATIONAL GMBH,
`Patent Owner.
`
`_____________________
`
`Case IPR2018-01427
`Patent 8,597,649 B2
`_____________________
`
`
`
`DECLARATION OF ROBERT D. STONER, PH.D.
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`EX2123
`Eli Lilly & Co. v. Teva Pharms. Int'l GMBH
`IPR2018-01427
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`
`
`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`
`TABLE OF CONTENTS
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`I.
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`Introduction ..................................................................................................... 1
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`A.
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`B.
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`C.
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`Background and Qualifications ............................................................. 1
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`Scope of Work ....................................................................................... 2
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`Evidence Considered ............................................................................. 4
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`II.
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`Summary of Opinion ...................................................................................... 5
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`III. The Teva-AlderBio Licensing Agreement Provides Additional Objective
`Evidence of Non-obviousness of the ‘649 Patent .......................................... 6
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`IV. Conclusions ................................................................................................... 11
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`i
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`I, Robert D. Stoner, Ph.D., declare as follows.
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`I.
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`Introduction
`A. Background and Qualifications
`I am a Principal at Economists Incorporated, and an expert in
`1.
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`industrial organization, with more than thirty years of experience in consulting,
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`antitrust, and economic research. I provide expert witness testimony and consulting
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`services in a variety of areas, including reasonable royalties, commercial success,
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`damages estimation, and business strategy.
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`2. My expertise and experience encompass a variety of topics, including
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`intellectual property, competition, antitrust, utility regulation, international trade,
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`commercial litigation, and class action. My work in intellectual property spans the
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`life sciences (with specific industry expertise in pharmaceuticals, medical devices
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`and drug wholesaling) as well as electronics (including computer memory, digital
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`music, smart phones, text messaging and telecommunications). I have worked on
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`projects in a diverse range of other industries (such as pharmaceutical data, electric
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`utilities, grocery stores, casinos, hospital beds, automobiles and oil refining and
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`marketing). I frequently provide expertise and analysis in evaluating commercial
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`success in the pharmaceutical industry.
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`3.
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`I earned my Ph.D. and M.A. in Economics from Berkeley, University
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`of California in 1978 and 1976, respectively, and my B.A. in Economics from
`
`1
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`Santa Cruz, University of California in 1970. At Santa Cruz, I received both
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`General Honors and Honors in Economics. I have also published research in
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`several peer-reviewed academic journals.
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`4.
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`I am educated and experienced in economics, as detailed in this
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`Declaration. My qualifications and credentials are also fully set forth in my
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`curriculum vitae, provided as EX2256. I understand that my declaration will be
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`included in Patent Owner’s Exhibit List as EX2123.
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`B.
`5.
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`Scope of Work
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`I have been retained as an expert witness on behalf of Teva
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`Pharmaceuticals International GmbH (“Teva”) for the above-captioned inter partes
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`review (“IPR”). I am being compensated for my time in connection with this IPR
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`at my standard consulting rate, but my compensation is not contingent upon my
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`opinions or the outcome of this or any other proceeding.
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`6.
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`I understand that this Declaration accompanies Teva’s response to an
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`IPR petition involving U.S. Patent No. 8,597,649 (“the ’649 patent”) (EX1001). I
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`understand that the petition was filed by Eli Lilly and Company (“Lilly”). I
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`understand that the ’649 patent resulted from U.S. Patent Application No.
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`13/870,871 (“the ’871 application”). I understand that the ’871 application is a
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`continuation application that relates to a series of previous applications. I also
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`understand that the earliest possible priority date of the ’649 patent is the
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`2
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`November 14, 2005 filing date of U.S. Patent Application No. 60/736,623. The
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`’649 patent issued on May 24, 2016.
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`7.
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`I understand that the Patent Trial and Appeal Board (“PTAB”)
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`instituted review on claims 1-9 of the ’649 patent.
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`8.
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`For this declaration, I was asked to evaluate commercial acquiescence
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`through licensing.
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`9.
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`This declaration is a statement of my opinions in this matter and the
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`basis and reasons for those opinions. In forming the opinions expressed in this
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`declaration, I have relied upon my education, experience, and knowledge of the
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`subjects discussed, as well as the cited documents and materials I have reviewed
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`specifically in conjunction with this proceeding.
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`10. This declaration summarizes only my current opinions, which are
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`subject to change depending upon additional information, and related analysis, that
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`comes to light as this or related proceedings progress. The entirety of my
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`declaration, including attachments and referenced materials, supplies the basis for
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`my analysis and conclusions. The organizational structure of the declaration is for
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`convenience. To the extent that facts, economic analysis, and other considerations
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`overlap, I generally discuss such issues only once for the sake of brevity. Neither
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`the specific order in which each issue is addressed nor the organization of my
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`declaration or attachments affects the ultimate outcome of my analysis.
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`3
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`C. Evidence Considered
`I have reviewed and relied on the articles and other documents cited in
`11.
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`the table below:
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`Teva
`Exhibit #
`1001
`
`Description
`
`U.S. Patent No. 8,597,649
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`2251
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`2252
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`2253
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`2255
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`2256
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`2257
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`2258
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`2259
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`2260
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`
`
`AIPLA Survey of Costs of Patent Litigation and Inter Partes
`Review, January 30, 2017
`Oppositions before the European Patent Office (EPO) – as a
`proactive risk management tool, March 16, 2017
`AIPLA 2015 Report of the Economic Survey
`
`“Alder Biopharmaceuticals® Enters into European Patent
`Settlement and Global License Agreement with Teva in the Field of
`Anti-CGRP-Based Therapy,” Alder Biopharmaceuticals, Inc.,
`January 8, 2018
`Dr. Robert D. Stoner’s Curriculum Vitae
`
`Redacted Alder-Teva Settlement and License Agreement, Jan 5,
`2018
`Reuters, Alder Biopharmaceuticals Inc. Company Profile,
`https://www.reuters.com/finance/stocks/companyProfile/ALDR.A
`“Alder BioPharmaceuticals® Reports Fourth Quarter and Full Year
`2018 Financial and Operating Results,” Alder Biopharmaceuticals,
`Inc., February 25, 2019
`“Teva Announces Global License Agreement with Alder
`BioPharmaceuticals® in the Field of Anti-CGRP-Based Therapy,”
`Teva Pharmaceutical Industries Ltd., January 8, 2018
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`4
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`II.
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`Summary of Opinion
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`13.
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`I provide this declaration in support of Patent Owner Teva’s
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`Response to Lilly’s IPR petition. Specifically, I have been asked to evaluate
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`whether there was commercial acquiescence through licensing. Teva licensed its
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`anti-CGRP antibody technology to AlderBio Holdings, LLC and Alder
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`Biopharmaceuticals, Inc. (collectively “AlderBio”) in January 2018. Such
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`commercial acquiescence is another indicator of the ’649 patent’s non-
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`obviousness.
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`14.
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`It is my understanding that commercial acquiescence of a claimed
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`invention can be used as objective evidence to further support a non-obvious claim.
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`The underlying theory is that the taking of a license would not usually make
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`economic sense unless the licensee perceives a strong likelihood that the patent(s)
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`in question would be upheld as valid. To buttress that theory, it is important to
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`establish a nexus between the taking of the license and the claimed invention. It is
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`my understanding that there are a number of factors that are recognized as helping
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`to establish a nexus, such as a showing that the consideration paid by the licensee
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`is large compared to the cost of litigation, and showing that the motivation for
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`entering the license is not “mutually beneficial.”
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`III. The Teva-AlderBio Licensing Agreement Provides Additional Objective
`Evidence of Non-obviousness of the ’649 Patent
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`15. On January 5, 2018, Teva reached an agreement with AlderBio to
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`resolve an appeal, following opposition proceedings before the European Patent
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`Office (“EPO”) relating to Teva’s European Patent No. EP1957106 with respect to
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`anti-CGRP antagonist antibodies. EX2255, 1-2; EX2260, 1. I understand from
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`counsel that EP1957106 is the European equivalent of the ’649 patent and that
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`patents in this family were filed in the US and world-wide. The agreement
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`validates Teva's IP and provides to AlderBio the ability to develop, manufacture
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`and commercialize AlderBio’s anti-CGRP antagonist antibody, eptinezumab, for
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`migraine prevention targeting CGRP (the “Teva-AlderBio Licensing Agreement”).
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`EX2255, 2; EX2257, 1; EX2260, 1.1
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`16. Pursuant to the Teva-AlderBio Licensing Agreement, Teva granted
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`AlderBio a royalty-bearing, non-transferable, non-exclusive license to certain
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`patents in order for AlderBio to develop, manufacture, and commercialize certain
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`products that practiced the intellectual property in those patents in the U.S. and
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`1 I understand that the Teva-AlderBio Licensing Agreement was redacted to
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`remove sensitive AlderBio information not relied on in this IPR.
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`6
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`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`worldwide (except Japan and South Korea). EX2257, 4, 6, 29; EX2255, 2;
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`EX2260, 1.
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`17.
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`In exchange for the rights to these patents, AlderBio agreed to
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`withdraw its appeal before the EPO related to European Patent No. EP1957106
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`EX2257, 4, 29, 31; EX2255, 2; EX2260, 1. In addition, AlderBio agreed to make
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`an initial cash payment of $25 million, and to make milestone payments of up to
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`$175 million if certain conditions were met. The milestone payments are as
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`follows:
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`•
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`$25 million upon the first regulatory approval of the AlderBio
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`Product2 in any country, except Japan and South Korea;
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`•
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`$75 million upon net sales of the AlderBio Product reaching $1 billion
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`in a calendar year; and
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`2 The AlderBio Product is defined as a pharmaceutical product that contains an
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`AlderBio Antibody, meaning either (a) eptinezumab; (b) any anti-CGRP antibody
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`that is other than eptinezumab and is first discovered or identified by Alder Bio as
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`of the effective date of the Agreement; or (c) any antigen-binding fragment of an
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`anti-CGRP antibody that is described in (a) or (b). EX2257, 1. See also EX2255, 2;
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`EX2260, 1.
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`$75 million upon net sales of the AlderBio Product reaching $2 billion
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`•
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`in a calendar year. EX2257, 8 29, 31; EX2255, 2; EX2260, 1.
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`18. AlderBio also agreed to pay Teva tiered royalties of between five
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`percent and seven percent based on worldwide net sales (excluding Japan and
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`South Korea) of the AlderBio Product. EX2257, 29, 31; EX2255, 2; EX2260, 1.
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`19. The agreement logically would have included the ’649 patent, because
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`Alder intends to introduce its eptinezumab product in the United States in 2020 and
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`would presumably not have taken a license that would risk infringement of the
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`’649 patent (and at least eight other patents in the same patent family, which were
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`challenged by Lilly in various related IPR proceedings). Indeed, Schedule 1.14
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`lists the challenged patent among the licensed patents within the Teva-AlderBio
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`Licensing Agreement. EX2255, 2; EX2257, 20-28; EX2260, 1.
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`20. Companies routinely enter into license agreements in acquiescence to
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`validity and infringement. AlderBio’s agreement to seek this license, which
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`involves hundreds of millions of dollars in consideration and running royalties of
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`5-7 percent on all net sales worldwide, by itself, would have been an implicit
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`admission that the ’649 patent is valid and infringed. EX2255, 2; EX2257, 8, 29,
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`31; EX2260, 1. In the agreement, AlderBio acknowledged that the licensed ’649
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`patent issued as of the effective date of the agreement, is valid and enforceable and
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`that AlderBio would otherwise infringe the ’649 patent (and at least eight other
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`8
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`patents in the same patent family) absent the granted license. EX2255, 2; EX2257,
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`5, 23; EX2260, 1.
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`21. AlderBio is a clinical-stage biopharmaceutical company with assets of
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`over $400 million, which strives to discover, develop, and seek to commercialize
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`genetically engineered therapeutic antibodies. EX2258,1. AlderBio is focused on
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`developing antibodies for the treatment of migraine. Id. In addition, AlderBio is
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`focusing its resources and development efforts “principally” on eptinezumab,
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`which is expected to compete with Teva's Ajovy® and Eli Lilly's Emgality®, and
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`submitted a biologics license application to the FDA for eptinezumab for the
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`prevention of migraine. Id. AlderBio's agreement to pay hundreds of millions of
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`dollars for rights to patents is evidence that the licensed patents are valid and
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`would be infringed by AlderBio’s anti-CGRP antagonist antibody product.
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`22.
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`Indeed, the Teva-AlderBio Licensing Agreement reflects a license of
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`the ’649 patent to a potential direct competitor, which suggests the inability to
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`design around this patent to develop a competing product. The Teva-AlderBio
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`Licensing Agreement shows that AlderBio sought a license to the ’649 patent (and
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`at least eight other patents in the same patent family) to avoid infringement, and is
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`willing to pay a royalty and upfront consideration to accomplish that end.
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`23.
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`I understand that when consideration paid by a licensee is large in
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`comparison to the expected cost of litigation, the license can provide evidence that
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`9
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`the licensee believed the patent to be valid. Indeed, AlderBio agreed to pay Teva
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`upfront payments, future milestone payments, and royalties on net sales totaling in
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`the hundreds of millions of dollars. The total consideration to be paid pursuant to
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`the Teva-AlderBio Licensing Agreement significantly exceeds the cost to attempt
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`to invalidate a patent within an EPO proceeding, an IPR, or in the U.S. Federal
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`Court system. I understand that opposition proceedings before the EPO typically
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`amount to €25,000 to €65,000 ($27,900 to $72,600 at current exchange rates), the
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`median cost of an IPR is approximately $350,000, and the median cost for patent
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`litigation when more than $25 million is at risk is approximately $8 million, which
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`is significantly below the consideration that AlderBio agreed to pay to Teva.
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`EX2251, 2; EX2252, 6; EX2253, 43.
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`24.
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`I also understand that the fact the license is not a “mutually
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`beneficial” arrangement with additional benefits to the licensee increases its value
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`as a secondary indicia of non-obviousness. The license that AlderBio took did not
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`give it any consideration beyond the ability to practice the Teva patents virtually
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`worldwide. Most notably, the license granted by Teva to AlderBio was not an
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`exclusive license—so AlderBio may have to compete with other potential Teva
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`licensees in the future. EX2257, 6-7; EX2255, 2; EX2260, 1. As such, the license
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`is not “mutually beneficial,” meaning that Alder is getting nothing more (or less)
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`10
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`Inter Partes Review of USPN 8,597,649
`Declaration of Robert D. Stoner, Ph.D. (EX2123)
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`than the right to sell its anti-CGRP product without being sued for infringement of
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`Teva’s applicable patents.
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`25. AlderBio decided to take a license from Teva to cover its anti-CGRP
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`antagonist antibody product. EX2255, 2; EX2257, 1; EX2260, 1. Absent such a
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`license, AlderBio would not be able to market its anti-CGRP antagonist antibody
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`product without risk of infringement and a potential damages award to Teva. In
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`fact, AlderBio stated that the agreement “provides clarity regarding Alder’s
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`freedom to develop, manufacture and commercialize eptinezumab, its lead product
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`candidate for migraine prevention targeting CGRP.” EX2257, 31; EX2259, 3;
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`EX2255, 2; EX2260, 1.
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`IV. Conclusions
`26. Alder’s acquiescence to the validity of the challenged patent claims
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`through licensing further supports the nonobviousness of claims 1-9 of the ’649
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`patent. In addition, Alder’s license has nexus to every challenged claim because
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`the agreement includes the challenged patent, the consideration paid by AlderBio
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`is large in comparison to the expected cost of litigation, and the motivation for
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`AlderBio to enter into the license was not “mutually beneficial.”
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`11
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`Inter Partes Review of USPN 8,597,649
`Declaration ofRobert D. Stoner, Ph.D.(EX2123)
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`I hereby declare that all statements made herein of my own knowledge are
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`true and that all statements made on information and belief are believed to be true,
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`and further that these statements were made with the knowledge that willful false
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`statements and the like so made are punishable by fine or imprisonment, or both,
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`under § 1001 of title 18 of the United States Code.
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`Dated:
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`MALI 30202?
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`fl 9%
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`Robert D. Stoner, Ph.D.
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