Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 1 of 28 PageID #: 72
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF NEW YORK
`
`Case No.: 2:15-cv-02416 LDW-AYS
`
`PARAGON’S ANSWER TO
`PLAINTIFF’S COMPLAINT AND
`COUNTERCLAIMS
`
`DEMAND FOR JURY TRIAL
`
`)))))))))))
`
`))))))))))))
`
`ALTAIRE PHARMACEUTICALS, INC.,
`
`Plaintiff/Counterclaim-Defendant,
`
`v.
`
`PARAGON BIOTECK, INC.,
`
`Defendant/Counterclaimant.
`
`PARAGON BIOTECK, INC.,
`
`Third-Party Plaintiff,
`
`v.
`
`SAWAYA AQUEBOGUE, LLC,
`
`Third-Party Defendant.
`
`PARAGON BIOTECK, INC.’S ANSWER, AFFIRMATIVE DEFENSES,
`COUNTERCLAIMS, AND THIRD-PARTY COMPLAINT
`
`Paragon BioTeck, Inc. (“Paragon”) answers and responds to each of the allegations of
`
`Plaintiff Altaire Pharmaceuticals, Inc.’s (“Altaire”) Complaint as follows:
`
`THE PARTIES
`
`Altaire is a New York corporation, having its principal place of business at 311
`1.
`West Lane, Aquebogue, New York 11931. All of Altaire’s employees, shareholders, officers,
`and directors are located in New York.
`
`ANSWER:
`
`Paragon lacks knowledge or information sufficient to form a belief as to the truth
`
`of the allegations in Paragraph 1 of the Complaint, and on that basis denies them.
`
`Paragon is a Nevada corporation, having its principal place of business at 4640
`2.
`SW Macadam Ave., Suite 80, Portland, Oregon 97239.
`
`ANSWER: Admitted.
`
`-1-
`
`PARAGON - EXHIBIT 2015
`
`

`
`Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 2 of 28 PageID #: 73
`
`Witham, an individual, is President and Chief Executive Officer of Paragon and,
`3.
`upon information and belief, a resident and citizen of Oregon.
`
`ANSWER:
`
`Paragon admits that Patrick Witham is a resident of Oregon and is the President
`
`and Chief Executive Officer of Paragon. To the extent not expressly admitted herein, Paragon
`
`denies the remaining allegations in Paragraph 3 of the Complaint.
`
`JURISDICTION AND VENUE
`
`The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §
`4.
`1332(a)(1) in that the parties are citizens of different States and the amount in controversy
`exceeds $75,000, exclusive of interest and costs.
`
`ANSWER:
`
`Paragraph 4 of the Complaint contains legal conclusions to which no answer is
`
`required. To the extent an answer is required Paragon admits that this Court has subject matter
`
`jurisdiction over this action with respect to Paragon. Patrick Witham was dismissed as a party to
`
`this action by Order of the Court dated August 5, 2015, and the allegations of the Complaint
`
`directed at Patrick Witham require no responsive pleading. To the extent not expressly admitted
`
`herein, Paragon denies the remaining allegations in Paragraph 4 of the Complaint.
`
`The Court has personal jurisdiction over Defendants under N.Y. C.P.L.R. §§ 301
`5.
`and 302. Witham, on behalf of Paragon, contacted Altaire representatives in New York to
`propose a business relationship and traveled to New York to negotiate a written Agreement (the
`“Agreement”) between the parties.1 The Agreement states, in part: “The parties to this
`Agreement agree that jurisdiction and venue of any action brought pursuant to this Agreement, to
`enforce the term hereof or otherwise with respect to the relationships between the parties created
`or extended pursuant hereto, shall properly lie in the Court(s) of the State of New York or the
`Court(s) of the United States having jurisdiction over Suffolk County, New York.” The
`Agreement further states: “The validity, construction and enforcement of, and the remedies
`under, this Agreement shall be governed in accordance with the laws of the State of New York.”
`
`ANSWER:
`
`Paragraph 5 contains legal conclusions to which no answer is required. For
`
`purposes of this action only, Paragon does not contest personal jurisdiction. Patrick Witham was
`
`dismissed as a party to this action by Order of the Court dated August 5, 2015, and the
`
`allegations of the Complaint directed at Patrick Witham require no responsive pleading. To the
`
`-2-
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`

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`Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 3 of 28 PageID #: 74
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`extent not expressly admitted herein, Paragon denies the remaining allegations in Paragraph 5 of
`
`the Complaint.
`
`Paragon employees have since visited Altaire in New York on numerous
`6.
`occasions during the course of the relationship between the parties, and in relation to the
`Agreement.
`
`ANSWER:
`
`Paragon admits that Patrick Witham has travelled to Altaire’s New York facility
`
`in pursuance of the parties’ May 30, 2011 Agreement. To the extent not expressly admitted
`
`herein, Paragon denies the remaining allegations in Paragraph 6 of the Complaint.
`
`Venue is proper in this District under 28 U.S.C. § 1391(b)(2), in that a substantial
`7.
`part of the events or omissions giving rise to the claims occurred in this District, and in
`accordance with the venue provisions referenced in paragraph 5.
`
`ANSWER:
`
`Paragraph 7 contains legal conclusions to which no answer is required. Paragon
`
`admits that the parties’ May 20, 2011 Agreement states, in part: “The parties to this Agreement
`
`agree that jurisdiction and venue of any action brought pursuant to this Agreement, to enforce the
`
`term hereof or otherwise with respect to the relationships between the parties created or extended
`
`pursuant hereto, shall properly lie in the Court(s) of the State of New York or the Court(s) of the
`
`United States having jurisdiction over Suffolk County, New York.” For purposes of this action
`
`only, Paragon does not dispute that venue is proper in this District. Patrick Witham was
`
`dismissed as a party to this action by Order of the Court dated August 5, 2015, and the
`
`allegations of the Complaint directed at Patrick Witham require no responsive pleading. To the
`
`extent not expressly admitted herein, Paragon denies the remaining allegations in Paragraph 7 of
`
`the Complaint.
`
`FACTUAL BACKGROUND
`
`The Agreement
`
`In 2011, Witham, Paragon’s President and CEO, contacted Assad (Al) Sawaya,
`8.
`the President of Altaire, in New York and proposed a business relationship between Paragon and
`Altaire. Witham and Sawaya were acquainted through Witham’s previous employer.
`
`-3-
`
`

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`
`ANSWER:
`
`Paragon admits that on May 30, 2011, Paragon and Altaire entered into an
`
`agreement (“the Agreement”), in which Altaire agreed to provide the Chemistry, Manufacturing,
`
`and Control (“CMC”) sections for New Drug Application (“NDA”) filings made by Paragon on
`
`two drug products. To the extent not expressly admitted herein, Paragon denies the remaining
`
`allegations in Paragraph 8 of the Complaint.
`
`Specifically, Witham proposed that Paragon and Altaire work together to file New
`9.
`Drug Applications (“NDA”s) with the Food and Drug Administration (“FDA”) for certain
`ophthalmic products, including a solution containing phenylephrine. Phenylephrine is a pupil-
`dilating agent commonly used by physicians and optometrists during eye examinations. The
`FDA has categorized phenylephrine as a medically necessary drug.
`
`ANSWER:
`
`Paragon admits that on May 20, 2011, Paragon and Altaire entered into the
`
`Agreement, in which Altaire agreed to provide the CMC sections for NDA filings made by
`
`Paragon on phenylephrine hydrochloride ophthalmic solution, 2.5% and 10%, and on a second
`
`drug product. Paragon admits that phenylephrine hydrochloride is a potent pupil-dilating agent
`
`that is commonly used by optometrists, ophthalmologists, and other physicians during ocular
`
`examinations, and that the Food and Drug Administration (“FDA”) has categorized
`
`phenylephrine as a medically necessary drug. To the extent not expressly admitted herein,
`
`Paragon denies the remaining allegations in Paragraph 9 of the Complaint.
`
`For many years before Witham contacted Altaire, Altaire had been manufacturing
`10.
`and selling its phenylephrine formulations in the marketplace. Altaire agreed to work with
`Paragon to submit NDAs to the FDA in part because in 2011, the FDA issued stricter guidelines
`regulating the marketing and selling of drugs unapproved by the FDA. Altaire believed that by
`working with Paragon to obtain FDA approval for its products, it would achieve greater
`protection and exclusivity in the marketplace with respect to those products.
`
`ANSWER:
`
`Paragon lacks knowledge or information sufficient to form a belief as to the truth
`
`of the allegations in Paragraph 10 of the Complaint, and on that basis denies them.
`
`11.
`May 30, 2011.
`
`After a period of negotiation, Paragon and Altaire entered into the Agreement on
`
`-4-
`
`

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`ANSWER:
`
`Paragon admits that on May 30, 2011, Paragon and Altaire entered into the
`
`Agreement, in which Altaire agreed to provide CMC sections for NDA filings made by Paragon
`
`on two drug products. To the extent not expressly admitted herein, Paragon denies the remaining
`
`allegations in Paragraph 11 of the Complaint.
`
`The Agreement obligated Altaire to provide the Chemistry, Manufacturing, and
`12.
`Control (“CMC”) sections for NDA filings that were to be submitted by Paragon on
`phenylephrine hydrochloride ophthalmic solution, 2.5% and 10% (“phenylephrine”), and on a
`second product (hereinafter referred to as “Product B”). Altaire also agreed to manufacture and
`supply the products in the Agreement. All of the research, development, and drafting of the CMC
`sections for phenylephrine took place in New York, and all manufacturing of that product takes
`place in New York. Altaire maintains no other manufacturing site.
`
`ANSWER:
`
`Paragon admits that on May 30, 2011, Paragon and Altaire entered into an the
`
`Agreement, in which Altaire agreed to provide the CMC sections for NDA filings made by
`
`Paragon on phenylephrine hydrochloride ophthalmic solution, 2.5% and 10%, and on a second
`
`product (“collectively products”). In consideration for providing the CMC sections, Paragon
`
`agreed to give Altaire exclusive manufacturing rights once Paragon obtained FDA approval to
`
`market its products. To the extent not expressly admitted herein, Paragon denies the remaining
`
`allegations in Paragraph 12 of the Complaint.
`
`Pursuant to the Agreement, Altaire was to be the exclusive manufacturer and
`13.
`supplier of the products once Paragon obtained FDA approval to market the products. Paragon
`was to be the exclusive marketer and distributor of the products.
`
`ANSWER:
`
`Paragon admits that pursuant to the Agreement, Paragon agreed to give Altaire
`
`exclusive manufacturing rights once Paragon obtained FDA approval to market its products and
`
`that Paragon was to be the exclusive marketer and distributor of the products. To the extent not
`
`expressly admitted herein, Paragon denies the remaining allegations in Paragraph 13 of the
`
`Complaint.
`
`The Agreement contained a “Confidentiality/Non-disclosure” section which, in
`14.
`part, acknowledged that all of Altaire’s CMC materials and information disclosed pursuant to the
`
`-5-
`
`

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`
`Agreement was proprietary and confidential information, not to be disclosed to any third party
`without Altaire’s written consent.
`
`ANSWER:
`
`Paragon admits that the Agreement contains a “Confidentiality/Non-Disclosure”
`
`section. Paragon denies that Paragraph 14 of the Complaint constitutes a complete and accurate
`
`reproduction of the “Confidentiality/Non-Disclosure” section. Paragon admits that the
`
`Agreement speaks for itself and is the best source for the respective content of the
`
`“Confidentiality/Non-Disclosure” section. To the extent not expressly admitted herein, Paragon
`
`denies the remaining allegations in Paragraph 14 of the Complaint.
`
`15.
`Paragon.
`
`The Agreement was signed by Al Sawaya for Altaire and Patrick Witham for
`
`ANSWER: Admitted.
`
`Altaire provided the CMC section for phenylephrine as required by the
`16.
`Agreement, and Paragon’s phenylephrine solution was approved by the FDA on March 21, 2013.
`
`ANSWER:
`
`Paragon admits that on March 21, 2013, Paragon obtained NDA approval for
`
`phenylephrine hydrochloride ophthalmic solution, 2.5% and 10%. To the extent not expressly
`
`admitted herein, Paragon denies the remaining allegations in Paragraph 16 of the Complaint.
`
`Negotiations Regarding “Product B”
`
`After the FDA approval of phenylephrine, Altaire contacted Paragon and offered
`17.
`to start the process for obtaining approval of Product B. Paragon, however, through Patrick
`Witham, informed Altaire that it was not certain whether it wanted to move forward with the
`approval process for Product B, despite its contractual obligation to prepare and submit the NDA
`applications for both phenylephrine and Product B. Witham then informed Altaire that Paragon
`wanted to pursue FDA approval of a third product, not Product B. For the next nine months,
`Altaire took steps to prepare for an Abbreviated New Drug Application (“ANDA”) filing for the
`third product.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 17 of the Complaint.
`
`In early 2014, Paragon sent Altaire a draft amendment to the Agreement
`18.
`regarding the replacement of Product B with the third product. Altaire objected to portions of the
`draft. Negotiations regarding the draft amendment ensued, but the amendment was never signed
`or executed because Paragon never sent Altaire a revised amendment that reflected all of the
`changes that had been discussed by the parties. Without an executed amendment to the
`
`-6-
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`

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`Agreement, Altaire had no basis for which to move forward with the new product, and Paragon
`never took steps to follow up with Altaire regarding its intent to complete an NDA or ANDA
`filing with the FDA for the third product or for any other “Product B” as contemplated in the
`Agreement.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 18 of the Complaint.
`
`Paragon’s Patent Application and Issuance
`
`On June 12, 2013, Paragon’s attorney contacted Altaire and informed Altaire that
`19.
`Paragon wished to amend the Agreement between Altaire and Paragon to allow Paragon to use
`Altaire’s confidential information in connection with applying for and obtaining a patent for
`phenylephrine.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 19 of the Complaint.
`
`Altaire responded to Paragon by stating that the proposed amendment was not
`20.
`acceptable as Paragon had drafted it and that Altaire would not agree to amend the Agreement in
`the manner Paragon was suggesting. Altaire also reminded Paragon that it was prohibited from
`using or disclosing Altaire’s confidential information beyond the limited purpose of obtaining
`NDA approval, pursuant to the terms of the Agreement.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 20 of the Complaint.
`
`In the fall of 2013, without further discussion with Altaire, Paragon filed for and
`21.
`was subsequently issued a United States Patent No. 8,859,623 (the “’623 patent”), entitled
`“Methods and Compositions of Stable Phenylephrine Formulations.”
`
`ANSWER:
`
`Paragon admits that United States Patent No. 8,859,623 (the “’623 patent”),
`
`entitled “Methods and Compositions of Stable Phenylephrine Formulations” was duly and
`
`legally issued by the United States Patent and Trademark Office on October 14, 2014. Paragon
`
`is the owner of all title, right, and interest in the ’623 patent by assignment. To the extent not
`
`expressly admitted herein, Paragon denies the remaining allegations in Paragraph 21 of the
`
`Complaint.
`
`Upon Information and belief, Paragon used and disclosed Altaire’s confidential
`22.
`information without written consent, as defined by and in violation of the Agreement, in its
`submissions to the United States Patent and Trademark Office (“USPTO”) to obtain the ‘623
`Patent.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 22 of the Complaint.
`
`-7-
`
`

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`23. While Altaire has performed its duties and fulfilled its obligations under the
`agreement, Paragon’s use of Altaire’s proprietary and confidential information to obtain a patent
`has materially damaged Altaire by allowing numerous parties access to Altaire’s proprietary and
`confidential information, expanding the market for phenylephrine production, enabling
`competitors to develop Altaire’s own product, and decreasing Altaire’s revenue and profits.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 23 of the Complaint.
`
`COUNT I
`Breach of Contract
`
`The preceding paragraphs of this Complaint are incorporated by reference as if set
`24.
`forth fully herein.
`
`ANSWER:
`
`Paragon reasserts and incorporates by reference its answers to Paragraphs 1-23 of
`
`the Complaint as if set forth fully herein.
`
`25.
`
`Altaire and Paragon entered into the Agreement on May 30, 2011.
`
`ANSWER:
`
`Paragon admits that on May 30, 2011, Paragon and Altaire entered into the
`
`Agreement.
`
`26.
`
`The contract required Paragon to, in part:
`
`a.
`
`b.
`
`c.
`
`Serve as the exclusive marketer and distributor of the phenylephrine
`product.
`
`Refrain from using Altaire’s confidential and proprietary information for
`any purpose other than obtaining the NDA approvals referenced in the
`Agreement.
`
`Prepare and submit NDA applications in support of both the
`phenylephrine product and Product B.
`
`ANSWER:
`
`Paragon denies that Paragraph 26 of the Complaint constitutes a complete and
`
`accurate reproduction of Paragon’s obligations under the Agreement. Paragon admits that the
`
`Agreement speaks for itself and is the best source for the respective content of Paragon’s
`
`obligations under the Agreement. To the extent not expressly admitted herein, Paragon denies
`
`the remaining allegations in Paragraph 26 of the Complaint.
`
`Altaire performed its responsibilities under the Agreement by providing and
`27.
`bearing the costs for the CMC sections of Paragon’s NDA filings for the phenylephrine product
`
`-8-
`
`

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`and manufacturing and supplying such product upon and since NDA approval. Altaire also began
`the process of providing the CMC section of the Product B NDA, but Paragon failed to follow
`through with its obligation to prepare the NDA for Product B.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 27 of the Complaint.
`
`28.
`
`Paragon breached the Agreement by, in part:
`
`a.
`
`b.
`
`Failing to comply with its obligations under the Agreement with respect to
`obtaining an NDA on a second product, thereby depriving Altaire of the
`benefits associated with manufacturing and selling that product under the
`Agreement.
`
`Disclosing Altaire’s confidential and proprietary product information in its
`patent application and subsequent patent.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 28 of the Complaint.
`
`29.
`
`As a result of Paragon’s breach of the Agreement, Altaire has suffered damage.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 29 of the Complaint.
`
`COUNT II
`Misappropriation of Confidential and Proprietary Information
`
`The preceding paragraphs of this Complaint are incorporated by reference as if set
`30.
`forth fully herein.
`
`ANSWER:
`
`Paragon reasserts and incorporates by reference its answers to Paragraphs 1-29 of
`
`the Complaint as if set forth fully herein.
`
`Altaire provided confidential and proprietary information to Paragon for the
`31.
`limited purpose of obtaining NDA approval.
`
`ANSWER:
`
`Paragon admits that the Agreement contains a “Confidentiality/Non-Disclosure”
`
`section. To the extent not expressly admitted herein, Paragon denies the remaining allegations in
`
`Paragraph 31 of the Complaint.
`
`Pursuant to the Agreement, Paragon explicitly agreed to use that confidential and
`32.
`proprietary information only for that limited purpose.
`
`ANSWER:
`
`Paragon admits that the Agreement contains a “Confidentiality/Non-Disclosure”
`
`section. Paragon admits that the Agreement speaks for itself and is the best source for the
`
`-9-
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`

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`respective content of the “Confidentiality/Non-Disclosure” section. To the extent not expressly
`
`admitted herein, Paragon denies the remaining allegations in Paragraph 32 of the Complaint.
`
`Paragon instead used that confidential and proprietary information to obtain a
`33.
`patent from the USPTO, in bad faith, and in conscious disregard of the Agreement between
`Paragon and Altaire.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 33 of the Complaint.
`
`As a result of Paragon’s misappropriation of confidential and proprietary
`34.
`information, Altaire has suffered damage.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 34 of the Complaint.
`
`COUNT III
`Unfair Competition
`
`The preceding paragraphs of this Complaint are incorporated by reference as if set
`35.
`forth fully herein.
`
`ANSWER:
`
`Paragon reasserts and incorporates by reference its answers to Paragraphs 1-34 of
`
`the Complaint as if set forth fully herein.
`
`The confidential information Altaire provided to Paragon under the agreement
`36.
`constituted a commercial advantage.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 36 of the Complaint.
`
`Paragon misappropriated that commercial advantage by acting in bad faith by
`37.
`withholding material facts and information from Altaire regarding Paragon’s efforts to obtain the
`‘623 patent and the use of Altaire’s confidential and proprietary information in the course of
`obtaining that patent.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 37 of the Complaint.
`
`38.
`
`As a result of Paragon’s unfair competition, Altaire has suffered damage.
`
`ANSWER:
`
`Paragon denies the allegations in Paragraph 38 of the Complaint.
`
`ALTAIRE’S PRAYER FOR RELIEF
`
`All remaining allegations not specifically admitted herein are denied. It is further denied
`
`that Altaire is entitled to the relief requested in the Complaint or to any relief whatsoever.
`
`-10-
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`

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`PARAGON’S AFFIRMATIVE DEFENSES
`
`Paragon sets for the following affirmative and other defenses to Altaire’s Complaint:
`
`FIRST DEFENSE
`
`The Complaint and every count therein fails to state a claim upon which relief can be
`granted.
`
`SECOND DEFENSE
`
`Altaire’s claims are barred, in whole or in part, by the doctrines of estoppel, unclean
`
`hands, and/or the illegality of its own actions.
`
`THIRD DEFENSE
`
`Altaire’s claims are barred, in whole or in part, because any alleged damages are
`
`speculative or remote.
`
`FOURTH DEFENSE
`
`Any injuries or damages sustained by Altaire were the result of Altaire’s own conduct.
`
`FIFTH DEFENSE
`
`Paragon reserves the right to plead additional defenses as may be appropriate depending
`
`upon facts revealed during discovery.
`
`COUNTERCLAIMS AND THIRD-PARTY COMPLAINT
`
`For its Counterclaims against Plaintiff/Counterclaim-Defendant Altaire Pharmaceuticals,
`
`Inc. (“Altaire”) and as its Third-Party Complaint against Third-Party Defendant Sawaya
`
`Aquebogue, LLC (“Sawaya Aque”), Defendant/Counterclaimant/Third-Party Plaintiff Paragon
`
`BioTeck, Inc. (“Paragon”) states as follows:
`
`THE PARTIES
`
`1.
`
`Paragon BioTeck, Inc. is a Nevada corporation, having its principal place of
`
`business at 4640 SW Macadam Ave., Suite 80, Portland, Oregon 97239.
`
`-11-
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`

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`
`2.
`
`Upon information and belief, Altaire Pharmaceuticals, Inc. is a New York
`
`corporation, having its principal place of business at 311 West Lane, Aquebogue, New York
`
`11931.
`
`3.
`
`Upon information and belief, Sawaya Aquebogue, LLC is a limited liability
`
`company organized in New York.
`
`4.
`
`5.
`
`6.
`
`Upon information and belief, Altaire controls and/or dominates Sawaya Aque.
`
`Upon information and belief, Altaire is the alter ego of Sawaya Aque.
`
`JURISDICTION AND VENUE
`
`This Court has subject-matter jurisdiction over these claims pursuant to 28 U.S.C.
`
`§ 1332 because there is complete diversity of citizenship between the parties and the amount in
`
`controversy exceeds $75,000.
`
`7.
`
`This Court has personal jurisdiction over Altaire because (1) it is incorporated in
`
`New York, (2) has its principal place of business in New York, and (3) commenced and
`
`continues to maintain this action against Paragon in this judicial district. This Court has personal
`
`jurisdiction over Sawaya Aque because it is a limited liability company organized under the laws
`
`of New York.
`
`8.
`
`9.
`
`Venue is proper in this judicial district pursuant to 28 U.S.C. §§ 1391(b) and (c).
`
`STATEMENT OF FACTS
`
`On May 30, 2011, Paragon and Altaire entered into an agreement (the
`
`“Agreement”), in which Altaire agreed to provide the Chemistry, Manufacturing, and Control
`
`(“CMC”) sections for New Drug Application (“NDA”) filings made by Paragon on
`
`phenylephrine hydrochloride ophthalmic solution, 2.5% and 10% (“phenylephrine”), and on a
`
`second product referred herein as Product B (collectively, “products”). In consideration for
`
`-12-
`
`

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`
`providing the CMC sections, Paragon agreed to give Altaire exclusive manufacturing rights
`
`once Paragon obtained approval from the Food and Drug Administration (“FDA”) to market its
`
`products. Moreover, Paragon provided valuable assets to a company designated by Altaire —
`
`Sawaya Aque in exchange for Altaire’s contractual agreements— and Paragon agreed to pay
`
`Altaire a set price for each unit of product.
`
`10.
`
`The Agreement also specified several alternative products (“alternative
`
`products”) which could qualify as Product B.
`
`11.
`
`Paragon (either itself, or through its exclusive distributor Bausch & Lomb) has paid
`
`Altaire the set price for every unit of phenylephrine that Altaire has supplied to Paragon.
`
`ALTAIRE’S FAILURE TO PROVIDE CMC SECTIONS FOR PRODUCT B OR THE
`ALTERNATIVE PRODUCTS
`
`12.
`
`Altaire has failed to provide the CMC sections for Product B or any of the
`
`alternative products despite taking the benefit of that bargain when Paragon provided valuable
`
`assets to Sawaya Aque. Providing these CMC sections to Paragon was a fundamental obligation
`
`of Altaire under the Agreement.
`
`13.
`
`Altiare’s failure to perform this fundamental obligation is a material breach of the
`
`Agreement that has caused the commercial launch of Product B or the alternative products to be
`
`significantly delayed.
`
`PARAGON’S NDA FOR PHENYLEPHRINE
`
`14.
`
`Phenylephrine is a potent pupil-dilating agent that is commonly used by
`
`optometrists, ophthalmologists, and other physicians during ocular examinations. The FDA has
`
`categorized phenylephrine as a medically necessary drug.
`
`15.
`
`Before 2013, several companies, including Altaire, Akorn, Inc., Alcon, and
`
`Sandoz, manufactured and sold 2.5% and 10% phenylephrine formulations that had not been
`
`-13-
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`

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`Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 14 of 28 PageID #: 85
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`reviewed and approved by the FDA. These unapproved formulations of phenylephrine, including
`
`Altaire’s formulation, had failed to comply with current FDA regulatory standards.
`
`16.
`
`Around 2010, Paragon conceived of the idea, based in part on FDA guidance, to
`
`take certain drug products that lacked FDA approval, and subject them to the modern rigors of
`
`FDA safety and efficacy testing.
`
`17.
`
`Paragon developed a formulation of phenylephrine consistent with current FDA
`
`standards that would withstand the rigors of the FDA approval process.
`
`18.
`
`On October 19, 2011, Paragon filed NDA 203510 on phenylephrine
`
`hydrochloride ophthalmic solution, 2.5% and 10%.
`
`19.
`
`In support of Paragon’s NDA filing, Altaire provided Paragon with stability data.
`
`The stability data that Altaire provided, however, was based on Altaire’s marketed, unapproved
`
`formulation of phenylephrine.
`
`20.
`
`On December 16, 2011, Paragon received a Refuse To File Letter from the FDA.
`
`The FDA asserted that the stability data that was provided to Paragon from Altaire could not be
`
`relied upon to support Paragon’s NDA filing for phenylephrine, 2.5% and 10%.
`
`21.
`
`The FDA stipulated that Paragon needed to provide (1) nine months of stability
`
`data on one lot of its 2.5% and 10% formulation of phenylephrine, and (2) six months of stability
`
`data on two lots of its 2.5% and 10% formulation of phenylephrine. Paragon instructed Altaire
`
`to prepare the new formulation, and instructed Altaire to generate the required stability data for
`
`this new Paragon formulation.
`
`22.
`
`On September 21, 2012, Paragon refiled its NDA for Paragon’s new formulation
`
`of phenylephrine hydrochloride ophthalmic solution, 2.5% and 10%, including the new stability
`
`data.
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`

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`Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 15 of 28 PageID #: 86
`
`23.
`
`On March 21, 2013, Paragon obtained NDA approval for Paragon’s
`
`phenylephrine hydrochloride ophthalmic solution, 2.5% and 10%.
`
`24.
`
`Upon obtaining NDA approval, Paragon entered into an exclusive
`
`commercialization and distribution agreement with Bausch & Lomb.
`
`25.
`
`Paragon immediately informed Altaire, and Assad Sawaya, the President of
`
`Altaire, of its agreement with Bausch & Lomb.
`
`26.
`
`Bausch & Lomb is a leading global eye health company that markets one of the
`
`most comprehensive ophthalmic portfolios in the industry. By partnering with Bausch & Lomb,
`
`Paragon expected sales of its phenylephrine drug product to increase.
`
`27.
`
`Both Paragon and Altaire stood to benefit financially from Paragon’s
`
`commercialization and distribution agreement with Bausch & Lomb.
`
`PARAGON’S PATENT
`
`28.
`
`During the course of developing its formulation of phenylephrine, Paragon
`
`discovered that the S-enantiomer of phenylephrine had a negative effect on pupil dilation. Thus,
`
`Paragon sought to develop a phenylephrine formulation that, when stored over long periods of
`
`time, maintained high chiral optical purity of the R-enantiomer of phenylephrine, which did not
`
`have a negative effect on pupil dilation. The conception of this formulation was made by
`
`Paragon alone.
`
`29.
`
`On November 14, 2013, Paragon filed a patent with the United States Patent and
`
`Trademark Office (“USPTO”) claiming this formulation and various embodiments.
`
`30.
`
`On October 14, 2014, the USPTO duly and legally issued United States Patent
`
`No. 8,859,623 (the “’623 patent”), entitled, “Methods and Compositions of Stable Phenylephrine
`
`Formulations.” A true and correct copy of the ’623 patent is attached hereto as Exhibit 1.
`
`-15-
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`

`
`Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 16 of 28 PageID #: 87
`
`31.
`
`The data disclosed in the ’623 patent references various methods of analyzing
`
`chiral purity, including high-performance liquid chromatography analysis. This data is not
`
`Altaire’s confidential and proprietary information. Paragon contracted with and obtained this
`
`data from an independent third party that is not affiliated with Altaire.
`
`32.
`
`The specification of the ’623 patent, specifically within the examples section,
`
`discloses formulations of phenylephrine. These formulations, which contain commonly known
`
`buffers and excipients, were publicly disclosed before Paragon filed its patent application. These
`
`formulations are not Altaire’s confidential and proprietary information and are immaterial to the
`
`claims of the ’623 patent.
`
`33.
`
`Pursuant to 21 U.S.C. § 355(b)(1), and the relevant FDA regulations, the ’623
`
`patent was listed in connection with NDA 203510 in the FDA publication “Approved Drug
`
`Products with Therapeutic Equivalence Evaluations” (the “Orange Book”).
`
`34.
`
`Under FDA regulations, the presence of an Orange Book listed patent requires that
`
`any Abbreviated New Drug Application (“ANDA”) generic filer provide a patent certification
`
`upon filing its ANDA. If the ANDA holder certifies that the patent is invalid, unenforceable, or
`
`not infringed, then the NDA holder may initiate a lawsuit that would automatically prevent the
`
`ANDA applicant from marketing its proposed generic drug product for up to 30 months.
`
`35.
`
`As the supplier of Paragon’s phenylephrine drug product, Altaire only stands to
`
`benefit from the existence of the ’623 patent.
`
`36.
`
`On December 11, 2014, Patrick Witham, the Chief Executive Officer and President
`
`of Paragon received a letter from Altaire’s counsel alleging that Paragon disclosed confidential
`
`information belonging to Altaire in Paragon’s ’623 patent, in violation of the Confidentiality/Non-
`
`-16-
`
`

`
`Case 2:15-cv-02416-LDW-AYS Document 22 Filed 08/14/15 Page 17 of 28 PageID #: 88
`
`Disclosure section of the Agreement. The letter demanded that Paragon assign all rights and
`
`interest in the ’623 patent to Altaire.
`
`37.
`
`On January 9, 2015, Paragon’s counsel sent a letter to