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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`Case No. 2:15-cv-1455-WCB
` LEAD CASE
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`§§§§§§§§§§
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`ALLERGAN, INC.,
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`Plaintiff,
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`v.
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`TEVA PHARMACEUTICALS USA, INC.,
`et al.,
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`Defendants.
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`MEMORANDUM OPINION AND ORDER
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`Before the Court is Defendants’ Motion for Leave to Amend Invalidity Contentions
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`(“Motion to Amend”), Dkt. No. 303. The Motion to Amend is GRANTED, and the parties are
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`directed to meet and confer regarding appropriate fact discovery related to the subject matter of
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`the motion, as discussed below.
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`BACKGROUND
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`The defendant pharmaceutical companies are seeking approval by the Food and Drug
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`Administration to sell a generic version of Restasis, an ophthalmic product sold by plaintiff
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`Allergan, Inc. On August 24, 2015, Allergan filed a patent infringement action under the Hatch-
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`Waxman Act against defendants Teva Pharmaceuticals USA, Inc.; Akorn, Inc.; Mylan
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`Pharmaceuticals, Inc.; and Mylan, Inc., alleging infringement of several Allergan patents related
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`to Restasis. Allergan, Inc. v. Teva Pharmaceuticals USA, Inc., No. 2:15-cv-1455 (E.D. Tex.).
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`Allergan later filed related actions against defendants Innopharma, Inc., and Famy Care Limited.
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`Allergan, Inc. v. Innopharma, Inc., No. 2:15-cv-1504 (E.D. Tex., filed Sept. 8, 2015); Allergan,
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`Inc. v. Famy Care Ltd., No. 2:16-cv-401 (E.D. Tex., filed April 12, 2016). The latter two actions
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`were consolidated with case no. 2:15-cv-1455.
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 2 of 10 PageID #: 12008
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`The defendants asserted anticipation and obviousness defenses based on two patents
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`issued to Dr. Shulin Ding, who worked for Allergan as a formulator from 1987 to 1998. See
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`Dkt. No. 303-2, at 9. During the discovery period, Allergan turned over documents related to Dr.
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`Ding’s work on cyclosporin treatments. In March 2016, Allergan produced Dr. Ding’s 1997
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`Technical Report entitled “Technology Transfer Report for Phase III Manufacture of
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`Cyclosporine 0.1% and 0.05% Ophthalmic Emulsions,” as well as a draft technical report
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`entitled “Freeze to Thaw and Low to High Cycling Studies Report for Cyclosporine Ophthalmic
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`Emulsion Formulations 8735X and 9054X.” See Dkt. No. 315-1. In September 2016, Allergan
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`produced the laboratory notebook of Toan Ha, who worked under Dr. Ding. See Dkt. No. 315-2.
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`In January 2017, the defendants deposed several witnesses regarding Dr. Ding’s
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`involvement in Allergan’s development of Restasis. See, e.g., Dkt. No. 314-2, at 33, 51. On
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`January 16, 2017, the defendants noticed Dr. Ding’s deposition and served a subpoena for the
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`production of documents related to her work on the development of Restasis. See Dkt. No. 314,
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`at 4.
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`Fact discovery closed on February 10, 2017. See Dkt. No. 269, at 2. The defendants
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`deposed Dr. Ding on February 24, 2017, as she had not been available before then, see Dkt. No.
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`314, at 4. Additional materials were produced to the defendants the day before her deposition,
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`including a copy of the previously produced draft technical report, but with Dr. Ding’s
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`handwritten notes on it. Dkt. No. 303, at 6-7.
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`On March 20, 2017, the defendants notified Allergan that they intended to seek leave to
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`add a new invalidity theory of incorrect inventorship under 35 U.S.C. § 102(f). Allergan
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`opposed the amendment. See Dkt. No. 314, at 4.
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 3 of 10 PageID #: 12009
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`The deadline for the parties to amend their pleadings was June 9, 2016. Dkt. No. 137, at
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`3.1 The defendants filed their Motion to Amend on March 24, 2017.
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`DISCUSSION
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`Once a scheduling order has been entered in a case and a deadline has been set for filing
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`amended pleadings, the decision whether to permit a post-deadline amendment is governed by
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`Fed. R. Civ. P. 16(b). See Squyres v. Heico Companies, L.L.C., 782 F.3d 224, 237 (5th Cir.
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`2015); EEOC v. Serv. Temps Inc., 679 F.3d 323, 333-34 (5th Cir. 2012); L.G. Motorsports, Inc.
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`v. NGMCO, Inc., No. 4:11-cv-112, 2013 WL 2543398, at *6 (E.D. Tex. June 6, 2013). Under
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`Rule 16(b)(4), a motion to modify the scheduling order by permitting the filing of an amended
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`pleading after the deadline in the scheduling order may be granted “only for good cause and with
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`the judge’s consent.”
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`The party seeking to modify a scheduling order has the burden to show good cause.
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`Squyres, 782 F.3d at 237; Self v. Quinn’s Rental Servs. (USA), LLC, Civil Action No. H-15-
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`1569, 2016 WL 6835093, at *1 (S.D. Tex. Nov. 21, 2016). Moreover, the Fifth Circuit has held
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`that Rule 16 gives trial courts “broad discretion to preserve the integrity and purpose of the
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`pretrial order.” Geiserman v. MacDonald, 893 F.2d 787, 790 (5th Cir. 1990) (quoting Hodges v.
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`United States, 597 F.2d 1014, 1018 (5th Cir. 1979)). The Fifth Circuit has directed that in
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`deciding whether to permit amendments to the pleadings after the deadline for such amendments,
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`district courts should consider “(1) the explanation for the party’s failure to [timely move for
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`leave to amend]; (2) the importance of the [amendment]; (3) potential prejudice in allowing the
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`[amendment]; and (4) the availability of a continuance to cure such prejudice.” United States ex
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`rel. Bias v. Tangipahoa Parish Sch. Bd., 816 F.3d 315, 328 (5th Cir. 2016) (quoting S&W
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`1 For Famy Care Ltd., the deadline was August 31, 2016. See Dkt. No. 170, at 3.
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 4 of 10 PageID #: 12010
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`Enters., L.L.C. v. SouthTrust Bank of Ala., N.A., 315 F.3d 533, 536 (5th Cir. 2003) (alterations
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`in original)); Filgueira v. U.S. Bank Nat’l Ass’n, 734 F.3d 420, 422 (5th Cir. 2013); Ciena Corp.
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`v. Nortel Networks, Inc., 233 F.R.D. 493, 494 (E.D. Tex. 2006). The Court will consider each of
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`those factors in exercising its discretion whether to grant the Motion to Amend.
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`I. The Defendants’ Explanation for the Untimely Motion to Amend
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`The defendants contend that they did not have a sufficient basis to assert an invalidity
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`defense based on the nonjoinder of an inventor under 35 U.S.C. § 102(f) until they deposed Dr.
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`Ding. The defendants also point out that they noticed Dr. Ding’s deposition before the close of
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`fact discovery, but that the deposition was postponed to accommodate Dr. Ding’s retirement
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`schedule.
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`In response, Allergan argues that the defendants had all the necessary material to raise a
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`102(f) invalidity defense by at least September 2016, and that Dr. Ding’s testimony merely
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`“confirmed” what was apparent from that material. Allergan also notes that after Dr. Ding’s
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`deposition, the defendants waited a month before filing the Motion to Amend and that they offer
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`no explanation for that period of delay.
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`The Court finds that the defendants are not at fault for the delay between the time of
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`Allergan’s early production of materials regarding Dr. Ding’s work and the time of Dr. Ding’s
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`deposition. The materials produced earlier show that (1) Toan Ha set forth the Restasis
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`formulation and that formulation was in fact manufactured for further study with Dr. Ding’s
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`approval, Dkt. No. 303-7; (2) Dr. Ding authored the 1997 Technical Report which stated that a
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`cyclosporin product was selected for Phase III studies, Dkt. No. 303-8; and (3) studies conducted
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`on 0.1% and 0.05% cyclosporin emulsions showed that the two emulsions performed similarly,
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`see Dkt. No. 303-9, at 4.
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 5 of 10 PageID #: 12011
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` Those earlier materials suggest that Dr. Ding played a role in the development of
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`cyclosporin treatments generally.2 Her deposition testimony, however, went farther, showing
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`that she may have played a significant role in the development of the specific formulation for
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`Restasis.
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`During her deposition, Dr. Ding testified that in 1993 or 1994 she began working on the
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`development of Restasis and that she continued working on that project until she left Allergan in
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`1998. See Dkt. No. 303-2, at 11, 14, 16. She stated that she conducted experiments with the
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`specific formulation for Restasis. Id. at 99, 101. When shown the laboratory notebook of Toan
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`Ha, which discloses that formulation, Dr. Ding testified that Toan Ha was a staff member
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`working under her guidance. Id. at 93-94.
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` Also at her deposition, Dr. Ding confirmed that she was the author of the 1997 Technical
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`Report. Dkt. No. 303-2, at 143-44. More importantly, she explained that the product moving
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`into Phase III study, identified in the Technical Report as “9054X,” is the same as the Restasis
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`formulation disclosed in Toan Ha’s laboratory notebook, where the formulation is identified as
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`“9054.”
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`Finally, Dr. Ding testified regarding the recently produced handwritten notes on the draft
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`technical report. Dkt. No. 303-2, at 172. She stated that she had written the handwritten note
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`that read: “The two formulations [0.1% and 0.05%] are similar in every regard with the
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`exception of cyclosporine concentration.” She then explained that the note refers to the
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`2 The Court does not include deposition testimony from other witnesses regarding Dr.
`Ding’s role as “earlier material” that may have prompted the defendants to seek to amend their
`invalidity contentions at an earlier time. Allergan points to relevant deposition testimony from
`Dr. Brenda Reis on January 13, 2017, see Dkt. No. 314, at 3-4, but the defendants promptly
`noticed Dr. Ding’s deposition three days later on January 16, 2017.
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 6 of 10 PageID #: 12012
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`formulations in Toan Ha’s laboratory notebook, including the 0.05% Restasis formulation,
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`9054.3
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`In sum, the early production may have prompted the defendants to question Dr. Ding’s
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`role regarding the invention, but it was Dr. Ding’s later deposition testimony that enabled the
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`defendants to conclude that Dr. Ding in fact conducted studies on the Restasis formulation and
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`that she “came up with the formulations for Phase [III]” testing. Dkt. No. 303-2, at 93-94. The
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`defendants could reasonably have believed that the additional evidence of Dr. Ding’s testimony
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`provided a good faith basis to assert a defense that requires “clear and convincing, corroborated
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`evidence.” Winbond Elecs. Corp. v. Int’l Trade Comm’n, 262 F.3d 1363, 1371 (Fed. Cir. 2001).
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`While the Court finds that the defendants were not at fault for failing to seek leave to
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`amend their invalidity contentions prior to Dr. Ding’s deposition, the Court finds that the
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`defendants were not diligent in filing the Motion to Amend after deposing Dr. Ding. The
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`defendants are therefore at fault for the one-month period of delay between Dr. Ding’s
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`deposition and the defendants’ filing of the Motion to Amend.
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`In general, this factor cuts in favor of allowing the amendment, but the defendants are
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`somewhat at fault for not filing the Motion to Amend more promptly after the deposition of Dr.
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`Ding.
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`II. The Importance of the Amendment
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`The defendants argue that the proposed amendment is important because, “if successful,
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`the defense would dispose of all of Allergan’s claims.” Dkt. No. 303, at 10. What the
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`defendants fail to acknowledge, however, is that the defense, if successful, would temporarily
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`3 Allergan states that this handwritten note was incorporated in the version produced to
`the defendants in September 2016. Dkt. No. 314, at 7 & n.3. In that earlier produced version,
`however, it was not apparent that the note was a proposed edit attributable to a particular
`individual.
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 7 of 10 PageID #: 12013
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`dispose of all of Allergan’s claims, but would not necessarily dispose of those claims
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`permanently. As explained in detail in Cassidian Communications, Inc. v. Microdata, GIS, Inc.,
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`No. 2:12-CV-162, 2015 WL 1848533 (E.D. Tex. Apr. 20, 2015), a successful defense based on a
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`finding of incorrect inventorship is not necessarily a win for the defendants. Allergan may
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`invoke (and has, in the alternative, already invoked, see Dkt. No. 319, at 4-5) the correction of
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`inventorship statute, 35 U.S.C. § 256, “to save the patent from invalidity” in the event the
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`defendants succeed in their section 102(f) defense. Pannu v. Iolab Corp., 155 F.3d 1344, 1350
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`(Fed. Cir. 1998); see also Winbond Elecs. Corp. v. Int’l Trade Comm’n, 262 F.3d 1363, 1371
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`(Fed. Cir. 2001) (“Incorrect inventorship is a technical defect in a patent that may be easily
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`curable.”). As occurred in the Cassidian Communications case, the defendants could win on
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`their inventorship defense, but Allergan could move to correct inventorship under section 256
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`and, if prevailing on that motion, move to vacate the judgment of invalidity. No. 2:12-CV-162,
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`2015 WL 1848533, at *4. Significantly, “the correction of inventorship does not affect the
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`validity or enforceability of the patent for the period before the correction.” Viskase Corp. v.
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`Am. Nat’l Can Co., 261 F.3d 1316, 1329 (Fed. Cir. 2001). So, the defendants could prove
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`incorrect inventorship but still be liable for infringement following an order correcting the error
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`in the naming of inventors.
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`That is not to say that an amendment raising such a defense is invariably futile and
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`therefore must be regarded as unimportant. For example, the defendants’ success would not be
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`futile in the event Allergan failed to seek, or obtain, correction of inventorship. See Stark v.
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`Advanced Magnetics, Inc., 119 F.3d 1551, 1554-55 (Fed. Cir. 1997). In addition, to allow
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`potential futility in this context to preemptively defeat any incorrect inventorship defense would
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 8 of 10 PageID #: 12014
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`not only deprive any defendant entirely of that defense, but it also would deprive the public of
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`the significant benefit of correcting the inventorship on an issued patent.
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`The law provides different incentives to name the correct inventors, whether by imposing
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`a duty to disclose such information on those individuals associated with the filing and
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`prosecution of patent, see 37 C.F.R. § 1.56; allowing for the correction of inventorship during the
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`application process, 35 U.S.C. § 116; allowing for the correction of inventorship on an issued
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`patent, 35 U.S.C. § 256; or allowing a defendant to assert an invalidity defense on that basis
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`during litigation, see 35 U.S.C. § 102(f). The Court will not bar the defendants from asserting
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`their rights under section 102(f) simply because Allergan has the potential for correcting
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`inventorship under section 256 and thereby avoiding invalidation of its asserted patents.
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`In determining the importance of the amendment, the Court must make a pragmatic
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`judgment as to the likelihood that the newly asserted defense will succeed. See Filgueira, 734
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`F.3d at 423 (“Filgueira fails to show the importance of his amendment” because “it would not
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`have changed the outcome of the court’s ruling” on the motion to dismiss.); Sw. Bell Tel. Co. v.
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`City of El Paso, 346 F.3d 541, 547 (5th Cir. 2003) (treating “likely failure of the proposed
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`counterclaims on the merits” as a factor weighing against allowing untimely amendment); see
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`also Bombardier Aerospace Corp. v. United States, 831 F.3d 268, 284 (5th Cir. 2016) (futility of
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`amendment supports decision to deny motion to amend); Tangipahoa Parish Sch. Bd., 816 F.3d
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`at 328 (same); Nourison Rug Corp. v. Parvisian, 535 F.3d 295, 299 (4th Cir. 2008) (same).
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`Based on Dr. Ding’s deposition testimony and the supporting materials, it appears that the
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`defendants have some likelihood of success in showing that Dr. Ding was a co-inventor.
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`Because the defendants’ effort to invalidate the patent on those grounds is not necessarily futile,
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 9 of 10 PageID #: 12015
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`the Court regards the amendment as being of sufficient importance to justify overlooking the
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`defendants’ failure to meet the deadline for amending their invalidity contentions.
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`III. Prejudice to Allergan
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`The defendants claim the amendment to the invalidity contentions would not prejudice
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`Allergan because Allergan “has the relevant documents” to respond to the defense and “still
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`employs or otherwise controls ten ‘Allergan witnesses [] all of whom had knowledge of the
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`Restasis development.’” Dkt. No. 317, at 4 (quoting Dkt. No. 314, at 7). Allergan, however,
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`responds that several key witnesses are not employed by Allergan, and that Allergan would need
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`further fact discovery in an already compressed schedule in order to diligently respond to the
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`proposed amendment. See Dkt. No. 319, at 4.
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`Although most of the relevant information is likely in Allergan’s possession, the Court
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`agrees that an amendment would burden Allergan to the extent that Allergan would need to
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`conduct further fact discovery from third-party witnesses. However, any potential prejudice
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`resulting from the need to conduct limited additional discovery can be cured by reopening fact
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`discovery for the limited purpose of allowing Allergan to investigate the inventorship issue, and
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`by allowing Allergan to assert a conditional claim for correction of inventorship under 35 U.S.C.
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`§ 256. The prejudice factor therefore cuts in favor of the defendants.
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`IV. The Availability of a Continuance
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`The Court agrees with Allergan that a continuance may “erode Allergan’s 30-month
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`stay,” Dkt. No. 314, at 9, but the Court also agrees with the defendants that no continuance is
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`warranted. Most of the relevant information pertaining to the inventorship issue is already in
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`Allergan’s possession, and there is sufficient time for Allergan to conduct the limited fact
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`discovery before the filing of dispositive and Daubert motions, and certainly before trial. The
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`Case 2:15-cv-01455-WCB Document 323 Filed 04/27/17 Page 10 of 10 PageID #: 12016
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`“availability of a continuance” factor is therefore not relevant to the Court’s decision on the
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`defendants’ motion.
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`Upon weighing the factors that bear on whether to grant the Motion to Amend, the Court
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`concludes that none of those factors favors Allergan and that the interest of justice favors
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`allowing the defendants to amend their invalidity contentions. Accordingly, the Motion to
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`Amend is GRANTED.
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`The parties are directed to promptly meet and confer regarding the discovery needed by
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`Allergan to oppose the inventorship defense. The Court expects that the parties will be able to
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`reach agreement on that issue. However, in the event of a dispute, the Court orders that the
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`parties present the dispute to the Court no later than May 5, 2017.
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`IT IS SO ORDERED.
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`SIGNED this 27th day of April, 2017.
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`_____________________________
`WILLIAM C. BRYSON
`UNITED STATES CIRCUIT JUDGE
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