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Amphastar pharmaceuticals Inc. v. Aventis Pharma SA

United States Court of Appeals, Ninth Circuit

May 11, 2017

Amphastar Pharmaceuticals Inc., Relator, Plaintiff-Appellee,
Aventis Pharma SA; Aventis Pharmaceuticals Inc.; Sanofi-Aventis SA, Defendants-Appellants. Amphastar Pharmaceuticals Inc., Relator, Plaintiff-Appellant,
Aventis Pharma SA; Aventis Pharmaceuticals Inc.; Sanofi-Aventis SA, Defendants-Appellees.

          Argued and Submitted November 10, 2016 Pasadena, California

         Appeal from the United States District Court for the Central District of California Marvin J. Garbis, District Judge, Presiding by Designation D.C. No. 5:09-cv-00023-MJG-OP

          Wayne R. Gross (argued), Evan C. Borges, Michael E. Lopez, and Bret D. Hembd, Greenberg Gross LLP, Costa Mesa, California, for Relator-Appellant/Appellee.

          Mark A. Perry (argued) and Stephen C. Payne, Gibson Dunn & Crutcher LLP, Washington, D.C.; M. Sean Royall, Tracey B. Davies, and Olivia A. Adendoroff, Gibson Dunn & Crutcher LLP, Dallas, Texas; for Defendants-Appellants/Appellees.

          Before: Diarmuid F. O'Scannlain and Johnnie B. Rawlinson, Circuit Judges, and Rosemary Marquez, [*] District Judge.


         False Claims Act

         In a qui tam suit under the False Claims Act, the panel affirmed the district court's dismissal of the action for lack of subject matter jurisdiction; dismissed as moot the defendant's appeal from the district court's denial of its motion for summary judgment; reversed the district court's denial of the defendant's motion for attorneys' fees; and remanded the case to the district court.

         The plaintiff alleged that by committing fraud against the United States Patent and Trademark Office in a patent application, the defendant obtained an illegal monopoly over a drug and then knowingly overcharged the United States. The panel held that the district court lacked subject matter jurisdiction because the complaint was based on public disclosures in the form of allegations of fraud, as well as allegations of the underlying facts, in a prior patent infringement suit. In addition, the plaintiff did not show that it was the original source of the information on which its allegations were based. The panel held that the plaintiff did not show both that it had direct, firsthand knowledge of the alleged fraud and that it obtained this knowledge independently.

         Reversing the denial of attorneys' fees under the fee-shifting provision of the False Claims Act, the panel held that the district court had authority to award attorneys' fees after the dismissal of the action for lack of subject matter jurisdiction. Agreeing with the Tenth Circuit, the panel held that the fee-shifting provision provides an independent grant of jurisdiction. In addition, the defendant was a prevailing party. The panel concluded that the Supreme Court's opinion in CRST Van Expedited, Inc. v. E.E.O.C., 136 S.Ct. 1642 (2016), effectively overruled the holding of Branson v. Nott, 62 F.3d 287 (9th Cir. 1995), that a defendant that wins because the action is dismissed for lack of subject matter jurisdiction is never a prevailing party. The panel remanded for resolution of the attorneys' fees issue.


          SCANNLAIN, Circuit Judge.

         We must decide whether we have subject matter jurisdiction over a corporate qui tam action[1] under the False Claims Act that accuses a competing company of committing fraud against the United States.


         This saga began in the early 1990s, when Aventis Pharma S.A., ("Aventis") a French pharmaceutical enterprise, [2] developed a plan to sell the drug enoxaparin in the United States under the brand name Lovenox. Enoxaparin is a heparin-based blood thinner that was patented in Europe in the 1980s as European Patent 40, 144 ("EP144"). Eventually, European authorities invalidated EP144 as lacking novelty.


         In June 1991, Aventis applied to the U.S. Patent and Trademark Office ("USPTO") for a patent to cover a supposedly new version of enoxaparin ("618 Product").[3]Aventis filed a New Drug Application ("NDA") with the Food and Drug Administration ("FDA") a month later.

         The initial versions of the NDA were rejected in part as being "obvious in view of the prior art, " including EP144. Aventis acknowledged that EP144 was prior art, but claimed that the 618 Product was a different drug from the drug produced by following EP144 ("EP144 Product"). After several subsequent rejections, Aventis submitted a revised NDA in 1993 supported by the expert declaration of Dr. Andre Uzan, a French scientist. Dr. Uzan claimed that data in Example 6[4] of the patent application, included in the revised NDA, "clearly demonstrate[d]" that the 618 Product has a longer half-life relative to the EP144 Product, and thus was novel.

         The USPTO then approved the revised application and issued Patent Number 5, 389, 618 ("618 Patent")[5] for the 618 Product in 1995, in large part because of Dr. Uzan's statements regarding Example 6. However, it turned out that Dr. Uzan's sworn declarations were incorrect. Dr. Uzan had based his claim of a difference by comparing a 40mg dose of the 618 Product with a 60mg dose of the EP144 Product, but had not disclosed that different dosages were used in the USPTO submissions. A dose-for-dose comparison would have shown that the difference between the products was "not statistically significant." This error went undetected for years. Meanwhile, after the 618 Patent was issued, Aventis listed it in the FDA's Orange Book, which invokes the protections of the Hatch-Waxman Act. 21 U.S.C. § 355(j)(5)(B)(iii) (requiring a generic drug competitor to certify that the patent is either not infringed or invalid).


         Amphastar Pharmaceuticals, Inc., ("Amphastar") a U.S.-based generic pharmaceutical firm founded in 1999 by Yong Feng Zhang, decided that enoxaparin would be a good prospect for a generic product, believing it might be possible to develop a generic version by utilizing information from EP144. Development work began in 2000 and included experiments performed from 2000 to 2003 ("Pre-Litigation Experiments"). The exact nature of the Pre-Litigation Experiments is disputed, but they led to Amphastar's being able to manufacture a generic enoxaparin. Amphastar then submitted an Abbreviated New Drug Application ("ANDA") to the FDA on March 4, 2003.

         Aventis responded to Amphastar's ANDA by bringing suit five months later, alleging that Amphastar and Teva Pharmaceuticals were infringing on the 618 Patent. Amphastar filed its Amended Answer and Counterclaim and made no mention of the Example 6 error or the Pre-Litigation Experiments.

         After discovery was underway, Amphastar filed a motion to amend its Answer and Counterclaim, stating, "based on facts recently developed in this litigation, Amphastar has added new affirmative defenses and several antitrust claims to its answer and counterclaims." Amphastar's additions included an affirmative defense alleging inequitable conduct by Aventis in obtaining the 618 Patent. After Aventis filed a motion to strike the amendments, Amphastar responded by asserting: "As to the unenforceability of the '618 patent based on inequitable conduct, all of the facts and evidence upon which this affirmative defense is based are in the possession and control of Aventis." Amphastar did not mention the Pre-Litigation Experiments when it listed the evidence on which it based its inequitable conduct defense. Amphastar also alleged antitrust violations.


         Amphastar eventually prevailed in its patent infringement litigation battle with Aventis.[6] By the end of the litigation the Federal Circuit had affirmed the district court's conclusions that: (1) Aventis made material nondisclosures and false representations to the USPTO regarding the 618 Patent application and (2) Aventis intended to deceive the USPTO. Amphastar was thus able to produce generic enoxaparin without fear of infringement-the 618 Patent was "found to be unenforceable on the ground of inequitable conduct." However, Amphastar's antitrust counterclaim was dismissed.


         Amphastar then brought this qui tam action against Aventis.[7] Amphastar duly sent the statutorily required letter to the United States Department of Justice, notifying it of its intent to bring this action. Amphastar then filed its sealed complaint on January 7, 2009, alleging that by committing fraud against the USPTO, Aventis obtained an illegal monopoly over enoxaparin and then knowingly overcharged the United States. By committing such fraud, Amphastar further alleged, Aventis knew the patent was invalid and thus knowingly defrauded the United States. The complaint was unsealed and the case proceeded in October 2011, after the government declined to join the litigation.


         On November 14, 2012, the district court ruled that Amphastar's complaint was based on public disclosures, and therefore Amphastar had to show it was the "original source . . . of the information on which the allegations are based." § 3730(e)(4). Thereafter, Aventis filed a motion for summary judgment contending Amphastar had failed to meet the original source exception to the jurisdictional bar. To be an original source of information underlying the complaint, Amphastar needed to meet the pre-suit disclosure and "direct and independent knowledge" requirements.

         Aventis first argued that Amphastar had failed to disclose enough information in its pre-suit disclosure letter. The district court denied Aventis's summary judgment motion on this issue in a May 2014 ruling, but certified its ruling for interlocutory appeal, which Aventis brought in No. 14-56382.


         The district court then proceeded to the "direct and independent knowledge" issue.[8] It held a four-day evidentiary hearing to determine if Amphastar had direct and independent knowledge of any of the information underlying its allegations. The district court made various factual findings: Amphastar had no knowledge of Example 6 being false before the Aventis I litigation began; Zhang (Amphastar's CEO) was not a credible witness; Amphastar had engaged in inconsistent actions regarding whether it had known of the Example 6 error before the Aventis I litigation, and such inconsistent actions undermined its argument. The district court also concluded that Amphastar did not produce enoxaparin by following EP144 in its Pre-Litigation Experiments, but copied key information from Patent 618. For all these reasons the district court held that Amphastar had neither direct nor independent knowledge of any of the elements of fraud supposedly committed by Aventis. The district court then dismissed the case for lack of jurisdiction. Aventis moved for attorneys' fees, which motion was denied.

         Amphastar timely appealed the dismissal of its qui tam suit. Aventis timely cross-appealed the ...

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