Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 1 of 9 PageID #: 21330
`
`IN THE UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
`
`
`
`
`
`
`
`
`
`
`CASE NO. 2:20-cv-00337-JRG
`
`
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`
`
`
`SEAGEN INC.,
`
`
`
`
`v.
`
`Plaintiff,
`
`
`DAIICHI SANKYO CO., LTD.,
`
`
`Defendant, and
`
`
`ASTRAZENECA
`PHARMACEUTICALS LP and
`ASTRAZENECA UK LTD.,
`
`
`
`
`
`
` Intervenor-Defendants.
`
`
`
`DEFENDANTS’ SUR-REPLY TO SEAGEN’S MOTION FOR
`JUDGMENT FOR SUPPLEMENTAL DAMAGES AND ONGOING ROYALTIES
`
`
`
`
`
`
`
`
`

`

`
`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 2 of 9 PageID #: 21331
`
`
`
`
`
`Seagen’s Reply confirms that Seagen’s request for an ongoing royalty of 10%-12% is
`
`unsupported, inappropriate, and should be denied. Contrary to Seagen’s assertion, Defendants
`
`have argued—and continue to maintain—that Seagen should not be awarded any ongoing royalty.
`
`(See Dkt. 469 at 3, 13.) Awarding an ongoing royalty here would be particularly inequitable
`
`because Seagen disclaimed the subject matter that constituted the infringement case it presented
`
`to the jury.1 See Cioffi v. Google, Inc., No. 2:13-cv-103, 2017 WL 4011143, at *2 (E.D. Tex. Sept.
`
`12, 2017) (“[O]ngoing royalties are a form of equitable relief, and the court may exercise its
`
`discretion to conclude that no forward looking relief is appropriate in the circumstances.”). If this
`
`Court finds an ongoing royalty is appropriate, however, it should be appreciably lower than 8%.
`
`Seagen incongruously frames its requested 10%-12% ongoing royalty as a “modest
`
`increase in the royalty from the jury’s implied rate of 8%,” yet also admits its proposed ongoing
`
`royalty would result in up to a 50% increase of the jury’s award. (Dkt. 471 at 1; Dkt. 443 at 4.)
`
`But Seagen fails to show why an increased ongoing royalty is warranted here. When the Court
`
`properly considers developments between the hypothetical negotiation presented at trial and the
`
`April 8, 2022 post-verdict hypothetical negotiation date, Seagen’s bargaining power actually
`
`decreased, supporting a lower royalty than the 5%-8% advocated by Seagen at trial.
`
`A.
`
`Seagen’s Failure to Seek an Injunction Impacts the Hypothetical Negotiation
`
`As explained in Defendants’ Opposition, Seagen’s decision not to seek an injunction
`
`supports a neutral or decreased ongoing royalty. (Dkt. 469 at 4-5.) Seagen argues that Defendants’
`
`
`1 Seagen argued that ENHERTU® infringes because it allegedly undergoes intracellular cleavage
`to release the drug, but never disputed that a metabolite was formed during this process. (See Dkt.
`442 (Lambert Decl.) ¶ 40.) And it is undisputed that ENHERTU®’s drug moiety is never
`intracellularly cleaved “from the antibody of the antibody-drug conjugate.” (See, e.g., id. ¶¶ 39-
`41; DX-0064 at 8.) Seagen’s arguments and evidence therefore were applicable only to the
`“intracellular metabolite” portion of the intracellular cleavage limitation, which is precisely what
`Seagen disclaimed.
`
`
`
`- 1 -
`
`

`

`
`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 3 of 9 PageID #: 21332
`
`
`
`
`
`position “ignores decisions to the contrary.” (Dkt. 471 at 1.) But Seagen’s interpretation of these
`
`cases is misguided. Seagen contends that Paice LLC v. Toyota Motor Corp., 609 F. Supp. 2d 620
`
`(E.D. Tex. 2009) stands for the broad proposition that the absence of an injunction is not a factor
`
`in the hypothetical negotiation and that “[t]he framework for an ongoing royalty rate presumes that
`
`there is no injunction.” (Dkt. 471 at 2.) This is incorrect. The Court in Paice narrowly found that
`
`an ongoing royalty may still be awarded “when injunctive relief is not appropriate under the eBay
`
`four-factor framework.” 609 F. Supp. 2d at 623-24. The Court in Paice did not find that the threat
`
`of an injunction—or lack thereof—has no impact on the bargaining power of the parties or the
`
`actual ongoing royalty rate. Rather, the Court stated that “[i]n many ongoing royalty negotiations,
`
`the threat of a permanent injunction serves as a big stick, essentially framing negotiation in terms
`
`of how much an adjudged infringer would pay for a license to continue its infringing conduct.”
`
`Id. at 624. In fact, the plaintiff in Paice did seek an injunction, but the injunction was denied. Id.
`
`at 622. Seagen does not contest that here, Seagen did not—and does not intend to—seek an
`
`injunction at all. Accordingly, the Paice decision is not instructive as to how Seagen’s decision
`
`not to seek an injunction impacts any ongoing royalty rate that may be awarded.
`
`The out-of-district opinion in Arctic Cat Inc. v. Bombardier Rec. Prods., Inc., No. 14-cv-
`
`62369, 2017 WL 7732873 (S.D. Fla. Jan. 3, 2017) similarly is not instructive here. Although the
`
`court in Arctic Cat awarded an increased ongoing royalty, the opinion does not discuss the impact
`
`a lack of injunction may have on an ongoing royalty rate. Instead, the court makes one reference
`
`to an “injunction” in a footnote where it notes that the Paice court rejected the argument that an
`
`ongoing royalty may not be awarded where an injunction is not warranted. Id. at *3 n.3.
`
`Seagen also disregards the court’s decision in EMC Corp. v. Zerto, Inc., No. 12-cv-956,
`
`2017 WL 3434212 (D. Del. Aug. 10, 2017), which completely undermines Seagen’s argument.
`
`
`
`- 2 -
`
`

`

`
`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 4 of 9 PageID #: 21333
`
`
`
`
`
`The court in EMC Corp. squarely addressed whether the lack of an injunction may impact an
`
`ongoing royalty rate. Relying on this Court’s decision in Paice, the court found that while an
`
`ongoing royalty should still be awarded despite rejecting plaintiff’s request for a permanent
`
`injunction, the lack of injunction “weigh[ed] against granting [plaintiff] a higher ongoing royalty
`
`rate.” Id. at *3. Thus, contrary to Seagen’s assertion, the case law holds that while the lack of an
`
`injunction does not prevent a court from awarding an ongoing royalty, the absence of the threat of
`
`an injunction—the “big stick”—militates against increasing the royalty rate and instead supports
`
`a lower (or at least neutral) rate. (See Dkt. 469 at 3-5.)
`
`
`
`Seagen also cites to a case involving DSC’s subsidiary, Plexxikon, to argue that DSC has
`
`acknowledged that the absence of an injunction is not a factor in the hypothetical negotiation. (See
`
`Dkt. 471 at 2; Chivvis Decl., Ex. B.) Nowhere in Plexxikon’s motion for ongoing royalties nor in
`
`the district court’s subsequent order was there any discussion on the impact of Plexxikon seeking
`
`or not seeking an injunction upon the ongoing royalty rate at issue. (See Chivvis Decl., Ex. B; see
`
`also Plexxikon Inc. v. Novartis Pharms. Corp., No. 4:17-cv-4405, 2022 WL 4591792 (N.D. Cal.
`
`Sept. 29, 2022).) Plexxikon’s motion also notes that, far from an increased ongoing royalty,
`
`Plexxikon sought “an ongoing royalty . . . less than half the rate awarded by the jury,” which
`
`clearly distinguishes the position advanced by Plexxikon from Seagen’s present motion for an
`
`increased ongoing royalty. (See Chivvis Decl., Ex. B, at 15 (emphasis added).)
`
`B.
`
`Seagen Continues to Assume Improper Inferences from the Jury’s Verdict
`
`Seagen again claims that the jury’s award of $41.82 million necessarily implies that the
`
`jury awarded an 8% royalty rate. (Dkt. 471 at 4.) The jury did not, however, award a particular
`
`royalty rate, a fact that Ms. Distler conceded. (Distler Dep. (Sep. 15, 2022) Tr. at 78:13-79:19;
`
`see also Dkt. 469 (Decl.) ¶ 10.) Seagen also makes the unsupported assertion that the jury’s award
`
`somehow indicates that the
`
`, is the
`
`
`
`- 3 -
`
`

`

`
`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 5 of 9 PageID #: 21334
`
`
`
`
`
`most comparable. (Dkt. 471 at 4.) While the
`
`
`
` at trial is the highest of several royalty rates she presented, nothing
`
`in the jury’s verdict supports Seagen’s contention that the jury found the
`
` the
`
`most comparable. (Dkt. 469 (Decl.) ¶ 12.)
`
`As Defendants explained in their Opposition, Ms. Distler and Dr. Meyer discussed
`
`numerous agreements at trial on which the jury may have relied when determining damages. (Dkt.
`
`469 at 6.) Most notably, the jury was presented with the
`
` which actually
`
`
`
`. (Id.) Seagen
`
`never addresses the
`
` in either of its briefs, nor does Ms. Distler discuss it in her
`
`declaration. (Dkt. 471 at 4.) This Court should reject Seagen’s attempt to support a 10%-12%
`
`ongoing royalty based on the false premise that the jury somehow endorsed the
`
`
`
` in rendering its verdict. See VLSI Tech. LLC v. Intel Corp., No. 6:21-CV-057-ADA,
`
`2022 WL 1477725, at *11 (W.D. Tex. Mar. 18, 2022) (“Any argument that the verdict was based
`
`on a [specific] agreement is entirely speculative.”).
`
`C.
`
`
`
`No Changed Circumstances Support an Increased Ongoing Royalty
`
`Seagen argues that the post-verdict hypothetical negotiation should take place after the date
`
`of final judgment (Dkt. 471 at 3 n.1) but the law is plain that the date of the “new hypothetical
`
`negotiation occurs on the date of the jury verdict.” Cioffi, 2017 WL 4011143, at *4. The Court
`
`should therefore limit its consideration of events from the related PTAB proceedings to the
`
`PTAB’s institution of post-grant review on April 7, 2022 (one day before the jury’s verdict), which
`
`presented a significant likelihood that the PTAB would invalidate all asserted claims. And even
`
`if the PTAB’s post-verdict de-institution decision on July 15, 2022 was legally relevant, it too casts
`
`significant doubt on the strength of the ’039 patent. Seagen expressly disclaimed Claims 6-8 of
`
`the ’039 patent and the PTAB subsequently entered an adverse judgment as to those claims, which
`
`
`
`- 4 -
`
`

`

`
`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 6 of 9 PageID #: 21335
`
`
`
`
`
`by definition narrows the scope of the patent.2 Seagen has no credible rebuttal to the fact that this
`
`disclaimer by Seagen and adverse judgment dedicates an aspect of the alleged claimed subject
`
`matter to the public and creates a substantial risk that all claims of the ’039 patent may be found
`
`invalid (see Dkt. 442), both of which decrease the value of the ’039 patent in a post-verdict
`
`negotiation and counter against awarding any increased ongoing royalty rate.
`
`
`
`Seagen also reiterates that additional FDA approvals for ENHERTU® since the pre-verdict
`
`hypothetical negotiation “mean that Enhertu is more valuable to DSC than in the original
`
`hypothetical negotiation, giving Seagen greater bargaining leverage.” (Dkt. 471 at 5.) Yet Ms.
`
`Distler’s original expert report discussed the high probability of success for ENHERTU®’s clinical
`
`trials, including comparing its efficacy to Tukysa, as a factor supporting her 5%-8% pre-verdict
`
`royalty rate. (See Dkt. 469 at 13; Dkt. 469 (Decl.) ¶ 25-26.) Seagen cannot double count
`
`ENHERTU®’s clinical successes in its grab for an unwarranted increased ongoing royalty. Indeed,
`
`in her original expert report, Ms. Distler relied on 2030 projections for ENHERTU® that were even
`
`higher than current 2030 projections. (See Dkt. 469 at 10-11.) And Seagen has no answer to the
`
`fact that the undisputed testimony from the only clinician to testify in the case, Dr. Ko, is that
`
`Tukysa and ENHERTU® do not actually compete but are instead “allies.” (Id. at 13.)
`
`CONCLUSION
`
`For the reasons explained above, Seagen’s Motion should be denied. In the alternative, if
`
`the Court disagrees, Defendants respectfully reiterate their request that Seagen’s proposed ongoing
`
`royalty rate of 10%-12% be rejected, and that any supplemental damages or ongoing royalty
`
`awarded be appreciably lower than 8%.
`
`
`
`
`2 See Dkt. 469 at 7. Dr. Meyer’s alleged lack of understanding of the legal import of Seagen’s
`disclaimer does not help Seagen’s position, as Dr. Meyer is not a legal expert. (Dkt. 471 at 4.)
`
`
`
`- 5 -
`
`

`

`
`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 7 of 9 PageID #: 21336
`
`
`
`
`
`Dated: October 21, 2022
`
`
`
`
`
`
`
`
`
`
`
`
`
`By: /s/ Preston K. Ratliff II
`
`
`
`Deron R. Dacus
`State Bar No. 00790553
`ddacus@dacusfirm.com
`THE DACUS FIRM, P.C.
`821 ESE Loop 323, Suite 430
`Tyler, Texas 75701
`Telephone: 903.705.1117
`Facsimile: 903.581.2543
`
`J. Mark Mann
`State Bar No. 12926150
`mark@themannfirm.com
`G. Blake Thompson
`State Bar No. 24042033
`Blake@themannfirm.com
`MANN | TINDEL | THOMPSON
`300 West Main Street
`Henderson, Texas 75652
`Telephone: 903.657.8540
`Facsimile: 903.657.6003
`
`Of Counsel:
`
`Preston K. Ratliff II
`prestonratliff@paulhastings.com
`Ashley N. Mays-Williams
`ashleymayswilliams@paulhastings.com
`PAUL HASTINGS LLP
`200 Park Avenue
`New York, New York 10166
`Telephone: 212.318.6000
`
`Jeffrey A. Pade
`jeffpade@paulhastings.com
`PAUL HASTINGS LLP
`2050 M Street NW
`Washington, DC 20036
`Telephone: 202.551.1700
`
`Attorneys for Defendant Daiichi Sankyo
`Company, Limited
`
`
`
`- 6 -
`
`

`

`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 8 of 9 PageID #: 21337
`
`Dated: October 21, 2022
`
`
`
`
`
`
`
`By: /s/ David I. Berl
`
`
`
`David I. Berl
`dberl@wc.com
`Jessamyn S. Berniker
`jberniker@wc.com
`Thomas S. Fletcher
`tfletcher@wc.com
`Jessica L. Pahl
`jpahl@wc.com
`Kathryn S. Kayali
`kkayali@wc.com
`Kevin Hoagland-Hanson
`khoagland-hanson@wc.com
`Andrew L. Hoffman
`ahoffman@wc.com
`Angela Gao
`agao@wc.com
`WILLIAMS & CONNOLLY LLP
`725 Twelfth Street, N.W.
`Washington, DC 20005
`Telephone: 202.434.5000
`Facsimile: 202.434.5029
`
`Jennifer Parker Ainsworth
`Texas State Bar No. 00784720
`jainsworth@wilsonlawfirm.com
`WILSON, ROBERTSON & CORNELIUS,
`P.C.
`909 ESE Loop 323, Suite 400
`Tyler, Texas 75701
`Telephone: 903.509.5000
`Facsimile: 903.509.5092
`
`Attorneys for Intervenor-Defendants AstraZeneca
`Pharmaceuticals LP and AstraZeneca UK Ltd.
`
`
`
`
`
`
`
`
`
`

`

`Case 2:20-cv-00337-JRG Document 483 Filed 10/31/22 Page 9 of 9 PageID #: 21338
`
`
`
`
`
`CERTIFICATE OF SERVICE
`
`The undersigned hereby certifies that all counsel of record who have consented to
`
`electronic service are being served with a copy of this document via electronic mail on October
`
`21, 2022.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`/s/ Preston K. Ratliff II
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`