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Sanofi, S.A., et al., v. Med-Tech Veterinarian Products,Inc. et al.
No. 83-2198
District Court for the District Kansas
1983 U.S. Dist. LEXIS 13684; 222 U.S.P.Q. (BNA) 143
September 16, 1983
PROCEDURAL POSTURE: Plaintiff moved for a preliminary injunction in a patent
infringement and business tort action, where plaintiff was a licensee of product patented
by a foreign drug manufacturer. Defendant countered that plaintiff lacked standing for the
action.
OVERVIEW: Plaintiff sought a preliminary injunction in a patent infringement and
business tort action. A foreign-based drug manufacturer held a U.S. patent in a drug
which it licensed to plaintiff, U.S.-based drug manufacturer, to produce and sell in the
U.S. and Canada. Defendant was granted approval to use the drug by the FDA with the
intent to use the drug to manufacture it into a finished product. Defendant contended that
the plaintiff could not maintain the action alone and the foreign-based manufacturer was
not entitled to injunction based on the sale of the drug to another U.S.-based defendant by
its subsidiary. The court granted the preliminary injunction holding that a licensee who
has acquired the exclusive right to make, use and sell a product has standing to sue for
patent infringement in its own name and to join the patent holder in an infringement suit.
OUTCOME: Motion for preliminary injunction granted. The court held that a licensee
who has acquired the exclusive right to make, use and sell a product has standing to join
the patent holder in an infringement suit and to sue for patent infringement in its own
name.
O'Connor, Chief Judge.
Memorandum and Order
This matter is presently before the court on plaintiff American Home Products
Corporation's application for a preliminary injunction.
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This case is an extension of litigation which is continuing in the United States District
Court for the District of New Jersey. In that case, the plaintiffs, American Home
Products Corporation and SANOFI, S.A., brought an identical action arising out of the
same facts against two distributors who handled the alleged infringing drug,
acepromazine maleate. Medico Industries, Inc., a defendant here, was originally a
defendant in the New Jersey suit, however it was dismissed for lack of personal
jurisdiction. The New Jersey court granted a preliminary injunction [*2] on behalf of
American Home Products against the distributors enjoining them from selling the drug;
SANOFI, S.A., however, was denied any injunctive relief. SANOFI, S.A. v. Med-Tech
Veterinarian Products, 26 BNA's Patent, Trademark and Copyright Journal 195 (6/15/83).
Plaintiff urges this court to grant a similar preliminary injunction against the defendant
manufacturer, Medico Industries, and the defendant marketer, Med-Tech Veterinarian
Products, of acepromazine maleate.
The plaintiffs filed this action on June 6, 1983, alleging that the defendants had
infringed one of their patents and engaged in other activities constituting business torts.
n1 After denying plaintiff's motion for a temporary injunction, the court permitted
American Home Products to present its motion for preliminary injunction at a hearing
held on August 19, 1983. After reviewing the evidence, the arguments, and the
suggestions of counsel, the court makes the following findings of fact and conclusions of
law.
n1 This motion for preliminary injunction is based solely upon the patent infringement
claim.
Findings of Fact
Although the parties have little disagreement over the following facts, these
findings[*3] are made solely on the basis of the evidence presented with respect to the
request for preliminary injunction.They are not in any manner intended to presage this
court's ultimate findings as to the merits of plaintiffs' claims.
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1. Plaintiff, SANOFI, S.A., (hereafter Sanofi), is a French corporation that
manufactures pharmaceutical products. It is the largest pharmaceutical company in
France, and thirty-fourth largest in the world. Sanofi holds the United States patent for
the drug acepromazine maleate.
2. Plaintiff, American Home Products Corporation (hereafter American Home), is
incorporated under the laws of Delaware, with its principal place of business in New
York. American Home manufactures and markets a variety of well known products
including ethical and propriety drugs.
3. Defendant, Medico Industries, Inc., (hereafter Medico), a Delaware corporation with
its principal place of business in Kansas, manufactures and processes drugs for the
veterinary market.
4. Defendant Med-Tech Veterinarian Products, Inc., (hereafter Med-Tech), is
incorporated under the laws of Missouri has its principal place of business in Kansas.
Med-Tech is engaged in marketing drugs[*4] for the veterinary field. Both defendants
Med-Tech and Medico are wholly-owned subsidiaries of Tech America Group, Inc.
5. Acepromazine maleae is a generic drug used for tranquilizer and antemetic purposes
in the veterinary field. An American patent was issued to a French company named
Establishments Clin-Byla, S.A., on July 11, 1967. This patent, No. 3,330,826, through a
series of mergers and business transactions has been transferred to the present plaintiff
Sanofi. These transactions have been duly recorded in the U.S. Patent and Trademark
Office. Acepromazine maleate also was covered by a Canadian patent. That patent,
however, has expired. The only patent remaining in the world is the United States patent
held by Sanofi.
6. In September 1959 Blin-Byla, S.A., Sanofi's predecessor, entered into an agreement
with plaintiff American Home to confer upon the latter company.
The right to manufacturer, sell or use in Canada [acepromazine maleate] and
pharmaceutical products containing [acepromazine maleate], either alone or
associated with other active products in injection or oral form for veterinary use.
The contract further provided:
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This right to manufacture, [*5] use or sell [acepromazine maleate] said
pharmaceutical products containing [acepromazine maleate], in Canada will be an
exclusive right and limited to products for veterinary use.
In January 1963 a letter agreement was entered into by the parties, which extended to
American Home "the right to sell [acepromazine maleate] in the veterinary field in the
United States under the same contractual conditions as exists for the Canadian sales."
Since that time, American Home has purchased acepromazine maleate in bulk form from
the plaintiff Sanofi's manufacturing subsidiary, Sempa-Chimie, and processed it into its
finished product.
7. In 1978, defendant Med-Tech filed a New Animal Drug Application [NADA] with
the United States Food and Drug Administration (hereafter FDA). On September 4,
1981, the FDA granted approval for Med-Tech's use of acepromazine maleate. 46
Fed.Reg. 44,443 (1981) (codified at 21 C.F.R. § 520.23).
8. In July 1981 and September 1981, Medico placed two separate orders with the
chemical broker, Flavine International, Inc., of New Jersey (hereinafter Flavine
International), for the purchase of acepromazine maleate in bulk form. Flavine
International[*6] subsequently contacted Flavine GmbH, a German drug broker.
Although an agent for Flavine International represented that Flavine GmbH and Flavine
International were sister companies, this court has not been presented sufficient evidence
to establish the exact relationship between them. Flavine GmbH subsequently contacted
Sempa-Chimie to procure acepromazine maleat.
9. Sempa-Chimie is a French wholly-owned subsidiary of Clin Midy, S.A., which is in
turn a wholly-owned subsidiary of the plaintiff Sanofi. Sempa-Chimie manufacturers
acepromazine maleate.
10. After receiving the order, Sempa-Chimie informed Flavine GmbH that there was a
patent on the material in the United States and inquired of its ultimate destination.
Sempa-Chimie had a policy not to sell any acepromazine maleate to a purchaser for use
in the United States. Flavine GmbH represented a telex to Sempa-Chimie that the
chemical was bound for South America, where there was no patent. Sempa-Chimie sold
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the chemical to Flavine GmgH without placing any written restrictions upon its use. The
chemical was actually delivered to the defendant Medico in Kansas.
11. Upon receiving the bulk chemical, Medico[*7] began processing the acepromazine
maleate into its finished form. On September 6, 1981, two days after receiving
government approval, defendants began marketing their product.
12. On October 2, 1981, Sanofi notified the defendant Med-Tech by letter that
acepromazine maleate was patented and that it was the owner of the patent. At that time,
American Home advised the defendants that it was the exclusive licensee of
acepromazine maleate for the veterinary field in the United States. Both of these letters
were sent prior to the receipt of the second order of acepromazine maleate by Medico on
December 2, 1981. On December 11, 1981, American Home sent a letter to all the
distributors of Med-Tech informing them of the patent and their exclusive license.
13. Plaintiff American Home has marketed its acepromazine maleate through two of its
divisions, Ayerst and Fort Dodge. Since 1979, all acepromazine containers sold by
American Home have included the patent numbre. Plaintiffs have proviced samples from
pharmaceutical trade research sources showing that patent information is available on this
product. Furthermore, the defendants have provided an affidavit prepared after a
patent[*8] search was conducted showing all patent rights in Sanofi.
Conclusions of Law
Plaintiff American Home seeks a preliminary injuction granting the following relief:
(1) Enjoining defendants from activities relating to the manufacture and sale of the drug
acepromazine maleate;
(2) Requiring the defendants to deliver up to the court their exisiting stocks of
acepromazine maleate and material used in the marketing and sale of acepromazine
maleate;
(3) Requiring defendant Med-Tech to recall stocks of acepromazine maleate from its
distributors throughout the United States;
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(4) Requiring defendant Med-Tech to make a public statement regarding (1), (2) and
(3) above; and
(5) Requiring defendants to filed with the court and serve on plaintiffs written
statements regarding compliance with (1), (2), (3) and (4) above.
***
(a) Standing
Before discussing the merits, the court will examine defendants' contention that the
plaintiffs lack standing to bring this action. Their argument is that American Home is not
an exclusive licensee and therefore cannot sue on its own behalf. We disagree.
Sanofi, in the January 1963 letter, agreed to give American Home "the right to sell
[acepromazine maleate] in the veterinary field in the United States under the same
conractual conditions as exist for the Canadian sales." American Home conceded at oral
argument that its rights consisted solely of the rights to sell and not to manufacture or
use. American Home characterizes this right as a "limited exclusive licensee."
The law is well-settled that the patentee or one who has acquired the exclusive right to
make, use and sell the product has standing to sue for patent infringement in its own
name. Waterman v. MacKenzie, 138 U.S. 252 (1891); Hook v. Hook & Ackerman, Inc.,
187 F.2d 52, 57-58, (3d Cir. 1951). "On the other hand, if the transfer by the patentee, or
his assigns, creates merely a bare license to make or use or vend the patented product, or
all three, and this right is not exclusive[*15] as to the rest of the world, the patentee
included, then * * * this bare license has not real proprietary interest in the patent. Thus,
he cannot sue on the patent at all, but is relegated to his rights to enforce his license
agreement as a contract [against the licensor]." Philadelphia Briefcase Co. v. Specialty
Leather Products Co., 145 F. Supp. 425 (D. N.J. 1956), aff'd, 242 F.2d 511, (3d Cir.
1957).
We view American Home as being more than a nonexclusive licensee. By virtue of its
contract with Sanofi, American Home has the exclusive right to sell acepromazine
maleate in the United States for veterinary use. An exclusive licensee has the power to
join the patent holder in a suit for infringement, either as a willing or unwilling plaintiff
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or defendant, in order to enforce the right granted in the license. Independent Wireless
Tel. Co. v. Radio Corp. of America, 269 U.S. 459 (1926).
We need not decide whether American Home could bring the action in its own name
without joining Sanofi as a party. When, as here, the patent holder is a co-plaintiff, an
exclusive licensee has the right to join in maintaining an action for infringement.
Independent Wireless Tel. Co. v. Radio[*16] Corp. of America, supra; Philadelphia
Briefcase Co. v. Specialty Leather Products co. v. Patent Reproducer Corp. 42 F.2d 116,
(2d Cir. 1930). Sanofi and American Home together own all rights to acepromazine
maleate in the United States.
The defendants urge, however, that Amerian Home could not alone maintain an action,
and that Sanofi is not entitled , as the New Jersey court found, to an injunction based
upon Sempa-Chimie's actvities in the sale of acepromazine maleate. Therefore, they
argue that it this court concludes that Sanofi is not entitld to the injunciton, as did the
New Jersey court, Sanofi should not be allowed "to launder its disentitlement to enforce
the patent against defendants by the simple process of joining its distributor licensee,
American Home, and then obtaining an injunction in its distributor's name." This
argument must fail.
This court is not bound by, nor do we necessarily accept, the New Jersey court's
conclusion that plaintiff Sanofi should be barred from receiving a prliminary injunction in
ths case. For the reason already discussed, we conclude that American Home has
standing to litigate its right under the license.
(b) American Home's probable[*17] success on the merits.
In order to determine the rights that American Home possesses, we must first analyze
the contract. When read together, the January 1963 letter agreement and the September
1959 agreement between Sanofi and American Home make clear that American Home
has the exclusive right to sell acepromazine maleate in the United States for veterinary
use.The defendants concede that unless they have an implied license from Sanofi, they do
not have any right to sell acepromazine maleate in the United States for veterinary use.
This court agrees with the New Jesey court and finds that Sanofi could not grant an
implied license in derogation of American Home's rights. American Home has the
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exclusive right to sell the drug. Even Sanofi does not have the right to sell the drug in
this country for veterinary purposes. Furthermore, Sempa-Chimie, as subsidiary of
Sanofi, was not the holder of the patent rights and therefore could not grant a license to
anyone.
The defendnats would have us hold that acquiring the patented product from the
subsidiary of the patent holder in the normal course of business is sufficient to grant an
implied license. We cannot accept[*18] such an argument. First, we have not been
presented with sufficient evidence to disregard the corporate separateness of SempaChimie and Sanofi.
Second, were we to hold the defendants suggest, we would throw the current licensing
system into a state of chaos. Anytime someone acquired a patented product from a seller
in privity with the patentee, they would have an implied license. A licensing agreement in
intentional patent situations such as this, however, requires more than just the possession
of the patented article. See Griffin v. Keystone Mushroom Farm, Inc., 453 F.Supp. 1283,
(E.D. Pa. 1974). Words and conduct sufficient to indicate a contractual relationship are
required to form a licensor-licensee relationship. In this case, for example, if the
defendnts had brought the acepromazine maleate from a European licensee of Sanofi,
defendants contend that they would have an implied license to sell the drug in the United
States. This situation would make the United States licensing agreement worthless.
As the New Jersey court found, even if we were to accept the defendant's theory on the
implied license to resell, that license would still be the subject to the outstanding[*19]
licenses. The general rule is that the first license prevails "even though the taker of the
second had no notice of the existence of the first." SANOFI, S.A. v. Medico, supra at 20
(and authorities cited therein). Clearly under these facts, Sanofi did not grant Medico an
implied license to sell acepromazine maleate in the United States.
The plaintiff has shown that there are substantial questions which will require litigation
and more deliberate investigation. In fact, the plaintiff has deomonstrated a substantial
likelihood of success on the merits. Thus, this requirement for the granting of a
preliminary injunction has been satisfied.
***
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