Free Answering Brief in Opposition - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

: : : Plaintiff/Counterclaim-Defendant, : : v. : : BANNER PHARMACAPS INC. : a Delaware corporation, : : Defendant/Counterclaim-Plaintiff. :

ABBOTT LABORATORIES, an Illinois corporation,

Civil Action No. 07-754 (GMS)

BANNER'S BRIEF IN OPPOSITION TO ABBOTT LABS' MOTION TO DISMISS

George Pazuniak (DE # 478) Anna Martina Tyreus (DE # 4771) WOMBLE CARLYLE SANDRIDGE & RICE, PLLC 222 Delaware Avenue, Suite 1501 Wilmington, Delaware 19801 Telephone: (302) 252- 4320 Email: [email protected] Email: [email protected] Attorneys for Banner Pharmacaps Inc. OF COUNSEL: Charles J. Raubicheck FROMMER LAWRENCE & HAUG, LLP 745 Fifth Avenue New York, NY 10151 (212) 588-0800 Dated: March 10, 2008

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TABLE OF CONTENTS PAGE NATURE AND STAGE OF THE PROCEEDING............................................................ 1 SUMMARY OF THE ARGUMENT ................................................................................. 1 STATEMENT OF FACTS ................................................................................................. 2 ARGUMENT...................................................................................................................... 3 A. B. C. Standard of Review................................................................................................. 3 Notice Pleading Requirement ................................................................................. 4 Governing Law of Unfair Competition................................................................... 4 1. 2. D. 1. 2. 3. 4. E. Federal Common Law Governs .................................................................. 4 Alternately, North Carolina Unfair Competition Governs ......................... 7 The Unfair Competition Pleading............................................................... 8 Well Established Law Supports Banner's Counterclaim.......................... 10 North Carolina Unfair Competition Law.................................................. 12 Delaware Unfair Competition Law........................................................... 13

I. II. III. IV.

Banner's Unfair Competition Counterclaim Is Sufficiently Pled ........................... 7

35 U.S.C. §271(e) Does Not Entitle Plaintiffs to File Bad-Faith Litigations ....... 15

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TABLE OF AUTHORITIES Cases Abbott Laboratories v. Teva Pharmaceuticals USA, Inc., 432 F. Supp.2d 408 (D. Del. 2006)..................... 1, 2, 3, 4, 5, 7, 8, 9, 10, 13, 14, 15, 16, 18 Am. Homepatient, Inc. v. Collier, 2006 WL 1134170 (Del.Ch. 2006) ............................................................................. 13, 14 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)) .......................................................................................................... 5 Bavarian Nordic A/S v. Acambis, Inc., 486 F. Supp. 2d 354 (D. Del. 2007).................................................................................... 7 Belden Corp. v. Internorth, Inc., Ill. App., 413 N.E.2d 98 (1980) .................................................................................. 14, 15 Bell Atl. Corp. v. Twombly, --U.S.--, 127 S. Ct. 1955 (2007) ......................................................................................... 4 Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341 (2001)............................................................................................................ 5 Candalaus Chicago, Inc. v. Evans Mill Supply Co., Ill. App., 366 N.E.2d 319 (1977) ...................................................................................... 15 Christopher v. Harbury, 536 U.S. 403, 122 S. Ct. 2179 (2002)................................................................................. 4 Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99 (1957)......................................................................................... 4 Edix Media Group, Inc. v. Mahani, 2006 Del. Ch. LEXIS 207 (Del. Ch. December 12, 2006) ................................................................................................................................. 13 Erickson v. Pardus, --U.S.--, 127 S. Ct. 2197 (2007) ......................................................................................... 4 Florida Prepaid Postsecondary Educ. Expense Bd. v. College Savings Bank, 527 U.S. 627, 119 S.Ct. 2199 (1999).................................................................................. 6 International Business Machines Corp. v Comdisco, Inc., Del. Super., 1993 Del. Super. LEXIS 183, C.A. No. 91-C-07-199, Goldstein, J., (June 30, 1993)..................................................................... 14

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Linder and Associates, Inc. v. Aetna Casualty and Surety Co., 166 F.3d 547 (3d Cir. 1999)........................................................................................ 5 Merck & Co. v. Apotex, Inc., 488 F. Supp.2d 418 (D. Del. 2007)............................................................................. 14, 15 Pfizer, Inc. v. Teva Pharmaceuticals USA, Inc., ___ F.3d. ___ (Fed. Cir. March 7, 2008) ......................................................................... 16 Prudential Ins. Co. v. Sipula, 776 F.2d 157 (7th Cir.1985) ............................................................................................. 15 Rhone Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002)................................................................................... 5, 6, 7 Richardson v. Bank of America, N.A., 643 S.E.2d 410 (N.C.App. 2007)................................................................................ 12, 13 SmithKlineBeecham Corp. v. Apotex Corp., 383 F. Supp.2d 686 (E.D. Pa. 2004) ..................................................................... 10, 11, 16 Strates Shows, Inc. v. Amusements of America, Inc., 646 S.E.2d 418 (N.C.App. 2007)..................................................................................... 12 Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981)............................................................................................................ 5 Zenith Laboratories, Inc. v. Abbott Laboratories, No. Civ.A. 96-1661, 1996 WL 33344963 (D. N.J. Aug. 7, 1996) .............................................................................................................. 11, 16 Statutes N.C. Gen. Stat.§ 75-1.1................................................................................................................. 12 21 U.S.C. §355(c)(3)....................................................................................................................... 6 35 U.S.C. §271(e) ................................................................................................................... 15, 16 21 U.S.C. 355(j)(4) ......................................................................................................................... 6 35 U.S.C. § 271(e)(2)...................................................................................................................... 6 Rules Federal Rule of Civil Procedure 12(b)(6) ....................................................................................... 3

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Other Authorities Coggio, Bresnick, The Right to a Jury Trial in Actions Under the Hatch-Waxman Act, 79 J. Pat. & Trademark Off. Soc'y 765, 768 (Nov. 1997)...................................................................... 6 Restatement (Second) of Torts § 768(1)(b) .................................................................................. 15 W. Page Keeton et al., Prosser and Keeton on the Law of Torts Torts (5th ed. 1984)] § 130, at 1013........................................................................ 14

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I.

NATURE AND STAGE OF THE PROCEEDING

Abbott Laboratories ("Abbott") filed a complaint against Banner Pharmacaps Inc. ("Banner") on November 21, 2007, alleging infringement of two patents, U.S. Patent Nos. 4,988,731 and 5,212,326. (D.I. 1). On January 28, 2008, Banner answered the Complaint, and counterclaimed against Abbott for declaratory judgment of non-infringement and for unfair competition. (D.I. 7). Abbott has moved to dismiss the unfair competition counterclaim, and this is Banner's brief in opposition to that motion. II. SUMMARY OF THE ARGUMENT

Abbott argues that Banner's unfair competition counterclaim should be dismissed as a matter of law, because a plaintiff's sham filing of a frivolous patent litigation "could never give rise to a viable claim" for unfair competition. (Abbott's Supporting Brief ("Abbott Br.") (D.I. 12 at 7) (emphasis in original)). Clear precedent of this and other Third Circuit district courts contradicts Abbott's unsupported position. See Abbott Laboratories v. Teva Pharmaceuticals USA, Inc., 432 F. Supp.2d 408 (D. Del. 2006). The Hatch-Waxman Act provides an avenue for alleging infringement, but nothing in the Act or any authority suggests Abbott's extreme position that a Plaintiff has the unbridled right to sue for infringement and harm competition even if the litigation is frivolous and undertaken in bad-faith for ulterior anti-competitive purposes. Abbott also argues that Banner's counterclaim should be dismissed because it failed to plead with sufficient particularity the factual elements of a claim for unfair competition under Delaware law. The argument fails for two reasons: (1) federal common law should apply here in order "to protect uniquely federal interests"; and (2) even if Delaware law were to apply, the factual allegations in Banner's unfair competition are more than sufficient to establish the factual 1

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basis for Banner's counterclaim. Banner's counterclaim alleges: (1) Banner intended to and intends to sell the delayed-release valproic acid capsules; (2) Abbot filed a complaint against Banner without an objectively reasonable, good faith basis to allege infringement, and solely to anticompetitively invoke the 30 month statutory delay; and (3) Abbott's filing and the resulting statutory repercussions caused Banner economic harm. (Banner's Counterclaim, D.I. 7 at ¶¶ 9, 17-19). III. STATEMENT OF FACTS

Abbot's brief misrepresents the factual background of the action. (Section titled "Paragraph IV Notice," Abbott Br., D.I. 12 at 5-6) Although Banner never relies on the facts in support of its arguments, the fanciful misrepresentations and omissions compel Banner to respond. The actual facts regarding Banner's Paragraph IV notice and Abbott's filing of this lawsuit are shown in the Declaration of Charles L. Cain ("Decl.") (attached hereto as Exh. 1) and the accompanying documents, and they are as follows. Charles L. Cain, Banner's counsel, sent Abbott Banner's "Paragraph IV" letter on October 9, 2007 (at ¶ 3). The letter explained why Banner's product would not infringe the '731 and '326 patents and attached an "Offer of Confidential Access to Banner's NDA". (Decl. at ¶ 4). On October 24, 2007, Jason G. Winchester, counsel for Abbott, left a voice mail with Charles Cain proposing a few changes to the Offer. (Decl. at ¶ 5). Mr. Cain responded on October 26, 2007 (via e-mail), stating that he did "not have a problem with your requested changes." (Decl. at ¶ 5). Mr. Winchester then responded a few hours later (via e-mail), proposing a few more changes and stating what portions of the NDA Abbott would like to review. (Decl. at ¶ 7). Mr.

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Cain then telephoned Mr. Winchester and offered to make Banner's NDA available for review at Banner's offices in High Point, North Carolina (Decl. at ¶ 8). In an e-mail later that day, Mr. Cain informed Mr. Winchester that Charles Raubicheck ("outside FDA counsel" for Banner) would contact Mr. Winchester "to finalize the agreement," and Mr. Winchester replied (via e-mail) that he had "communicated [Banner's] position to Abbott" and he would be "[h]appy to work with Charlie to get the OCA finalized". (Decl. at ¶ 9). Mr. Raubicheck confirmed with Mr. Winchester via email that Banner would make the NDA available to Abbott at Banner's facility in North Carolina. (Decl. at ¶ 11). Mr. Cain then followed up with Mr. Winchester (via e-mail) on November 5, 2007, to determine whether any progress had been made on Banner's Offer. (Decl. at ¶ 12). Having received no response, Mr. Raubicheck left two voice mail messages with Mr. Winchester, and finally sent a letter (via facsimile) on November 13, 2007, inquiring whether Abbott would agree to Banner's proposed Offer. (Decl. at ¶ 13). The only response was this lawsuit, which was filed on November 21, 2007. Contrary to Abbott's contrary suggestion ­ (1) Banner did not refuse to provide any portion of the NDA to Abbott; (2) Banner was not unreasonable in its efforts to coordinate with Abbott; and (3) Abbott never requested a sample of Banner's material, and, therefore, Banner never refused to provide the material. IV. A. Standard of Review Federal Rule of Civil Procedure 12(b)(6) requires a court to accept as true all material allegations of a counterclaim, and may dismiss only if, after accepting as true all of the facts alleged in the counterclaim, and drawing all reasonable inferences in the counterclaimant's favor, no relief could be granted under any set of facts consistent with the allegations of the 3 ARGUMENT

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counterclaim. Erickson v. Pardus, --U.S.--, 127 S. Ct. 2197, 2200 (2007); Christopher v. Harbury, 536 U.S. 403, 406, 122 S. Ct. 2179 (2002); Abbott Laboratories v. Teva Pharmaceuticals USA, Inc., 432 F. Supp.2d 408, 419 (D. Del. 2006). Dismissal is only appropriate when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957). B. Notice Pleading Requirement A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to `give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, --U.S.--, 127 S. Ct. 1955, 1964 (2007). A complaint does not need detailed factual allegations, although "a plaintiff's obligation to provide the `grounds' of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1965 (citations omitted). The "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations in the complaint are true (even if doubtful in fact)." Id. (citations omitted). C. Governing Law of Unfair Competition Abbott mistakenly assumes that Delaware law governs the counterclaim. It does not. The counterclaim is governed by federal common law of unfair competition. If federal common law of unfair competition is not available, then the applicable unfair competition law is that of North Carolina. 1. Federal Common Law Governs

Banner alleges that Abbott filed the present litigation in federal court, under purported federal patent law, knowing that Banner did not and could not infringe the United States patents

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in suit, as bad-faith sham litigation solely to preclude the United States Food & Drug Administration from granting marketing clearance to Banner under the federal Hatch-Waxman Act, and thereby thwart the federal agency from granting Banner the right to compete in the United States marketplace which Banner was otherwise entitled under federal law. The interests here are entirely that of federal law, and, therefore, federal common law should apply here in order "to protect uniquely federal interests." Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640 (1981) (federal common law is used when "a federal rule of decision is `necessary to protect uniquely federal interests'") (citing Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 426 (1964)). For example, ensuring that the Hatch -Waxman Act is not subverted to gain an improper competitive advantage is surely a "uniquely federal interest." Cf., Linder and Associates, Inc. v. Aetna Casualty and Surety Co., 166 F.3d 547, 550 (3d Cir. 1999) (federal common law governed the interpretation of the flood insurance policy at issue as its terms were prescribed by FEMA regulations, and hence "neither the statutory nor decisional law of any particular state [wa]s applicable to the case at bar"). Similarly, Abbott's actions touch FDA jurisdiction (because the filing of the law suit prohibited the FDA from approving Banner's NDA for 30 months), and this also requires that federal common law apply. See Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 347-48 (2001) (federal common law pre-empted state law regarding a cause of action based on the FDA's approval of medical devices). In Rhone Poulenc Agro, S.A. v. DeKalb Genetics Corp., 284 F.3d 1323 (Fed. Cir. 2002), the Federal Circuit noted that rights arising under, or related to, the patent statutes are governed by federal common law, rather than state common law. In that case, the issue was whether

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federal or state law determined whether a patent licensee was a bona-fide purchaser. The Federal Circuit held that federal common law governed, analyzing: There is quite plainly a need for a uniform body of federal law on the bona fide purchaser defense. See Florida Prepaid Postsecondary Educ. Expense Bd. v. College Savings Bank, 527 U.S. 627, 645, 119 S.Ct. 2199 (1999) ("The need for uniformity in the construction of patent law is undoubtedly important...."). On the related question of the transferability of patent licenses, many courts have concluded that federal law must be applied. In so holding, courts generally have acknowledged the need for a uniform national rule that patent licenses are personal and non-transferable in the absence of an agreement authorizing assignment, contrary to the state common law rule that contractual rights are assignable unless forbidden by an agreement. So too we have held that the question of whether an invention is the subject of a commercial offer for sale more than one year before a patent is filed is a question of federal rather than state law. We noted that that rule was necessary to avoid the possibility of a patent's being valid in one state and invalid in another state. In short, because of the importance of having a uniform national rule, we hold that the bona fide purchaser defense to patent infringement is a matter of federal law. Because such a federal rule implicates an issue of patent law, the law of this circuit governs the rule. Rhone Poulenc Agro, S.A., 284 F.3d at 1328. (Internal citations omitted). For much the same reasons, federal, and not state, common law, must be applied here in resolving disputes arising under the combined force and interplay of the patent and FDA statutes. As one commentator has observed: Recognizing that the FDA's approval process has important economic consequences such that any modifications would be best achieved by a systematic, rather than an ad hoc approach, Congress in 1984 amended both the patent and FDA laws to establish a single, interrelated system to satisfy the conflicting needs of the affected parties. The Act has been hailed as the most important statute affecting the drug industry since the 1962 amendments. Coggio, Bresnick, The Right to a Jury Trial in Actions Under the Hatch-Waxman Act, 79 J. Pat. & Trademark Off. Soc'y 765, 768 (Nov. 1997).

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As evidence of this interrelationship is the fact that "FDA and patent law provisions, in many instances, explicitly cross-reference one another:" Examples include FDA provisions 21 U.S.C. §§ 355(c)(3) and 355(j)(4), citing the statutory infringement action; and patent provision 35 U.S.C. § 271(e)(2), citing the related ANDA procedure. Certainly, the patent infringement action created by this section is inextricably intertwined with the ANDA-approval process. Id. at 773. As is the case with patent law, given "the importance of having a uniform national rule" whenever the 30-month stay is triggered by the filing of sham litigation, a claim (or counterclaim) based on such conduct should be governed by Federal common law. RPA, 284 F.3d at 1328. This avoids the very real possibility of such conduct being deemed proper in one state and improper in another state (based on differences in those state's unfair competition laws). Id. 2. Alternately, North Carolina Unfair Competition Governs

Abbott erroneously postulates that Delaware law is the applicable law, which is incorrect because there are no allegations that any of the alleged tortious acts or particular harm took place in Delaware. Cf., Bavarian Nordic A/S v. Acambis, Inc., 486 F. Supp. 2d 354, 364 (D. Del. 2007) ("How can Delaware law be invoked when none of the alleged conduct took place in Delaware; there is no alleged injury in Delaware; and the parties had no relationship in Delaware?"). If federal common law of unfair competition is not applicable here, then the applicable unfair competition law is that of North Carolina. As pled in the Complaint and counterclaim, Banner's principal place of business is in North Carolina and is the place of injury. D. Banner's Unfair Competition Counterclaim Is Sufficiently Pled Banner's unfair competition counterclaim is properly and sufficiently pled, regardless of which law applies. As noted above, the Federal Rules require only notice pleading, and do not 7

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require unfair competition to be pled with the specificity demanded by Abbott. Accepting as true all material allegations of Banner's counterclaim and drawing all reasonable inferences in Banner's favor, it can not be concluded that "it appears beyond doubt that [Banner] can prove no set of facts in support of [its] claim which would entitle [it] to relief." 1. The Unfair Competition Pleading

A key pleaded fact is that Abbott knew that Banner did not infringe. Banner specifically pled that Banner applied to market valproic acid and that the "FDA advised Banner to rely on Abbott's product as the reference listed drug for Banner's product." (Counterclaim, D.I. 7 at ¶ 9) The two Abbott patents in suit are attached to Abbott's Complaint, and the claims of both patents clearly require "1:1 molar ratio of sodium valproate and valproic acid."1 These two facts

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The claims of Abbott's Patent 4,988,731 are as follows: 1. An oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and containing about 4 such units. 2. An oral pharmaceutical dosage form for treating the symptoms of epileptic seizures or convulsions, containing as the active principal an oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and containing about 4 such units.

The claims of Abbot's Patent 5,212,326 are as follows: 1. An oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and containing about 4 to 6 such units. 2. An oral pharmaceutical dosage form for treating the symptoms of epileptic seizures or convulsions, containing as the active principal an oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and containing about 4 to 6 such units.

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establish that Abbot knew, as a matter of plain patent law, that Banner's proposed product did not infringe the `731 or `326 patent claims. Banner further alleged that its "Paragraph IV" certification advised Abbott that Banner's product does not infringe the `731 patent or the `326 patent, and explained why it is impossible for Banner to have infringed "either literally or under the doctrine of equivalents." (Counterclaim, D.I. 7 at ¶¶ 10-12). Abbott does not even attempt to justify how an application to market valproic acid can infringe claims that plainly require "1:1 molar ratio of sodium valproate and valproic acid," and, thus, effectively concedes that it had no basis to allege infringement in this case. Banner further alleged in its counterclaim that Abbott "filed this action without substantial justification . . . in order to prevent the FDA from issuing final approval to Banner's NDA 22-152," which would compete with Abbott's product. (Counterclaim, D.I. 7 ¶ 18). Sham litigation to invoke statutory roadblocks constitutes unfair competition under any law. An NDA is a request that the FDA approve the marketing of a certain drug. (D.I. 7 at ¶ 9). The mere

3. An oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and containing about 6 such units. 4. An oral pharmaceutical dosage form for treating the symptoms of epileptic seizures or convulsions, containing as the active principal an oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and containing about 6 such units. 5. An oligomer having a 1:1 molar ratio of sodium valproate and valproic acid of the unit formula, (CH3 CH2 CH2)2 CHCO2 Na/(CH3 CH2 CH2)2 CHCO2 H, and having physical/chemical properties as follows: a. stable, white crystalline powder; b. melting point of 98°-100° C.; and c. an infrared spectrum having strong absorption bands at about 2957, 2872, 2932, 1685, 1555 and 1370 cm-1. 9

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filing of an NDA inherently states that the applicant is "prepared to market or sell its generic product." 2. Well Established Law Supports Banner's Counterclaim

Abbott has not argued that Banner has not stated a cause of action for unfair competition under federal common law, as, indeed, it could not. The factual allegations in Banner's counterclaim, namely that Abbott brought this sham patent infringement lawsuit against Banner for the sole purpose of illegitimately precluding Banner from marketing generic valproic acid by filing a baseless lawsuit, coupled with Abbott's knowledge that the illegitimate filing would automatically invoke a statutory delay in Banner's ability to compete, are more than sufficient to establish all of the elements of an unfair competition claim. Indeed, numerous courts in the Third Circuit expressly contradict Abbott's argument that the factual allegations in Banner's unfair competition counterclaim "could never give rise to a viable claim against Abbott." (Abbott Br., D.I. 12 at 7) (emphasis in original). In Abbott Laboratories v. Teva Pharmaceuticals USA, Inc., 432 F. Supp.2d 408 (D. Del. 2006), the Defendant alleged that Abbott and others brought an objectively baseless "sham" infringement litigation solely for the purpose of triggering the 30-month stay (under the HatchWaxman Act), thereby improperly blocking approval of Teva's ANDA application. Those factual allegations formed the basis for both antitrust and tortious interference counterclaims. In denying a motion to dismiss the tortious interference counterclaims, this Court relied on SmithKlineBeecham Corp. v. Apotex Corp., 383 F. Supp.2d 686 (E.D. Pa. 2004) to hold that "the allegation that the defendant brought a sham patent infringement suit against the plaintiff with the purpose of keeping it out of the generic drug market [is] sufficient to state a claim for tortious interference with prospective business advantage." Teva, 432 F. Supp.2d at 433 (citing SmithKlineBeecham, 383 F. Supp. 2d at 704). 10

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In SmithKlineBeecham, the court denied a motion to dismiss a counterclaim, holding that the "allegation that [Plaintiff] brought a sham patent infringement suit against [counterclaimant] with the purpose of keeping it out of the generic Paxil market is sufficient to state a claim for tortuous interference with prospective economic advantages." SmithKlineBeecham, 383 F. Supp.2d at 704. The court went on to state that "[s]uch conduct, being wrongful and independently actionable, is not protected by the competitor's privilege." Id. Similarly, in Zenith Laboratories, Inc. v. Abbott Laboratories, No. Civ.A. 96-1661, 1996 WL 33344963 (D. N.J. Aug. 7, 1996) (attached hereto as Exh. 2), plaintiff alleged that defendant Abbott brought a sham patent infringement suit solely for the purpose of improperly invoking the 30-month "Hatch-Waxman" stay, and those actions constituted unfair competition, abuse of process and tortious interference. The Court denied Abbott's motion to dismiss, holding that if the allegations were true plaintiff "ha[d] articulated a claim of unfair competition against Abbott." Id. at *6. Considering that Abbott was a party in two of the three above cited decisions, including a decision from this Court, it is disingenuous for Abbott to reargue the same failed contentions that have been repeatedly rejected by the courts ­ without even advising the Court of the prior negative decisions. It remains unclear how Abbot can represent to the Court that "Banner's sham litigation counterclaim can "never give rise to a viable claim" (Abbott Br., D.I. 12 at 7) in view the prior decisions directly to the contrary. In any event, as the above cited case law makes clear, Banner's unfair competition claim can not simply be dismissed as a matter of law.

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3.

North Carolina Unfair Competition Law

If a single state law were to be applicable, rather than federal common law, then only North Carolina law would be relevant. North Carolina law, § 75-1.1, "Methods Of Competition, Acts And Practices Regulated; Legislative Policy" provides in relevant part: (a) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful. (b) For purposes of this section, "commerce" includes all business activities, however denominated, but does not include professional services rendered by a member of a learned profession. N.C. Gen.Stat. § 75-1.1(a) (2005). In Strates Shows, Inc. v. Amusements of America, Inc., 646 S.E.2d 418 (N.C.App. 2007), the Court most recently interpreted this statute as follows: Our State's Unfair and Deceptive Practices Act ("UDP"), found in North Carolina General Statutes, section 75-1 et seq., provides that "[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful." N.C. Gen.Stat. § 75-1.1(a) (2005). Section 75-16 of the Act "creates a cause of action to redress injuries resulting from violations of Chapter 75 of the General Statutes and provides that any damages recovered shall be trebled." . . . "An unfair and deceptive trade practice claim requires plaintiffs to show: (1) that defendants committed an unfair or deceptive act or practice; (2) in or affecting commerce; and (3) plaintiffs were injured thereby. Plaintiffs must also establish they `suffered actual injury as a proximate result of defendants' [unfair or deceptive act].'" Strates Shows, 646 S.E.2d at 424 (internal citations omitted). In Richardson v. Bank of America, N.A., 643 S.E.2d 410 (N.C.App. 2007), the court stated: "To prevail on a claim of unfair and deceptive trade practices, a plaintiff must show: (1) [the] defendants committed an unfair or deceptive act or practice; (2) in or affecting commerce; and (3) that [the] plaintiff was injured thereby." "A practice is unfair when it offends established public policy as well as when the practice is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers." "[A] practice is deceptive if it has the capacity or tendency to deceive; proof of actual deception is not required." "[U]nder N.C.G.S. § 75-1.1, it is a question for the jury as to whether [a party] committed the alleged acts, and then it is a question of law for the court as to whether these proven facts constitute an unfair or deceptive trade practice." 12

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. . . "[W]here a party engages in conduct manifesting an inequitable assertion of power or position, such conduct constitutes an unfair act or practice." Richardson, 643 S.E.2d at 416-17 (internal citations omitted). The pleaded conduct clearly meets the North Carolina statutory standard of unfair competition. 4. Delaware Unfair Competition Law

Abbott's motion to dismiss does not fare well, even if Delaware state law were to be applicable. Abbott relies on only one case, Am. Homepatient, Inc. v. Collier, 2006 WL 1134170 (Del.Ch. 2006), and argues that Banner had to plead the "legitimate expectancy of a business relationship . . . between Banner and a prospective customer for its unapproved generic drug, or with the FDA itself" which Abbott thwarted by this sham litigation. (Abbott Br., D.I. 12 at 7). Abbott is entirely in error, because Am. Homepatient was a decision after trial directed to interference with prospective contractual relationships, and the opinion neither set forth any pleading requirements nor even the elements of unfair competition in all contexts. Contrary to Abbott's argument, the court never suggested that unfair competition is limited solely to interference with contractual relationships. Indeed, after deciding Am. Homepatient, Chancellor Chandler stated that: Plaintiff maintains that defendant has engaged in and will continue to engage in unfair competition. . . . Delaware courts have struggled to precisely define the boundaries of the common law in this area. The essential element separating unfair competition from legitimate market participation, however, is an unfair action on the part of defendant by which he prevents plaintiff from legitimately earning revenue. Edix Media Group, Inc. v. Mahani, 2006 Del. Ch. LEXIS 207, 61-62 (Del. Ch. December 12, 2006) (attached as Exhibit 3). Thus, Chancellor Chandler's decision in Am. Homepatient plainly does not restrict Delaware unfair competition common law.

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Abbott's subsequent citation to this Court's decision in Merck & Co. v. Apotex, Inc., 488 F. Supp.2d 418 (D. Del. 2007) (Abbott Br., D.I. 12 at 7-8) similarly fails, because the Court did not address unfair competition in that decision. However, the Court specifically stated in Merck that The court is by no means discharging the requirements of Rule 11. . . . In this case, however, there are no alleged facts from which the court can conclude that, in fact, Merck knew that Apotex's generic version . . . did not infringe . . . . Merck, 488 F. Supp.2d at 428 n.7. Here, the alleged and undisputed facts are that Banner sought regulatory approval to market only valproic acid, and that all the claims of both Abbott patents clearly require "1:1 molar ratio of sodium valproate and valproic acid." These two facts are at least sufficiently plead, and establish that Abbot knew that, as a matter of plain patent law, Banner's proposed product did not infringe the `731 or `326 patent claims. Thus, Banner meets the Merck rule. Even in the Am. Homepatient context, Abbott errs in limiting the law. In a leading case, International Business Machines Corp. v Comdisco, Inc., Del. Super., 1993 Del. Super. LEXIS 183, C.A. No. 91-C-07-199, Goldstein, J., (June 30, 1993) (attached as Exhibit 4), the court suggested that unfair competition may be found where a party engages in any conduct that amounts to a recognized tort and when that tort deprives the plaintiff of customers or other prospects: Unfair competition is a form of tortious interference with prospective economic advantage. See Belden Corp. v. Internorth, Inc., Ill. App., [] 413 N.E.2d 98, 102 (1980); [W. Page Keeton et al., Prosser and Keeton on the Law of Torts (5th ed. 1984)] § 130, at 1013. The elements of the tort of interference with prospective advantage are similar [to those of the tort of interference with contractual relations], but not identical. The plaintiff must have a reasonable expectancy of entering a valid business relationship, and defendant must purposely interfere and defeat this legitimate expectancy, thereby causing harm to the plaintiff.

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Belden, 413 N.E.2d at 101, quoted in Prudential Ins. Co. v. Sipula, 776 F.2d 157, 162-63 (7th Cir. 1985). Only wrongful interferences will satisfy the tort, as some interferences are seen as justified or privileged under the aegis of competition. Candalaus Chicago, Inc. v. Evans Mill Supply Co., Ill. App., [] 366 N.E.2d 319, 326-27 (1977). See also Restatement (Second) of Torts § 768(1)(b). "Unfair competition, which is not privileged, includes fraud, intimidation, or disparagement." Belden, 413 N.E.2d at 103. * * * Another authority states, "Quite apart from any improper motive, unfair competition, or for that matter other interferences with prospects, can be found when the defendant engages in any conduct that amounts to a recognized tort and when that tort deprives the plaintiff of customers or other prospects." Keeton et al., supra, § 130, at 1014. Id. at *63-65. Abbott's filing of a sham litigation to preclude Banner from entering the market to compete with Abbott in entering into prospective business relations with customers meets even the most narrow standard of Delaware unfair competition law. To the extent that Delaware law were applicable and required an existing contractual arrangement, Abbott's motion is still unfounded, because the Declaration of Charles Cain establishes that Banner has entered into a contractual arrangement that is being precluded by Abbott's sham litigation. (Decl. at ¶ 2) Indeed, Abbott even plead in its Complaint that Banner has a "business partner" which is "responsible for marketing and distributing Banner's proposed product upon FDA approval." (Complaint, D.I. 1 at ¶ 16) Abbott's suggestion to the contrary is blatantly misleading. E. 35 U.S.C. §271(e) Does Not Entitle Plaintiffs to File Bad-Faith Litigations Abbott finally cites Merck for the proposition that 35 U.S.C. §271(e) exempts it from liability, regardless of how malicious and sham the present litigation, based solely on the fact that Banner filed its NDA. (Abbott Br., D.I. 12 at 8-10). Abbott's interpretation of Merck is plainly erroneous, given the Court's plain warning that it was "by no means discharging the

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requirements of Rule 11 in the context of Hatch Waxman litigation." Merck, 488 F. Supp.2d at 428 n.7. If the Federal Rules authorize Courts to sanction Plaintiffs who file frivolous patent infringement actions under 35 U.S.C. §271(e), then clearly Plaintiffs do not have free reign to assert sham limitations to unfairly compete. Indeed, Abbott misreads the law. That the filing of an "NDA is an act of infringement" (Abbott Br., D.I. 12 at 9) does not shield bad faith suits from liability for unfair competition. Teva, 432 F. Supp.2d at 433-34; SmithKlineBeecham, 383 F. Supp.2d at 704; Zenith, 1996 WL 33344963 at *6. The cited 35 U.S.C. §271(e) statutory language merely defines actionable infringement for which an action may be brought as a procedural device for establishing jurisdiction by the Courts. A Plaintiff must still act in good faith in filing the action. Cf., Pfizer, Inc. v. Teva Pharmaceuticals USA, Inc., ___ F.3d. ___ (Fed. Cir. March 7, 2008) where the Court noted that: Pfizer alleged that Teva's ANDA filing was an act of patent infringement because the ANDA sought approval to manufacture, use or sell a drug claimed in a patent or the use of which is claimed in a patent. Op. cit. at page 3 (emphasis added). The statute permits a Plaintiff to sue for infringement under 35 U.S.C. §271(e) only if the ANDA application reflects a product that Plaintiff in good-faith, upon reasonable investigation, believes infringes the claims of its patent, and not otherwise. If, as Abbott's argument necessarily implies, the patentee's motivation and basis for filing that suit is entirely inconsequential, then surely Congress would have dispensed with that requirement, and simply legislated that the 30-month stay was automatically triggered whenever a paragraph IV certification was filed.

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V.

CONCLUSION

For the aforementioned reasons, Abbott's motion to dismiss should be denied. Respectfully Submitted, Dated: March 10, 2008 By: /s/ George Pazuniak___________________ George Pazuniak (DE # 478) Anna Martina Tyreus (DE # 4771) Womble Carlyle Sandridge & Rice, PLLC 222 Delaware Avenue, Suite 1501 Wilmington, Delaware 19801 Telephone: (302) 252- 4320 Email: [email protected] Email: [email protected] Attorneys for Banner Pharmacaps Inc. OF COUNSEL: Charles J. Raubicheck Frommer Lawrence & Haug, LLP 745 Fifth Avenue New York, NY 10151 (212) 588-0800

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CERTIFICATE OF SERVICE I hereby certify that on March 10, 2008, I caused a true copy of the foregoing Banner's Brief in Opposition to Abbott Labs' Motion to Dismiss to be served on the following by hand delivery and by e-mail, and was electronically filed with the Clerk of the Court using CM/ECF, which will send notification of such filing to the following:

Paul E. Crawford, Esquire Connolly, Bove, Lodge & Hutz The Nemours Building 1007 North Orange Street P.O. Box 2207 Wilmington, DE 19899 (302) 658-9141 [email protected] Attorney for Plaintiff

/s/ George Pazuniak__________ George Pazuniak

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