Opinion
Nos. M-21-81 (BSJ), MDL Docket No. 1291.
August 9, 2004
Opinion
INTRODUCTION
Astra moved for costs incurred during Phases I and III of this case to be taxed against Defendants Genpharm, Andrx and Cheminor. At issue is whether Astra was the prevailing party in this litigation and whether it is entitled to costs.
Astra argues that it was the prevailing party because it obtained a judgment whereby Defendants are enjoined from marketing their generic omeprazole products through 2007. In opposition, Defendants argue that because they succeeded in invalidating some of Astra's patents, they should all be considered prevailing parties, or, in the alternative, that no party should be considered prevailing. Defendants also argue that if the Court finds that Astra was the prevailing party, the Court nonetheless should decline to award Astra costs.
The Court disagrees with Defendants' arguments, and finds that Astra is the prevailing party and is entitled to costs.
DISCUSSION
Pursuant to Federal Rule of Civil Procedure 54, "costs other than attorneys' fees shall be allowed as of course to the prevailing party." Fed.R.Civ.P. 54(d)(1). "[A] plaintiff `prevails' when actual relief on the merits of his claim materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff." Id. at 111-112; see also Former Employees of Motorola Ceramics Prods. v. United States, 336 F.3d 1360, 1364 (Fed. Cir. 2003).
The decision whether or not to award costs rests with the sound discretion of the trial court, Cosgrove v. Sears, Roebuck Co., 191 F.3d 98, 101-02 (2d Cir. 1999), but as the language of the Rule indicates, prevailing parties are presumptively entitled to costs. See Delta Airlines, Inc. v. August, 450 U.S. 346, 352 (1981).
This Court must use precedent from the Federal Circuit in determining which party, if any, prevailed in this case. See Inland Steel Co. v. LTV Steel Co., 70 U.S.P.Q.2d 1472, 1474 (Fed. Cir. 1994) (citing Manildra Milling Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178, 1181 (Fed. Cir. 1996)).
Ascertaining which party prevailed requires the Court to "look at the substance of the litigation to determine whether an applicant has substantially prevailed in its position, and not merely the technical disposition of the case or motion. In effect, substance should prevail over form." Schultz v. United States, 918 F.2d 164, 166 (Fed. Cir. 1990) (quoting Devine v. Sutermeister, 733 F.2d 892, 898 (Fed. Cir. 1984) (emphasis in original)). A party does not necessarily have to succeed on the central issue in the litigation in order to be considered prevailing so long as the party "succeed[s] in any significant issue in the litigation which achieves some benefit the parties sought in bringing."Farrar v. Hobby, 506 U.S. 103, 109 (1992); see also Gentry Gallery v. Berkline Corp., 134 F.3d 1473, 1480 (Fed. Cir. 1998).
Looking at this litigation as a whole, it is clear to the Court that Astra is the prevailing party because its successes on its affirmative claims far outweigh any gains Defendants made on their counterclaims. First, the most significant remedy resulting from this Hatch Waxman Act case was the injunction preventing Defendants from marketing their generic omeprazole product through 2007. This injunction clearly modified Defendants' behavior in a way that directly benefits Astra. See Farrar, 506 U.S. at 111-12. In addition, although a Court need not focus on which party won as to the central issue in a case, here, the finding that the Defendants infringed two of Astra's patents and that they were entitled to an injunction was an overwhelming victory for Astra; one that leads inexorably to the conclusion that Astra was the prevailing party in this litigation. Cf. Warner Bros., Inc. v. Dae Rim Trading, Inc., 677 F. Supp. 740, 771 (S.D.N.Y. 1988) (analyzing which party prevailed on the "main issue" in the case, where both parties claimed they were the prevailing party).
It is without legal significance that Astra succeeded on only some, but not all, of its claims. See Farrar, 506 U.S. at 114 ("[T]he prevailing party inquiry does not turn on the magnitude of the relief obtained."). Similarly, Defendants' argument that they are enjoined only through 2007 rather than 2014, as Astra originally sought, does not aid their position. That they are enjoined at all is sufficient.
Despite this outcome, Defendants argue that they too should be considered prevailing parties because of their successes in invalidating Astra's H. pylori patents. In support of their position, Defendants cite Manildra Milling Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178, 1183 (Fed. Cir. 1996) for the proposition that "as a matter of law, a party who has a competitor's patent declared invalid meets the definition of `prevailing party.'" This holding, however, is more limited than the Defendants' construction of it. In Manildra, the competitor argued that merely invalidating a patent, without a money judgment or award of even nominal damages, was insufficient as a matter of law to qualify a party to be a `prevailing party.' Accordingly, Manildra merely holds that obtaining a declaration that a competitor's patent is invalid is sufficient to be considered a prevailing party. Manildra's holding cannot be read to mean that a party automatically must be considered prevailing under Rule 54(d) so long as he has one of his competitor's patents invalidated, regardless of all other factors in the case. Indeed, the Federal Circuit has never held that a defendant that invalidates a patent is the prevailing party when other patents are successfully asserted against it.
In this case, the H. pylori patents that were invalidated were of much less significance than the formulation patents that Astra successfully asserted against the Defendants. First, it is undisputed that the vast majority of trial days were spent on the formulation patents. Second, throughout the course of the litigation, the Defendants themselves recognized and commented on the relative insignificance of the H. pylori patents. See, e.g., Astra Ex. E at 7 (Cheminor stating that "the vast percentage of recorded sales of Prilosec are for uses not covered by the [ H. pylori] patents."); Astra Ex. F at 1-2 (Genpharm stating that the uses approved by the FDA covered by the H. pylori patents are "applicable for only a small percentage of prescriptions," and are "peripheral at best"); Astra Ex. G at 5 (Andrx's expert testifying that "the vast majority of omeprazole capsules" are used in ways not covered by the H. pylori patents, and that these other uses are "exceptionally important"). Defendants cannot now credibly argue the importance of these patents.
Genpharm argues that it should be considered prevailing in part because it received a substantial sum of money from KUDCo, which is not party to Astra's motion to tax costs, in exchange for waiving its 6-month exclusivity right as a first-filer. Assuming this is true, it is nonetheless completely irrelevant because Genpharm did not obtain its 6-month exclusivity right as a result of this lawsuit.
Authority from outside the Federal Circuit supports the theory that where a plaintiff's victory substantially outweighs the defendants' victory, the plaintiff is considered the prevailing party as that term is used in Rule 54(d)(1). See, e.g., Hillside Enters. v. Carlisle Corp., 69 F.3d 1410, 1416 (8th Cir. 1995); Roberts v. Madigan, 921 F.2d 1047, 1058 (10th Cir. 1990); E.I. du Pont de Nemours Co. v. Monsanto Corp., 42 U.S.P.Q.2d 1152, 1153 (D. Del. 1997) (finding plaintiff the prevailing party because its victory "far outweigh[ed]" the defendant's victory). "[A] successful counterclaimant generally will be considered the prevailing party when plaintiff fails to recover or is awarded less than defendant receives on the counterclaim." 10 Wright, Miller Kane, Federal Practice and Procedure § 2667; see also Goldman v. Burch, 780 F. Supp. 1441, 1445-1446 (S.D.N.Y. 1992) (same).
Accordingly, the Court finds Astra to be the prevailing party in the case and entitled to costs.
The Court declines Andrx's invitation to reserve judgment on the issue of costs because it is allegedly "premature" due to the May 19, 2004 opinion issued by this Court on Phases II and IV. Significantly, this opinion did not affect the Court's injunction that prohibits the marketing of Andrx's product. Although Andrx successfully had Astra's '281 patent invalidated, this victory does not alter the Court's finding that Astra is the prevailing party overall for same reasons explained supra.
This holding does not end the issue of taxing costs, however. Even if a court finds a party to prevail within the meaning of Rule 54(d), it nonetheless retains "broad discretion as to how much to award." Manildra Milling, 76 F.3d at 1183. Although the Court believes that Astra is entitled to most, if not all, of the costs incurred in Phases I and III of the litigation, the Court will consider all objections raised by Defendants.
The Court has received Defendants objections to Astra's Bill of Costs, and directs Astra to respond to thee objections on or before August 23, 2004.
The Judgment Clerk is directed to file Astra's Bill of Costs.
SO ORDERED: