United States District Court, N.D. California, San Jose Division
ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR
AWARD OF ATTORNEY FEES AGAINST DR. DONALD AND DETERMINATION
OF FEE AMOUNT [RE: ECF 451]
LAB SON FREEMAN, United States District Judge.
the Court is Defendant Genentech Inc.'s
(“Genentech”) motion for award of attorney fees
against third-party Defendant Dr. Carlton DeWitt Donald
(“Dr. Donald”) and for determination of the
amount of reasonable fees owed to Genentech, pursuant to the
Court's order granting fees against Plaintiff Phigenix,
Inc. (“Phigenix”) (“Fees Order”, ECF
442). Mot., ECF 451. For the reasons that follow, the Court
finds that Genentech is not entitled to fees from Dr. Donald
and that Genentech is entitled to $1, 756, 764.49 in fees
from Phigenix. The motion is thus GRANTED IN PART AND DENIED
Court provided a detailed factual background of this case in
its Fees Order from August 13, 2018. Phigenix, Inc. v.
Genentech, Inc., No. 15-CV-01238-BLF, 2018 WL 3845998,
at *1-*3 (N.D. Cal. Aug. 13, 2018) (discussing history of
this litigation). Because many of those facts are relevant to
resolving a portion of the instant motion, the Court recounts
them again here, and then discusses the relevant details of
the Fees Order.
Factual and Procedural Background
is a pharmaceutical and biomedical research company founded
in 2007 by Dr. Donald, who is a named inventor on numerous
issued patents and pending patent applications, including
U.S. Patent No. 8, 080, 534 (“the '534
patent”). First Am. Compl. (“FAC”)
¶¶ 1, 9, ECF 21. The '534 patent is titled
“Targeting PAX2 for the Treatment of Breast
Cancer.” Ex. A to FAC (“'534 patent”),
ECF 21-1. Phigenix brought this action against Genentech
alleging infringement of the '534 patent based on
Genentech's drug Kadcyla, a drug targeting a type of
metastatic breast cancer. See generally FAC.
Genentech and Kadcyla
1998, Genentech obtained FDA approval of Herceptin
(trastuzumab) for the treatment of HER2 breast cancer.
Weiner Expert Report in Supp. of Mot. for Summ. J.
¶¶ 39, 120, ECF 349-1. At that time, Herceptin also
received approval as a “first-line treatment in
combination with the taxane paclitaxel.” Id.
¶ 120. According to Genentech, it then began working on
a next-generation treatment: conjugates of Herceptin
(trastuzumab) and the maytansinoid DM1, which were disclosed
in a Genentech patent application that published in 2001
(“'244 application, ” ECF 37-6). ECF 400 at
2. Those conjugates work with the precise molecule that
eventually would be approved as Kadcyla. Id.
Phigenix Contacts Genentech
2013, the FDA approved Kadcyla. Ex. 3 to Kreeger Decl. in
Supp. of Mot. for Summ. J. (“Kadcyla Label”), ECF
348-3. The approved indication was for patients previously
treated with Herceptin and a taxane. Id. at 1.
Thereafter, in June 2013, Phigenix sent multiple letters
signed by Dr. Donald to Genentech about securing
“patent protection” for Kadcyla by offering to
negotiate a license for Phigenix's patent portfolio. Exs.
A and B to Schwartz Decl. in Supp. of Mot. to Dismiss, ECF
37-4, 37-5. Dr. Donald included a diagram hypothesizing that
trastuzumab-DM1 conjugates affect a signal pathway, resulting
in the inhibition of PAX2 in breast cancer cells. Dr. Donald
asserted that this infringed Phigenix's patent.
See Ex. B to Schwartz Decl. in Supp. of Mot. to
Dismiss; Ex. 3 to Ackerman Decl. in Opp'n to Mot. for
Sanctions, ECF 215-3.
September 2013, Genentech declined the offer and stated that
its '244 application discloses “trastuzumab-DM1
conjugates . . . for the treatment of breast cancer”
and was published more than four years before the priority
date of the earliest-filed application in Phigenix's
patent portfolio. Ex. D to Schwartz Decl. in Supp. of Mot. to
Dismiss, ECF No. 37-7. In November 2013, Genentech sent an
email letter to Phigenix stating that if Phigenix's
patent claims cover “direct or indirect inhibition of
PAX2 for the treatment of cancer, ” they would be
inherently anticipated by the '244 application. Ex. F to
Schwartz Decl. in Supp. of Mot. to Dismiss, ECF 37-9.
January 31, 2014, Phigenix initiated its suit against
Genentech in the United States District Court for the
Northern District of Georgia. ECF 1. The Northern District of
Georgia granted Genentech's motion to transfer the action
to this District. ECF 66.
2014, Genentech told Phigenix that the complaint warrants
Rule 11 sanctions; Phigenix disagreed. Mot. for Sanctions at
5, ECF 198; Opp'n to Mot. for Sanctions, ECF 214. On May
10, 2016, Genentech filed its motion for sanctions under Rule
11. ECF 198. The parties submitted supplemental briefing
after Phigenix provided results on its testing of Kadcyla. On
October 31, 2016, this Court found that Phigenix had
“properly relied on scientific, peer-reviewed articles
to formulate its infringement theory” and that
Genentech had not demonstrated how Phigenix's complaint
was “baseless.” Sanctions Order at 7, ECF 290.
The parties' briefing on Phigenix's test results did
not compel a different conclusion. Id. In declining
to take a deep dive into the scientific articles submitted,
the Court noted that weighing the value of different
experimental studies without the aid of experts would not
assist the Court in deciding the sanctions motion.
Id. Furthermore, the Court found that Genentech had
not shown that the '244 application inherently
anticipates the '534 patent for the purpose of the
sanctions motion. Id. at 11. Nevertheless, the Court
recognized the “potentially significant weaknesses in
Phigenix's theory of infringement.” Id. As
such, this Court allowed Genentech to request Rule 11
sanctions or extraordinary case fees under § 285 in the
event that Genentech obtained judgment in its favor.
Id. at 11-12.
September 22, 2016, Genentech filed its first motion for
summary judgment. First Mot. for Summ. J., ECF 257. The
parties disputed whether the '534 patent was entitled to
the October 14, 2005 priority date. The '534 patent is a
continuation-in-part of U.S. Application No. 12/090, 191
(“'191 application”), which is a national
stage entry of WO 2007/047512 (“PCT
application”). Exs. 2, 3 to Chivvis Decl. in Supp. of
First Mot. for Summ J., ECF 258-2, 258-3. The PCT application
claims priority to U.S. Provisional Application No. 60/726,
921, filed on October 14, 2005 (the “2005 provisional
application”). Exs. 3, 4 to Chivvis Decl., ECF 258-3,
258-4. On February 24, 2017, the Court found that no
reasonable trier of fact would find adequate written
description support in the 2005 provisional application for
the asserted claims. First Summ. J. Order 12-19, ECF 327. As
such, Phigenix lost the 2005 priority date for the asserted
Court further addressed Genentech's argument that the
asserted claims are anticipated by the use of Kadcyla in
clinical trials, which were made public in 2007. See
Id. at 23-24. Phigenix asserted that there was a factual
dispute as to whether the public use necessarily met the
claim limitations. Id. The Court agreed that there
was a genuine issue of material fact as to whether
Kadcyla's public use in 2007 anticipated the asserted
claims. Id. at 24. The Court noted that one of the
documents submitted by Genentech states that “[i]n
addition to Trastuzumab, all patients with objective
responses had previously been treated with paclitaxel,
docetaxel, and/or vinorelbine.” Id. (citing
Ex. C to Girish Decl., ECF 259-3; Ex. G to Girish Decl. at
27, ECF 259-7). While paclitaxel and docetaxel are taxanes,
vinorelbine is not. Id. Given the disjunctive in the
list of “paclitaxel, docetaxel, and/or vinorelbine,
” the Court found that it was possible that the
patients of the clinical trials received vinorelbine but not
either of the two taxanes. Id. On this basis, the
Court ruled that there was enough evidence for the trier of
fact to find that the public use and the asserted infringing
methods are not identical. Id.
Genentech filed a second motion for summary judgment of
non-infringement and invalidity on June 9, 2017. Second Mot.
for Summ. J., ECF 347. During a May 23, 2017 deposition,
Phigenix's expert Dr. Richard Pestell testified that his
infringement opinion was limited to patients who had
previously been treated with Herceptin and a taxane and
nothing else. Id. at 5 (citing Ex. 2 to
Kreeger Decl. at 51:5-12, 53:20-25, 53:14-19, ECF 348-2).
According to Genentech, only in an email dated May 31, 2017,
did Phigenix restrict its infringement theory to apply to
patients who had previously received trastuzumab and a taxane
“and nothing else.” Second Mot. for Summ. J. 10
(citing Ex. 6 to Kreeger Decl. in Supp. of Second Summ. J.
(“2017 Email”), ECF 348-6). Genentech moved to
strike Dr. Pestell's “new” infringement
August 18, 2017, the Court granted in part Genentech's
second motion for summary judgment. Second Summ. J. Order,
ECF 391. The Court noted that “Phigenix only narrowed
its infringement theory in response to the Court's
[first] summary judgment order finding that the '534
patent was not entitled to an earlier priority date.”
Id. at 16. But Phigenix neither moved to amend its
infringement contentions nor notified Genentech of the new
infringement theory. Id. As such, the Court
sustained Genentech's objection and struck Dr.
Pestell's infringement opinion. Id. Without
evidence of infringement, the Court granted summary judgment
of no infringement. Id. In addition, the Court
granted summary judgment of no induced infringement for lack
of specific intent due to the absence of evidence of
Genentech's intent to induce infringement as to the
narrow patient subpopulation who previously received
“trastuzumab and a taxane and nothing else” under
Phigenix's newly disclosed infringement theory.
Id. at 9-14. Accordingly, the Court entered judgment
in favor of Genentech and against Phigenix. Judgment, ECF
The Previous Fees Order
judgment, Genentech moved the Court to join Dr. Donald under
Federal Rule of Civil Procedure 19 (ECF 398) and for an
exceptional case finding under 35 U.S.C. § 285 and an
award of attorney fees against Dr. Donald and Phigenix (ECF
Court first held that it could not impose fees against Dr.
Donald because he had not been given an opportunity to oppose
the motion. Fees Order at 8. So the Court denied
Genentech's request for fees against Dr. Donald without
prejudice to Genentech's reasserting the argument in the
instant fees motion.
Court next held that “there came a point in this case
when Phigenix's continued prosecution of the case became
‘exceptional'”: when Phigenix changed its
theory of infringement seemingly to skirt the holdings in the
Court's first summary judgment order. The Court first
noted that Phigenix was “on notice about issues
concerning potential anticipation of the '534 patent by
prior art” before the lawsuit began and that Phigenix
was continually reminded throughout the litigation of the
weaknesses of its infringement theory, including in the
Court's sanctions order. Id. at 9-10. Though
these facts alone were insufficient to find the case
exceptional, the Court held that the “tipping
point” at which Phigenix's actions made the case
exceptional was after the Court determined that Phigenix
could not maintain its 2005 priority date, and yet Phigenix
“unreasonabl[y] determin[ed] to forge ahead with
prolonged litigation when it had no tenable theory of
infringement.” Id. at 10-11. Instead of
conceding defeat, Phigenix narrowed its infringement theory
in response to the Court's order but failed to amend its
infringement contentions or notify Genentech of the change,
instead electing to disclose its new theory in a deposition
after the close of fact discovery. See Id. at 11.
The Court found that “Phigenix unreasonably manipulated
its theories to postpone defeat” based on anticipation
of the '534 patent, evincing “gamesmanship”
that warranted an exceptional case finding. Id.
Moreover, additional facts supported the Court's holding,
including that Phigenix's infringement theory defied
common sense, that Phigenix chose to submit IPR petitions on
Kadcyla-related patents that it was not accused of
infringing, and that Phigenix's testing of Kadcyla was
unreliable. See Id. at 12-13 (citing Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 572
U.S. 545, 554 (2014)). Given these facts, the Court concluded
that “Genentech is entitled to reasonable
attorneys' fees accrued since the issuance of the First
Summary Judgment Order on February 24, 2017.”
Id. at 13.
joinder, the Court held that joinder of Dr. Donald was both
necessary and feasible under Federal Rule of Civil Procedure
19(a)(1). The Court first held that Dr. Donald's joinder
was necessary because the evidence indicated that Phigenix
did not have the financial resources to provide full relief
to Genentech. Id. at 18-20. The Court also held that
Genentech was not attempting to join Dr. Donald by
“piercing the corporate veil, ” but instead aimed
to join him because of his own conduct. Id. at 19.
The evidence “support[ed] Genentech's position that
Dr. Donald had control over this litigation” because
“[h]e alone holds more than 50% ownership of Phigenix,
” and the evidence showed that Dr. Donald's wife
“is the only other employee of Phigenix.”
Id. at 20-21 (citing Ex. 1 to Chivvis Decl. in Supp.
of Mot. for Joinder at 237:15-22, ECF 399-1; Ex. A to Jacobs
Decl. in Supp. of Mot. for Sanctions at 11:16-22, ECF 199-1).
The Court rejected Phigenix's contention that its
five-person Board of Directors voted to initiate the
litigation because Phigenix did not provide any evidence of
this fact or of the fact that anyone else directed the
litigation. See Id. at 21. The Court then held that
joinder was feasible because the Court has personal
jurisdiction over Dr. Donald due to his actions in this
district. See Id. at 22-27.
the Court issued its Fees Order, Genentech filed this motion,
renewing its attempt to hold Dr. Donald jointly and severally
liable for fees and seeking a determination by the Court of
reasonable attorneys' fees.
LIABILITY OF DR. DONALD
argues that the Court should hold Dr. Donald liable on two
theories: (1) Dr. Donald was individually responsible for
Phigenix's exceptional conduct in the case, Mot. at 3-5;
and (2) Dr. Donald is liable because he is Phigenix's
alter ego, Mot. at 5-7. The Court discusses each theory in
Genentech Has Not Shown that Dr. Donald Was Responsible for
Phigenix's Exceptional Conduct
Court first discusses the relevant case law and then analyzes
the parties' competing evidence.
may hold an individual liable under 35 U.S.C § 285 where
it finds that the individual's “personal conduct
was the dominant cause” or “the driving
force” making the case exceptional. Iris Connex,
LLC v. Dell, Inc., 235 F.Supp.3d 826, 843-44, 852 (E.D.
Tex. 2017); see also Ohio Cellular Products Corp. v.
Adams USA, Inc., 175 F.3d 1343, 1349-50 & n.6 (Fed.
Cir. 1999). This rule reflects “a more general and
uncontroversial principle: that the corporate form cannot be
used as a shield to insulate officers and parent corporations
against liability for their own tortious conduct or tortious
conduct they control.” Iris Connex, 235
F.Supp.3d at 844.
Federal Circuit elaborated on this rule in Machinery
Corp. of America v. Gullfiber AB, 774 F.2d 467 (Fed.
Cir. 1985). In that case, the Federal Circuit remanded for
the district court to apply the correct legal standard to
determine whether the case was exceptional. See Id.
at 473. The court also addressed the defendant's argument
that its agent could not be held liable for any fees awarded.
The court recognized that it had previously held that
“an individual may be assessed fees under § 285 if
his conduct supports a finding that the case is
exceptional.” Id. at 475. As such, the Court
held that the agent “may be assessed fees individually,
” but “only if the district court finds that [the
plaintiff] has proved by clear and convincing evidence that
his actions were in fact tortious or were undertaken in a
personal capacity and not as agent of [the defendant].”
Federal Circuit again addressed the issue in Ohio
Cellular. There, the Federal Circuit affirmed the
district court's imposition of individual liability on
third-party defendant Nelson, the president and sole
stockholder of Ohio Cellular. 175 F.3d at 1345, 1350. The
district court had held that the case was exceptional under
§ 285 because Ohio Cellular had committed inequitable
conduct when Nelson withheld material prior art during a
patent prosecution. Id. Importantly, the court noted
that there was no evidence “that the attorney who
prosecuted the application was aware of the undisclosed
material prior art. Instead, it appears that Nelson withheld
the prior art from his attorney and thus from the Patent
Office.” Id. at 1345 n.3. Because Nelson was
an inventor on the relevant patent, was the president and
sole shareholder of Ohio Cellular, was intimately involved in
the patent's prosecution, and “was the sole
basis” for the inequitable conduct, the district court
held that Nelson could be held individually liable.
Id. at 1346, 1348.
Federal Circuit agreed. The Federal Circuit emphasized that
Nelson's own conduct underpinned the exceptional case
holding and that, “as president and sole shareholder of
Ohio Cellular[, ] Nelson could control and did control
litigation decisions made on behalf of Ohio Cellular.”
Id. at 1349-50; see also Hughes v. Novi Am.,
Inc., 724 F.2d 122, 126 (Fed. Cir. 1984) (upholding
award of fees against the plaintiff patent inventor based on
his “personal conduct during the trial, ”
including false interrogatory responses and awareness that
the defendant had not infringed, as well as his individual
fraud in procuring the patents).
the Eastern District of Texas issued a comprehensive opinion
on the matter in Iris Connex. In that case,
individual-plaintiff Yates was the sole owner of the
plaintiff-corporation Iris Connex's parent corporation.
235 F.Supp.3d 826, 833-34. The Court found that Iris Connex
had no assets except the patent, no working capital, and no
employees and was formed by Yates solely to enforce the
patent. Id. at 840. From this the court concluded
that Mr. Yates had created Iris Connex as “the first
level of two shell corporations which were intended to shield
the real actor, Mr. Brian Yates, from personal
liability.” Id. at 833; see also Id.
at 851. After holding that the case was exceptional because
the plaintiffs had filed suit with an infringement theory
that was wholly unsupportable, the court held that Mr. Yates
could be held individually liable. “From start to
finish, ” it said, “Mr. Yates ha[d] been the
driving force behind th[e] litigation, ” such that
“[e]very reason for th[e] Court's exceptional case
finding emanate[d] from Mr. Yates.” Id. at
“Mr. Yates conceived and then carried out each step
leading up to the filing of th[e] meritless lawsuit, ”
including negotiating a license before either creating Iris
Connex or consulting an attorney. Id. Mr. Yates was
also solely responsible for forcing Iris Connex to file the
lawsuits, such that the court found “[i]t is hard . . .
to understate the importance of Mr. Yates' direct and
personal control through pre-suit process of finding and
acquiring the '950 patent, as Iris Connex had no other
purpose than to enforce its only asset.” Id.
at 852-53. Mr. Yates also “independently performed
pre-suit diligence” and “personally controlled
the events occurring toward the end of th[e] lawsuit, ”
including personally calculating the damages model for
settlement purposes. Id. at 853. “Ultimately,
” the Court concluded, “the interposing of an
‘Iris Connex' between the real actor [Yates] and an
exceptional case” would encourage frivolous lawsuits
and thus be contrary to § 285's purpose.
Id. at 846.
argues that under this law, Dr. Donald should be held
personally liable because “Dr. Donald acted as the
driving force behind Phigenix's litigation strategy from
the start.” Mot. at 3. Specifically, Genentech points
to the following facts to support this contention,
id. at 3-4:
(1) Dr. Donald holds more than 50% ownership of Phigenix;
see 12/2/2016 Donald Depo. at 237:15-22, ECF 399-1;
(2) Dr. Donald's wife is the only other employee of
Phigenix; see 8/4/2015 Donald Depo. 11:16-22, ECF
(3) Before the litigation began, Dr. Donald “developed
Phigenix's infringement theories and directly
communicated them to Genentech, ” see ECF 37-4
(6/10/2013 Dr. Donald Letter to Genentech offering to
negotiate licensing of Phigenix's patents); ECF 37-5
(6/17/2013 Dr. Donald Letter to Genentech offering to
negotiate licensing of Phigenix's patents and including
pathway diagram); 8/4/2015 Donald Depo. at 118:17- 119:13,
(4) Dr. Donald “raised money to fund the litigation and
contributed his own, ” see 12/2/2016 Donald
Depo. at 180:25-181:4, ECF 399-1; 12/2/2016 Donald Depo. at
79:1-10, 180:6-9, 180:25-181:2, ECF 425-2;
(5) Dr. Donald “personally attended court hearings and
depositions in this lawsuit, holding himself out as
Phigenix's sole representative, ” see,
e.g., ECF 228 at 3:14 (Claims Constr. Hearing Tr.).
to Genentech, these facts make clear that Dr. Donald
“was, and is, the party ultimately responsible for the
conduct that the Court found exceptional, ” including
authorizing the case without pre-suit testing and, in the
face of potentially anticipating prior art, filing IPRs and
proceeding with the case after the Court's first summary
judgment order on February 24, 2017. Mot. at 4.
Donald submitted a declaration in opposition to
Genentech's motion. Donald Opp., ECF 460. He presents the
following counter-testimony and evidence to oppose
(1) Dr. Donald avers that Phigenix has over one hundred
shareholders and has gone through multiple rounds of
fundraising. He states and submits documentation showing that
he is one of five members of Phigenix's Board of
Directors and that “the Board, by majority vote, made
the decision to file the lawsuit in this case.” Donald
Opp. Decl. ¶¶ 7, 12 & Ex. 9.
(2) Dr. Donald submits a 2013 Executive Summary showing at
least two organizational leaders who were not also Directors
of the Board. Id. ¶ 9 & Ex. 3.
(3) Dr. Donald states that he sent Genentech a diagram of how
KADCYLA worked not as an infringement theory, but instead to
teach Genentech's General Counsel the scientific
mechanisms at issue. Id. ¶¶ 5, 15 &
Exs. 8-9. He avers that his attorneys developed all of the
legal theories at issue in the case, not him. Id.
Specifically, as to the 2017 narrowing of the infringement
theory, he testifies that he did not have any reason to
change the infringement contentions because he believed that
Genentech's understanding of Phigenix's infringement
theory was the same as Phigenix's and because he
understood Phigenix to have been able to keep its '534
patent priority date. Id. ¶¶ 28-36. He
also submits an email exchange with his counsel in which his
counsel sent him a draft response to Genentech's
accusation that Phigenix had narrowed its theory of
infringement, and Dr. Donald responded “I agree with
the points that you've raised in the draft
response” and pointed out relevant statements by
Genentech's counsel at a court hearing. Id.
¶ 38, Ex. 20. He also states that he has never
communicated with Dr. Pestell. Id. ¶ 39.
(4) Dr. Donald testifies that Phigenix authorized and sold 3,
000, 000 shares between 2007 and 2013 to support pre-suit
activities, showing that his raising money for the company
was not for the purposes of litigation. Id. ¶
9. He also submits documentation that his provision of ...