Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Farmaceutisk Laboratorium Ferring v. Shire U.S.

April 7, 2009


The opinion of the court was delivered by: DuBOIS, J.



For the purposes of this Memorandum, the factual and procedural history, as alleged in the Complaint, is as follows. Plaintiffs Farmaceutisk Laboratorium Ferring A/S t/a Ferring A/S, Ferring International Center S.A., and Ferring Pharmaceuticals A/S (collectively "plaintiffs" or "Ferring") own the trademark PENTASA(r). (Compl. ¶ 13.) PENTASA(r) is a pharmaceutical product approved by the United States Food and Drug Association ("FDA") for the treatment of ulcerative colitis; the active ingredient is 5-aminosalicylic acid ("5-ASA"). (Compl. ¶¶ 13, 20.) For many years, plaintiffs also owned and licensed patents that covered certain oral formulations of 5-ASA, including the specific formulation of PENTASA(r) marketed by defendant; the last of these patents expired on October 2, 2007. (Compl. ¶¶ 15, 17.)

On April 25, 1983, plaintiffs entered into an exclusive license agreement with Marion Laboratories, Inc. ("Marion"), which allowed Marion to manufacture and sell certain 5-ASA formulations under the patents and the trademark PENTASA(r) in the United States and Canada ("1983 Agreement"). (Compl. ¶ 21; 1983 Agreement, Ex. A to Compl.) On April 1, 1998, Marion, "now known as" Hoechst Marion Roussel, Inc. ("HMRI") granted to Roberts Laboratories, Inc. ("Roberts") an exclusive sublicense under the 1983 Agreement ("1998 Sublicense"). (Compl. ¶¶ 22, 23; 1998 Sublicense, Ex. B. to Compl.) Roberts thereafter merged with Shire Pharmaceuticals Group, PLC, the parent company of Shire U.S, Inc., defendant; defendant then possessed an exclusive sublicense to manufacture and sell the licensed formulations under the trademark PENTASA(r). (Compl. ¶¶ 24--26.) To resolve a dispute over the definition of the term "Net Sales" in the 1983 Agreement and the 1998 Sublicense, plaintiffs and defendant entered into a settlement agreement dated February 18, 2005, which provided that the 1983 Agreement and the 1998 Sublicense would expire on October 2, 2007 ("2005 Settlement Agreement"). (Compl. ¶¶ 39--40; 2005 Settlement Agreement §§ 2.1.2, 2.1.3., Ex. F to Compl.) Plaintiffs also granted defendant an exclusive license for the use of the PENTASA(r) trademark "in connection with all oral products containing 5-ASA, for consideration of 2% of Net Sales...." (2005 Settlement Agreement § 2.4.)*fn1

On March 19, 2007, defendant began marketing and selling LIALDA(r), a different formulation of 5-ASA also approved by the FDA to treat ulcerative colitis. (Compl. ¶¶ 47--55.)

On February 22, 2008, plaintiffs filed a Complaint naming as defendants Shire U.S., Inc. and Shire Pharmaceutical Development, Inc. The Complaint alleged the following causes of action:

Count I Shire U.S.'s Breach of the Implied Duty of Good Faith/Best Efforts/Due Diligence to Exploit the Exclusive License Count II Shire U.S.'s Breach of the 1983 License Agreement Count III Shire U.S.'s Breach of the 2005 Settlement Agreement Count IV Fraudulent Inducement of the 2005 Settlement Agreement Count V Shire Pharmaceutical Development, Inc.'s Breaches of the 2005 Safety Information Agreement Defendants answered the Complaint and asserted two counterclaims, as follows: Count I Shire U.S. v. Farmaceutisk Laboratorim A/S t/a Ferring A/S-Declaratory Judgment Count II Shire Pharmaceuticals v. Ferring Pharmaceuticals A/S-Declaratory Judgment and Breach of Safety Information Agreement

On November 25, 2008, the parties stipulated to the dismissal of Count II of defendants' counterclaims, which the Court approved. On December 5, 2008, the Court approved the parties' stipulation to the dismissal of Count V of plaintiffs' Complaint and the dismissal of defendant Shire Pharmaceutical Development, Inc. On December 29, 2008, defendant filed the instant Motion for Judgment on the Pleadings, seeking dismissal of the remaining counts.


A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is analyzed under the same standard as a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). See Shelly v. Johns-Manville Corp., 798 F.2d 93, 97 n.4 (3d Cir. 1986); Regalbuto v. City of Phila., 937 F. Supp. 374, 376 (E.D. Pa. 1995), aff'd 91 F.3d 125 (3d Cir. 1996). A motion for judgment on the pleadings will only be granted where "the plaintiffs would not be entitled to relief under any set of facts that could be proved." Green v. Fund Asset Mgmt., L.P., 245 F.3d 214, 220 (3d Cir. 2001). In determining whether a plaintiff has stated a claim for relief, the court must view the facts and inferences to be drawn from the pleadings in the light most favorable to the non-moving party. Inst. for Scientific Info., Inc. v. Gordon & Breach, Sci. Publishers, Inc., 931 F.2d 1002, 1004 (3d Cir. 1991).

A motion for judgment on the pleadings, like a motion to dismiss, tests the legal sufficiency of a claim in light of the facts pled in the complaint. To survive such a motion, "a civil plaintiff must allege facts that 'raise a right to relief above the speculative level....'" Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)). In other words, a claim must contain "'enough factual matter (taken as true) to suggest'" the elements of the claims asserted. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 127 S.Ct. at 1965).


A. Choice of Law

The 1983 Agreement and the 1998 Sublicense contain Missouri choice of law provisions. (1983 Agreement § 16.00, Ex. A to Compl.; 1998 Sublicense § 15.01, Ex. B. to Compl.) The 2005 Settlement Agreement, however, does not expressly designate what law will control, and the parties dispute whether the Court should apply Missouri or Pennsylvania law. (See Def.'s Mot. 10; Pls.' Resp. 19--20 n.10.) For the purposes of this Memorandum, whether Missouri or Pennsylvania law governs the construction of the 2005 Settlement Agreement is irrelevant, as the Court would reach the same conclusions applying the law of either jurisdiction. Accordingly, the Court declines to rule at this time on the question of what law governs the 2005 Settlement Agreement.

B. Count I: Shire U.S.'s Breach of the Implied Duty of Good Faith/Best Efforts/Due Diligence to Exploit the Exclusive License

In Count I, plaintiffs allege that by marketing and selling LIALDA(r), allegedly a PENTASA(r) competitor, defendant breached the duties of good faith and best efforts contained, by implication, in the 1983 Agreement, the 1998 Sublicense, and the 2005 Settlement Agreement.*fn2

(Compl. ¶¶ 120--127.) In its motion, defendant counters that the only express non-compete clause contained in the contracts expired eight years ago and that courts will not imply a non-compete obligation. (Def.'s Mot. 15.)

Both Missouri and Pennsylvania law imply a general obligation of good faith and fair dealing in every contract. Finova Capital Corp. v. Ream, 230 S.W.3d 35, 45 (Mo. Ct. App. 2007); Countrywide Servs. Corp. v. SIA Ins. Co., 235 F.3d 390, 393 (8th Cir. 2000) (applying Missouri law); Pierce v. QVC, Inc., 555 F. Supp. 2d 499, 502--03 (E.D. Pa. 2008) (applying Pennsylvania law); Kaplan v. Cablevision of PA, Inc., 671 A.2d 716, 721--22 (Pa. Super. Ct. 1996). "This implied covenant imposes upon each party the duty to do nothing destructive of the other party's right to enjoy the fruits of the contract and to do everything that the contract presupposes they will do to accomplish its purpose." Conoco, Inc. v. Inman Oil Co., 774 F.2d 895, 908 (8th Cir. 1985) (applying Missouri law) (citation omitted); accord John B. Conomos, Inc. v. Sun Co., 831 A.2d 696, 706 (Pa. Super. Ct. 2003). The implied covenant of good faith and fair dealing is not "an everflowing cornucopia of wished-for legal duties; indeed, the covenant cannot give rise to new obligations not otherwise contained in a contract's express terms." Comprehensive Care Corp. v. RehabCare, 98 F.3d 1063, 1066 (8th Cir. 1996) (applying Missouri law) (citation omitted); accord John B. Conomos, 831 A.2d at 706.

Courts have distinguished between the general duty of good faith and the more specific duty to use reasonable efforts,*fn3 which is implied in the context of an exclusive license. See, e.g., Permanence Corp. v. Kennametal, Inc., 908 F.2d 98, 100 n.2 (6th Cir. 1990) (applying Pennsylvania law); Emerson Radio Corp. v. Orion Sales, Inc., 253 F.3d 159, 169 (3d Cir. 2001); Flights Concepts Ltd. P'ship v. Boeing Co., 819 F. Supp. 1535, 1550 (D. Kan. 1993), aff'd 38 F.3d 1152 (10th Cir. 1994); Beraha v. Baxter Health Care Corp., 956 F.2d 1436, 1443 (7th Cir. 1992). The implied duty of an exclusive licensee to use reasonable efforts to raise revenue originated in the landmark case of Wood v. Lucy, Lady Duff-Gordon, 118 N.E. 214 (N.Y. 1917). In Wood, defendant, a fashion designer, granted plaintiff the exclusive right to place her endorsement on the designs of others and to market defendant's designs. Id. at 214. Although the contract contained no express promise, the court implied an obligation to use "reasonable efforts to bring profits and revenues into existence" because defendant's only recompense from the contract was royalties from plaintiff's sales of her endorsement and designs and defendant was thus at plaintiff's mercy. Id. at 214--15. "Unless [plaintiff] gave his efforts, [defendant] could never get anything." Id. at 214. Such implication is necessary "because otherwise the contract at issue would lack mutuality of obligation and be inequitable." Permanence, 908 F.2d at 100 (citations omitted); accord Nat'l Refining Co. v. Cox, 57 S.W.2d 778, 781 (Mo. Ct. App. 1933).

Both Missouri and Pennsylvania law have recognized that an obligation to use reasonable efforts "will be implied in a contract granting an exclusive agency if the plaintiff depends for its consideration solely upon sales of the licensed product." Permanence, 908 F.2d at 100; accord Nat'l Refining, 57 S.W.2d at 781; Maxwell v. Schaefer, 112 A.2d 69, 72 (Pa. 1955). The cases recognizing such an implied obligation in Missouri and Pennsylvania, as well as in other jurisdictions, do so when the licensor must rely entirely on the good faith of the licensee to receive any consideration because the licensor's sole compensation is royalties from sales of the licensed product. See, e.g., Permanence, 98 F.2d at 102; Post Mach. Co. v. Tanges, 705 F. Supp. 55, 58 (D.N.H. 1989); Vacuum Concrete Corp. v. Am. Mach. & Foundry Co., 321 F. Supp. 771, 773 (S.D.N.Y. 1971); Mech. Ice Tray Corp. v. Gen. Motors Corp., 144 F.2d 720, 725 (2d Cir. 1944). When the licensor receives other compensation for the exclusive license, such as an advance payment or a guaranteed minimum royalty payment, the licensor is no longer completely at the mercy of the licensee and the need for an implied obligation of reasonable efforts diminishes. See, e.g., Permanence, 98 F.2d at 102; Vacuum Concrete, 321 F. Supp. at 773. Even if the licensor's compensation is solely ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.