Here is an excerpt of another one of the documents filed by Intellect
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07/02/2013 MEMORANDUM OF LAW IN OPPOSITION Memo of Law in Opposition with Redactions for Efiling to Comply with Order on Sealing Motion 002 STANLEY K SHAPIRO :
MEMORANDUM OF LAW OF PLAINTIFF IN OPPOSITION TO MOTION OF
DEFENDANTS TO DISMISS THE COMPLAINT PURSUANT TO.CPLR 3211(a) (7)
FOR FAILURE TO STATE A CAUSE OF ACTION
This memorandum of law is submitted by plaintiff Intellect Neurosciences, Inc. (" Intellect") in opposition to the motion of defendants Pfizer Inc. and its wholly owned subsidiary or division Rinat Neuroscience Corp. (together "Pfizer") to dismiss the complaint pursuant to CPLR 3211 (a) (7) for purportedly failing to state a cause of action.
It is clear, on fair reading of the license agreement (Agreement"), that the US Patent Milestone payment became payable upon the grant by the United States Patent and Trade Office
("USPTO") on May 8, 2012 to Intellect's of the '127 patent, granted upon a patent application listed on Schedule 1 to the Agreement (see Complaint ~~27-28). The plain and ordinary meaning and intent of the contract language, as we review below, is that the patent milestone payment is payable at the time when a Licensed Patent reaches the milestone described in the clause --that is, upon the grant in the United States of a Licensed Patent with at least one Valid Claim that covers a Licensed Product, or if the grant of US patent would have occurred in 2008 before Pfizer's exercise of the option, upon the exercise of the option.
The complaint duly states a cause of action against Pfizer for breach of the Agreement by failing to make the US Patent Milestone payment after it came due upon the grant of Intellect's '127 patent --a breach of contract that is indeed established as a matter of law upon the documentary evidence and facts not in dispute.
Pfizer predicates its motion to dismiss on a false assertion that the underlying contract "expressly conditions payment upon Pfizer's infringement of the patent" (Defendants' Memo of Law at 1). Yet, nowhere in the Milestone payment provision does the Agreement mention "Pfizer's infringement of the patent" or any like terms. Certainly, the Agreement does not "expressly condition" payment on "Pfizer's Infringement".
Far from conditioning the Patent Milestone on there first being infringing commercial sales by Pfizer, the parties contemplated at the time the contract was made that the milestone payment would become payable on the grant of a pateilt to Intellect, even while Pfizer was still in early Phase I studies, years away from any conceivable FDA approval and commercial sales of a product. 1
When the court looks to the prior negotiations to determine what was intended, any possible doubt as to the meaning of the Milestone patent provision is removed, demonstrating conclusively that the parties contemplated and intended that the Patent Milestone would be achieved and payable even while the product was still only in Phase I study, as soon as one of the listed patents on Schedule 1 was granted in the United States --indeed even as early as the first business after January 1, 2009.
The relevant negotiations are set forth and documented in the affidavit of Intellect's CFO and president Elliot Maza and plaintiff's Exhibits B to M submitted herewith in opposition to defendants' motion to dismiss, and are referred to but not repeated at length in this Memo of Law.
Moreover, that the milestone payrent was intended to be due upon the grant of the patent, notwithstanding that the grant was made before any FDA approval or drug on the market is further proved by the fact that the European Patent milestone payment was actually made, "bundled" into the Exercise Fee, tv-hen the European patent was granted before the Agreement was signed, without any infringing commercial sales having been made.
The evidence in context demonstrates that in reaching the Agreement, Intellect and Pfizer were guided by the payment terms of Intellect's non-exclusive license with Wyeth and Elan, entered prior to the negotiation of the subject license agreement with Pfizer, with its "most favored nation" clause.
Thus, an email from Pfizer's Assistant General Counsel, Mark Cooper, dated June 12, 2008, expressed Pfizer's manifest understanding and intent that the Patent Milestone payments were to be payable upon the grant of the patent, even if granted in 2008, and not at all conditioned on there first being infringing Pfizer commercial sales. Rather, Pfizer's General Counsel staes in the email expressing the parties' intent at the time the Agreement was made that:
"For clarification, the intent was [to make] the milestone payable when the Elan/Wyeth milestone is payable." (Exhibit I) (emphasis added).
This intent is integrated in the final Agreement, which incorporate as Schedule 2 a Press Release, issued in conjunction with the signing that is expressly integrated into the Agreement
(Exhibit A1, §1.1 at 1)2, which stated that "[r]ecently, Intellect
receiv~d its first milestone payment under its license with Wyeth and Elan related to this patent family" (Agreement, Exhibit AI, Schedule 2) [referring to the analogous European Patent Milestone that was triggered by the grant a patent by the European Patent Office on July 30, 2008]. Pfizer knew there were no infringing commercial sales nor regulatory approvals yet by Elan or Wyeth of any licensed products.
On its motion to dismiss, Pfize~ essentially asks the Court to rewrite the contract, to infer a condition to the Patent Milestone nowhere stated in the Agreement, that "until Pfizer infringed a newly issued Intellect patent, no milestone payment would be due"
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(Defendants' Memo of Law at 4). If ~he parties really had intended such a condition, they could easiJy and clearly have expressly stated so in the agreement that until Pfizer infringed the patent no milestone payment would be due --instead of trying to imply such a condition by resorting to the strained and specious logic artificially squeezed by implicatiqn irom isolating words out of context in the defined terms, as now argued by Pfizer.
Pfizer's proposed interpretation, to infer such a material unstated condition to the obligation and time to pay the Patent milestone is further belied by Section 3.1.3[c), within the Milestone Payment section of the Agreement, which shows the intention to fully and clearly e~(press the understanding with respect to the milestone payments, repeating "[fJor the avoidance of doubt" that:
"in the event that a Party has given the other Party any notice of termination of this Agreement under Article 7, no further payments under Section 3.1.3(a) shall become due following the date of such notice, but all payments due with respect to milestones achieved prior to such date shall remain payable :in accordance with their terms"
(License Agreement Section 3.1. 3 [c)) (emphasis added). 4
Pfizer's motion papers also make the unfounded, evidently false representation that "Pfizer stopp~d practicing any technology covered by Intellect's patent" befor~ that patent was issued on May 8, 2012. Documentary evidence show continuing efforts by Pfizer to develop ponezumab directed to amyloid beta as a treatment for human disease, including, notably, filing in March 2013 to begin a new Phase II study (see Exhibit 0 to Maza Affidavit), as well as continued work on earlier studies (see Defendants' Exhibit 7, and Plaintiff's Exhibit N). Pfizer's continued work and interest in development ponezemab as a commercial product presumably explains why Pfizer did not exercise its right to terminate the Agreement prior to the May 2012 grant of the patent, which could have relieved it of the obligation to pay the US Patent Milestone payment had Pfizer terminated the Agreement.
The documentary evidence of the negotiations, including particularly Pfizer's own proposed term sheets and drafts, put the Agreement in context to interpret the intended meaning of the Patent Milestone Provision at the time it was made, and evidence that Pfizer has wilfully and knowingly breached the Agreement. The contrived construction argued by Pfizer in support of its spurious motion to dismiss clearly does not' reflect the intention of the parties when the contract was made, and appears to be an unworthy after the fact attempt by Pfizer to rationalize its wilful default in payment, suggestive of bad faith on Pfizer's part.
