Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_18-cv-01496/USCOURTS-cand-3_18-cv-01496-3/pdf.json

Nature of Suit Code: 376
Nature of Suit: other
Cause of Action: 31:3729 False Claims Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ZACHARY SILBERSHER, et al.,

Plaintiffs,

v.

VALEANT PHARMACEUTICALS 

INTERNATIONAL, INC., et al.,

Defendants.

Case No. 3:18-cv-01496-JD 

ORDER RE MOTION TO DISMISS

Re: Dkt. No. 36

This is a qui tam action under the federal False Claims Act (“FCA”), 31 U.S.C. §§ 3729-

3733, and the counterpart statutes of twenty-eight states, and the District of Columbia. In a 

“corrected first amended complaint,” Dkt. No. 10 (“CFAC”), plaintiff-relator Zachary Silbersher 

alleges that defendants fraudulently obtained U.S. Patent No. 8,865,688 (the “’688 patent”), which 

allowed them to raise the price for the prescription drug Apriso by wrongfully excluding generic 

competitors. The false claim is said to be the inflated prices that Medicare, Medicaid and other 

government agencies paid for Apriso prescriptions. 

Silbersher is an attorney, and the CFAC is based on a patent litigation case he handled that 

invalidated the ’688 patent. He was never an employee or an insider at any of the defendant 

companies. The United States has declined to intervene, Dkt. No. 8, and no state or the District of 

Columbia has sought to join as a plaintiff. 

The Valeant and Salix defendants move to dismiss the CFAC under Federal Rule of Civil 

Procedure 12(b)(6) on three grounds: (1) it does not allege an actionable false claim; (2) the claim 

is foreclosed by the FCA’s public disclosure bar; and (3) the claim sounds in fraud and has not 

been alleged with the degree of particularity required by Rule 9(b). Dkt. No. 36. Valeant and 

Salix also moved to stay discovery pending disposition of the Rule 12(b)(6) motion. Dkt. No. 41. 

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Defendant Dr. Falk Pharma GmbH, a German corporation headquartered in Breisgau, 

Germany, joins the motions and the arguments Valeant and Salix make against the CFAC and to 

stay discovery. Dkt. Nos. 42, 52. Falk also filed a separate motion under Rule 12(b)(2) that 

challenged personal jurisdiction in this District, which the Court denied. Dkt. Nos. 43, 108.

The Court heard oral argument on the Rule 12(b)(6) motion. Dkt. No. 94. The case was 

stayed in all aspects pending this order. Id. The federal FCA claim is dismissed under the public 

disclosure bar, and the Court declines to exercise jurisdiction over the state law claims. The 

motion to stay discovery is terminated as moot.

BACKGROUND

As alleged in the CFAC, defendants make and sell Apriso, a drug used to treat 

inflammatory bowel conditions like ulcerative colitis. Dkt. No. 10 ¶ 2. The active ingredient in 

Apriso is mesalamine, which is said to have been used “for decades” for ulcerative colitis and “has 

long been off-patent.” Id. To ensure that mesalamine reaches the bowel and is not metabolized in 

the stomach, it can be encased in a protective enteric coating that dissolves only in the colon. Id. 

¶¶ 3-4. Apriso is a coated and extended release formulation of mesalamine that was approved for 

sale in the United States in 2008. Id. ¶¶ 2, 4. 

The patent situation for mesalamine changed in October 2014, when the United States 

Patent and Trademark Office (“USPTO”) issued the ’688 patent, which has been assigned to Falk 

at all times relevant to this case. Id. ¶¶ 44, 80-82. The ’688 patent relates to the remission of 

ulcerative colitis. Claim 1 recites a “method of maintaining the remission of ulcerative colitis in a 

subject comprising administering to the subject a granulated mesalamine formulation . . . once per 

day in the morning, without food.” ’688 patent, col. 34, ll. 11-15. The patent’s other independent 

claim, claim 16, is identical to claim 1, but adds the limitation of “advising the subject that 

granulated mesalamine should not be taken with antacids.” Id. at col. 35, ll. 5-6.

After the ’688 patent was issued, generics manufacturers sued to invalidate it. Dkt. No. 10 

¶¶ 15-16. The key proceedings took place before the Patent Trial and Appeal Board (“PTAB”). 

The lead plaintiff was GeneriCo, LLC, which filed a petition in December 2015 for inter partes 

review (“IPR”) of the ’688 patent. GeneriCo, LLC v. Dr. Falk Pharma GmbH, Case IPR2016-

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00297, 2017 WL 2211672, at *1 (P.T.A.B. May 19, 2017). IPR was instituted to determine 

whether claims 1 and 16 were unpatentable as obvious over prior art that was available before the

’688 patent application was filed. Id. at *3; see also 35 U.S.C. § 103(a) (2006). 

In May 2017, the PTAB concluded that claims 1 and 16 were unpatentable as obvious.

1

 

The PTAB construed the ’688 patent to address problems with prior mesalamine delivery systems 

such as “sensitivity to conditions that increase gastric pH and cause premature release of 

mesalamine (e.g., ingestion of a meal).” GeneriCo, 2017 WL 2211672, at *2 (citation omitted). It 

determined that the method in the ’688 patent was an obvious solution over several publicly 

available prior art references. These included two press releases by Salix, one of which 

specifically announced the “successful completion” of clinical trials of a granulated mesalamine 

formulation with an enteric coating, id. at *8, and three academic papers: (1) the “Davis -- 1985” 

study by S. S. Davis, The Design and Evaluation of Controlled Release Systems for the 

Gastrointestinal Tract, 2 J. Controlled Release 27-38 (1985); (2) the “Marakhouski” study by Y.

Marakhouski, et al., A Double-Blind Dose-Escalating Trial Comparing Novel Mesalazine Pellets 

with Mesalazine Tablets in Active Ulcerative Colitis, 21 Alimentary Pharmacology Therapeutics

133-40 (2005); and (3) the “Brunner” study by M. Brunner, et al., Gastrointenstinal Transit and 

Release of 5-Aminosalicylic Acid from 153Sm-Labelled Mesalazine Pellets vs. Tablets in Male 

Healthy Volunteers, 17 Alimentary Pharmacology Therapeutics 1163-69 (2003), id. at *3, *8-*9. 

Davis --1985 discussed the effect of food on stomach pH and gastric emptying in connection with 

orally administered medications, as well as the positioned release of drugs in the colon, and used

the treatment of ulcerative colitis as an example. Id. at *8. 

The PTAB made a detailed analysis of this prior art in the course of invalidating the ’688 

patent. See id. at *8-*19. Among other findings, it noted that the Salix press releases disclosed 

“the elements recited in the preamble [to the ’688 patent] and most of paragraph [a] of claim 1” for 

the administration of a granulated mesalamine formulation. Id. at *9. It determined that the 

“without food” limitation “is suggested by either Marakhouski or Brunner in view of Davis --

1 Because the claims were identical save for the antacid advisory and an omission of the article “a” 

from claim 16, the PTAB confined its discussion to claim 1. GeneriCo, 2017 WL 2211672, at *3. 

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1985,” and that these references would have indicated that the method described in the Salix press 

releases “could be advantageously and successfully practiced by administering granulated 

mesalamine without food.” Id. 

The PTAB also found that a person of ordinary skill in the art would have been aware of 

these teachings and motivated to combine them to obtain the advantages of a granulated 

mesalamine formulation administered independent of food. Id. at *14-*15. Consequently, it 

concluded that GeneriCo had established that claims 1 and 16 of the ’688 patent were unpatentable 

as obvious. Id. at *24. 

News sources immediately published reports of GeneriCo’s victory and its implications for 

Apriso. Law360, for example, a national legal publication with wide readership, ran a story on 

May 19, 2017, announcing that GeneriCo “had shown the challenged patent claims would have 

been obvious.” Matthew Bultman, Part of Apriso Patent Nixed in IPR with Hedge Fund Ties, 

Law360 (May 19, 2017, 4:58 p.m. EDT), https://www.law360.com/articles/926213/part-of-aprisopatent-nixed-in-ipr-with-hedge-fund-ties. The article expressly linked the PTAB’s finding of 

obviousness to Apriso, reporting that the decision “invalidated part of a patent covering Apriso, an 

ulcerative colitis treatment.” Id.

2

Falk appealed the PTAB decision to the Federal Circuit. The appeal was pending when the 

CFAC was filed, Dkt. No. 10 ¶ 16, but in June 2019, the Federal Circuit affirmed the decision in 

all respects. Dr. Falk Pharma GmbH v. GeneriCo, LLC, 774 F. App’x 665 (Fed. Cir. 2019). 

Plaintiff-relator Silbersher was deeply involved in GeneriCo’s litigation against the ’688 

patent. He served as a lead counsel for GeneriCo in the PTAB proceedings, and again in 

defending the decision before the Federal Circuit on GeneriCo’s behalf. GeneriCo, 2017 WL 

2211672; Dr. Falk Pharma GmbH, 774 F. App’x at 666. 

The ’688 patent litigation is the foundation on which the CFAC is built. The FCA claim is 

premised on the allegation that defendants wrongfully obtained the ’688 patent by advising the 

2 The Law360 article meets the standards for admissibility set forth in Federal Rule of Evidence

201(b). The Court takes judicial notice of it solely as an indication of what information was in the 

public realm at the time. See Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 

954, 960 (9th Cir. 2010). 

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USPTO during patent prosecution that “administering the claimed granulated mesalamine

formulation without food was not obvious.” Dkt. No. 10 ¶ 9 (emphasis in original). Silbersher

references the patent law doctrine of inequitable conduct, which makes the claims in a patent 

unenforceable or invalid when the applicant violated the duty of candor during prosecution by

deliberately omitting material prior art. Id. ¶ 72. He alleges that defendants “withheld” the 

Brunner and Marakhouski studies from the USPTO to falsely suggest that the advantage of 

administering the formulation without food was “unexpected,” id. ¶¶ 14-15, and “because they 

knew these papers would render the patent invalid as obvious in light of prior art,” id. ¶ 99. The 

CFAC has a number of additional allegations about other omissions and inconsistencies in 

defendants’ statements to the USPTO, see, e.g., id. ¶¶ 88-98, but the heart of Silbersher’s case is 

that defendants obtained the ’688 patent by “willful deceit,” as “confirmed” by the PTAB 

decision, id. ¶ 15. 

The CFAC further alleges that defendants obtained the patent to exclude competition from 

generic versions of Apriso and maintain prices at supracompetitive levels. Id. ¶ 5. It says that 

competition would have lowered the price of Apriso “by at least 80%,” and defendants would have 

lost “at least 90% of Apriso’s market share.” Id. ¶ 24. The ’688 patent allowed defendants to 

escape these adverse impacts by keeping generic formulations of Apriso out of the market from 

July 2012 through the filing of the CFAC in October 2018, and, Silbersher says, possibly beyond. 

Id. ¶¶ 118-122. 

The linchpin of the FCA claim is the allegation that the artificially high prices made a false 

claim out of “each and every” Apriso prescription covered by Medicare, Medicaid, and other 

government agencies. Id. ¶¶ 28-30. The CFAC says that defendants falsely certified that Apriso’s 

price was “fair and reasonable” when it was “unlawfully elevated as a result of Defendants’ false, 

fraudulent, and misleading statements to the Patent Office.” Id. ¶ 30. The CFAC alleges that 

Medicare reimbursed over 460,000 Apriso claims for approximately $183 million between 2011 

and 2016. Id. ¶ 31. State Medicaid programs are said to have paid out approximately $65 million 

for over 175,000 claims during the same period. Id. ¶ 33.

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The CFAC does not say why the government expenditures on Apriso between 2011 and 

2016 are in play under the FCA. The ’688 patent was not issued until October 2014, id. ¶ 7, and it 

was not invalidated by the PTAB until May 2017, id. ¶ 15. No generic manufacturers are alleged 

to have been blocked from entering the market until “possibly” July 2012. Id. ¶ 122. It is also 

unclear how or why “the number and cost of false claims Defendants submitted . . . continued to 

increase in 2017 and 2018,” after the ’688 patent was invalidated. Id. ¶ 33.

DISCUSSION

I. LEGAL STANDARDS

Rule 8 requires a complaint to provide “a short and plain statement of the claim showing 

that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To meet that rule and survive a Rule 

12(b)(6) motion to dismiss, a plaintiff must allege “enough facts to state a claim to relief that is 

plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial 

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 

inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 

678 (2009) (citing Twombly, 550 U.S. at 556). The plausibility analysis is “context-specific” and 

not only invites, but “requires the reviewing court to draw on its judicial experience and common 

sense.” Id. at 679.

“A claim under the FCA must not only be plausible, but pled with particularity under Rule

9(b).” Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th Cir. 2019) (citations omitted). 

It must “state with particularity the circumstances constituting fraud or mistake, including the 

who, what, when, where, and how of the misconduct charged. In addition, the plaintiff must set 

forth what is false or misleading about a statement, and why it is false.” Ebeid ex rel. United 

States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (internal quotations and citations omitted).

The Court may consider judicially noticeable materials on a motion to dismiss. Khoja v. 

Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). “Courts may take judicial notice

of publications introduced to indicate what was in the public realm at the time, not whether the 

contents of those articles were in fact true.” Von Saher v. Norton Simon Museum of Art at 

Pasadena, 592 F.3d 954, 960 (9th Cir. 2010). Similarly, “when a court takes judicial notice of 

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another court’s opinion [on a Rule 12(b)(6) motion], it may do so not for the truth of the facts 

recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over 

its authenticity.” Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001) (internal quotation 

and citation omitted). Defendants filed a request for judicial notice, Dkt. No. 37, which relator did

not oppose, Dkt. No. 44. 

II. THE FALSE CLAIMS ACT

At heart, the motion to dismiss asks whether Silbersher may bring a qui tam action based 

on public litigation before the PTAB, a federal tribunal of administrative judges within the 

USPTO. The answer depends on the meaning and scope of the public disclosure bar and original 

source provisions in the FCA in light of amendments Congress made in 2010. 

A. Background And Current Law

As many cases have observed, the FCA originated during the Civil War to fight corrupt 

suppliers who committed fraud against the United States. See Vermont Agency of Nat. Res. v. 

United States ex rel. Stevens, 529 U.S. 765, 781-82 (2000). The FCA imposes civil liability on 

one who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or 

approval.” 31 U.S.C. § 3729(a)(1)(A). It provides two mechanisms of enforcement. The 

government can bring suit, id. § 3730(a), or, as in this case, a private person may file a qui tam 

action as a relator “for the person and for the United States Government . . . in the name of the 

Government,” id. § 3730(b)(1). The FCA incentivizes whistleblower suits by awarding the relator 

a bounty in the form of a substantial share of the fraudulent payments that are recovered, plus 

attorney’s fees and costs. Id. § 3730(d). 

The public disclosure bar restricts the information that can be used in a qui tam case to 

pursue these generous incentives. Graham Cty. Soil & Water Conservation Dist. v. United States 

ex rel. Wilson, 559 U.S. 280, 293-94 (2010). The basic idea is that if the government already had

notice to investigate the potential fraud, a private action would be “parasitic,” and should not be 

rewarded. Id. at 294. 

Congress has modified the disclosure bar on several occasions to find “the golden mean 

between adequate incentives for whistle-blowing insiders with genuinely valuable information and 

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discouragement of opportunistic plaintiffs who have no significant information to contribute of 

their own.” Id. (citation omitted). From the enactment of the FCA to World War II, there were no 

constraints on the sources of information that could be used as the basis of a qui tam action. This 

period of openness culminated in 1943, when the Supreme Court permitted a relator to recover for 

a false claim he “discovered” simply by reading a federal criminal indictment. Id. (citing United 

States ex rel. Marcus v. Hess, 317 U.S. 537 (1943)). Congress promptly reacted by amending the 

FCA to prohibit actions “based upon evidence or information in the possession of the United 

States . . . at the time such suit was brought.” Id. (citation omitted).

The 1943 disclosure bar proved to be an over-correction that sharply reduced “the volume 

and efficacy of qui tam litigation.” Id. Congress responded with amendments in 1986 aimed at 

striking a better “balance between encouraging private persons to root out fraud and stifling 

parasitic lawsuits” based on public sources. Id. at 294-95. There is no dispute the 1986 

amendments were intended to encourage more private enforcement lawsuits. Id. at 298 (citing 

S. Rep. No. 99-345, at 23-24 (1986), as reprinted in 1986 U.S.C.C.A.N. 5266, 5288-89). At the 

same time, Congress sought to “bar a subset of those suits that it deemed unmeritorious or 

downright harmful.” Id. (emphasis in original). 

Congress amended the disclosure bar again in 2010 in the Patient Protection and 

Affordable Care Act, the well-known healthcare reform bill. These amendments are the current 

law, and they govern this case. Silbersher does not allege that defendants made any false claims 

for payment until July 2012 at the earliest, so the 2010 amendments apply here. See Hughes 

Aircraft Co. v. United States ex rel. Schumer, 520 U.S. 939, 946 n.5 (1997). 

As the public disclosure bar states (31 U.S.C. § 3730(e)(4)):

(A) The court shall dismiss an action or claim under this section 

[FCA], unless opposed by the Government, if substantially the same 

allegations or transactions as alleged in the action or claim were 

publicly disclosed --

(i) in a Federal criminal, civil, or administrative hearing in 

which the Government or its agent is a party;

(ii) in a congressional, Government Accountability Office, or 

other Federal report, hearing, audit, or investigation; or

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(iii) from the news media,

unless the action is brought by the Attorney General or the person 

bringing the action is an original source of the information.

(B) For purposes of this paragraph, “original source” means an 

individual who either (i) prior to a public disclosure under (e)(4)(a), 

has voluntarily disclosed to the Government the information on which 

allegations or transactions in a claim are based, or (2) who has 

knowledge that is independent of and materially adds to the publicly 

disclosed allegations or transactions, and who has voluntarily 

provided the information to the Government before filing an action 

under this section.

With the 2010 amendments, Congress changed public disclosure from a jurisdictional issue

to a defense. Prior to 2010, the FCA stated that “[n]o court shall have jurisdiction” over a qui tam 

claim where the public disclosure bar applied. 31 U.S.C. § 3730(e)(4)(A) (2006). “After the 2010 

Amendments, a court could assert jurisdiction over the relator’s complaint and entertain public 

disclosure as a defense.” Prather v. AT&T, Inc., 847 F.3d 1097, 1103 (9th Cir. 2017). 

Consequently, the public disclosure bar is properly considered in a motion to dismiss when the 

material facts are not in dispute, which is true here. See id. at 1102 (citing United States ex rel. 

Osheroff v. Humana, Inc., 776 F.3d 805, 810 (11th Cir. 2015)). 

B. The CFAC Would Have Been Barred Before 2010

The 2010 amendments are critical to the CFAC. Silbersher acknowledges that, without the 

amendments, the 1986 disclosure bar would be fatal to his claims. As his attorney said at oral 

argument, “[b]efore 2010, there would be no case.” Dkt. No. 102 at 12:24. 

This forthright concession is well taken. In a strikingly similar case, the Ninth Circuit 

affirmed the dismissal of virtually identical FCA claims under the 1986 disclosure bar. Amphastar 

Pharmaceuticals Inc. v. Aventis Pharma SA, 856 F.3d 696, 701 (9th Cir. 2017). A generic drug 

manufacturer had established in another action that a drug patent was unenforceable because the 

patentee had engaged in inequitable conduct by withholding material disclosures from the 

USPTO. Id. at 701-02. The generic company subsequently filed a qui tam complaint alleging that 

the patentee had “obtained an illegal monopoly” over the drug “and then knowingly overcharged 

the United States.” Id. at 702. The circuit court affirmed dismissal on the grounds that the 

material allegations of fraud had been publicly disclosed in the litigation, and so were barred under 

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the 1986 disclosure rules, which applied there. Id. at 702 n.7, 711. Silbersher is quite right to 

recognize that he wouldn’t have a leg to stand on before the 2010 amendments. 

Silbersher is also a far cry from the quintessential whistleblower plaintiff contemplated by

the FCA. The “paradigm qui tam case is one in which an insider at a private company brings an 

action against his own employer. . . . Qui tam suits are meant to encourage insiders privy to a 

fraud on the government to blow the whistle on the crime.” United States ex rel. Fine v. Chevron,

U.S.A., Inc., 72 F.3d 740, 742 (9th Cir. 1995) (en banc) (citation omitted); see also Prather, 847 

F.3d at 1105 (FCA designed “to encourage insiders to come forward with [information about 

possible fraud] where they would otherwise have little incentive to do so.” (brackets in original 

and internal quotation omitted)). Because Congress envisioned the paradigmatic qui tam plaintiff 

to be an inside employee with access to non-public evidence of fraud, the FCA contains an antiretaliation provision that protects relators from discrimination “in the terms and conditions of 

employment.” 31 U.S.C. § 3730(h)(1). 

None of this fits Silbersher. He is, or was, a lawyer at a law firm, and does not allege that 

he was ever an employee or other insider of Valeant, Salix, or Falk. The CFAC indicates that his 

knowledge of defendants’ conduct is based entirely on publicly available prior art references and 

other public documents, and the decision by the PTAB in favor of his client. Nothing in the 

CFAC reflects any non-public or insider evidence. Silbersher says that his information had not 

been publicly disclosed and that he is an original source, Dkt. No. 10 ¶¶ 37-38, 47, but these are 

wholly conclusory allegations unsupported by any facts. They are also inconsistent with the 

panoply of public materials that are discussed in the CFAC. 

At best, Silbersher and the CFAC simply infer FCA violations from publicly available 

evidence. But a “relator’s ability to recognize the legal consequences of a publicly disclosed

fraudulent transaction does not alter the fact that the material elements of the violation already 

have been publicly disclosed.” Prather, 847 F.3d at 1105 (citations omitted). 

C. The CFAC Is Barred Under Current Law

To be sure, Silbersher would protest that these observations are irrelevant because they are 

associated with the 1986 disclosure bar, and Congress opened the door to his case in 2010. It is 

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true that precedents construing the pre-2010 FCA are not dispositive, but it also true that the 

changes in 2010 cannot be construed in a vacuum, as if the long history of the public disclosure 

bar did not exist. The question is whether the 2010 amendments were an incremental adjustment 

of the bar, or, as Silbersher argues, a major sea change such that a qui tam action that would have 

been an opportunistic lawsuit under prior law is now a good case. 

As in all statutory interpretation cases, analysis begins with the plain words of the text. 

Universal Health Servs., Inc. v. United States ex rel. Escobar, ___ U.S. ___, 136 S. Ct. 1989, 1999 

(2016). The “inquiry must cease if the statutory language is unambiguous” and “the statutory 

scheme is coherent and consistent.” Schindler Elevator Corp. v. United States ex rel. Kirk, 563 

U.S. 401, 412 (2011) (citations omitted).

This fundamental rule is supplemented by two other principles of interpretation. The first 

is that claims of a sea change in the law should be treated with caution. Congress “does not alter 

the fundamental details of a regulatory scheme in vague terms or ancillary provisions -- it does 

not, one might say, hide elephants in mouseholes.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 

457, 468 (2001). Silbersher’s case assumes just that. It hinges on the proposition that Congress 

made a major change to the public disclosure bar in a short section inserted in a historic and 

massive healthcare reform law.

The second guiding principle is that the 2010 amendments must be construed in light of the 

statute as a whole and the purpose of the disclosure bar. See Schindler, 563 U.S. at 409-10. To 

“determine the meaning of one word in the public disclosure bar, we must consider the provision’s 

‘entire text,’ read as an ‘integrated whole.’” Id. at 408 (quoting Graham Cty., 559 U.S. at 290, 

293 n.12). The Court bears “the conventional judicial duty to give faithful meaning to the 

language Congress adopted in the light of the evident legislative purpose in enacting the law in 

question.” Graham Cty., 559 U.S. at 298 (citation omitted). This is all the more true here because 

there is no legislative history that might shed some light on the 2010 amendments, even subject to 

the usual caveats about relying on such history. See United States ex rel. Moore & Co., P.A. v. 

Majestic Blue Fisheries, LLC, 812 F.3d 294, 299 (3d Cir. 2016). 

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While the historical path of the public disclosure bar sometimes “raises more questions 

than it answers,” there is no doubt that Congress has always acted “to strike a balance between 

encouraging private persons to root out fraud and stifling parasitic lawsuits.” Schindler, 563 U.S. 

at 412-13 (quoting Graham Cty., 559 U.S. at 294-96). The 2010 amendments were not a flat-out 

rejection of the principle that qui tam suits should be barred where “the Government was on notice 

to investigate the fraud before the relator filed his complaint.” United States ex rel. Mateski v. 

Raytheon Co., 816 F.3d 565, 574 (9th Cir. 2016); see also Schindler, 563 U.S. at 410. It is still the 

case that the “public disclosure bar is intended to encourage suits by whistle-blowers with 

genuinely valuable information, while discouraging litigation by plaintiffs who have no significant 

information of their own to contribute.” Mateski, 816 F.3d at 570 (citing Graham Cty., 559 U.S. 

at 294-95). 

The factors for determining when the bar applies also have not materially changed. The 

bar applies when: (1) the disclosure at issue occurred through one of the channels specified in the 

statute; (2) the disclosure was “public”; and (3) the relator’s action is substantially similar to the 

allegations or transactions publicly disclosed. Id. at 570, 573. “Courts have interpreted 

‘allegation’ to refer to a direct claim of fraud, and ‘transaction’ to refer to facts from which fraud 

can be inferred.” Id. at 571. 

These factors warrant dismissal here, just as they did in Amphastar Pharmaceuticals. The

prior proceeding there for inequitable conduct was held to constitute a disqualifying public 

disclosure even though the allegations “never mentioned any false claims submitted to or paid by 

the federal government and state governments.” 856 F.3d at 704. The only new allegation 

Amphastar made in the FCA case was “that the government also bought the drug while Aventis 

held its illegal monopoly, but this is an obvious inference based on the publicly disclosed 

allegations.” Id. As a result, the “allegations in this case are so ‘substantially similar’ to the prior 

allegations that we are satisfied the public disclosure bar applies.” Id. (citing Mateski, 816 F.3d at 

573-74). 

So too, here. The allegations in the CFAC about the obviousness of the ’688 patent, and 

defendants’ allegedly nefarious conduct in obtaining it, were all disclosed in the PTAB 

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proceedings. If anything, the substantial similarity between the prior litigation and the CFAC is 

even more evident than in Amphastar because the CFAC takes its key allegations directly out of

the PTAB’s findings. The CFAC expressly depends on the PTAB’s finding of obviousness, 

alleging that “Defendants’ willful deceit was confirmed on May 19, 2017, when the Patent 

Office’s Patent Trial and Appeal Board (‘PTAB’) invalidated the ’688 Patent on the grounds it 

was obvious in light of the Brunner and Marakhouski articles.” Dkt. No. 10 ¶ 15.

A good argument can be made that the PTAB decision also foreshadowed the CFAC’s 

inequitable conduct theory, even though inequitable conduct is outside the scope of IPR

proceedings. See 35 U.S.C. § 311(b). The PTAB highlighted that “Dr. Roland Greinwald is the 

head of research and development at Falk, with responsibility for pharmaceutical development and 

clinical development” and “is a co-author of Marakhouski and Brunner.” GeneriCo, 2017 

WL 2211672, at *6 (citations omitted). The point of this observation is that the failure to disclose 

those studies is even more suspect given that a co-author worked at Falk during the patent 

prosecution stage. Similarly, in concluding that it would have been obvious to a person of 

ordinary skill in the art to combine the two Salix press releases with the Marakhouski and Brunner 

studies, the PTAB found that the “evidence further establishes that all four references pertain to a 

granulated mesalamine formulation that was provided by or licensed from the same company --

Falk (Patent Owner).” Id. at *14. The PTAB raised several flags about the possibility of 

impropriety before the USPTO. 

As in Amphastar, the CFAC adds nothing to the PTAB’s findings except the bare assertion

that defendants “intentionally withheld [prior art] from the Patent Office,” Dkt. No. 10 ¶ 15, and 

the inference of an FCA violation. In effect, Silbersher simply seized upon a favorable patent 

decision in a case he litigated and added the new punchline of a false claim. That is the 

quintessence of the opportunistic and “parasitic” lawsuit Congress has always intended to bar. See 

Prather, 847 F.3d at 1105. The possibility that Silbersher’s status as a lawyer “may have enabled 

[him] to formulate [his] novel legal theory of fraud is irrelevant to the question of whether the 

material transactions giving rise to the alleged fraud were already disclosed in the public domain 

in the first place.” A-1 Ambulance Serv., Inc. v. California, 202 F.3d 1238, 1245 (9th Cir. 2000).

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Silbersher does not seriously dispute the overall purpose of the public disclosure bar or the 

precedents as discussed so far. His main argument is that “[u]nder the plain words of the statute as 

it exists today, the PTAB is not an enumerated fora” that might trigger the disclosure bar. Dkt. 

No. 102 at 14:18-19. In his view, the PTAB litigation and decision do not amount to a disclosure 

under a disqualifying public channel in the current FCA, and so this lawsuit is not barred. 

The point is not well taken. Defendants do not dispute that the first channel in

Section 3730(e)(4)(A)(i) is not applicable because the PTAB proceedings were not “a Federal 

criminal, civil, or administrative hearing in which the Government or its agent is a party.” But the 

second channel in Section 3730(e)(4)(A)(ii) is not subject to the same government-party 

limitation. This subsection bars the use of substantially similar allegations or transactions 

disclosed “in a congressional, Government Accountability Office, or other Federal report, hearing, 

audit, or investigation.” This plain text shows that the government need not be a party for the bar 

to arise in a federal forum. And under the prior version of the FCA, a “‘[h]earing’ in this context 

is synonymous with ‘proceeding.’” A-1 Ambulance Serv., 202 F.3d at 1244. This construction 

was not changed by Congress in 2010 and carries over to the amended statute. See Lamar, Archer 

& Cofrin, LLP v. Appling, ___ U.S. ___, 138 S. Ct. 1752, 1762 (2018) (Congress is presumptively 

aware of a “longstanding judicial interpretation” and retains that meaning if language is not 

changed in amendments.). 

Section 3730(e)(4)(A)(ii) encompasses the PTAB proceedings that are the foundation of 

the CFAC. The PTAB is an adjudicative body within the USPTO that conducts IPR trials and 

other proceedings before administrative patent judges. 35 U.S.C. § 6. This functionality falls 

squarely within the plain meaning of a federal hearing as used in Section 3730(e)(4)(A)(ii), and 

Silbersher offers no good reason to conclude otherwise. The possibility of some overlap in the 

definition of a “hearing” between Section 3730(e)(4)(A)(ii) and Section 3730(e)(4)(A)(i) is not 

problematic. As the Supreme Court determined in Schindler, the FCA “mentions ‘administrative 

hearings’ twice, reflecting intent to avoid underinclusiveness even at the risk of redundancy.” 563

U.S. at 408. Those are the same “hearings” at issue here. 

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Nor does a potential overlap threaten to make a part of the FCA entirely redundant. Our 

circuit held as much when it affirmed the dismissal of a whistleblower action under 

Section 3730(e)(3), which prohibits qui tam suits “based upon allegations or transactions which 

are the subject of a civil suit or an administrative civil money penalty proceeding in which the 

Government is already a party.” See United States ex rel. Bennett v. Biotronik, Inc., 876 F.3d 

1011 (9th Cir. 2017). Recognizing “there will be numerous relators who are barred both by the 

government action bar, § 3730(e)(3), and the public disclosure bar, § 3730(e)(4)(A)(i)” under its 

interpretation, the circuit nevertheless concluded, “[t]he statutes do not entirely overlap, and their 

redundancy does not persuade this court to read the statutory language in an overly narrow 

manner.” Id. at 1019.

This is enough to dismiss the CFAC. For the sake of completeness, the Court finds that the 

news media bar in Section 3730(e)(4)(A)(iii) also requires dismissal. As noted, the online news

service Law360 published an article on May 19, 2017, entitled Part of Apriso Patent Nixed in IPR 

with Hedge Fund Ties. See supra note 2 and accompanying text. The webpage 

(https://www.law360.com/articles/926213/part-of-apriso-patent-nixed-in-ipr-with-hedge-fund-ties) 

reported on the substance of the PTAB’s obviousness determinations and the link to Apriso, and 

included all of the case name and number information needed to find the decision. The article 

summarized the prior art references, mentioning the Salix press releases and academic papers. 

The article may also have included a link directly to the PTAB’s decision, which relator has 

conceded would bar his suit, Dkt. No. 102 at 12:23-13:2, although that is not entirely clear from 

the record. 

These are “facts from which fraud can be inferred” in a public disclosure by the news 

media. Mateski, 816 F.3d at 571. Contrary to Silbersher’s suggestion, Dkt. No. 45 at 11, the 

public disclosure need not contain “an explicit allegation of fraud” or “an explicit accusation of 

wrongdoing,” id. at 571 (citations omitted); see also Amphastar, 856 F.3d at 704 (same). The 

government would have been “on notice to investigate the fraud before the relator filed his 

complaint” from the Law360 article as-is. Mateski, 816 F.3d at 574. 

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D. Silbersher Is Not An Original Source

Silbersher might have been able to move forward with the CFAC despite the disclosure 

bars if he had plausibly alleged that he was an original source of the disclosed information. 31 

U.S.C. § 3730(e)(4)(B). He did not. He makes only a cursory and wholly conclusory allegation 

that he is an original source. Dkt. No. 10 ¶¶ 38, 47. No facts of any sort are offered that might 

show why this assertion is plausible. That will not do for Rule 8 purposes. See Iqbal, 556 U.S. at 

678 (citing Twombly, 550 U.S. at 555). 

This effectively closes the door to Silbersher as an original source, but since leave to 

amend will be granted, a few additional points of guidance are warranted. Silbersher says for the 

first time in his opposition brief that he is an original source because he disclosed the Marakhouski 

and Brunner studies to the PTAB while representing GeneriCo in the IPR proceedings. In 

addition to the fact that an argument in a brief is no substitute for an allegation in the CFAC, see 

Rothschild Digital Confirmation, LLC v. Skedulo Holdings Inc., Case No. 19-cv-2659-JD, 2020 

WL 1307016, at *5 (N.D. Cal. Mar. 19, 2020), the point is not of substantive help to him. 

Pre-filing information disclosed in the course of a relator’s job does not qualify as a 

“voluntary disclosure” under Section 3730(e)(4)(B)(i). See Fine, 72 F.3d at 741; Prather, 847 

F.3d at 1107-08. To be sure, Fine and Prather involved government lawyers who were tasked 

with fraud investigation duties. But Silbersher was engaged in an equivalent undertaking as the 

lead counsel for the generic drug manufacturer in the IPR. Silbersher’s job was to find and use the 

Marakhouski and Brunner studies, and the Salix press releases, to attack the ’688 patent. He “was 

no volunteer. He was . . . compelled to disclose the fraud by the very terms of his employment. 

He no more voluntarily provided information to the government than we, as federal judges 

voluntarily hear arguments and draft dispositions.” Fine, 72 F.3d at 743-44. Silbersher did not 

require the incentive of a qui tam recovery to risk his job or reputation to provide the invalidating 

prior art to the PTAB. Id. at 743 n.3, 745. That’s what he was paid to do, and he did it 

successfully.

Allowing a lawyer to qualify as an original source based on information a client paid him 

to obtain raises a possible ethical problem as well. It could incentivize lawyers to keep an eye out 

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for the possibility of a personal bounty under the FCA when the attorney’s attention should be 

focused solely on the client under the duties of loyalty and candor. See id. at 745 (discussing 

“perverse incentives” of rewarding government auditors for disclosing fraud under FCA). There is 

also the issue of why the lawyer should be allowed to appropriate an FCA claim from an 

underlying case, in lieu of the client who paid for the work. Both would be similarly situated as 

plaintiffs, and it is hard to see how the lawyer would necessarily have a better claim to the relator 

role. 

Silbersher also might have qualified as an original source under the FCA if he had alleged 

“knowledge that is independent of and materially adds to the publicly disclosed allegations or 

transactions, and [he] has voluntarily provided the information to the Government before filing an 

action.” 31 U.S.C. § 3730(e)(4)(B)(2). Congress included the “materially adds” language for the 

first time in the 2010 amendments, and it has not yet been precisely construed. But on any 

reasonable understanding, Silbersher has not alleged that he materially added to the publicly 

disclosed information. He mentions “inconsistencies” in defendants’ statements in prosecuting the 

’688 patent and another patent that “were not raised in the underlying IPR, or anywhere.” Dkt. 

No. 45 at 14. How that might be relevant here is not clear, and in any event, adding a few details 

is hardly the stuff of an original source. See United States ex rel. Solis v. Millennium Pharm., Inc., 

885 F.3d 623, 627 (9th Cir. 2018). 

The Court notes that the CFAC goes on at great length about a set of patents denominated 

as the “Otterbeck Patents.” Dkt. No. 10 ¶¶ 17-18, 100-116. But it is again unclear how these 

patents are relevant to the false claims, since Silbersher attributes Apriso’s inflated price only to

the ’688 patent, not the Otterbeck patents. Id. ¶¶ 20-25; Dkt. No. 45 at 3 n.2. They do not 

materially add to previously disclosed information.

As a final observation, Silbersher does not qualify as an original source under Section 

3730(e)(4)(B)(2) because he did not plausibly allege that he “provided the information [about the 

other patents] to the Government before filing” this action. There is no allegation in the CFAC or 

elsewhere that Silbersher communicated with any pertinent agency before filing this lawsuit. 

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E. No Government Opposition To Dismissal

An FCA claim cannot be dismissed under the public disclosure bar if the federal 

government objects. 31 U.S.C. § 3730(e)(4)(A). The government declined to intervene in this 

case. Dkt. No. 8. It did not file an opposition to defendants’ motion to dismiss, nor did it appear 

at the August 2019 hearing on the motion. Dkt. No. 94. Accordingly, dismissal on the basis of 

the FCA’s public disclosure bar is appropriate.

III. STATE LAW CLAIMS

The Court declines to retain jurisdiction over Silbersher’s remaining state law claims. See 

28 U.S.C. § 1367(c)(3) (district court may “decline to exercise supplemental jurisdiction over a 

claim . . . if the district court has dismissed all claims over which it has original jurisdiction.”). 

CONCLUSION

The CFAC is dismissed under the public disclosure bar. The Court declines to take up 

defendants’ other arguments for dismissal at this time. Although the efficacy of amendment is not 

readily apparent, the Court cannot say it would be futile. Silbersher may file an amended 

complaint consistent with this order by June 15, 2020. No new claims or parties may be added 

without the Court’s prior approval. If this deadline is not feasible in light of the public health 

situation, the parties may agree on a new date by stipulation. If the parties cannot agree, a party 

may ask the Court to extend the deadline. Failure to respond to this order by June 15, 2020, will 

result in dismissal with prejudice under Rule 41(b). The motion to stay discovery is terminated as 

moot.

IT IS SO ORDERED.

Dated: May 11, 2020

JAMES DONATO

United States District Judge

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