Supply and Purchase Agreement Triggers On-Sale Bar Provision of 35 USC § 102(b)
The US Court of Appeals for the Federal Circuit reversed the district court and found that a Supply and Purchase Agreement between Helsinn and third-party MGI Pharma, Inc. (MGI) before the critical date of the asserted patents constituted a sale of the claimed invention. The court concluded that, after the Leahy-Smith America Invents Act (AIA), the details of the invention need not be publicly disclosed in the terms of sale. The court also noted that it did not broadly hold that distribution agreements will always be invalidating under § 102(b), merely that the Agreement at issue was. Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc. et al, Case Nos. 2016-1284, 2016-1787 (Fed. Cir. May 1, 2017) (Dyk, J.).
Helsinn owns four patents directed to formulations and use of palonosetron in reducing the likelihood of chemotherapy-induced nausea and vomiting (CINV). All four patents claim priority from the same provisional application, filed on January 30, 2003. Three of the patents were filed before the effective date of the AIA, while one was filed after the AIA effective date. On April 6, 2001, during Phase III clinical trials, Helsinn entered into two agreements with MGI, agreeing to sell palonosetron products (defined as having 0.25 mg or 0.75 mg doses of palonosetron) to MGI for an upfront payment of $11 million, plus ongoing royalties. The agreements were announced in a press release and in MGI’s Securities and Exchange Commission (SEC) filings, which included partially redacted copies of both agreements. Neither the press release nor the SEC filings disclosed the actual dosage amounts of palonosetron. Ultimately, the US Food and Drug Administration (FDA) approved Helsinn’s application to market a 0.25 mg palonosetron product.
Teva subsequently filed an abbreviated new drug application (ANDA) seeking approval to market a generic version of Helsinn’s 0.25 mg palonosetron product. Helsinn brought suit against Teva, alleging infringement of various claims of its four palonosetron patents. Teva defended on the ground that asserted claims were invalid under the on-sale bar provision of 35 USC § 102(b). The district court found that the patents-in-suit were not invalid. With respect to the three pre-AIA patents, the district court found there was a commercial offer for sale before the critical date, but that the invention was not ready for patenting. With respect to the fourth patent, governed by the AIA, the district court concluded that there was no commercial offer for sale because the AIA changed the relevant standard and, in any event, the invention was not ready for patenting.
The Federal Circuit reversed and specifically addressed the following three questions: (1) whether the inventions claimed in Helsinn’s pre-AIA patents were subject to a sale or offer for sale prior to the critical date; (2) whether the AIA changed the meaning of the on-sale bar under 35 USC § 102(b) such that there was no sale as to the invention claimed Helsinn’s fourth (post-AIA) patent; and (3) whether the inventions were ready for patenting at the time of the sale or offers for sale.
As to the first question, the Federal Circuit found that there was a sale of the pre-AIA patented palonosetron products. The court relied heavily on the framework for determining whether there is an offer for sale set forth in its recent en banc decision in Medicines Co. v. Hospira, Inc., 827 F.3d 1363 (Fed. Cir. 2016). In Medicines, the court explained that the question of an on-sale bar must be “analyzed under the law of contracts as generally understood” and “must focus on those activities that would be understood to be commercial sales and offers for sale in the commercial community.” In this context, the court found that the Supply and Purchase Agreement contained all the hallmarks of a commercial offer for sale (e.g., price, method of payment and method of delivery). It obligated MGI to purchase exclusively from Helsinn and obligated Helsinn to supply MGI’s requirements of the 0.25 and 0.75 mg doses of palonosetron products if approved by FDA. And while certain terms of the Supply and Purchase Agreement were redacted from the public copy of the agreement, the court found there was no argument that the transaction itself remained confidential.
The court expressly rejected Helsinn’s arguments that the Supply and Purchase Agreement was not a commercial sale because: (1) it was contingent upon FDA approval; and (2) it was uncertain because it covered the 0.25 mg dose, the 0.75 mg dose, and both doses. The court found that an agreement contracting for the sale of the claimed invention contingent on regulatory approval is still a commercial sale as the commercial community would understand that term. Helsinn also argued that Medicines stands for the proposition that commercial activities with a third-party should not be invalidating if those same activities could be performed in-house without triggering the on-sale bar. The court rejected this argument stating that “[s]uch a broad principle would largely eviscerate the on-sale bar provision except as to sales to end users; that was not the holding of Medicines.”
Addressing whether the AIA changed the meaning of the on-sale bar under 35 USC § 102, the court held that the change to the on-sale bar language in § 102 did not change the outcome in this particular case because the sale between Helsinn and MGI was public. Prior to the AIA, settled law established that even secret sales of a claimed invention triggered the on-sale bar. By enacting the AIA, Congress amended § 102 to bar the patentability of an invention that was “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 USC § 102(a)(1). Helsinn argued that the AIA changed the law by adding the “otherwise available to the public” phrase. According to Helsinn, the on-sale bar now does not encompass secret sales and requires that a sale make the invention available to the public in order to trigger application of the on-sale bar. The district court agreed with Helsinn and found that this change in language removed the ability of a secret sale to invalidate a patent. The Federal Circuit reversed because it found the sale between Helsinn and MGI was public, holding that the on-sale bar only requires the sale to be public, not the details of the invention to be public.
Finally, the Federal Circuit found that under the ready-for-patenting framework of Pfaff, the patented invention, i.e., the use of 0.25 mg dose of palonosetron to reduce the likelihood of CINV in patients, was actually reduced to practice and ready for patenting prior to the critical date. The Federal Circuit relied on Helsinn’s Phase III trial and summary of the trial data (both before the critical date) that showed over 80 percent of patients receiving 0.25 palonosetron experienced relief from nausea for 24 hours, as required by the claims of the asserted patents.
Accordingly, the Federal Circuit reversed the district court and found all the asserted patents invalid under both the pre-AIA and post-AIA versions of the on-sale bar.
Second Circuit Allows Class Action Suit Involving Diabetes Drug to Proceed
Purchasers of Takeda Pharmaceuticals Company’s branded diabetes drug, ACTOS, filed an antitrust suit alleging that Takeda falsely described two patents to the US Food and Drug Association (FDA) and, as a result, delayed competitors from introducing generic versions of the drug and caused the purchasers to pay monopoly prices for ACTOS during this period. In re Actos End-Payor Antitrust Litigation, Case No. 15-3364 (2d Cir. 2017) (Rakoff, J.).
Under the Hatch-Waxman Act, how a brand holder classifies its patents affects the manner in which an applicant seeking to market a generic version of the drug must assure the FDA that the generic drug will not infringe the brand’s patents. Many generic suppliers file a “Paragraph IV certification” stating that the brand’s patents are invalid or will not be infringed and the first generic supplier to file a Paragraph IV certification receives a 180-day period of generic exclusivity. This filing typically results in the brand holder launching a patent infringement suit, which triggers a 30-month waiting period before the FDA can approve the generic drug supplier’s application. When a brand’s patents cover a method of using the drug, however, a generic supplier can instead submit a “Section viii statement” that carves out the patented uses from its label. Unlike a Paragraph IV certification, a Section viii statement is not a justiciable act of infringement and, therefore, a generic supplier is not immediately subject to a patent infringement suit. Furthermore, a successful Section viii application is not subject to the 180-day bottleneck caused by the Paragraph IV exclusivity provision.
The plaintiffs alleged that Takeda falsely described its patents to the FDA as being both drug product patents and method patents and thus caused the suppliers of the generic versions of ACTOS to have to file Paragraph IV certifications, which created significant delays for the generic drugs. There were ten generic applicants and nine of them filed Paragraph IV certifications. One of them, Teva Pharmaceuticals, initially filed a Section viii statement but in response to a citizen petition, the FDA required Teva to take the Paragraph IV route.
The district court dismissed plaintiffs’ claims for failing to plausibly allege that Takeda’s false patent descriptions caused the delay in generic entry. The district court found that plaintiffs failed to identify a viable regulatory path beyond the Paragraph IV route and even if they had, the generic suppliers would still have faced delays caused by Takeda’s patent litigation.
The US Court of Appeals for the Second Circuit affirmed the lower court’s ruling with respect to the plaintiffs’ theory as it applied to the nine generic applicants that filed a Paragraph IV certification but vacated the lower court’s ruling with respect to the plaintiffs’ theory as to Teva and its Section viii statement. The 2nd Circuit explained that “because plaintiffs claim that [nine] generic manufacturers filed their Paragraph IV certifications…under duress, their theory presupposes that the generic manufacturers knew that Takeda had described them as drug patents when they filed their ANDAs.” But the 2nd Circuit noted that at the time Takeda’s patents were added to the FDA’s Orange Book, there was a flaw whereby patents submitted could only reflect one description. Thus, even though Takeda identified its patents as both drug product patents and method patents, the Orange Book only reflected the latter. Accordingly, the 2nd Circuit concluded that the Orange Book description was not the cause of the nine generic applicants’ decision to file Paragraph IV certifications and the complaint lacked any allegations of other means by which the applicants would have known that Takeda described the patents as drug product patents.
With respect to the plaintiffs’ theory as to Teva and its Section viii statement, however, the 2nd Circuit noted that this did not depend on Teva’s knowledge of Takeda’s description of its patents as drug product patents. Unlike the other applicants, Teva had avoided the Paragraph IV route and filed a Section viii statement and it was only because of the FDA’s reliance on Takeda’s descriptions that the FDA required Teva to instead proceed through the Paragraph IV route.
Court Dismisses Infringement Theory Premised on Speculated Future Formulation Changes
The US District Court for the District of New Jersey granted generic manufacturer’s motion for judgment on the pleadings under Fed. R. Civ. P. 12(c) on the basis of non-infringement. Par Pharmaceutical, Inc. v. Luitpold Pharmaceuticals, Inc., Case No. 16-cv-02290 (D.N.J. Feb. 1, 2017) (Walls, J.).
Par is the New Drug Applications (NDA) holder and assignee of the two Orange Book-listed patents for Adrenalin®, 1 mg/ mL injectable epinephrine. Adrenalin® is indicated for the emergency treatment of allergic reactions and induction and maintenance of mydriasis (dilation of the pupil) during intraocular surgery. The two Orange Book patents, US Patent Nos. 9,119,876 and 9,295,657, are directed to pharmaceutical compositions comprising epinephrine and various specified excipients, and methods of treatment using such compositions.
Even though the product described in Luitpold’s ANDA lacks one of the excipients (the bisulfite antioxidant) required by the claims of both Orange Book patents, Par nevertheless filed suit on April 22, 2016. Par’s infringement claims were based on allegations that the product Luitpold will eventually market will infringe the Orange Book patents. In other words, Par speculated that the US Food and Drug Administration (FDA) will require Luitpold to change its formulation, and that those changes will bring Luitpold’s product within the scope of the patent claims. Luitpold filed its motion for judgment on the pleadings on September 9, 2016.
Relying on the Federal Circuit’s opinion in Warner-Lambert Co. v. Apotex Corp., 316 F.3d 1348, 1364 (Fed. Cir. 2003), the district court held that 35 USC § 271(e)(2) does not encompass speculative claims, or future acts of infringement. Because the formulation in Luitpold’s ANDA falls outside the independent claims of the Orange Book patents, and Par’s claim is “entirely premised on speculation that future, uncertain amendments to Luitpold’s ANDA will infringe,” judgment in favor of Luitpold was warranted. The court then dismissed Par’s infringement claims with prejudice, and granted Luitpold’s counterclaim for a declaratory judgment of non-infringement. The court noted that should Luitpold be required by Food and Drug Administration to amend its ANDA, it would then need to send a new Paragraph IV certification, giving Par the opportunity to file a second infringement action.
Notably, the court later granted attorney fees under 35 USC § 285 (a carefully calculated $207,482.50), and costs ($4,580.93) to Luitpold. Par Pharmaceutical, Inc. v. Luitpold Pharmaceuticals, Inc., Case no. 16-02290-WHW-CLW (DNJ Apr. 24, 2017). The court noted Par’s unjustified maintenance of meritless claims and vigorous attempts to engage in overbroad discovery of highly confidential, competitive business information as the basis for finding an exceptional case.
Court Construes “Hydrate” to Require Crystalline Form Following Battle of the Experts
Addressing the issue of the proper construction of claims to a trihydrate compound, the US District Court for the District of New Jersey concluded that a person of ordinary skill in the art (POSA) would understand “hydrate” to require a crystalline form. AstraZeneca AB v. Andrx Labs, LLC, Case Nos. 14-8030, 15-1057 (D.N.J. Jan. 11, 2017) (Cooper, J.).
Defendants Andrx and Perrigo both sought to market generic versions of Plaintiff’s Nexium® product. Plaintiff asserted patents covering the magnesium salt of S-omeprazole trihydrate. The parties disputed whether the term “trihydrate” requires a crystalline form—Defendants argued in the affirmative and Plaintiff disagreed. All parties pointed to intrinsic and extrinsic evidence to support their positions, including expert testimony. The court began by summarizing the written description and prosecution histories of the asserted patents, but concluded that “[a]fter reviewing the specification and prosecution histories in detail, the question of whether the term ‘trihydrate’ was understood by the POSA to connote a crystalline form is left unanswered.” The court next turned to the extrinsic evidence and found “the testimony and exhibits of Andrx’s expert, Dr. Zaworotko most persuasive.”
The court placed particular emphasis on the fact that Dr. Zawartko cited numerous texts from the pertinent time period indicating that “trihydrate” refers to a crystalline form. The court also noted that two of the references on which Dr. Zawartko relied were authored by AstraZeneca’s expert, Dr. Byrn, whose pre-priority date writings “made clear distinctions between hydrates and amorphous forms on the basis of crystallinity.” Based on the references provided by Dr. Zawartko, the court was “persuaded that the POSA would have understood the term ‘trihydrate’ to mean a crystalline form.”
In contrast, the court rejected the competing references proffered by Plaintiff’s expert, Dr. Byrn, as “not persuasive” and emphasized that Dr. Byrn’s own publications contradicted his opinions. In addition to the Byrn articles relied on by Dr. Zawartko, the court pointed out that Dr. Byrn’s “prior writings directly contradict [his] position” that “solid state materials exist on a continuum of amorphous and crystalline material”; further, Dr. Bryn’s “prior writings also directly contradict his characterization of a hydrate.”
Plaintiff also argued that the principle of claim differentiation required a broad reading of the trihydrate term. The asserted claims defined the claimed compound in different ways: the broadest claim covered “[t]he magnesium salt of S-omeprazole trihydrate” with no other limitations, while other claims further required that trihydrate be “characterized by” a list of 13 “major peaks in its X-ray diffractogram” or “represented by” the X-ray power diffraction (XRPD) diffractogram provided in “FIG 1.” According to Plaintiff, because the claim directed to the trihydrate compound must be broader in scope than the claims directed to a trihydrate with a particular XRPD profile, the term “trihydrate” must encompass non-crystalline forms.
The court agreed that the claims differ in scope, but cautioned that “the doctrine of claim differentiation cannot broaden the term ‘the magnesium salt of S-omeprazole trihydrate’ beyond its correct scope.” The court then adopted the rationale of Andrx’s expert and concluded that the claim to the trihydrate compound “may cover all crystalline polymorphs of S-omeprazole magnesium trihydrate.” Thus, the claims requiring a particular XRPD profile are narrower because they “are both limited to a particular crystalline polymorph of that trihydrate.”
Practice Note: Before proffering expert testimony in support of a claim construction position, counsel should review the expert’s publications on the subject at issue in order to avoid a potential credibility hit from repeated inconsistencies.
Subject Matter Jurisdiction
New Jersey Court Rules That a Parent Company Is Still on the Hook for Divested Subsidiary’s ANDA Filing
Addressing a motion to dismiss for lack of subject matter jurisdiction, a New Jersey district court held that Merck could maintain a Hatch-Waxman lawsuit against Actavis, Inc. n/k/a Allergan Finance LLC (Actavis), despite Actavis having sold all interest in the abbreviated new drug application (ANDA) in question. Merck Sharp & Dohme Corp. v. Actavis Labs. FL, Inc. et al., 15-cv-6075 (D.N.J. Mar. 24, 2017) (Sheridan, J.). The court found that subject matter jurisdiction is measured as of the suit’s inception, and Actavis did not divest the department responsible for the ANDA until midway through the lawsuit.
The case related to an ANDA directed to posaconazole, which Actavis Laboratories FL, Inc. (Actavis Florida) filed in June 2015. Actavis Florida, then a subsidiary of Actavis, sent its notice letter to Merck on June 25, 2015, and Merck initiated its lawsuit on August 6, 2015, suing Actavis, Actavis Florida and other Actavis corporations. In the complaint, Merck alleged that all of the companies were collectively responsible for causing Actavis Florida to file the ANDA. The companies collectively admitted that they sought approval to market the ANDA product in their answer, and that doing so would trigger liability under § 271(e) if the patents were valid and infringed.
A year into the lawsuit Allergan, Actavis’ parent company, sold its generic pharmaceuticals business to Teva. This sale included Actavis Florida and the other subsidiaries, but Allergan maintained control of Actavis as a wholly owned subsidiary. Following the sale, Actavis moved to dismiss the case against it, arguing that it no longer had any interest in the ANDA. Actavis also acknowledged that it could still potentially be liable for money damages, but it raised a ripeness challenge to that, arguing it would only be relevant if the drug launched at risk, the patents are held valid and infringed, and the defendants sold to Teva could not satisfy the monetary damages.
The court disagreed, noting that subject matter jurisdiction is based on the allegations in the complaint at the time they are made. Here, Actavis admitted in its answer that it caused the ANDA to be filed and sought approval to market the drug for a potentially infringing use. The fact that it later divested itself of the relevant business units does not impact the fact that it previously undertook allegedly infringing acts. As such, subject matter jurisdiction was satisfied at the time of filing and the court denied Actavis’ motion to dismiss.
Declaratory Judgment Jurisdiction
Earlier Eye Drop Settlement Agreement Relieves Court of Subject Matter Jurisdiction
Finding no case or controversy, the US District Court for the Southern District of Indiana granted Intervenor-Defendant Barr’s motion to dismiss Apotex’s declaratory judgment action for lack of subject matter jurisdiction. Apotex Inc. v. Alcon Research, Ltd. (Defendant) and Barr Labs., Inc. (Intervenor-Defendant), No. 16-3145-STL-MJD (S.D. Ind. Feb. 27, 2017) (Lawrence, D.J.).
Apotex and Alcon settled their initial Hatch-Waxman litigation in 2013 (Apotex Patent Action), entering into a settlement agreement that resulted in the underlying litigation being dismissed without prejudice. The settlement agreement granted Apotex a license to Alcon’s Orange Book patents listed for the eye drop drug Pataday (olopatadine), but because Apotex was not first-to-file, it could not launch its generic product until first-filer Barr triggered its 180-day exclusivity by marketing its generic product. In an effort to create forfeiture of Barr’s 180-day exclusivity, the settlement agreement between Apotex and Alcon allowed Apotex to file a declaratory judgment action against Alcon seeking a declaration that Apotex’s generic abbreviated new drug application (ANDA) product would not infringe the Orange Book patents because they would be licensed products (Apotex DJ Action). The settlement agreement also provided that (1) Alcon would not oppose entry of final judgment of non-infringement, and (2) Alcon waived its right to appeal.
Shortly after the Apotex declaratory judgment (DJ) Action was filed, the parties submitted a stipulated and agreed motion requesting the court enter a consent judgment of non-infringement that acknowledged Alcon’s waiver of appeal. Barr intervened and filed a motion to dismiss for lack of subject matter jurisdiction arguing there was no case or controversy between Apotex and Alcon. Judge Lawrence agreed and dismissed Apotex’s declaratory judgment action.
The court, dismissing several arguments by Apotex along the way, found no case or controversy because Apotex and Alcon did not have adverse legal interests and had no dispute that would be resolved by entry of the judgment. First, the court found that even though a district court retains jurisdiction to enter a consent judgment, the consent judgment must change the legal relationship between the parties. Importantly, the settlement agreement between Apotex and Alcon did not make entry of a consent judgment a condition of settling and dismissing the Apotex Patent Action. The court held there was no case or controversy because the declaratory judgment sought was not for the purpose of resolving a dispute—the dispute was already resolved by the settlement agreement—thus, nothing that happened in Apotex’s DJ Action would change the legal obligations of the parties.
Second, the court found that even had the judge in the earlier Apotex Patent Action retained jurisdiction to enforce the settlement agreement, the enforcement would have occurred in the dismissed Apotex Patent Action, not in a newly filed case. The court noted that retaining jurisdiction to enforce a settlement agreement means there is a dispute over the settlement agreement, which was not present. The court also found the judge in the prior case did not retain jurisdiction to enforce the settlement agreement.
Third, the court distinguished the facts of Caraco Phar. Labs v. Forest Labs, 527 F.3d 1278 (Fed. Cir. 2008) and Apotex v. Daiichi Sankyo, 781 F.3d 135 (Fed. Cir. 2015). In Caraco, the generic defendant filed a declaratory judgment claim on an unasserted Orange Book patent and received a unilateral covenant not to sue from the patent owner, who moved to dismiss the DJ claim. The Federal Circuit held the generic defendant’s declaratory judgment claim was ripe because plaintiff granted a covenant not to sue for the very purpose of preventing the generic defendant from gaining earlier US Food and Drug Administration approval by activating the first-filers exclusivity period through a judgment of non-infringement. In Apotex v. Daiichi, the patent holder had disclaimed the patent, and Apotex sought declaratory judgment of non-infringement to gain earlier entry into the market.
The court reasoned that unlike those cases, the facts showed Apotex and Alcon resolved their dispute through the settlement agreement, the settlement agreement was not contingent on entering an agreed judgment in the earlier case, and because parties not seeking entry of injunction or other prospective relief, there was no case or controversy conferring declaratory judgment jurisdiction. In essence, the settlement agreement eliminated the adversity and case or controversy between the two parties. As such, the court dismissed Apotex’s DJ Action against Alcon for lacking subject matter jurisdiction.
Lidoderm Plaintiffs Survive Class Certification in Pay-for-Delay Suit
Lisa P. Rumin
The US District Court for the Northern District of California certified classes of direct purchasers and end-payers in a pay-for-delay multidistrict litigation involving Lidoderm. In re Lidoderm Antitrust Litigation, Case No. 14-md-02521 (N.D. Cal. Feb. 21, 2017) (Orrick, J.).
Plaintiffs brought antitrust claims alleging that they paid inflated costs for brand name and generic versions of lidocaine patches due to a reverse payment patent litigation settlement between defendants Endo Pharmaceuticals, Teikoku Seiyaku Co., Teikoku Pharma USA and Watson Pharmaceuticals, Inc. The court certified a class of direct purchasers (wholesalers, hospitals, pharmacies and retailers) and a class of end-payers (employee health and welfare benefit plans, municipal corporations, employee unions and individuals who purchased from other third parties). Defendants argued that class certification was inappropriate because individualized issues predominated questions of injury and damages. Defendants pointed to the highly stratified nature of the pharmaceutical distribution chain, as well as the various purchasing agreements among the direct purchaser and end-payer plaintiffs and the role of pharmacy benefit managers, group purchasing organizations and third-party payers (e.g., health plans).
Despite the complexities surrounding prices, rebates, discounts, insurance benefits, market position, purchasing power and actual purchasing history, the court found that plaintiffs’ experts presented reliable, statistically-sound methods to determine class-wide injury and proof of aggregate damages. Once the issues common to the class are resolved and experts have demonstrated aggregate damages with class-wide proof, the court can then conduct an individualized analysis of injury and damages. The court reasoned that the plaintiffs’ expert had proposed a reliable method for addressing several factors of the complex prescription drug market. Defendants’ disputes regarding how to account for copayments, rebates, uninjured plaintiffs, brand loyalists and aggregate data in the statistical model did not undermine the fact that plaintiffs were injured or the reliability of their damages model. Even though plaintiffs “may have incurred significantly different amounts of damages,” the court reasoned that damages issues would not “overwhelm the common liability questions” such as whether a reverse payment settlement or other anticompetitive conduct occurred, whether that conduct resulted in overcharges for brand and generic Lidoderm patches, and the total amount of damages that resulted from that conduct.
Regarding the direct purchasers, the court rejected an argument that the direct purchasers were not so numerous as to make joinder impracticable because three direct purchasers controlled 86 percent of the market. The court found that the number of direct purchasers (53) was sufficiently numerous. It reasoned judicial economy supported a class action where the direct purchasers were geographically dispersed and a substantial number were so small that they had claims worth less than it would cost to litigate just a portion of the case.
Practice Note: Pharmaceutical manufacturers involved in reverse payment settlement litigation should be mindful that the complex and highly stratified nature of the pharmaceutical distribution chain may be insufficient to overcome the vast issues common to plaintiffs at the class certification stage.
Settling the Discoverability of Settlement Agreements
Bhanu K. Sadasivan, PhD
Settlement agreement between a co-defendant and plaintiff in a Hatch-Waxman patent litigation matter is discoverable, ruled Judge Bryson in Allergan, Inc. v. Teva Pharmaceuticals, Inc. et al., Case No. 15-1455 (E.D. Tex., Jan. 12, 2017) (Bryson, J.).
Plaintiff Allergan sued three generic drug manufacturers Apotex, Mylan and Teva. Apotex settled and Mylan sought a copy of the settlement agreement between Allergan and Apotex. Allergan ultimately agreed to produce the settlement agreement but with the caveat that Mylan’s outside counsel with access to the settlement agreement should not be involved in any settlement negotiations with Allergan. Mylan did not agree.
The court first evaluated whether the agreement was relevant. It acknowledged that settlement agreements are often regarded as relevant for damages, which is typically not an issue in Hatch-Waxman cases, but nonetheless found it minimally relevant to commercial success, one of the secondary considerations of non-obviousness. Allergan argued that the agreement was not relevant because it did not intend to rely on the agreement to show commercial success. The court rejected Allergan’s argument noting that Allergan did not say that it would not argue commercial success, but only that it did not intend to rely on the settlement agreement.
Having found the settlement agreement relevant, the court also rejected Allergan’s requested restrictions on access to the agreement, explaining that Allergan had not demonstrated the exceptional need for such a restriction. The court concluded that no further bar to discovery existed: “federal settlement privilege” did not apply to the case at bar; policy considerations, such as reluctance of parties to settle if the agreement were discoverable, were not sufficiently persuasive; and confidentiality clause in the agreement imposed no limit to discovery if the court were to order its production. Finding no reason to foreclose relevant discovery, the court ordered Allergan to produce the settlement agreement without the additional restrictions requested by Allergan.