NJ Court Grants Exceptional Case Fees Based on Speculative Infringement Suit
The US District Court for the District of New Jersey awarded Luitpold more than $210,000 in fees and costs under 35 USC § 285 after granting its motion for judgment on the pleading under Fed. R. Civ. P. 12(c) (ANDA Update, July 2017). Par Pharmaceutical, Inc. v. Luitpold Pharmaceuticals, Inc., Case No. 16-cv-2290 (D.N.J., Apr. 24, 2017) (Walls, J).
Senior Judge William H. Walls granted Luitpold’s Rule 12(c) motion because its abbreviated new drug application (ANDA) product did not presently infringe, and Par’s infringement claims were based entirely on speculation that the US Food and Drug Administration would require Luitpold to change its product formulation in a manner that would infringe Par’s patents.
The court found that Luitpold was the prevailing party because it “received at least some relief on the merits, which altered the legal relationship of the parties.” Judge Walls found the case to be exceptional based on Par’s unjustified maintenance of the lawsuit and attempts to use discovery to police Luitpold’s future conduct. Specifically, the court cited the following:
- The lack of any factual basis in the complaint and amended complaint to support allegations that Luitpold’s current ANDA infringed the patents-in-suit
- Par’s refusal to admit that Luitpold’s operative ANDA did not infringe
- The absence of credible allegations or evidence that Par faced irreparable harm absent declaratory relief
- Par’s vigorous engagement in overbroad discovery of highly confidential, competitive information, including the filing of a baseless motion to compel
Finally, the court determined that Luitpold’s fee request was reasonable. The court first calculated a lodestar amount, which is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. The law firm representing Luitpold billed hourly rates ranging from $215 to $950, with most of the work by lawyers billed at hourly rates between $300 and $800. The court found $925 per hour to be unreasonable, and determined fees would be awarded at a rate of $550 per hour for lawyer work and $125 per hour for paralegal work.
The court then determined how much time was reasonably expended on the matter. Luitpold requested compensation for 485 hours of work in total, comprising 419 hours of lawyer work and 66 hours of work typically performed by paralegals. The court found Luitpold’s billing unreasonable in part, because it included hours incorrectly billed to this matter, hours billed for unnecessary tasks due to inexperience, and hours for tasks that should have been performed by more cost-effective billers (i.e., lawyers doing paralegal work). The court also reduced the number of hours to account for time spent on work product and issues that were not raised with the court.
Based on its detailed review of the billing records submitted, the court awarded a lodestar total of $207,482.50. The court also awarded the full amount of $4,580.93 in requested costs, which included costs expended in the delivery of service and documents, payment of filing fees, travel to an in-person hearing, and necessary document reproduction.
Motions to Amend
Generic Defendants Shed No Tears after Winning Motion to Add Incorrect Inventorship Defense
The US District Court for the Eastern District of Texas granted defendants’ motion to amend their pleadings after the deadline for amending had passed. Allergan v. Teva Pharmaceuticals USA, No. 15-1455-WCB, 2017 WL 1512334 (E.D. Tex. Apr. 27, 2017) (Bryson, C.J.)
Allergan sued several defendants, including Teva, Mylan and Akorn, alleging infringement of patents Orange-Book listed for Restasis, an ophthalmic emulsion for treating chronic dry eyes containing 0.05 percent cyclosporine. Defendants asserted invalidity defenses based on prior art patents naming Dr. Shulin Ding as the inventor. Dr. Ding, who worked for Allergan as a formulation scientist during the relevant development period of Restasis, was not named as an inventor of the asserted Orange-Book patents.
Defendants sought discovery related to Dr. Ding’s work at Allergan. In response, Allergan produced technical reports and later, after the deadline for amending pleadings, a lab notebook showing Dr. Ding was involved in formulating and testing the formulation that became the Restasis product. During Dr. Ding’s deposition, taken after the close of fact discovery and after the amended pleading deadline, she testified that she had worked on the development of Restasis for several years, and confirmed that the formulations described in the reports and lab notebook were her work and were the same formulations that eventually became Restasis. Two months after Dr. Ding’s deposition, defendants moved to amend their pleadings to add a new invalidity theory based on incorrect inventorship.
Judge Bryson analyzed defendants’ motion to amend under the 5th Circuit’s four prong test, weighing each prong to determine whether to allow defendants to add a defense after the amended pleadings deadline had passed. Judge Bryson considered: (1) defendants’ explanation of delay; (2) the importance of amendment; (3) prejudice to plaintiff; and (4) availability of a continuance to cure prejudice.
The court weighed the first prong in favor of allowing the amendment, even though defendants waited two months after Dr. Ding’s deposition to file their motion to amend. The court found the defendants were not at fault for the delay between the production of the technical reports and lab notebook related to Dr. Ding’s work or the delay in taking her deposition. Nor did the court agree that defendants could have amended their pleadings after receiving the technical reports and lab notebook. It was only after Dr. Ding’s deposition could defendants have had a good faith basis to assert an invalidity defense based on incorrect inventorship.
Turning to the second prong, even though inventorship could be corrected by Allergan, which would obviate defendants’ invalidity defense, the court found the second prong also weighed in favor of allowing the amendment. In weighing this factor, the court reasoned that even though inventorship could be corrected, there were incentives to name the correct inventors (e.g., triggering the duty of disclosure of an unnamed, but correct, inventor). The court also weighed this factor with a “pragmatic judgment” on the likelihood that the new defense would succeed, effectively overlaying a likelihood of success analysis. In doing so, the court found that defendants were somewhat likely to show Dr. Ding was a co-inventor.
Finishing with the third and fourth prongs, the court gave Allergan additional time to conduct limited discovery on the inventorship issue, thus negating any prejudice to Allergan. The fourth prong was found to be irrelevant because there was sufficient time in the case schedule to allow for limited fact discovery on the inventorship issue. Because all the factors weighed in favor of allowing the amendment or were irrelevant, the court granted defendants motion to amend their pleadings and invalidity contentions to add an invalidity defense based on incorrect inventorship.
Looking Beyond the Label for Inducement in Post-Launch Case
Addressing objections to a magistrate’s report and recommendation, a Delaware district court held that a generic manufacturer’s label showing an intent to induce infringement was not enough on its own to establish induced infringement in a post-launch case, and that evidence of actual inducement was required. GlaxoSmithKline LLC v. Glenmark Pharms. Inc., USA, Case No. 14-cv-877 (D. Del., June 9, 2017) (Stark, J). The court found that post-launch cases differ from pre-launch cases, since evidence of actual inducement (if such occurred) would be available in the former but not the latter.
The dispute before the court arose from a magistrate judge’s report and recommendation regarding a summary judgment motion by the defendants seeking a finding of no induced infringement. Induced infringement requires a plaintiff to show both intent to induce infringement and actual inducement. Courts tend to focus on the intent element as evidenced by a generic drug’s label in pre-launch Hatch-Waxman cases, because there can be no evidence of actual inducement before a drug is on the market.
Defendants argued that because this was a post-launch case, evidence of intent based on the label was not sufficient to support a finding of inducement. They moved for summary judgment, arguing that they had introduced undisputed evidence that doctors do not actually read the drug label when prescribing, so there could be no actual inducement. Plaintiffs disagreed, arguing both that the label was sufficient evidence of inducement on its own regardless of the drug’s launch status and that whether the label actually induced infringement was a genuinely contested issue of fact. The magistrate agreed with defendants that plaintiffs would have to show evidence of actual inducement, but denied summary judgment on the basis that plaintiffs had introduced sufficient circumstantial evidence of inducement to survive summary judgment.
Both sides objected to the magistrate’s order. Plaintiffs again argued that there was a per se rule that intent to induce infringement as shown by a generic label is sufficient for a finding of induced infringement, and defendants argued that the magistrate had erred in finding a genuine issue of material fact.
Judge Stark overruled both parties’ objections and adopted the magistrate’s report. In doing so, he made clear that there is a valid reason for distinguishing between inducement in pre-launch and post-launch cases based on the evidence available. He also clarified, however, that plaintiffs need not provide direct evidence of actual inducement in order to prevail on an induced infringement claim. Instead, “so long as there is circumstantial evidence that could lead a factfinder to believe that the alleged acts of encouragement led to some amount of ‘successful communication’ between the alleged inducer . . . and the third-party direct infringer,” the induced infringement standard would be satisfied.
Practice Note: Be aware of the distinctions between the induced infringement standards for pre-launch and post-launch cases, and adjust your case theories accordingly.
Litigation Procedure / Severance and Stay of Claims
Judicial Economy Considerations Can Determine Whether and When a Claim Is Heard
In denying a brand manufacturer’s motion to dismiss antitrust counterclaims and motion to stay pending appeal of a preliminary injunction order, the US District Court for the District of New Jersey placed significant weight on practical factors, such as maximizing judicial economy and streamlining substantive issues. Fresenius Kabi USA, LLC v. Fera Pharm., LLC, Case No. 15-3654 (D.N.J., May 19, 2017) (McNulty, J).
Fresenius’s patents at issue relate to formulations of levothyroxine, a hormone used to treat hypothyroidism. Earlier in this case, Fera filed inequitable conduct counterclaims, alleging that Fresenius submitted a declaration containing material omissions and misleading statements to the US Patent and Trademark Office (PTO) during prosecution. Fera later filed antitrust counterclaims on the grounds that Fresenius delayed Fera’s entry into the market by engaging in a sham litigation based on fraudulently obtained patents. Although these two counterclaims share many of the same factual underpinnings, they are distinct and have different legal standards that must be resolved individually.
Before the motions at issue in the present decision were filed, the court had denied Fresenius’s motion to dismiss Fera’s inequitable conduct counterclaims and entered a preliminary injunction against Fera. The court explained that although Fera had met the “relatively low” pleading requirement for stating an inequitable conduct claim, the evidence of record did not indicate that Fera was likely to succeed on that claim. The court further found that the balance of harms and public interest favored an injunction. Fera appealed to the US Court of Appeals for the Federal Circuit. Fresenius moved to stay the case pending Fera’s appeal of the preliminary injunction and to dismiss the antitrust claims altogether. The present decision resolves these two motions.
The district court denied Fresenius’s motion to dismiss the antitrust claims “as presented,” and decided sua sponte to sever and stay those claims pending resolution of the infringement and inequitable conduct issues. The court found that although the pleading standard is relatively low, Fresenius identified several “potential deficiencies” in Fera’s factual allegations. The court noted that whether Fera had pled sufficient facts was up for debate, but opted to postpone consideration of those issues in the interests of judicial economy. For example, if the asserted patents were found to be invalid or unenforceable, the antitrust claims would be mooted. And even if the asserted patents were found to be valid and enforceable, the antitrust claims would still likely be mooted, because “enforcement of a valid patent does not generally violate the antitrust laws.” Moreover, litigation of the inequitable conduct issues would provide a “sturdy legal and factual foundation” for later consideration of the antitrust claims.
The court also denied Fresenius’s motion to stay the entire case pending Fera’s appeal of the preliminary injunction. First, denial of a stay would not impose undue hardship on Fresenius. Because the injunction was already in place, Fresenius did not need a stay in order to preserve its rights and interests pending appeal. Nor would denial of a stay prejudice Fresenius with respect to litigation costs. Discovery was already essentially complete, and, in any event, “the routine costs of litigation, without more, do not constitute a particular hardship.”
In contrast, a stay would likely prejudice Fera because, even if the injunction was ultimately lifted, Fera would “have won no more than the right to launch its generic products ‘at-risk’” and would still need to successfully litigate the infringement and enforceability issues. Delaying resolution of those issues would prejudice Fera because other generic competitors could win US Food and Drug Administration approval and gain early market share during the stay.
Fresenius did not dispute that a stay could put Fera at a competitive disadvantage, but instead argued that any prejudice to Fera would be self-imposed because it had opted not to settle (as other former co-defendants had). The court rejected Fresenius’s argument because “Fera is entitled to assert its legitimate rights; it has no obligation to settle just because others have done so.”
Finally, the court found that a stay pending appeal of a preliminary injunction order would not simplify any substantive issues in the case, unlike a stay pending appeal of a potentially dispositive issue such as a Markman order or collateral proceeding at the PTO (e.g., ex parte re-examination, inter partes review). For all of these reasons, the court denied Fresenius’s motion to stay the entire case pending appeal of the preliminary injunction order.
Direct/Indirect Infringement and Obviousness
Unknown Problem Plus Nonobvious Solution Cannot Render Patent for Sublingual Formulation of Asenapine Obvious
The District Court for the District of Delaware found Forest Labs’ patent for sublingual or buccal compositions of asenapine and methods of using such compositions to treat mental disorders, including schizophrenia and mania, infringed and not invalid. Forest Labs., LLC v. Sigmapharm Labs., LLC, et al., Civ. No. 16-cv-914 RGA, (D. Del. June 30, 2017) (Robinson, J.).
Forest Labs markets Saphris®, an antipsychotic containing asenapine maleate approved for the treatment of schizophrenia and manic or mixed episodes associated with bipolar I disorder. Saphris is the only antipsychotic that is administered sublingually.
Development of the Patented Invention
Asenapine was not initially developed as a sublingual tablet but, instead, as a standard conventional tablet given orally. Early studies published by Organon, the company that first developed asenapine for use in humans, demonstrated that asenapine was safe and clinically effective at relatively low doses. Encouraged by these early studies, Organon continued to perform dose ranging and pharmacokinetic studies with asenapine. Studies were conducted to assess the safety and tolerance of asenapine administered intravenously, and to obtain preliminary data on the bioavailability of orally administered asenapine. The IV studies (which were not published) showed serious adverse side effects such that the investigators concluded IV infusion of asenapine was not well tolerated. After the IV study, Organon scientists focused on an oral tablet formulation. Further tests with the oral tablet formulation also demonstrated serious toxicity side effects not previously shown in the earlier published studies. These further tests of the conventional oral tablet were also not published.
After brainstorming to develop possible avenues of further research, Organon scientists, including the inventors of the patent-in-suit, postulated using a buccal/sublingual route of administration to solve the problems associated with the cardiotoxic side effects encountered in previous studies focused on IV and oral routes of administration. After further testing, Organon determined that asenapine administered sublingually eliminated the cardiovascular side effects associated with oral and IV administration. Based on this discovery, the inventors filed an application that issued as US Patent No. 5,763,476 (the ‘476 patent).
Sigmapharm Laboratories, LLC (Sigmapharm), Breckenridge Pharmaceutical, Inc. (Breckenridge), Hikma Pharmaceuticals, LLC (Hikma), Alembic Pharmaceuticals, Inc. (Alembic) and Amneal Pharmaceuticals, LLC (Amneal), each submitted an abbreviated new drug application (ANDA) in an attempt to market generic versions of asenapine before expiration of the ‘476 patent. The defendants all conceded infringement of claim 1 of the ‘476 patent; however, two of the defendants, Sigmapharm and Breckenridge, contested infringement of claim 4. All defendants contended that the ‘476 patent was invalid for being obvious.
Claim 4 of the ‘476 patent is directed to a method for treating: (1) tension, excitation, anxiety, and psychotic and schizophrenic disorders, comprising (2) administering sublingually or buccally an (3) effective amount of asenapine or a pharmaceutically acceptable salt thereof. The issue of infringement of claim 4 boiled down to a single question: whether defendants infringed claim 4 even though their generic asenapine products are indicated only for the treatment of “manic episodes” associated with bipolar I disorder. Forest Labs argued that to the extent there are any differences between the treatment of manic episodes associated with bipolar I disorder with asenapine and the treatment of excitation with asenapine as recited in claim 4, such differences are insubstantial. That is, the treatments are equivalent. Forest Labs relied solely on the testimony of its expert who opined that excitation is the defining feature of manic episodes and, therefore, treating excitation is equivalent to treating manic episodes. The court noted that there was no mention of bipolar I disorder or maniac episodes associated with bipolar I disorder in the ‘476 patent. Further, while acknowledging that excitation is a symptom of manic episodes, no reference relied upon by Forest Labs’ expert literally described excitation as the defining feature of mania. Instead, the references refer to excitation as one of several criteria that must be present to properly diagnose a manic episode of bipolar I disorder. Accordingly, the court found that Forest Labs had not carried its burden to prove direct infringement under the doctrine of equivalents, especially when Alembic’s and Breckenridge’s proposed labels limit the indication of use to manic and mixed episodes of bipolar I disorder.
Although there can be no indirect infringement in the absence of a direct infringer, the court addressed Forest’s evidence of indirect infringement nonetheless. The court found no intent on the part of Alembic and Breckenridge to induce infringement of the ‘476 patent. The court’s finding was largely based on the fact that after the court issued its claim construction ruling, Alembic and Breckenridge submitted new proposed labels to the FDA for their generic products removing schizophrenia as an indication. The court specifically rejected Forest’s off-label infringing use argument to establish intent of inducement.
The defendants argued that the prior art of record would have motivated persons of ordinary skill in the art to formulate asenapine (a new and promising antipsychotic in 1994) as a rapidly disintegrating composition with a reasonable expectation of success. Defendants’ primary invalidity theory was that skilled artisans would have been motivated to develop a sublingual formulation of asenapine because there was a bioavailability concern with conventional, orally administered asenapine. The court rejected this theory and stated that the evidence at trial demonstrated that skilled artisans reviewing the publically reported clinical studies would have understood that orally administered asenapine was safe, bioavailable and clinically effective. The publically available prior art further showed that Organon was in the process of conducting a large scale Phase II trial with a conventional oral tablet. The court noted that there was nothing in the prior art that would have indicated that the oral tablet had significant side effects, and ultimately concluded that there was no motivation from the record evidence to completely change the route of administration to a sublingual formulation—especially since a sublingual administration had never before been used for an antipsychotic drug.
The court also found that the objective indicia of nonobviousness weighed in favor of the validity of the ‘476 patent. Particularly, the court found that the record was full of evidence demonstrating that it was a surprising and unexpected result of the claimed invention that the sublingual route of administration successfully resolved the serious side effects encountered during the development of the invention and as described in the ‘476 patent. Moreover, prior to the claimed invention, typical antipsychotics used in the treatment of schizophrenia and mania possessed debilitating side effects. The court found that the claimed sublingual administration meet this unsolved need for a much safer treatment of schizophrenia and mania.
Claim to Gel Formulation Not Obvious Over Prior Art Liquid Formulation
Addressing the issue of whether a topical gel with an increased concentration of active ingredient would have been obvious over a prior art liquid product, the US District Court for the District of New Jersey concluded that the claimed formulation was not predictable and exhibited unexpected results. Horizon Pharma Ireland Ltd. v. Actavis Labs., UT, Inc., Case No. 14-7992 (D.N.J., May 12, 2017) (Hillman, J).
Actavis filed an abbreviated new drug application (ANDA) seeking to market a generic version of Horizon’s PENNSAID® 2%, which is a topical diclofenac sodium formulation indicated for treating the pain associated with osteoarthritis of the knees. Horizon asserted a method of treatment claim that required twice daily administration of a 2 percent diclofenac sodium formulation having a particular viscosity and further containing particular amounts of dimethyl sulfoxide (DMSO), ethanol, propylene glycol, hydroxypropylcellulose (HPC) and water. Actavis stipulated to infringement and argued that the asserted claim was obvious over the prior art PENNSAID® 1.5% formulation.
Aside from the difference in the concentration of the active ingredient, the branded product and prior art product differ substantially in terms of vehicle and application frequency. PENNSAID® 2.0% is a gel; the prior art PENNSAID® 1.5% formulation was an “unthickened liquid solution” with a “viscosity similar to water.” PENNSAID® 2.0% is administered twice daily, while the prior art PENNSAID® 1.5% product was approved for a dosing regimen of “40 drops four times a day.” However, the claimed formulation differed from the prior art product by only a single ingredient—HPC was used instead of glycerin—and other than the 0.5 percent increase in diclofenac sodium, only ethanol changed in concentration. Actavis argued that these modifications were merely routine optimization, but the court disagreed.
The court accepted Actavis’ argument that, in general, a person having ordinary skill in the art (POSA) would have been motivated to improve the prior art of the 1.5 percent product by “increasing the amount of drug absorbed per application in order to reduce the application frequency” and by “making the formulation thicker to prevent run-off and improve absorption.” But the court cautioned that “[r]ecognition of a need does not render obvious the achievement that meets that need.” The court also acknowledged that the prior art suggested that “HPC was an attractive thickener” and “would have informed a POSA of…the suitable ranges for diclofenac sodium, ethanol, and HPC.” However, “[e]ven if the range of values for a particular variable was set out in the prior art and even if the combination of variables was itself predicted, the result will still not be obvious if the variables interacted in an unpredictable or unexpected way.”
Ultimately, the court concluded that the claimed formulation “was not a result of routine optimization” because “general principles and ranges of permissible concentrations would not have predicted the exact formulation and dosing frequency that resulted in PENNSAID® 2%.” In reaching this decision, the court emphasized the “daunting hurdles overcome through experimentation” by plaintiff in order to obtain the claimed product. The court was also persuaded by the unpredictability resulting from the need to modify several variables at one time; “[a]lthough individually adjusting one ingredient at a time may provide a predictable result, the combination of adjustments needed to change PENNSAID® 1.5% into PENNSAID® 2% was not predictable from the prior art.” The court concluded that plaintiff’s evidence established that the claimed formulation, and “the manner and method of getting there would not have been obvious to the relevant POSA and reflects a protectable step forward.”