IP News

Fed. Circ.: Brand Pharmaceutical Company Entitled to 50% Of Generic Drug Maker's Profits During Patent Term Only

On April 7, 2015, a Federal Circuit panel of Judges O'Malley, Clevenger, and Bryson issued a unanimous opinion, authored by Judge Bryson, in Astrazeneca AB v. Apotex Corp., Case No. 2014-1221. The panel affirmed-in-part the district court's damages award to Astrazeneca AB (Astra) for 50% of Apotex's profits made during the patent term, but reversed Astra's damages award based on Apotex's profits made during the period of pediatric exclusivity, holding that 35 U.S.C. '284 only provides for reasonable royalty damages for patent infringement-based sales as opposed to sales made after a patent expires. See, Slip op. at 31'35.

The appeal resulted from a dispute between Astra, owner of U.S. Patent Nos. 4,786,505 and 4,853,230 (collectively, “the patents-at-issue”) and Apotex. The patents-at-issue relate to pharmaceutical formulations containing omeprazole, which is the active ingredient in Astra's drug, Prilosec, used in the treatment of gastrointestinal disorders. See, id. at 2. Previous litigation between the parties resulted in a finding of infringement, affirmed by the Federal Circuit on appeal. See, In re Omeprazole Patent Litig., 536 F.3d 1361 (Fed. Cir. 2008). Following In re Omeprazole, the district court held a bench trial to determine Astra's damages award and found that, “in a hypothetical negotiation, Astra and Apotex would have agreed upon a license to Astra's patents in exchange for a royalty rate of 50[%] of Apotex's profits from the sales of its infringing omeprazole product during the period of its infringement, 2003 to 2007.” Id. at 11. Astra was awarded over $76 million in damages. Apotex appealed.

The Federal Circuit affirmed-in-part the damages award covering Apotex's sales during the patent term, but reversed the damages awarded based on generic sales during the post-expiration period of pediatric exclusivity.

The appellate court was not persuaded by Apotex's argument that a 50% royalty rate was inappropriate, explaining that Apotex: 1) ignored many of the district court's factual findings supporting the reasonable royalty rate; 2) failed to consider the Georgia-Pacific factors, which showed that “Astra's formulation [ ] created a new, commercially viable omeprazole drug,” and therefore demonstrated “utility and advantages of the [product] over any old modes or devices that had been used”; and 3) failed to prove that other non-infringing alternatives were available to Apotex at the time of the generic's launch, thus foreclosing any arguments that the value of the patented formulation should be discounted due to the existence of such alternatives at the time of infringement. See, id. at 12, 22'27.

The Federal Circuit did agree, however, with Apotex's objection to the district court's decision to award damages for generic sales made during the “pediatric exclusivity” period, which occurred after Astra's patents had expired. The court explained that “there can be no infringement once the patent expires because the rights flowing from the patent exist only for the term of the patent.” Id. at 31 (internal quotations and citations omitted). The panel concluded that the “damages determination should not include Apotex's sales during the post-expiration period of pediatric exclusivity, because Astra's rights during that period were not attributable to its patents and were not invaded by Apotex's infringement.” Id. at 33. Thus, the Federal Circuit reversed-in-part the damages award based on sales during pediatric exclusivity and remanded for recalculation of damages.

Fed. Circ.: Petitions For Panel Rehearing on Enhanced Damages In ' 284 Of the Patent Act Are Denied

On March 23, 2015, the Federal Circuit, sitting en banc, issued a 9-2 precedential order in Halo Elecs., Inc. v. Pulse Elecs., Inc., Case Nos. 2013-1472, 1656. The majority opinion denied Halo Electronic Inc.'s (Halo) petition for panel rehearing and rehearing en banc regarding the application of the enhanced-damages provision of 35 U.S.C. '284. See, Slip op. at 2. In its petition, Halo raised the question of “[w]hether an infringer who subjectively knew pre-suit that it was infringing a valid patent (after being given notice of the patent, and failing to design around, seek a license, or stop infringing) can use an unsuccessful defense developed post-suit as a per se bar to liability for pre-suit willful infringement, despite the flexible text of 35 U.S.C. '284.” Judges Taranto and Reyna concurred. Judges O'Malley and Hughes dissented.

In his concurrence, Judge Taranto noted that while further review of Halo's question was not warranted, there may be other “distinct, but related, questions that others have raised about '284,” which may warrant en banc review on a case-by-case basis. See, Concurrence at 1. The concurrence explained that “Section 284 is close to content free in what it expressly says about enhanced damages,” and that it “continues to lack language prescribing substantive or procedural standards for the enhancement of damages.” Id. at 2. According to Judge Taranto: “Questions are not being raised about reconsidering virtually every aspect of enhancement.” Id. Examples of those questions included: 1) “whether willfulness should remain a necessary condition for enhancement under '284's 'may' language[?]“; 2) “what are the proper standards for finding willfulness?”; 3) “[s]hould a judge or jury decide willfulness, in full or in part?”; and 4) “what standards govern appellate review?” Id. at 2'4.

The dissent argued for a complete reevaluation of the Federal Circuit's jurisprudence with regard to the standard for enhanced damages under '284, citing the Supreme Court's decisions in Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), as evidence that the court's interpretation of the statute is incorrect. See generally, Dissent at 1'5.

Fed. Circ.: Defendant Unable to Seek Stay of Patent Infringement Suit Prior to PTAB Instituting Petitions Seeking Covered Business Method Reviews under AIA

On April 1, 2015, a Federal Circuit panel of Judges O'Malley, Bryson, and Hughes issued a 2-1 opinion, authored by Judge O'Malley, in Intellectual Ventures II LLC v. JPMorgan Chase & Co., Case No. 2014-1724. The majority dismissed the defendant's interlocutory appeal from the district court's decision on a motion to stay the patent infringement suit pending the result of several planed petitions for covered business method review (CBMR), citing lack of jurisdiction under '18(b)(2) of the America Invents Act (AIA). See, Slip op. at 1. Judge Hughes dissented.

Intellectual Ventures II LLC (IV) alleged infringement of five patents directed to inter alia systems and methods for providing security related to computer and/or electronic transactions (i.e., banking transactions). JP Morgan Chase (JPMC) moved to stay the case pending the result of four CBMR petitions that it was planning to file. After filing the motion to stay, JPMC filed only two of the four petitions; the other two were never filed. The district court denied the motion under '18(b)(1) of the AIA after concluding that “JPMC's argument that the PTAB's resolutions of the CBMR petitions would reduce the court's workload was largely speculative, and was offset by IV's right to a speedy trial.” Id. at 4. JPMC appealed, arguing that the Federal Circuit had jurisdiction to review the denial of a motion to stay relating to the CBMR proceedings under '18(b)(2) of the AIA.

As an initial matter, the Federal Circuit noted that: “Consistent with the final judgment rule, this court normally only has jurisdiction to review 'a final decision of the district court.'” Id. at 5 (emphasis in original). The court further noted the parties' mutual agreement that “decisions on motions to stay ordinarily are not immediately appealable under the final judgment rule,” and that “rulings on motions to stay premised on the institution of inter partes review proceedings are not appealable under this rule.” Id. at 6. As such, the panel stated that “appellate review of stay rulings relating to CBMR proceedings is a statutory grant of jurisdiction to this court which must be construed narrowly.” Id. at 7.

Turning to the express language of '18(b), the Federal Circuit explained that the statute granted it jurisdiction “over an immediate interlocutory appeal from a district court's decision on a motion to stay 'relating to a [CBMR] proceeding for that patent.'” Id. The panel therefore focused on whether the term “proceeding,” as used in '18(b)(2), encompassed “pending CBMR petitions on which the PTAB has not yet acted,” like the petitions filed by JPMC. Id. at 7'8. The majority held that it did not. In reaching its decision, the court reviewed both the statutory language and legislative history of '18(b), stating that: “Because the language of the statutory scheme consistently defines 'proceeding' as beginning when the PTAB institutes review, we adopt that interpretation.” Id. at 11. As such, the opinion concluded by stating that “we do not have jurisdiction under '18(b)(2) of the AIA to consider an interlocutory appeal from a decision on a motion to stay until the PTAB institutes a CBMR proceeding.” Id. at 15. Thus, the majority dismissed the appeal for lack of jurisdiction.

In his dissent, Judge Hughes argued that the majority “improperly” limited the Federal Circuit's review authority by relying on an “overly narrow textual analysis” of '18(b), which is “at odds with the overall purpose of the AIA and the specific purpose of the [CBMR] procedure.” Dissent at 2. Rather than dismiss the instant case for lack of jurisdiction, Judge Hughes stated, “I would find that we possess jurisdiction to review the district court's denial of the stay. And on the merits, I would affirm the district court's decision.” Id. at 7.

Jeff Ginsberg is a Partner in the New York office of Kenyon & Kenyon LLP. Brooke Hazan is an associate at the firm.

Fed. Circ.: Brand Pharmaceutical Company Entitled to 50% Of Generic Drug Maker's Profits During Patent Term Only

On April 7, 2015, a Federal Circuit panel of Judges O'Malley, Clevenger, and Bryson issued a unanimous opinion, authored by Judge Bryson, in Astrazeneca AB v. Apotex Corp., Case No. 2014-1221. The panel affirmed-in-part the district court's damages award to Astrazeneca AB (Astra) for 50% of Apotex's profits made during the patent term, but reversed Astra's damages award based on Apotex's profits made during the period of pediatric exclusivity, holding that 35 U.S.C. '284 only provides for reasonable royalty damages for patent infringement-based sales as opposed to sales made after a patent expires. See, Slip op. at 31'35.

The appeal resulted from a dispute between Astra, owner of U.S. Patent Nos. 4,786,505 and 4,853,230 (collectively, “the patents-at-issue”) and Apotex. The patents-at-issue relate to pharmaceutical formulations containing omeprazole, which is the active ingredient in Astra's drug, Prilosec, used in the treatment of gastrointestinal disorders. See, id. at 2. Previous litigation between the parties resulted in a finding of infringement, affirmed by the Federal Circuit on appeal. See, In re Omeprazole Patent Litig., 536 F.3d 1361 (Fed. Cir. 2008). Following In re Omeprazole, the district court held a bench trial to determine Astra's damages award and found that, “in a hypothetical negotiation, Astra and Apotex would have agreed upon a license to Astra's patents in exchange for a royalty rate of 50[%] of Apotex's profits from the sales of its infringing omeprazole product during the period of its infringement, 2003 to 2007.” Id. at 11. Astra was awarded over $76 million in damages. Apotex appealed.

The Federal Circuit affirmed-in-part the damages award covering Apotex's sales during the patent term, but reversed the damages awarded based on generic sales during the post-expiration period of pediatric exclusivity.

The appellate court was not persuaded by Apotex's argument that a 50% royalty rate was inappropriate, explaining that Apotex: 1) ignored many of the district court's factual findings supporting the reasonable royalty rate; 2) failed to consider the Georgia-Pacific factors, which showed that “Astra's formulation [ ] created a new, commercially viable omeprazole drug,” and therefore demonstrated “utility and advantages of the [product] over any old modes or devices that had been used”; and 3) failed to prove that other non-infringing alternatives were available to Apotex at the time of the generic's launch, thus foreclosing any arguments that the value of the patented formulation should be discounted due to the existence of such alternatives at the time of infringement. See, id. at 12, 22'27.

The Federal Circuit did agree, however, with Apotex's objection to the district court's decision to award damages for generic sales made during the “pediatric exclusivity” period, which occurred after Astra's patents had expired. The court explained that “there can be no infringement once the patent expires because the rights flowing from the patent exist only for the term of the patent.” Id. at 31 (internal quotations and citations omitted). The panel concluded that the “damages determination should not include Apotex's sales during the post-expiration period of pediatric exclusivity, because Astra's rights during that period were not attributable to its patents and were not invaded by Apotex's infringement.” Id. at 33. Thus, the Federal Circuit reversed-in-part the damages award based on sales during pediatric exclusivity and remanded for recalculation of damages.

Fed. Circ.: Petitions For Panel Rehearing on Enhanced Damages In ' 284 Of the Patent Act Are Denied

On March 23, 2015, the Federal Circuit, sitting en banc, issued a 9-2 precedential order in Halo Elecs., Inc. v. Pulse Elecs., Inc., Case Nos. 2013-1472, 1656. The majority opinion denied Halo Electronic Inc.'s (Halo) petition for panel rehearing and rehearing en banc regarding the application of the enhanced-damages provision of 35 U.S.C. '284. See, Slip op. at 2. In its petition, Halo raised the question of “[w]hether an infringer who subjectively knew pre-suit that it was infringing a valid patent (after being given notice of the patent, and failing to design around, seek a license, or stop infringing) can use an unsuccessful defense developed post-suit as a per se bar to liability for pre-suit willful infringement, despite the flexible text of 35 U.S.C. '284.” Judges Taranto and Reyna concurred. Judges O'Malley and Hughes dissented.

In his concurrence, Judge Taranto noted that while further review of Halo's question was not warranted, there may be other “distinct, but related, questions that others have raised about '284,” which may warrant en banc review on a case-by-case basis. See, Concurrence at 1. The concurrence explained that “Section 284 is close to content free in what it expressly says about enhanced damages,” and that it “continues to lack language prescribing substantive or procedural standards for the enhancement of damages.” Id. at 2. According to Judge Taranto: “Questions are not being raised about reconsidering virtually every aspect of enhancement.” Id. Examples of those questions included: 1) “whether willfulness should remain a necessary condition for enhancement under '284's 'may' language[?]“; 2) “what are the proper standards for finding willfulness?”; 3) “[s]hould a judge or jury decide willfulness, in full or in part?”; and 4) “what standards govern appellate review?” Id. at 2'4.

The dissent argued for a complete reevaluation of the Federal Circuit's jurisprudence with regard to the standard for enhanced damages under '284, citing the Supreme Court's decisions in Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), as evidence that the court's interpretation of the statute is incorrect. See generally, Dissent at 1'5.

Fed. Circ.: Defendant Unable to Seek Stay of Patent Infringement Suit Prior to PTAB Instituting Petitions Seeking Covered Business Method Reviews under AIA

On April 1, 2015, a Federal Circuit panel of Judges O'Malley, Bryson, and Hughes issued a 2-1 opinion, authored by Judge O'Malley, in Intellectual Ventures II LLC v. JPMorgan Chase & Co., Case No. 2014-1724. The majority dismissed the defendant's interlocutory appeal from the district court's decision on a motion to stay the patent infringement suit pending the result of several planed petitions for covered business method review (CBMR), citing lack of jurisdiction under '18(b)(2) of the America Invents Act (AIA). See, Slip op. at 1. Judge Hughes dissented.

Intellectual Ventures II LLC (IV) alleged infringement of five patents directed to inter alia systems and methods for providing security related to computer and/or electronic transactions (i.e., banking transactions). JP Morgan Chase (JPMC) moved to stay the case pending the result of four CBMR petitions that it was planning to file. After filing the motion to stay, JPMC filed only two of the four petitions; the other two were never filed. The district court denied the motion under '18(b)(1) of the AIA after concluding that “JPMC's argument that the PTAB's resolutions of the CBMR petitions would reduce the court's workload was largely speculative, and was offset by IV's right to a speedy trial.” Id. at 4. JPMC appealed, arguing that the Federal Circuit had jurisdiction to review the denial of a motion to stay relating to the CBMR proceedings under '18(b)(2) of the AIA.

As an initial matter, the Federal Circuit noted that: “Consistent with the final judgment rule, this court normally only has jurisdiction to review 'a final decision of the district court.'” Id. at 5 (emphasis in original). The court further noted the parties' mutual agreement that “decisions on motions to stay ordinarily are not immediately appealable under the final judgment rule,” and that “rulings on motions to stay premised on the institution of inter partes review proceedings are not appealable under this rule.” Id. at 6. As such, the panel stated that “appellate review of stay rulings relating to CBMR proceedings is a statutory grant of jurisdiction to this court which must be construed narrowly.” Id. at 7.

Turning to the express language of '18(b), the Federal Circuit explained that the statute granted it jurisdiction “over an immediate interlocutory appeal from a district court's decision on a motion to stay 'relating to a [CBMR] proceeding for that patent.'” Id. The panel therefore focused on whether the term “proceeding,” as used in '18(b)(2), encompassed “pending CBMR petitions on which the PTAB has not yet acted,” like the petitions filed by JPMC. Id. at 7'8. The majority held that it did not. In reaching its decision, the court reviewed both the statutory language and legislative history of '18(b), stating that: “Because the language of the statutory scheme consistently defines 'proceeding' as beginning when the PTAB institutes review, we adopt that interpretation.” Id. at 11. As such, the opinion concluded by stating that “we do not have jurisdiction under '18(b)(2) of the AIA to consider an interlocutory appeal from a decision on a motion to stay until the PTAB institutes a CBMR proceeding.” Id. at 15. Thus, the majority dismissed the appeal for lack of jurisdiction.

In his dissent, Judge Hughes argued that the majority “improperly” limited the Federal Circuit's review authority by relying on an “overly narrow textual analysis” of '18(b), which is “at odds with the overall purpose of the AIA and the specific purpose of the [CBMR] procedure.” Dissent at 2. Rather than dismiss the instant case for lack of jurisdiction, Judge Hughes stated, “I would find that we possess jurisdiction to review the district court's denial of the stay. And on the merits, I would affirm the district court's decision.” Id. at 7.

Jeff Ginsberg is a Partner in the New York office of Kenyon & Kenyon LLP. Brooke Hazan is an associate at the firm.