Categories: Antitrust
      Date: Oct 16, 2014
     Title: Tyco Health v. Mutual Pharmaceutical:  Federal Circuit Reverses Lower Court Antitrust Ruling on Generic Drug Marketing
Category: Antitrust  
 
 
 
By: Roy Rabindranath, Contributor 
 
TitleTyco Health Group LP v. Mutual Pharmaceutical Company, Inc. (Fed. Circ. August 6, 2014).
Issue[Whether the district court’s summary judgment order that Tyco did not violate the antitrust laws by [(1) filing an alleged “sham infringement lawsuit”] against Mutual or [(2)] by filing [an alleged sham “citizen petition”] with the Food and Drug Administration (“FDA”) seeking to bar Mutual from obtaining FDA permission to market its generic version of one of Tyco’s drugs [under Mutual’s Abbreviated New Drug Application (ANDA) with the FDA].
Tyco Healthcare Group, at *2 (text added).
HoldingThere is a recognized exception to Noerr-Pennington immunity for “sham litigation,” which the Supreme Court has defined as litigation that (1) is “objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits” (the objective element), and (2) is motivated by a desire “to interfere directly with the business relationships of a competitor” (the subjective element). Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993) (“PRE”). […] PRE’s two part test, however, is not limited to court litigation; it has been applied to administrative petitions, including FDA citizens petitions.
Id. at *8 15 (text added, internal citations omitted).
 
 


Procedural HistoryTyco is the owner of several patents directed to formulations or methods of treatment with temazepam, a drug used to treat insomnia [….] The patents all claim 7.5 mg formulations of temazepam having a specific surface area between 0.65 and 1.1 square meters per gram (m2/g) [….] In November 2006, Mutual filed an [ANDA] with the FDA, seeking approval to manufacture and sell a generic 7.5 mg version of temazepam. Mutual’s ANDA representing that its product would have a specific surface area of not less than 2.2 m2/g, which was well above the specific surface area range claimed in the temazepam patents. Mutual’s ANDA included a certification representing that the generic drug was not protected by a U.S. patent [, also known as a paragraph IV certification]. On February 5, 2007, Mutual sent Tyco a “paragraph IV certification letter” notifying Tyco of its ANDA. The letter set forth Mutual’s position that the proposed ANDA product would not infringe the temazepam patents because the generic product’s specific surface area would not fall within the 0.65-1.1 m2/g range claimed by those patents. In response to Mutual’s paragraph IV certification, Tyco filed an action alleging that Mutual’s ANDA infringed Tyco’s patents under 35 U.S.C. 271(e)(2)(A), the special infringement provision of the Hatch-Waxman Act . […] In its amended answer, Mutual raised antitrust counterclaims, which the district court temporarily stayed pending the resolution of Tyco’s infringement claims. On August 4, 2009, the district court granted summary judgment of noninfringement [....] At that point only [U.S. Patent 5,211,954] was at issue because Tyco's other temazepam patents ahd expired. [...] On August 5, 2009, the day after the district court entered its judgment of noninfringement, Tyco filed a citizen petition with the FDA. The citizen petition urged the FDA to change the criteria for evaluating the bioequivalence of proposed generic temazepam products [….] On September 8, 2009, although the citizen petition was still pending, the FDA approved Mutual’s ANDA, which allowed Mutual to bring its generic temazepam product to market. Five months later, the FDA denied Tyco’s citizen petition in its entirety [….] On May 5, 2010, the district court granted summary judgment on Mutual’s invalidity counterclaims, holding the claims of [Tyco’s '954 patent] invalid for obviousness. This court affirmed that decision [….] After our disposition of the first appeal, the district court lifted the stay of Mutual’s antitrust counterclaims. The court then granted summary judgment to Tyco on all of those counter claims [….] Mutual subsequently took this appeal from the district court’s summary judgment order.
Tyco Healthcare Group, *at 2-8 (text added, internal citations omitted).
 
 
Legal Reasoning (Bryson, Moore)
Whether Tyco's Infringement Suit was Objectively BaselessOn appeal, Mutual asserts that there is a disputed issue of fact concerning whether Tyco’s infringement suit was “objectively baseless” so as to fall within the sham-litigation exception to Noerr-Pennington immunity. According to Mutual, the section 271(e)(2)(A) infringement claim rejected by this court in Bayer AG v. Elan Pharmaceutical Research Corp., 212 F.3d 1241 (Fed. Cir. 2000), is legally and factually indistinguishable from Tyco’s claim […. However,] Mutual’s argument, which is based on Elan, ignores other decisions of this court, and language of Elan itself, that could give a patentee in Tyco’s position a reasonable expectation of a favorable outcome even though the generic manufacturer’s ANDA application describes a generic drug with characteristics that take it outside the patent’s claims. […] In Bayer AG v. Biovail Corp. […] this court addressed infringement, under section 271(e)(2)(A), of the same patent at issue in Elan, by the same generic drug at issue in Elan, but for a different does of that drug. Although the legal and factual issues in Biovail were similar to those in Elan, we found that the factual evidence proffered in Biovail called for a different result [….] In Biovail […] the patent owners “introduced evidence of actual infringement by a commercial tablet made under the specifications of an allegedly identical ANDA.” That evidence “raised a legitimate question” under section 271(e)(2)(A) whether the generic manufacturer would “make a…product that literally infringes Bayer’s…patent upon approval of the ANDA.” […] Therefore, we agree with Tyco that it is not unreasonable for a patent owner to allege infringement under section 271(e)(2)(A) if the patent owner has evidence that the as-marketed commercial ANDA product will infringe, even though the hypothetical product specified in the ANDA could not infringe. […] Tyco’s infringement claim is based on its theory that Mutual’s use of 40 °C as the outgassing temperature was inappropriate and that 105 °C – the temperature at which Tyco…tested [the drug] – should have been used instead. The parties do not dispute that the specific surface area of Mutual’s temazepam falls within the infringing range when the outgassing temperature is set at 105 °C. […] expert testimony and other evidence, including images from a scanning electron microscope, suggest that exposing Mutual’s temazepam to a temperature of 105 °C physically alters the temazepam material itself, resulting in larger temazepam particles and decreased specific surface area. [….] Based on the evidence of record and this analysis, we conclude that further inquiry is needed into the effect of the outgassing temperature on the specific surface area of Mutual’s generic product. [….] Based on the evidence of record and this analysis, we conclude that further inquiry is needed into the effect of the outgassing temperature on the specific surface area of Mutual’s generic product.
Tyco Healthcare Group, at *8-20 (text added, internal citations omitted, condensed for issue simplification).
Reasonable Prospect of Success[….] Mutual next argues that the district court erred by granting summary judgment for Tyco with respect to Mutual’s sham-litigation claim because Tyco lacked a reasonable prospect of success in defending the validity of its patents. On that issue, we uphold the district court’s ruling. Given the presumption of patent validity and the burden on the patent challenger to prove invalidity by clear and convincing evidence, it will be a rare case in which a patentee’s assertion of its patent in the face of a claim of invalidity will be so unreasonable as to support a claim that the patentee has engaged in sham litigation. Only if the exacting standards of PRE are satisfied will the patentee lose its Noerr-Pennington immunity in that setting. […] Mutual contends that a reasonable litigation in Tyco’s position would have known that the asserted patents would be found invalid for obviousness because the only difference between the prior art 15 mg [drug] capsule and the claimed capsules is the 7.5 mg does of temazepam [….] Mutual’s argument is both legally and factually flawed. When an invention falls within a range disclosed in the prior art, the burden of production shifts to the patent holder, but not the burden of proof, which remains with the patent challenger throughout . [….] Mutual also ignores the evidence Tyco offered to meet its burden of production. [….] We conclude that Mutual has not met its burden to establish that Tyco’s validity arguments were objectively baseless, even though those arguments were ultimately unsuccessful.
Id. at *8-20 (text added, internal citations omitted, condensed for issue simplification).
FDA Petition[….] Mutual next argues that the district court erred by granting summary judgment for Tyco with respect to Mutual’s claim that Tyco’s citizen petition to the FDA was a sham that stripped Tyco of its Noerr-Pennington immunity. Because the district court applied the wrong legal standard and because disputed issues of material fact remain, we vacate that portion of the district court’s judgment [….] The district court concluded that the sham exception to Noerr-Pennington immunity and the test set forth in PRE are “expressly limited to litigation” and that Mutual had therefore failed to set forth a legal standard applicable to sham administrative petitions. PRE’s two part test, however, is not limited to court litigation; it has been applied to administrative petitions, including FDA citizen petitions [….] We conclude […] that there are disputed issues of fact that preclude summary judgment with respect to whether the citizen petition was objectively baseless [….] Particularly probative is the FDA’s response, which denied the petition in terms indicating that, in the FDA’s view, it was wholly without merit. The FDA found that Tyco had “provided no evidence from clinical trials, pharmacokinetic studies, bioequivalence testing, or any other sources….Instead the petition relies entirely on uncorroborated generalities and theoretical speculation to support its critical point” [….] With respect to the subjective element of the PRE test, the district court found that Mutual did not produce any evidence “to support an inference that [the citizen petition] was an attempt to interfere directly with the business relationships of a competitor.” Mutual, however, produced evidence that the citizen petition was filed just one day after the district court granted Mutual summary judgment of noninfringement – an event that results in lifting the automatic stay of the FDA’s approval of the ANDA [....] According to Mutual, filing the citizen petition at that later date caused the FDA to delay the approval of Mutual’s ANDA, and thus resulted in a further period of market exclusively for Tyco. […] The timing of the citizen petition and the email are sufficient evidence from which a reasonable finder of fact could determine that Mutual had satisfied the subjective element necessary to show that Tyco’s citizen petition was a sham. It was therefore error for the district court to grant summary judgment against Mutual [...]
Id. at *8-20 (text added, internal citations omitted, condensed for issue simplification).
Conclusion
In summary, we affirm the judgment of the district court with respect to Mutual’s claim that Tyco’s assertion of the validity of its patents was a sham [….] We vacate the summary judgment that Tyco’s infringement claims were not a sham and remand for further proceedings on that issue, with particular attention to the effect of the differences in outgassing temperatures on the specific surface area of Mutual’s product. We also vacate the summary judgment that Tyco’s citizen petition to the FDA was not a sham and remand for further proceedings, including a determination as to whether the citizen petition caused any injury to Mutual in the form of delay in the approval of Mutual’s ANDA.
Tyco Healthcare Group, at *21-22 (text added).
 
 
 
NEWMAN, Circuit Judge, dissenting. Tyco Healthcare Group, Newman Dissent, at *1.
With its reversal of the district court's summary judgment dismissing Mutual's antitrust counterclaims, this court now creates several new grounds of antitrust liability. The panel majority holds that antitrust issues are raised by Tyco's Hatch-Waxman suit, although the suit is for infringement of presumptively valid patents asserted against a product whose ANDA and Paragraph IV Certification constituted a technical act of infringement under 35 U.S.C. 271(e). The constitutional right to petition government, as well as the patent right to exclude, does not dissipate between competitors.
Tyco Healthcare Group, Newman Dissent, at *1.
The intrusion of antitrust issues into route patent cases has been controlled in precedent. [...] My collleagues now hold otherwise, although the nation's history of innovation has been built on the balanced foundation that: The patent and antitrust laws are complementary, the patent system serving to encourage invention and the bringing of new products to market by adjusting investment-based risk, and the antitrust laws serving to foster industrial competition. The court's rulings today are contrary to law, precedent, and the Constitution. I respectfully dissent.
Id. at *10. 
 
 
Image Attribution Statement: Bmramon, “NOVAMOXIN antibiotic,” available under a under the Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license, http://commons.wikimedia.org/wiki/File:NOVAMOXIN_antibiotic.jpg (imaged edited) (last visited Oct. 12, 2014).