06/17/14

Endo Pharma. v Actavis: Distinguishing a License for “All Inventions” from a License for a Specific Set of Patents


Category: Licensing 
 
 
 
By: Abby Lin, Contributor 
 
TitleEndo Pharma. Inc. v. Actavis, Inc., No. 20130-1628, -1662 (Fed. Cir. March 31, 2014).
Issues
[1: Express License] Endo contends that the plain language of the agreements, which limit “Licensed Patents” to several enumerated patents and applications claiming priority to them, does not grant Appellees an express license to practice the asserted patents [US 8,309,122(‘122), US 8,329,216(‘216), US 7,851,482(‘482)] [which are not listed on the agreement, but claim priority to enumerated patents in the agreement]. It argues that the “No Implied Rights” provision further makes clear that the agreements do not cover the asserted patents.
Endo Pharma. Inc., at *6 (text added).
[2: Implied License and 3: Injunction / Estoppel] Endo contends that the plain language of the Endo argues that the district court legally erred in concluding the Appellees are impliedly licensed to practice the asserted patents due to legal estoppel.
Id. at *10.
Holdings
[1: Express License] The ’216 and ’122 patents do not cross-reference the applications that issued as any of the licensed patents. Therefore, it is quite clear that the ’122 and ’216 patents do not “claim priority to” any of the licensed patents [...] There is no reading of [the Roxane and Actavis contract] language that extends coverage to patents that merely have a provisional application in common with the licensed patents [...]. Finally, the ’482 patent is completely unrelated to any of the previously licensed patents, and is likewise not covered by the agreement.
Id. at *8-9.
[2: Implied License] “Appellees seek to capture via implied license subject matter in addition to that for which they bargained.”
Id. at *12.
[3: Injunction / Estoppel] Endo is not estopped from asserting the patents at issue in these appeals because none of the asserted patents is a continuation of any of the licensed patents [and is therefore beyond the terms of what was bargained for].
Id. at *13-14 (text added).
 
 
 
Procedural History
The patents that are the subject of this litigation issued after Endo’s [license] agreements with Appellees[Roxane and Actavis]. The ’122 and ’216 patents issued to Endo and the ’482 patent was acquired by Endo. Endo again sued Appellees for patent infringement under 35 U.S.C. § 271(e)(2)(A) and moved for a preliminary injunction to prevent the marketing and sales of their generic oxymorphone formulations. Appellees opposed on the theories of express license and implied license by reason of legal estoppel. With regard to the latter, Appellees argued that Endo attempted to deprive them “of the benefit of [the] earlier bargain.” The [district] court held that “as a matter of law . . . Endo is estopped from claiming that the activity of Actavis and Roxane, which has gone on for a substantial period of time, is now suddenly barred because of these new patents.”
Endo Pharma. Inc., at *4-5 (internal citations omitted) (text added).
Endo Pharmaceuticals, Inc. (Endo) appeals from the [Southern District of New York]district court’s order denying its motions for a preliminary injunction to prevent Roxane Laboratories, Inc. (Roxane), Actavis Inc., and Actavis South Atlantic LLC (Actavis) from marketing and selling their respective generic drug products during the pendency of this litigation.
Id. at *2(text added).
 
 
 
Legal Reasoning (Moore, Newman, Dyk)
Background
Legal Standards
Standard of ReviewWe review decisions to grant or deny a preliminary injunction for an abuse of discretion, which may be established when a district court based its decision on an error of law. Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1374 (Fed. Cir. 2006). “To the extent the court’s decision is based upon an issue of law, we review that issue de novo.” Id.
Endo Pharma. Inc., at *5.
Contract LawWhether legal estoppel has been created and whether an implied license exists are questions of law. Wang Labs., Inc. v. Mitsubishi Elecs. Am., Inc., 103 F.3d 1571, 1578, 1580 (Fed. Cir. 1997). “The interpretation of a Settlement Agreement, i.e., a contract, is a question of law that we [also] review de novo.” Augustine Med., Inc. v. Progressive Dynamics, Inc., 194 F.3d 1367, 1370 (Fed. Cir. 1999). “The burden of proving that an implied license exists is on the party asserting an implied license as a defense to infringement.” Id.
Id. at *5-6.
Analysis: Express License
Express License: Roxanne
Roxanne AgreementThe settlement and license agreement between Endo and Roxane (Roxane Agreement) defines “Licensed Patents” as follows:

(a) any [U.S.] patents that are both (i) now owned by Endo . . . and (ii) issued as of the Effective Date of this Agreement, including the Opana® ER Patents

(b) any [U.S.] patent applications that claim priority to the Opana® ER Patents, including any continuation, continuation-in-part and divisional patent applications that claim priority to Opana® ER Patents,

(c) any patents resulting from the reissue or reexamination of patents or patent application of patents or patent applications comprised within clauses (a) and (b) . . .

[…] The Roxane Agreement defines “Opana® ER Patents” as U.S. Patent Nos. 5,662,933, 5,958,456, and 7,276,250.

Endo Pharma. Inc., at *3-4.
Asserted Patents Not Part of Agreement
Roxane’s express license arguments are meritless. Section 1.16(b) of the Roxane Agreement covers U.S. patent applications that “claim priority to the Opana® ER Patents [e.g., any of the licensed patents], including any continuation, continuation-in-part and divisional patent applications that claim priority to Opana® ER Patents.” There can be no dispute that the ’122 and ’216 patents are not continuations of any of the licensed patents. Likewise, there is no reasonable argument that the ’122 and ’216 patents claim priority to any of the licensed patents. An application that claims priority to another patent must contain an express cross reference to “a prior-filed nonprovisional application from which the patent issued.” […] The ’216 and ’122 patents, however, do not cross-reference the applications that issued as any of the licensed patents. [...]. Therefore, it is quite clear that the ’122 and ’216 patents do not “claim priority to” any of the licensed patents. [Additionally, there is no reading of this language that extends coverage to patents that merely have a provisional application in common with the licensed patents.]
Id. at *7-8 (text added, internal citations omitted).
The ’122 and ’216 patents claim priority to the ’357 provisional application, and the ’250 patent claims priority to the ’357 application as well. The ’122 and ’216 patents do not claim priority to the ’250 patent. Although the language is clear on its face, the fact that Endo and Roxane considered including in their agreement a grant of a license to “any application claiming a common priority date as the licensed patents” reinforces this conclusion. […] Because the ’122 and ’216 patents have a provisional application in common with the ’250 patent, the “common priority date” language would have expressly covered the ’122 and ’216 patents. See 35 U.S.C. § 119(e)(1) (2012). But that language does not appear in the final version of the Roxane Agreement.
Id. at *8-9 (internal citations omitted).
Finally, the ’482 patent is completely unrelated to any of the previously licensed patents, and is likewise not covered by the agreement.
Id. at *9.
Express License: Actavis
The settlement and license agreement between Endo and Actavis (Actavis Agreement) is similar. The Actavis Agreement includes a grant of a license, a covenant not to sue, and a “No Implied Rights” provision, but covers one additional patent not included in the Roxane Agreement and not relevant to this appeal.
Id. at *4.
Contributor Note: This Court decided that Actavis Agreement also did not have an express license for the same reasons as the Roxane Agreement.
Analysis: Implied License and Estoppel
Analyszing TransCore Precedent[A] patent license does not convey to the licensee “an absolute right” to make, use, or sell a product “because not even the patentee . . . is given that right.” […] The patentee’s right “is merely one to exclude others from making, using or selling [the product covered by the licensed patent], 35 U.S.C. § 154” and “the patentee . . . and his licensee, when making, using, or selling [the product], can be subject to suit under other patents” when practicing the patented invention. […] The doctrine of legal estoppel does not nullify these general principles. Instead, it “refers to a narrow category of conduct encompassing scenarios where a patentee has licensed or assigned a right, received consideration, and then sought to derogate from the right granted.” TransCore, 563 F.3d at 1279 (alteration omitted) (emphasis added). In TransCore, the patentee asserted a continuation patent that “was broader than, and necessary to practice” one of the patents included in a prior settlement agreement. Id. We observed that the fact that the patentee “adopted its [licensed] patent infringement contentions as its contentions related to the [asserted] patent,” id., provided undisputed evidence that the patentee “sought to enforce the [asserted] patent in derogation of the rights it granted” under the prior agreement, id. at 1279 n.4. Even though the agreement stated that it “shall not apply to other patents . . . to be issued in the future,” we concluded that the patentee was legally estopped from asserting a patent whose claim scope fully encompassed that of the claims of one of the licensed patents. […].
Endo Pharma. Inc. at *11-12 (some internal citations omitted).
Contributor NoteThe court then concludes that Endo is not estopped from asserting the patents at issue because there is no express license, as explained in the “Express License” section. Additionally, the Court state “We reject Appellees’ invitation to expand the implied license doctrine. You get what you bargain for. And we will not use the implied license doctrine to insert ourselves into that bargain and rewrite the contract.” Endo Pharma. Inc., at *12.
EstoppelAppellees rely heavily on the general rule that “[t]he grantor is estopped from taking back in any extent that for which he has already received consideration.” Actavis Br. 27 (quoting TransCore, 563 F.3d at 1279 (quoting AMP Inc. v. United States, 389 F.2d 448, 452 (Ct. Cl. 1967))); see also Roxane Br. 20–21. But this rule does not apply to the cases before us because, unlike accused infringers in TransCore and General Protecht, Appellees seek to capture via implied license subject matter in addition to that for which they bargained. AMP is not to the contrary because the agreement at issue in that case gave the Government the license “to practice, and cause to be practiced . . . throughout the world, each Subject Invention”— rather than any specific patents. 389 F.2d at 450, 454 (emphasis added). […] Here, rather than grant a license to an “idea,” Endo has granted to Appellees a license and covenant not to sue limited to specific patents and patent applications. If Appellees wanted to market and sell their accused generic products free from any threat of being sued by Endo for patent infringement, they could have negotiated for the appropriate language in the settlement and license agreements. As we observed in Spindelfabrik, “patent license agreements can be written to convey different scopes of promises not to sue, e.g., a promise not to sue under a specific patent or, more broadly, a promise not to sue under any patent the licensor now has or may acquire in the future.” 829 F.2d at 1081 (quoted in TransCore, 563 F.3d at 1276).
Id. at *14-15.
Conclusion
Because the district court erred in concluding that Roxane and Actavis (Appellees) had an implied license to practice the asserted patents, and because Apellees do not have an express license, we vacate and remand.
Endo Pharma. Inc. at *2-3.
 
 
 
 
DYK, Circuit Judge, dissenting in part. Endo Pharma. Inc., Dyk Op. at *2.
Asserted Patents Within Scope of NegotiationsI part company with the majority on the question of whether Actavis has an implied license to the ’122 and ’216 patents. At the time of their settlement agreement, Endo owned those patent applications, which claimed priority to the same provisional application that provided priority to a patent covered by the settlement agreement (the ’250 patent). During the settlement negotiations, Endo did not disclose the ’122 and ’216 patent applications, but rather licensed Actavis to produce the product at issue here. Furthermore, there are material differences between the Actavis and Roxane agreements and negotiations. [At the time of the settlement agreements, Endo disclosed the pending applications for the ‘122 and ‘126 patents to Roxane but not to Actavis. In the course of its negotiations with Endo, Roxane became aware of the ’122 and ’216 patent applications, sought to have these pending patents included in the agreement, and ultimately failed to secure a license to them. That history is sufficient to negate an implied license. But the Actavis negotiations were different, having occurred two years before the Roxane agreement.] Under these circumstances, I conclude that Actavis has an implied license to practice the ’122 and ’216 patents with respect to the product covered by the ANDA that was the subject of the settlement agreement.
Endo Pharma. Inc., Dyk Op. at *2, see also id. at 4, 8 (text added).
Agreement Confers an Implied LicenseAlthough the ’122 and ’216 patents are not continuations of the licensed patents, as was the case in TransCore and General Protecht, the logic of those cases applies equally here. Under 35 U.S.C. § 119(e)(1), a patent that claims priority to a provisional application must “have the same effect, as to such invention [the provisional invention], as though filed on the date of the provisional application.” 35 U.S.C. § 119(e)(1). Thus, as we have explained in the past, “‘[w]hat is claimed by the patent application [claiming priority to a provisional application] must be the same as what is disclosed in the [provisional] specification.’” New Railhead Mfg., L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290, 1296 (Fed. Cir. 2002) […] That is to say, a patent claiming priority to a provisional application must cover the same inventive subject matter as the provisional application. Since the ’250 patent (covered by the license agreements) and the ’122 and ’216 patent applications (subsequently issued) claim priority to the same provisional application and, thus, must cover the same inventive subject matter, the agreements confer an implied license to the two new patents absent contrary evidence.
Id. at *7-8.
 
 
 
 
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