United States: Hatch-Waxman Infringement Claims And FDA Citizen Petition May Violate Antitrust Laws

In Tyco Healthcare Group LP v. Mutual Pharmaceutical Co., No. 13-1386 (Fed. Cir. Aug. 6, 2014), the Federal Circuit affirmed-in-part and vacated-in-part the district court's SJ decision that Hatch-Waxman infringement claims and a citizen petition filed with the FDA did not violate the antitrust laws.

Tyco Healthcare Group LP and Mallinckrodt, Inc. (collectively "Tyco") own several patents directed to temazepam (brand name Restoril), 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).  Although the claims do not recite any measurement technique, the patent specifications state that surface-area measurements are made essentially in accordance with a known gas-adsorption technique, B.E.T. testing, which involves an outgassing step generally performed at an elevated temperature.  Tyco used an outgassing temperature of 105°C in its B.E.T. testing.

Mutual Pharmaceutical Company, Inc. and United Research Laboratories, Inc. (collectively "Mutual") filed an ANDA seeking FDA approval of a generic 7.5 mg version of temazepam.  Mutual's ANDA represented that the specific surface area of its proposed ANDA product would be not less than 2.2 m²/g and thus made a Paragraph IV certification of noninfringement.  Mutual used an outgassing temperature of 40°C in its B.E.T. testing. 

Tyco sued Mutual, alleging infringement under 35 U.S.C. § 271(e)(2)(A).  Mutual raised antitrust counterclaims, which the district court stayed pending resolution of Tyco's infringement claim.  The district court first entered judgment of noninfringement.  The next day—one week before the end of the statutory thirty-month stay of Mutual's ANDA approval—Tyco filed a citizen petition with the FDA.  The citizen petition urged the FDA to change the parameters of evaluating the bioequivalence of generic temazepam.  The FDA nevertheless approved Mutual's ANDA and, five months later, denied the citizen petition, finding "no basis" for adopting Tyco's proposed bioequivalence criteria.  Slip op. at 5.  The district court later granted SJ to Mutual on invalidity, which the Federal Circuit affirmed.  Afterwards, the district court granted SJ to Tyco on all of Mutual's antitrust counterclaims, including that Tyco's infringement claim constituted sham litigation, that Tyco's citizen petition was a sham, and that Tyco's action was the product of fraud within the meaning of Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965).  Mutual appealed.

"[I]t 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."  Slip op. at 10.

On appeal, the Federal Circuit rejected Mutual's first argument that a genuine dispute existed as to whether Tyco's infringement suit was objectively baseless and, thus, fell within the sham-litigation exception to Noerr-Pennington antitrust immunity.  Mutual argued that because its ANDA recited a specific surface area falling outside the claimed range, its proposed generic could not infringe.  The Court disagreed, explaining that the infringement inquiry in an ANDA case focuses on what is likely to be sold following FDA approval and is not limited to the ANDA itself. 

Nonetheless, the Court vacated the district court's SJ decision regarding sham litigation and remanded.  According to the Court, under Tyco's infringement theory, Mutual's use of 40°C as the outgassing temperature was inappropriate and that 105°C—the temperature at which Tyco tested Restoril—should have been used instead.  While the parties did not dispute that Mutual's generic temazepam fell within the infringing range at an outgassing temperature of 105°C, the Court noted that there was also evidence that using 105°C physically altered the temazepam, inappropriately decreasing the specific surface area, and that, barring physical alterations, higher outgassing temperatures would potentially increase, not decrease, the surface area.  The Court therefore concluded that, because Tyco's infringement theory would make it more likely that Mutual's commercial product would measure outside of the infringement range, further inquiry was required as to whether Tyco's factual theory of infringement was objectively baseless.

In contrast, the Federal Circuit affirmed SJ for Tyco on the invalidity portion of Mutual's sham-litigation counterclaim.  According to Mutual, Tyco lacked a reasonable prospect of success in defending the nonobviousness of its patents because the only novel claim element was the 7.5 mg dose, which fell within a range disclosed in the prior art.  The Court explained that although this scenario shifted the burden of production to the patent holder, it did not remove the burden of proof from the patent challenger.  And, according to the Court, not only did Tyco offer evidence to meet its burden of production, which Mutual ignored, but also Tyco's "teaching away" argument was not objectively baseless.

Next, the Federal Circuit vacated the district court's SJ decision that Tyco's citizen petition was not a sham.  First, following the precedent from other circuits, the Court held that the sham exception to Noerr-Pennington immunity was not limited to litigation, but also applied to administrative petitions, including FDA citizen petitions.  Second, the Court held that disputed factual issues precluded SJ regarding whether the citizen petition was objectively baseless.  The Court noted that particularly probative of whether the citizen petition was reasonable was the FDA's denial, which indicated that the FDA viewed the petition as wholly without merit.  The Court also noted that Mutual's expert concluded that Tyco lacked a scientific basis to conclude that Mutual's product would not be bioequivalent.  Third, regarding the subjective element of the test, the Court held that the timing of Tyco's citizen petition and an internal e-mail indicating that a bioequivalent temazepam formulation could be made with a different specific surface area together could support a finding that the petition was an attempt to interfere directly with a competitor's business relationships.  The Court noted, however, that it remained an open question whether the filing of the citizen petition caused any antitrust injury to Mutual via a delay in its ANDA approval and that SJ for Tyco may still be appropriate on this basis.

Finally, the Court affirmed SJ on Mutual's claim that Tyco's predecessor in interest had fraudulently obtained the asserted patents from the PTO by omitting material information during prosecution and that Tyco had at least constructive knowledge of the fraud.  The Court held that there was insufficient evidence that Tyco knew of any fraud, concluding instead that Mutual's evidence, at most, supported the inference that Tyco knew of prior art that could impact the validity or enforceability of the patents.

Accordingly, the Court affirmed SJ for Tyco on Mutual's antitrust counterclaims predicated on sham litigation regarding validity and on fraud, and vacated and remanded those predicated on sham litigation regarding Tyco's infringement claim and the citizen petition.

Dissenting, Judge Newman stated that the panel majority had created several new grounds of antitrust liability.  In her view, litigation to enforce a presumptively valid patent following a Paragraph IV certification—a technical act of infringement under 35 U.S.C. § 271(e)—cannot be objectively baseless because the certification constitutes probable cause to initiate suit.  In addition, she stated that Tyco had the constitutional right to communicate with the FDA concerning public information on matters within the agency's authority and responsibility without incurring antitrust liability.  Thus, according to Judge Newman, "[t]he panel majority improperly inserts antitrust issues into the issues of infringement, validity, and communication to the government, contravening precedent and the Constitution."  Newman Dissent at 3-4.

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