United States: Sham Hatch-Waxman Infringement Suits And FDA Citizen Petitions; A Potential For New Liability For Innovators?

Under what is commonly known as "Noerr-Pennington immunity," persons exercising their First Amendment right to petition the government for redress are generally immune from antitrust liability, even though their actions may harm competition or competitors.  The Supreme Court has recognized an exception to this immunity for "sham litigation," which it has defined as litigation that is "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits," and is motivated by a desire "to interfere directly with the business relationships of a competitor."  (Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993)).

In its August 6th decision in Tyco Healthcare Group LP v. Mutual Pharmaceutical Company, Inc., the U.S. Court of Appeals for the Federal Circuit ruled on a number of antitrust counterclaims asserted against Tyco in a Hatch-Waxman Act patent infringement suit.  The Court vacated and remanded the district court's ruling that Tyco's infringement claims and its citizen petition to the FDA were not sham petitioning, provoking a strong dissent accusing the majority of creating several new grounds of antitrust liability.

Tyco owned several patents directed to formulations or methods of treatment with temazepam, a drug used to treat insomnia.  The patents all claimed 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 Abbreviated New Drug Application ("ANDA") with the FDA, seeking approval of a generic 7.5 mg version of temazepam.  Mutual's ANDA represented 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 Tyco's temazepam patents.  As required by the Hatch-Waxman Act, 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 Tyco's 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, Tyco filed an infringement suit against Mutual under the Hatch-Waxman Act.  On August 4, 2009, the district court granted judgment of noninfringement holding that a product manufactured to the ANDA's specification could not literally infringe Tyco's patent.

The day after the district court's judgment, Tyco filed a citizen petition with the FDA urging the FDA to change the criteria for evaluating the bioequivalence of proposed generic temazepam products.  During the pendency of the citizen petition, the FDA approved Mutual's ANDA.  Thereafter, it denied Tyco's citizen petition in its entirety.  The FDA concluded that there was "no basis" for adopting Tyco's proposed bioequivalence criteria, and that the citizen petition "relie[d] entirely on uncorroborated generalities and theoretical speculation."

On May 5, 2010, the district court granted Mutual summary judgment on its invalidity counterclaim, holding the claims of Tyco's one remaining patent were invalid for obviousness.  The court found that the dosage level in Tyco's patent was disclosed in a 1983 volume of the British National Formulary.

In response to Tyco's infringement claims, Mutual asserted antitrust counterclaims based on four theories:

  1. The patent litigation was a sham because Tyco's infringement claim was objectively baseless;
  2. Tyco's validity claim was objectively baseless;
  3. The citizen petition filed with FDA was a sham; and
  4. A Walker Process claim that Tyco's predecessor, Sandoz, had obtained the patent through fraud on the U.S. Patent Office.

The district court granted summary judgment to Tyco on all of the antitrust counterclaims.

The Court of Appeals affirmed the district court on Mutual's validity and Walker Process antitrust counterclaims.  However, it vacated and remanded Mutual's sham infringement claim and sham citizen petition claim.

On the sham infringement claim, the Court held that the fact that Mutual's ANDA asserted a surface area outside the range specified in Tyco's patent was not dispositive "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."  However, the Court stated that does not end the inquiry.

Tyco's infringement claim was based on a theory that Mutual had used too low an outgassing temperature in measuring the specific surface area and should have used a higher outgassing temperature.  The Court noted expert testimony in the record that increasing the outgassing temperature would have increased the specific surface area of the ANDA product even further outside the scope of Tyco's patent.  Because Tyco's infringement theory appeared to be contrary to the underlying scientific principles, the Court directed the district court to determine on remand whether Tyco's infringement theory was objectively baseless.

With regard to the citizen petition claim, the Court held that the district court committed error in concluding that the sham exception to Noerr-Pennington petitioning immunity was expressly limited to litigation.  It ruled that it did apply to administrative petitioning, including FDA citizen petitions.

The Court of Appeals found there were disputed issues of fact that precluded summary judgment with respect to whether the citizen petition was objectively baseless.  "Particularly probative of whether the citizen petition was reasonable is the FDA's response, which denied the petition in terms indicating that, in the FDA's view, it was wholly without merit."  Also, there was expert testimony that some of the criteria proposed by Tyco had "limited to no application in bioequivalence studies."  In addition, the timing of the citizen petition and an internal Tyco email that admitted that a bioequivalent formulation of temazepam could be made that had a specific surface area different from Tyco's product were additional evidence that citizen petition was a sham.

The dissent charged the majority with creating "several new grounds of antitrust liability" and converting "routine patent litigation into an antitrust cause."  Judge Newman asserted that the filing of a Paragraph IV Certification with an ANDA, in and of itself, constitutes probable cause to initiate suit and is authorized by the Hatch-Waxman Act.  The citizen petition was simply "the right to communicate with the FDA concerning public information on matters within the agency's authority and responsibility."

With regard to the infringement counterclaim, the dissent noted that Mutual sought ANDA approval for a product "that is required to be identical to Tyco's FDA-approved product in order to rely on that product's data of safety and efficacy."  Based on Mutual's representation that its product met the ANDA requirements and its Paragraph IV Certification challenging Tyco's patent, a Hatch-Waxman infringement suit cannot be a sham.

According to the dissent, Tyco's citizen petition simply "communicated to the FDA the public information that the Mutual generic product is not the same as the FDA-approved Tyco product.  An accurate communication cannot be an antitrust violation, even if it relates to competitors, as firmly established by Noerr-Pennington."  Noting that the Supreme Court has reminded that those who petition the government for redress are generally immune from antitrust liability, Judge Newman chided the majority for failing to avoid "chilling the exercise of the First Amendment right . . . with the imposition of this antitrust liability."

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