United States: Judicial Economy Considerations Can Determine Whether And When A Claim Is Heard

In denying a brand manufacturer's motion to dismiss antitrust counterclaims and motion to stay pending appeal of a preliminary injunction order, the US District Court for the District of New Jersey placed significant weight on practical factors, such as maximizing judicial economy and streamlining substantive issues. Fresenius Kabi USA, LLC v. Fera Pharm., LLC, Case No. 15-3654 (D.N.J., May 19, 2017) (McNulty, J).  

Fresenius's patents at issue relate to formulations of levothyroxine, a hormone used to treat hypothyroidism. Earlier in this case, Fera filed inequitable conduct counterclaims, alleging that Fresenius submitted a declaration containing material omissions and misleading statements to the US Patent and Trademark Office (PTO) during prosecution. Fera later filed antitrust counterclaims on the grounds that Fresenius delayed Fera's entry into the market by engaging in a sham litigation based on fraudulently obtained patents. Although these two counterclaims share many of the same factual underpinnings, they are distinct and have different legal standards that must be resolved individually. 

Before the motions at issue in the present decision were filed, the court had denied Fresenius's motion to dismiss Fera's inequitable conduct counterclaims and entered a preliminary injunction against Fera. The court explained that although Fera had met the "relatively low" pleading requirement for stating an inequitable conduct claim, the evidence of record did not indicate that Fera was likely to succeed on that claim. The court further found that the balance of harms and public interest favored an injunction. Fera appealed to the US Court of Appeals for the Federal Circuit. Fresenius moved to stay the case pending Fera's appeal of the preliminary injunction and to dismiss the antitrust claims altogether. The present decision resolves these two motions. 

The district court denied Fresenius's motion to dismiss the antitrust claims "as presented," and decided sua sponte to sever and stay those claims pending resolution of the infringement and inequitable conduct issues. The court found that although the pleading standard is relatively low, Fresenius identified several "potential deficiencies" in Fera's factual allegations. The court noted that whether Fera had pled sufficient facts was up for debate, but opted to postpone consideration of those issues in the interests of judicial economy. For example, if the asserted patents were found to be invalid or unenforceable, the antitrust claims would be mooted. And even if the asserted patents were found to be valid and enforceable, the antitrust claims would still likely be mooted, because "enforcement of a valid patent does not generally violate the antitrust laws." Moreover, litigation of the inequitable conduct issues would provide a "sturdy legal and factual foundation" for later consideration of the antitrust claims. 

The court also denied Fresenius's motion to stay the entire case pending Fera's appeal of the preliminary injunction. First, denial of a stay would not impose undue hardship on Fresenius. Because the injunction was already in place, Fresenius did not need a stay in order to preserve its rights and interests pending appeal. Nor would denial of a stay prejudice Fresenius with respect to litigation costs. Discovery was already essentially complete, and, in any event, "the routine costs of litigation, without more, do not constitute a particular hardship." 

In contrast, a stay would likely prejudice Fera because, even if the injunction was ultimately lifted, Fera would "have won no more than the right to launch its generic products 'at-risk'" and would still need to successfully litigate the infringement and enforceability issues. Delaying resolution of those issues would prejudice Fera because other generic competitors could win US Food and Drug Administration approval and gain early market share during the stay. 

Fresenius did not dispute that a stay could put Fera at a competitive disadvantage, but instead argued that any prejudice to Fera would be self-imposed because it had opted not to settle (as other former co-defendants had). The court rejected Fresenius's argument because "Fera is entitled to assert its legitimate rights; it has no obligation to settle just because others have done so." 

Finally, the court found that a stay pending appeal of a preliminary injunction order would not simplify any substantive issues in the case, unlike a stay pending appeal of a potentially dispositive issue such as a Markman order or collateral proceeding at the PTO (e.g., ex parte re-examination, inter partes review). For all of these reasons, the court denied Fresenius's motion to stay the entire case pending appeal of the preliminary injunction order.

Judicial Economy Considerations Can Determine Whether And When A Claim Is Heard

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