ANDA Filing Not Violation of Express Terms of Injunction
By Sherri Oslick --
In an opinion authored by Chief Judge Michel and issued late last week, the CAFC reversed the United States District Court for the Northern District of Illinois, finding Apotex not to have violated an injunction prohibiting it from manufacturing, using, selling, offering for sale, or importing into the United States generic divalproex sodium until the expiration of U.S. Patent Nos. 4,988,731 and 5,212,326. Divalproex sodium (an oligomer of units of sodium valproate and valproic acid) is marketed by Abbott as Depakote®, and is an anti-seizure medication. The claims of the '731 and '326 require that the oligomer contain 4-6 units.
The present holding represents round 3 at the CAFC for the parties. In 1997, Apotex filed an ANDA seeking approval to market generic Depakote®; the ANDA included a Paragraph IV certification of invalidity against the '731 and '326 patents, the two patents listed in the Orange Book for Depakote®. Abbott filed suit against Apotex for infringement of the '731 and '326 patents, and obtained a favorable ruling on summary judgment on both validity and infringement. Apotex appealed; the CAFC affirmed the ruling on validity but remanded for a trial on infringement. Following a bench trial, Judge Posner (sitting by designation) determined that Apotex's filing of an ANDA infringed Abbott's patents as Abbott had proved by a preponderance of the evidence that Apotex's product was a 4-6 unit oligomer of divalproex sodium. As such, the District Court entered an injunction prohibiting Apotex from "commercially manufacturing, using, selling, or offering to sell generic divalproex sodium which the Court has found to be infringing within the United States, or from importing such product into the United States, until Abbott's U.S. Patent Nos. 4,988,731 and 5,212,326 expire and defendants have received final approval from FDA to market generic divalproex sodium." Apotex appealed the judgment and the CAFC affirmed without opinion.
Subsequently, Apotex attempted to prepare a design-around having greater than 6 units of divalproex sodium, and entered into an agreement with Nu-Pharm (formerly owned by Apotex's parent company) whereby Apotex would fund, but Nu-Pharm would file, an ANDA for the design-around. Nu-Pharm's ANDA was filed in 2005 with a Paragraph IV certification of non-infringement, and Abbott responded by filing suit against Nu-Pharm. After Nu-Pharm filed an amended ANDA directed to additional dosages, and having learned of the defendants' relationship, Abbott filed a second suit, this time against Nu-Pharm and Apotex. Upon motion by Abbott, the second suit was reassigned to Judge Pallmeyer based on its relatedness to the first case.
On the day that Nu-Pharm moved for summary judgment of non-infringement before Judge Pallmeyer, Abbott moved both to enforce the injunction before Judge Posner and to stay the proceedings in front of Judge Pallmeyer. The stay was granted, and Judge Posner found Apotex in contempt, interpreting the injunction to cover any generic divalproex sodium found to be infringing. Because Posner found no difference (and therefore no "colorable" difference) between Apotex's prior product and its design-around, he found Apotex's new product to infringe the claims of Abbott's patents and extended the injunction to cover the Nu-Pharm ANDA. Apotex appealed.
On appeal, Apotex argued that the District Court had no statutory authority to entertain the contempt proceeding as the Hatch-Waxman Act does not grant such subject matter jurisdiction, and in the alternative, that the proceedings were improper as an infringement inquiry was to be handled only by trial under the Federal Rules of Civil Procedure. Specifically, on the first point, Apotex argued that in a Hatch-Waxman scenario, such a contempt proceeding was unlawful because the underlying suit is filed prior to any "classically infringing" activity (i.e., making and selling an infringing product) and more specifically, that Apotex had not engaged in such activities. In short, asserted Apotex, the "artificial infringement" as a result of their second ANDA filing was not an act subject to scrutiny in a contempt proceeding.
The CAFC dismissed Apotex's argument, noting that it had held numerous times that, albeit "highly artificial," the filing of a Paragraph IV certification as part of an ANDA was, by statute, an act of infringement and that infringement in a Hatch-Waxman suit was to be analyzed in the same way as any other infringement suit. Moreover, noted the CAFC, the District Court had authority outside of the Hatch-Waxman Act in general principles of equity governing injunctions. The District Court, according to the CAFC, had the authority to enforce its injunction through contempt proceedings, and nothing in the Hatch-Waxman Act ran contrary to this.
Additionally, while the CAFC recognized that it had previously cautioned against contempt proceedings of a summary nature where expert and other testimony would be helpful, such as in an infringement determination, it noted that such caution applied where an alleged infringer made a "good faith effort to modify" a prior infringing product. In this case, however, the lower court concluded that Apotex's decision to have Nu-Pharm file the second ANDA was nothing more than a "subterfuge intended to give Apotex a crack at another district judge" and a more favorable ruling. The CAFC declined to disturb that finding, and concluded that it was not an abuse of discretion on the part of the lower court to address issues of infringement related to the Nu-Pharm ANDA in a contempt proceeding.
Moreover, the CAFC, in applying its two part test, affirmed the lower court's finding that the subject of the Nu-Pharm ANDA was an infringing product, and that the extension of the injunction to include this product was not an abuse of discretion. According to the first part of the two part test, the District Court must address whether a contempt proceeding is the proper forum for addressing infringement of the design-around, including an assessment of whether there is more than a colorable difference between the original and new products such that there are substantial issues to be tried. The CAFC found that the lower court, which carefully reviewed the evidence presented, did not abuse its discretion in determining that there was no colorable difference the two products and that contempt proceedings were appropriate. In the second part of the two part test, the lower court must then engage in an infringement determination. Here, the CAFC found, in light of all the evidence, that the lower court did not clearly err in this regard.
With regard to the ultimate finding of contempt, however, the CAFC reversed the District Court, finding an error of law in the lower court's interpretation of the original injunction to include the mere act of filing an ANDA. The original injunction, noted the CAFC, was limited to commercial acts within the U.S., and as it was undisputed that Apotex's design-around activities all occurred outside of the U.S., Apotex had not violated the injunction. In short, while the CAFC concluded that the Nu-Pharm ANDA filing was an act of infringement, it was not a violation of the injunction, and the lower court had erred in misinterpreting the injunction as excluding acts beyond its plain terms.
Dissenting-in-part, Judge Dyk asserted that the contempt proceedings were inappropriate as there was "fair ground of doubt" as to whether the injunction applied. Specifically, because the original injunction did not preclude the filing of an ANDA, argued Judge Dyk, there was a "fair ground of doubt" as to whether Apotex's conduct was wrongful, summary contempt proceedings were therefore inappropriate, and the majority's use of the "colorable difference" test was a too narrow an application of the more general "fair ground of doubt" test. In a lengthy footnote, the majority countered the dissent by noting that Judge Dyk failed to identify any doubt that would require full litigation rather than a summary proceeding, and more particularly, what was doubtful about the determination that the Nu-Pharm ANDA did not fall within the injunction. Summary determination was appropriate, countered the majority, as there was no doubt in either the infringement determination or the determination that an ANDA filing was outside of the scope of the original injunction. The dissent's approach of requiring full litigation on infringement, rather than a contempt proceeding, according to the majority, would serve neither Apotex's due process interests nor judicial economy where the ultimate determination was that the filing of the ANDA was not a violation of the injunction.
Abbott Labs. v. Torpharm, Inc. (Fed. Cir. 2007)
Panel: Chief Judge Michel, Circuit Judge Dyk, and District Judge Otero
Opinion by Chief Judge Michel; opinion concurring-in-part and dissenting-in-part by Circuit Judge DykAdditional information regarding this case can be found at Patently-O and the Orange Book Blog.
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