Opposing Federal Circuit Preliminary Injunction Standards in Abbott Laboratories v. Sandoz
By Kevin E. Noonan --
The Court of Appeals for the Federal Circuit affirmed grant of a preliminary injunction in Abbott Laboratories v. Sandoz on October 21, and also affirmed the District Court's determination that the patents-in-suit were not rendered unenforceable by inequitable conduct during prosecution (although defendant Sandoz will be able to pursue this defense at trial). In coming to both conclusions, the majority decision illustrated nicely the appellate penchant (and prerogative) of deciding where lines are to be drawn when considering equitable issues.
Abbott's patents-in-suit, U.S. Patent Nos. 6,010,718 and 6,551,616, relate to extended release formulations of clarithromycin, the active ingredient in Abbott's Biaxin® XL product. Abbott filed suit after Sandoz file an ANDA having a Paragraph IV certification that Abbot's patents were invalid or unenforceable.
Claim 1 of the '718 patent is representative:
1. A pharmaceutical composition for extended release of an erythromycin derivative in the gastrointestinal environment, comprising an erythromycin derivative and from about 5 to about 50% by weight of a pharmaceutically acceptable polymer, so that when ingested orally, the composition induces statistically significantly lower mean fluctuation index in the plasma than an immediate release composition of the erythromycin derivative while maintaining bioavailability substantially equivalent to that of the immediate release composition of the erythromycin derivative.
As are claims 1 and 2 of the '616 patent (which is a continuation-in-part of the '718 patent):
1. A method of reducing gastrointestinal adverse side effects comprising administering an effective amount of extended release pharmaceutical composition comprising an erythromycin derivative and a pharmaceutically acceptable polymer.
2. The method according to claim 1, wherein the erythromycin derivative is clarithromycin.
The District Court granted Abbott a preliminary injunction "to preserve the status quo" using the conventional four-factor test: whether there was a "(1) likelihood of success on the merits of the underlying litigation, (2) whether irreparable harm is likely if the injunction is not granted, [considering] (3) the balance of hardships as between the litigants, and (4) factors of the public interest." The Federal Circuit reviewed the grant of preliminary injunction based on an abuse of discretion standard. Sandoz alleged that Abbott's claims were anticipated and/or obvious over several prior art references, which the District Court found were not sufficient to establish that the claims were invalid. An interesting feature of the District Court's analysis was a reconsideration of the obviousness question in view of the Supreme Court's KSR v. Teleflex decision, which came down after the District Court originally considered Sandoz's obviousness contentions.
The question decided by the Federal Circuit was not concerned with the merits per se of the District Court's decision on the substantive question of whether Abbott's claims were anticipated or obvious; the panel found no clear error in the lower Court's factual determinations and no errors of law in its legal conclusions. The Federal Circuit also found no error in the District Court's claim construction or determination that Abbott was likely to establish at trial that Sandoz's product infringed at least one asserted claim of the patents-in-suit. Rather, the question before the Federal Circuit was the extent of the showing sufficient to preclude a district court from granting a preliminary injunction based on the likelihood of success on the merits prong of the four-factor test. This discussion was cast in Section VI of the decision, where Judge Newman was joined in her opinion upholding the injunction by Judge Archer, and from which Judge Gajarsa dissented.
Judge Newman (at left) rejected Sandoz's contention, and the dissent's, that a defendant must merely "[raise] a substantial question concerning either infringement or validity" to render grant of a preliminary injunction to be an abuse of discretion. Rather than being merely a question of whether a defendant could show claims were "vulnerable" to an invalidity challenge, at this stage Judge Newman said that sound precedent made the question whether there was a likelihood of success on the merits. In making this determination, the opinion sets forth what Judge Newman termed "the law governing the grant of a preliminary injunction." This precedent includes Supreme Court, "every regional circuit, and controlling Federal Circuit precedent," including Gillette Co. v. Energizer Holdings, Inc., 405 F.3d 1367 (Fed. Cir. 2005); Ranbaxy Pharmaceuticals., Inc. v. Apotex, Inc., 350 F.3d 1235 (Fed. Cir. 2003); Reebok Int'l Ltd. v. J. Baker, Inc., 32 F.3d 1552 (Fed. Cir. 1994); and Smith Int'l, Inc. v. Hughes Tool Co., 718 F.2d 1573 (Fed. Cir. 1983). The opinion characterized a "substantial question" as "more than a scintilla but less than a preponderance of evidence in support of its side," and further noted that there are also equitable factors that "are of particular significance at a preliminary stage," citing University of Texas v. Camenisch, 451 U.S. 390 (1981), and that a court must consider these factors in addition to whether a defendant has raised a "substantial question." The opinion also cited the Supreme Court's decision in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), that patent cases are not deserving of unique treatment" when courts consider these equitable factors in deciding whether to grant a preliminary injunction.
The opinion then sets forth what the dissent characterizes as "a superfluity of citations" to decisions from all the regional circuits and the Supreme Court in support of it thesis that the "likelihood of success on the merits" is the principal criterion used by district courts in deciding whether to grant a preliminary injunction, and by reviewing courts when deciding whether a lower court has abused its discretion. The opinion specifically cites Hybritech Inc. v. Abbott Laboratories, 849 F.2d 1446 (Fed. Cir. 1988); Roper Corp. v. Litton Systems Inc., 757 F.2d 1266 (Fed. Cir. 1985); Pretty Punch Shoppettes, Inc. v. Hauk, 844 F.2d 782 (Fed. Cir. 1988); Nutrition 21 v. United States, 930 F.2d 867 (Fed. Cir. 1991); and Texas Instruments Inc. v. Tessera, Inc., 231 F.3d 1325 (Fed. Cir. 2000) (as well as another dozen cases) as Federal Circuit precedent in support of the "likelihood of success" standard for preliminary injunctive relief, all of which are in accord with the principles the Supreme Court enunciated in eBay, according to the majority opinion. The opinion contrasts this standard with the adequacy of the "substantial question" standard for averting judgment on the pleadings or summary judgment, citing Christianson v. Colt Industries Operating Corp., 486 U.S. 800 (1988).
The dissent takes the opposite position, and Judge Gajarsa (at right) has a number of Federal Circuit opinions in support of the "substantial question" standard. Like the majority opinion, the dissent focuses on the first prong, the need for a plaintiff patentee to show a likelihood of success on the merits for a court to grant an injunction. Judge Gajarsa opines that the District Court abused its discretion because Sandoz
had raised enough of a question on the validity of the patents-in-suit
to preclude Abbott from satisfying the "likelihood of success" prong of
the preliminary injunction standard. He emphasizes that the burden is on the patentee, in view of the "extraordinary nature of the relief" sought (i.e., an injunction) to establish this prong. However, if a defendant "raises a substantial question concerning either infringement or validity, i.e., asserts an infringement or invalidity defense that the patentee cannot prove 'lacks substantial merit,' the preliminary injunction should not issue," citing Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343 (Fed. Cir. 2001). The dissent bases its argument that a showing by a defendant that claims are "vulnerable" is supported by language from Abbott Labs. v. Andrx Pharms., Inc., 452 F.3d 1331 (Fed. Cir. 2006) (quoting Amazon):
In resisting a preliminary injunction, however, one need not make out a case of actual invalidity. Vulnerability is the issue at the preliminary injunction stages, while validity is the issue at trial. The showing of a substantial question as to invalidity thus requires less proof than the clear and convincing showing necessary to establish invalidity itself.
Judge Gajarsa's point is that the District Court imposed a requirement that Sandoz show, by clear and convincing evidence, that the asserted claims of the patents-in-suit were invalid in order to defeat the grant of a preliminary injunction to Abbott, and that this burden was improper at the preliminary injunction stage. The precedential basis for his contention that Sandoz merely needed to raise a substantial question as to validity includes E.I. du Pont de Nemours & Co. v. MacDermid Printing Solutions, L.L.C., 525 F.3d 1353 (Fed. Cir. 2008); Genentech, Inc. v. Novo Nordisk A/S, 108 F.3d 1361 (Fed. Cir. 1997); Tate Access Floors v. Interface Architectural Res., 279 F.3d 1357 (Fed. Cir. 2002); Erico Int'l Corp. v. Vutec Corp., 516 F.3d 1350 (Fed. Cir. 2008); and PHG Techs., LLC v. St. John Cos., 469 F.3d 1361 (Fed. Cir. 2006). Moreover, Sandoz having established to Judge Gajarsa's satisfaction that its claims were vulnerable to being invalidated on obviousness grounds, the burden was on Abbott to show that Sandoz's invalidity contentions lacked "substantial merit."
The differences in opinion, and copious citation of authority by both the majority and the dissent, perhaps suggest that there is a split in the Federal Circuit's jurisprudence that requires the Court to revisit this question en banc (or for the Supreme Court to weigh in on the quanta of evidence required to uphold vel non the likelihood of success on the merits for preliminary injunctions). It is equally likely, however, that these cases illustrate how courts must balance the evidence presented by each party in making a determination of whether the patentee is likely to succeed on the merits. The majority and dissent each assert different opinions on whether Sandoz's obviousness contentions have merit and raise a "substantial question" of invalidity. For the majority, the deficiencies in Sandoz's evidence lead to the conclusion that Abbott is likely to prevail on the merits, and hence the majority upholds the District Court's grant of a preliminary injunction. The dissent, on the other hand, believes Sandoz's contentions have merit, and that granting a preliminary injunction under these circumstances is an abuse of discretion. The perhaps inevitable consequence of this equitable balancing is that the Federal Circuit applies its "abuse of discretion" standard to questions of whether a district court's grant of a preliminary injunction is upheld or overturned by substituting (or imposing) its judgment for the judgment of the district court. It is reasonable to ask, as it has been asked in other contexts, whether the Federal Circuit's mandate justifies this result, and whether its penchant for so extending its plenary authority is contrary to the behavior and outcome in the other regional circuit courts of appeal. It is also reasonable to ask whether this penchant is precisely the kind of jurisprudence that has so motivated the Supreme Court to review, and reverse, the Federal Circuit so often over the past ten years.
Panel: Circuit Judge Newman, Senior Circuit Judge Archer, and Circuit Judge Gajarsa
Opinion by Circuit Judge Newman; dissenting opinion by Circuit Judge Gajarsa
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