Antitrust Law Daily Wrap Up, ANTITRUST—D.N.J.: Patent infringement lawsuit not a sham; antitrust counterclaims tossed, (Jun 2, 2015)

By Thomas Long, J.D.

A medical supply company’s patent infringement lawsuit against a drug manufacturer over a generic version of the brand name drug Restoril was not a “sham,” and the complaining company was entitled to summary judgment in its favor on the generic manufacturer’s antitrust counterclaims, the federal district court in Newark has decided. The generic drug maker failed to establish that the infringement claims lacked any objective factual basis. However, the drug maker could go forward with a claim that a citizen petition submitted by the complaining company to the Food and Drug Administration caused a delay in approval of the generic drug’s application (Tyco Healthcare Group LP v. Mutual Pharmaceutical Company, Inc., May 29, 2015, Chester, S.).

Background. Tyco Healthcare, a manufacturer of medical devices and supplies, marketed temazepam, a drug used to treat insomnia, under the brand name Restoril. In 2001, Tyco acquired Restoril and several related patents directed at formulations or methods of treatment with temazepam from Sandoz Limited. In 2006, Mutual Pharmaceutical Company filed an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA), seeking approval to manufacture and sell a generic version of temazepam. Mutual’s ANDA represented that the generic drug was not protected by a U.S. patent.

Tyco filed an action, alleging that Mutual’s ANDA infringed its patents, and Mutual responded with antitrust counterclaims. After the district court entered a judgment of noninfringement in favor of Mutual, Tyco filed a citizen petition with the FDA. The petition urged the FDA to change the criteria for evaluating the bioequivalence of proposed generic temazepam products. The FDA approved Mutual’s ANDA, which allowed Mutual its generic temazepam to market, and denied Tyco’s petition in its entirety. Subsequently, the district court granted summary judgment to Tyco on Mutual’s antitrust counterclaims and Mutual appealed to the Federal Circuit.

In an August 6, 2014, decision, the Federal Circuit affirmed in part, vacated in part, and remanded the case for further proceedings. Two matters vacated by the Federal Circuit were at issue in the current district court proceeding: (1) the grant of summary judgment that Tyco’s infringement claims were not sham litigation; and (2) the grant of summary judgment that Tyco’s citizen’s petition to the FDA was not a sham.

Sham litigation. In its previous summary judgment decision, the district court granted Tyco’s motion for summary judgment that the infringement action did not fall within the sham litigation exception to Noerr-Pennington immunity. The dispute over infringement turned on the patent’s specific surface area limitation. In vacating the district court’s decision, the Federal Circuit stated that it was undisputed that the specific surface area of Mutual’s temazepam fell within the infringing range when the outgassing temperature was set the same as Tyco’s. However, Mutual presented evidence that the higher temperature physically altered the temazepam itself, resulting in a decreased specific surface area. Based on evidence and analysis in the record, further inquiry was needed into the effect of the outgassing temperature on the specific surface area of Mutual’s generic product and whether Tyco’s factual theory of infringement was objectively baseless, the appellate court determined. On remand, Tyco moved again for summary judgment on Mutual’s sham litigation claim.

The issue on remand was limited to the question of whether Tyco’s factual theory of infringement was objectively baseless. The present question was not whether Mutual’s expert opinions were factually correct, but whether or not Tyco had scientific support for its contrary view of the evidence, and whether reliance on that support was reasonable or objectively baseless. Tyco argued that Mutual could not show that the patent infringement litigation was a sham under an objective standard.

Tyco relied on a combination of scientific treatises and the statements of Mutual’s expert, Dr. Williams, to demonstrate that its basis for suit was objectively reasonable. Tyco contended that this evidence showed that its infringement theory had a basis in scientific fact. Mutual had the burden to demonstrate that the material relied upon by Tyco was not enough to demonstrate a basis in scientific evidence.

It was insufficient for Mutual to show that its experts had demonstrated that Mutual’s temazepam did not infringe. Mutual had to show that no reasonable person could have relied on Tyco’s material to support the belief that there was a reasonable possibility of prevailing on an infringement claim. The opinion of Mutual’s expert, Dr. Gardella, that the 40-degree outgassing procedure detailed in Mutual’s ANDA was appropriate did not raise a factual dispute over the specific factual bases for Tyco’s infringement theory, the court said. Tyco’s theory rested on the proposition that raising the outgassing temperature might have resulted in a lower, infringing surface area measurement. Dr. Gardella did not show why the treatises and reasoning underlying Tyco’s position made it unreasonable. Other opinions rendered by Mutual’s experts merely expressed disagreement with Tyco’s theory and did not address the underlying references relied on my Tyco or demonstrate why those references were objectively baseless.

In the court’s view, based on the more fully completed factual record, both sides had theories that were supported by evidence. For purposes of the objective baselessness inquiry, Mutual failed to show that Tyco’s theory had no factual basis whatsoever. The court concluded that Tyco’s filing of the complaint for patent infringement was protected by Noerr-Pennington immunity, and judgment was entered in Tyco’s favor on the sham litigation counterclaims.

Citizen’s petition to FDA. With respect to the issue of the citizen’s petition to the FDA, the Federal Circuit had held that the district court erred in granting summary judgment to Tyco regarding Mutual’s claim that Tyco’s citizen’s petition was a sham because disputed issues of material fact remained. The appellate court noted that the FDA’s denial of Tyco’s petition as wholly without merit was particularly probative of whether the petition was reasonable. Moreover, Mutual presented expert evidence that Tyco did not have a scientific basis to conclude that Mutual’s product would be bioequivalent to Restoril. However, further inquiry was needed as to whether Mutual suffered an antitrust injury in the form of a delay in FDA approval of its generic product due to the filing of Tyco’s citizen petition.

On remand, Tyco moved for partial summary judgment on Mutual’s citizen petition counterclaim, on the ground that Mutual had no evidence that the citizen petition caused a delay in the approval of Mutual's ANDA. The district court stated that Tyco satisfied its initial burden of proof by pointing to the absence of evidence to support finding causation. The burden then shifted to Mutual to point to evidence that the petition caused a delay in approval of the ANDA.

Mutual pointed to evidence that largely based a causal inference on the timing of events, the court noted. However, at deposition, Mutual’s vice president for regulatory affairs testified that an FDA official told him “that there was a blocking petition that was preventing our 7.5-milligram ANDA from being approved.” Tyco did not argue that this testimony was inadmissible. In the court’s view, Mutual pointed to sufficient evidence to allow a reasonable jury to find that the citizen’s petition delayed approval of Mutual’s ANDA. Therefore, with respect to the citizen’s petition to the FDA, the motion for partial summary judgment was denied.

The case is Civil Action No. 07-1299 (SRC).

Attorneys: Carissa L. Rodrigue (McCarter & English LLP) for Tyco Healthcare Group LP, and Mallinckrodt Inc. James S. Richter (Winston & Strawn, LLP) for Mutual Pharmaceutical Company, Inc.

Companies: Tyco Healthcare Group LP; Mallinckrodt Inc.; Mutual Pharmaceutical Company, Inc.

Cases: Antitrust NewJerseyNews