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Tyco Healthcare Group LP v. Mutual Pharmaceutical Co., Inc.

United States Court of Appeals, Federal Circuit

August 6, 2014


Page 1339

Appeal from the United States District Court for the District of New Jersey in No. 07-CV-1299, Judge Stanley R. Chesler.

PETER E. STRAND, Shook, Hardy & Bacon, L.L.P., of Washington, DC, argued for plaintiffs-appellees. With him on the brief were JOHN D. GARRETSON and REBECCA J. SCHWARTZ, of Kansas City, Missouri.

STEFFEN N. JOHNSON, Winston & Strawn LLP, of Washington, DC, argued for defendants-appellants. With him on the brief were CHARLES B. KLEIN, JOHN K. HSU, and EIMERIC REIG-PLESSIS, of Washington, DC, and JAMES F. HURST, of Chicago, Illinois.

Before NEWMAN, BRYSON, and MOORE, Circuit Judges. OPINION filed by Circuit Judge BRYSON. Dissenting opinion filed by Circuit Judge NEWMAN.


Page 1340

Bryson, Circuit Judge.

Mutual Pharmaceutical Company, Inc., and United Research Laboratories, Inc., (collectively, " Mutual" ) appeal from a summary judgment entered by the United States District Court for the District of New Jersey in favor of Tyco Healthcare Group LP and Mallinckrodt, Inc., (collectively, " Tyco" ). In the order on appeal, the district court held that Tyco did not violate the antitrust laws by filing suit against Mutual or by filing a " citizen petition" with the Food and Drug Administration (" FDA" ) seeking to bar Mutual from obtaining FDA permission to market its generic version of one of Tyco's drugs. We affirm in part, vacate in part, and remand.


Tyco is the owner of several patents directed to formulations or methods of treatment with temazepam, a drug used to treat insomnia. Tyco markets temazepam under the brand name Restoril. Tyco acquired Restoril and several related patents from Sandoz Limited in 2001. The patents all claim 7.5 mg formulations of temazepam having a specific surface area between 0.65 and 1.1 square meters per gram (m2/g). Specific surface area is a measure of the surface area of a drug per unit of weight. Generally, as chunks of drug material are ground down into smaller particles, the specific surface area increases because more of the drug is exposed to the surrounding environment.

The claims of the temazepam patents do not recite any particular measurement technique. However, the specifications of each of the patents state that " [s]urface area measurements are made essentially in accordance with the standard B.E.T. procedure of Brunauer, Emmet and Teller." E.g., U.S. Patent No. 5,211,954 (" the '954 patent" ), col. 2, ll. 1-4.

B.E.T. testing is a gas-adsorption technique for measuring specific surface area. The procedure measures the amount of an adsorbate gas that has bound to the surface of the test material. In order to prepare a sample of a drug for measurement, a process of outgassing is performed, during which gas or vapor is removed from the surface of the sample to produce a clean surface that can be measured accurately. Outgassing is performed at a particular temperature, and the selection of that temperature can affect the ultimate specific surface area measurement. Increasing the outgassing temperature speeds the process of cleaning the test material's surface and allows measurements to be obtained more quickly. It is important, however, to avoid selecting a temperature so high that the heat physically alters the test material, for example by softening or melting it.

Sandoz conducted specific surface area testing while seeking FDA approval for

Page 1341

Restoril. Tyco also performed testing after acquiring Restoril and the temazepam patents. In both cases, the testers used the B.E.T. procedure with an outgassing temperature of 105° C.

In November 2006, Mutual filed an Abbreviated New Drug Application (" ANDA" ) with the FDA, seeking approval to manufacture and sell 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 the temazepam patents. Mutual's ANDA included a certification representing that the generic drug was not protected by a U.S. patent, as required by 21 U.S.C. § 355(j)(2)(A)(vii). Mutual's certification was filed under paragraph IV of section 355(j)(2)(A)(vii), which permits a generic manufacturer to assert that the patent or patents at issue are invalid or that the generic product that is the subject of the ANDA would not infringe those patents. Such certifications are known as " paragraph IV certifications." On February 5, 2007, 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 the temazepam 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 to Mutual's paragraph IV certification, Tyco filed an action alleging that Mutual's ANDA infringed Tyco's patents under 35 U.S.C. § 271(e)(2)(A), the special infringement provision of the Hatch-Waxman Act. Pursuant to the automatic stay provision of the Act, 21 U.S.C. § 355(j)(5)(B)(iii), Tyco was entitled to an automatic stay of the FDA's approval of Mutual's ANDA until the earlier of 30 months from the date Tyco filed its complaint or the date that a court determined that Tyco's patents were invalid or not infringed by Mutual's ANDA. In its amended answer, Mutual raised antitrust counterclaims, which the district court temporarily stayed pending the resolution of Tyco's infringement claims.

On August 4, 2009, the district court granted judgment of noninfringement under Fed.R.Civ.P. 52(c). At that point only the '954 patent was at issue because Tyco's other temazepam patents had expired.

Based on this court's decision in Bayer AG v. Elan Pharmaceutical Research Corp., 212 F.3d 1241 (Fed. Cir. 2000), the district court found that Mutual did not infringe the '954 patent under section 271(e) because Mutual's ANDA " defines the proposed temazepam product in a manner that directly addresses the issue of infringement" and because a " product manufactured to the ANDA's specification," i.e., a product having a specific surface area of not less than 2.2 m2/g, " could not literally infringe the '954 Patent." Tyco Healthcare Grp. LP v. Mutual Pharm. Co., No. 2:07-cv-01299, *20 (D.N.J. Aug 4, 2009).

On August 5, 2009, the day after the district court entered its judgment of noninfringement, Tyco filed a citizen petition with the FDA. The citizen petition urged the FDA to change the criteria for evaluating the bioequivalence of proposed generic temazepam products in order to " help ensure therapeutic equivalence" of generic temazepam to Restoril. Tyco proposed guidelines that would require generic temazepam manufacturers to demonstrate bioequivalence to Restoril through a series of pharmacokinetic parameters considerably more extensive and complex than the parameters traditionally required by the FDA for a bioequivalence determination.

Page 1342

Tyco reasoned that the safety and efficacy of Restoril was likely linked to its pharmacokinetic profile, and that changes to parameters such as specific surface area in a generic version could alter that profile and thereby affect the safety and efficacy of the generic version as compared to Restoril.

On September 8, 2009, although the citizen petition was still pending, the FDA approved Mutual's ANDA, which allowed Mutual to bring its generic temazepam product to market. Five months later, the FDA denied Tyco's citizen petition in its entirety. The FDA concluded that Tyco " had not provided adequate evidence to support any of the actions requested in the petition" and that there was " no basis" for adopting Tyco's proposed bioequivalence criteria. In addition, the FDA found that the citizen petition " relie[d] entirely on uncorroborated generalities and theoretical speculation." The FDA explained that it " require[s] additional bioequivalence criteria" in " very rare circumstances." Those circumstances, according to the FDA, have arisen only in the case of " complex extended-release or otherwise modified-release products for which there was a known and clinically significant connection between release characteristics and clinical performance." Temazepam, the FDA explained, " is not such a drug."

On May 5, 2010, the district court granted summary judgment on Mutual's invalidity counterclaim, holding the claims of the '954 patent invalid for obviousness. This court affirmed that decision. Tyco Healthcare Grp. LP v. Mutual Pharm. Co., 642 F.3d 1370, 1377 (Fed. Cir. 2011). We held that the only feature of the '954 claims not found in the prior art 15 mg Restoril capsules was the 7.5 mg temazepam dosage level. That dosage level, however, was disclosed in a 1983 volume of the British National Formulary (" BNF" ) that recommended administering between 5 and 15 mg of temazepam for the treatment of insomnia in the elderly. Id. at 1372. This court rejected Tyco's argument that various prior art references taught away from that 7.5 mg dosage level. See id. at 1374-76. We also rejected Tyco's argument that the BNF reference did not teach the 7.5 mg dose because it did not provide evidence of the efficacy of that dose. See id. at 1373-74.

After our disposition of the first appeal, the district court lifted the stay of Mutual's antitrust counterclaims. The court then granted summary judgment to Tyco on all of those counterclaims. Tyco Healthcare Grp. LP v. Mutual Pharm. Co., No. 2:07-cv-1299, (D.N.J. Jan. 18, 2013).

The district court first rejected Mutual's claim that Tyco's section 271(e)(2)(A) infringement claim constituted sham litigation that subjected Tyco to antitrust liability for using illegitimate means to keep the product of its competitor, Mutual, off the market. The court noted that the dispute over infringement turned on the specific surface area limitation. Mutual claimed that the specific surface area of its generic product was 2.2 m2/g and thus outside the range of 0.65 to 1.1 m2/g claimed in the '954 patent. The evidence showed, however, that in testing its proposed ANDA product, Mutual had used an outgassing temperature of 40° C, while Tyco had used an outgassing temperature of 105° C in its tests of the product. Because of that difference in temperatures used during the measurement process, the court concluded that it was reasonable for Tyco to proceed with its infringement action.

The district court also rejected Mutual's argument that no reasonable litigant could have expected Tyco's patents to withstand a validity challenge. The court reasoned that, given the presumption of validity and

Page 1343

the clear-and-convincing evidence standard for proving invalidity, Mutual had failed " to submit evidence sufficient to demonstrate a material factual question about whether Plaintiffs objectively had a reasonable basis to believe that they had a chance to succeed." Tyco, No. 2:07-cv-1299, at *15 (D.N.J. Jan. 18, 2013) (emphasis in original).

The district court next rejected Mutual's claim that Tyco's citizen petition was a sham. The court reasoned that Mutual had put forward an inadequate legal theory because, according to the court, antitrust liability for sham claims " is expressly limited to litigation" and therefore does not apply to conduct such as the filing of an administrative petition. The court also found that Mutual had failed to put forward evidence that would allow the inference that the citizen petition was an attempt to interfere directly with the business relationships of a competitor.

Finally, the district court rejected Mutual's claim that Tyco was subject to antitrust liability because its action was the product of fraud within the meaning of the Supreme Court's decision in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). The court found that Mutual's evidence supported two factual assertions: (1) that Tyco had read the relevant patents' prosecution histories and (2) that Tyco knew of the " Memo for the Record," which documented a 1984 teleconference between Sandoz and the FDA during which an FDA doctor told Sandoz that temazepam doses from 5 to 15 mg were recommended in Great Britain for the elderly. That evidence, according to the district court, " at most . . . supports the inference that Plaintiffs were aware that relevant prior art existed that could impact the validity or enforceability of the patents." According to the district court, however, that was " a far cry . . . from demonstrating that [Tyco] knew that Sandoz had engaged in a deliberately planned and carefully executed scheme to defraud the Patent Office." Mutual subsequently took this appeal from the district court's summary judgment order.


1. A party is ordinarily exempt from antitrust liability for bringing a lawsuit against a competitor. That principle is known as " Noerr-Pennington immunity," because it originated with the Supreme Court's decisions in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), and United Mine Workers of Am. v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). There is a recognized exception to Noerr-Pennington immunity for " sham litigation," which the Supreme Court has defined as litigation that (1) is " objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits" (the objective element), and (2) is motivated by a desire " to interfere directly with the business relationships of a competitor" (the subjective element). Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) (" PRE " ).

On appeal, Mutual asserts that there is a disputed issue of fact concerning whether Tyco's infringement suit was " objectively baseless" so as to fall within the sham-litigation exception to Noerr-Pennington immunity. According to Mutual, the section 271(e)(2)(A) infringement claim rejected by this court in Bayer AG v. Elan Pharmaceutical Research Corp., 212 F.3d 1241 (Fed. Cir. 2000), is legally and factually indistinguishable from Tyco's claim. In

Page 1344

Elan, we held that an ANDA that recited a drug's specific surface area falling outside the range claimed in the relevant patents could not infringe those patents under section 271(e)(2)(A). Despite the patent owner's argument that the generic manufacturer had not specified a validated test protocol in its ANDA to measure specific surface area, we found that the only drug the generic manufacturer could legally produce under the ANDA was a drug that does not infringe. See id. at 1248-50.

Mutual's argument, which is based on Elan, ignores other decisions of this court, and language in Elan itself, that could give a patentee in Tyco's position a reasonable expectation of a favorable outcome even though the generic manufacturer's ANDA application describes a generic drug with characteristics that take it outside the patent's claims. The question addressed in Elan and similar cases is whether the product that the ANDA applicant will likely market if its application is approved will infringe. Elan, 212 F.3d at 1248. That can occur in spite of the ANDA specification if, for example, the ANDA is based on faulty testing or screening procedures.

In Bayer AG v. Biovail Corp., 279 F.3d 1340 (Fed. Cir. 2002), this court addressed infringement, under section 271(e)(2)(A), of the same patent at issue in Elan, by the same generic drug at issue in Elan, but for a different dose of that drug. Although the legal and factual issues in Biovail were similar to those in Elan, we found that the factual evidence proffered in Biovail called for a different result. In Elan, neither party submitted evidence that the commercial ANDA product would contain active ingredients falling within the patent's specific surface area range and outside the range specified in the ANDA. In Biovail, however, the patent owners " introduced evidence of actual infringement by a commercial tablet made under the specifications of an allegedly identical ANDA." Biovail, 279 F.3d at 1346. That evidence " raise[d] a legitimate ...

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