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In Re: Wellbutrin Xl Antitrust Litigation

May 11, 2012

IN RE: WELLBUTRIN XL ANTITRUST LITIGATION


The opinion of the court was delivered by: McLaughlin, J.

MEMORANDUM

j

TABLE OF CONTENTS

Page

I. Legal and Factual Background.. . . . . . . . . . . . . . . 2

A. The Drug Approval Process and Regulatory Framework. . 2

B. The Citizen Petition Process. . . . . . . . . . . . . 4

C. Wellbutrin IR, Wellbutrin SR, and Wellbutrin XL.. . . 5

D. Noerr-Pennington Immunity and the Sham Exception. . . 7

E. Standard of Proof as to Objective Baselessness. . . 11

II. Overview.. . . . . . . . . . . . . . . . . . . . . . . . 13

III. Biovail's Conduct. . . . . . . . . . . . . . . . . . . . 15

A. The Anchen Lawsuit. . . . . . . . . . . . . . . . . 15

B. The Watson Lawsuit. . . . . . . . . . . . . . . . . 26

C. The Abrika Lawsuit. . . . . . . . . . . . . . . . . 28

D. The Impax Lawsuit.. . . . . . . . . . . . . . . . . 43

E. The Citizen Petition. . . . . . . . . . . . . . . . 50

IV. GSK's Conduct. . . . . . . . . . . . . . . . . . . . . . 82

A. The Impax and Watson Lawsuits.. . . . . . . . . . . 84

B. Biovail's Citizen Petition. . . . . . . . . . . . . 86

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

In re: WELLBUTRIN XL CIVIL ACTION ANTITRUST LITIGATION

: NO. 08-2431 (direct) NO. 08-2433 (indirect)

MEMORANDUM

McLaughlin, J.

Wellbutrin XL is a once-a-day antidepressant containing the active pharmaceutical ingredient bupropion hydrochloride. It is produced by Biovail Corporation, Biovail Laboratories, Inc., and Biovail Laboratories International SRL*fn1 (together, "Biovail"), and distributed by SmithKline Beecham Corporation and GlaxoSmithKline, PLC (together, "GSK"). The plaintiffs, direct and indirect purchasers of Wellbutrin XL, have sued Biovail and GSK for illegally conspiring to prevent generic versions of Wellbutrin XL from entering the American market by filing sham patent infringement lawsuits and a citizen petition with the Food and Drug Administration ("FDA"), and entering into agreements with generic companies to settle the lawsuits.

Biovail and GSK now each move for summary judgment, arguing that their conduct is protected from antitrust liability under the Noerr-Pennington doctrine, and that the settlement agreements are not independently actionable. GSK also argues that it had no involvement in some of the allegedly anticompetitive conduct and, therefore, cannot be held conspiratorially liable for it. The Court will grant the motions as to the four lawsuits and the citizen petition, and defer decision as to the settlement agreements until a future date.

I. Legal and Factual Background*fn2

A. The Drug Approval Process and Regulatory Framework

The Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-92 ("FDCA"), provides that the Food and Drug Administration ("FDA") must approve all drugs before they may be introduced into interstate commerce. Companies seeking to market drugs may file applications for approval under one of two procedures.

Under the first procedure, the applicant files a New Drug Application ("NDA"), which must contain examples of the proposed labeling for the drug as well as clinical data demonstrating the drug's safety and efficacy. Among other things, the NDA must also contain the patent number and expiration date of any patent that claims either the drug or a method of using the drug if "a claim of patent infringement could reasonably be asserted." The FDA publishes the names of approved drugs and their associated patents in what is commonly known as the "Orange Book." 21 U.S.C. § 355(b).

Congress established the second new drug approval procedure in 1984 with the Drug Price Competition and Patent Term Restoration Act (the "Hatch-Waxman Act"). Pub. L. No. 98-417, 98 Stat. 1585 (1984). Under the Hatch-Waxman Act, companies seeking to manufacture and market a generic version of a previously approved pioneer drug (known as the "listed drug") need not file an NDA. Instead, they are permitted to file an Abbreviated New Drug Application ("ANDA"). The ANDA permits the applicant to rely on the safety and efficacy data for the listed drug if the applicant can show that the generic product is "bioequivalent" to the listed drug. 21 U.S.C. §§ 355(j)(2)(A)(iv), (j)(8)(B).

As part of the ANDA process, a generic manufacturer must make one of four certifications regarding each patent associated in the Orange Book with the listed drug: (I) that the patent information has not been filed; (II) that the patent has expired; (III) that the patent is set to expire; or (IV) that the patent is invalid or will not be infringed by the generic drug. This fourth certification is known as a "paragraph IV certification." 21 U.S.C. § 355(j)(2)(A)(vii)(IV). A generic manufacturer that files a paragraph IV certification must give notice to the patent holder and provide a "detailed statement of the factual and legal basis of the opinion of the applicant that the patent is invalid or will not be infringed." 21 U.S.C. § 355(j)(2)(B).

The Hatch-Waxman Act provides that if the patent holder files an infringement suit within 45 days after receiving notice, the patent holder benefits from a statutory stay on FDA approval of the ANDA for a period of 30 months or until the resolution of the infringement suit, whichever is shorter. 21 U.S.C. § 355(j)(5)(B)(iii). The first generic company to file an ANDA containing a paragraph IV certification (the "first filer") also receives an "exclusivity" period of 180 days during which the FDA may not approve any later-filed paragraph IV ANDA based on the same NDA. Id. § 355(j)(5)(B)(iv). The 180-day period begins to run from (1) the date that the first filer begins to market its drug or (2) the date of a final judgment that the patent is invalid or not infringed, whichever is earlier. Id. §§ 355(j)(5)(B)(iv), 355(j)(5)(D).

B. The Citizen Petition Process

Federal regulations provide that an interested person may petition the FDA to "issue, amend, or revoke a regulation or order, or to take or refrain from taking any other form of administrative action." 21 C.F.R. § 10.25. A citizen petition must describe the FDA action requested, include a statement of the factual and legal grounds on which the petitioner relies, and certify that the petition includes "all information and views on which the petition relies, and that it includes representative data and information known to the petitioner which are unfavorable to the petition." 21 C.F.R. § 10.30(a). Within 180 days of receiving the petition, the FDA must furnish a response to the petitioner either approving, denying, or providing a tentative response that indicates why the agency has been unable to reach a decision on the petition.*fn3 Id. § 10.30(e)(2).

C. Wellbutrin IR, Wellbutrin SR, and Wellbutrin XL Buproprion hydrochloride, an active pharmaceutical ingredient for treating depression, was first approved by the FDA for the treatment of major depressive disorder in 1985 in an immediate release formulation known by its branded name, Wellbutrin IR. Wellbutrin IR provides for rapid release of the active ingredient and is taken three times a day. The FDA approved Wellbutrin IR on the basis of human clinical trials that demonstrated the safety and efficacy of buproprion hydrochloride and set the maximum recommended daily dose at 450 mg/day. Clinical data indicated an increase in seizure risk above that recommended daily dose. Biovail Stmt. ¶¶ 77-78; Pls.' Stmt. Resp. ¶¶ 77-78; GSK Stmt. ¶ 1; Pls.' Stmt. Resp. ¶ 1.

The next bupropion hydrochloride product to reach the market was the sustained release Wellbutrin SR, which is taken twice a day. Wellbutrin SR was approved on the basis of bioequivalence to Wellbutrin IR. The maximum recommended daily dose for Wellbutrin SR is also 450 mg/day. Biovail Stmt. ¶ 79; Pls.' Stmt. Resp. ¶ 79.

Biovail acquired the rights to two U.S. patents covering extended release formulations of bupropion hydrochloride: U.S. Patent No. 6,096,341 (the "'341 patent") and U.S. Patent No. 6,143,327 (the "'327 patent"). Both patents are set to expire on October 30, 2018. GSK Stmt. ¶ 3; Pls.' Stmt. Resp. ¶ 3.

Previous patents had covered bupropion hydrochloride tablets that contained "stabilizers," which are ingredients that prevent bupropion hydrochloride from degrading. Biovail Stmt. ¶ 1; Pls.' Stmt. Resp. ¶ 1. The '341 patent's summary of the invention, however, describes a controlled release tablet comprising:

(i) a core comprising bupropion hydrochloride and conventional excipients, free of stabilizer; and

(ii) a coating consisting essentially of a water-insoluble, water-permeable film-forming polymer, a plasticizer and a water-soluble polymer.

'341 Patent (BX 1) (emphasis added).

On October 26, 2001, Biovail and GSK entered into an agreement to develop a once-a-day extended release bupropion hydrochloride tablet that practiced the '341 patent. The extended release formulation, brand-named Wellbutrin XL, would be taken once a day and allow for the continuous and slow release of bupropion hydrochloride into the bloodstream over time. In August 2002, GSK filed an NDA for Wellbutrin XL and included the '341 and '327 patents for listing in the Orange Book. The FDA approved the NDA for Wellbutrin XL in August 2003 on the basis of bioequivalence to Wellbutrin IR and SR. Thereafter, GSK began to market the drug to great commercial success. As with Wellbutrin IR and SR, the recommended daily dose for Wellbutrin XL was 450 mg/day, although the adult target dose is 300 mg/day. Biovail Stmt. ¶¶ 2, 80; Pls.' Stmt. Resp. ¶¶ 2, 80; GSK Stmt. ¶ 7; Pls.' Stmt. Resp. ¶ 7.

D. Noerr-Pennington Immunity and the Sham Exception

A party who petitions the government for redress is generally immune from antitrust liability. Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc. ("PRE"), 508 U.S. 49, 56 (1993); Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 122 (3d Cir. 1999). Under what is known as the NoerrPennington doctrine, the First Amendment protects the right to petition all types of government entities, including the right to bring legitimate disputes to the courts for judicial resolution. Eastern R.R. Presidents Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127, 136 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657, 670 (1965); California Motor Transp. Co. v. Trucking Unltd., 404 U.S. 508, 510 (1972).

Noerr-Pennington immunity, however, is not absolute. It is subject to a "sham" exception for activities that are a "mere sham to cover . . . an attempt to interfere directly with the business relationships of a competitor." PRE, 508 U.S. at 56 (citing Noerr, 365 U.S. at 144). The sham exception is applicable not only to lawsuits but also to administrative petitions.*fn4 Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119,

Under the first prong of the test, the party invoking the sham exception, here the plaintiffs, must show that the defendants' conduct is "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." PRE, 508 U.S. at 60. Put another way, "[i]f an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail." Id. The existence of probable cause to institute proceedings is an absolute defense to antitrust liability.*fn5 Cheminor Drugs, 168 F.3d at 122 (citing PRE, 508 U.S. at 62-63).

Loss on the merits of the underlying proceeding, although instructive, is not determinative on the issue of objective baselessness. See PRE, 508 U.S. at 65 (holding that a copyright action in which the party lost on summary judgment was not sham litigation); FilmTec Corp. v. Hydranautics, 67 F.3d 931, 937 (Fed. Cir. 1995). The PRE Court specifically warned courts to "resist the understandable temptation to engage in post hoc reasoning by concluding that an ultimately unsuccessful action must have been unreasonable or without foundation." 508 U.S. at 61 n.5 (internal citations and quotation marks omitted). Where there is no dispute over the predicate facts of the underlying legal proceeding, a court may decide probable cause as a matter of law. PRE, 508 U.S. at 63.

Only if an action is objectively baseless may a court proceed to the second prong of the sham exception definition. Under the subjective second prong, a court should examine whether the baseless suit or petition "conceals an attempt to interfere directly with the business relationships of a competitor through the use of the governmental process - as opposed to the outcome of that process - as an anticompetitive weapon." PRE, 508 U.S. at 61 (internal quotation marks and citations omitted).

E. Standard of Proof as to Objective Baselessness

The parties dispute whether the plaintiffs must establish objective baselessness using a preponderance of the evidence standard or a clear and convincing evidence standard. The Court of Appeals for the Federal Circuit has not published a decision that explicitly sets forth the standard of proof for showing that a lawsuit or petition was objectively baseless in the sham exception context.*fn6

In C.R. Bard, Inc. v. M3 Sys., Inc., the Federal Circuit cited with approval Handgards, a Ninth Circuit case that required clear and convincing evidence of bad faith to invoke the sham exception. 157 F.3d 1340, 1368-69 (Fed. Cir. 1998) (citing Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282 (9th Cir. 1984)). However, Handgards predates PRE's division of the sham exception inquiry into objective and subjective prongs, and C.R. Bard did not explicitly adopt the clear and convincing evidence standard for the objective baselessness prong. The only Federal Circuit decision to do so in the Noerr-Pennington context is unpublished. Mitek Surgical Prods., Inc. v. Arthrex, Inc., 230 F.3d 1383 (Fed. Cir. 2000) (unpublished table disposition).

Nevertheless, the Federal Circuit has imposed a clear and convincing evidence standard in other contexts where the parties must establish objective baselessness under PRE. See, e.g., 800 Adept, Inc. v. Murex Secs. Ltd., 539 F.3d 1354, 1370 (Fed. Cir. 2008); Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1253, 1263-64 (Fed. Cir. 2008). The issue in those cases was whether state tort claims against patent holders were preempted by federal patent law. Preemption turned on whether the patent holder acted in "bad faith" in the publication or enforcement of its patent. Part of the bad faith analysis required clear and convincing evidence that the patent holder's infringement allegations were objectively baseless, as defined in PRE. Murex, 539 F.3d at 1369-70.

The Federal Circuit has not clarified in a published decision whether the clear and convincing evidence standard required to show objective baselessness in preemption cases also applies in the sham exception context. However, both the unpublished Mitek table disposition and other district court decisions suggest that a clear and convincing evidence standard of proof may be appropriate.*fn7 See Teva Pharms. USA, Inc. v. Abbott Labs., 580 F. Supp. 2d 345, 362 (D. Del. 2008) (requiring clear and convincing evidence of objective baselessness); In re Relafen Antitrust Litig., 346 F. Supp. 2d 349, 360 (D. Mass. 2004) (same). Nevertheless, the Court need not decide in this case whether a clear and convincing evidence or a preponderance of the evidence standard is the proper standard in the context of a sham exception claim because the Court's decision on summary judgment would be the same under either standard.

II. Overview

Between September 2004 and May 2005, four different generic companies - Anchen, Abrika, Impax, and Watson - filed ANDAs with the FDA, each seeking approval of a generic version of Wellbutrin XL. In each case, Biovail filed a lawsuit against the generic company, claiming infringement of the '341 patent.*fn8 With respect to most of the generic products, the lawsuits were filed within 45 days of receiving the generic companies' paragraph IV notices, thus triggering the 30-month statutory stay on ANDA approval. GSK joined Biovail in the lawsuits against Anchen and Abrika, but later withdrew. Biovail Stmt. ¶ 2; Pls.' Stmt. Resp. ¶ 2; GSK Stmt. ¶ 9; Pls.' Stmt. Resp. ¶ 9.

On December 20, 2005, Biovail filed a citizen petition (the "Citizen Petition") with the FDA. GSK did not join the filing. The FDA issued its final response granting in part and denying in part Biovail's Citizen Petition on December 14, 2006, the same day that it approved Anchen's ANDA. Citizen Petition (BX 96); FDA Final Resp. (BX 108); Anchen Approval Ltr. (GX 42). Shortly thereafter, the defendants reached a series of agreements with Anchen, Impax, Watson, and another generic pharmaceutical company, Teva Pharmaceuticals, that settled or otherwise disposed of the Anchen, Impax, and Watson patent infringement lawsuits and set a schedule for generic entry. Biovail also separately settled the Abrika lawsuit.

The plaintiffs allege that the defendants' lawsuits and the Citizen Petition constituted an illegal conspiracy to delay entry of generic versions of Wellbutrin XL in violation of the Sherman Antitrust Act. The defendants contend that their conduct is immune from antitrust liability under the Noerr-Pennington doctrine. The plaintiffs also contend that the agreements disposing of some of the lawsuits independently violated the antitrust laws, even if the lawsuits themselves were not sham litigation.

The Court will grant the defendants' motions for summary judgment as to the four patent infringement lawsuits and the Citizen Petition because they do not fall within the sham exception to Noerr-Pennington immunity. The Court does not decide today whether the settlement agreements independently violated the antitrust laws, as that issue is still being briefed. The Court will omit the settlement agreements from the recitation of facts and discussion of law below.

III. Biovail's Conduct

A. The Anchen Lawsuit

1. Facts as to Anchen

On September 21, 2004, Anchen Pharmaceuticals, Inc. filed an ANDA with the FDA, seeking permission to sell a generic version of Wellbutrin XL. Anchen provided Biovail and GSK with its paragraph IV notice by cover letter dated November 12, 2004, claiming that its product did not infringe the '341 patent. Anchen's paragraph IV notice claimed non-infringement because its "tablet core contains a stabilizing amount of hydrochloric acid" and hence was not "free of stabilizer," the term used in the '341 patent. Anchen also provided selected portions of its ANDA to Biovail and GSK. Biovail Stmt. ¶¶ 3-5; Pls.' Stmt. Resp. ¶¶ 3-5.

Anchen's ANDA did not quantify the amount of hydrochloric acid in its product on a per unit basis. The ANDA described a product that used hydrochloric acid as a "stabilizing agent" in the manufacturing process, but stated that the acid was "evaporated during processing" and indicated a "--" under the column designated "MG PER TABLET." Similarly, the percentage of hydrochloric acid was listed as "-" and ingredients other than hydrochloric acid were shown in the ANDA to add up to 100.0% of the finished product. See Biovail Br. Exs. A, B. A list in the ANDA that compared the Anchen product to Wellbutrin XL did not include hydrochloric acid as an ingredient in Anchen's product. Biovail Br. Ex. C.

On November 16, 2004, four days after Anchen sent its paragraph IV notice, Stan Hull, senior vice president of GSK, emailed Carol Chapuis, a Biovail vice president, proclaiming the "need to get aligned on our main messages and position" regarding the ANDA. Ms. Chapuis's response referenced a Joint Steering Committee meeting to expand on the topics that Mr. Hull mentioned. PX 380.

Shortly after receiving Anchen's paragraph IV notice, Biovail and GSK reached a Common Interest Agreement with respect to their common legal interest in potential infringement of the '341 and '327 patents by Anchen or filers of additional ANDAs and paragraph IV notices, and regarding any litigation in response thereto. The Common Interest Agreement related to the paragraph IV certifications of Anchen, Abrika, and Impax, and to the Anchen and Abrika lawsuits. Stip. of Parties Concerning Defs.' Common Interest Claims ¶ 1 (ECF No. 363/ECF No. 347).

On December 21, 2004, within 45 days of receiving Anchen's paragraph IV notice, Biovail and GSK jointly initiated a patent infringement action against Anchen in the Central District of California. The lawsuit triggered the 30-month statutory stay under Hatch-Waxman. The case was assigned to the Honorable James V. Selna. Anchen answered the complaint, denying infringement and asserting counterclaims for non-infringement and invalidity. Biovail Stmt. ¶¶ 8-9; Pls.' Stmt. Resp. ¶¶ 8-9; Anchen Compl. (BX 2). After GSK moved to withdraw as a plaintiff, the Anchen court approved the parties' stipulation of GSK's withdrawal from the suit on April 25, 2005. Biovail continued the lawsuit following GSK's withdrawal. GSK Stmt. ¶¶ 43, 44; Pls.' Stmt. Resp. ¶¶ 43, 44.

During the claim construction portion of the litigation, Biovail argued that in the '341 patent, the term "free of stabilizer" should be construed to mean that "the core lacks an effective stabilizing amount of an organic or inorganic acid capable of inhibiting the degradation of bupropion hydrochloride . . . ." Biovail Prelim. Cl. Constr. Br. 9 (BX 17). By contrast, Anchen argued that the term "free of stabilizer" should mean "not united with, attached to, combined with, or mixed with . . . any substance or agent that tends to prevent changes to the chemical or physical integrity of the tablet, or enhances the ability of the tablet to maintain protection against microbiological contamination." Anchen Opening Cl. Constr. Br. 11-12 (BX 18).

On February 8, 2006, Judge Selna issued a Claim Construction Order finding that "free of stabilizer" meant that "the core is free of any substance or agent that tends to prevent changes to the chemical integrity of the tablet." Am. Order on Cl. Constr. Hr'g 5 (PX 182). See also Order Clarifying Court's Cl. Constr. 2 (BX 19). Regarding Biovail's claim construction argument, Judge Selna's order stated:

Biovail's proposed definition of "stabilizer" is not found anywhere in the '341 patent, and actually contradicts the summary of the invention.

Am. Order on Cl. Constr. Hr'g 9 (PX 182).

Following Judge Selna's ruling on claim construction, the parties filed cross-motions for summary judgment. Judge Selna issued a tentative minute order denying Anchen's motion, finding a genuine issue of material fact regarding whether Anchen's ANDA directly addressed the infringement inquiry. Biovail Stmt. ¶¶ 19, 21; Pls.' Stmt. Resp. ¶¶ 19, 21; Tentative Summ. J. Order (BX 34).

However, after oral argument, Judge Selna granted Anchen's motion for summary judgment on August 1, 2006. Judge Selna denied Biovail's motion for reconsideration, then entered judgment on August 25, 2006. Biovail appealed to the Federal Circuit, challenging both the claim construction and summary judgment orders. Biovail Stmt. ¶¶ 22-24; Pls.' Stmt. Resp. ¶¶ 22-24; PX 216.

Following full briefing and after holding oral argument on September 5, 2007, the Federal Circuit granted Biovail's motion to withdraw its appeal on June 11, 2008. Order Granting Mot. to Withdraw (BX 38).

2. Analysis as to Anchen

The Anchen lawsuit centered around the term "free of stabilizer," which appears in each claim in the '341 patent. See '341 Patent (BX 1). Anchen argued for a plain reading of the term and contended that its generic product did not infringe the '341 patent because it contains hydrochloric acid, a commonly used stabilizer. Biovail argued on claim construction that "stabilizer" should be construed to have a functional component. Separately, Biovail argued that Anchen's ANDA described and sought approval to market a product that did not contain a stabilizer, and that Biovail was entitled to rely on the representations in the ANDA. The Court finds that the plaintiffs have not met their burden of showing that the Anchen lawsuit was objectively baseless.

a. Claim Construction

On the claim construction question, Biovail put forth a colorable argument in the underlying proceeding that "stabilizer" should have been construed as a functional term -- something that actually stabilizes the tablet. First, as a matter of plain meaning, the Court does not find Biovail's argument that a stabilizer ordinarily means something that actually provides stability to be unreasonable. Second, the Manual of Patent Examining Procedure provides for the patentability of functional limitations, which it defines as "an attempt to define something by what it does, rather than by what it is." MPEP § 2173.05(g) (BX 117). Various courts, including the Federal Circuit, have read patent terms containing the suffix "-er" to contain a functional limitation. For example, in Kim v. ConAgra Foods, Inc., the Federal Circuit interpreted "potassium bromate replacer" as a composition that actually replaces, or performs the same function as potassium bromate. 465 F.3d 1312, 1318 (Fed. Cir. 2006). See also, e.g., Allergan, Inc. v. Watson Labs., Inc., No. 09-511 (D. Del. Dec. 8, 2010), Cl. Constr. Order 3 n.10 (BX 118) (interpreting "release controlling polymer" to mean that the polymer must actually function to control the rate of release); Profile Prods. LLC v. Encap, LLC, No. 09-92, 2009 U.S. Dist. LEXIS 60282, at *11 (W.D. Wis. July 15, 2009) (requiring a "binder" to "actually bind" as opposed to merely having the ability to bind). Thus, the '341 patent attempted to distinguish itself from two prior patents because those earlier formulations "require[d] a stabilizer to achieve sufficient stability," whereas the '341 patent did not. '341 Patent col. 1 ll. 22-24 (BX 1) (emphasis added).

Based on the above, the Court cannot say that it was objectively baseless to argue on claim construction that a stabilizer must actually function to stabilize the tablet as opposed to merely having the ability to stabilize. The Anchen court (and, later, the Abrika and Impax courts) eventually rejected Biovail's proposed claim construction. The court instead construed "free of stabilizer" to mean that "the core is free of any substance or agent that tends to prevent changes to the chemical integrity of the tablet." Am. Order on Cl. Constr. Hr'g 5 (BX 182). However, although the outcome is instructive, the Court does not find it determinative in this case. See PRE, 508 U.S. at 65.

b. Anchen's ANDA

More importantly, Biovail had a colorable legal argument that (1) Biovail was entitled to rely on the representations in the ANDA when initiating suit, and that (2) Anchen had an obligation under FDA regulations and guidance to quantify even residual amounts of HCl if the ingredient tended to stabilize the final tablet.

An infringement inquiry triggered by an ANDA filing is focused on the product that is likely to be sold following FDA approval. Because the potentially infringing drug has not yet been marketed when the patent holder files suit,*fn9 the inquiry is a hypothetical one that asks the fact finder to determine whether the drug that will be sold upon approval of the ANDA will infringe the asserted patent. Bayer AG v. Elan Pharm. Research Corp., 212 F.3d 1241, 1248-49 (Fed. Cir. 2000). Thus, "[b]ecause drug manufacturers are bound by strict statutory provisions to sell only those products that comport with the ANDA's description of the drug, an ANDA specification defining a proposed generic drug in a manner that directly addresses the issue of infringement will control the infringement inquiry." Abbott Labs. v. TorPharm, Inc., 300 F.3d 1367, 1373 (Fed. Cir. 2002); see also Glaxo, Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1569 (Fed. Cir. 1997) (inquiry is "properly grounded in the ANDA application and the extensive materials typically submitted in its support"). In Anchen, whether the ANDA directly addressed the issue of infringement turned on whether Anchen was required to quantify hydrochloric acid in its ANDA.

FDA regulations require ANDA applicants to include a list of all components used in the manufacture of the drug product, regardless of whether they appear in the drug product, as well as a statement of the composition of the drug product.

21 C.F.R. § 314.50. ANDA applicants must also "identify and characterize the inactive ingredients in the proposed drug product." Id. § 314.94(a)(9)(ii). In 2003, the FDA issued a "Guidance for Industry" that states:

The function (i.e., role) of each component in the formulation should be stated. Components that are used in the manufacture of the drug product and do not appear in the finished drug product except at residual levels (e.g., some solvents) should be identified as processing agents.

The target amount of each component by definite weight or other measure should be provided on a per unit basis. 2003 FDA Guidance 8 (BX 25). Thus, in its pre-NDA submission to the FDA, the brand manufacturers of the original Wellbutrin IR had quantified a target amount per tablet of 0.5 mg of hydrochloric acid in the 50 mg formulation and 1.0 mg in the 100 mg formulation of Wellbutrin IR. BX 132 at GSKWXL0054379-80. Similarly, the NDA submitted for Wellbutrin SR indicated a target amount per tablet of 16.20 mg of cysteine hydrochloride, a different kind of acid stabilizer. BX 131 at GSKWXL0072506.

The instruction to quantify the target amount of each component does not apply, however, to "processing agents." 2003 FDA Guidance 9 (BX 25). The FDA guidance does not clearly define "processing agent." Biovail presented expert testimony that processing agents are components that appear in the finished tablet only at residual levels and have no function to perform in the finished tablet. See Fleischer WBXL Rpt. ¶ 14 (BX 24); Lin Rpt. ¶¶ 11, 17 (BX 27). The plaintiffs do not expressly set forth their own definition of "processing agent" or explain why hydrochloric acid is a processing agent. However, citing expert testimony from both sides, the plaintiffs argue that the FDA only wants to know whether a drug is stable, and that the FDA does not require stabilizing agents present in such small trace amounts to be quantified. Kaplan Dep. 48-49 (PX 147) ("FDA policy is such that if the ingredient is not more than one percent it need not be quantified."); Lin Dep. 67-68 (PX 148).

The Court need not decide in this case whether the FDA rules, regulations, and the 2003 guidance required Anchen to quantify the amount of hydrochloric acid on a per unit basis -only whether it was objectively baseless to argue that they did. Notwithstanding the expert testimony cited by the plaintiffs regarding FDA policy, the text of the 2003 guidance itself is not inconsistent with Dr. Fleischer's and Biovail's definition of a processing agent. 2003 FDA Guidance 8 (BX 25). The guidance states that "[t]he function . . . of each component in the formulation should be stated," but qualifies that "[c]omponents that are used in the manufacture of the drug product and do not appear in the finished drug product except at residual levels . . . should be identified as processing agents." Id. One plausible reading of this language is that processing agents have no function to perform in the final tablet, because if they did, the function would need to be stated. Therefore, it was not objectively baseless to contend that if hydrochloric acid tended to stabilize the chemical integrity of the final product, it was not a "processing agent" and, thus, needed to be quantified on a per unit basis.*fn10

Anchen's ANDA, as set forth in the facts, did not quantify hydrochloric acid on a per unit basis. The plaintiffs point out that it is industry convention to use a symbol such as "-" or "**" to signify that a component remains in the final pharmaceutical product in a residual, non-zero, but nonnumerically quantified amount. Pls.' Br. 46-47. But industry convention would be inapposite if a court sided with Biovail on its argument that Anchen was required to numerically quantify any hydrochloric acid in the product.

Thus, Biovail had at least a colorable legal argument in Anchen that under Abbott Laboratories and the applicable FDA regulations and policy, Anchen's ANDA controlled the infringement inquiry and suggested that the Anchen product was not "free of stabilizer," as ultimately defined by Judge Selna on claim construction. The Court finds that Anchen does not fit the profile of objectively baseless sham litigation.

B. The Watson Lawsuit 1. Facts as to Watson

Watson Pharmaceuticals filed an ANDA with the FDA on May 19, 2005, seeking permission to sell a generic version of the 150 mg Wellbutrin XL. Watson later requested permission for the 300 mg Wellbutrin XL as well. Watson provided its paragraph IV notices to Biovail and GSK on July 21, 2005 and July 27, 2005, claiming non-infringement. As with Anchen, Watson claimed that its generic product "will contain a stabilizer, namely hydrochloric acid." Biovail Stmt. ¶¶ 72-73; Pls.' Stmt. Resp. ¶¶ 72-73.

Watson's ANDA, like Anchen's, did not quantify the amount of hydrochloric acid in its product on a per unit basis. Although diluted hydrochloric acid is identified as a "stabilizer," the ANDA indicated a "--" under the column designated "AMOUNT PER TABLET." The composition statement in the ANDA indicated that "[w]ater is removed during processing." Similarly, the percentage of hydrochloric acid was listed as "-" and ingredients other than hydrochloric acid were shown in the ANDA to add up to 100.0% of the finished product. A list in the ANDA that compared the generic product to Wellbutrin XL did not include hydrochloric acid as an ingredient in Watson's product. BX 88. Biovail's counsel signed an offer of confidential access with Watson for access to certain portions of Watson's ANDA. PX 320.

On September 6, 2005, Biovail filed a patent infringement suit against Watson in the Southern District of New York. The Honorable Kenneth M. Karas was assigned to the case. On February 26, 2007, while discovery was ongoing, and before reaching the claim construction stage, the Watson lawsuit ...


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