United States District Court, E.D. Pennsylvania
Federal Trade Commission v. Actavis, 133 S.Ct. 2223
(2013), the Supreme Court wrestled with the complexities of
how a reverse-payment patent litigation settlement fits
within an antitrust context. Ultimately concluding that a
rule of reason analysis applies, the Court stressed that the
“structuring of the present rule-of-reason antitrust
litigation” must be left to the trial court. This
Opinion sets forth such a structure where the relevant patent
is found to be invalid and not infringed several years after
the reverse-payment settlement agreements were executed.
careful consideration and noting that there is no
precedential guidance on this issue, I conclude that prior
findings of patent invalidity and non-infringement made after
the reverse-payment settlement agreements are irrelevant to a
rule of reason analysis. However, I conclude that the prior
patent ruling is relevant to Plaintiffs' antitrust
causation showing and, in this context, the ruling is
admissible under Federal Rule of Evidence 403.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
case before me involves allegations that four reverse-payment
settlement agreements entered into by a brand-name drug
manufacturer, Cephalon, Inc., and four generic drug companies
constitute antitrust violations under the Sherman
Plaintiffs claim that these settlement agreements were
executed for the purpose of delaying competition from generic
versions of the brand-name pharmaceutical, Provigil.
Defendants, signatories to the settlement agreements,
maintain that the agreements were pro-competitive and
legitimate settlements of litigation involving Provigil and
its related patent.
result of various settlements and the procedural postures of
other related cases, the only plaintiffs who will participate
in the upcoming trial are Apotex, Inc., a generic competitor,
and a group of owners and operators of retail pharmacies.
Over the course of this litigation, these plaintiffs have
been referred to as “Individual Plaintiffs, ”
“Retailer Plaintiffs, ” “Opt-Out
Plaintiffs” and “Merchant Plaintiffs.” The
only defendants in the upcoming trial are generic
manufacturers Mylan and Ranbaxy.
Relevant Regulatory Background
the Drug Price Competition and Patent Term Restoration Act of
1984, Pub. L. No. 98-417, commonly known as the Hatch-Waxman
Act, generic manufacturers are permitted to file an
Abbreviated New Drug Application (“ANDA”) when
seeking approval from the Food and Drug Administration to
market a generic version of an approved drug. An ANDA filer
is able to adopt the safety and efficacy studies that the FDA
previously approved in connection with a brand-name
drug's New Drug Application. See Caraco Pharm. Labs.,
Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1282 (Fed.
filing an ANDA, a generic manufacturer must demonstrate that
its generic product and the approved brand-name drug share
the same active ingredients and are bioequivalent. As to any
patents covering the brand-name drug, the generic
manufacturer must certify: (1) that the relevant patent
information has not been filed with the FDA; (2) that any
such patent has expired; (3) the date that such patent will
expire; or (4) “that such patent is invalid or will not
be infringed by the manufacture, use, or sale of the new drug
for which the application is submitted.” Id.
at 1282-83 (quoting 21 U.S.C. § 355(j)(2)(A)(vii)). If a
generic manufacturer seeks to market a generic drug prior to
the expiration of patents covering the brand drug, it must
file a certification under 21 U.S.C. §
355(j)(2)(A)(vii)(IV)-i.e., a “Paragraph IV
certification.” Id. at 1283. The filing of a
Paragraph IV ANDA constitutes an act of patent infringement,
often prompting the patent holder to file a lawsuit.
Actavis, 133 S.Ct. at 2228 (citing 35 U.S.C. §
patent holder files an infringement lawsuit within forty-five
days of a generic manufacturer's ANDA filing, the FDA is
barred from approving the generic's ANDA for a period of
thirty months. 21 U.S.C. § 355(j)(5)(B)(iii). If the
case is resolved during the thirty month stay, the FDA will
take action on the ANDA consistent with the court's
judgment. Actavis, 133 S.Ct. at 2228. However, if
the case is not resolved during that period, the FDA may
approve the ANDA, at which point the generic company decides
whether to sell its product “at-risk” of
incurring damages should the infringement case result in a
judgment in favor of the patent holder. Id.
Relevant Factual Background
held U.S. Reissue Patent No. 37, 516 (RE ‘516) claiming
a specific formulation of modafinil-a molecule with
wakefulness-promoting properties. The RE ‘516 patent
covered Cephalon's drug, Provigil, and, when combined
with a number of FDA regulatory exclusivity periods Cephalon
had obtained, it had the potential to protect Provigil from
generic competition through April 6, 2015.
December 24, 2002, the first day allowed by law, the Generic
Defendants sought permission from the FDA to market generic
versions of Provigil. In doing so, the four generic drug
manufacturers filed Paragraph IV certifications attesting
that the RE ‘516 patent was either invalid or not
infringed by their proposed generic Provigil products. In
response to these certifications, Cephalon filed suit against
the Generic Defendants for patent infringement. The parties
have referred to these lawsuits as the “Paragraph IV
litigation.” Between December 2005 and February 2006,
the Paragraph IV litigation settled, with Cephalon paying the
Generic Defendants millions of dollars in return for various
business arrangements and, most importantly for purposes of
this case, promises from each of the Generic Defendants to
drop their respective invalidity contentions and not market a
generic version of Provigil until April 6, 2012.
to another provision of the Hatch-Waxman Act, no other
company could sell generic Provigil until six months after
the settling Generic Defendants began to market their
versions. Thus, in order to be allowed to enter the market
sooner, a competing generic-here, Apotex-would need to
receive a court determination that the RE ‘516 patent
was invalid or not infringed.
cases before me, the Federal Trade Commission, two putative
classes of plaintiffs, the Retailer Plaintiffs and Apotex
brought Actavis antitrust claims against all
Defendants. Apotex also brought claims for Walker
Process fraud and sham litigation against Cephalon and
also sought a declaratory judgment invalidating the RE
that resolution of the antitrust claims could take many
years, I commenced a patent trial in 2011. After submission
of extensive testimony, I found merit in Apotex's
position and declared Cephalon's patent invalid on
several grounds and also unenforceable as a result of
Cephalon's inequitable conduct during the procurement
process. See Apotex, Inc. v. Cephalon, Inc., 2011 WL
6090696 (E.D. Pa. Nov. 7, 2011). This ruling was subsequently
affirmed by the United States Court of Appeals for the
Federal Circuit, Apotex, Inc. v. Cephalon, Inc., 500
Fed. App'x 959 (Fed. Cir. 2013), and certiorari was
denied by the United States Supreme Court. See 134
S.Ct. 825 (2013).
antitrust case progressed, the parties subsequently litigated
whether the patent ruling had a preclusive effect on certain
arguments Cephalon sought to present in defending against the
antitrust claims brought against it. See King Drug Co. of
Florence v. Cephalon, Inc., 2014 WL 982848 (E.D. Pa.
Mar. 13, 2014); F.T.C. v. Cephalon, Inc., 36
F.Supp.3d 527 (E.D. Pa. 2014) (collectively,
“collateral estoppel decisions”). These
collateral estoppel decisions primarily dealt with whether
Cephalon was precluded from relitigating issues decided in
the 2011 patent proceedings and presenting evidence that
implicated those previously litigated issues.
extensive discovery and further motion practice, a liability
trial-including the Apotex and the Retailer Plaintiffs'
cases-was scheduled to begin on February 2, 2016. Prior to
that date, the parties filed multiple motions in limine
regarding what role, if any, the prior patent findings should
play in the upcoming antitrust trial. Many of the
parties' Daubert motions also touched on this
ruling on a number of Plaintiffs' Daubert
motions, I summarized how the collateral estoppel decisions
would shape the antitrust trial in general and the Walker
Process claim against Cephalon in particular as follows:
With trial pending, it may be useful to restate here which
issues have been decided and may not be revisited: (1) the RE
‘516 patent is invalid due to the on-sale bar,
derivation and obviousness; and (2) the materiality prong of
Walker Process fraud has been established.
Consequently, and as will be explained in greater detail
infra, any expert opinions contrary to these holdings will
not be permitted.
It is also my intention to explain to the jury that these
issues have been previously decided, must be accepted, and
are not for their consideration. This explanation will come
by way of instructions prior to opening statements and the
taking of testimony. I will, of course, accept input from
counsel as to how these concepts should be conveyed to the
jury, but care will be taken to ensure that Defendants'
rights in defending the antitrust allegations will be
King Drug Co. of Florence, Inc. v. Cephalon, Inc.,
2015 WL 6750899, at *3-4 (E.D. Pa. Nov. 5, 2015). I also
noted that my collateral estoppel decisions made clear that
“[t]he fact that the patent was found invalid in the
2011 Apotex patent litigation should have no bearing on the
proofs necessary to hold the Generic Defendants liable for
antitrust violations . . . [and] [t]he Generic Defendants
will still be able to argue, should they so choose, that
settlement was pro-competitive, and that they were unaware of
Cephalon's alleged fraud or the invalidity of the
patent.” Id. at *3 (quoting King Drug Co.
of Florence v. Cephalon, Inc., 2014 WL 982848, at *13).
lead up to the February 2016 trial date, Defendants appealed
my ruling granting certification of a Direct Purchaser class.
In light of that appeal, the United States Court of Appeals
for the Third Circuit stayed the February trial date as to
all parties. As such, many of the motions in limine were not
resolved at that time and were still pending when a new trial