Opinion
No. 07-912.
Filed: January 7, 2008.
SHASHANK UPADHYE, Vice President-Global Head of Intellectual Property Apotex, Inc., 150 Signet Drive, Weston, Ontario M9L 1T9, Canada, (416) 401-7701.
Counsel of Record
DEANNE M. MAZZOCHI, RAKOCZY MOLINO MAZZOCHI, SIWIK LLP, 6 West Hubbard Street, Suite 500, Chicago, Illinois 60610, (312) 222-6301, Counsel for Petitioners.
PETITION FOR A WRIT OF CERTIORARI QUESTION PRESENTED
Whether the Federal Circuit, in direct conflict with long-established precedent of this Court, erred in upholding the district court's imposition of contempt remedies on Apotex while simultaneously holding that the district court abused its discretion in finding Apotex in contempt of a prior injunction.
LIST OF PARTIES
TorPharm, Inc., (now subsumed within Apotex, Inc.) an original plaintiff below, no longer exists.
RULE 29.6 CORPORATE DISCLOSURE STATEMENT
The parent company of Apotex, Inc. is Apotex Pharmaceutical Holdings, Inc. The parent company of Apotex Corp. is Apotex Holdings, Inc. There is no publicly-held corporation that owns 10% or more of either Apotex, Inc. or Apotex Corp.
TABLE OF CONTENTS
Page
QUESTION PRESENTED ........................................ i LIST OF PARTIES ......................................... ii RULE 29.6 CORPORATE DISCLOSURE STATEMENT ................. ii TABLE OF CONTENTS ....................................... iii TABLE OF APPENDICES ..................................... vii TABLE OF CITED AUTHORITIES ............................. viii OPINIONS BELOW ............................................ 1 JURISDICTION .............................................. 1 CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED .......... 1 STATEMENT OF THE CASE ..................................... 1 I. TorPharm I.............................................. 4 II. TorPharm II............................................ 5 III. TorPharm III ......................................... 6 IV. TorPharm IV ........................................... 6 V. Apotex's subsequent design-around efforts ................................................... 7 VI. Events leading to the second district court proceeding, involving Nu-Pharm ............................ 8 A. Nu-Pharm's ANDA filing ............................... 8 B. Abbott knew precisely what Nu-Pharm was ............................................ 8 C. Abbott sues Nu-Pharm in a traditional Hatch-Waxman action ......................... 9 D. Nu-Pharm voluntarily disclosed its ANDA, product samples, and Apotex's involvement in 2005 ........................... 10 E. Abbott tries to pull Apotex into the Nu-Pharm litigation ................................ 10 F. When Nu-Pharm provides Abbott with proof that divalproex sodium from Nu-Pharm is a non-infringing crystalline polymer, Abbott returns to Judge Posner ........................................... 11 1. The Nu-Pharm litigation moves into expert discovery .............................. 11 2. Based on the single-crystal x-ray data, Nu-Pharm moves for summary judgment of non-infringement .................................... 12 3. Faced with the new polymer evidence, Abbott retreats from the Nu-Pharm litigation, and returns to Judge Posner ............................ 13 VII. After an irregular proceeding, Judge Posner "extends" his prior injunction against the TorPharm ANDA product to cover the Nu-Pharm ANDA product ..... ................... 14 VIII. The Federal Circuit finds no contempt, but accepts Judge Posner's conclusion that Nu-Pharm's ANDA product would infringe the Abbott patents .............................. 16 REASONS FOR GRANTING THE PETITION 17 I. The Federal Circuit's refusal to vacate the district court's new findings and injunction directly conflicts with this Court's prior precedent ....................... ......... 17 A. It was undisputed that Apotex did not violate the 2004 injunction ............................ 18 B. The district court had no "inherent authority" to enforce an injunction that was never violated ....................... ........ 22 II. The Federal Circuit's decision creates a loophole that undermines both Congressional intent and the public interest in encouraging patent design- around efforts .......................................... 24 CONCLUSION .............................................. 28TABLE OF APPENDICES
35 U.S.C.A. § 271
Appendix A — Opinion Of The United States Court Of Appeals For The Federal Circuit Dated October 11, 2007 ................................. la Appendix B — Opinion Of The United States District Court For The Northern District Of Illinois, Eastern Division Dated October 6, 2006 ................................................... 25a Appendix C — Order Of The United States Court Of Appeals For The Federal Circuit Denying Petition For Rehearing And Rehearing En Banc Dated And Filed December 5, 2007 ............... 44a Appendix D — (e) ........... 46a Appendix E — Excerpts From Transcript Of Proceedings Dated August 30, 2006 ...................... 49aTABLE OF CITED AUTHORITIES
Cases Page Abbott Labs. Ltd. v. Nu-Pharm Inc. rev'd Abbott Labs. v. Apotex, Inc. 455 F. Supp. 2d 831 Abbott Labs. v. TorPharm, Inc. 122 Fed. Appx. 511 Abbott Labs. v. TorPharm, Inc. 156 F. Supp. 2d 738 Abbott Labs. v. TorPharm, Inc. 300 F.3d 1367 Abbott Labs. v. TorPharm, Inc. 309 F. Supp. 2d 1043 Passim Abbott Labs. v. TorPharm, Inc. 503 F.3d 1372 Passim Andrx Pharms., Inc. v. Biovail Corp. 276 F.3d 1368 Cal. Artificial Stone Paving Co. v. Molitor 113 U.S. 609 Collins v. Barry 841 F.2d 1297 Cooke v. United States 267 U.S. 517 Doe v. Bush 261 F.3d 1037 Eli Lilly and Co. v. Medtronic, Inc. 496 U.S. 661 Ex parte Fisk 113 U.S. 713 Federal Trade Commission v. Enforma Natural Prods. 362 F.3d 1204 Federal Trade Commission v. Kuykendall 371 F.3d 745 Ferrell v. U.S. Department of Housing Urban Development 186 F.3d 805 Fonar Corp. v. Deccaid Serv., Inc. 983 F.2d 427 Hicks v. Feiock 485 U.S. 624 Imageware, Inc. v. U.S. West Commc'ns 219 F.3d 793 Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara 335 F.3d 357 KSM Fastening Sys., Inc. v. H.A. Jones Co., Inc. 776 F.2d 1522 Lear, Inc. v. Adkins 395 U.S. 653 London v. Carson Pirie Scott Co. 946 F.2d 1534 Medimmune, Inc. v. Genentech, Inc. 127 S.Ct. 764 Mylan Pharms., Inc. v. Thompson 268 F.3d 1323 Perez v. Danbury Hosp. 347 F.3d 419 Preemption Devices, Inc. v. Minn. Mining Mfg. Co. 803 F.2d 1170 Proctor v. North Carolina 830 F.2d 514 Shepherd v. American Broad. Cos. 62 F.3d 1469 State Indus., Inc. v. A.O. Smith Corp. 751 F.2d 1226 United Elec., Radio and Mach. Workers of Am. v. 163 Pleasant St. Corp. 960 F.2d 1080 United States v. Spectro Foods Corp. 544 F.2d 1175 Westvaco Corp. v. Int'l Paper Co. 991 F.2d 735 Statutes 21 U.S.C. § 1 21 U.S.C. § 355 21 U.S.C. § 355 21 U.S.C. § 355 28 U.S.C. § 1254 35 U.S.C. § 1 35 U.S.C. § 271 35 U.S.C. § 271 35 U.S.C. § 271 35 U.S.C. § 271 35 U.S.C. § 271 Rules 12 56
, No. T-1722- 95 [1998] 78 C.P.R.3d 38, 1998 Carswell Nat. 269 (Fed. Ct. Trial Div. Feb. 11, 1998); , [1998] 83 C.P.R.3d 441, 1998 Carswell Nat. 1904 (Fed. Ct. App. Sept. 28, 1998) ........................... 8-9 , (N.D. Ill. 2006) ....................................... 6, 15 , (Fed. Cir. 2005) .................................... 6 , (N.D. Ill. 2001) ............................... 4-5, 9 , (Fed. Cir.2002) .................................. 5, 6, 7, 12 , (N.D. Ill. 2004) ............................. , (Fed. Cir.2007) ................................... , (Fed. Cir. 2002) ..................................... 25 , (1885) ....................... 17, 18, 19, 20, 23 , (6th Cir. 1998) .. 21 , (1925) ...... 20 , (11th Cir. 2001) ...... 22 , (1990) ..................................................... 4 , (1885) ............... 20 , (9th Cir. 2004) ................ 22 , (10th Cir. 2004) ............................. 22 , (7th Cir. 1999) ......... 21-22 , (2d Cir. 1993) ............................................ 21 , (1988) ............. 21 , (8th Cir. 2000) .............................. 21 , (5th Cir.2003) ............................................ 21 , (Fed. Cir. 1985) ........................ 19, 26 , (1969) ..... 3, 24 , (Fed. Cir. 1991) .......................................... 24 , (2007) ................................................ 25 , (Fed. Cir.2001) ........................................... 25 , (2nd Cir. 2003) ..................................................... 23 , (Fed. Cir. 1986) ............. 17 , (4th Cir. 1987) ..................................................... 21 , (D.C. Cir. 1995) .......................................... 22 , (Fed. Cir. 1985) ..................................... 24 , (1st Cir. 1992) ........................................... 20 , (3rd Cir. 1976) ...................................... 21 , (Fed. Cir. 1993) ...................................... 24 .......................................... 1 ........................................ 1 (j)(5)(B)(iii) ......................... 9 (j)(5)(B)(iii)(I)(aa) ......... 10, 13, 26 (1) ................................... 1 ......................................... 1 (e) .............................. 1, 9, 23 (e)(1) ........................ 11, 18, 25 (e)(2) ................................ 26 (e)(2)(A) .............................. 5 (e)(4) ............................. 7, 26 FED. R. CIV. P. (b) ..................................... 11 FED. R. CIV. P. ........................................ 23 N.D. Ill. Local Rule 40.4 .............................. 9, 13OPINIONS BELOW
The decision of the United States Court of Appeals for the Federal Circuit (App. A) for which review is sought is available at 503 F.3d 1372 (Fed. Cir. 2007). The decision of the United States District Court for the Northern District of Illinois that was reviewed by the Federal Circuit (App. B) is reported at 455 F. Supp. 2d 831 (N.D. Ill. 2006).
References to "App.___" are to the Appendices attached hereto, as required under Supreme Court Rule 14.1(i).
JURISDICTION
The Federal Circuit issued the judgment for which review is sought on October 11, 2007. The Federal Circuit denied Apotex's petition for rehearing en banc on December 5, 2007. (App. C). This Court has jurisdiction to review the judgment of the Federal Circuit under 28 U.S.C.§ 1254(1).
CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED
This case involves sections of the Hatch-Waxman Act, which amended the Patent Laws, 35 U.S.C. § 1 et seq., particularly 35 U.S.C. § 271(e) (App. D), and the Food, Drug and Cosmetic laws, 21 U.S.C. § 1 et seq., particularly 21 U.S.C. § 355, governing Abbreviated New Drug Applications ("ANDAs") for pharmaceutical products.
STATEMENT OF THE CASE
The issue before this Court is whether district courts are authorized to use contempt proceedings to issue binding factfindings, injunctions, remedies and judgments, absent an arguable act of contempt in the first instance. This issue has considerable significance in patent cases, particularly Hatch-Waxman cases involving drug products, where Congress has strongly incentivized generic drug companies to design around brand name patents to bring cheaper drugs to market before patents expire.
This Hatch-Waxman case involves a decade-long patent dispute between Abbott Laboratories and TorPharm, Inc. (now part of Apotex, Inc.) involving drugs generically called "divalproex sodium." In 2004, Judge Richard A. Posner, sitting by designation in the district court, entered an injunction prohibiting Apotex from commercially manufacturing, using, selling or offering to sell infringing divalproex sodium in the United States, and further prohibiting FDA from approving TorPharm's divalproex sodium ANDA No. 75-112.
The present petition is directed towards post-judgment proceedings that Abbott initiated before Judge Posner in August of 2006. The Federal Circuit acknowledged that the Apotex activities Abbott complained of — serving as a divalproex sodium contract manufacturer for a different ANDA filer, Nu-Pharm — did not violate Judge Posner's 2004 injunction. The Federal Circuit held that Judge Posner abused his discretion in holding Apotex in contempt. The Federal Circuit nevertheless refused to vacate Judge Posner's new infringement factfindings regarding the Nu-Pharm ANDA, and a new injunction prohibiting Apotex from commercially making this second ANDA product, and prohibiting FDA from approving this second ANDA. Apotex thus is subject to contempt punishments despite doing nothing in contempt of a court order.
The dissent from the panel's decision called the Federal Circuit's refusal to vacate Judge Posner's contempt remedies regarding the second ANDA "puzzling," and it truly is. If the Federal Circuit was convinced that Apotex did nothing in contempt, Apotex should not be bound by the contempt punishment (infringement findings and a new injunction) that Judge Posner imposed.
Since the Federal Circuit now has established a rule granting district courts the authority to impose contempt remedies without an act in contempt of a court order, litigants have a powerful incentive to avoid regular district court actions, with the traditional jurisdictional and procedural protections they offer defendants. Indeed, Abbott did so here. Before initiating the August 2006 proceedings before Judge Posner, Abbott had already sued Nu-Pharm and Apotex in the Northern District of Illinois alleging that the divalproex sodium drug in the Nu-Pharm ANDA infringed Abbott's patents.
Review is needed here because the Federal Circuit's refusal to vacate the factfindings and injunction order against Apotex from the contempt proceedings directly conflicts with precedent from this Court.
Further, permitting the Federal Circuit's rule to stand as a lone minority position will work a tremendous disservice on a unique area of patent law — the goal of encouraging adjudged infringers to try to design-around patents and bring new products to market. This Court has long-recognized that federal policy favors "the full and free use of ideas in the public domain."Lear, Inc. v. Adkins, 395 U.S. 653, 674 (1969) The public interest on that score is particularly heightened here, since Congress enacted the Hatch-Waxman act with the express purpose of encouraging generic drug companies to challenge brand-name drug companies' patents. Eli Lilly and Co. v. Medtronic, Inc., 496 U.S. 661, 676-678 (1990). If a second generic challenge may be routed to contempt proceedings, the Congressional intent of Hatch-Waxman will be permanently undermined.
Apotex respectfully requests that this Court clarify that when a party's post-injunction activities do not violate any court order, a patentee must complain of these new acts in a new case. New or expanded remedies should not be imposed on a party via contempt proceedings unless that party is first in actual contempt of a court order. Similarly, when a contempt finding is reversed, any findings, injunctions, remedies and/or judgments issued during the contempt proceedings must be vacated.
To demonstrate why Apotex should never have been the subject of contempt proceedings, let alone subject to new infringement findings and injunctions from Judge Posner, requires a brief overview of the prior patent case and related decisions.
I. TorPharm I.
In about April, 1997, TorPharm, Inc. (now part of Apotex, Inc.) submitted an ANDA to FDA seeking approval to market generic Depakote®, an anti-epileptic drug marketed by Abbott. TorPharm's ANDA contained a "Paragraph IV certification" stating that Abbott's U.S. Patent Nos. 4,988, 731 and 5,212,326 ("the Abbott patents"), were not infringed, invalid, and/or unenforceable. Abbott Labs. v. TorPharm, Inc., 156 F. Supp. 2d 738,740 (N.D. Ill. 2001) ( "TorPharm I"). Abbott relied on TorPharm's Paragraph IV ANDA filing to sue TorPharm (and Apotex) for infringement of the patents under 35 U.S.C. § 271(e)(2)(A). Id.
The Abbott patents are directed toward a particular form of the drug divalproex sodium. "Divalproex sodium" means the drug contains two valproate molecules for every one sodium atom. Abbott claimed to have discovered a unique form of divalproex sodium, namely one that was oligomeric, made up of 4, 5, or 6 divalproex sodium units.
TorPharm disputed that its drug product was oligomeric, particularly since Abbott based its oligomer structure theory on inferences from solution-based molecular-weight testing, not through direct proofs by single-crystal testing on the solid.
The district court (Norgle, J.) initially entered summary judgment of infringement against the TorPharm ANDA. The district court concluded that Abbott's molecular-weight tests were enough to prove TorPharm's product satisfied the oligomer elements. TorPharm I, 156 F. Supp. 2d at 746.
II. TorPharm II.
On appeal, the Federal Circuit reversed the infringement conclusion because there was a fact dispute whether TorPharm's product satisfied the "oligomer" element. Abbott Labs. v. TorPharm, Inc., 300 F.3d 1367, 1377 (Fed. Cir. 2002) ( "TorPharm II"). The court noted that while one might rely on Abbott's solution-based molecular-weight tests to infer the presence of an oligomer, a factfinder could also find such tests insufficient to prove the structure of TorPharm's divalproex sodium as a solid. Id. The case was thus remanded to the district court for trial. Id. at 1380-81.
III. TorPharm III.
After remand, Judge Posner was designated to sit as a district court judge for the case. After trial, Judge Posner issued an opinion finding infringement. Abbott Labs. v. TorPharm, Inc., 309 F.Supp. 2d 1043, 1054 (N.D.
Ill. 2004) ( "TorPharm III"). Judge Posner observed that divalproex sodium could exist as a non-infringing monomer, infringing oligomer, or non-infringing polymer. Id. at 1045-46. He explicitly found that the "only certain way to determine" whether a given divalproex sodium structure was infringing or not was single-crystal x-ray testing. Id. at 1049 (emphasis in original). Judge Posner relied on Abbott's solution-based molecular-weight testing to infer that TorPharm's product was oligomeric.
At the conclusion of the trial, Judge Posner enjoined TorPharm, Inc., Apotex, Inc. and Apotex Corp. from infringing the Abbott patents, and ordered FDA to postpone final approval of the TorPharm ANDA until the expiration of the Abbott patents. Abbott Labs. v. Apotex, Inc., 455 F. Supp. 2d 831, 833 (N.D. Ill. 2006) ( "Abbott V").
To date, FDA has not finally approved the TorPharm ANDA.
IV. TorPharm IV.
TorPharm appealed Judge Posner's findings. The Federal Circuit summarily affirmed his judgment. Abbott Labs. v. TorPharm, Inc., 122 Fed. Appx. 511 (Fed. Cir. 2005) ( "TorPharm IV"). Abbott received the only remedy it had requested, and indeed, the only one the statute permitted: an injunction ordering postponement of final FDA approval of the TorPharm ANDA until the Abbott patents expired. See 35 U.S.C. § 271(e)(4).
V. Apotex's subsequent design-around efforts.
The prior decisions of the Federal Circuit and Judge Posner provided a clear design-around path. TorPharm II, 300 F.3d at 1377; TorPharm III, 309 F. Supp. 2d at 1045-46. A divalproex sodium "polymer" could not infringe. Single-crystal X-ray diffraction testing would be "certain" proof of a non-infringing structure. TorPharm III, 309 F. Supp. 2d at 1049. Abbott's own representations to the PTO during the prosecution of the patents-in-suit, and the trial testimony of its expert, gave direction how one could prepare non-infringing divalproex sodium products.
Apotex developed two new processes for preparing divalproex sodium to maximize its ability to prepare a non-infringing product. All such development activities occurred in Canada. The new divalproex sodium products were used to conduct a new human biostudy, formulation, and stability studies (again, in Canada), and eventually submitted to FDA as an entirely new ANDA.
Although Apotex developed the new divalproex sodium, there were several practical constraints on what it could do with it. The pending injunction created uncertainty. The market was shrinking since other generic competitors were on the horizon. The patents were near the end of their life. Abbott was trying to switch patients over to a new extended-release formulation; Apotex's attempt to make a generic version of that new formulation had failed. Apotex had committed its manufacturing facilities to drugs involved in patent challenges that involved potentially a billion-dollar return.
To recoup its RD costs, Apotex gave the opportunity to pursue U.S. rights for the new products to Nu-Pharm, Inc. Nu-Pharm focuses on sales and marketing of drug products, not production. Apotex had a longstanding relationship with Nu-Pharm, having once been owned by Apotex's parent company. Nu-Pharm already sold Apotex's divalproex sodium in Canada, and thus was familiar with the product. The parties agreed that if Nu-Pharm took on the RD costs and the litigation efforts with Abbott, Apotex would manufacture the new products in Canada.
VI. Events leading to the second district court proceeding, involving Nu-Pharm.
A. Nu-Pharm's ANDA filing.
On March 7, 2005, Nu-Pharm filed a divalproex sodium ANDA with FDA. The ANDA clearly identifies Nu-Pharm as the ANDA sponsor; Apotex, Inc. as the contract manufacturer in Canada; and Apotex Corp. as the correspondence address. Nu-Pharm filed a Paragraph IV certification with its ANDA, consistent with its independent assessment that the Apotex design-around products were not infringing oligomers.
B. Abbott knew precisely what Nu-Pharm was.
Nu-Pharm was no stranger to Abbott. Abbott had previously accused Nu-Pharm's Canadian divalproex sodium product — a product that Abbott knew Apotex made for Nu-Pharm — of infringing the Canadian equivalent to the Abbott patents. See Abbott Labs. Ltd. v. Nu-Pharm Inc., No. T-1722-95 [1998] 78 C.P.R.3d 38, 1998 Carswell Nat. 269 (Fed. Ct. Trial Div. Feb. 11, 1998) (acknowledging Apotex as Nu-Pharm's supplier); rev'd, [1998] 83 C.P.R.3d 441, 1998 Carswell Nat. 1904 (Fed. Ct. App. Sept. 28, 1998) (finding Nu-Pharm's non-infringement position valid). Indeed, during TorPharm I, Abbott sought detailed discovery of Nu-Pharm's Canadian divalproex sodium products. Abbott used the TorPharm I case specifically to elicit testimony about the relationship between Nu-Pharm and Apotex.
C. Abbott sues Nu-Pharm in a traditional Hatch-Waxman action.
After Nu-Pharm submitted its Paragraph IV notice letter to Abbott for the Nu-Pharm ANDA, Abbott initiated the Nu-Pharm litigation in the Northern District of Illinois, which was assigned to Judge Pallmeyer. Abbott's complaint asserted that the filing of the Nu-Pharm ANDA was an infringing act under 35 U.S.C. § 271(e), and sought an order enjoining final FDA approval of Nu-Pharm's ANDA until the Abbott patents expired. Abbott did not move to have its new case assigned to Judge Posner as a "related case." See N.D. Ill. Local Rule 40.4 (permitting reassignment of a case to a judge hearing an earlier-filed related case).
As a result of Abbott's suit, Nu-Pharm's 500 mg product was subject to a 30-month stay of FDA approval. See 21 U.S.C. § 355(j)(5)(B)(iii) (suit filed by patentee within 45 days after Paragraph IV certification imposes automatic 30-month stay of final FDA approval). This meant that absent a district court decision in its favor, Nu-Pharm's ANDA product would not be finally approvable until 30 months from the date Abbott received Nu-Pharm's Paragraph IV Notice letter, or about November 13, 2007. See 21 U.S.C. § 355(j)(5)(B)(iii) (I)(aa).
D. Nu-Pharm voluntarily disclosed its ANDA, product samples, and Apotex's involvement in 2005.
In 2005, months before Abbott propounded a single discovery request to Nu-Pharm, Nu-Pharm voluntarily turned over to Abbott's attorneys the entirety of the Nu-Pharm ANDA, and raw material and biobatch product samples. The ANDA identified Nu-Pharm as the ANDA sponsor and explicitly identified Apotex, Inc. as the contract manufacturer.
E. Abbott tries to pull Apotex into the Nu-Pharm litigation.
On January 25, 2006, Abbott moved to file an amended complaint in the Nu-Pharm litigation against Apotex, Inc. and Apotex Corp., alleging, among other things, that:
• Apotex, Inc. and Apotex Corp. were subject to Judge Posner's prior injunction;
• Apotex, Inc. was manufacturing the Nu-Pharm ANDA product, which Abbott alleged infringed the Abbott patents; and
• Apotex Corp. committed an act of infringement when it served as the registered agent for the Nu-Pharm ANDA.
Abbott moved to file a second amended complaint on February 17, 2006. In response, Apotex moved to dismiss Abbott's claims on the basis that Abbott's pleadings conceded that Nu-Pharm was the ANDA sponsor; that Apotex's allegedly infringing activities occurred outside the U.S.; and that Apotex's activities were immune from liability under the "safe harbor" provisions of 35 U.S.C. § 271(e)(1).
Abbott filed a third amended complaint on April 21, 2006, again seeking to bring Apotex, Inc. and Apotex Corp. as defendants into the Nu-Pharm litigation. Apotex filed yet another motion to dismiss Abbott's claims under FED. R. CIV. P. 12(b). That motion remains pending.
For more than a year, Abbott was content for its claims against the Nu-Pharm ANDA — including claims based on allegations that the Nu-Pharm ANDA product lacked colorable differences from the TorPharm ANDA product — to proceed before Judge Pallmeyer. Abbott never sought to return to Judge Posner via contempt proceedings or otherwise.
F. When Nu-Pharm provides Abbott with proof that divalproex sodium from Nu-Pharm is a non-infringing crystalline polymer, Abbott returns to Judge Posner.
1. The Nu-Pharm litigation moves into expert discovery.
Under Judge Pallmeyer's scheduling order, the parties were to exchange their first round of expert reports on July 31, 2006, with expert discovery to follow. Judge Pallmeyer also ordered Nu-Pharm to file its motion for summary judgment of non-infringement on August 15, 2006, with Abbott's response due shortly thereafter.
On July 31, 2006, Nu-Pharm provided Abbott with the expert report of Prof. Michael Hursthouse, who heads the United Kingdom's national crystallography service, and is a world-renowned specialist in difficult-to-solve crystal structures. In the prior litigation, Abbott's expert Dr. Jerry Atwood had proclaimed that technologically, it was impossible to perform the "only certain" test of molecular structure, owing to the small size of TorPharm's divalproex sodium crystals. TorPharm III, 309 F. Supp. 2d at 1049-50. But, Nu-Pharm's Hursthouse analyzed the Nu-Pharm crystals using a specialized low-temperature analysis. He confirmed that this divalproex sodium was polymeric, not oligomeric — the very structure that the Federal Circuit and Judge Posner previously said could not infringe Abbott's patents. TorPharm II, 300 F.3d at 1377; TorPharm III, 309 F. Supp. 2d at 1046.
2. Based on the single-crystal x-ray data, Nu-Pharm moves for summary judgment of non-infringement.
Based on its single-crystal testing, which Judge Posner previously found was "certain" proof of molecular structure, TorPharm III, 309 F. Supp. 2d at 1049, Nu-Pharm moved for summary judgment of non-infringement before Judge Pallmeyer. 3. Faced with the new polymer evidence, Abbott retreats from the Nu-Pharm litigation, and returns to Judge Posner.
The same day Nu-Pharm filed its summary judgment motion, Abbott abruptly suspended its efforts before Judge Pallmeyer, and instead returned to Judge Posner's courtroom, filing what it termed a "Motion to Enforce Its Injunction Order." In its motion, Abbott did not contend that Apotex was violating Judge Posner's prior order. Instead, Abbott presented the same allegations against Nu-Pharm's product (it lacked colorable distinctions from the TorPharm ANDA product; Nu-Pharm and Apotex were scheming to avoid the injunction order; etc.) that it had complained of before Judge Pallmeyer. Abbott sought the same relief that it was seeking from Judge Pallmeyer: postponing final FDA approval of the Nu-Pharm ANDA product until the Abbott patents expire.
Abbott never moved under Local Rule 40.4 to have the Nu-Pharm litigation assigned to Judge Posner. See N.D. Ill. Local Rule 40.4. Instead, Abbott asked Judge Pallmeyer to stay the Nu-Pharm proceedings so that it could now proceed before Judge Posner. Abbott thus gained a critical advantage: keeping the Nu-Pharm Hatch-Waxman case pending before Judge Pallmeyer ensured that an adverse ruling from Judge Posner would not qualify as a court decision on the merits sufficient to terminate the automatic 30-month stay of FDA approval against Nu-Pharm. See 21 U.S.C. § 355(j)(5)(B)(iii) (I)(aa). Abbott's motion before Judge Posner accused Apotex of violating Judge Posner's prior injunction, but failed to specify what Apotex's alleged infringing acts in violation were. Apotex confirmed that it was not making, using, selling or offering for sale or importing the TorPharm ANDA product that was the subject of the prior injunction.
Apotex, for its part, insisted that the pending Hatch-Waxman proceedings before Judge Pallmeyer served as the proper forum to adjudicate whether the Nu-Pharm ANDA product infringed the Abbott patents. Apotex further pointed out that the Hatch-Waxman remedies are ANDA-specific, and thus an injunction against one ANDA could not be expanded to cover future ANDA applications.
VII. After an irregular proceeding, Judge Posner "extends" his prior injunction against the TorPharm ANDA product to cover the Nu-Pharm ANDA product.
In response to Abbott's August 15, 2006 motion, Judge Posner never addressed Apotex's threshold question, i.e., what Apotex had supposedly done that actually violated his prior injunction order. Judge Posner held an evidentiary hearing not to hear any evidence from Abbott that Apotex did the acts his prior order prohibited (commercial marketing of the TorPharm ANDA product). Instead, Judge Posner directed the entire hearing towards whether the new Nu-Pharm ANDA product infringed Abbott's patents.
Despite repeated pleas from Apotex, Judge Posner never ordered the production of expert reports; never permitted Apotex discovery of Abbott's experts or the underlying test data; and refused to give Apotex time to submit comparative testing between the TorPharm and Nu-Pharm products that Judge Posner demanded. (App. E, 49a-52a). Indeed, when Apotex submitted with post-hearing briefing the comparative test data that Judge Posner deemed essential to his infringement decision — data that showed that the TorPharm and Nu-Pharm ANDA products were not the same — Judge Posner refused to consider it. The basis for that refusal was not that the evidence was irrelevant, or non-compliant with the evidentiary rules, but because he had not "authorized" Apotex to submit such evidence in its defense. Abbott V, 455 F. Supp. 2d at 837.
In his opinion, Judge Posner found that the Nu-Pharm ANDA product infringed Abbott's patents. The sole relief he granted was to "extend the injunction to embrace the Nu-Pharm ANDA." Abbott V, 455 F. Supp. 2d at 840. This is the same relief Abbott sought in the Nu-Pharm litigation before Judge Pallmeyer. Nowhere in Judge Posner's opinion did he identify any act by Apotex that actually violated his prior injunction order, such as commercially marketing the TorPharm ANDA product. Thus, Abbott secured new factfindings and a new injunction regarding infringement of the Nu-Pharm ANDA product, without ever presenting any evidence to Judge Pallmeyer, the Judge assigned to hear the case against Nu-Pharm.
In view of Judge Posner's decision, Judge Pallmeyer stayed the Nu-Pharm litigation; that stay is still in effect.
VIII. The Federal Circuit finds no contempt, but accepts Judge Posner's conclusion that Nu-Pharm's ANDA product would infringe the Abbott patents.
On October 11, 2007, the Federal Circuit unanimously held that a contempt finding was an abuse of Judge Posner's discretion since his 2004 injunction did not restrict the filing of an ANDA by Nu-Pharm, nor did it preclude Apotex from developing further divalproex sodium products outside the United States. But, as Judge Dyk explained in dissent, "The majority reaches a different conclusion by holding that contempt proceedings are appropriate as long as there is no more than a `colorable difference' between the accused and enjoined products." Abbott Labs. v. TorPharm, Inc., 503 F.3d 1372, 1384 (Fed. Cir. 2007) (Dyk, J., dissenting) ( "Abbott VI"). The panel was untroubled by Judge Posner's holding of contempt-style proceedings to issue new findings and remedies to extend his 2004 injunction to cover the new Nu-Pharm ANDA. Id. at 1381. Judge Dyk disagreed with the majority saying, "If I am correct that contempt proceedings were improper, it necessarily follows that any decisions made in the course of those proceedings must be vacated." Id. at 1384 (Dyk, J., dissenting).
Ultimately, the Federal Circuit refused to rehear the appeal en bane.
REASONS FOR GRANTING THE PETITION
I. The Federal Circuit's refusal to vacate the district court's new findings and injunction directly conflicts with this Court's prior precedent.
This case raises serious due process concerns and cannot be squared with this Court's decision in California Artificial Stone Paving Co. v. Molitor, 113 U.S. 609 (1885).
In California Artificial Stone, the patentee had previously successfully proven that pavement blocks the defendant manufactured infringed his patent; the defendant was enjoined from making such pavement in the future. 113 U.S. at 612-13. The defendant then changed his process for constructing pavement; the patentee initiated contempt proceedings against the defendant. Id. at 613. While the district court found contempt, the court of appeals reversed. Id.
This Court characterized the patentee's complaint regarding the construction of the new pavement as "substantially a new suit on the patent; and we are asked to decide it." Cal. Artificial Stone, 113 U.S. at 617. It instructed that since "the judges disagree there can be no judgment of contempt; and the defendant must be discharged." Id. at 618. Because it was "a doubtful question whether the new process adopted is an infringement or not," the "by far . . . most appropriate" approach was for the patentee to bring an independent infringement suit regarding the new pavement. Id. The "[p]rocess of contempt is a severe remedy, and should not be resorted to where there is fair ground of doubt as to the wrongfulness of the defendant's conduct." Id. accord Preemption Devices, Inc. v. Minn. Mining Mfg. Co., 803 F.2d 1170, 1173 (Fed. Cir. 1986). The Federal Circuit ignored the principles set forth in California Artificial Stone by letting Judge Posner's new infringement findings and injunction against Apotex and the Nu-Pharm ANDA stand, even though the Federal Circuit expressly found Apotex never violated the 2004 injunction.
A. It was undisputed that Apotex did not violate the 2004 injunction.
It is undisputed that Apotex did not violate the 2004 injunction. The Federal Circuit recognized, quite correctly, that "[s]ince Apotex did not make, use, sell, offer to sell in the U.S. or import into the U.S. generic divalproex sodium, it did not violate the injunction." Abbott VI, 503 F.3d at 1382. The panel majority further confirmed that filing the Nu-Pharm ANDA was not an act that "actually violated the original injunction." Id. The "plain language" of the original injunction only prohibited FDA from approving the TorPharm ANDA. Id. at 1383. By statute, Congress immunized from infringement liability all activities Apotex engaged in to assist Nu-Pharm with filing the Nu-Pharm ANDA. See 35 U.S.C. § 271(e)(1).
There similarly was no dispute that the district court never intended to hold Apotex in contempt for the second Nu-Pharm ANDA filing. See Abbott VI, 503 F.3d at 1382. Abbott realized that such authority was wanting; it never asked for any finding or monetary award for any purported contempt. ("THE COURT: . . . you're not actually asking me to find Apotex in contempt, is that correct? MR. REIDY: That's correct, Judge."). Likewise, Judge Posner realized he had no contempt authority, and stated in open court that he had no intention of entering a contempt finding. ("So, my legal question is whether I have to find by clear and convincing evidence that these are the same products, even though I'm not actually going to find contempt or enter a contempt sanction.") (emphasis added). (App. E, 53a). The Federal Circuit explicitly held that the district court "abused its discretion in holding Apotex in contempt," Abbott VI, 503 F.3d at 1382, reversing any "judgment of contempt" that Judge Posner arguably entered. Id. at 1383.
Apotex submits that without a violation of an injunction, and without the authority to hold a party in contempt, there was no legal basis to nevertheless uphold the contempt remedies Judge Posner imposed as punishment to Apotex involving the second Nu-Pharm ANDA. Under the Federal Circuit's own reasoning, there was no wrongful conduct by Apotex in violation of the injunction. Abbott VI, 503 F.3d at 1382. Thus, as Judge Dyk cogently observed in dissent, there was at the very least "a fair ground of doubt" as to the alleged wrongfulness of Apotex's conduct. Id. at 1383 (Dyk, J., dissenting); KSM Fastening Sys., Inc. v. H.A. Jones Co., Inc., 776 F.2d 1522, 1524 (Fed. Cir. 1985) ("A civil contempt proceeding for violation of an injunction issued after patent litigation, while primarily for the benefit of the patent owner, nevertheless, involves also the concept of an affront to the court for failure to obey its order"). Accordingly, as California Artificial Stone requires, the Federal Circuit should have exercised restraint and vacated Judge Posner's "contempt" remedies against Apotex.
The Federal Circuit chose not to vacate Judge Posner's findings and injunction under the theory that the second Nu-Pharm product was insubstantially different from the original infringing product. Abbott VI, 503 F.3d at 1380, n. 3. Respectfully, the Federal Circuit should not have even begun that analysis without first finding the existence of an injunction order that prohibited any of Apotex's acts. Even so, the only way Judge Posner could find "no evidence" that the TorPharm and Nu-Pharm products were different was because Judge Posner struck as "unauthorized" Apotex's side-by-side comparison test data that proved those differences! Thus, the irregular proceedings wreaked an injustice on Apotex.
Prior cases before this Court, and in every other circuit, traditionally vacate the contempt remedies when a party is not in contempt; when the contempt proceedings were irregular; or when the incorrect rule of law was applied to render the contempt analysis. For example:
In California Artificial Stone, this Court ordered dismissed the patent infringement charges against the defendant when contempt was not reliably shown. 113 U.S. at 618.
In Cooke v. United States, 267 U.S. 517, 539-40 (1925), an attorney's letter to the district court was viewed as contemptuous; nevertheless, owing to the irregularity of the contempt proceedings themselves, the contempt punishment was vacated and the case remanded for further proceedings.
In Ex parte Fisk, 113 U.S. 713 (1885), when a state court lacked jurisdiction over Fisk, its order finding him in contempt was similarly "without jurisdiction and void." Id. at 726. Also see United Elec., Radio and Mach. Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080 (1st Cir. 1992) (vacating preliminary injunction and contempt order when district court lacked personal jurisdiction over Scottish defendant corporation).
In Hicks v. Feiock, 485 U.S. 624 (1988) this Court vacated the contempt order after determining the correct application of the Due Process clause, remanding for further proceedings.
In Fonar Corporation v. Deccaid Services, Inc., 983 F.2d 427 (2d Cir. 1993), the Second Circuit vacated contempt findings when it found that the alleged copyright infringement did not violate a prior court order.
In United States v. Spectro Foods Corporation, 544 F.2d 1175 (3rd Cir. 1976), the Third Circuit vacated contempt judgments and remedies in connection with a TRO issued for violating FDA regulations, because the "right to remedial relief disappears when it is determined that an injunction was issued erroneously." Id. at 1182.
In Imageware, Inc. v. U.S. West Communications, 219 F.3d 793 (8th Cir. 2000), the Eighth Circuit vacated a contempt judgment and associated remedies when it found that there was no underlying act of contempt.
Also see Proctor v. North Carolina, 830 F.2d 514 (4th Cir. 1987) (vacating factfindings and remedy when district court's contempt ruling was in error); Karaha Bodas Co., v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357 (5th Cir. 2003) (vacating contempt order and preliminary injunction); Collins v. Barry, 841 F.2d 1297 (6th Cir. 1998) (vacating contempt findings and injunctions); Ferrell v. U.S. Department of Housing Urban Development, 186 F.3d 805 (7th Cir. 1999) (vacating contempt citation and preliminary injunction); Federal Trade Commission v. Enforma Natural Products, 362 F.3d 1204 (9th Cir. 2004) (vacating injunction from contempt proceedings); Federal Trade Commission v. Kuykendall, 371 F.3d 745 (10th Cir. 2004) (vacating contempt remedies for party held not in contempt); Doe v. Bush, 261 F.3d 1037 (11th Cir. 2001) (vacating contempt order and class certification order); Shepherd v. American Broadcasting Cos., 62 F.3d 1469 (D.C. Cir. 1995) (vacating district court factfindings after reversing contempt sanctions).
The reason why contempt remedies are routinely vacated in conjunction with a finding of no contempt is fundamental: a party should not be punished in contempt without first correctly finding a predicate contemptible act. There is no excuse for exempting patent cases from this sound principle.
B. The district court had no "inherent authority" to enforce an injunction that was never violated.
While the Federal Circuit was correct that a district court has inherent authority "to enforce its injunction through contempt proceedings," Abbott VI, 503 F.3d at 1379, by its own reasoning, there was nothing to enforce here since the injunction did not cover the activity complained of. Apotex did nothing to justify contempt.
The Federal Circuit acknowledged that "we cannot and do not purport to rewrite the original injunction." Abbott VI, 503 F.3d at 1383. Yet it paradoxically sustained the district court's use of contempt proceedings to do just that, namely expand the injunction to forbid FDA from approving the Nu-Pharm ANDA. Id. With the contempt proceedings themselves in error, "it follows that the remedies imposed based on the finding of infringement must be vacated." Id. at 1385 (Dyk, J., dissenting); also see Perez v. Danbury Hosp., 347 F.3d 419 (2nd Cir. 2003) (since district court's later injunction from contempt proceedings was not designed to ensure compliance with consent decree, but to expand its terms and impose new obligations beyond the original order, it was improper and vacated).
The proper route to the remedy the district court provided — precluding FDA from approving the second Nu-Pharm ANDA — was the Hatch-Waxman lawsuit that Abbott already had filed under 35 U.S.C. § 271(e), which Abbott cut short upon receiving Nu-Pharm's evidence establishing non-infringement. See Abbott VI, 503 F.3d at 1384 (Dyk, J., dissenting); Cal. Artificial Paving, 113 U.S. at 618. If Abbott thought it had evidence sufficient to foreclose a trial, it was free to seek summary judgment, but that would be the most "summary" procedure to which it would be entitled, and even that remedy would be unavailable if material facts were in dispute. See FED. R. CIV. P. 56.
* * *
If the district court's findings and injunction order is not vacated, then the Federal Circuit's reversal of the contempt finding against Apotex is mere lip service, for Abbott is receiving precisely the remedy it sought against Apotex (infringement findings and an expanded injunction) from Judge Posner.
There is no justification for imposing contempt proceedings and remedies in patent cases absent a threshold finding of contempt. In fact, as the next section discusses, such a rule fundamentally undermines Congressional incentives set in place by Hatch-Waxman to encourage generic drug manufacturers to challenge brand-name drug patents.
II. The Federal Circuit's decision creates a loophole that undermines both Congressional intent and the public interest in encouraging patent design-around efforts.
Patents are, in essence, a tradeoff that the public has made to balance the evil of monopoly against the good of new inventions. Because monopolies are rightly viewed with suspect, the patent law has always strongly encouraged competitors to design-around patents to bring new products to market. Westvaco Corp. v. Int'l Paper Co., 991 F.2d 735, 745 (Fed. Cir. 1993); London v. Carson Pirie Scott Co., 946 F.2d 1534, 1538 (Fed. Cir. 1991); State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1235-36 (Fed. Cir. 1985); also see Lear, 395 U.S. at 670 (acknowledging the "important public interest in permitting full and free competition in the use of ideas which are in reality a part of the public domain").
Because a patent challenge by a would-be competitor is the surest way to ensure that the public is not continually "required to pay tribute to would-be monopolists without need or justification," this Court has previously rejected the imposition of heightened requirements on patent challenges that would muzzle "the only individuals with enough economic incentive to challenge" patents. Lear, 395 U.S. at 670.
Indeed, the very impetus for the Hatch-Waxman Act that created the ANDA process, and created a specific avenue for challenges to brand-name patents, and the remedies available, was to encourage generic drug companies to bring lower-cost drugs to market, fast. Mylan Pharms., Inc. v. Thompson, 268 F.3d 1323, 1326 (Fed. Cir. 2001); Andrx Pharms., Inc. v. Biovail Corp., 276 E3d 1368,1370-71 (Fed. Cir. 2002).
A generic drug challenge requires a tremendous investment, not only with regard to the drug itself, but ensuring that a given drug can be prepared as a viable formulation, capable of achieving the correct therapeutic performance, in facilities that pass FDA standards. It may well be that the only party with the capabilities and resources to design-around a brand name drug patent is a party that previously tried to do so and failed. Moreover, patent litigation and the associated liability is not without its costs. See Medimmune, Inc. v. Genentech, Inc., 127 S. Ct 764, 775 (2007) ("The rule that a plaintiff must destroy a large building, bet the farm, or (as here) risk treble damages and the loss of 80 percent of its business, before seeking a declaration of its actively contested legal rights finds no support in Article III").
It is hardly surprising that generic drug companies' efforts to challenge brand-name patents, either on validity or on infringement, will sometimes fail. But Congress also included provisions within Hatch-Waxman that would encourage further attacks on brand-name patents. These provisions include:
• Immunizing from infringement liability all activities needed to develop a drug to submit an ANDA for review by FDA, in 35 U.S.C. § 271(e)(1);
• Permitting challenges to brand-name patents before a drug product is actually brought to market, under 35 U.S.C. § 271(e)(2); and
• Limiting by statute the permissible scope of remedies that a district court may award after an unsuccessful patent challenge (before the generic product comes to market) to only an injunction against infringing commercial activity in the U.S., and prohibiting FDA from finally approving the ANDA that was the subject of the lawsuit. 35 U.S.C. § 271(e)(4).
These statutory provisions are specifically designed to permit a generic drug company to mount multiple challenges to a brand name patent.
Under the Federal Circuit's decision in this case, if a generic drug company fails in its first attempt to avoid a brand-name patent, it loses the procedural protections that it would otherwise enjoy in a Hatch-Waxman patent infringement action for a subsequent design-around attempt. A patentee can first bring a traditional Hatch-Waxman infringement action (as Abbott did here), sticking a generic company with an automatic 30-month stay of FDA approval, 21 U.S.C. § 355(j)(5)(B)(iii)(I)(aa), and simultaneously initiate contempt proceedings, choosing at its leisure which forum will be most advantageous.
This gives brand-name patentees an unparalleled tactical advantage. The Federal Circuit recognized it as "substantial," KSM, 776 F.2d at 1524, and the consequent detriment to accused infringers seeking to design around a patent:
Allowing the patentee to proceed by a summary contempt proceeding in all cases would unnecessarily deter parties from marketing new devices that are legitimately outside the scope of the patent in question.
Id. at 1530 (internal citations omitted).
These advantages will necessarily counsel against a second design-around attempt — a result that is in stark conflict with the purpose of the Hatch-Waxman Act, and ultimately detrimental to the drug-buying public, which might otherwise have a less expensive, competitive drug product available in the market.
CONCLUSION
The petition for certiorari should be granted. Alternatively, the Court should call for the views of the Solicitor General.