By Kevin E. Noonan —

ANDA litigation, pursuant to the Hatch-Waxman Act, has become more complicated over the years since enactment of the statute in 1984, with more patents being asserted and more parties participating over the opportunity to market a generic version of a branded, innovator drug.  Particularly under circumstances where there are several ANDA litigants, and where most of them are not the sole "first filer" entitled to 180-day market exclusivity should they prevail in invalidating the innovator's patent(s) or (less often) showing that their generic product will not infringe, there is an incentive for the branded drug maker and at least some of the competing generic companies to enter into a settlement agreement.  (It should be noted that these settlements are not in the manner of "pay-for-delay" agreements; that is a separate topic).  One feature of these settlement agreements is that, absent any first filer garnering exclusivity status, each settling generic company seeks an agreement granting them the right enter the market when any non-settling generic company succeeds in invalidating the branded drug patent(s) or proving non-infringement.  The Federal Circuit's decision over such a settlement agreement in Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals Inc. illustrated the impossibility of crafting an agreement that encompasses all contingencies, the difficulty in foreseeing all contingencies, and the efforts a patentee will expend to enforce provisions of an agreement despite the agreement not being satisfied (as well as the toxic effect even the hint of gamesmanship can produce, even where the fact of a party engaging in gamesmanship may be very much in doubt).

This case arose over Takeda's Colcrys® product, involving 0.6 mg tablet formulations of colchicine for treating gout flares.  Takeda asserted 17 Orange Book-listed patents in that litigation and the parties settled, specifying a date certain in future (later than the date of the settlement but prior to the expiration date of the last-to-expire of the asserted patents).  The Settlement Agreement contained this provision for accelerating the date Mylan could bring its generic version of Colcrys® to market and the events that could trigger such an accelerated date:

[Mylan would become entitled to launch its generic product on t]he date that is [a specified time period] after the date of a Final Court Decision (as defined in Exhibit A) holding that all unexpired claims of the Licensed Patents that were asserted and adjudicated against a Third Party are either (i) not infringed, or (ii) any combination of not infringed and invalid or unenforceable[.]

(Section 1.2(d); emphasis added).  Exhibit A defines a Final Court decision as "entry by a federal court of a final judgment from which no appeal . . . has been or can be taken."  Another relevant passage, Section 1.10, provides that any breach of this agreement would cause Takeda irreparable harm.

Concurrently, Takeda was also pursuing patent infringement litigation against another generic drug maker, Hikma, in a litigation styled as Takeda Pharm. USA v. West-Ward Pharm. Corp.  In that litigation, defendant Hikma did not file an ANDA application but rather a § 505(b)(2) New Drug Application which the FDA approved for Hikma's Mitigare® product.  In that litigation, Takeda asserted 8 patents against Hikma, but during the course of the litigation the parties agreed to dismiss the complaint with prejudice as to 5 of the 8 asserted patents and litigate only the remaining 3 patents.  The district court ultimately granted summary judgment in Hikma's favor over the claims of these 3 remaining patents.  Takeda did not appeal that judgment.

As a consequence of that outcome, Mylan informed Takeda that it was invoking the provisions of Section 1.2(d) and planned on immediate market entry.  In response. Takeda filed suit and sought a preliminary injunction against the proposed Mylan launch; in the interim the parties agreed that Mylan would voluntarily cease sale and distribution of Mylan's Colcrys® generic product.

The District Court denied Takeda's motion, on the grounds that Takeda had "failed to show it is likely to succeed on the merits or that it will suffer irreparable harm."  With regard to the likelihood of success prong, the District Court agreed with Mylan that the decision in Hikma's favor without an appeal triggered the provisions of Section 1.2(d).  The Court rejected Takeda's argument that the decision in Hikma did not do so because of the five initially asserted patents that were withdrawn from that litigation; according to the Court the three remaining patents that the parties had litigated satisfied the "all unexpired claims of the Licensed Patents that were asserted and adjudicated against a Third Party" provision because those were the patents that had been "asserted and adjudicated."  (In addition to basing its decision on this exercise of contract interpretation, a question of law, the District Court noted that "Takeda's proposed interpretation would prevent Mylan from ever relying on the clause to enter the market because Takeda could always 'withdraw one patent (or one claim on one patent),' whether through gamesmanship or through the normal course of litigation, to avoid triggering Section 1.2(d)").  The District Court also rejected Takeda's contention that this provision was only triggered by litigation against a Colcrys® generic which excluded application for Mitigare®.  The Court's decision was based on the parties' use of terms like "Generic Equivalent" or "Authorized Generic Products" elsewhere in the agreement but not in Sections 1.2(d), (e), or (f).

Turning to the question of inequitable harm, the District Court rejected Takeda's contention that the circumstances here invoked the inequitable harm provisions of Section 1.10, which required Takeda to show that Mylan had breached the settlement agreement.  Accordingly, the District Court found that Takeda would not be able to successfully contend irreparable harm but rather should be satisfied with money damages.  This appeal followed.

The Federal Circuit affirmed, in an opinion by Chief Judge Prost joined by Judge Hughes; Judge Newman dissented.  The panel majority construed the terms of Section 1.2(d) and held that the Hikma decision triggered the provisions of Section 1.2(d), and as a consequence Takeda would not be able to prevail on the merits under Delaware law (which controlled under an express provision in the Settlement Agreement).  The panel rejected Takeda's argument that the term "all" in Section 1.2(d) required adjudication of the five patents the parties dismissed in addition to the three patents that went to trial.  The panel majority held that this interpretation was not consistent with the plain language of the agreement, based on use of the phrase "asserted and adjudicated" in this section of the Agreement.  One basis for this decision is that Takeda's interpretation would render the word "adjudication" meaningless in the panel majority's view.  Perhaps equally persuasive was the panel majority's recognition that Takeda's construction would "lead[] to the absurd result that Takeda could prevent Mylan from ever relying on the clause by simply asserting and then withdrawing a claim from a proceeding," which the opinion characterized as "gamesmanship."

The panel majority also rejected Takeda's contention that the intent of the parties was to permit Mylan's "early" entry into the colchicine market based on a change in the status quo (or the status of the licensed patents) for the entire market, because the Agreement did not have terms reciting this intention.  And the panel majority rejected Takeda's further contention that the Agreement did not contemplate Hikma's Mitigare® product, saying that considering the Hikma litigation as a triggering event was "exactly a circumstance Takeda asserts Section 1.2(d) was intended to cover" (and in a footnote, notes that the Hikma litigation was ongoing when the Settlement Agreement with Mylan was being negotiated).

With regard to the question of whether Takeda would be irreparably harmed, the panel majority held that Takeda's reliance on Section 1.10 is fatal to its claim, because that provision requires Mylan to have breached the provisions of Section 1.2(d) in order for that provision to apply.  Absent that, the panel majority states that Takeda made "no credible assertion" of irreparable harm or that it could not be recompensed with money damages.  The panel majority recognizes that "price erosion and loss of market share may in some cases be irreparable injuries" but that Takeda's "bare assertion" of irreparable harm is insufficient to support this prong of the preliminary injunction standard.  Accordingly, the Federal Circuit affirmed the District Court's denial of Takeda's motion for preliminary injunction.

Judge Newman saw things differently in her dissent.  For this Judge, the Settlement Agreement contained an "explicitly agreed provision" regarding when Mylan was entitled to accelerate its market entry date, and it breached that agreement by informing Takeda it would begin selling its generic Colcrys® after the Hikma decision was final.  In addition to violating "fundamental principles of contract law and commerce," the Judge also believed there were strong public policy concerns raised by the majority's decision.  In Judge Newman's view, Mylan was not entitled to invoke the acceleration provisions of Section 1.2(d) because "the cited event [finality of the Hikma decision] relates to a different product of a different provider having a different FDA approval for different uses, and is not a generic counterpart of Colcrys®" (emphasis added).  Showing that different judges can come to different conclusions on the same facts, the same coincidence of the Settlement Agreement negotiations cited (albeit in a footnote) by the majority to support their conclusion that the parties could have expressly included the Hikma litigation in the Settlement Agreement is cited by Judge Newman to support her interpretation, i.e., that the parties could have and should have included the outcome of the Hikma litigation in Section 1.2(d) if they intended it to provide a triggering event for Mylan's acceleration of its marketing date.  In addition, using a "balance of the harms" analysis Judge Newman believes is contained in Section 1.10  of the Settlement Agreement, her dissent states that "if it were to turn out that the requested injunction were wrongfully granted, Mylan could be made whole by the injunction bond required by Fed. R. Civ. P. 65(c); whereas if the injunction were wrongfully denied Takeda could not be made whole from the market impact of Mylan's entry."  Under Delaware law, "contractual stipulations as to irreparable harm alone suffice to establish that element for the purpose of issuing preliminary injunctive relief" Judge Newman contends, citing Cirrus Holding. Co. v. Cirrus Indus., Inc., 794 A.2d 1191, 1209 (Del. Ch. 2001), and TP Group-CI, Inc. v. Vetecnik, No. CV 16-00623-RGA, 2016 WL 5864030, at *2 (D. Del. Oct. 6, 2016).  Judge Newman also sees a violation of the public's interest in settlements and upholding the integrity of contracts in the majority's decision as another basis for her dissent.

Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2020)
Panel: Chief Judge Prost and Circuit Judges Newman and Hughes
Opinion by Chief Judge Prost; dissenting opinion by Circuit Judge Newman