On March 31, 2014, in Endo Pharmaceuticals Inc. v. Actavis, Inc., the US Court of Appeals for the Federal Circuit vacated the US District Court for the Southern District of New York's denial of a preliminary injunction against the defendants, holding that a license and covenant not to sue on specific patents and patent applications grants an implied license only as to continuations of the licensed patents (Nos. 2013-1658, 2013-1662, (Fed. Cir. Mar. 31, 2014)).

Endo Pharmaceuticals, Inc. sells Opana ER, which contains a painkiller called oxymorphone, and it holds a number of patents related to oxymorphone. After Roxane Laboratories, Inc., Actavis, Inc, and Activis South Atlantic, LLC (collectively Roxane and Actavis) filed Abbreviated New Drug Applications (ANDAs) to market generic versions of Opana, Endo sued Actavis for patent infringement. These lawsuits settled after Endo granted Roxane and Actavis licenses and covenants not to sue on specified patents related to oxymorphone as well as any continuations, continuations-in-part and divisional applications claiming priority to those patents. After the agreement, two new patents issued to Endo and Endo acquired a third patent. None of these three patents is listed or defined in the earlier licenses.

Endo sued Roxane and Actavis for infringing these three patents, and moved for a preliminary injunction to prevent the marketing and sales of Roxane's and Actavis' generic oxymorphone formulations. Roxane and Actavis opposed the preliminary injunction on the theories of express license and implied license by reason of legal estoppel and the district court denied Endo's motion. Endo appealed.

On appeal, Roxane argued that it had an express license to practice two of the asserted patents because those patents had a provisional application in common with one of the licensed patents. In support of their implied license argument, Roxane and Actavis relied on a series of Federal Circuit cases, including TransCore, LP v. Electronic Transaction Consultants Corp., where the Federal Circuit held that a patentee was legally estopped from bringing a second infringement action even though an earlier settlement agreement stated that it would not apply to any other patents (563 F.3d 1271 (Fed. Cir. 2009)).

The Federal Circuit rejected these arguments and emphasized that the agreements were limited to the licensed patents and patents that claimed priority to those patents. The court held that neither Roxane nor Actavis held an express license to the asserted patents because they did not claim priority directly to the licensed patents.

The Federal Circuit also rejected Roxane and Actavis' implied license arguments. The court first explained that the TransCore line of cases stand for no more than the rule that a license or a covenant not to sue on specific patents may legally estop a patentee from asserting continuations of those licensed patents in the absence of mutual intent to the contrary. The Federal Circuit held that Endo is not estopped from asserting the patents at issue because none of the asserted patents is a continuation of any of the licensed patents.

Judge Dyk dissented from a portion of the decision, arguing that Actavis had an implied license to practice two of the asserted patents because of differences in the negotiations and language in its license.

The Federal Circuit refused to extend the legal estoppel doctrine in a way that would effectively rewrite the licenses in this case. The court's decision confirms that the doctrine of legal estoppel will not broaden the scope of licensed patent rights where the language of the agreement is clear. Parties should make sure that they specify the patents covered by a license or settlement and they should clearly identify how any later-issued patents will be treated under the agreement.