$16 Million Damages Award Against At Risk Generic Affirmed: Federal Circuit | Practical Law

$16 Million Damages Award Against At Risk Generic Affirmed: Federal Circuit | Practical Law

In Sanofi-Aventis Deutschland GMBH v. Glenmark Pharmaceuticals Inc., USA, the US Court of Appeals for the Federal Circuit affirmed a jury verdict of over $16 million in damages, holding that the district court did not err in its rulings on obviousness, spoliation and standing.

$16 Million Damages Award Against At Risk Generic Affirmed: Federal Circuit

Practical Law Legal Update 5-565-7726 (Approx. 5 pages)

$16 Million Damages Award Against At Risk Generic Affirmed: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 22 Apr 2014USA (National/Federal)
In Sanofi-Aventis Deutschland GMBH v. Glenmark Pharmaceuticals Inc., USA, the US Court of Appeals for the Federal Circuit affirmed a jury verdict of over $16 million in damages, holding that the district court did not err in its rulings on obviousness, spoliation and standing.
In its April 21, 2014 opinion in Sanofi-Aventis Deutschland GMBH v. Glenmark Pharmaceuticals Inc., USA, the US Court of Appeals for the Federal Circuit affirmed the US District Court for the District of New Jersey's judgment against Glenmark Pharmaceuticals Inc, USA and the jury's damages award (No. 2012-1489, (Fed. Cir. 2014)). In affirming the jury's determination that Glenmark did not prove the asserted patent invalid, the Federal Circuit held that:
  • All of the characteristics of the claimed invention may be considered in an obviousness analysis, regardless of when those characteristics are discovered.
  • Spoliation of evidence in the course of preparing for litigation does not need to be concealed from the jury.
  • Ownership of the NDA evidenced the plaintiffs' mutual intent to grant exclusive rights to the patented product.

Background

Sanofi-Aventis Deutschland GmbH owns US Patent No. 5,721,244 (the '244 patent), which covers the combination of the angiotensin converting enzyme (ACE) inhibitor trandolapril and the calcium antagonist verapamil hydrochloride. This combination is sold as an antihypertension drug under the brand name Tarka. The Food and Drug Administration (FDA) approved the New Drug Application (NDA) for Tarka in 1996 and Abbott Laboratories (Abbott) acquired the NDA in 2001. Abbott Laboratories Inc. (ALI) is Abbott's exclusive distributor of Tarka in the US.
In 2007, Glenmark Pharmaceutcals Inc. and Glenmark Pharmaceuticals Ltd. (collectively, Glenmark) filed an Abbreviated New Drug Application (ANDA) seeking to market a generic version of Tarka. Glenmark included a Paragraph IV Certification in its ANDA and Sanofi-Aventis, Aventis Pharma S.A. and Abbott filed an infringement suit against Glenmark.
Approval of Glenmark's ANDA was stayed for 30 months as a result of the patent infringement suit under 21 U.S.C. § 355(j)(5)(B)(iii). The 30-month stay expired in 2010 and the plaintiffs moved for a preliminary injunction to block Glenmark's launch. The district court denied the motion and Glenmark launched its generic version of Tarka at risk in June 2010.
During a jury trial, Glenmark admitted that its generic product infringes the '244 patent, but challenged the validity of the patent. The jury found that Glenmark failed to prove the '244 patent invalid and awarded $15,2000,000 in lost profits and $803,514 in price erosion damages.
Glenmark appealed the district court judgment, arguing that:
  • The '244 patent is invalid for obviousness.
  • Glenmark is entitled to a new trial based on a prejudicial jury instruction on spoliation.
  • Damages should not be awarded because Abbott and ALI lack standing to sue.

Outcome

On appeal, the Federal Circuit affirmed all aspects of the district court's judgment and related rulings. The Federal Circuit rejected Glenmark's arguments and held that:
  • It was not improper for the district court to consider the invention's unexpected benefits that were discovered after the '244 patent's filing.
  • The district court's jury instruction allowing an adverse inference based on Glenmark's spoliation of evidence was not improper.
  • The district court's finding that Abbott and ALI have standing to sue was not improper and it was appropriate for the court to consider the evidence as a whole, including Abbott's ownership of the NDA and the relationships and agreements among the plaintiffs.
Because Glenmark did not appeal the amount of the damages award, the Federal Circuit remanded the case to the district court for an accounting of any post-verdict damages.

Obviousness

Glenmark argued on appeal that the '244 patent is invalid for obviousness because both the ACE inhibitor and calcium antagonist were known in the prior art and that it would have been obvious to a person of ordinary skill in the art to try the claimed combination. Glenmark argued that the unexpected benefits of improved kidney and blood vessel function should be excluded from the obviousness analysis because they were not discovered until after the patent was filed.
The Federal Circuit rejected Glenmark's argument that all unexpected properties must be known prior to a patent's filing and held that patentability may consider all of the characteristics possessed by the claimed invention, whenever those characteristics become manifest.

Spoliation

In 2005 and 2006, Glenmark had a policy that all e-mails and related electronic documents would be kept for only one month, and this policy was in place while Glenmark was preparing its ANDA. As a result, Glenmark produced only three e-mails from 2005 and twenty-two e-mail chains from 2006, even though other evidence showed that Glenmark was preparing its ANDA and its Paragraph IV certification during that time. The district court concluded that Glenmark had violated its duty to preserve relevant evidence in anticipation of litigation and instructed the jury that it was permitted to draw an adverse inference that the electronic documents that Glenmark deleted would have been unfavorable to Glenmark's position.
In finding that Glenmark improperly destroyed documents, the district court relied on the US Court of Appeals for the Third Circuit's decision in Bull v. United Parcel Serv., Inc., which explained that spoliation of evidence occurs when:
  • The evidence was in the party's control.
  • The evidence is relevant to the claims or defenses in the case.
  • There has been actual suppression or withholding of evidence.
  • The duty to preserve the evidence was reasonably foreseeable to the party.
The Federal Circuit agreed with the district court that litigation was reasonably foreseeable to Glenmark no later than February 2006, the date it first asserted work product immunity in its privilege log. The Federal Circuit also held that it was appropriate for the district court to rely on circumstantial evidence to conclude that the deleted documents related to the litigation, including evidence that Glenmark used e-mail for communications about the research and development of the generic drug. In affirming the district court's adverse inference instruction, the Federal Circuit held that the destruction of documents in the course of preparing for litigation is not entitled to judicial protection and that destruction of documents does not need to be concealed from the jury.

Standing

Glenmark argued that the damages award was not appropriate because Abbott and ALI did not have standing to sue. Glenmark argued that Abbott did not own any rights in the '244 patent when it granted ALI exclusive distributor rights to Tarka. The district court found that Abbott and ALI had exclusive rights to Tarka in the US based on Abbott's ownership of the NDA and the relationships and agreements among the plaintiffs.
The Federal Circuit agreed with the district court's holding that in determining patent and license rights in complex transfers, the standard is whether the evidence as a whole convinces the trier of fact of mutual intent to transfer and vest exclusive rights. The Federal Circuit affirmed the district court's finding that Abbott's acquisition of the NDA was evidence that the parties intended Abbott and ALI to have exclusive rights to the '244 patent in the US and held that the parties had standing to sue. The Federal Circuit also stated that it was appropriate for all of the parties in the licensing chain to join the suit in order to avoid multiple infringement suits.

Practical Implications

The Federal Circuit's decision provides patent litigants with important reminders on commonly litigated issues. First, the Federal Circuit's decision regarding obviousness confirms that patent owners can rely on unexpected properties to counter obviousness, even if the unexpected properties are unknown at the time of the patent's filing.
Second, the Federal Circuit's spoliation discussion highlights the importance of implementing litigation holds as soon as litigation becomes reasonably foreseeable. ANDA applicants in particular should consider how their document retention policies may impact documents that they will have to produce during litigation and may need to adjust their policies before developing new generic drugs.
Finally, the Federal Circuit's licensing discussion highlights the complexities that can exist in patent licensing arrangements. Even though the Federal Circuit found standing in this case, parties to licensing agreements should make sure to accurately record and specify all of the granted rights to avoid unnecessary disputes over standing.