On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-2828-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 31, 2012
Before Judges Axelrad, Nugent and Haas.
In this patent infringement action, plaintiffs Apotex Inc. and Apotex Corp. (collectively Apotex) appeal the April 8, 2011 order of the Law Division granting summary judgment to defendants Sanofi-Aventis, Sanofi-Synthelabo Inc., Bristol-Myers Squibb Co., and Bristol-Myers Squibb Sanofi Pharmaceuticals Partnership (collectively Sanofi/BMS) and denying their own motion for summary judgment. After reviewing the record in light of the contentions advanced on appeal, we reverse the entry of summary judgment as to Sanofi/BMS's claims, affirm the denial of Apotex's motion, and remand for further proceedings consistent with this opinion.
Sanofi/BMS is the owner of the patent for the drug Plavix® (the '265 patent). Apotex sought approval from the Food and Drug Administration (FDA) to produce a generic equivalent prior to the expiration of Sanofi/BMS's patent, claiming that the patent was invalid. In response to Apotex's application with the FDA, Sanofi/BMS filed a patent infringement suit in federal district court against Apotex. Apotex counterclaimed, alleging that Sanofi/BMS's patent was invalid. See Sanofi-Synthelabo v. Apotex, Inc., 488 F. Supp. 2d 317 (S.D.N.Y. 2006), aff'd, 470 F.3d 1368 (Fed. Cir. 2006).
Sanofi/BMS's filing of the patent infringement action triggered a thirty-month stay of FDA approval for Apotex's application to market the generic drug. Sanofi-Synthelabo, supra, 470 F.3d at 1373. The stay expired on May 17, 2005 and, on January 20, 2006, the FDA gave Apotex final approval to sell its generic product. Ibid.
Prior to the FDA's approval, however, the parties initiated negotiations that culminated in a written settlement agreement on March 17, 2006 (the March Agreement). Paragraphs three through fifteen of the March Agreement contained provisions that would result in a settlement of the patent infringement litigation and the dismissal of all claims and counterclaims without prejudice, and would grant Apotex a limited license to market its product under the '265 patent. These provisions are not at issue in this appeal.
Because of its involvement in prior patent litigation, Sanofi/BMS was
subject to several consent decrees with the
Federal Trade Commission (FTC) and stipulated injunctions with a
consortium of State Attorneys General (the Consortium), which required
review by either the FTC or the Consortium, or both, of any agreement
that would settle patent litigation involving Sanofi/BMS.*fn1
These reviews had to be concluded within thirty days of
receipt by the regulators of a proposed agreement. Sanofi/BMS was
prohibited, by the stipulated injunctions and consent decrees, from
settling any matter without approval by the FTC or the Consortium.
The parties addressed the need for this regulatory review in the March Agreement. Paragraph seventeen of the March Agreement provided it was subject to "Regulatory Review" by the FTC and the Consortium. Under this provision, paragraphs three through fifteen would not become effective unless the FTC "issued an advisory opinion determining that the agreement would not raise issues under . . . the Federal Trade Commission Act[.]" These terms would also not go into effect if the Consortium failed to "provide written notice that they do not object to the agreement." If both of these conditions were met, "Regulatory Clearance" would be achieved, and paragraphs three through fifteen of the March Agreement would become effective. On the other hand, "Regulatory Denial" would occur if either the FTC or the Consortium denied its approval or Sanofi/BMS opted not to continue to seek Regulatory Clearance.
Paragraph eighteen provided that, if Regulatory Denial occurred, the litigation would resume. In addition, BMS/Sanofi would pay Apotex $60 million (the "break-up fee") if Regulatory Denial occurred on or before June 30, 2006. If BMS/Sanofi opted to continue to seek Regulatory Clearance, it would make additional payments to Apotex if Regulatory Denial thereafter occurred. If BMS/Sanofi was later successful on its patent infringement claim, the parties agreed that Apotex's damages would be limited to 70% of its net sales of its generic product. Without this provision, Apotex would have faced possible treble damages and damages calculated on the basis of BMS/Sanofi's loss from the infringement.
Paragraph nineteen provided that, five business days after Regulatory Denial, Apotex could begin to market its generic drug product. BMS/Sanofi agreed not to seek to enjoin Apotex from proceeding until Apotex actually began delivering the product to the marketplace. BMS/Sanofi also agreed not to launch a generic version of its own to compete with Apotex prior to Apotex doing so.
Finally, paragraph twenty of the March Agreement stated that "[n]o provision of this agreement shall require [Sanofi/BMS] or Apotex to do any act that violates any term of any of the FTC consent decrees or court injunctions [involving the Consortium] to which [Sanofi/BMS] is subject, or is otherwise unlawful."
On March 22, 2006, Sanofi/BMS submitted the March Agreement to the FTC and the Consortium, seeking their review as required by the March Agreement and by the injunctions and consent decrees to which it was bound. On April 4, 2006, an in-person meeting between representatives of Sanofi/BMS and the regulators was held to discuss the March Agreement. At that meeting, staff attorneys from the Consortium expressed concern about paragraph eighteen of the March Agreement. On April 13, 2006, BMS/Sanofi submitted a "white paper" to the regulators in an attempt to persuade them to approve the settlement.
During discovery in the present matter, deposition testimony was obtained from Anne Schenof, an FTC attorney, and from Meredyth Smith Andrus, an Assistant Attorney General (AAG) of the Maryland Attorney General's Office, which was one of the states comprising the Consortium. Both depositions were strictly limited in terms of time, place, duration and subject matter by the FTC and the Maryland Attorney General.
Schenof testified that paragraph eighteen raised some issues for the FTC because the $60 million break-up fee to be paid by Sanofi/BMS "was in the nature of a pay to delay, which the [FTC] had consistently been objecting to and actually litigating against because the way it was set up is that Apotex agreed . . . not to launch at risk pending the [FTC's] decision to issue an advisory opinion." According to Schenof, "this looked exactly to us like an agreement for [Sanofi/BMS] to pay Apotex not to put a generic on the market. So we said that was a problem under . . . the FTC Act, and we said we could not approve a settlement that contained that term."
After the April 4, 2006 meeting, Schenof told Sanofi/BMS's attorney, Richard Stark, the break-up fee was a problem and that its payment would violate provisions of the FTC consent decrees. Schenof testified that only the full FTC could issue an advisory opinion on any subject. The FTC never issued an advisory opinion stating the break-up fee was permissible under the consent decrees. However, sometime in May 2006, Schenof called Stark and told him to withdraw Sanofi/BMS's request ...