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Shire Development LLC v. Amneal Pharmaceuticals LLC

United States District Court, D. New Jersey, Camden Vicinage

October 11, 2018

Shire Development LLC, Shire Pharmaceutical Development Inc., Cosmo Technologies Limited, and Nogra Pharma Limited. Plaintiffs,
v.
Amneal Pharmaceuticals LLC, Amneal Pharmaceuticals of New York, LLC, Amneal Pharmaceuticals Co. (1) PVT. LTD., and Amneal Life Sciences PVT. LTD. Defendants.

          OPINION

          ROBERT B. KUGLER, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on the motion [ECF Doc. 373] by defendants' (collectively “Amneal” or “defendants”), seeking a declaration this case is “exceptional” under 35 U.S.C. § 285[1] and an award of defendant's attorneys' fees after 31 August 2017, the date plaintiffs (collectively “Shire” or “plaintiffs”) served their expert reports.

         For the reasons discussed below, defendants' motion is DENIED. An order accompanies.

         1.0 Relevant Facts and Procedural History

         On 22 April 2015, plaintiff Shire filed a patent infringement suit against defendants Amneal (“the Amneal ANDA suit” or “this suit”) after Amneal sought approval in the form of an Abbreviated New Drug Application (“ANDA”) from the Food and Drug Administration [“FDA”] for a generic form of the drug Lialda®, covered by U.S. Patent Number 6, 773, 720 (“ ‘720 patent”).[2] Claim 1 of the ‘720 patent recites a controlled-release oral pharmaceutical composition comprising the active ingredient 5-amino-salicylic acid and having an inner lipophilic matrix and an outer hydrophilic matrix wherein the active ingredient is dispersed in both the lipophilic matrix and hydrophilic matrix. The lipophilic matrix consists of substances derived from fatty acids or cholesterol; the hydrophilic matrix consists of water soluble substances.

         From 2012 through November 2015, in response to other ANDA applications before the FDA, Shire filed similar patent infringement cases against these ANDA applicants: Zydus, Osmotica, Watson (now Teva), Mylan, and Lupin (ECF Doc. No. 380-3) [“the other ANDA cases”].

         For plaintiff, neither this nor any other ANDA case involving the '720 patent can be categorized as an unqualified prevail. In particular: the Osmotica ANDA case has been dismissed. The Lupin ANDA case has been stayed pending Lupin's resubmission to the FDA. In the Zydus ANDA case, the District Court of Delaware found non-infringement, affirmed by the Federal Circuit. The Watson ANDA case had two separate appeals to the Federal Circuit, each on the meaning of a different claim term, and both of which were finally determined as non-infringement. In the Mylan ANDA case, the Federal Circuit affirmed the District Court's finding of non-infringement.

         Not only have plaintiffs' lawsuits meant all six ANDA applicants have had to navigate infringement challenges but also that all applicants, including defendants Amneal, have had difficulty gaining approval from the FDA for their proposed Lialda® generics. Only Zydus and Watson have gotten FDA approval and launched generic products, and these only within the last year. Defendants's own regulatory struggles include receipt, on 16 September 2016, of an FDA rejection for genotoxic impurities in the active pharmaceutical ingredient of its generic product, and continued failure to obtain FDA approval to date. Summarizing these ANDA cases, it can be seen that plaintiffs' suits for Lialda® infringement are more Sisyphean, while defendants' efforts to get approved generics more Herculean.

         In response to the complaint, defendants sought a declaratory judgment of non-infringement of its ANDA product as well as a determination of invalidity of the ‘720 patent claims. During a discovery period marked by at least 8 amended scheduling orders and scheduling conferences in the 16 months between September 2016 and January 2018 and several discovery disputes, plaintiffs served opening expert reports on 31 August 2017, with expert depositions taking place over the fall of 2017. On 19 January 2018, this Court held the pretrial conference.

         As background to this suit's procedure, in the spring of 2017, the Zydus generic product, previously adjudicated non-infringing, entered the market, whereas by spring of 2018, the Watson generic products, also adjudicated non-infringing, entered as well. Further, in April 2018, the Federal Circuit affirmed a finding of non-infringement for Mylan's proposed generic. Between spring 2017 and April 2018, plaintiffs faced both Federal Circuit judgments of non-infringement of its ‘720 patent and entry of generic products in competition to Lialda®, which may have eroded its expectations of relying on the ‘720 patent for marketplace exclusivity.

         On 3 May 2018, at Shire's initiative, the parties settled this ANDA suit by voluntarily dismissing both the infringement claims and invalidity counterclaims with prejudice. On 7 Jun 2018, Amneal filed this motion seeking a declaration this case is exceptional and $83, 994 in attorneys' fees from 31 August 2017 to the date of dismissal.

         Parties' Contentions

          Defendants' core contention is, even though the Federal Circuit has rejected Shire's infringement theory on five separate occasions in three of the other ANDA cases, plaintiffs continued to advance that very theory in this case when it served its expert reports on 31 August 2017. Defendants further asserts that plaintiffs' infringement theory is the distribution of an excipient in its claimed pharmaceutical composition and titles this the “excipient distribution theory”. (ECF Doc.373:3-4). Defendants state the ‘720 patent claims do not recite an excipient distributed throughout the composition, as plaintiffs advance, but rather a composition having two macroscopically separate elements: an inner lipophilic matrix and an outer hydrophilic matrix. Defendants assert the Federal Circuit made clear that an accused, generic composition can infringe the ‘720 claims only if it has both recited structures and that infringement cannot occur if the accused composition lacks these.

         Defendants further contend plaintiffs knew their infringement theory was untenable when, on 31 August 2017, plaintiffs filed in this case its expert reports that advanced the excipient distribution theory (ECF Doc.373:1), but nonetheless pressed forward with an infringement argument it knew it couldn't win. (ECF Doc. 373-9-10). Defendants argue such action is unconscionable in that it unnecessarily delayed adjudication of a meritless case and needlessly racheted up its attorneys' fees, thereby abusing the Hatch- Waxman litigation regime and justifying a declaration of “exceptional” here. (ECF Doc.373: 16-19).

         Plaintiffs contend defendant can prevail on this motion only if it shows plaintiff's infringement position was meritless as of 31 August 2017, the date when plaintiffs filed expert reports. Plaintiffs also contend defendant's labelling of plaintiffs' infringement position as the “excipient distribution theory” is incorrect, and that such mislabeling grounds a serious misrepresentation of the Federal Circuit's decisions in the other ANDA cases. Further, defendants are also incorrect in their interpretation of these Federal Circuit decisions because none opined on an “excipient distribution” infringement theory.

         In addition, both parties accuse each other of unwarranted litigation-delaying tactics (ECF Doc. 373:11-13; ECF Doc. 380:5-6), which could ground a finding of ...


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