Monday, December 11, 2006

CAFC Issues Post-eBay Injunction Decision

Sanofi v. Apotex (06-1613) December 8, 2006

The Federal Circuit issued it's opinion in the Sanofi case Friday, affirming the lower court's grant of a preliminary injunction against Apotex's generic version of Plavix. Sanofi and Apotex were previously involved in litigation over Plavix and tried to settle the case until the state attorney general issued a regulatory denial of various settlement terms. In light of the regulatory denial, the two companies resumed litigation, and Sanofi obtained a preliminary injunction in the lower court when (1) Apotex stipulated to infringement; and (2) the lower court found that Apotex was unlikely to prove invalidity/inequitable conduct/unclean hands at trial.

Since preliminary injunctions are slightly different from permanent injunction (requiring a "reasonable likelihood of success" versus actual success), there wasn't a heavy reliance on the eBay decision. Nevertheless, the CAFC reviewed Apotex's contentions of invalidity, inequitable conduct and unclean hands and concluded that the lower court properly found that the evidence did not establish that Apotex had a reasonable likelihood of success in rendering Sanofi's patents invalid or unenforceable.

Regarding the 3 other factors of the Supreme Court's four-factor test, the CAFC found that irreparable harm could be presumed by Sanofi, even though Apotex argued that Sanofi "bargained away" its right to seek preliminary injunctive relief, since Sanofi inserted specific monetary amounts in an earlier settlement agreement, which stated the following:

If the litigation results in a judgment that the ’265 patent is not invalid or unenforceable, Sanofi agrees that its actual damages for any past infringement by Apotex, up to the date on which Apotex is enjoined, will be 50% of Apotex’s net sales of clopidogrel products if Sanofi has not launched an authorized generic and 40% of Apotex’s net sales if Sanofi has launched an authorized generic. Sanofi further agrees that it will not seek increased damages under 35. U.S.C. § 284.
Because this clause contemplated injunctive relief and addressed only past infringement, the CAFC found the provision favored Sanofi:
We disagree with Apotex that by entering into that agreement, Sanofi bargained away its right to seek preliminary injunctive relief, and thus its right to prove irreparable harm, in the event the settlement was not approved. The above provision itself contemplates an injunction in referring to "up to the date on which Apotex is enjoined" and speaks only of damages for past infringement. In addition, based on other provisions in the agreement, it is clear that the parties contemplated the possibility of a preliminary injunction in the event of regulatory denial. Paragraph 15 of the agreement, for example, sets forth the procedural steps the parties must follow when seeking a preliminary injunction. Moreover, merely because a patentee is able to identify a monetary amount that it deems sufficient to avoid or end litigation does not necessarily mean that it automatically foregoes its right to seek a preliminary injunction or that any potential irreparable injury ceases to exist if infringement resumes.
Apotex also argued that the district court erred by applying a presumption of irreparable harm because Sanofi established a likelihood of success on the merits. Apotex contended that applying such a presumption is in direct contravention of the Supreme Court’s decision in eBay. However, because the CAFC concluded that the district court did not clearly err in finding that Sanofi established several kinds of irreparable harm, including irreversible price erosion, the CAFC did not address this contention.

Regarding the balance of hardships and the impact to the public interest, the CAFC also found these factors favored Sanofi, stating that "[t]he patent system provides incentive to the innovative drug companies to continue costly development efforts. We therefore find that the court did not clearly err in concluding that the significant 'public interest in encouraging investment in drug development and protecting the exclusionary rights conveyed in valid pharmaceutical patents' tips the scales in favor of Sanofi."

It appears that the CAFC's decision is consistent with the developing district court trend, finding injunctive relief proper only in "competitor vs. competitor" cases where two actual products are affected by patent rights. Michael Smith from the E.D. Tex. Blog published a recent paper titled"Effect of eBay v. MercExchange on District Courts' Decisions Whether to Grant Injunctions in Patent Cases" and found that, so far, only "productive" patent holders have been able to get injunctions on infringed patents. Download Michael's paper here.

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