• Exceptional Case Finding Against Generic Pharmaceuticals: "Baseless" Patent Certification Coupled with Litigation Misconduct
  • January 12, 2009
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., Appeal Nos. 2007-1269/1270 (Fed. Cir. December 8, 2008)

    In a December 8, 2008 decision, the U.S. Court of Appeals for the Federal Circuit affirmed an award of attorneys' fees to the patent holder for the anti-diabetic drug pioglitazone sold under the brand name Actos. In so ruling, the Federal Circuit refused to disturb a district court's finding that a generic pharmaceutical company making a certification of patent invalidity falls short of its duty of care when its Paragraph IV certification letter fails to present a prima facie case of invalidity. Coupled with litigation misconduct consisting mainly of shifting theories of obviousness, the Federal Circuit affirmed a judgment finding the case exceptional and awarding over $16 million in attorneys' fees to the patent owner under 35 U.S.C. § 285.

    Takeda v. Mylan is the latest decision regarding the anti-diabetic drug pioglitazone. Previously, the Federal Circuit affirmed that the claims of Takeda's U.S. Patent No. 4,687,777 ("the '777 patent"), directed to the molecule pioglitazone, were not invalid as obvious. Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd., 492 F.3d 1350 (Fed. Cir. 2007). In part, the Federal Circuit's earlier opinion upholding the '777 patent claims relied on the failure of the generics to explain why a skilled artisan would have identified a specific prior art compound (known as "compound b") as the lead compound for modification to arrive at pioglitazone. Without such an explanation, the generics could not establish a prima facie case of obviousness against the claims.

    Having successfully defended its patent claims against the invalidity allegation, the patent owner asked the court to declare the case "exceptional" and to award attorneys' fees. Judge Cote of the Southern District of New York found, and the Federal Circuit affirmed, that Mylan and Alphapharm each lacked a good faith basis for their Paragraph IV letters and engaged in misconduct throughout the litigation.

    Regarding Alphapharm, the Federal Circuit rejected the argument that Alphapharm was merely honing its obviousness arguments for trial in response to information produced during discovery and not available at the time it sent its Paragraph IV letter.

    The affirmance cited the finding of "insidious" scientific errors and "baseless" assertions in Alphapharm's letter and that these arguments were abandoned because they were "unsupportable" rather than merely tactical choices.

    Regarding Mylan, the Federal Circuit found no clear error in the finding that Mylan's Paragraph IV letter was "utterly frivolous" based on scientific errors, specifically pointing out Mylan's assertion that benzene and pyridine rings are bioisosteres – experts for Takeda and Mylan both disagreed with this assertion.

    In light of the scientific errors present in Mylan's certification letter, the fact that the court was unmoved by Mylan's decision not to pursue this obviousness claim at trial can hardly be deemed clear error. We believe that court had ample reason to hold that Mylan's certification letter was filed in bad faith and with no reasonable basis to claim the '777 patent invalid.

    Slip op. at 12-13.

    The Federal Circuit also addressed an argument made by amicus curiae Generic Pharmaceutical Manufacturers Association that a finding of an exceptional case would deter generic applicants from presenting defenses at trial that were not included in their certification letters. According to the Court:

    Given the court's specific articulation that its ruling was directed toward baseless ANDA filings and litigation in bad faith, we decline to disturb the court's finding of an exceptional case as potentially chilling non-frivolous ANDA filings under the Hatch-Waxman Act. Well-supported filings challenging the validity and infringement of patents owned by an NDA holder should not raise the specter of an unjustified holding of an exceptional case.

    Slip op. at 14.1.

    Finally, the Court rejected a challenge to the amount of the award as excessive, citing the broad discretion of the trial judge, including the unusual award of expert fees based on the district court's inherent power to impose sanctions.

    The Federal Circuit's affirmance in Takeda v. Mylan is mostly an acknowledgment of the discretion trial judges enjoy in awarding attorneys' fees in "exceptional cases" under 35 U.S.C. § 285. The decision is likely to elevate the significance of the Paragraph IV letter in the Hatch-Waxman scheme and should serve as a warning of the consequences of making a patent certification without fully analyzing the legal and scientific basis for bringing a patent challenge.