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A Successful Invalidity Defense to a Preliminary Injunction Need Only Raise a Substantial Question of Invalidity, a Lower Standard of Proof Than the Clear and Convincing Standard Required at Trial

May 14, 2009

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Last Month at the Federal Circuit - June 2009

Judges: Judges: Newman (concurring), Gajarsa, Ward (District Judge sitting by designation, author)

[Appealed from: D.N.J., Judge Linares]

In Altana Pharma AG v. Teva Pharmaceuticals USA, Inc., No. 08-1039 (Fed. Cir. May 14, 2009), the Federal Circuit affirmed the district court’s denial of a request by Altana Pharma AG (“Altana”) for a preliminary injunction.

Altana owns U.S. Patent No. 4,758,579 (“the ’579 patent”) directed to a proton pump inhibitor (“PPI”) called pantoprazole, which is the active ingredient in Altana’s Protonix® drug. PPIs inhibit gastric acid secretion in the stomach by interfering with the action of a gastric acid pump. At the time the application for the ’579 patent was filed, the mechanism by which PPI’s blocked acid secretion in the stomach was unknown. Altana also owns U.S. Patent No. 4,555,518 (“the ’518 patent”), filed before the ’579 patent. The ’518 patent compares the effectiveness of eighteen claimed compounds to four prior art compounds. One of those eighteen compounds is referred to as “compound 12.” Compound 12 has a chemical structure identical to pantoprazole, except that compound 12 contains a methyl group (-CH3) at the 3-position of the pyridine ring, whereas pantoprazole contains a methoxy group (-OCH3) at the same location.

Teva Pharmaceuticals USA, Inc. (“Teva”) filed an ANDA to sell a generic version of Protonix® prior to the expiration of the ’579 patent. Sun Pharmaceutical Industries, Ltd. (“Sun”) later filed similar ANDAs. Altana filed suits against Teva and Sun, and the district court later consolidated the two cases. Altana then filed a motion for preliminary injunction. Teva responded by conceding infringement but arguing that Altana was not entitled to a preliminary injunction because the ’579 patent was invalid as obvious.

Following a hearing, the district court found that the defendants had demonstrated a substantial question of invalidity, and that Altana had not shown that the argument lacked substantial merit. In particular, the district court found that one of skill in the art would have selected compound 12 as a lead compound for modification. Moreover, the district court held that various prior art references provided the motivation to one of skill in the art to modify compound 12 and demonstrated that such a modification was feasible. Accordingly, the district court concluded that Altana had failed to establish a likelihood of success on the merits. In addition, the district court further held that Altana’s alleged harms (e.g., irreversible price erosion, substantial loss of profits, decrease in market share, inability to service debts, employee layoffs, and loss of research opportunities) were not irreparable. Accordingly, the district court denied Altana’s request for a preliminary injunction.

On appeal, the Federal Circuit first addressed the district court’s decision that Altana had failed to establish a likelihood of success on the merits. In particular, the Court addressed Altana’s arguments that the district court (1) failed to take into account an accused infringer’s clear and convincing burden to prove invalidity, (2) erred by selecting compound 12 as a lead compound, and (3) misinterpreted a prior art reference, referred to as the Bryson article.

With respect to Altana’s argument that the district court failed to take into account the accused infringer’s clear and convincing burden to prove invalidity, the Federal Circuit held that the district court had applied the correct standard. Citing its own precedent, the Federal Circuit held that a party is not entitled to a preliminary injunction if the accused infringer raises a substantial question concerning validity, enforceability, or infringement, and the party moving for the preliminary injunction cannot show that the argument lacks substantial merit.

Altana then questioned the district court’s obviousness analysis. Altana argued that the district court improperly considered compound 12 from the ’518 patent as a lead compound, when the prior art suggested numerous other compounds that were just as promising. The Court held, however, that ample evidence supported selecting compound 12 as a lead compound. For example, the ’518 patent instructed that its compounds provided improvements over the prior-existing PPIs, such as omeprazole, and disclosed compound 12 as one of the more potent compounds among the eighteen compounds disclosed. These facts, the Federal Circuit concluded, would have led one of ordinary skill in the art to select compound 12 for further study. To the extent that Altana suggested that the prior art must point to only a single lead compound for further development, the Court found that such a restrictive view would equate to the rigid application of the teaching-suggestion-motivation standard of obviousness rejected by the Supreme Court in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007). Thus, the Court concluded that none of the district court’s findings on choosing compound 12 as a starting compound, including its treatment of conflicting expert testimony, was clearly erroneous.

Altana also objected to the district court’s interpretation of the Bryson article, contending that the court’s inaccurate description of that reference constituted clear error. Specifically, the district court stated that, according to Bryson, the pKa value of a methoxy group at the 3-position was 4 while the pKa of a methyl group at that position was 5. Altana correctly noted that Bryson actually taught a pKa value for a methoxy group as 4.83, which, due to the logarithmic nature of the pKa scale, was 6.7 times larger than a value of 4. Despite this difference, the Federal Circuit did not find clear error because, even with the correct pKa value considered, Bryson still taught that changing the substituent at the 3-position from a methyl group to a methoxy group would substantially lower the pKa value.

With respect to Altana’s contention that it would suffer irreparable harm due to price erosion, loss of market share, loss of profits, loss of research opportunities, and possible layoffs, the Federal Circuit acknowledged that it had previously upheld findings of irreparable harm based on these very factors. Slip op. at 18 (citing Sanofi -Synthelabo v. Apotex, Inc., 470 F.3d 1368, 1382-83 (Fed. Cir. 2006)). Nevertheless, the Court further observed that such cases demonstrated that the Federal Circuit will give deference to a district court’s determination of whether a movant has shown irreparable harm. Accordingly, the Courtrefused to find that the district court’s decision was clearly erroneous.

Judge Newman concurred and noted that she agreed with the Federal Circuit’s affirmance of the district court’s decision to deny a preliminary injunction because of the discretionary weight afforded to the district court for weighing conflicting expert opinions interpreting the evidence at this preliminary stage. She clarified, however, that, in her view, Teva’s evidence did not establish the invalidity of the ’579 patent.