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Preliminary Injunction Should Not Issue Where Substantial Questions of Validity Exist

June 22, 2006

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Last Month at the Federal Circuit - July 2006

Judges: Newman (dissenting), Gajarsa, Prost (author)

In Abbott Laboratories v. Andrx Pharmaceuticals, Inc., No. 05-1433 (Fed. Cir. June 22, 2006), the Federal Circuit vacated the preliminary injunction (“PI”) issued by the district court, finding that the defendant Teva Pharmaceuticals USA, Inc. (“Teva”) had raised substantial issues concerning the validity of each of the asserted patent claims.

Abbott Laboratories (“Abbott”) sued Andrx Pharmaceuticals, Inc., Roxane Laboratories, Inc., and Teva, alleging infringement of its patents relating to extended release (“ER”) formulations of the antibiotic clarithromycin. Clarithromycin is a broad spectrum antibiotic from the macrolide family of antibiotics, all of which are derived from erythromycin A. Abbott licensed the patent for clarithromycin and, in 1991, introduced Biaxin, an immediate release (“IR”) formulation of clarithromycin. In 1997, Abbott filed a patent application directed to an ER formulation of clarithromycin, comprising erythromycin derivatives combined with a pharmaceutically acceptable polymer. The ER formulation enables patients to take a pill once per day rather than twice, as had been required with the IR formulation. That application issued on January 4, 2000, as U.S. Patent No. 6,010,718 (“the ’718 patent”). U.S. Patent No. 6,551,616 (“the ’616 patent”) issued from a CIP application, claiming a method of reducing adverse gastrointestinal (“GI”) side effects of erythromycinderived drug formulations by using ER formulations.

Abbott introduced its ER clarithromycin formulation, Biaxin XL, in 2000. In 2002, Teva filed an ANDA, seeking approval to market an ER formulation of clarithromycin similar to Biaxin XL. In 2005, Abbott sued Teva for infringement of claims 2, 4, and 6 of the ’718 patent and claim 2 of the ’616 patent, and moved for a PI against Teva. Teva responded, conceding infringement of the patents, but alleging that the asserted patent claims are invalid for obviousness under 35 U.S.C. § 103 and, therefore, Abbott could not establish a likelihood of success on the merits as necessary for issuance of a PI.

The district court found that Teva had raised a substantial question concerning the validity of claim 2 of the ’616 patent but had not done so with respect to claims 2, 4, and 6 of the ’718 patent. Further concluding that Abbott would suffer irreparable harm absent a PI, that the balance of hardships favored Abbott, and that the public interest was best served by enforcing the ’718 patent, the district court issued a PI enjoining Teva.

On appeal, Teva argued that the district court erred in finding that Abbott had demonstrated Teva’s invalidity defense to claims 2, 4, and 6 of the ’718 patent lacked substantial merit, and in finding that Abbott had established that it would suffer irreparable harm if Teva were not enjoined. Abbott countered that it made a clear showing of a likelihood of success on the merits regarding claims 2, 4, and 6 of the ’718 patent, and as such, it was entitled to the presumption that it would suffer irreparable harm absent the PI. Abbott also argued for affirmation of the PI on the alternate ground that Teva failed to raise a substantial challenge to the validity of claim 2 of the ’616 patent.

The Federal Circuit began its analysis by stating that Abbott had the burden to establish its right to a PI by showing that (1) it was likely to succeed on the merits of the underlying litigation, (2) it would suffer immediate irreparable harm absent a PI, (3) the balance of hardships to the parties weighed in Abbott’s favor, and (4) the public interest would be best served by granting the PI. Then the Court addressed whether Abbott carried its burden of showing a likelihood of success. The Court observed that validity challenges during PI proceedings require less proof than is necessary to support a judgment of invalidity at trial and the patentee must present a clear case supporting the validity of its patents.

The Federal Circuit began with the obviousness contentions regarding claims 2 and 4 of the ’718 patent, directed to pharmaceutical compositions for ER of an erythromycin derivative. The claims have three basic elements: an erythromycin derivative, a polymer, and certain pharmacokinetic parameters. The Court looked to U.S. Patent No. 5,705,190 (“the ’190 patent”), an Abbott patent, for the disclosure of ER formulations of clarithromycin with a polymer different from the polymers used in the ’718 patent claims and noted that the ’190 patent composition “arguably” has the pharmacokinetic parameters of the ’718 patent claims. The Court also looked to WO 95/30422 (“the ’422 publication”) for disclosure of an ER formulation of azithromycin with HPMC, the polymer in the ’718 patent claims. The Federal Circuit observed that claims 4 and 14 of the ’190 patent cover compositions that include azithromycin or clarithromycin, even though the specification only explicitly describes compositions made from clarithromycin. The Court explained that by disclosing only clarithromycin ER compositions in the specification, yet claiming azithromycin compositions, Abbott had represented to the PTO that “the differences between clarithromycin and azithromycin were such that azithromycin could be substituted into a controlled release clarithromycin composition by a person of ordinary skill in the art without undue experimentation.” Slip. op. at 18. Therefore, there existed a substantial argument that one of skill in the art would combine the polymers of the ’422 publication and compositions of the ’190 patent with a reasonable expectation of success. The Court concluded, therefore, that Teva had raised a substantial question of validity against claims 2 and 4 of the ’718 patent and Abbott had not carried its burden.

The Federal Circuit then turned to the defense of obviousness regarding claim 6 of the ’718 patent, which is directed to an ER composition comprising an erythromycin derivative and having an improved taste profile, and claim 2 of the ’616 patent, which is directed to a method of reducing GI adverse side effects from erythromycin derivatives by administering an ER composition. The Court explained that, in view of the analysis of claims 2 and 4 of the ’718 patent, the validity of those claims likely depended on the additional limitations relating to improved side effects. As such, Abbott had to present evidence of unexpected results over the closest prior art. The Court stated, however, that the prior art and Abbott’s own statements indicated that a reduction in side effects would not have been unexpected. Therefore, the Court held that Teva raised a substantial question regarding the validity of claims 2 and 6, and the district court was correct in its finding regarding claim 2.

Thus, the Court held that because Teva raised a substantial question of validity with respect to each claim, Abbott had not established a likelihood of success on the merits for the PI.

Turning the irreparable harm factor, the Federal Circuit noted that Abbott was no longer entitled to a presumption of irreparable harm because it did not establish a likelihood of success. Additionally, though the district court agreed with Abbott’s economic arguments establishing harm and concluded that “entry of the generic extended release formulation competitor will likely crush the market,” the Court rejected Abbott’s arguments. Id. at 29. Abbott argued that the “sharp economic consequences of open competition from generic drugs establish the inadequacy of monetary damages and irreparable harm.” Id. The Court noted that

if this court were to accept a patentee’s
“arguments that, ‘apart from the
presumption,’ its ‘potential lost sales’ alone
demonstrate ‘manifest irreparable harm’,
acceptance of that position would require a
finding of irreparable harm to every
manufacturer/patentee, regardless of

Id. (citations omitted).

The Court also noted, however, that “Teva has not proven that monetary damages will suffice.” Id. The Court concluded:

Therefore, where a patentee has not shown a
likelihood of success on the merits, and where
the patentee has not clearly established that
monetary damages could not suffice but the
defendant has not established that monetary
damages do suffice, we cannot say that the
irreparable harm prong of the analysis favors
either party.

Id. at 30.

Because Teva did not appeal the district court’s determination that the balance of hardships favored Abbott, the Federal Circuit affirmed the district court’s determination in that regard. Finally, as to the public interest factor, the Federal Circuit agreed with the district court that the public is best served by enforcing patents that are likely valid and infringed. However, because the Court concluded that Abbott did not establish a likelihood of success on the merits, it disagreed with the district court on that factor, concluding that the public interest is best served by denying the PI. As a result of those considerations, the Court vacated the PI.

Judge Newman dissented from the decision, stating that the majority incorrectly rejected “the requirement that in determining the likelihood that the patent will be proved invalid it is necessary to consider the burdens of proof that would inhere at trial.” Dissent at 3. However, even if Teva had made a substantial argument of invalidity, Judge Newman did not feel abuse of discretion by the district court was shown.