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The Grant of a Preliminary Injunction Is Reviewed for Clear Error

October 21, 2008

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Last Month at the Federal Circuit - November 2008

Judges: Newman (author), Archer (concurring), Gajarsa (dissenting)

[Appealed from: N.D. Ill., Judge Coar]

In Abbott Laboratories v. Sandoz, Inc., No. 07-1300 (Fed. Cir. Oct. 21, 2008), the Federal Circuit affirmed the district court’s grant of a preliminary injunction barring Sandoz, Inc. (“Sandoz”) from selling a generic form of extended release clarithromycin pending final resolution of the case.

The suit relates to extended release formulations of clarithromycin. Sandoz filed an ANDA, which the FDA approved in 2005. Abbott Laboratories (“Abbott”), who markets the drug under the brand name Biaxin®XL, filed suit, charging Sandoz with infringing U.S. Patent No. 6,010,718 (“the ’718 patent”) and U.S. Patent No. 6,551,616 (“the ’616 patent”). The ’718 patent claims an extended release formulation comprising an erythromycin derivative and a pharmaceutically acceptable polymer. The ’616 patent is a CIP of the ’718 patent, which claims a method of reducing gastrointestinal side efffects.

The district court considered the factors relevant to the grant or denial of a preliminary injunction and found that Abbott was likely to prevail on Sandoz’s challenges based on patent invalidity in view of the prior art, unenforceability based on inequitable conduct during prosecution, and noninfringement. In addition, the district court determined that each of the equitable factors weighed in Abbott’s favor.

On appeal, the Federal Circuit found that the district court did not clearly err in its determination that Sandoz would not likely succeed in establishing invalidity based on anticipation or obviousness. The Court found no error in the district court’s conclusion that Sandoz would not likely succeed in establishing anticipation, as the prior art reference neither described the product of the ’718 patent claims nor enabled the pharmacokinetic properties that are set forth in the claims. With respect to obviousness, the prior art references provided various controlled release formulations including clarithromycin, as well as the same polymeric carriers used in controlled release dosage forms for drugs other than clarithromycin. The district court found, and the Federal Circuit agreed, that “Sandoz had not produced evidence indicating that the [pharmacokinetic] limitations [of the patent claims] were disclosed in the prior art or were inherent to the structural limitations of the prior art compositions.” Slip op. at 16. Regarding Sandoz’s argument that the claimed invention was obvious to try, the Court held that KSR International Co. v. Teleflex, Inc., 127 S. Ct. 1727 (2007), did not create a presumption that all experimentation in fields where there is already a background of useful knowledge is “obvious to try,” without considering the nature of the science or technology. Rather, the Court held that each case must be decided in its particular context, including the characteristics of the science or technology, the nature of the known choices, the specificity or generality of the prior art, and the predictability of results in the area of interest. The Court also noted that “knowledge of the goal does not render its achievement obvious.” Slip op. at 19. Accordingly, the Federal Circuit affirmed the district court’s ruling, holding that it appropriately applied the KSR standard of whether the patents-in-suit represented an “identified, predictable solution” and “anticipated success” to the problem of producing extended release formulations having the pharmacokinetic properties in the claims. Id. at 19-20.

The Federal Circuit further found that the district court had not erred in its analysis of Sandoz’s challenges based on inequitable conduct. The Federal Circuit agreed with the district court that Sandoz did not establish that the various types of data that Abbott failed to submit to the PTO during prosecution were material under either Rule 56 or the reasonable examiner standard. Moreover, Sandoz did not present any independent evidence of intent to deceive, and the Court noted that materiality, even if found, does not establish intent. Thus, the Court found that the district court did not abuse its discretion in holding that the patents-in-suit were not likely to be held unenforceable due to inequitable conduct.

Regarding noninfringement, the Federal Circuit found no error in the district court’s claim construction of “pharmaceutically acceptable polymer,” which was based on the Federal Circuit’s prior construction of the phrase in Abbott Laboratories v. Andrx Pharmaceuticals, Inc., 473 F.3d 1196 (Fed. Cir. 2007). The district court found that Abbott demonstrated a substantial likelihood that the maltodextrin found in Sandoz’s product satisfied this limitation. Accordingly, the Court affirmed the district court’s ruling that Abbott had shown a reasonable likelihood of proving infringement.

The Federal Circuit also found that the district court properly concluded that the equitable factors each weighed in favor of granting the preliminary injunction. Specifically, the Federal Circuit agreed with the district court’s conclusion that damages for infringement, if Abbott should ultimately prevail in the litigation, did not negate the market share and revenue loss caused by Sandoz’s market entry during the proceedings. In addition, the Federal Circuit agreed that the balance of hardships weigh in Abbott’s favor, concluding that “Abbott will lose much more if [the] Court did not enjoin Sandoz’s infringing conduct than if the Court enjoins Sandoz and it is subsequently found that the ’718 patent is invalid or unenforceable.” Slip op. at 38 (quoting Abbott Labs. v. Sandoz, Inc., 500 F. Supp. 2d 807, 845 (N.D. Ill. 2007)). Finally, as to the public interest, the district court acknowledged that public interest favors less expensive drugs. The district court also recognized that shifting market benefits to the infringer while litigation is pending for patents that are likely to withstand the attack adversely affects the incentive for discovery and development of new products. Thus, the Federal Circuit held that the district court did not abuse its discretion in weighing the legal probabilities and equities and granting preliminary injunction.

Judge Gajarsa dissented, focusing on the court’s treatment of the likelihood of success factor in the preliminary injunction analysis. Specifically, Judge Gajarsa stated that the district court had erred because, under Federal Circuit precedent, “[i]n resisting a preliminary injunction, however, one need not make out a case of actual invalidity. Vulnerability is the issue at the preliminary injunction stages, while validity is the issue at trial.” Gajarsa Dissent at 2 (quoting Abbott Labs. v. Andrx Pharms., Inc., 452 F.3d 1331, 1335 (Fed. Cir. 2006)). Further, Judge Gajarsa stated that “when the alleged infringer raises a substantial question regarding validity, a preliminary injunction cannot issue because the patentee has failed to demonstrate a likelihood of success on the merits.” Id. at 4. Here, Judge Gajarsa would find that the district court committed reversible error because Sandoz had raised substantial questions as to obviousness and enforceability of the claims that were the basis for the preliminary injunction.

In a section of the opinion in which concurring Judge Archer did not join, Judge Newman addressed the dissent’s arguments as to the proper standard of review of the grant of a preliminary injunction in patent cases. Judge Newman summarized the standard as applied in each circuit and by the Supreme Court, explaining that each reviewed the grant of a preliminary injunction for an abuse of discretion, and that “[t]he correct standard is not whether a substantial question has been raised, but whether the patentee is likely to succeed on the merits.” Slip op. at 41. In addition, Judge Newman stated that the dissent relied on recent Federal Circuit decisions that are not clearly established precedent, and if there is a conflict between more recent holdings and prior Federal Circuit decisions, the Court must follow the holdings of the earlier decisions. If the Court believes a different standard should apply to patent cases, that change must be made en banc.