Endo Settlement Agreements for Generic Opana ER Did Not Cover Later Issued Patents

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By Tony Dutra  

April 1 --Endo Pharmaceuticals Inc.'s first settlement agreements with generic drug makers did not create an implied license to subsequently issued and purchased patents, the U.S. Court of Appeals for the Federal Circuit ruled March 31.

The 2-1 decision overturned a lower court's judgment that Endo was estopped from a second lawsuit because Roxane Laboratories Inc. and Actavis Inc. had relied on the agreements in preparing to introduce generic versions of Endo's Opana ER pain relief drug.

The majority and dissent disagreed first as to limitations in reading the appeals court's precedents on implied licenses and second as to whether differences between Roxane and Actavis's agreements allowed the latter more leeway in claiming it had an implied license.

The case shows the difficulty in finding a fine line in negotiating a license--here with respect to pharmaceuticals but applicable to most technologies--to patents underlying a product when subsequent patents may or may not expand the scope of the original ones.

Ultimately, the majority concluded that the parties had bargained for licenses to specific patents and their continuations only, while the dissent said that Actavis had bargained for protection against lawsuit related to a specific product and a specific patent application disclosure.

But the three members of the panel agreed that Endo could assert a patent purchased after the settlement agreements in any case.

Sequence of Events Matters Here

Endo filed a provisional patent application (60/303,357) in 2001 on a painkiller called oxymorphone, which matured into different nonprovisional patent applications.

Actavis in 2008 and Roxane in 2009 filed Abbreviated New Drug Applications to market generic versions of Opana ER, and per Hatch-Waxman Act procedures, Endo timely filed lawsuits against each. At this time, three patents (including U.S. Patent No. 7,276,250) had issued and were listed in the Food and Drug Administration's Orange Book as underlying Opana ER.

Endo was then prosecuting two other patent applications, each claiming priority to the '357 provisional as did the '250 patent, but emanating from a different nonprovisional than the '250 patent. Endo apparently did not disclose those two applications to Actavis before settling with that firm in 2009, but did disclose them to Roxane by the time they had agreed to a license in 2011.

In 2012, the Patent and Trademark Office issued patents (8,309,122 and 8,329,216) on the two applications, related to extended-release Opana tablets. Endo purchased another patent (7,851,482) on purified oxymorphone compositions and methods of making those compositions. The '482 patent was granted to Johnson Matthey in 2010 and purchased by Endo in 2012.

Endo now asserted the '122, '216 and '482 patents against Roxane and Actavis, but Judge Thomas P. Griesa of the U.S. District Court for the Southern District of New York ruled that Roxane and Activis had an implied license to practice the asserted patents. He denied Endo's motions for preliminary injunctions and Endo appealed.

No Express License

Judge Kimberly A. Moore, writing for the majority, first readily disposed of Roxane's argument that the settlement agreements expressly licensed the patents.

By the plain language of the relevant provisions, it was clear that the agreements expressly covered any future patents only to the extent they were issued from “continuation, continuation-in-part [or] divisional patent applications that claim priority to” the three patents asserted in the first case. The newly asserted patents instead claimed priority to a different nonprovisional than the '250 patent.

The court gave its first lesson to Roxane here, that it should have negotiated a license that would cover “any application claiming a common priority date as the licensed patents.”

Implied License on Continuations Only

The Federal Circuit had found an implied license in TransCore LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271, 2009 BL 74772, 90 U.S.P.Q.2d 1372 (Fed. Cir. 2009), and Gen. Protecht Grp., Inc. v. Leviton Mfg. Co., 651 F.3d 1355, 2011 BL 179239, 99 U.S.P.Q.2d 1275 (Fed. Cir. 2011).

Majority: Endo did not grant a license to an “idea” but rather on specific patents and their applications.

However, the majority said, “these cases stand for the rule that a license or a covenant not to sue enumerating specific patents may legally estop the patentee from asserting continuations of the licensed patents in the absence of mutual intent to the contrary.” In contrast here, the court said again that the new patents asserted are not continuations of any of the licensed patents.

The court distinguished a 1967 case because the license agreement at issue there was to the “subject invention” and not to any specific patents. Here, the court said, Endo did not grant a license to an “idea” but rather to specific patents and their applications. Actavis and Roxane failed to negotiate “for the appropriate language,” the court said, and thus, “Appellees will not now be heard to complain.”

The court thus vacated the lower court's denials of a preliminary injunction.

Judge Pauline Newman joined the opinion.

Dissent: Implied License When Same Provisional

Judge Timothy B. Dyk disagreed with respect to Actavis's implied license--to the '122 and '216 patents but not the purchased '482 patent--largely because Actavis was not aware of the then-current patent applications. Further, he distinguished the two agreements, though the majority had said they were “similar.” Dyk pointed out that the license and covenant not to sue in Actavis's agreement applied to “any products other than the Opana® ER Generic Products,” while the same provision in the Roxane agreement applied to products “or with respect to any patents other than the Licensed Patents.”

Dissent: “Actavis could reasonably conclude it had negotiated a right to sell all Opana® ER generic products despite the interim issuance of the '122 and '216 patents.”

The record “suggests that Actavis could reasonably conclude it had negotiated a right to sell all Opana® ER generic products despite the interim issuance of the '122 and '216 patents,” he said.

However, Dyk also faulted the majority for reading the “continuation patent only” limitation into TransCore and General Protecht.

The Federal Circuit's jurisprudence is that a nonprovisional application, in order to claim priority to a specific provisional application, must be assumed to have the same disclosure as the provisional. “That is to say, a patent claiming priority to a provisional application must cover the same inventive subject matter as the provisional application,” he said.

And since the two lines of patents at issue here claim priority to the same '357 provisional, he said, the “inventive subject matter” is the same and the court's precedents should be read to find an implied license here accordingly.

Martin J. Black of Dechert LLP, Philadelphia, represented Endo. Charles A. Weiss of Holland & Knight LLP, New York, represented Actavis. Alan B. Clement of Locke Lord LLP, New York, represented Roxane.


To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

Text is available at http://www.bloomberglaw.com/public/document/Endo_Pharmaceuticals_Inc_v_Actavis_Inc_Docket_No_1301658_Fed_Cir_/1.

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