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In re Cyclobenzaprine Hydrochloride Extended-Release Capsule Patent Litigation

Case Name: In re Cyclobenzaprine Hydrochloride Extended-Release Capsule Patent Litigation, No. 2012-1280, 2013 U.S. App. LEXIS 3072 (Fed. Cir. Feb. 1, 2013) (Circuit Judges Newman, O’Malley, and Reyna presiding; Opinion by O’Malley) (Appeal from D. Del., Robinson, J.)

Drug Product and Patent(s)-in-Suit: Amrix® (cyclobenzaprine hydrochloride); U.S. Pat. Nos. 7,387,793 (“the ’793 patent”) and 7,544,372 (“the ’372 patent”)

Nature of the Case and Issue(s) Presented:  Impax appealed the district court’s decision to explicitly add Impax to a previously-entered preliminary injunction, the district court’s refusal to modify the injunction prospectively, and the district court’s decision that Impax’s right to enter the generic market had not been triggered under the terms of a settlement agreement. On the last day of trial, Impax entered into a settlement agreement with Cephalon granting Impax a non-exclusive license to the patents-in-suit and provided five different “triggering events” in which Impax may enter the generic market. After a bench trial, on May 12, 2011, the district court found the asserted claims invalid as obvious. On May 24, 2011, the district court enjoined Mylan and Cephalon, along with all persons “acting in active concert or participation” with them, from selling generic versions of the drug. Also in May 2011, Cephalon entered into a “Sales Agent Agreement” naming Watson Pharmaceuticals its sales agent for authorized generic versions of Amrix should the litigation result in an ANDA filer launching “at risk.” On November 8, 2011, the district court clarified the injunction to specifically include Impax. On March 15, 2012, the district court determined that Impax’s right to enter the generic market was not triggered under the terms of the settlement agreement. Impax appealed the injunction based on three reasons: (i) Impax claimed that the district court abused its discretion enjoining Impax in the May 2011 injunction; (ii) Impax asserted that the district court modified the May 2011 injunction in November 2011 by adding Impax; and (iii) Impax argued that it sought to modify or dissolve the injunction prospectively. The Federal Circuit rejected Impax’s arguments and affirmed the injunction. Impax also appealed the district court’s determination that Impax could not enter the market based on the settlement agreement. Impax argued that Cephalon’s appointment of Watson as a sales agent triggered Impax’s right to enter the market under the settlement agreement. The Federal Circuit affirmed the district court’s determination that Cephalon’s use of Watson as a sales agent for Cephalon’s own generic product did not trigger Impax’s right to enter the market.

Why Defendants Prevailed:  The Federal Circuit was not persuaded by any of Impax’s arguments regarding the injunction. It found that Impax’s appeal of the May 2011 Order was untimely. Impax filed the appeal months after the injunction was entered. The Court determined that Impax was enjoined as a person acting “in active concert or participation” with Cephalon by virtue of the settlement agreement. Thus, the district court’s November 2011 Order simply clarified the May 2011 injunction. Since Impax was a party to the May 2011 injunction, its appeal was untimely. The Federal Circuit also determined that Impax was not able to prospectively seek modification of the injunction. Impax claimed sufficient changed circumstances because: (i) the district court recently named Impax in the injunction; (ii) Mylan’s exclusivity had expired; and (iii) Impax received authorized generics from Cephalon. The Federal Circuit readily dismissed Impax’s arguments. Since Impax was always subject to the May 2011 injunction and knew as of then the length of Mylan’s exclusivity, its expiration has no bearing on Impax’s right to enter the market. The Federal Circuit also determined that Cephalon’s appointment of Watson as a sales agent did not trigger Impax’s right to enter the market. The settlement agreement allowed Impax to enter the market the same day as Cephalon licensed or authorized a third party (that is not entitled to first filer exclusivity) to sell a generic. Impax argued that Watson was a third party under the agreement. The Federal Circuit rejected this argument; it viewed Cephalon’s use of Watson as simply effectuating Cephalon’s own entry into the market. Watson did not file its own ANDA. The Cephalon-Watson agreement appointed Watson as a sales agent to solicit orders and required Watson to inform customers that it was acting on behalf of Cephalon. Cephalon maintained the right to set prices and retained title to the generic drug until it reached the customer. Since title was never passed to Watson, the Federal Circuit determined that Watson was not licensed or authorized to “sell” Cephalon’s generic. It also found that Impax’s construction of “third party” would create an absurd result. Impax’s construction would require Cephalon to own and operate the entire generic distribution chain before Cephalon could launch its generic. Cephalon, like most brand name companies, lacks the infrastructure to sell generics without any assistance. Impax’s construction would mean that any third party that aids Cephalon by soliciting orders would trigger Impax’s rights—the Federal Circuit found this to be absurd.

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