Teva sought Supreme Court review of the Federal Circuit's decision. Teva also moved the chief justice as the circuit justice for the Federal Circuit to recall the panel's mandate while the Supreme Court evaluated whether to hear the patent case. Before a decision on whether the Court would review the merits, Chief Justice Roberts denied the request to recall the mandate. See Lyle Denniston, "Court Won't Block Teva Rivals," SCOTUSblog, Apr. 18, 2014. Several months later, the Supreme Court granted certiorari and scheduled the case for argument in October 2014. Teva again moved Chief Justice Roberts to recall the mandate invalidating the patents before the Supreme Court could address validity of the patents. Teva argued that interim generic sales before the merits decision posed damage to Teva's market for Copaxone. Nonetheless, the chief justice again denied Teva's request to recall the mandate.
In a one-paragraph opinion, Chief Justice Roberts recited a three-part test for a stay of a mandate that required demonstrating (1) "a reasonable probability" that [the Supreme] Court will grant certiorari, (2) a "fair prospect that the Court will reverse the decision below," and (3) "a likelihood that irreparable harm will result from denial of the stay." Teva Pharms. USA, Inc. v. Sandoz, Inc., No. 13A1003 (No. 13-854) (Apr. 18, 2014) (Roberts, C.J., in chambers). The chief justice then noted that while Teva met the first two elements, he "was not convinced, however, that [Teva demonstrated] a likelihood of irreparable harm from a denial of a stay." Id. To the chief justice, irreparable harm from an "at risk" launch before the merits ruling was questionable. He based his ruling on the generic manufacturers' "acknowledge[ment] that, should Teva prevail [before the Supreme Court] and its patent be held valid, Teva will be able to recover damages from [one generic defendant] for past infringement." Id.
The chief justice's rationale is surprising given his concurrence in the Supreme Court's decision on patent-based injunctions and lower court cases on stays in Hatch-Waxman cases. In eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 394, 126 S. Ct. 1837, 1841 (2006), the Supreme Court decided that the lower courts should not graft presumptions onto the analysis of requests for injunctions in patent cases. Rather, patent cases are subject to traditional equitable principles. Those principles require that a plaintiff seeking a permanent injunction must show
(1) that it has suffered irreparable injury; (2) that remedies at law such as money damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and the defendant, a remedy at law is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
126 S. Ct. at 1839.
Agreeing with those principles, Chief Justice Roberts, along with Justices Scalia and Ginsburg, went on to note a long history of granting injunctions
upon a finding of infringement in the vast majority of patent cases given the difficulty of protecting a right to exclude through monetary remedies that allow an infringer to use an invention against the patentee's wishes—a difficulty that often implicates the first two factors [irreparable harm and the inadequacy of money damages] of the traditional [injunction] test.
126 S. Ct. at 1841 (Roberts, C.J., concurring) (emphasis in original).
The chief justice added that while historical practice should not create an automatic entitlement to an injunction or a general rule that an injunction should issue, a court should not work off a "blank slate." He suggested that courts should exercise their injunctive discretion according to legal standards developed in the case law. Id. Quoting Oliver Wendell Holmes, the Chief Justice noted that "a page of history is worth a volume of logic." Id. (quoting N.Y. Trust Co. v. Eisner, 256 U.S. 345, 349 (1921)).
The "page of history" relevant to injunctions against "at risk" launches in Hatch-Waxman cases demonstrated a pattern in the Federal Circuit and district courts granting preliminary injunctions against "at risk" launches when the plaintiff has shown a likelihood of success on the merits. (The test for a preliminary injunction differs from the elements for a permanent injunction by inserting the analysis of a likelihood of success on the merits for the availability of remedies at law in the permanent injunction calculus.) In Hatch-Waxman cases, once the likelihood of success is shown, the courts analyze irreparable harm but usually find the requisite level of harm to support an injunction. For example, in Abbott Laboratories v. Sandoz, Inc., 544 F. 3d 1341, 1361–62 (Fed. Cir. 2008), the court issued a preliminary injunction after finding a substantial likelihood that the defendant infringed a valid patent covering an extended-release antibiotic. Despite two generic competitors already on market, the court found irreparable harm from potential loss of additional market share and price erosion. Further, in Sanofi-Synthelabo v. Apotex, Inc., 470 F. 3d 1368, 1382–83 (Fed. Cir. 2006), the court upheld a preliminary injunction against a continued "at risk" launch of a generic version of the anticoagulant Plavix after expiration of a contractually agreed-to period of generic sale. The Federal Circuit noted that the contract limiting damages for a short period of sale did not prevent a finding of irreparable harm. The court also found evidence of irreparable harm from price erosion even in the face of the allowed generic sales as well as loss of goodwill, potential loss of jobs, and reduction of research clinical trials. Id. See also Pozen Inc. v. Par Pharm., Inc., 800 F. Supp. 2d 789 (E.D. Tex. 2011) (finding irreparable harm after noting that launch of a generic product would significantly affect a branded company's revenue stream and in turn affect product development and market share).
In the Teva case, the grant of certiorariand the chief justice's statement that Teva met the required showing of a "fair prospect" of reversal arguably equate with the likelihood of success on the merits in the preliminary injunction test. In refusing to find the impact of an "at risk" launch an irreparable harm because damages are available for past patent infringement, Chief Justice Roberts seems to have "written on a blank slate." He apparently ignored the decisions in Abbott and Sanofi-Synthelabo. Moreover, his reasoning appears incomplete because the cases recognize other potential indicia of irreparable harm. Under Federal Circuit precedent, "price erosion, loss of goodwill, damage to reputation, and loss of business opportunities are all valid grounds for finding irreparable harm." Aria Diagnostics, Inc. v. Sequenom, Inc., 726 F.3d 1296, 1304 (Fed. Cir. 2013) (quoting Celsis in Vitro, Inc., v. Cellz Direct, Inc., 644 F.3d 922, 930 (Fed. Cir. 2012)) (quotations and brackets omitted). As noted in Aria, refusing to find irreparable harm because a patent holder could recover lost sales at a later date could improperly convert a patent from a right to exclude to a compulsory licensing regime. 726 F.3d at 1304.
After the chief justice's refusal to recall the mandate in the Teva case, defendants resisting preliminary injunctions in Hatch-Waxman and other patent cases may try to rely on the Teva ruling to argue absence of irreparable harm. Defendants could argue that there is no irreparable harm because later money damages are available if there is an infringement verdict. Patentees will want to try to rebut that contention by arguing that the chief justice ignored relevant precedent regarding evidence of likely price erosion, lost sales, and loss of market share. Patentees will also want to expand the scope of a court's irreparable harm analysis. Patentees will want to buttress their arguments for irreparable harm with additional evidence that an injunction is needed to prevent more than just the lost sales. They will want to demonstrate loss of goodwill, loss of jobs, and loss of resources to invent and develop new medical treatments.
Edwards Lifesciences AG v. CoreValve, Inc.
Patentees seeking injunctions in medical cases will also want to study District of Delaware Judge Sleet's decision in Edwards Lifesciences AG .v CoreValve, Inc., 2014 WL 1493187 (D. Del. Apr. 15, 2014). In that case, the plaintiff Edwards developed and patented a device that allowed doctors to implant artificial aortic valves through catheters. The invention alleviated open heart surgery in patients that could not tolerate chest opening procedures. The Edwards product used a balloon catheter. A larger medical device company, Medtronic, hired former Edwards engineers and developed a valve and catheter system that did not use a balloon. Medtronic sold its device, known as Generation 3, for use in certain high-risk patents starting in 2006 under limited Food and Drug Administration (FDA) approval. Contending that Edwards could have met the entire market demand, Edwards sued Medtronic for patent infringement. In April 2010, a jury found willful infringement and awarded Edwards over $372 million in lost profits and over a million dollars for a reasonable royalty. However, Judge Sleet denied a request for a permanent injunction because Medtronic represented that it would move production to Mexico. The Federal Circuit affirmed the jury award but remanded to allow the district court to take a closer look at Medtronic's statement that it was moving production out of the country. Edwards Lifesciences AG v. CoreValve, Inc., 699 F.3d 1305, 1315–16 (2012).
In November 2013, Edwards went back to Judge Sleet. By that time, Edwards was closer to obtaining FDA approval for an improved version of its product, and Medtronic was closer to obtaining full FDA approval for the Generation 3 device. Although Edwards's patent would have naturally expired in 2014, Edwards believed it was going to obtain two years of patent term extension. In light of the risk that Medtronic would enter the market in 2014 for all aortic valve replacement patients at the same time that Edwards introduced its improved product, Edwards moved the court for a preliminary injunction. Edwards wanted to prevent Medtronic from widely selling the Generation 3 device once FDA gave full approval to Medtronic. However, Edwards's request for relief contained a carve-out allowing Medtronic to supply devices for difficult-to-treat patients. Edwards Lifesciences AG .v CoreValve, Inc., 2014 WL 1493187 at *2–3 (D. Del. Apr. 15, 2014).
After holding a day-long evidentiary hearing on the public interest implications of an injunction, the court issued a detailed opinion. The court found a likelihood of success on the merits. Edwards had already won on infringement and validity, and Edwards's claim for patent term extension was supported in the case law. Judge Sleet then found irreparable harm from price erosion and loss of sales, market share, and revenue. His analysis focused on the direct competition between the two parties, which were the only suppliers in the market. The court noted a huge drop in Edwards's stock valuation after Medtronic announced an accelerated U.S. launch of its device. The court found that Medtronic would be able to take advantage of training that Edwards previously presented to hospitals and leverage Medtronic's larger size to take sales away from Edwards. Judge Sleet pointed to evidence of Medtronic's quick capture of sales in Europe as additional support for his conclusion that without an injunction, Edwards would lose sales and market share to Medtronic. Further, Medtronic's history of undercutting Edwards's prices in Europe also supported likely price erosion in the United States. The court refused to accept Medtronic's statement that Medtronic would price the Generation 3 at a similar amount to the Edwards product. Medtronic lost credibility through its "questionable" earlier representations about moving production to Mexico. Citing Federal Circuit precedent in Celsis and Sanofi-Synthelabo, the court stated that "the likelihood of price erosion should Medtronic enter the market is sufficient to establish irreparable harm." Edwards Lifesciences, 2014 WL 1493187, at *6. Judge Sleet also relied on Celsis and Sanofi-Synthelabo to find that the balance of hardships favored Edwards. Aortic valves were 70 percent of Edwards's business but less than 7 percent of Medtronic's sales. The judge noted that if Medtronic could sell devices for the entire spectrum of valve replacement patients, Edwards's core right to exclude Medtronic would be meaningless. "Edwards would effectively be forced to compete against its own invention." Id. at *8.
Also, the court undertook an extensive analysis of the public interest factor. This pitted the policy of using exclusivity to protect investment in research and development against the availability of options in selecting important medical devices. Judge Sleet divided the issue into three categories. The first category concerned extreme-risk patients with very small blood vessels. Medtronic argued that in patients with tiny femoral arteries, only its product and not the Edwards device was appropriate. However, the court found that the improved Edwards product, which was near regulatory approval, would also work in patients with small arteries. The small-artery patient group did not tip the public interest in Medtronic's favor. Conversely, a second category of patients with very large valves did help Medtronic's argument. Expert testimony showed that this group of patients benefited from the Medtronic device and that patients with large valves were not candidates for Edwards's improved product. Based on the need for the Medtronic device in patients with large valves, the court found that despite the existence of the factors favoring injunction, "the public interest require[d] making some accommodations that would grant patients with large annulus sizes access to the …Generation 3." Id.
Finally, the court addressed Medtronic's contention that the Medtronic device was safer than the Edwards product and, consequently, all valve replacement candidates should have access to the Generation 3 device. While there were no head-to-head studies comparing the two products, indirect data were available on how each device fared against open heart valve replacement. The court observed that the indirect comparison against open heart surgery favored Medtronic. Further, an expert cardiologist testifying for Medtronic without pay as a patient advocate urged the court to allow access to the Generation 3 device. The expert doctor credibly stressed that the two valves were not interchangeable. He explained that removing access to the Medtronic device "would have a devastating effect . . . that would put at risk a substantial portion of [the] general population with aortic valve disease. . . ." The doctor then warned the court that eliminating a physician's choice of device and "tying the doctor's hands behind their backs in delivering care would be a huge mistake." Id. at *13.
Having heard the evidence about the two valves, Judge Sleet stated that the public interest would be served by allowing "at least some number of Generation 3 devices to be sold on the market." Id. Nonetheless, citing Sanofi-Synthelabo, the court focused on the "strong public interest in enforcement of patent rights." Judge Sleet stressed that Edwards right to exclude Medtronic was especially important because Medtronic continued to produce and sell its product even after a verdict of willful infringement. Id. The court did not want to reward Medtronic for infringing the Edwards patent and create an incentive for others to infringe patents. Judge Sleet then entered a preliminary injunction preventing sales of the Medtronic valve subject to an accommodation to allow Medtronic to sell devices to patients who could not be helped by Edwards products. Id. However, he temporarily stayed the injunction to allow appeal, and the Federal Circuit continued the stay pending review of the merits. Edwards Lifesciences AG v. CoreValve, Inc., No. 2014-1409 (Fed. Cir. May 7, 2014). A few weeks later, the parties reached a global settlement involving a payment of $750 million to Edwards. Press Release, Edwards Lifesciences Corp., Edwards Lifesciences, Medtronic Agree to Global Transcatheter Valve Litigation Settlement (May 20, 2014).
Judge Sleet's injunction respecting a patentee's right to exclude but accounting for patient need was not written on a "blank slate." Several prior cases denied injunctions in medical technology patent suits because of the public interest in having choices of therapies available. An unpublished Federal Circuit opinion suggested that even without a demonstration of any advantages of the infringing product, the need for options prevented injunction. Cordis Corp. v. Boston Scientific Corp, 99 F. App'x 928, 935 (Fed. Cir. 2004). The Federal Circuit noted "a strong public interest support[ed] a broad choice of drug eluting stents even though no published study prove[d] superiority." Id. (emphasis added). Following that principle, another district judge also noted "[a] strong public interest in maintaining diversity in the coronary stent market." Advanced Cardiovascular Sys., Inc. v. Medtronic Vascular, Inc., 579 F. Supp. 2d 554 561 (D. Del. 2008) (Robinson, J.). On the other hand, in Amgen, Inc. v. Hoffman-La Roche Ltd., 581 F. Supp. 2d 160 (D. Mass. 2008) (Young, J.), aff'd in part and rev'd in part without affecting injunction, 580 F.3d 1340 (Fed. Cir. 2009), a district court did not countenance diversity of products as placing the public interest factor in the defendant's favor absent a showing of clinical advantage. The court remarked that "[a]lthough doctors and patients would probably benefit from additional choice [in red blood cell stimulating drugs], it [was] not clear that the infringing [product] Mircera offer[ed] significant clinical advantages over [Amgen's products.]"
Similarly, in Bard Peripheral Vascular v. W.L. Gore & Associates, 670 F.3d 1171 (Fed. Cir. 2012), the patent holder directly competed with the defendant in some product lines of artificial vascular grafts. After the defendant introduced evidence showing physician preference and advantages of its devices, the trial court refused to enjoin continued sale of the infringing products because the products were beneficial to the public health. Bard Peripheral Vascular v. W.L. Gore & Assocs., 2009 WL 920300 (D. Ariz.). Instead, the trial court imposed a royalty of 20 percent on directly competing products and 12.5 percent on products that were covered by the patents but that did not compete with the patent holder's product line. Affirming the royalty rates, the Federal Circuit noted that "[t]he award of an ongoing royalty instead of a permanent injunction to compensate for future infringement is appropriate in some cases." 670 F.3d at 1192. See also Johnson & Johnson Vision Care v. Ciba Vision Corp., 712 F. Supp. 2d 1285 (M.D. Fla. 2010) (citing the Bard district court decision and noting Bard involved life-saving technology; refusing to grant an injunction in case about contact lenses to avoid consequential medical, practical, and economic issues for large numbers of users of infringing contact lenses).
When viewed in the context of the "page of history" of cases that preceded it, the recent decision in Edwards Lifesciences, unlike the denial of the recall in Teva, appropriately favored the patentee's right to exclude, given the patentee's record of success on the merits. In Edwards Lifesciences, Judge Sleet also appropriately provided an exception to protect the public interest for sales of the defendant's device to patients in need of the infringing product.
Keywords: litigation, intellectual property, injunction, health care, patent, Hatch-Waxman, eBay, Teva Pharmaceuticals, Edwards Lifescience