United States Court of Appeals 

for the Federal Circuit ______________________ 

ASTRAZENECA AB, aka ASTRA ZENICA AB, 

AKTIEBOLAGET HASSLE, KBI-E INC., KBI INC., 

ASTRAZENECA LP,

Plaintiffs-Appellees

v.

APOTEX CORP., APOTEX INC., 

TORPHARM INC.,

Defendants-Appellants

______________________ 

2014-1221

______________________ 

Appeal from the United States District Court for the 

Southern District of New York in No. 1:01-cv-09351-DLC, 

Senior Judge Denise Cote.

______________________ 

Decided: April 7, 2015

______________________ 

CONSTANTINE L. TRELA, JR., Sidley Austin, LLP, Chicago, IL, argued for plaintiffs-appellees. Also represented 

by JOHN W. TREECE, DAVID C. GIARDINA; JOSHUA EUGENE 

ANDERSON, Los Angeles, CA; PAUL ZEGGER, Washington, 

DC. 

JAMES F. HURST, Winston & Strawn LLP, Chicago, IL,

argued for defendants-appellants. Also represented by 
2 ASTRAZENECA AB v. APOTEX CORP. 

STEFFEN NATHANAEL JOHNSON, EIMERIC REIG-PLESSIS,

CHRISTOPHER ERNEST MILLS, Washington, DC. 

______________________ 

Before O’MALLEY, CLEVENGER, and BRYSON, Circuit 

Judges.

BRYSON, Circuit Judge.

Apotex Corp., Apotex Inc., and TorPharm Inc., (collectively, “Apotex”) appeal from a final judgment entered 

against them by the United States District Court for the 

Southern District of New York. We previously affirmed 

the district court’s decision in an earlier phase of the same 

litigation holding that Apotex had infringed certain 

patents held by AstraZeneca AB and related parties

(collectively, “Astra”). In re Omeprazole Patent Litig., 536 

F.3d 1361 (Fed. Cir. 2008). In the portion of the proceeding now under review, the district court awarded damages 

to Astra on a reasonable royalty theory of recovery. We 

affirm in part, reverse in part, and remand.

I 

A 

The patents at issue in this case are U.S. Patent No. 

4,786,505 (“the ’505 patent”) and U.S. Patent No. 

4,853,230 (“the ’230 patent”). The two patents relate to 

pharmaceutical formulations containing omeprazole, the 

active ingredient in Astra’s highly successful prescription 

drug, Prilosec. 

Omeprazole is a “proton pump inhibitor” (“PPI”). It 

inhibits gastric acid secretion and for that reason is 

effective in treating acid-related gastrointestinal disorders. However, the omeprazole molecule can be unstable 

in certain environments. In particular, it is susceptible to 

degradation in acidic and neutral media. Its stability is 

also affected by moisture and organic solvents. 
ASTRAZENECA AB v. APOTEX CORP. 3

To protect the omeprazole in a pharmaceutical dosage 

from gastric acid in the stomach, formulators have tried 

covering the omeprazole with an enteric coating. Enteric 

coatings, however, contain acidic compounds, which can 

cause the omeprazole in the drug core to decompose while 

the dosage is in storage, resulting in discoloration and 

decreasing omeprazole content in the dosage over time. 

To enhance the storage stability of a pharmaceutical 

dosage, alkaline reacting compounds (“ARCs”) must be 

added to the drug core. The addition of ARCs, however, 

can compromise a conventional enteric coating. Ordinarily, an enteric coating allows for some diffusion of water 

from gastric juices into the drug core. But when water 

enters the drug core, it dissolves parts of the core and 

produces an alkaline solution near the enteric coating. 

The alkaline solution in turn can cause the enteric coating 

to dissolve.

The inventors of the ’505 and ’230 patents solved that 

problem by adding a water-soluble, inert subcoating that 

separates the drug core, and thus the alkaline material, 

from the enteric coating. The resulting formulation, 

consisting of an active ingredient core with ARCs, a 

water-soluble subcoating, and an enteric coating, provides

a dosage form of omeprazole that has both good storage 

stability and sufficient gastric acid resistance to prevent 

the active ingredient from degrading in the stomach. 

Once the dosage reaches the small intestine, where the 

drug can be effectively absorbed, the solubility of the 

subcoating allows for rapid release of the omeprazole in 

the drug core.

Astra held patents on both the active ingredient, 

omeprazole, and the formulation for delivering it. The 

active ingredient patents expired in 2001, but several 

patents covering the formulation, including the patents at 

issue in this case, did not expire until April 20, 2007.
4 ASTRAZENECA AB v. APOTEX CORP. 

Starting in 1997, anticipating the expiration of the active ingredient patents, eight generic drug manufacturers, 

including Apotex, filed Abbreviated New Drug Applications (“ANDAs”) with the Food and Drug Administration 

(“FDA”), seeking permission to manufacture and sell 

omeprazole. Those applications were accompanied by 

what are known as “Paragraph IV certifications,” in 

which the generic drug manufacturers asserted that their 

formulations did not infringe the ’505 and ’230 patents 

and that the patents were invalid. See 21 U.S.C. 

§ 355(j)(2)(A)(vii)(IV). Astra subsequently sued all eight 

generic drug companies in the same district court. The 

lawsuits were divided into two groups, each involving four 

defendants.

In the “first wave” litigation, the district court found 

that the ’505 and ’230 patents were not invalid and that 

three of the first wave defendants—all except Kremers 

Urban Development Co. and Schwarz Pharma, Inc. (collectively, “KUDCo”)—infringed the patents. We affirmed 

the district court’s decision in In re Omeprazole Patent 

Litig., 84 F. App’x 76 (Fed. Cir. 2003) (“Omeprazole I”), 

and In re Omeprazole Patent Litig., 483 F.3d 1364 (Fed. 

Cir. 2007) (“Omeprazole II”). 

On May 31, 2007, during the “second wave” litigation, 

the district court issued an opinion holding that the 

generic version of omeprazole manufactured by Mylan 

Laboratories, Inc., and Mylan Pharmaceuticals, Inc., 

(collectively, “Mylan”) did not infringe the patents. The 

district court also held that the generic version of omeprazole manufactured by Lek Pharmaceutical and Chemical 

Company D.D. and Lek USA, Inc., (collectively, “Lek”) did 

not infringe Astra’s patents. The court, however, entered 

judgment of infringement against Apotex. We affirmed 

the judgment in favor of Mylan in In re Omeprazole 

Patent Litig., 281 F. App’x 974 (Fed. Cir. 2008) (“Omeprazole III”). We affirmed the judgment of infringement 
ASTRAZENECA AB v. APOTEX CORP. 5

against Apotex in In re Omeprazole Patent Litig., 536 F.3d 

1361 (Fed. Cir. 2008) (“Omeprazole IV”). 

Apotex started selling its generic omeprazole product 

in November 2003, during the pendency of the second 

wave litigation. It continued selling its generic product 

until 2007, when the district court held that Apotex’s 

formulation infringed Astra’s patents. After we affirmed 

the district court’s judgment of liability against Apotex, 

the district court held a bench trial to determine Astra’s 

damages.

B 

Upon a finding of infringement, the patentee is entitled to “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty 

for the use made of the invention by the infringer.” 35 

U.S.C. § 284. The two “alternative categories of infringement compensation” under section 284 are “the patentee’s 

lost profits and the reasonable royalty he would have 

received through arms-length bargaining.” Lucent Techs., 

Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 

2009).

The parties in this case agreed that damages were to 

be assessed based on a reasonable royalty theory. The 

district court sought to determine the reasonable royalty

by analyzing the royalty that would have been reached 

through a hypothetical negotiation between the parties in 

November 2003, when Apotex began to infringe. Following the bench trial, the court held that Astra was entitled 

to 50 percent of Apotex’s gross margin from its sales of 

omeprazole between 2003 and 2007. 

In the course of its analysis, the court made detailed 

findings of fact. In summary, the court’s findings were as 

follows: 

Three generic companies launched their generic 

omeprazole products after the district court’s first wave 
6 ASTRAZENECA AB v. APOTEX CORP. 

opinion in 2002 and before Apotex launched its generic 

product. KUDCo, whose formulation had been found to be 

non-infringing, was first on the market, but it did not 

have the manufacturing capacity to supply the full needs 

of the market immediately, and it kept the price of its 

omeprazole product high. Lek and Mylan were second 

wave defendants, and at that time the district court had 

not yet ruled on Astra’s infringement claims against 

them. Nonetheless, they made the decision to launch 

their products in August 2003, knowing that they were at 

risk of later being held to infringe. In light of the risk 

that they might be held to be infringing Astra’s patents, 

Mylan and Lek did not cut their prices aggressively.

The district court found that after those generic manufacturers entered the market, the price of generic 

omeprazole declined, but not significantly. However, the 

court found that the sales of Prilosec, Astra’s prescription 

PPI drug, declined precipitously, both before 2002, when 

Prilosec was being replaced by Astra’s newer prescription

PPI drug, Nexium, and after 2002, when the generic 

manufacturers entered the market. Nonetheless, Astra 

continued to reap substantial revenues from Prilosec, 

which had net sales of $865 million in 2003, and $361

million in 2004.

After surveying the relevant data, the district court 

concluded that the price of generic omeprazole remained

“relatively and uncharacteristically high” as of November 

2003, due to the fact that only KUDCo was operating 

“freely and without the threat of litigation hanging over 

it.” The district court therefore concluded that if Apotex 

had obtained a license from Astra in November 2003, it 

would have had “a golden opportunity to take significant 

market share away from both other generic manufacturers and perhaps even branded PPIs by launching at a 

lower price.”
ASTRAZENECA AB v. APOTEX CORP. 7

The district court found that Astra had anticipated 

the expiration of its patent on omeprazole, and that before 

the omeprazole patent expired, it had introduced Nexium, 

which it hoped would take the place of Prilosec over time. 

Nexium quickly developed into a highly successful drug. 

In 2003, Astra’s net sales of Nexium totaled $2.5 billion. 

Astra’s strategy was to extend the period of market 

dominance for Prilosec through the strategic use of its 

patents and to attempt to transition Prilosec patients to 

Nexium, which was marketed as a superior drug that 

would offer relief to some patients who failed on Prilosec. 

Astra believed that patients who remained on Prilosec 

were more likely to transition to Nexium than patients 

who switched to generic omeprazole. 

At that time, the district court found, Astra was 

intent on seeing that Nexium remained an approved drug 

with a favorable reimbursement formula from third-party 

payers (“TPPs”), such as health insurance providers, who 

paid a share of patients’ prescription drug costs. Astra 

was already effectively reducing the price of Nexium by

offering rebates to the TPPs to ensure that the TPPs

would continue to approve prescriptions for Nexium. In 

fact, between December 2002 and November 2003, the 

cost of Nexium therapy to the TPPs was actually lower 

than the cost of omeprazole therapy, both because of the 

rebates the TPPs received from Astra and because the 

price of generic omeprazole remained relatively high. 

Importantly, the modest decline in the price of omeprazole 

after Mylan and Lek entered the market in August 2003

was not sufficient to cause the TPPs to take steps to 

promote the use of generic omeprazole over Prilosec or 

Nexium.

The district court found that Astra had “every reason 

to expect that the launch of a fourth generic, particularly 

for a licensed product, would swiftly accelerate the decline 

in omeprazole prices” and would lead to the destruction of 
8 ASTRAZENECA AB v. APOTEX CORP. 

the remaining Prilosec market. In addition, the district 

court found, Astra would have been very concerned about 

the effect that the entry of a fourth generic product would 

have on the TPPs’ willingness to continue to support 

Prilosec and Nexium.

In fact, after Apotex entered the market in November 

2003, Astra had to increase its Nexium rebates to the 

TPPs to cope with pricing pressures from generic omeprazole. While prices declined even with Apotex’s “at risk” 

entry into the market, the district court found that Astra 

would have been concerned that with a licensed product 

Apotex would have felt freer to cut prices in order to gain 

market share. That, in turn, would have caused an even 

more dramatic reduction in omeprazole prices, with the 

accompanying threat to Prilosec and, especially, Nexium. 

 Previously, in an agreement reached in 1997, Astra 

had licensed Procter & Gamble (“P&G”) to market an 

over-the-counter version of Prilosec, known as Prilosec 

OTC, which was launched in September 2003. Because 

the market for over-the-counter drugs is largely separate 

from the market for prescription drugs, Astra viewed the 

introduction of Prilosec OTC as a way to continue to sell 

Prilosec in the event the market for prescription omeprazole were to be completely “genericized.”1 In addition, 

Astra believed that the availability of Prilosec OTC could

also help promote Nexium because, if a patient failed on 

Prilosec OTC, the patient would naturally proceed to 

Nexium, since it was the only PPI that had been shown to 

be superior to Prilosec.

1 A market is considered “genericized” when the 

TPPs impose a “maximum allowable cost,” which is the 

maximum amount they will pay for a particular prescription drug. Typically, the maximum allowable cost is

based on the generic price of the drug.

 
ASTRAZENECA AB v. APOTEX CORP. 9

The introduction of Prilosec OTC caused a reduction 

in the market share of both Prilosec and the generic 

omeprazole products. Significantly, however, the court 

found that the introduction of Prilosec OTC did not have 

any effect on omeprazole pricing, “because the systems 

through which prescription and OTC drugs are paid for 

are largely separate.” 

Viewing the matter from Apotex’s perspective, the 

district court found that, as Apotex prepared to enter the 

market in 2003, it expected to experience roughly $581 

million in sales during its first five years on the market, 

and that in the first year it expected to earn profits of $27 

million at a profit margin of 92.5 percent. Moreover, the 

court found that Apotex knew that sales of its generic 

omeprazole would help Apotex sell its other pharmaceutical products. Accordingly, the court found that because 

Apotex “expected to (and did) make substantial profits 

from its sale of omeprazole, it would have been willing to 

pay a large share of those profits for the right to use 

[Astra’s formulation] patents in 2003.” 

Contrary to Apotex’s argument at trial, the court 

found that as of November 2003, it was not likely that 

Apotex would be able to develop a non-infringing version 

of an omeprazole formulation within a reasonable period 

of time. Nor, the court found, would Apotex have been 

able to copy the formulations of others. As of November 

2003, only KUDCo’s patented formulation had been held 

not to infringe Astra’s patents; the formulations used by 

Mylan and Lek had not yet been adjudged non-infringing. 

Moreover, the district court found that if Apotex had tried 

to copy either of those formulations, it would have incurred considerable time and expense in research and 
10 ASTRAZENECA AB v. APOTEX CORP. 

development, because of the very different technical 

approaches taken by Mylan and Lek.2 

With the background of those factual findings, the 

district court set about to determine what royalty rate 

Astra and Apotex would have agreed to if they had negotiated a license to Astra’s patents in November 2003. In 

doing so, the court employed the so-called Georgia-Pacific

factors, the set of 15 factors drawn from the frequently 

cited opinion in Georgia-Pacific Corp. v. U.S. Plywood 

Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970).

The court concluded that the parties would have 

settled on a royalty rate of 50 percent of Apotex’s gross 

margin from the sales of its omeprazole product. The 

court based that conclusion principally on these considerations:

First, in November 2003 Apotex expected a gross 

margin on sales of its omeprazole product more than twice 

as large as the average gross margin on other generic 

products that it sold in the United States. The district 

court found that Apotex’s estimates of its profits would 

have been even higher if it had had a license to Astra’s 

patents, since the litigation would have ended and Apotex 

would not have had to act “with the caution in pricing its 

generic product that is customary for ‘at risk’ entrants 

into the generic market.” 

Second, Apotex’s prospects of finding a non-infringing 

omeprazole formulation were not good. Delays in entering the market and obtaining governmental approval for a 

new formulation, moreover, would have put Apotex at risk 

of being shut out of the generic market altogether. That 

2 In addition, by 2003 Lek had already obtained a 

patent relating to its formulation. Mylan obtained patent 

protection for its formulation the following year.

 
ASTRAZENECA AB v. APOTEX CORP. 11

risk was enhanced, the district court noted, because of the 

practice among pharmacies of carrying only one generic 

version of a drug, a practice that could have severe consequences for late entrants into the market.

Third, Astra did not license generic manufacturers of 

prescription omeprazole, and it would have been especially reluctant to license Apotex in 2003, because Apotex’s 

entry would have altered the dynamics of the PPI market, 

damaged Astra financially, and disrupted its long-term 

PPI strategy. In particular, the entry of a licensed generic 

manufacturer would have risked the “genericization” of 

the prescription omeprazole market, since the entry of 

low-priced generic drugs could have caused the TPPs to 

adopt a maximum allowable cost for prescription omeprazole or otherwise to restrict patients’ use of branded drugs 

such as Prilosec and Nexium.

Fourth, the district court examined other licenses and 

settlements entered into by Astra relating to omeprazole 

and determined that those settlements, although not a 

“perfect benchmark” for the outcome of a hypothetical 

negotiation between Astra and Apotex in November 2003, 

nonetheless provided support for the 50 percent royalty 

rate selected by the court in this case.

Based on its conclusion as to the likely effects of the 

hypothetical negotiation, the court entered final judgment 

against Apotex in the amount of $76,021,994.50 plus 

prejudgment interest. This appeal followed.

II

The issue before us is whether the district court committed legal or factual error in concluding that, in a 

hypothetical negotiation, Astra and Apotex would have 

agreed upon a license to Astra’s patents in exchange for a 

royalty rate of 50 percent of Apotex’s profits from the

sales of its infringing omeprazole product during the 

period of its infringement, 2003 to 2007. The amount of 
12 ASTRAZENECA AB v. APOTEX CORP. 

damages awarded to a patentee, when fixed by the district 

court, is a factual finding reviewed for clear error, while 

the methodology underlying the court’s damages computation is reviewed for abuse of discretion. Aqua Shield v. 

Inter Pool Cover Team, 774 F.3d 766, 770 (Fed. Cir. 2014); 

Ferguson Beauregard/Logic Controls, Div. of Dover Res., 

Inc. v. Mega Sys., LLC, 350 F.3d 1327, 1345 (Fed. Cir. 

2003).

A 

Apotex first contends that the district court’s damages 

award overcompensated Astra because the court “lost 

sight of the essential purpose of the exercise: to compensate Astra for harm actually suffered.” According to 

Apotex, the court’s analysis (1) improperly discounted 

evidence that by November 2003 the market for omeprazole was “well on its way to full genericization”; (2) placed 

undue emphasis on Astra’s ability to keep Apotex temporarily off the market by refusing to grant a license; and (3) 

gave “short shrift to contemporaneous licensing agreements that Astra entered with other companies” for 

royalty rates lower than 50 percent. 

With respect to the first issue, Apotex argues that it 

was the fourth generic manufacturer to enter the omeprazole market, and therefore its entry caused little marginal 

injury to Astra. Because Astra suffered “negligible harm” 

from Apotex’s infringement, according to Apotex, the 

damages award granted by the district court substantially 

overcompensated Astra for its loss.

Apotex’s argument ignores many of the detailed 

findings made by the district court in support of the 

court’s determination of the reasonable royalty in this 

case. For example, Apotex challenges the court’s finding

that in November 2003, Astra would have been concerned 

that Apotex’s licensed entry would cause the price of 

generic omeprazole to plummet, thereby triggering a 

“genericization” of the omeprazole market. Apotex points 
ASTRAZENECA AB v. APOTEX CORP. 13

to the fact that, in reality, it did not aggressively cut 

prices. The district court, however, explained that a 

licensed generic drug manufacturer would be able to 

launch at a lower price while an “at-risk” entrant, with 

the threat of litigation hanging over it, would be forced to 

set an “uncharacteristically high” price on its generic 

product. Based on that distinction, the district court 

correctly concluded that Apotex’s actual pricing history

sheds little light on how Apotex would have priced its 

omeprazole if it had obtained a license from Astra. 

Moreover, Apotex’s focus on what it refers to as “the 

harm that Astra actually suffered” is more suited to a 

case involving lost profits. Apotex argues, for example,

that “if Apotex’s entry caused Prilosec sales to implode, 

that would be evidence of significant harm for which 

Astra would be entitled to a higher royalty.” 

That argument would be relevant in a lost profits 

case. The reasonable royalty theory of damages, however, 

seeks to compensate the patentee not for lost sales caused 

by the infringement, but for its lost opportunity to obtain 

a reasonable royalty that the infringer would have been 

willing to pay if it had been barred from infringing. 

Lucent Techs., 580 F.3d at 1325. In determining what 

such a reasonable royalty would be, the district court was 

required to assess Astra’s injury not according to the 

number of sales Astra may have lost to Apotex, but according to what Astra could have insisted on as compensation for licensing its patents to Apotex as of the 

beginning of Apotex’s infringement, in November 2003.3

3 Apotex’s intermingling of the lost profits and the

reasonable royalty methods of calculating damages is 

illustrated by its reliance on this court’s decision in Grain 

Processing Corp. v. American Maize-Products Co., 185 

F.3d 1341 (Fed. Cir. 1999). The statement in Grain 

 
14 ASTRAZENECA AB v. APOTEX CORP. 

As the district court explained in detail, the benefits 

to Apotex, and the costs to Astra, of a license to the formulation patents would have been considerable. For its 

part, Apotex stood to (and did) garner immense profits 

from selling its generic omeprazole product. The district 

court found that even after a 50 percent royalty payment 

to Astra, Apotex would be left with a profit margin of 36 

percent, which was “solidly in the range of 31 to 48% 

margins [Apotex] typically earned on its products at the 

time.”

For Astra, on the other hand, a license would have entailed risks to both of its highly successful branded PPIs, 

Prilosec and Nexium. As the district court found, Astra 

would reasonably have expected that Apotex’s entry into 

the market, armed with a license, “would swiftly accelerate the decline in omeprazole prices and lead to the destruction of the remaining Prilosec market” as well as a 

decrease in Nexium sales or a forced increase in Nexium 

rebates to the TPPs. Under those circumstances, the 

district court was justified in concluding that a reasonable 

royalty rate of 50 percent would not overcompensate 

Astra for Apotex’s infringement. 

Processing that a district court must reconstruct the 

market “as it would have developed absent the infringing 

product, to determine what the patentee would have 

made,” is directed to a lost profits analysis, not to a reasonable royalty analysis, as the portion of the district 

court opinion quoted by the Grain Processing court makes 

clear. See id. at 1350 (citing Grain Processing Corp. v. 

Am. Maize-Prods. Co., 979 F. Supp. 1233, 1236 (N.D. Ind. 

1997)). The reasonable royalty analysis does not look to 

what would have happened absent the infringing product, 

but to what the parties would have agreed upon as a 

reasonable royalty on the sales made by the infringer.

 
ASTRAZENECA AB v. APOTEX CORP. 15

 Apotex’s second “overcompensation” argument is that 

a royalty rate that depends on the obstacles that would 

have “ke[pt] a competitor off the market, regardless of the 

actual harm the patentee suffers,” is not reasonable. To 

the extent Apotex means to say that the costs the infringer would incur to produce a non-infringing product are not 

relevant to the reasonable royalty for a license to sell a 

product covered by the patent, we disagree. 

When an infringer can easily design around a patent 

and replace its infringing goods with non-infringing 

goods, the hypothetical royalty rate for the product is 

typically low. See Grain Processing, 185 F.3d at 1347; see 

also Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 

1312 (Fed. Cir. 2002) (“The economic relationship between 

the patented method and non-infringing alternative 

methods, of necessity, would limit the hypothetical negotiation.”). There is little incentive in such a situation for 

the infringer to take a license rather than side-step the 

patent with a simple change in its technology. By the 

same reasoning, if avoiding the patent would be difficult, 

expensive, and time-consuming, the amount the infringer 

would be willing to pay for a license is likely to be greater. 

The district court found that Apotex would have faced 

substantial technical and practical obstacles to marketing 

a non-infringing generic omeprazole formulation. Based 

on that finding, it was proper for the court to hold that the 

difficulties Apotex would have encountered upon attempting to enter the omeprazole market with a non-infringing 

product are relevant to the royalty rate a party in Apotex’s position would have been willing to pay for a license 

to Astra’s patents. 

Apotex takes issue with the district court’s consideration of the FDA regulatory delay as one factor affecting 

the result of the hypothetical negotiation. The district 

court found that Apotex would have faced considerable 

difficulties in marketing a non-infringing product of its 
16 ASTRAZENECA AB v. APOTEX CORP. 

own, because Apotex’s proposed changes to its existing 

infringing formulation either had been rejected for technical reasons or were unlikely to result in a noninfringing product. In the alternative, the court found 

that even if Apotex could have successfully created an 

alternative, non-infringing formulation that would have 

received FDA approval, the process of development and 

approval would have resulted in a delay of at least two 

years before Apotex would have been able to market its 

new, non-infringing product. That two-year period, 

according to the district court, would have included approximately a year for the completion of the FDA approval process. 

Apotex argues that the district court overcompensated 

Astra by considering the regulatory delay, which applies 

to every drug application and bears no relation to the 

value of Astra’s patents. Significantly, however, the 

district court’s principal finding was that as of November 

2003 Apotex would have had little chance of developing 

and marketing a non-infringing product of its own, and 

the evidence at trial supports that finding. The evidence 

shows that none of Apotex’s proposed changes to its 

infringing formulation were feasible. Indeed, by the end 

of the trial, Apotex had “largely abandoned its argument 

that it could have altered the infringing formulation 

successfully.” Simply put, in November 2003 Apotex’s 

prospect of developing its own non-infringing alternative 

was bleak, with or without a period of FDA delay. The 

district court’s consideration of the regulatory delay, as an 

alternative ground for its conclusion that Apotex would 

not have been able to market a non-infringing formulation 

within a reasonable period of time, therefore had no effect 

on the court’s damages calculation.

Apotex’s third claim regarding Astra’s alleged overcompensation is that the district court’s analysis of the 

evidence regarding settlement and licensing negotiations 

with omeprazole sellers other than Apotex was funda-
ASTRAZENECA AB v. APOTEX CORP. 17

mentally flawed and that the court abused its discretion 

in the way it assessed that evidence. We do not agree. 

The district court analyzed the pertinent settlement and 

licensing negotiations in detail and with close attention to 

the similarities and differences between those negotiations and the hypothetical negotiation in this case. We 

are satisfied that the court fairly weighed those negotiations in reaching its ultimate determination as to the 

reasonable royalty rate for damages purposes.

With regard to the settlement and license negotiations, Apotex focuses principally on Astra’s license to P&G 

for the rights to sell Prilosec OTC. Although the royalty 

formula in that case was complex, the district court found 

that the royalty rate turned out to be a blended rate of 

approximately 20 percent of P&G’s net sales, or 23 percent for the first three years of the license, counting 

P&G’s initial payment. Apotex argues that because that 

rate is significantly below the 50 percent rate assessed by 

the district court, the district court’s royalty rate was 

plainly too high.

 As the district court explained, and as Astra underscores in its brief, the P&G license for Prilosec OTC had 

an economic impact on Astra very different from the 

impact a license to a generic manufacturer such as Apotex 

would have had. For reasons explained in detail by the 

district court, the over-the-counter drug market is largely 

distinct from the prescription drug market. Astra did not 

expect Prilosec OTC to have a significant impact on the 

price and sales of its prescription drug, Prilosec. The risk 

to Prilosec from prescription generic omeprazole, by 

contrast, was much greater. Moreover, Astra expected 

sales of Prilosec OTC to be helpful to it by promoting

Nexium as a more effective drug for patients who had not 

obtained satisfactory results with Prilosec. As the district 

court summarized the situation, the P&G licensing arrangement was especially favorable to Astra because 
18 ASTRAZENECA AB v. APOTEX CORP. 

Astra “received a handsome royalty for a product that was 

an essential part of its long-term PPI strategy.”

Besides criticizing the district court for giving insufficient weight to the P&G license, Apotex complains that 

the court gave too much weight to a settlement and offer 

of settlement between Astra and two other generic manufacturers, Andrx Pharmaceuticals, Inc., and Teva Pharmaceuticals USA, Inc. The court found that the amount 

of Astra’s settlement with Teva represented 54 percent of 

Teva’s net profits on its omeprazole sales, and that the 

offer of settlement by Andrx was for 70 percent of Andrx’s 

profits on the 40mg omeprazole dosage and 50 percent of 

its profits on the 20mg and 10 mg dosages. Astra did not 

accept Andrx’s offer.

Apotex contends that the fact that the Teva and 

Andrx transactions occurred in the midst of litigation 

makes them irrelevant for purposes of determining a 

reasonable royalty rate in this case. That contention goes 

too far. While the fact that a settlement or settlement 

offer comes in the midst of litigation may affect the relevance of the settlement or offer, there is no per se rule 

barring reference to settlements simply because they 

arise from litigation. See ResQNet.com, Inc. v. Lansa, 

Inc., 594 F.3d 860, 872 (Fed. Cir. 2010) (noting that “the 

most reliable license in this record arose out of litigation,” 

while also recognizing that in other instances, “litigation 

itself can skew the results of the hypothetical negotiation”); see also In re MSTG, Inc., 675 F.3d 1337, 1348 

(Fed. Cir. 2012). 

In this case, Teva’s settlement and Andrx’s offer both 

arose only after the district court had held the patents 

valid and had made a finding of infringement as to both 

defendants. The setting in which those events took place 

was therefore similar to the setting of a hypothetical 

negotiation in which infringement and patent validity are 

assumed. In that context, Andrx’s willingness to take a 
ASTRAZENECA AB v. APOTEX CORP. 19

license for between 50 and 70 percent of its profits, and 

Teva’s agreement to settle the infringement action 

against it for 54 percent of its net sales, constitute persuasive evidence that a royalty rate in the neighborhood 

of 50 percent of net sales for a similarly situated party 

would be reasonable. See Studiengesellschaft Kohle, 

m.b.H. v. Dart Indus., Inc., 862 F.2d 1564, 1570-72 (Fed. 

Cir. 1988); John M. Skenyon et al., Patent Damages Law 

and Practice § 1:15, at 25 (2013 ed.) (“[L]icenses negotiated to settle a case after a court has established validity 

and infringement of the patent are very probative of 

reasonable royalty. Such licenses duplicate the analytical

process undertaken by the court in setting reasonable 

royalty damages in the ‘willing licensor-willing licensee’ 

fictional negotiation.”).4

4 In its reply brief, Apotex argues that Andrx’s situation at the time it made its offer was not comparable to 

Apotex’s situation in 2003 because Andrx would have 

been the sole generic seller of 40 mg omeprazole for 180 

days and because Andrx sought to have Astra drop its 

claims for willful infringement, past damages, and attorney fees. While those factors distinguish the Andrx offer 

from a pure license for future sales, the offer nonetheless 

served “as a marker of the value of licensing rights,” as 

the district court held.

As for the Teva settlement, Apotex points to evidence 

that the amount paid by Teva was in settlement of claims 

against both Teva and Impax, and that the settlement 

actually constituted only 39 percent of the collective 

profits of those two entities. That number, while lower 

than the 54 percent royalty rate referenced by the district 

court, nonetheless demonstrates that generic manufacturers attached a high premium to the right to sell generic omeprazole. Moreover, generic entrance is often a race 

to the market, because most pharmacies keep only one 

 
20 ASTRAZENECA AB v. APOTEX CORP. 

We therefore reject Apotex’s challenges to the district 

court’s evidentiary analysis and its conclusion from that 

analysis that the 50 percent royalty rate constituted fair 

compensation to Astra under the reasonable royalty 

theory of damages.

B

Apotex next contends that the district court improperly based its damages calculation on the value of the 

omeprazole product as a whole. According to Apotex, 

because the active ingredient patents had expired at the 

time of the infringement and the active ingredient had 

thus become a “conventional element,” the district court 

should have calculated damages by apportioning the 

relative contribution of value between the active ingredient and the “inventive element” of the patents, i.e., the 

subcoating.

Apotex predicates its argument on this court’s cases 

applying the “entire market value rule.” The court has

held that when small elements of multi-component products are accused of infringement, a patentee may “assess 

damages based on the entire market value of the accused 

product only where the patented feature creates the basis 

generic version of a drug on hand. In light of the fact that 

Teva/Impax were willing to pay at least a 39 percent rate 

on profits to become the fifth generic to enter the market, 

the district court’s finding that Apotex would have paid a 

50 percent rate to become the fourth generic entrant is 

reasonable. 

In a footnote, Apotex points to Astra’s licensing 

agreements relating to PPI products other than omeprazole. Because those agreements did not involve omeprazole and contained cross-licenses and other features, the 

district court properly found them irrelevant to the damages determination. 

 
ASTRAZENECA AB v. APOTEX CORP. 21

for customer demand or substantially creates the value of 

the component parts.” Uniloc USA, Inc. v. Microsoft 

Corp., 632 F.3d 1292, 1318 (Fed. Cir. 2011) (internal 

quotation marks omitted); see also. LaserDynamics, Inc. v. 

Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012). 

A threshold question arose below regarding the applicability of the entire market value rule in this case. As 

an initial matter, the district court noted that “there is

little reason to import [the entire market value] rule for 

multi-component products like machines into the generic 

pharmaceutical context.” While we do not hold that the 

entire market value rule is per se inapplicable in the 

pharmaceutical context, we concur with the district court 

that the rule is inapplicable to the present case. 

The entire market value rule is derived from Supreme 

Court precedent requiring that the patentee “must in 

every case give evidence tending to separate or apportion 

the defendant’s profits and the patentee’s damages between the patented feature and unpatented features, and 

such evidence must be reliable and tangible, and not 

conjectural or speculative.” LaserDynamics, 694 F.3d at 

67 (quoting Garretson v. Clark, 111 U.S. 120, 121 (1884)). 

We recently reiterated that principle, holding that even 

when the accused infringing product is “the smallest 

salable unit,” the patentee “must do more to estimate 

what portion of the value of that product is attributable to 

the patented technology” if the accused unit is “a multicomponent product containing several non-infringing 

features with no relation to the patented feature.” VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327 (Fed. 

Cir. 2014). Thus, the entire market value rule applies 

when the accused product consists of both a patented 

feature and unpatented features; the rule is designed to 

account for the contribution of the patented feature to the 

entire product. 
22 ASTRAZENECA AB v. APOTEX CORP. 

This case does not fit the pattern in which the entire 

market value rule applies. Astra’s formulation patents 

claim three key elements—the drug core, the enteric 

coating, and the subcoating. The combination of those 

elements constitutes the complete omeprazole product

that is the subject of the claims. Thus, Astra’s patents 

cover the infringing product as a whole, not a single

component of a multi-component product. There is no 

unpatented or non-infringing feature in the product. 

While the entire market value rule does not apply to 

this case, the damages determination nonetheless requires a related inquiry. When a patent covers the infringing product as a whole, and the claims recite both 

conventional elements and unconventional elements, the 

court must determine how to account for the relative 

value of the patentee’s invention in comparison to the 

value of the conventional elements recited in the claim, 

standing alone. See Ericsson, Inc. v. D-Link Sys., Inc., 

773 F.3d 1201, 1233 (Fed. Cir. 2014) (“[T]he patent holder 

should only be compensated for the approximate incremental benefit derived from his invention.”) (citing Garretson, 111 U.S. at 121).

Several of the factors set forth in the Georgia-Pacific

case bear directly on this issue. Georgia-Pacific factors

nine and ten refer to “the utility and advantages of the 

patent property over any old modes or devices that had 

been used” and “the nature of the patented invention, its 

character in the commercial embodiment owned and 

produced by the licensor, and the benefits to those who 

used it,” respectively. Factor thirteen, which refers to the 

“portion of the realizable profit that should be credited to

the invention,” embodies the same principle. Thus, the 

standard Georgia-Pacific reasonable royalty analysis 

takes account of the importance of the inventive contribution in determining the royalty rate that would have 

emerged from the hypothetical negotiation. However, 

while it is important to guard against compensation for 
ASTRAZENECA AB v. APOTEX CORP. 23

more than the added value attributable to an invention, it 

is improper to assume that a conventional element cannot

be rendered more valuable by its use in combination with 

an invention. 

In practice, “all inventions are for improvements; all 

involve the use of earlier knowledge; all stand upon 

accumulated stores of the past.” Cincinnati Car Co. v. 

N.Y. Rapid Transit Corp., 66 F.2d 592, 593 (2d Cir. 1933). 

Yet it has long been recognized that a patent that combines “old elements” may “give[] the entire value to the 

combination” if the combination itself constitutes a completely new and marketable article. Westinghouse Elec. & 

Mfg. Co. v. Wagner Elec. & Mfg. Co., 225 U.S. 604, 614 

(1912) (citing Hurlbut v. Schillinger, 130 U.S. 456, 472

(1889)); see also Seymour v. Osborne, 78 U.S. 516, 542 

(1870) (“Improvements in machines protected by letters 

patent may also be mentioned, of a much more numerous 

class, where all the ingredients of the invention are old, 

and where the invention consists entirely in a new combination of the old ingredients, whereby a new and useful 

result is obtained, and many of them are of great utility 

and value, and are just as much entitled to protection as 

those of any other class.”). 

It is not the case that the value of all conventional elements must be subtracted from the value of the patented 

invention as a whole when assessing damages. For a 

patent that combines “old elements,” removing the value 

of all of those elements would mean that nothing would 

remain. In such cases, the question is how much new 

value is created by the novel combination, beyond the 

value conferred by the conventional elements alone.5 

5 We recently made the same point in University of 

Pittsburgh v. Varian Medical Systems, Inc., 561 F. App’x 

934, 947-50 (Fed. Cir. 2014). In addressing the proper 

 
24 ASTRAZENECA AB v. APOTEX CORP. 

The district court addressed, and answered, that 

question. The court rejected Apotex’s proposition that the 

patented formulation constituted only a minor, incremental improvement over the active ingredient. The court 

found instead that the formulation “substantially create[d] the value” of the entire omeprazole product. That 

was because, despite the effectiveness of omeprazole in 

reducing the production of gastric acid, it is notoriously 

difficult to formulate. Omeprazole is most effective when 

absorbed by the small intestine, but it is highly susceptible to degradation in the acidic environment of the stomach. In order to deliver the active ingredient to the part of 

the human body where it can take effect, scientists had to 

develop a formulation that would allow the drug to pass 

through the stomach and be absorbed by the small intestine, while ensuring adequate shelf life in a drug that is 

sensitive to heat, moisture, organic solvents, and light. 

After years of effort, Astra’s scientists determined 

that a water-soluble subcoat helped solve many of these 

problems and allowed them to formulate a commercially

viable drug. The district court found that Astra’s prior 

formulations, which lacked a subcoat, were not commercially viable.

The district court did not clearly err in concluding 

that the subcoating is so important to the viability of the 

commercial omeprazole product that it was substantially 

responsible for the value of the product. A commercially 

viable omeprazole drug requires both storage stability 

calculation of the royalty base in a reasonable royalty 

determination, we declined the defendant’s invitation to 

remove the conventional elements from the overall value 

of the combination apparatus; we noted that guarding 

against compensation for more than the added value 

attributable to the invention “is precisely what the Georgia-Pacific factors purport to do.” Id. at 950.

 
ASTRAZENECA AB v. APOTEX CORP. 25

and gastric acid resistance. The former may be achieved 

with the addition of ARCs to the drug core, and the latter 

with the enteric coating. Without the subcoating, however, storage stability and acid resistance are irreconcilable, 

because the addition of ARCs would compromise the 

enteric coating. By inventing a structure in which a 

subcoating separates the drug core, and thus the ARCs, 

from the enteric coating, and finding the right subcoating 

material, Astra was able to achieve both storage stability 

and acid resistance. That combination of features made it 

possible for drug manufacturers to commercialize 

omeprazole. 

Astra’s formulation thus created a new, commercially 

viable omeprazole drug. That product was previously 

unknown in the art and was novel in its own right. 

Accordingly, the district court permissibly found no reason to exclude the value of the active ingredient when 

calculating damages in this case.6 

C 

Taking another tack in challenging the compensation 

awarded to Astra for Apotex’s infringing sales, Apotex 

argues that the value of the patented formulation must be 

discounted in light of the non-infringing alternative 

formulations in existence at the time of the infringement. 

6 In support of its apportionment argument, Apotex 

relies on a license that Astra granted to Takeda Chemical 

Industries, Ltd. that included the ’230 patent, for Takeda 

to practice with a different PPI ingredient and formulation. The license enabled Takeda to develop and ultimately market its own formulation. The royalty rates 

paid by Takeda under that license do not bear on whether 

the damages for infringing the omeprazole formulation 

patents must be apportioned between the active ingredient and the formulation.

 
26 ASTRAZENECA AB v. APOTEX CORP. 

The district court examined those alleged non-infringing

alternatives and concluded that none were available to 

Apotex as of the beginning of Apotex’s infringement in 

November 2003. Apotex did not have a non-infringing 

alternative formulation at that time, and KUDCo was the 

only generic market entrant found to be non-infringing. 

KUDCo’s formulation, however, was covered by its own 

patents, and the district court found that Apotex had 

failed to explain how it could copy that formulation without infringing KUDCo’s patents. Finally, the district 

court found that the formulations used by two other 

generic manufacturers, Lek and Mylan, could not have 

been regarded as non-infringing alternatives in November 

2003, as they launched at risk in 2003 and their formulations were not found to be non-infringing until 2007.

Apotex does not challenge the finding that it had no 

non-infringing formulation of its own, and we agree with 

the district court that the Lek and Mylan formulations, 

which were launched at risk amid on-going litigation with 

Astra and were not found to be non-infringing until 2007, 

would not have been considered as non-infringing alternatives in November 2003. See Pall Corp. v. Micron Separations, Inc., 66 F.3d 1211, 1222 (Fed. Cir. 1995) (an accused 

alternative product offered by a third party could not be 

considered as a non-infringing alternative before the 

patentee and the third party voluntarily settled their

litigation); Datascope Corp. v. SMEC, Inc., 879 F.2d 820, 

824 (Fed. Cir. 1989). The issue is therefore whether the 

KUDCo formulation was available to Apotex in November 

2003. 

In the district court, Apotex did not dispute that 

KUDCo’s formulation was covered by KUDCo’s own 

patents. Apotex argues that it was not shown that the 

KUDCo formulation was unavailable at the time of the 

infringement because Astra did not prove that using the 

KUDCo formulation would have infringed the KUDCo 

patents. We disagree.
ASTRAZENECA AB v. APOTEX CORP. 27

The patents held by KUDCo were designed to protect 

its formulation. From that fact, the district court could 

reasonably infer that the KUDCo formulation was not 

available to Apotex as a non-infringing alternative. 

Apotex’s conclusory assertion that it could have used 

KUDCo’s formulation without infringing KUDCo’s patents does not suffice to overcome that inference. See

Grain Processing, 185 F.3d at 1353. Therefore, the district court did not clearly err by refusing to discount the 

value of Astra’s patents based on the existence of alternatives to the infringing formulation that Apotex actually 

used.

III

Finally, Apotex objects to the district court’s decision 

to award damages for sales of its generic omeprazole

during the “pediatric exclusivity” period of the asserted 

patents. Under 21 U.S.C. § 355a, the FDA is authorized 

to make a written request to the holder of an approved 

New Drug Application (“NDA”) for the holder to perform 

pediatric studies. See Omeprazole IV, 536 F.3d at 1368. 

If the NDA holder agrees to the request and performs the 

pediatric studies, and if the FDA considers the results of 

the studies acceptable, the statute extends the period 

during which the FDA is barred from approving ANDAs 

filed by competing drug manufacturers for six months 

beyond the patent’s expiration date. 21 U.S.C. § 355a(b)-

(c); Omeprazole IV, 536 F.3d at 1368. That six-month 

extension is known as the pediatric exclusivity period. 

When a generic drug manufacturer files an ANDA 

with a Paragraph IV certification, the patent holder may 

then initiate a patent infringement suit against the 

ANDA applicant. See 21 U.S.C. § 355(j)(2)(A)(vii); 35 

U.S.C. § 271(e)(2)(A). If the district court determines that 

the patent is both valid and infringed, the court is required to order the effective date of the ANDA approval to 

be a date “not earlier than” the expiration date of the 
28 ASTRAZENECA AB v. APOTEX CORP. 

patent. 35 U.S.C. § 271(e)(4)(A). If the FDA has not 

approved the ANDA at the time of the district court’s 

decision, the FDA may not approve the ANDA (and the 

generic may not sell its drug) until after the patent expires. Omeprazole IV, 536 F.3d at 1367. If the FDA has 

already approved the ANDA, the district court’s order 

alters the effective date of that approval. Id. at 1367-68.

Astra obtained the right to a six-month pediatric exclusivity before the district court’s liability decision. 

Thus, although the asserted patents expired on April 20, 

2007, the district court ordered that the effective date of 

Apotex’s ANDA approval be set six months later, on 

October 20, 2007. See Omeprazole IV, 536 F.3d at 1376 

(affirming the district court’s order resetting Apotex’s 

ANDA effective date). On June 28, 2007, pursuant to the 

district court’s order, the FDA revoked its earlier approval 

of Apotex’s ANDA, forcing Apotex to cease distribution of 

its generic drug until the FDA re-approved its ANDA on 

October 22, 2007. See Apotex Inc. v. U.S. Food & Drug 

Admin., 508 F. Supp. 2d 78, 80 (D.D.C. 2007). Apotex 

made some sales between April 20, 2007, and June 28, 

2007, i.e., during the pediatric exclusivity period and 

before the FDA’s revocation order. The district court 

allowed Astra to recover a reasonable royalty on those 

sales, even though the sales had occurred after the expiration date of the patents. 

The district court reasoned that the effect of the pediatric exclusivity period, like that of the patent term, is to 

bar the sale of a generic product until after the expiration 

of the exclusivity period. The court further noted that the 

FDA allows a party holding statutory exclusivity rights to 

waive those rights in favor of another drug manufacturer. 

See Boehringer Ingelheim Corp. v. Shalala, 993 F. Supp. 

1, 2 (D.D.C. 1997). The district court therefore concluded 

that if Apotex had obtained a license from Astra in 2003, 

the license would have included the right to sell omeprazole both during the original term of the asserted patents 
ASTRAZENECA AB v. APOTEX CORP. 29

and during Astra’s pediatric exclusivity period. In exchange, Astra would have received both a royalty payment for sales made during the original patent term and a 

payment for its waiver of its pediatric exclusivity rights 

for sales made during the pediatric exclusivity period. 

Apotex contends that the district court’s award of 

damages for the period after the expiration of Astra’s 

patents runs counter to the Supreme Court’s decision in

Brulotte v. Thys Co., 379 U.S. 29 (1964). In that case, the 

Court held that a royalty agreement that projects beyond 

the expiration date of the patent is unlawful per se. Id. at 

32. 

We do not agree with Apotex that Brulotte controls 

the outcome in this case. In Brulotte, the Supreme Court

barred a patentee from using a licensing agreement to 

extract royalties after the patent had expired because the 

Court deemed such a practice to be a wrongful leverage of 

the patent monopoly, “analogous to an effort to enlarge

[that] monopoly” beyond its lawful duration. Brulotte, 379 

U.S. at 32-33. The Court’s analysis in Brulotte, however, 

does not apply to a situation such as this one, in which 

Congress, by creating the pediatric exclusivity period, 

explicitly authorized additional market exclusivity to be 

granted to the patent owner beyond the life of the patent. 

In Brulotte, anyone was free to use the patented technology after the patent expired. In this case, by contrast, 

absent a waiver from Astra the FDA was not free to 

authorize the sale of a generic drug using the patented 

technology until the end of the pediatric exclusivity period. Thus, Astra’s demand for royalty payments for postexpiration sales does not rest on its patent monopoly; the 

demand is based on the fact of Astra’s legal entitlement to 

a pediatric exclusivity period. The only issue here is 

whether the period during which damages are to be 

measured under section 284 may include the post-
30 ASTRAZENECA AB v. APOTEX CORP. 

expiration pediatric exclusivity period.7 We hold that it 

may not. 

For an act of infringement, as defined in 35 U.S.C.

§ 271(e)(2), the Patent Act provides three types of remedies. They are as follows:

(A) the court shall order the effective date of 

any approval of the drug . . . involved in the infringement to be a date which is not earlier than 

the date of the expiration of the patent which has 

been infringed,

(B) injunctive relief may be granted against an 

infringer to prevent the commercial manufacture, 

use, offer to sell, or sale within the United States 

or importation into the United States of an approved drug . . . [and] 

(C) damages or other monetary relief may be 

awarded against an infringer only if there has 

been commercial manufacture, use, offer to sell, or 

sale within the United States or importation into 

the United States of an approved drug . . . . 

35 U.S.C. § 271(e)(4). 

While the remedy under subparagraph (A) is unique 

to section 271(e)(2) infringement, subparagraphs (B) and 

(C) provide the “typical remedies” for patent infringement: 

injunctive relief and money damages. Omeprazole IV, 536 

F.3d at 1367. When there has been “commercial manufacture, use, or sale of an approved drug,” the patentee is 

7 We do not decide whether the pediatric exclusivity 

period may be considered in determining the royalty rate

that might be employed in a hypothetical negotiation. 

Neither party has raised that argument, and the district 

court made no finding regarding the relationship between 

the royalty rate and the pediatric exclusivity period. 

 
ASTRAZENECA AB v. APOTEX CORP. 31

entitled to “damages adequate to compensate for the 

infringement, but in no event less than a reasonable 

royalty for the use made of the invention by the infringer.” 35 U.S.C. §§ 271(e)(4)(C), 284; see Eli Lilly and Co. v. 

Medtronic, Inc., 496 U.S. 661, 678 (1990) (section 271(e)(2)

created a “highly artificial act of infringement” to enable 

“judicial adjudication” upon which the ANDA and paper 

NDA schemes depend; monetary damages, however, are 

permitted only if there has been “commercial manufacture, use, or sale” of the patented invention). 

The district court found that in November 2003, the 

parties would have agreed to a license that would extend 

beyond the expiration date of the patent, because the FDA 

allows Astra to monetize its exclusivity right by waiving it 

in favor of a generic drug manufacturer, much as a patentee may license the right to use its patent for a payment of royalty. Indeed, when Andrx, one of the “first 

wave” defendants, attempted to settle its dispute with 

Astra in 2005, it offered precisely such a royalty payment 

covering both the original patent term and the pediatric 

exclusivity period. Thus, the post-expiration royalty that 

the district court envisioned resulting from a hypothetical 

negotiation reflects what a generic drug manufacturer in 

Apotex’s position would have agreed to in a real licensing 

negotiation. Nevertheless, on the facts of this case it was 

error for the court to award that amount as part of Astra’s

patent infringement damages under sections 271(e)(4)(C) 

and 284. 

We have long held that “there can be no infringement 

once the patent expires,” because “the rights flowing from 

a patent exist only for the term of the patent.” Kearns v. 

Chrysler Corp., 32 F.3d 1541, 1550 (Fed. Cir. 1994) (citing 

Kinzenbaw v. Deere & Co., 741 F.2d 383, 386 (Fed. Cir. 

1984); Standard Oil Co. v. Nippon Shokubai Kagaku 

Kogyo, Ltd., 754 F.2d 345, 347 (Fed. Cir. 1985)). The 

pediatric exclusivity period is not an extension of the term 

of the patent. See 21 U.S.C. 355a(o)(1) (distinguishing 
32 ASTRAZENECA AB v. APOTEX CORP. 

patent exclusivity from non-patent exclusivity); see also

FDA, Guidance for Industry Qualifying for Pediatric 

Exclusivity Under Section 505A of the Federal Food, Drug, 

and Cosmetic Act (Sept. 1999) (“FDA Guidance”), at 13 

(“Pediatric exclusivity . . . is not a patent term extension 

under 35 U.S.C. § 156.”); Mylan Labs., Inc. v. Thompson, 

389 F.3d 1272, 1280 (D.C. Cir. 2004) (giving Chevron 

deference to the FDA’s interpretation of the pediatric 

exclusivity statute). For that reason, it is clear that

Apotex did not infringe Astra’s patents during the exclusivity period, since those patents had expired; if Apotex 

had launched its generic product during the exclusivity 

period, Astra could not have sued Apotex for patent 

infringement based on those sales. 

The royalty base for reasonable royalty damages cannot include activities that do not constitute patent infringement, as patent damages are limited to those 

“adequate to compensate for the infringement.” 35 U.S.C. 

§ 284; see Hoover Grp., Inc. v. Custom Metalcraft, Inc., 66 

F.3d 299, 304 (Fed. Cir. 1995) (“[A patentee] may of 

course obtain damages only for acts of infringement after 

the issuance of the [] patent.”); cf. Johns Hopkins Univ. v. 

CellPro, Inc., 152 F.3d 1342, 1366 (Fed. Cir. 1998) (the 

district court abused its discretion in ordering the repatriation of the exported vials under section 283, because 

the injunction was directed at activities that did not 

constitute infringement). 

For example, in Gjerlov v. Schuyler Labs., Inc., 131 

F.3d 1016 (Fed. Cir. 1997), the patent owner and the 

defendant had reached a settlement agreement under 

which the defendant agreed not to manufacture or sell 

certain products, including certain non-infringing products, in exchange for a release from patent infringement 

liability. Upon a request of the patent owner to enforce 

the settlement agreement, the district court awarded 

reasonable royalty damages under section 284 for the 

defendant’s sales of a non-infringing product that were
ASTRAZENECA AB v. APOTEX CORP. 33

prohibited under the contract. We reversed and vacated 

that portion of the district court’s judgment because the 

reasonable royalty award included damages for the sale of 

non-infringing products. If the defendant had breached 

the contract by selling an infringing product, reasonable 

royalty damages under section 284 would have been the 

proper remedy. Gjerlov, 131 F.3d at 1022-23. We held, 

however, it was improper to award reasonable royalty 

damages for the defendant’s sale of the prohibited noninfringing products, because acts that do not constitute 

patent infringement cannot provide a proper basis for 

recovery of damages under section 284. Id. at 1024. 

That proposition follows from the familiar principle 

that the royalty due for patent infringement should be the 

“‘value of what was taken’—the value of the use of the 

patented technology.” Aqua Shield, 774 F.3d at 770 

(quoting Dowagiac Mfg. Co. v. Minn. Moline Power Co., 

235 U.S. 641, 648 (1915) (“As the exclusive right conferred 

by the patent was property, and the infringement was a 

tortious taking of a part of that property, the normal 

measure of damages was the value of what was taken.”)); 

Ericsson, 773 F.3d at 1226 (“As a substantive matter, it is 

the ‘value of what was taken’ that measures a ‘reasonable 

royalty’ under 35 U.S.C. § 284.”). 

In this case, what was taken by Apotex was the exclusive right conferred by Astra’s patents up to the date that 

they expired. The damages determination should not 

include Apotex’s sales during the post-expiration period of 

pediatric exclusivity, because Astra’s rights during that 

period were not attributable to its patents and were not 

invaded by Apotex’s infringement. Therefore, even 

though a party in Apotex’s position would have agreed to 

a license covering both the patent term and the pediatric 

exclusivity period, determining damages adequate to 

compensate Astra for Apotex’s infringement requires that 

we focus solely on those activities that constitute actual 

infringement, i.e., Apotex’s pre-expiration sales. Apotex’s
34 ASTRAZENECA AB v. APOTEX CORP. 

sales during the pediatric exclusivity period cannot support Astra’s claim for reasonable royalties under section 

284, because those sales did not infringe Astra’s patents.8 

Nor can the award of damages for post-expiration 

sales be justified on the ground that those damages can be 

treated as “‘waiver’ payments made in exchange for 

Astra’s waiver of the pediatric exclusivity period,” as the 

district court held. Astra did not assert a claim under the 

Federal Food, Drug, and Cosmetic Act; its sole claim for 

relief was predicated on 35 U.S.C. § 271(a), and the scope 

of recoverable damages under that section is defined by 

section 284. Even if it had asserted such a claim, the 

statute provides no such remedy. See 21 U.S.C. § 337(a) 

(“Except as provided in subsection (b) of this section, all 

such proceedings for the enforcement, or to restrain 

violations, of this chapter shall be by and in the name of 

the United States.”). 

By prohibiting the FDA from approving an ANDA for 

six months after the expiration of the patent, section 355a 

in effect gives an NDA holder in Astra’s situation six 

additional months free from competition from ANDA 

applicants. See 21 U.S.C. § 355a(b)-(c); FDA Guidance, at 

13 (“Pediatric exclusivity . . . extends the period during 

which the approval of an abbreviated new drug application (ANDA) or 505(b)(2) application may not be made 

effective by FDA.”). But the statute does not create a 

damages remedy against an ANDA applicant who was 

authorized by the FDA to make sales during that period, 

as Apotex was for the first two months following the 

expiration of Astra’s patents. 

8 Astra also argues that reasonable royalties are recoverable for Apotex’s post-expiration sales under the socalled “accelerated market entry” theory. The cases cited 

by Astra, however, were all directed at lost profits analysis and are therefore inapposite. 

 
ASTRAZENECA AB v. APOTEX CORP. 35

The problem that arose in this case resulted from the 

timing of the district court’s infringement ruling. If the 

liability determination had been made before the expiration date of the patents, the FDA would have revoked the 

approval of Apotex’s ANDA in time so that Apotex would 

have been barred from selling its generic product during 

the entire pediatric exclusivity period. However, because 

the district court’s ruling was issued after the expiration

date of the patent, there was a two-month period during 

which Apotex was authorized to sell its generic products 

before the FDA withdrew its approval of Apotex’s ANDA. 

Although the sales that Apotex was authorized to make 

during that two-month period may have benefited Apotex 

and injured Astra, section 284 is not designed to compensate for those post-expiration sales. 

 Given that section 284 fails to support Astra’s claim 

for royalty payments on Apotex’s post-expiration sales, we 

reverse the portion of the district court’s damages award

relating to the pediatric exclusivity period, and we remand for a recalculation of damages. 

Costs to Astra. 

AFFIRMED IN PART, REVERSED IN PART, and 

REMANDED