Court Opinion

ID: 9324300
Source: CourtListenerOpinion
Date Created: 2022-12-09 20:00:57.87373+00
Date Added: 2024-06-11T17:14:54.082640
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                ______________

                                       No. 21-2608
                                     ______________

  TAKEDA PHARMACEUTICAL CO LTD; TAKEDA PHARMACEUTICALS USA
           INC; TAKEDA PHARMACEUTICALS AMERICA INC

                                             v.

     ZYDUS PHARMACEUTICALS (USA) INC; CADILA HEALTHCARE LTD,
                                 Appellants
                        ______________

                    On Appeal from the United States District Court
                              for the District of New Jersey
                                   (No. 3-18-cv-01994)
                    U.S. District Judge: Honorable Freda L. Wolfson
                                     ______________

                      Submitted Under Third Circuit L.A.R. 34.1(a)
                                  December 9, 2022
                                  ______________

             Before: SHWARTZ, MATEY, and FUENTES Circuit Judges.

                                (Filed: December 9, 2022)
                                     ______________

                                        OPINION ∗
                                     ______________

       ∗
        This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
SHWARTZ, Circuit Judge.

       Zydus Pharmaceuticals (USA) Inc. and Cadila Healthcare Ltd. (“Zydus”) appeal

the District Court’s order granting summary judgment to Takeda Pharmaceutical Co.

Ltd., Takeda Pharmaceuticals USA Inc., and Takeda Pharmaceuticals America Inc.

(“Takeda”) on Zydus’s antitrust counterclaims. Because Takeda had an objective basis

for bringing its patent infringement claims, those claims cannot provide a basis for

antitrust liability. We will therefore affirm.

                                                 I

                                                 A

       Takeda manufactures Prevacid SoluTab (“Prevacid”), which is used to treat

gastroesophageal reflux disease. Prevacid dissolves in the patient’s mouth leaving fine

granules that obviate the need for the patient to swallow. Takeda holds four patents

related to Prevacid, including Patent No. 6,328,994 (“‘994 patent”).

       In 2009, Zydus filed an Abbreviated New Drug Application (“ANDA”) seeking

Food and Drug Administration (“FDA”) approval to market a generic version of

Prevacid. Pursuant to the Hatch-Waxman Act, Zydus served Takeda with a “Paragraph

IV Certification” asserting that their generic version did not infringe Takeda’s patents.

Within forty-five days of receiving the certification, Takeda sued Zydus for infringement,

triggering the Hatch-Waxman Act’s automatic thirty-month stay on the FDA’s ability to

approve Zydus’s generic version of Prevacid. 21 U.S.C. § 355(j)(5)(B)(iii).

       During the ensuing litigation, the District Court construed language in the ‘994

patent stating that Prevacid’s fine granules “hav[e] an average particle diameter of 400

                                                 2
µm or less,” App. 261, 1092. It found that the language established a particle diameter

400 µm plus or minus ten percent, such that granules measuring up to 440 µm were

captured by the patent’s language. The Court then held a bench trial at which Zydus’s

expert found the generic drug’s granules averaged between 443 µm and 457 µm because

they had become “agglomerate[d]” or stuck together during the manufacturing process,

App. 98. Takeda’s expert measured the generic drug’s granules when deagglomerated

(i.e. separated) and found that they measured 420 µm. The Court concluded that the

patent required deagglomeration and held that Zydus’s product literally infringed the

patent.

          The United States Court of Appeals for the Federal Circuit reversed the District

Court’s claim construction ruling and finding of infringement. Takeda Pharm. Co. v.

Zydus Pharms. USA, Inc., 743 F.3d 1359 (Fed. Cir. 2014). The Federal Circuit

interpreted the patent’s language to require “an average . . . diameter of precisely 400 µm

or less” rather than the ten percent variance imposed by the District Court. Id. at 1363-

65. Because Zydus’s granules were larger than 400 µm, its product did not infringe the

patent. Id. at 1365-66. Judgment was ultimately entered for Zydus. Takeda Pharm. Co.

v. Zydus Pharms. USA, Inc., No. 10-CV-01723, 2014 WL 12629965, at *2 (D.N.J. Oct.

16, 2014).

                                               B

          Despite the favorable judgment, Zydus did not immediately obtain FDA approval

to market a generic of Prevacid. Instead, Zydus amended its ANDA with a new

formulation of the product, which addressed the FDA’s concerns regarding a risk of

                                               3
clogging when the drug was delivered via oral or nasogastric tubes by “incorporating new

excipients at the extra-granular manufacturing stage,” App. 1776. It did not make any

changes “to the ingredients or manufacturing of the [granules that] . . . were the focus of

the prior litigation.” App. 1776.

       Zydus sent Takeda a new Paragraph IV Certification, explaining that the amended

ANDA “still requires that its fine granules . . . [measure] not less than 440 µm,” App.

453–54. Takeda nonetheless sued Zydus for infringement of the same patents, which

again triggered Hatch-Waxman’s thirty-month stay period. Zydus counterclaimed,

alleging Takeda’s suit was a sham meant to foreclose Zydus’s entrance into the market in

violation of the Sherman Act and New Jersey’s antitrust laws.

       After testing Zydus’s product and concluding that it did not infringe its patents,

Takeda dismissed its infringement claims. Zydus did not, however, dismiss its antitrust

counterclaims and the parties eventually both moved for summary judgment on those

claims. The District Court granted Takeda’s motion, and denied Zydus’s cross-motion,

because it concluded that Takeda was immune from antitrust liability under the Noerr-

Pennington, explaining that (1) Takeda had an objective basis for believing that Zydus’s

reformulated drug directly infringed its patents based on the parties’ prior litigation,

Zydus’s course of dealing with the FDA, and Takeda’s experience with other

manufacturers’ attempts to create a generic version of Prevacid, Takeda Pharm. Co. v.

Zydus Pharms. (USA) Inc., No. 18-CV-01994, 2021 WL 3144897, at *12–14 (D.N.J.

July 26, 2021); (2) even if it had none of this information, Takeda still had a valid

infringement claim under the doctrine of equivalents, id. at *15; and (3) Takeda had a

                                              4
subjective basis for the claim based primarily on a pre-filing letter from its outside

counsel which “recite[d] several legitimate grounds for” bringing suit, id. at *17–19.

       Zydus appeals.

                                             II 1

       Under the Noerr-Pennington doctrine, “[a] party who petitions the government for

redress generally is immune from antitrust liability.” Cheminor Drugs, Ltd. v. Ethyl

Corp., 168 F.3d 119, 122 (3d Cir. 1999) (citations omitted). This immunity extends to

those who petition the courts by initiating litigation. Cal. Motor Transp. Co. v. Trucking

Unlimited, 404 U.S. 508, 510–11 (1972). It does not apply, however, where a lawsuit is

a “mere sham to cover what is actually nothing more than an attempt to interfere directly

with the business relationships of a competitor.” E. R.R. Presidents Conf. v. Noerr Motor

Freight, Inc., 365 U.S. 127, 144 (1961).

       To determine whether a lawsuit is a “sham,” courts apply a two-part test. Pro.

Real Est. Invs., Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993). “First, the

lawsuit must be objectively baseless in the sense that no reasonable litigant could

       1
         The District Court had jurisdiction under 28 U.S.C. §§ 1331, 1337, 1338(a), and
1367. We have appellate jurisdiction under 28 U.S.C. § 1291 because Takeda dismissed
its patent infringement claims, leaving only antitrust counterclaims that do not involve a
substantial question of patent law. FTC v. AbbVie Inc, 976 F.3d 327, 346–50 (3d Cir.
2020) (concluding that the Federal Circuit did not have exclusive jurisdiction over an
antitrust suit that was based in part on a sham-litigation theory of anti-competitive
conduct).
        Our review “of a grant of summary judgment is plenary.” Watson v. Eastman
Kodak Co., 235 F.3d 851, 854 (3d Cir. 2000) (citation omitted). Summary judgment is
appropriate where “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
                                              5
realistically expect success on the merits.” 2 Id. Second, “[o]nly if [the] challenged

litigation is objectively meritless may a court examine the litigant’s subjective

motivation” to determine “whether the baseless lawsuit conceals an attempt to

interfere . . . with . . . a competitor.” 3 Id. at 60–61 (citations and quotation marks

omitted).

       Here, we need only evaluate the first prong because Takeda had two objectively

valid bases for bringing its second patent infringement suit against Zydus: (1) literal

infringement and (2) the doctrine of equivalents. 4

                                               A

       At the time it filed its second infringement suit, Takeda had a reasonable basis for

its literal infringement claim. See FilmTec Corp. v. Hydranautics, 67 F.3d 931, 938 (Fed.

Cir. 1995) (explaining that the objective baselessness prong “requires an inquiry into the

reasonableness of the” litigation when it was filed). Indeed, even though Zydus certified

its product did not infringe Takeda’s patents in its Paragraph IV Certification, Zydus’s

ANDA submission is, “by statutory definition, an infringing act.” In re Wellbutrin XL

       2
          Where, as here, there is no dispute over the predicate facts underlying the legal
proceeding, the reasonableness of the suit is a question of law. Pro. Real Estate, 508 U.S.
at 63; see also In re Wellbutrin XL Antitrust Litig. Indirect Purchaser Class, 868 F.3d
132, 151 (3d Cir. 2017).
        3
          Zydus had the burden of proving that Takeda is not entitled to Noerr-Pennington
immunity, In re Wellbutrin, 868 F.3d at 148 n.18, but “[b]ecause our decision in this case
does not hinge on the standard of proof,” we need not determine whether Zydus was
required to make its showing by a preponderance of the evidence or by clear and
convincing evidence, id.
        4
          For the same reason, we need not analyze the substance of Zydus’s antitrust
claims.
                                               6
Antitrust Litig. Indirect Purchaser Class, 868 F.3d 132, 149 (3d Cir. 2017); see also 35

U.S.C. § 271(e)(2)(A) (“It shall be an act of infringement to submit . . . [an ANDA] for a

drug claimed in a patent . . . .”). Thus, Takeda’s literal infringement claim “could only be

objectively baseless if no reasonable person could disagree with [Zydus’s] assertion[] of

noninfringement . . . in [its revised Paragraph IV] [C]ertification.” In re Wellbutrin, 868

F.3d at 149.

       It was reasonable for Takeda to disagree with Zydus’s assertion of

noninfringement. Zydus’s Paragraph IV Certification stated that it amended the

formulation of its generic product. Takeda reasonably inferred the new formulation

addressed clogging risks, which other generic manufacturers had experienced by

including smaller granules that could fall within Takeda’s patents. Thus, Takeda had a

basis to perceive a reasonable chance of success in its patent infringement claim. See id.

at 150 (explaining patentee need only have evidence to suggest “the non-infringement

theory . . . was, or at least could be, infirm”).

       Zydus argues its amended ANDA renders Takeda’s suit unreasonable because it

specified that Zydus’s granules would measure 440 µm or more and Takeda’s patents, as

construed by the Federal Circuit, only capture granules measuring 400 µm or less. This

argument fails for two reasons. First, the language in Zydus’s ANDA does not control

the infringement inquiry, which is instead “focused on [the product] likely to be sold

following FDA approval.” Glaxo, Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1568 (Fed.

Cir. 1997); see also Tyco Healthcare Grp. LP v. Mut. Pharm. Co., 762 F.3d 1338, 1344

(Fed. Cir. 2014) (“[I]t is not unreasonable for a patent owner to allege infringement . . . if

                                                7
the patent owner has evidence that the as-marketed commercial ANDA product will

infringe, even though the hypothetical product specified in the ANDA could not

infringe.”); Abbott Labs v. TorPharm, Inc., 300 F.3d 1367, 1373 (Fed. Cir. 2002) (“It is

also possible, at least in theory, that other evidence may directly contradict the clear

representations of the ANDA and create a dispute of material fact regarding the identity

of the compound that is likely to be sold following FDA approval.”).

       Second, Takeda reasonably discounted Zydus’s description of its own product

based on the events in the first infringement case. In that case, Zydus asserted in its

ANDA that its granules measured at least 450 µm but its own expert found that some of

its granules measured less than 450 µm. This history gave Takeda reason to be skeptical

of the revised ANDA’s statement that the granules were now no smaller than 440 µm,

and Takeda reasonably acted on this skepticism by seeking to test Zydus’s product. 5 See

       5
         To the extent Zydus faults Takeda for failing to test Zydus’s product prior to the
litigation, its argument is unavailing because Takeda’s actions were consistent with the
Hatch-Waxman Act. Nothing in the Act requires a brand name manufacturer to conduct
a pre-suit investigation that includes testing the drug. Rather, the Act’s “design and
intent” is to “incentivize[] brand-name drug manufacturers to promptly file patent
infringement suits by rewarding them with a stay of up to 30 months if they do so.” In re
Wellbutrin, 868 F.3d at 157–58. This “file-now, discover-details-later policy”
contemplates that the brand name manufacturer cannot know every detail about the
generic drug before it files suit. Id. at 151 n.22. Litigation provides a forum for learning
these details, and for the prompt resolution of the infringement claims, before the generic
goes to market. FTC v. AbbVie Inc., 976 F.3d at 339. Takeda followed the Act’s intent
here—in only five months, Takeda brought suit, used the discovery process to obtain
Zydus’s product, tested the product, and then dismissed its claims after its testing
indicated that the product did not infringe. See In re Terazosin Hydrochloride Antitrust
Litig., 335 F. Supp. 2d 1336, 1357–58 (S.D. Fla. 2004) (explaining that a brand
manufacturer’s suit was not objectively baseless where it sued to “obtain additional
information about the proposed generic products” and then dismissed the suit “[a]fter

                                              8
Tyco, 762 F.3d at 1344 (explaining patentee may have “a reasonable expectation of a

favorable outcome even though the generic manufacturer’s ANDA application describes

a generic drug with characteristics that [could] take it outside the patent’s claims” in

situations where “the ANDA is based on faulty testing or screening procedures”); see

also Takeda, 743 F.3d at 1367 n.3 (recognizing, in the previous litigation between these

parties, that “there is the potential for inconsistent results” when measuring the product’s

granules). Thus, Takeda had an objective basis to sue Zydus for literal infringement.

                                              B

       Takeda also had an objective basis for bringing suit under the doctrine of

equivalents. Unlike a literal infringement claim, which requires a plaintiff to show that

the accused product contains every component of the asserted claims, Presidio

Components, Inc. v. Am. Tech. Ceramics Corp., 702 F.3d 1351, 1358 (Fed. Cir. 2012),

under the doctrine of equivalents, “a product . . . infringe[s] if there is ‘equivalence’

between the elements of the accused product . . . and the claimed elements of the patented

invention,” Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 21 (1997)

(quoting Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 609 (1950)).

Put differently, the doctrine states that a product not captured by the patent’s language

may still infringe “if it performs substantially the same overall function or work, in

substantially the same way, to produce substantially the same overall result as the

receiving that information”). Imposing antitrust liability on Takeda in this situation
would “punish behavior that Congress sought to encourage.” In re Wellbutrin, 868 F.3d
at 158 (citation omitted).
                                               9
claimed invention.” Dolly, Inc. v. Spalding & Evenflo Cos., 16 F.3d 394, 397 (Fed Cir.

1994). In the previous litigation, Takeda’s expert testified that a deviation in granule size

of up to ten percent was “universally accepted,” which could reasonably indicate that

granules measuring as low as 440 µm are “insubstantially different” from Takeda’s

product.

       Zydus argues Takeda’s doctrine of equivalents theory was objectively baseless

because of two related limitations on the doctrine: (1) prosecution history estoppel and

(2) specification disavowal. Relevant here, these limitations bar a patent holder from

using equivalency to capture product elements or specifications it had previously

disavowed, or which are explicitly excluded by the language in its patent. See Festo

Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 733–34 (2002)

(discussing prosecution history estoppel); Dolly, 16 F.3d at 400 (discussing specification

disavowal). For each of these limitations, Zydus relies on the Federal Circuit case.

Zydus argues that, in the previous litigation, the Federal Circuit recognized that Takeda’s

patents create a “clear dividing line between the ‘fine’ granules of 400 µm or less (which

avoid a feeling of roughness in the mouth) and ‘conventional’ granules of 400 µm or

more (which do not).” Takeda, 743 F.3d at 1364. According to Zydus, the Federal

Circuit’s reasoning means it was unreasonable for Takeda to now argue that granules

greater than 400 µm were equivalent to Prevacid.

       Contrary to Zydus’s view, the Federal Circuit’s ruling does not render Takeda’s

doctrine of equivalents claim unreasonable. First, the Federal Circuit evaluated an earlier

formulation of the product and its reasoning there does not make the present suit based

                                             10
upon a different formulation objectively unreasonable. Second, the Federal Circuit

provided no opinion about whether Zydus infringed under the doctrine of equivalents.

Thus, while the patent’s language and the Federal Circuit’s reasoning may have limited

Takeda’s success on its infringement claim, there was still a reasonable chance that it

would succeed. See Pro. Real Estate, 508 U.S. at 62-63. As a result, Takeda’s suit against

Zydus was not objectively baseless.

                                            III

       For the foregoing reasons, Takeda is entitled to immunity from antitrust liability

under Noerr-Pennington and so we will affirm the order of the District Court.

                                            11