Court Opinion

ID: 2658890
Source: CourtListenerOpinion
Date Created: 2014-03-31 15:22:33.000681+00
Date Added: 2024-06-11T13:01:13.151444
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

         ENDO PHARMACEUTICALS INC.,
               Plaintiff-Appellant,

                           v.

               ACTAVIS, INC. AND
         ACTAVIS SOUTH ATLANTIC, LLC,
               Defendants-Appellees.
              ______________________

                      2013-1658
                ______________________

   Appeals from the United States District Court for the
Southern District of New York in No. 12-CV-8985, Senior
Judge Thomas P. Griesa.

              ----------------------

         ENDO PHARMACEUTICALS INC.,
               Plaintiff-Appellant,

                           v.

          ROXANE LABORATORIES, INC.,
                Defendant-Appellee.
              ______________________

                      2013-1662
                ______________________
2                 ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

   Appeal from the United States District Court for the
Southern District of New York in No. 13-CV-3288, Senior
Judge Thomas P. Griesa.
                 ______________________

                  Decided: March 31, 2014
                  ______________________

    MARTIN J. BLACK, Dechert LLP, of Philadelphia,
Pennsylvania, argued for plaintiff-appellant. With him on
the brief were ROBERT D. RHOAD and JONATHAN D. LOEB.
Of counsel were VINCENT AUGUST GALLO and JOSEPH
RAYMOND HEFFERN.

    CHARLES A. WEISS, Holland & Knight LLP, of New
York, New York, argued for defendants-appellees, Ac-
tavis, Inc., et al. With him on the brief were ERIC H.
YECIES and NICHOLAS P. CHIARA.

     ALAN B. CLEMENT, Locke Lord LLP, of New York, New
York, argued for defendant-appellee, Roxane Laborato-
ries, Inc. With him on the brief were KEITH D. PARR,
HUGH S. BALSAM, and MYOKA KIM GOODIN, of Chicago,
Illinois.
                 ______________________

     Before NEWMAN, DYK, and MOORE, Circuit Judges.
    Opinion for the Court filed by Circuit Judge MOORE.
    Opinion dissenting in part filed by Circuit Judge DYK.
MOORE, Circuit Judge.
    Endo Pharmaceuticals, Inc. (Endo) appeals from the
district court’s order denying its motions for a preliminary
injunction to prevent Roxane Laboratories, Inc. (Roxane),
Actavis Inc., and Actavis South Atlantic LLC (Actavis)
from marketing and selling their respective generic drug
products during the pendency of this litigation. Because
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.                3

the district court erred in concluding that Roxane and
Actavis (Appellees) had an implied license to practice the
asserted patents, and because Appellees do not have an
express license, we vacate and remand.
                       BACKGROUND
    Endo sells Opana® ER, which are branded extended-
release tablets containing a painkiller called oxy-
morphone. The asserted patents are listed in the Ap-
proved Drug Products with Therapeutic Equivalence
Evaluations (Orange Book) entry for Opana® ER. Two of
the asserted patents, U.S. Patent Nos. 8,309,122 (the ’122
patent) and 8,329,216 (the ’216 patent), are each continu-
ations of the same parent application and are directed to
extended-release oxymorphone compositions and methods
of treating pain using those compositions. The third
patent-in-suit, U.S. Patent No. 7,851,482 (the ’482 pa-
tent), is not related to the other two patents. It recites
purified oxymorphone compositions and methods of mak-
ing those compositions. The ’122 and ’216 patents are at
issue in both appeals, and the ’482 patent is at issue only
in the Actavis appeal.
    Prior to this litigation, Endo sued Appellees for patent
infringement under 35 U.S.C. § 271(e)(2)(A) based on
their Abbreviated New Drug Applications (ANDAs) to
market generic versions of Opana® ER—the same prod-
ucts as those at issue in these appeals. The first set of
lawsuits settled after Endo granted to Appellees a license
and a covenant not to sue. The settlement and license
agreement between Endo and Roxane (Roxane Agree-
ment) defines “Licensed Patents” as follows:
   (a) any [U.S.] patents that are both (i) now owned
   by Endo . . . and (ii) issued as of the Effective Date
   of this Agreement, including the Opana® ER Pa-
   tents,
4                ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

    (b) any [U.S.] patent applications that claim prior-
    ity to the Opana® ER Patents, including any con-
    tinuation, continuation-in-part and divisional
    patent applications that claim priority to Opana®
    ER Patents, and
    (c) any patents resulting from the reissue or reex-
    amination of patents or patent application of pa-
    tents or patent applications comprised within
    clauses (a) and (b) . . .
J.A. in appeal no. 2013-1662 (Roxane J.A.), at 4973 § 1.16
(emphases added).      The Roxane Agreement defines
“Opana® ER Patents” as U.S. Patent Nos. 5,662,933,
5,958,456, and 7,276,250. Id. § 1.20.
     Pursuant to the agreement, Endo granted Roxane a
covenant that it would not assert that Roxane’s generic
versions of Opana® ER “infringe[] the Licensed Patents”
and a license “under the Licensed Patents . . . to make,
use, have made, sell, offer to sell, import and use” those
generic products. Roxane J.A. 4978 §§ 4.1(a),(b) (empha-
ses added); see also Roxane J.A. 4974 §§ 1.28, 1.29. Final-
ly, the Roxane Agreement includes a “No Implied Rights”
provision stating that Endo does not grant to Roxane any
license or right “whether by implication, estoppel or
otherwise, other than as expressly granted herein.”
Roxane J.A. 4949 § 4.4. The settlement and license
agreement between Endo and Actavis (Actavis Agree-
ment) is similar. The Actavis Agreement includes a grant
of a license, a covenant not to sue, and a “No Implied
Rights” provision, but covers one additional patent not
included in the Roxane Agreement and not relevant to
this appeal. J.A. in appeal no. 2013-1658 (Actavis J.A.),
at 4893–908.
   The patents that are the subject of this litigation is-
sued after Endo’s agreements with Appellees. The ’122
and ’216 patents issued to Endo and the ’482 patent was
acquired by Endo. Endo again sued Appellees for patent
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.             5

infringement under 35 U.S.C. § 271(e)(2)(A) and moved
for a preliminary injunction to prevent the marketing and
sales of their generic oxymorphone formulations. Appel-
lees opposed on the theories of express license and implied
license by reason of legal estoppel. With regard to the
latter, Appellees argued that Endo attempted to deprive
them “of the benefit of [the] earlier bargain.” Roxane J.A.
4823; see also Actavis J.A. 2717.
    At a joint hearing, the district court commented that
“this is a highly unfair and unjust situation if . . . in-
fringement of the new patents would stop the marketing
and permitting process that was going on by Actavis and
Roxane.” Actavis J.A. 6411. The court held that “as a
matter of law . . . Endo is estopped from claiming that the
activity of Actavis and Roxane, which has gone on for a
substantial period of time, is now suddenly barred be-
cause of these new patents.” Id. The court therefore
denied Endo’s motions. Endo Pharm., Inc. v. Actavis Inc.,
C.A. No. 12-cv-8985-TPG (S.D.N.Y. Sept. 18, 2013), ECF
No. 35.
   Endo appeals. We have jurisdiction under 28 U.S.C. §
1292(a)(1).
                       DISCUSSION
    We review decisions to grant or deny a preliminary in-
junction for an abuse of discretion, which may be estab-
lished when a district court based its decision on an error
of law. Sanofi-Synthelabo v. Apotex, Inc., 470 F.3d 1368,
1374 (Fed. Cir. 2006). “To the extent the court’s decision
is based upon an issue of law, we review that issue de
novo.” Id. Whether legal estoppel has been created and
whether an implied license exists are questions of law.
Wang Labs., Inc. v. Mitsubishi Elecs. Am., Inc., 103 F.3d
1571, 1578, 1580 (Fed. Cir. 1997). “The interpretation of
a Settlement Agreement, i.e., a contract, is a question of
law that we [also] review de novo.” Augustine Med., Inc.
v. Progressive Dynamics, Inc., 194 F.3d 1367, 1370 (Fed.
6               ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

Cir. 1999). “The burden of proving that an implied license
exists is on the party asserting an implied license as a
defense to infringement.” Id.
                   I. Express License
    Endo argues that the district court abused its discre-
tion in denying Endo’s motions for a preliminary injunc-
tion. Endo contends that the plain language of the
agreements, which limit “Licensed Patents” to several
enumerated patents and applications claiming priority to
them, does not grant Appellees an express license to
practice the asserted patents. It argues that the “No
Implied Rights” provision further makes clear that the
agreements do not cover the asserted patents. In the
district court, both Actavis and Roxane argued that they
have an express license to practice these newly issued
patents. In this appeal, Actavis no longer presents this
argument, although Roxane continues to do so. The
district court did not decide the question of express li-
cense, stating that “I do not feel, for the purposes of a
preliminary injunction motion, that I am able to make
any findings on the issues that I have just described.”
Actavis J.A. 6438.
    Roxane responds that the express terms of the settle-
ment and license agreement grant it a license to practice
the asserted patents because the previously licensed U.S.
Patent No. 7,276,250 (’250 patent) claims priority to U.S.
Provisional Application No. 60/303,357 (’357 application),
and the ’122 and ’216 patents also claim priority to that
provisional application. It contends that the word “in-
cluding” in § 1.16(b) of the Roxane Agreement shows that
the agreement covers more than just continuation, con-
tinuation-in-part, and divisional applications that claim
priority to the Opana® ER Patents. Roxane argues that
this section “necessarily embraces any patent applications
that claim priority to any applications and provisional
applications” to which the licensed patents likewise claim
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.             7

priority. Roxane Br. 29. It contends that Endo’s interpre-
tation reads out the word “including” and other license
terms, and argues that the common provisional applica-
tion teaches subject matter that “binds” the ’250 patent to
the asserted ’122 and ’216 patents.
    Roxane’s express license arguments are meritless.
Section 1.16(b) of the Roxane Agreement covers U.S.
patent applications that “claim priority to the Opana® ER
Patents [e.g., any of the licensed patents], including any
continuation, continuation-in-part and divisional patent
applications that claim priority to Opana® ER Patents.”
Roxane J.A. 4973 § 1.16(b). There can be no dispute that
the ’122 and ’216 patents are not continuations of any of
the licensed patents. 1 Likewise, there is no reasonable

   1     We note that counsel for Actavis repeatedly ar-
gued to the district court that the ’122 and ’216 patents
are continuations of the ’250 patent and are therefore
expressly licensed. See, e.g., Actavis J.A. 2716 (“Endo’s
’122 patent and ’216 patent are continuations of a patent
called out by number as licensed in the 2009 settlement
and license agreement.”). This is flatly wrong, and it is
difficult to believe that this argument was made given
what is required for an application to be a continuation.
For example, to be called a “continuation” of a prior
patent, a patent must make an express cross-reference to
the nonprovisional application from which the prior
patent issued. The continuation must also have the same
disclosure as the prior patent. See Manual of Patent
Examining Procedure (MPEP) § 201.07 (8th ed. Rev. 9,
Oct. 2012). The ’122 and ’216 patents do not have the
same disclosure as the ’250 patent, nor do they claim
priority to the application that issued as the ’250 patent.
To be continuations of the ’250 patent, the ’122 and ’216
patents would have to, on their face, expressly indicate
8                ENDO PHARMACEUTICALS INC.    v. ACTAVIS, INC.

argument that the ’122 and ’216 patents claim priority to
any of the licensed patents. An application that claims
priority to another patent must contain an express cross-
reference to “a prior-filed nonprovisional application from
which the patent issued.” 37 C.F.R. § 1.78(d)(2) (2013);
see 35 U.S.C. § 120 (2012); Encyclopaedia Britannica, Inc.
v. Alpine Elecs. of Am., Inc., 609 F.3d 1345, 1351 (Fed.
Cir. 2010). The ’216 and ’122 patents, however, do not
cross-reference the applications that issued as any of the
licensed patents. See ’122 patent col. 1 ll. 6–7; ’216 patent
col. 1 ll. 6–7. Therefore, it is quite clear that the ’122 and
’216 patents do not “claim priority to” any of the licensed
patents.
Roxane’s argument that the word “including” somehow
broadens what it means “to claim priority to” another
patent is unpersuasive. The Roxane Agreement covers
“any applications that claim priority to the [’250 patent],
including any continuation, continuation-in-part and
divisional” patent applications. Roxane J.A. 4973. Claim-
ing priority to a licensed patent is a prerequisite for the
license, and “including” by no means eviscerates that
requirement. There is no reading of this language that
extends coverage to patents that merely have a provision-
al application in common with the licensed patents. The
figure reproduced below, which is part of the record,
shows this clearly. See Roxane J.A. 5232. The ’122 and
’216 patents claim priority to the ’357 provisional applica-
tion, and the ’250 patent claims priority to the ’357 appli-
cation as well. The ’122 and ’216 patents do not claim
priority to the ’250 patent. Although the language is clear
on its face, the fact that Endo and Roxane considered
including in their agreement a grant of a license to “any
application claiming a common priority date as the li-

that they are continuations of the application that issued
as the ’250 patent—unequivocally, they do not.
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.              9

censed patents” reinforces this conclusion. Roxane J.A.
4864–65 (emphasis added). Because the ’122 and ’216
patents have a provisional application in common with
the ’250 patent, the “common priority date” language
would have expressly covered the ’122 and ’216 patents.
See 35 U.S.C. § 119(e)(1) (2012). But that language does
not appear in the final version of the Roxane Agreement.

     The Actavis Agreement likewise does not cover the
’122, ’216, and ’482 patents at issue in the Actavis appeal.
It contains the same “continuations, continuations-in-part
or divisionals” language as the Roxane Agreement. See
Actavis J.A. 4893, 4895, 4898. For the reasons discussed
above, the asserted patents are not continuations, contin-
uations-in-part, or divisionals of the licensed patents. See
MPEP §§ 201.06–.08. Finally, the ’482 patent is complete-
ly unrelated to any of the previously licensed patents, and
is likewise not covered by the agreement. We hold that
Appellees do not have an express license to practice any of
10               ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

the patents asserted in this litigation.
                    II. Implied License
    Endo argues that the district court legally erred in
concluding that Appellees are impliedly licensed to prac-
tice the asserted patents due to legal estoppel. It con-
tends that the court’s recognition of an implied license
defense is incorrect. It argues that the specifications of
the asserted patents are different from those of the previ-
ously licensed patents, and that the claims cover different
subject matter. Endo points out that the previously
licensed patent (the ’250 patent) that claims priority to
the same provisional application as the ’122 and ’216
patents was not even asserted in the previous litigation,
and only added to the final settlement and license agree-
ments because Endo realized that Appellees did not
infringe it. Endo argues that, in contrast, the ’122 and
’216 patents—and the unrelated ’482 patent—cover the
accused generic tablets. Endo argues that the cases relied
upon by Appellees regarding estoppel are distinguishable
because they involved continuations and because the
licenses in those cases included products as well as pa-
tents. Endo argues that, by ignoring the language of the
agreements and the parties’ intent, the district court’s
approach violates the sanctity of contract and thus impli-
cates serious public policy concerns.
    Appellees respond that they have an implied license
to practice the asserted patents based on the principle
that equity does not permit the licensor to detract from its
grant of a property right. Appellees contend that Endo
granted them a license to market their accused generic
products for valuable consideration, that they relied on
the license in going forward with the Food and Drug
Administration approval of the ANDAs, and that Endo’s
later-obtained patents “eviscerated” the benefit of the
licenses. Appellees argue that the “No Implied Rights”
language in the agreements is not dispositive because
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.             11

estoppel “must override any such provision.” Roxane Br.
22; see Actavis Br. 29–30.
    Appellees contend that the facts here are analogous to
those in TransCore, LP v. Electronic Transaction Consult-
ants Corp., where we held that the patentee was legally
estopped from bringing a second infringement action even
though the earlier settlement agreement stated that it
“shall not apply to any other patents.” 563 F.3d 1271,
1279 (Fed. Cir. 2009). They argue that TransCore and
related cases dictate that Endo cannot deprive Appellees
of the benefit of the earlier bargain, and that nothing in
the reasoning of TransCore limits its holding to continua-
tions or even related applications. Appellees contend that
the settlement and license agreements should be deemed
as allowing them to make, use, and sell their generic
tablets without threat of further lawsuits by Endo.
    We hold that Appellees’ broad reading of TransCore is
incorrect and agree with Endo that the district court erred
as a matter of law in finding legal estoppel in favor of
Actavis and Roxane. We begin with the well-established
proposition, recognized in TransCore, that a patent li-
cense does not convey to the licensee “an absolute right”
to make, use, or sell a product “because not even the
patentee . . . is given that right.” Spindelfabrik Suessen-
Schurr, Stahlecker & Grill GmbH v. Schubert & Salzer
Maschinefabrik Aktiengesellschaft, 829 F.2d 1075, 1081
(Fed. Cir. 1987) (quoted in TransCore, 563 F.3d at 1275–
76). The patentee’s right “is merely one to exclude others
from making, using or selling [the product covered by the
licensed patent], 35 U.S.C. § 154” and “the patentee . . .
and his licensee, when making, using, or selling [the
product], can be subject to suit under other patents” when
practicing the patented invention. Id.
    The doctrine of legal estoppel does not nullify these
general principles. Instead, it “refers to a narrow category
of conduct encompassing scenarios where a patentee has
12               ENDO PHARMACEUTICALS INC.    v. ACTAVIS, INC.

licensed or assigned a right, received consideration, and
then sought to derogate from the right granted.”
TransCore, 563 F.3d at 1279 (alteration omitted) (empha-
sis added). In TransCore, the patentee asserted a contin-
uation patent that “was broader than, and necessary to
practice” one of the patents included in a prior settlement
agreement. Id. We observed that the fact that the pa-
tentee “adopted its [licensed] patent infringement conten-
tions as its contentions related to the [asserted] patent,”
id., provided undisputed evidence that the patentee
“sought to enforce the [asserted] patent in derogation of
the rights it granted” under the prior agreement, id. at
1279 n.4. Even though the agreement stated that it “shall
not apply to other patents . . . to be issued in the future,”
we concluded that the patentee was legally estopped from
asserting a patent whose claim scope fully encompassed
that of the claims of one of the licensed patents. Id. at
1279. We thus recognized that the asserted patent claims
were broader than the licensed claims. To avoid a wind-
fall to the licensee, we expressly limited the implied
license to the scope of the licensed claims. Id. (“[T]o
obtain the benefit of its bargain with [the licensor], [the
licensee] must be permitted to practice the [asserted
patent] to the same extent it may practice the [licensed
patents].”); id. at 1279–80 (“[Licensee’s] rights under its
implied license to the [asserted patent] are necessarily
coextensive with the rights it received in the . . . license
agreement.”).
    Our subsequent cases confirm the limited scope of
TransCore. In General Protecht Group, Inc. v. Leviton
Manufacturing Co., Inc., we found an implied license
where the asserted patents had “[t]he same inventive
subject matter [as that] disclosed in the licensed patents”
and “[t]he same products were accused.” 651 F.3d 1355,
1361 (Fed. Cir. 2011). As in TransCore, the patents at
issue in General Protecht were continuations of the li-
censed patents. See id. at 1360 (quoting TransCore, 563
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC. 13
F.3d at 1279–80). We observed that “the newly asserted
continuations are based on the same disclosure as the
previously licensed patents and that, by definition, the
continuations can claim no new inventions not already
supported in the earlier issued patents.” Id. at 1361.
After explaining that TransCore “prohibits a patent
licensor from derogating from rights granted under the
license,” we held that “where . . . continuations issue from
parent patents that previously have been licensed as to
certain products, it may be presumed that, absent a clear
indication of mutual intent to the contrary, those products
are impliedly licensed under the continuations as well.”
Id. (emphasis added). In Intel Corp. v. Negotiated Data
Solutions, Inc., we explained that TransCore and General
Protecht “analyzed a licensee’s rights when the patent
holder received a continuation patent” and “recognized
that allowing the patent holder to sue on subsequent
patents, when those later patents contain the same in-
ventive subject matter that was licensed, risks derogating
rights for which the licensee paid consideration.” 703
F.3d 1360, 1366 (Fed. Cir. 2012) (emphases added).
Taken together, these cases stand for the rule that a
license or a covenant not to sue enumerating specific
patents may legally estop the patentee from asserting
continuations of the licensed patents in the absence of
mutual intent to the contrary. See Gen. Protecht, 651
F.3d at 1361; TransCore, 563 F.3d at 1279. We reject
Appellees’ invitation to expand the implied license doc-
trine. You get what you bargain for. And we will not use
the implied license doctrine to insert ourselves into that
bargain and rewrite the contract.
    Endo is not estopped from asserting the patents at is-
sue in these appeals because none of the asserted patents
is a continuation of any of the licensed patents. The only
familial relationship between the asserted and licensed
patents is that the ’122 and ’216 patents claim priority to
the same provisional application as the ’250 patent. That,
14               ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

however, does not make these patents continuations of
the ’250 patent. See MPEP § 201.07. The ’482 patent is
not related to any of the licensed patents. The lack of a
continuation relationship between any of the asserted and
licensed patents and explicit disclaimer of any other
licenses not within the literal terms of the contract are
dispositive.
      Appellees rely heavily on the general rule that “[t]he
grantor is estopped from taking back in any extent that
for which he has already received consideration.” Actavis
Br. 27 (quoting TransCore, 563 F.3d at 1279 (quoting
AMP Inc. v. United States, 389 F.2d 448, 452 (Ct. Cl.
1967))); see also Roxane Br. 20–21. But this rule does not
apply to the cases before us because, unlike accused
infringers in TransCore and General Protecht, Appellees
seek to capture via implied license subject matter in
addition to that for which they bargained. AMP is not to
the contrary because the agreement at issue in that case
gave the Government the license “to practice, and cause to
be practiced . . . throughout the world, each Subject Inven-
tion”—rather than any specific patents. 389 F.2d at 450,
454 (emphasis added). AMP made clear that “[t]he facet
of this licensing agreement which is of crucial importance
. . . is that it licenses the Government to use an idea and
not just the Byrem Patent itself.” Id. at 454 (emphasis in
original). By asserting a newly acquired patent covering
the licensed invention, AMP derogated from its grant, and
the Court of Claims concluded that AMP’s patent in-
fringement suit was barred by legal estoppel “in order to
protect the specific rights granted to the Government by
contract.” Id. at 454.
    Here, rather than grant a license to an “idea,” Endo
has granted to Appellees a license and covenant not to sue
limited to specific patents and patent applications. If
Appellees wanted to market and sell their accused generic
products free from any threat of being sued by Endo for
patent infringement, they could have negotiated for the
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.             15

appropriate language in the settlement and license
agreements. As we observed in Spindelfabrik, “patent
license agreements can be written to convey different
scopes of promises not to sue, e.g., a promise not to sue
under a specific patent or, more broadly, a promise not to
sue under any patent the licensor now has or may acquire
in the future.” 829 F.2d at 1081 (quoted in TransCore,
563 F.3d at 1276). Having agreed to licenses that do not
cover the patents at issue in these appeals, Appellees will
not now be heard to complain.
                       CONCLUSION
    We have considered the parties’ remaining arguments
and do not find them to be persuasive. We vacate the
district court’s denials of a preliminary injunction in both
cases and remand for further proceedings.
             VACATED AND REMANDED
  United States Court of Appeals
      for the Federal Circuit
                ______________________

         ENDO PHARMACEUTICALS INC.,
               Plaintiff-Appellant,

                           v.

               ACTAVIS, INC. AND
         ACTAVIS SOUTH ATLANTIC, LLC,
               Defendants-Appellees.
              ______________________

                      2013-1658
                ______________________

   Appeals from the United States District Court for the
Southern District of New York in No. 12-CV-8985, Senior
Judge Thomas P. Griesa.

              ----------------------

         ENDO PHARMACEUTICALS INC.,
               Plaintiff-Appellant,

                           v.

          ROXANE LABORATORIES, INC.,
                Defendant-Appellee.
              ______________________

                      2013-1662
                ______________________
2               ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

   Appeal from the United States District Court for the
Southern District of New York in No. 13-CV-3288, Senior
Judge Thomas P. Griesa.
                 ______________________
DYK, Circuit Judge, dissenting in part.
    I agree with the majority that Roxane did not have an
express or implied license to practice the ’122 and ’216
patents. Roxane was aware of Endo’s applications for
those patents at the time of the settlement with Endo,
and the parties agreed not to include them in the settle-
ment agreement. This, it seems to me, is inconsistent with
an implied license. I also agree that Actavis does not have
an implied license to the ’482 patent, which Endo did not
own at the time of the Actavis settlement agreement.
    I part company with the majority on the question of
whether Actavis has an implied license to the ’122 and
’216 patents. At the time of their settlement agreement,
Endo owned those patent applications, which claimed
priority to the same provisional application that provided
priority to a patent covered by the settlement agreement
(the ’250 patent). During the settlement negotiations,
Endo did not disclose the ’122 and ’216 patent applica-
tions, but rather licensed Actavis to produce the product
at issue here. Furthermore, there are material differences
between the Actavis and Roxane agreements and negotia-
tions. Under these circumstances, I conclude that Actavis
has an implied license to practice the ’122 and ’216 pa-
tents with respect to the product covered by the ANDA
that was the subject of the settlement agreement. I re-
spectfully dissent from the majority’s contrary conclusion.
                             I
    Under the Hatch-Waxman Act, pharmaceutical manu-
facturers filing a New Drug Application (NDA) must list
patents in the FDA’s Orange Book that “could reasonably
be asserted” against a competing generic producer. 21
ENDO PHARMACEUTICALS INC.      v. ACTAVIS, INC.                  3

U.S.C. § 355(b)(1); 21 C.F.R. § 314.53(c)(2)(ii). Endo filed
an NDA for a pain relief medication called Opana® ER on
June 22, 2006 (NDA No. 21-610). Endo listed four patents
covering the NDA product—the ’250, ’933, ’456, and ’143
patents—in the Orange Book. The FDA approved Endo’s
NDA.
    On February 14, 2008, Actavis sent Endo notice that
it had filed an Abbreviated New Drug Application
(ANDA) seeking FDA approval to market a generic ver-
sion of Opana® ER, as did Roxane on December 21, 2009.
After receiving these notices, Endo sued Actavis and
Roxane (which had also filed a similar ANDA) in the
United States District Court for the District of New
Jersey, claiming that Actavis and Roxane’s ANDA filings
constituted an act of infringement. See 35 U.S.C.
§ 271(e)(2)(A). Endo asserted only the ’456 patent in the
complaint.
    Before the litigation could proceed to trial, Endo en-
tered into separate settlement and license agreements
with Actavis in 2009 and Roxane in 2011, permitting
these companies to sell generic versions of Opana® ER
pursuant to their ANDA filings. Sections 4.1(a) and (b) of
Actavis’s agreement with Endo granted Actavis a license
to produce and sell generic versions of Opana® ER under
the ’456 patent and specified that “Endo . . . covenant[s]
not to sue [i.e., licenses] Actavis . . . for infringement of . . .
the Opana® ER Patents [i.e., the ’250, ’933, and ’143
patents] based on the manufacture, use, import, sale or
offer for sale of any Opana® ER Generic Products . . . .”
Actavis J.A. 3305. The Actavis agreement defined
“Opana® ER Generic Product” as “any product that is . . .
sold under the Actavis ANDA.” Actavis J.A. 3302. Sec-
tions 4.1(a) and (b) of Roxane’s settlement agreement with
4                ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

Endo were similar. 1 Both agreements also contained
clauses stating: “Endo . . . do[es] not grant to Actavis [or
Roxane] . . . any license, right or immunity, whether by
implication, estoppel or otherwise, other than as expressly
granted herein.” Actavis J.A. 3306; Roxane J.A. 4569.
However, as I later discuss, Roxane’s negotiation history
and resulting agreement differed significantly in other
respects from that of Actavis.
    The FDA approved both Actavis’s and Roxane’s AN-
DAs, and those companies have been selling generic
versions of Opana® ER under their ANDAs since 2011.
    At the time of the settlement agreements, Endo had
pending patent applications for the ’122 and ’216 patents.
This was disclosed to Roxane but not to Actavis. After
Actavis and Roxane began to sell their generic versions of
Opana® ER pursuant to their settlement agreements, the
PTO issued the ’122 and ’216 patents to Endo in Novem-
ber and December 2012, respectively. These patents cover
Opana® ER’s active ingredient as well as its slow release
method. See U.S. Patent No. 8,309,122; U.S. Patent No.
8,329,216. Endo has now listed these new patents in the
Orange Book as related to Opana® ER. The ’122 and ’216
patents claim priority to the same 2001 provisional appli-
cation that gave priority to the ’250 patent licensed under
the settlement agreements.
    In this case, Endo has sought to enjoin Actavis and
Roxane’s production of Opana® ER generic products on
the ground that such sales infringe the ’122 and ’216
patents. Thus, the question is whether, as the district
court held, these companies have implied licenses to

    1   The Roxane agreement defined “Opana® ER Pa-
tents” as only the ’250, ’456, and ’933 patents because the
’143 patent expired in 2008.
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.               5

produce the disputed products under their settlement
agreements with Endo.
                             II
    In my view, the majority’s holding that Actavis has no
right to an implied license is inconsistent with our prior
decisions in TransCore, LP v. Electronic Transaction
Consultants Corp., 563 F.3d 1271 (Fed. Cir. 2009) and
General Protecht Group, Inc. v. Leviton Manufacturing
Co., Inc., 651 F.3d 1355 (Fed. Cir. 2011). The majority
reads these cases as standing for the proposition “that a
license or a covenant not to sue enumerating specific
patents may legally estop the patentee from asserting
continuations of the licensed patents in the absence of
mutual intent to the contrary.” Majority Op. at 13. I think
there is no meaningful distinction between the provisional
patent relationship at issue in this appeal and the contin-
uation patent relationships at issue in our earlier deci-
sions.
    The logic driving TransCore and General Protecht is
rooted in a decision of our predecessor court, AMP Inc. v.
United States, 389 F.2d 448 (Ct. Cl. 1968). Our predeces-
sor court’s decision in AMP recognized that a patentee
may convey rights to future patents on that invention in
licensing agreements even when the licensing agreement
does not explicitly cover future patents on the same
invention. Id. at 454-56. TransCore applied AMP’s holding
to a situation similar to the present appeals. TransCore
held that a patentee cannot license existing patents to
another party for the production of a specific product and
then assert a newly acquired patent against that party to
prevent it from producing the same product. TransCore,
563 F.3d at 1278-79. As the majority accurately summa-
rizes, the patentee in TransCore, after agreeing to license
the product under existing patents, “asserted a continua-
tion patent that ‘was . . . necessary to practice’ one of the
patents included in a prior settlement agreement.” Major-
6                ENDO PHARMACEUTICALS INC.    v. ACTAVIS, INC.

ity Op. at 12 (quoting TransCore, 563 F.3d at 1279).
Although the TransCore settlement agreement, similar to
the settlement agreements at issue here, provided that
“‘[t]his Covenant Not To Sue shall not apply to any other
patents . . . to be issued in the future,’” 563 F.3d at 1273,
we held that “in order for [the licensee] to obtain the
benefit of its bargain with TransCore, it must be permit-
ted to practice the [new patent] to the same extent it may
practice the [licensed] patents.” Id. at 1279. We further
explained that “[t]his language may protect TransCore
against broad claims that future patents generally are
impliedly licensed, but it does not permit TransCore to
derogate from the rights it has expressly granted and
thus does not preclude a finding of estoppel.” Id. Thus,
TransCore clarified that an explicit disclaimer of any
other license not within the literal terms of the contract
does not protect the patentee from an implied license
when such a license is necessary to ensure the licensee
obtains “the benefit of its bargain.” Id.
    Similarly, in General Protecht, the patentee sued
General Protecht for infringement of two patents, reached
a license and settlement agreement with General Pro-
techt allowing it to produce a defined product under the
existing patents, and then, three years later, sued Gen-
eral Protecht again, alleging infringement of two new
patents that issued after the settlement agreement. Gen.
Protecht, 651 F.3d at 1357-58. The patentee argued that
TransCore “d[id] not control” its appeal because
TransCore “is limited to cases where the claims of the
continuation are broader than and therefore necessary to
practice the claims of the expressly licensed patents.” Id.
at 1361. In response, this court reasoned that
    [the patentee] cannot deny . . . that the newly as-
    serted continuations are based on the same disclo-
    sure as the previously licensed patents and that,
    by definition, the continuations can claim no new
    invention not already supported in the earlier is-
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.              7

   sued patents. Moreover, the same products ac-
   cused in the earlier suit are accused here.
   TransCore prohibits a patent licensor from dero-
   gating from rights granted under the license by
   taking back in any extent that for which it has al-
   ready received consideration. In this case, [the pa-
   tentee’s] actions have unquestionably derogated
   from [General Protecht]’s rights under the Set-
   tlement Agreement. The same products were ac-
   cused. The same inventive subject matter was
   disclosed in the licensed patents. If [the patentee]
   did not intend its license of these products to ex-
   tend to claims presented in continuation patents, it
   had an obligation to make that clear.
Id. (emphasis added) (internal quotation marks and
citation omitted) (alteration in original omitted).
    Here too, if Endo succeeds on its infringement allega-
tions, Actavis will not be able to sell the very product for
which it secured licenses in its settlement agreement.
Although the ’122 and ’216 patents are not continuations
of the licensed patents, as was the case in TransCore and
General Protecht, the logic of those cases applies equally
here. Under 35 U.S.C. § 119(e)(1), a patent that claims
priority to a provisional application must “have the same
effect, as to such invention [the provisional invention], as
though filed on the date of the provisional application.” 35
U.S.C. § 119(e)(1). Thus, as we have explained in the past,
“‘[w]hat is claimed by the patent application [claiming
priority to a provisional application] must be the same as
what is disclosed in the [provisional] specification.’” New
Railhead Mfg., L.L.C. v. Vermeer Mfg. Co., 298 F.3d 1290,
1296 (Fed. Cir. 2002) (quoting Festo Corp. v. Shoketsu
Kinzoku Kogyo Kabushiki Co., 535 U.S. 722 (2002)) (citing
Lockwood v. Am. Airlines, Inc., 107 F.3d 1565, 1572 (Fed.
Cir. 1997)); see also Ariad Pharms. Inc. v. Eli Lilly & Co.,
598 F.3d 1336, 1342 (Fed. Cir. 2010). That is to say, a
patent claiming priority to a provisional application must
8                ENDO PHARMACEUTICALS INC.    v. ACTAVIS, INC.

cover the same inventive subject matter as the provisional
application.
    Since the ’250 patent (covered by the license agree-
ments) and the ’122 and ’216 patent applications (subse-
quently issued) claim priority to the same provisional
application and, thus, must cover the same inventive
subject matter, the agreements confer an implied license
to the two new patents absent contrary evidence. In other
words, under our decisions in TransCore and General
Protecht, the settlement agreements here created a pre-
sumption that the ’122 and ’216 patents were impliedly
licensed to Actavis and Roxane, even though the only
licenses explicitly mentioned in the settlement agree-
ments were to the ’250, ’456, and ’933 patents.
                             III
     Nevertheless, I also think that the parties can agree
to eliminate the presumption of implied licenses. Under
our prior decisions, this cannot be accomplished simply by
stating that the agreement does not extend to any patents
beyond those listed in the agreement. TransCore and
General Protecht rejected this very contention. See Gen.
Protecht, 651 F.3d at 1362-63; TransCore, 563 F.3d at
1279. Here, as to Roxane there is more. In the course of
its negotiations with Endo, Roxane became aware of the
’122 and ’216 patent applications, sought to have these
pending patents included in the agreement, and ultimate-
ly failed to secure a license to them. That history, it seems
to me, is sufficient to negate an implied license. But the
Actavis negotiations were different, having occurred two
years before the Roxane agreement. The record contains
no indication that the ’122 and ’216 patent applications
were discussed during Actavis-Endo negotiations or that
Actavis was even aware of Endo’s applications for the ’122
and ’216 patents.
    While the majority states that the language of the Ac-
tavis and Roxane agreements is “similar,” Majority Op. at
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.               9

4, there are, in fact, important differences. Compare
Actavis J.A. 3300, 3302, 3305 with Roxane J.A. 4563,
4568. While both agreements provide an explicit license to
produce generic versions of Opana® ER covered by Ac-
tavis’s and Roxane’s ANDAs under the ’250, ’456, and ’933
patents, clause (c) of the agreements is different. Clause
(c) of the Actavis agreement reads:
   (c) For avoidance of doubt, and notwithstanding
   anything to the contrary in this Agreement, the
   License and Covenant Not to Sue do not grant to
   Actavis any rights or immunities with respect to
   any products other than the Opana® ER Generic
   Products, including any combination products.
Actavis J.A. 3305 (emphasis added). Critically, the
agreement defines “Opana® ER Generic Products” as “any
product that is marketed and/or sold under the Actavis
ANDA.” Actavis J.A. 3302 (emphases added). Actavis sells
the allegedly infringing product under the Actavis ANDA.
    In contrast, clause (c) of the Roxane license agreement
reads:
   (c) . . . the License and Covenant Not to Sue does
   not grant to Roxane any rights or immunities with
   respect to any products other than the Roxane
   Products or with respect to any patents other than
   the Licensed Patents.
Roxane J.A. 4568 (emphasis added). The agreement
defines “Licensed Patents” as
   (a) any United States patents that are both (i)
   now owned by Endo . . . and (ii) issued as of the Ef-
   fective Date of this Agreement, including the
   Opana® ER Patents, (b) any United States patent
   applications that claim priority to the Opana® ER
   Patents, including any continuation, continuation-
   in-part and divisional patent applications that
   claim priority to the Opana® ER Patents, and (c)
10               ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

     any patents resulting from the reissue or reexam-
     ination of patents or parent applications com-
     prised within clauses (a) and (b) above, in each
     case that Endo . . . could assert would be infring-
     ing by the making, using, selling, offering to sell
     or importing of the Roxane Product.
Roxane J.A. 4563 (emphases added). Thus, while the
Actavis license is only limited to “any product that is
marketed and/or sold under the Actavis ANDA,” Actavis
J.A. 3302 (emphasis added), the Roxane license specifies
that it neither extends to any other “products” nor “to any
patents other than the Licensed Patents,” Roxane J.A.
4568 (emphasis added), i.e., the 250, ’456, and ’933 pa-
tents. Thus, in subsection (c), the Actavis agreement does
not limit the license to specific patents as the Roxane
agreement does. A comparison of the two license agree-
ments and the different negotiation histories suggests
that Actavis could reasonably conclude it had negotiated a
right to sell all Opana® ER generic products despite the
interim issuance of the ’122 and ’216 patents, not merely
practice the patents expressly licensed. 2
    The majority concludes: “If Appellees wanted to mar-
ket and sell their accused generic products free from any

     2  With respect to the ’482 patent, that patent does
not claim priority to the provisional application, and the
negotiating history does not suggest that Actavis could
reasonably conclude that it had negotiated a license to all
future patents that might be acquired by Endo relating to
Opana® ER. Because the ’482 patent issued to another
company, Johnson Matthey, in 2010, was acquired by
Endo in 2012, and does not claim priority to the provi-
sional application, Actavis should not be treated as hav-
ing an implied license to the ’482 patent. Neither Endo
nor Actavis could have known that Endo might later
acquire this patent.
ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.            11

threat of being sued by Endo for patent infringement,
they could have negotiated for the appropriate language
in the settlement and license agreements.” Majority Op.
at 14-15. But under that theory, this court’s precedent in
TransCore and General Protecht would have been wrongly
decided. An implied license is not foreclosed simply be-
cause the parties could have negotiated for an express
license. Here, as in General Protecht, Actavis’s agreement
allowed it to produce and sell a defined product, and we
should imply licenses to the new patents because “the
same products accused in the earlier suit are accused
here,” Gen. Protecht, 651 F.3d at 1361, and the patents
relate to the same inventive subject matter claimed in the
provision application.
    That the ’122 and ’216 patent applications were pub-
lished at the time of the settlement negotiations should
not affect this conclusion: in both General Protecht and
TransCore, at least one of the new patents at issue was
published as a pending application at the time of the
settlement and licensing negotiations. See Gen. Protecht,
1357-58 (the patentee and General Protecht entered into
a licensing agreement in 2007, and then the patentee
sued General Protecht for infringement of two new pa-
tents—U.S. Patent Nos. 7,463,124 and 7,764,151—in
2010); U.S. Patent No. 7,463,124 (first published on
March 24, 2005, and issued on December 9, 2008);
TransCore, 563 F.3d at 1273-74.
    There is nothing unfair in granting an implied license
in Actavis’s favor. Although Actavis could have re-
searched pending patent applications at the time of the
settlement, placing the burden of disclosure on the party
with greater access to information (here, Endo) increases
the efficiency of the bargaining process. See generally
Bruce L. Hay, Effort, Information, Settlement, Trial, 24 J.
Legal Stud. 29, 31, 55-56, 62 (1995); Lucian Arye Beb-
chuk, Suing Solely To Extract a Settlement Offer, 17 J.
Legal Stud. 437, 448 (1988); Lucian Arye Bebchuk, Litiga-
12                ENDO PHARMACEUTICALS INC.   v. ACTAVIS, INC.

tion and Settlement Under Imperfect Information, 15
RAND J. Econ. 404, 414 (1984). Assigning this burden to
the party with inferior access to information creates an
incentive for the more knowledgeable party to hide infor-
mation: the more informed party will not face repercus-
sions for failing to disclose information, and, indeed, will
benefit from such information asymmetries. See generally
Bebchuk, Suing Solely, supra, at 448; Bebchuk, Litigation
and Settlement, supra, at 414 (“[L]egal rules and institu-
tions that magnify the extent to which an informational
asymmetry is present might well increase the likelihood
of litigation.”); Richard A. Posner, An Economic Approach
to Legal Procedure and Judicial Administration, 2 J.
Legal Stud. 339, 422-26 (1973). By creating incentives to
hide and obscure important information in settlement
negotiations, we undermine the purpose of the settlement
process: the avoidance of further litigation.
     I respectfully dissent.