Court Opinion

ID: 9411679
Source: CourtListenerOpinion
Date Created: 2023-07-27 17:00:38.580047+00
Date Added: 2024-06-11T16:41:08.976481
License: Public Domain

PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT
              _______________

        Nos. 22-1193, 21-1194 and 22-1195
                _______________

         MYLAN INC & SUBSIDIARIES

                        v.

   COMMISSIONER OF INTERNAL REVENUE,
                            Appellant
             _______________

    On Appeal from the United States Tax Court
    (IRS-1: 16-26976, 16-26977 and 16-26978)
    Tax Court Judge: Honorable Patrick J. Urda
                _______________

                     Argued
                 January 12, 2023

Before: JORDAN, PHIPPS and ROTH, Circuit Judges

               (Filed July 27, 2023)
                _______________
Clint Carpenter [ARGUED]
Arthur T. Catterall
United States Department of Justice
Tax Division
950 Pennsylvania Avenue, NW
P.O. Box 502
Washington, DC 20044

Emily J. Giometti
550 Main Street
Suite 9-351
Cincinnati, OH 45202

Lisa M. Rodriguez
Office of District Council
Internal Revenue Service
One Newark Center – Ste. 1500
Newark, NJ 07102

Mary H. Weber
Internal Revenue Service
Office of Chief Counsel
312 Elm Street – Ste. 2350
Cincinnati, OH 45202
      Counsel for Appellant

Gregory G. Garre [ARGUED]
Eric Konopka
Latham & Watkins
555 11th Street, NW – Ste. 1000
Washington, DC 20004

                              2
Bryan M. Killian
William F. Nelson
James G. Steele, III
Morgan Lewis & Bockius
1111 Pennsylvania Avenue, NW – Ste. 800 North
Washington, DC 20004
      Counsel for Appellee

Matthew Hellman
Adam G. Unikowsky
Jenner & Block
1099 New York Avenue, NW – Ste. 900
Washington, DC 20001
      Counsel for Amicus Appellee
                    _______________

                  OPINION OF THE COURT
                      _______________

JORDAN, Circuit Judge.

I.    OVERVIEW

       The Commissioner of Internal Revenue1 appeals a
ruling of the United States Tax Court allowing Mylan, Inc., a
manufacturer of generic drugs, to deduct as ordinary and
necessary business expenses the legal fees it incurred in
defending itself against patent infringement lawsuits brought
under the Hatch-Waxman Act, Pub. L. No. 98-417, 98 Stat.
1585. According to the Commissioner, such fees ought to be

      1
          The Commissioner now in office is Daniel I. Werfel.

                               3
understood as a cost of acquiring approval from the U.S. Food
and Drug Administration (“FDA”) to market Mylan’s generic
drugs and should therefore be treated as capital expenditures.
The Tax Court, in a thorough and well-reasoned opinion,
explained why the Commissioner is wrong. Based on our own
precedent and the sound reasons given by the Tax Court, we
will affirm.

II.    BACKGROUND

       A.     Regulatory Overview

       To understand the outlines of this dispute, it will first be
helpful to have in mind the FDA approval process for generic
drugs, as well as the rules of taxation distinguishing between
deductions and capitalization.

              1.      The Hatch-Waxman Act

        Drug manufacturers must obtain FDA approval to
market any new pharmaceutical in the United States. See
Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 355(a)
(2022) (“No person shall introduce or deliver for introduction
into interstate commerce any new drug, unless an approval of
an application filed ... is effective with respect to such drug.”).
Typically, a manufacturer submits a New Drug Application
(“NDA”) to the agency, and so begins “a long, comprehensive,
and costly testing process, after which, if successful, the
manufacturer will receive marketing approval from the FDA.”
F.T.C. v. Actavis, Inc., 570 U.S. 136, 142 (2013) (citing 21
U.S.C. § 355(b)(1)). That process is formidable, and, until
1984, generic drug manufacturers needed to comply with it
fully, even though they were marketing essentially identical

                                4
versions of preexisting, FDA-approved drugs. aaiPharma Inc.
v. Thompson, 296 F.3d 227, 230-31 (4th Cir. 2002). If the
business risks and costs involved in the regulatory process
were not already a high enough barrier to the creation of
generic drugs, legal liability loomed as well, since the
development and testing of a proposed generic drug was
deemed to be an act of patent infringement, as stated in Roche
Products, Inc. v. Bolar Pharm. Co., 733 F.2d 858, 861 (Fed.
Cir. 1984).

        In an effort to change the risk-reward ratio and entice
the development and marketing of generic drugs, Congress
passed the Drug Price Competition and Patent Term
Restoration Act of 1984, commonly known as the Hatch-
Waxman Act, codified at portions of Title 35 and Title 21 of
the U.S. Code. The Hatch-Waxman Act established an
expedited process for obtaining FDA approval to sell generic
drugs. Rather than filing an NDA, generic manufacturers
could now file an Abbreviated New Drug Application
(“ANDA”). See 21 U.S.C. § 355(j). Instead of the time-
consuming and costly testing requirements of an NDA, an
ANDA requires the simpler showing that a generic drug has
“the same active ingredients as, and is biologically equivalent
to, [the already approved] brand-name drug.” Actavis, 570
U.S. at 142 (internal quotation marks omitted). The Hatch-
Waxman Act also effectively overturned the ruling in Roche
Products by providing a legal safe harbor for the development
of generic drugs prior to the expiration of a branded drug
manufacturer’s patents.2 See 35 U.S.C. § 271(e)(1) (“It shall

      2
         Patent owners ordinarily enjoy the right to exclude
others from making, using, or selling a patented invention for
“20 years from the date on which the application for the patent

                              5
not be an act of infringement to make, use, offer to sell, or sell
within the United States … a patented invention … solely for
uses reasonably related to the development and submission of
information under a Federal law which regulates the
manufacture, use, or sale of drugs[.]”); see also Warner-
Lambert Co. v. Apotex Corp., 316 F.3d 1349, 1357-58 (Fed.
Cir. 2003) (recognizing that the passage of the Hatch-Waxman
Act, in relevant part, 35 U.S.C. § 271(e)(1), effectively
overruled its prior holding in Roche Products by “enabl[ing]
generic manufacturers to test and seek approval to market
during the patent term”). Finally, the Act grants certain
successful ANDA filers a 180-day period of exclusivity to
market the first approved generic version of a brand-name
drug. 21 U.S.C. § 355(j)(5)(B)(iv).

       In passing the Hatch-Waxman Act, Congress
“attempted to balance the goal of making available more low
cost generic drugs with the value of patent monopolies in
incentivizing beneficial pharmaceutical advancement.” In re
Lipitor Antitrust Litig., 855 F.3d 126, 134 (3d Cir. 2017)
(cleaned up). “The Act seeks to accomplish this purpose, in
part, by encouraging manufacturers of generic drugs ... to
challenge weak or invalid patents on brand name drugs so
consumers can enjoy lower drug prices.” Id. at 134-35
(cleaned up). To that end, the Act requires the FDA to decide
on an expedited basis whether to approve an ANDA. 21 U.S.C.
§ 355(j)(5)(A) (imposing a 180-day deadline on the agency to
approve or disapprove the application, absent mutual
agreement with the applicant). And, in tandem with that

was filed[.]” 35 U.S.C. § 154(a)(2); Minerva Surgical, Inc. v.
Hologic, Inc., 141 S. Ct. 2298, 2303 (2021).

                                6
approval process, the Act seeks “to facilitate the resolution of
patent-related disputes over pharmaceutical drugs” through a
“streamlined mechanism for identifying and resolving patent
issues related to the proposed generic products.” Apotex, Inc.
v. Thompson, 347 F.3d 1335, 1338 (Fed. Cir. 2003).

      That “streamlined mechanism” involves brand-name
manufacturers listing the patents that cover their drugs in an
FDA publication known as the Orange Book,3 and generic drug

       3
          The publication is formally titled “Approved Drug
Products With Therapeutic Equivalence Evaluations,” but is
commonly called the Orange Book, “after the color of its
cover.” Ethypharm S.A. Fr. v. Abbott Lab’ys, 707 F.3d 223,
227 (3d Cir. 2013). That volume is available online at
http://www.fda.gov/cder/ob/ (last visited May 30, 2023). See
generally, e.g., 21 U.S.C. § 355(j)(7)(A)(i) (“the Secretary
shall publish and make available to the public … a list … of
the official and proprietary name of each drug which has been
approved for safety and effectiveness[.]”); Caraco Pharm.
Lab’ys, Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 404-06 (2012).
See also 21 C.F.R. § 314.53(c)(2)(ii)(P)(3), (c)(3) (2023)
(brand-name manufacturers must provide the FDA with
descriptions of any “method-of-use” patents it holds in order
to “assist … ANDA applicants” in the ANDA application
process). The FDA does not evaluate the substance or validity
of patents published in the Orange Book. See Am. Bioscience,
Inc. v. Thompson, 269 F.3d 1077, 1080 (D.C. Cir. 2001) (“The
FDA, pursuant to longstanding practice and its own
regulations, and based on its acknowledged lack of expertise
and resources … accept[s] at face value the accuracy of [brand-
name patent] holders’ … declarations” in the Orange Book).

                               7
manufacturers in turn certifying in their ANDA filings that
they “will not infringe” any relevant patents, or that the patents
are invalid. Caraco Pharm. Lab’ys, Ltd. v. Novo Nordisk A/S
et al., 566 U.S. 399, 406 (2012); 21 U.S.C. § 355(b). The
generic drug manufacturer can provide that assurance in one of
four ways: by certifying (1) that no patent information on the
branded drug has been submitted to the FDA (a Paragraph I
certification); (2) that any relevant patents have expired (a
Paragraph II certification); (3) that any relevant patents will
expire on a stated date, implying that they will have expired by
the time the generic drug goes to market with FDA approval (a
Paragraph III certification); or (4) that any relevant patents are
“invalid or will not be infringed by the manufacture, use, or
sale of the new [generic] drug for which the [ANDA] is
submitted” (a Paragraph IV certification).            21 U.S.C.
                            4
§ 355(j)(2)(A)(vii)(I)-(IV). That last type of certification,
under Paragraph IV, is the most frequent and the kind that is
germane here.

       A Paragraph IV certification is, by virtue of the Hatch-
Waxman Act, a technical act of patent infringement, so it
“often means provoking litigation.” Actavis, 570 U.S. at 143
(internal quotation marks omitted). Indeed, it is designed to
give patentholders a chance to start the dispute-resolution
process without waiting for the creation of a case or
controversy by an ordinary act of infringement, such as the

       4
          While not relevant here, generic drug manufacturers
can also make a so-called “section viii statement,” which
asserts that the generic manufacturer will market the drug for a
method of use not covered by the branded drug maker’s
patents. 21 U.S.C. § 355(j)(2)(A)(viii).

                                8
manufacture, use, or sale of a copy-cat drug. In re Wellbutrin
XL Antitrust Litig. Indirect Purchaser Class, 868 F.3d 132, 144
n.6 (3d Cir. 2017). When making a Paragraph IV certification
to the FDA, the generic drug manufacturer is obligated to send
notice of the certification to the brand-name manufacturer,
explaining in detail the factual and legal bases for the claim
that the patent is invalid or will not be infringed. 21 U.S.C.
§ 355(j)(2)(B). At that point, the branded drug maker can
choose to respond to the technical act of infringement by filing
suit, by negotiating,5 or by walking away from the fight.
Assuming it chooses to file suit, the brand-name manufacturer
will invoke 35 U.S.C. § 271(e)(2), which provides:

       It shall be an act of infringement to submit … an
       [ANDA] … for a drug claimed in a patent or the
       use of which is claimed in a patent … if the
       purpose of such submission is to obtain approval
       … to engage in the commercial manufacture,
       use, or sale of a drug … claimed in a patent or
       the use of which is claimed in a patent before the
       expiration of such patent.

35 U.S.C. § 271(e)(2).

        Patent infringement suits launched under § 271(e)(2) as
a result of a Paragraph IV certification are often called ANDA
suits and are functionally the same as other patent infringement
suits, Glaxo, Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1569

       5
          Any negotiation would have to comport with federal
antitrust law. F.T.C. v. Actavis, Inc., 570 U.S. 136 (2013).

                               9
(Fed. Cir. 1997), though their timing is different.6 ANDA suits
are preemptive, occurring before the release of a potentially

       6
          The Commissioner argues that ANDA suits differ
from ordinary patent litigation in two ways. First, he asserts
that ordinary patent litigation concerns disputes about pre-
existing intangible assets while an ANDA suit occurs “in the
process of pursuing the acquisition of an intangible.” (Reply
Br. at 16.) But that argument assumes what the Commissioner
must prove – that ANDA litigation expenses are part of the
process of obtaining FDA approval of a drug, and, as we hold
today, they are not. Second, he argues that ANDA litigation is
different in kind from ordinary patent litigation because it
involves a “deemed infringer as a matter of law[,]” “not an
alleged infringer[.]” (Reply Br. at 15.) But that distinction is
a red herring. It is true that the statute declares a Paragraph IV
certification to be an act of infringement, see 35 U.S.C.
§ 271(e)(2), but, as we have stated before, such “infringement”
“is a legal construct that permits a patent holder to initiate suit
without having to wait for the generic manufacturer to actually
make, use, or sell a generic version of the patented drug.” In
re Wellbutrin XL Antitrust Litig. Indirect Purchaser Class, 868
F.3d 132, 144 n.6 (3d Cir. 2017); accord Eli Lilly & Co. v.
Medtronic, Inc., 496 U.S. 661, 676 (1990) (stating that the
function of § 271(e)(2) is to define a “somewhat artificial” act
of infringement); and Warner-Lambert Co. v. Apotex Corp.,
316 F.3d 1348, 1358 (Fed Cir. 2003) (stating that § 271(e)(2)
“created an artificial act of infringement”). That technical act
of infringement “does not speak to whether the disclosed
generic drug does, in fact, infringe the cited patent.”
Wellbutrin, 868 F.3d at 144 n.6; accord Bayer Schering
Pharma AG v. Lupin, Ltd., 676 F.3d 1316, 1325 (Fed. Cir.
2012) (“Section 271(e)(2)(A) defines the filing of an ANDA as

                                10
infringing product into the market. Id. The Hatch-Waxman
Act encourages brand-name manufacturers to file an
infringement complaint within 45 days of receiving notice of a
Paragraph IV certification, because doing so triggers a 30-
month stay of FDA approval of the generic. 21 U.S.C.
§ 355(j)(5)(B)(iii) and 35 U.S.C. § 271(e)(2)(A). The stay
serves, in effect, as an automatic injunction. The FDA review
process continues during the stay, but the generic manufacturer
cannot bring its drug to market while the litigation is ongoing,
even if the FDA completes its review favorably. See Actavis,

an act of infringement, but it does not alter the underlying
patent infringement analysis[.]”); and Glaxo, Inc. v.
Novopharm, Ltd., 110 F.3d 1562, 1569 (Fed Cir. 1997)
(“[Section] 271(e)(2) provide[s] patentees with a defined act of
infringement sufficient to create case or controversy
jurisdiction to enable a court to promptly resolve any dispute
concerning infringement and validity.”).
        Furthermore, a court can rule that an ANDA applicant
did not infringe a patent, even after an “infringement” action
under § 271(e)(2) is filed. See, e.g., Genentech, Inc. v. Sandoz
Inc., 55 F.4th 1368, 1381 (Fed. Cir. 2022) (affirming a district
court’s holding of non-infringement in an ANDA suit filed
under § 271(e)(2)); Pernix Ireland Pain DAC v. Alvogen Malta
Operations Ltd., 323 F. Supp. 3d 566, 630 (D. Del. 2018)
(holding that defendant’s generic pain medication did not
infringe plaintiff’s brand-name drug in an ANDA suit under
§ 271(e)(2) because plaintiff’s alleged patents were invalid);
Reckitt Benckiser LLC v. Amneal Pharm. LLC, 276 F. Supp. 3d
261, 263, 287, 292 (D.N.J. 2017) (holding that defendant’s
ANDA for a generic version of Mucinex did not “literally”
infringe plaintiff’s patents in a suit filed under § 271(e)(2)).

                              11
570 U.S. at 143 (“If the brand-name patentee brings an
infringement suit within 45 days, the FDA then must withhold
approving the generic … while the parties litigate patent
validity (or infringement) in court.”). The brand-name
manufacturer thus has the possibility of preventing effective
FDA approval of the generic drug until the original patent
expires, if litigation is filed within 30 months of expiration.

       Once a generic manufacturer has obtained FDA
approval for its ANDA, it must wait for the approval to become
effective, which occurs either upon resolution of the litigation
in its favor within the 30-month period, 21 U.S.C.
§ 355(j)(5)(B)(iii)(I), or, if litigation is still pending, upon the
expiration of the 30-month stay, id. § 355(j)(5)(B)(iii); see also
Actavis, 570 U.S. at 143 (explaining that if a § 271(e)(2) suit is
not resolved within the 30-month period, “the FDA may go
forward and give approval to market the generic product”).7
Again, and of especial importance here, brand-name
manufacturers do not always file a lawsuit in response to a
Paragraph IV certification.8              Therefore, an ANDA

       7
         ANDA approval could also be effective almost
immediately, if the patentee fails to file suit within 45 days. 21
U.S.C. § 355(j)(5)(B)(iii).
       8
          Mylan’s general counsel testified during the Tax Court
proceedings that patentholders sue “maybe 75 percent of the
time” in response to those certifications. (Supp. App. at 70:1-
6.) The same testimony gave examples of Mylan ANDA
filings, such as that for the cancer drug imatinib sold under the
brand name Gleevec, where Mylan filed a Paragraph IV
certification and “didn’t get sued.” (Supp. App. at 82:1-5.)
Mylan not only issues but also receives notices of Paragraph

                                12
accompanied by a Paragraph IV certification could receive
effective approval and go to market without any attendant
patent litigation.

       While giving branded drug manufacturers the
opportunity to vindicate their patent rights, the Hatch-Waxman
Act simultaneously motivates generic manufacturers to file
Paragraph IV certifications. Most notably, the Act grants a
valuable 180-day period of exclusivity to the first applicant of
a generic version of a brand-name drug approved after its
maker has submitted a Paragraph IV certification. 21 U.S.C.
§ 355(j)(5)(B)(iv). “During that period … no other generic can
compete with the brand-name drug,” a right of exclusivity that
is “possibly worth several hundred million dollars.” Actavis,
570 U.S. at 143-44 (internal quotation marks omitted).

        A brand-name drug manufacturer’s decision to engage
in or abstain from patent infringement litigation plays no role
in the FDA’s review of an ANDA. See, e.g., 21 C.F.R.
§ 314.127 (2023) (listing reasons the FDA will refuse approval
of an ANDA, none of which concern patent litigation under
§ 271(e)(2)). Whether the application is approved or rejected
turns on scientific and technical issues, 21 U.S.C. § 355(j)(4)
(listing grounds for disapproval, none of which concern
patents), as the FDA “does not independently assess [a]
patent’s scope” and “lacks ‘both [the] expertise and [the]

IV certifications, see Supp. App. at 69:16-25, and its general
counsel testified that there are “tactical and business and legal
strategic considerations on the brand company side about
whether suing … is worth the time and effort and expense[.]”
(Supp. App. at 81:14-24.)

                               13
authority’ to review patent claims[.]” Caraco, 566 U.S. at 406-
07 (second and third alterations in original).9 And, while an
ANDA suit may affect the timing of the FDA’s effective
approval of a generic drug application, litigation does not
control the timing of the FDA’s review.            21 U.S.C.
§ 355(j)(5)(A).

              2.      Tax Deductions and Capitalizations

       Turning now to the pertinent tax law, § 162(a) of the
Internal Revenue Code (“Code”) allows a taxpayer to deduct
“all the ordinary and necessary expenses paid or incurred

       9
         Further, if a brand-name manufacturer objects to the
FDA’s decision about an ANDA, its remedy lies in an action
under the Administrative Procedure Act (“APA”), 5 U.S.C.
§§ 702-706, not under patent law. See, e.g., Minn. Mining and
Mfg. Co. v. Barr Lab’ys, Inc., 289 F.3d 775, 777 (Fed. Cir.
2002) (holding that a claim about Paragraph IV certification
notice compliance under the Hatch-Waxman Act “cannot be
enforced by a private party in a patent infringement action, but
must be enforced, if at all, only in the context of an action under
the Administrative Procedure Act”); Andrx Pharms., Inc. v.
Biovail Corp., 276 F.3d 1368, 1378-80 (Fed. Cir. 2002)
(indicating that, because an action asserting a claim against the
FDA under the Hatch-Waxman Act is “not tied to any
recognized patent infringement” action, the claim “might
properly be brought under the APA”); Mova Pharm. Corp. v.
Shalala, 140 F.3d 1060, 1077 (D.C. Cir. 1998) (affirming a
successful challenge to the FDA’s interpretation of the Hatch-
Waxman Act’s ANDA requirements, with no mention of
patent law).

                                14
during the taxable year in carrying on any trade or business[.]”
26 U.S.C. § 162(a). In contrast, § 263 of the Code “allows no
deduction for a capital expenditure[.]” INDOPCO, Inc. v.
Comm’r, 503 U.S. 79, 83 (1992) (citing 26 U.S.C. § 263(a)(1)).
For nearly a century, courts have examined and explained the
distinctions between deductions and capital expenditures.
INDOPCO, 503 U.S. at 85 n.5 (collecting cases). In addition,
and especially important here, certain Treasury Regulations lay
out the rules for applying § 263 to intangible assets, as more
fully described herein. They require capitalization for “an
amount paid to facilitate … an acquisition or creation of
[certain types of] intangible[s.]” 26 C.F.R. § 1.263(a)-
4(b)(1)(v) (2023).10

       The practical difference in tax treatment between
deductions and capital expenditures is the timeline of cost
recovery: deductions may be claimed during the year incurred
while capital expenditures are either depreciated (for tangible
assets) or amortized (for intangible assets) over the life of an
asset – for example, expenditures made to acquire the
intangible asset of FDA approval to market a drug are
amortized over 15 years.11 26 U.S.C. §§ 167(a) (depreciation)

       10
           The regulations incorporate multiple references to
various types of intangibles, the costs for which should be
capitalized. A representative sample includes an ownership
interest in a corporation, a futures contract, a lease, computer
software, or certain rights obtained from a governmental
agency, like a trademark, patent, copyright, or an FDA
approval. 26 C.F.R. § 1.263(a)-4(c), (d).

        A “license, permit, or other right granted by a
       11

governmental unit or an agency or instrumentality thereof,”

                              15
and 197(a) (amortization). The idea is to match expenses with
the relevant revenues during the taxable period, resulting in a
more accurate income tax calculation. See Comm’r v. Idaho
Power Co., 418 U.S. 1, 16 (1974) (“[Section 263 of the Code]
serves to prevent a taxpayer from utilizing currently a
deduction properly attributable, through amortization, to later
tax years when the capital asset becomes income producing.”).
The Supreme Court explained in INDOPCO, Inc. v.
Commissioner, 503 U.S. 79 (1992), that “deductions are
exceptions to the norm of capitalization,” and that the rules
governing them should be “strictly construed[,] and
[deductions] allowed only as there is a clear provision therefor”
in the Internal Revenue Code. Id. at 84 (internal quotation
marks omitted). “[T]he burden of clearly showing the right to
the claimed deduction is on the taxpayer.” Id. “Although the
mere presence of an incidental future benefit – ‘some future
aspect’ – may not warrant capitalization, a taxpayer’s
realization of benefits beyond the year in which the
expenditure is incurred is undeniably important in determining
whether the appropriate tax treatment is immediate deduction
or capitalization.” Id. at 87.

       It has long been the rule that taxpayers may deduct the
costs of defending one’s business against a tort because
mounting such a defense is an ordinary business response. See
Comm’r v. Heininger, 320 U.S. 467, 471-72 (1943) (holding
that legal expenses incurred in defending a business from
“threatened destruction” by an adverse postal designation were
deductible as ordinary and necessary business expenses). That

such as an FDA approval to market a drug, is amortized “over
[a] 15-year period.” 26 U.S.C. § 197(a), (d)(1)(D).

                               16
principle has been captured by current IRS regulations. See 26
C.F.R. § 1.263(a)-5(l) (Example 18) (stating that “amounts
paid by [a taxpayer] to its outside counsel … to resolve … tort
liability … are not required to be capitalized”).

        It has likewise long been the rule that patent
infringement claims “sound[] in tort.” Schillinger v. United
States, 155 U.S. 163, 169 (1894). Consistent with that
longstanding principle, both the U.S. Court of Appeals for the
Sixth Circuit and the Tax Court have held that litigation costs
incurred by defendants in patent infringement suits are indeed
deductible. See Schnadig Corp. v. Gaines Mfg. Co., Inc., 620
F.2d 1166, 1169 (6th Cir. 1980) (“When an infringer is
required to pay damages to a design patentee, the amount so
paid is deductible from his income tax.”); Meyer & Bro. Co. v.
Comm’r, 4 B.T.A. 481, 482 (1926) (holding that a defendant’s
payment to a court-appointed accountant to determine patent
infringement damages was deductible as an ordinary and
necessary business expense).12 This is a natural corollary to
our own precedent, Urquhart v. Commissioner, stating that
litigation expenses a patentee incurs in enforcing its patents are
ordinary and necessary business expenses because they are
“peculiarly normal to the business in which … [patentee]
taxpayers [a]re engaged.” 215 F.2d 17, 19 (3d Cir. 1954); cf.
Mathey v. Comm’r, 177 F.2d 259, 263 (1st Cir. 1949) (“[W]hat
a patent owner loses from infringement is the acquisition of a
just and deserved gain from the exploitation of the invention
embodied in his patent[,]” so “an award of damages ... is
ordinarily an award of compensation for gains or profits lost

       12
         The opinion in Meyer & Bro. was issued by an earlier
version of the Tax Court known as the Board of Tax Appeals.

                               17
by the patent owner and hence is taxable to him as income in
the year received.”) (internal quotation marks omitted). For
reasons we are about to explain, we hold today that it makes no
difference in deciding the question of deductibility whether the
patent litigation expenses are incurred by the patentee or the
alleged infringer. Nor does it matter that the deductibility
question arises in the context of an ANDA suit.

                      a)     Tax        Determinations         for
                      Intangibles

       In INDOPCO, the Supreme Court addressed how to
determine tax liabilities relating to the acquisition of intangible
assets. It specifically held that “investment banking, legal, and
other costs” incurred during a friendly acquisition in which a
company was transformed from a publicly held entity to a
wholly owned subsidiary were not deductible because they
“b[ore] the indicia of capital expenditures[,]” and that was
because “the [acquisition] produced significant benefits ... that
extended beyond the tax year in question[.]” INDOPCO, 503
U.S. at 88, 90. After the INDOPCO decision, the IRS issued
regulations addressing capitalization of expenses to acquire,
create, or enhance intangible assets. 26 C.F.R. § 1.263(a)-4;
id. § 1.263(a)-5 (2023). Those regulations govern how and
when to capitalize expenditures incurred to create or acquire
intangible assets, like a government “license” in the form of
FDA approval to market a drug. Id. § 1.263(a)-4(d)(1),
(d)(5)(i). The regulation relevant here mandates capitalization
of amounts paid to “facilitate” the acquisition or creation of
intangibles. Id. § 1.263(a)-4(b)(1)(v). “Facilitation” is
described as follows:

                                18
       [A]n amount is paid to facilitate the acquisition
       or creation of an intangible (the transaction) if
       the amount is paid in the process of investigating
       or otherwise pursuing the transaction. Whether
       an amount is paid in the process of investigating
       or otherwise pursuing the transaction is
       determined based on all of the facts and
       circumstances. In determining whether an
       amount is paid to facilitate a transaction, the fact
       that the amount would (or would not) have been
       paid but for the transaction is relevant, but is not
       determinative.

Id. § 1.263(a)-4(e)(1)(i).

       In promulgating the capitalization regulations and
providing examples,13 the IRS emphasized that, consistent with

       13
            Several examples follow in the regulation that
illustrate the scope and limits of “facilitation,” and, during oral
argument, counsel for the Commissioner said that Example 10
from 26 C.F.R. § 1.263(a)-5(l) (2023) is the most analogous to
the present case. Example 10 describes an attempted corporate
acquisition in which competition regulators file suit to prevent
the acquisition. The costs incurred to defend against such
antitrust litigation must be capitalized, says the Commissioner,
because the “amounts incurred … facilitate [the] acquisition.”
(Opening Br. at 46) (citing 26 C.F.R. § 1.263(a)-5(l)). The
Commissioner believes that since antitrust litigation and
ANDA litigation are both elective, once litigation is triggered,
all costs associated with resolving the litigation must be
capitalized. But a merger threatened by antitrust litigation
cannot occur without resolution of the litigation, whereas the

                                19
“current law” and specifically in light of our decision in
Urquhart, 215 F.2d 17, the rules are “not intended to require
capitalization of amounts paid to protect ... property against
infringement.”      Guidance Regarding Deduction and
Capitalization of Expenditures, 67 Fed. Reg. at 77705 (Dec.
19, 2002). The IRS then provided an example reflecting the
rule applied in Urquhart. 26 C.F.R. § 1.263(a)-4(e)(5)
(Example 6).14 Relying on that interpretative guidance, generic
drug manufacturers had, for many years, commonly deducted
ANDA litigation expenses, without objection from the IRS.

        Beginning in 2011, however, the IRS issued several
non-binding memoranda asserting that generic drug companies
should capitalize and amortize the costs of defending patent
infringement suits filed in response to Paragraph IV
certifications.15 The reasoning of the memoranda seems to be,

same is not true for FDA approval of an ANDA. As explained
further herein, an ANDA suit – even when triggered – is not a
precondition to receiving an FDA approval of the ANDA.
Thus, the example is not analogous and does not foreclose
Mylan’s argument for the deductibility of its litigation
expenses.
      14
          The Commissioner agrees that “Example 6 illustrates
the rule applied in Urquhart[.]” (See Reply Br. at 15 n.4.)
      15
          See IRS Office of Chief Counsel, Memo. No.
20114901F, Attorney Fees Incurred to Defend Against Patent
Infringement Claims and to Investigate Patents, 2 (Sept. 14,
2011), https://www.irs.gov/pub/irs-lafa/114901f.pdf; IRS
Office of Chief Counsel (“The attorney fees incurred to defend
actions for patent infringement pursuant to 35 U.S.C.

                              20
in essence, that the expenses should be viewed as payments
toward the acquisition of FDA approval of ANDAs. That is
certainly the position the Commissioner is taking here.16 And
yet, the Commissioner also says that brand-name drug

§ 271(e)(2) for submitting ANDAs to market and sell generic
drugs before the expirations of the listed patents must be
capitalized.”); IRS Office of Chief Counsel, Memo. No.
20114703F, Cost Recovery of Capitalized Attorney Fees
Incurred to Defend Against Patent Infringement Claims and to
Investigate      Patents,     2     (Sept.     27,      2011),
https://www.irs.gov/pub/irs-lafa/114703f.pdf (“As franchises,
FDA-approved ANDAs are amortizable I.R.C. § 197
intangibles ….”); IRS Office of Chief Counsel, Memo. No.
AM2014-006, Legal Fees Incurred by Drug Manufacturers
Under the Hatch-Waxman Act, 1-2 (Aug. 11, 2014),
https://www.irs.gov/pub/irs-utl/AM2014-006.pdf (“Where a
drug manufacturer files an ANDA with ¶ IV certification, the
legal fees the drug manufacturer incurs to defend against a 35
U.S.C. § 271(e)(2) patent infringement suit are required to be
capitalized under § 263(a) of the Code and §§ 1.263(a)-4(d)(5)
and 1.263(a)-4(b)(1)(v) of the regulations.”).
       16
          The Commissioner contended before the Tax Court
that Mylan’s defense of ANDA suits “occurred as a step in the
process of seeking FDA-approved ANDAs.” (Supp. App.135.)
The Commissioner continues to argue on appeal that “Mylan’s
legal fees were incurred to facilitate the creation of intangible
assets (i.e., the FDA approvals) and were therefore capital
expenditures, which must be capitalized and deducted ratably
over a multi-year (in this case, 15-year) amortization period.”
(Opening Br. at 4.)

                               21
companies can continue to deduct the litigation expenses they
incur in the same lawsuits.

              3.     Mylan’s Claimed Deductions

        From 2012 to 2014, Mylan regularly submitted ANDAs
to the FDA, often including Paragraph IV certifications stating
that the particular proposed generic drug at issue would not
infringe valid patents. In consequence of those Paragraph IV
certifications, Mylan had to defend itself in about 120 patent
infringement suits brought under § 271(e)(2), and, in the
process, has incurred tens of millions of dollars in legal fees.
Mylan incurred additional but much lower legal fees in
preparing the notice letters associated with the Paragraph IV
certifications. In total, “Mylan incurred legal fees of
$46,158,403, $38,211,911, and $38,618,993 during 2012,
2013, and 2014, respectively, to prepare notice letters and to
litigate the [ANDA] suits.” (App. at 16.) Mylan deducted
those amounts in the years incurred.

       The IRS responded that Mylan could not deduct the
nearly $130 million of legal expenses incurred from 2012 to
2014, and, hence, that its additional tax liability was about $50
million across that period. The result was the issuance of
notices of deficiency for each of the three tax years, and Mylan
petitioning the Tax Court for redetermination.

       B.     Procedural History

        The Tax Court consolidated all three cases and held a
trial, which consisted largely of “expert testimony regarding
internal FDA processes … [and] the typical course of dealing
between an ANDA applicant and the FDA during the

                               22
submission process for an ANDA with a paragraph IV
certification.” (App. at 18.) After the trial, the Tax Court
issued an opinion holding that the “legal expenses [Mylan]
incurred to prepare notice letters [we]re required to be
capitalized because they were necessary to obtain FDA
approval of [its] generic drugs[,]” but – and this is the heart of
the dispute – the Court also held that “the legal expenses
[Mylan] incurred to defend patent infringement suits [we]re
deductible as ordinary and necessary business expenses
because the patent litigation was distinct from the FDA
approval process.” (App. at 2.)

        The Tax Court identified the underlying taxable
“transaction” as effective FDA approval of an ANDA with a
Paragraph IV certification, and the parties do not take issue
with that. (App. at 29-30.) The parties have also accepted the
Tax Court’s determination that the costs of preparing notice
letters must be capitalized as a necessary element of acquiring
such approval.17 The issue that is left is whether Mylan’s tens
of millions of dollars in litigation costs to defend against patent
infringement suits are ordinary and necessary business
expenses, and so deductible, or were incurred to facilitate the
acquisition of ANDA approvals, and so should have been
capitalized.

       17
         The tax deficiency thus due from Mylan was in
aggregate $1,960,993. The parties do not contest that part of
the Tax Court’s judgment.

                                23
III.   DISCUSSION18

        This appeal comes down to what the word “facilitate”
means. IRS regulations require capitalization of amounts paid
to “facilitate” the acquisition or creation of intangible assets.
26 C.F.R. § 1.263(a)-4(b)(1)(v), (d)(1), (d)(5)(i). The
regulations say that an expense “facilitate[s] the acquisition or
creation of an intangible (the transaction) if the amount is paid
in the process of investigating or otherwise pursuing the
transaction.” Id. § 1.263(a)-4(e)(1)(i) (2023). A “transaction”
is then defined as “all of the factual elements comprising an
acquisition or creation of an intangible and includes a series of
steps carried out as part of a single plan.” Id. § 1.263(a)-
4(e)(3). Again, “[i]n determining whether an amount is paid to
facilitate a transaction, the fact that the amount would (or
would not) have been paid but for the transaction is relevant,
but is not determinative.” Id. § 1.263(a)-4(e)(1)(i).

        Mylan argues that ANDA litigation costs do not
facilitate the acquisition of FDA approval since approval can
be granted regardless of the resolution of the litigation. The
Commissioner responds that if a generic drug company
chooses to make a Paragraph IV certification – thereby seeking

       18
          The Tax Court had jurisdiction over Mylan’s petitions
for redetermination under 26 U.S.C. §§ 6213(a), 6214, and
7442. We have jurisdiction under 26 U.S.C. § 7482(a)(1). We
review the Tax Court’s legal conclusions, including its
interpretation of the Internal Revenue Code and associated
regulations, de novo, and its factual findings for clear error.
DeNaples v. Comm’r, 674 F.3d 172, 176 (3d Cir. 2012); Conn.
Gen. Life Ins. Co. v. Comm’r, 177 F.3d 136, 143 (3d Cir. 1999).

                               24
to benefit from the 180-day exclusivity period for first-to-
market generics – then it triggers the requisite step of resolving
any litigation from a Paragraph IV certification. The
Commissioner contends, in other words, that litigation is a
choice and is a “part of the statutory process for pursuing
effective approval of [an] ANDA.” (Opening Br. at 31.)

        There are several flaws in the Commissioner’s
reasoning, at least one of which is exposed by the plausible
scenario of a generic manufacturer receiving FDA-approval of
an ANDA even when the manufacturer loses the patent case it
is called on to defend. For example, if the litigation is still
going on after the 30-month stay expires and if the generic has
met all the FDA requirements for an ANDA, nothing prevents
the FDA from issuing effective approval.19 21 U.S.C.
§ 355(j)(5)(B)(iii) (stating that Paragraph IV “approval shall be
made effective upon the expiration of the thirty-month
period”); Actavis, 570 U.S. at 143 (noting that if ANDA
litigation is unresolved by the end of the 30-month period, then

       19
         By contrast, Paragraph IV notice letters – which the
Tax Court correctly held must be capitalized – are a
precondition for FDA approval of a generic to go to market
before the expiration of the brand-name patent. There is no
conceivable scenario in which an applicant could receive an
FDA-approved ANDA by Paragraph IV certification without
having to first issue a notice letter to the brand-name
patentholder. See 21 U.S.C. § 355(j)(2)(B)(iii) (stating that an
applicant “shall give notice” to “each owner of the patent that
is the subject of the certification” and to “the holder of the
approved” NDA of the brand-name drug “that is claimed by
the patent or a use of which is claimed by the patent”).

                               25
“the FDA may go forward and give approval to market the
generic product”). And even if the generic manufacturer loses
the patent suit after receiving effective approval, the FDA does
not revoke or suspend approval, but merely converts the
approval to a tentative approval effective after the expiration
of the relevant patents. Mylan also presented testimony at the
Tax Court that FDA approval sometimes occurs after the
resolution of patent litigation. For instance, Mylan prevailed
in an infringement action in 2012, which was affirmed in 2013,
but the FDA did not approve Mylan’s generic drug until 2015.

       Nothing prevents a generic manufacturer from
commercially marketing its approved drug under the cloud of
patent litigation, as long as it has an effective FDA-approved
ANDA. That is known as launching “at risk” because, while
going to market under such conditions is lawful, generic
manufacturers subject themselves to potential infringement
damages if the patentholder ultimately prevails in an ANDA
suit. In re Lipitor Antitrust Litig., 868 F.3d 231, 241 (3d Cir.
2017). Mylan twice took generic drugs to market under those
circumstances. Win or lose, the outcome of patent litigation is
irrelevant to the FDA’s review; the generic is considered either
safe and effective, or not. 21 U.S.C. § 355(j). And all of this
assumes that the patent owner chooses to file suit in the first
place, which, according to evidence before the Tax Court, does
not happen in a substantial percentage of instances where a
Paragraph IV certification is made.

             The Commissioner does not, and cannot, dispute any of
that.   20
              Instead, the Commissioner focuses on the statute’s

             20
      The Commissioner concedes that, under the Act,
ANDA “approval will become effective before the [brand-

                                   26
restrictions of FDA approval during the 30-month stay and
argues that the linkage of patent litigation to the Hatch-
Waxman Act creates an inseparable, interdependent process.
But the examples just given refute that notion. While it is true
that, for up to 30 months, the Hatch-Waxman Act delays the
effective approval of an ANDA during follow-on litigation,
that interplay between regulatory approval and litigation is
unrelated to the FDA’s final safety and effectiveness review.
The FDA can approve an ANDA for an infringing generic and
deny an ANDA for a non-infringing generic.

       Put differently, ultimate FDA approval is never decided
by the outcome of patent litigation under § 271(e)(2), even if it
is delayed by such litigation. That the Hatch-Waxman Act
affects when suit can be brought is noteworthy but certainly
not determinative.21 In short, as well summarized by the Tax
Court:

name] patent expires … upon the expiration of the 30-month
period, if the [§ 271(e)(2)] litigation is still pending at that
time[.]” (Opening Br. at 12.)
       21
           It is true, as the Commissioner argues, that the
expenses incurred in defending against these ANDA suits
“would not be incurred but for” the filing of an ANDA with a
Paragraph IV certification. (Opening Br. at 34.) But that does
not mean that those costs should be interpreted as having been
paid to facilitate the transaction in question. But-for causation
and facilitation are not synonymous, as the regulations
themselves make abundantly clear. See 26 C.F.R. § 1.263(a)-
4(e)(1)(i) (“In determining whether an amount is paid to
facilitate a transaction, the fact that the amount would (or

                               27
       The outcome of a Section 271(e)(2) suit has no
       bearing on the FDA’s safety and bioequivalence
       review. The FDA continues its review process
       during the pendency of the patent infringement
       suit and may issue a tentative or final approval
       before the suit is resolved. The FDA does not
       analyze patent issues as part of its review, and
       neither the statute nor regulations suggest that
       patent issues might block approval of an ANDA.
       And winning a patent litigation suit does not
       ensure that the generic drug manufacturer will
       receive approval, as the FDA can disapprove an
       ANDA for not meeting safety and
       bioequivalence standards.

(App. at 33-34.)

       Despite all that, the Commissioner says that “facilitate”
should be interpreted broadly to include any litigation costs
associated with an ANDA.22 He claims that the plain

would not) have been paid but for the transaction is relevant,
but is not determinative.”).
       22
          The Commissioner does not argue that any deference
is owed to his interpretation, and none is. The Commissioner’s
interpretation was not issued in a rulemaking or agency
adjudication and does not enjoy Chevron deference. Chevron,
U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837
(1984); see also United States v. Mead Corp., 533 U.S. 218,
221, 226-27 (2001) (agency implementation of a statutory
provision enjoys Chevron deference only when it is clear from
Congress that such a ruling carries the “force of law”). And

                              28
dictionary meaning of “facilitate” supports that reading,
because the patent litigation helps bring about FDA approval,
making the acquisition easier and less difficult. (Reply Br. at
22 (citing Facilitate, Merriam-Webster’s Collegiate
Dictionary 447 (11th ed. 2003) (“defining ‘facilitate’ as ‘to
make easier: help bring about [growth]’”)). He stresses that,
under the Hatch-Waxman Act, generic manufacturers like
Mylan could certify in several ways that they will not infringe
Orange-Book-listed patents – ways that do not provoke
litigation as Paragraph IV certifications often do. The
argument goes that, if generic manufacturers elect to file a
Paragraph IV certification to benefit from exclusive marketing
opportunities, they “invit[e]” litigation that then becomes a
“precondition to obtaining the special benefit that proceeding
under [P]aragraph IV affords.” (Opening Br. at 39.) But, as
we have just explained, that is simply not so. Patent litigation,
if it occurs at all after a Paragraph IV certification, does not
facilitate the acquisition of an FDA-approved ANDA because
the two processes are distinct and ultimately separate. If
anything, an ANDA suit makes acquisition of FDA approval
more difficult because it slows it down. As the Court of
Federal Claims said in a recent decision analyzing substantially
the same issue we now confront, “Hatch-Waxman litigation
can only delay, never accelerate, final ANDA approval[.]”

there is nothing relevant but ambiguous in the pertinent
regulations to trigger deference to the agency’s interpretation
of its own rules under Auer v. Robbins, 519 U.S. 452 (1997).
See Kisor v. Wilkie, 588 U.S. ___, 139 S. Ct. 2400, 2415 (2019)
(“[A] court should not afford Auer deference [to an agency’s
interpretation of its own regulations] unless the regulation is
genuinely ambiguous.”).

                               29
Actavis Labs., FL, Inc. v. United States, 161 Fed. Cl. 334, 370
(2022).

       Such reasoning, the Commissioner insists, “focuses on
the wrong ‘process.’” (Reply Br. at 19.) Even though he has
argued primarily that an ANDA suit is a necessary step or
element in acquiring an FDA-approved ANDA, the
Commissioner’s fallback position is it does not follow “that the
regulation requires capitalization only of costs associated with
a ‘required’ step or element of the acquisition.” (Reply Br. at
20.) Instead, he contends that “any amount paid in the ‘process
of [investigating or otherwise] pursuing’ the acquisition must
be capitalized[.]” (Reply Br. at 20, 19 (citing 26 C.F.R.
§ 1.263(a)-4(e)(1)(i)).) Since § 271(e)(2) litigation costs are
made in pursuit of an ANDA, he says, they therefore fit that
category. But that argument assumes the conclusion that
ANDA litigation expenses are in pursuit of – or “facilitate” the
acquisition of – an FDA-approved ANDA, which, as we have
explained, they do not; the processes can and do co-exist but
do not depend on each other in the way the Commissioner
contends, even though both are part of the Hatch-Waxman
regime.

        All in all, Paragraph IV certifications do not transform
ordinary patent infringement litigation into a facilitating step
for generic drug approval. Instead, suits filed in response to a
Paragraph IV certification are functionally like any other
patent infringement suit, although they operate under a
different set of time constraints than do other suits. See Glaxo,
Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1569 (Fed. Cir. 1997)
(“[A] district court’s inquiry in a suit brought under § 271(e)(2)
is the same as it is in any other [patent] infringement suit[.]”).
The different timing reflects the careful balancing of

                               30
competing interests achieved by the Hatch-Waxman Act. In
exchange for expedited generic drug approval, Congress
provided an option for patentholders to file a preemptive suit
before sustaining damages caused by potentially infringing
generics. That mere shift in timing does not justify disparate
tax treatment of litigation expenses for generic manufacturers
defending against alleged patent infringement. If it did, the
very purpose of the Hatch-Waxman Act – to encourage generic
drug development – would be impeded by forcing substantial
additional costs onto generic manufacturers. 23

        The Tax Court therefore correctly determined that
litigation in response to a Paragraph IV certification is distinct
from the FDA’s scientific review process and not actually
facilitative of generic drug approval. We agree with its holding
that “Congress’ decision to coordinate effective FDA approval
with the outcome of a Section 271(e)(2) suit” through the 30-

       23
           Amicus Accessible Medicines argues that “[p]arity in
the tax treatment of generic and branded drug manufacturers’
litigation expenses is essential to generic manufacturers’
ability to provide lower-cost generic medicines[,]” (Amicus
Br. at 2), and holding otherwise would “jeopardize … patient[]
… access to lower-cost generic drugs, in direct contravention
of Hatch-Waxman’s purposes.” (Amicus Br. at 4.) We are
inclined to agree but recognize that policy issues implicated by
the word “parity” may go beyond what we are required to
address here. It is enough to say today that imposing very
different tax treatment on the warring sides in an ANDA
dispute, as the Commissioner advocates, is at odds with the
careful statutory balance of improving access to lower-cost
generic drugs while respecting intellectual property rights.

                               31
month stay mechanism, 21 U.S.C. § 355(j)(5)(B)(iii), “does not
convert such litigation into a link in the ANDA approval
chain.”24 (App. at 37.)

       24
           The Commissioner also asserts that the “origin of the
claim” and “future benefits” tests from the Supreme Court
support his position, but for largely the same reasons explained
in this opinion, those additional arguments fail. The “origin of
the claim” test involves the “simple[] inquiry whether the
origin of the claim litigated is in the process of acquisition
itself.” Woodward v. Comm’r, 397 U.S. 572, 577 (1970). If
so, the litigation costs incurred must be capitalized. Id. at 577-
78. Additionally, in INDOPCO, Inc. v. Comm’r, 503 U.S. 79
(1992), the Court established the rule that costs associated with
the creation or acquisition of a distinct and separate intangible
asset that “produce[s] significant benefits … that extend[]
beyond the tax year in question” should be capitalized. Id. at
88, 90. The Commissioner argues that those tests support his
position because the substance of the underlying claim in
ANDA litigation arises out of the acquisition of effective FDA
approval and such FDA approval bestows on generic drug
manufacturers an asset that produces valuable future benefits.
Once peeled back, the Commissioner’s arguments rely on the
same faulty premise we have already rejected – that the
litigation costs facilitate the acquisition of an effective FDA
approval.
        Critically, when generic manufacturers like Mylan
defend themselves in patent infringement suits resulting from
a Paragraph IV certification, they obtain no rights from a
successful outcome. They acquire neither the intangible asset
of a patent nor an FDA approval. Furthermore, it is unclear
why the Commissioner’s “future benefits” logic would not also
extend to ordinary patent infringement litigation costs. When

                               32
IV.    CONCLUSION

       For the foregoing reasons, we will affirm the decision
of the Tax Court.

businesses succeed in defending themselves against ordinary
patent infringement suits, they “may obtain several years’
worth of revenue that would have been unavailable if the patent
had stood in the way.” (Amicus Br. at 6.) So, by the
Commissioner’s reasoning, ordinary patent infringement
litigation as well as § 271(e)(2) litigation appear to fit the same
rationale for tax capitalization, a result not even the
Commissioner tries to justify.

                                33