Argument Recap

This month the Federal Circuit heard oral argument in two related cases that attracted amicus briefs, Takeda Pharmaceuticals U.S.A. v. Mylan Pharmaceuticals Inc. and Takeda Pharmaceuticals U.S.A. v. Alkem Laboratories Limited. In these cases, the court confronted breach of contract and patent infringement claims against two different alleged infringers–Mylan and Alkem. As we noted in our argument preview, Takeda argues that Section 1.2(d) of license agreements with the accused infringers does not allow for the production of generic versions of Takeda’s patented product at this time. Mylan and Alkem, along with the district court, disagree. The Federal Circuit consolidated the cases for argument purposes only, and the parties presented their arguments to a panel including Chief Judge Prost and Judges Newman and Hughes. This is our argument recap.

Porter F. Fleming argued for Takeda. Fleming started his argument by quoting the language of Section 1.2(d) that “requires that there be a final court decision holding that all unexpired claims of licensed patents [that] were asserted and adjudicated against [a] third party are either (1) not infringed or (2) a combination of not infringed and invalid.” Fleming goes on to bring up the West-Ward Litigation (the relevant prior patent case) and the fact that five out of eight patents in that case were voluntarily dismissed. Takeda, Fleming maintained, has repeatedly conceded that the voluntary dismissal constituted an adjudication. Fleming directed the court to various pages throughout Takeda’s briefs in both cases where they have stated that “a voluntary dismissal with prejudice constitutes an adjudication.” On this point, Chief Judge Prost clarified that, with respect to the West-Ward Litigation, “the claims were all asserted and all adjudicated.” Fleming highlighted why, in his view, this matters: because “the language of 1.2(d) requires a holding where there is either a finding of non-infringement or a combination of non-infringement and invalidity.”

Chief Judge Prost brought up “the ramifications of the construction [Takeda] is asserting” and the gamesmanship of that construction. Fleming responded that both Mylan and Alkem agreed to a date where they would be granted a license to use of the technology covered by the patents, and argued that Subpart (d) of the section is a specific exception to that agreed upon date. He emphasized that it requires “a holding of all patents or claims of patents that were asserted and adjudicated.” Chief Judge Prost, seemingly unswayed by the response, pointed out that Takeda “can effectively . . . make sure that this exception never comes into play” and said “that doesn’t seem the norm in negotiating [and seems] a little one-sided.” Fleming denied that one side can control this exception and to the allegation of gamesmanship. Fleming argued that the West-Ward Litigation is simply not applicable in this instance because all claims of all eight patents were not asserted and adjudicated as required, and, thus, Section 1.2(d) cannot be triggered in this instance. In short, he maintained, there was not the required substantive holding for all eight patents.

Chief Judge Prost then moved Fleming to the irreparable harm part of his argument. Fleming argued that both Alkem and Mylan stipulated “that there would be irreparable harm if Section 1.2 were breached . . . and that [Takeda] is entitled in immediate injunctive relief.” Takeda, he contended, has also suffered lost sales and a loss of goodwill with respect to the improper launch of Mylan’s and Alkem’s brand generic products. Fleming, however, then conceded that the irreparable harm stipulation comes into play only if the court agrees with Takeda’s construction of the contract.

Michael S. Sommer argued for both Mylan and Alkem. Teresa M. Summers also argued for Alkem, addressing Alkem-specific questions from the panel.

Sommer began by responding to a question by Chief Judge Prost. He argued that, “until this morning, both Mylan and Takeda agreed that the five licensed patents that Takeda voluntarily dismissed in the West-Ward Litigation were not adjudicated.” Sommer highlighted that in Takeda’s oral argument, Fleming said those patents were adjudicated.

Chief Judge Prost posed a question about the likelihood of success on the merits. Sommer responded by emphasizing that there is a very heavy burden to reverse the lower court’s determination of no likelihood of success. He claimed that Takeda wants to “read out the words ‘and adjudicated'” from the contract, which is not allowed as “the term there is ‘asserted and adjudicated.'” Allowing Takeda to read out those words would give them “the power to decide what patents it does or does not want to assert.”

On the point of irreparable harm, Sommer argued “there is not a single decision of this court or any other court [Mylan] has identified where a stipulation as to irreparable harm has been sufficient in the absence in the finding of likelihood of the success on the merits.” In the absence of the stipulation, he argued, Takeda did not provide any evidence of irreparable harm.

Summers joined the argument after Sommer to address any questions from the judges and to address any issues not brought up by Sommer. Summers highlighted that, “with respect to Section 1.2” and the likelihood of success on the merits, “the provisions set forth in 1.2 are all independent,” and “none of them . . . is really an exception” but instead “just different triggering points.” With respect to irreparable harm, she argued that the relevant provision, Section 1.10, “states that Alkem acknowledges that marketing a . . . product in breach of [Section] 1.2 would cause Takeda irreparable harm.” As a result, she maintained, if there is no likelihood of breach, “then that takes care of the irreparable harm.”

In his rebuttal, Fleming addressed the allegations that Takeda has either waived or changed its position. He explained that “that could not be more incorrect” and mentioned how he already “cited to the opening briefs and the [preliminary injunction] briefs where, indisputably, Takeda makes statements that a voluntary dismissal is an adjudication.” He explained that “[t]hat has always been our position.” Fleming pointed out that “the language of 1.2(d), however, requires that you have to look at all the licensed patents that were asserted and adjudicated.” Fleming argued “that only three patents were adjudicated to a holding of non-infringement,” and maintained that “the holding that is required to satisfy 1.2(d) requires that you look at all [the patents.]” Fleming emphasizes the word “all” in that there “was not holding that adjudicated all eight patents.” Chief Judge Prost pointed to his brief where Fleming stated that, “with respect to the remaining five patents, there was no adjudication at all.” Fleming responded by explaining that the sentence goes on to read “let alone an adjudication one way or the other regarding infringement, invalidity, and unenforceability.”

We will monitor this case and report on its outcome.