The AIPLA Antitrust News

Transcription

1 The AIPLA Antitrust News A Publication of the AIPLA Committee on Antitrust Law April 2015 Chair s Corner In our January 2015 newsletter, we forecast a busy start to Unlike your weather service (or at least mine), our forecast was correct. PROGRAMMING The Committee is set to co-sponsor a joint CLE program (with the Licensing and Standards & Open Source Committees) at the AIPLA meeting in Los Angeles. The program will take place on April 30, from 3:30-5:30, and is entitled The Perplexing Intersection of IP, Standards, Licensing, and Antitrust. The table will be set by a pair of speakers from NEMA and the IEEE who will address how standards bodies create standards and seek to address current patent issues. Next, a panel will conduct what we anticipate will be a lively debate on the licensing dynamic when standard-essential patents are involved, giving positions from both the licensor s and licensee s perspectives. Finally, a second panel will debate the vexing litigation issues that are currently being addressed by the courts in connection with standard-essential patents, including injunctions, RAND, antitrust issues and more. The factual basis for both panel debates is set forth below in a thorny hypothetical fact pattern, which our very own Sandy Block prepared. Come to our meeting to witness how the panel debates play out! AIPLA 2015 Spring Meeting Hypothetical BACKGROUND: LEE Enterprises makes and sells a TRANSVERTER. The TRANSVERTER enables a user to place its handheld device [HHD] next to any enabled printer and, with a user prompt, prints out the file being displayed. One portion of the TRANSVERTER resides in the HHD and another portion is in the printer. One HHD manufacturer heralds the component as a feature you can t do without. TRANSVERTER is compliant with a standard created by COUPLER, a standard setting organization. THE PATENTS: LEE s competitor AMGINE owns three patents one of which AMGINE declared to COUPLER as a standards essential patent [SEP] during the standard s development. AMGINE had (and continues to have) a reasonable belief that the patent contains claims that cannot be avoided when implementing the standard. This patent includes one claim to the HHD The AIPLA Antitrust News April 2015 Page 1

2 part, another claim to the printer part, and a third claim including both. A second patented invention is unrelated to the standard. Each claim of the third patent includes a limitation that is not described in the standard s specification, but arguably is used in effectuating the standard through the claimed elements described in the standard s specification. AMGINE does not consider this patent to be a SEP. COUPLER PATENT POLICY: The market prices of printers and HHDs have increased since the TRANSVERTER was incorporated. Under the COUPLER patent policy, AMGINE is committed to licensing implementers on reasonable and nondiscriminatory [RAND] terms. Also under COUPLER policy, if a committed SEP holder does not offer RAND terms, an implementer who requests a RAND license is to notify COUPLER. In addition, A SEP holder may condition its RAND license on reciprocity. COUPLER identifies several arbitration organizations that can assist if disputes arise. LICENSING: AMGINE has sent notice letters to LEE s customers (who make devices and printers). The letters were sent a year after the standard was approved and after LEE began making and selling TRANSVERTERs. The letter identifies the allegedly infringed patents and seeks a royalty of 2% of the revenues for the devices and printers sold that include AMGINE s patents, and a license back. No customer has responded to the letter, after several follow ups from AMGINE. LEE has non- SEPs in the field that it licenses for 3%. A pool licenses 100 SEPs for the standard at 1%. COUPLER has posted 200 declared patents for its standard. Only AMGINE and the pool are licensing implementers. LITIGATION: LEE, who does not participate in COUPLER standards and who has not contacted AMGINE, files a declaratory judgment action on the grounds that AMGINE has violated its FRAND commitment, is in breach of express and implied contract, has engaged in misrepresentation, is engaged in unfair competition, and is misusing its SEP patents. LEE insists on a license for itself under RAND terms and conditions based on the component price, while AMGINE seeks to license makers of HHDs and printers. AMGINE seeks an injunction and damages against LEE s customers based on the allegedly infringed three patents, in a US court and in a non-us court. AMGINE seeks an Exclusion Order at the International Trade Commission (ITC) to stop importation of products that infringe its patents. LEE raises the unfair competition question at the Federal Trade Commission, and at other regulators, including in Europe and China. The AIPLA Antitrust News April 2015 Page 2

3 The Committee will also hold a joint CLE program during the Fall 2015 AIPLA meeting, this time with the Standards and Open Source Committee and the China Committee. Although it is still under development, the program proposes to address topics ranging from Chinese competition agency investigations to standardization reform, and examine the implications for FRAND licensing. SUBCOMMITTEES The Committee has also established subcommittees to focus on three important topics at the intersection of IP and competition law IP acquisitions, pharmaceuticals, and standards with periodic telephone conference calls in which members of our subcommittees share important developments in their focus areas with members of the Committee as a whole. IP Acquisitions: David Blonder, Subcommittee Chair. Among other support, the subcommittee prepared a letter to the Federal Trade Commission in response to the FTC's recent invitation for comments regarding its proposed information requests in connection with its planned 6(b) study on patent assertion entities, and provided important input to the Committee, including in connection with our upcoming joint CLE events. Pharmaceuticals: Jennifer Tempesta, Subcommittee Chair. Among other support, the subcommittee has tracked how lower courts and the FCT are applying the Supreme Court s decision in FTC v. Actavis, and is working with the FDA to arrange an FDA attendee (Markus Meier or a designee) for a future Committee call, in order to address the FDA s current position and actions under both Actavis and a related area of enforcement, so-called product hopping. Standards: Richard Stark, Subcommittee Chair. Among other support, the subcommittee has monitored the area of FRAND encumbered patents and provided important reports to the Committee membership, including in connection with our upcoming joint CLE events. Please contact David, Jennifer or Richard if you wish to get involved in any of the activities of the subcommittees; your assistance would be greatly appreciated. NEWSLETTER Our newsletter features an article by Adam C. Krol and Muna Abu-Shaar that addresses an important aspect of the Food and Drug Administration Amendment Act of 2007 (FDAAA), which authorized the FDA to require drug sponsors to submit a safety plan called a risk evaluation and mitigation strategy (REMS). The article, entitled Safety, Innovation, or Access? REMS Creates Another Battlefront Between Branded and Generic Pharmaceuticals, addresses thorny issues involved with REMS, including disputes stemming from the listing of patents in the Orange Book. Read on for further information! The AIPLA Antitrust News April 2015 Page 3

4 The Antitrust Committee publishes this newsletter three times a year. We welcome articles from regular as well as first-time contributors on any relevant topics of interest. If you would like to contribute an article, please contact our newsletter editor David Swenson at david_swenson@baylor.edu. The Committee held its most recent committee call on March 24, and will hold its final call for the spring on May 19. We look forward to seeing you in Los Angeles if you are attending the Spring meeting. Paul Ragusa Chair, AIPLA Antitrust Committee AIPLA Antitrust Committee Paul A. Ragusa, Chair Partner, Baker Botts LLP paul.ragusa@bakerbotts.com Marc Sandy Block, Vice-Chair Counsel, Intellectual Property Law, IBM msb@us.ibm.com David G. Swenson, Editor Baylor Law School david_swenson@baylor.edu The AIPLA Antitrust News April 2015 Page 4

5 Safety, Innovation, or Access? REMS Creates Another Battlefront Between Branded and Generic Pharmaceuticals Adam C. Krol and Muna Abu-Shaar 1 Biospark Intellectual Property Law Cambridge, MA adam@biospark-ip.com muna@biospark-ip.com The Food and Drug Administration Amendment Act of 2007 (FDAAA) authorized the FDA to require drug sponsors to submit a safety plan called a risk evaluation and mitigation strategy (REMS) to ensure that the benefits of certain drugs outweigh their risks. 2 The FDA can require submission of a REMS either before or after approval of a drug, 3 and can require the REMS to include one or more of the following: a medication guide or patient package insert, a communication plan, an implementation system, and elements to assure safe use (ETASU). 4 ETASU are the most extensive elements of a REMS and are required for drugs with known serious risks that would not otherwise be approved because of those risks. 5 ETASU can restrict distribution of a drug by requiring, for example, that the drug be dispensed to patients only in certain health care settings, such as hospitals, or that the drug only be 1 The authors thank Nazli Saka, J.D. and Scott McLean, J.D. for their assistance in researching and drafting this paper U.S.C U.S.C (a)(1)-(2) U.S.C (e)-(f) U.S.C (f)(1). dispensed to patients with evidence or other documentation of safe-use conditions. 6 Since its implementation, the REMS program has become a basis for cat-andmouse games between branded pharmaceutical manufacturers and their generic manufacturing counterparts, with the generics industry accusing branded drug sponsors of using ETASU to thwart generic competition. 7 Controversy has arisen as to whether a branded manufacturer may use a REMS distribution restriction to prevent a generic manufacturer from obtaining sufficient quantities of a Reference Listed Drug (RLD) for bioequivalence testing. Additionally, drug sponsors are obtaining patents covering the REMS programs and listing them in the FDA s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Because the FDAAA requires that generic versions of REMS products also be subject to REMS, 8 the generic The AIPLA Antitrust News April 2015 Page U.S.C (f)(3). 7 The Generic Pharmaceutical Association (GPhA) claims that misuse of REMS programs costs the healthcare system $5.4 billion in lost savings from 40 generic small molecule products whose market entry is delayed. See report summary entitled Lost Prescription Savings from Use of REMS Programs to Delay Generic Market Entry, which can be downloaded from er_final_2.pdf. 8 The FDAAA requires that brand name and generic drug manufacturers should work together on coordinating a single, shared REMS program with ETASU unless either the FDA determines that the burden of creating a single, shared system between competitors outweighs the benefit of a shared system or an aspect of the elements to assure safe use for the applicable listed drug is the subject of a trade secret or patent that has not expired and the generic

6 manufacturers cannot readily avoid REMS patents, and such patents thus present additional barriers to entry. Questions have been raised by generic manufacturers regarding whether such patents can properly be listed in the Orange Book and whether they are directed to patent eligible subject matter. This article provides an overview of these disputed aspects of the REMS system. REMS Antitrust Battles Section 505(j) of the Federal Food, Drug, and Cosmetics Act (FDCA) requires that an abbreviated new drug application (ANDA) seeking approval of a generic drug demonstrates that the generic drug is bioequivalent to the corresponding RLD. 9 Bioequivalence studies require that the ANDA applicant have access to a sufficient quantity of the RLD in order to compare with the generic drug. Typically, generic manufacturers purchase the RLD from pharmaceutical wholesalers. However, if the drug is covered by a REMS program that restricts the drug s distribution, the generic manufacturer may be forced to seek samples of the RLD directly from the branded manufacturer rather than from a wholesaler. Although early drafts of the FDAAA included provisions that would have expressly required branded manufacturers to sell ANDA applicants a sufficient quantity of drug to conduct bioequivalence testing, 10 the final version of the FDAAA only prohibits branded manufacturers from using a REMS to block or delay approval of an ANDA. 11 manufacturer certifies that it has sought but was unable to obtain a license. 21 U.S.C. 355(i)(1)(B) U.S.C. 355(j). 10 H.R. 2900, 110th Cong. 901(b) (2007) U.S.C (f)(8). Instances in which branded manufacturers have cited concerns of REMS violations and product liability when refusing to sell samples of REMS products to generic manufacturers have led to accusations by generic manufacturers that their branded counterparts are improperly using REMS distribution restrictions to prevent the generic manufacturers from obtaining samples of RLDs for bioequivalence testing. Although a number of antitrust suits 12 have been filed since 2008, to date there are no substantive court decisions providing guidance on whether the refusal to sell samples for bioequivalence testing constitutes an antitrust violation. In all but one ongoing suit, the parties have settled prior to trial. In 2008, generic manufacturer Lannett Co. sued Celgene Corp. for allegedly violating Section 2 of the Sherman Act after Celgene refused to sell Lannett samples of Thalomid for bioequivalence testing in connection with a planned ANDA filing. 13 Thalomid is subject to a REMS, having a restricted distribution program. Celgene filed a motion to dismiss the suit on the basis that Celgene should not be forced The AIPLA Antitrust News April 2015 Page 6 12 In at least one instance of which we are aware, a generic manufacturer petitioned the FDA to enforce the provisions of the FDCA that bar RLD sponsors from using REMS to block or delay approval generic competition. The citizen petition, filed by Dr. Reddy s in June 2009 (Docket No. FDA P-0266), was finally decided by the FDA in August The FDA informed Dr. Reddy s of its plans to issue clarifying guidance but declined to enforce the FDCA on the basis that such enforcement was outside the scope of the agency s citizen petition procedures and best addressed by the FTC. 13 Complaint, Lannett Co. v. Celgene Corp., No. 2:08-cv (E.D. Pa. Aug. 15, 2008).

7 to deal with its competitors. 14 Celgene s motion was denied, and the case settled before substantive consideration of Lannett s antitrust claim. 15 In 2012, Actelion Pharmaceuticals preemptively filed suit against multiple generic manufacturers, seeking a declaratory judgment that Actelion is under no duty to supply the generic manufacturers with samples of Tracleer, Actelion s pulmonary arterial hypertension medication that is subject to a REMS. The generic manufacturers counterclaimed, asserting Actelion s refusal to sell Tracleer to the generic manufacturers violated Sections 1 and 2 of the Sherman Act. 16 The case settled after Actelion s motion for judgment on the pleadings and to dismiss the generics counterclaims was denied. 17 In 2013, generic manufacturer Accord Healthcare brought suit against Acorda Therapeutics Inc. and one of its distributors, alleging that the defendants refusal to sell samples of Ampyra to Accord for bioequivalence testing violated 14 Defendant Celgene Corporation s Memorandum of Law in Support of its Renewed Motion to Dismiss, No. 2:08-cv (E.D. Pa. May 28, 2010). 15 Order, No. 2:08-cv-3920 (E.D. Pa. Dec. 6, 2011). 16 Answer of Apotex, Inc. and Apotex Corp. at 24 28, No. 1:12-cv (D.N.J. Nov. 27, 2012); Answer of Roxane Labs., Inc., No. 1:12-cv (D.N.J. Nov. 27, 2012); Answer of Actavis Elizabeth LLC, Actelion, No. 1:12-cv (D.N.J. Dec. 26, 2012). 17 Order, No. 1:12-cv (D. N.J. Oct. 21, 2013); Order of Dismissal, No. 1:12-cv (D.N.J. Feb. 28, 2014). Section 2 of the Sherman Act. 18 Accord alleged that the defendants refused to sell samples of Ampyra to Accord even though the approved REMS for Ampyra did not contain ETASU that restricted distribution of the drug. 19 Accord voluntarily dismissed the suit with prejudice before the defendants answered the complaint, 20 presumably following a settlement. In 2014, Mylan Pharmaceuticals sued Celgene, alleging that Celgene used the REMS for Thalomid and Revlimid to prevent Mylan from obtaining samples of the two drugs for bioequivalence testing, in violation of Sections 1 and 2 of the Sherman Act. 21 The Federal Trade Commission (FTC) filed an amicus brief in favor of Mylan and in opposition to Celgene s motion to dismiss, arguing that generic manufacturers should be allowed to sue RLD sponsors under Section 2. Celgene s motion to dismiss was in part predicated on a legal requirement for prior voluntary dealings between the parties for Section 2 to apply, which in this case did not exist. The FTC s amicus brief analyzed a trio of Supreme Court decisions on Section 2, Otter Tail Power Co. v. United States, 22 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 23 and Verizon Commc ns, Inc. v. Law Offices of Curtis V. Trinko, LLP, 24 and advanced the conclusion that voluntary prior The AIPLA Antitrust News April 2015 Page 7 18 Complaint, Accord Healthcare v. Acorda Therapeutics, No. 0:13-cv (S.D. Fla. Apr. 1, 2013). 19 Id. at Order of Dismissal, No. 0:13-cv (S.D. Fla. May 6, 2013). 21 Mylan Pharmaceuticals Inc. v. Celgene Corp., No. 2:14-CV-2094 (D. N.J. Apr. 3, 2014) U.S. 366 (1973) U.S. 585 (1985) U.S. 398 (2004).

8 dealings were not required. The FTC argued that a Section 2 analysis should instead focus on a party s willingness to sacrifice profitable sales in the short run in order to protect its long-term monopoly profits. The court agreed with the FTC s position that Mylan could bring the Section 2 claim but dismissed Mylan s Section 1 claims for failing to adequately plead a concerted action between Celgene and wholesale distributors and pharmacies. 25 After the ruling, the court, recognizing that its decision was inconsistent with those of other district courts, certified the question of [w]hether a prior, voluntary course of dealing is required to allege an actionable refusal to deal under Section Two of the Sherman Act 26 and permitted Celgene to file an interlocutory appeal. The Third Circuit, however, refused to hear the issue, 27 and the parties are now conducting discovery on the merits of the Section 2 claim. The FDA and Congress have taken steps to facilitate or mandate access to REMS products for bioequivalence testing. The FDA issued draft guidance in December 2014 regarding how a generic manufacturer can obtain confirmation from the agency that its proposed bioequivalence study contains safety protocols comparable to those in the REMS. 28 Even if the guidance is eventually adopted, it would not have the force of law. Furthermore, although compliance with the guidance would likely protect RLD sponsors from claims of REMS violations it would not immunize the sponsors from product liability claims based on injuries resulting from generic manufacturers bioequivalence testing. Federal legislation introduced by Congressmen Steve Stivers and Peter Welch seeks to address the issues relating to REMS, RLDs, and generic entry, and, if passed, would render the above litigation moot. The Fair Access for Safe and Timely (FAST) Generics Act of would condition continued approval of RLDs on access by generic manufacturers to samples for testing purposes, require the supply of REMS products for testing purposes at commercially reasonable prices, and prohibit RLD sponsors from using shared REMS programs to impede generic entry. Though the FAST Generics Act enjoys bipartisan support, it remains to be seen whether it will fare better than prior attempts to impose a requirement on branded manufacturers to sell REMS products to generic manufacturers for bioequivalence testing. 25 Oral Opinion, No. 2:14-CV-2094 (D. N.J. Dec. 22, 2014). 26 Celgene Corp. s Petition for Leave to File Interlocutory Appeal Under 28 U.S.C. 1292(b), Mylan Pharmaceuticals Inc v. Celgene Corp., No (3d Cir. Feb 09, 2015). 27 Order denying Petition for Permission to Appeal under 28 U.S.C. Section 1292(b), Mylan Pharmaceuticals Inc v. Celgene Corp., No (3d Cir. March 5, 2015). The AIPLA Antitrust News April 2015 Page 8 28 See How to Obtain a Letter from FDA Stating that Bioequivalence Study Protocols Contain Safety Protections Comparable to Applicable REMS for RLD, Guidance for Industry, U.S. Food and Drug Administration, available at plianceregulatoryinformation/guidances/ucm pdf. 29 H.R. 5657, 113th Cong. (2014).

9 REMS Patents Assuming a generic manufacturer succeeds in procuring samples of a REMS product, the last obstacle to generic entry is the branded manufacturer s patents. order, or until the date of a court decision in the suit. The automatic stay of ANDA approval provided by the FDCA provides NDA holders with an incentive to list patents claiming the drug or methods of using the drug in the Orange Book. Section 505 of the FDCA requires a branded manufacturer who submits a new drug application (NDA) to submit to the FDA the patent number and the expiration date of any patent which claims the drug for which the applicant submitted the application or which claims a method of using such drug. 30 The FDCA requires that the FDA publish the submitted patent information in the Orange Book and requires ANDA applicants to make certifications regarding each of the listed patents. 31 An ANDA applicant seeking to market a generic product prior to expiry of an Orange Book-listed patent must make a certification (referred to as a paragraph IV certification) that the patent is invalid or will not be infringed by the marketing of the generic product, notify the NDA holder and patent holder that an ANDA has been filed and provide a detailed statement of the applicant s factual and legal basis of the applicant s opinion that the patent is not valid or will not be infringed. 32 The filing of a paragraph IV certification is a technical act of infringement that gives the NDA holder or patent owner the right to file a patent infringement action within 45 days from receiving notice of such certification. 33 If a patent infringement action is instituted, the FDA cannot approve the ANDA for 30 months or for such a period as a court may U.S.C. 355(b)(g) U.S.C. 355(j)(2)(A)(vii)(I)- (j)(2)(a)(vii)(iv) U.S.C. 355(j)(2)(B)) U.S.C. 355(j)(5)(B)(iii). It is unclear whether Section 505 s provision for submitting patents claiming a method of using a drug for Orange Book listing applies to patents claiming an aspect of a REMS. 34 The FDA s implementing regulations require that [f]or patents that claim a method of use, the applicant shall submit information only on those patents that claim indications or other conditions of use that are described in the pending or approved application, and that [f]or approved applications, the applicant submitting the method-of-use patent shall identify with specificity the section of the approved labeling that corresponds to the method of use claimed by the patent submitted. 35 An argument can be made that a patent claiming an aspect of a REMS claims a condition of use and is properly listed on the Orange Book if the application or approved labeling describes the REMS. 36 On the other hand, a REMS is not a traditional condition of use in the same way that, for example, dosage and route of administration are conditions of use. To our knowledge, no court has yet decided The AIPLA Antitrust News April 2015 Page 9 34 We examined the legislative history of the Drug Price Competition and Patent Term Restoration Act of 1984, better known as Hatch-Waxman, and did not find any discussion of what Congress intended to be the scope of the method of use patents to be listed on the Orange Book CFR (b). 36 See, e.g., the label for Xyrem, which describes aspects of the REMS for Xyrem, the Xyrem Success Program.

10 whether REMS patents can be properly listed in the Orange Book. We recently surveyed the list of approved REMS to identify any RLDs subject to REMS that have one or more Orange Book listed REMS patents. 37 We identified five such drugs: Cubist s Entereg, Celgene s Pomalyst, Revlimid, and Thalomid, and Jazz s Xyrem. Drug Company Orange Book listed REMS patents Revlimid Celgene Corporation 6,045,501 6,315,720 6,561,976 6,561,977 6,755,784 6,908,432 8,204,763 Drug Company Orange Book listed REMS patents Entereg Cubist Pharmaceuticals, Inc. 8,112,290 8,645,160 Pomalyst Celgene Corporation 6,045,501 6,315,720 6,561,976 6,561,977 6,755,784 6,908,432 8,204,763 8,315,886 8,589,188 8,626,531 8,315,886 8,589,188 8,626,531 Thalomid Celgene Corporation 6,045,501 6,315,720 6,561,976 6,561,977 6,755,784 6,869,399 6,908,432 7,141,018 7,874,984 7,959,566 8,204,763 8,315, The list of FDA approved REMS can be found at: ugsafetyinformationforpatientsandproviders/ucm htm Xyrem Jazz Pharmaceuticals, Inc. 8,589,188 8,626,531 7,668,730 7,765,106 7,765,107 7,895,059 The AIPLA Antitrust News April 2015 Page 10

11 Drug Company Orange Book listed REMS patents 8,457,988 8,589,182 8,731,963 Table 1: Drugs with Orange Book listed REMS patents The Orange Book listing for each of these drugs lists both REMS and non-rems patents. Thus, the Orange Book listed REMS patents are not, at least at the present time, the only patent barriers to entry for generics. The REMS patents are typically the last to expire and at some point may be the only barriers to generic entry, thus raising antitrust implications if improperly listed. The Orange Book listability and subject matter eligibility of REMS patents have played out in a variety of challenges by Jazz of the REMS patents for Xyrem that have been brought before the United States Patent and Trademark Office (USPTO) 38 and the federal courts. 38 Interestingly, the group Coalition for Affordable Drugs, led by activist investor Kyle Bass and his hedge fund Hayman Capital Management LP, have challenged the 059 patent via an inter partes review (IPR) on grounds of obviousness, as part of a strategy to challenge a pharmaceutical s patents after shorting the stock. See Hedge-Fund Manager Kyle Bass Challenges Jazz Pharmaceuticals Patent. kyle-bass-challenges-jazz-pharmaceuticals-patent (subscription required). The IPR, no. IPR , raises the interesting issue, beyond the scope of this paper, that most features of the In 2010, Jazz filed suit against Roxane Laboratories for infringement of Orange Book-listed patents for Xyrem in response to an ANDA that Roxane had filed. The patents that Jazz alleged had been infringed included the 730, 106, and 107 REMS patents. 39 Roxane counterclaimed, asserting that the 730, 106, and 107 patents were improperly listed in the Orange Book because they all relate to a drug distribution system and method which utilizes a central pharmacy and database to track all prescriptions for a sensitive drug and do not claim an approved method of using the drug. 40 After several years of procedural wrangling, briefing has yet to take place in the case. In 2013, Jazz separately sued Amneal Pharmaceuticals and Par Pharmaceutical for infringement of Jazz s Orange Book listed patents in response to ANDAs that Amneal and Par had filed. 41 The cases have since been consolidated. Jazz filed additional suits against Amneal and Par in 2014 and 2015 to assert REMS method claimed in the 059 patent were the subject of discussions between Jazz and the FDA regarding appropriate measures to restrict distribution of Xyrem. 39 Jazz Pharmaceuticals, Inc. v. Roxane Laboratories, Inc., No. 2:10-cv (D. N.J. Nov. 22, 2010). A subsequent suit was filed in 2011 to assert infringement of the 059 patent (No. 2:11-cv (D. N.J. May 2, 2011)). The cases have been consolidated. 40 Answer, Affirmative Defenses, and Counterclaims to Plaintiff s Complaint at 7, No. 2:10-cv (D. N.J. Dec. 29, 2010) 41 Jazz Pharmaceuticals, Inc. v. Amneal Pharmaceuticals, LLC, No. 2:13-cv (D. N.J. Jan. 18, 2013); Jazz Pharmaceuticals, Inc. v. Par Pharmaceutical, Inc., No. 2:13-cv (D. N.J. Dec. 27, 2013). The AIPLA Antitrust News April 2015 Page 11

12 infringement of its more recently issued REMS patents. 42 These cases have not been consolidated with the prior action as of this writing. Par s and Amneal s counterclaims in the various cases assert that Jazz s listing of REMS patents in the Orange Book is an improper attempt to use its REMS to block or delay approval of ANDAs in violation of 21 U.S.C (f)(8) because the REMS patents do not claim indications or other conditions of use for Xyrem. Briefing has not yet taken place in these cases. In 2014, Jazz separately sued Ranbaxy Laboratories and Watson Laboratories for infringement of Jazz s Orange Book-listed patents in response to ANDAs that Ranbaxy and Watson had filed. 43 Though Ranbaxy and Watson have filed counterclaims, they have not alleged that Jazz s REMS patents were improperly listed in the Orange Book. Instead, Ranbaxy has only filed counterclaims seeking declarations of non-infringement and invalidity, while Watson has filed a motion to dismiss the action with respect to Jazz s REMS patents on the basis that each of the REMS patents is invalid as directed to patent ineligible subject matter under 35 U.S.C Briefing has not yet taken place in these cases. 42 Jazz Pharmaceuticals, Inc. v. Amneal Pharmaceuticals, LLC, No. 2:14-cv (D. N.J. May 20, 2014); Jazz Pharmaceuticals, Inc. v. Par Pharmaceutical, Inc., No. 2:14-cv (D. N.J. Aug. 15, 2014); Jazz Pharmaceuticals, Inc. v. Amneal Pharmaceuticals, LLC, No. 2:15-cv (D. N.J. Feb. 6, 2015). 43 Jazz Pharmaceuticals, Inc. v. Ranbaxy Laboratories Limited et al., No. 2:14-cv (D. N.J. Jul. 15, 2014); Jazz Pharmaceuticals, Inc. v. Watson Laboratories, Inc., No. 2:14-cv (D. N.J. Dec. 21, 2014). A preview of the 101 arguments likely to be made by Watson in its case against Jazz can be seen in an attempt by generic manufacturers to institute covered business method ( CBM ) reviews of six of Jazz s Orange Book-listed REMS patents, the 059, 988, 730, 182, 106, and 107 patents. 44 A CBM review, unlike a reexamination or an inter partes review, permits attacking a patent on grounds other than prior art, including subject matter eligibility under 35 U.S.C CBM review is available to challenge a patent only when the patent qualifies as a CBM patent, which USPTO regulations define as a patent claiming subject matter that is used in the practice, administration, or management of a financial product or service but is not a technological invention. 45 Although the Patent Trial and Appeal Board (PTAB) had previously taken an expansive view of what constitutes a CBM patent, 46 it denied all CBM petitions The AIPLA Antitrust News April 2015 Page Amneal Pharmaceuticals, LLC v. Jazz Pharmaceuticals, Inc. (CBM ); Amneal Pharmaceuticals, LLC v. Jazz Pharmaceuticals, Inc. (CBM ); Par Pharmaceutical, Inc. v. Jazz Pharmaceuticals, Inc. (CBM ); Amneal Pharmaceuticals, LLC v. Jazz Pharmaceuticals, Inc. (CBM ); Roxane Laboratories, Inc. v. Jazz Pharmaceuticals, Inc. (CBM ); Roxane Laboratories, Inc. v. Jazz Pharmaceuticals, Inc. (CBM ) CFR (a) ( Covered business method patent means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions. ). 46 In SAP America, Inc. v. Versata Development Group, Inc. (CBM ), the PTAB determined that a patent directed to pricing of a particular product for a particular purchaser was

13 of Jazz s REMS patents on the basis that the petitioners did not meet their burden 47 of demonstrating that the patents at issue related to a financial product or service. Although the PTAB denied the CBM petitions of Jazz s REMS patents, petitioners arguments regarding 101 subject matter eligibility are instructive. The petitioners advanced the following common arguments regarding the REMS method claims: (1) the claims cover an abstract idea because they can be performed without the use of a computer, for instance, by recording and organizing information by a pharmacist or pharmacy personnel either in his mind or using pen and paper 48 ; (2) the claims are less specific than the algorithms that were denied patent eligibility in Bilski and Gottschalk 49 ; (3) the method claims only indirectly reference a general purpose computer instead of reciting any practical application or a specific machine, which is insufficient to render the process patenteligible according to Mayo 50 ; and (4) the claims do not include meaningful limitations that extend beyond the abstract idea, analogous to the claims found to be ineligible in Alice where addition of a generic computer implementation feature was held to be a merely drafting effort to monopolize the abstract idea itself. 51 Final Thoughts The REMS system exists at the intersection of three important public policy issues: ensuring the safety of pharmaceuticals released to the public, patent protection for the parties that develop properly subject to CBM review (Paper No. 36, PTAB Jan. 9, 2013). The PTAB s decision to construe CBM broadly was based on the legislative history of CBM review and comments in the USPTO s notice of proposed rulemaking suggesting that the claimed subject matter may be incidental to financial activity and the patent need not be related to the financial services industry. Id. at The petitioner bears the burden of showing that the patent in issue claims a method used in the practice, administration, or management of a financial product or service. 37 CFR (a). 48 See, e.g., CBM at 34-36: The abstract nature of the method claims is further evident at the process can be carried out without a computer each of the simple steps recited in claim 1 can be performed by human pharmacy personnel, without the use of any computer hardware These data pertaining to prescriptions, doctors, and patients are easily recorded and organized by the human mind, or by the human mind using a pen and paper. 49 See, e.g., CBM at 39 (referencing Bilski v. Kappos, 130 S. Ct (2010) and Gottschalk v. Benson, 409 U.S. 63 (1972)): Method claims 1-15 each recite no practical application and even less structure than the more specific algorithms that nevertheless were found ineligible by the Supreme Court in Bilski and Gottschalk v. Benson, 409 U.S. 63 (1972). 50 See, e.g., CBM at (referencing Mayo Collaborative Servs. v. Prometheus Labs., Inc. 132 S. Ct (2012)): Adding a computer implementation limitation as an afterthought cannot save a claim directed to a purely mental concept Here, method claims 1-11 of 730 patent lack any inventive implementation steps and, at most, merely use a computer to accelerate an ineligible mental process. 51 See, e.g., CBM at 48 (referencing Alice Corp. v. CLS Bank Int l, 573 US (2014)): Like how Alice s claim preempted the abstract idea of using an intermediary to mitigate settlement risk, the 182 patent here preempts the abstract idea of maintaining records regarding drug distribution to control risk of abuse. Like in Alice, the 182 patent s generic computer recitations are no more than a drafting effort designed to monopolize the abstract idea. The AIPLA Antitrust News April 2015 Page 13

14 those pharmaceuticals, and the role that generics play providing greater accessibility to the pharmaceuticals. To date, this intersection remains combative, with accusations from generic pharmaceutical manufacturers that their branded counterparts are effectively using the REMS system as an instrument to hinder the development of generics. Though there have been multiple disputes between branded and generic manufacturers over these matters, to date none of these disputes have been decided on the merits. Legislation to resolve these issues is likewise mostly academic at this point. Though the lawsuits and the intent of pending legislation offer some guidance about the future of the REMS system, significant clarification is still required. The AIPLA Antitrust News April 2015 Page 14