PA Federal Business Decisions Volume 13, No. 2

Business Litigation Update

Pennsylvania Federal Business Decisions
Bridget M. Gillespie and Henry M. Sneath, Business Decisions Editors [Originally published in the Summer 2008 edition of the Pennsylvania Bar Association's Civil Litigation Update]

Generic Drug Applicant is Not Permitted to Send ANDA Paragraph IV Notice to Patentee Before Time Period Provided Under the Hatch Waxman Act's Paragraph IV Process

In SB Pharmco Puerto Rico, Inc. v. Mutual Pharmaceutical Co, Inc., 2008 U.S. Dist. LEXIS 34433 (E.D. Pa. 2008), the Court reviewed the Abbreviated New Drug Application ("ANDA") process under the Hatch-Waxman Act to market a generic version of a previously approved FDA drug in connection with SB Pharmco's declaratory judgment action against Mutual. As holder of patents listed with the FDA on its FDA-approved drug, SD Pharmco sought a judgment that Mutual's notice of ANDA application was improper and premature.

Congress passed the Hatch-Waxman Act in 1984 to ease the process for approval to market generic drugs. Under 21 U.S.C. § 355(j), a maker of a drug that is a generic version and bioequivalent of a pioneer drug registered with the FDA may file an ANDA, which allows the generic manufacturer to rely upon clinical studies conducted by the pioneer drug manufacturer. When Congress passed the Act, it intended to increase the availability of generic drugs while protecting the patents claimed in the pioneer drugs. Therefore, a generic drug applicant must certify when filing its ANDA that the generic drug will not infringe on any of the listed patents of the pioneer drug.

Under 21 U.S.C. § 355(j)(2)(A)(vii)(I)-(IV), the ANDA applicant has four options to certify that its generic drug will not infringe upon the patents covering the pioneer drug: (I) that the required patent information has not been filed; (II) that the patent has expired; (III) that the patent has not expired, but will expire on a particular date, or (IV) that the patent is invalid or will not be infringed by the drug for which the applicant seeks approval. An ANDA applicant that files a Paragraph IV certification must give notice to the patent holder stating that its patent is invalid or is not infringed by the generic drug. The notice advises the patent holder that an ANDA has been filed seeking approval to manufacture, use or sell the generic drug, which the ANDA applicant does not believe to infringe the patents associated with the pioneer drug.

The ANDA applicant is required to send the Paragraph IV notice to the patent holder once it receives confirmation from the FDA that the ANDA has been accepted as received. The patent holder subsequently has forty-five days to initiate a patent infringement suit against the ANDA applicant. If the patent holder fails to initiate an action, the ANDA will become effective immediately. On the other hand, if the patent holder files a suit, the ANDA may not be approved until the Court finds that the patent is invalid, not infringed or until the expiration of thirty months, whichever occurs first.

SB Pharmco owned the patent for the compound COREG CR and for methods of using the compound to treat various heart conditions. The patent was also listed with the FDA. Six months after issuance of SB Pharmco's patent and the FDA's approval of COREG CR, Mutual submitted an ANDA for the generic version of COREG CR. One month later and before receiving a notification from the FDA informing Mutual that its ANDA had been received, Mutual filed an amendment to the ANDA, which contained a Paragraph IV certification that the generic drug did not infringe SB Pharmco's patent.

When Mutual refused SB Pharmco's request to withdraw the Paragraph IV notice, SB Pharmco waited the statutory response time of forty-five days from the date it received the Paragraph IV notice and filed a declaratory judgment action on the last day to avoid a declaration that its patent was not infringed by the generic drug. After filing the declaratory judgment action against Mutual, SB Pharmco filed, and the Court granted, its motion for judgment on the pleadings finding that Mutual was not entitled to trigger the ANDA litigation process with the invalid Paragraph IV notice.

To arrive at its holding, the Court first reviewed the procedure for submitting an ANDA under 21 C.F.R. § 314.101 and found that the FDA is actually in receipt of an ANDA when the FDA has made a determination that the application is "sufficiently complete to permit a substantive review." There is a period of limbo between the date the FDA has received the ANDA, but before it has been determined to be complete for review and therefore officially filed. A review of the FDA's response to the comments on the proposed C.F.R. suggestion and the applicable section of the Hatch-Waxman Act supported the same conclusion. The FDA's comment revealed that it determined that there was a distinction between "physically received" ANDAs, which may eventually be determined to be complete, and "officially received" ANDAs which are complete enough to be reviewed. The Paragraph IV notice provision in the Hatch-Waxman Act also supported the contention that the ANDA applicant is only to send Paragraph IV notice to the patent holder after the applicant has received notice from the FDA that the application has been filed and sufficiently complete for review.

The Court therefore rejected Mutual's argument that the Act did not prohibit it from voluntarily sending Paragraph IV notice prior to receiving acceptance from the FDA. The Court found that Mutual's contention would permit an ANDA applicant to trigger the patent litigation at any time it chooses, which would defeat the purpose of the timing requirement. The timing requirement of a Paragraph IV notice is intricately related to the patent litigation statutory framework since the notice triggers a forty-five day period in which the patent holder may file a patent infringement action. Further, approval of an ANDA is delayed for thirty months or until the litigation has ended. Such an ANDA would not normally meet the requirement of the "case and controversy" requirement for jurisdiction in federal court; however, the Act provides a section which qualifies the filing of a Paragraph IV notice as an artificial act of infringement sufficient for federal jurisdiction. Therefore, even though the applicants were not actually infringing SB Pharmco's patent by actually making or selling the patented drug, statutory section 271(e)(2) defined the act of filing an ANDA as creating a case or controversy to enable the Court to resolve the dispute involving infringement.

Since the process under a Paragraph IV notice provision requires that the notice should not be sent to the patent holder until after the FDA accepts the application for review, the process protects the statutory litigation trigger from resulting in an unnecessary patent infringement action resulting from incomplete ANDAs. Such a protection saves valuable resources from both parties being needlessly wasted by premature patent litigation.

The Court further rejected Mutual's argument that it was actually required to file a notice under section 355(j)(2)(B)(ii)(II), which provides in a vacuum that upon the filing of an amended application the applicant shall provide the Paragraph IV notice. Upon review of the statutory section as a whole, the Court found that Mutual's assertion lacked logic and that the statute specifically referenced that Paragraph IV notice is proper where the amendment was filed to an ANDA that the FDA already accepted for review. If the applicant was permitted to send a Paragraph IV notice amending an ANDA not yet accepted for review, the applicant could speed the process for patent ligation beyond Congress' intention. Therefore, the ANDA applicant must adhere to the timelines provided under the Paragraph IV process.

--Contributed by Elaine J. Wizzard, Esquire, Picadio Sneath Miller & Norton, P.C., Pittsburgh, PA; ewizzard@psmn.com

Prejudgment Interest Awarded for Copyright Infringement

In William A. Graham Company v. Haughey, 2008 U.S. Dist. LEXIS 26396 (E.D. Pa. 2008), the Court was asked to decide whether to award pre-judgment interest to a plaintiff which successfully proved defendants infringed its copyright. The Court held that pre-judgment interest can be awarded under the Copyright Act, 17 U.S.C. §§ 101 et seq., and that plaintiff was entitled to pre-judgment interest under the facts of this case.

The Copyright Act does not address the subject. Moreover, the Third Circuit has not addressed it. Consequently, the Court relied upon the Third Circuit's reaffirmance in the ERISA context of "the long standing rule that, in the absence of an explicit statutory command otherwise, district courts have broad discretion to award pre-judgment interest on a judgment obtained pursuant to a federal statute." Additionally, the Court noted, of the courts outside the Third Circuit to consider the issue, a majority have determined that pre-judgment interest may be added under the Copyright Act in appropriate circumstances.

Turning to whether or not pre-judgment interest should be awarded under the facts of this case, the Court was guided by the holdings of the Sixth and Ninth Circuits that pre-judgment interest should be awarded under the Copyright Act when dong so would further the statute's purposes of making copyright holders whole and removing incentives for copyright infringement. In this case, plaintiff was only awarded defendants' profits, plaintiff was not awarded damages based on its losses. The Court agreed with defendant that pre-judgment interest on an infringer's profits cannot be justified on the ground that it is necessary to make plaintiff whole. However, the Court found it was justified on the ground that such an award removes the incentives for infringement, especially in the instances where the infringement was willful, as it was in this case.

The Court also decided the applicable interest rate. In its discretion, the Court rejected plaintiff's suggestion to apply the annual prime rate. Instead, the Court applied the T-Bill rate. The Court considered the benefit defendants would receive from investing the wrongly-obtained profits. The Court found that it is that amount of indirect profit which must be added to the judgment to ensure that defendants disgorge all benefits from their infringement. Based upon this, the Court considered the T-Bill rate to be a fair approximation of any benefit defendants obtained from the use of their wrongfully obtained profits.

Finally, the Court calculated the amount of pre-judgment interest. The Court first apportioned the total verdict amount among the years and partial years of the damages period. Then it multiplied the apportioned verdict amount for each year by the T-Bill rate and added the resultant sums, compounding interest annually.

--Contributed by Kelly A. Williams, Esquire, Picadio Sneath Miller & Norton, P.C., Pittsburgh, PA; kwilliams@psmn.com

Similarity in Literary Elements Insufficient to Support Claim for Copyright Infringement

In Douglas v. Osteen, 2008 U.S. Dist. LEXIS 40152 (E.D. Pa. 2008), Defendant Reverend Joel Osteen filed a motion to dismiss a copyright and trademark infringement suit filed by Plaintiff Reverend Herman Douglas, Sr. Douglas, who was acting pro se, also included claims for violation of the UTPCPL and tortious interference with contractual relations. Douglas was the author of a book entitled Prayer Power in the Eyes of Faith. Douglas filed suit alleging that Osteen's book, entitled Your Best Life Now: 7 Steps for Living at Your Full Potential, had infringed on his book.

Both Douglas' and Osteen's books were motivational religious books. Douglas alleged that there were substantial similarities in the two books. Specifically, Douglas alleged that Osteen used a portion of the title of his book, the same biblical stories, similar words and expressions, and the same literary style. Osteen countered that Douglas had failed to state a claim for copyright infringement because: titles of books cannot be copyrighted, and short phrases, or biblical stories in the public domain, as well as use of the same literary style did not rise to a finding of "substantial similarity."

The Court agreed with Osteen, granting his motion to dismiss Douglas' copyright infringement claim. The Court agreed that book titles, as well as short phrases, cannot be copyrighted, and that the biblical stories were in the public domain. The Court noted that, given that the two books at issue both explored the idea of religious motivation, it was unsurprising that they would contain the same biblical stories, similar expressions and phrases, and similar literary styles.

In his trademark infringement claim, Douglas asserted an unregistered trademark in the title of his book,Prayer Power in the Eyes of Faith, which he alleged constituted a descriptive mark. The Court rejected Douglas' claim, holding that Douglas had failed to allege any likelihood of confusion resulting from Osteen's alleged use of the trademark four times on one page of his differently-titled book. The Court further rejected Douglas' claimed trademark in the phrase "eyes of faith" because Douglas had failed to allege a secondary meaning for the phrase, and could not prove that the phrase "eyes of faith" distinguished his book from the products of others, especially in light of the fact that the phrase was widely used in literary and religious circles.

The Court also dismissed Douglas' remaining claims.

--Contributed by Stephen S. Photopoulos, Esquire, Picadio Sneath Miller & Norton, P.C., Pittsburgh, PA

Pending Infringement Actions on Same Trademark Not Grounds for Early Dismissal

In Just Enterprises, Inc. v. O'Malley & Langan, P.C., 2008 U.S. Dist. LEXIS 42909 (M.D. Pa. 2008), Defendant O'Malley & Langan, P.C. filed a motion to dismiss a trademark infringement suit filed by Plaintiff Just Enterprises, Inc. ("JEI"). JEI, a Missouri corporation, registered the trademark 1-800-JUSTICE for use in connection with its legal referral services. O'Malley & Langan, a law firm based in Scranton, PA, used the mark (888) JUSTICE in connection with its legal business.

This case apparently stems from a trademark dispute between JEI and (888) Justice, Inc., a New York corporation, over the use of the marks 1-800-JUSTICE and (888) JUSTICE. See Just Enters. v. (888) Justice, Inc., 2007 U.S. Dist. LEXIS 9040 (W.D. Mo. 2007); see also (888) Justice, Inc. v. Just Enters., 2007 U.S. Dist. LEXIS 61849 (S.D.N.Y. 2007). O'Malley & Langan licensed the allegedly infringing mark (888) JUSTICE from (888) Justice, Inc.

After sending cease and desist letters to O'Malley & Langan, JEI filed an action in the Middle District of Pennsylvania claiming that O'Malley & Langan's mark infringed upon JEI's trademark because it caused "consumer confusion, mistake and deception." JEI's Complaint alleged counts for trademark infringement pursuant to 15 U.S.C. § 1114 and false designation of origin in violation of 15 U.S.C. § 1125(a), as well as state law claims for unfair competition and common law trademark infringement.

In its motion to dismiss, O'Malley & Langan asserted, inter alia, that the case should be dismissed because JEI had filed lawsuits in five different federal courts which involve identical legal issues arising from the use of (888) JUSTICE. O'Malley & Langan argued that dismissal would promote judicial economy because the earlier-filed action in the Western District of Missouri was further along in discovery and would likely reach a decision first. The Court, however, declined to dismiss the case because there the parties were not identical. Citing the "first-filed" rule outlined by the Third Circuit in EEOC v. University of Pennsylvania, 850 F.2d 969, 971 (3d Cir. 1988), the Court found that although JEI was a party in the other federal lawsuits, O'Malley & Langan was not, and therefore the Court was not compelled to abstain from hearing the case.

O'Malley & Langan also filed a motion to stay and motion for sanctions based upon the additional lawsuits filed by JEI. The Court denied both motions, ruling that the other actions would have no legal effect upon the case despite O'Malley & Langan's assertions that JEI would be barred by the doctrine of res judicata.