The biologics industry has been closely monitoring Amgen Inc.’s (“Amgen’s”) lawsuit against Sandoz Inc. (“Sandoz”) for refusing to engage in the BPCIA’s “patent dance” with respect to Sandoz’s application for Zarxio®, a biosimilar of Amgen’s Neupogen® (filgrastim), to see what, if any, guidance the district court would provide on the interpretation of the BPCIA. See Left without a Partner: Amgen Sues Sandoz for Refusing to Dance in Accordance with BPCIA Patent Procedures. This litigation has sparked additional interest in view of FDA’s recent approval of Zarxio®, which has led to industry-wide speculation regarding the litigation’s potential impact on Sandoz’s ability to market its now approved biosimilar. See FDA Approves First Biosimilar: Sandoz’s Zarxio®. The District Court of the Northern District of California has now provided an answer, siding with Sandoz’s interpretation that the BPCIA’s patent dance provisions are optional and the 180 day notice provision does not require licensure, and denying Amgen’s request for a preliminary injunction.
The Court came to this conclusion while ruling on the parties’ cross-motions for partial summary judgment or judgment on the pleadings and Amgen’s injunction request. Specifically, Amgen moved for partial judgment on the pleadings or, alternatively, partial summary judgment on Sandoz’s alleged BPCIA violations that caused unlawful competition and for declaratory judgment barring Sandoz’s counterclaims of noninfringement and invalidity of Amgen’s asserted patent. Amgen, Inc., et al. v. Sandoz, Inc., et al., Case No. 14-cv-04741-RS, Dkt. 105 at 6-7 (N.D. Cal. March 19, 2015). Sandoz cross-moved for partial judgment on the pleadings for declaratory judgment on its counterclaims regarding its interpretation of the BPCIA patent dance requirements, that the BPCIA preempts or renders remedies under unlawful competition and conversion claims unlawful, and that a reference product sponsor does not maintain exclusive possession or control over its biologic product license. Id. at 7. Sandoz also moved for dismissal of Amgen’s unlawful competition and conversion claims as well as denial of Amgen’s motion. Id. Amgen also requested a preliminary injunction to prevent Sandoz from entering the market with Zarxio® until a decision on the merits of the case has issued. Id. at 2.
Judge Richard Seeborg issued a detailed opinion outlining the parties’ positions, discussing the BPCIA provisions at issue, and explaining the reasons for his decision. In his opinion, Judge Seeborg noted that, since Amgen’s preliminary injunction request, the parties stipulated that Sandoz would not market Zarxio® until the earlier of partial judgment on the pleadings in its favor or April 10, 2015. Id. at 2, n.3. Additionally, Sandoz agreed to provide Amgen with five days’ notice prior to launching Zarxio® should it receive a favorable ruling. Id. This suggests that Amgen’s preliminary injunction request was not as significant as the industry suspected.
Interpretation of the Patent Dance Provisions
Although the statute repeatedly uses “shall” to describe the parties’ patent dance obligations under 42 U.S.C. Section 262(l)(2)-(8), Judge Seeborg found that “that an action ‘shall’ be taken does not imply it is mandatory in all contexts.” Id. at 9. Siding with Sandoz’s overall statutory interpretation, Judge Seeborg reasoned that “if both parties wish to take advantage of [subsection (l)’s] disclosure procedures, then they ‘shall’ follow the prescribed procedures; in other words, these procedures are ‘required’ where the parties elect to take advantage of their benefits, and may be taken away when parties ‘fail.’” Id. Compliance with subsection (l) allows a biosimilar applicant to enjoy “a temporary safe harbor from litigation” and gives the parties the opportunity to resolve or narrow patent disputes outside of any court proceedings. Id. Further, subparagraphs (l)(9)(B) and (C) dictate what occurs when a biosimilar applicant fails to comply with disclosure procedures or fails to complete the process once initiated, which is removal or preclusion of the litigation safe harbor by allowing the reference product sponsor to immediately begin patent litigation after failed compliance. Id. at 10.
To further support his opinion, Judge Seeborg cited to Congress’ addition “that an applicant’s failure to disclosure information regarding a potentially infringed patent under subsection (l)’s requirements is immediately actionable” as a clear indication that such a dispute is ripe for adjudication. Id. Judge Seeborg also cited case law from the District of Minnesota that found that a statutory provision containing “shall” was not mandatory because the statute specifically contemplated failure to comply and outlined the consequences of doing so. Id. Additionally, Judge Seeborg noted that subparagraph (l)(8)(B) provides the remedy of a preliminary injunction in the event of a biosimilar applicant’s failure to provide the 180 day notice required in (l)(8)(A). Id. This further evidenced Congress’ intent to “merely encourage use of the statute’s dispute resolution process in favor of litigation” by providing “the carrot of a safe harbor for [biosimilar] applicants who otherwise would remain vulnerable to suit.” Id. Judge Seeborg also observed that the BPCIA does not provide “a stick” to force compliance. Id. at 10-11. Instead, the biosimilar applicant has the decision to either engage in the process set forth in subsection (l), which can take up to 230 days to commence litigation, or to forgo the disclosure process in favor of expediency and invite immediate litigation. Id. at 11. Sandoz’s decision to pursue the expediency of an immediate lawsuit instead of engage in the patent dance was permissible under the BPCIA’s “plain language and overall statutory scheme.” Id. at 12.
Interpretation of the 180 Day Notice Provision
Judge Seeborg also sided with Sandoz’s interpretation of 42 U.S.C. Section 262(l)(8), which in subpargraph (A) states that a biosimilar applicant “shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).” Id. at 12 (internal quotations omitted). The reference product sponsor may then either seek an injunction and/or initial a declaratory judgment action. Id. Judge Seeborg reasoned that “the more persuasive interpretation accounts for the fact that FDA approval must precede market entry.” Id. at 13. Accordingly, Judge Seeborg concluded that “before” modifies “first commercial marketing” and “licensed” only refers to a “biological product,” not the time for notice. Id. He further explained that, under Amgen’s reading, notice can only be given after a biosimilar is licensed—an unconditional extra six months of market exclusivity would be added to the 12 years the reference product sponsor already enjoys under 42 U.S.C. Section 262(k)(7)(A). Id. If Congress intended to extend the exclusivity period, it could have done so more clearly. Id. at 13-14. Further, Judge Seeborg reasoned that if Congress intended for infringement suits to begin only after a biosimilar receives FDA approval, it could have been more explicit in its drafting. Id. at 14. Accordingly, it was not wrongful for Sandoz to provide Amgen with its 180 days’ notice in advanced of receiving FDA approval. Id. Judge Seeborg noted that if Sandoz had failed to provide notice, it would only be subject to an action for declaratory judgment regarding patent infringement, validity, or enforceability, as set forth in 42 USC 262(l)(9)(B). Id. at n.8.
Amgen’s Unlawful Competition and Conversion Claims
In view of Judge Seeborg’s interpretation, Sandoz did not violate any provisions of the BPCIA or otherwise engage in any unlawful or wrongful acts that could sustain Amgen’s unlawful competition and conversion claims. Id. at 14. Moreover, the BPCIA expressly contemplates that a biosimilar applicant will “rely on the reference product’s license and other publicly available safety and efficacy information about the reference product.” Id. at 15. Accordingly, Amgen’s unlawful competition/business practices and conversion claims were dismissed with prejudice. Id.
Sandoz’s Counterclaims for Patent Noninfringement and Invalidity
Judge Seeborg noted that “[a]sserting a counterclaim is not the equivalent of commencing a lawsuit.” Id. at 16. The BPCIA only addresses a biosimilar applicant’s ability to bring an action, not a counterclaim. Id. Subparagraph (l)(9)(C) states that “the reference product sponsor, but not the subsection (k) applicant, may bring an action… for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.” Id.at 15-16 (internal quotations omitted). Further, Sandoz’s counterclaims were compulsory in response to Amgen’s claims and would have been waived if they were not asserted. Id. at 16. Thus, Sandoz’s counterclaims regarding noninfringement and invalidity of Amgen’s asserted patent are not barred by the BPCIA. Id.
Amgen’s Request for Preliminary Injunction
In view of Amgen’s failure to show that its unlawful competition or conversion claims were viable and its decision to not yet proceed on its infringement claim, Amgen cannot demonstrate serious questions as to the merits or a likelihood of success. Id. at 17. Further, Amgen cannot carry its burden of demonstrating irreparable harm absent injunctive relief. Id. at 17. The harms raised by Amgen, all related to diversion of resources and market difficulties, were found to be “at best highly speculative” and based on the “unproven premise that Sandoz has infringed a valid patent belonging to Amgen.” Id. at 18. Since Amgen has not yet raised its infringement contentions for disposition, it must be assumed that no such infringement has occurred. Id. Further, the 12 year period for market exclusivity of Neupogen® has long since expired, resulting in no substantive bar to market entry for Zarxio® and, therefore, no basis for Amgen’s requested injunctive relief. Id.
Status of BPCIA Interpretation
Judge Seeborg’s interpretation of the BPCIA patent dance provisions as being optional flies in the face of Judge Paul A. Crotty’s suggestion that these provisions are mandatory. See Declaratory Judgment Action Premature: Decision Suggests “Patent Dance” Mandatory for Biosimilar Applicants. However, it is unclear whether Judge Crotty’s interpretation is persuasive in view of the Federal Circuit’s express refusal to address his interpretation of the BPCIA. See Federal Circuit Affirms Dismissal of Sandoz’s BPCIA-Related Declaratory Judgment Action Regarding Enbrel® Patents, but Declines to Address BPCIA Interpretation. Amgen will likely appeal Judge Seeborg’s decision, which may force the Federal Circuit to finally weigh in on the proper interpretation of the BPCIA.
K&L Gates will continue to monitor this litigation to see what further developments may arise.
