The Federal Circuit's decision in the consolidated appeals of Endo Pharmaceuticals Inc. v. Actavis, Inc. and Endo Pharmaceuticals Inc. v. Roxane Laboratories, Inc. amply demonstrates the concept that you should be careful what you bargain for, wherein the Court held that a prior ANDA settlement agreement provides neither express or implied licenses to newly issued patents.  As a consequence, the Court reversed the District Court's denial of a preliminary injunction against the generic defendants and remanded for continuation of the current (ANDA) litigation.

The case involved Endo's Opana® ER (extended release) tablet for the opioid painkiller oxymorphone.  Prior ANDA litigation between Endo and the generic defendants settled with an agreement between the parties independently, the relevant provisions of the Roxane Agreement that define "Licensed Patents" as:

(a) any [U.S.] patents that are both (i) now owned by Endo . . . and (ii) issued as of the Effective Date of this Agreement, including the Opana® ER Patents,
(b) any [U.S.] patent applications that claim priority to the Opana® ER Patents, including any continuation, continuation-in-part and divisional patent applications that claim priority to Opana® ER Patents, and
(c) any patents resulting from the reissue or reexamination of patents or patent application of pa- tents or patent applications comprised within clauses (a) and (b) . . .  [emphasis in opinion]

where the Agreement defines "Opana® ER patents" to be U.S. Patent Nos. 5,662,933, 5,958,456, and 7,276,250.  The Agreement also contained a "covenant not to sue" with regard to the Licensed Patents, and a "No Implied Rights" provision stating that Endo did not grant any other license or right "whether by implication, estoppel or otherwise, other than as expressly granted herein."  (The Federal Circuit opinion characterizes the Actavis Agreement as being "similar" but that it grants the license, covenant not to sue, and contains the No Implied Right section with regard to an additional patent not at issue in the appeal.)

The patents now at issue between the parties granted after settlement of the earlier litigation (U.S. Patent Nos. 8,309,122 and 8,329,216) or were acquired by Endo (U.S. Patent No. 7,851,482); the latter patent is only at issue between Endo and Actavis.  The District Court denied Endo's motion for preliminary injunction, the Court stating that "this is a highly unfair and unjust situation if . . . infringement of the new patents would stop the marketing and permitting process that was going on by Actavis and Roxane."  The District Court stated in its decision that "as a matter of law . . . Endo is estopped from claiming that the activity of Actavis and Roxane, which has gone on for a substantial period of time, is now suddenly barred because of these new patents."

The Federal Circuit reversed, in an opinion by Judge Moore joined in full by Judge Newman and in part by Judge Dyk, who also dissented in part.  With regard to the generic defendant Roxane's contention that they had an express license under the Agreement for the asserted patents, Judge Moore was blunt, stating that this argument is "meritless."  This argument is based on the relationship between the patents-in-suit and licensed patents, wherein the '122 and '216 patents claim priority to a provisional patent application that was the priority document for one of the Licensed Patents (specifically, U.S. Patent No. 7,276,250).  Roxane contended that the language of the license, wherein the licensed patents "included continuation, continuation-in-part, and divisional applications that claim priority to the Opana® ER Patents" indicated that the provision was not limited to those species but would include inter alia patents such as the '122 and '216 patents by virtue of their common priority document with the expressly licensed patents.  Judge Moore based her analysis on the definition of "continuation, continuation-in-part, and divisional applications," stating (in a footnote) that "[t]he '122 and '216 patents do not have the same disclosure as the '250 patent, nor do they claim priority to the application that issued as the '250 patent.  To be continuations of the '250 patent, the '122 and '216 patents would have to, on their face, expressly indicate that they are continuations of the application that issued as the '250 patent [and] unequivocally, they do not."  Nor, according to the opinion, do the '122 and '216 patents cross-reference or otherwise expressly claim priority to any of the Licensed Patents.  Judge Moore was also not persuaded that the word "including" in the license "somehow broadens what it means to 'claim priority to' another patent," stating that "[t]here is no reading of this language that extends coverage to patents that merely have a provisional application in common with the licensed patents."  The opinion illustrates this with a graphic showing the relationships between the various patents:

As for the '492 patent, the opinion characterizes this patent as being "completely unrelated to any of the previously licensed patents, and is likewise not covered by the agreement."

Turning to the generic defendants' implied license argument, the Court was equally unpersuaded (at least regarding Roxane's allegations).  The opinion specifically distinguishes the situation before it in this case with the Court's prior decision in TransCore, LP v. Electronic Transaction Consultants Corp., 563 F.3d 1271, 1279 (Fed. Cir. 2009), where the patentee was legally estopped from bringing a second infringement action even though the earlier settlement agreement stated that it "shall not apply to any other patents."  The opinion states that no one, not even a patentee, has an "absolute right" to "make, use and sell" a product.  Thus, no license agreement from a patentee can confer (or transfer) a right the patentee does not have.  The concept of estoppel, according to the Court, is "a narrow category of conduct encompassing scenarios where a patentee has licensed or assigned a right, received consideration, and then sought to derogate from the right granted" (emphasis in opinion).  One distinction the opinion notes with the TransCore case is that there, the patentee was "asserting a patent whose claim scope fully encompassed that of the claims of one of the licensed patents" and that "the asserted patent claims were broader than the licensed claims."  According to the opinion, the narrowness of this exception was consistently adhered to by the Court in later applications of the doctrine, for example, General Protecht Group, Inc. v. Leviton Manufacturing Co., Inc., 651 F.3d 1355, 1361 (Fed. Cir. 2011) (where the asserted patents had "[t]he same inventive subject matter [as that] disclosed in the licensed patents" and "[t]he same products were accused), and Intel Corp. v. Negotiated Data Solutions, Inc., 703 F.3d 1360, 1366 (Fed. Cir. 2012), both cases involving continuation applications claiming priority to a licensed patent.  The opinion expressly refuses to "expand the implied license doctrine," stating "You get what you bargain for."  Endo has not granted a license to "an idea" but rather to "specific patents and patent applications."  Citing Spindelfabrik Suessen- Schurr, Stahlecker & Grill GmbH v. Schubert & Salzer Maschinefabrik Aktiengesellschaft, 829 F.2d 1075, 1081 (Fed. Cir. 1987), the opinion concludes that ""patent license agreements can be written to convey different scopes of promises not to sue, e.g., a promise not to sue under a specific patent or, more broadly, a promise not to sue under any patent the licensor now has or may acquire in the future."  "Having agreed to licenses that do not cover the patents at issue in these appeals, Appellees will not now be heard to complain."

Judge Dyk dissented only with regard to whether Actavis had an implied license under its Agreement to the '122 and '216 patents.  In this regard Judge Dyk cites the factual distinction between the generic parties that Endo had obtained the '122 and '216 patent applications while negotiating with Actavis and did not disclose their existence for Actavis (but did disclose them to Roxane), as well as differences in the language in the two Agreements that have (to him) significance with regard to the scope of the licenses.  Under his appreciation of the facts, the relationship between the priority document for the '250 patent and the '122 and '216 patents is enough to create an implied license under the Activis Agreement in view of the Court's TransCore and General Protecht Group precedents, and he would affirm the District Court as to this defendant and these patents.

Endo Pharmaceuticals Inc. v. Actavis, Inc. & Endo Pharmaceuticals Inc. v. Roxane Laboratories, Inc. (Fed. Cir. 2014)
Panel: Circuit Judges Newman, Dyk, and Moore
Opinion by Circuit Judge Moore; dissenting-in-part opinion by Circuit Judge Dyk