Beyond the Merits: Generic Company Defense Strategies

On January 27, 1880, the United States Patent and Trademark Office issued U.S. Patent No. 223,898 to Thomas Edison for his invention, the incandescent lamp. Despite Mr. Edison’s substantial contribution to the scientific arts, which brought the first practical, electric light into existence, the device was protected by only a single United States patent.

Fast forward 138 years. Whereas only a single patent may have been necessary to protect Mr. Edison’s innovation in the 19^th century, it is not uncommon today for multiple patents to cover a single product or device. In the pharmaceutical industry, in particular, brand innovators can take advantage of any number of rules, regulations, and statutes to build a wall of patent protection on single pharmaceutical drug fortified with multiple, or even multiple dozens of patents. For example, 19 patents comprising seven different patent families are listed in the Orange Book for Purdue’s reformulated version of its OxyContin product. 36 patents comprising seven patent families are listed in the Orange Book for Hysingla ER, another opioid product manufactured and sold by Purdue.

In the context of litigation under the Hatch-Waxman Act, the wall of patent protection built by the brand does more than set out the metes-and-bounds of the brand’s property rights; it also allows the brand to defend against generic market entry using patent prosecution and litigation strategies that can strain the human and financial resources of the generic litigant embroiled in litigation under the Hatch-Waxman Act, and generally allow the brand to side-step the overarching objective of the Act-that is, to facilitate early resolution of patent disputes with respect to pharmaceutical products. These strategies can be weaponized by (1) maintaining a high number of asserted claims in litigation, and (2) prosecuting child applications during the pendency of litigation.

Asserting a high number of claims in a patent infringement action is a strategy that necessarily drives up the cost of defense, which in turn allows “junk patents to proliferate” and creates “[t]hickets of dubious patents” that “can stifle innovation and deter new market entrants.” Using this strategy, patentees can assert hundreds of claims early in the case and then resist narrowing their case until much closer to trial, which in turn forces defendants to litigate all claims, including by providing time-consuming and costly invalidity contentions and, in some jurisdictions such as New Jersey, non-infringement contentions. The need to engage in fact and expert discovery with respect to each claim often leads to delays in the governing case schedule and a risk of delay to the trial date, which is often of central importance to the generic litigant seeking to enter the market or force another generic to enter the market.

Child applications can similarly be used as effective tools to delay litigation. These applications come in three breeds-divisionals, continuations, and continuations-in-part (“CIPs”). Continuations and CIPs, in particular, are tremendously powerful tools that can be used flexibly to respond to real-world events impacting the value of an underlying patent application. Through these child applications, new claims can be added to cover a competitor’s product, or to respond to litigation events, such as claim construction decisions or judgments of invalidity, which can impact the value of the claims that issued from the underlying parent application.

So how do brands weaponize these strategies in litigation against potential generic competitors?

Imagine the following scenario:

A generic competitor seeking to introduce a lower-cost alternative to a brand-named product commences the procedure outlined in the Hatch-Waxman Act by filing “Paragraph IV” certifications against the patents listed by the brand in the Orange Book. The brand company files a civil action, which results in the FDA staying approval of the lower-cost alternative for 30 months.

The brand asserts hundreds of claims at the outset of the case, which forces the generic competitor to expends significant financial and human resources to prove that the lower-cost alternative does not infringe the brand’s patents, and that the brand’s patents are invalid.

Behind the scenes, the brand company is at work prosecuting child applications stemming from the parent applications that issued as the patents originally listed in the Orange Book. The brand company monitors the litigation with the generic competitor and modifies applications as necessary to account for litigation events, including claim construction and expert reports, in an effort to protect against potentially negative court decisions on the original set of Orange Book-listed patents. At the same time, the brand resists narrowing the scope of asserted claims, and continues to maintain a number of claims that is well beyond what a court would allow at trial.

The brand company times its child applications perfectly. At the tail end of expert discovery in the litigation involving the generic competitor, new patents issue from the child applications with new claims directed to seemingly similar subject matter. The newly-issued patents are then listed in the Orange Book, and, ultimately, asserted against the generic in the already pending litigation.

A hearing is scheduled with the court to discuss consolidation of the newly-issued patents and, naturally, an extension of the trial date. The brand requests that the court extend the trial date to afford the generic competitor adequate time to mount a defense to the brand’s strategic patent prosecution practices. Because these patents are directed to the same product currently being litigated, the court has an incentive to consolidate the newly-filed complaint with the original. The generic litigant also has an incentive to consolidate the newly asserted patents so as to achieve a single resolution on all asserted patents, thus forestalling the possibility of having to launch at-risk.

The court extends the trial date by a few months, and agrees that the generic competitor should be afforded a second round of discovery. Because of the modest delay of the trial date, however, the second round of discovery is heavily compressed, which requires that the generic litigant double-track its trial preparations, including preparation of the pretrial order-itself a massive undertaking in pharmaceutical patent litigation.  

Throughout this process, the brand continues to maintain a high number of asserted claims well beyond what it could reasonably expect to address at trial. The generic competitor, in turn, is forced to litigate its defenses on all asserted patents and claims, but ultimately is blind-until the last possible moment-as to which patents and claims the brand will bring forward to trial.

This is not a hypothetical scenario, but rather one that played out in a case that my firm and I recently handled. To defend against this strategy, the generic litigant must take action by going beyond the merits of its patent defense.

Demand claim reduction at every opportunity

Faced with potentially hundreds of asserted claims across multiple patents at the outset of a Hatch-Waxman litigation, and additional claims from patents issuing from later child applications, the generic litigant should pursue claim reduction at every stage of litigation, not simply when the child applications issue as new patents and the brand seeks further consolidation.

Courts are cognizant of the toll that an assertion of an excessive number of patent claims can have on defendants and the courts. Indeed, the case law is replete with examples of courts ordering a reduction in the number of asserted claims, usually after fact discovery and prior to claim construction, with some courts recognizing that waiting to reduce until after claim construction is too late in the litigation process.

Generic litigants should rely heavily on claim reduction during scheduling negotiations and in response to brand requests to extend deadlines. As a first measure, the generic should push for a single reduction prior to claim construction. In this manner, the generic prevents brand from using claim construction phase as an opportunity to cherry-pick the best claims based on the outcome of the claim construction decision. To the extent new patents and claims are injected into the litigation at a later stage, such as in the scenario described above, it will be essential that multiple claim reduction deadlines be reduced to writing in a scheduling order to prevent uncertainty leading up to trial.

Oppose consolidation of new actions later in litigation based on patents issuing from child applications

In the scenario described above, the request for consolidation came with a request to extend the trial date due to the brand’s behind-the-scenes patent prosecution strategies. Although both the court and the generic likely have some incentive to allow consolidation as mentioned above, the generic should nevertheless strive to limit the brand’s ability to inject new patents and new claims into the consolidated action. This can be done, for example, by limiting consolidation only to patents issuing before a date certain, or precluding any consolidation after a certain date. In this manner, the generic can blunt the litigation strategy of trying to keep the generic in the dark with respect to which claims the brand ultimately will bring forward to trial.

Oppose unilateral reduction of claims on the eve of trial

The goal of claim reduction is two-fold: first, to lessen the burden on financial and human resources in defending the action; and second, to eliminate the uncertainty as to which claims will be brought forward to trial. Indeed, the savviest of generic litigants (and the attorneys who represent them) have these goals in mind and are focused on the contours of trial as a strategy to facilitate an early and favorable settlement.

Part and parcel to these goals is the need to prevent the brand from undercutting the generic’s trial preparation by narrowing claims on the eve of trial without notice, which can have a drastic impact on the generic’s trial preparation, thematic presentation to the court, and allocation of resources. This need can be addressed through, for example, a stipulation that the plaintiff shall not further reduce the number of asserted claims prior to trial without either an agreement between the parties or permission from the court. Such stipulations encourage the brand to finalize its claim set by a date certain, thus dispensing with uncertainty that can sometimes flummox generic litigants as trial dates draw near.

Demand that the claims to be tried are representative of all asserted claims and give rise to estoppel

Brands often seek leverage in Hatch-Waxman patent infringement actions by agreeing to pursue only a subset of their asserted claims at trial, while also refusing to waive their infringement positions with respect to the other asserted claims. But, generic litigants must understand that the prospect of serial litigation of subsets of asserted claims directed to the same pharmaceutical drug product is antithetical to the overarching objective of the Hatch-Waxman Act and entirely untenable as a litigation or negotiating tactic.

As a measure to defend against this potential gamesmanship, however, the generic litigant should utilize the pretrial order and pretrial conference to make clear that (1) the claims being tried are representative of all asserted claims and (2) the brand shall be precluded from asserting any other claims from the patents-in-suit in any later action concerning the same generic product. This helps to avoid the situation where the brand loses at trial and then seeks to pursue a second trial against the same generic on a different subset of asserted claims.

Do not neglect statutory bases to obtain awards of attorney’s fees and reimbursement of costs

Efforts to delay resolution of litigation through strategic prosecution of child applications and maintaining an excessive number of asserted claims may form a basis for a request that the court deem the case “exceptional” under 35 U.S.C. § 285 or may support a request for sanctions under 28 U.S.C. § 1927.

Section 285 permits a “prevailing party” to obtain an award of attorney’s fees upon a finding that the case is “exceptional.” Generally, courts have been reluctant to find exceptionality based solely on a patentee’s strategies with respect to assertion, and then narrowing, of patent claims. This is because, during the normal course of litigation, issues are expected to be narrowed before trial. Nevertheless, given the right set of facts, Plaintiffs’ litigation behavior in maintaining a high number of asserted claims or patents could be deemed unreasonable and give rise to an award of attorney’s fees. Indeed, courts may be more inclined to deem a case “exceptional” based on strategies used by brands to delay Hatch-Waxman litigation and strain the resources of the generic litigant based on the Supreme Court’s 2014 decision in Octane Fitness. This decision overturned the Federal Circuit’s rigid standard for determining when a case is “exceptional” under Section 285 in favor of a more flexible analysis that requires review of the “totality of the circumstances.”

28 U.S.C. § 1927 may also form the basis of an award of fees based on brand strategies intended to delay litigation. While Section 285 is considered in view of Federal Circuit law, the determination of sanctions under Section 1927 is an issue of regional circuit law. The District of New Jersey-a hub for pharmaceutical patent litigation under the Hatch-Waxman Act-held for example in In re Prosser that sanctions under this statute “are intended to deter an attorney from intentionally and unnecessarily delaying judicial proceedings . . . .”

Thus, when faced with the prospect of having to defend against an assertion of an excessive (and ultimately untriable) number of asserted claims, the generic litigant must not neglect potential statutory remedies designed to deter litigation misconduct.

Conclusion

Generic companies embroiled in Hatch-Waxman patent infringement litigations must do more than defend on the merits. Left unchecked, the use of child applications and assertion of an excessive number of claims to delay litigation and generally strain the financial and human resources of the generic litigant can undermine the generic’s ability to pursue a robust and successful defense; or worse, force the generic into an unfavorable settlement.

The strategies outlined above help form the foundation of a broad, overall defense strategy that focuses not only on the merits, but also on defending against the litigation tactics employed by brands in Hatch-Waxman litigation. 

Josh Reisberg is counsel in Axinn Veltrop & Harkrider LLP's New York, NY office.