By Memorandum Order by Judge Sue Robinson dated October 1, 2009 (PDF), the United States District Court for the District of Delaware granted the motion of plaintiffs, Eurand, Inc. (“Eurand”) and Cephalon, Inc. (“Cephalon”), to sever and stay discovery on the antitrust and patent misuse counterclaims and related affirmative defense asserted by defendants, Mylan Pharmaceuticals, Inc. and Mylan Inc. After balancing the equities, the Court found that bifurcation of plaintiffs’ patent infringement action from defendants’ antitrust counterclaims and patent misuse affirmative defense and counterclaim was warranted.

By way of background, Eurand is the owner of U.S. Patent No. 7,387,793 (the ‘793 patent), which is directed to a skeletal muscle relaxant.  Cephalon is the exclusive licensee of the ‘793 patent and is the holder of a FDA approved New Drug Application (“NDA”) for cyclobenzaprine hydrochloride capsules sold under the tradename AMRIX(R).  The ‘793 patent is listed in the FDA’s Orange Book for AMRIX(R).  Defendants filed an Abbreviated New Drug Application (“ANDA”) with the FDA, seeking approval to market a generic version of AMRIX(R), and subsequently notified plaintiffs of the ANDA.  In their communication to plaintiffs, defendants stated an intent to rely upon the bioequivalence data of AMRIX(R) and certified that defendants’ generic copy of AMRIX(R) would not infringe the ‘793 patent.

Plaintiffs filed a patent infringement suit against defendants, pursuant to 35 U.S.C. § 271(e)(2)(A), which triggered a 30 month stay on the FDA’s approval of defendants’ ANDA.  In their answer to plaintiffs’ complaint, defendants included, among other things, counterclaims based on theories of patent misuse and antitrust violation and a related affirmative defense of patent misuse.

Plaintiffs moved to sever and stay discovery on defendants’ antitrust and patent misuse counterclaims and related affirmative defense pursuant to Rule 42(b) of the Federal Rules of Civil Procedure.  Plaintiffs sought to have two separate phases of trial – the first to determine issues of infringement, and the second, if necessary, to determine issues of patent misuse and antitrust violation.  Defendants opposed the motion only to the extent that plaintiffs sought bifurcation of the patent misuse affirmative defense and counterclaim.

In analyzing the motion, the Court noted that the Federal Circuit has recognized that “[district courts] are afforded broad discretion to control and manage their dockets, including the authority to decide the order in which they hear and decide issues pending before them.”  Amado v. Microsoft Corp., 517 F.3d 1353, 1362 (Fed. Cir. 2008).  The Court acknowledged that “[d]istrict courts have properly exercised this discretion through the ‘standard practice’ of separating patent issues from related antitrust issues.”  (citing In re Innotron Diagnostics, 800 F.2d 1077, 1084 (Fed. Cir. 1986).

In granting plaintiffs’ motion, the Court concluded that defendants’ antitrust and patent misuse claims could be rendered moot by resolution of the patent infringement issues.  Defendants have the burden of showing that the infringement suit is “objectively baseless” to have any chance of succeeding on their theories of antitrust violation and patent misuse.  In fact, even if plaintiffs do not succeed in proving infringement, the Court could still determine that plaintiffs “realistically expected success on the merits”, thereby obviating the need to adjudicate the antitrust and patent misuse issues.  Although the Court recognized that both patent misuse and antitrust violation claims do require an inquiry into anticompetitive behavior, it found that any economies derived from severing the antitrust issues from the infringement action would be minimized by failing to also sever the patent misuse issues.

Further, the Court recognized that there is a distinct lack of evidentiary overlap between issues of patent validity and infringement and issues of patent misuse and antitrust.  Indeed, the Court emphasized that the evidence necessary to prove patent misuse and antitrust violation is largely, if not totally, irrelevant to discerning the existence of patent infringement or validity and allowing defendants to introduce such evidence would serve only to distract the jury from the complicated, primary and potentially dispositive issue of patent infringement. 

Counsel for parties in patent infringement actions that inclue affirmative defenses or counterclaims of antitrust violation, patent misuse or inequitable conduct should carefully consider whether it is in their respective client’s interest to move to sever the patent infringement claims from the antitrust, patent misue and/or inequitable conduct counterclaims or affirmative defenses.