Federal Circuit Addresses Damages In The Hatch-Waxman Context

On April 7, 2015, the United States Court of Appeals for the Federal Circuit issued its decision in Astrazeneca AB v. Apotex Corp., No. 2014-1221, affirming an award of a reasonable royalty of 50% in a case arising from the Hatch-Waxman Act. While largely affirming a damages award of over $70 million, the Federal Circuit reversed the district court's award of damages during the period of pediatric exclusivity that AstraZeneca's product held after patent expiration.

The case provides important guidance regarding damages in the Hatch-Waxman context, and in particular whether damages are available in the period of pediatric exclusivity awarded to pharmaceutical patent holders who conduct qualifying pediatric studies.

Of note, the Federal Circuit specifically considered the use of the "entire market value" rule in this case, and held that the entire market value rule was inapplicable because the infringed patents "cover the infringing product as a whole," but also that the district court still must consider the relative value of the invention compared to "conventional" features in the claim.

BACKGROUND

Omeprazole is the active ingredient in AstraZeneca's Prilosec® product. AstraZeneca's product was covered by several patents, including patents related to the active ingredient (which expired in 2001) and patents related to the pharmaceutical formulation (which expired April 20, 2007).

Beginning in 1997, Apotex and several other generic manufacturers filed "Paragraph IV Certifications" as to the formulation patents, certifying to the FDA their belief that those patents were invalid or not infringed, and AstraZeneca in turn sued. The "Paragraph IV Certifications" permitted the FDA to approve the generic products before AstraZeneca's patents expired, even though litigation was ongoing. Apotex and some other generic companies thus launched their products "at risk" before infringement and validity were determined by the court.

Unlike some of the other generics, Apotex's product was found to infringe the formulation patents on May 31, 2007, and it was enjoined from further sales shortly thereafter. In 2008, the Federal Circuit affirmed the infringement ruling against Apotex, In re Omeprazole Patent Litig., 536 F.3d 1361 (Fed. Cir. 2008), and the case returned to the district court to set AstraZeneca's damages.

AFFIRMING THE 50% REASONABLE ROYALTY

The Relevance of the Market

The district court found a 50% royalty on Apotex's gross margin to be...