In a dispute over the terms of a settlement agreement, the US Court of Appeals for the Federal Circuit found that a patent owner was not entitled to a preliminary injunction despite a stipulation that it would be irreparably harmed if the accused infringer breached certain provisions of the agreement. Takeda Pharmaceuticals U.S.A., Inc. v. Mylan Pharmaceuticals, Inc., Case Nos. 20-1407, -1417 (Fed. Cir. July 31, 2020).

Takeda originally sued Mylan to prevent Mylan’s launch of a generic version of Takeda’s branded drug Colcrys. The parties ultimately settled under terms set forth in a settlement/license agreement, including a provision in Section 1.2(d) stating that Mylan would be entitled to launch a generic product after a Final Court Decision holding that all unexpired claims of the licensed patents that were asserted and adjudicated against a third party were either (i) not infringed or (ii) any combination of not infringed and invalid or unenforceable. The licensed patents included 17 Orange-Book-listed patents that Takeda had asserted against Mylan. The parties further agreed that a breach of this provision “would cause Takeda irreparable harm.”

While Takeda and Mylan were negotiating the settlement, another patent litigation that involved some of the licensed patents was ongoing (the West-Ward litigation). The West-Ward litigation involved a different party and a different drug product. Takeda did not assert all 17 patents in the West-Ward litigation. It only asserted eight and ultimately dismissed five with prejudice. On summary judgment, the district court in the West-Ward litigation found that the asserted claims of the remaining three patents were not infringed.

Mylan informed Takeda that it would launch its generic product, arguing that summary judgment in the West-Ward litigation triggered Section 1.2(d), allowing it to launch its generic product because all of the asserted claims remaining in the suit had been found not infringed. In response, Takeda filed a complaint alleging breach of contract and patent infringement, and sought a preliminary injunction to enjoin Mylan from its launch. The preliminary injunction motion was denied. Takeda appealed.

A plaintiff seeking a preliminary injunction must show (i) that it is likely to succeed on the merits, (ii) that it will suffer irreparable harm in the absence of preliminary relief, (iii) that the balance of equities tips in its favor, and (iv) that an injunction is in the public interest. The Federal Circuit’s decision focused on the first two factors: likelihood of success and irreparable harm.

The Federal Circuit’s analysis of the likelihood of success prong turned on the meaning of Section 1.2(d). Takeda argued that Section 1.2(d) had not been triggered because not all unexpired claims that were asserted in the West-Ward litigation had been found not infringed, specifically the asserted claims of the five withdrawn patents. Mylan argued that triggering Section 1.2(d) only required that all unexpired claims that had been asserted and adjudicated to be found not infringed or invalid, and because the asserted claims of the five dismissed patents were not adjudicated, it was not necessary that the dismissed claims be found not infringed in order for Section 1.2(d) to be triggered. The Federal Circuit agreed with Mylan’s interpretation, finding that the plain reading of Section 1.2(d) required the term “all unexpired claims” to apply to both “asserted” and “adjudicated.” The Court reasoned that Takeda’s interpretation would render meaningless the “adjudication requirement” and allow for gamesmanship because Takada could prevent Section 1.2(d) from ever being trigged by simply asserting and then withdrawing a claim from a proceeding before adjudication.

The Federal Circuit also rejected Takeda’s argument that Section 1.2(d) was intended to apply only to generic equivalents of Colcrys and that a patent lawsuit against a different product did not apply. The Court noted that other sections of the agreement included a reference to “Generic Equivalents,” but Section 1.2(d) did not. From this, the Court inferred that “the parties knew how to limit Mylan’s market entry based on the product at issue,” but did not do so with respect to Section 1.2(d). For these reasons, the Federal Circuit agreed that Takeda was unlikely to succeed on the merits.

In trying to establish irreparable harm, Takeda relied on a provision of the agreement that entitled it to injunctive relief if Mylan breached certain provisions of the agreement, and on Mylan’s acknowledgement that marketing a generic product would cause Takeda irreparable harm.

The Federal Circuit noted, however, that irreparable harm was predicated on a breach of the agreement, and because Takeda was not likely to succeed on its breach of contract claim, this section was “not useful for establishing irreparable harm.” The Court also found that Takeda made no credible assertion that it could not be compensated by monetary damages. Accordingly the Court affirmed the lower court’s denial of a preliminary injunction.