Mylan Inc. v. Smithkline Beecham Corp.
| Decision Date | 22 July 2013 |
| Docket Number | No. 12-1539,12-1539 |
| Parties | MYLAN INC.; MYLAN PHARMACEUTICALS INC., Appellants v. SMITHKLINE BEECHAM CORPORATION, n/k/a GLAXOSMITHKLINE LLC, d/b/a GLAXOSMITHKLINE; SMITHKLINE BEECHAM P.L.C., n/k/a SMITHKLINE BEECHAM, LIMITED; SMITHKLINE BEECHMAN (CORK) LIMITED, successor to SB PHARMCO PUERTO RICO, INC.; APOTEX INC; and APOTEX CORPORATION |
| Court | U.S. Court of Appeals — Third Circuit |
PRECEDENTIAL
Appeal from the United States District Court
for the District of New Jersey
Before: SCIRICA, AMBRO, and FUENTES, Circuit JudgesGary D. Adamson, Esquire
Michael E. Johnson, Esquire (Argued)
Alston & Bird
Counsel for Appellants
F. Christopher Mizzo, Esquire (Argued)
Michael A. Pearson, Esquire
Kirkland & Ellis
Thomas A. Cunniff, Esquire
Fox Rothschild
Eric I. Abraham, Esquire (Argued)
Christina L. Saveriano, Esquire
Hill Wallack
Counsel for Appellees
This case involves competing rights over the pharmaceutical paroxetine hydrochloride controlled release tablets ("paroxetine") in generic form. Defendant/Appellee GSK1 holds patent and FDA rights to market and sell paroxetine for the treatment of depression under the brand name Paxil CR.2 As part of a 2007 settlement agreement, GSK granted Plaintiff/Appellant "Mylan" (jointly and severally referring to Mylan Inc. and Mylan Pharmaceuticals Inc.) certain rights to produce, market, and sell generic paroxetine. Then, in 2010, GSK agreed—as part of an unrelated settlement—to begin supplying Defendant/Appellee "Apotex" (jointly and severally referring to Apotex Inc. and Apotex Corp.) with GSK-produced generic paroxetine for marketing and sale to downstream customers. Mylan filed suit against GSK and Apotex, claiming the 2010 agreementviolated its licensing agreement with GSK, which did not permit GSK to provide its own form of generic paroxetine to another generic drug company—such as Apotex—to be marketed and sold in direct competition with Mylan.
The District Court found that the terms of the GSK-Mylan agreement were unambiguous, and they did not limit to whom GSK was permitted to market and sell its own version of generic paroxetine. It thus held GSK did not breach its agreement by agreeing to provide Apotex with GSK-produced generic drugs, and granted summary judgment against Mylan on all claims. For the reasons that follow, we reverse the Court's grant of summary judgment on the breach-of-contract cause of action against GSK, and remand for the parties to proceed to trial on that claim. We affirm its grant of summary judgment on all other claims. Because the District Court denied GSK's motion to strike Mylan's expert damages report as moot on the basis of its summary judgment rulings, we will vacate that denial for reconsideration on remand.3
In June 2007, GSK sued Mylan for patent infringement after Mylan sought FDA approval to introduce a generic version of paroxetine into the market before GSK's patent had expired.4 The parties settled the case shortly thereafter,signing a Patent License and Settlement Agreement in August 2007 ("License Agreement"). Section II(c) of the License Agreement granted Mylan exclusive rights to market and sell generic paroxetine for the remaining life of GSK's patent (i.e., nearly nine years of complete generic exclusivity). This included manufacturing, marketing, and selling Mylan's own generic paroxetine drug products, as well as sales rights for AG paroxetine manufactured by GSK. Mylan's generic rights were exclusive "even [as] to GSK." See J.A. at 51 (quoting License Agreement, Section II(c)).
The parties submitted to the Federal Trade Commission ("FTC") the License Agreement, in accord with its terms and as required by federal law. See Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, Title XI §§ 1112-13, 117 Stat. 2066, 2461-63 (codified at 21 U.S.C. § 355). In response to concerns raised by the FTC about the length and absoluteness of Mylan's exclusive generic rights, the parties amended the License Agreement in September 2007 (the "Second Amendment"; the First Amendment to the License Agreement is irrelevant to this opinion). It provided two specific exceptions to the complete generic exclusivity provided under the License Agreement. First, in the settlement of subsequent patent litigation with other third-party companies that had filed ANDAs for generic paroxetine, GSK was permitted to grant nonexclusive licenses as part of a settlement agreement with those third parties:
If GSK receives a Third Party Notification and GSK initiates an action for patent infringement, GSK can enter into a settlement agreement withrespect to such action at any time and Mylan agrees to waive its exclusivity under Section II(c) in order to permit GSK under such settlement agreement to grant such Third Party a non-exclusive license under the GSK Patents to sell Generic Paroxetine Product(s) in the dosage form(s) specified in the Third Party's ANDA . . . .
J.A. at 51 (quoting Second Amendment, Section II(e) para. a) (the so-called "ANDA Clause").
Second, and more relevant here, GSK (or a GSK affiliate) was entitled to market and sell AG paroxetine beginning two years after Mylan launched its generic products:
Also, GSK or its Affiliate may commence marketing and selling generic paroxetine hydrochloride controlled or modified release products pursuant to its Paxil® CR NDA ("Authorized Generic Products") at the end of the second year after Mylan launches its Generic Paroxetine Products.
Id. (quoting Second Amendment, Section II(e) para. b) (the "Authorized Generic Clause").
The Second Amendment alleviated the FTC's exclusivity-related concerns. Thereafter, Mylan launched its generic paroxetine drug products in May 2008.
In May 2010, GSK settled an unrelated antitrust lawsuit brought against it by Apotex. The terms of thesettlement agreement provided for a $300 million cash payment to Apotex; in addition, Apotex was entitled to a guaranteed minimum of $180 million to be earned through the sale of GSK products (i.e., "in-kind transfers"). During negotiations regarding the potential products GSK would provide for the in-kind transfers, Apotex became aware that Mylan (i) had certain licensing rights with respect to paroxetine, for which Mylan paid GSK royalties, and (ii) was the only generic paroxetine market participant. While it refused Apotex's request for a copy of the License Agreement due to confidentiality concerns, GSK did advise Apotex that its supply obligation to Mylan ended by June 2010. See J.A. at 8.
The parties agreed that one of the GSK-supplied products from which Apotex would produce sales revenues would be AG paroxetine. Thus, to implement the in-kind transfer arrangement, GSK and Apotex subsequently entered into an Exclusive Supply & Distribution Agreement for AG paroxetine ("S&D Agreement"). Id. Apotex subsequently began sales activities for AG paroxetine, which led to the filing by Mylan of this lawsuit in September 2010.
Mylan brought claims against GSK for breach of contract and the implied covenant of good faith and fair dealing, and against Apotex for tortious interference with and inducement to breach a contract. The crux of Mylan's claims was that the terms of the amended License Agreement only allowed third-party generic companies that had filed their own ANDAs to sell generic paroxetine, and that, even after Mylan's two-year exclusivity period, only GSK was permitted to engage in marketing and sales activities for AG paroxetine that were directed to downstream customers—e.g., "wholesalers, retailers, pharmacy chains, mail orderpharmacies, pharmacists, hospitals, clinics, and managed market companies." See Mylan Br. at 43. Mylan asserted this was consistent with its position during negotiations—that to allow otherwise would force it to compete against other generic companies that were not required to expend the time and resources to secure FDA approval by filing an ANDA. Mylan thus argued that GSK violated the License Agreement by entering into the S&D Agreement and supplying Apotex—an intermediary drug company—with GSK-produced AG paroxetine for marketing and sale in competition with Mylan.5
The District Court granted summary judgment in favor of GSK and Apotex. In doing so, it ruled that the Authorized Generic Clause of the Second Amendment was clear and unambiguous, thus permitting GSK to market and sell AG paroxetine to whomever it wished, including Apotex, after Mylan's two-year period of generic exclusivity. Hence the Court declined to consider any of the intent evidence submitted by the parties, as well as the industry and custom evidence offered by Mylan, on the ground that such evidence "cannot be used 'to create an ambiguity where none exists' in order to preclude summary judgment." Id. at 13 (quoting Int'l Union, UAW v. Skinner Engine Co., 188 F.3d 130, 145 (3d Cir. 1999)).
The Court thus held GSK did not violate the License Agreement or, in the absence of proof of bad motive, the implied covenant of good faith and fair dealing. Because it found no protectable contract right, the Court also held Mylan's claims against Apotex necessarily failed; this meant that GSK and Apotex were entitled to judgment as a matter of law on all claims brought by Mylan.
On appeal, Mylan challenges the District Court's interpretation of the Authorized Generic Clause and its consequent grant of summary judgment in favor of (i) GSK on Mylan's contractual claims, and Apotex with respect to Mylan's tortious interference claim.6
Our review of the grant or denial of summary judgment is plenary, and we "apply[] the same standard as the district court." Tri-M Grp.,...
To continue reading
Request your trial