Equitable Estoppel Archives

Federal Circuit Divided on Whether Skinny Labeling Compliance Precludes Inducement or Supports Equitable Estoppel

by Paul Devinsky | Feb 24, 2022 | Patents

The US Court of Appeals for the Federal Circuit denied a generic drug manufacturer’s petition for en banc review of a panel opinion finding induced infringement liability despite the manufacturer’s adherence to skinny labeling rules, and suggested that equitable estoppel was the appropriate vehicle for considering whether the branded drug manufacturer’s representations to the US Food & Drug Administration (FDA) should prevent it from recovering. GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., Case Nos. 18-1976, -2023 (Fed. Cir. Feb. 11, 2022) (per curiam) (Moore, C.J., concurring) (Prost, J., dissenting) (Dyk, J., dissenting) (Reyna, J., dissenting).

GlaxoSmithKline (GSK) developed a drug called carvedilol, which it markets (with FDA approval) for three indications: hypertension, left ventricular dysfunction following myocardial infarction (post-MI LVD) and congestive heart failure (CHF). GSK indicated to the FDA that only the CHF indication was under patent. Teva developed a generic version of carvedilol. Commensurate with skinny labeling regulations, Teva carved out from its label the language that GSK indicated was related to the protected CHF indication. Nonetheless, GSK alleged that Teva’s label induced infringement of patents covering the CHF indication. After trial, the jury agreed that the remaining language on Teva’s label would encourage physicians to practice the patented method of treating CHF. Notwithstanding the jury’s verdict, the district court granted judgment as a matter of law that Teva did not induce infringement. GSK appealed, and a divided panel reinstated the verdict (GSK v. Teva). Teva sought panel rehearing, which was denied, and then sought en banc review.

Out of the nine judges who considered the petition for en banc review, six voted to deny it and three would have granted it. All nine judges expressed concern that Teva should be held liable for induced infringement notwithstanding its compliance with the skinny labeling regulations and GSK’s representation to the FDA that the carved-out language was the only language in the label that would implicate its patents on the CHF indication. The judges differed, however, as to why Teva should not be held liable.

Chief Judge Moore’s concurrence, in which Judges Newman, O’Malley, Taranto, Chen and Stoll joined, affirmed the panel majority’s opinion and endorsed its approach of considering all the evidence. According to Judge Moore, any concerns that the result was unfair to Teva, which had complied with the skinny labeling requirements, should be addressed in the district court’s resolution of the still-pending equitable estoppel defense. In Judge Moore’s view, the facts fit squarely within the doctrine of equitable estoppel: GSK’s representations to the FDA could be seen as misleading Teva into believing that GSK would not seek to enforce its patents against the skinny label (which would omit the language GSK identified as relating to the infringing use); Teva could be seen as having relied on GSK’s representations in obtaining its skinny label and bringing its generic carvedilol product to market; and Teva could be seen as having been greatly prejudiced by later being found liable for GSK’s lost profits, which were greatly in [...]

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Sixth Circuit: It’s a Go on Plaintiff’s Claims Despite Arbitration Clause

by Paul Devinsky | Sep 16, 2021 | Trade Secrets

The US Court of Appeals for the Sixth Circuit affirmed in part a district court’s grant of a stay pending arbitration, finding that as non-parties to the underlying arbitration agreement, defendants could not stay the plaintiff’s action against them by arguing that they were beneficiaries of the arbitration agreement. AtriCure, Inc. v. Meng, Case No. 19-4067 (6th Cir. Aug. 27, 2021) (Murphy, J.) (Guy, J., dissenting).

AtriCure invested millions into developing medical devices that treat a serious degenerative heart condition known as atrial fibrillation. The company sells these products to hospitals throughout the world. In the mid-2000s, AtriCure sought to enter the Chinese market. In order to do so, it needed a Chinese agent. Dr. Jian Meng approached AtriCure about partnering with one of his companies to serve as AtriCure’s Chinese distributor. AtriCure eventually entered into a relationship with Meng’s company, ZenoMed.

In 2015, AtriCure discovered that another of Meng’s companies, Med-Zenith, was attempting to market a knockoff version of one of AtriCure’s medical devices. AtriCure opted to continue the relationship with ZenoMed, and in 2016, AtriCure and ZenoMed entered into a distribution agreement. However, in 2017, AtriCure learned that Med-Zenith was attempting to develop more counterfeit versions of AtriCure’s devices. As a result, AtriCure allowed the distribution agreement to expire and demanded that ZenoMed return its inventory.

AtriCure then sued Meng and Med-Zenith in the Southern District of Ohio, alleging improper manufacturing and selling of dangerous counterfeit productions, as well as various state law claims. AtriCure also brought an arbitration demand under the distribution agreement against ZenoMed. Meng and Med-Zenith sought to stay the federal lawsuit, arguing that they were beneficiaries of the arbitration clause in the distribution agreement under equitable estoppel and agency theories. After the district court denied the motion, Meng appealed.

The Sixth Circuit explained that after the Supreme Court of the United States’ 2009 ruling in Arthur Andersen LLP v. Carlisle, circuit courts are obligated to look to relevant state common law to decide when nonparties may enforce or be bound by an arbitration agreement. As a result, the blanket federal presumption favoring arbitration even against nonparties was no longer applicable. Now, courts must examine state law to determine whether nonparties may enforce or be bound by an arbitration agreement. The Court examined Ohio contract law to determine that a nonparty cannot enforce an arbitration clause unless it is an intended third-party beneficiary. The Court rejected Meng and Med-Zenith’s equitable estoppel arguments, finding that under Ohio law, AtriCure’s state law claims did not seek to enforce the distribution agreement against Meng and Med-Zenith, or rely on any theory that they owed contractual duties to AtriCure notwithstanding their nonparty status. Finally, the Court remanded the question of whether Meng’s agency argument could prevail by determining if he was acting as an agent of ZenoMed when he engaged in the conduct AtriCure complained about in the separate arbitration.

In dissent, Judge Ralph B. Guy Jr. argued that Meng “unambiguously sought a ‘stay under Section 3 of the [...]

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Summary Judgment Foreclosed when There Is More than One Possible Inference from Evidence

by Alexander P. Ott | Nov 19, 2020 | Patents

Reversing a summary judgment ruling that barred a correction of inventorship claim, the US Court of Appeals for the Federal Circuit, found issues of material fact foreclosed summary judgment and warned that where an issue is a “quintessentially fact-laden one” such as equitable issue involving possible equitable estoppel on inventorship, summary judgement is likely not appropriate.. Ferring B.V. et al. v. Allergan, Inc. et al., Case No. 20-1098 (Fed. Cir. Nov. 10, 2020) (O’Malley, J.)

From 1998 to 2002, Dr. Seymour Fein worked as a consultant for Ferring Pharmaceuticals to develop a drug that helps regulate the body’s retention of water. That work apparently did not include any obligation by Fein to assign any inventions. As a result, both Ferring and Fein ultimately filed dueling patent applications directed to aspects of the drug and its use. In correspondence that took place while patent prosecution was pending, Fein indicated to Ferring that his application would be directed to a low dose administration route for the drug. Ferring responded that it believed that aspect (i.e., the low dose route) to be disclosed by prior art. Both sides eventually obtained patents, and Fein assigned his patents to Allergan.

In 2012, Ferring filed a state court action for correction of inventorship, seeking to add its researchers to Fein’s patents. Allergan counterclaimed with its own inventorship claim seeking to add Fein to Ferring’s patents, and also asserted an equitable estoppel defense based on the above-noted correspondence between the parties that occurred during patent prosecution. Allergan then moved for summary judgment on its equitable estoppel defense, which was granted. The judge subsequently held a bench trial and rejected Allergan’s inventorship claim. Ferring appealed the summary judgment decision.

On appeal, the Federal Circuit rejected Ferring’s argument that the trial court should not have considered any conduct that preceded issuance of the patents for purposes of equitable estoppel. However, the Federal Circuit held that the trial court’s summary judgment decision had improperly resolved issues of material fact regarding that pre-issuance conduct. According to the Federal Circuit, the pre-issuance discussions did not lead to only one possible inference, but rather were subject to interpretation because the claim scope discussed (low dose administration) did not necessarily match the claim scope ultimately granted. As a result, the Federal Circuit vacated the summary judgment decision and remanded to the district court.