Astrazeneca Ab v. Apotex Corp.
782 F.3d 1324
| Fed. Cir. | 2015Background
- AstraZeneca held formulation patents (the ’505 and ’230 patents) claiming an omeprazole dosage comprising a drug core with alkaline reacting compounds (ARCs), a water‑soluble subcoating, and an enteric coating; those formulation patents expired April 20, 2007.
- Multiple generic manufacturers filed ANDAs with Paragraph IV certifications; Apotex commercially launched an infringing generic omeprazole in November 2003 and sold until 2007.
- Prior appeals resolved liability: this court previously affirmed the district court’s finding that Apotex infringed the formulation patents.
- At a bench trial on damages the district court used a hypothetical negotiation dated November 2003 and awarded Astra 50% of Apotex’s gross margin on omeprazole sales (about $76M plus prejudgment interest).
- The district court found (inter alia) that a licensed Apotex would have priced more aggressively, threatening Astra’s prescription PPI franchise (Prilosec/Nexium); Apotex lacked a viable non‑infringing alternative at the relevant time.
- Apotex appealed, contesting (1) overcompensation under the reasonable‑royalty analysis, (2) failure to apportion value between active ingredient and formulation, (3) disregard of alleged non‑infringing alternatives, and (4) recovery for sales during the pediatric exclusivity/post‑patent period.
Issues
| Issue | Plaintiff's Argument (Astra) | Defendant's Argument (Apotex) | Held |
|---|---|---|---|
| Proper reasonable‑royalty rate (50% of gross margin) | A hypothetical license in Nov 2003 would reflect Astra's bargaining leverage and the commercial value of the formulation; comparable settlements and offers support a ~50% rate | Award overcompensates Astra; market was already 'genericizing' and Apotex's incremental harm was small; contemporaneous licenses were for lower rates | Affirmed in part: district court properly applied Georgia‑Pacific factors and did not clearly err in finding a 50% rate reasonable for damages calculation (for pre‑expiration infringement) |
| Relevance of ability to design around / regulatory delay | Difficult, costly, and time‑consuming to design a non‑infringing alternative; FDA delay and technical obstacles make avoidance unlikely, increasing license value | Considering obstacles (including FDA delay) improperly inflates the royalty; regulatory delay is general and not attributable to the patent | Court held these factors are relevant; district court did not clearly err in treating inability to practicably design around as increasing the hypothetical royalty bargaining position |
| Apportionment / entire‑market‑value rule (whether active ingredient value must be excluded) | The patented combination (core + subcoat + enteric coat) created the commercially viable omeprazole product; the inventive subcoating substantially created product value | Because active ingredient patents expired, damages must be apportioned to remove value of conventional active ingredient; cannot base royalty on whole product | Entire‑market‑value rule inapplicable here because the patent claims the product as a whole; court affirmed district court’s finding that the inventive combination substantially created product value and thus exclusion of active‑ingredient value was not required |
| Damages for sales during pediatric exclusivity (post‑patent sales) | A hypothetical license would have covered pediatric exclusivity too; district court may award royalty covering that period | Post‑patent sales during pediatric exclusivity are not patent infringement; Brulotte and patent‑term principles bar recovery for post‑expiration patent royalties | Reversed: damages under 35 U.S.C. §284 are limited to acts that constitute patent infringement; sales after patent expiration (even during pediatric exclusivity) are not recoverable as patent damages, so the post‑expiration portion of award must be recalculated |
Key Cases Cited
- Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir.) (discusses alternative damages measures: lost profits vs reasonable royalty)
- Georgia‑Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y.) (articulates the Georgia‑Pacific factors for hypothetical negotiation)
- Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir.) (discusses entire‑market‑value rule and need for apportionment)
- LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir.) (apportionment required even when accused product is smallest salable unit)
- VirnetX, Inc. v. Cisco Sys., Inc., 767 F.3d 1308 (Fed. Cir.) (apportionment / value‑attribution principles for multi‑component products)
- Garretson v. Clark, 111 U.S. 120 (U.S.) (historical principle that damages must separate patented from unpatented features)
- Brulotte v. Thys Co., 379 U.S. 29 (U.S.) (per se rule against royalty agreements that extend patent leverage beyond expiration)
- Ericsson, Inc. v. D‑Link Sys., Inc., 773 F.3d 1201 (Fed. Cir.) (reasonable royalty should approximate the incremental value from the invention)
- Aqua Shield v. Inter Pool Cover Team, 774 F.3d 766 (Fed. Cir.) (standard of review for damages findings and methodology)