The Tough Act of Balancing Preliminary Injunction Factors: Indivior Inc. v. Dr. Reddy’s Laboratories, S. A. (Fed. Cir. 2018)
By Sanjeev Mahanta, Ph.D., J.D. | January 2, 2019
A preliminary injunction is a court order issued by a judge early in a lawsuit to stop the defendant from continuing his or her allegedly harmful actions. Its purpose is to preserve the status quo and protect respective rights of the parties pending final disposition of the litigation. To obtain a preliminary injunction, a plaintiff must establish that (1) he is likely to succeed on the merits, (2) he is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in his favor, and (4) an injunction is in the public interest.” Winter v. Natural Res. Def. Council, 555 U.S. 7, 20 (2008). The competing claims of injury by the parties must be balanced and the effect on each party of the granting or withholding of the requested relief must be considered. Id. at 24.
How the likelihood of success on the merits should (or should not) be determined and the four factors balanced in a patent infringement case, are areas in which there has been significant disagreement among the judges of the Federal Circuit. For example, in 2011, three judges dissented from a denial of a petition for rehearing en banc of a panel decision reversing the grant of a preliminary injunction. Kimberly-Clark v. First Quality Baby Prod. 660 F.3d 1293 (Fed. Cir. 2011) (“Kimberly-Clark”). Judge Newman, one of the dissenting judges, wrote that the panel’s view of the law governing preliminary injunctions warranted correction, for it was in conflict not only with controlling Federal Circuit precedent but also in conflict with the law of the Supreme Court and the law of all of the regional circuits. Kimberly-Clark at 1294. Judge O’Malley, another dissenting judge, joined in the criticism that the court had focused the preliminary injunction calculus on the “vulnerability” of the patent claims to the challenger’s defenses, rather than on a balancing of all four of the equitable factors. Kimberly-Clark at 1300.
Preliminary injunction is an act of equity. Equity, in a broad jurisprudential sense, means power to do justice in a particular case by exercising discretion to mitigate the rigidity of strict legal rules. Kevin C. Kennedy, Equitable Remedies and Principled Discretion: The Michigan Experience, 74 U. Det. Mercy L. Rev. 609 (1996-1997). The concern in patent infringement cases is that emphasis during appeal on the merits of the alleged infringement and invalidity defenses (which address only the first factor) runs counter to the principles of equity and can undermine the purpose of preliminary injunction.
Indivior Inc. v. Dr. Reddy’s Laboratories, S.A., (Fed. Cir. 2018) (“Indivior”) also centers on possible errors in the determination of the likelihood of success on the merits and the balancing (or lack thereof) of the preliminary injunction factors. In Indivior a Federal Circuit panel vacated the preliminary injunction granted by the New Jersey district court against Dr. Reddy’s Laboratories S.A. and Dr. Reddy’s Laboratories, Inc. (collectively, “DRL”) for attempting to market a generic equivalent of Indivior’s Suboxone Film. A two-judge panel majority concluded that Indivior was unlikely to succeed on the merits of its infringement claim. This conclusion was based largely on its interpretation of claim scope. It then reversed the grant of preliminary injunction without considering the remaining preliminary injunction factors. Indivior, Maj. Op. at 21. Dissenting sharply, Judge Newman remarked that balancing of all factors is the foundation of a discretionary ruling, and that when one side is subject to substantially greater harm, that might outweigh other factors believed to favor the opponent. Indivior, Dis. Op. at 11.
Suboxone Film is a rapidly dissolving formulation that adheres to the underside of a patient’s tongue. It contains two active ingredients and is a leading treatment for opioid dependency. Each film is produced as a large sheet and cut into individual dosage units. Content uniformity is critical to ensure that individual doses contain equal amounts of drug. Suboxone Film is protected by U.S. Patent Nos. 9,931,305 and 8,603,514. The patents share a common specification. The preliminary injunction factors and their balancing in Indivior is considered next.
Likelihood of success on the merits
As noted above, the majority’s conclusion that Indivior was unlikely to succeed on the merits of its infringement claim was largely based on its interpretation of claim scope. Although only the ’305 patent is at issue in this case, some facts about the ’514 patent are relevant to the majority’s conclusion. The ’514 patent was the subject of an ANDA litigation in another district court (Delaware). In that case, Indivior alleged infringement by DRL’s predecessor in interest. Asserted claims of the ’514 patent cover a drug delivery composition comprising a cast film having a film-forming matrix capable of being dried without loss of substantial uniformity of the active ingredients. Uniformity is measured after casting and drying. The court found that the specification expressly disclaimed and disparaged solely using conventional air drying from the top and construed “dried” to mean “dried without solely employing conventional convection air drying from the top.” Indivior, Maj. Op. at 5. Then, finding that in DRL’s process, drying occurred from the top, it concluded that the process was outside the scope of the asserted claims and that there was no infringement. The court’s decision is currently on appeal to the Federal Circuit.
After the judgement in the ’514 patent infringement case, Indivior amended certain claims of a then-pending application, replacing the words “dried” and “drying,” with “continuously” and “continuously cast.” Also, Indivior filed a terminal disclaimer to overcome obviousness-type double patenting rejections based on the claims of the ’514 patent. The application ultimately issued as the ’305 patent. It then accused DRL of infringing the ’305 patent in the New Jersey district court based on the same ANDA that triggered the infringement suit in the ’514 patent. Soon thereafter, DRL received FDA approval for its generic Suboxone Film and immediately launched the generic product. Indivior applied for a preliminary injunction to enjoin DRL from selling its product and the court granted the injunction. DRL appealed.
As in the Delaware case, the panel majority hearing the appeal determined that the patent specification disclaimed solely using conventional top air drying. For evidence, it pointed to the statement in the specification that conventional methods such as top air-drying result in films that do not have content uniformity, a key feature of the invention. It concluded that claims of the ’305 patent do not cover DRL’s films and that Indivior was not likely to succeed on the merits of its infringement claim.
In Judge Newman’s view, it was an error for the panel majority to require the claims of the ’305 patent to be read as including the “drying process limitation,” which had been cancelled from the claims. The court was rewriting a product claim to contain a process limitation from the specification – a limitation that was contained in a preferred, not the sole embodiment – thereby confounding the roles of the specification and the claims, the judge remarked. A specification disclaimer requires a clear and explicit intent by the patentee to limit the claims, but the contrary intent was explicit in this case since the ’305 patent claims were amended to not limit them to any drying method, the judge explained. Also, the judge referred to the “heavy presumption” that claim terms carry their full ordinary and customary meaning unless the patentee has unequivocally imparted a novel meaning to those terms or expressly relinquished claim scope during prosecution.
According to the judge, the panel majority erred also in ruling that claim preclusion likely barred Indivior’s suit on the basis that the asserted claims of the ’514 and the ’305 patents were patentably indistinct. The view that the claims were indistinct was based on both the importation of the “drying/dried” limitation into the ’305 claims, which Judge Newman disagreed with as explained above, and the filing of a terminal disclaimer in the ’305 patent. The ground related to the terminal disclaimer also was not supported by law and precedent, the judge observed, stating that the filing of a terminal disclaimer simply serves the statutory function of removing a double patenting rejection and raises neither presumption nor estoppel on the merits of the rejection. Indivior, Dis. Op. at 10. The judge further noted that the fact that the Delaware court’s decision might be reversed, supported the New Jersey court’s decision to preserve the status quo through granting the preliminary injunction, as otherwise, Indivior might be subjected to irreparable harm.
Irreparable harm, balance of equities, and public interest
The judge noted that the district court had found that the entry of a generic would cause Indivior to lose market share, lose Suboxone Film’s advantageous formulary status, and impair research and development. Price erosion, loss of goodwill, damage to reputation, and loss of business opportunities are all valid grounds for finding irreparable harm, the judge observed, citing precedent. Id. at 12.
As to balance of equities, the judge pointed to the district court’s finding that while Indivior could not recover its reputation and market, DRL could readily be made whole by monetary payment, noting that an injunction bond of $72 million required by the district court had been posted. Id. at 2. On the other hand, DRL was found by the district court to have knowingly invested “at risk” and its projected losses were found to stem from a market it sought to enter, not one that it was already in. Id. at 12. Further, the judge observed that Federal Circuit precedent supported the district court’s view that in “at risk” market entry situations, the accused infringer’s harms are almost entirely preventable and the result of its own calculated risk to launch its product pre-judgment. Id. at 13.
Next, the judge pointed to the district court’s determination that public interest would be served by the issuance of a preliminary injunction given that while Suboxone Film was an efficacious means of administering buprenorphine (one of the active ingredients), it was not the only means, and the disadvantages of having no generic alternative did not outweigh the public benefit of maintaining Indivior’s rights as a patent holder while litigation was pending. The judge noted that the district court had found that the injunction would not deny access to the active ingredient, which may be administered by other means. The judge observed that the public’s interest in the discovery and provision of new products was an important aspect of the court’s exercise of equity. Id.
Review of a preliminary injunction order
The decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts and must be reviewed accordingly, Judge Newman reminded. According to the judge, the majority’s explicit refusal to review the traditional equitable factors such as the balance of harms, based on its conclusion that Indivior had not shown that it was likely to succeed on the merits of its infringement claim, was an error. Id. at 11. The judge remarked that after a full and careful analysis of law and equity, the district court had imposed a preliminary injunction pending trial, holding that in the event the injunction was imposed in error, the enjoined party, DRL, could readily be made whole by monetary payment, whereas Indivior could not recover its reputation and market share. Id. at 1-2. Other relevant factors alluded to by the judge include the injunction bond of $72 million required by the district court, and the fact that DRL had knowingly risked the district court’s grant of preliminary injunction by choosing to enter the market “at risk.” Id. at 2.
Relying on these factors the district court had concluded that the balance of harms appeared to favor Indivior, but this reasoning was ignored by the majority in disregard of the requisite appellate standard of review, Judge Newman noted. Instead, as the judge put it, the majority made appellate findings of the merits of infringement, although there had been no trial of infringement. According to the judge, the majority erred also in applying the decision of the Delaware district court on a different patent with different claims to overturn the New Jersey district court’s equitable action, an injunction pendente lite, while the Delaware district court decision was pending on appeal. Id. at 3.
Finally, the judge pointed to the high bar set by the US Supreme Court with regard to reversing the grant of preliminary injunction: “It is well settled that the granting of a temporary injunction, pending final hearing, is within the sound discretion of the trial court; and that, upon appeal, an order granting such an injunction will not be disturbed unless contrary to some rule of equity, or the result of improvident exercise of judicial discretion.” Deckert v. Independence Shares Corp., 311 U.S. 282, 290 (1940) (internal quotation marks and citation omitted). Id. at 13.
Whether or not to grant the extraordinary relief of preliminary injunction to a patentee is a matter largely within the discretion of the trial court. This discretion is to be exercised in consistence with traditional principles of equity, grounded on well-articulated principles, and based on long-held precedents. Grant or denial of a preliminary injunction by a trial court may be overturned only upon a showing of abuse of discretion by the trial court. Failing to consider the totality of the preliminary injunction factors during review can lead to an outcome inconsistent with the requirements of equity.
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