Tools to Combat Frivolous Hatch-Waxman Cases

Generic pharmaceutical companies and §505(b)(2) NDA filers routinely use Paragraph IV certifications to challenge the patents a brand company listed on the FDA’s Orange Book.  Such a challenge generates subject matter jurisdiction for patent infringement suits.  When the brand company timely sues, FDA approval of the patent challengers’ applications is automatically stayed for 30 months or more.  This statutory scheme generates a tremendous economic incentive for brand companies to sue first and ask questions later.  Courts have noted this incentive, including recently in the Third Circuit opinion in the FTC v. AbbVie antitrust case. 

About 10% of all patent infringement cases in the U.S. are Hatch-Waxman cases.  Generic companies collectively spend tremendous resources defending these lawsuits.  However, the automatic stay of FDA approval often causes far more damage to the defendants.  In some cases, the stay blocks FDA approval for years even though the question of patent non-infringement or invalidity is not even close.  In a recent example, part of AbbVie’s Androgel Hatch-Waxman case against two §505(b)(2) filers was adjudicated “objectively baseless.”

What should a Hatch-Waxman defendant do when it is convinced that the case is baseless and improperly brought?  There are tools available to seek redress.  This article discusses three of them. 

Award of Attorneys’ Fees under 35 U.S.C. § 285

In “exceptional” patent cases, 35 U.S.C. §285 operates to grant the prevailing party “reasonable attorney fees.”  Because litigation misconduct can lead to a finding of “exceptional case,” Hatch-Waxman litigants routinely include §285 fee awards as a request in their pleadings, to cover anything that could be considered baseless, outrageous, or otherwise improper or unduly injurious before and during litigation.  Once a party has won its patent case on the merits, it can seek fees under §285 based on the misconduct it has experienced or discovered during the litigation, much of which the trial court may have already known.  Of the three tools to combat baseless lawsuits discussed here, §285 fee award is the easiest to use and the most flexible and widely applicable.  However, the reward under §285 is limited to reasonable attorney’s fees.  Considering the enormous economic stakes a Hatch-Waxman case can involve, a potential fee award may not be a sufficient deterrent for frivolous lawsuits. 

Antitrust Violation Counterclaims

When faced with baseless allegations, a Hatch-Waxman defendant can assert a claim/counterclaim for antitrust violation under the “sham litigation” theory.  If the defendant has obtained tentative approval from the FDA on its drug application, potential antitrust damages based on its lost sales may arise.  When the defendant does not have tentative approval, it can try to recover the attorney’s fees and other expenditures associated with defending the lawsuit.  Because damages in an antitrust case can treble, the award can potentially be very large.  Plus drug companies need to be cognizant that antitrust suits may be filed by payors (direct and indirect purchasers). 

However, the prospect of antitrust damages may not work well as a deterrent for frivolous Hatch-Waxman lawsuits.  As the Third Circuit observed in AbbVie, it would be an uphill struggle to prove such litigation a “sham.”  It is not enough to prove the brand company’s lawsuit “objectively baseless.”  To win, one must also prove that the brand company knew the case was baseless.  This “subjective baselessness” prong could best be supported by records of the brand company’s pre-suit deliberations.  However, such records are typically protected by the attorney-client privilege.  If the records are a “smoking gun,” one could hardly expect the brand company to waive the privilege.  In the case mentioned above, the district court turned to other evidence such as the objective baselessness of AbbVie’s lawsuit and the enormous financial stakes, and found subjective baselessness.  The Third Circuit upheld the decision, but AbbVie has petitioned the Supreme Court for review.  AbbVie argues that the Third Circuit’s reasoning would make antitrust defendants feel compelled to waive privilege, and that should not be the law.  This case has generated considerable interest.   

The FTC v. AbbVie case did not touch upon the role of OCA in a “subjective baselessness” inquiry.  A generic company challenging an OB patent on non-infringement grounds is required by law to offer its technical documents to the brand company under the OCA.  Once the brand company took the offer and received the documents, this is evidence that a pre-suit investigation had indeed taken place.  If the lawsuit following an OCA tender and acceptance turns out to be objectively baseless in the end, in this author’s opinion there is at least evidence of subject baselessness. 

Rule 11 Sanctions

Federal Rule of Civil Procedure 11 requires attorneys to maintain reasonableness when signing court filings.  The sanction for improprieties, such as filing suit absent a reasonable pre-suit investigation, can be severe.  Plaintiff-side attorneys in patent cases have been sanctioned up to and even beyond all financial rewards they had received from participating in those lawsuits.  Furthermore, a Rule 11 violation is not “cured” by any investigation or discovery after an unreasonable court filing.  Rule 11 deters “filing first, asking questions later.”  

Because Rule 11 can target the attorneys personally in addition to their corporate clients, in the right circumstances this rule has teeth and serves as an important deterrent for the filing and/or defense of frivolous Hatch-Waxman cases.  For example, if the asserted OB patent is of a type that is not necessarily infringed by all ANDA products referencing the protected brand product, but the plaintiff’s counsel did not accept an OCA and never received the defendant’s technical documents before filing suit, that should be prima facie evidence that pre-suit investigation was lacking.  In such circumstances, it can be argued that the filing of suit is per se unreasonable, and the attorneys whose names appeared on the court filings could be subject to Rule 11 sanction, regardless of the ultimate merit of their case.  Furthermore, even if the filing of a lawsuit was permissible, perpetuating the lawsuit could raise distinct liability. And this lawsuit perpetuation can be powerful because the weight of discovery from documentary evidence, depositions, and experts are available to show the continued frivolity. 

There is a view that, because the filing of an ANDA with a Paragraph IV certification is an “artificial act of infringement,” a Hatch-Waxman case may not require any pre-suit analysis on actual patent infringement.  In this author’s opinion, this view is not correct.  It is settled law that the “artificial act of infringement” confers subject matter jurisdiction, but it does not generate patent infringement liability by itself.  The merits of a Hatch-Waxman case, or the reasonableness of the filing of such a case, are determined in similar ways to a traditional patent infringement analysis.  If the presence of a Paragraph IV certification were by itself enough to make the filing of a Hatch-Waxman case “reasonable,” a “sham litigation” antitrust counterclaim would never have been allowed, at least at the pleadings stage—how could a “reasonably” filed lawsuit possibly be both objectively and subjectively unreasonable?  The OCA statutory requirement also speaks to the importance of pre-suit investigation, at least when non-infringement is at issue

How we can help you?

We help clients in patent litigation and appeals. Because we know our patent law and litigation cold, we help clients win at the trial level but also preserve issues for appeal. As we see, a §505(b)(2) NDA filer or an ANDA filer does have tools to fight back when facing a frivolous lawsuit and unreasonable court filings by an opposing party. Upadhye Tang LLP represents both 505(b)(2) and ANDA sponsors in strategy counseling and litigation. 

About Upadhye Tang LLP 

Upadhye Tang LLP is an IP and FDA boutique firm concentrating on the pharmaceutical and medical device spaces. We help clients with navigating the legal landscape by helping on counseling and litigation. Clients call us to help move drug and device approvals along and to represent them in IP and commercial litigation. Contact Yixin Tang at or 312-598-2611 for more information.

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