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Preliminary Injunction Denied Because of Failure to Draft Precise Terms That Capture the Intent of the Parties

| Christopher L. LewisKaren Cassidy

TAKEDA PHARMACEUTICALS U.S.A., INC. V. MYLAN PHARMACEUTICALS INC.

Before Prost, Newman, and Hughes. Appeal from the United States District Court for the District of Delaware

Summary:  The scope of a contract term may not be interpreted to render a provision or term meaningless.

In 2016, Takeda Pharmaceuticals U.S.A., Inc. (“Takeda”) filed suit against Mylan Pharmaceuticals Inc. (“Mylan”) for patent infringement based on Mylan’s submission of an Abbreviated New Drug Application (“ANDA”) for a generic version of the drug colchicine. The parties resolved the litigation through a Settlement Agreement and License Agreement (“License Agreement”).  The License Agreement allowed Mylan to begin selling its generic colchicine product upon certain events, including “the date that is [a time period] after the date of a Final Court Decision holding that all unexpired claims of the Licensed Patents that were asserted and adjudicated against a third party are either (i) not infringed or (ii) any combination of not infringed and invalid or unenforceable.”  Concurrent with its litigation against Mylan, Takeda also pursued patent claims against a third party (“Hikma”) based on its colchicine product. Initially, Takeda asserted eight of the Licensed Patents against Hikma, but voluntarily dismissed with prejudice five of the patents.  In December of 2018, the district court granted summary judgment of non-infringement in favor of Hikma on all asserted claims in the three remaining Licensed Patents.  The district court entered final judgment of non-infringement and Takeda did not appeal.  In October 2019, Mylan notified Takeda of its intent to begin selling its generic colchicine product, per the Licensing Agreement.  Mylan subsequently launched its product in November, 2019.  Shortly thereafter Takeda filed suit alleging breach of contract and patent infringement related to the Mylan’s marketing and selling of its generic colchicine product. Takeda also filed a motion for a preliminary injunction, seeking to enjoin Mylan from commercially manufacturing, offering to sell, or selling the generic colchicine product.  Takeda argued that the Hikma decision did not trigger the provision of the License Agreement allowing Mylan to begin selling its product because the district court only ruled on the three patents still at issue, not the five that were dismissed with prejudice.  The district rejected this argument, explaining that the language in the License Agreement was “asserted and adjudicated” not “asserted or adjudicated,” as Takeda’s argument suggested.  The district court further explained that, practically speaking, interpreting the clause as Takeda proposed would prevent Mylan from ever relying on the clause because Takeda could always withdraw one patent, or even one claim, to avoid triggering it.  Accordingly, the district denied Takeda’s motion for a preliminary injunction, finding that the Takeda failed to show that it was likely to succeed on the merits or that it will suffer irreparable harm.  Takeda appealed. 

On appeal, Takeda argued the district court erred because its interpretation of the contract language reads out the term “all,” giving effect only to the term “adjudicated.”  Takeda argued that because not all claims that were asserted in the case, specifically the five patents that were dismissed, were held invalid, unenforceable, or not infringed, the clause was not triggered.  Takeda further argued that the intent of the clause was to limit changes with respect to generic colchicine products, which did not include Hikma’s branded colchicine product.  The Federal Circuit rejected Takeda’s arguments.  The plain language of the agreement requires a Final Court Decision for all claims that were both asserted and adjudicated.  Takeda’s proposed interpretation would render the “adjudication” requirement meaningless.  The Federal Circuit further rejected Takeda’s attempt to limit the clause to generic colchicine products as that language is entirely absent from the language of the provision.  The Federal Circuit concluded that, when the License Agreement is correctly construed, there can be no dispute that the launch clause was triggered, and agreed with the district court that Takeda was unlikely to succeed on the merits.  The Federal Circuit also agreed with the district court that Takeda failed to show that it would be irreparably harmed.  Takeda relied exclusively on a clause in the License Agreement stipulating to irreparable harm in the event of a breach. Because the Federal Circuit concluded that it is unlikely that Takeda can show a breach, it found the irreparable harm clause not useful for establishing irreparable harm in the case.  Accordingly, the Federal Circuit affirmed the district court’s denial of Takeda’s request for a preliminary injunction.

Judge Newman dissented, arguing that, because the court should effectuate the parties’ intent when interpreting the contract, it would not be reasonable to hold that Takeda would have agreed to this interpretation of the contract.

Editor: Paul Stewart