Cephalon, Inc. v. Sun Pharms., Ltd.

Case Name: Cephalon, Inc. v. Sun Pharms., Ltd., Civ. No. 11-5474-FLW, 2013 U.S. Dist. LEXIS 144576 (D.N.J. Oct. 7, 2013) (Wolfson, J.) (The Federal Circuit’s decision in Seagate did not create any pleading requirement above and beyond that established under Fed. R. Civ. P. 8, nor did it create a per se rule that a plaintiff could never succeed on a willful infringement claim if it was denied a preliminary injunction.)

Drug Product and Patent(s)-in-Suit: Gabatril® (anhydrous tiagabine hydrochloride); U.S. Patent No. 5,958,951 (“the ’951 patent”)

Nature of the Case and Issue(s) Presented: Cephalon is the owner of the ’951 patent, which covers Gabatril, a drug used to treat epilepsy. Defendants Sun and Caraco (collectively, “Sun”) filed an ANDA seeking FDA approval to market a generic version of Gabatril. Sun’s ANDA certified under paragraph IV that the ’951 patent was invalid, and that Sun’s proposed generic formulation would not infringe. Cephalon filed suit against Sun, in conjunction with a motion for a preliminary injunction to block the sale of Sun’s generic version of Gabatril. The court denied Cephalon’s motion. Cephalon filed a second amended complaint, adding an allegation of willful infringement. Sun sought to dismiss the willful infringement allegation under Fed. R. Civ. P. 12(b)(6) as an insufficiently pled claim, or in the alternative, for failing to state a claim upon which relief could be granted. The court ruled in Cephalon’s favor.

Why Cephalon Prevailed:  The issue presented was whether plaintiff’s claim of willful infringement should have been dismissed as insufficiently pled under the Federal Rules of Civil Procedure. Sun first argued that the standard set forth in In re Seagate Tech., LLC, 497 F.3d 1360, 1370-71 (Fed. Cir. 2007) controlled. Specifically, Sun argued that under Seagate, the plaintiff’s allegation of willful infringement was subject to a two-pronged objective/subjective test. The first prong required a showing that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Then, the alleged infringer must demonstrate that the objectively-defined risk was either known or so obvious that it should have been known to the alleged infringer. In light of the Seagate standard, defendants argued that the plaintiff’s allegation of willful infringement failed to even state the mere elements of a willful infringement claim.

In response, Cephalon argued that Seagate did not provide the proper pleading standard, because its holding was directed toward the burden of proof to be established at trial with respect to willful infringement. Cephalon further argued that all that was required at the pleading stage was a short and plain statement of the claim showing that the plaintiff is entitled to relief.

The court found that Seagate did not create any pleading requirement above and beyond that established under Fed. R. Civ. P. 8. The court noted that Seagate refers to the concept that objective recklessness must be proved based on the entire record of the proceeding, supporting Cephalon’s argument that Seagate governs the burden of proof at trial, not at the pleading stage. Accordingly, the court determined that Seagate did not alter the general Rule 8 pleading standard. Instead, the court held that a plaintiff need only provide a pleading equivalent to “with a knowledge of the patent and of his infringement” to state a proper allegation of willful infringement. Here, Sun was clearly aware of the patent before suit due to the submission of its ANDA, and the fact that the Sun participated in an “at risk” launch of its generic drug constituted evidence of objective recklessness. In light of these facts, the court held that Cephalon had stated a valid claim for willful infringement, at least with respect to the pleading stage.

Next, Sun argued that Cephalon failed to state a claim on which relief could be based because Cephalon’s motion for a preliminary injunction was denied. Again, Sun relied on Seagate. Sun argued that under Seagate, a “substantial question” regarding infringement or invalidity can be sufficient to preclude a finding of willfulness. Accordingly, the court’s rejection of Cephalon’s request for injunctive relief demonstrated the existence of a substantial question with respect to Sun’s infringement or the validity of the asserted patent. Cephalon argued that Seagate did not create a per serule that a plaintiff could never succeed on a willful infringement claim if it was denied a preliminary injunction (although the court noted it would likely be an uphill battle). The court agreed with Cephalon and concluded that dismissal of the claim for willful infringement should not be subject to dismissal under Fed. R. Civ. P. 12(b)(6).

Last, the court addressed Sun’s argument that Cephalon improperly requested a finding that the case is “exceptional.” Sun argued that such a request should only be made after the court had decided the merits. The court dismissed Sun’s argument, finding that the plaintiff had properly included the request in its prayer for relief. Accordingly, the court rejected Sun’s contention that the second amended complaint improperly requested a finding of an exceptional case.