KV Pharmaceutical's Motion for Rule 11 Sanctions in Ritalin LA Case Denied

Includes: CELG, KVPBQ, NVS
by: Aaron F. Barkoff

Celgene and Novartis v. KV Pharm., No. 07-4819 (D.N.J. 2008)

KV Pharmaceutical (KVA) filed an ANDA for a generic version of Ritalin LA (methylphenidate HCl extended-release capsules) with paragraph IV certifications to Celgene's (NASDAQ:CELG) U.S. Patent Nos. 5,837,284 and 6,635,284.  Apparently KV made an offer of confidential access to its ANDA, but Celgene and Novartis (NYSE:NVS) (which markets Ritalin LA) declined it.  Last October, within 45 days of receiving notice of KV's paragraph IV certifications, Celgene and Novartis sued KV for infringing the two patents.

Earlier this year, KV filed a motion for sanctions under Rule 11 on grounds that Celgene and Novartis "failed to make a reasonable inquiry into their infringement claims before filing suit." KV sought dismissal of the suit, plus costs and attorney fees. KV's motion relied on Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004), which states,

In the context of patent infringement actions, we have interpreted Rule 11 to require, at a minimum, that an attorney interpret the asserted patent claims and compare the accused device with those claims before filing a claim alleging infringement.

On July 22, the district court denied KV's motion with prejudice. According to the court,

The pre-filing requirements stated in Q-Pharma make sense only in the context of a typical patent infringement case, and not in the context of a Hatch-Waxman case.

The court reasoned:

In Q-Pharma, the act of infringement alleged in the complaint was the sale of the infringing product.  ...  Here, in contrast, the act of infringement alleged in the complaint is the filing of an ANDA--not the manufacture or sale of the product.

The court further observed:

If this Court were to grant KV's motion, it would put pharmaceutical patent owners in an untenable position.  After receipt of notification of an ANDA application for a generic pharmaceutical, the patent owner would need to conduct what is likely to be a highly technical infringement analysis, make the decision to file suit, and then do so, all within 45 days, or face dismissal as a sanction under Rule 11.  This would be difficult for patent owners to accomplish and would have the effect of frustrating the purpose of the Hatch-Waxman scheme.

In conclusion, the court explained its decision to deny KV's motion with prejudice:

Because KV's motion is premised on an erroneous application of Federal Circuit law, and because this Court finds the record before it sufficient to determine that Celgene's pre-filing investigation of the allegation that KV infringed Celgene's patents by filing ANDA No. 79-004 was reasonable under the circumstances, it is appropriate not only to deny this motion prior to full briefing, but to deny it with prejudice.

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