Amgen Inc. v. Sandoz Inc.
794 F.3d 1347 (Fed. Cir. 2015), cert. granted, No. 15-1039, 2017 WL 125661 (U.S. Jan. 13, 2017), and cert. granted, No. 15-1195, 2017 WL 125662 (U.S. Jan. 13, 2017)
Authored by Gabrielle Farkosh
Statement of Facts: The Food and Drug Administration (“FDA”) normally approves biological products for commercial licenses. When the creator of a future biosimilar product seeks a commercial license, the Biologics Price Competition and Innovation Act (“BPCIA”) permits an applicant to file an abbreviated biologics license application (“aBLA”), giving the applicant the opportunity to “demonstrate that its product is ‘biosimilar’ to or ‘interchangeable’ with a previously approved reference product.” Amgen Inc. v. Sandoz Inc., 794 F.3d 1347, 1351 (Fed. Cir. 2015). The BPCIA then provides for an information exchange process between the reference product sponsor (“RPS”) and the applicant, along with a commercial marketing requirement.
In May 2014, Sandoz sought an aBLA for its filgrastim product, Zarxio, claiming that it is a biosimilar product to Neupogen, which is Amgen’s filgrastim product. Sandoz notified Amgen on July 8, 2014, that the application had been filed, but did not disclose its aBLA or manufacturing information to Amgen, as the BPCIA requires. On March 6, 2015, the FDA approved the aBLA and Sandoz gave notice of commercial marketing.
Amgen sued Sandoz in the United States District Court for the Northern District of California, claiming unfair competition, conversion for using Amgen’s license on Neupogen, and patent infringement. Amgen alleged Sandoz violated the BPCIA when it failed to disclose the required information in the information exchange process and gave ineffective notice of commercial marketing. Sandoz filed for declaratory judgment, claiming it correctly interpreted the BPCIA and did not commit patent infringement. In January 2015, Amgen and Sandoz filed cross-motions for summary judgment. In February 2015, Amgen filed for a preliminary injunction attempting to enjoin Sandoz from introducing its product.
Procedural History: The United States District Court for the Northern District of California held that the BPCIA permits an applicant not to disclose its aBLA to the RPS, subject only to the RPS’s action against the applicant for a “declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.” 42 U.S.C. § 262(l)(9)(C). This alone is not a basis for injunctive relief, restitution, or damages. The district court also concluded that the applicant may give commercial notice of marketing before FDA approval. Both the unfair competition and conversion claims were dismissed with prejudice and Amgen’s motion for preliminary injunction was denied. Amgen then appealed to the the Federal Circuit.
Questions Presented: (1) Does the BPCIA allow an applicant to elect not to disclose its aBLA and manufacturing information to the RPS, and instead subject itself to the consequences in section 262(l)(9)(C)? (2) Does the applicant satisfy the notice of commercial marketing requirement by giving notice before the FDA licenses its product? Is the commercial marketing requirement mandatory? (3) Did the district court properly dismiss the unfair competition and conversion claims? (4) Did the district court properly deny Amgen’s motion for preliminary injunction?
Holdings: (1) Yes. An applicant is permitted not to disclose its aBLA and manufacturing information to the RPS, and instead subject itself to “remedies based on a claim of patent infringement.” Amgen Inc., 794 F.3d at 1357. (2) No. An applicant can only give effective notice of commercial marketing once its product has been licensed. Yes. The commercial marketing notice requirement is mandatory. (3) Yes. The district court properly dismissed the unfair competition and conversion claims. (4) Amgen’s appeal from the denial of its motion for preliminary injunction is moot because the district court resolved the parties’ motions for judgment on the pleadings in favor of Sandoz.
Reasoning: Regarding the first question, the Federal Circuit began with statutory interpretation. Section 262(l)(2)(A) provides that the applicant “shall provide to the reference product sponsor a copy of the application . . . and such other information that describes the process or processes used to manufacture the biological product . . .” 42 U.S.C. § 262(l)(2)(A) (emphasis added). Read in isolation, this provision appears to require the applicant to disclose the aBLA to the RPS. Such a mandatory interpretation favors Amgen regarding Sandoz’s failure to comply with section 262(l)(2)(A). However, section 262(l)(2)(A) must be read in conjunction with section (l)(9)(C), which states that when the applicant “fails to provide the application and information required under paragraph (2)(A), the reference product sponsor, but not the section (k) applicant, may bring an action . . . for a declaration of infringement, validity, or enforceability of any patent that claims the biological product or a use of the biological product.” 42 U.S.C. § 262(l)(9)(C). The majority held that, read together, the provisions account for instances where the applicant fails to disclose required information; therefore, compliance with section (l)(2)(A) is not mandatory. If compliance were mandatory, the remedy in section (l)(9)(C) would be useless.
Regarding the notice of commercial marketing issue, the majority determined that notice of commercial marketing could only be given after the FDA has licensed the biosimilar product. Section 262(l)(8)(A) provides that the applicant “shall provide notice to the reference product sponsor not later than 180 days before the date of the first commercial marketing of the biological product licensed under subsection (k).” 42 U.S.C. § 262(l)(8)(A) (emphasis added). The majority reasoned that because section (l)(8)(A) is the only subsection to use the language “biological product licensed under subsection (k),” Congress intended notice to be given after the FDA licenses the product. Amgen Inc., 794 F.3d at 1357. Elsewhere in subsection (l), the product is referred to as “the biological product that is the subject of” the application. Id. The majority concludes that if Congress meant for notice of commercial marketing to be given before the FDA has licensed the product, then it would have used “subject of” rather than “licensed” in section (l)(8)(A).
The majority has three reasons for interpreting the notice of commercial marketing provision as such. First, it prevents litigation against products before one knows when or if the product will be licensed. Second, “[g]iving notice after FDA licensure . . . allows the RPS to effectively determine whether, and on which patents, to seek a preliminary injunction from the court.” Id. at 1358. Notice before licensure might require the RPS to guess as to the scope of the license. Third, this interpretation does not conflict with section 262(k)(7)(A)’s 12-year exclusivity period by adding an additional 180 days, except in rare instances. Most aBLAs will be filed during the exclusivity period; therefore, the exclusivity period will not be extended 180 days.
The majority also concluded that notice of commercial marketing is mandatory. In contrast to section (l)(2)(A) and the statutory provisions setting out the consequences for noncompliance, the notice of commercial marketing section does not have a corresponding section setting out the consequences of noncompliance when the applicant has not complied with section (l)(8)(A). Here, because the applicants have not complied with section (l)(2)(A), the majority stated that the remedy available in section (l)(9)(B) is not available to the RPS; therefore, notice of commercial marketing is mandatory for Sandoz. Sandoz provided effective notice on March 6, 2015; therefore, Sandoz cannot market its products until 180 days later on September 2, 2015. The majority also concludes that section (l)(8)(A) is a standalone provision, conditioned upon no other provisions of subsection (l).
The majority dismissed the unfair competition claim on two bases. First, Sandoz did not violate the BPCIA by failing to comply with section (l)(2)(A). In California, unfair competition remedies are only available where the underlying law (in this case, the BPCIA) does not provide an exclusive remedy. Because the BPCIA provides an exclusive remedy for violation of section (l)(2)(A), the unfair competition remedy is unavailable to Amgen. Second, the unfair competition claim based on ineffective notice of commercial marketing is moot because Sandoz gave effective notice and cannot market until September 2, 2015.
Regarding the conversion claim, the majority concludes Amgen failed to show a wrongful act (because compliance with subsection (k) is not mandatory), which is required for a conversion claim. Also, the exclusivity requirement is not met because the 12-year exclusivity period for Neupogen has expired.
Concurring-in-Part: Judge Newman concurred that notice of commercial marketing cannot be effectively given until after the FDA licenses the product, but Judge Newman disagreed with the majority’s interpretation that compliance with section (l)(2)(A) is not required just because the statute provides that the RPS can file an infringement suit when the applicant does not comply.
In Judge Newman’s opinion, the majority inconsistently interpreted the words “shall provide” that appear in both the notice of commercial marketing section and in section (l)(2)(A). She believed that “shall” is a command and should be treated as such when interpreting a statute. The BPCIA uses “shall” and “may” throughout, indicating that drafters knew how to construct mandatory and permissive language.
Judge Newman also points out that the exclusive remedies in section (l)(9)(C) apply only “to ‘product’ and ‘use’ claims, and does not include manufacturing process” claims. Amgen Inc., 794 F.3d at 1364 (Newman, J., concurring in part). Manufacturing process claims are at issue here; therefore, the exclusive remedies of section (l)(9)(C) are not available.
Finally, Judge Newman relies heavily on the BPCIA’s legislative history to establish a reciprocal obligation between the applicant and the RPS. She concludes that “[w]hen a beneficiary of the statute withholds compliance with provisions enacted to benefit others, the withholder violates that balance.” Id. at 1366.
Dissenting-in-Part: Judge Chen agreed with the majority that failure to comply with section (l)(2)(A) is not a violation of the BPCIA because of the remedy provided in sections (l)(9) and 271(e), but he thought that this reasoning should also be applied consistently to the notice of commercial marketing provision. Section (l)(8)(A) must be read in the context of subsection (l) in its entirety as “simply part and parcel of the integrated litigation management process contemplated in (l)(2)–(l)(8).” Amgen Inc., 794 F.3d at 1367 (Chen J., dissenting in part). Just as the “shall” provisions in sections (l)(2)–(l)(7) are contingent upon performing section (l)(2), section (l)(8) is also contingent upon that performance. In short, once the “applicant fails to comply with (l)(2), the provisions in (l)(3)–(l)(8) cease to matter.” Id. Section (l)(8), then, is not a separate standalone provision. “[T]he most logical reading of (l)(8) in context is that (l)(8)’s vitality is predicated on the performance of the preceding steps in subsection (l)’s litigation management process. Without first engaging in these procedures, (l)(8) lacks meaning.” Id. at 1369.
Judge Chen also stated that section (l)(8)(A), under the majority’s interpretation, creates an automatic 180-day injunction, even though the applicant has not complied with section (l)(2)(A). Congress knows how to create automatic stays and would have explicitly done so if that is what it meant. “[T]he better reading of (l)(8) is that it does not apply, just as (l)(3)–(l)(7) do not apply, when the (k) applicant fails to comply with (l)(2).” Id. at 1371.