On June 24, 2020, District Court of Delaware largely accepted Magistrate Judge’s recommendation & granted Defendants motion for damages because of breach of Settlement and License Agreement.
Somaxon and ProCom (Plaintiffs) filed Hatch-Waxman suit against Mylan as well as three other generic pharmaceutical companies (Actavis, Par & Zydus) for filing ANDA against Silenor® (Doxepin) tablets. Plaintiffs and Mylan entered into the Agreement on July 17, 2012 & as a result it granted license to Mylan to sell Authorised Generic (AG) starting from Jan. 01, 2020 for 180 days. But in Oct.2019, Currax informed Mylan that Currax planned to launch its own AG product “on or around Jan. 1, 2020.” Mylan filed this motion to enforce the Agreement on Dec. 23, 2019. The Court said that it must determine whether Currax’s plan to market and sell its own AG constitutes a breach of the parties’ Agreement, if § 5.1(a) of the Agreement is enforceable, and if Defendants are entitled to specific performance.
Court said that there is no dispute that there is contract & Plaintiffs breached an obligation in the Agreement. The parties only dispute is whether the breach was material. The law gives rise to a remedy for both non-material breach and material breach of contract; it is not necessary for the Court to determine if Plaintiffs’ breach was material to enforce the Agreement. Thus, Plaintiffs has breached the agreement. With respect to its enforcement, Plaintiffs argued that § 5.1(a) is illegal under current antitrust law (F.T.C. v. Actavis, Inc.. 570 U.S. 136 (2013)), which would make it unenforceable. The Court said that the plaintiffs must prove “payment for delay” to prove anticompetitive effects in the context of reverse settlement agreements. At this stage of the proceedings, it is not sufficient to allege a harm; Plaintiffs must offer evidence that there is one. Plaintiffs submitted two declarations in connection with their opposition to the motion but neither one offers any evidence of any anticompetitive harm. Moreover, “no-AG” provision in the agreement may be subject to the rule-of-reason analysis “when it represents an unexplained large transfer of value from the patent holder to the alleged infringer.” Here, Plaintiffs have not shown that § 5.1(a) of the Agreement fulfills this criterion. Second, even if the Court determines a given “no-AG” provision is subject to rule-of-reason analysis, the ultimate outcome of that analysis turns on myriad facts. (describing the fact-intensive inquiry required for rule-of-reason analysis). The Plaintiffs have not presented any facts that indicate there were anticompetitive effects in this case. The Court thus found that the Plaintiffs have failed to meet their burden to show anticompetitive effects.
With respect to damages Court said that Defendants have sufficiently proven damages. By virtue of this breach Plaintiffs have conceded that Defendants incurred damages in the form of a decreased market share. Defendants now have to compete with Plaintiffs’ AG and Actavis’ AB-rated generic rather than with just the Actavis generic. Defendants here asked for specific performance of § 5.1(a) of the Agreement. Court said that “Specific performance is an extraordinary remedy” that is appropriate when “assessing money damages would be impracticable or would fail to do complete justice.” Defendants asserted that the harms that flows from the breach are: “lost revenues, loss of market share, price erosion, and loss of customer goodwill” as well as the loss of the first mover advantage. The Magistrate Judge recommended that an order of specific performance is an appropriate remedy in this matter. But Court said that while that recommendation made sense at the time the Magistrate Judge made it, the passage of time leads court to conclude that the balance of the equities does not now weigh in favor of granting specific performance. Defendants have already lost the majority of their semi-exclusive window for selling the AG of Silenor®. (Defendants were granted 180 days of semi-exclusivity for their AG starting on January 1, 2020. It is now late-June of 2020) By the time Plaintiffs are able to pull their AG from the market the Defendants’ exclusivity period will likely have lapsed. An order of specific performance is not appropriate when monetary damages would be sufficient to compensate the injured party, and when it is possible to arrive at a legal measure with a reasonable degree of certainty. The Court thus found the more appropriate remedy is monetary damages. Defendants are free to pursue damages for their breach of contract claim.
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