Jazz Pharmaceuticals, Inc. v. Avadel Cns Pharmaceuticals, LLC

60 F.4th 1373

• Court: Court of Appeals for the Federal Circuit
• Decided: February 24, 2023
• Docket: 23-1186
• Status: Published

Opinion

Case: 23-1186 Document: 59 Page: 1 Filed: 02/24/2023

United States Court of Appeals for the Federal Circuit ______________________

JAZZ PHARMACEUTICALS, INC., Appellant

v.

AVADEL CNS PHARMACEUTICALS, LLC, Appellee ______________________

2023-1186 ______________________

Appeal from the United States District Court for the District of Delaware in No. 1:21-cv-00691-GBW, Judge Gregory Brian Williams. ______________________

Decided: February 24, 2023 ______________________

STEVEN J. HOROWITZ, Sidley Austin LLP, Chicago, IL, argued for plaintiff-appellant. Also represented by GABRIEL P. BRIER, FRANK CHARLES CALVOSA, FRANCIS DOMINIC CERRITO, ELLYDE R. THOMPSON, Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY.

GABRIEL K. BELL, Latham & Watkins LLP, Washing- ton, DC, argued for defendant-appellee. Also represented by CHARLES S. DAMERON, SARAH ELIZABETH PROPST, AUDRA SAWYER; KENNETH G. SCHULER, MARC NATHAN ZUBICK, Chicago, IL; KIRA ALEXIS DAVIS, KATHERINE MCNUTT, Mor- rison & Foerster LLP, Los Angeles, CA; DARALYN JEANNINE Case: 23-1186 Document: 59 Page: 2 Filed: 02/24/2023

DURIE, REBECCA EMILY WEIRES, San Francisco, CA; DANIEL M. SILVER, McCarter & English, LLP, Wilmington, DE.

DAVID BOOKBINDER, Niskanen Center, Inc., Washing- ton, DC, for amici curiae Elianan Bookbinder, Robin Feld- man, Brian Mahn, Niskanen Center, Public Interest Patent Law Institute. ______________________

Before LOURIE, REYNA, and TARANTO, Circuit Judges. LOURIE, Circuit Judge. Jazz Pharmaceuticals, Inc. (“Jazz”) appeals from an or- der of the United States District Court for the District of Delaware granting a motion for an injunction brought by Avadel CNS Pharmaceuticals, Inc. (“Avadel”). See Jazz Pharms., Inc. v. Avadel CNS Pharms., LLC, No. 21-cv- 00691, 2022 WL 17084371 (D. Del. Nov. 18, 2022) (“Deci- sion”). The injunction directed Jazz to take measures to delist U.S. Patent 8,731,963 (“the ’963 patent”) from the U.S. Food and Drug Administration’s (“the FDA’s”) Ap- proved Drug Products with Therapeutic Equivalence Eval- uations publication, more colloquially known as the “Orange Book.” For the following reasons, we lift our stay of the injunction and affirm. BACKGROUND Jazz holds an approved New Drug Application (“NDA”) for the narcolepsy drug Xyrem®. J.A. 1445. Xyrem’s active ingredient is sodium gamma-hydroxybutyrate (“GHB”), which is also known as sodium oxybate. Id. GHB exerts a heavily sedating effect, which is theorized to grant deep- ened nighttime sleep, resulting in improved daytime wake- fulness. GHB is prone to heavy misuse and is infamously known as a date-rape drug. Given that misuse, the FDA conditioned approval of Jazz’s NDA upon development of Risk Evaluation and Mitigation Strategies (“REMS”), which include protocols that must be followed prior to Case: 23-1186 Document: 59 Page: 3 Filed: 02/24/2023

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prescribing or dispensing Xyrem. Id. Xyrem’s REMS orig- inally restricted distribution to a single-pharmacy system, although the FDA waived that requirement in 2017. J.A. 5660. The ’963 patent relates to Jazz’s single-pharmacy dis- tribution system, which controls access to abuse-prone pre- scription drugs prescribed to narcolepsy patients through a central pharmacy and computer database by tracking prescriptions, patients, and prescribers. Representative claims 1 and 6 are presented below: 1. A computer-implemented system for treatment of a narcoleptic patient with a pre- scription drug that has a potential for misuse, abuse or diversion, comprising: one or more computer memories for stor- ing a single computer database having a database schema that contains and inter- relates prescription fields, patient fields, and prescriber fields; said prescription fields, contained within the database schema, storing prescrip- tions for the prescription drug with the po- tential for abuse, misuse or diversion, wherein the prescription drug is sold or distributed by a company that obtained approval for distribution of the prescrip- tion drug; said patient fields, contained within the database schema, storing information suf- ficient to identify the narcoleptic patient for whom the company’s prescription drug is prescribed; said prescriber fields, contained within the database schema, storing information suf- ficient to identify a physician or other pre- scriber of the company’s prescription drug Case: 23-1186 Document: 59 Page: 4 Filed: 02/24/2023

and information to show that the physi- cian or other prescriber is authorized to prescribe the company’s prescription drug; a data processor configured to: process a database query that operates over all data related to the prescription fields, prescriber fields, and patient fields for the prescription drug; and reconcile inventory of the prescription drug before the shipments for a day or other time period are sent by using said database query to identify information in the prescription fields and patient fields; wherein the data processor is config- ured to process a second database query that identifies that the narcolep- tic patient is a cash payer and a physi- cian that is interrelated with the narcoleptic patient through the schema of the single computer database; said identifying that the narcoleptic pa- tient is a cash payer by said second da- tabase query being an indicator of a potential misuse, abuse or diversion by the narcoleptic patient and being used to notify the physician that is interre- lated with the narcoleptic patient through the schema of the single com- puter database. ’963 patent at col. 8 l. 39–col. 9 l.13 (emphasis added). 6. The system of claim 1 wherein the prescrip- tion drug comprises gamma hydroxyl butyr- ate (GHB). Case: 23-1186 Document: 59 Page: 5 Filed: 02/24/2023

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Id. col. 9 ll. 27–28. Under the Hatch-Waxman Act (“the Act”), when a drug developer files an NDA, information on each patent “for which a claim of patent infringement could reasonably be asserted” must be submitted to the FDA if the patent claims either (i) the drug submitted for approval, or a for- mulation or composition thereof, or (ii) “a method of using such drug for which approval is sought or has been granted in the application.” 21 U.S.C. § 355(b)(1)(A)(viii). For “pa- tents that claim a method of use, the applicant must sub- mit information only on those patents that claim indications or other conditions of use for which approval is sought or has been granted in the NDA.” 21 C.F.R. § 314.53(b)(1). The FDA publishes that information in the Orange Book, arming the patent owner with the ability to trigger a presumptive, thirty-month suspension of the FDA’s approval of a competitive product. In 2014, Jazz listed the ’963 patent in the Orange Book as covering a method of using Xyrem. In 2017, three of the ’963 patent’s 28 claims were found unpatentable in an inter partes review proceeding. See Amneal Pharms. LLC v. Jazz Pharms., Inc., No. IPR2015-01903, 2017 WL 1096638 (P.T.A.B. Mar. 22, 2017). The remaining claims expired in December 2022. Because Jazz received a grant of pediatric exclusivity, however, the ’963 patent prevents the FDA from approving follow-on products until June 2023. Deci- sion at *1; J.A. 6350. The Orange Book was intended to meet the conflicting goals of generic applicants who wish to market approved products via an abbreviated approval pathway and holders of NDAs who own patents claiming approved products and their uses. See H.R. Rep. No. 98-857, pt. 1, at 14−15, 27−28, 32−33 (1984), reprinted in 1984 U.S.C.C.A.N. at 2647−48, 2660−61, 2665−66, 1984 WL 37416 (Leg. Hist.); see also 21 U.S.C. § 355(j) (describing Abbreviated New Drug Ap- plications (“ANDAs”)); id. § 355(b)(2) (describing Case: 23-1186 Document: 59 Page: 6 Filed: 02/24/2023

§ 505(b)(2)1 NDAs, which differ from stand-alone NDAs in that at least some of the information required for approval comes from studies not conducted by or for the applicant or for which the applicant has a right of reference or use). Un- der the Act, a § 505(b)(2) applicant must file a certification with respect to each patent listed in the Orange Book that claims the drug or method of using the drug for which the applicant seeks approval. See 21 U.S.C. § 355(b)(2)(A). In December 2020, Avadel submitted an NDA for GHB- based drug FT218, along with amendments pursuant to § 505(b)(2) and a proposed REMS. Unlike Xyrem, which requires the patient to wake up a few hours into the night to ingest a second dose, FT218 is dosed once nightly. Deci- sion at *1. FT218’s REMS also uses multiple pharmacies and databases for ensuring proper drug handling. Despite these differences, and the fact that Avadel had filed an NDA, not an ANDA, the FDA required Avadel to file a cer- tification regarding the ’963 patent’s single-pharmacy sys- tem. Jazz subsequently sued Avadel for infringement of the ’963 patent. Avadel contemporaneously sued the FDA, alleging that it violated the Administrative Procedure Act (“APA”) by requiring certification over the ’963 patent. No- tably, the FDA does not verify that submitted patents ac- tually meet statutory listing criteria, nor does the FDA proactively remove improperly listed patents. See Apotex, Inc. v. Thompson, 347 F.3d 1335, 1347 (Fed. Cir. 2003)

1 This number refers to the original section number from the Federal Food, Drug, and Cosmetic Act of 1938, Pub. L. No. 75-717 (codified as amended at 21 U.S.C. § 301 et seq.) (“FDCA”), which has been superseded by 21 U.S.C. § 355(b)(2). The industry continues to refer to this type of abbreviated application using the original FDCA section number. We will also. Case: 23-1186 Document: 59 Page: 7 Filed: 02/24/2023

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(“[T]he FDA’s . . . duties with respect to Orange Book list- ings are purely ministerial.”). Another remedy for an improper listing is for an ac- cused infringer to counterclaim when it is sued, seeking an order requiring the patent owner to correct or delete a list- ing under 21 U.S.C. § 355(c)(3)(D)(ii)(I) for NDA filers and under § 355(j)(5)(C)(ii)(I) for ANDA filers. Avadel’s suit against the FDA was accordingly dismissed after the dis- trict court identified that § 355(c)(3)(D)(ii)(I) provided Avadel with a separately available and adequate remedy for its alleged harms. See Avadel CNS Pharms., LLC v. Becerra, No. 1:22-cv-02159, 2022 WL 16650467, at *6−9 (D.D.C. Nov. 3, 2022). Avadel thus responded to Jazz’s infringement asser- tions with a counterclaim seeking delisting of the ’963 pa- tent for failure to claim a drug or method of use. In evaluating the counterclaim, the district court found that, as a matter of claim construction, the ’963 patent claims a system and thus does not claim an approved method of use. The district court subsequently ordered Jazz to ask the FDA to delist the ’963 patent. Jazz filed a notice of appeal and moved the district court and this court to stay the in- junction pending appeal. On November 29, 2022, we issued a temporary stay pending resolution of the concurrent dis- trict court motion. After the district court denied Jazz’s stay motion on December 5, 2022, we extended the stay un- til the issues on appeal could be evaluated by this court on the merits. We have jurisdiction under 28 U.S.C. § 1292(c)(1). DISCUSSION We review a district court’s grant of a permanent in- junction for abuse of discretion. Novo Nordisk A/S v. Car- aco Pharm. Lab’ys, Ltd., 688 F.3d 766, 767 (Fed. Cir. 2012). An abuse of discretion may be established by showing that the court either made a clear error of judgment in weighing relevant factors, or exercised its discretion based on an Case: 23-1186 Document: 59 Page: 8 Filed: 02/24/2023

error of law or on findings that were clearly erroneous. Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 772 (Fed. Cir. 1993). Jazz contends that the district court abused its discre- tion in finding that the ’963 patent is not a method-of-use patent for listing and delisting purposes under the FDCA. It further contends that, even if the ’963 patent was not a method-of-use patent, the court abused its discretion in de- termining that § 355(c)(3)(D)(ii)(I) provides a delisting remedy. We address each argument in turn. I. First, we consider whether the district court erred in determining that the ’963 patent is not a method-of-use pa- tent under the FDCA. Jazz asserts that this inquiry in- volves asking two questions: (1) what does the patent claim, and (2) is the patented invention either “the drug for which the application was approved” or “an approved method of using the drug”? We address each question in turn. A. We first address whether the district court erred in de- termining what the ’963 patent claims in the context of a listing/delisting inquiry. Jazz contends that patent law does not provide the correct framework for determining whether a patent should be listed in the Orange Book. Ap- pellant’s Br. at 27 (“[T]he disputed phrase in the FDCA is not directed to a patent-law question at all[.]”); id. at 29 (“[T]he Orange Book listing rules codified in the FDCA have nothing to do with . . . patent-law problems.”). The listing requirements set forth in 21 U.S.C. § 355(b) concern whether, inter alia, a patent “claims a method of using [the] drug for which approval is sought or has been granted in the application.” Similarly, the listing require- ments set forth in 21 C.F.R. § 314.53(b)(1) concern patents that “claim[] the drug or a method of using the drug,” set- ting forth additional requirements “[f]or patents that claim Case: 23-1186 Document: 59 Page: 9 Filed: 02/24/2023

JAZZ PHARMACEUTICALS, INC. v. 9 AVADEL CNS PHARMACEUTICALS, LLC.

a method of use” and for when “the method(s) of use claimed by the patent do[] not cover an indication or other approved condition of use in its entirety.” An inquiry into whether a patent may be properly listed or delisted from the Orange Book therefore clearly requires a determina- tion of what that patent claims. Jazz has acknowledged that analyzing a patent in that context involves asking the question, “what does the patent claim,” and that the answer should be derived using the tools and framework of patent law, including claim con- struction. Appellant’s Reply Br. at 4. It therefore seems undisputed that these statutes and regulations involve de- termining what a patent claims and that this determina- tion raises issues of patent law. Apotex, 347 F.3d at 1344; Caraco Pharm. Lab’ys, Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 405 (2012). Jazz further asserts that “what the ’963 patent claims turns out to be largely uncontroversial,” describing the claims as reciting “elements of a REMS-based procedure to ensure that Xyrem® can be safely prescribed by doctors and safely used by patients. Avadel does not appear to disa- gree.” Appellant’s Reply Br. at 5; see also Appellant’s Br. at 6 (“The ’963 patent, properly construed, claims a method.”); id. at 26 (“In short, the patent claims a method.”); id. at 55−58. Avadel, of course, does disagree. Appellee’s Br. at 52−55. We do also. Claim construction is a question of law that we review de novo. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1454 (Fed. Cir. 1998) (en banc). “It is a ‘bedrock principle’ of patent law that ‘the claims of a patent define the inven- tion[,] which the patentee is entitled . . . to exclude.’” Phil- lips v. AWH Corp., 415 F.3d 1303, 1312 (Fed. Cir. 2005) (en banc) (quoting Innova/Pure Water, Inc. v. Safari Water Fil- tration Sys., Inc., 381 F.3d 1111, 1115 (Fed. Cir. 2004)); see also Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996) (“[W]e look to the words of the claims Case: 23-1186 Document: 59 Page: 10 Filed: 02/24/2023

themselves . . . to define the scope of the patented inven- tion.”). The district court determined that the ’963 patent claims recite systems, not methods. Decision at *2−3. Jazz contends that the word “system” as it appears in the ’963 patent claims is, essentially, a synonym for “method.” Ap- pellant’s Br. at 56−58. But method claims require the per- formance of steps; claims that describe physical components of a whole are system, or apparatus, claims. See Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1204 (Fed. Cir. 2010); In re Kollar, 286 F.3d 1326, 1332 (Fed. Cir. 2002) (noting the “distinction between a claim to a product, device, or apparatus, all of which are tangible items, and a claim to a process, which consists of a series of acts or steps”). Each of the ’963 patent’s three independent claims de- scribes a “computer-implemented system” that comprises “one or more computer memories” and a “data processor.” ’963 patent at col. 8 l. 39−col. 9 at l. 13 (independent claim 1); id. col. 10 l. 27−col. 11. l. 6 (independent claim 23); id. col. 11 l. 7−col. 12 l. 10 (independent claim 24). As the dis- trict court correctly analyzed in its Markman Order, these claims recite “an assemblage of components,” defining a system. J.A. 5723. Jazz has not identified any description in the patent specification or prosecution history to alter that conclusion. The claims to a system comprising com- puter memories and a data processor are not claims to a method. That the claimed systems can be used in the course of treating patients suffering from narcolepsy does not alter the fact that these are system claims. See MasterMine Soft- ware, Inc. v. Microsoft Corp., 874 F.3d 1307, 1315−16 (Fed. Cir. 2017) (finding that the inclusion of active verbs and other functional language describing the capabilities of a claimed system does not transform a system claim into a method claim); see also HTC Corp. v. IPCom GmbH & Co., Case: 23-1186 Document: 59 Page: 11 Filed: 02/24/2023

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667 F.3d 1270, 1277 (Fed. Cir. 2012). We therefore find that the claims of the ’963 patent were properly construed by the district court as system claims, not method claims. B. We next turn to whether the system claimed in the ’963 patent is “an approved method of using the drug” under 21 U.S.C. § 355(c)(2) and § 355(c)(3)(D)(ii)(I). According to Jazz, FDA regulation 21 C.F.R. § 314.53(b)(1), which describes listing patents that “claim conditions of use,” informs the analysis of whether a patent claims “an approved method of using the drug” under § 355. Jazz contends that this regulation yields a broader definition of “method” than permitted by the language of patent law and that this broader definition encompasses the claims of the ’963 patent. More specifically, it contends that Xyrem prescribers were bound to follow the approved REMS; that is, the use of Xyrem, including using it to treat patients with narcolepsy, was conditioned on following the REMS. Because Xyrem’s approved REMS involved the sin- gle pharmacy system that is described in the ’963 patent, the ’963 patent describes a listable condition of use for which approval had been granted in the NDA. Jazz thus contends that the district court erred by ending its analysis after construing the ’963 patent claims as system claims, rather than further inquiring into whether § 314.53(b)(1) nevertheless allows these system claims to be listed as method-of-use claims. Avadel responds in part by asserting that Jazz forfeited this argument. We need not address forfeiture because we conclude that, regardless of forfeiture, Jazz misreads the regulation describing method-of-use patents. Section 314.53 does not broaden the term “method” such that recit- ing a condition of use turns a system patent into a listable method-of-use patent. Rather, this regulation narrows that category of listable patents to those that (1) claim methods of use, wherein (2) those methods of use are Case: 23-1186 Document: 59 Page: 12 Filed: 02/24/2023

directly relevant to the NDA in question. See 21 C.F.R. § 314.53(b)(1) (“For patents that claim a method of use, the applicant must submit information only on those patents that claim indications or other conditions of use for which approval is sought or has been granted in the NDA.”). The fact that the ’963 patent claims recite a system that was, at least prior to 2017, implicated in a condition of using Xyrem, does not disturb the determination that the claims do not recite a listable method of use, which makes this regulatory provision inapplicable. Jazz also points to subsections of 21 U.S.C. § 355 that use the phrase “conditions of use,” in an attempt to estab- lish that this term is inclusive of all patents claiming ele- ments of an approved REMS. Appellant’s Br. at 34−36. We are not persuaded. The subsections to which Jazz points (e.g., § 355(d)(5), 355(e)(5), and 355(j)(2)) describe condi- tions of use evaluated for efficacy, implicating “relevant sci- ence,” “clinical investigations,” as well as “establishing effectiveness” and determining whether a “new drug can be expected to have the same therapeutic effect as the listed drug when administered” according to the approved “con- ditions of use prescribed, recommended, or suggested in the labeling.” The scope of “conditions of use” in those provi- sions, however, does not expand the meaning of “method of using the drug” in the statutory provision at issue here, which must take its meaning from the patent laws. Jazz asserts that, to the extent these listing statutes are ambiguous, deference should be given to the FDA’s in- terpretation reflected in regulation § 314.53 under Chev- ron, U.S.A., Inc. v. Natural Resource Defense Council, Inc., 467 U.S. 837 (1984). As explained above, we do not find § 314.53 to be an interpretation of the distinct statutory delisting provision at issue here, which we think must be interpreted to borrow the patent-law meaning of “method” in its reference to claiming methods of using a drug. More- over, even if we thought the delisting language ambiguous as to that question, which we do not, Chevron deference Case: 23-1186 Document: 59 Page: 13 Filed: 02/24/2023

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cannot be given here because the FDA has not definitively answered the question whether REMS patents more broadly should or can be listed in the Orange Book. Alt- hough the FDA has opened several notice-and-comment in- quiries into whether REMS patents belong in the Orange Book, it has never proclaimed an official agency stance on that issue, instead proclaiming that “its duties with respect to Orange Book listings are purely ministerial.” Apotex, 347 F.3d at 1347; see also J.A. 3986 n.34 (“Consistent with its ministerial role, FDA has not evaluated what the ’963 patent actually covers or whether the [method] use code published in the Orange Book accurately reflects what is covered by the ’963 patent.”). Avadel also highlights that the FDA only requires list- ing patents “for which a claim of patent infringement could reasonably be asserted,” and that Congress explicitly pro- hibited companies from using REMS requirements to “block or delay” ANDA and § 505(b)(2) approvals. 21 U.S.C. § 355-1(f)(8). Although § 355-1(f)(8) does not ex- pressly provide that a REMS patent may not be asserted against potential infringers, Avadel suggests that listing a REMS patent would allow a patent owner to “block or de- lay” ANDA and § 505(b)(2) filers in violation of that stat- ute. Appellee’s Br. at 46; see also Appellant’s Br. at 10 (recognizing that “submission of an application under Sec- tion 505(b)(2) for a drug claimed in a patent or the use of which is claimed in a patent listed in the Orange Book is a statutory act of infringement”). Because we find that the district court did not err in concluding that the ’963 patent must be delisted, we need not address Avadel’s broader ar- guments about REMS patents, more generally. II. We finally consider Jazz’s argument that 21 U.S.C. § 355(c)(3)(D)(ii)(I) is not available to provide Avadel with a delisting remedy for the ’963 patent. Case: 23-1186 Document: 59 Page: 14 Filed: 02/24/2023

Jazz asserts that, in 2014, the regulatory framework permitted Jazz to list the ’963 patent, which, it says, at a minimum fell into a category of patents neither required nor forbidden to be listed. According to Jazz, because it was permissive to list the ’963 patent in 2014, § 355(c)(3)(D)(ii)(I) does not provide Avadel with the power to request an order to delist it now. We disagree. As the district court correctly analyzed, the delisting statute does not require us to consider whether the patent holder violated the law by listing the patent in the first in- stance. It simply provides that those accused of infringing a listed patent may request an order requiring the patent holder to correct or delete listings for patents that do not claim the drug or a method of using the drug. As the ’963 patent claims neither and has been asserted in a patent infringement action against Avadel, § 355(c)(3)(D)(ii)(I) provides Avadel with a delisting remedy. The district court therefore correctly ordered Jazz to seek delisting of the ’963 patent from the Orange Book. CONCLUSION We have considered Jazz’s remaining arguments and find them unpersuasive. For the foregoing reasons, we af- firm and lift our stay of the injunction requiring Jazz to ask the FDA to delist the ’963 patent. As the original date to comply with the injunction has expired, we modify the in- junction insofar as restarting the 14-day period for compli- ance prescribed by 21 C.F.R. § 314.53(f)(2)(i) to be within 14 days of this decision. AFFIRMED