Cozen O’Connor: Recovery of Damages on a Bond in Connection with a TRO Barring a Pharmaceutical Product Launch [Alert]

Recovery of Damages on a Bond in Connection with a TRO Barring a Pharmaceutical Product Launch

Alert

December 18, 2018

Hikma and related companies have been awarded more than $31 million in damages on a $46 million bond because they were wrongfully restrained from launching or making any preparations to launch Mitigare or Mitigare AG — colchicine capsules indicated for gout prophylaxis.

On December 12, 2018, Judge Andrews in the District of Delaware granted defendants West-Ward Pharmaceutical Corporation, Hikma Americas Inc., and Hikma Pharmaceuticals PLC recovery of $31,871,027, plus prejudgment interest of $463,272.09, on Takeda Pharmaceuticals, USA’s bond issued in connection with a temporary restraining order.

The events leading to recovery on the bond began four years ago. On October 9, 2014, a TRO was granted, but on November 4, 2014, the court held that the TRO had been improvidently granted, denied Takeda’s request for a preliminary injunction, extended the TRO during the pendency of Takeda’s appeal from the denial of the preliminary injunction and increased the bond of $13 million by $500,000 per day until the Federal Circuit’s decision on the preliminary injunction appeal. On January 9, 2015, the Federal Circuit affirmed the denial of the preliminary injunction and lifted the TRO, allowing defendants to launch Mitigare and Mitigare AG after the TRO had been in effect for three months. Takeda simultaneously launched Colcrys AG, an authorized generic of Colcrys. Between 2009 and January 2015, Colcrys had been the only FDA-authorized colchicine product on sale in the United States.

On December 12, 2018, Judge Andrews also entered summary (final) judgment in favor of defendants on plaintiff’s claims of infringement and, therefore, rejected Takeda’s argument that defendants’ motion for recovery on the bond was premature.

The court rejected defendants’ argument for recovery in excess of the bond, explaining that under Third Circuit law retroactively increasing the amount of the bond is improper and a wrongfully enjoined party may only recover in excess of the bond where the party seeking the injunction engaged in bad faith or fraud. The court also rejected defendants’ argument that Takeda was judicially estopped from changing its contentions from those asserted in petitioning for the TRO. In its petition for the TRO, Takeda had calculated a higher loss from defendants’ launch than they calculated in opposing defendants’ motion for recovery on the bond. The court reasoned that although Takeda’s contentions in opposing defendants’ recovery on the bond were inconsistent with its arguments in support of the TRO, that Takeda was entitled to change positions because it now had the benefit of seeing the impact of defendants’ colchicine product launch and that, therefore, it had not changed its position in bad faith.

The court rejected Takeda’s argument that defendants’ lost profits can be determined simply by assuming that they would have been the same as the profits defendants actually made in the first three months after the launch of their colchicine product. The court reasoned that defendants are entitled to the profits that they would have made “but for” the TRO, and that the actual profits of defendants over the first three months were less than what they would have been in the absence of the TRO because Takeda had had three months to prepare to compete with defendants, which it would not have had in the absence of the TRO.

The court analyzed five factors to determine the amount of defendants’ lost profits: (1) what amount of colchicine market share would Defendants have gained if they had been allowed to launch in October 2014, (2) when would Takeda have launched its Colcrys AG, (3) what long-term market share would defendants have secured, (4) what incremental expenses would defendants have incurred, and (5) at what price would defendants have sold Mitigare/Mitigare AG.

The court also determined that defendants were entitled to prejudgment interest on their lost profits from the date the TRO was granted until the date of the Federal Circuit judgment vacating the TRO, but that defendants may not receive prejudgment interest above the amount secured by the bond.

Lastly, the court determined that defendants had waived costs by failing to timely request them within the time allowed by the Local Rules of the U.S. District Court for Delaware — within 14 days after the issuance of the 2015 mandate of the Federal Circuit Court.


Authors

Marilyn Neiman

Member

mneiman@cozen.com

(212) 883-4985

Martin B. Pavane

Vice Chair, Intellectual Property Department
Co-Chair, Hatch-Waxman & Biologics Litigation

mpavane@cozen.com

(212) 883-4994

Related Practices


To discuss any questions you may have regarding the issues discussed in this Alert please contact Marilyn Neiman at (212) 883-4985 or mneiman@cozen.com or Martin Pavane at (212) 883-4994 or mpavane@cozen.com.