IMPAX LABORATORIES, INC. v. ACTAVIS LABORATORIES FL, INC. et al

Filing 47

OPINION/ORDER granting in part and denying in part 43 Motion to Stay; that Impax shall provide the Court with status updates regarding the ex parte reexamination of U.S. Patent No. 7,094,427, every sixty (60) days starting June 17, 2016; that Impax shall notify the Court within ten (10) days of any disposition of the ex parte reexamination of U.S. Patent No. 7,094,427. Signed by Judge Stanley R. Chesler on 5/26/16. (DD, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
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IMPAX LABORATORIES, INC..,

Plaintiff,
v.
ACTAVIS LABORATORIES FL, INC.
and ACTAVIS PHARMA INC.,

Civil Action No. 15-cv-6934 (SRC)(CLW)

OPINION AND ORDER

Defendants.
CHESLER, District Judge
This matter comes before the Court upon the motion filed by Plaintiff Impax
Laboratories, Inc. (“Impax”) to stay proceedings in this case related to U.S. Patent No. 7,094,427
(“the ’427 patent”), pending the outcome of ongoing United States Patent and Trademark Office
(“PTO”) reexamination proceedings [Docket Entry 43]. Defendants Actavis Laboratories FL,
Inc. and Actavis Pharma Inc. (“Actavis”) oppose this motion. The Court has considered the
parties’ submissions and proceeds to rule without oral argument, pursuant to Federal Rule of
Civil Procedure 78. For the reasons set forth below, the Court will grant in part and deny in part
Impax’s motion.
I.

BACKGROUND
a. DISTRICT OF NEW JERSEY LITIGATION
Impax filed the Complaint on September 17, 2015, based on Actavis’s submission of

Abbreviated New Drug Application (“ANDA”) No. 208522 to the Food and Drug
Administration (“FDA”), seeking approval for a generic version of Impax’s Rytary®
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(Levodopa/Carbidopa) capsule drug. (Compl. ¶ 1.) Impax asserts six patents in this suit. 1
(Compl. ¶¶ 1, 29-97.) Of relevance to this motion, Impax is the holder of the ’427 patent, issued
on August 22, 2006. (Compl. ¶ 20.) Impax also holds New Drug Application (“NDA”) No.
203312 for carbidopa and levodopa capsules for oral use in various dosages, sold under the
tradename Rytary®. (Compl. ¶ 26.)
The 30-month stay on final approval of Actavis’s ANDA in this case, pursuant to the
provisions of the Hatch-Waxman Act, expires on February 5, 2018 [Docket Entry 33]. Actavis
served preliminary non-infringement and invalidity contentions on March 10, 2016 [Docket
Entry 42]. Impax’s responses to Actavis’s contentions, as well as Impax’s infringement
contentions, are due June 3, 2016 [Docket Entry 42]. Claim construction is scheduled to be
completed on August 19, 2016, and the Court has not yet set a date for a Markman hearing
[Docket Entry 33]. The deadline for fact discovery is scheduled for February 14, 2017 [Docket
Entry 33]. No depositions have been taken, no expert reports have been filed, and a trial date has
not been set. Finally, Impax filed this motion to stay April 19, 2016 [Docket Entry 43].
b. PTO REEXAMINATION OF THE ’427 PATENT
A third party filed a request for an ex parte reexamination of the ’427 patent on May 11,
2012. (Reexam No. 90/012293). Pursuant to this request, on May 3, 2013, the PTO issued a
non-final office action rejecting all claims of the ’427 patent as anticipated or obvious based on
prior art. Impax has amended its claims twice, but the PTO still issued a final rejection of all
amended claims on July 25, 2014. Impax responded to the final rejection by submitting a further
set of amendments to the PTO on September 25, 2014, but the PTO declined to enter these

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The six patents asserted in this suit are U.S. Patent Nos. 7,094,427, 8,377,474, 8,454,998, 8,557,283, 9,089,607,
and 9,089,608. (Compl. ¶ 1.)
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suggested amendments on November 24, 2014. Impax filed a notice of appeal to the Patent Trial
and Appeal Board (“PTAB”) the next day, based on further amended claims. The final argument
in the reexamination appeal is set before the PTAB for June 1, 2016. Impax acknowledges that it
has abandoned pursuit of all original claims in the ’427 patent.
Impax seeks a stay with respect to the ’427 patent, until completion of the reexamination
proceedings; furthermore, Impax acknowledges that there is no definite schedule for when these
proceedings will be completed. Actavis contends that Impax is seeking a stay of all proceedings
on this patent until the appeals process is completed, which could take several years, and that
such a stay would cause undue prejudice to Actavis.
II.

LEGAL STANDARD TO STAY A PROCEEDING
“The power to stay proceedings is incidental to the power inherent in every court to

control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “How this can best
be done calls for the exercise of judgment, which must weigh competing interests and maintain
an even balance.” Id. at 254-55. Therefore, district courts have broad powers to stay
proceedings. Bechtel v. Laborers’ Int’l Union, 544 F.2d 1207, 1215 (3d Cir. 1976). “In the
exercise of its sound discretion, a court may hold one lawsuit in abeyance to abide the outcome
of another which may substantially affect it or be dispositive of the issues.” Id.; see also Am.
Life Ins. Co. v. Stewart, 300 U.S. 203, 215 (1937). The party seeking a stay of civil litigation
bears the burden to show that the stay would be appropriate. Landis, 299 U.S. at 255.
Courts have “consistently recognized the inherent power of the district courts to grant a
stay pending reexamination of a patent.” Procter & Gamble v. Kraft Foods Global, Inc., 549
F.3d 842, 849 (Fed. Cir. 2008); see also Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1426-27 (Fed.
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Cir. 1988); Viskase Corp. v. Am. Nat’l Can Co., 261 F.3d 1316 (Fed. Cir. 2001). There is no
conflict between a challenge to a patent in federal court and a reexamination at the PTO, despite
the fact that the two forums may come to different legal conclusions on the same patent given the
different legal standards applied. Ethicon, 849 F.2d at 1428-29, n.3.
Courts in this District have noted a generally liberal policy toward granting stays pending
patent reexamination by the PTO. See, e.g., Brass Smith, LLC v. RPI Indus., Inc., No. 09-6344,
2011 WL 4444717, at *6 (D.N.J. Nov. 1, 2010) (listing relevant cases); Sabert Corp. v.
Waddington N. Am., Inc., No. 06-5423, 2007 WL 2705157, at *5-6 (D.N.J. Sept. 14, 2007);
Cima Labs., Inc. v. Actavis Grp. HF, No. 07-893, 2007 WL 1672229, at *9 (D.N.J. June 7,
2007). When courts have denied a stay pending reexamination proceedings at the PTO, it has
most often been because the case was in a “late stage of litigation, [] discovery was or would be
almost completed, or the matter had been marked for trial.” GPAC, Inc. v. D.W.W. Enters., Inc.,
144 F.R.D. 60, 64 (1992). District courts seek to avoid the potential for waste of a court’s time
and resources when a PTO decision could “drastically alter” the nature of a case. WABCO
Holdings v. Bendix Commercial Vehicle Sys., No. 09-3179, 2010 WL 2628335, at *2 n.2 (D.N.J.
June 28, 2010). But stays pending PTO reexamination of one or more asserted patents in a case
are not automatic, as a “stay in litigation inevitably causes further delay in an already lengthy
process, and could potentially harm [the opposing party].” Brass Smith, No. 09-6344, 2011 WL
4444717, at *2 (quoting Eberle v. Harris, No. 03-5809, 2005 WL 6192865, at *2 (D.N.J. Dec. 8,
2005)). Furthermore, the PTO cannot stay the reexamination once a request has been granted,
and thus the district court is the only forum in which a party can seek a stay in a case with
parallel proceedings. Ethicon, 849 F.2d at 1422.

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III.

DISCUSSION
Typically, courts consider the following three factors in determining whether to stay a

case pending reexamination of a patent: “(1) whether a stay would unduly prejudice or present a
clear tactical disadvantage to the non-moving party; (2) whether a stay will simplify the issues
and the trial of the case; and (3) whether discovery is complete and a trial date has been set.”
Stryker Trauma S.A. v. Synthes (USA), No. 01–3879, 2008 WL 877848, at *1 (D.N.J. Mar. 28,
2008) (quoting Xerox Corp. v. 3Com Corp., 69 F. Supp. 2d 404, 406 (W.D.N.Y. Feb. 18, 1999)).
In analyzing these factors, courts “weigh[ ] the benefits of the stay against the costs.” Id.
a. Potential Prejudice to Actavis
The first factor for consideration in analyzing Impax’s request for a stay is “whether a
stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party.”
Id. The court weighs whether disadvantages from delay are outweighed by advantages from
allowing the PTO to complete the reexamination process before further consideration of the
district court case, on a case-by-case basis. ICI Uniqema v. Kobo Prods., Inc., No. 06-2943,
2009 WL 4034829, at *2 (D.N.J. Nov. 20, 2009). Furthermore, the Federal Circuit has made
clear that district courts are not required to stay judicial resolution of a case pending
reexamination. Viskase, 261 F.3d at 1328. But “[t]he delay inherent to the reexamination
process does not constitute, by itself, undue prejudice.” CCP Sys. AG v. Samsung Elecs. Corp.,
No. 09-4354, 2010 WL 5080570, at *3 (D.N.J. Dec. 7, 2010).
Given the facts underlying its suit, Impax has not made an ordinary request for a stay
pending a reexamination. Impax filed suit and asserted the ’427 patent more than a year after the
PTO had issued a final rejection on all amended claims in the ’427 patent; in fact, the
reexamination had proceeded well into the appeal process at the time of Impax’s filing. Impax
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has not established that moving forward with litigation on the ’427 patent would be particularly
unfair or burdensome, since Impax asserted claims that it knew could not be enforced in their
asserted forms, given the PTO’s rejection and Impax’s subsequent amendment of these claims in
the reexamination process.
Actavis faces potentially significant prejudice from a stay, however. First, Actavis made
its invalidity and non-infringement disclosures on March 10, 2016. A stay at this time would
allow Impax to avoid making its infringement and validity disclosures for an unknown period of
time. Granting a stay would provide an unfair tactical advantage to Impax in this litigation, since
the Complaint does not allege specific facts that make clear what the basis of Impax’s allegations
against Actavis are with respect to the ’427 patent.
The unknown duration of Impax’s requested stay increases the risk of prejudice to
Actavis. Should Impax not succeed in its current appeal before the PTAB, it has the right to
appeal the decision at the PTAB and then the Federal Circuit. These appeals could take years,
therein prejudicing Actavis’s ability to enter the market following the end of the 30-month stay,
should it prevail on the merits. See Nippon Steel & Sumito Metal Corp. v. POSCO, No. 12-2429,
2013 WL 1867042, at *6 (D.N.J. May 2, 2013). Should Impax prevail at some point during the
appeals process, the Court will be forced to litigate the ’427 patent on a separate track, therein
potentially delaying Actavis’s entry onto the market even further. Furthermore, Impax gains a
tactical advantage, should litigation be delayed in this case. Delaying the date on which Actavis
could enter the market by granting a long stay in this case may, in effect, extend the 30-month
stay in place on the final approval of Actavis’s ANDA. Impax offers no reasonable justification
as to why Actavis should have to potentially enter the market at risk when the 30-month stay
concludes, if this Court grants a stay on the ’427 patent. For these reasons, the Court finds that
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this factor weighs against granting a stay.
b. Potential Simplification of the Case
The second factor for consideration “whether a stay will simplify the issues in question
and trial of the case.” Stryker Trauma, 2008 WL 877848, at *1. Reexamination proceedings may
simplify litigation by the “cancellation, clarification, or limitation of claims” that may eliminate
the court’s need to litigate whether Actavis has infringed one or more of the asserted claims.
Ethicon, 849 F.2d at 1428. At this point, all claims in the original ’427 patent have been finally
rejected by the PTO. If the ’427 patent does emerge from reexamination in any form, it will do
so with amended claims. Expending significant effort now in the litigation of this patent at this
time may be illogical, given that Markman proceedings and expert reports at this time would
analyze the original ’427 claims Impax has already abandoned. That being said, Actavis asserts
that the ’427 patent is prior art to the other patents in the suit, and thus some discovery about this
patent may be relevant to the case even if the patent is cancelled. Given these facts, this factor
weighs in favor of at least a partial stay.
c. Status of Case
The third and final factor for consideration is “whether discovery is complete and
whether a trial date has been set.” Stryker Trauma, 2008 WL 877848, at *1. Courts emphasize
that a stay should be sought early in the litigation process. Sabert Corp., 2007 WL 2705157, at
*7 (D.N.J. Sept. 14, 2007). The third factor often weighs against a stay in situations with a “late
stage of litigation, [where] discovery was or would be almost completed, or [when] the matter
had been marked for trial.” GPAC, 144 F.R.D. at 64. This case is in its early stages. Fact
discovery in this case is not scheduled to end until February 14, 2017 [Docket Entry 33].
Markman hearing and trial dates have not been set by this Court. No depositions have been
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taken, no expert reports have been filed, and no dispositive motions have been filed with the
Court. Discovery in this case is certainly not complete. The Court finds that this factor weighs
in favor of granting a stay.
d. Weighing the Factors
The Court finds that Impax has not met its burden to justify the grant of a total stay on
proceedings on the ’427 patent. Actavis faces significant potential prejudice from a complete
stay, given the potential length of the stay, the current state of the reexamination, and the
procedural posture of the case. The risk of prejudice to Actavis outweighs the possibility that a
stay may simplify the case, and the relatively early stage of the case.
Actavis concedes that proceeding to a Markman hearing and expert reports on the ’427
patent at this time may not be logical, since the claims Impax is currently asserting before the
PTAB are not the claims asserted before this Court, and the Court agrees. (Opp. Br. at 14.) That
being said, requiring Impax to serve its validity and infringement contentions with respect to the
’427 patent, and permitting some fact discovery on the ’427 patent will help to mitigate the
prejudice to Actavis from a stay, while conserving the Court’s resources. Therefore, the Court
will order Impax to proceed according to the Scheduling Order with respect to the submission of
its Local Patent Rule 3.1, 3.4A and 3.6 validity and infringement contentions. Furthermore, fact
discovery may proceed with respect to the ’427 patent. Specifically, fact discovery is permitted
with respect to the history, conception, reduction to practice, use and/or sale of any embodiments
or alleged inventions disclosed or claimed in the ‘427 patent, any support for disclosures made in
and inventions claimed in the ’427 patent, and information and factual materials disclosed in the
specification or used in the prosecution and reexamination history, pertaining to the ’427 patent
and related patents.
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IT IS THEREFORE, on this 26th day of May, 2016,
ORDERED that Impax’s motion to stay proceedings in this case related to U.S. Patent
No. 7,094,427 [Docket Entry 43] is GRANTED IN PART and DENIED IN PART; and it is
further
ORDERED that Impax shall proceed according to the Amended Scheduling Order
[Docket Entry 42] with respect to its required disclosures on U.S. Patent No. 7,094,427; and it is
further
ORDERED that fact discovery shall proceed with respect to U.S. Patent No. 7,094,427
as detailed in this Opinion and Order; and it is further
ORDERED that the remainder of this case, with respect to U.S. Patent No. 7,094,427, is
STAYED pending completion of the reexamination process; and it is further
ORDERED that Impax shall provide the Court with status updates regarding the ex parte
reexamination of U.S. Patent No. 7,094,427, every sixty (60) days starting June 17, 2016; and it
is further
ORDERED that Impax shall notify the Court within ten (10) days of any disposition of
the ex parte reexamination of U.S. Patent No. 7,094,427.

s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge

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