The Federal Circuit has left intact most of a $76 million damages award that Apotex Corp. was ordered to pay AstraZeneca AB for infringing two patents for the indigestion drug Prilosec. But the lower court was instructed to recalculate a portion of the award. The appeals court rejected most of Apotex’s challenges to the damages award, which was based on U.S. Senior Judge Denise Cote’s 2013 decision that AstraZeneca was entitled to 50 percent of Apotex’s profits from sales of the infringing generic product.
While the Federal Circuit said the award did not overcompensate AstraZeneca in most respects, it ruled that the judge’s determination should not have included sales of Apotex’s products for two months during the so-called pediatric exclusivity period, at which point AstraZeneca’s patents had expired. The court said:
The damages determination should not include Apotex’s sales during the post-expiration period of pediatric exclusivity, because Astra’s rights during that period were not attributable to its patents and were not invaded by Apotex’s infringement.
The pediatric exclusivity period is a six-month period during which the Food and Drug Administration is barred from approving competing generic drugs if the branded drug owner agrees to conduct pediatric studies. In the instant case, the period began at the point AstraZeneca’s Prilosec patents expired in 2007, and some of Apotex’s sales took place during the period. The Federal Circuit reversed the part of the damages award related to post-expiration sales and remanded so the award could be recalculated.
The court rejected Apotex’s argument that the lower court’s 50 percent royalty rate was inappropriate. For example, Apotex said at the time its generic product entered the market, there were already other generic versions of the drug, so its version caused only “negligible harm” to AstraZeneca. The court said Apotex’s argument ignored many of the detailed factual findings that Judge Cote made about the market for the drug when she set the 50 percent royalty rate. The court said:
We therefore reject Apotex’s challenges to the district court’s evidentiary analysis and its conclusion from that analysis that the 50 percent royalty rate constituted fair compensation to Astra under the reasonable royalty theory of damages.
Apotex began selling a generic version of Prilosec in 2003, in the midst of infringement litigation by AstraZeneca against several generics makers. Apotex’s product remained on the market until 2007, when a judge found it infringed AstraZeneca’s patents. After that ruling was affirmed by the Federal Circuit in 2008, a separate proceeding began to determine the amount of damages AstraZeneca was entitled to as a result of Apotex’s sales. This resulted in Judge Cote’s 2013 damages decision, following a bench trial.
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