A recent New Jersey Law Journal story, “SCOTUS Rulings Dash Legal Fee Bid in Abilify Patent Dispute,” reports that Otsuka Pharmaceutical Co. has lost its bid for attorney fees in a patent dispute after a federal judge in Trenton found that the six generic drug company defendants in the case did not litigate in an unreasonable manner under two recent U.S. Supreme Court rulings.  But the judge did order the defendants to pay Otsuka $545,498 in costs from the litigation.

Otsuka claimed that defendants Teva Pharmaceuticals, Barr Laboratories, Apotex Corp., Sun Pharmaceutical Industries Ltd., Synthon Pharmaceuticals Inc., and Zydos Pharmaceuticals should pay its legal fees because they were vexatious and unreasonable in the course of the patent case.  But U.S. District Judge Mary Little Cooper of the District of New Jersey said the defendants’ conduct did not meet the definition of “exceptional” under U.S. Supreme Court rulings issued April 29, 2014, in Octane Fitness LLC v. Icon Health & Fitness, Inc., and Highmark Inc. v. Allcare Health Management System.

Otsuka which claimed in a series of suits in 2007 that the defendants were infringing the patent for its anti-psychotic drug Abilify in Abbreviated New Drug Applications, was granted a judgment in 2010 as to validity of its patent for that drug.  The U.S. Court of Appeals for the Federal Circuit affirmed in August 2012.  Otsuka then sought fees under 35 U.S.C. 285, based on a claim that the defendants filed baseless certifications under Paragraph IV of the Wax-Hatchman Act, citing Federal Circuit case law holding that the filing of a baseless Paragraph IV certification or maintenance of an unjustified ANDA litigation warrants an exceptional case holding and the corresponding imposition of fees.

Otsuka cited the defendants’ refusal to drop baseless arguments, its dramatic shifts in positions and “extensive and disproportionate” discovery requests.  Otsuka claimed it produced over 800,000 documents, only to have the defendants admit “fewer than 10 total documents at trial.”

Otsuka also claimed the defendants were unable to narrow their arguments, calling a notice of intention to rely on 806 patents and publications at trial a “frivolous and vexatious litigation tactic” because the defendants only cited to 30 at trial.

Oral argument was held on the motion in September 2013. But the case was stayed in light of the pending Octane Fitness and Highmark cases at the Supreme Court, and Cooper held another hearing Aug. 13 to discuss the impact of the Supreme Court rulings.

In Octane, the Supreme Court said prevailing parties may be awarded reasonable attorney fees in exceptional cases.  It overruled the prior framework, which it called “inflexible” and “overly rigid.”  In Octane, the court said that under the fee-shifting framework of Sec. 285, courts may consider “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.”  Patent litigants must then prove their entitlement to an award of attorney fees by a preponderance of the evidence, rather than the previous standard of clear and convincing evidence.

Cooper said that although Otsuka prevailed on the issue of the validity and enforceablity of the ’528 patent, the defendants’ arguments “did not rise to the level of being ‘exceptionally meritless.’”

The defendants “put forth some good faith arguments in favor of their positions,” the judge said.  She said the case was one where the losing party “could not meet the burden of the arguments” but the arguments did not “descend to the level of frivolous argument or objective unreasonableness.”

Cooper also disagreed with Otsuka’s contention that the defendants litigated the case in an unreasonable manner due to excessive discovery demands, baseless arguments and changing positions.  The discovery requested in the case is typical of any Hatch-Waxman case in which an NDA holder possesses voluminous relevant evidence and the ANDA filers “possess only minimal relevant discovery,” she said.

“Otsuka has failed to show how the defendants’ discovery requests amounted to unreasonable litigation.  One of the purposes of discovery is to allow the defendant to pin down the plaintiff’s theories, thus confining discovery and trial preparation to information that is pertinent to the theories of the case,” Cooper said.

And although the defendants conceded that some of their arguments shifted or changed after discovery, this does not render a case exceptional, the judge said.

“Rather, it illustrates that the defendants properly used discovery throughout the course of litigation as a means to refine or change their arguments,” Cooper said.

The judge ordered that the six defendants were jointly and severally liable for the $545,498 in costs.  The company had requested $743,036, but the judge made significant cuts to the requests for deposition costs and for bills to outside vendors who prepared trial exhibits and visual aids.