A Delaware federal judge has issued a decision regarding the date that a hypothetical negotiation would have taken place, a decision that impacts the amount of damages that could be recovered in the patent dispute between Mallinckrodt and Airgas over Mallinckrodt's patents covering its INOmax and DSir Plus products, which deliver nitric oxide therapy primarily for treating hypoxic respiratory failure in neonates. Airgas developed competing products called Ulspira and Ulspira TS.
The Central Issue: Timing of Hypothetical Negotiations
In patent litigation, courts must determine, in part, when a willing licensor and licensee would have negotiated a reasonable royalty agreement—known as the "hypothetical negotiation date." This timing is important because it affects both the calculation of damages and the assessment of available alternatives that might influence licensing terms.
As described in the Georgia-Pacific factors, the hypothetical negotiation concerns the reasonable royalty that a licensor and a licensee "would have agreed upon (at the time the infringement began)." Georgia-Pac. Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y.1970). Infringement generally occurs when an unauthorized party "makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent."
In this case, Mallinckrodt argued for November 2022 as the hypothetical negotiation date, pointing to when Airgas amended its ANDA application to include paragraph IV certifications for patents listed in the FDA's Orange Book for Mallinckrodt's INOmax products. Under the Hatch-Waxman Act framework, filing an ANDA constitutes an artificial act of infringement, giving patent holders grounds to sue. Airgas argued that the hypothetical negotiation date should be around the date Airgas launched its Ulspira product.
Court Rejects Mallinckrodt's Theory
Judge Richard Andrews rejected Mallinckrodt's proposed date, ruling instead that November 2023—when Airgas actually launched its competing Ulspira product—represents the appropriate hypothetical negotiation date.
The court explained that the hypothetical negotiation framework assumes a "willing licensor-willing licensee" scenario, which "attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began." The judge noted that this approach contemplates negotiations when an infringer actually needs a license for its product launch.
Judge Andrews distinguished between two different concepts: the artificial infringement created by ANDA filing and the practical reality of when licensing negotiations would occur. While acknowledging that filing an ANDA with paragraph IV certifications constitutes infringement for litigation purposes, the court found this doesn't necessarily establish the optimal timing for hypothetical licensing discussions.
"An ANDA holder does not need a license to file its ANDA, even if that ANDA is found to infringe," the judge wrote. "But the ANDA holder would need a license to launch the infringing product."
Looking Forward
With the hypothetical negotiation date established as November 2023, the case will now proceed to address other issues including patent validity, infringement scope, and the ultimate calculation of reasonable royalty damages. The ruling demonstrates how timing determinations in patent law can have consequences for both patent holders and generic drug manufacturers in the complex pharmaceutical litigation landscape.
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