Richards Layton & Finger

Chief Judge Stark Denies Motion to Dismiss Hatch-Waxman Complaint

March 6, 2018

In Insys Therapeutics, Inc. v. Alkem Laboratories Ltd., No. 17-1419-LPS (D. Del. Jan. 23, 2018), Chief Judge Stark denied the defendants’ motion to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim.

The defendants, Alkem Laboratories Ltd. and S&B Pharma, Inc. (together, “Alkem”), argued that the plaintiffs, Insys Therapeutics Inc. and Insys Development Company, Inc. (together, “Insys”), lacked standing because they did not provide a draft agreement of confidential access to Alkem’s ANDA after insisting on certain terms to which Alkem had agreed. Alkem also faulted Insys for refusing its offer of access under District of Delaware Local Rule 26.2, which limits disclosure of material designated confidential to outside counsel until the entry of a protective order. Having not viewed the ANDA, argued Alkem, Insys could not show that there was a dispute over which the Court would have subject matter jurisdiction or state a claim for patent infringement. In support of the relief it sought, Alkem argued that Insys’ actions were tantamount to a failure to conduct an adequate pre-suit investigation.

Insys responded that it was negotiating the terms of confidential access with Alkem but could not agree with Alkem on the drafting of the agreement within the 45-day window to file suit, and that there was nothing improper or uncommon about such circumstances. Insys also stated that Alkem was unable to cite authorities for the exact relief it sought here, and that 35 U.S.C. § 271(e)(2) required only the allegation that Alkem filed an ANDA with a Paragraph IV certification, which sufficed both to state a claim and to give the Court subject matter jurisdiction over the action.

The Court denied the motion, concluding that Insys had a reasonable basis to file suit. According to Chief Judge Stark, it was well established that courts have subject-matter jurisdiction over claims for patent infringement under Section 271(e)(2), and that what Alkem actually appeared to be arguing was that Insys had violated Rule 11, which was not the motion Alkem had filed. Chief Judge Stark found nothing regarding the negotiations over confidential access to be unreasonable. Finally, the Court found the allegations of the complaint—that Alkem had filed an ANDA with a Paragraph IV certification—sufficient to state a claim for infringement.

Key Point: The Court implicitly rejected the defendants’ argument that the plausibility pleading standard requires a plaintiff alleging infringement under 35 U.S.C. § 271(e)(2) to allege facts beyond the constructive act of infringement, such as identifying the formulation in the accused product and explaining why it infringes.