Conflict Between Granting a Preliminary Injunction and Staying the Case Pending Appeal of the Injunction

In Fresenius Kabi USA, LLC v. Fera Pharmaceuticals, LLC, et al., Case No. 15-3654 (D.N.J.) the district court recently denied Fresenius’s motion to dismiss Fera’s antitrust counterclaims, but simultaneously decided to sever and stay those claims pending resolution of the patent infringement claims. Additionally, the court denied Fresenius’s motion to stay the patent infringement claims pending resolution of Fera’s appeal of the district court’s earlier grant of a preliminary injunction.

The case is premised on three patents directed to formulations of levothyroxine, which is a hormone generated by the thyroid. Fresenius alleges that Fera will infringe the patents and Fera alleges, inter alia, inequitable conduct and raises two antitrust counterclaims. Meanwhile, Fresenius also moved for a preliminary injunction preventing Fera from launching its generic products at-risk. Of particular interest in this decision is the district court’s discussion and reasons for denying Fresenius’s motion to stay the litigation pending resolution of Fera’s interlocutory appeal of the preliminary injunction.

As a threshold matter, the district court denied Fresenius’s motion to dismiss Fera’s two antitrust counterclaims. While the court recognized that entering a preliminary injunction (which included a finding that Fresenius was likely to prevail on the merits) is inherently inconsistent with accepting Fera’s sham litigation counterclaim, the merits of those claims could be debated and thus, the court opted instead to sever and stay those claims. The court reasoned that because the antitrust claims are derived from the inequitable conduct claims, it was reasonable to sever and stay the antitrust claims while focusing first on the infringement and inequitable conduct claims.

The court also addressed whether to stay the entire case during the pendency of Fera’s appeal of the preliminary injunction. Interestingly, Fresenius did not bring its motion to stay the case under either Fed. R. Civ. P. 62(c) or Fed. R. App. P. 8, because as the court noted, the standard for granting a stay under each rule requires a showing similar to what is required to obtain a preliminary injunction. As such, a request to stay under one of these mechanisms would fail because as the beneficiary of the injunction, Fresenius could not show irreparable harm in the absence of a stay.

Instead, Fresenius argued for entry of a stay based on the court’s inherent power to enter a stay. However, even under this standard the district court found that the balance of factors weighed against entry of a stay. On the issue of whether Fera would be disadvantaged by the stay, the district court concluded that Fera might be put at a competitive disadvantage. Fera argued that at best, winning the appeal would only enable it to launch its products at-risk and that it would still need to resolve the infringement claims, the resolution of which should not be delayed. Also, because of the possibility that its generic competitors – some which had already settled with Fresenius – could get FDA approval during the pendency of the stay, Fera’s competitive advantage, having already secured FDA approval, could be lost. Meanwhile, Fresenius failed to show that it would face any hardship or inequity if the stay were denied. Additionally, the court was not persuaded that the stay would result in any meaningful simplification of the case. The issues appealed to the Federal Circuit are not dispositive and would not lead to the kind of narrowing of issues that can happen in patent infringement cases where, for example, there are collateral proceedings in the PTO. Finally, the court concluded that even though a trial date was not set, the completion of fact and expert discovery weighed against entry of a stay.

A particularly interesting take-away from this case is the court’s discussion of the conflict between granting a preliminary injunction and addressing entry of a stay of the litigation pending appeal of that decision. It appears from the analysis that it may be very difficult for the beneficiary of a preliminary injunction to present a compelling case for staying the underlying litigation while an appeal on the preliminary injunction is addressed.