Jazz Pharmaceuticals v. Avadel CNS Pharmaceuticals, decided May 6, 2025

Case: Jazz Pharmaceuticals, Inc. v. Avadel CNS Pharmaceuticals, LLC (United States Court of Appeals for the Federal Circuit, May 6, 2025)

Case Numbers: 2024-2274, 2024-2277, 2024-2278

Appeal from: U.S. District Court for the District of Delaware (Judge Gregory Brian Williams) Decision Date: May 6, 2025

Judges: LOURIE, REYNA, and TARANTO, Circuit Judges

Subject: Appeal of a permanent injunction issued by the District Court against Avadel regarding its drug Lumryz and its development for Idiopathic Hypersomnia (IH).

Overview:

This case involves a patent dispute between Jazz Pharmaceuticals and Avadel CNS Pharmaceuticals concerning Avadel's drug Lumryz, a sodium oxybate formulation. Jazz, the manufacturer of Xyrem and Xywav (the latter being the only FDA-approved treatment for IH), sued Avadel, alleging infringement of its U.S. Patent 11,147,782 ("the '782 patent"). Jazz initially alleged artificial infringement under the Hatch-Waxman Act based on Avadel's submission of a New Drug Application (NDA) for Lumryz. Following FDA approval and commercial launch of Lumryz for narcolepsy, Jazz amended its complaint to allege actual infringement under 35 U.S.C. § 271(a)-(c) for making and selling Lumryz. A jury found Avadel's product infringed the '782 patent and awarded Jazz past damages. Subsequently, the District Court granted a limited permanent injunction prohibiting Avadel from seeking FDA approval and marketing Lumryz for the treatment of IH. Avadel appealed this injunction, arguing its activities related to IH development are protected by the Hatch-Waxman Act's safe-harbor provision (35 U.S.C. § 271(e)(1)).

The Federal Circuit Court of Appeals reviewed the District Court's permanent injunction, focusing on three specifically enjoined activities: initiating new clinical trials, offering open-label extensions (OLEs) in ongoing trials, and applying for FDA approval for IH. The court reversed the injunction in part, vacated in part, and remanded the case to the District Court for further consideration of specific issues.

Key Facts and Background:

• Jazz Products: Jazz manufactures Xyrem and Xywav, both sodium oxybate products. Xywav is the first and currently only FDA-approved treatment for Idiopathic Hypersomnia (IH).

• Avadel Product: Avadel developed Lumryz, a once-nightly formulation of sodium oxybate.

• Avadel's Initial NDA: On December 15, 2020, Avadel submitted a 505(b)(2) "paper NDA" to the FDA seeking approval of Lumryz for narcolepsy, relying in part on Jazz's Xyrem data.

• Jazz's '782 Patent: Jazz filed a patent application on March 23, 2021, which issued as the '782 patent on October 19, 2021. Claim 24, the asserted claim, recites a unit dose (specifically a sachet) formulation of gamma-hydroxybutyrate with specific components.

• No Orange Book Listing: The '782 patent is not listed in the Orange Book for Xyrem or Xywav, and Avadel did not make patent certifications under § 355(b)(2)(A) regarding this patent when filing its NDA.

• Initial Lawsuit: Jazz sued Avadel on November 10, 2021, alleging artificial infringement under 35 U.S.C. § 271(e)(2)(A) based on Avadel's NDA submission.

• Shift to Actual Infringement: On May 1, 2023, the FDA approved Avadel's NDA for Lumryz for narcolepsy, and Avadel commercially launched the product on June 5, 2023. Jazz amended its complaint to allege actual infringement under § 271(a)-(c) for making and selling Lumryz.

• Jury Verdict: The parties stipulated that Lumryz would infringe claim 24 if valid. A jury found Avadel failed to prove the invalidity of claim 24 and awarded Jazz a reasonable royalty for past infringement.

• Permanent Injunction: Following the trial, Jazz moved for a permanent injunction under 35 U.S.C. § 283. The District Court granted a limited permanent injunction on August 27, 2024, prohibiting Avadel from seeking FDA approval and marketing Lumryz for IH. The injunction excluded ongoing clinical trials.

• Stay Order and Clarification: On September 24, 2024, the District Court clarified the injunction's scope, stating Avadel was enjoined from: "(1) offering open-label extensions to [REVITALYZ] trial participants; (2) applying for FDA approval of Lumryz for IH; and (3) initiating new clinical trials or studies after the [Permanent Injunction Order]’s effective date."

• Appellate Stay: A motions panel of the Federal Circuit stayed the injunction only as it pertained to "initiating new clinical trials or studies."

Main Themes and Most Important Ideas/Facts:

1. Hatch-Waxman Act and the Safe Harbor Provision (§ 271(e)(1)): A central theme is the interpretation and application of the Hatch-Waxman Act, particularly the safe-harbor provision. This provision exempts from infringement activities done "solely for uses reasonably related to the development and submission of information" to the FDA. The court highlights the purpose of this provision as encouraging "immediate competition" upon patent expiration by allowing experimentation and data development before patent expiry.

2. Quote: "To that end, Congress created the safe-harbor provision, § 271(e)(1), 'to establish that experimentation with a patented drug product, when the purpose is to prepare for commercial activity which will begin after a valid patent expires, is not a patent infringement.'"

3. Quote: "Congress determined that 'experimental activity does not have any adverse economic impact on the patent owner’s exclusivity during the life of a patent, but prevention of such activity would extend the patent owner’s commercial exclusivity beyond the patent expiration date.'"

Scope of Permanent Injunctions in Patent Cases: The court emphasizes that injunctions should generally be limited to adjudicated infringing activities.

• Quote: "[D]istrict courts are frequently admonished not to issue sweeping injunctions against potentially infringing activities in patent cases, but to restrict the scope of the injunction to the particular adjudicated infringing activity."

Initiating New Clinical Trials: The court held that enjoining Avadel from initiating new clinical trials is unlawful because this activity is statutorily non-infringing under the safe harbor (§ 271(e)(1)) and statutorily precluded from being enjoined under § 271(e)(3). This was deemed a purely legal invocation of the safe harbor and did not require the factual development typically associated with a safe-harbor defense to alleged past or current infringement.

• Quote: "The plain language and purposes of the Hatch-Waxman Act make it clear that enjoining Avadel from initiating new clinical trials for Lumryz (for IH or otherwise) until expiration of the ’782 patent is unlawful and, therefore, an abuse of discretion."

• Quote: "That activity is statutorily non-infringing under § 271(e)(1) and statutorily precluded from being enjoined under § 271(e)(3)."

Offering Open-Label Extensions (OLEs): Similar to initiating new clinical trials, the court found that enjoining Avadel from offering OLEs in ongoing clinical trials was improper because this activity had not been accused of infringement and its status under the safe harbor was a question of fact not adjudicated by the District Court.

• Quote: "Accordingly, because this activity has never been accused of infringement, and because '[t]he statute clearly requires that the § 271(e)(1) issue be decided prior to the grant of injunctive relief,' . . . we reverse the injunction insofar as it enjoins Avadel from offering OLEs to patients in clinical trials."

Applying for FDA Approval: The court analyzed whether applying for FDA approval of Lumryz for IH could be enjoined.

• Submission of Application under § 271(a): The court agreed that the mere submission of an FDA application is not an act of infringement under § 271(a) (making, using, selling, etc.).

• Submission of Application under § 271(e)(2): The court noted that submission of a 505(b)(2) paper NDA is an artificial act of infringement under § 271(e)(2)(A).

• Dispute Regarding Scope of § 271(e)(2): A critical unresolved issue, raised at oral argument, is whether § 271(e)(2) infringement is limited to submissions related to Orange Book listed patents and requiring paragraph IV certifications, or if it applies to any paper NDA or ANDA where an existing patent claims the drug or its use. The court notes the plain language of § 271(e)(2) does not appear to be limited to Orange Book patents, but acknowledges legislative history suggesting a focus on applications that trigger notice and stays.

• Remand for Clarification: The court vacated the injunction related to seeking FDA approval for new indications and remanded for the District Court to determine in the first instance if Avadel's submission of a paper NDA for an additional indication (like IH) would be an act of infringement under § 271(e)(2).

• Remedies if § 271(e)(2) Infringement: If the submission is a § 271(e)(2) infringement, the available remedies are limited by § 271(e)(4) and do not include enjoining the application submission itself. The remedies focus on adjusting the approval effective date, enjoining commercial activities, and awarding damages for past commercial activities. Enjoining the application would run counter to the Hatch-Waxman Act's purpose of encouraging timely competition after patent expiry.

• Remedies if No Infringement: If the submission is not an act of infringement, it could only be enjoined if necessary to prevent infringement (under the eBay factors). The District Court's finding of harm related to market entry was deemed insufficient to justify enjoining the application itself, as the application does not automatically lead to market entry or future infringement. A causal nexus between the enjoined activity (applying for approval) and the alleged irreparable harm (market entry) was found lacking in the District Court's analysis.

Conclusion:

The Federal Circuit reversed the District Court's injunction as it applied to initiating new clinical trials and offering open-label extensions, finding these activities either statutorily non-infringing or unadjudicated as infringing. The court vacated the injunction concerning seeking FDA approval for new indications and remanded the case. On remand, the District Court is instructed to first determine if a paper NDA submission for a new indication constitutes infringement under § 271(e)(2), considering the scope of that provision. If it does, the injunction cannot stand. If it does not, the District Court must re-evaluate the injunction under the eBay factors and establish a sufficient causal nexus between enjoining the application and preventing future infringement.