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Ortho Pharmaceutical Corp. v. Amgen Inc.

argued: June 28, 1989.


On Appeal from the United States District Court for the District of Delaware, D.C. Civil Action No. 89-00034.

Mansmann, Scirica and Seitz, Circuit Judges.

Author: Scirica

SCIRICA, Circuit Judge.

Defendant Amgen, Inc. appeals from the grant of a preliminary injunction in favor of plaintiff Ortho Pharmaceutical Company, in a contract dispute that the parties agreed to submit to arbitration. The primary issues in this appeal are whether the Federal Arbitration Act, 9 U.S.C. §§ 1-14 (1982), abrogates the district court's power to issue a preliminary injunction in an arbitrable dispute, and whether the district court erred in deciding that Ortho had met the prerequisites for a preliminary injunction.

The appeal is moot as it relates to paragraphs one and three of the district court order and will be dismissed. We will vacate and remand to the district court those aspects of the order with continuing legal effect, to determine whether the circumstances continue to warrant the imposition of preliminary injunctive relief.


Amgen is a biotechnology company with the technology for the production of commercial quantities of erythropoietin (EPO), a human protein normally produced in the kidney, which stimulates the formation of red blood cells. Persons who develop chronic kidney disease often suffer from an impaired ability to make erythropoietin, which in turn results in an impaired ability to make red blood cells, a condition commonly known as anemia. By correcting the body's erythropoietin deficiency, synthetic EPO offers an alternative to the current form of treatment for this disease -- repeated red blood cell or whole blood transfusions -- which itself can present serious side-effects.

Ortho is a subsidiary of Johnson & Johnson involved in the research, development, manufacturing and marketing of pharmaceutical and biological medicines. On September 30, 1985, Amgen and Ortho entered into two written contracts, a Technology License Agreement and a Product License Agreement (collectively, the Agreement), to bring to market three different biological medicines: hepatitis B vaccine (Hep-B), Interluekin-2 (IL-2), and EPO.

Under the Agreement, Amgen granted Ortho an exclusive royalty-bearing license to market and sell EPO in the United States for all therapeutic indications except dialysis, reserving for itself the dialysis market. Additionally, Amgen promised to manufacture and supply Ortho's requirements for EPO in the United States.*fn1 Pursuant to the Public Health Service Act, 42 U.S.C. §§ 262 et seq. (1982), and accompanying regulations, 21 C.F.R. §§ 600-601.51 (1988), a biological substance such as EPO can be sold in the United States only after the Food and Drug Administration (FDA) approves both a Product License Application (PLA), which licenses the product, and an Establishment License Application (ELA), which licenses the manufacturing facility where the product is made.*fn2 The Agreement presupposed that each company was responsible for obtaining its own FDA approval, but would exchange and cross-reference all information in this regard to expedite approval of both applications by the FDA. Finally, the Agreement provided that the parties would submit to arbitration all disputes arising under the Agreement, and that California substantive law would govern their resolution.

During 1987, the parties began disputing their respective regulatory, marketing, and supply rights and obligations. More specifically, the parties differed over: the strategy for obtaining FDA approval, in particular, whether the two companies would submit a joint filing with the FDA or would individually file a separate PLA/ELA for their respective commercial markets; the acceptability of several marketing collaboration proposals, calculated in part to address Amgen's concern that Ortho's focus on the "pre-dialysis" market, combined with its desire to submit a joint PLA/ELA, would infringe on Amgen's reserved dialysis market;*fn3 and the price and quantity terms of the EPO supply arrangement which were left unspecified in the Agreement.

In October, 1987, Amgen filed its application with the FDA for the indication "chronic renal failure," supported solely by its own clinical data from dialysis patients. This application never included Ortho's pre-dialysis clinical data.*fn4

On January 23, 1989, Ortho filed a demand for arbitration with the American Arbitration Association. In addition to damages, Ortho sought from the arbitrator an order requiring Amgen to submit Ortho's clinical data to the FDA, to identify Ortho as a distributor in the PLA/ELA, to submit Ortho's label to the FDA, and to supply Ortho with EPO. Amgen filed for arbitration on other issues. On January 31, 1989, Ortho filed suit in the district court seeking preliminary injunctive relief "to maintain the status quo during the pendency of the arbitration proceeding." More specifically, Ortho claimed that Amgen had breached the Agreement by refusing to make the necessary filings with the FDA needed to enable Amgen to supply Ortho with EPO, including Amgen's refusal to submit Ortho's pre-dialysis clinical studies, and by refusing to supply finished EPO to Ortho. Ortho requested an injunction prohibiting Amgen from further prosecuting its PLA/ELA for EPO and from marketing EPO pending arbitration, unless Amgen were to make all filings necessary to permit Ortho to sell in its agreed-upon market. Without such relief, Ortho urged, Amgen would cause Ortho irreparable injury by preempting the entire EPO market for itself, thereby depriving Ortho of the benefits of the exclusive license.

While this litigation was pending, on February 9, 1989, after meeting with FDA representatives, Amgen wrote the FDA requesting permission to narrow its PLA/ELA to the indication "end-stage chronic renal failure," which would include only patients currently receiving dialysis treatment. Later that same month, Ortho filed with the FDA its own PLA/ELA for the indication of chronic renal failure.

After the parties had engaged in expedited discovery, the district court held an evidentiary hearing on March 17, 1989. On March 23, 1989, the district court issued its first opinion and accompanying order. Ortho Pharmaceutical Corp. v. Amgen. Inc., 709 F. Supp. 504 (D.Del. 1989). The district court determined that under the Federal Arbitration Act, it had the authority to issue a preliminary injunction "to preserve the status quo pending arbitration." Id. at 509-10. Accordingly, as the district court explained in denying Amgen's motion for reconsideration, the court "made certain limited findings of fact to ascertain the status quo." Ortho Pharmaceutical Corp. v. Amgen, Inc., No. 89-34-JJF, slip op. at 2 (D.Del. April 21, 1989). In this regard, the court found that Amgen and Ortho had agreed, through a course of conduct, to submit a joint PLA/ELA, and that the "status quo" of the parties was that of "one joint PLA/ELA . . . with respect to EPO for the indication of chronic renal failure." 709 F. Supp. at 506-07. The court also held that Ortho had met the legal requirements for the issuance of injunctive relief. 709 F. Supp. at 510. The court mandated that: (1) Amgen withdraw its request to the FDA to limit its PLA/ELA to end-stage chronic renal failure (i.e., dialysis) (paragraph one of order); (2) Ortho withdraw the PLA/ELA it filed with the FDA insofar as it seeks approval for chronic renal failure (paragraph two); (3) Amgen submit to the FDA the Ortho data, as provided to Amgen by Ortho on February 7, 1989, as a supplemental filing to Amgen's PLA/ELA (paragraph three); (4) the parties provide reasonable prior notice to one another of all meetings with the FDA regarding Amgen's PLA/ELA, provide one another with all documents submitted to or received from the FDA regarding Amgen's PLA/ELA, make reasonable efforts to include one another in telephone conversations initiated ...

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