Case 2:15-cv-01455-WCB Document 252 Filed 01/12/17 Page 1 of 8 PageID #: 9818
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`Case No. 2:15-cv-1455-WCB
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`§§§§§§§§§§
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`ALLERGAN, INC.,
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`Plaintiff,
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`v.
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`TEVA PHARMACEUTICALS USA, INC.,
`et al.,
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`Defendants.
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`MEMORANDUM OPINION AND ORDER
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`Before the Court is Mylan Pharmaceuticals Inc., and Mylan Inc.’s Motion to Compel,
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`Dkt. No. 210. The Mylan defendants (“Mylan”) ask the Court to order plaintiff Allergan, Inc., to
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`produce a settlement agreement between Allergan and Apotex (formally, Apotex Corp. and
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`Apotex Inc.), one of the generic drug manufacturers initially sued by Allergan in this case. The
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`Court GRANTS the motion to compel and directs that the agreement be produced on an Outside
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`Counsel’s Eyes Only basis.
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`BACKGROUND
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`After the Apotex settlement, Mylan requested that Allergan produce the Apotex
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`Settlement and License Agreement, the document that reflects the terms on which Allergan and
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`Apotex settled this action against Apotex. Allergan refused to produce the agreement, citing the
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`confidentiality clause in the agreement that prohibited Allergan from revealing the terms of the
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`agreement to others. Allergan ultimately agreed to produce the agreement on an Outside
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`Counsel’s Eyes Only basis if Mylan would agree that the attorneys who were privy to the
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`agreement would not be involved in any settlement negotiations with Allergan. Mylan refused to
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`accept that offer and filed the present motion to compel.
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`DISCUSSION
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`Settlement and license agreements are frequently the subjects of discovery requests,
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`including in patent cases where one accused infringer settles with a patentee and others seek to
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`discover the agreement between the settling parties. The parties seeking disclosure of such
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`agreements claim that the agreements are relevant to issues in the remaining litigation, such as
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`damages, secondary indicia of non-obviousness, the availability of injunctive relief, and patent
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`misuse.
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`Courts have frequently ordered the production of such agreements, subject to appropriate
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`guarantees of confidentiality. See, e.g., PerdiemCo, LLC v. Industrack LLC, 2:15-cv-727, 2016
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`WL 6611488, at *4-5 (E.D. Tex. Nov. 9, 2016) (Payne, J.); Charles E. Hill & Assocs., Inc. v.
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`ABT Elecs., Inc., 854 F. Supp. 2d 427, 428 (E.D. Tex. 2012) (Gilstrap, J.); Datatreasury Corp. v.
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`Wells Fargo & Co., No. 2:06-cv-72, 2010 WL 903259, at *2 (E.D. Tex. Mar. 4, 2010) (Folsom,
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`J.); Tyco Healthcare Grp. LP v. E-Z-EM, Inc., No. 2:07-cv-262, 2010 WL 774878, at *2 (E.D.
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`Tex. Mar. 2, 2010) (Ward, J.); State Farm Mut. Auto. Ins. Co. v. Universal Health Grp., Inc.,
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`Case No. 14-cv-10266, 2016 WL 6822014, at *2 (E.D. Mich. Nov. 18, 2016); Phillips v. Ottey,
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`Civil Action No. DKC 14-980, 2016 WL 6582647, at *2 (D. Md. Nov. 7, 2016); Blount v.
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`Major, No. 4:225-cv-322, 2016 WL 6441597, at *2 (E.D. Mo. Nov. 1, 2016); Blair v. Transam
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`Trucking, Inc., Case No. 09-2443, 2016 WL 1756446, at *3 (D. Kan. Apr. 29, 2016); Simms v.
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`Nat’l Football League, Civil Action No. 3:11-cv-248, 2013 WL 11570273, at *4 (N.D. Tex. Feb.
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`27, 2013); Automated Merchandising Sys. Inc. v. Crane Co., 279 F.R.D. 366, 371 (N.D.W. Va.
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`2011); Small v. Nobel Biocare USA, LLC, 808 F. Supp. 2d 584, 590 (S.D.N.Y. 2011);
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`Volumetrics Med. Imaging, LLC v. Toshiba Am. Med. Sys., Inc., No. 1:05-cv-955, 2011 WL
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`2470460, at *13-14 (M.D.N.C. June 20, 2011) (citing numerous cases); Wyeth v. Orgenus
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`Pharma Inc., Civil Action No. 09-3235, 2010 WL 4117157, at *4 (D.N.J. Oct. 19, 2010);
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`Thermal Design, Inc. v. Guardian Bldg. Prods., Inc., 270 F.R.D. 437, 439 (E.D. Wis. 2010); In re
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`Enron Corp. Sec. Derivative & ERISA Litig., 623 F. Supp. 2d 798, 838 (S.D. Tex. 2009) (citing
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`numerous cases); Abbott Diabetes Care Inc. v. Roche Diagnostics Corp., No. C05-03117, 2007
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`WL 4166030, at *4 (N.D. Cal. Nov. 19, 2007); Gutter v. E.I. DuPont De Nemours & Co., No.
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`95-2152-CIV, 2001 WL 36086590, at *2 (S.D. Fla. Jan. 31, 2001); Datapoint Corp. v. Picturetel
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`Corp., No. Civ. A. 3:93-cv-2381, 1998 WL 51356, at *2 (N.D. Tex. Jan. 23, 1998); Key Pharms.,
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`Inc. v. ESI-Lederle, Inc., No. Civ. A. 96-1219, 1997 WL 560131, at *3 (E.D. Pa. Aug. 29, 1997);
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`Koch Indus., Inc. v. Columbia Gas Transmission Corp., Civ. A. No. 89-2156, 1990 WL 72789,
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`at *2 (E.D. La. May 29, 1990).
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`Although Allergan is correct that many of the courts that have required the production of
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`settlement agreements have done so after determining that the agreements may be relevant to
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`damages—a matter that is not at issue in this case—a number of courts have required the
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`production of settlement agreements based at least in part on their relevance to issues of validity.
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`See Wyeth v. Organus Pharma, Inc., 2010 WL 4117157, at *4; Datatreasury Corp. v. Wells
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`Fargo & Co., 2010 WL 93259, at *1; Datapoint Corp. v. Picturetel Corp., 1998 WL 51356, at *2;
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`In re Mahurkar Double Lumen Hemodialysis Catheter Patent Litig., 831 F. Supp. 1354, 1378-79
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`(N.D. Ill. 1993) (Easterbrook, J., sitting by designation); Am. Standard Inc. v. Pfizer Inc., 722 F.
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`Supp. 86, 136 n.55 (D. Del. 1989); Am. Standard, Inc. v. Pfizer, Inc., Misc. 87-1-73, 1988 WL
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`156152, at *2 (S.D. Ind. July 8, 1988). Moreover, although Allergan suggests that the general
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`principles requiring disclosure of such agreements do not apply to Hatch-Waxman cases, one of
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`the cases cited above, Key Pharmaceuticals, Inc. v. ESI-Lederle, Inc., was a Hatch-Waxman case
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`in which the court ordered a third-party settlement agreement produced.1
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`Allergan contends that Mylan has not shown that the settlement agreement is relevant to
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`any issue in the case. Allergan is correct that because this is a Hatch-Waxman case, certain
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`theories of relevance that would be applicable in other infringement actions are not applicable
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`here. Thus, while settlement agreements are often regarded as relevant to damages, Allergan
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`points out that damages are not likely to be an issue in this case, as damages are typically not
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`awarded in Hatch-Waxman cases. In addition, while settlement agreements can be pertinent to
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`the availability of injunctive relief to the extent they bear on the adequacy of monetary relief,
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`that is less likely to be a factor in a Hatch-Waxman Act case, because an injunction is the
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`ordinary remedy granted to a successful patentee. See 35 U.S.C. § 271(e)(4)(B). Finally, to the
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`extent that Mylan argues that the settlement agreement could be relevant to a defense of patent
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`misuse, Allergan points out that no defendant has raised patent misuse as a defense, and the time
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`for amending pleadings has long since passed.
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`While Allergan has successfully rebutted several theories of relevance, the Court finds
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`that the settlement agreement is nonetheless at least minimally relevant to the secondary
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`consideration of commercial success, which in turn relates to the issue of obviousness. Allergan
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`responds that it does not plan to use the settlement with Apotex to argue commercial success,
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`and that the settlement agreement is therefore not relevant to the secondary considerations
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`bearing on the validity of the patents in suit. But that is an unsatisfactory response; the
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`settlement agreement is potentially relevant to commercial success regardless of whether
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`1 To be sure, as Allergan points out, the Key Pharmaceuticals case is distinguishable
`because the court in that case based its relevance determination on a claim of patent misuse,
`which has not been pleaded in this case.
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`Allergan plans to exploit it, since it is possible that the defendants may wish to make use of that
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`evidence. Significantly, Allergan is not saying that it does not intend to argue commercial
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`success, only that it does not intend to use the settlement agreement with Apotex to support its
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`commercial success argument. On that point, Mylan’s argument as to relevance is persuasive.
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`Allergan argues that Mylan is seeking to obtain access to the settlement agreement not
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`because of its relevance to any issue in the litigation, but for the improper purpose of aiding
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`Mylan in potential settlement negotiations. Allergan points out that it has offered to provide the
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`settlement agreement to Mylan if Mylan would limit access to outside counsel who are not
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`involved in settlement negotiations. Mylan, however, has refused that offer, arguing that such a
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`restriction would impose an unjustified burden on it by restricting the ability of its attorneys to
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`advise their client in the course of this litigation. Creating a group of “litigation” counsel and a
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`separate group of “settlement” counsel, Mylan argues, would be both cumbersome and
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`expensive, and is not justified by any of Allergan’s arguments regarding the sensitivity of the
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`settlement agreement. The confidentiality of that agreement, Mylan argues, will be sufficiently
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`protected by limiting its access to outside counsel who are engaged in the litigation, with no
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`restrictions placed on the ability of those attorneys to advise their client with regard to
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`settlement. The Court agrees that Allergan has not made the showing of exceptional need that
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`would be required to justify the kind of restriction on access that Allergan is requesting, which
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`would go beyond even the highly restrictive “Outside counsel—attorneys’ eyes only” limitation.
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`Allergan contends that as a policy matter disclosure of settlement agreements will
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`discourage parties from settling cases such as this one if the parties know their settlement
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`agreements will be discoverable by their competitors who may be co-defendants in the litigation.
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`In making that argument, Allergan argues that its position “reflect[s] the policy concerns
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`underlying Federal Rule of Evidence 408.”
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`Although Allergan stops short of arguing that Rule 408 applies to the discovery request
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`here at issue, other courts have addressed that issue and have held that the rule does not create a
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`“federal settlement privilege” that bars the discovery of settlement agreements. A particularly
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`thorough and thoughtful analysis of the applicability of Rule 408 to a request for disclosure of a
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`settlement agreement is from Judge Bates of the United States District Court for the District of
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`Columbia, in In re Subpoena Issued to Commodity Futures Trading Comm’n, 370 F. Supp. 2d
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`201 (D.D.C. 2007). After analyzing the competing arguments, Judge Bates concluded that there
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`is no federal settlement privilege, and that Rule 408 was directed to the issue of the admissibility
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`of settlement material, not its discoverability. 370 F. Supp. 2d at 207-12. Judge Bates concluded
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`that the opponent of production in that case had failed to show with “a high degree of clarity and
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`certainty that the proposed privilege will effectively advance a public good,” and he “decline[d]
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`to tinker so fundamentally with the rules of litigation based on little more than [the opponent’s]
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`assertion that it will benefit the public.” Id. at 212 (citing In re Sealed Case, 148 F.3d 1073, 1076
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`(D.C. Cir. 1998)). This Court reaches the same conclusion. The ordinary rules of litigation
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`require the production of relevant information; the Court has concluded that the settlement
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`agreement in this case is relevant; no privilege or other bar to production exists; so the material
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`must be produced.
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`In any event, whatever force there may have been at one point to the argument that the
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`disclosure of settlement agreements will discourage parties from entering into settlements, that
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`argument has little force now, because well-counseled parties who engage in settlement
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`negotiations in multi-defendant cases such as this one will know that it is very possible that their
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`settlement agreements will be discoverable by co-defendants who may be their competitors.
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`While they may prefer that such agreements not be shared with co-defendants, that is not to say
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`that the production of such agreements has significantly affected parties’ behavior or that it will
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`do so in the future. It is speculative to guess whether the possibility of the disclosure of
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`settlement agreements imposes a burden on parties in such cases sufficient to dissuade them from
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`settling lawsuits; for that reason, the policy consideration argued by Allergan is not sufficiently
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`persuasive to justify altering the principles of discovery to accommodate it.
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`Finally, Allergan argued in its response that it is “precluded” from producing the Apotex
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`settlement agreement by the terms of the agreement and Apotex’s refusal to waive the
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`confidentiality clause of the agreement. Whatever limits that agreement may impose on
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`Allergan, however, the case law is clear that no such confidentiality agreement can bind a court
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`and bar the court from ordering production of the agreement. Otherwise, parties could, by
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`agreement, effectively create new privileges against discovery orders, no matter how relevant the
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`material in question may be. See Wyeth v. Orgenus Pharma Inc., 2010 WL 4117157, at *4
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`(citing numerous cases). During the telephonic hearing, Allergan acknowledged that a court
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`order requiring the production of a settlement agreement would override a confidentiality clause
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`in the agreement. That clause therefore imposes no limit on the discoverability of the settlement
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`agreement.
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`In summary, Mylan has made a showing that the settlement agreement with Apotex is at
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`least minimally relevant, and Allergan has presented no persuasive reason to foreclose discovery
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`of that material. The Court therefore GRANTS the motion to compel the production of the
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`requested information. At the hearing, Mylan agreed to the condition on production that the
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`settlement agreement be made available only to Mylan’s outside counsel and on an Attorneys’
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`Eyes Only basis. The Court will endorse that agreement and make it part of the order requiring
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`the material to be produced.
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`In its motion to compel, Mylan stated that it is seeking the production of the settlement
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`agreement resolving an Inter Partes Review involving Allergan and Argentum Pharmaceuticals
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`LLC. However, in its request for relief, Mylan did not request that the Court enter an order with
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`regard the Argentum settlement agreement. The parties, moreover, have not briefed the merits of
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`that issue. The Court therefore will not address the issue of the production of the Argentum
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`settlement agreement in the present order.
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`IT IS SO ORDERED.
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`SIGNED this 12th day of January, 2017.
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`_____________________________
`WILLIAM C. BRYSON
`UNITED STATES CIRCUIT JUDGE
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