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`DAVIS POLK & WARDWELL LLP
`450 Lexington Avenue
`New York, New York 10017
`Telephone: (212) 450-4000
`Facsimile: (212) 701-5800
`Marshall S. Huebner
`Benjamin S. Kaminetzky
`Timothy Graulich
`James I. McClammy
`Eli J. Vonnegut
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`Counsel to the Debtors
`and Debtors in Possession
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`UNITED STATES BANKRUPTCY COURT
`SOUTHERN DISTRICT OF NEW YORK
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`In re:
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`Chapter 11
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`PURDUE PHARMA L.P., et al.,
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`Case No. 19-23649 (RDD)
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`Debtors.1
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`(Jointly Administered)
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`DEBTORS’ OMNIBUS OBJECTION AND REPLY IN SUPPORT OF DEBTORS’
`MOTION FOR ORDER MODIFYING THE AUTOMATIC STAY TO PERMIT THE
`DEBTORS TO PROSECUTE CERTAIN PENDING PATENT LITIGATION
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`Purdue Pharma L.P. (“PPLP”) and its affiliates that are debtors and debtors in possession
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`in these proceedings (collectively, the “Debtors,” the “Company,” or “Purdue”) submit this
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`omnibus objection and reply (the “Objection”) to (i) the motion of Collegium Pharmaceutical,
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`Inc. (“Collegium”) for relief from the automatic stay [ECF No. 1465] (the “PTAB Liftstay
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`1 The Debtors in these cases, along with the last four digits of each Debtor’s registration number in the applicable
`jurisdiction, are as follows: Purdue Pharma L.P. (7484), Purdue Pharma Inc. (7486), Purdue Transdermal
`Technologies L.P. (1868), Purdue Pharma Manufacturing L.P. (3821), Purdue Pharmaceuticals L.P. (0034),
`Imbrium Therapeutics L.P. (8810), Adlon Therapeutics L.P. (6745), Greenfield BioVentures L.P. (6150), Seven
`Seas Hill Corp. (4591), Ophir Green Corp. (4594), Purdue Pharma of Puerto Rico (3925), Avrio Health L.P. (4140),
`Purdue Pharmaceutical Products L.P. (3902), Purdue Neuroscience Company (4712), Nayatt Cove Lifescience Inc.
`(7805), Button Land L.P. (7502), Rhodes Associates L.P. (N/A), Paul Land Inc. (7425), Quidnick Land L.P. (7584),
`Rhodes Pharmaceuticals L.P. (6166), Rhodes Technologies (7143), UDF LP (0495), SVC Pharma LP (5717), and
`SVC Pharma Inc. (4014). The Debtors’ corporate headquarters is located at One Stamford Forum, 201 Tresser
`Boulevard, Stamford, CT 06901.
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`Motion”) and (ii) the response of Collegium [ECF No. 1463] (“Collegium’s Response”) to the
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`Debtors’ Motion For Order Modifying the Automatic Stay to Permit the Debtors to Prosecute
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`Certain Pending Patent Litigation (the “Debtors’ Liftstay Motion”)2, and respectfully state as
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`follows:
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`Preliminary Statement
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`1.
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`As set forth in the Debtors’ Liftstay Motion, the Debtors seek to modify the
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`automatic stay to continue certain Patent Litigation against Collegium in the Massachusetts
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`District Court. Collegium argues that the Debtors’ Liftstay Motion should be denied, or in the
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`alternative, that the automatic stay should also be lifted with respect to a separate matter (Case
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`PGR2018-00048, the “PTAB Action”) before the United States Patent and Trademark Office’s
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`Patent Trial and Appeal Board (the “PTAB”) for post-grant review of certain claims of one of
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`the Debtors’ patents, U.S. Patent No. 9,693,961 B2 (the “’961 Patent”). Collegium’s Response
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`p. 11.
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`2.
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`The Debtors object to the PTAB Liftstay Motion for the same reason that the
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`Debtors’ Liftstay Motion did not address the PTAB Action, which is that the Debtors believe that
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`the PTAB Action no longer exists. On October 2, 2019, the PTAB entered an order (PGR2018-
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`00048, Paper 45 (Oct. 2, 2019), the “Stay Order”)3 setting a deadline of April 6, 2020 (the
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`“PTAB Deadline”) by which Collegium was required to seek relief from the automatic stay
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`from this Court in order to continue the PTAB Action. The consequence of inaction was clear —
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`the time for the PTAB to administer the PTAB Action would expire on the PTAB Deadline.
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`Collegium instead inexplicably allowed the PTAB Deadline to pass, thereby causing the PTAB
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`2 Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Debtors’
`Liftstay Motion.
`3 A copy of the Stay Order is attached hereto as Exhibit A.
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`Action to terminate. Collegium now seeks to undo the consequences of its failure to follow the
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`PTAB’s express directions.
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`3.
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`The Debtors hereby request that the Court deny the PTAB Liftstay Motion,
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`overrule the objections stated in Collegium’s Response, and permit the Debtors to proceed with
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`the only live dispute between the Debtors and Collegium — the Patent Litigation in the
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`Massachusetts District Court — as set forth in the Debtors’ Liftstay Motion. In the alternative, if
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`the Court determines that the automatic stay should be modified with respect to both the Patent
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`Litigation and the PTAB Action, the Debtors respectfully submit that this Court’s views on
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`matters of bankruptcy law raised in Collegium’s Response and this Objection, and in particular
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`with respect to section 108(c) of the Bankruptcy Code, could assist the PTAB in efficiently
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`reaching a decision regarding whether the PTAB Action remains pending without referring the
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`matter back to the Bankruptcy Court, which would promote judicial economy.
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`Argument
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`A.
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`The PTAB Action Terminated When Collegium Failed to Seek Relief from the
`Automatic Stay Before the Deadline Established by the PTAB
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`4.
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`On March 13, 2018, Collegium filed a petition to commence the PTAB Action.
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`The PTAB instituted post-grant review of claims under the ’961 Patent on October 4, 2018.
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`Under the 2011 Leahy-Smith America Invents Act (the “AIA”) (the PTAB’s governing statute),
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`“the final determination in any post-grant review [is required to] be issued not later than 1 year
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`after the date on which the Director notices the institution of a proceeding under this chapter,
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`except that the Director may, for good cause shown, extend the 1-year period by not more than 6
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`months.” 35 U.S.C. § 326(a)(11). Thus, the PTAB was required by statute to issue its decision
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`(the “Final Written Decision”) by October 4, 2019, subject to a one-time extension of up to six
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`months for good cause.
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`5.
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`On September 24, 2019, the Debtors filed a notice of bankruptcy in the PTAB
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`Action. During a hearing before the PTAB panel, Collegium argued that the automatic stay did
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`not apply to the PTAB Action, while the Debtors argued that the automatic stay did apply.
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`Consistent with its actions in prior cases in similar postures, on October 2, 2019, the PTAB
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`entered the Stay Order, which had three key effects. First, the PTAB Action was stayed. Stay
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`Order p. 4. Second, the PTAB Deadline was extended by up to six months, through April 6,
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`2020, for “good cause” in order to provide additional time for this Court to consider whether the
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`automatic stay applied to the PTAB Action and/or any request for relief from the stay. Stay
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`Order p. 4; see also PGR2018-00048, Paper 44 (Oct. 2, 2019) (the “Grant of Good Cause
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`Extension”)4 (finding that “good cause” exists because “[a]n extension of the one-year period
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`will provide additional time for the Bankruptcy Court to address the applicability of the
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`Automatic Stay provision of the Bankruptcy Code . . . to this proceeding.”). Third, and
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`critically, it was incumbent upon Collegium to timely seek such relief, or else the PTAB Action
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`would terminate. Stay Order p. 3 (“Under the circumstances, we determine that the
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`disagreement as to whether the Automatic Stay provision applies to this proceeding is best
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`addressed in the Bankruptcy Court. As such, [Collegium] should seek any relief it deems
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`appropriate from the Bankruptcy Court.”); Stay Order p. 4 (“[T]he Chief Judge has determined
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`that good cause exists to extend the one-year period for issuing a Final Written Decision
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`here . . . . Accordingly, the time to administer the present proceeding is extended by up to six
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`months.”) (emphasis added).
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`6.
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`Three key facts were thus clear to Collegium upon entry of the Stay Order. First,
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`if Collegium wished to continue the PTAB Action, it would have to seek relief from the
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`4 A copy of the Grant of Good Cause Extension is attached hereto as Exhibit B.
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`automatic stay in the Bankruptcy Court. Second, the PTAB could not issue its Final Written
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`Decision for so long as the Stay Order was in effect. Third, stay relief would need to be obtained
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`quickly to preserve the PTAB Action, because the PTAB only granted a six-month extension of
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`the PTAB Deadline and offered no indication that it could — or would — extend the deadline
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`further. In fact, there are no provisions in the post-grant review governing statutes and
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`regulations which empower the PTAB to provide further extensions under the current facts.
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`7.
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`Despite the express terms of the Stay Order, Collegium chose not to seek relief
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`from the automatic stay from this Court at any time during the six-month extension period, and
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`thus allowed the PTAB Deadline to elapse. It was Collegium’s failure to act, and not the
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`existence of any stay, that caused the PTAB Action to terminate.
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`B.
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`The PTAB Has Not Unlawfully Withheld Its Final Written Decision
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`8.
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`Collegium attempts to revive the PTAB Action by asserting that the Federal
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`Circuit could compel the PTAB to issue its Final Written Decision on the theory that the PTAB
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`“unlawfully withheld” its decision. This argument is unfounded. The PTAB’s actions in this
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`matter have been in full compliance with the Bankruptcy Code and the AIA, such that there has
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`been no “agency action unlawfully withheld or unreasonably delayed” to compel. Forest
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`Guardians v. Babbitt, 174 F.3d 1178, 1187 (10th Cir. 1998). Unlike in Forest Guardians, on
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`which Collegium relies, compelling the PTAB to issue its Final Written Decision would require
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`the PTAB to act contrary to its statutory obligations.
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`9.
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`In Forest Guardians, the Secretary of the Interior was obligated by statute to
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`identify a critical habitat for the Rio Grande silvery minnow within one year of designating the
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`minnow as an endangered species. Id. at 1182. The Secretary designated the silvery minnow as
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`endangered in March 1994, but a critical habitat was not identified by the March 1995 deadline
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`because of alleged fiscal impracticability due to a funding moratorium. Id. at 1182–83. When
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`that critical habitat had still not been designated by April 1997, Forest Guardians filed suit
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`against the Secretary and moved to compel action. On review of the district court’s decision
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`declining to compel the Secretary to act, the Tenth Circuit found that, under the Administrative
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`Procedures Act, the “reviewing court shall compel agency action unlawfully withheld or
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`unreasonably delayed.” Id. at 1187. Finding the Secretary’s failure to designate the critical habit
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`by the statutory deadline to necessarily be “unreasonable delay,” the Tenth Circuit reversed the
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`district court’s denial of Forest Guardians’ motion and remanded to the district court to order the
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`Secretary to publish, as soon as possible, a final regulation designating the critical habitat for the
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`silvery minnow. Id. at 1180, 1182.
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`10.
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`Unlike in Forest Guardians, where the agency’s failure to act was a statutory
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`violation, here, the PTAB has acted according to its governing statutes. First, the PTAB acted
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`according to the requirements of section 362(a) of the Bankruptcy Code, which prohibits
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`issuance of the Final Written Decision for so long as the automatic stay is in effect, by declining
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`to render a decision during the pendency of the stay. Second, the AIA requires a final written
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`decision to be rendered no more than eighteen months after institution of trial before the PTAB,
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`given the “good cause” shown here. 35 U.S.C. § 326(a)(11). The PTAB accordingly extended
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`the PTAB Deadline by six months — the maximum permitted under the AIA — to allow
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`Collegium to seek relief from this Court necessary to allow the PTAB to issue its decision, and,
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`as discussed above, affirmed the PTAB Deadline in the Stay Order. Because the PTAB was
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`acting within the mandates of the Bankruptcy Code and the AIA by not issuing its Final Written
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`Decision in this case, there is no “agency action unlawfully withheld or unreasonably delayed”
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`that is a predicate to requiring the reviewing court to compel action as was done in Forest
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`Guardians. Significantly, unlike the Secretary’s action in Forest Guardians, the PTAB would be
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`acting contrary to statute if it issued a Final Written Decision after the expiration of the PTAB
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`Deadline. Indeed, the only party that failed to act in a timely manner was Collegium. In every
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`similar instance where a PTAB matter was paused based on a bankruptcy stay, the petitioner
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`took action to ensure that the matter was resolved within the Section 326 deadline. See Mylan
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`Pharms. Inc. v. Pozen Inc. and Horizon Pharma USA, Inc., IPR2017-01995, Paper 51 (PTAB
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`Aug. 31, 2018) (suspending deadlines due to suggestion of bankruptcy and terminating case
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`based on settlement prior to expiration of 18 months from institution); Twitter, Inc. v. Youtoo
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`Technologies, LLC, IPR2017-00829, Paper 23 at 2 (PTAB Dec. 27, 2017) (extending deadlines
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`to provide petitioner an opportunity to seek relief from the automatic stay (or a determination
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`that it does not apply) by the bankruptcy court and issuing Final Written Decision prior to 18-
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`month extended deadline); Maxilinear v. Cresta, IPR2015-00594 (Final Written Decision issued
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`prior to 12-month deadline). Collegium’s failure to do so here is the cause of the issue of which
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`it currently complains.
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`C.
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`Section 108(c) of the Bankruptcy Code Does Not Operate to Extend Any Deadline in
`the PTAB Action, Including the Deadline Set by the PTAB to Seek Stay Relief
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`11.
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`Collegium asserts that “it should be clear that any applicable statutory deadline in
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`a stayed proceeding is automatically extended pursuant to sections 108(c) and 362(a) of the
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`Bankruptcy Code.” Collegium’s Response p. 10. Collegium’s reliance on section 108(c) is
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`misplaced, however, because the deadline it missed was a deadline to seek relief from the
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`automatic stay. Section 108(c) has nothing to do with this deadline, since Collegium was of
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`course not barred from seeking stay relief. Moreover, section 108(c) by its plain language does
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`not apply in the context of an administrative action such as the PTAB Action.
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`12.
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`Section 362(a)(1) of the Bankruptcy Code provides that the filing of a bankruptcy
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`petition “operates as a stay . . . of the commencement or continuation . . . of a judicial,
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`administrative, or other action or proceeding against the debtor . . .” 11 U.S.C. § 362(a)(1)
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`(emphasis added). Section 108(c) of the Bankruptcy Code, by contrast, provides that, “if
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`applicable nonbankruptcy law, an order entered in a nonbankruptcy proceeding, or an agreement
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`fixes a period for commencing or continuing a civil action in a court other than the bankruptcy
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`court on a claim against the debtor . . . and such period has not expired before the date of the
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`filing of the petition, then such period does not expire until the later of . . . 30 days after notice of
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`the termination or expiration of the [automatic stay].” 11 U.S.C. § 108(c) (emphasis added).
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`13.
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`Thus, while section 362 imposes a stay with respect to “judicial, administrative,
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`or other action[s] or proceedings[s] against the debtor,” section 108(c) unambiguously extends
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`the period for “commencing or continuing” only a subset of those stayed actions — “civil
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`actions” brought in a “court.” As the juxtaposition of these two related provision clearly shows,
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`Congress was aware of the distinction between civil actions, on the one hand, and administrative
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`or other actions, on the other, and by use of the explicit language in section 108(c) intended
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`section 108(c) to only apply to civil actions brought in courts. The Court is “obligated to
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`interpret the Bankruptcy Code according to its plain meaning.” In re Weidenbenner, 521 B.R.
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`74, 81 (Bankr. S.D.N.Y. 2014). It must be assumed that Congress intended to use different
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`language in these two related sections of the Bankruptcy Code. Sosa v. Alvarez-Machain, 542
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`U.S. 692, 712 n. 9 (2004) (“[W]hen the legislature uses certain language in one part of the statute
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`and different language in another, the court assumes different meanings were intended.”)
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`(citations omitted); BedRoc Ltd., LLC v. U.S., 541 U.S. 176, 183 (2004) (“The preeminent canon
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`of statutory interpretation requires us to presume that [the] legislature says in a statute what it
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`means and means in a statute what it says there.”). While this Court has broad powers, the
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`Bankruptcy Code does not authorize the Court to disregard the plain language of the statute.
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`E.g., In re Barbieri, 199 F.3d 616, 620–21 (2d Cir. 1999) (“The equitable powers emanating
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`from § 105(a) . . . are not a license for a court to disregard the clear language and meaning of the
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`bankruptcy statutes and rules.” (citations omitted)).
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`14.
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`The PTAB is an administrative body, not a “court.” See, e.g., Samuels, Kramer &
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`Co. v. Comm’r, 930 F.2d 975, 990 (2d Cir. 1990) (“Certainly administrative agencies are not
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`‘Courts of Law,’ as that term is used in [U.S. Const. art. II, § 2] simply because they perform
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`adjudicatory functions.”); L.M. Rests. Inc. v. Ale Yeah!, Inc., 2016 U.S. Dist. LEXIS 11571 at *7
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`(W.D.N.C. Feb. 1, 2016) (“[T]he [Trademark Trial and Appeal Board] is not a court, but an
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`administrative tribunal of the USPTO, housed within the executive branch of the federal
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`government.” (citations omitted)). Moreover, a “civil action” is a proceeding brought in a
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`“court.” See, e.g., Senju Pharmaceutical Co., Ltd. v. Metrics, Inc., 96 F. Supp. 3d 428, 445
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`(D.N.J. 2015) (noting that the PTAB has interpreted the filing of a “civil action” in 35 U.S.C.
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`§ 325(a)(1) to refer to “filing a complaint with a court to commence a civil action.”); SSIH
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`Equip. S.A. v. U.S. ITC, 718 F.2d 365, 371 (Fed. Cir. 1983) (“Civil actions, as that term is
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`commonly understood, refers to proceedings in court.”).
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`15.
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`As a result, section 108(c) of the Bankruptcy Code cannot operate to extend the
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`PTAB Deadline. Collegium argues that “[s]everal Courts hold that sections 108(c) and 362(a)
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`operate to toll and extend all deadlines in matters subject to the stay, whether imposed by
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`appropriately promulgated rules, statute or Court order.” Collegium’s Response p. 10.
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`However, the cases cited by Collegium, In re Hoffinger Industries, Inc., 329 F.3d 948 (8th Cir.
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`2003) and In re Shamus Holdings, LLC, 642 F.3d 263 (1st Cir. 2011), do not support this
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`categorical rule, as both cases addressed extensions of limitations periods in the context of civil
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`actions in courts. Indeed, other courts have held that section 108(c) does not apply to nonjudicial
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`actions specifically. In re Gianninoto, 539 B.R. 452, 460–61 (Bankr. D.N.J. 2015) (Section
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`108(c) “is not applicable because it applies to statutes of limitations for filing civil actions
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`against a debtor . . . . The 60-day time period for recording a deed or mortgage after the filing of
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`a notice of settlement is not tolled because it is not a limitations period for “commencing or
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`continuing a civil action in a court other than a bankruptcy court on a claim against the debtor.”
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`(citations omitted)); In re Riley, 2016 Bankr. LEXIS 2958 at *3 (Bankr. D.C. Aug. 12, 2016)
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`(“Section 108(c) does not apply to the commencement of a nonjudicial foreclosure sale, as it
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`only applies to ‘commencing or continuing a civil action in a court.’”).
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`16.
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`As discussed above, the parties disagreed as to whether the automatic stay applied
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`to the PTAB Action. The PTAB did what it had done in prior cases when confronted with the
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`same question — it stayed the PTAB Action, extended the time to administer the PTAB Action
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`to the maximum amount permitted under the AIA, and directed the Petitioner, i.e., Collegium, to
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`take the dispute to the bankruptcy court. Had this Court had the opportunity to timely consider
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`the question, it might have found that Collegium was correct and the automatic stay did not
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`apply to the PTAB Action, in which case the PTAB would have been free to issue its Final
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`Written Decision before the PTAB Deadline. In the alternative, this Court might have found that
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`the automatic stay did apply to the PTAB Action, in which case Collegium could have argued for
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`stay relief for cause. But the PTAB needed to know the answer before the PTAB Deadline,
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`because if the automatic stay did not apply the PTAB would clearly be required to issue its Final
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`Written Decision by that time, and even if the automatic stay did apply to the PTAB Action,
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`section 108(c) of the Bankruptcy Code would not toll the deadline. To compel timely action and
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`resolve the complex interplay between the AIA and the Bankruptcy Code, the PTAB decreed in
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`the Stay Order itself that the time to administer the PTAB Action would terminate as of the
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`PTAB Deadline.
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`17.
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`The PTAB’s elegant solution to a difficult problem, however, relied on Collegium
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`to act. Now, having failed to timely seek stay relief, Collegium attempts to evade the
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`consequences by arguing the PTAB Deadline set by the Stay Order and the AIA was
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`automatically tolled by operation of section 108(c) of the Bankruptcy Code. This argument
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`entirely ignores the ambiguity surrounding application of the automatic stay to the PTAB Action
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`in the first place that the PTAB clearly grappled with when crafting the Stay Order, the express
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`language of the Stay Order, which provided that the “time to administer” the PTAB Action was
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`extended by up to six months (Sale Order p. 4), and the fact that by its plain text, section 108(c)
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`of the Bankruptcy Code does not even apply in administrative actions like the PTAB Action, and
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`so it cannot provide a basis for overriding any deadlines set by the PTAB governing statutes or
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`by any order issued by the PTAB.
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`18. Moreover, Collegium has not argued, and cannot argue, that any other statute or
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`regulation governing the PTAB Action extends the PTAB Deadline set under the Stay Order and
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`by operation of 35 U.S.C. § 326(a)(11). The PTAB Action therefore terminated by operation of
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`statute and by order of the PTAB panel due to Collegium’s failure to seek relief from this Court
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`during the six-month extension period.
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`D.
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`The Debtors Are Not Using the Automatic Stay as a Sword
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`19.
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`Contrary to Collegium’s argument (Collegium’s Response pp. 11–12), the
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`Debtors are not attempting to use the automatic stay as a “sword” and a “shield” by proceeding
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`with the Patent Litigation while keeping the PTAB Action stayed. The PTAB Action was not
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`terminated by the automatic stay, but rather by Collegium’s choice to fail to meet a deadline to
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`seek stay relief imposed by the PTAB. To the extent that the Court does not find that the PTAB
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`Action has terminated, the Debtors agree that relief from the automatic stay with respect to both
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`actions would be proper, and the Debtors reserve all rights to argue to, without limitation, the
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`PTAB and the Federal Circuit that the PTAB Action has terminated. Moreover, as discussed
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`above, the imposition of the automatic stay did not prevent Collegium from taking the action that
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`the PTAB itself directed and expected Collegium to take — to seek timely relief from the stay
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`from this Court.
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`E.
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`The Final Written Decision Will Not Render the Patent Litigation Moot
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`20.
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`Equally without merit is Collegium’s mere speculation that the PTAB Action
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`“may render much of the Infringement Action moot.” Collegium’s Response p. 6. Because the
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`PTAB Action has terminated, the parties do not know what the PTAB’s Final Written Decision
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`would have held, and it is not the role of this Court or the parties to speculate in this regard.
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`21. Moreover, the ’961 Patent — the subject of the PTAB Action — is just one of the
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`patents in suit in the Patent Litigation. As Collegium acknowledges, there are other patents in
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`suit – U.S. Patent Nos. 9,073,933 (“’933 Patent”) and 9,522,919 (“’919 Patent”). These patents
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`are not related to the ’961 Patent — they have different specifications, different records
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`(prosecution histories) before the U.S. Patent and Trademark Office, and different claims to be
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`litigated.
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`22.
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`Further, the ’933 Patent has withstood Collegium’s best defenses, with respect to
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`both infringement and validity, that were the subject of its failed summary judgment motion.5
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`As such, the resolution of the Patent Litigation with respect to the ’933 and ’919 Patents should
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`5 On February 14, 2017 Collegium moved for summary judgement of invalidity and noninfringement of the asserted
`patents, including the ’933 patent. On September 28, 2018 the court denied Collegium’s summary judgement in all
`respects as to the ‘933 patent (C.A. No. 1:15-cv-13099-FDS [D.I. 193]).
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`Purdue 2046
`Collegium v. Purdue, PGR2018-00048
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`19-23649-rdd Doc 1592 Filed 08/19/20 Entered 08/19/20 15:56:16 Main Document
`Pg 13 of 13
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`under no circumstances be delayed based on Collegium’s speculation that a hypothetical Final
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`Written Decision in the PTAB Action would have rendered the ’961 Patent Litigation moot.
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`Conclusion
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`For the reasons set forth above, the Debtors respectfully request that the Court (i) grant
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`the Debtors’ Motion, (ii) deny the PTAB Liftstay Motion on the basis that the PTAB Action is
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`no longer pending; and (c) overrule Collegium’s Response to the extent required to effectuate the
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`foregoing.
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`Dated: August 19, 2020
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`New York, New York
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`/s/ Eli J. Vonnegut
`DAVIS POLK & WARDWELL LLP
`450 Lexington Avenue
`New York, New York 10017
`Telephone: (212) 450-4000
`Facsimile: (212) 701-5800
`Marshall S. Huebner
`Benjamin S. Kaminetzky
`Timothy Graulich
`James I. McClammy
`Eli J. Vonnegut
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`Counsel to the Debtors
`and Debtors in Possession
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`Purdue 2046
`Collegium v. Purdue, PGR2018-00048
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