Key Points

• A DNJ judge ordered in camera review of attorney-client communications in a Hatch-Waxman patent suit after a prima facie showing that the underlying litigation may have been objectively baseless and brought to delay generic competition.
• The decision highlights the crime-fraud exception to the attorney-client privilege in the pharmaceutical patent context, signaling continued judicial scrutiny of sham litigation claims tied to product hop strategies.
• Brand-name pharmaceutical companies may face privilege risks when Hatch-Waxman suits are challenged as anticompetitive tools used to exploit the statutory 30-month stay.

Finding a potential exception to the attorney-client privilege, a federal judge in the District of New Jersey has ordered an in camera review of litigation-related communications between a brand-name pharmaceutical company and its lawyers after finding there is sufficient evidence that a Hatch-Waxman patent suit was "objectively baseless" and may have been brought for the sole purpose of delaying generic competition.

The ruling provides a significant analysis of the crime-fraud exception in the pharmaceutical patent context and highlights judicial willingness to scrutinize whether brand-name companies are weaponizing the Hatch-Waxman framework's automatic 30-month stay to further business strategies rather than to vindicate legitimate patent rights.

A Persistent Tension

Hatch-Waxman litigation inherently pits generic drug manufacturers seeking to market lower-cost alternatives against brand-name companies defending their patent exclusivity. This dynamic creates a persistent tension where antitrust and anticompetitive concerns lurk in the background, as brand-name litigants may be tempted to use the litigation process itself as a tool to delay competition rather than to vindicate legitimate patent rights.

Sitting as a special discovery master, retired U.S. District Judge Jose L. Linares confronted this tension in Metacel Pharmaceuticals LLC v. Rubicon Research Private Limited. In a June 29, 2026 Opinion and Order, he explained why he ordered an in camera review.

Background: The Underlying Patent Litigation

Metacel sued Rubicon under the Hatch-Waxman Act, alleging that Rubicon’s ANDA No. 214445 for a generic version of Metacel’s oral baclofen product, Ozobax, would infringe U.S. Patent No. 10,610,502 (the “’502 Patent”). Metacel’s Ozobax product requires storage “at from about 2 to about 8°C.” Likewise, the ’502 Patent claims a method requiring refrigerated storage “at from about 2 to about 8°C” (commonly referred to as the “Fridge Limitation”). Rubicon’s proposed ANDA label, however, instructed room-temperature storage (20–25°C), with refrigeration only optional.

On July 7, 2023, the District Court granted summary judgment of no infringement for Rubicon. Metacel argued that nonpublic statements to the FDA, such as Rubicon’s Storage Statement, which instructed storage at 2–8°C, were sufficient to find downstream users would infringe. The District Court rejected this argument, finding nothing in the record suggested downstream users would ever see these requirements. Rather, the “label is what matters,” and there is no induced infringement where the infringing use is described as merely an optional step.

The Federal Circuit affirmed on April 23, 2025, in part because “there is no genuine dispute that Rubicon’s proposed ANDA label clearly instructs room temperature storage while only optionally permitting refrigeration.”

Rubicon’s ‘Sham Litigation’ Counterclaim

Following the summary judgment ruling, Rubicon asserted an antitrust counterclaim alleging that Metacel’s patent suit was a “sham litigation” maintained for an anticompetitive purpose of delaying Rubicon’s generic market entry.

Specifically, Rubicon asserted that without the litigation, it would have been able to launch by March 13, 2023 (the date it received tentative FDA approval) and seven months before Metacel’s product launched on October 12, 2023. But because of the lawsuit, Metacel was able to launch 14 months before Rubicon ultimately launched on December 6, 2024 — the so-called “product hop.”

The Crime-Fraud Exception Motion

During discovery, Rubicon sought documents between Metacel and its attorneys regarding various topics related to the filing and maintenance of the litigation, the merits of the case, Metacel’s knowledge of the 30-month stay, and other activities undertaken by Metacel purportedly relating to bad faith.

Invoking the crime-fraud exception, Rubicon moved to pierce Metacel’s attorney-client privilege, seeking full production of withheld documents, removal of privilege redactions, and unrestricted depositions of Metacel personnel. Rubicon supported its motion with internal Metacel emails and an interim expert report opining that Metacel had no reasonable basis to expect success on the merits given the Fridge Limitation.

Metacel countered that Rubicon had not made a prima facie showing that the crime-fraud exception applies, arguing where the communications are “run-of-the-mill discussions likely to be held at branded and generic companies,” simply alleging a sham litigation does not trigger the exception, and losing a summary judgment motion does not equate to an objectively baseless position.

The Special Master’s Analysis

The Special Master first explained that the crime-fraud exception allows piercing the attorney-client privilege when “(1) the client was engaged in or planning criminal or fraudulent activity when the attorney-client communications were made and (2) the communications were in furtherance of that activity.” And once a prima facie showing that the exception applies has been made, the Court will conduct an in camera review to assess the communications rather than order a blanket production.

The Special Master applied the Third Circuit’s two-step framework from In re Abbott Laboratories, 96 F.4th 371 (3d Cir. 2024) and King Drug Co. of Florence v. Abbott Laboratories, 2023 WL 2646926 (E.D. Pa. Mar. 27, 2023), which dictates that to make a prima facie showing of “sham litigation,” the proponent must show:

• Objective Baselessness: The underlying lawsuit was “objectively baseless”—meaning no reasonable litigant could realistically expect success on the merits.
• Improper Subjective Motivation: The plaintiff’s subjective motivation was not to obtain a favorable judgment on the merits, but to use the litigation process itself as an anticompetitive weapon.

Critically, the Special Master acknowledged that a mere allegation of “sham litigation” does not automatically strip privilege. But the Special Master found that Rubicon made the required prima facie showing. On objective baselessness, the opinion noted that the ANDA label — which instructs room-temperature storage — controlled the infringement analysis, and Metacel had identified little evidence supporting a viable induced infringement theory.

During oral argument, Metacel was only able to point to the fact that the branded product was refrigerated and “that its own expert opined that Rubicon’s label was vague.” On subjective motivation, internal Metacel emails suggested the company sought to delay generic entry to execute its product hop strategy, consistent with King Drug.

The Outcome: Granted in Part

Metacel was ordered to supplement its privilege log to include all withheld documents, including communications with regulatory and litigation counsel about the underlying lawsuit. Rubicon must then designate specific log entries for in camera review by the Special Master, who will determine on a document-by-document basis which materials, if any, must be produced. Metacel retains the opportunity to submit additional context on selected documents, in camera, during that review.

The Special Master noted that his holding that Rubicon made a prima facie showing sufficient to warrant in camera review “does not mean that Rubicon will prevail on the merits of its sham litigation counterclaim at trial.”

Paul W. Kalish and Jonathan J. Madara are members of the IP Litigation team in Fox Rothschild’s Princeton, NJ office and write about patent litigation decisions in the District of New Jersey. Contact Paul at pkalish@foxrothschild.com or 609.895.6751 and Jonathan at jmadara@foxrothschild.com or 609.844.7428.

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