2.2.0.25falsefalse1120 - Disclosure - LEGAL PROCEEDINGS AND OTHER MATTERStruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011 USD ($) USD ($) / shares $D2011Q1http://www.sec.gov/CIK0000873364duration2011-01-01T00:00:002011-03-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDPerShareDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0ceph_LegalProceedingsAndOtherMattersDisclosureAbstractcephfalsenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseLEGAL PROCEEDINGS AND OTHER MATTERS3false0us-gaap_CommitmentsAndContingenciesDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00<table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman',times,serif"> <tr> <td> 12.  LEGAL PROCEEDINGS AND OTHER MATTERS   PROVIGIL Patent Litigation and Settlements   In March 2003, we filed a patent infringement lawsuit against four companiesTeva Pharmaceuticals USA, Inc., Mylan Pharmaceuticals, Inc., Ranbaxy Laboratories Limited and Barr Laboratories, Inc.based upon the abbreviated new drug applications (ANDA) filed by each of these firms with the FDA seeking approval to market a generic form of modafinil. The lawsuit claimed infringement of our U.S. Patent No. RE37,516 (the 516 Patent) which covers the pharmaceutical compositions and methods of treatment with the form of modafinil contained in PROVIGIL and which expires on April 6, 2015. We believe that these four companies were the first to file ANDAs with Paragraph IV certifications and thus are eligible for the 180-day period of marketing exclusivity provided by the provisions of the Federal Food, Drug and Cosmetic Act. In early 2005, we also filed a patent infringement lawsuit against Carlsbad Technology, Inc. (Carlsbad) based upon the Paragraph IV ANDA related to modafinil that Carlsbad filed with the FDA.   In late 2005 and early 2006, we entered into settlement agreements with each of Teva, Mylan, Ranbaxy and Barr; in August 2006, we entered into a settlement agreement with Carlsbad and its development partner, Watson Pharmaceuticals, Inc., which we understand has the right to commercialize the Carlsbad product if approved by the FDA. As part of these separate settlements, we agreed to grant to each of these parties a non-exclusive royalty-bearing license to market and sell a generic version of PROVIGIL in the United States, effective in April 2012, subject to applicable regulatory considerations. Under the agreements, the licenses could become effective prior to April 2012 only if a generic version of PROVIGIL is sold in the United States prior to this date. Various factors could lead to the sale of a generic version of PROVIGIL in the United States at any time prior to April 2012, including if (i) we lose patent protection for PROVIGIL due to an adverse judicial decision in a patent infringement lawsuit; (ii) all parties with first-to-file ANDAs relinquish their right to the 180-day period of marketing exclusivity, which could allow a subsequent ANDA filer, if approved by the FDA, to launch a generic version of PROVIGIL in the United States at-risk; (iii) we breach or the applicable counterparty breaches a PROVIGIL settlement agreement; or (iv) the FTC prevails in its lawsuit against us in the U.S. District Court for the Eastern District of Pennsylvania (EDPA) described below.   We filed each of the settlements with both the U.S. Federal Trade Commission (the FTC) and the Antitrust Division of the U.S. Department of Justice (the DOJ) as required by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Medicare Modernization Act). The FTC conducted an investigation of each of the PROVIGIL settlements and, in February 2008, filed suit against us in the U.S. District Court for the District of Columbia challenging the validity of the settlements and related agreements entered into by us with each of Teva, Mylan, Ranbaxy and Barr. We filed a motion to transfer the case to the EDPA, which was granted in April 2008. The complaint alleges a violation of Section 5(a) of the Federal Trade Commission Act and seeks to permanently enjoin us from maintaining or enforcing these agreements and from engaging in similar conduct in the future. We believe the FTC complaint is without merit. While we intend to vigorously defend ourselves and the propriety of the settlement agreements, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.   Numerous private antitrust complaints have been filed in the EDPA, each naming Cephalon, Barr, Mylan, Teva and Ranbaxy as co-defendants and claiming, among other things, that the PROVIGIL settlements violate the antitrust laws of the United States and, in some cases, certain state laws. These actions have been consolidated into a complaint on behalf of a class of direct purchasers of PROVIGIL and a separate complaint on behalf of a class of consumers and other indirect purchasers of PROVIGIL. The plaintiffs in all of these actions are seeking monetary damages and/or equitable relief. In addition, in December 2009, we entered a tolling agreement with the Attorneys General of Arkansas, California, Florida, New York and Pennsylvania to suspend the running of the statute of limitations to any claims or causes of action relating to our PROVIGIL settlements pending the resolution of the FTC litigation described above.   Separately, in June 2006, Apotex, Inc., a subsequent ANDA filer seeking FDA approval of a generic form of modafinil, filed suit against us, also in the EDPA, alleging similar violations of antitrust laws and state law. Apotex asserts that the PROVIGIL settlement agreements improperly prevent it from obtaining FDA approval of its ANDA, and seeks monetary and equitable remedies. Apotex also seeks a declaratory judgment that the 516 Patent is invalid, unenforceable and/or not infringed by its proposed generic. In May 2009, Apotex also filed a declaratory judgment complaint in the EDPA that our U.S. Patent No. 7,297,346 (the 346 Patent) is invalid and/or not infringed by its proposed generic. The 346 Patent covers pharmaceutical compositions of modafinil and expires in May 2024.  In February 2011, the court bifurcated the patent claims, and in April 2011 we completed the trial against Apotex with respect to the validity and enforceability aspects of  the 516 Patent. Trial regarding Apotexs infringement of the 516 patent is currently scheduled for July 2011.  We believe that the private antitrust complaints described in the preceding paragraph and the Apotex antitrust and declaratory judgment complaints are without merit. While we intend to vigorously defend ourselves and the propriety of the settlement agreements, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.   In November 2005 and March 2006, we received notice that Caraco Pharmaceutical Laboratories, Ltd. (Caraco) and Apotex, respectively, also filed Paragraph IV ANDAs with the FDA in which each firm is seeking to market a generic form of PROVIGIL. We have not filed a patent infringement lawsuit in the United States against either Caraco or Apotex, although Apotex has filed suit against us, as described above. In early August 2008, we received notice that Hikma Pharmaceuticals plc (Hikma Pharmaceuticals) filed a Paragraph IV ANDA with the FDA in which it is seeking to market a generic form of PROVIGIL. We have not filed a patent infringement lawsuit against Hikma Pharmaceuticals.  In March 2011 and April 2011, we received notice that Aurobindo Pharma Limited and Mylan, and Alembic Pharmaceuticals Limited, respectively, filed Paragraph IV ANDAs with the FDA in which each firm is seeking to market a generic form of PROVIGIL.   In 2010, generic versions of modafinil were launched in Portugal, Sweden and Denmark.  We have filed lawsuits in each of these countries and intend to vigorously enforce our intellectual property rights.  A trial enforcing our intellectual property rights is scheduled to begin in May 2011 in the UK against Mylan in anticipation of sales of generic modafinil in the UK   The European Commission is conducting a pharmaceutical sector inquiry of over 100 companies regarding, among other matters, settlements by branded pharmaceutical companies (such as Cephalon) with generic pharmaceutical companies. We are cooperating with the European Commissions inquiry and have provided questionnaire responses regarding our business and documents related to our 2005 PROVIGIL settlement with Tevas UK affiliate. In April 2011, the European Commission announced the launch of a formal investigation regarding this matter.  The opening of proceedings does not mean that the European Commission has conclusive proof of an infringement, only that it will investigate the case as a matter of priority.   In July 2010, two purported stockholders of the company filed derivative suits on behalf of Cephalon in the EDPA naming each member of our Board of Directors as defendants. The two suits allege, among other things, that the defendants failed to exercise reasonable and prudent supervision over the management practices and controls of Cephalon, including with respect to the marketing and sale of PROVIGIL, ACTIQ and GABITRIL and the execution of the PROVIGIL settlement agreements, and in failing to do so, violated their fiduciary duties to the stockholders. The complaints seek an unspecified amount of money damages, disgorgement of all compensation and other equitable relief.  We believe the allegations in these matters are without merit, and we intend to vigorously defend them.  These efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.   NUVIGIL Patent Litigation   In December 2009, January 2010, February 2010 and August 2010, we filed patent infringement lawsuits against seven companiesTeva, Actavis, Mylan, Watson, Sandoz, Lupin, and Apotexbased upon the ANDA filed by each of these firms with the FDA seeking approval to market a generic form of NUVIGIL. The lawsuits claimed infringement of our 570 Patent, 346 Patent and 516 Patent.  In March 2011, Actavis converted its Paragraph IV certification to a Paragraph III certification and was dismissed from our suit.  Including the six-month pediatric extension, the 516 Patent, the 346 Patent, and the 570 Patent expire on April 6, 2015, May 29, 2024, and June 18, 2024, respectively.   Under the provisions of the Hatch-Waxman Act, the filing of the Teva,  Mylan, Watson, Sandoz, Lupin and Apotex lawsuits stays any FDA approval of the applicable ANDA until the earlier of entry of a district court judgment in favor of the ANDA holder or 30 months from the date of our receipt of the respective Paragraph IV certification letter.  Assuming no earlier district court judgment, the earliest the 30-month stay will expire is in May 2012.   AMRIX Patent Litigation   In October 2008, Cephalon and Eurand, Inc. (Eurand), received Paragraph IV certification letters relating to ANDAs submitted to the FDA by Mylan and Barr, each requesting approval to market and sell a generic version of the 15 mg and 30 mg strengths of AMRIX. In November 2008, we received a similar certification letter from Impax Laboratories, Inc. Mylan and Impax each allege that the U.S. Patent Number 7,387,793 (the Eurand Patent), entitled Modified Release Dosage Forms of Skeletal Muscle Relaxants, issued to Eurand will not be infringed by the manufacture, use or sale of the product described in the applicable ANDA and reserves the right to challenge the validity and/or enforceability of the Eurand Patent. Barr alleges that the Eurand Patent is invalid, unenforceable and/or will not be infringed by its manufacture, use or sale of the product described in its ANDA. The Eurand Patent does not expire until February 26, 2025. In late November 2008, Cephalon and Eurand filed a lawsuit in U.S. District Court in Delaware against Mylan and Barr for infringement of the Eurand Patent. In January 2009, Cephalon and Eurand filed a lawsuit in U.S. District Court in Delaware against Impax for infringement of the Eurand Patent.   In late May 2009, Cephalon and Eurand received a Paragraph IV certification letter relating to an ANDA submitted to the FDA by Anchen Pharmaceuticals, Inc. (Anchen) requesting approval to market and sell a generic version of the 15 mg and 30 mg strengths of AMRIX. Anchen alleges that the Eurand Patent is invalid, unenforceable and/or will not be infringed by its manufacture, use or sale of the product described in its ANDA. In July 2009, Cephalon and Eurand filed a lawsuit in U.S. District Court in Delaware against Anchen for infringement of the Eurand Patent.   In October 2010, through our subsidiary Anesta AG, we entered into a settlement agreement with Eurand and Impax to settle the parties patent litigation concerning AMRIX.  Under the agreement, Anesta and Eurand will grant Impax a non-exclusive, royalty-bearing license to Eurands patent and other current and future Orange Book-listable patents to market and sell a generic version of AMRIX in the United States.  Impaxs license becomes effective one year prior to expiration of the Eurand Patent, which is currently expected to expire in February 2025, or earlier under certain circumstances. The settlement agreement does not affect the status of the separate patent litigations with Mylan, Barr and Anchen.   Also in October 2010, we completed the trial against Anchen, Barr and Mylan with respect to the Eurand Patent.  We anticipate a decision by the U.S. District Court in Delaware at any time.  In April 2011, the court issued an injunction that prevents Anchen, Barr and Mylan from launching a generic version of AMRIX prior to issuance of the courts decision.  We anticipate a separate trial against Anchen with respect to later-issued patents that also cover AMRIX.   FENTORA Patent Litigation   In April 2008, June 2008 and January 2010, we received Paragraph IV certification letters relating to ANDAs submitted to the FDA by Watson Laboratories, Inc., Barr and Sandoz, respectively, requesting approval to market and sell a generic equivalent of FENTORA. Both Watson and Barr allege that our U.S. Patent Numbers 6,200,604 and 6,974,590 (FENTORA Orange Book Patents) covering FENTORA are invalid, unenforceable and/or will not be infringed by the manufacture, use or sale of the product described in their respective ANDAs. The FENTORA Orange Book Patents cover methods of use for FENTORA and do not expire until 2019. In June 2008, July 2008 and January 2010, we and our wholly-owned subsidiary, CIMA, filed lawsuits in U.S. District Court in Delaware against Watson, Barr and Sandoz for infringement of these patents.  In May 2010, the trial for the Watson FENTORA matter was completed.  In addition to the FENTORA Orange Book Patents, we asserted at trial that Watson has and will infringe another of our patents, U.S. Patent Number 6,264,981 (the 981 Patent).   In March 2011, the court ruled in Watsons favor on the FENTORA Orange Book Patents, upheld the validity of our 981 Patent and found that Watsons proposed generic version of FENTORA infringes the 981 Patent.  Subsequently, the court entered an order giving effect to the parties stipulations providing that Watson will not sell its product before the 981 Patent expires, unless the stipulations are earlier vacated or dissolved.  Watson has appealed the courts decision regarding the 981 Patent, and we have appealed the courts decision regarding the FENTORA Orange Book Patents.  In the Sandoz FENTORA matter, the court has set a trial date in June 2011.   In November 2009, we entered into a binding agreement-in-principle (the Barr Agreement) with Barr to settle its pending patent infringement lawsuit related to FENTORA. The Barr Agreement does not affect the status of our separate FENTORA patent litigation with Watson and Sandoz. In connection with the Barr Agreement, we will grant Barr a non-exclusive, royalty-free right to market and sell a generic version of FENTORA in the United States. Barrs license will become effective in October 2018 or earlier under certain circumstances.   In January 2011, we received a Paragraph IV certification letter relating to an ANDA submitted to the FDA by Mylan requesting approval to market and sell a generic equivalent of FENTORA.  Mylan alleges that our FENTORA Orange Book Patents are invalid, unenforceable and/or will not be infringed by the manufacture, use or sale of the product described in its ANDA.   While we intend to vigorously defend the NUVIGIL, AMRIX and FENTORA intellectual property rights, these efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.   U.S. Attorneys Office and Related Matters   In September 2008, we entered into a settlement agreement (the Settlement Agreement) with the DOJ, the USAO, the OIG, TRICARE Management Activity, the U.S. Office of Personnel Management (collectively, the United States Government) and the relators identified in the Settlement Agreement to settle the outstanding False Claims Act claims alleging off-label promotion of ACTIQ and PROVIGIL from January 1, 2001 through December 31, 2006 and GABITRIL from January 2, 2001 through February 18, 2005 (the Claims). As part of the Settlement Agreement we paid a total of $375 million (the Payment) plus interest of $11.3 million. Pursuant to the Settlement Agreement, the United States Government and the relators released us from all Claims and the United States Government agreed to refrain from seeking our exclusion from Medicare/Medicaid, the TRICARE Program or other federal health care programs. In connection with the Settlement Agreement, we pled guilty to one misdemeanor violation of the U.S. Food, Drug and Cosmetic Act and agreed to pay $50 million (in addition to the Payment). All of the payments described above were made in the fourth quarter of 2008.   As part of the Settlement Agreement, we entered into a five-year Corporate Integrity Agreement (the CIA) with the OIG. The CIA provides criteria for establishing and maintaining compliance. We are also subject to periodic reporting and certification requirements attesting that the provisions of the CIA are being implemented and followed. We also agreed to enter into a State Settlement and Release Agreement (the State Settlement Agreement) with each of the 50 states and the District of Columbia. Upon entering into the State Settlement Agreement, a state received its portion of the Payment allocated for the compensatory state Medicaid payments and related interest amounts. Each state also agrees to refrain from seeking our exclusion from its Medicaid program.   In September 2008, we entered into an Assurance of Voluntary Compliance (the Connecticut Assurance) with the Attorney General of the State of Connecticut and the Commissioner of Consumer Protection of the State of Connecticut (collectively, Connecticut) to settle Connecticuts investigation of our promotion of ACTIQ, GABITRIL and PROVIGIL. Pursuant to the Connecticut Assurance, (i) we paid a total of $6.15 million to Connecticut and (ii) Connecticut released us from any claim relating to the promotional practices that were the subject of Connecticuts investigation. We also entered into an Assurance of Discontinuance (the Massachusetts Settlement Agreement) with the Attorney General of the Commonwealth of Massachusetts (Massachusetts) to settle Massachusetts investigation of our promotional practices with respect to fentanyl-based products. Pursuant to the Massachusetts Settlement Agreement, (i) we paid a total of $0.7 million to Massachusetts and (ii) Massachusetts released us from any claim relating to the promotional practices that were the subject of Massachusetts investigation.   In late 2007, we were served with a series of putative class action complaints filed in the EDPA on behalf of entities that claim to have reimbursed for prescriptions of ACTIQ for uses outside of the products approved label in non-cancer patients. The complaints allege violations of various state consumer protection laws, as well as the violation of the common law of unjust enrichment, and seek an unspecified amount of money in actual, punitive and/or treble damages, with interest, and/or disgorgement of profits. In May 2008, the plaintiffs filed a consolidated and amended complaint that also alleges violations of RICO and conspiracy to violate RICO. The RICO allegations were dismissed with prejudice in May 2009. In February 2009, we were served with an additional putative class action complaint filed on behalf of two health and welfare trust funds that claim to have reimbursed for prescriptions of GABITRIL and PROVIGIL for uses outside the approved labels for each product. The complaint alleges violations of RICO and the common law of unjust enrichment and seeks an unspecified amount of money in actual, punitive and/or treble damages, with interest. We believe the allegations in the complaints are without merit, and we intend to vigorously defend ourselves in these matters and in any similar actions that may be filed in the future. These efforts will be both expensive and time consuming and, ultimately, due to the nature of litigation, there can be no assurance that these efforts will be successful.   In January 2011, we received a subpoena duces tecum (for documents) from the U.S. Postal Service Office of Inspector General (Postal Service) in connection with an investigation relating to Postal Service employees workers compensation claims.  The subpoena requests that we provide to the Postal Service documents pertaining to FENTORA.  We understand that this investigation is being conducted by the Postal Service in conjunction with the Civil Division of the United States Attorneys Office in Philadelphia.  We are in the process of responding to the subpoena and intend to cooperate fully.   DURASOLV   In the third quarter of 2007, the U.S. Patent and Trademark Office (PTO) notified us that, in response to re-examination petitions filed by a third party, the Examiner rejected the claims in the two U.S. patents for our DURASOLV ODT technology. We disagree with the Examiners position, and we filed notices of appeal to the Board of Patent Appeals of the PTOs decisions in the fourth quarter of 2007 regarding one patent and in the second quarter of 2008 regarding the second patent. In September 2009, the Board affirmed the Examiners position with respect to the first of the DURASOLV patents. We requested reconsideration of that decision, and in March 2011, the Board reversed the Examiners rejections on both DURASOLV patents.  The Board entered new grounds of rejection and afforded us the opportunity to reopen prosecution with the Examiner.  We expect to file a response to the new rejections in June 2011.  Due to the nature of the re-examination process, there can be no assurance that these efforts will be successful. Invalidity of the DURASOLV patents could reduce our ability to enter into new contracts with regard to our drug delivery business.   Other Matters   We are a party to certain other litigation in the ordinary course of our business, including, among others, European patent oppositions, patent infringement litigation and matters alleging employment discrimination, product liability and breach of commercial contract. We do not believe these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial condition, results of operations or cash flows.   Three putative class actions have been filed in the Delaware Court of Chancery against our Board and/or us, alleging breach of duties in connection with Valeants non-binding acquisition proposal and seeking injunctive relief.  We expect additional complaints to be filed relating to our proposed acquisition by Teva.  We intend to vigorously defend these actions.   Other Commitments   We have committed to make potential future milestone payments to third parties as part of our in-licensing and development programs primarily in the area of research and development agreements.  Payments generally become due and payable only upon the achievement of certain developmental, regulatory and/or commercial milestones.  Because the achievement of these milestones is neither probable nor reasonably estimable, we have not recorded a liability on our consolidated balance sheet for any such contingencies, with the exception of the contingent consideration recorded upon an acquisition when appropriate. As of March 31, 2011, the potential milestone, option exercise payments and other contingency payments due under current contractual agreements are $3.3 billion, excluding amounts recognized as liabilities on our consolidated balance sheet of $208.2 million.</td></tr></table></td></tr></table> 12.  LEGAL PROCEEDINGS AND OTHER MATTERS   PROVIGIL Patent Litigation and Settlements   In March 2003, we filed a patentfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringIncludes disclosure of commitments and contingencies. 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