United States: Subsequent Paragraph IV Filer Has Legally Cognizable Interest in When First-Filer's Exclusivity Period Begins

This article previously appeared in Last Month at the Federal Circuit - November 2010

Judges: Rader, Dyk, Prost (author)
[Appealed from D.N.J., Chief Judge Brown]

In Teva Pharmaceuticals USA, Inc. v. Eisai Co., No. 09-1593 (Fed. Cir. Oct. 6, 2010), the Federal Circuit held that a subsequent Paragraph IV filer has a legally cognizable interest in when the first-filer's exclusivity period begins. Accordingly, the Court held that delay in triggering that period qualifies as an "injury-in-fact" sufficient to provide subject matter jurisdiction under Article III of the Constitution for a DJ action for patent invalidity. The Court also found that the district court abused its discretion in declining DJ jurisdiction.

Teva Pharmaceuticals USA, Inc. ("Teva") and its unincorporated division, Gate Pharmaceuticals ("Gate"), sought to manufacture and market two generic versions of donepezil, an approved drug. Eisai Co. and Eisai Medical Research, Inc. (collectively "Eisai") hold the approved NDA for the drug and own the five patents listed for the drug in the Orange Book. The first ANDA for a generic form of donepezil was filed by Ranbaxy Laboratories Ltd. ("Ranbaxy") in 2003. Ranbaxy submitted a Paragraph III certification for U.S. Patent No. 4,895,841 ("the '841 patent"), agreeing not to market a generic version of the drug until after the '841 patent expires in November 2010. Because Ranbaxy filed the first Paragraph IV certification for the four DJ patents, Ranbaxy is eligible for 180 days of market exclusivity upon FDA approval of its ANDA, beginning when Ranbaxy begins commercially marketing its drug or upon issuance of a court judgment holding the DJ patents invalid or not infringed.

Teva and Gate subsequently filed two separate ANDAs for generic donepezil. Both ANDAs made Paragraph IV certifications against all five of Eisai's Orange Book-listed patents. Because under the Hatch-Waxman Act, filing a Paragraph IV certification constitutes an act of patent infringement, Eisai sued Teva for infringement of the '841 patent, but not the four DJ patents. Though filed separately, these two infringement actions were consolidated, and Teva and Gate stipulated that its generic forms of the drug infringe various claims of the '841 patent unless the patent is invalid or unenforceable. Eisai moved for a preliminary injunction to prevent Teva and Gate from marketing any form of the generic drug after the expiration of the thirty-month stay, and the motion was granted. The preliminary injunction bars Teva and Gate from marketing any drug containing the active ingredient as claimed in the '841 patent.

Teva subsequently filed the DJ action, seeking a DJ that the manufacture, use, offer for sale, sale, or importation of generic donepezil covered by the Gate ANDA will not infringe four of the listed Orange Book patents ("the DJ patents"). Eisai never brought suit to enforce any of the DJ patents against Teva. Instead, before the DJ action arose, Eisai filed statutory disclaimers with the PTO regarding two of the DJ patents, thereby barring their enforcement.

Eisai moved to dismiss the DJ action for lack of subject matter jurisdiction. While Eisai's motion to dismiss the DJ action was pending, Teva and Eisai negotiated a covenant-not-to-sue covering the two other DJ patents. All four DJ patents, however, remained listed in the Orange Book. Teva's amended complaint acknowledged the statutory disclaimers and covenant-not-to-sue. Teva, however, maintained that it suffers an injury under Article III because the DJ patents remain listed in the Orange Book and, thus, approval of Teva's ANDA cannot occur until the exclusivity period of the first-filer, Ranbaxy, has run. The district court dismissed the DJ action for lack of jurisdiction—specifically, for lack of a justiciable controversy under Article III of the U.S. Constitution.

On appeal, the Federal Circuit explained that, under the Hatch-Waxman Act, a party that files an ANDA with Paragraph IV certifications may bring suit under the Declaratory Judgment Act, and that the Declaratory Judgment Act provides that in the case of an actual controversy, any court of the United States may declare the rights and other legal relations of any interested party seeking such declaration. The Court further reminded that federal courts have subject matter jurisdiction over cases brought by ANDA filers to the extent consistent with the Constitution, and that the Constitution requires an Article III case or controversy.

The Court reviewed two of its earlier decisions that set out the framework for determining whether an Article III controversy exists in a DJ action arising under the Hatch-Waxman Act. The Court explained that it previously held in Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc., 527 F.3d 1278 (Fed. Cir. 2008), that the exclusion of noninfringing generic drugs from the market can be a judicially cognizable injury-in-fact. Because a company is not free to manufacture or market drugs until it receives FDA approval, under the Hatch-Waxman framework, an "injury" occurs when the NDA holder takes action that delays FDA approval of subsequent ANDAs. In Caraco, the action was listing particular patents in the Orange Book. "But-for" the defendant's decision to list a patent in the Orange Book, FDA approval of the generic drug company's ANDA would not have been independently delayed by that patent. A DJ of patent invalidity redresses this alleged injury, because it eliminates the potential for the corresponding listed patent to exclude the generic drug from the market.

"Here, as in Caraco, a favorable judgment 'would eliminate the potential for the [DJ patents] to exclude [Teva] from the drug market.'" Slip op. at 12 (alterations in original) (quoting Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1293 (Fed. Cir. 2008)).

The Court next explained that its decision in Janssen Pharmaceutica, N.V. v. Apotex, Inc., 540 F.3d 1353 (Fed. Cir. 2008), reaffirmed Caraco's holding that the injury-in-fact must stem from the actions of the company that listed the patents in the Orange Book, not the inherent framework of the Hatch-Waxman Act. The Court explained that in Janssen, where the subsequent filer had stipulated to the validity, infringement, and enforceability of another patent listed in the Orange Book for the same drug, even if the subsequent filer had prevailed in its DJ action, it could not have launched its generic drug before expiration of the patent covered by the stipulation. The Court explained that the alleged harm in Janssen—inability to enter the market—was not fairly traceable to the NDA holder's listing of the subject patents in the Orange Book, but to the stipulation instead. In Janssen, the Court found that a first-filer's exclusivity period in itself does not give rise to an injury-in-fact because the resulting exclusion of other generic companies from the market results from the inherent framework and intended workings of the Hatch-Waxman Act.

Under the framework laid out by Caraco and Janssen, the Court held that the current DJ action presents an actual controversy. "Here, as in Caraco, a favorable judgment 'would eliminate the potential for the [DJ patents] to exclude [Teva] from the drug market.'" Slip op. at 12 (alterations in original) (quoting Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1293 (Fed. Cir. 2008)). Unlike the generic drug company in Janssen, Teva had not stipulated to the validity or enforceability of any other patent listed in the Orange Book for the drug. Nor was Teva subject to any final judgment regarding an Orange Book patent for the drug that would prevent Teva from selling products covered by the ANDA. The preliminary injunction in the separate '841 patent infringement litigation was only "preliminary," and there was no final determination as to the validity, infringement, or enforceability of the '841 patent.

Next, the Court analyzed whether the district court had abused its discretion in declining to entertain the suit pursuant to its broad discretion under the Declaratory Judgment Act. The Court reviewed the language of 35 U.S.C. § 271(e)(5), analyzed how it impacts a district court's general grant of discretion in 28 U.S.C. § 2201, and upheld discretionary decisions declining jurisdiction in DJ actions. However, the Court also found that, "while the Declaratory Judgment Act does 'confer on federal courts unique and substantial discretion' to decide whether to exercise jurisdiction, that discretion is not unbounded." Slip op. at 15 (citations omitted).

Here, the Federal Circuit found that it was an abuse of discretion to decline jurisdiction because the district court erroneously concluded that it lacked subject matter jurisdiction. The Court reasoned that the district court should not have considered whether it had subject matter jurisdiction in making the subsequent, discretionary decision of whether to exercise jurisdiction over the case, because the existence of jurisdiction in itself is not probative of the relevant factors under § 2201(a), such as whether the DJ remedy will be useful or whether the case is fit for resolution.

Further, the Court found that the district court's exercise of discretion was not supported by the facts. The district court had concluded that the relationship between Teva and Gate, combined with multiple ANDAs, amounted to thinly disguised, improper gamesmanship. However, the Court noted that nothing in the Hatch-Waxman Act bars a company from filing multiple ANDAs covering different formulations of the same drug. Nor did the Court find it improper for those ANDAs to be filed under different corporate names, particularly since that filing decision was made at the FDA's request. The Court found that none of the typical factors that might warrant the exercise of discretion to decline jurisdiction existed.

Because the case presented an actual controversy justiciable under Article III and no well-founded basis for declining jurisdiction was established, the Court reversed and remanded the district court's decision.

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