United States: Earlier Eye Drop Settlement Agreement Relieves Court Of Subject Matter Jurisdiction

Finding no case or controversy, the US District Court for the Southern District of Indiana granted Intervenor-Defendant Barr's motion to dismiss Apotex's declaratory judgment action for lack of subject matter jurisdiction. Apotex Inc. v. Alcon Research, Ltd. (Defendant) and Barr Labs., Inc. (Intervenor-Defendant), No. 16-3145-STL-MJD (S.D. Ind. Feb. 27, 2017) (Lawrence, D.J.).

Apotex and Alcon settled their initial Hatch-Waxman litigation in 2013 (Apotex Patent Action), entering into a settlement agreement that resulted in the underlying litigation being dismissed without prejudice. The settlement agreement granted Apotex a license to Alcon's Orange Book patents listed for the eye drop drug Pataday (olopatadine), but because Apotex was not first-to-file, it could not launch its generic product until first-filer Barr triggered its 180-day exclusivity by marketing its generic product. In an effort to create forfeiture of Barr's 180-day exclusivity, the settlement agreement between Apotex and Alcon allowed Apotex to file a declaratory judgment action against Alcon seeking a declaration that Apotex's generic abbreviated new drug application (ANDA) product would not infringe the Orange Book patents because they would be licensed products (Apotex DJ Action). The settlement agreement also provided that (1) Alcon would not oppose entry of final judgment of non-infringement, and (2) Alcon waived its right to appeal.

Shortly after the Apotex declaratory judgment (DJ) Action was filed, the parties submitted a stipulated and agreed motion requesting the court enter a consent judgment of non-infringement that acknowledged Alcon's waiver of appeal. Barr intervened and filed a motion to dismiss for lack of subject matter jurisdiction arguing there was no case or controversy between Apotex and Alcon. Judge Lawrence agreed and dismissed Apotex's declaratory judgment action.

The court, dismissing several arguments by Apotex along the way, found no case or controversy because Apotex and Alcon did not have adverse legal interests and had no dispute that would be resolved by entry of the judgment. First, the court found that even though a district court retains jurisdiction to enter a consent judgment, the consent judgment must change the legal relationship between the parties. Importantly, the settlement agreement between Apotex and Alcon did not make entry of a consent judgment a condition of settling and dismissing the Apotex Patent Action. The court held there was no case or controversy because the declaratory judgment sought was not for the purpose of resolving a dispute—the dispute was already resolved by the settlement agreement—thus, nothing that happened in Apotex's DJ Action would change the legal obligations of the parties.

Second, the court found that even had the judge in the earlier Apotex Patent Action retained jurisdiction to enforce the settlement agreement, the enforcement would have occurred in the dismissed Apotex Patent Action, not in a newly filed case. The court noted that retaining jurisdiction to enforce a settlement agreement means there is a dispute over the settlement agreement, which was not present. The court also found the judge in the prior case did not retain jurisdiction to enforce the settlement agreement.

Third, the court distinguished the facts of Caraco Phar. Labs v. Forest Labs, 527 F.3d 1278 (Fed. Cir. 2008) and Apotex v. Daiichi Sankyo, 781 F.3d 135 (Fed. Cir. 2015). In Caraco, the generic defendant filed a declaratory judgment claim on an unasserted Orange Book patent and received a unilateral covenant not to sue from the patent owner, who moved to dismiss the DJ claim. The Federal Circuit held the generic defendant's declaratory judgment claim was ripe because plaintiff granted a covenant not to sue for the very purpose of preventing the generic defendant from gaining earlier US Food and Drug Administration approval by activating the first-filers exclusivity period through a judgment of non-infringement. In Apotex v. Daiichi, the patent holder had disclaimed the patent, and Apotex sought declaratory judgment of non-infringement to gain earlier entry into the market. 

The court reasoned that unlike those cases, the facts showed Apotex and Alcon resolved their dispute through the settlement agreement, the settlement agreement was not contingent on entering an agreed judgment in the earlier case, and because parties not seeking entry of injunction or other prospective relief, there was no case or controversy conferring declaratory judgment jurisdiction. In essence, the settlement agreement eliminated the adversity and case or controversy between the two parties. As such, the court dismissed Apotex's DJ Action against Alcon for lacking subject matter jurisdiction.

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