The Federal Circuit has begun to delineate the limits of federal court jurisdiction in patent declaratory judgment actions under the new standard.

In the wake of the Supreme Court of the United States' decision in MedImmune Inc. v. Genentech Inc., 127 S. Ct. 764 (2007), the Federal Circuit has decided a series of cases regarding jurisdiction over declaratory judgment (DJ) actions in patent cases. Such declaratory judgment actions, when allowed, permit putative infringers who have not been sued yet to seek relief from the courts in the form of a declaration that the patent is not infringed or is invalid—thereby removing business uncertainty. However, federal courts do not have jurisdiction to entertain hypothetical disputes.

The Prasco Case

The August 15, 2008, Federal Circuit decision in Prasco, LLC v. Medicis Pharmaceutical Corp. further delineates the subtle borderland between jurisdiction and lack thereof.

In Prasco, a non-Hatch Waxman case, the manufacturer of a generic benzoyl peroxide product attempted to bring a declaratory judgment action for non-infringement of four patents that were marked on a competitor's benzoyl peroxide product. The generic manufacturer had not been sued for infringement on these patents nor had it been threatened or approached for a license. The generic manufacturer based its claim of jurisdiction simply upon the fact that its competitor marked the product with the four patents, had sued the generic manufacturer previously on an unrelated patent and a different product, and had not signed a covenant not to sue on the four patents in question.

Comparing the inquiry into Article III jurisdiction with tests for standing, ripeness and mootness, the Federal Circuit explained that there was no "injury in fact" or "actual harm" that DJ Plaintiff Prasco had suffered and therefore there was no jurisdiction. The court further stated that "MedImmune does not change our long-standing rule that the existence of a patent is not sufficient to establish declaratory judgment jurisdiction."

The Federal Circuit also commented on the circumstances that can lead to jurisdiction under MedImmune. The court explained that MedImmune did not "do away with the relevance" of a reasonable apprehension of suit to the question of jurisdiction.

However, MedImmune recognized that the "reasonable apprehension of suit" test was not the only route to declaratory judgment jurisdiction. "[A]n injury in fact sufficient to create an actual controversy can exist even when there is no apprehension of suit." But there must be a "real and immediate injury or threat of future injury that is caused by the defendants – an objective standard that cannot be met by a purely subjective or speculative fear of future harm."

Thus, the court enumerated several types of behavior that could create jurisdiction, including the following:

  • Creating a reasonable apprehension of suit
  • Demanding royalty payments
  • Creating a barrier to regulatory approval of a product

The court then concluded that Prasco's stated concerns were too hypothetical to find jurisdiction. Prasco had gone forward with the commercialization of its product despite such subjective concerns.

Hatch-Waxman and DJ Jurisdiction

Prasco's third enumerated basis for declaratory judgment jurisdiction (creating a barrier to regulatory approval of a product) derives from several Hatch-Waxman pharmaceutical cases where DJ jurisdiction was at issue.

The Federal Circuit has found jurisdiction over declaratory judgment counterclaims for invalidity or non-infringement of Orange-Book-listed patents under certain circumstances.

Branded innovators are required to "list" patents that are valid and enforceable and cover their products in the U.S. Food and Drug Administration's (FDA's) "Orange Book." This listing then requires generic drug makers to either avoid manufacture of infringing products until after the listed patents expire or to certify (a Paragraph IV certification) that their proposed generic product will not infringe the patent or that the patent is invalid or unenforceable. The branded company must be advised of the generic certification and then has 45 days to decide whether to bring a patent infringement action. If an action is brought, an automatic 30-month stay is imposed on FDA approval of the generic, unless the generic obtains a favorable court ruling. In addition to these basic rules, the first generic to file against a drug is granted 180 days of exclusive marketing vis-à-vis other generics—a provision designed to encourage generics to file early. However, this 180-day exclusivity can be accelerated or forfeited under various statutorily-enumerated circumstances and thus cannot be used by the first filer to delay other generics indefinitely if the first-filer fails to market. (See generally 35 U.S.C. 271(e) and 21 U.S.C. 355.)

The key criteria for determining DJ jurisdiction in the Hatch Waxman context appears to be whether allowing the declaratory judgment action could lead to earlier generic product marketing by more rapidly triggering (and thus expediting the expiration or forfeiture of) the 180-day exclusivity period.

Caraco v. Forest Labs

Thus, in Caraco Pharmaceutical Labs v. Forest Labs, 527 F.3d 1278 (Fed. Cir. 2008), the Federal Circuit found jurisdiction over a DJ counterclaim relating to an unasserted patent where the patentee had sued on the other Orange-Book-listed patents and had even covenanted not to sue on the unasserted patent.

The Federal Circuit explained that Caraco, which was not the first generic to file a paragraph IV certification for the two patents listed in the Orange Book, would be hindered by the Hatch-Waxman 180-day exclusivity given to the first generic filer, unless Caraco was given the opportunity to trigger and expedite that 180-day exclusivity period through a successful DJ action.

As a first matter, the Federal Circuit stated that there was necessarily DJ jurisdiction when "a patentee lists patents in the Orange Book, the ANDA applicant files its ANDA certifying the listed patents under paragraph IV, and the patentee brings an action against the submitted ANDA on one or more of the patents."

Further, the Federal Circuit, applying MedImmune, recognized that even a subsequent covenant not to sue (which would eliminate any apprehension of suit) may not eliminate DJ jurisdiction—if there is some remaining "injury-in-fact." The remaining injury-in-fact in Caraco (even after the covenant not to sue) was the looming 180-day exclusivity, which could be ameliorated by a successful DJ action. The Caraco court explained:

Ivax [the first generic filer] cannot trigger its 180-day exclusivity period via the commercial-marketing trigger, 21 U.S.C. § 355(j)(5)(B)(iv)(l) (2000), until the '712 patent expires in 2012. . . . With Ivax no longer able to trigger its exclusivity period, only two pathways remain open to subsequent Paragraph IV ANDA filers who seek to trigger Ivax's exclusivity period before the '712 patent expires in 2012. First, a subsequent Paragraph IV ANDA filer could obtain a court judgment invalidating the '712 patent, which would allow the FDA to approve Ivax's drug. . . . Second, a subsequent Paragraph IV ANDA filer could trigger Ivax's exclusivity period immediately – regardless of when Ivax begins marketing its drug – via the court-judgment trigger, 21 U.S.C. § 355(j)(5)(B)(iv)(ll) (2000).

Thus, Caraco's DJ action could remedy their injury.

Merck v. Apotex (July 16, 2008)

By contrast, the Federal Circuit has found an absence of DJ jurisdiction in several other Hatch-Waxman cases.

In a decision rendered on July 16, 2008, in Merck v. Apotex (appealed from the District of Delaware), the Federal Circuit distinguished the Caraco case because in Merck v. Apotex: (1) the FDA had dissolved the 30-month stay against Apotex, and (2) the 180-day exclusivity period had already been triggered by the first generic filer when it marketed its own product. Thus, the Federal Circuit concluded that Apotex's DJ counterclaims were moot, because even if successful they would not provide any further relief.

Merck v. Apotex (August 21, 2008)

In a different Merck v. Apotex case (decided August 21, 2008, on appeal from the District of New Jersey) the Federal Circuit found there was no DJ jurisdiction for a different reason. Apotex again was not the first generic filer. The first generic filer could not market its product until October 28, 2008. Thus, the Federal Circuit concluded that any DJ challenge to the patentee's patent would not resolve itself in time (before the first generic could market) to trigger or cause a forfeiture of the first filer's 180-day exclusivity.

In essence, although Apotex was in a similar situation to that experienced by Caraco, the timing of the various approvals was such that the courts would be "unable to provide any realistic relief." Thus there was no jurisdiction.

Janssen Pharmaceutica v. Apotex

In Janssen Pharmaceutica v. Apotex, the Federal Circuit once again found that there was no jurisdiction for a DJ action. Apotex had been sued on one of three Orange-Book-listed patents and sought DJ relief with respect to the other two patents. Again, Apotex was not the first to certify against the two non-asserted patents and thus was subject to another generic company's 180-day exclusivity. Thus, Apotex argued that the Caraco decision was controlling and DJ jurisdiction should exist. The Federal Circuit noted that Apotex had stipulated to the infringement and validity of the one asserted patent, and then distinguished Caraco:

Caraco wanted to be able to challenge both patents [the asserted patent and the unasserted patent] and if successful, this would trigger Ivax's [the first filer] 180-day exclusivity period at a time when Ivax could obtain FDA approval and then launch its product. Hence, if Caraco was successful, Ivax would get its 180-day exclusivity period sooner and Caraco would be able to obtain FDA approval earlier – resulting in greater competition at an earlier time.
The key difference between Caraco and this case is that the harm that gave rise to the jurisdiction over the declaratory judgment claim in Caraco ceased to exist once Apotex stipulated to the validity, infringement, and enforceability of the [asserted] '663 patent. Therefore, unlike Caraco, Apotex cannot claim that at the time of the district court's dismissal it was being excluded from selling a noninfringing product by an invalid patent – it stipulated to the validity of the '663 patent. Even if Apotex successfully invalidates the '425 and '527 patents, it cannot obtain FDA approval until the expiration of the '663 patent because of its stipulations with respect to that patent. . . .
Apotex's inability to promptly launch its generic risperidone product because of Teva's 180-day exclusivity period is not a cognizable Article III controversy, but a result envisioned by the Hatch-Waxman Act.

Thus, Janssen noted that, unlike in Caraco, Apotex had, in this case, stipulated to the validity and infringement of the asserted (and first to expire) patent. Thus, Apotex could not launch prior to expiration of the asserted patent—even if it invalidated the later-expiring non-asserted patent. Thus, there was no present hindrance from an invalid patent.

Furthermore, the Janssen court explained that any possible future delay in triggering the start of the first-filer's 180-day exclusivity (based upon these later expiring patents being invalidated in the DJ action) did not justify DJ jurisdiction at present.

The Janssen case draws an interesting distinction from Caraco that seems to require that the subsequent ANDA filer have a viable DJ action against an asserted earlier-expiring Orange-Book patent (that is presently keeping them off the market) before any DJ action against non-asserted later-expiring patents can go forward.

Conclusion

Immediately after the Supreme Court's MedImmune decision, there appeared to be very few ways to avoid declaratory judgment jurisdiction. However, as the Federal Circuit has begun to address varying fact patterns, it has begun to delineate the limits of federal court jurisdiction in patent declaratory judgment actions under the new standard. While the standard is still more permissive than it was before MedImmune, the federal courts are not open to any and all "disputes." A careful factual analysis of each particular case is required. As the law evolves further we may expect some of the current lines to be challenged and further refinements or reconsiderations of these cases to occur.

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