By Kevin E. Noonan —

The Federal Circuit expanded the scope of Article III jurisdiction under the Declaratory Judgment Act (28 U.S.C. § 2201) in the Hatch-Waxman context in Teva Pharmaceuticals USA, Inc. v. Eisai Co., Ltd.  Specifically, the Court held that listing patents on the Orange Book could provide a sufficient injury-in-fact for an Abbreviated New Drug Application (ANDA) filer to assert an actual controversy, when its entry into the marketplace is blocked by a prior first ANDA filer.

Teva, and its subsidiary Gate Pharmaceuticals, each filed an ANDA for different generic versions of donepezil hydrochloride, a drug for treating Alzheimer's disease sold by NDA-holder Eisai as Aricept®.  Eisai listed five patents in the FDA's Orange Book:  U.S. Patent Nos. 4,895,841; 5,985,864; 6,140,321; 6,245,911; and 6,372,760.  Eisai sued Teva and Gate on the '841 patent in a separate and ongoing action, obtaining a preliminary injunction.  The first ANDA filer, Ranbaxy, filed its ANDA with a Paragraph III certification for the '841 patent, agreeing to keep its generic donepezil off the market until that patent's expiry (which will occur in November, 2010), and a Paragraph IV certification for the remaining four Orange Book listed patents.  Teva and Gate filed its declaratory judgment action on the other four Orange Book listed patents, alleging an actual controversy because Ranbaxy's earlier-filed ANDA kept Teva off the market until after expiry of its statutory 180-day exclusivity period.  This period will not commence until Ranbaxy first sells generic donepezil or there is a court judgment that the Orange Book listed patents are not infringed, invalid, or not enforceable.  The District Court dismissed Teva's and Gate's complaint, on the ground that they did not allege a justiciable case or controversy because, inter alia, the preliminary injunction in the other action barred sale of their generic donepezil.  Any "injury" suffered by Teva and Gate did not have sufficient "immediacy and reality," according to the District Court, because Teva was preliminarily-enjoined in the "separate, still-pending action" between the parties.

The Federal Circuit reversed, in an opinion by Judge Prost joined by Chief Judge Rader and Judge Dyk.  The Court based its decision expressly on its earlier decisions in Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Ltd., 527 F.3d 1278 (Fed. Cir. 2008), and Janssen Pharmaceutical, N.V. v. Apotex, Inc., 540 F.3d 1353, 1359 (Fed. Cir. 2008), holding that the alleged injury was "sufficiently concrete . . . [and] fairly traceable to Eisai's actions" and that the injury "can be redressed by the requested relief" because it would trigger the first-filer's exclusivity period.

The Federal Circuit noted that Eisai had not brought suit against Teva or Gate (or Ranbaxy) for infringement of the four patents that were the subject of Teva's DJ action, and that even though Eisai filed statutory disclaimers for the '321 and '864 patents, they remain listed in the Orange Book.  The Court also took note that the parties negotiated a convenant not to sue over the other two DJ patents ('911 and '760), which also remain listed in the Orange Book.  This was significant according to Teva (and the Court agreed), because under Hatch-Waxman, Teva and Gate cannot enter the marketplace with their generic donepezil until Ranbaxy's exclusivity period has run, regardless of any separate agreements with Eisai over the listed patents.

Citing Medimmune, Inc. v. Genentech, Inc., the Federal Circuit recited the standard that "a controversy exists when the dispute is "definite and concrete, touching the legal relations of parties having adverse legal interests."  MedImmune, 549 U.S. at 128 (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937)).  This dispute must be "real and substantial," and of "sufficient immediacy and reality to warrant issuance of a declaratory judgment."  Id.  Further, the plaintiff's injury must be "fairly traceable" to the defendant's conduct.  Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 102-03 (1998).  Finally, the requested relief must be likely to redress the alleged injury.  Id."

The Court addressed two questions:  did an "actual controversy" exist, and did the District Court abuse its discretion by dismissing Teva's suit.  As to the first question, the Court held that the question of "actual controversy" is framed by the Court's own Caraco and Janssen decisions.  For Caraco, the opinion states that "exclusion of non-infringing generic drugs from the market can be a judicially cognizable injury-in-fact."  One occasion for such an injury is when an NDA holder "takes action that delays FDA approval of subsequent ANDAs."  That action, in both Caraco and Janssen, was listing patents in the Orange Book.  This is a "but-for" situation, since "but for" the Orange Book listing, the generic drugmaker could market its product.  "When an Orange Book listing creates an 'independent barrier' to entering the marketplace that cannot be overcome without a court judgment that the listed patent is invalid or not infringed — as for Paragraph IV filers — the company manufacturing the generic drug has been deprived of an economic opportunity to compete."

In contrast, in Janssen, the first ANDA filer stipulated to infringement, validity, and enforceability of the Orange Book listed patents.  Thus, obtaining a declaratory judgment would not permit the subsequent ANDA filer to launch until after the listed patent(s) expired.  Under these circumstances, the subsequent ANDA filer's injury was not "fairly traceable" to listing the patents in the Orange Book.  And the first-filer's exclusivity period does not give rise to an "injury-in-fact" since it is mandated by the Hatch-Waxman regulatory regime.

Under the circumstances of this case, the Court held that Caraco controls and an actual controversy existed.  The Court also held that the existence of the preliminary injunction in the '841 litigation between the parties did not mandate a different outcome, since it was a "preliminary" injunction and hence Teva was not subject to a final judgment.

Regarding the abuse of discretion question, the Court held that Section 271(e)(5) states that "the courts shall . . . have subject matter jurisdiction."  However, this express statutory commandment does not override the general grant of discretion over declaratory judgment actions codified at 28 U.S.C. § 2201(a), which states that "any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration."  The language of § 271(e)(5) "speaks only to the power of a court to decide a case, not the prudence," according to the Court's opinion, and "clarifies the maximum extent of a court's jurisdiction" without "govern[ing] how the district court may exercise its discretion under §2201."

Nevertheless, here the Federal Circuit held that the District Court had abused its discretion, by "erroneously conclud[ing] that it lacked subject matter jurisdiction" and because the exercise of the court's discretion is "not supported by the facts."  The opinion states that the District Court imputed "gamesmanship" to plaintiffs based on the relationship between Teva and Gate and the multiple ANDA filings.  This is not improper under Hatch-Waxman, according to the Federal Circuit, particularly since the FDA requested separate ANDA filings based on different forms of donepezil for each ANDA.  The District Court thus had "'no sound basis' for refusing to adjudicate this case," according to the Federal Circuit, remanding the case back to the District Court for further proceedings.

This case illustrates how the complex (perhaps Byzantine) regulations for patent infringement litigation under Hatch-Waxman have effects outside the mere statutory language of 35 U.S.C. §271(e), particularly in the interplay with other statutory mandates (in this case, regarding a court's jurisdiction to hear declaratory  judgment actions).  Perhaps a growing recognition of the consequences (intended or otherwise; see "Maybe Hatch-Waxman Data Exclusivity Isn't So Good For Traditional Drugs After All") of Hatch-Waxman explains the complex lengths to which Congress went in crafting purported statutory controls on litigation in the follow-on biologics provisions of the healthcare reform act.  More than 25 years after passage of the Hatch-Waxman Act, the Federal Circuit is still struggling with how that regulatory regime can be accommodated by general principles governing when a justiciable controversy exists.

Teva Pharmaceuticals USA, Inc. v. Eisai Co., Ltd. (Fed. Cir. 2010)
Panel: Chief Judge Rader and Circuit Judges Dyk and Prost
Opinion by Circuit Judge Prost