Expanding Jurisdiction over Patent Challenges: Federal Circuit Continues Trend

Teva filed an Abbreviated New Drug Application ('ANDA') for the generic version of Famvir, and certified under paragraph IV of the applicable statutory provision that the five Novartis patents were either invalid or would not be infringed by manufacture, use, or sale of the generic drug. Such 'paragraph IV' certifications constitute technical patent infringement. As a result, Novartis, if it sued Teva for infringement of a listed patent within 45 days of Teva's certification, was entitled to a statutorily mandated 30-month stay to delay FDA approval of Teva's generic drug and thus keep it off the market.

Novartis elected to sue Teva within the 45-day period, but alleged infringement of only the single patent on the active ingredient of Famvir, and did not assert the four other patents directed to methods of using Famvir. Novartis thus was able to obtain the 30-month stay without putting the four method patents at risk of being deemed invalid or not infringed in the litigation it initiated against Teva. Teva, seeking to launch its generic drug without the threat of future litigation, filed a declaratory judgment action alleging noninfringement and invalidity of the four remaining method patents.

A New Jersey federal court dismissed Teva's declaratory judgment action, finding that it lacked jurisdiction because Teva had failed to establish a 'reasonable apprehension' of being sued for infringement of the four patents that Novartis had not asserted against Teva.

Repudiation of 'Reasonable Apprehension' Test; Expansion of DJ Jurisdiction

The Federal Circuit had long required that a party seeking a declaratory judgment of noninfringement or invalidity of a patent must show an explicit threat or other action by the patentee that creates a reasonable apprehension of being sued for patent infringement. The reasonable apprehension requirement allowed patent holders to take certain steps to license their technology without the risk of having to defend lawsuits by prospective licensees over the validity or infringement of their patents. The requirement also led to uncertainty for potential infringers unable to have a patent declared invalid or not infringed before committing sometimes substantial resources to potentially infringing activity that exposed them to an injunction and treble damages for willful infringement.

Earlier this year, the U.S. Supreme Court in MedImmune Inc. v. Gene- tech Inc., 127 S. Ct. 764 (2007) disapproved of the Federal Circuit's longstanding 'reasonable apprehension' test and instead employed a broader test that takes into account 'all the circumstances.' Applying the broader test, the Supreme Court permitted a patent licensee to bring a declaratory judgment action challenging the licensed patent even though the licensee had not first breached the license to create a 'reasonable apprehension' of being sued by the licensor.

In light of MedImmune, the Federal Circuit in SanDisk Corp. v. STMicrosystems Inc., 480 F.3d 1372 (Fed. Cir. 2007) repudiated its former 'reasonable apprehension' test in favor of the broader 'all the circumstances' test. The court concluded that declaratory judgment jurisdiction existed in light of extensive cross-licensing discussions between the parties, but broadly stated that a justiciable controversy arises 'where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license.' The court further observed that 'the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.'

The SanDisk decision is viewed as sharply increasing the risk of declaratory judgment patent challenges arising from licensing negotiations. As Judge William Curtis Bryson observed in his concurring opinion, SanDisk potentially permits a prospective licensee to bring a declaratory judgment action challenging a patent 'in virtually any case in which the recipient of an invitation to take a patent license elects to dispute the need for a license and then to sue the patentee.'

Teva Further Expands DJ Jurisdiction

In Teva, the trial court's decision predated the Supreme Court's MedImmune decision, and the trial court thus employed the since-repudiated 'reasonable apprehension' test to dismiss Teva's declaratory judgment action. In light of the intervening MedImmune decision, the Federal Circuit reversed the trial court's dismissal. The court concluded, as it had in SanDisk, that the 'reasonable apprehension' test for declaratory judgment jurisdiction had been rejected in favor of the 'all the circumstances' test in light of MedImmune. With this test, a declaratory judgment plaintiff must show that 'under all the circumstances,' there is 'an actual or imminent injury caused by the defendant that can be redressed by judicial relief and that is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.' The court concluded that a justiciable controversy 'is found where a plaintiff has demonstrated an injury-in-fact caused by the defendant that can be redressed by the court.' After finding that 'in the present case, only the concrete injury-in-fact requirement under Article III is in dispute,' the court held that 'under all the circumstances as found in this case, Teva has an injury-in-fact and therefore has a justiciable Article III controversy.'

The Federal Circuit specifically identified five circumstances that 'taken as a whole ' establish a justiciable controversy' between Teva and Novartis: 1) Novartis' listing of its Famvir patents in the Orange Book, thereby representing that a patent infringement claim could reasonably be asserted against a generic drug maker; 2) Teva's submission of its ANDA certifying noninfringement or invalidity of the Famvir patents ' itself an act of patent infringement; 3) statutory provisions and Novartis' frustrating legislative purposes by simultaneously benefiting from the statutory 30-month stay and insulating its four method patents from a validity challenge; 4) Novartis' selectively suing Teva on only one of the five patents listed in the Orange Book and certified by Teva under paragraph IV, creating legal uncertainty as to Teva's ANDA; and 5) the possibility of future litigation and multiple infringement suits Novartis created by suing Teva on only one of the five patents.

Thus, as the court ruled in Teva, an ANDA applicant may maintain a declaratory judgment action for invalidity or noninfringement if: 1) the patent holder lists patents in the Orange Book; 2) the ANDA applicant certifies noninfringement or invalidity of the listed patents as part of its ANDA application; and 3) the patent holder sues the ANDA applicant on any one or more of the Orange Book-listed patents. 'The combination of these three circumstances is dispositive in establishing an actual declaratory judgment controversy as to all the paragraph IV certified patents, whether the patentee has sued on all or only some of the paragraph IV certified patents.'

In a concurring opinion, Judge Daniel Mortimer Friedman took an even more liberal view. He reasoned that there was an actual controversy merely because Novartis listed the challenged patents in the Orange Book and Teva certified the patents were invalid or would not be infringed. Judge Friedman viewed Novartis' patent infringement action against Teva as confirmation of, but not a prerequisite to, the existence of a controversy.

Implications of Teva

Teva discourages patent holders from 'gaming the system' by selectively suing generic drug companies on some Orange Book-listed patents to trigger the 30-month stay on ANDA approval, and at the same time holding other listed patents in reserve for future litigation against the same company. A holder of Orange Book-listed patents can choose to take advantage of the 30-month stay by asserting all Orange Book-listed patents relating to a particular ANDA within 45 days after the ANDA is filed. Alternately, the patent holder can decline to assert any of its Orange Book-listed patents within the 45-day window, and thereby preserve the threat of future patent litigation that may discourage generics from launching after obtaining ANDA approval. The latter option, however, may be foreclosed if courts eventually adopt the reasoning of the concurring opinion in Teva. Teva makes it clear that selectively asserting only some Orange Book-listed patents, however, will permit a generic drug company to bring a declaratory judgment action on the unasserted patents, which action may or may not be consolidated with the patent holder's infringement action. Teva thus encourages the concurrent resolution of all patent issues relating to a particular ANDA, as opposed to piecemeal sequential litigation.

Like the MedImmune and SanDisk decisions that preceded it, Teva likely will spawn an increase in declaratory judgment actions, at least until patent holders adapt their strategies to the shifts in patent law. Generic drug makers may increasingly seek to pre-emptively challenge drug patents to clear the way for launching generic drugs without the threat of future litigation or any resulting injunction or treble damages for willful infringement.

Trent Campione is an attorney in the Austin office of Dewey Ballantine LLP. His practice focuses on patent litigation and counseling. He can be reached at 512-226-0610 and [email protected].

Continuing the recent trend of court decisions expanding jurisdiction over declaratory judgment challenges to patents, the Court of Appeals for the Federal Circuit (the 'Federal Circuit' or the 'court') opened the door to increased challenges to drug patents in Teva Pharms. USA Inc. v. Novartis Pharms. Corp ., 482 F.3d 1330 (Fed. Cir. 2007). The Federal Circuit ruled that a generic drug company could, under the appropriate circumstances, pre-emptively seek a declaratory judgment that certain drug patents listed in the FDA's Orange Book are invalid or not infringed. Generic drug companies thus can have a court resolve patent infringement issues before undertaking the expense of launching a generic drug under the threat of patent litigation and any resulting injunction or treble damages for willful infringement. The Teva decision is expected to increase declaratory judgment challenges by generic drug companies and help speed generic drugs to market when those challenges are successful.

Background

Novartis filed with the Food and Drug Administration ('FDA') a New Drug Application for approval of the antiviral drug Famvir'. As part of the application process, Novartis listed five patents in the FDA's Orange Book, which catalogs patents for drugs evaluated by the FDA. One of the listed patents is directed to the active ingredient in Famvir and expires in 2010. The remaining four patents cover methods of using Famvir and do not expire until 2014-15.

Teva filed an Abbreviated New Drug Application ('ANDA') for the generic version of Famvir, and certified under paragraph IV of the applicable statutory provision that the five Novartis patents were either invalid or would not be infringed by manufacture, use, or sale of the generic drug. Such 'paragraph IV' certifications constitute technical patent infringement. As a result, Novartis, if it sued Teva for infringement of a listed patent within 45 days of Teva's certification, was entitled to a statutorily mandated 30-month stay to delay FDA approval of Teva's generic drug and thus keep it off the market.

Novartis elected to sue Teva within the 45-day period, but alleged infringement of only the single patent on the active ingredient of Famvir, and did not assert the four other patents directed to methods of using Famvir. Novartis thus was able to obtain the 30-month stay without putting the four method patents at risk of being deemed invalid or not infringed in the litigation it initiated against Teva. Teva, seeking to launch its generic drug without the threat of future litigation, filed a declaratory judgment action alleging noninfringement and invalidity of the four remaining method patents.

A New Jersey federal court dismissed Teva's declaratory judgment action, finding that it lacked jurisdiction because Teva had failed to establish a 'reasonable apprehension' of being sued for infringement of the four patents that Novartis had not asserted against Teva.

Repudiation of 'Reasonable Apprehension' Test; Expansion of DJ Jurisdiction

The Federal Circuit had long required that a party seeking a declaratory judgment of noninfringement or invalidity of a patent must show an explicit threat or other action by the patentee that creates a reasonable apprehension of being sued for patent infringement. The reasonable apprehension requirement allowed patent holders to take certain steps to license their technology without the risk of having to defend lawsuits by prospective licensees over the validity or infringement of their patents. The requirement also led to uncertainty for potential infringers unable to have a patent declared invalid or not infringed before committing sometimes substantial resources to potentially infringing activity that exposed them to an injunction and treble damages for willful infringement.

Earlier this year, the U.S. Supreme Court in MedImmune Inc. v. Gene- tech Inc. , 127 S. Ct. 764 (2007) disapproved of the Federal Circuit's longstanding 'reasonable apprehension' test and instead employed a broader test that takes into account 'all the circumstances.' Applying the broader test, the Supreme Court permitted a patent licensee to bring a declaratory judgment action challenging the licensed patent even though the licensee had not first breached the license to create a 'reasonable apprehension' of being sued by the licensor.

In light of MedImmune, the Federal Circuit in SanDisk Corp. v. STMicrosystems Inc., 480 F.3d 1372 (Fed. Cir. 2007) repudiated its former 'reasonable apprehension' test in favor of the broader 'all the circumstances' test. The court concluded that declaratory judgment jurisdiction existed in light of extensive cross-licensing discussions between the parties, but broadly stated that a justiciable controversy arises 'where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license.' The court further observed that 'the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.'

The SanDisk decision is viewed as sharply increasing the risk of declaratory judgment patent challenges arising from licensing negotiations. As Judge William Curtis Bryson observed in his concurring opinion, SanDisk potentially permits a prospective licensee to bring a declaratory judgment action challenging a patent 'in virtually any case in which the recipient of an invitation to take a patent license elects to dispute the need for a license and then to sue the patentee.'

Teva Further Expands DJ Jurisdiction

In Teva, the trial court's decision predated the Supreme Court's MedImmune decision, and the trial court thus employed the since-repudiated 'reasonable apprehension' test to dismiss Teva's declaratory judgment action. In light of the intervening MedImmune decision, the Federal Circuit reversed the trial court's dismissal. The court concluded, as it had in SanDisk, that the 'reasonable apprehension' test for declaratory judgment jurisdiction had been rejected in favor of the 'all the circumstances' test in light of MedImmune. With this test, a declaratory judgment plaintiff must show that 'under all the circumstances,' there is 'an actual or imminent injury caused by the defendant that can be redressed by judicial relief and that is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.' The court concluded that a justiciable controversy 'is found where a plaintiff has demonstrated an injury-in-fact caused by the defendant that can be redressed by the court.' After finding that 'in the present case, only the concrete injury-in-fact requirement under Article III is in dispute,' the court held that 'under all the circumstances as found in this case, Teva has an injury-in-fact and therefore has a justiciable Article III controversy.'

The Federal Circuit specifically identified five circumstances that 'taken as a whole ' establish a justiciable controversy' between Teva and Novartis: 1) Novartis' listing of its Famvir patents in the Orange Book, thereby representing that a patent infringement claim could reasonably be asserted against a generic drug maker; 2) Teva's submission of its ANDA certifying noninfringement or invalidity of the Famvir patents ' itself an act of patent infringement; 3) statutory provisions and Novartis' frustrating legislative purposes by simultaneously benefiting from the statutory 30-month stay and insulating its four method patents from a validity challenge; 4) Novartis' selectively suing Teva on only one of the five patents listed in the Orange Book and certified by Teva under paragraph IV, creating legal uncertainty as to Teva's ANDA; and 5) the possibility of future litigation and multiple infringement suits Novartis created by suing Teva on only one of the five patents.

Thus, as the court ruled in Teva, an ANDA applicant may maintain a declaratory judgment action for invalidity or noninfringement if: 1) the patent holder lists patents in the Orange Book; 2) the ANDA applicant certifies noninfringement or invalidity of the listed patents as part of its ANDA application; and 3) the patent holder sues the ANDA applicant on any one or more of the Orange Book-listed patents. 'The combination of these three circumstances is dispositive in establishing an actual declaratory judgment controversy as to all the paragraph IV certified patents, whether the patentee has sued on all or only some of the paragraph IV certified patents.'

In a concurring opinion, Judge Daniel Mortimer Friedman took an even more liberal view. He reasoned that there was an actual controversy merely because Novartis listed the challenged patents in the Orange Book and Teva certified the patents were invalid or would not be infringed. Judge Friedman viewed Novartis' patent infringement action against Teva as confirmation of, but not a prerequisite to, the existence of a controversy.

Implications of Teva

Teva discourages patent holders from 'gaming the system' by selectively suing generic drug companies on some Orange Book-listed patents to trigger the 30-month stay on ANDA approval, and at the same time holding other listed patents in reserve for future litigation against the same company. A holder of Orange Book-listed patents can choose to take advantage of the 30-month stay by asserting all Orange Book-listed patents relating to a particular ANDA within 45 days after the ANDA is filed. Alternately, the patent holder can decline to assert any of its Orange Book-listed patents within the 45-day window, and thereby preserve the threat of future patent litigation that may discourage generics from launching after obtaining ANDA approval. The latter option, however, may be foreclosed if courts eventually adopt the reasoning of the concurring opinion in Teva. Teva makes it clear that selectively asserting only some Orange Book-listed patents, however, will permit a generic drug company to bring a declaratory judgment action on the unasserted patents, which action may or may not be consolidated with the patent holder's infringement action. Teva thus encourages the concurrent resolution of all patent issues relating to a particular ANDA, as opposed to piecemeal sequential litigation.

Like the MedImmune and SanDisk decisions that preceded it, Teva likely will spawn an increase in declaratory judgment actions, at least until patent holders adapt their strategies to the shifts in patent law. Generic drug makers may increasingly seek to pre-emptively challenge drug patents to clear the way for launching generic drugs without the threat of future litigation or any resulting injunction or treble damages for willful infringement.

Trent Campione is an attorney in the Austin office of Dewey Ballantine LLP. His practice focuses on patent litigation and counseling. He can be reached at 512-226-0610 and [email protected].