Dr. Michelle S. Rhyu is a partner in the Cooley Godward Kronish Intellectual Property Litigation practice group and a member of the firmââ?¬â?¢s Litigation department in the Palo Alto office. Thomas F. PochÃ?© is a partner in the firm’s Intellectual Property Litigation group and a member of the firmââ?¬â?¢s Litigation Department in the Washington, D.C. office. Thomas J. Friel, Jr. is a partner in the firm’s Litigation department, head of the firm’s national Intellectual Property Litigation practice and head of the Firmââ?¬â?¢s Bay Area Intellectual Property Litigation practice group.

A new Federal Circuit decision promises to lead to more patent suits between generic drug companies and pioneer drug companies. Following the Supreme Court’s explicit direction in its MedImmune v. Genentech opinion, the Federal Circuit has overturned its prior restrictive test for the right of generic drug companies to bring declaratory judgment actions against pioneer drug companies. In Teva v. Novartis, issued March 30, 2007, the Federal Circuit has opened the door more widely for generic drug companies that wish to establish certainty regarding patent rights; generic companies can now more easily bring declaratory judgment suits against pioneer drug companies.1 To get into court, generic companies will no longer need to prove “reasonable apprehension of imminent suit,” but now need only to establish an “actual controversy.”2

Background

Under the Hatch-Waxman Act, a generic company can speed FDA approval for its drug by submitting an Abbreviated New Drug Application (“ANDA”), which relies on clinical data previously submitted for the drug by the pioneer company.3 Upon filing an ANDA, the generic company must certify that, with respect to each patent of the pioneer company that is listed in the “Orange Book” which claims the drug or which claims a use for the drug for which the applicant seeks approval, (I) no patent information has been filed, (II) the patents have expired, (III) it will not market the drug until the patents expire, or (IV) the patents are invalid or will not be infringed by the manufacture, use or sale of the generic applicant’s drug.1 As is often the case, if a generic company files certification under paragraph (IV), the pioneer company will bring suit within 45 days, thereby obtaining a 30 month stay of the FDA’s approval of the ANDA.

Sometimes, however, the pioneer company is not motivated to bring suit within the 45 days, leaving the generic drug company with the unfavorable option of launching its product in the face of unresolved patent liability (so-called “at risk” launches). In recognition of this problem, Congress amended the patent statute in 2003 to provide generic companies with a mechanism to bring a declaratory judgment suit after the 45 days expires in order to establish certainty as to its rights prior to launching its product.5

Despite this explicit attempt by Congress to establish declaratory judgment jurisdiction for generic companies, the Federal Circuit held in Teva v. Pfizer (2005) that declaratory judgment jurisdiction did not exist because Teva had not proven a “reasonable apprehension of imminent suit.”6 This decision essentially eviscerated Congress’s prior act, and generic drug companies remained dependent on action by the pioneer company in order to resolve their rights as to the patents relating to their drugs.

But the scales tipped again when the U.S. Supreme Court issued its MedImmune v. Genentech ruling earlier this year, registering its weighty support on the side of generic companies.7 Evaluating the right of a patent licensee in good standing to bring a declaratory judgment suit challenging patent invalidity against the licensor, the Supreme Court discarded the Federal Circuit’s “reasonable apprehension of suit” standard. Furthermore, although the issue was not squarely before the Court, it specified in a lengthy footnote that this standard, as applied in Teva v. Pfizer, contradicted Supreme Court precedent.8

The Teva v. Novartis Case

Novartis holds the New Drug Application (NDA) for Famvir�®, an antiviral medication. The active ingredient in Famvir�® is famciclovir. Novartis listed five patents relating to Famvir�® in the Orange Book: one patent covering the compound famciclovir and four patents directed to methods of its therapeutic use. In 2004, Teva filed an ANDA to produce a generic famciclovir. To satisfy its ANDA certification requirements, Teva certified under paragraph IV that its drug did not infringe any of the five Novartis patents listed in the Orange Book or that the patents were invalid.

Novartis filed suit within 45 days, asserting that Teva infringed its single listed patent covering the famciclovir compound. However, Novartis did not sue on the four patents for methods of using famciclovir. Teva responded with a declaratory judgment action against Novartis, asserting noninfringement and invalidity of the four method patents. Following the then-precedential Teva v. Pfizer case, the district court found no reasonable apprehension of suit and dismissed Teva’s declaratory judgment action relating to the four method patents.

With the benefit of MedImmune v. Genentech, the Federal Circuit revisited the right of a generic company to obtain a declaration of patent invalidity and noninfringement. Interpreting the declaratory judgment standard discussed in MedImmune, the Federal Circuit required that a declaratory judgment plaintiff must show that, considering “all the circumstances,” there exists “an actual or imminent injury caused by the defendant that can be redressed by judicial relief” that is of “sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”9

The Court proceeded to identify five circumstances that in totality demonstrated injury:

(1) Novartis listed its method patents in the Orange Book;

(2) Teva’s submission of its ANDA and paragraph IV certification created a justiciable controversy for Novartis, and should thus create one for Teva;

(3) The Hatch-Waxman Act intended to create declaratory judgment jurisdiction for generic companies in the situation where the patent owner’s actions frustrate the purpose of the Act;

(4) Novartis filed suit against Teva on the compound patent; and

(5) Novartis’ failure to sue on all five Orange Book-listed patents left open the possibility of future litigation, subjecting Teva to multiple infringement suits based on the submission of a single ANDA.

The Court rejected Novartis’ arguments (a) that because it has not filed suit or threatened to sue Teva on the method patents, no injury and thus no controversy existed and (b) that the method patents constitute an entirely different controversy from the compound patent infringement controversy. The Court repeatedly cast Novartis as a company failing in its obligation to cooperate reasonably in expediting the challenge to their Orange Book-listed patents.

The Federal Circuit’s emphasis on “all the circumstances” and the particular facts of Teva v. Novartis arguably may limit the holding to the situation where the pioneer company has initiated an infringement suit against the generics company on only some of the patents listed in the Orange Book.

It still remains uncertain whether a generic drug company has declaratory judgment jurisdiction where the pioneer company has not brought suit at all, as was the case in Teva v. Pfizer. It is noteworthy that at least the first three of the five circumstances cited by the court to establish injury occur in all paragraph IV certifications.10 Beyond that, any additional evidence that the pioneer company is attempting to delay the applicant’s ANDA approval or delay resolution of patent liability issues would tend to support a finding of actual or imminent injury and declaratory judgment jurisdiction. The Court’s emphasis on the legislative intent and the purpose of the statute to “enable competitors to bring cheaper, generic drugs to market as quickly as possible” suggests that the Court may well be inclined to find jurisdiction in the absence of any infringement action by the pioneer company. Against this backdrop, pioneer companies will need to consider their options carefully when confronted with a paragraph IV certification, lest they find themselves defending a declaratory judgment suit in an unfamiliar or unfriendly jurisdiction.

Reprinted with permission from Cooley Alerts, April 7, 2007.

Notes

1 Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., No. 06-1181, slip op. (Fed. Cir. Mar. 30, 2007). Recent Federal Circuit opinions may be viewed at http://www.fedcir.gov/dailylog.html.

2 The Federal Circuit separately applied the MedImmune v. Genentech standard to find declaratory judgment jurisdiction stemming from extensive cross-licensing discussions between the parties in SanDisk Corp. v. STMicroelectronics, Inc., No. 05-1300, slip op. (Fed. Cir. Mar. 26, 2007). Overturning its prior “reasonable apprehension of imminent suit” test, the Court held that “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, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.” Id. at 15. The Court found that the unequivocal statement by the patentee that “ST [STMicroelectronics] has absolutely no plan whatsoever to sue SanDisk,” did not moot the actual controversy created by ST’s acts, which included presenting to SanDisk a thorough infringement analysis detailing the manner in which ST believed SanDisk’s products infringed the specific claims of each of ST’s fourteen patents. Id. at 17.

3 21 U.S.C. �¤ 355(j).

4 21 U.S.C. �¤ 355(j)(2)(A)(vii)(I-IV).

5 35 U.S.C. Ã?¤ 271(e)(5) (stating that federal courts “shall, to the extent consistent with the Constitution, have subject matter jurisdiction in any action brought . . . under Ã?¤ 2201 of title 28 for a declaratory judgment that such patent is invalid or not infringed”).

6 Teva Pharms. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1333 (2005).

7 MedImmune v. Genentech, 127 S. Ct. 764 (2007); see also Cooley Alert at http://www.cooley.com/news/alerts.aspx?ID=000040494620.

8 MedImmune v. Genentech, 127 S. Ct. 764, 774 n.11 (2007).

9 Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., No. 06-1181, slip op. at 9 (Fed. Cir. Mar. 30, 2007).

10 The fifth category would arguably also be met, because by refraining to sue, the pioneer company leaves open the possibility of future litigation, absent a covenant not to sue.

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