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Last January, in MedImmune Inc. v. Genentech Inc., 127 S. Ct. 764 (2007), the U.S. Supreme Court held that a patent licensee in good standing may sue for a declaratory judgment that the licensed patent is invalid, unenforceable or not infringed. That ruling overturned settled U.S. Court of Appeals for the Federal Circuit precedent prohibiting licensees who are current in their obligation to pay royalties from mounting challenges to licensed patents. In reaching that result, the court authored a lengthy footnote (No. 11) discussing the test used by the Federal Circuit to determine when a party threatened with a claim of patent infringement may sue for declaratory judgment. Under that test, a declaratory judgment plaintiff must show that it has a “reasonable apprehension” that “it will face an infringement suit.” This rule does much to place the keys to the courthouse in the hands of the patent holder, who can make it difficult or impossible to trigger declaratory judgment jurisdiction by disclaiming any intent immediately to sue for infringement. Footnote 11, however, observed that the test “conflicts” with three Supreme Court declaratory judgment decisions, including a patent case, and is “in tension” with a fourth. The footnote did not explicitly overrule Federal Circuit precedent applying the test. Nevertheless, the court made clear its view that generally applicable declaratory judgment principles � which focus on whether there is a “substantial controversy . . . of sufficient immediacy and reality” � should govern, rather than special rules tailored to patent cases. In this respect, MedImmune is similar to the court’s decision in eBay Inc. v. MercExchange LLC, 126 S. Ct. 1837 (2006), in which it held that the traditional four-factor test used to determine when an injunction should issue must be applied in patent cases, instead of a different rule developed by the Federal Circuit for patent cases. In decisions issued during the past few months, the Federal Circuit has explicitly recognized that MedImmune did away with the “reasonable apprehension of imminent suit” test, and substantially changed its approach to declaratory judgment jurisdiction. ‘MedImmune’ is shaping generic drug litigation That development has already had a significant effect in one particularly contentious area of patent litigation � disputes over efforts to market generic drugs. Declaratory judgment principles often are important in generic drug litigation because generic drug manufacturers typically must make large investments before coming to market, and therefore place great value on the certainty that a declaratory judgment of patent invalidity or noninfringement can bring. Under the Hatch-Waxman Act, passed in 1984, a company that files a new drug application (NDA) must notify the Food and Drug Administration (FDA) of all patents covering the compound. The statute allows a generic drug manufacturer to file an abbreviated new drug application (ANDA), which can rely on previously submitted safety and efficacy studies. An ANDA must address each patent listed by an NDA holder, indicating that the generic will not be marketed during the term of the patent, or that the patent is invalid or will not be infringed. Under the statute, submitting an ANDA constitutes an act of infringement. If the NDA holder files a patent infringement suit within 45 days after receiving notice of the ANDA, the FDA may not approve the ANDA for 30 months, unless the lawsuit is resolved or the patents expire. In 2003, the statute was amended to provide that, if the NDA holder does not sue within 45 days, the generic marketer may file a “civil action to obtain patent certainty” seeking a declaratory judgment of invalidity or noninfringement. Before MedImmune, the Federal Circuit narrowly construed the 2003 amendments in Teva Pharmaceuticals USA Inc. v. Pfizer Inc., 395 F.3d 1324 (Fed. Cir. 2005). There, Pfizer listed two patents covering the blockbuster drug Zoloft. Teva, a generic manufacturer, filed an ANDA stating that it would not go to market before the expiration of the older Pfizer patent, and claiming that the later patent was invalid or not infringed. When Pfizer did not bring an infringement suit during the statutory 45-day period, Teva sought a declaratory judgment that the later-expiring patent was not infringed or valid. Applying its existing “reasonable apprehension” test, the Federal Circuit affirmed dismissal of the action. It rejected the argument that Teva had a reasonable apprehension of imminent suit based on Pfizer’s designation of the patent in connection with its NDA, the fact that Pfizer had refused a covenant not to sue and the fact that Pfizer had aggressively pursued infringers of other patents. None of this, the court found, created an “imminent” threat. Teva’s argument that it was prejudiced by uncertainty was not enough. Teva was more successful in June, after MedImmune was decided, in Teva Pharmaceuticals USA Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330 (Fed. Cir. 2007). There, Teva filed an ANDA to launch a generic version of the herpes drug Famvir, which is covered by five patents Novartis filed with the FDA. Novartis sued, but asserted infringement of only one patent. Teva counterclaimed for a declaratory judgment that the other four patents were not infringed or invalid. The district court, acting before MedImmune, applied the “reasonable apprehension” test and dismissed the counterclaims. On appeal, the Federal Circuit recognized that MedImmune had overruled the “reasonable apprehension” test. Following MedImmune, the court held that a declaratory judgment plaintiff must show “under ‘all the circumstances’ 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.’ ” 482 F.3d at 1338. Reversing the district court, the Federal Circuit found that the circumstances “as a whole” satisfied this standard. The court of appeals relied on the fact that Novartis had listed the four patents with the FDA, that Teva had submitted an ANDA certifying that the patents were not infringed or invalid and that Novartis had itself filed suit on one of the patents. According to the court, “Congress created the ANDA declaratory judgment action for generic drug companies specifically to avoid the type of legal uncertainty that Novartis has created.” 482 F.3d at 1345.However, the Federal Circuit did not hold that mere listing of patents with the FDA and later filing of an ANDA is sufficient for declaratory judgment jurisdiction � it was not called upon to address that question. Another recent Federal Circuit decision also presents a before- and after- MedImmune contrast, this time in a non-ANDA context. In SanDisk Corp. v. ST Microelectronics Inc., 480 F.3d 1372 (Fed. Cir. 2007), defendant ST wrote to plaintiff SanDisk to request a meeting to discuss a cross-licensing agreement, referring to eight ST patents that “may be of interest” to SanDisk. The parties had several meetings and phone calls, during which ST’s representatives presented detailed analyses concluding that SanDisk was infringing the ST patents. During one meeting, an ST executive gave SanDisk a packet including ST patents, reverse-engineering reports for SanDisk products and diagrams showing the elements of ST’s patent claims that allegedly covered those products. In handing over the packet, the ST executive said that she knew that “this is material that would allow SanDisk to DJ” [file a declaratory judgement action against] ST. The executive added, however, that “ST has absolutely no plan whatsoever to sue SanDisk.” After negotiations broke down, San-Disk did indeed sue for a declaration of noninfringement and invalidity. Using the pre- MedImmune standard, the district court dismissed, finding insufficient evidence that ST had decided to sue for infringement, stressing ST’s statement that it did not intend to sue. Disclaimer of intent to sue did not eliminate controversy A unanimous Federal Circuit panel reversed, with a concurring opinion observing that the district court’s decision was correct under the pre- MedImmune test. Under MedImmune, however, ST’s “thorough infringement analysis presented by seasoned litigation experts, detailing that one or more of the patents read on one or more of SanDisk’s identified products,” combined with “liberal” references to “present, ongoing infringement,” was sufficient to trigger jurisdiction. ST’s statement that it did not intend to sue did not eliminate the controversy because ST had nevertheless “engaged in a course of conduct that shows a preparedness and willingness to enforce its patent rights.” The Federal Circuit explained: “[W]e hold only 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.” MedImmune has produced a sea change in Federal Circuit declaratory judgment law, making it far easier for parties threatened with infringement to go to court, and reducing the power of patent holders to defeat jurisdiction by denying a present intention to sue. Of course, a patent holder willing to make a clear promise not to sue based on past activities should be able to defeat jurisdiction � an action was dismissed last month on that basis in Benitec Australia Ltd. v. Nucleonics Inc., No. 06-1122, 2007 WL 2069646 (Fed. Cir. July 20, 2007). Whether this new regime promotes certainty in the market, or instead stimulates litigation that otherwise might never have been brought, remains to be seen. Lewis R. Clayton is a litigation partner in the New York office of Paul, Weiss, Rifkind, Wharton & Garrison and co-chairman of the firm’s intellectual property litigation group. He can be reached at [email protected]. Larry Coury, an associate with the firm, assisted in the preparation of this article.

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