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In January, the Supreme Court overruled the decades-old test used by the U.S. Court of Appeals for the Federal Circuit to determine whether a case or controversy exists for purposes of declaratory judgment jurisdiction. In March, a Federal Circuit decision demonstrated that the high court had indeed changed the landscape of declaratory judgment jurisdiction in pharmaceutical cases by relaxing the case-or-controversy standard for patent challengers. Taken together, the Supreme Court’s decision in MedImmune Inc. v. Genentech Inc. and the Federal Circuit’s response in Teva Phar�maceuticals USA v. Novartis Pharmaceuticals Corp. provide new declaratory judgment opportunities for generic drug companies, the practical effects of which are multifaceted and suggest a need for heightened due diligence of Orange Book-listed patents. The Food and Drug Administration requires drug companies to list all patents that could reasonably be asserted against a manufacturer that makes, uses, or sells a generic version of a pharmaceutical. This publicly available list is commonly known as the Orange Book. Often a single pharmaceutical may be covered by multiple listed patents (for example, on the base compound, on different formulations, or on methods of administration). When a company files an Abbreviated New Drug Application to market a generic version of a drug, it must make a certification addressing every patent listed in the Orange Book. Most often, the generic company files a Paragraph IV certification, stating that the listed patents are invalid, unenforceable, or would not be infringed by the proposed generic product. Such Paragraph IV challenges rarely come as a surprise to the patent-holder. In preparation for future challenges, which often lead to litigation, the patent-holder typically performs due diligence on its Orange Book-listed patents. Based on the results of its due diligence, a patent-holder may choose to sue the generic company on one or more patents in the Orange Book and not sue on others. In some cases, it may be wise not to assert presumptively valid and infringed patents due to the particular equities in the case and the complexity caused by the assertion of additional patents. Generic companies, on the other hand, often wish to litigate all Orange Book-listed patents simultaneously, in order to exploit the perceived negative equities that can arise from multiple patents covering a single drug and to eliminate the possibility of future suits based on unasserted patents. To litigate unasserted patents, a generic company must file a declaratory judgment action. Before the MedImmune decision, such actions were routinely dismissed for lack of jurisdiction because there was no case or controversy � i.e., the generic company had no “reasonable apprehension of suit” because the innovator company had, so far, declined to assert the patent. Then, in MedImmune, the Supreme Court overruled the Federal Circuit’s reasonable-apprehension-of-suit test, finding it in direct conflict with three Supreme Court cases and in tension with a fourth. Many suspected that MedImmune would change the landscape of declaratory judgment actions in the context of Abbreviated New Drug Application cases. As evidenced by Novartis, it has. ALL THE CIRCUMSTANCES The Federal Circuit case involved five Orange Book-listed patents related to the Novartis drug Famvir, one directed to the active ingredient (the base patent) and four directed to methods of therapeutic use (the method patents). In 2004, Teva filed an Abbreviated New Drug Application with a Paragraph IV certification against all five patents. Novartis brought suit, but only on the base patent. Teva then brought a declaratory judgment action on the unasserted method patents. Novartis moved to dismiss for lack of jurisdiction because there was no case or controversy. The district court, which relied on the Federal Circuit’s old reasonable-apprehension-of-suit test, dismissed Teva’s declaratory judgment action. The Federal Circuit took a different tack on appeal: Reaching its decision after MedImmune, the court analyzed the Novartis case based on the totality of the circumstances. The court first addressed Novartis’ Orange Book listing of patents related to Famvir. While the Orange Book listing might not be sufficient to establish an Article III controversy, the court wrote, “it is a circumstance to be considered in determining whether a justiciable controversy exists under the totality of the circumstances.” The Federal Circuit also found significant Teva’s Paragraph IV certification alleging that its generic product would not infringe Novartis’ patents, which gave Novartis an immediate justiciable controversy against Teva. “It logically follows,” the court wrote, “that if such an action creates a justiciable controversy for one party, the same action should create a justiciable declaratory judgment controversy for the opposing party.” The court also considered that while Novartis’ actions insulated it from an immediate judicial determination of the metes and bounds of the four method patents, it did not diminish the prospect of future litigation on those patents. The court noted that this created uncertainty as to Teva’s legal rights and that Teva suffered “direct legal injury” from Novartis’ actions. Thus, based on the totality of the circumstances, the Federal Circuit found an actual case or controversy. FACING NO SUIT Novartis removes any doubt that Med�Immune broadened declaratory judgment jurisdiction in the context of Abbreviated New Drug Application cases. No declaratory judgment jurisdiction existed for Teva’s claim under the reasonable-apprehension-of-suit test, but it did exist after MedImmune. Novartis, however, leaves at least one significant question unanswered: If a patent-holder does not bring suit on any Orange Book-listed patents after receiving a Paragraph IV certification, will there be declaratory judgment jurisdiction? Courts addressing this scenario will likely analyze factors similar to those found in Novartis. For instance, the listing of a patent in the Orange Book would be “a circumstance to be considered” in determining whether a justiciable controversy exists. And as in the Novartis scenario, the patentee could later assert the previously unasserted patent(s) against the generic filer, creating uncertainty as to that company’s right to produce the pharmaceutical. The majority opinion in Novartis found these factors indicative of an actual case or controversy. The concurrence in Novartis seemed to suggest that declaratory judgment jurisdiction could lie based on the two circumstances of Novartis’ Orange Book listing of the five related patents and Teva’s Paragraph IV certification letter alleging noninfringement. If that view controlled, declaratory judgment jurisdiction might lie even in the absence of any suit by the innovator company. But that view did not command a majority in Novartis. Indeed, under the totality-of-the-circumstances analysis, the Novartis majority considered it significant that the innovator company was suing over at least one Orange Book-listed patent. The majority explained that while Teva’s declaratory judgment action and Novartis’ infringement suit were different “cases,” they were part of the same “controversy.” A key difference in this scenario is that, unlike in Novartis, the innovator company would not have filed suit on any Orange Book-listed patents. And because listing a patent in the Orange Book is a statutory requirement, the Federal Circuit held in Teva v. Pfizer Inc. (2005) that it “should not be construed as a blanket threat to potential infringers.” Moreover, where the patent-holder has declined to file any suit, a court could view a generic company’s declaratory judgment action as simply a request for a judicial advisory opinion. Although some state courts issue advisory opinions, federal courts do not, and, therefore, the generic company’s suit could be dismissed. DUE DILIGENCE NOW As a practical matter, the risk of being subjected to declaratory judgment suits on all Orange Book-listed patents suggests at least four courses of action for owners of pharmaceutical patents. First, innovator companies should be vigilant in the initial prosecution of patents destined for the Orange Book. The patent-holder’s best asset in any kind of infringement litigation is a strong patent. Second, innovator companies should diligently analyze their current Orange Book-listed patents to identify the likely issues to be litigated and begin the process of addressing those issues. Appropriate due diligence would include reviewing internal files and records related to the invention, speaking with the inventors, performing prior art searches, and analyzing the prosecution history and prior art cited. No doubt, this kind of ongoing diligence is costly and difficult for the patent-holder � and can be even more so for external evaluators, such as investment banks or merger candidates, that have limited access to internal files. Third, following due diligence, an innovator company may attempt to address potential litigation issues through either the reissue or the re�examination process. On the other hand, if the company determines that it could not reasonably assert a patent listed in the Orange Book, it should de-list that patent. Fourth, innovator companies should no longer expect to automatically avoid litigation by declining to file suit against generic challengers. Instead, they should be prepared either to file suit or to enter into a covenant not to sue on an Orange Book-listed patent they do not wish to litigate. MedImmune and Novartis expanded the scope of declaratory judgment jurisdiction for generic companies to challenge pharmaceutical patents. Exactly how far is not yet clear. What is clear is that upfront planning and heightened due diligence can reduce the negative ramifications for innovator drug companies.
John D. Livingstone is an associate, resident in the Tokyo office, and Michael J. McCabe II is a partner, resident in the Atlanta office, of Finnegan, Henderson, Farabow, Garrett & Dunner. Livingstone’s practice concentrates on patent litigation and client counseling, primarily in the pharmaceutical and biotechnology arts. McCabe’s practice concentrates on patent litigation and client counseling, primarily in the pharmaceutical and chemical arts. They can be reached at [email protected] and [email protected].

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