By Kevin E. Noonan --
The Supreme Court has spent the past few years issuing decision after decision circumscribing the Federal Circuit's Congressionally-mandated authority over U.S. patent law, pursuant to its plenary powers under Article III of the Constitution. Among these decisions (including KSR Int'l Co. v. Teleflex Inc., eBay Inc. v. MercExchange, LLC, Quanta Computer, Inc. v. LG Electronics, Inc., Merck KGAA v. Integra Lifesciences I, Ltd., Microsoft Corp. v. AT&T Corp., Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Dickinson v. Zurko), perhaps the one that provoked the most extreme reaction from the Federal Circuit was Medimmune, Inc. v. Genentech, Inc. With a mere footnote, the Supreme Court motivated the Federal Circuit to completely abandon 25 years of its declaratory judgment jurisprudence, specifically its "reasonable apprehension of suit" test for declaratory judgment actions (see "Is it time for the Supreme Court to stop flogging the Federal Circuit?"). Ever since, the Federal Circuit has been fashioning the contours of its new approach to declaratory judgment jurisdiction, in cases including SanDisk Corp. v. STMicroelectronics, Inc., Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., Benitec Australia, Ltd. v. Nucleonics, Inc., and Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc. The Court's efforts continue with its decision in Prasco LLC v. Medicis Pharmaceutical Corp., issued on Friday.
Defendant Medicis Pharmaceutical Corp. is the owner of U.S. Patent No. 5,648,389, and Defendant Imaginative Research Associates is owner of U.S. Patent Nos. 5,254,334; 5,409,706; and 5,632,996; these patents were licensed to Medicis. Medicis markets a skin cleansing product containing benzoyl peroxide (TRIAZ®). Declaratory Plaintiff Prasco makes a benzoyl peroxide skin cleanser (OSCION®), but prior to filing suit had not marketed the product. According to the record, Prasco had made "substantial efforts" in development and marketing of its future product. Because Prasco had not entered the marketplace prior to filing suit, Defendants were not aware of Prasco's proposed product until served with the declaratory judgment complaint.
Prasco asserted two bases in support of Article III jurisdiction: first, that Medicis marked its TRIAZ® product with the four patent numbers, pursuant to the public notice requirements of 35 U.S.C. § 287, and second, there had been a prior lawsuit between the parties on a different patent and over a different product. When faced with Defendants' motion to dismiss, Prasco supplied them with a sample of its product and a request for a covenant not to sue (which was refused). This prompted Prasco to file an amended complaint that included these facts in support for the District Court's exercise of its declaratory judgment jurisdiction. At that time Prasco also began marketing its OSCION® product.
The District Court granted Defendants' motion to dismiss after the Supreme Court's Medimmune decision, applying the "reasonable apprehension of suit" test (which the District Court did not understand to be overturned by this decision); recognizing the questionable vitality of the test, however, the District Court also based its decision on there being "no definite and concrete dispute that touches the legal relations of these parties." Prasco moved for reconsideration once the Federal Circuit abrogated its test in Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., but the District Court refused to change its decision.
The Federal Circuit affirmed, in a unanimous decision by Judge Gajarsa joined by Judges Clevenger and Moore. The decision was grounded firmly in the Supreme Court's rubrics from Medimmune, starting with the requirement that "the dispute must be 'definite and concrete, touching the legal relations of parties having adverse legal interests,' 'real and substantial,' and 'admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts,'" citing MedImmune, 127 S. Ct. at 771. Also citing the Medimmune decision, the opinion states that there is no bright line rule for deciding whether a case or controversy exists, thereby neatly setting out the Federal Circuit's task of defining the scope of declaratory judgment jurisdiction under the "totality of the circumstances" (and referencing its own decision in Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc. as an apt application of the test).
The decision also notes that the related doctrines of standing, ripeness, and a "lack of mootness" were "rooted in the same Article III inquiry," and thus can be used by a court to decide whether a party has asserted a sufficient case or controversy for the court to be able to exercise jurisdiction. The CAFC characterized these doctrines as representing "the absolute constitutional minimum for a justiciable controversy" in justifying its explication of these considerations in this case. And in an interesting twist, the decision also opined that the Supreme Court's Medimmune decision "did not completely do away with the relevance of a reasonable apprehension of suit." In making this statement, the Federal Circuit for the first time since SanDisk Corp. v. STMicroelectronics, Inc., acknowledged that the reasonable apprehension of suit test was "one of multiple ways that a declaratory judgment plaintiff can satisfy the more general all-the-circumstances test" to establish the existence of an Article III case or controversy.
The decision also clarified a minor procedural matter concerning the status of what the parties and the District Court characterized as the "amended complaint." As explicated in the decision, the second-filed complaint was not an amended complaint but rather a "supplemental complaint," pursuant to Fed. R. Civ. Pro. 15(d). Filing such a complaint is appropriate, according to the decision, to "cure" defects in an initial complaint, including jurisdictional deficiencies (citing Matthews v. Diaz, 426 U.S. 67, 75 (1976)). The significance of this distinction is that the Federal Circuit considered all the interactions between the parties, including Prasco's marketing of its possibly infringing product and Medicis' refusal to agree to Prasco's proposed covenant not to sue, when reviewing dismissal of Prasco's declaratory judgment complaint.
Even considering these additional facts alleged in the supplemental complaint, the Federal Circuit affirmed dismissal because Prasco did not allege "a controversy of sufficient 'immediacy and reality' to create a justiciable controversy." (As the decision discusses in a footnote, these considerations also implicate the ripeness requirement.) In its analysis, the Court resorted to the "lens of standing," saying that the complaint failed to allege a sufficient injury-in-fact "fairly traceable to the patentee." "The mere existence of a potentially adverse party does not [by itself] cause an injury or create an imminent risk of injury" absent affirmative action by the patentee. At best, Prasco is only a "potential competitor . . . legally free to market its product in the face of an adversely-held patent," citing Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330, 1345 (Fed. Cir. 2007). The Court rejected Prasco's allegation that the "paralyzing uncertainty" produced from its fear of Medicis alleging that Prasco's product infringed any of the patents-in-suit supported jurisdiction. The Court noted instead that Prasco's behavior had not evinced paralysis, having performed "extensive" development and marketing preparation for entering the market, and indeed actually marketing its potentially infringing product. The Court also characterized any such fear as being completely subjective and thus insufficient for supporting declaratory judgment jurisdiction:
Although MedImmune clarified that an injury-in-fact sufficient to create an actual controversy can exist even when there is no apprehension of suit, it did not change the bedrock rule that a case or controversy must be based on a real and immediate injury or threat of future injury that is caused by the defendants – an objective standard that cannot be met by a purely subjective or speculative fear of future harm.
Finally, the Court discussed ways in which a patentee could cause injury sufficient to support an allegation of a justiciable controversy. These included creating a reasonable apprehension of suit, demanding royalty payments (Medimmune), and creating a regulatory barrier to required regulatory approval (Caraco). Prasco alleged none of these actions by Defendants, and thus failed to satisfy the constitutional requirements for Article III court jurisdiction.
Turning to the specifics of the case, the Federal Circuit found that mere patent marking of Defendant Medicis' product was insufficient, because failure to mark does not prevent a patentee from demanding a license or obtaining patent damages after actual notice of its patent rights to an alleged infringer. On the contrary, mere marking "provides little, if any, evidence" that a patentee will ever choose to enforce a patent. Although prior litigious conduct is a circumstance the court says deserves to be considered in assessing the totality of the circumstances, by itself one prior suit between the parties on an unrelated patent and unrelated products was not enough to create the required real and immediate controversy; indeed, the Court held that this conduct was entitled to "only minimal weight" in making its determination. And the Defendants' refusal to enter into a covenant not to sue Prasco was not dispositive according to the Court, refusing to require a patentee to face the alternatives of testing Prasco's product to determine whether it infringed or foreswearing ever filing a patent infringement suit in the future. Again, while this behavior is a relevant consideration in the totality of the circumstances a court should consider, here the CAFC held that some "affirmative action by the defendant" was also required. In summary:
Here, where Prasco has suffered no actual present injury traceable to the defendants, and the defendants have not asserted any rights against Prasco related to the patents nor taken any affirmative actions concerning Prasco's current product, one prior suit concerning unrelated patents and products and the defendants' failure to sign a covenant not to sue are simply not sufficient to establish that Prasco is at risk of imminent harm from the defendants and that there is an actual controversy between the parties of sufficient immediacy and reality to warrant declaratory judgment jurisdiction. Although we understand Prasco's desire to have a definitive answer on whether its products infringe defendants' patents, were the district court to reach the merits of this case, it would merely be providing an advisory opinion. This is impermissible under the Article III (sic).
And proving that the Federal Circuit knows a thing or two itself about footnotes, the decision in a final footnote disclaims any interpretation of its decision as applied to a declaratory judgment action that conceded infringement but contested patent validity, presumably based in part on the public interest represented by such a validity challenge.
Prasco, LLC v. Medicis Pharmaceutical Corp. (Fed. Cir. 2008)
Panel: Circuit Judge Gajarsa, Senior Circuit Judge Clevenger, and Circuit Judge Moore
Opinion by Circuit Judge Gajarsa
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Court Report: Each week we will report briefly on recently filed
biotech and pharma cases, and a few interesting cases will be selected
for periodic monitoring.
September 11, 2008 - 
Earlier this month, several European news outlets reported on a decision by the UK High Court of Justice declaring a Human Genome Sciences (HGS) patent disclosing the nucleotide and amino acid sequence of Neutrokine-alpha, a novel member of the TNF ligand superfamily, to be invalid. The High Court agreed with HGS' opponent, Eli Lilly, that the claimed invention in HGS' patent was not capable of industrial application (in U.S. patent parlance, the invention was found to lack utility). Echoing the landmark U.S. utility case Brenner v. Manson, Lilly had argued that "a patent cannot simply operate as a hunting licence to find an industrial use," but "[r]ather the patent must describe an industrial use which is specific, substantial and credible."
Taking a page out of the U.S. Supreme Court's Brenner decision, Justice Kitchin noted that HGS had "secured broad protection over an unexplored technical field without providing an adequate compensating benefit to the public." The similarities between this decision and Brenner should not be surprising, given Justice Kitchen's citation of a number of U.S. cases, and his statement that the industrial applicability/utility principles in the UK and U.S. were consistent.
The USPTO spends a good deal of ink demonstrating the methodology used to calculate the fees as well as discussing the statutory authority that allows for Office-based fee adjustments. Much of the discussion is spent on analyzing the impact of the fee changes on small entities, as required by the Regulatory Flexibility Act.
The 
Earlier this year, we 
Today, The Washington Post reported on Insmed's continuing efforts to teach Congress about biologic drugs and about the benefits of follow-on biologics (see "
Last Tuesday, CongressDaily 
However, CongressDaily also noted that the ultimate fate of patent reform legislation in the 111th Congress may rest with the outcome of the fall elections. If the Democrats retain control of Congress, Representative 
On Friday, CongressDaily 
Coalition for Patent Fairness lobbyist Mark Isakowitz (at left) told CongressDaily that Senator Kyl's bill was a "well-intended," but "rejectionist" effort, and noted that Coaltion members were "not among the rejectionists."
About
Court Report: Each week we will report briefly on recently filed
biotech and pharma cases, and a few interesting cases will be selected
for periodic monitoring.
August 11-12, 2008 - 
Once Again, The New Yorker Gets It Wrong on Patents -- Update
Last week, Patent Docs posted an article by Kevin Noonan (see "Once Again, The New Yorker Gets It Wrong on Patents") regarding "The Permission Problem," an article by James Surowiecki that appears in the August 11th edition of The New Yorker. Over the weekend, Mr. Surowiecki and Dr. Noonan engaged in an interesting and spirited dialog regarding each of their articles in the Comments section following Dr. Noonan's piece. For Patent Docs readers who may have missed their online conversation, we are reprinting it:
Editor's Note: Mr. Surowiecki's and Dr. Noonan's comments were edited to correct minor typographical and grammatical errors. In addition, portions of the comments that were not relevant to the discussion of their articles were deleted. However, the original comments can be found in their entirety at the end of Dr. Noonan's article.
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