Janssen Pharmaceutica, N.V. v. Apotex, Inc. (Fed. Cir. 2008)

    By Kevin E. Noonan --

Over the past year, the Federal Circuit has addressed on many occasions the scope of the "case or controversy" requirement for a court to have jurisdiction under Article III of the Constitution.  Several of these decisions have been directed to the proper jurisdictional scope of declaratory judgment actions filed in ANDA cases, where a generic drug company has filed its ANDA on a drug having at least one patent listed by the innovator in the FDA Orange Book.  These cases include Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc. and Merck & Co. v. Apotex, Inc.  Continuing this trend is the Court's decision, issued last Thursday, in Janssen Pharaceutica, N.V. v. Apotex, Inc.

The dispute arose over Janssen's branded antipsychotic drug Risperdal®, having three patents listed in the Orange Book:  U.S. Patent No. 4,804,663 on the risperidone compound itself; U.S. Patent No. 5,453,425 on aqueous solutions of risperidone (Risperdal® is an oral solution of risperidone), and U.S. Patent No. 5,616,587 for methods of making said aqueous solutions.  Teva was the first generic company to file an ANDA on Risperdal®; its ANDA contained a Paragraph III certification on the '663 patent (wherein Teva deferred approval of its ANDA until the '663 patent expired); Janssen did not file suit against Teva on the '425 or the '587 patents.  As the first ANDA filer, Teva was thus entitled to a 180-day exclusivity period, which would begin on June 29, 2008 (a date six months after the expiration date of the '663 patent due to an additional six-month pediatric exclusivity period; see Patent Docs report on Merck & Co. cases).

Apotex filed its ANDA several years after Teva, and initially filed Paragraph IV certifications on the '425 and 587 patents; in January 2006, Apotex filed a Paragraph IV certification on the '663 patent.  This provoked Janssen to file suit pursuant to 35 U.S.C. § 271(e)(4); Janssen did not sue Apotex on the '425 and '587 patents.  Apotex responded to Janssen's suit with counterclaims for a declaratory judgment on non-infringement of these two unasserted patents.  Janssen granted Apotex a covenant not to sue on the '425 and '587 patents, and Apotex stipulated that the '663 patent was not invalid or unenforceable and infringed by its ANDA.  Despite this, Apotex refused to withdraw its counterclaims, and the District Court on Janssen's motion dismissed for lack of subject matter jurisdiction.

The Federal Circuit affirmed, in an opinion written by Judge Moore and joined by Judge Rader and Chief Judge Michel.  In its opinion, the Court addressed the three grounds Apotex asserted in support of jurisdiction:  first, that  it would be unable to promptly launch its product upon expiration of the '663 patent; second, that FDA approval of its product was being "indefinitely delayed"; and third, that the covenant not to sue did not protect its upstream suppliers or downstream customers.  The Court found no merit in any of these arguments.

Apotex's first argument was based on the advantages it might obtain should the '425 and '587 patents be invalidated.  Under the Hatch-Waxman regime, as amended by Title XI of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, Pub. L. No. 108-173, § 1102(a), 117 Stat. 2066, 2457-60, Teva's 180-day exclusivity would be triggered either by (1) Teva's first sale of generic risperidone or (2) invalidation of the '425 and '587 patents.  Should Apotex be able to invalidate these unasserted patents prior to Teva's ANDA approval date (i.e., June 29, 2008), the 180-day period would begin before Teva could launch its generic product.  Thus, if properly timed, Apotex would be able to launch its product as early as the end of the pediatric exclusivity period; otherwise, the earliest Apotex could launch would be 180 days after the end of the pediatric exclusivity period (during which time, significantly, Teva would be the exclusive generic risperidone product on the market).

Apotex argued that the Court's decision in Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc. was controlling.  In the Caraco case, innovator Forest listed two patents in the Orange Book, but sued first ANDA filer Ivax on only one of them; this patent was found not invalid or unenforceable and infringed.  When Caraco filed its subsequent ANDA, Forest filed suit only on the same, previously-litigated patent, and granted Caraco a covenant not to sue on the unasserted patent.  The Court noted that in the Caraco case, finding jurisdiction would permit Caraco to obtain a declaratory judgment on both patents, which (like here) would trigger the 180-day exclusivity period for the first ANDA filer (Ivax).  However, the Court noted that in the Caraco case, triggering Ivax's exclusivity period would permit Ivax to launch at an earlier time and thus allow Caraco to obtain its own FDA approval at an earlier time, resulting in increased competition at an earlier time.  Without the declaratory judgment, Caraco would be excluded from entering the marketplace even if the asserted patent was found to be invalid or unenforceable.

The Federal Circuit contrasted the situation before it with Caraco, because here Apotex stipulated the validity of  the '663 patent, which was the impediment to first ANDA filer Teva obtaining FDA approval, launching its product, and triggering its 180-day exclusivity period.  The Court said that the harm to Apotex stemmed directly from Teva's 180-day exclusivity period, which prevented Apotex from entering the market, and that the timing of this exclusivity period depended on the validity, enforceability, and infringement of the '663 patent, to which Apotex had stipulated.  Moreover, the Court held that the mere existence of Teva's 180-day exclusivity period did not raise a case or controversy under Article III because that period was expressly contained in the statute "as an incentive to challenge suspect Orange Book listed patents."  The statute expressly provides this period of exclusivity, which the Court said was "important to generic pharmaceutical companies as it promotes patent challenges by enabling a generic company a period to recover its investment in these challenges."  Thus, the Court rejected Apotex's first argument in support of jurisdiction because the 180-day exclusivity period was a legitimate part of the statutory scheme and the intent of Congress to "balance [the] two competing interests in the pharmaceutical industry: '(1) inducing pioneering research and development of new drugs and (2) enabling competitors to bring low-cost, generic copies of those drugs to market.'"

Apotex next argued that it was subject to indefinite delay in launching its product, because while Teva's exclusivity period could begin on June 29, 2008, Teva was not compelled to launch on that date; indeed, the parties stipulated that Teva had not launched as of the date of the oral hearing, July 7, 2008.  Looking at the timing of the events in the District Court below, the Federal Circuit said that on the date the District Court entered final judgment, November 2, 2007, Apotex's claim that Teva might unduly delay launching its product, and triggering its 180-day exclusivity period, past June 29, 2008, was too uncertain and speculative to support declaratory judgment jurisdiction.  The Court stated that this result was consistent with its Caraco decision, as well as Supreme Court precedent, including Medimmune, Inc. v. Genentech, Inc., which required that a dispute must be "definite and concrete" and "real and substantial" to support the exercise of a district court's subject matter jurisdiction.  Citing Prasco, LLC, the Federal Circuit said that Medimmune ""did not change the bedrock rule that a case or controversy must be based on a real and immediate injury . . . an objective standard that cannot be met by a purely subjective or speculative fear of future harm."

Finally, the Federal Circuit rejected Apotex's third argument on appeal, that the covenant not to sue did not protect the upstream suppliers or downstream customers.  The Court found the suppliers protected by the express language of the covenant, that Janssen would not sue Apotex for "manufacturing" or "having manufactured" infringing risperidone formulations; the term "having manufactured," in the Court's view, expressly encompassed "all suppliers and affiliates involved in the manufacturing process."  As for Apotex's customers, the Court found that the covenant contained language that "Janssen would not sue or otherwise seek to hold Apotex's customers and distributors liable."  Thus, the Court found that by its express terms the covenant not to sue protected not only Apotex but its suppliers and customers.

Janssen Pharmaceutica, N.V. v. Apotex, Inc. (Fed. Cir. 2008)
Panel: Chief Judge Michel and Circuit Judges Rader and Moore
Opinion by Circuit Judge Moore

Comments

[Josh]

Something is clearly amiss in this opinion. The distinction over Caraco makes absolutely no sense at all. The key mistake in this opinion is the following passage:

“Hence, if Caraco was successful, Ivax would get its 180-day exclusivity period sooner and Caraco would be able to obtain FDA approval earlier—resulting in greater competition at an earlier time. Without a declaratory judgment, Caraco could be excluded from selling a noninfringing product even if the asserted patent was proven to be invalid. See id. at 1287, 1296 n.14. Therefore, Caraco could have been blocked from entering the market by an invalid patent.”

The phrase “if Caraco was successful” assumingly means that both patents are invalidated. Ivax gets its 180 days because it can now launch as the first patent was invalidated. Ivax was blocked from selling because it lost on the first patent, but now that the first patent is out of the way it gets 180 days based on its successful maintenance of P-IV for the second patent (Ivax wasn’t sued on the second).

But then the court says “Without a declaratory judgment, Caraco could be excluded from selling a noninfringing product even if the asserted patent was proven to be invalid.” This makes no sense. If Caraco invalidates the first patent, then Ivax can launch and it gets 180 days, and immediately afterwards Caraco can launch.

Of course, the only difference is that in the second scenario Ivax can delay entry and thus deny Caraco entry for an indefinite period. But isn’t that the same as in this case. Ultimately, the objective in both cases is to trigger the exclusivity period for the second patent. So what’s the difference?

[Kevin E. Noonan]

Dear Josh:

I think the problem is in the "proven to be invalid" language. In order for the opinion to make sense, the court must have meant something like "even if the patent was in fact invalid," which would also make sense of the language a few sentences later to the effect of Caraco being precluded from entering the market by an invalid patent.

This interpretation is consistent with the distinction the court seems to be making - that the '663 patent was not invalid, because Apotex had stipulated to the earlier judgment of validity and enforceability.

Or at least that's how I read it. Feel free to let me know if you can find a flaw in this interpretation; I admit this isn't the most clearly-written opinion.

Thanks for the comment.

[Josh]

"the proven to be valid" relates to the "asserted patent" not the second patent that they did not assert for which Caraco wanted a DJ.

My point is. If Caraco successfully invalidated the "asserted patent", then they would no longer be blocked entry by that patent, rather they would be blocked entry by Ivax's 180 days. Ivax could of course delay the 180 days by delaying marketing - and that's prceisely the reason Caraco brought the DJ - to trigger the 180 days by "court judgment".

So there really is no difference in the "injury" in Caraco and the injury in this case. In both cases the second filer wanted to trigger the 180 days by "court judgment".

I think the Caraco case was wrongly decided (see J Freidman's dissent), but this opinion doesn't reconcile.

Judge Moore is a newbie. But what about Michel and Rader? They are well respected.

[Sean]

I don't mean to sound nit-picky at all, but I think you overlooked an important fact that creates a major distinction in one of the cases you cite: the Prasco case was NOT an ANDA/Orange Book case.

For the DJ plaintiff to try to have the court exercise jurisdiction there was a real stretch beyond the limits of the "case or controversy" requirement. Basically the patentee had marked its product and had not responded to a demand for a covenant not to sue, and that's pretty much it.

The rest of the cases, including Carasco, have an Orange-Book/ANDA tie. An argument could be made that the listing of patents and the filing of an ANDA is sufficient to create DJ jurisdiction, especially in light of Congress' provision for DJ jurisdiction to the extent allowed by the Constitution.

The Prasco case simply didn't have the Orange Book/ANDA angle, and accordingly it was really a slam dunk for the patentee.

[Kevin E. Noonan]

Dear Sean:

Nice catch. Prasco was inadvertently put into the wrong list of cases (it was originally in a list of Article III cases that was deleted in editing, and we incorrectly included it in the ANDA list).

We appreciate the correction.

[Kevin E. Noonan]

Dear Josh:

According to the court, Apotex needed to prevail against both of the non-asserted, Orange Book-listed patents in order to trigger Teva's 180-day exclusivity period. So I don't think the distinction you draw about asserted and non-asserted patents in Caraco is the one the court was considering. The relevant passage from the Caraco case is as follows:

"Only by obtaining a judgment of noninfringement on BOTH the '712 and '941 patents can Caraco trigger Ivax's 180-day exclusivity period, which currently prevents the FDA from approving Caraco's ANDA." (emphasis added)

I think the point is that here, the court judgment would NOT have permitted Teva to market, due to the Paragraph III Certification on the '663 patent. This, coupled with the fact that Apotex had stipulated that the '663 patent was not invalid or unenforceable and infringed, may be the distinction the court was trying to reach. Sometimes the court thinks there is an equity (like Apotex trying to burn Teva's 180 days with a judgment) and crafts an opinion directed to that goal. Maybe this is such a case.

Thanks for the comment.

[Josh]

Kevin,

I read your response, but I couldn't make sense of what you're trying to say about "both" needed for triggering the 180 days. That's true and undisputed and in my previous comments I didn't write any different.

The point is like this:
1. Caraco was required to kill only the first (asserted) patent in order for Ivax to be able to start marketing (after which Caraco could start.
2. Caraco was required to kill BOTH patents in order to trigger Ivax's 180 days.
3. Thus the reason for Caraco seeking a DJ on the second patent was because they wanted to trigger the 180 days, so that Ivax won't delay market entry.

But isn't that precisely the same reason Apotex is bringing the DJ against Janssen, i.e. in order to trigger Teva's 180 days? So where's the difference?

Finally, your point about "burning" Teva's 180 days is entirely unclear. If you mean that Teva's 180 days would be burned to the extent it's triggered before the expiry of the '663 - well here the court denied DJ even after the '663 expiry AND also in the Caraco case there was surely a chance that only the second patent would be struck and not the first - whereby Ivax's 180 days would be burned.

There can be differences of opinions, but an "opinion" needs to make sense. This opinion doesn't.

[Kevin E. Noonan]

Dear Josh:

They don't make it easy, do they?

Turning to your comment, you say that Caraco needed to invalidate only the asserted patent for Ivax to begin marketing, and then you say they needed to invalidate both to trigger Ivax's 180-day exclusivity. But if Ivax could begin marketing if only one (the asserted) patent was invalidated, wouldn't marketing start the 180-day period for Ivax? So then was the Caraco court incorrect when it said:

"Only by obtaining a judgment of noninfringement on BOTH the '712 and '941 patents can Caraco trigger Ivax's 180-day exclusivity period, which currently prevents the FDA from approving Caraco's ANDA."

What am I missing?

[Josh]

1. If the first patent is invalidated Ivax can be begin marketing anytime they want - They can delay market entry (despite being granted market entry) and they wouldn't forfeit the 180 days. Only when they begin marketing would the 180 days start to run. Thus Caraco would be subject to Ivax's discretion as to when the 180 would start running.

2. On the other hand, if BOTH patents were invalidated then the 180 days would start running immediately upon court judgement.

Thus, Caraco wanted BOTH patents struck, because they didn't want the start of the 180 days to depend upon Ivax's willingness to begin marketing.

Bottom line, the DJ on the second patent was to trigger Ivax's 180 days. There is no distinction over this case.

[I have a gut feeling that Moore lacks familiarity with the intricate structe of the H-W act. The lack of clarity in this opinion attests to that]

[Kevin E. Noonan]

Dear Josh:

Sometimes I think Judge Moore isn't alone.

Maybe this panel agrees with Judge Friedman who dissented in Caraco that the case was wrongly decided. This opinion could be a way for Judges Michel and Rader to set up a conflict in CAFC jurisprudence that would justify en banc review, either in this case or a future one. In which case, having Judge Moore write the opinion is pretty clever.

Thanks for the comment string. It made the piece better.

[EG]

Kevin,

DJs after MedImmune, and Hatch-Waxman patent issues relating to the filing ANDAs, are each headache enough. The combination of the two, as in Janssen and Caraco, requires an Extra Stength dose of Excedrin. The conclusion in the Janssen cases seems right to me, even in view of Caraco. As I read Janssen, basically Apotex shot itself in the foot by stipulating to the validity, infringement and enforceability of the '633 patent. So even if Apotex was able to clear the other 2 patents (the '425 and '587 patents) out its way, they still wouldn't be able to move forward on their generic product launch because the '663 patent was still in the way, and no longer challengeable by Apotex because of their stipulation. Did I get it right?

[Kevin E. Noonan]

Dear EG:

I think Apotex did shoot themselves in the foot, but Josh's point (which is persuasive to me) is that if Caraco should be able to leap the jurisdictional hurdle (i.e., NOT on the merits) then Apotex should as well. I think the equities are different (in Caraco the panel seemed concerned about generic market entry delay by an invalid patent versus the apparent duplicity of Apotex stipulating to the validity of the '663 patent and then trying to trigger Teva's 180 days before the '663 patent expired).

The only counter I can think of is that here there was no remedy for Apotex even if they had invalidated the two unasserted patents. There was just a harm against Teva that would work to Apotex's advantage.

But the case isn't a paragon of judicial clarity.

Thanks for the comment.