AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. (Fed. Cir. 2018)

By Kevin E. Noonan --

Ever since the Supreme Court loosened the reins on declaratory judgment actions in patent cases twelve years ago, in MedImmune v. Genentech, courts have decided cases fleshing out the metes and bounds of the factual predicates thereof.  One of the most persistent questions is what is the extent to which a declaratory judgment plaintiff can base the action not on traditional grounds (such as those between competitors for a patented product) but rather on the effects of patents on consumers or beneficiaries of a patented compound; these questions have arisen with greatest vigor over patented drug products.  The public policy issues surrounding drug costs and regulation, and those of the proper interplay with patent law was considered by the Federal Circuit (and rejected) in AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. earlier this month.

The case arose when AIDS Healthcare Foundation (AHF) filed suit against defendants Gilead Sciences, Inc., Japan  Tobacco Inc., Johnson & Johnson, and Janssen Sciences Ireland UC over various drugs comprising the anti-HIV compound tenofovir alafenamide fumarate ("TAF") used in the treatment of AIDS.  Such drugs included TAF itself (sold as Genvoya®) as well as several embodiments comprising assorted other antiviral drugs (including Descovy® and Odefesey®).  Each defendant was either an owner of a patent relating to these drugs or licensee of such patents.  AHF provides healthcare to AIDS patients, including TAF-comprising drugs.  In filing its declaratory judgment action, AHF frankly stated that it was interested in "clear[ing] out the invalid patents" to enable generic drug companies to enter the marketplace as soon as possible; to that end AHF filed this action a mere two months after the FDA approved Genvoya® and thus almost four years before a generic competitor could file an Abbreviated New Drug Application.  AHF's justification for taking this preemptive strike so early was the "lengthy time consumed by litigating patent validity"; the opinion notes that it was "undisputed that no unlicensed source was offering a TAF product or preparing to do so when this declaratory action was filed."  AHF freely admitted that it was a consumer of AIDS treatment products and would not be involved in manufacturing any generic equivalents of any of the drugs protected by the patents-in-suit.

The District Court dismissed AFH's declaratory judgment complaint on these grounds, that "encouraging others to produce generic TAF products in the future, and Healthcare's interest in purchasing such products," did not satisfy the "case or controversy" requirements for declaratory judgment relief.  This appealed followed.

The Federal Circuit affirmed, in a precedential opinion by Judge Newman joined by Judges Dyk and Stoll.  The opinion notes at the outset the jurisdictional implications of AHF's complaint, and that a court is without authority to render a judgment unless the jurisdictional requirements are satisfied (which is complainant's burden to carry).  The facts comprising this burden are that there is "injury-in-fact, [a] connection between the challenged conduct and the injury, and redressability by the requested remedy," the Court citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103–04 (1998).  The mere existence of a patent is not enough, without more, to establish these grounds.

The panel rejected the three bases for jurisdiction asserted by AHF on appeal:

(1) Healthcare is an indirect infringer of the TAF patents based on its requests to potential producers to provide the patented products;

(2) Gilead's non-response to Healthcare's request for a covenant not to sue created a present controversy; and

(3) public policy favors invalidation of invalid patents and thus the testing of "weak" patents.

The facts adduced before the District Court did not establish that "under all the circumstances, []here is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment" as required under MedImmune Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)).  The alleged lengthy time incurred by patent litigation was not enough, according to the opinion, to provide the required "immediacy and reality" because there was no current infringement (or preparation for infringing activity) and thus no threat of patent infringement litigation.  "If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither 'immediate' nor 'real' and the requirements for justiciability have not been met," according to the opinion, citing  Cat Tech LLC v. Tubemaster, Inc., 528 F.3d 871, 880 (Fed. Cir. 2008).  And "the mere possibility of future infringement does not meet the immediacy and reality criteria, for '[a] party may not obtain a declaratory judgment merely because it would like an advisory opinion,'" citing Matthews Int'l Corp. v. Biosafe Eng'g, LLC, 695 F.3d 1322, 1328 (Fed. Cir. 2012).  Here, AHF was only an "encourager" of future infringing activity and a future consumer of any  product resulting therefrom, and this was not enough to satisfy the "immediacy and reality" requirement.  And the Federal Circuit notes the procedures constituting the Hatch-Waxman generic drug regime (including the filing of an ANDA) none of which had occurred.

Moreover, AHF alleged activities that at most would incur infringement liability for inducing infringement under 35 U.S.C. § 271(b).  However such liability depends on there being a direct infringer under § 271(a), and because of the lack of an ANDA filer or any party as a direct infringer, this basis also failed to establish declaratory judgment jurisdiction.  AHF had solicited third parties to produce a generic (and infringing) version of TAF-containing anti-AIDS drugs.  But no party had responded to AHF (they "elicited no response from the solicited pharmaceutical manufacturers") by taking steps to produce such infringing products, and under these circumstances AHF's supplications were not enough to establish declaratory judgment jurisdiction.  And AHF's role as a purchaser was also not enough, the opinion stating that "[s]uch an economic interest alone, however, cannot form the basis of an 'actual controversy' under the Declaratory Judgment Act," citing Creative Compounds, LLC v. Starmark Labs., 651 F.3d 1303, 1316 (Fed. Cir. 2011) (quoting Microchip Tech. Inc. v. Chamberlain Group, Inc., 441 F.3d 936, 943 (Fed. Cir. 2006)).  The Federal Circuit agreed with the District Court that "a potential customer's interest in buying infringing product does not create present liability for induced infringement," citing Arris Grp., Inc. v. British Telecomms. PLC, 639 F.3d 1368, 1374–75 (Fed. Cir. 2011).

Finally, the Federal Circuit rejected AHF's argument that it had established that its legal interests were adverse to any of the defendants or that this created an existing controversy.  Once again, the Court relied on its Arris precedent that an adverse economic interest was by itself insufficient to support declaratory judgment jurisdiction.

The panel also affirmed the District Court's holding that Defendants' refusal to grant AHF a covenant not to sue did not support declaratory judgment jurisdiction, even in light of Gilead's alleged known penchant for protecting its patent rights.  Citing BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 980 (Fed. Cir. 1993) and SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1380–81 (Fed. Cir. 2007), the panel held that this by itself (i.e., in the absence of any affirmative actions by Defendants) was not enough ("[D]eclaratory judgment jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee." (emphasis added)).  And the Court rejected out of hand the policy considerations, for access to generic drugs, as being properly within the scope of the Hatch-Waxman regulatory regime, which provides "a balance of several policy interests, seeking to preserve the patent incentive to invent new drugs, while enabling validity challenge by ANDA filers before actual infringement occurs," citing Andrx Pharm., Inc. v. Biovail Corp., 276 F.3d 1368, 1371 (Fed. Cir. 2002).

The entirety of the Federal Circuit's opinion reinforces the focus since MedImmune on the totality of the circumstances (rather than some bright line formula) as the proper measure of whether a declaratory judgment plaintiff has alleged sufficiently for a court to find declaratory judgment jurisdiction has been established.  Using this approach, while lacking the consistency of a bright line rule appears robust enough to prevent expansion of declaratory judgment jurisdiction into the realm of permitting public or patient interest groups interested in promoting their agendas onto the patent and regulatory frameworks for innovator and generic drugs, regardless of any purported societal benefits these groups may assert in support of their efforts.

AIDS Healthcare Foundation, Inc. v. Gilead Sciences, Inc. (Fed. Cir. 2018)
Panel: Circuit Judges Newman, Dyk, and Stoll
Opinion by Circuit Judge Newman

Comments

[Paul F. Morgan]

They could have used faster and (eventually) cheaper IPRs instead of a DJ action, unless they were hoping their DJ action would obtain a quick cheap license settlement. But if they did not win at the PTAB level they may well not have been able to appeal to the Fed. Cir for lack of Article III standing on similar facts?
Was the DJ complaint even adequate for current practice? i.e, did it specifically identify allegedly invalidating prior art [that others could use]?

[Skeptical]

Mr. Morgan,

Would an IPR path now be out of the question?

[Paul F. Morgan]

Anon, here is 35 USC 315 (a), and I leave it to you to say if it answers your question or not - I am not speculating if the situation here of a DJ attempt dismissed for lack of jurisdiction is really a perpetual IPR bar under this IPR statute or not:
(a) Infringer’s Civil Action-
(1) INTER PARTES REVIEW BARRED BY CIVIL ACTION- An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent."

[Kevin E. Noonan]

The complaint is here:
https://ecf.cand.uscourts.gov/doc1/035113813204
and alleges that the claims are invalid under Section 101, and in violation of Sections 1 and 2 of the Sherman Act. While there is a passing reference to Section 103 no art is cited. Which answers the question of why there was no IPR filed.

[Skeptical]

Mr. Morgan,

Here, I understand your reticence of providing an answer. It certainly appears to require providing a non-trivial legal opinion as to whether or not the failed attempt at DJ would count as "filed a civil action." Certainly, a civil action was filed and certainly that civil action was definitely challenging the validity of a claim of the patent.

The question apparently is that whether the mere act of filing is enough // whether a fatal filing "counts" as a filing or is somehow void ab initio.

Any brave souls out there with an informed opinion?

[skeptical]

Dr. Noonan,

Unfortunately, your link is not an open site and carries the following message:

This is a Restricted Web Site for Official Court Business only. Unauthorized entry is prohibited and subject to prosecution under Title 18 of the U.S. Code. All activities and access attempts are logged.

[Kevin E Noonan]

Sorry - thought it was open. You'll have to trust me (or I have to figure out how to link the complaint some other way).

[Lawrence Ebert]

As to the drug -- tenofovir alafenamide fumarate ("TAF")--, note that Truvada with --tenofovir disoproxil fumarate ("TDF") -- made the recent FDA list of Reference Listed Drug (RLD) Access Inquiries (with no REMS issue). The FDA approved generic Truvada in 2017, with Teva and Gilead making a deal. Some of the lawsuits involving Gilead and TAF are over issues other than patents. If, hypothetically, there were an obviousness issue it might be that TAF is obvious over TDF.