Intellectual Property Law

In a decision that balances the provisions of the Hatch-Waxman Act with the ?case or controversy? mandate of the U.S. Constitution, the Federal Circuit recently opened the door a little wider for declaratory judgment actions brought by potential infringers ? at least as in matters relating to pharmaceutical products.  Specifically, the court held in Caraco Pharmaceutical Laboratories, Inc, Ltd. v. Forest Laboratories, Inc. (April 1, 2008) that the district court had erred in declining to exercise jurisdiction in a declaratory judgment action brought by an accused infringer of a pharmaceutical product on the ground that the patent owner had provided the potential infringer with a covenant not to sue.

Forest Laboratories had listed two patents related to the anti-depressant drug Lexapro in the FDA?s ?Orange Book.?  Under the scheme set forth in the Hatch-Waxman Act, a manufacturer of a generic version of that drug could market the generic only if (i) the listed patents expired or will expire by the date marketing would begin, (ii) Forest had not filed patent information on the drug, or (iii) the generic manufacturer certified that the patents are invalid, unenforceable or not infringed by the generic (known as a ?Paragraph IV certification?).  A second generic manufacturer can obtain approval to market its product by making a Paragraph IV certification, but Hatch-Waxman gives the first generic manufacturer to make a Paragraph IV certification a 180-day exclusivity period to market its generic version of the drug.  The second generic company can trigger the first challenger?s exclusivity period by only obtaining a court judgment that the Orange Book patent is invalid, unenforceable or not infringed.

Caraco was the second generic manufacturer to file a Paragraph IV certification as to the two Lexapro drugs listed by Forest.  Forest had sued the first manufacturer for infringing one of the two listed patents (the ?712 patent) and likewise filed suit against Caraco for infringing the ?712 patent.  However, because no suit was pending related to the other patent (the ?941 patent), no court decision regarding the validity of that patent was on the horizon.  Caraco therefore had no ability to trigger the first challenger?s 180-day exclusivity period and thus would not be able to obtain approval to market its generic product. 

In an attempt to prevent Caraco from raising invalidity via a declaratory judgment action, Forest gave Caraco a covenant not to sue on the ?941 patent.  Based on that covenant, the district court granted Forest?s motion to dismiss Caraco?s declaratory judgment case to invalidate the ?941 patent, finding there was no case or controversy in light of the covenant not to sue.

In a split decision, the Federal Circuit reversed.  The majority first noted that the Supreme Court in MedImmune Inc. v. Genentech Inc. (February 2007) and the Federal Circuit in SanDisk Corp. v. ST Microelectronics, Inc. (March 26, 2007) and Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp. (March 30, 2007) had broadened the test for determining whether a case or controversy existed beyond the ?reasonable apprehension of suit? test employed by the Federal Circuit for many years.  The court then held that, notwithstanding the covenant not to sue given by Forest, a case or controversy existed because Forest could prevent Caraco from entering the Lexapro market by listing the ?941 patent in the Orange Book and not filing suit on that patent.  The majority held that Caraco?s exclusion from the generic drug market by Forest?s actions was a sufficient Article III injury in fact.  The dissent by Judge Friedman argued that the majority?s decision rested on a premise ? Caraco?s inability to get to market ? that was highly speculative and conjectural.

Although the decision in the Caraco Pharmaceutical case is a product of the unique features of the Hatch-Waxman Act and thus impacts only the pharmaceutical industry, it further reflects a continuing trend toward expanding declaratory judgment cases.  Is this a good thing?  Has the trend led to the flood of new declaratory relief actions as some commentators expected?  Let us know what you think.

Today?s Bloggers:  Bob Sloss and Jeff Fisher