Intellectual Property Law

Covenant not to sue insufficient to defeat DJ jursidiction because of Hatch-Waxman issues

By McKee, Voorhees & Sease, P.L.C.

In a recent decision, the Federal Circuit addressed the issue of declaratory judgment jurisdiction in the context of the Hatch-Waxman Act. The court found that a unilateral covenant not to sue on a patent does not defeat declaratory judgment jurisdiction because there is still a "restraint on the free exploitation of non-infringing goods."

This case had a somewhat peculiar factual scenario:  the first generic company to file an ANDA, and therefore challenge a patent on a prescription drug, is rewarded with a 180-day exclusive marketing period after either (1) the patent is declared invalid or not infringed, or (2) the company begins marketing the drug (typically after the patent expires).  The FDA is prohibited from approving subsequent ANDAs until the exclusivity period ends.

Here, the first company to file was unsuccessful in getting a court to declare one of the two relevant patents (that expires in 2012) invalid or not infringed.  So, a subsequent ANDA filer attempted to trigger the first ANDA filer's exclusivity period by seeking to have the patents declared invalid or not infringed, so the subsequent filer could then begin marketing its generic before the patent expires.  In response, the patent holder granted the subsequent filer a covenant not to sue under the patent, attempting to prevent a judicial determination that might permit a generic from being introduced before the patent's expiration.  Based on the covenant not to sue, the district court dismissed the subsequent filer's declaratory judgment action as lacking a case or controversy under Article III.

The Federal Circuit reversed, finding that although the covenant not to sue removed any reasonable apprehension of suit, under the new "totality of the circumstances" test post-MedImmune, there was still a sufficient controversy to support Article III jurisdiction.  Essentially, the court saw that the patentee was trying to prevent any other drug company from getting a generic to market before 2012, which allowed a finding of a sufficient continuing case or controversy.  As a result, the court reversed the district court's holding that declaratory judgment jurisdiction and remanded the case for further proceedings.

More detail of Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc. after the jump.

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Full post as published by FileWrapper on April 21, 2008 (boomark / email).