Caraco Pharmaceutical Lab. v. Forest Laboratories

• Citation: 527 F.3d 1278
• Decision Date: 01 April 2008
• Docket Number: No. 2007-1404.,2007-1404.
• Parties: CARACO PHARMACEUTICAL LABORATORIES, LTD., Plaintiff-Appellant, v. FOREST LABORATORIES, INC., Forest Laboratories Holdings, Ltd., and H. Lundbeck A/S, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

527 F.3d 1278

CARACO PHARMACEUTICAL LABORATORIES, LTD., Plaintiff-Appellant, v. FOREST LABORATORIES, INC., Forest Laboratories Holdings, Ltd., and H. Lundbeck A/S, Defendants-Appellees.

No. 2007-1404.

United States Court of Appeals, Federal Circuit.

April 1, 2008.

James F. Hurst, Winston & Strawn, LLP, of Chicago, IL, argued for plaintiff-appellant. With him on the brief were Derek J. Sarafa and Samuel S. Park. Of counsel on the brief were Steffen N. Johnson and Luke W. Goodrich, of Washington, DC.

Gerald J. Flattmann, Jr., Kirkland & Ellis LLP, of New York, NY, argued for defendants-appellees. With him on the brief were John M. Desmarais, Christine Willgoos, and Benjamin A. Lasky. Of counsel was Peter J. Armenio.

Before GAJARSA, Circuit Judge, FRIEDMAN, Senior Circuit Judge, and PROST, Circuit Judge.

Opinion for the court filed by Circuit Judge GAJARSA. Dissenting opinion filed by Circuit Judge FRIEDMAN.

GAJARSA, Circuit Judge.

This is an action brought under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, and the provision of the Hatch-Waxman Act establishing civil actions for patent certainty, 21 U.S.C. § 355(j)(5)(C). Plaintiff-Appellant Caraco Pharmaceutical Laboratories, Ltd. ("Caraco") appeals a decision of the United States District Court for the Eastern District of Michigan dismissing its declaratory judgment action for noninfringement against Defendants-Appellees Forest Laboratories, Inc., et al., ("Forest"). Caraco's action was dismissed for lack of Article III jurisdiction on the grounds that it had been rendered moot when Forest unilaterally granted Caraco a covenant not to sue for infringement of the patent-in-suit, U.S. Patent No. 6,916,941. However, in the context of the Hatch-Waxman framework, Forest's covenant not to sue did not eliminate the controversy between the parties. Accordingly, we hold that Caraco's declaratory judgment action presents a continuing Article III controversy, and reverse and remand for further proceedings.

I. BACKGROUND

This case arises under the Hatch-Waxman Act,¹ which governs the Food and Drug Administration's ("FDA") approval of new and generic drugs. The goal of the Act is to "[strike] a balance between two competing policy interests: (1) inducing pioneering research and development of new drugs and (2) enabling competitors to bring low-cost, generic copies of those drugs to market." Andrx Pharms., Inc. v. Biovail Corp., 276 F.3d 1368, 1371 (Fed. Cir.2002). The following five aspects of the Hatch-Waxman framework are relevant to this case.

First, a pioneering drug company must obtain FDA approval for its drug by submitting a New Drug Application ("NDA"). See 21 U.S.C. § 355(a), (b). As part of the NDA process, the drug company must inform the FDA of all patents covering its drug or the methods of using the drug, "with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug." See 21 U.S.C. § 355(b)(1), (c)(2). The FDA lists all such patents in a publication titled the "Approved Drug Products With Therapeutic Equivalence Evaluations." This publication is commonly known as the "Orange Book." Drugs approved by the FDA are known as "listed drugs." See 21 U.S.C. § 355(j)(2)(A)(i).

Second, to facilitate the development of generic versions of listed drugs, the Hatch-Waxman Act provides an Abbreviated New Drug Application ("ANDA") process for generic drug manufacturers. See 21 U.S.C. § 355(j). The ANDA process streamlines FDA approval of generic drugs by allowing applicants to rely on the results of the safety and efficacy studies that supported the FDA's approval of a listed drug. See id.; Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 676, 110 S.Ct. 2683, 110 L.Ed.2d 605 (1990). Under the ANDA process, a generic drug company must submit information to show, inter alia, that its generic drug and the relevant listed drug share the same active ingredients and are bioequivalent. 21 U.S.C. § 355(j)(2)(A)(ii), (iv). In addition, generic drug companies must submit one of four certifications addressing each Orange-Book-listed patent covering the listed drug. Specifically, the ANDA filer must certify—

(I) that [the required] patent information has not been filed [with the FDA],

(II) that such patent has expired (III) of the date on which such patent will expire, or

(IV) that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.

21 U.S.C. § 355(j)(2)(A)(vii). If a generic drug company seeks to market a generic version of a listed drug before the expiration of Orange-Book-listed patents covering that drug, it must file a certification under 21 U.S.C. § 355(j)(2)(A)(vii)(IV), i.e. a "Paragraph IV certification." See Eli Lilly, 496 U.S. at 677, 110 S.Ct. 2683. All Paragraph IV ANDA filers must provide notice of their Paragraph IV certification to both the patent owner and the NDA holder. 21 U.S.C. § 355(j)(2)(B). This notice must set forth a "detailed statement of the factual and legal basis for the opinion of the applicant that the patent is invalid or will not be infringed." 21 U.S.C. § 355(j)(2)(B)(iv)(II).

Third, the Hatch-Waxman Act facilitates the early resolution of patent disputes between generic and pioneering drug companies by providing that the mere act of filing a Paragraph IV ANDA constitutes an act of patent infringement. 35 U.S.C. § 271(e)(2); Eli Lilly, 496 U.S. at 678, 110 S.Ct. 2683. The Act states that "it shall be an act of infringement" to submit an ANDA "if the purpose of such submission is to obtain approval . . . to engage in the commercial manufacture, use, or sale of a drug . . . claimed in a patent or the use of which is claimed in a patent before the expiration of such patent." 35 U.S.C. § 271(e)(2). As this court has explained, "§ 271(e)(2) is designed to create an artificial act of infringement for purposes of establishing jurisdiction in the federal courts." Glaxo Group Ltd. v. Apotex, Inc., 376 F.3d 1339, 1351 (Fed.Cir. 2004) (emphasis in original); see also Eli Lilly, 496 U.S. at 678, 110 S.Ct. 2683 ("Quite obviously, the purpose of subsection[ ](e)(2) . . . is to enable the judicial adjudication upon which the ANDA . . . scheme[ ] depend[s].")

Fourth, to incentivize ANDA filers to challenge the validity of listed patents or design around those patents as early as possible, the Hatch-Waxman Act provides that the first ANDA applicant to file a Paragraph IV certification ("first Paragraph IV ANDA filer") shall enjoy a 180-day period of generic marketing exclusivity. See 21 U.S.C. § 355(j)(5)(B)(iv). Until the first Paragraph IV ANDA filer's exclusivity period expires, the FDA may not approve a later-filed Paragraph IV ANDA based on the same NDA (hereinafter a "subsequent Paragraph IV ANDA"). Id. Importantly, the first Paragraph IV ANDA filer is entitled to the 180-day exclusivity period whether or not it establishes that the NDA holder's Orange-Book-listed patents are invalid or not infringed by the drug described in its ANDA; all that is required is that the first Paragraph IV ANDA filer submit a substantially complete ANDA that contains a Paragraph IV certification. 21 U.S.C. § 355(j)(5)(B)(iv)(II)(bb).

The Hatch-Waxman Act provides that the 180-day period of exclusivity begins either on the date that the first Paragraph IV ANDA filer begins marketing its generic drug, or on the date of a final court decision finding the relevant Orange-Book-listed patents invalid or not infringed, whichever comes first. See 21 U.S.C. § 355(j)(5)(B)(iv) (2000)²; see also Teva Pharms. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1328 (Fed.Cir.2005) ("Pfizer"). In other words, the applicable statutory provisions provide for two methods of triggering the first Paragraph IV ANDA filer's 180-day exclusivity period: (1) a commercial-marketing trigger pursuant to 21 U.S.C. § 355(j)(5)(B)(iv)(I) (2000) and (2) a court-judgment trigger pursuant to 21 U.S.C. § 355(j)(5)(B)(iv)(II) (2000). Only the first Paragraph IV ANDA filer can trigger its 180-day exclusivity period via the commercial-marketing trigger. See 21 U.S.C. § 355(j)(5)(B)(iv)(I). However, subsequent Paragraph IV ANDA filers can trigger the first Paragraph IV ANDA filer's 180-day exclusivity period via the court-judgment trigger. Minn. Mining & Mfg. Co. v. Barr Labs., Inc., 289 F.3d 775, 780 (Fed.Cir.2002) ("3M") (holding that the first Paragraph IV ANDA filer's 180-day exclusivity period can be triggered by a court judgment obtained by a subsequent Paragraph IV ANDA filer).

Since the FDA cannot approve subsequent Paragraph IV ANDAs until the first Paragraph IV ANDA filer's 180-day exclusivity period expires, the date on which the exclusivity period is triggered is critical to NDA holders and subsequent Paragraph IV ANDA filers. On the one hand, subsequent Paragraph IV ANDA filers have a strong incentive to generate a triggering event allowing the FDA to approve their subsequent Paragraph IV ANDAs 181 days after the triggering event. On the other hand, NDA holders have a strong incentive to prevent a triggering event, because subsequent Paragraph IV ANDAs cannot be approved until the exclusivity period expires. Moreover, because subsequent Paragraph IV ANDA filers can only activate the first Paragraph IV ANDA filer's 180-day exclusivity period through the court-judgment trigger, subsequent Paragraph IV ANDA filers have a strong incentive to challenge the NDA holder's Orange-Book-listed patents in court. Conversely, NDA holders have a strong incentive to avoid litigation that would trigger the first Paragraph IV ANDA filer's exclusivity period and allow the FDA to approve subsequent Paragraph IV ANDAs 181 days after the triggering event.

For example, if a first Paragraph IV ANDA filer is found liable in a § 271(e)(2) infringement action or simply fails to market its generic drug, then it...