Teva Pharmaceuticals Usa, Inc. v. Pfizer Inc.

405 F.3d 990, 74 U.S.P.Q. 2d (BNA) 1296, 2005 U.S. App. LEXIS 5318, 2005 WL 834618

Opinions

ORDER

A combined petition for panel rehearing and rehearing en banc was filed by the Appellant, and a response thereto was invited by the court and filed by the Appel-lee.¹ The petition for rehearing was referred first to the merits panel that heard the appeal. Thereafter, the petition for rehearing en banc, response, and the amici curiae briefs were referred to the circuit judges who are authorized to request a poll whether to rehear the appeal en banc. A poll was requested, taken, and failed.

Upon consideration thereof,

IT IS ORDERED THAT:

(1) The petition for panel rehearing is denied.

(2) The petition for rehearing en banc is denied.

(3) The mandate of the court will issue on April 11, 2005.

MAYER, GAJARSA, and DYK, Circuit Judges, would rehear the appeal en banc.

GAJARSA, Circuit Judge, with whom DYK, Circuit Judge, joins, dissents in a separate opinion.

DYK, Circuit Judge, with whom GAJARSA, Circuit Judge, joins, dissents in a separate opinion.

GAJARSA, Circuit Judge, with whom DYK, Circuit Judge, joins,, dissenting from the order declining rehearing en banc.

The Court has denied the petition to review this case en banc. I must respectfully dissent from that denial. This is a critical issue under the Hateh-Waxman Act.¹ The failure of this court by en banc action to correct the Teva court’s decision, 395 F.3d 1324 (Fed.Cir.2005), allows the statutory procedures to be manipulated by the patent holders to the clear and foreseeable detriment of the generic drug industry.

The Teva court’s reasonable apprehension analysis is the wrong test for a concrete, actual, or imminent injury in fact when considering the problem of a generic with a second-filed ANDA certification.² Article III does not compel it, and the Supreme Court has rejected the doctrinal rigidity that Teva introduces. Our cases recognize reasonable apprehension, in the typical patent infringement case, as but a pragmatic attempt to give operational guidance against which patentees can structure their conduct, and control their litigation costs, in a fact-specific area of law. The ANDA facts correspond to the typical infringement case in name only, and it is this court’s constitutional duty to look at those facts in their proper context. The Teva court’s misguided Article III analysis further thwarts Congress’s clear intent to foster, through the detailed provisions of Hateh-Waxman, greater competition in generic pharmaceuticals.

I.

The question is whether Teva has shown a justiciable case or controversy within Article III. Congress unambiguously swept aside any additional limitation on jurisdiction potentially introduced by the Declaratory Judgment Act, 28 U.S.C. § 2201.

[T]he courts of the United States shall, to the extent consistent with the Constitution, have subject matter jurisdiction in any action brought by such person under section 2201 of title 28 for a declaratory judgment that such patent is invalid or not infringed.

35 U.S.C.A. § 271(e)(5) (West Supp.2004), as added by Pub. L. 108-173, 117 Stat. 2457 (Dec. 8, 2003). The law is clear that this justiciability issue has three elements: (1) a concrete, actual or imminent injury in fact; (2) fairly traceable causation between the injury and defendant’s conduct; and (3) redressability. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 103-04, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998); Valley Forge Christian Coll. v. Ams. United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). Only the concrete injury in fact is disputed.

The cases treat the controversy requirements of Article III and § 2201 together and their approach is instructive here. Jurisdiction under § 2201 can be no broader than jurisdiction under Article III, yet the cases show that § 2201 is very broad indeed. Article III is no narrower. See Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240, 57 S.Ct. 461, 81 L.Ed. 617 (1937) (§ 2201 “has regard to the constitutional provision and is operative only in respect to controversies which are such in the constitutional sense[.]”). As the Supreme Court recognizes, the § 2201 controversy requirement is highly fact specific.

The difference between an abstract question and a “controversy” contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy. Basically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941). The Supreme Court,³ this court,⁴ and our sister circuits⁵ consistently apply this holding by looking to all the circumstances surrounding a controversy.

A.

The Teva majority opinion does not, and its reasons for failing to do so are not convincing. In far more difficult factual contexts the courts have nonetheless found “a concrete, actual or imminent injury in fact” satisfying Article III. In Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978), for example, the appellees challenged the constitutionality of the Price-Anderson Act. By that Act, Congress limited the aggregate tort liability of nuclear power plant operators for a single nuclear “incident.” The appellant was a utility that was constructing nuclear power plants. The appellees, including persons “who live within close proximity of the planned facilities,” challenged the statute under the Fifth Amendment. Id. at 67, 98 S.Ct. 2620 (emphasis added). Their theory was that “in the event of a nuclear accident their property would he ‘taken’ without any assurance of just compensation.” Id. at 69, 98 S.Ct. 2620 (emphasis added). The court concluded that this theory stated a justiciable Article III controversy. See id. at 81, 98 S.Ct. 2620 (“[A]ppellees will sustain immediate injury from the operation of the disputed power plants.”).

The breadth of Article III standing in environmental cases sharply contrasts with the Teva court’s narrow construction in this ANDA context. The Supreme Court has held that a concrete injury in fact, for Article III, is shown where a non-profit’s members allege that a polluter’s discharges, “and the affiant members’ reasonable concerns about the effects of those discharges, directly affected those affiants’ recreational, aesthetic, and economic interests.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 183-84, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (emphasis added). The Court expressly ruled that conditional statements— that members would use a river for recreation if Laidlaw stopped discharging pollutants into it — sufficed to show concrete injury in fact under Article III. Id. at 184, 120 S.Ct. 693. Teva’s injury in this case, by comparison, is far more immediate.

The facts showing Teva’s “concrete, actual or imminent injury” are far easier to identify. Ivax filed the first ANDA on the active ingredient for Zoloft; Teva filed a subsequent or second ANDA. Teva certified that its proposed formulation would not infringe Pfizer’s U.S. Patent No. 5,248,699, or that the patent was invalid. Pfizer had 45 days to sue Teva for this patent infringement, 35 U.S.C. § 271(e)(2)(A), and did not. Although Pfizer had sued Ivax, they settled out of court. Pfizer granted Ivax a royalty bearing license for the ’699 patent, preserved Ivax’s 180 day statutory exclusivity, and designed a comfortable duopoly set to begin on June 30, 2006 and potentially last 180 days past the ’699 patent expiration in 2010. The FDA therefore could not approve Teva’s generic drug until 180 days after Ivax’s exclusivity expired — when either the ’699 patent expired or was invalidated — and without FDA approval Teva could not market its product.

By settling with Ivax, Pfizer leveraged the Hatch-Waxman exclusivity to insulate the ’699 patent from any validity challenge. Pfizer also insulated itself from any judicial determination of the-metes and bounds of its ’699 patent claim scope in relation to a design-around, a determination central to the proper function of our patent system. Because of this insular effect, Pfizer effectively extended — ás against all but Ivax — the term of its underlying U.S. Patent No. 4,356,518, which expires on June 30, 2006, to, coincide with the ’699 patent’s later expiration in 2010.⁶

This ties up Teva’s investment in its proposed generic until at least 2010, precludes it from testing a potentially weak patent, precludes it from triggering the statutory exclusivity period with a successful validity challenge, and precludes it from introducing an effective design-around, as is its right and as the patent law encourages. The live controversy is found on the face of this bottleneck under the statute.⁷ Any of this. defines a concrete, actual or imminent injury in fact within the meaning of Article III, and on that basis Teva states a justiciable controversy under § 2201.

B.

None of these problems can be found in the typical patent infringement context, in which this court has regularly tested immediate injury in fact by the reasonable apprehension test. Consistent with Maryland Casualty, this court has never held that Article III required that analysis. Quite to the contrary, this court has repeatedly observed that reasonable apprehension was simply a functional approach to typical patent infringement problems under § 2201. See EMC Corp. v. Norand Corp., 89 F.3d 807, 810 (Fed.Cir.1996) (quoting Md. Cas.); BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed.Cir.1993) (“There is no simple rule that addresses all shades of relationships between disputants.”); Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735-36 (Fed.Cir.1988) (observing “there is no specific, all-purpose test” for an actual controversy). The purpose of the reasonable apprehension analysis “is to determine whether the need for judicial attention is real and immediate.” BP Chems., 4 F.3d at 978. The Teva court ignores this precedent and reads general infringement policy considerations into Article III, where they do not belong.

The contextual differences between the second ANDA filer and the typical patent infringement case make the reasonable apprehension test inappropriate for this action. By guiding the patentee’s conduct in the typical case, the reasonable apprehension analysis allows the patentee to avoid litigation. Identifying a justiciable controversy in terms of a threat of infringement litigation, the doctrine establishes the circumstances in which the uncertainty of legal rights materially harm a potential infringer in the marketplace. The injury facing Teva in this case is different in kind, but no less actionable.

Teva’s injury does not depend on threats from the incumbent. In view of the statute, the injury exists independent of any threat, and the policy motivation for applying the reasonable apprehension test is completely lacking. There is no sense in the court demanding the incumbent to brandish the threat of infringement actions, even beyond the act of listing a patent in the Orange Book, given a statutory system that encourages the incumbent to do everything possible to prevent its patents from being put in play. No incumbent will ever make the threat, if it can simply ride out the term in the listed patent.⁸ From first principles, a fact specific analysis shows that the reasonable apprehension test is not designed for this case.

II.

The language of § 271(e)(5) grants Article III jurisdiction to the maximum extent possible. The statute provides that the courts shall have subject matter jurisdiction. The majority’s analysis in Teva of the legislative history to the 2003 Act⁹ seems addressed to this point, but its reasoning is unconvincing.

The statute specifically provides that the courts “shall, to the extent consistent with the Constitution, have subject matter jurisdiction in any action.” The court, therefore, has a Congressional directive to refrain from applying any jurisdictional limitation crafted by the courts or found in § 2201. The Teva court overlooks this basic point.

The Teva court further focuses on the language originally introduced for § 271(e)(5), which provided that an incumbent’s failure to sue within 45 days “shall establish an actual controversy between the applicant and the patent owner.” Teva, 395 F.3d at 1336. In conference the language was changed to a provision that the courts “shall, to the extent consistent with the Constitution, have subject matter jurisdiction” over these actions. Id. The court concludes that § 271(e)(5) was “not meant to automatically bestow district court jurisdiction over actions such as Teva’s.” Id. This conclusion is contrary to the plain language of § 271(e)(5). The change in language bestowed full Article III jurisdiction and simply recognizes the court’s role in declaring when the judicial powers under Article III extend to this action. It does not bear on the proper scope of Article III.

The Teva court also focuses on a Committee Report accompanying the modified 2003 Act. The language in the Report cannot contradict the plain language of § 271(e)(5). A legislative enactment cannot limit the judicial power under Article III, and, a fortiori, language in a Committee Report that misstates our Article III jurisprudence cannot bind this court.

Ultimately, the .idea that § 271(e)(5) suggests a limitation on standing is misplaced, given the plain language of Hatch-Waxman. The statute provides an express mechanism for generics to challenge, with declaratory actions, the claim scope or validity of listed patents. Under this statutory scheme, it is court,challenges by generic drug companies that limit incumbent overreaching by submitting over-inclusive lists of patents applicable to any given branded formulation. Congress’s intent to foster early generic market entry precludes any real argument for any limitation. Certainly under the circumstances of this case, Teva’s declaratory action is the ideal method to police Pfizer’s strategic manipulation of the Hatch-Waxman exclusivity provisions. Delayed resolution of the bottleneck facing Teva serves no purpose, as by then the patents at issue will have expired. There is no basis for precluding this suit on Article III grounds.

III.

The Teva court’s Article III • analysis distorts longstanding Supreme Court jurisprudence and misapplies the decisions of this court. Teva has presented a justicia-ble controversy, and the courts should decide it. Worst of all, the Teva court’s Article III analysis forestalls legislative correction. The court should have corrected this error en banc. I respectfully dissent from the refusal to do so.

1 . Amicus curiae briefs were filed by:

1-The Federal Trade Commission.

2-The Generic Pharmaceutical Association.

3-Ivax Pharmaceuticals, Inc.

4-United States Senators Edward M. Kennedy, John S. McCain, and Charles E. Schumer.

1 . The Patent Laws and Drug Price Competition and Patent Term Restoration Act of 1984, Pub.L. No. 98-417, 98 Stat. 1585 (codified at 21 U.S.C. §§ 355, 360(cc) (2000), 35 U.S.C. §§ 156, 271 and 282 (2000)), as amended by Title XI of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (codified as amended at 21 U.S.C.A. § 355(j)(5)(C)(i) (West Supp.2004) and 35 U.S.C.A. § 271(e)(5) (West Supp.2004)).

2 . The overall scheme of the Hateh-Waxman Act is described in detail in our decisions in Mylan Pharms., Inc. v. Thompson, 268 F.3d 1323 (Fed.Cir.2001) and Andrx Pharms., Inc. v. Biovail Corp., 276 F.3d 1368 (Fed.Cir.2002).

3 . See Steel Co., 523 U.S. at 103-04, 118 S.Ct. 1003; Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 81, 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978) (finding actual case and controversy where plaintiffs would sustain injury from operation of planned nuclear power plant, and injury was redressable by constitutionality challenge to Price-Anderson Act).

4 . See EMC Corp. v. Norand Corp., 89 F.3d 807, 810 (Fed.Cir.1996) (quoting Md. Cas.); BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed.Cir.1993) ("There is no simple rule that addresses all shades of relationships between disputants."); Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735-36 (Fed.Cir.1988) (observing "there is no specific, all-purpose test” for an actual controversy).

5 .See, e.g., Riva v. Mass., 61 F.3d 1003, 1009-10 (1st Cir.1995); Kidder, Peabody & Co., Inc. v. Maxus Energy Corp., 925 F.2d 556, 562-63 (2d Cir.1991); Oneida Tribe of Indians of Wis. v. State of Wis., 951 F.2d 757, 760 (7th Cir.1991).

6 . That is, the '518 patent claims the active ingredient in Zoloft. The '699 patent is an improvement. A generic, like Teva, that could design around the '699 but not the '518- — or that thought it had found invalidating art for the .'699 patent — would need a license to the '518 patent to enter the market, or face an infringement action. Once the '518 patent expired, Teva could confidently enter the market with a compound that did not infringe the '699 patent. But because of the Hatch-Waxman exclusivity, Pfizer insulated the '699 patent from any test in litigation. In practice this extends the '518 patent term until the ’699 patent expires.

7 . Cf. Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1073 n. 18 (D.C.Cir.1998) ("It is possible that such a statutorily-created bottleneck, coupled with the statute’s express reference to declaratory judgment actions as a means of relieving that bottleneck, might suffice to allow a plaintiff to show the existence of a 'case or controversy’ without demonstrating an immediate risk of being sued.”).

8 . See Minn. Mining and Mfg. Co. v. Barr Labs., Inc., 289 F.3d 775 (Fed.Cir.2002).

. Title XI of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (codified at 21 U.S.C.A. § 355(j)(5)(C)(i) (West Supp.2004) and 35 U.S.C.A. § 271(e)(5) (West Supp.2004)) [hereinafter “2003 Act”].