The U.S. Court of Appeals for the Federal Circuit vacated a district court decision regarding infringement and invalidity and held that the case no longer presented an Article III case or controversy upon which relief could be reasonably granted. Merck & Co. v. Apotex, Case No. 07-1362, (Fed. Cir., July 16, 2008) (Gajarsa, J.).

Apotex filed an Abbreviated New Drug Application (ANDA) for a generic version of Merck’s Fosomax® drug for treating osteoporosis. As part of the process for obtaining Food and Drug Administration (FDA) approval for Fosomax®, Merck listed 10 patents in the FDA’s Orange Book, including U.S. Patent No. 4,621,077, which covers alendronate sodium, the active ingredient. Six of the listed patents cover various formulations for the Fosomax® tablets, while the remaining three patents are directed to dosing schedules. For the ’077 patent, Apotex filed a Paragraph III certification stating that Apotex would not market its generic drug until six months after the expiration of the patent. For Merck’s nine other Orange-Book-listed patents for Fosomax®, Apotex filed a Paragraph IV certification stating that the patents were invalid or not infringed by Apotex’s generic drug. Merck then sued Apotex under the Hatch-Waxman Act for infringement of the nine Orange-Book-listed patents for which Apotex filed a Paragraph IV certification. Upon Merck’s filing of this infringement action, the FDA stayed approval of Apotex’s ANDA for 30 months as required by Act.

Following institution of Merck’s suit, the FDA stayed Apotex’s ANDA for 30 months as required by Hatch-Waxman, allowing Apotex an entry to the generic market on the drug no earlier than August 24, 2008. Following discovery, Merck granted Apotex a covenant not to sue on the patents-in-suit. Merck then moved to dismiss on the grounds that there was no longer a case or controversy between the parties. Apotex in response moved to amend its complaint to include a claim for Sherman Act violations. The district court granted Merck’s motion and denied Apotex’s motion. Apotex appealed.

Importantly, Apotex was not the first Paragraph IV ANDA filer with respect to Fosomax®. During pendency of the appeal, Teva Pharmaceuticals obtained FDA approval for its own version of generic Fosomax® and began marketing the drug on February 6, 2008. Because it had been the first generic company to file a paragraph IV ANDA on the generic version, Teva was entitled to a 180-day exclusivity period in marketing the drug. In its appeal, Apotex asserted that it suffered damages because in granting Merck’s motion, the court had precluded Apotex from entering the market on February 6, 2008, and it could only do so following Teva’s 180 days of regulatory exclusivity.

On appeal, the Federal Circuit concluded that the injury-in-fact alleged by Apotex, which was the delay in marketing generic Fosomax®, was “not fairly traceable” to Merck in view of the covenant not to sue. Relying heavily on its decision in Caraco, the panel noted that “depending on the circumstances, a justiciable Article III controversy may continue to exist between a patentee drug company and a Paragraph IV ANDA filer in the context of the Hatch-Waxman Act even after the patentee drug company has granted the Paragraph IV ANDA filer a covenant not to sue.” In this case, however, the Federal Circuit found two factual distinctions from Caraco. First, the FDA decided to treat the 30-month stay on Apotex’s ANDA as dissolved once the district court dismissed this case. Second, Teva, the first Paragraph IV filer, triggered its 180-day exclusivity period under the Act by marketing its generic drug on or about February 6, 2008. As a result, the Court concluded, Apotex no longer suffers a delay in entering the market under either the 30-month stay provision or the 180-day exclusivity provision that is traceable to Merck and redressible by a court judgment. The Federal Circuit also affirmed the district court’s denial of Apotex’s motion to amend its complaint to include its antitrust counterclaim. Applying regional (Third Circuit) law, the panel agreed with the district court that Apotex “failed to allege facts sufficient to support its antitrust counterclaim, and that Apotex’s antitrust allegations were ‘bald and conclusory.’”