Federal Circuit No. 2014-1693

In this case Sandoz sought a declaratory judgment that U.S. Patents 8,063,182 (“the ’182 patent”) and 8,163,522 (“the ’522 patent”) (collectively “the patents in suit”), owned by Hoffman-LaRoche and exclusively licensed to Amgen, are invalid or not infringed by its proposed generic etanercept product.1 The patents in suit issued in late 2011 and early 2012, respectively.

In 2004 Sandoz began developing its own etanercept product. In 2010, about a year before the patents issued, Congress enacted the Biologics Price Competition and Innovation Act (BPCIA).2 After consultation with the FDA, Sandoz announced its plan to conduct Phase III trials for its proposed etanercept product. On the same day it announced the Phase III trials, Sandoz filed a declaratory judgment action seeking judgment that its etanercept product would not infringe any valid claims of the ‘182 and ‘522 patents. Sandoz had not filed an application for FDA approval to market an etanercept product at the time of filing the declaratory judgment action. The district court dismissed Sandoz’s complaint because there was no case or controversy, concluding that Sandoz could not obtain a declaratory judgment before filing an FDA biosimilarity application. The district court also observed that both Sandoz and Amgen were precluded from filing a lawsuit unless they had engaged in the patent exchanges required by the BPCIA, which neither had done.

The Federal Circuit affirmed the district court’s ruling, but made clear that its resolution of the case made it unnecessary to address the district court’s rationale under the BPCIA. Reviewing the district court’s decision de novo, The Federal Circuit held that in a declaratory judgment action the Court has subject matter jurisdiction only if there is sufficient “reality” and “immediacy.” The reality requirement is fulfilled when the number of contingencies that must be overcome for the DJ plaintiff to take an action exposing it to liability is sufficiently low. The immediacy requirement is fulfilled when the harm to the potential infringer at the time of the suit, in the absence of declaratory relief, is high and when the passage of time is not likely to change the nature of the suit or eliminate the controversy. The Federal Circuit agreed with Amgen that the existence of a future case or controversy on these facts is too speculative to fulfill the minimum requirements of Article III. The Court explained that it could not simply assume that the outcome of Sandoz’s Phase III trials would be favorable, that Sandoz’s proposed product would not change before the filing of an Application or before marketing, or that Sandoz would ever obtain approval for the product. Sandoz also had not shown that, in the absence of declaratory relief, it would suffer an immediate or substantial adverse impact because Sandoz could not market and sell the product at the time of the suit (June 24, 2013) anyway and the completion of Phase III trials was still two years away.

Although the Federal Circuit refused to adopt a categorical rule, this case shows that there is a high bar for generic pharmaceutical companies contemplating declaratory judgment actions prior to filing an application for FDA approval. Additionally, the Federal Circuit specifically pointed out that it did “not decide whether, once an application is filed under the BPCIA, that statute forecloses a declaratory-judgment action concerning whether the ultimate marketing of the application-defined product would infringe under 35 U.S.C. § 271(a).”