In Apotex Inc. v. Daiichi Sankyo, Inc., Nos. 14-1282, -1291 (Fed. Cir. Mar. 31, 2015), the Federal Circuit reversed the district court’s dismissal of Apotex, Inc.‘s (“Apotex”) complaint for DJ that Apotex will not infringe an Orange-Book-listed patent owned but disclaimed by Daiichi Sankyo, Inc. and Daiichi Sankyo Co., Ltd. (collectively “Daiichi”) if Apotex manufactures or sells a generic drug bioequivalent of Daiichi’s Benicar®. The Federal Circuit also reversed the district court’s denial of Mylan Pharmaceuticals, Inc.‘s (“Mylan”) motion to intervene.

Daiichi listed two patents in the Orange Book to cover Benicar®. The first, U.S. Patent No. 5,616,599 (“the ’599 patent”), covers the active ingredient of the drug, olmesartan medoxomil, and expires on April 25, 2016. Daiichi’s second listed patent, U.S. Patent No. 6,878,703 (“the ’703 patent”), covers methods of treatment and expires on November 19, 2021.

Mylan filed an ANDA in April 2006, certifying that both patents were invalid or would not be infringed by Mylan’s proposed drug. Thereafter, Daiichi disclaimed all claims of the ’703 patent and asked the FDA to remove the ‘703 patent from the Orange Book. The FDA did not remove the ‘703 patent from the Orange Book. Daiichi sued Mylan for infringing the ‘599 patent. The district court in that case upheld the validity of the ‘599 patent and entered judgment of infringement against Mylan. As such, Mylan’s earliest date of market entry is October 25, 2016, six months after the expiration date of the ’599 patent.

After the litigation was over, Apotex filed its own ANDA and two certifications under 21 U.S.C. § 355(j)(2)(A)(vii): (1) a Paragraph III certification accepting the result of the prior Mylan litigation with respect to the ‘599 patent; and (2) a Paragraph IV certification stating that Apotex’s product would not infringe the ’703 patent. Daiichi did not sue Apotex for infringing the ’703 patent. Apotex brought a DJ action, seeking a declaration that its product would not infringe the disclaimed, but still listed, ‘703 patent. Mylan moved to intervene, and both it and Daiichi moved to dismiss Apotex’s complaint. The district court granted Daiichi’s motion to dismiss and denied Mylan’s motion to intervene as moot. Apotex appealed, and Mylan cross-appealed the denial of its motion to intervene.

On appeal, the Federal Circuit first confirmed Mylan’s right to intervene. To the Court, Apotex seeks to cause a forfeiture of Mylan’s presumed market-exclusivity period, and Mylan has a strong, concrete monetary interest in retaining such exclusivity—180 days of more sales and/or higher prices than are likely when Apotex enters the market. The Court explained that, although Daiichi likely benefits from the exclusivity period as well, Mylan’s interest exists apart from that of Daiichi.

The Federal Circuit then reversed the district court’s dismissal of Apotex’s complaint for lack of a case or controversy, concluding that “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.” Slip op. at 9 (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). In reaching this conclusion, the Federal Circuit addressed the following four issues.

First, the Federal Circuit rejected Daiichi’s contention that its statutory disclaimer of the ’703 patent itself means that there is no adversity between it and Apotex over stakes of a concrete character. To the Court, the concrete stakes over which Daiichi and Apotex were fighting are the revenues to be earned through selling olmesartan medoxomil. The patent disclaimer only eliminates one of the potential legal barriers to Apotex’s ability to make such sales sooner rather than later. The listing of the ’703 patent, with the current consequence of preventing FDA approval during Mylan’s presumptive exclusivity period, is another legal barrier, and the parties have adverse concrete interests in truncating or preserving that period. The Court also explained that all three parties were likely affected by whether Apotex can cause the forfeiture of Mylan’s exclusivity period. As explained by the Court, once Apotex enters the market, Daiichi and Mylan can expect to lose sales they otherwise would have made.

Second, the Federal Circuit held that Daiichi was also wrong in asserting that the delayed entry of Apotex is not “fairly traceable” to Daiichi. Id. at 12. The Court explained that a first filer’s eligibility for marketing exclusivity is expressly conditioned on its ability to “lawfully maintain[]” a Paragraph IV certification. Id. (alteration in original) (quoting 21 U.S.C. § 355(j)(5)(B)(iv)(II)(bb)). According to the Court, Daiichi’s original listing of the ’703 patent in the Orange Book supports Mylan’s exclusivity period. Had Daiichi not listed the ’703 patent in the Orange Book, the ’599 patent would be the only listed patent, and Mylan would have no exclusivity period. Thus, the Court concluded that Daiichi was responsible for the current existence of Mylan’s exclusivity-period rights.

Third, the Federal Circuit decided that Apotex did not have to wait until it obtains tentative FDA approval of its proposed drug to support an adjudication of the request for a noninfringement judgment. The Court explained that the congressional judgment embodied in the Hatch-Waxman Act and the Court’s case law make clear that “tentative approval of an ANDA is generally not a precondition to the existence of a case or controversy concerning patents listed in the Orange Book.” Id. at 18.

Fourth, the Federal Circuit highlighted the two requirements for forfeiture under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003—a court’s final decision of noninfringement that is no longer appealable (certiorari aside) and the second (or later) filer’s receipt of tentative FDA approval. The first filer forfeits its exclusivity if it has not entered the market seventy-five days after those two requirements are satisfied. The Court concluded that Apotex can trigger forfeiture by obtaining a DJ of noninfringement and tentative approval, if it does both early enough in relation to Mylan’s market entry.

The Federal Circuit rejected Mylan’s argument that the second filer must have tentative approval before it initiates the DJ action and stressed that no such requirement could be found in the statutory text. To the Court, tentative approval is required to trigger forfeiture, and Apotex’s approval status when it brought the DJ action is immaterial. The Court also rejected Mylan’s argument regarding the statutory policy underlying the exclusivity period, emphasizing that the exclusivity period encourages early entry by generics into the market by providing a reward to first filers, but only up to a point. Finally, the Court distinguished the instant case from Teva Pharmaceuticals USA, Inc. v. Sebelius, 595 F.3d 1303 (D.C. Cir. 2010), by pointing out that the forfeiture Apotex sought to produce would not be effected by Daiichi’s unilateral action but by a court judgment.