For the second time in three months, the U.S. Court of Appeals for the Federal Circuit held that Apotex lacked declaratory judgment jurisdiction in the context of its Hatch-Waxman litigation for its Abbreviated New Drug Applications (ANDAs). (SeeIP Update, Vol. 11, No. 8, published August 2008). The Court affirmed a district court’s decision that a covenant-not-to-sue, coupled with a stipulation of validity and enforceability, removed any case or controversy required for declaratory judgment jurisdiction. Janssen Pharmaceutica v. Apotex, 540 F.3d 1353 (Fed. Cir., 2008) (Moore, J.).

Janssen is a brand-name drug manufacturer that holds an approved New Drug Application (NDA) for Risperdal, used for anti-psychotic treatments. Janssen originally listed the ’663 patent, the ’425 patent and the ’587 patent in connection with Risperdal’s NDA. In a previous case, the ’663 patent was found to be infringed, valid and enforceable. While Apotex was not a party to that trial, Apotex stipulated to the validity and enforceability of the ’663 patent based on the Federal Circuit opinion.

Notably, before the dispute between Janssen and Apotex, Teva Pharmaceuticals filed an ANDA to make a generic version of Risperdal, risperidone. In its filing, Teva respected the validity of the ’663 patent by filing a Paragraph III Certification on that patent. Janssen did not sue Teva for infringement of the other two patents. Since Teva was the first to file an ANDA, it was entitled to 180 days of generic market exclusivity, during which the Food and Drug Administration (FDA) will not approve a later-filed Paragraph IV ANDA based on the same NDA. Teva’s 180-day exclusivity period would begin either the day it begins marketing its drug or on the date a court determines that the ’425 and ’587 patents are invalid or not infringed—whichever comes first.

Apotex subsequently filed an ANDA to market its generic version of risperidone with paragraph IV certifications on the ’425, ’587, and ’663 patents.

Janssen sued Apotex for infringing only the ’663 patent. Apotex then counterclaimed for declaratory judgment of non-infringement of the ’425 and ’587 patents.

Janssen provided Apotex with a covenant-not-to-sue with respect to the ’425 and ’587 patents and the district court granted Janssen’s motion to dismiss Apotex’s counterclaims on the ground that the action did not present a case or controversy as required by Article III of the Constitution.

In its appeal, Apotex argued that it was suffering three actual and continuing injuries which create a substantial controversy of sufficient immediacy to warrant the issuance of a declaratory judgment. Specifically, Apotex argued that it is unable to promptly launch its generic risperidone product and compete in the market immediately upon the expiration of the ’663 patent, its approval of its non-infringing generic risperidone product is being indefinitely delayed and its affiliates, suppliers, and downstream customers face patent uncertainty because Janssen’s covenant-not-to-sue does not cover them.

With regard to Apotex’s first alleged injury, the Court held that Apotex has already stipulated to the validity of the patent that is preventing Teva from introducing its generic product. As a result, a favorable judgment would not start Teva’s exclusivity period, removing the sufficient immediacy of harm necessary for a declaratory judgment action.

Apotex next argued that absent a declaratory judgment, its ANDA application would be indefinitely delayed until Teva’s 180-day exclusivity period was triggered. The Federal Circuit, however, dismissed this argument, noting that at no time between the filing of the counterclaims through the final judgment was there any basis to conclude that Teva is likely to delay bringing its generic product to the market. Therefore, the possible delay in the future marketing of a first filer’s generic drug could not support declaratory judgment jurisdiction.

Finally, the Federal Circuit addressed Apotex’s claim that Janssen’s covenant-not-to-sue did not protect Apotex’s affiliates, suppliers and downstream customers from future liability. The Federal Circuit, however, found that Apotex’s affiliates, suppliers and downstream customers were protected by the covenant-not-to-sue, which, therefore, did not provide a basis for jurisdiction. Accordingly, the Federal Circuit affirmed the district court’s dismissal for lack of a justiciable Article III controversy.