On December 5, 2014, the Federal Circuit in Sandoz Inc. v. Amgen Inc.(Docket No. 2014-1693) affirmed the dismissal of a declaratory-judgment action concerning patents alleged to cover Amgen Inc.’s Enbrel biological product used to treat rheumatoid arthritis. Sandoz Inc. had challenged two Hoffman-La Roche Inc. patents—U.S. Patent Nos. 8,063,182 and 8,163,522—that Amgen, the exclusive licensee of the ’182 and ’522 patents, says cover Enbrel and its active ingredient, etanercept. Sandoz is developing its own etanercept product and has indicated that it will seek approval from the U.S. Food and Drug Administration for its product as biosimilar to Enbrel. But Sandoz has not yet filed this biosimilar application with the FDA. In June 2013, Sandoz sought a declaration that its contemplated etanercept product would not infringe the ’182 and ’522 patents, and that both patents were invalid and unenforceable. Judge Maxine Chesney of the Northern District of California, however, dismissed the case holding that no Article III controversy existed between the parties. Judge Chesney also found that the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) barred Sandoz’s suit because the BPCIA requires several disclosures including a notice of commercial marketing “not later than 180 days before the date of the first commercial marketing of the biological product licensed under [§ 262] subsection (k).” Because Sandoz had not filed for a biological license yet, Judge Chesney reasoned that it was legally impossible for Sandoz to have provided this notice.

Sandoz appealed. The Federal Circuit, in a unanimous decision, affirmed the dismissal on the declaratory-judgment holding only concluding that Sandoz did not allege an injury of “sufficient immediacy or reality” to create subject-matter jurisdiction.

The Federal Circuit’s decision discussed the Supreme Court’s instruction in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2008), that courts must consider the immediacy and reality of any alleged controversy to determine whether the circumstances warrant a declaratory judgment. The decision noted that in assessing the issues of immediacy and reality in cases of potential patent infringement, the Federal Circuit has focused on the timing and contingency of any potential infringement and the related need for patent adjudication, as well as any potential harms to the party seeking the declaration if that adjudication were to be delayed. Sandoz, at 7. After reviewing the facts, the Federal Circuit determined that Sandoz’s complaint failed to present a case or controversy.

Regarding timing and immediacy, the Federal Circuit noted that Sandoz faced no immediate exposure to infringement liability and that any potential exposure was likely years away. Id. at 9. When Sandoz sued Hoffman-La Roche and Amgen in 2013, Sandoz was not marketing its etanercept product. In fact, Sandoz was in the middle of a large Phase III clinical trial. The Federal Circuit explained that the clinical trial itself posed little potential for infringement because it was being conducted outside the United States and was, moreover, likely protected from liability under the “safe harbor” provision of 35 U.S.C. § 271(e)(1). Id. Furthermore, the Federal Circuit found little immediacy in any potential future infringement liability. The court emphasized that Sandoz still needed FDA approval to engage in any liability-exposing conduct. If all goes well, Sandoz’s Phase III trial will end in April 2015 and in all likelihood must be completed before Sandoz files any related biosimilar application with the FDA. Given the time left on the clinical trial and the time that the FDA will need to review Sandoz’s application, the Federal Circuit concluded that the case did not meet the requisite immediacy requirement. See id. at 10-11.

Regarding contingencies and reality, the Federal Circuit recognized that any dispute over potential infringement of the ’182 and ’522 patents is subject to “significant uncertainties.” Id. at 11. Chief among these uncertainties is the success of Sandoz’s Phase III trial. The Federal Circuit would not assume that the clinical trial would succeed and recognized that any failures could significantly affect the contemplated patent dispute. Id. at 10-11. At worst, the clinical trial could fail so badly that Sandoz decides to abandon its etanercept product and never seeks FDA approval. Under this scenario, the need for a patent dispute would be eliminated entirely. But even if Sandoz maintains the project, the results of the Phase III trial may force Sandoz to reformulate its current etanercept product before seeking FDA approval. Under this scenario, there may still be a patent dispute, but the relevant patent claims would likely differ. Given these uncertainties and Sandoz’s failure to downplay their significance, the Federal Circuit concluded that the case did not meet the requisite reality requirement. Id. at 12.

Regarding potential harm to Sandoz, the Federal Circuit was not convinced that Sandoz would suffer any harm from a delayed adjudication of the patent dispute. Without FDA approval for its etanercept product, Sandoz cannot legally enter the market. Because it cannot legally enter the market, Sandoz is not at risk of taking immediate action that would accumulate infringement liability relating to the ’182 and ’522 patents. Thus, the Federal Circuit concluded that the potential harm to Sandoz was insufficient to overcome the necessary requirements of immediacy and reality. Id. at 14.

The Federal Circuit expressed no opinion about whether Sandoz might be able to get declaratory relief on the ’182 and ’522 patents once it has filed an application with the FDA. Indeed, the Federal Circuit limited its holding to the particular facts of the case and noted, “[W]e do not address Sandoz’s ability to seek a declaratory judgment if and when it files an FDA application under the BPCIA.” Id. at 8. Furthermore, the Federal Circuit expressly refused to create a categorical rule that no case or controversy exists when the only action that could lead to infringement would be a future action that required a yet-to-be-sought FDA approval. The Federal Circuit did so despite recognizing that it is unaware of any Federal Circuit decision finding a case or controversy in that situation. See id. at 10.