The U.S. Court of Appeals for the Federal Circuit reversed and remanded a district court’s ruling that generic pharmaceutical company had not sufficiently plead an Article III controversy, thus allowing a declaratory judgment action over four Orange Book listed patents to proceed. Teva Pharms. USA, Inc. v. Eisai Co., Ltd., Case No. 09-1593 (Fed. Cir., Oct. 6, 2010) (Prost, J.).

Innovator pharmaceutical company Eisai has five patents listed in the Orange Book that cover the Alzheimer’s drug donepezil, marketed as Aricept®. Ranbaxy Laboratories was the first ANDA filer with Paragraph IV certifications for four of the listed patents, which entitles Ranbaxy to a market exclusivity period. Teva subsequently filed two ANDAs for generic donepezil. Both were amended to include Paragraph IV certifications for all five listed patents. In litigation separate from this action before the Federal Circuit, Eisai filed an infringement action against Teva asserting only the patent not covered by Ranbaxy’s Paragraph IV certifications (the ’841 patent). Teva has stipulated that its generic donepezil would infringe the ’841 patent unless it was found invalid or unenforceable. During this separate litigation, Eisai filed statutory disclaimers with the U.S. Patent and Trademark Office (USPTO) for two of the other listed patents. Nonetheless, Eisai did not de-list any of the five patents.

Because Ranbaxy’s exclusivity period had not been triggered, Teva’s second ANDA was indefinitely delayed. Under Hatch-Waxman, the exclusivity period can only be triggered if the first-filer begins marketing its drug or if a court enters a final judgment of invalidity or non-infringement for the listed patents. Thus, Teva could not begin marketing generic donepezil until Ranbaxy’s exclusivity period had run out. Seeking relief from the delay, Teva filed an action seeking declaratory judgment of non-infringement or, in the alternative, that the remaining listed patents were invalid. During the litigation, Eisai and Teva negotiated a covenant-not-to-sue over the two remaining listed patents that were not disclaimed. After the district court dismissed the action for lack of jurisdiction, Teva appealed.

On appeal, Eisai argued that the district court lacked jurisdiction for the declaratory action or, in the alternative, that the disclaimers and covenant-not-to-sue rendered the action moot. Writing for the unanimous panel, Judge Prost disagreed, explaining that an actual controversy existed if an innovator company takes action that delays FDA approval of subsequent ANDAs. Here, Eisai’s action to list or failure to de-list the patents was the “but for” cause of Teva’s injury (i.e., delay in market access). The Court also noted that, even though Eisai’s disclaimer and covenant would prevent Eisai from having standing to sue under Hatch-Waxman, the Act still provided Teva with a remedy in the form of declaratory relief. These actions were “fairly traceable” to Eisai, not Teva or the inherent framework of Hatch-Waxman.

Finally, the Court held that the district court also abused its discretion in declining to hear Teva’s declaratory judgment action and its erroneous finding that Teva’s actions were “improper gamesmanship.” Instead, the Court held that Teva’s actions were consistent with the rules of Hatch-Waxman, as well as specific requests by the FDA.

Practice Note: Along with the court’s prior decision in Caraco v. Forest Labs., (see IP Update, Vol. 11, No. 4) this decision provides incentive for subsequent ANDA filers to seek declaratory judgments under Hatch-Waxman for patents that innovator companies have not asserted in infringement actions but nonetheless remain listed in the Orange Book.