District Court Decision Rules on the Middle Ground Between Caraco and Janssen in ANDA Declaratory Judgment Actions

By Kurt R. Karst –      

Over the past year or so, the U.S. Court of Appeals for the Federal Circuit has addressed the proper jurisdictional scope of the “case or controversy” requirement under Article III of the U.S. Constitution for a court to have jurisdiction in ANDA Hatch-Waxman declaratory judgment actions where a patent covering the Reference Listed Drug is listed in the Orange Book.  These decisions came in the wake of the U.S. Supreme Court’s January 2007 decision in Medimmune, Inc. v. Genentech, Inc., in which the Court ruled that a dispute must be “definite and concrete” and “real and substantial” to support the exercise of a district court’s subject matter jurisdiction, and the Federal Circuit’s March 2007 decision in Teva Pharms. USA, Inc. v. Novartis Pharma. Corp., in which the court, consistent with the Supreme Court’s Medimmune decision, rejected the “reasonable apprehension of imminent suit” test the court had followed for several years, and instead adopted an “all the circumstances” standard for determining when a justiciable controversy for declaratory judgment actions exists. 

In a decision issued earlier this year by the U.S. District Court for the District of Delaware in Dey L.P. and Dey Inc. v. Sepracor Inc. concerning Dey’s ANDAs for generic versions of Sepracor’s XOPENEX (levalbuterol HCl), the court found that Dey’s declaratory judgment action presented a justiciable Article III controversy.  The opinion, which is currently the subject of a motion to stay pending resolution on interlocutory appeal, provides an important precedent on ANDA declaratory judgment jurisdiction actions that fall in between the Federal Circuit’s opinions in Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc. and Janssen Pharaceutica, N.V. v. Apotex, Inc. 

In one “bookend” decision – Caraco, concerning LEXAPRO (escitalopram oxalate) – the Federal Circuit held that an ANDA applicant’s declaratory judgment action for non-infringement met the Article III “case or controversy” requirement notwithstanding that the patentee had granted the generic applicant a covenant not to sue.  In that case, the Federal Circuit determined that “Forest’s covenant not to sue did not eliminate the controversy between the parties.”  In the other “bookend” decision – Janssen, concerning RISPERDAL (risperidone) Oral Solution – the Federal Circuit dismissed a declaratory judgment action for non-infringement notwithstanding a covenant not to sue, because the “alleged harm of indefinite delay of [ANDA] approval was too speculative to create an actual controversy to warrant the issuance of a declaratory judgment,” and therefore, did not meet the Article III requirement.  Although the factual scenarios presented to the Federal Circuit in Caraco and Janssen were very similar, the point of difference that led the Federal Circuit to rule against declaratory judgment jurisdiction in Janssen was that the ANDA applicant, Apotex, stipulated to the validity, infringement, and enforceability of one Orange Book-listed patent covering RISPERDAL (that was not the subject of the declaratory judgment action).  As a result, according to the Federal Circuit, the potential harm to Apotex changed, in that Apotex eliminated any possibility of going to market until the expiration of that patent even if the company could claim victory in its declaratory judgment action concerning 2 other Orange Book-listed patents. 

In the instant case – Dey – Sepracor listed 6 patents in the Orange Book covering XOPENEX.  One generic applicant, Breath, submitted the first ANDA containing a Paragraph IV certification (with respect to all 6 Orange Book-listed patents), thereby making Breath a “first applicant” eligible for 180-day exclusivity.  Sepracor sued Breath for patent infringement, and the parties later settled the lawsuit.  Under a royalty-bearing license agreed to by the companies, Breath would be allowed to market its generic version of XOPENEX in 2012, prior to expiration of 3 of the 6 Orange Book-listed patents. 

Dey subsequently submitted ANDAs for generic versions of XOPENEX.  Dey’s ANDAs also contained a Paragraph IV certification to all 6 Orange Book-listed patents.  Sepracor sued Dey for patent infringement on 5 of the 6 patents, and Dey brought a declaratory judgment action seeking a declaration of non-infringement on the single patent with respect to which Sepracor did not sue – U.S. Patent No. 6,341,289 (“the ‘289 patent”).  Sepracor then provided Dey with a covenant not to sue on the ‘289 patent, and argued that as a result of the covenant, there is no declaratory judgment jurisdiction and the case should be dismissed because Dey is not under threat of suit.

In finding declaratory judgment jurisdiction, the district court in Dey explained that:

The instant case is intermediate to Caraco and Janssen.  Like Janssen, there appears to be a possibility that if the Court were to recognize declaratory judgment jurisdiction, the primary ANDA filer, Breath, could lose its 180-day exclusivity period.  Specifically, because of the settlement agreement between Breath and Sepracor, Breath may not go to market until August 2012.  If, more than 254 days prior to this Dey were to attain a court judgment of non-infringement or invalidity of Sepracor’s Orange Book patents, Breath’s exclusivity period would be completed entirely before Breath could go to market. 

However, unlike Apotex in the Janssen case, Dey has not precluded itself from going to market prior to the primary ANDA filer.  Indeed, Dey has not, like Breath, agreed to forego marketing its generic until August 2012.  Put another way, in the instant case, the Court finds nothing equivalent to Apotex’s stipulation to the infringement and validity of the [relevant] patent. . . .  Here, . . . Dey has not stipulated to be on equal foot with Breath.  Thus, unlike as in Janssen, if Dey were to prevail on its declaratory judgment action, the sole effect would not be to simply destroy Breath's exclusivity period.  Rather, Dey could also potentially go to market well in advance of August 2012, the earliest date that Breath could go to market under its settlement agreement with Sepracor.  On these facts, the Court finds that the policy objectives of the Hatch-Waxman Act . . . tilt towards granting declaratory judgment jurisdiction.

Sepracor’s Motion for Certification of the Court’s Order and to Stay Proceedings Pending Resolution of Appeal, which is currently before Judge Joseph J. Farnan, Jr., will reportedly be decided on the papers submitted by the parties.  Whatever Judge Farnan decides, this case appears to be destined for an appeal to the Federal Circuit.