The U.S. Court of Appeals for the Federal Circuit upheld a finding of subject-matter jurisdiction in a declaratory judgment action brought by a generic, even though the brand drug manufacturer had provided the generic with a covenant not to sue on one of the brand’s Orange Book patents. Dey Pharma, LP and Dey Inc. v. Sunovion Pharmaceuticals, Inc., Case No. 11-1507 (Fed. Cir., April 16, 2012) (Dyk, J.).

Hatch-Waxman Regulatory Framework

To market a new drug, a brand manufacturer must obtain approval for its New Drug Application (NDA) from the U.S. Food and Drug Administration (FDA). The brand must also list all patents covering the drug in a publication called the Orange Book (OB). To bring a generic to market, a generic company must file an Abbreviated New Drug Application (ANDA) including one of several possible certification statements. If the generic files its ANDA with a paragraph IV certification (i.e., that the Orange Book patents are invalid or will not be infringed), the ANDA may be approved unless the brand sues the generic within 45 days.

The first ANDA filer containing a paragraph IV certification receives a 180-day market exclusivity period from the date of its “first commercial marketing,” but this exclusivity period is forfeited if the generic fails to launch within 75 days of a final court judgment that the asserted OB patents are invalid or not infringed.

The FDA will approve later-filed ANDAs only after the expiration of the first ANDA filer’s 180-day exclusivity period. Thus, it is in the best interest of later ANDA filers for the 180-day period to occur as early as possible.

This framework has led to a phenomenon called “parking,” in which brands and first ANDA filers sometimes settle their patent disputes prior to a final judgment on invalidity or non-infringement of the OB patents, usually by granting the generic a license or paying the generic to stay off the market. Notably, without a final judgment, the 180-day exclusivity period is not triggered, thereby keeping later ANDA filers off of the market until the patents expire.

Later ANDA filers, however, can trigger the first ANDA filer’s 180-day exclusivity period by securing a final judgment of invalidity or non-infringement on the OB patents that had been asserted against the first ANDA filer.

To prevent later ANDA filers from triggering the first ANDA filer’s exclusivity period, brand manufacturers sometimes sue later ANDA filers on only a subset of OB listed patents, holding others in “reserve.” Such action means that a final judgment on invalidity or non-infringement can be reached for only the subset of OB listed patents and not on the reserved patents. Without a final judgment on the reserved patents, the first ANDA filer’s 180-day exclusivity period cannot be triggered. Congress addressed this situation by allowing ANDA filers to bring declaratory judgment actions to seek a declaration relating to the validity or infringement of reserved patents.

Dey Lives Another Day

The present case involves a declaratory judgment action brought by the second ANDA filer (Dey) against the brand manufacturer (Sunovion, formerly Sepracor) in order to trigger the 180-day exclusivity period of the first ANDA filer (Breath Ltd.).

In June 2005, Breath filed its ANDA with a paragraph IV certification for all three OB patents listed for Sunovion’s drug Xopenex. Sunovion sued Breath for infringement of all three patents, but the parties settled in 2008 before any final judgment was entered. The settlement agreement granted Breath a license to sell generic Xopenex starting August 20, 2012.

In July 2005, Dey filed a second ANDA with a paragraph IV certification for all three OB patents. Sunovion sued Dey for infringement of the two earlier-expiring patents, but did not assert the later-expiring patent. Dey brought a declaratory judgment action to obtain a declaration that the later-expiring patent is invalid or not infringed by either Dey’s or Breath’s generic product. Sunovion then granted Dey a covenant not to sue on the subject patent and moved to dismiss the declaratory judgment action for lack of subject-matter jurisdiction. The parties stipulated as to non-infringement, and the district court entered a final judgment in favor of Dey. Sunovion appealed on jurisdictional grounds.

Sunovion argued that there was no subject-matter jurisdiction because success in the declaratory judgment action was insufficient to redress Dey’s injury, since Dey would still need to succeed in its suit involving the other two OB patents. The Federal Circuit court rejected Sunovion’s argument, saying that “a favorable declaratory judgment for Dey . . . will eliminate the potential for that patent to exclude Dey from the market.” In particular, if Dey succeeds on the declaratory judgment action as to the later expiring patent, Breath’s 180-day exclusivity period would be triggered in the event that Dey also succeeds in its suit as to the other two OB patents. If Dey cannot bring the declaratory judgment action (or does not succeed), success in its suit as to the other two OB patents would not trigger Breath’s 180-day exclusivity period, and Dey would be kept off the market until either Sunovion’s later expiring patent expires, or until a final judgment on invalidity or non-infringement is entered as to all three OB patents.

Sunovion further argued that, as a practical matter, the litigation over the other two OB patents could not possibly be concluded before Breath’s permitted launch date of August 20, 2012, and that once Breath is permitted to launch, there will no longer be a case or controversy to support the declaratory judgment action. The Federal Circuit rejected this argument, pointing out that “[e]ven after Breath is entitled to launch, the possibility remains that Breath will not do so.” The Court further explained that, “[i]f Breath chooses to delay triggering its 180-day exclusivity period, Dey and other generics could potentially be kept off the market until expiration of the [later expiring] patent in 2021, absent a judgment of noninfringement or invalidity.”

The Court concluded by pointing out that the party arguing that a case has become moot has the burden of providing sufficient information to prove mootness, and that Sunovion did not meet that burden.