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Teva/Novartis decision opens the door for generics to bring declaratory judgments against branded drug companies.

In Teva Pharmaceuticals USA, Inc. v Novartis Pharmaceuticals Corp., No. 06-1181, slip op. (Fed. Cir. March 30, 2007), the United States Court of Appeals for the Federal Circuit ('CAFC') interpreted the Supreme Court's ruling in MedImmune v Genentech, 127 S. Ct. 764, 774 (2007), to necessarily require the overruling of the reasonable apprehension of suit test followed by the CAFC. The reasonable apprehension of suit test requires a declaratory judgment plaintiff to prove that it faces a reasonable apprehension of imminent suit by the patent holder prior to bringing suit against such patent holder. The Teva decision moves away from such a requirement and allows generics to only establish a lower threshold that an 'actual controversy' exists making it easier for such generics to get into court and obtain such declaratory judgments against their branded counterparts.

The Supreme Court evaluated the CAFC's reasonable apprehension of suit test in the MedImmune decision. In footnote number 11 of the MedImmune decision, the Supreme Court noted that the reasonable apprehension of suit test violated Supreme Court precedent. Specifically, the Supreme Court, in its prior decision in Altvater v Freeman, 319 US 359, 365 (1943), held that a licensee should not be forced by the courts to choose between paying certain royalty payments or committing wilful patent infringement, risking treble damages. The CAFC's reasonable apprehension of suit test requiring that a breach of contract must exist before the courts could have jurisdiction over declaratory judgment suits that seek to invalidate patents clearly flies in the face of the Altvater decision.

With the MedImmune decision, the Supreme Court has also shown its support for the congressional amendments to the Hatch-Waxman Act passed as part of the Medicare Modernization Act of 2003. The Hatch-Waxman amendments attempt to alleviate certain risks that generics take when they decide to launch products, even if a branded drug company does not sue a generic within 45 days of the generics filing a Paragraph IV Certification. By way of background, when filing an abbreviated new drug application ('ANDA'), a generic has to make what is known as a Paragraph IV Certification which requires the generic to certify that the patents of the branded drug company will not be infringed by the manufacture, use or sale of the generic's drug product. After a Paragraph IV Certification is made, a branded drug company has 45 days to bring a suit against the generic and can thereby obtain a 30-month stay of the FDA's approval of the ANDA. Prior to these Hatch-Waxman amendments, if a branded drug company decided not to invoke its right to sue within such 45-day window, generics could open themselves up to potential patent infringement liability if they decided to launch the product anyway. To solve this problem, the Hatch-Waxman amendments allow generics to bring declaratory judgment actions regarding a branded company's patent 45 days after the generic files its Paragraph IV Certification. The CAFC, however, essentially eviscerated this right with its decision in Teva v Pfizer, which held that declaratory judgment jurisdiction did not exist irrespective of these Hatch-Waxman amendments until Teva had proven a 'reasonable apprehension of imminent suit.

The CAFC clearly has taken notice of the MedImmune decision with its recent decision in Teva v Novartis. In this Teva case, Teva filed an ANDA and filed five Paragraph IV Certifications with respect to Novartis' compound and method of use patents for the drug Famvir[R]. Novartis brought an infringement suit against Teva asserting that Teva would only be infringing on Novartis' compound patent. Teva brought a declaratory judgment action with respect to the other four patents. Given the MedImmune decision, the CAFC ruled in this Teva case that the reasonable apprehension of suit test was overruled and that a plaintiff in a declaratory judgment suit now needs to show that 'an actual or imminent injury caused by the defendant [exists] that can be redressed by judicial relief' which is of 'sufficient immediacy and reality to warrant the issuance of a declaratory judgment. In addition, the CAFC stated that 'all the circumstances' would be considered when reviewing whether such injury exists. In particular, the CAFC found that an actual controversy existed in this case when Novartis listed its patents in the Orange Book, Teva listed the Novartis patents in its Paragraph IV Certifications and Novartis sued Teva on the one compound patent.

Although the Teva case seems to open up the doors for generics to bring declaratory judgment suits against branded drug companies, this case and the MedImmune decision have other implications for patent holders, and likely licensors, of drug compounds. In the wave of cases allowing and opening up the ability for would be declaratory judgment plaintiffs, it will be even more important for licensors to negotiate covenants not to sue into their license agreements. This will act as a measure to prevent at least the licensees, as was the case in MedImmune, from bringing declaratory judgment suits against the licensors.
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Title Annotation:NOTES FROM THE US
Publication:Journal of Commercial Biotechnology
Date:Aug 1, 2007
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