Forest Labs had a bit of a reversal of fortune in its patent dispute with Caraco Pharmaceutical Labs over its drug Lexapro®, which is used to treat depression and generalized anxiety disorder.

The U.S. Court of Appeals for the Federal Circuit reversed and remanded the case back to the U.S. District Court, which had dismissed Caraco’s request for a declaratory judgment of noninfringement. Caraco Pharmaceutical Labs v. Forest Labs (07-1404).

Caraco’s action was dismissed for lack of Article III jurisdiction on the grounds that it had been rendered moot when Forest unilaterally granted Caraco a covenant not to sue for infringement of the patent-in-suit, U.S. Patent No. 6,916,941.

What’s interesting is that Forest’s covenant not to sue did not eliminate the controversy between the parties. So, the court held that Caraco’s declaratory judgment action presents a continuing Article III controversy.

In filing its Lexapro® NDA, Forest listed two patents in the FDA’s Orange Book, namely: U.S. Patent Nos. Re. 34,712 and 6,916,941. The ’712 patent includes claims covering substantially pure forms of escitalopram, the active ingredient of Lexapro®. The ’941 patent generally covers crystalline particles of escitalopram oxate of a particular size range, as well as dosage forms containing particles of this size range, and methods of manufacturing particles in this size range. The ’712 patent expires in 2012; the ’941 patent expires in 2023.

The first ANDA applicant to file a Paragraph IV certification for Forest’s ’712 and ’941 patents was Ivax Pharmaceuticals. Therefore, Ivax is entitled to 180 days of generic market exclusivity, which will begin either on the day it begins marketing its generic drug, or on the date a court determines that the ’712 and ’941 patents are invalid or not infringed—whichever comes first.

Forest thanked Ivax by suing them for infringement of the ’712 patent, the earlier of the two patents to expire. Ivax counterclaimed that the ’712 patent was invalid. Despite suing Ivax on the ’712 patent, Forest did not sue Ivax for infringement of the ’941 patent.

By holding the ’941 patent card, Forest kept it from an invalidity or noninfringement challenge by Ivax. Forest won and obtained a judgment that the drug described in Ivax’s ANDA infringed the ’712 patent. Because Ivax didn’t obtain a judgment that both of Forest’s Orange-Book-listed patents are invalid or not infringed it didn’t get its 180-day exclusivity period.

The court said that only two pathways remain open to subsequent Paragraph IV ANDA filers who seek to trigger Ivax’s exclusivity period before the ’712 patent expires in 2012.

First, a subsequent Paragraph IV ANDA filer could obtain a court judgment invalidating the ’712 patent, which would allow the FDA to approve Ivax’s drug. With FDA approval, Ivax would be legally free to sell its generic drug, and its exclusivity period would be triggered on the day of its first commercial marketing.

Second, a subsequent Paragraph IV ANDA filer could trigger Ivax’s exclusivity period immediately—regardless of when Ivax begins marketing its drug—via the court-judgment trigger. However, because Ivax was the first Paragraph IV ANDA filer with respect to both the ’712 and ’941 patents, a subsequent Paragraph IV ANDA filer can only activate Ivax’s exclusivity period via the court-judgment trigger by obtaining a judgment that both the ’712 and ’941 patents are invalid or not infringed.

If a subsequent Paragraph IV ANDA filer is not able to pursue either of these two pathways to triggering Ivax’s exclusivity period, then Ivax’s exclusivity period cannot begin until the ’712 patent expires in 2012. Ivax’s exclusivity period will not be triggered on the date the ’712 patent expires unless Ivax actually begins marketing its generic drug on that date. Even if Ivax does so, the FDA will still be restricted from approving any subsequent Paragraph IV ANDA until 181 days after the date the ’712 patent expires.

In short, absent an event triggering Ivax’s exclusivity, all subsequent Paragraph IV ANDA filers, including Caraco, will be denied entry to the drug market for a significant time. These subsequent Paragraph IV ANDA filers will be precluded from the market regardless of whether the generic drugs described in their ANDAs infringe Forest’s Orange-Book-listed patents and regardless of whether Forest’s patents are valid.

Got that?

So, when Caraco filed an ANDA for generic escitalopram that included a Paragraph IV certification for Forest’s ’712 and ’941 patents, Forest sued Caraco for infringement of the ’712 patent — Forest did not sue Caraco on the ’941 patent.

Since Caraco has an economic interest in determining whether the ’941 patent is invalid or not infringed by the drug described in its ANDA — because only a judgment of invalidity or noninfringement with respect to both the ’712 and ’941 patents can trigger Ivax’s exclusivity period.

Forest filed a motion to dismiss Caraco’s action on the grounds that the action did not present a “case” or “controversy” as required by Article III of the Constitution. In its motion, Forest argued that there was no controversy because Caraco did not have a reasonable apprehension of suit on the ’941 patent. Forest hinged its entire argument for dismissal on the covenant not to sue, stating: “There is no controversy because we gave a covenant not to sue.” The district court agreed, stating from the bench that “[t]here’s a covenant not to sue on the ’941 so there’s not going to be any loss, there’s no threat of lawsuit.”

In overturning the decision, the court found that the district court failed to take into account the more recent cases:

(1) In, MedImmune v Genentech, the Supreme Court said that whether a declaratory judgment action presents an Article III controversy must be determined based on “all the circumstances,” not merely on whether the declaratory judgment plaintiff is under a reasonable apprehension of suit.

(2) In Novartis v. Teva, the CAFC held that where an NDA holder brings an infringement suit against a Paragraph IV ANDA filer on only one of several Orange-Book-listed patents covering its NDA, the ANDA filer has standing to seek a declaratory judgment on any of the NDA holder’s remaining Orange-Book-listed patents for that NDA. However, Novartis had not been decided at the time so Ivax never sought a declaratory judgment that Forest’s ’941 patent was invalid or not infringed by its generic drug. Even though Novartis only sued Teva on one of its Orange-Book-listed patents, this was sufficient to trigger a 30-month stay barring Teva’s ANDA from approval under 21 U.S.C. § 355(j)(5)(B)(iii).

In reversing and remanding, the CAFC pointed out that:

First, the dissent states that there is “no basis to conclude that the first-filing generic manufacturer will, or is likely to, delay bringing its product to market after the ’712 patent expires.” We agree. What the dissent fails to recognize, however, is that the injury upon which Caraco’s suit is premised is the delay (in triggering Ivax’s exclusivity period) between now and when the ’712 patent expires in 2012, not any delay (in triggering Ivax’s exclusivity period) after the ’712 patent expires. Thus, the dissent is in error when it notes that our analysis requires speculating as to when Ivax decides to market its drug after the ’712 patent expires.

Second, the dissent states that we assume that a first Paragraph IV ANDA filer who unreasonably delays in marketing its drug cannot lose its right to exclusivity. The dissent is incorrect. Our conclusion that the first filer in this case, i.e. Ivax, cannot forfeit its exclusivity period is not based on an assumption, but rather the texts of the Hatch-Waxman Act and the MMA. A s discussed, the MMA amendments to the Hatch-Waxman Act include a grandfather provision that specifically exempts a certain class of Paragraph IV ANDA filers, including Ivax, from being subject to the MMA’s 180-day exclusivity forfeiture provisions. Accordingly, it cannot plausibly be argued that Ivax may nevertheless forfeit its exclusivity period.

Third, the dissent states that our analysis “assumes that [Caraco] will prevail in its non-infringement claim—an uncertain assumption at best.” We make no such assumption, nor need we. A plaintiff need not prove it will prevail on the merits of its case in order to prove that it has standing to bring the case. Steel Co., 523 U.S. at 89 (“It is firmly established in our cases that the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction, i.e., the courts’ statutory or constitutional power to adjudicate the case.”).

Expect to see more on this issue. Forest had Lexapro sales of about $2.5 billion last year.

More at the Orange Book blog and IPBiz.

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