On October 6, 2010, the Federal Circuit released a decision holding that unenforceable patents can be the cause of a justiciable controversy under Article III of the United States Constitution if the patents block a generic pharmaceutical manufacturer’s entry into the market. The decision overturned the United States District Court for the District of New Jersey. Teva Pharmaceuticals USA, Inc. v. Eisai Co., Ltd., 08cv2344, 2009 U.S. Dist. LEXIS 82102 (D.N.J. September 9, 2009).
Eisai holds the approved New Drug Application (“NDA”) for donepezil, which is marketed as Aricept®. Eisai has five patents listed in the Orange Book regarding Aricept® and its use. Ranbaxy filed an Abbreviated New Drug Application (“ANDA”) for a generic version of donepezil in 2003 and was the first generic manufacturer to attempt entering this market. In this effort, Ranbaxy submitted four Paragraph IV certificates. By filing the Paragraph IV certificates Ranbaxy indicates their belief that Eiasi’s four challenged patents are either invalid or will not be infringed by the generic’s entry into the market. Additionally, as the first to file Paragraph IV certificates, Ranbaxy is entitled to 180 days of market exclusivity, in which they will face no other generic competition, once their ANDA is approved by the Food and Drug Administration (“FDA”). The period of exclusivity begins when Ranbaxy begins commercially marketing or there is an issuance of a court judgment holding the relevant Eisai patent – those implicated by the Paragraph IV certificates – invalid or not infringed.
Teva then filed two ANDA’s for a generic version of donepezil, both of which were accompanied by Paragraph IV certificates. Seeking approval for an ANDA, Teva commenced a declaratory action against Eisai. The action was seeking a judgment that none of Eisai’s four relevant patents would be infringed by the approved ANDA. Seems ordinary, but there is a twist. Eisai claimed that the district court lacked subject matter jurisdiction because they had previously signed a covenant not to sue with Teva regarding the relevant patents. Teva responded claiming they did suffer an injury because the four relevant patents are listed in the Orange Book. Thus, Teva cannot receive FDA approval for their ANDA until Ranbaxy’s period of exclusivity is completed. However, the period will not start until the Eisai patents are found invalid. So, Teva faces being blocked from market entry by patents that cannot be enforced against them.
The Federal Circuit faced the question whether a justiciable controversy existed in this case by examining whether there was an actual controversy. The court noted that “regardless of whether Eisai could bring an infringement action with respect to the [relevant] patents, under the Hatch-Waxman Act Teva still needs a court judgment of noninfringement or invalidity to obtain FDA approval and enter the market.” So, even though the Eisai patents were unenforceable, Teva was facing enough harm to justify receiving a declaratory judgment.
This case ensures that the second generic manufacturer to the market will not be blocked by the first generic for an unduly long period of time. It is now clear that the second generic to file an ANDA has the power to control their fate because they are harmed by any potential patents blocking their entry to the market, even if those patents are unenforceable. Being blocked from the market is harm and is enough to justify a court ruling. This decision is clearly in-line with prior Federal Circuit decisions which have held that a controversy exists when an issue is “definite and concrete touching the legal relations of parties having adverse legal interests.” This opinion also seems to further the interest of FDA regulation of generics. The first generic to file a Paragraph IV certificate should be rewarded for their efforts with a period of generic exclusivity. However, a prolonged bar to other generics from the market does not further the interests of the regulatory scheme.