Federal Circuit Issues Two Decisions Impacting Standing to Challenge Validity of Pharma Patents
Two recent Federal Circuit decisions address when a party has standing to challenge the validity of a patent. Though the cases arose in different contexts, they both center on the question of what it means for a party to be facing an imminent and cognizable injury. In Altaire Pharmaceuticals, Inc. v. Paragon Bioteck, Inc., 17-1487, the Federal Circuit upheld a party’s standing to appeal from a post-grant review where it was at risk of an infringement suit. In AIDS Healthcare Foundation v. Gilead Sciences, Inc. et al., 16-2475, however, the court reached the opposite conclusion and determined that the immediacy requirement to bring a declaratory judgment action was not met for a party that had an interest in purchasing generic drugs, but did not itself produce them.
Altaire v. Paragon
Altaire and Paragon had partnered to market eye-dilation drops pursuant to an NDA held by Paragon, but the relationship had soured and Paragon was actively seeking to terminate the agreement. With the partnership breaking down, Altaire planned to file an ANDA and continue manufacturing eyedrops on its own as soon as the agreement is terminated. Altaire argued that Paragon will inevitably assert infringement of its ‘623 patent as soon the ANDA is filed. In order to remove this obstacle, Altaire sought post-grant review of the ‘623 patent, but the PTAB upheld the validity of the ‘623 patent.
On appeal, the Federal Circuit addressed whether Altaire met the Article III “case or controversy” requirement for standing (because the PTAB is an administrative agency, no such requirement exists at the post-grant review stage). The court determined that Altaire had demonstrated injury-in-fact sufficient to satisfy Article III, relying heavily on an affidavit from Altaire’s general counsel outlining the Altaire-Paragon contract dispute and Altaire’s plans to file an ANDA due to termination of the contract. Because Paragon was seeking to terminate the agreement with Altaire and would certainly assert the ‘623 patent, the Federal Circuit determined that “Altaire’s injury is inevitable.”
The Federal Circuit noted that “Altaire’s injury is compounded” by the likelihood of estoppel under 35 USC § 325(e)(2), which provides that “[t]he petitioner in a post-grant review . . . may not assert . . . in a civil action . . . that [a] claim is invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review.” Although the Federal Circuit has held in Phigenix v. Inc. v. Immunogen, Inc., 845 F.3d 1168 (Fed. Cir. 2017) and Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258 (Fed. Cir. 2014) that estoppel does not constitute an injury in fact when the appellant is not engaged in infringing activity that would give rise to an infringement suit, the Federal Circuit distinguished Altaire’s situation, where the threat of an infringement suit is real and imminent. Thus, the court concluded, “[a]lthough we do not decide whether this potential estoppel effect is sufficient independently to establish standing, the estoppel effect in this case further supports Altaire’s claimed injury in fact.”
Judge Schall dissented on the ground that Altaire’s injury was not imminent. In his view, the standing question turned on the Altaire-Paragon contract dispute. While it is possible that Paragon will succeed in terminating the agreement, Judge Schall noted, the agreement would not otherwise terminate until 2021. According to Judge Schall, an injury that may not be felt until 2021 cannot support Article III standing. As the dissent explains: “Put most simply, what we have is a situation in which the parties to a contract that is due to terminate in approximately three years are in a dispute. At the same time, in view of the terms of the Agreement, Altaire cannot infringe the ’623 patent while the Agreement is in effect. These circumstances, it seems to me, come nowhere near providing Altaire with grounds for claiming that it is subject to imminent harm.” In the dissent’s view, “a determination of imminent harm is speculative” where the court “do[es] not know what will happen” in the breach of contract suit on which Altaire’s claim of imminent harm depends. Judge Schall also disagreed with the majority’s holding with regard to the estoppel effect of the post-grant review. Since the Altaire-Paragon agreement prevents Altaire from infringing until 2021, Judge Schall would hold that Altaire “is not engaged in any activity that would give rise to a possible infringement suit.”
AHF v. Gilead
Gilead produces drugs containing TAF, which is used in the treatment of HIV/AIDS. AIDS Healthcare Foundation (“AHF”), brought a declaratory judgment action against Gilead, seeking, as AHF put it, to “clear out the invalid patents” covering TAF so that generic drug makers could produce generic TAF as soon as Gilead’s five-year New Chemical Entity non-patent exclusivity expired. According to AHF, bringing a declaratory judgment action well before the end of the exclusivity period was necessary given “the lengthy time consumed by litigating patent validity.” AHF itself is a consumer, not a producer, of pharmaceuticals. AHF appealed from the district court’s dismissal for lack of standing.
The Federal Circuit affirmed, holding that AHF could not bring a declaratory judgment action. It noted that a plaintiff seeking a declaratory judgment bears the burden of demonstrating that an actual controversy exists when the case is filed, which requires a showing of injury-in-fact. Underpinning this holding was AHF’s status as a mere potential consumer of TAF drugs; because it neither produced drugs, nor did it intend to, “there is no present infringement, no threat or possibility of infringement litigation, and no meaningful preparation to infringe.” Though AHF claimed it was encouraging generic drug makers to produce their own generic TAF in the future, the Federal Circuit agreed with the district court that there was “significant uncertainty about the nature of any hypothetical product.”
AHF argued that its efforts to persuade generic drug makers to produce TAF were inducement of infringement under 35 USC § 271(b), but the Federal Circuit rejected the argument, noting that inducement requires the existence of direct infringement. Because no direct infringement was occurring, or even reasonably expected, there was no evidence that AHF had induced infringement. Finally, AHF argued that a controversy existed because its legal interests were adverse to Gilead: it had an interest in buying an infringing product. The court held, however, that this was merely an adverse economic interest, which is insufficient to create an actual controversy. Gilead’s refusal to give a covenant not to sue also failed to create a controversy.
Momentum for Momenta?
With the Federal Circuit’s standing decision in Momenta Pharmaceuticals, Inc. v. Bristol-Myers Squibb Co., No. 17-1694 forthcoming, patent practitioners will wonder how much to read into Altaire, where the appellant was found to have standing before filing an ANDA. But Altaire may be a case-specific decision driven by the unique circumstances of the dispute. Altaire was not the typical biosimilar maker or generic applicant seeking to gain access to the market as a new entrant; Altaire had already been manufacturing the disputed product in partnership with the patent-holder for years.
 Patterson Belknap represented Johnson & Johnson and Janssen Sciences Ireland UC (the “Janssen parties”) in this action at the district court stage. The Janssen parties were not parties to the Federal Circuit appeal.