Court Opinion

ID: 4274584
Source: CourtListenerOpinion
Date Created: 2018-05-11 16:00:37.421849+00
Date Added: 2024-06-11T14:06:43.527651
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                 ______________________

     AIDS HEALTHCARE FOUNDATION, INC.,
               Plaintiff-Appellant

                            v.

GILEAD SCIENCES, INC., JAPAN TOBACCO INC.,
            Defendants-Appellees

   JOHNSON & JOHNSON, JANSSEN SCIENCES
                IRELAND UC,
                  Defendants
            ______________________

                       2016-2475
                 ______________________

   Appeal from the United States District Court for the
Northern District of California in No. 3:16-cv-00443-
WHA, Judge William H. Alsup.
                ______________________

                 Decided: May 11, 2018
                 ______________________

    DANIEL P. HIPSKIND, Berger & Hipskind LLP, Los
Angeles, CA, argued for plaintiff-appellant. Also repre-
sented by DORIAN S. BERGER.

     GARY N. FRISCHLING, Irell & Manella LLP, Los Ange-
les, CA, argued for defendants-appellees. Gilead Sciences,
Inc. also represented by JOHN PRESTON LONG, YITE JOHN
LU, KEITH A. ORSO, JASON SHEASBY.
2              AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

    JEROME WAYNE HOFFMAN, Holland & Knight, LLP,
Jacksonville, FL, for defendant-appellee Japan Tobacco
Inc. Also represented by NEAL N. BEATON, New York, NY;
BRUCE C. HAAS, CHRISTOPHER EARL LOH, Fitzpatrick,
Cella, Harper & Scinto, New York, NY.
                 ______________________

    Before NEWMAN, DYK, and STOLL, Circuit Judges.
NEWMAN, Circuit Judge.
    This appeal is from the dismissal of a declaratory
judgment action filed by AIDS Healthcare Foundation,
Inc. (“Healthcare” or “AHF”) against Gilead Sciences, Inc.
et al. (“Defendants”) in the United States District Court
for the Northern District of California. 1 On appellate
review, we conclude that this action does not meet the
requirements of the Declaratory Judgment Act.
                      BACKGROUND
    The Defendants produce or sell several drug products
containing the antiviral agent tenofovir alafenamide
fumarate (“TAF”), which is used in the treatment of AIDS.
The first TAF-containing drug product, brand name
Genvoya®, received FDA approval in November 2015 and
is a combination drug product containing TAF and other
specified antiviral agents. Dist. Ct. Op. at *3. In 2016,
the FDA approved two additional TAF-containing combi-
nation products—Descovy® and Odefesey®—each of
which contains at least one other antiviral agent. Id. The
Defendants have patents or are licensees of patents on
TAF and its combination products.

    1   AIDS Healthcare Found. v. Gilead Scis., Inc., No.
C 16-00443 WHA, 2016 WL 3648623 (N.D. Cal. July 6,
2016) (“Dist. Ct. Op.”).
AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.             3

    Healthcare provides medical care to persons afflicted
with AIDS, including providing antiviral drugs such as
the TAF products that Healthcare buys from the Defend-
ants. Id. Healthcare filed this suit requesting declara-
tions of invalidity for five patents purportedly covering
TAF and various combination products. Healthcare told
the district court that it brought this declaratory action in
order to “clear out the invalid patents” so that it “would
have the ability then to partner with generic makers and
purchase generic TAF as soon as it could become availa-
ble” on expiration of the five-year New Chemical Entity
exclusivity set forth in 21 U.S.C. § 355(j)(5)(F)(ii). Tr. of
Hr’g at 17:10–13, June 23, 2016, ECF No. 102; Dist. Ct.
Op. at *4–5.
    Healthcare argued that in view of the lengthy time
consumed by litigating patent validity, such litigation
needed to start well in advance of expiration of the five-
year exclusivity period. See, e.g., AHF Br. 5; Dist. Ct. Op.
at *4–5. Healthcare filed this declaratory action in Janu-
ary 2016, two months after the FDA approved Gen-
voya®—the first TAF-containing product to receive FDA
approval. The other TAF products were still undergoing
clinical trials and FDA approval procedures. It is undis-
puted that no unlicensed source was offering a TAF
product or preparing to do so when this declaratory action
was filed.
    The district court asked Healthcare to clarify its role
with respect to TAF products:
    Court: But the Healthcare, AIDS Healthcare is
    not going to be manufacturing anything? Or will
    you even be buying anything?
    Counsel: We would be purchasing it . . . .
    Court: So AIDS Healthcare Foundation is a con-
    sumer?
    Counsel: It is a consumer . . . .
4               AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

Tr. of Hr’g at 16:13–24, June 23, 2016, ECF No. 102.
Healthcare told the district court that it “had reached out
to a number of generic makers” but that “none of the
generic makers wanted to enter the market because there
was the fear of liability because of these patents.” Id. at
17:3–10.
    The district court ruled that Healthcare’s actions in
encouraging others to produce generic TAF products in
the future, and Healthcare’s interest in purchasing such
products, did not create a case of actual controversy in
terms of the Declaratory Judgment Act. Dist. Ct. Op. at
*5–6. Healthcare appeals, arguing that there are several
grounds on which it meets the declaratory judgment
criteria, and that the district court erred in dismissing
this action.
                       DISCUSSION
    Exercise of the Constitution’s judicial power is limited
to actual cases and immediate controversies. Muskrat v.
United States, 219 U.S. 346, 356 (1911). When this con-
stitutional requirement is not met, a court has no authori-
ty to decide the issues presented, whatever the
“convenience and efficiency” of such judicial action.
Hollingsworth v. Perry, 133 S. Ct. 2652, 2661 (2013)
(quoting Raines v. Byrd, 521 U.S. 811, 820 (1997)); see
Muskrat, 219 U.S. at 356 (“[U]nless [the exercise of the
judicial power] is asserted in a case or controversy within
the meaning of the Constitution, the power to exercise it
is nowhere conferred.”). The Declaratory Judgment Act
conforms to these principles, providing:
    In a case of actual controversy within its jurisdic-
    tion, except . . . , any court of the United States,
    upon the filing of an appropriate pleading, may
    declare the rights and other legal relations of any
    interested party seeking such declaration, wheth-
    er or not further relief is or could be sought. Any
    such declaration shall have the force and effect of
AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.           5

   a final judgment or decree and shall be reviewable
   as such.
28 U.S.C. § 2201(a).
    A plaintiff seeking a declaratory judgment bears the
burden of demonstrating that a case of actual controversy
existed at the time the declaratory action was filed.
Matthews Int’l Corp. v. Biosafe Eng’g, LLC, 695 F.3d
1322, 1328 (Fed. Cir. 2012). That requires a showing of
injury-in-fact, connection between the challenged conduct
and the injury, and redressability by the requested reme-
dy. Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83,
103–04 (1998).
     The existence of a patent, without more, does not cre-
ate a case of actual controversy. See Prasco, LLC v.
Medicis Pharm. Corp., 537 F.3d 1329, 1339 (Fed. Cir.
2008) (“[J]urisdiction generally will not arise merely on
the basis that a party learns of the existence of a patent
owned by another or even perceives such a patent to pose
a risk of infringement, without some affirmative act by
the patentee.” (quoting SanDisk Corp. v. STMicroelectron-
ics, Inc., 480 F.3d 1372, 1380–81 (Fed. Cir. 2007))).
    Healthcare presents several additional arguments for
declaratory jurisdiction, including that (1) Healthcare is
an indirect infringer of the TAF patents based on its
requests to potential producers to provide the patented
products; (2) Gilead’s non-response to Healthcare’s re-
quest for a covenant not to sue created a present contro-
versy; and (3) public policy favors invalidation of invalid
patents and thus the testing of “weak” patents. The
district court, receiving all of Healthcare’s arguments,
correctly held that the declaratory judgment criteria were
not met.
                             A
   The declaratory requirement of immediacy
   and reality is not met by litigation delay
6              AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

    The foundation of a declaratory action is that “the
facts alleged, under all the circumstances, show that there
is a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and
reality to warrant the issuance of a declaratory judg-
ment.” MedImmune Inc. v. Genentech, Inc., 549 U.S. 118,
127 (2007) (quoting Maryland Cas. Co. v. Pac. Coal & Oil
Co., 312 U.S. 270, 273 (1941)). “The immediacy require-
ment is concerned with whether there is an immediate
impact on the plaintiff and whether the lapse of time
creates uncertainty.” Sandoz Inc. v. Amgen Inc., 773 F.3d
1274, 1277 (Fed. Cir. 2014).
    Healthcare argues that it meets this requirement be-
cause of the lengthy time required for patent litigation,
such that an immediate start is needed. However, the
time consumed by litigation of a speculative future con-
troversy does not provide the “immediacy and reality”
required for declaratory judgment actions; nor is a declar-
atory tribunal precluded from providing expedited relief
when such is warranted. In this case, where there is no
present infringement, no threat of or possibility of in-
fringement litigation, and no meaningful preparation to
infringe, the “immediacy and reality” criteria are not met.
See, e.g., Prasco, 537 F.3d at 1338–39.
    The Sandoz court summarized the application of the
law: “We have assessed ‘immediacy’ by considering how
far in the future the potential infringement is, whether
the passage of time might eliminate or change any dis-
pute, and how much if any harm the potential infringer is
experiencing, at the time of suit, that an adjudication
might redress.” 773 F.3d at 1278. In Cat Tech LLC v.
Tubemaster, Inc., 528 F.3d 871, 880 (Fed. Cir. 2008), the
court elaborated that “the issue of whether there has been
meaningful preparation to conduct potentially infringing
activity remains an important element in the totality of
circumstances which must be considered in determining
whether a declaratory judgment is appropriate,” citing
AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.            7

Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuti-
cals Corp., 482 F.3d 1330, 1339 (Fed. Cir. 2007), for the
principle that “MedImmune requires that a court look at
‘all the circumstances’ to determine whether a justiciable
Article III controversy exists.” For “[i]f a declaratory
judgment plaintiff has not taken significant, concrete
steps to conduct infringing activity, the dispute is neither
‘immediate’ nor ‘real’ and the requirements for justiciabil-
ity have not been met.” Cat Tech, 528 F.3d at 880. Thus
“meaningful preparation to conduct potentially infringing
activity” is “an important element in the totality of cir-
cumstances which must be considered in determining
whether a declaratory judgment is appropriate.” Prasco,
537 F.3d at 1336 n.4 (quoting Cat Tech, 528 F.3d at 880).
Here, however, there was no showing or representation of
such “meaningful preparation.”
    The district court observed the absence of evidence of
preparation to produce a product covered by any of the
TAF patents, and found “significant uncertainty about the
nature of any hypothetical product.” Dist. Ct. Op. at *5.
The uncertainty of whether future infringement might
occur at all weighs against the immediacy and reality
requirement of declaratory action. Matthews, 695 F.3d at
1328–29. In addition, precedent illustrates that the mere
possibility of future infringement does not meet the
immediacy and reality criteria, for “[a] party may not
obtain a declaratory judgment merely because it would
like an advisory opinion,” id. at 1329 (quoting Cat Tech,
528 F.3d at 881). For example, in Benitec Australia, Ltd.
v. Nucleonics, Inc., 495 F.3d 1340, 1349 (Fed. Cir. 2007),
this court held that a representation that the declaratory
plaintiff “expects to begin work shortly” on “potentially
infringing” activities was of insufficient immediacy to
support a declaratory action.
    The district court concluded that Healthcare’s role as
an encourager of others to provide infringing product in
the future, and its role as a future purchaser of such
8               AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

product, fell short of the declaratory judgment require-
ments of immediacy and reality. Dist. Ct. Op. at *6. We
note that the Hatch-Waxman statute created an artificial
act of infringement by the filing of a certain abbreviated
new drug application (“ANDA”); this is an explicit statu-
tory basis for litigation before actual infringement occurs.
See Acorda Therapeutics Inc. v. Mylan Pharm. Inc., 817
F.3d 755, 760–62 (Fed. Cir. 2016). Here, it is undisputed
that no potential generic producer had filed an ANDA for
any TAF-containing products at the initiation of this
action, for TAF’s New Chemical Entity period of exclusivi-
ty forecloses such a filing until November 2019; nor is
there any other basis for declaratory judgment jurisdic-
tion.     The district court correctly concluded that
Healthcare, “in its current posture, cannot invoke any
statutory relaxation of otherwise-applicable immediacy
and reality requirements,” Sandoz, 773 F.3d at 1281, and
Healthcare has not otherwise shown that there is a con-
troversy of sufficient immediacy and reality to create
declaratory judgment jurisdiction.
                             B
    Liability for inducing infringement requires
    that there be direct infringement
    Healthcare argues that it is incurring present liability
for inducing infringement, 35 U.S.C. § 271(b), by its
attempts to persuade possible manufacturers to provide
generic TAF products after the five-year New Chemical
Entity period of exclusivity. Healthcare refers to its
“public statements soliciting unlicensed production of
TAF,” AHF Br. 5, and its “request[s] to place orders with
pharmaceutical manufacturers” for the patented TAF
products. AHF Br. 13.
    Liability for induced infringement requires that some
other entity is directly infringing the patent. Power
Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc.,
843 F.3d 1315, 1331 (Fed. Cir. 2016). Jurisdiction for a
AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.            9

declaratory action premised on an inducement theory
does not arise in the absence of “concrete steps [that] have
been taken with the intent to conduct activity which could
constitute infringement.” Fina Research, S.A. v. Baroid
Ltd., 141 F.3d 1479, 1485 (Fed. Cir. 1998).
     The district court was told that Healthcare’s requests
for generic production of TAF-containing drug products
elicited no response from the solicited pharmaceutical
manufacturers. Dist. Ct. Op. at *3; see Tr. of Hr’g at
18:3–11, June 23, 2016, ECF No. 102 (stating that no
manufacturer responded to Healthcare’s requests). There
was no evidence or allegation that Healthcare’s requests
had induced potentially infringing activity.
    The district court also considered Healthcare’s role as
a purchaser of TAF drugs. Dist. Ct. Op. at *5. “Such an
economic interest alone, however, cannot form the basis of
an ‘actual controversy’ under the Declaratory Judgment
Act.” Creative Compounds, LLC v. Starmark Labs., 651
F.3d 1303, 1316 (Fed. Cir. 2011) (quoting Microchip Tech.
Inc. v. Chamberlain Group, Inc., 441 F.3d 936, 943 (Fed.
Cir. 2006)). The district court reached the correct conclu-
sion, for as discussed post, a potential customer’s interest
in buying infringing product does not create present
liability for induced infringement. See Arris Grp., Inc. v.
British Telecomms. PLC, 639 F.3d 1368, 1374–75 (Fed.
Cir. 2011) (“In the absence of a controversy as to a legal
right, a mere adverse economic interest is insufficient to
create declaratory judgment jurisdiction.”).
     Healthcare also argues that its present actions “create
liability for indirect infringement the moment an ANDA
is filed.” AHF Reply Br. 6. This theory of possible future
liability does not achieve the immediacy and reality
required by the Declaratory Judgment Act.
    The district court correctly held that declaratory
standing did not arise on the theory of induced or indirect
infringement.
10              AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

                             C
     An interest in buying infringing product is
     not an adverse legal interest for declaratory
     jurisdiction
    Healthcare argues that its legal interests are adverse
to the Defendants, thereby creating a present controversy
subject to declaratory action. However, a general interest
in a patented product, without foundation in actual case-
or-controversy, does not create declaratory standing.
Litigation-supportive adverse legal interests exist where
there is “a dispute as to a legal right, such as an underly-
ing legal cause of action that the declaratory defendant
could have brought or threatened to bring, if not for the
fact that the declaratory plaintiff had preempted it.”
Creative Compounds, 651 F.3d at 1316; see also AbbVie
Inc. v. MedImmune Ltd., 881 F.3d 1334, 1336 (Fed. Cir.
2018) (“As a general principle, federal courts, when de-
termining declaratory judgment jurisdiction, often look to
the character of the threatened action that the declarato-
ry-judgment defendant might have brought. In other
words, courts examine declaratory actions, at least in
part, by looking to the mirror image suit the declaratory
defendant might bring if and when it seeks coercive
relief.” (internal quotation marks and citations omitted)).
    An adverse economic interest alone is insufficient.
Arris Grp., 639 F.3d at 1374; see Caraco Pharm. Labs.,
Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1296–97 (Fed.
Cir. 2008) (explaining why “the dispute as to infringement
or invalidity of the relevant Orange-Book-listed patents”
afforded jurisdiction to a generic manufacturer having an
adverse economic interest). In response to the district
court’s inquiry, see ante, Healthcare verified that its sole
interest was in buying cheaper product than was availa-
ble from the Defendants.
    The district court recognized that an actionable legal
interest is not here present, for neither Healthcare nor
AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.             11

any producer of TAF products is infringing or preparing to
infringe any TAF patent. Precedent clearly counsels that
an adverse economic interest is not of itself an adverse
legal interest.
    Healthcare argues that its risk of liability need not be
absolute in order to establish an adverse legal interest
sufficient to support declaratory standing, citing Fina
Research, 141 F.3d at 1480, and Allergan, Inc. v. Alcon
Laboratories, Inc., 324 F.3d 1322, 1332 (Fed. Cir. 2003).
These cases do not support Healthcare’s argument.
    In Fina Research, the declaratory plaintiff was a for-
eign entity that was manufacturing and selling an ingre-
dient of drilling mud abroad; the holder of United States
patents on compositions containing the drilling mud had
sent letters to the foreign producer, stating that the
patentee would sue for infringement if the ingredient
were introduced in the United States. The court held that
such a direct threat of suit against an existing product
and its producer established declaratory jurisdiction.
Fina Research, 141 F.3d at 1482–84; see also SanDisk,
480 F.3d at 1382 (describing how the presentation of “a
thorough infringement analysis” and “element-by-
element” product analyses created a case or controversy
supporting declaratory judgment jurisdiction). In con-
trast, here the record does not refer to threats of litigation
on importation of existing product, or even an identifica-
tion of any product whose importation may violate Gile-
ad’s patent rights. No such TAF-containing products are
reported to exist.
    In Allergan, the court considered whether a Hatch-
Waxman proceeding was available on the filing of an
ANDA directed to an unpatented product and use; the
court held that a Hatch-Waxman action can be for in-
duced infringement, and considered whether possible
inducement of an infringing use that has not received
FDA approval provided Hatch-Waxman jurisdiction. 324
12              AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

F.3d at 1331–32. The unique facts of Allergan do not
support the declaratory jurisdiction here requested by
Healthcare.
    Precedent illustrates the variety of circumstances in
which declaratory jurisdiction has been considered, but no
precedent supports Healthcare’s position. The district
court correctly held that Healthcare did not meet the
criteria of declaratory judgment standing.
                             D
     The absence of a covenant not to sue does
     not create a declaratory controversy
    Healthcare argues that the Defendants did not agree
to grant a covenant not to sue, and that since Gilead is
known to protect its patent rights, the withholding of a
covenant not to sue supports declaratory jurisdiction.
     However, the absence of a covenant not to sue infring-
ers did not create a justiciable case or controversy. Under
the circumstances here, there was no affirmative act by
the patentee to assert patent rights against Healthcare
for any present or planned activity. See generally BP
Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 980 (Fed.
Cir. 1993) (confirming the relevance of “a patentee’s
refusal to give assurances that it will not enforce its
patent”); see also SanDisk, 480 F.3d at 1380–81
(“[D]eclaratory judgment jurisdiction generally will not
arise merely on the basis that a party learns of the exist-
ence of a patent owned by another or even perceives such
a patent to pose a risk of infringement, without some
affirmative act by the patentee.” (emphasis added)). The
Defendants also point out that the covenant not to sue
was not requested by Healthcare until after this suit was
filed, and thus this aspect was not among the circum-
stances at the time of filing. Tr. of Hr’g at 18:11–24, June
23, 2016, ECF No. 102.
AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.           13

    The absence of a covenant not to sue did not create a
case-or-controversy between the Defendants and
Healthcare. See Prasco, 537 F.3d at 1341 (“[T]hough a
defendant’s failure to sign a covenant not to sue is one
circumstance to consider in evaluating the totality of the
circumstances, it is not sufficient to create an actual
controversy—some affirmative actions by the defendant
will also generally be necessary.”) The absence of a
covenant not to sue, even had it been timely requested
and denied, does not here shift the balance to create a
controversy of the immediacy and reality needed to sup-
port declaratory jurisdiction.
                             E
   Policy aspects involve considerations in ad-
   dition to declaratory principles
     Healthcare argues that public policy is served by in-
validation of invalid patents, and thus supports immedi-
ate challenge to the “weak” TAF patents. Yet the Hatch-
Waxman Act is already a balance of several policy inter-
ests, seeking to preserve the patent incentive to invent
new drugs, while enabling validity challenge by ANDA
filers before actual infringement occurs. Andrx Pharm.,
Inc. v. Biovail Corp., 276 F.3d 1368, 1371 (Fed. Cir. 2002).
    The present policy reflects a balance of several factors
and public interests; any policy change would require re-
exploration of all aspects. Healthcare’s proposal of a
change in policy to facilitate challenge to drug patents
would warrant legislative consideration, not departure
from precedent. SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348,
1358 (2018) (“Policy arguments are properly addressed to
Congress, not this Court.”)
                       CONCLUSION
    The district court correctly held that Healthcare had
not established a case of actual controversy within the
meaning of the Constitution and the Declaratory Judg-
14           AIDS HEALTHCARE FOUND.   v. GILEAD SCIS., INC.

ment Act. The dismissal of Healthcare’s declaratory
action is affirmed.
                   AFFIRMED