Apotex, Inc. v. Food & Drug Administration

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Decided June 6, 2006

No. 06-5105

APOTEX, INC.,

APPELLANT

v.

FOOD & DRUG ADMINISTRATION, ET AL.,

APPELLEES

TEVA PHARMACEUTICALS USA, INC., ET AL.,

INTERVENORS

On Motion for Summary Affirmance

______

Appeal from the United States District Court

for the District of Columbia

(No. 06cv00627)

Jay P. Lefkowitz, Steven A. Engel, John C. O’Quinn, and

Michael D. Shumsky filed the motion for summary affirmance

and the reply thereto for intervenor Teva Pharmaceuticals USA,

Inc.

Arthur Y. Tsien, William A. Rakoczy, and Christine J. Siwik

filed the opposition for appellant.

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Before: HENDERSON, TATEL, and BROWN, Circuit Judges.

Opinion for the Court filed PER CURIAM.

PER CURIAM: This case is the latest flare-up in a long-

running dispute between the Food and Drug Administration

(FDA) and several generic drug manufacturers as to what

qualifies under the Hatch-Waxman Act as “a decision of a court

. . . holding [a challenged] patent . . . to be invalid or not

infringed.” 21 U.S.C. § 355(j)(5)(B)(iv) (2000) (amended

2003). The stakes are high: any such decision triggers the start

of a 180-day exclusivity period during which one generic

manufacturer—the first to file an abbreviated new drug

application (ANDA) with FDA—can market its product without

competition from other manufacturers. We assume familiarity

with this complicated regulatory scheme, which we have

described in detail elsewhere. See Mova Pharm. Corp. v.

Shalala, 140 F.3d 1060, 1063-65 (D.C. Cir. 1998).

The present dispute arises out of a 1998 FDA decision

finding that a district court order dismissing a patent suit for lack

of subject matter jurisdiction could not qualify as a “court

decision” sufficient to trigger the exclusivity period. An

aggrieved generic drug manufacturer, Teva Pharmaceuticals,

challenged FDA’s decision, which we set aside because “FDA[]

fail[ed] to explain adequately its refusal to treat the . . . dismissal

as a triggering ‘court decision.’” Teva Pharms., USA, Inc. v.

FDA, 182 F.3d 1003, 1012 (D.C. Cir. 1999) (Teva I). We

flagged three issues for FDA’s attention. First, and most

important, we observed that “the significance of a court’s

‘decision’ or ‘holding’ often lies in its preclusive effect,” id. at

1008, and pointed out that

the . . . dismissal [for lack of jurisdiction] appears to

meet the requirements of a triggering ‘court decision’

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because [the] court had to make a predicate finding with

respect to whether [the patent holder] would ever sue

[the generic drug manufacturer] for infringement in

order to conclude that there was no case or controversy

between the parties. . . . On remand, of course, the FDA

will have the opportunity to explain why it fails to meet

them.

Id. at 1009. Second, we noted that FDA never explained why a

decision holding a patent unenforceable was a triggering court

decision, but that a dismissal based on a finding of

unenforceability was not. Id. at 1009-10. And third, we

explained that FDA’s position appeared to conflict with an

internal agency guidance document as well as Granutec, one of

the agency’s earlier decisions. See Granutec, Inc. v. Shalala,

No. 97-1873, 1998 WL 153410 (4th Cir. Apr. 3, 1998)

(reviewing FDA’s Granutec decision). Teva I, 182 F.3d at

1010-11.

On remand, FDA reached the same conclusion. This time

around, however, it justified its decision by establishing a hard-

and-fast rule: the agency will never look beyond the face of a

court order to ascertain whether it qualified as a triggering court

decision. Because a dismissal for lack of subject matter

jurisdiction does not, on its face, make any “holding” on the

invalidity, noninfringement, or unenforceability of a patent,

FDA found that the dismissal did not trigger exclusivity. As an

“explanation” in support of this rule, FDA submitted a short

affidavit from Douglas Sporn, then director of the Office of

Generic Drugs. In his affidavit, Sporn gave just one reason for

the new rule, namely, that a more sophisticated inquiry “could

place an unbearable burden upon [FDA] staff and would require

a substantial use of [FDA]’s limited resources” because “[FDA]

lacks the expertise to make accurate determinations about the

legal effect, such as estoppel, of representations relating to

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patents that are not embodied in a court decision.” Sporn Aff.

at 6, reprinted in Tsien Decl. Ex. F. We rejected this self-

serving justification in Teva II, explaining that “FDA did not

meaningfully address [the] question [posed in Teva I] on

remand.” Teva Pharms., USA, Inc. v. FDA, No. 99-5287, 2000

WL 1838303, at *1 (D.C. Cir. Nov. 15, 2000) (Teva II).

Several years later, Teva filed the first ANDA to market a

generic version of Pravachol, a Bristol-Myers Squibb Co.

(BMS) product, in ten, twenty, and forty milligram tablets.

BMS’s patent on the Pravachol molecule expired on April 20,

2006, at which point Teva expected to roll out its product and

take advantage of its 180-day exclusivity period. But one of

Teva’s competitors had other plans. In an effort to trigger

Teva’s 180-day exclusivity period long before Teva could

market its generic product, Apotex, Inc., appellant herein, filed

suit against BMS in the Southern District of New York in

October 2003 seeking a declaratory judgment that its own

generic version of Pravachol did not violate various BMS

patents. Although BMS moved to dismiss the complaint for

lack of subject matter jurisdiction, BMS and Apotex ultimately

resolved the dispute by agreeing to a “stipulation and order”

stating that BMS had no intention of suing Apotex and that the

complaint should be dismissed “for lack of subject matter

jurisdiction.” Stipulation & Order at 3, Apotex Inc. v. Bristol-

Myers Squibb Co., No. 04 CV 2922 (S.D.N.Y. July 23, 2004),

reprinted in Tsien Decl. Ex. I. The district court signed the

“stipulation and order” on July 23, 2004.

Apotex then asked FDA whether the signed stipulation

qualified as a triggering court decision. Believing itself bound

by substantive holdings it saw in Teva I and Teva II, FDA

replied that the signed stipulation did qualify and that Teva’s

180-day exclusivity period had long since run its course.

Determined not to lose its exclusivity period, Teva filed suit

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challenging FDA’s decision. In Teva Pharmaceuticals USA,

Inc. v. FDA, 441 F.3d 1, 5 (D.C. Cir. 2006) (Teva III), we held

that “FDA mistakenly thought itself bound by our decisions”

and that its “error render[ed] its decision arbitrary and

capricious.”

On remand from Teva III, FDA reversed itself, finding

Apotex’s “stipulation and order” insufficient to trigger Teva’s

180-day exclusivity. Justifying this reversal, it re-adopted its

earlier rule that a triggering “court decision” must include an

“actual ‘holding’ . . . evidenced by language on the face of the

court’s decision showing that the determination of invalidity,

noninfringement, or unenforceability has been made by the

court.” Letter from Gary Buehler, Dir., Office of Generic

Drugs, to Tammy McIntire, Apotex Corp. 2 (Apr. 11, 2006),

reprinted in Tsien Decl. Ex. A (Buehler Letter). Given the

vagaries of patent law and FDA’s lack of expertise in patent

matters, the agency explained that inquiring into the estoppel

effects of representations embodied in district court opinions

would spawn litigation and lead to unpredictability in the

marketplace. Concluding that “[i]t is in the public’s interest, as

well as FDA’s own interest, to have exclusivity triggering

determinations governed by a legal regime that is clear and

easily administered,” id. at 14, FDA found that the “stipulation

and order” never triggered the 180-day exclusivity period.

Apotex filed suit challenging FDA’s decision as arbitrary

and capricious, and the district court granted Teva’s motion to

intervene. Apotex then moved for a temporary restraining order

and a preliminary injunction forbidding FDA from allowing

Teva to begin exclusive marketing of a generic version of

Pravachol. The district court denied the motion, reasoning that

Apotex had no chance of prevailing on the merits:

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Not only did the agency’s fifteen-page, single-spaced

remand decision thoughtfully deconstruct the

multifaceted implications of the estoppel and

holding-on-the-merits approaches, but it also sufficiently

addressed each of the three concerns raised in Teva I and

recalled in Teva III. There is no “want of reasoned

decisionmaking” here.

Apotex, Inc. v. FDA, No. 06-cv-00627, slip op. at 29-30 (D.D.C.

Apr. 19, 2006).

Apotex now appeals, and Teva has moved for summary

affirmance. On April 24, 2006 we denied Apotex’s request for

a stay pending appeal. Apotex, Inc. v. FDA, No. 06-5105 (D.C.

Cir. Apr. 24, 2006). We now summarily affirm the district

court’s refusal to grant the preliminary injunction.

Apotex argues that “FDA’s decision merely regurgitates the

same tired explanations and rationales that this Court previously

rejected” in Teva II, Apotex’s Emergency Mot. for Injunctive

Relief Pending Appeal 6, and that therefore it has a strong

likelihood of demonstrating the decision’s unreasonableness.

We disagree.

Apotex correctly points out that we rejected FDA’s previous

effort to adopt the rule that a holding of invalidity,

noninfringement, or unenforceability must be evident on the

face of a court order. See Teva II, 2000 WL 1838303. But we

never suggested such a rule was untenable; rather, we found that

it “fail[ed] for want of reasoned decisionmaking.” Id. at *2. In

sharp contrast to the decision at issue in Teva II, FDA’s rejection

of Apotex’s “stipulation and order” as a triggering court

decision addressed concerns identified in Teva I. Indeed, FDA

provided entirely new justifications for declining to look beyond

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the face of a court order. To be sure, those justifications share

a common premise with the drain-on-resources rationale laid out

in the Sporn affidavit—that “applying the estoppel standard

articulated by the Teva I court would often require FDA to

resolve factually intensive questions with little guidance from

the courts on how to apply the facts to the law.” Buehler Letter

8. But the validity of this premise is not in question. FDA is

indisputably correct that equitable estoppel in the patent law

context rarely presents pure issues of law amenable to easy

resolution. As FDA pointed out, the Federal Circuit has

established a context-specific three-element inquiry into whether

patent holders are equitably estopped from enforcing their

patents. See A.C. Aukerman Co. v. R.L. Chaides Constr. Co.,

960 F.2d 1020, 1028 (Fed. Cir. 1992) (en banc). We have little

doubt that applying this standard would force FDA, an agency

lacking patent law expertise, to resolve borderline questions

about the estoppel effects of patent-holder declarations.

As FDA sees it, the uncertainty inherent in an estoppel-

based inquiry would lead to two inter-related problems, neither

of which relates to the drain-on-resources rationale set forth in

the quite brief Sporn affidavit the agency relied on in Teva II.

First, FDA believes that the uncertainty would “undermin[e]

marketplace certainty and interfer[e] with business planning and

investment.” Buehler Letter 14. And second, FDA worries that

forcing it to parse court decisions will invite fruitless litigation

from generic drug manufacturers seeking to trigger, or to avoid

triggering, exclusivity periods. In FDA’s view,

[w]ere [the agency] to adopt a standard less objective

and clear than the “holding-on-the-merits” standard, the

opportunities for disputes regarding the tripping of the

court decision trigger would increase. . . . Encouraging

highly-interested and well-financed litigants to pursue

ever-finer distinctions, ever farther removed from the

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language of the statute and from its purposes, does not

advance the public’s interest. It offers no guarantee of

more rapid generic drug approvals, only a high

likelihood of delay due to litigation . . . .

Id. In our view, these perfectly reasonable propositions

adequately support FDA’s position that an estoppel-based

approach to the court decision trigger is ill-advised.

Apotex also argues that FDA’s decision cannot stand

because the agency failed to address a concern discussed in

Teva I, namely, a possible inconsistency between its holding-on-

the-merits approach and Granutec. Apotex is wrong. Not only

did FDA address the Granutec issue, but it did so persuasively

by pointing out that the summary judgment order at issue in

Granutec was “clearly a holding on the merits of patent

noninfringement as a matter of law.” Buehler Letter 12; see also

Teva II, 2000 WL 1838303, at *3 (Edwards, J., dissenting) (“It

is clear from the face of the summary judgment order at issue in

Granutec that the court there had issued a decision on the

merits.”). By contrast, the “stipulation and order” here, as well

as the dismissal for lack of subject matter jurisdiction at issue in

Teva I, make no such holding on their faces.

Next, Apotex argues that FDA cannot justify treating court

decisions that include a patent holder’s promise not to sue

differently from decisions explicitly holding a patent

unenforceable. But we see nothing inconsistent about FDA

saying on the one hand that a court order holding a patent

unenforceable will trigger the 180-day period, and on the other

that it will not look beyond the face of a court order to see if the

patent may be unenforceable because of one of the party’s

representations. While Apotex’s claim might have merit if FDA

failed to explain why it chose to adopt such a rule, here it

provided an ample explanation.

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Finally, Apotex contends that FDA’s interpretation

“nullifies” the declaratory judgment mechanism underlying the

Hatch-Waxman Act. As Apotex observes, no generic

manufacturer can maintain an action against a patent holder who

has promised never to sue for infringement since, under settled

Federal Circuit case law, any such promise would relieve the

challenger of a reasonable apprehension of suit and moot a

declaratory judgment action. See Super Sack Mfg. Corp. v.

Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995).

According to Apotex, this creates an anomalous situation:

although a patent might be unenforceable because of a patent

holder’s representations, no court would have jurisdiction to

render a holding to that effect. This arguable anomaly, however,

nullifies nothing in the Hatch-Waxman Act. Congress knew that

federal courts lack jurisdiction where no case or controversy

exists, yet it nonetheless chose to make the exclusivity trigger “a

decision of a court . . . holding the [challenged] patent . . . to be

invalid or not infringed.” 21 U.S.C. § 355(j)(5)(B)(iv) (2000)

(amended 2003). Congress’s regulatory scheme thus depends in

large measure on whether courts can maintain jurisdiction over

patent suits. If a court cannot constitutionally assert jurisdiction,

then certainly one reasonable view is that it cannot issue a

“decision” that “holds” anything. This is FDA’s position, and

while it may not reflect the only possible interpretation of the

court decision trigger, see Teva I, 182 F.3d at 1012 (noting that

“FDA is likely correct that [an estoppel-based] interpretation is

not the only permissible construction of the ‘court decision’

requirement”), it is in no way inconsistent with the plain

language of the statute. See Ariz. Pub. Serv. Co. v. EPA, 211

F.3d 1280, 1287 (D.C. Cir. 2000) (“As long as the agency stays

within Congress’ delegation, it is free to make policy choices in

interpreting the statute, and such interpretations are entitled to

deference.” (internal quotation marks and alterations omitted)).

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In short, Apotex has little likelihood of succeeding on the

merits of its claim. See CityFed Fin. Corp. v. Office of Thrift

Supervision, 58 F.3d 738, 746 (D.C. Cir. 1995) (requiring the

moving party to “demonstrate . . . a substantial likelihood of

success on the merits”). Thus having no need to address the

other preliminary injunction factors, see City of Las Vegas v.

Lujan, 891 F.2d 927, 935 (D.C. Cir. 1989) (affirming district

court’s denial of preliminary injunction without addressing

irreparable injury because appellant had insufficient likelihood

of success on the merits), we affirm the district court’s order and

remand for further proceedings consistent with this opinion.

So ordered.