Federal Circuit Holds That a Customer Does Not Have Standing For a Declaratory Judgment

The Federal Circuit recently held that a healthcare provider did not have standing to bring a declaratory judgment action where its only interest was as a purchaser of potential generic versions of the patented drug. AIDS Healthcare Foundation v. Gilead Sciences, Inc., No. 2016-2475 (Fed. Cir. May 11, 2018).  The court held that absent direct infringement or liability for induced infringement, a consumer of a patented product has no standing to challenge the validity of the patent under the Declaratory Judgment Act.

AIDS Healthcare provides treatment to individuals affected with AIDS, including patented drug products containing the antiviral agent tenofovir alafenamide fumarate (“TAF”).  AIDS Healthcare filed a declaratory judgment action challenging the validity of five patents relating to TAF two months after the FDA approved the first TAF-containing product.  AIDS Healthcare argued that the immediacy requirement was satisfied because, given the lengthy patent litigation process, litigation must start well before the NCE exclusivity period was set to expire.  The court rejected this argument, explaining that the Hatch-Waxman Act creates an explicit statutory basis for litigation before actual infringement occurs:  the filing of an ANDA.  Here, no ANDA had been filed, nor could be until the NCE exclusivity period expired.  Given the uncertainty about the nature of a hypothetical generic product, AIDS Healthcare failed to satisfy the immediacy requirement.

AIDS Healthcare next argued that its attempts to persuade manufacturers to produce generic TAF products create liability for induced infringement.  The court explained that liability for induced infringement requires that some other entity is directly infringing the patent.  As no generic manufacturers responded to AIDS Healthcare’s solicitations, there was no evidence of potentially infringing activity.  Further, AIDS Healthcare’s mere economic interest in buying infringing product does not create present liability for induced infringement, nor does it create an adverse legal interest sufficient to satisfy the actual case or controversy requirement.  The patent owner’s refusal to grant a covenant not to sue also failed to create a justiciable case or controversy, which requires an affirmative act by the patentee to assert its patent rights.

The Federal Circuit repeatedly distinguished AIDS Healthcare’s role as a consumer, as opposed to a manufacturer. Thus, a drug manufacturer could potentially satisfy the standing requirement for a declaratory judgment action when challenging the validity of competitors’ patents prior to any direct infringement by demonstrating an intention to produce a competing patented product.

Thanks to Elvis Kim, Twin Cities Diversity in Practice Summer Rotation Clerk and law student at the University of Minnesota Law School, for his contributions to this post.