Generic’s Counterclaims for Non-Infringement are Proper Despite Covenant Not to Sue From Brand

On April 9, 2014, in Purdue Pharmaceutical Products, L.P. v. TWi Pharmaceuticals, Inc., Civ. No. 12-5311 (D.N.J.), Judge Jose L. Linares of the United States District Court for the District of New Jersey ruled that a generic drug company who is not a first-filer has standing to assert a counterclaim for non-infringement despite the issuance of a covenant not to sue by the NDA holder.  Although this issue has yet to be squarely addressed by the Federal Circuit, non-first filers should consider asserting non-infringement counterclaims for all Orange Book patents on which they have filed paragraph IV certifications, thereby preserving their ability to trigger the first-filer’s 180-day exclusivity period.

Defendant TWi Pharmaceuticals, Inc. (TWi) submitted an ANDA seeking paragraph IV approval for its generic version of Intermezzo®.  By the time TWi filed its ANDA, at least four other generic drug companies had already submitted ANDAs relating to zolpidem tartrate sublingual tablets.

Thereafter, on August 20, 2013, Purdue filed a two-count complaint seeking a declaratory judgment that TWi infringed two of the four patents listed in the Orange Book for Intermezzo®.    TWi filed a counterclaim seeking a declaration of noninfringement as to all four of the listed Orange Book patents.  In response, Purdue tendered a covenant not to sue as to two of the patents, and filed a motion to dismiss TWi’s counterclaims of noninfringement as to those patents.  Specifically, Purdue asserted that no Article III case or controversy existed because (1) the covenant not to sue rendered the action moot; (2) under the Hatch-Waxman Act, TWi’s injury was not redressable; and (3) the dispute was not ripe in light of TWi’s inability to obtain tentative FDA approval.

As to the covenant not to sue, the court acknowledged that TWi did not face infringement liability, but nonetheless held that TWI had a cognizable legal interest.  Namely, the court explained that TWi, as a non-first filer, would be unable to obtain FDA approval until the first filer’s 180-day exclusivity period was either forfeited or ran out, and that one way for TWi to trigger the first ANDA filer’s exclusivity period was to obtain a favorable final judgment as to the listed patents for Intermezzo®.  As a result, despite the lack of infringement liability, the covenant not to sue did not moot TWi’s counterclaims.

Purdue next argued that TWi’s counterclaims lacked redressability.  Specifically, Purdue claimed that a judgment in favor of TWi on the two patents subject to the covenant not to sue would not independently trigger the first ANDA filer’s exclusivity period, as TWi had not yet obtained tentative FDA approval, and therefore, the court could award no concrete relief.  In other words, Purdue argued that an ANDA applicant could not seek a declaratory judgment as to noninfringement until it had first received FDA approval.  And although the court agreed that TWi required tentative FDA approval in order to trigger the first filer’s 180-day exclusivity period, it noted that the statute did not explicitly require TWi to obtain tentative approval prior to seeking a declaratory judgment of noninfringement.  Moreover, the court explained that requiring TWi to obtain tentative approval as a condition precedent would undermine a key policy of the Hatch-Waxman Act – early resolution of patent disputes.  As a result, the court concluded that TWi’s counterclaims were redressable.

Finally, as to the ripeness inquiry, the court explained that TWi had already submitted its ANDA for FDA approval and that additional factual development would not help the court determine whether the proposed product would infringe the two patents.  Moreover, the court explained that delaying its decision as to infringement could have an immediate and substantial impact on TWi in the form of lost profits.  In so stating, the court declined to adopt Purdue’s argument that the counterclaims for noninfringement were not ripe for judicial review, and ultimately concluded that TWi had standing to assert counterclaims for noninfringement as to all patents listed in the Orange Book for Intermezzo®.