Seattle Children’s Hospital v. Akorn, Inc.

Case Name:  Seattle Children's Hospital v. Akorn, Inc., Civ. No. 10-CV-5118, 2011 U.S. Dist. LEXIS 145998 (N.D. Ill. Dec. 20, 2011) (Dow, Jr., J.).

Drug Product and Patent(s)-in-Suit: TOBI^® (tobramycin inhalation solution); U.S. Patent No. 5,508,269

Nature of the Case and Issue(s) Presented:  Whether a covenant not to sue moots the entire controversy between parties in a patent infringement action.  Plaintiffs moved to dismiss their lawsuit for (i) lack of subject matter jurisdiction, or (ii) in the alternative, for dismissal without prejudice pursuant to Fed. R. Civ. P. 41(a)(2).  On June 27, 2011, Plaintiffs gave Akorn a covenant not to sue, and as a result, argued that the Court no longer had subject matter jurisdiction because the covenant mooted the controversy between the parties.  In the alternative, Plaintiffs asked the Court to dismiss the action pursuant to Rule 41(a)(2), given the early stage of the proceedings and the alleged lack of prejudice to Akorn.  Because Akorn was not the first-to-file generic company-non-party Teva Pharma. USA, Inc. was-Akorn contended that the only way for it to remove Teva's exclusivity period (which had not begun and had not been forfeited) as a barrier to the approval of its ANDA was to obtain final judgment concerning the ‘269 patent.  Akorn, therefore, moved to amend its answer to include a claim for a declaratory judgment of noninfringement.  According to Akorn, if the Court granted plaintiffs' motion, Akorn would be deprived indefinitely of the legal right to enter the market.  The Court granted Akorn's motion to amend and denied plaintiffs' motion to dismiss.

Why Akorn Prevailed:  (Covenant not to sue does not moot regulatory controversy regarding generic market entrance).  Akorn admitted that the covenant resolved the infringement issue in its case with plaintiffs, but maintained that it did not resolve the regulatory issue, namely that under the Hatch-Waxman Act because Akorn was not the first generic filer, the FDA could not approve its ANDA until Teva's 180-day exclusivity period was exhausted or forfeited.  Absent a court ruling that the ‘269 patent was invalid or not infringed, Akorn would not be able to market its generic drug until 180 days after Teva began marketing its drug.  Citing Federal Circuit precedent, the Court recognized that the "creation of an independent barrier to the drug market by a brand drug company that deprives the generic company of an economic opportunity to compete satisfies the injury-in-fact and causation requirements of Article III standing."  Because judgment in Akorn's favor would eliminate the "potential" for the ‘269 patent to exclude Akorn from the drug market, and because Akorn had not stipulated to the validity, infringement or enforceability of any other patent listed in the Orange Book for TOBI, the Court granted Akorn's motion.

Plaintiffs' argument that the court had no jurisdiction because Akorn had not yet received tentative approval from the FDA was also rejected.  The 2003 amendments to the Hatch-Waxman Act created a civil action to obtain patent certainty (CAPC) that an ANDA applicant could bring at a time when it did not have tentative approval.  The "case law and the expression of congressional intent...as well as the realities and time commitments associated with complex litigation, support Akorn's attempt to pursue tentative approval of its ANDA with the FDA while simultaneously seeking a favorable judgment in this action...."

The Court denied plaintiffs' motion to dismiss pursuant to Rule 41 because, among other reasons, Akorn had already invested significant effort and expense in that it prepared, filed, and served a summary-judgment motion in the case, and the parties had extensively briefed the instant motion to dismiss.

Because the Court found that an actual case or controversy existed, it granted Akorn leave to file an amended answer to assert a claim for declaratory judgment of noninfringement.