Federal Circuit Upholds Dismissal of Prasco's Suit for Declaratory Judgment on Medicis' Triaz Patents

Holding:

The U.S. Court of Appeals for the Federal Circuit affirmed a district court's dismissal of a suit brought against Medicis Pharmaceutical Corp. by a generics manufacturer that sought a non-infringement judgment. In this case over patents relating to the benzoyl peroxide cleansing product Triaz, the Federal Circuit held that plaintiff-appellant Prasco, LLC ('Prasco") failed to establish a case or controversy under Article III of the U.S. Constitution. In particular, the marking of products with applicable patents does not suffice to create declaratory judgment jurisdiction, absent any actual injury traceable to the patentee. Here, Medicis had not asserted any rights against Prasco related to its patents, nor taken any affirmative actions concerning Triaz. In this regard, one prior suit concerning unrelated patents and products and Medicis’ failure to sign a covenant not to sue were simply not sufficient to establish that Prasco was at risk of imminent harm from Medicis and that there was an actual controversy between the parties of sufficient immediacy and reality to warrant declaratory judgment jurisdiction.

Detailed Summary:

Plaintiff-appellant Prasco, LLC (“Prasco”) brought a declaratory judgment action against defendants-appellees Medicis and Imaginative Research Associates, Inc. (collectively “the defendants”), seeking a declaration that one of its products did not infringe various patents owned by the defendants-appellees. The U.S. District Court of the Southern District of Ohio dismissed the action for lack of jurisdiction, concluding that Prasco’s complaint failed to establish a case or controversy under Article III of Constitution. Opinion, pp. 1-2, citing Prasco LLC v. Medicis Pharm. Corp., No. 1:06cv313, slip op. (S.D. Ohio Mar. 27, 2007) (”Prasco I”); Prasco LLC v. Medicis Pharm. Corp., No. 1:06cv313, slip op. (S.D. Ohio July 3, 2007) (”Prasco II”).

Medicis markets a benzoyl peroxide cleansing product Triaz, which is marked as being covered by four patents. Prasco makes a generic benzoyl peroxide cleansing product Oscion, which it alleged will directly compete with Medicis’ Triaz product. One of the patents is owned by Medicis; the other three are owned by Imaginative Research Associates and licensed to Medicis. Id.

On May 26, 2006, Prasco filed action, requesting a declaratory judgment that Oscion did not infringe the patents. At the time that Prasco filed its declaratory judgment action, it had not yet begun marketing Oscion, but had devoted substantial efforts to development and marketing plans. Id.

Prasco did not dispute that the defendants did not know about the existence of Oscion until the complaint was served. Rather, in its initial complaint, Prasco based its alleged Article III jurisdiction on two facts unrelated to the existence of Oscion: (1) Medicis’ marking of Triaz products with the numbers of the four patents-in-suit to satisfy the public notice requirements of 35 U.S.C. § 287 and (2) an infringement suit brought by Medicis against Prasco and another generic company in October 2005, concerning a different cleanser product, covered by an unrelated patent. Id, pp. 2-3.

Defendants moved to dismiss the initial complaint on the grounds that a lack of case or controversy precluded subject matter jurisdiction. Shortly after the Supreme Court issued its decision in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007), the district court granted the motion to dismiss the Amended Complaint. Id., p.3, citing Prasco I, slip op. at 10.

MedImmune reaffirmed that the proper test for subject matter jurisdiction in declaratory judgment actions is “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id., citing MedImmune, 127 S. Ct. at 77.

The only issue on appeal was whether the facts alleged in this case establish that there is a justiciable case or controversy within the meaning of the Declaratory Judgment Act and Article III of the Constitution. Id., p. 4.

The Declaratory Judgment Act provides: “In a case of actual controversy within its jurisdiction . . . 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, whether or not further relief is or could be sought.” Id, pp. 4-5.

The Federal Circuit resolved this issue in the negative, citing court precedents. Rather than a purely subjective fear or the mere existence of a potentially adverse patent alone, the alleged injury at the root of most justiciable declaratory judgment controversies in the patent context is a “restraint on the free exploitation of non-infringing goods,” or an imminent threat of such restraint. Id., pp. 11-12, citing Caraco Pharms. Labs. Ltd. v. Forest Labs., 527 F.3d 1278, 1291 (Fed. Cir. 2008)(quoting Red Wing Shoe Co., Inc. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir. 1998)).

Here, Prasco did not allege that defendants-appellees had actually restrained its right to freely market Oscion at the time the supplemental complaint was filed. Rather, it is the threat of future injury that forms the basis for Prasco’s complaint. Thus, there can be no controversy without a showing that this threat was real, imminent, and traceable to defendants-appellants. Id.

Defendants-appellees have not accused Prasco of infringement or asserted any rights to Oscion, nor have they taken any actions which imply such claims. Instead, what was merely brought was Prasco’s allegation that its product does not infringe the defendants’ patents. Defendants-appellees’ lack of any “concrete claim of a specific right” is an important factor weighing against a finding of an actual controversy, particularly given that there has been no actual injury. The lack of any evidence that the defendants believe or plan to assert that the plaintiff’s product infringes their patents creates a high barrier to proving that Prasco faces an imminent risk of injury. Id.

Moreover, not only have the defendants not taken a concrete position adverse to Prasco’s, but they also have taken no affirmative actions at all related to Prasco’s current product. Id.

The Federal Circuit added that one prior suit concerning unrelated patents and products and the defendants-appellees’ failure to sign a covenant not to sue were simply not sufficient to establish that Prasco was at risk of imminent harm from the defendants and that there is an actual controversy between the parties of sufficient immediacy and reality to warrant declaratory judgment jurisdiction. Id., pp. 16-17.

Considering the totality of the circumstances, Prasco failed to establish a case or controversy under Article III. Therefore, the Federal Circuit affirmed the judgment of the district court dismissing the case for lack of jurisdiction.

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