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Consumer’s interest in purchasing hypothetical infringing products does not create declaratory jurisdiction

Consumer’s interest in purchasing hypothetical infringing products does not create declaratory jurisdiction

AIDS Healthcare v. Gilead was decided on May 11, 2018 on appeal from the Northern District of California. Declaratory defendant Gilead has patents or is a licensee of patents on a particular antiviral agent used to treat AIDS. Declaratory plaintiff Healthcare provides medical care to persons afflicted with AIDS. Healthcare filed a declaratory judgment action seeking to invalidate five patents covering the antiviral agent, so that it could “partner with generic makers and purchase generic [antiviral agent] as soon as it could become available on expiration of the five-year New Chemical Entity exclusivity [under statute].” “[N]o unlicensed source was offering a [product containing the agent] or preparing to do so when this declaratory action was filed.” The district court dismissed the action. Healthcare appealed.

The Federal Circuit affirmed the dismissal of the declaratory action.

The district court correctly held that Healthcare had not established a case or controversy. “A plaintiff seeking a declaratory judgment bears the burden of demonstrating that a case of actual controversy existed at the time the declaratory action was filed.” The plaintiff must allege facts showing “that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality.”

Healthcare did not meet the immediacy requirement. “The immediacy requirement is concerned with whether there is an immediate impact on the plaintiff and whether the lapse of time creates uncertainty.” Healthcare argued that “it meets this requirement because of the lengthy time required for patent litigation, such that an immediate start is needed.” The Federal Circuit rejected this argument. “[T]he time consumed by litigation of a speculative future controversy does not provide the ‘immediacy and reality’ required for declaratory judgment actions…. [W]here there is no present infringement, no threat of or possibility of infringement litigation, and no meaningful preparation to infringe, the immediacy and reality criteria are not met.” “Healthcare’s role as an encourager of others to provide infringing product in the future, and its role as a future purchaser of such product,” did not meet the requirement. “[T]he mere possibility of future infringement does not meet the immediacy and reality criteria.”

Declaratory standing did not arise on the theory of induced infringement based on Healthcare’s “attempts to persuade possible manufacturers to provide [the generic antiviral product].” Jurisdiction for a declaratory action based on an inducement theory requires “concrete steps that have been taken with the intent to conduct activity which could constitute infringement.” And here, “Healthcare’s requests for generic production … elicited no response from the solicited pharmaceutical manufacturers.” “[A] potential customer’s interest in buying infringing product does not create present liability for induced infringement.” “An adverse economic interest alone is insufficient.”

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The withholding by Gilead of a covenant not to sue did not create a declaratory controversy. “[T]here was no affirmative act by the patentee to assert patent rights against Healthcare for any present or planned activity.” Moreover, Healthcare did not request the covenant not to sue “until after this suit was filed.”

The policy objectives served by “invalidation of invalid patents” didn’t not provide declaratory jurisdiction because “the Hatch-Waxman Act is already a balance of several policy interests, seeking to preserve the patent incentive to invent new drugs, while enabling validity challenge by ANDA filers before actual infringement occurs.”

 

AIDS Healthcare Found., Inc. v. Gilead Scis., Inc., 890 F.3d 986 (Fed. Cir. 2018)