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In re Rivastigmine Patent Litigation

April 19, 2007

IN RE RIVASTIGMINE PATENT LITIGATION


The opinion of the court was delivered by: Harold Baer, U.S.D.J.

(MDLNo. 1661)

REPORT AND RECOMMENDATION

Plaintiffs Novartis Pharmaceuticals Corporation, Novartis AG, Novartis Pharma AG, Novartis International Pharmaceutical Ltd. and Proterra AG (collectively, "Novartis"), seek to dismiss their claim against defendants Watson Pharmaceuticals Inc. and Watson Laboratories, Inc. (collectively, "Watson") and Sun Pharmaceutical Ltd. ("Sun") for infringement of U.S. Patent No. 5,602,176. The defendants oppose the motion unless a number of conditions are accepted by Novartis and incorporated into its covenants not to sue. For the reasons set forth below, I recommed that Novartis' motion be granted subject to certain conditions, but that this court retain jurisdiction of this matter for the purpose of considering the defendants' request for attorneys' fees.

Background

This multidistrict litigation concerns the patent rights for rivastigmine tartrate ("rivastigmine"), the active ingredient in Exelon, a medication marketed by Novartis for the treatment of mild to moderate dementia of the Alzheimer's type.*fn1 Sun and Watson indicated their intent to market a generic version of Exeleon by filing Abbreviated New Drug Applications ("ANDAs") with the FDA, the first step in bringing a generic product to market. See Purepac Pharmaceutical Co. v. Thompson, 354 F.3d 877, 879 (D.C. Cir. 2004) (citing 21 U.S.C. § 355(j)(2)(A); 21 C.F.R. § 314.94(a)(3)). In response, Novartis brought actions alleging that the defendants,*fn2 by filing ANDAs, induced infringement of two patents owned by Novartis. One defendant, Watson, then counterclaimed against Novartis for a declaratory judgment that the patents in question are invalid.

Novartis now seeks to dismiss with prejudice its claims with regard to one of the two rivastigmine patents, U.S. Patent No. 5,602,176 ("the '176 patent"), and to dismiss without prejudice Watson's counterclaims regarding that patent.*fn3 Novartis filed a motion to dismiss its claim against Sun on February 2, 2007 and another to dismiss its claim against Watson on February 8, 2007. In addition, it has executed covenants not to sue Sun and Watson over the '176 patent (collectively, "the covenants"). (Plaintiffs' Covenant Not to Sue Sun for Infringement of the '176 Patent, attached as Exh. 9 to Declaration of Simon A. Fitzpatrick dated Feb. 2, 2007 ("Fitzpatrick 2/2/07 Decl."); Plaintiffs' Covenant Not to Sue Watson for Infringement of the '176 Patent on Products Covered by ANDA No. 77-129 ("Watson Covenant"), attached as Exh. 9 to Declaration of Simon A. Fitzpatrick dated Feb. 8, 2007 ("Fitzpatrick 2/8/07 Decl.")).*fn4

Defendants Sun and Watson oppose Novartis' motion to dismiss as it is currently formulated on the grounds that they will be prejudiced unless various conditions are attached to the dismissal. The defendants seek the inclusion of language in any dismissal order making it clear that the dismissal was for lack of subject matter jurisdiction and specifying that the Court retains jurisdiction over the case for the purpose of adjudicating the defendants' demand for attorneys' fees. They also seek the addition of certain language to the covenants. First, the defendants ask that the covenant not to sue be extended to include the defendants' "suppliers, distributors, customers, partners, or their successors and assigns." Second, they ask that the covenant cover not only patent infringement based on the importation, manufacture use, sale, or offer for sale, but also "any other basis for any claim of direct, contributory, or induced infringement" related to the products in question. Third, they ask that the covenants state explicitly that they apply not only to the defendants' ANDAs, but to "any amendment made thereto." (Sun's Proposed Covenant Not to Sue, attached as Exh. 1 to its Memorandum of Law in Opposition to Plaintiffs' Motion to Dismiss with Prejudice Their Action Against Sun For Infringement of U.S. Patent No. 5,602,176 ("Sun Memo."); Watson's Proposed Covenant Not to Sue, attached as Exh. 2 to Declaration of James K. Stronski dated March 2, 2007 ("Stronski Decl.")). The defendants contend that these changes are necessary to eliminate any case or controversy between the parties and thus to make dismissal appropriate. In addition, Watson seeks to have the dismissal certified as a partial final judgment under Rule 54(b)of the Federal Rules of Civil Procedure.

Novartis opposes each of these proposed changes in whole or in part. However, as explained below, although this Court has no power to order Novartis to alter its covenants, the case and controversy will not be sufficiently settled to warrant dismissal absent certain modifications to the covenants.

Discussion

It is axiomatic that the exercise of judicial power under Article III of the United States Constitution requires the existence of a case or controversy. Courts may not render advisory opinions or decide questions that do not affect the rights of the parties to the case. See Preiser v. Newkirk, 422 U.S. 395, 401 (1975). The existence of an actual controversy "must be evaluated on a claim-by-claim basis." Jervis B. Webb Co. v. Southern Systems, Inc., 742 F.2d 1388, 1399 (Fed. Cir. 1984). Moreover, "'[i]t is well-established that a trial court may be divested or deprived of subject matter jurisdiction over a particular patent claim if the patentee covenants not to assert an infringement claim against a putative infringer.'" Crossbow Technology, Inc. v. YH Technology, Inc., No. C 03-04360, 2007 WL 174422, at *2 (N.D. Cal. Jan. 22, 2007)(quoting Eli Lilly & Co. v. Zenith Goldline Pharmaceuticals, 101 F. Supp. 2d 1139, 1142 (S.D. Ind. 2000)). Here, Novartis argues that its covenant not to sue coupled with a motion for dismissal with prejudice effectively ends any case or controversy, and thus deprives the Court of jurisdiction under Article III. (Plaintiff's Memorandum of Law in Support of Their Motion to Dismiss With Prejudice Their Claim Against Watson for Infringement of U.S. Patent No. 5,602,176 at 3-4; Plaintiffs' Memorandum of Law in Support of Their Motion to Dismiss With Prejudice Their Action Against Sun for Infringement of U.S. Patent No. 5,602,176 at 4-5). Thus, it contends that as of the execution of its covenant not to sue, this Court no longer has the power to condition dismissal on changes to the covenants nor to entertain an application for attorneys' fees. The defendants, while conceding that Novartis' actions require the Court to dismiss the case (Sun Memo. at 2), argue that the dismissal falls under Rule 41(a)(2) of the Federal Rules of Civil Procedure*fn5 and thus may be made contingent upon "such terms and conditions as the court deems proper".

A. Jurisdiction Over Novartis' Claim for Patent Infringement

The first issue at hand is whether a voluntary dismissal with prejudice, accompanied by a covenant not to sue, divests the court of subject matter jurisdiction as a matter of constitutional law, or whether such dismissal is governed by Rule 41(a)(2). I note at the outset that the law of the Federal Circuit governs questions of patent law, while the law of the regional circuit applies to procedural questions that are not specific to patent law. See Madey v. Duke University, 307 F.3d 1351, 1358 (Fed. Cir. 2002). Following that principle, district courts have universally applied Federal Circuit law in patent cases in order to determine whether a court retains subject matter jurisdiction in the face of a covenant by the plaintiff not to sue. See, e.g., Merck & Co. v. Watson Laboratories, Inc., No. C.A. 05-658, 2006 WL 1537375, at *3 (D. Del. June 2, 2006); Sirius Satellite Research Inc. v. Acacia Research Corp., No. 05 Civ. 7495, 2006 WL 238999, at *3 (S.D.N.Y. Jan. 30, 2006); Eon Labs, Inc. v. Pfizer Inc., No. 05 Civ. 0002, 2005 WL 2848952, at *1-2 (S.D.N.Y. Oct. 28, 2005); SVG Lithography Systems, Inc. v. Ultratech Stepper, Inc., 334 F. Supp. 2d 21, 26 (D. Mass. 2004); Kos Pharmaceuticals, Inc. v. Barr Laboratories, Inc., 242 F. Supp. 2d 311, 314 (S.D.N.Y. 2003); Synopsys, Inc. v. Ricoh Co., 343 F. Supp. 2d 883, 888 (N.D. Cal. 2003); Arista Technologies, Inc. v. Arthur D. Little Enterprises, Inc., 125 F. Supp. 2d 641, 654 (E.D.N.Y. 2000).

Several Federal Circuit decisions have implied that dismissal in this situation is required as a matter of constitutional law.

In Super Sack Manufacturing Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058-59 (Fed. Cir. 1995), the Federal Circuit affirmed a district court order dismissing a patent infringement suit on the basis of a representation by the plaintiff that it would not sue the defendant for infringement of the patent in question. The district court improperly dismissed the case under Rule 41(a)(2),*fn6 id. at 1057 n.2, but the Federal Circuit nonetheless affirmed the trial court's decision to "dismiss[] the case for lack of an actual controversy as required by Article III." Id. at 1057; see also Intellectual Property Development, Inc. v. TCI Cablevision of California, Inc., 248 F.3d 1333, 1340 (Fed. Cir. 2001)(finding that Super Sack "determin[ed] that Federal Rule of Civil Procedure 41(a)(2) . . . was inapplicable, but nevertheless determin[ed] that the trial court dismissed the case for lack of an actual controversy as required by Article III based on a statement of non-liability"). Other courts have found that under Super Sack and Intellectual Property Development, dismissal in such circumstances is mandatory as a constitutional matter rather than discretionary pursuant to Rule 41. See SVG Lithography Systems, 334 F. Supp. 2d at 26 (finding that "[i]n both Super Sack and Intellectual Property Development, the Federal Circuit affirmed the district court decisions based on the lack of subject matter jurisdiction based on the plaintiffs' statements of non-liability rather than on dismissal pursuant to Rule 41(a)(2)" and therefore that the patent infringement claims at issue had to be dismissed for lack of Article III jurisdiction rather than under Rule 41(a)(2)); Merck, 2006 WL 1537375, at *3 (holding, in case involving voluntary ...


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