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“Reasonable Apprehension of Suit” Test Revived as One of Several Ways to Establish DJ Jurisdiction

August 15, 2008

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Last Month at the Federal Circuit - September 2008

Judges: Gajarsa (author), Clevenger, Moore

[Appealed from: S.D. Ohio, Judge Barrett]

In Prasco, LLC v. Medicis Pharmaceutical Corp., No. 07-1524 (Fed. Cir. Aug. 15, 2008), the Federal Circuit affirmed the district court’s dismissal of Prasco, LLC’s (“Prasco”) DJ action, holding that Prasco’s complaint failed to establish a case or controversy under Article III of the U.S. Constitution.

Medicis Pharmaceutical Corporation (“Medicis”) markets a benzoyl peroxide cleansing product TRIAZ®, which is marked as being covered by four patents. One of the four patents is owned by Medicis; the remaining three are licensed to Medicis by Imaginative Research Associates. Prasco makes a generic benzoyl peroxide cleaning product OSCION™, which it alleged would directly compete with Medicis’s TRIAZ® product. Prasco filed this DJ action before it had begun marketing OSCION™. The initial complaint alleged that DJ jurisdiction was proper based on (1) Medicis’s marketing of TRIAZ® products with the numbers of the four patents-in-suit to satisfy the public knowledge requirements of 35 U.S.C. § 287; and (2) an infringement lawsuit brought by Medicis against Prasco in 2005 concerning a different cleansing product. Defendants moved to dismiss for lack of case or controversy that precluded subject matter jurisdiction. Prasco subsequently sent a sample of OSCION™ and a list of ingredients to defendants and requested a covenant not to sue under the four patents. When the defendants refused to sign the covenant not to sue, Prasco filed an amended complaint that included this postfiling conduct and the fact that Prasco had started to market their product. Defendants then renewed their motion to dismiss. The district court granted defendants’ motion to dismiss the amended complaint shortly after the Supreme Court issued its decision in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007).

The Court stated that MedImmune requires that the analysis be calibrated to the particular facts of each case with the basic standard being whether the facts alleged, under all the circumstances, show that there is a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant the issuance of a DJ. The Court noted that before MedImmune, the Court generally required that a DJ plaintiff in a patent dispute demonstrate conduct by the patentee that created a reasonable apprehension of suit on the part of the DJ plaintiff. Despite the Court’s previous conclusion that MedImmune had effectively overruled the “reasonable apprehension of suit test,” the Court here stated that MedImmune did not completely do away with the relevance of a reasonable apprehension of suit. Rather, following MedImmune, the Court noted that proving a reasonable apprehension of suit is one of multiple ways that a DJ plaintiff can satisfy the more general all-the-circumstances test to establish that an action presents a justiciable Article III controversy.

As an initial matter, the Court noted that under Fed. R. Civ. P. 15(d), Prasco’s Amended Complaint was technically a supplemental complaint because it included allegations regarding events that happened after the first complaint. The Court then held that while later events may not create jurisdiction where none existed at the time of filing, the proper focus in determining jurisdiction is on the facts existing at the time the complaint under consideration was filed.

Considering the totality of the circumstances, the Court held Prasco had not alleged a controversy of sufficient “immediacy and reality” to create a justiciable controversy. The Court held that Prasco’s complaint focused on the threat of future injury and not on a threat that was real, imminent, and traceable to defendants. The Court ruled that defendants had not accused Prasco of infringement or asserted any rights to OSCION™. Rather, the Court noted that all it had before it was Prasco’s allegation that its product does not infringe the defendants’ patents. Additionally, the Court held that none of the facts on which Prasco relied overcame the complete lack of evidence of a defined, preexisting dispute between the parties concerning OSCION™.

First, Prasco relied on Medicis’s marking of its products with the four patents-in-suit, consistent with the requirements of 35 U.S.C. § 287(a). The Court noted that under § 287(a), a patentee’s marking of its products with the applicable patent numbers serves as notice to the public that the goods are patented. The marking entitles the patentee to recover damages for infringement that took place before the alleged infringer received actual notice of the infringement. The Court held that Medicis’s decision to mark its products is irrelevant and is not a circumstance that supports finding an imminent threat of harm sufficient to create an actual controversy.

Second, Prasco argued that Medicis’s past history of enforcing its patent rights to protect its core products supports a finding of a case or controversy. Prasco claimed that Medicis’s infringement suit against Prasco and another generic demonstrates a genuine risk that the defendants will also attempt to enforce the patents against Prasco. The Court held that while prior litigious conduct is one circumstance to be considered in assessing whether the totality of the circumstances creates a controversy, one prior suit concerning different products is not the type of pattern of prior conduct that creates a reasonable assumption that Medicis will also take action against Prasco regarding its new product.

Finally, Prasco placed significant weight on defendants’ failure to sign a covenant not to sue after Prasco sent them samples of OSCION™. The Court rejected this argument and held that a patentee has no obligation to spend the time and money to test a competitor’s product nor to make a definitive determination that it will never bring an infringement suit. The Court noted that although a defendant’s failure to sign a covenant not to sue is one circumstance to consider in evaluating the totality of the circumstances, it is not sufficient to create an actual controversy—some affirmative actions by the defendant are also necessary.

The Court held that Prasco had suffered no actual present injury traceable to the defendants. The Court further held that Prasco had not established that it was at risk of imminent harm from the defendants or that there is an actual controversy between the parties of sufficient immediacy and reality to warrant DJ jurisdiction. In affirming the dismissal of the case, the Court held that if the district court reached the merits of the case, it would impermissibly be providing an advisory opinion in violation of Article III of the U.S. Constitution.