Client Alert: Covenant Not To Sue Does Not Divest Court Of Jurisdiction Over Declaratory Judgment Action

In Caraco Pharmaceutical Labs., Ltd. v. Forest Labs., Inc., 2008 WL 850330, Case No. 2007-1404 (Fed. Cir. April 1, 2008), the Federal Circuit held that a court has jurisdiction to entertain a declaratory judgment action by an Abbreviated New Drug Application (“ANDA”) applicant to obtain an adjudication of an Orange-Book-listed patent despite the fact the patentee had granted the ANDA applicant a “covenant not to sue” on the patent. The Federal Circuit held that a generic company whose ANDA approval was being delayed under the Hatch-Waxman Act due to the 180-day exclusivity of a first-filer had jurisdiction to bring a declaratory judgment suit to resolve its patent disputes so that it could attempt to expedite FDA approval.

The All Circumstances Test For Declaratory Judgment Jurisdiction

The Federal Circuit’s holding in Caraco is the most recent in a series of cases which over the last year have reshaped the jurisdictional requirements for declaratory judgment suits related to patent noninfringement, invalidity and/or unenforceability. In MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2007), the Supreme Court rejected the “reasonable apprehension of suit test” previously applied by the Federal Circuit and instead adopted the “all the circumstances” test, which requires that “there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, 127 S. Ct. at 771. Shortly after MedImmune, the Federal Circuit ruled that the “all the circumstances” test applied to declaratory judgment actions in the Hatch-Waxman context. more...