Granutec v. Genpharm ( 1998 )

Filed: May 7, 1998
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
Nos. 97-1873(L)
(CA-97-485-5-BO)
Granutec, Incorporated,
Plaintiff - Appellee,
versus
Genpharm, Incorporated,
Intervenor - Appellant.
O R D E R
The Court amends its opinion filed April 3, 1998, as follows:
On page 3, section 1, line 4 -- the following attorneys are
added for Genpharm: "Edgar H. Haug, Barry S. White, James K.
Stronski, FROMMER, LAWRENCE & HAUG, L.L.P., New York, New York."
On page 15, footnote 2, line 11 -- the sentence is corrected
to begin "Glaxo appealed that judgment . . . ."
For the Court - By Direction
/s/ Patricia S. Connor
Clerk
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
GRANUTEC, INCORPORATED,
Plaintiff-Appellee,
v.
DONNA E. SHALALA, SECRETARY OF
HEALTH AND HUMAN SERVICES; MICHAEL
FRIEDMAN, M.D.; FOOD & DRUG
ADMINISTRATION,
No. 97-1873
Defendants,
and
GENPHARM, INCORPORATED,
Intervenor-Appellant.
BOEHRINGER INGELHEIM CORPORATION,
Amicus Curiae.
GRANUTEC, INCORPORATED,
Plaintiff-Appellee,
v.
DONNA E. SHALALA, SECRETARY OF
No. 97-1874
HEALTH AND HUMAN SERVICES; MICHAEL
FRIEDMAN, M.D.; FOOD & DRUG
ADMINISTRATION,
Defendants-Appellees,
and
GENEVA PHARMACEUTICALS,
INCORPORATED,
Intervenor-Appellant.
BOEHRINGER INGELHEIM CORPORATION,
Amicus Curiae.
Appeals from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Terrence W. Boyle, Chief District Judge.
(CA-97-485-5-BO)
Argued: October 1, 1997
Decided: April 3, 1998
Before RUSSELL* and MOTZ, Circuit Judges, and PHILLIPS,
Senior Circuit Judge.
_________________________________________________________________
Reversed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Richard Melvyn Cooper, WILLIAMS & CONNOLLY,
Washington, D.C., for Appellant Genpharm; Joel E. Hoffman, SUTH-
ERLAND, ASBILL & BRENNAN, L.L.P., Washington, D.C., for
Appellant Geneva. Howard Stanley Scher, Appellate Staff, Civil
Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash-
ington, D.C.; Robert Fritz Green, LEYDIG, VOIT & MAYER, LTD.,
Chicago, Illinois, for Appellees. ON BRIEF: George A. Borden, Dan
_________________________________________________________________
* Judge Russell heard oral argument in this case but died prior to the
time the opinion was filed. The opinion is filed by a quorum of the panel.
28 U.S.C.A. § 46(d) (West 1993).
2
S. Sokolov, WILLIAMS & CONNOLLY, Washington, D.C.; Robert
W. Spearman, Catharine B. Arrowood, Robert H. Tiller, PARKER,
POE, ADAMS & BERNSTEIN, L.L.P., Raleigh, North Carolina;
Edgar H. Haug, Barry S. White, James K. Stronski,
FROMMER, LAWRENCE & HAUG, L.L.P., New York, New York, for
Appellant Genpharm. Hamilton P. Fox, III, Timothy J. Cooney, Kris-
ten J. Indermark, Melina Zacharopoulos, SUTHERLAND, ASBILL
& BRENNAN, L.L.P., Washington, D.C.; Steven J. Lee, Frederick H.
Rein, Reem F. Jishi, KENYON & KENYON, New York, New York;
Noel Allen, ALLEN & PINNIX, P.A., Raleigh, North Carolina, for
Appellant Geneva. Frank W. Hunger, Assistant Attorney General,
Janice McKenzie Cole, United States Attorney, Douglas N. Letter,
Appellate Staff, Civil Division, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C.; Margaret Jane Porter, Chief Coun-
sel, Elizabeth H. Dickinson, Catherine M. Cook, Office of the Chief
Counsel, FOOD & DRUG ADMINISTRATION, Rockville, Mary-
land, for Federal Appellees. John F. Fleder, David F. Weeda, Arthur
Y. Tsien, OLSSON, FRANK & WEEDA, P.C., Washington, D.C.;
John R. Wallace, WALLACE, CREECH & SARDA, L.L.P., Raleigh,
North Carolina, for Appellee Granutec. Barbara S. Wahl, ARENT,
FOX, KINTNER, PLOTKIN & KAHN, Washington, D.C.; Martin B.
Pavane, Michael C. Stuart, COHEN, PONTANI, LIEBERMAN &
PAVANE, New York, New York, for Amicus Curiae.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
This appeal concerns the Food and Drug Administration's enforce-
ment of certain provisions of 21 U.S.C.A. § 355, part of the 1984
revision to the Food, Drug, and Cosmetic Act known collectively as
the "Hatch-Waxman Amendments." See Drug Price Competition and
Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat.
1585 (1984). The district court determined that the Food and Drug
Administration (FDA) incorrectly declined to apply the terms of a
3
regulation, promulgated pursuant to the Hatch-Waxman Amend-
ments, that the District Court for the District of Columbia had all but
held invalid in Mova Pharmaceutical Corp. v. Shalala, 955 F. Supp.
128 (D.D.C. 1997).
At the time of the district court's decision in the present case, FDA
had decided:
to acquiesce temporarily -- pending an appellate decision
overturning the district court decision or a favorable ruling
on summary judgement -- in the Mova preliminary injunc-
tion in order to promote administrative uniformity and to
avoid forum shopping problems that would lead . . . appli-
cants back to the United States District Court for the District
of Columbia where the Mova decision was rendered.
Brief of FDA at 11. Genpharm, Inc., and Geneva Pharmaceuticals,
Inc., intervened in opposition to Granutec's motion for an injunction,
with each cross-claiming that it was entitled to the 180-day exclusive
marketing period Granutec sought to enjoin.
For the reasons set forth within, we conclude that the regulation
Granutec seeks to enforce is invalid. Further, we hold that, as the first
applicant under the statute, Genpharm was entitled to a 180-day
exclusivity period measured from March 3, 1997, until August 29,
1997. We therefore reverse the judgment of the district court.
I.
A.
The provision of the Hatch-Waxman Amendments relevant to this
appeal concerns the availability of a 180-day market exclusivity
period to the first company that seeks, under certain circumstances,
to market a generic form of a patented drug approved by the FDA.
Under the Food, Drug, and Cosmetic Act generally, pioneer drug
manufacturers must obtain FDA approval for any new drug by filing
a New Drug Application (NDA), which requires the submission of
specific data concerning the safety and effectiveness of the drug, as
4
well as any information on applicable patents. All drug patent infor-
mation is published by the FDA.
One of the primary innovations of the Hatch-Waxman Amend-
ments is an additional provision that allows companies subsequently
seeking to produce and market a generic form of a pioneer drug to
avoid filing a full NDA. Instead, these companies may file only an
Abbreviated New Drug Application (ANDA), in which they may rely
on the findings of safety and effectiveness included in the original
NDA. The only important new information that must be included in
the ANDA regards the generic company's position vis-a-vis the origi-
nal patent, and the company must make one of four certifications: I)
that no patent for the pioneer drug has been filed; II) that the patent
for the pioneer drug has expired; III) that the patent for the pioneer
drug will expire on a particular date; or IV) that the patent for the pio-
neer drug is invalid or will not be infringed upon by the proposed
generic. See 21 U.S.C.A. § 355(j)(2)(A)(vii) (West Supp. 1997). The
last of these, commonly referred to as a "Paragraph IV" certification,
is the certification at issue in this appeal.
If a generic company chooses Paragraph IV certification, it must
notify both the patent owner and the NDA holder of the ANDA appli-
cation. That notification must include the basis for why the proposed
generic does not infringe upon the patent, or why that patent is
invalid. See 21 U.S.C.A. § 355(j)(2)(B) (West Supp. 1997). After
such notice, an action for patent infringement must be brought within
45 days, and if no such action is brought, FDA may approve the
ANDA. If an infringement action is brought, FDA cannot approve the
ANDA for 30 months, unless the matter is adjudicated in the ANDA
applicant's favor or the court hearing the suit orders a shorter or lon-
ger waiting period. See 21 U.S.C.A. § 355(j)(4)(B)(iii) (West Supp.
1997).
In addition, and here we reach the statutory provision contested in
this appeal, the Hatch-Waxman Amendments also provide an incen-
tive for companies to challenge patents and develop alternative forms
of patented drugs by offering a 180-day period of market exclusivity
to those who successfully make their Paragraph IV certifications. The
relevant provision states:
5
(iv) If the application [ANDA] contains a certification
described in [Paragraph IV] . . . and is for a drug for which
a previous application has been submitted under this subsec-
tion continuing [sic: usually read as "containing"] such a
certification, the application shall be made effective not ear-
lier than one hundred and eighty days after--
(I) the date the Secretary receives notice from the
applicant under the previous application of the first
commercial marketing of the drug under the previ-
ous application, or
(II) the date of a decision of a court in an action
described in clause (iii) holding the patent which
is the subject of the certification to be invalid or
not infringed,
whichever is earlier.
21 U.S.C.A. § 355(j)(4)(B)(iv) (West Supp. 1997). Thus, the statute
grants a 180-day period of exclusive marketing rights to the first
generic manufacturer to file an ANDA containing a Paragraph IV cer-
tification, measuring from the date it decides to begin marketing after
the 30-month stay has expired (presumably assuming the risk of lia-
bility for patent infringement) or from the date of a favorable patent
infringement decision, whichever is earlier.
Further, pursuant to 21 U.S.C.A. § 371(a), FDA may promulgate
regulations for the enforcement of the Food, Drug, and Cosmetic Act
as a whole, and has done so with regard to the 180-day market exclu-
sivity provision. See 21 U.S.C.A. § 371(a) (West 1972). That regula-
tion, found at 21 C.F.R. § 314.107(c)(1), states that:
(1) If an abbreviated new drug application contains a cer-
tification that a relevant patent is invalid, unenforceable, or
will not be infringed and the application is for a generic
copy of the same listed drug for which one or more substan-
tially complete abbreviated new drug applications were pre-
viously submitted containing a certification that the same
6
patent was invalid, unenforceable, or would not be infringed
and the applicant submitting the first application has suc-
cessfully defended against a suit for patent infringement
brought within 45 days of the patent owner's receipt of
notice submitted under § 314.95, approval of the subsequent
abbreviated new drug application will be made effective no
sooner than 180 days from whichever of the following dates
is earlier:
(i) The date the applicant submitting the first
application first commences commercial market-
ing of its drug product; or
(ii) The date of a decision of the court holding
the relevant patent invalid, unenforceable, or not
infringed.
21 C.F.R. § 314.107(c)(1) (1997) (emphasis added). This provision,
therefore, not only restates the statutory requirements for the 180-day
exclusivity period, but additionally requires that"the applicant sub-
mitting the first application has successfully defended against a suit
for patent infringement." Id.B.
The regulation's addition to the requirements for the 180-day
exclusivity period is commonly known as the "successful defense"
requirement, and has been enforced since the regulation's adoption in
1994. Earlier, in 1989, an unwritten FDA interpretation of the statute
requiring that the Paragraph IV applicant be sued in order to be eligi-
ble for the exclusivity period was challenged as unreasonable in
Inwood Laboratories, Inc. v. Young, 723 F. Supp. 1523 (D.D.C.
1989), appeal dismissed, 43 F.3d 712 (D.C. Cir. 1989). There, a dis-
trict court granted a motion for a preliminary injunction against FDA
on the ground that, because 21 U.S.C. § 355(j)(4)(B)(iv) was clear on
its face, a court should not "permit[ ] the FDA to read into [the stat-
ute] a requirement of a lawsuit which is simply not there." Id. at 1526.
Nevertheless, FDA promlgated a regulation containing an even
more demanding interpretation of the statute -- i.e., the "successful
7
defense" requirement -- in 1994. That regulation was itself chal-
lenged in an injunction context last year in Mova, where the District
Court for the District of Columbia, while not declaring the regulation
invalid, stated that the likelihood was "very high" that a challenge to
the "successful defense" portion of the regulation as an impermissible
addition to the relevant statute would succeed. Mova, 955 F. Supp. at
131. In so doing, the district court declared:
The language of the statute may be complex, and even cum-
bersome, but it is plain and unambiguous. It does not
include a "successful defense" requirement, and indeed it
does not even require the institution of patent litigation. It
was Mova's first filing of an ANDA for micronized glybu-
ride [the drug there in question] under paragraph IV, and not
Upjohn's infringement suit, that required FDA to withhold
approval from subsequent paragraph IV filers. . . . The oper-
ation of the statute on the facts of this case may appear to
FDA to be unwise, and may appear . . . to be an invitation
for abuse, but their remedy lies with Congress, not this
Court.
Id. at 130-31 (citing Inwood, 723 F. Supp. at 1526). Thus, Mova
strongly implied that the regulation in question was not a permissible
"interpretation" of the 180-day exclusivity provision in the statute.
C.
In the present case, Granutec successfully persuaded the district
court to enjoin FDA from granting the 180-day marketing exclusivity
period to its competitor, Genpharm, for the production of a generic
form of Zantac, a medication for the treatment of ulcers and one of
the largest-selling prescription drugs in the world. Granutec's argu-
ment in this regard was that, contrary to Mova, FDA erred in not
applying the "successful defense" requirement. Granutec maintained
that FDA's failure to follow its own regulation, which compelled the
result that no ANDA applicant in this matter was entitled to 180-day
exclusivity, was arbitrary and capricious. As stated above, FDA had
adopted a position acquiescing in the Mova decision and its implica-
tions for the validity of the "successful defense" requirement. In
8
granting the injunction, however, the district court cited the regulatory
"successful defense" requirement, without further explanation.
Granutec's claim against Genpharm resulted from a series of
efforts by various pharmaceutical companies to use the Paragraph IV
certification to gain FDA approval for a generic form of Zantac. The
original patents for the two operative forms of ranitidine hydrochlo-
ride (ranitidine), the active ingredient in Zantac, belonged to Glaxo-
Wellcome, Inc. (Glaxo), the pioneer manufacturer of Zantac. The two
forms of ranitidine, Forms 1 and 2, are considered equivalent by
FDA, but are covered by different patents: Patent No. 4,521,431 (the
431 patent) covers Form 2 ranitidine, and will expire on June 4, 2002,
and Patent No. 4,128, 658 (the 658 patent) covers Form 1, and
expired on July 25, 1997. See Brief of FDA at 11, 34 & n.3.
The first company to challenge either patent was Genpharm,
which, in February 1991, filed an ANDA for a generic ranitidine
product, and included a Paragraph IV certification as to the 431 patent
for Form 2 ranitidine. Later, Genpharm amended that application to
include a Paragraph IV certification as to the 658 patent as well.
Glaxo filed an infringement suit within the 45-day statutory period,
and prevailed in October 1995. See Glaxo, Inc. v. Genpharm Pharma-
ceuticals, Inc., C.A. Nos. K-92-1831 and K-93-4228 (D. Md. Oct. 23,
1995). In 1996, Genpharm filed a Paragraph IV certification under its
ANDA alleging non-infringement of the 431 patent for Form 1 raniti-
dine, and again Glaxo sued. That case remained pending when this
appeal was filed.
In January 1994, Geneva filed an ANDA for generic ranitidine,
which included a Paragraph IV certification as to the 431 patent for
a Form 1 product. Glaxo sued Geneva, and that case also remained
pending as of the time this appeal was filed.
In April 1994, Granutec filed an ANDA for generic ranitidine,
which also included a Paragraph IV certification as to the 431 patent
for a Form 1 product. Glaxo sued, and Granutec prevailed in July
1996; Glaxo appealed that decision and lost on appeal when the Fed-
eral Circuit affirmed on April 4, 1997. See Glaxo, Inc. v. Novopharm,
Ltd., 931 F. Supp. 1280 (E.D.N.C. 1996), aff'd, 110 F.3d 1562 (Fed.
Cir. 1997). In the wake of this decision, Glaxo and Granutec entered
9
into a licensing agreement regarding the 658 patent, which provided
that, in exchange for a substantial monetary payment, Glaxo would
allow Granutec to begin marketing generic Zantac on July 10, 1997,
fifteen days before the scheduled expiration of the 658 patent.
This case was instituted when Granutec, having entered into the
15-day licensing agreement with Glaxo for its generic version of Zan-
tac, sought FDA approval of its ANDA effective July 10, 1997. FDA
responded that it could not approve Granutec's ANDA effective as of
July 10, 1997. Pursuant to its decision to acquiesce in Mova and that
decision's implications for the "successful defense" requirement,
FDA concluded that Genpharm was entitled to the 180-day marketing
exclusivity period because Genpharm filed the first ANDA with a
Paragraph IV certification for Zantac. FDA measured Genpharm's
exclusivity period from March 3, 1997, the date that Glaxo's right to
appeal expired in Glaxo, Inc. v. Boehringer Ingelheim Corp., 954 F.
Supp. 469 (D. Conn. 1996), judgment entered by 962 F. Supp. 295(D. Conn. 1997), aff'd, No. 97-1283, 1997 WL 355339 (Fed. Cir.
June 4, 1997), a wholly unrelated suit in which a district court deter-
mined that Boehringer Ingelheim's generic version of Form 1 raniti-
dine did not infringe upon Glaxo's 431 patent.
This judgment, FDA claimed, satisfied the requirement of 21
U.S.C.A. § 355(j)(4)(B)(iv) that, before the 180-day period of exclu-
sivity can begin, there must be "a decision of a court in an action . . .
holding the patent which is the subject of the certification to be
invalid or not infringed." 21 U.S.C.A. § 355(j)(4)(B)(iv)(II) (emphasis
added). As FDA had decided to "acquiesce" in the Mova decision, it
did not apply the additional "successful defense" requirement found
in 21 C.F.R. § 314.107(c)(1).
On June 17, 1987, Granutec filed this action, seeking declaratory
and injunctive relief against FDA, in the District Court for the Eastern
District of North Carolina. Granutec alleged that no company was
entitled to a 180-day exclusivity period and sought approval of its
ANDA effective July 10, consistent with the terms of its license from
Glaxo. Genpharm and Geneva intervened and cross-claimed, and, on
July 3, 1997, the district court dismissed the two cross-claims and,
sua sponte, granted a permanent injunction against FDA.
10
This appeal followed. Although FDA was the party against whom
the district court enforced the permanent injunction, on appeal the
agency has realigned itself. FDA now asserts that the district court's
injunction was proper and should be upheld.
On July 9, 1997, we entered a stay of the district court's injunction
pending appeal. We also ordered Genpharm and Geneva each to post
a five million dollar supersedeas bond to protect Granutec's stake in
the event we ultimately affirmed the district court's order. Granutec
thereafter executed an agreement with Genpharm wherein Genpharm
waived any entitlement to exclusivity in favor of Granutec, but pre-
served Granutec's right to challenge Genpharm's claim to exclusivity.
In the wake of this agreement, FDA approved Granutec's ANDA
effective August 1, 1997, and Granutec has been marketing its generic
version of Zantac since that date.
On August 6, 1997, the District Court for the District of New Jer-
sey dismissed with prejudice Glaxo's infringement claim against
Geneva. See Glaxo, Inc. v. Geneva Pharmaceuticals, Inc., C.A. Nos.
94-1921 and 94-4589 (D.N.J. Aug. 6, 1997). FDA thereafter approved
Geneva's ANDA as of August 29, 1997. On August 15, 1997, Gen-
pharm prevailed over Glaxo in its infringement suit. See Glaxo-
Wellcome, Inc. v. Genpharm, Inc., No. 96-CIV-6719 (S.D.N.Y. Aug.
15, 1997). FDA approved Genpharm's ANDA effective August 22,
1997, and Genpharm has marketed its generic since that date.
II.
This case turns on a fundamental problem of administrative law: an
agency's authority to interpret the statutes it is required to enforce.
A.
Genpharm and Geneva allege that the district court incorrectly
required FDA to adhere to the "successful defense" requirement -- a
requirement that both companies claim is invalid because it directly
conflicts with the plain language of the statutory provision regarding
the 180-day market exclusivity period. In support of this allegation,
Genpharm and Geneva cite Mova, and other cases holding that regu-
11
lations, like the one here, that add to rather than elucidate a statutory
requirement go beyond an agency's authority to interpret legislative
grants of power. We agree with their argument.
As Judge Robertson stated in Mova when he examined the validity
of the "successful defense" requirement, the language of 21 U.S.C.A.
§ 355(j)(4)(B)(iv) is "plain and unambiguous. It does not include a
``successful defense' requirement, and indeed it does not even require
the institution of patent litigation." Mova, 955 F. Supp. at 130. In light
of this plain and unambiguous language, FDA's interpretive authority
with regard to the statutory provision is limited to the extent that Con-
gress has already spoken directly to the issue addressed by the regula-
tion. See Chevron U.S.A. v. Natural Resources Defense Council, 467
U.S. 837, 842-45 (1984).
Here, that issue involves the exact requirements a generic manufac-
turer must satisfy to qualify for the 180-day market exclusivity
period. By expressly including certain requirements in the statute to
the exclusion of all others, Congress presumably intended that the
statutory requirements would comprise the full measure of eligibility.
As we held in Cabell Huntington Hospital, Inc. v. Shalala, 101 F.3d
984, 990-91 (4th Cir. 1996), an agency cannot issue regulations that
alter the statute's requirements for benefits the agency administers.
All that Congress required for the 180-day exclusivity period is: (1)
the filing of the first ANDA that includes a Paragraph IV certifica-
tion; and (2) either (a) the first commercial marketing of the drug
(after no infringement suit has been filed within 45 days or no resolu-
tion to such a suit has been reached after the expiration of the 30-
month stay), or (b) a decision that the patent in question is either
invalid or not infringed. See 21 U.S.C.A. § 355(j)(4)(B)(iv).
Demanding a "successful defense" neither interprets the statute nor
fills a gap left by statutory silence. Rather, the"successful defense"
requirement adds a requirement not contemplated in the statute,
and, as Genpharm notes, renders superfluous 21 U.S.C.A.
§ 355(j)(4)(B)(iv)(I), which allows the 180-day period to begin at the
time FDA receives notice of marketing of the drug, regardless of the
outcome of any infringement suit. See Foxglenn Investors L.P. v.
Cisneros, 35 F.3d 947, 950-51 (4th Cir. 1994) (declaring invalid a
12
regulatory interpretation that rendered a section of the applicable stat-
ute superfluous).
Both Granutec and FDA argue that the regulation in question
merely elucidates rather than adds to the requirements for the 180-day
exclusivity period. Further, Granutec painstakingly attempts to dem-
onstrate that the regulation does not render 21 U.S.C.
§ 355(j)(4)(B)(iv)(I) superfluous. Granutec and FDA cite legislative
history in support of their argument that the regulation is consistent
with the statute. However, both are mistaken. Chevron clearly states
that the determination of a regulation's validity under its enabling
statute involves a two-stage process. Analysis of legislative history
and policy goals occurs at the second stage, and is reached only if
Congress, through the relevant statute, has not spoken directly to the
issue in question. See Chevron, 467 U.S. at 842-43. If Congress has
so spoken, "that is the end of the matter," id. at 842; a court simply
does not undertake to assess the reasonableness of the agency's inter-
pretation of the statute if Congress has spoken.
Our examination of the regulation's relation to the statute never
reaches the second stage in this case. Congress has plainly laid out the
requirements for the 180-day exclusivity period in the statute (albeit
in tortured language), and, thus, our inquiry into Congressional intent
must end there. Having found the exclusivity requirements embodied
in the statutory language of 21 U.S.C.A. § 355(j)(4)(B)(iv) clear and
conclusive, we are bound to hold invalid any attempt to alter the
terms of that statute.
The "successful defense" requirement in 21 C.F.R. § 314.107(c)(1)
amounts to such an alteration because it adds a requirement to 21
U.S.C.A. § 355(j)(4)(B)(iv) that Congress never contemplated. Fur-
ther, the idea that any 180-day exclusivity period must be premised
on the successful defense of an infringement suit results in the evis-
ceration of 21 U.S.C.A. § 355(j)(4)(B)(iv)(I), which clearly contem-
plates an exclusivity period beginning -- whether or not an
infringement suit has come to resolution -- on the date of first com-
mercial marketing by the first ANDA filer.
Thus, we hold the "successful defense" requirement contained in
21 C.F.R. § 314.107(c)(1) to be an invalid addition to the statutory
13
requirements for exclusivity. Genpharm, as the first ANDA filer, was
therefore entitled to a period of exclusivity under the statute.1
B.
Having concluded that the "successful defense" requirement
imposed by 21 C.F.R. § 314.107(c)(1) is invalid, we turn now to
determine how to measure Genpharm's period of exclusivity. This
determination depends upon the interpretation given to the phrase "the
date of a decision of a court" holding the patent invalid or not
infringed, as used in 21 U.S.C.A. § 355(j)(4)(B)(iv)(II). The litigants
(and amicus Boehringer Ingelheim Corp.) espouse multiple interpreta-
tions of the phrase, and, accordingly, suggest just as many different
dates from which to measure exclusivity.
FDA has adopted alternative positions regarding how to interpret
this provision, depending upon our decision with regard to the valid-
ity of the "successful defense" requirement. If we upheld the "suc-
cessful defense" requirement found in 21 C.F.R. § 314.107(c)(1),
FDA argued that, pursuant to the language of that regulation, we
should conclude "a court" means " the court" that rendered the "suc-
cessful defense" decision for the first ANDA applicant. Thus, no liti-
gant would be entitled to exclusivity because the only litigant ever
possibly entitled was Genpharm, and Genpharm had not successfully
defended when Granutec sought approval of its ANDA effective July
10.
_________________________________________________________________
1 We reject Geneva's argument that Genpharm lost its place in line as
the first ANDA applicant, and thus the only ANDA applicant, eligible
for exclusivity. FDA maintains that, although Genpharm did not make
the Paragraph IV certification relevant to these proceedings until 1996,
Genpharm qualifies as the first ANDA applicant for purposes of the
exclusivity because the certification relates back to the date of its ANDA
application. This interpretation does not clearly conflict with either the
regulations or the statute, and thus we find no reason to substitute a con-
trary judgment on this matter for that of FDA. See Chevron, 467 U.S. at
843-45; Pauley v. Beth Energy Mines, Inc., 501 U.S. 680, 696-98, 705-
06 (1991); Mullins Coal Co. v. Director, OWCP, 484 U.S. 135, 159
(1987); Lisa Lee Mines v. Director, OWCP, 86 F.3d 1358, 1360-63 & n.8
(4th Cir. 1996).
14
However, in the event that we found the "successful defense"
requirement invalid, as we have, FDA adheres to the argument consis-
tent with its original position in this suit, reflecting its acquiescence
in Mova. That is, the "successful defense" requirement being invalid,
FDA argues that "a court" means " any court." By this reasoning, Gen-
pharm's exclusivity began running at the date of a decision by the
first court to hold the 431 patent not infringed, whether or not that
decision involved Genpharm (the first ANDA applicant).
FDA then combines this reasoning with the terms of 21 C.F.R.
§ 314.107(e). "[F]or purposes of establishing the effective date of
approval," that section defines "a decision of a court" in terms of a
"final judgment from which no appeal can be or has been taken." Sec-
tion 314.107(e) goes on to state that "the date of final decision" shall
be, in the case of no appeal by the patent holder,"the date on which
the right to appeal lapses," and, in the case of an appeal, "the date of
the first decision or order by a higher court" affirming the district
court's non-infringement decision. 21 C.F.R. § 314.107(e) (1997).
Thus, FDA concludes that Genpharm's period of exclusivity ran from
March 3, 1997 -- the date that Glaxo's right of appeal lapsed in the
Boehringer Ingelheim suit2 -- and expired 180 days later on August
29, 1997.
_________________________________________________________________
2 Genpharm contends that Glaxo did appeal the district court's order,
and thus March 3, 1997, is an improper date to measure from even under
FDA's analysis. We disagree. By order dated October 7, 1996, the dis-
trict court in the Boehringer suit granted partial summary judgment to
Boehringer on the basis of Glaxo's express concession that Boehringer's
generic did not infringe the 431 patent. Thereafter, on November 18,
1996, the court entered partial summary judgment in Boehringer's favor
on Glaxo's claim that Boehringer infringed Glaxo's patents by filing its
ANDA. On January 30, 1997, the court entered final judgment with
regard to both of these orders. See Glaxo, Inc. v. Boehringer Ingelheim
Corp., 962 F. Supp. 295 (D. Conn. 1997). Glaxo appealed that judg-
ment and lost, see 1997 WL 355339 (Fed. Cir. June 4, 1997); however,
it appealed only with regard to the November 18 order, not the October
7 order that the district court entered on the basis of Glaxo's express con-
cession of non-infringement. See id. at n.1; see also Memorandum of
Genpharm, Inc., in Support of its Mot. for an Inj. Pending Appeal, at Tab
4 (Aug. 18, 1997) (copy of letter from attorney for Glaxo to attorney for
Boehringer Ingelheim declaring that "Glaxo is not appealing the Court's
October 7, 1996 decision").
15
Although FDA's "successful defense" regulation was an invalid
attempt to impose an additional requirement in derogation of the stat-
utory scheme, FDA's reading of "the date of a decision of a court"
simply interprets ambiguous statutory terminology. Despite the corpo-
rate litigants' arguments and protests to the contrary, this statutory
language possesses no clear, definite meaning. For the purpose of
measuring exclusivity under this statutory scheme,"the date of a deci-
sion" may mean the date of a district court decision, but it may also
mean -- without, contrary to Granutec's suggestion, doing harm to
ordinary principles of finality and res judicata-- the date appeal
rights lapse or the date a higher court renders its first decision, as
FDA's regulation contemplates. Similarly, "a court" may mean "the
court," but it may just as well mean "any court." A fair reading of this
statutory language does not clearly dictate a particular interpretation.
Each version bears certain problems in relation to the statutory
scheme. At first blush, FDA's preferred interpretation (if the "suc-
cessful defense" requirement is invalid) achieves a seemingly anoma-
lous result in that a first applicant (here, Genpharm) receives an
entitlement to exclusivity during a period when, presuming the impo-
sition of a 30-month stay under 21 U.S.C.A. § 355(j)(4)(B)(iii), that
applicant may not be able to take advantage of its exclusive rights
until the 30-month period ends or it receives a favorable non-
infringement judgment. However, this interpretation seeks to thwart
any attempt by pioneer drug manufacturers to capture the generic
market, and to some degree achieves that goal. Furthermore, although
FDA's interpretation subjects first applicants to the vagaries of timing
and speed attributable to different courts, it does not strip exclusivity
of all value. As Genpharm and Granutec have demonstrated, the abil-
ity to waive exclusivity in favor of another generic manufacturer can
be quite lucrative.
By contrast, Genpharm and Geneva contend that "a court" must
mean "the court," and thus each maintains that the period of exclusiv-
ity cannot begin to run until the generic manufacturer entitled to
exclusivity begins marketing or wins a patent infringement suit
brought against it by the pioneer manufacturer. This interpretation
preserves exclusivity for the first applicant until it prevails in litiga-
tion, or at least until it begins marketing while assuming the risk of
losing the litigation. However, it clears the way for generic capture.
16
Such a result would be antithetical to the very purpose of the exclu-
sivity incentive and the entire ANDA regime. As the legislative his-
tory of the Hatch-Waxman amendments indicates, the ANDA scheme
purports to "make available more low cost generic drugs." H.R. Rep.
No. 98-857, pt. 1, 98th Cong., 2d Sess., at 14 (1984), reprinted in
1984 U.S.C.C.A.N. 2647, 2647. A situation where no generic can
come to market because the pioneer has imposed a stranglehold by
gaining entitlement to an exclusive marketing period for its captured
generic, yet never exercises that right, could not have been contem-
plated by Congress.3
Given the complicated and sensitive nature of the statutory drug
approval mechanism, we choose to defer to the interpretation posited
by the agency charged by Congress with administering the statutory
scheme. FDA's interpretation of the statutory language and its own
regulations is a permissible, reasonable interpretation of a compli-
cated legislative framework that reflects a considered balance of com-
peting statutory goals. We recognize that positions adopted by an
agency solely for litigation do not deserve the deference of this Court.
See Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 213 (1988)
("Deference to what appears to be nothing more than an agency's
convenient litigating position would be entirely inappropriate.").
However, we are not faced with such a situation here. FDA did not
adopt its current position in anticipation of this litigation, but in
response to the Mova decision, which suggested the probable invalid-
ity of the "successful defense" requirement. It made its position
known to all ANDA applicants seeking approval in the wake of
_________________________________________________________________
3 We recognize that even under FDA's interpretation a pioneer could
place a stranglehold on the generic market, although we think it is less
likely. For example, a pioneer in control of a captured generic could file
the first ANDA with a Paragraph IV certification. As long as the pioneer
prevents its captured generic from going to market and at the same time
does not file an infringement suit against any generic manufacturer (cap-
tured or non-captured), the captured generic's exclusivity period would
never begin to run, and no generic could begin to sell pursuant to a Para-
graph IV certification. The "successful defense" requirement would solve
this problem, were it valid. But this problem, like many others, arises
from the manner in which Congress drafted the exclusivity mechanism,
and, as such, the remedy lies with Congress.
17
Mova, seeking to avoid any forum shopping that might result. Indeed,
it was FDA's adherence to its post-Mova position that precipitated
this lawsuit by Granutec. In such a situation, the concerns that caution
against deference to an agency's litigation position do not exist
because the position reflects the thoughtful judgment of the agency,
not just the posture of litigation counsel. See National Wildlife Fed'n
v. Browner, 127 F.3d 1126, 1129 (D.C. Cir. 1997) (citing Auer v.
Robbins, 117 S. Ct. 905, 912 (1997)); Herman v. NationsBank Trust
Co., 126 F.3d 1354, 1363 (11th Cir. 1997); Appalachian States Low-
Level Radioactive Waste Comm'n v. Pena, 126 F.3d 193, 198-99 (3rd
Cir. 1997); Monongahela Power Co. v. Reilly, 980 F.2d 272, 279 &
n.7 (4th Cir. 1993).
C.
Both Genpharm and Geneva also assert jurisdictional and proce-
dural grounds for reversal of the district court-- namely, that the dis-
trict court lacked subject matter jurisdiction over this case and failed
to give the intervenors the proper notice and hearing before dismiss-
ing the cross-claims and granting, sua sponte, a permanent injunction.
We would have jurisdiction if the district court lacked it, and thus
all appellants have received the remedy they seek-- a full hearing
and decision on the merits in the Court of Appeals. In addition, if we
held that the district court failed to provide proper notice and hearing
to the parties, the remedy would be to remand to the district court for
largely the same proceedings that we have conducted.
For these reasons, we reject these allegations of procedural short-
comings on the part of the district court.
III.
In sum, then, we hold that the "successful defense" requirement
imposed by 21 C.F.R. § 314.107(c)(1) is invalid. Further, we hold
that, under the interpretation of the statutory scheme adopted by the
FDA in contemplation of such a decision, Genpharm was entitled to
a period of exclusivity that ran from March 3, 1997, until August 29,
1997. Because Genpharm waived its exclusivity with regard to
18
Granutec, and FDA approved Geneva's ANDA as of August 29,
1997, no party has violated Genpharm's period of exclusivity.
Granutec was never entitled to begin marketing on July 25, 1997, so
its agreement with Glaxo to begin marketing on July 10, 1997, was
based on an erroneous premise. The supersedeas bonds shall be
returned, along with accrued interest, to Genpharm and Geneva.
We understand this opinion will not satisfy any party to this suit.
In cases involving complicated regulatory schemes such as this, we
seek to give full effect to the plain language of a statute while simul-
taneously deferring to reasonable interpretations offered by the rele-
vant federal agency. The complex legislative scheme and the
awkwardly drafted statute at issue here do not lend themselves to sim-
ple solutions, particularly when further complicated by secondary
licensing arrangements, a stay pending appeal, and multi-million dol-
lar bonds. In accordance with this opinion, the judgment of the district
court is hereby
REVERSED.
19