Prasco v. Medicis Pharm. Corp., No. 2007-1524 (Fed. Cir. 2008)

Medicis markets a benzoyl peroxide cleansing product, Triaz.  Prasco sells a competing benzoyl peroxide cleansing product, Oscion.  Prasco filed a declaratory judgment complaint, requesting judgment that Oscion does not infringe four patents owned or licensed by Medicis.  Prasco alleged declaratory judgment jurisdiction based on three facts:  (1) Medicis marked its Triaz products with the numbers of the four patents-in-suit; (2) Medicis previously sued Prasco for infringement of an unrelated patent by a different cleanser product; and (3) Medicis refused to provide Prasco with a covenant not to sue on the four patents-in-suit.

In an opinion released August 15th, the Federal Circuit affirmed the district court's dismissal of Prasco's complaint for lack of subject matter jurisdiction.  At the outset, the court noted that the "basic standard" for declaratory judgment jurisdiction, as set forth by the Supreme Court in MedImmune last year, is whether "the facts alleged, under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."

In this case, the Federal Circuit viewed the "immediacy and reality" inquiry "through the lens of standing."  According to the Federal Circuit, standing is established when the plaintiff alleges "(1) an injury-in-fact, i.e., a harm that is concrete and actual or imminent, not conjectural or hypothetical, (2) that is fairly traceable to the defendant's conduct, and (3) redressible by a favorable court decision."  Prasco's complaint was based on the threat of future injury by Medicis.  Thus, the court stated, "there can be no controversy without a showing that this threat was real, imminent, and traceable to defendants."

The court found that "none of the facts on which Prasco relies overcome the complete lack of evidence of a defined, preexisting dispute between the parties concerning Oscion."  First, the court found that "Medicis' decision to mark its products, prior to any knowledge of Prasco's Oscion product, is irrelevant to the question of whether Medicis believes Oscion infringes the applicable patents."  Second, while "prior litigious conduct is one circumstance to be considered," "one prior suit concerning different products covered by unrelated patents is not the type of pattern of prior conduct that makes reasonable an assumption that Medicis will also take action against Prasco regarding its new product."  And third, "a defendant's failure to sign a covenant not to sue is one circumstance to consider . . . (but) it is not sufficient to create an actual controversy--some affirmative actions by the defendant will also generally be necessary."  Here, the court noted that "a patentee has no obligation to spend the time and money to test a competitors' product nor to make a definitive determination, at the time and place of the competitors' choosing, that it will never bring an infringement suit."

Accordingly, the court found that under the totality of the circumstances, Prasco had failed to establish declaratory judgment jurisdiction.