Federal Circuit Claims Jurisdiction over Regulatory Decision but Denies Nationwide Injunction for State Law Infraction

By Dennis Crouch

For many innovative new products, regulatory approval is a much greater hurdle than patent protection. And, unlike patent rights, regulatory approval is often a necessity. The present case is interesting in that the mascara product straddles the border between a lightly regulated beauty aide and a medical drug treatment.

Allergan, Duke University, and Dr. Murray Johnstone v. Athena Cosmetics (Fed. Cir. 2013) (CaseText)

Duke & Dr. Johnstone each hold several patents that are apparently embodied by Allergan's eyelash growth medicine Latisse and exclusively licensed by Allergan. In 2009, these partners collectively sued Athena Cosmetics for selling RevitaLash mascara in a way that infringes the patents. In addition, Allergan alleged violation of state (California) unfair competition law by selling drugs (i.e., medicated mascara) without regulatory approval.

Following some amount of pretrial litigation (including a claim construction and summary judgment of non-infringement), the district court dismissed all of the patent claims without prejudice (stipulated dismissal). A dismissal without prejudice means that the patentee to can re-file those claims at a later date. The district court then found summary judgment for the plaintiffs — holding that Athena violated California's unfair competition law (UCL) by marketing, distributing and selling the mascara without regulatory approval. The district court then ordered a nationwide injunction against the sales.

Federal Circuit Jurisdiction. On appeal, the Federal Circuit first focused on the question of appellate jurisdiction. Under the law, the Federal Circuit has appellate jurisdiction over "any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents."

Although the original complaint clearly raised substantial issues of patent law, Allergan argued that the stipulated dismissal without prejudice removed the arising under jurisdiction. See Gronholz v. Sears, Roebuck & Co., 836 F.2d 515 (Fed. Cir. 1987) (dismissal of patent claims without prejudice operated as an amendment of the complaint and thus eliminated arising under jurisdiction); Rothe Dev. Corp. v. Dep't of Def., 545 F.3d 1023 (Fed. Cir. 2008) ("the basis of a district court's jurisdiction—and thus the path of appeal—may change over time in a case, for example, if certain claims are dismissed without prejudice").

On appeal, the Federal Circuit determined that the non-prejudicial dismissal did not eliminate the court's arising-under appellate jurisdiction. The court agreed that a non-prejudicial dismissal can eliminate its appellate jurisdiction, but distinguished this case because the prior patent rulings in the case indelibly altered the parties legal rights. In particular, the district court's prior claim construction ruling and summary judgment of non-infringement.

In the decision, the Federal Circuit did not discuss either the importance of amendments to the jurisdictional law found in the AIA or the recent Minton v. Gunn decision. By ignoring Minton, the Federal Circuit skipped over the more holistic interests-based approach to arising-under jurisdiction required there in favor of a more bright-line analysis that has been previously rejected by the Supreme Court.

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No Nationwide Injunction for Violating California Law: The Federal Circuit agreed that the district court correctly found Athena liable for violating California law, but the Appellate Panel rejected that court's nationwide injunction order as an abuse-of-discretion. The Federal Circuit wrote:

The injunction impermissibly imposes the UCL on entirely extraterritorial conduct regardless of whether the conduct in other states causes harm to California. This injunction is so broad that it would bar Athena from making its product in Idaho, distributing it from a facility in Nevada, and selling it to Connecticut consumers.

Interestingly, because the cause of action here was based on California law, the Federal Circuit looked to see whether California courts would have imposed a nationwide injunction and found that the "[t]he conduct enjoined here is exactly the sort of purely extraterritorial conduct that the California Court of Appeals expressly held could not be regulated by the UCL."

In addition, the Federal Circuit held that such extraterritorial application of California would be a violation of the U.S. Constitution's dormant Commerce Clause.

In short, California may, as it has in this case, conclude that its own unfair competition law has been violated, and it may prohibit any future conduct within its borders that would cause continued violation of its law. California is not permitted, however, to extend its unfair competition law to other states.

The upshot then is that RevitaLash is back on the market, but not in California (as shown in the image above).

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Professor Shubha Ghosh has written a number of important and interesting academic works. One is his recent book titled Identity, Invention, and the Culture of Personalized Medicine Patenting (2012 Cambridge Press). That book relates here because Ghosh identifies the '105 patent as a "race specific patent." The patent made Ghosh's book because identifies the race and gender of study subjects: e.g., "[study included] 38 Caucasian, 3 African-American, 1 Asian, 1 Hispanic; 13 male, 30 female." Ghosh argues that race-specific categories should not be allowed to be particularly claimed (they were not in this particular patent).

9 thoughts on “Federal Circuit Claims Jurisdiction over Regulatory Decision but Denies Nationwide Injunction for State Law Infraction

  1. Professor Shubha Ghosh has written a number of important and interesting academic works. One is his recent book titled Identity, Invention, and the Culture of Personalized Medicine Patenting (2012 Cambridge Press). That book relates here because Ghosh identifies the ’105 patent as a “race specific patent.” The patent made Ghosh’s book because identifies the race and gender of study subjects: e.g., “[study included] 38 Caucasian, 3 African-American, 1 Asian, 1 Hispanic; 13 male, 30 female.” Ghosh argues that race-specific categories should not be allowed to be particularly claimedThat’s interesting. Controlling one’s ability to legally treat or diagnose everybody’s illness creates one set of issues; controlling one’s ability to legally treat or diagnose only people of a specific race opens up an additional can of worms.What percentage of so-called diagnostic or medical treatment patents have claims that recite “race-specific categories”, I wonder? In what percentage of those applications are the distinctions between the races defined in a legally satisfactory manner?

  2. “…. violation of California… law by selling drugs …. without regulatory approval”Does anyone know enough about this law to know if this means (i) it is a violation of California law to sell drugs not approved by the USFDA; or (ii) it is a violation of California law to sell drugs not approved by the state of California?It sounded to me as if it were the latter case, and if so, I wondered if California is permitted to have its own regulatory scheme overlaying the US FDCA?

  3. The original purpose of the Federal Circuit was to avoid forum-shopping. At the time that court was established in 1982, there was significant disparity between regional circuits as to their application of federal patent law. The result was rampant forum-shopping with patentees or declaratory judgment plaintiffs filing suit in districts where the regional circuit was most or least favorable, respectively, to patent rights.But now the Federal Circuit has adopted a rule that, it appears, will facilitate reverse forum shopping. So if you want to evade your regional circuit court, and ensure that an appeal goes to the Federal Circuit, toss in a lame patent infringement claim that you litigate through a couple of meaningless rulings, and then dismiss it without prejudice shortly thereafter. That now gives you Federal Circuit jurisdiction over the case, forever.This is not an unexpected result, of course, as anyone who understands administrative law or the history of specialized courts, could confirm. When you give a specialized court the power to decide its own jurisdiction, is hard to imagine that it will ever pass up an opportunity to expand it. If there is no patent claim in the case at the time of judgment, there is simply no justification to deprive the regional circuit of its ordinary right to hear the case.

    1. Agreed.Moreover, if the parties do not settle and actually take this to the Supreme Court, expect some sort of reversal.

    2. Your description of ‘lame and dismiss’ seems to miss the rationale given by the court here to make the exception: “but distinguished this case because the prior patent rulings in the case indelibly altered the parties legal rights. In particular, the district court’s prior claim construction ruling and summary judgment of non-infringement.”It seems that dismissing without prejudice is not the same as dismissing without affecting rights.

      1. Not exactly. The Federal Circuit was bound by its previous precedent that a straightforward dismissal “without prejudice” of the patent claims will strip the Federal Circuit of appellate jurisdiction. Normally a “without prejudice” dismissal wipes out the claim as through it was never filed. In this case, there was a dismissal without prejudice, but the parties also conceded that the district court’s prior rulings regarding claim construction and summary judgment would be binding in a future action. This is why the Federal Circuit said that the patent rulings “altered the parties’ legal rights,” and that somehow changed the result.But what’s missing from the Federal Circuit’s ruling is the answer to the simpler question — so what? The patent issues were entirely gone from the district court case at the time of dismissal. None of the issues on appeal had anything to do with patent rights. This was a general law claim that absolutely should have been heard by the regional circuit court.

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