Biotechnology Industry v. District of Columbia

496 F.3d 1362

BIOTECHNOLOGY INDUSTRY ORGANIZATION, Plaintiff-Appellee, and Pharmaceutical Research and Manufacturers of America, Plaintiff-Appellee, v. DISTRICT OF COLUMBIA, Adrian M. Fenty, Mayor of the District of Columbia, Office of the Attorney General for the District of Columbia, Robert Spagnoletti, Attorney General of the District of Columbia, Office of Documents and Administrative Issuances of the District of Columbia, Arnold R. Finlayson, Administrator, Office of Documents and Administrative Issuances of the District of Columbia, Defendants-Appellants.

No. 2006-1593.

United States Court of Appeals, Federal Circuit.

August 1, 2007.

David W. Ogden, Wilmer Cutler Pickering Hale and Dorr LLP, of Washington, DC, argued for all plaintiffs-appellees. With him on the brief for Pharmaceutical Research and Manufacturers of America were Randolph D. Moss, Anne K. Small, Catherine M.A. Carroll, and Thomas G. Saunders. On the brief for Biotechnology Industry Organization were Daniel E. Troy and Eric A. Shumsky, Sidley Austin LLP, of Washington, DC.

William J. Earl, Assistant Attorney General, Office of Attorney General for the District of Columbia, of Washington, DC, argued for defendants-appellants. With him on the brief were Linda Singer, Acting Attorney General, District of Columbia, Todd S. Kim, Solicitor General, and Edward E. Schwab, Deputy Solicitor General.

Sean M. Fiil-Flynn, Program on Information Justice and Intellectual Property, Washington College of Law, American University, of Washington, DC, for amici curiae, National Legislative Association on Prescription Drug Prices, et al. With him on the brief was Joshua D. Sarnoff, Glushko-Samuelson Intellectual Property Law Clinic.

Jeffrey L. Handwerker, Arnold & Porter LLP, of Washington, DC, for amicus

curiae The AIDS Institute. With him on the brief was Matthew H. Solomson.

Richard A. Samp, Washington Legal Foundation, of Washington, DC, for amici curiae Washington Legal Foundation, et al. With him on the brief was Daniel J. Popeo.

Before BRYSON, Circuit Judge, PLAGER, Senior Circuit Judge, and GAJARSA, Circuit Judge.

GAJARSA, Circuit Judge.

This is a pre-enforcement challenge to a statute of the District of Columbia, before this court after transfer from the United States Court of Appeals for the District of Columbia Circuit. Defendants, the District of Columbia and various of its departments and officers (collectively, "the District" or "D.C."), appeal from a judgment of the United States District Court for the District of Columbia declaring the District's Prescription Drug Excessive Pricing Act of 2005, codified at D.C.Code § 28-4551 to 28-4555 ("the Act"), preempted by the federal patent laws and enjoining its enforcement. We affirm the judgment of the district court and the injunction.

I. BACKGROUND

A. The challenged legislation

The D.C. City Council has adopted specific legislation which prohibits any patented drug from being sold in the District for an excessive price. The operative section of the Excessive Pricing Act reads:

It shall be unlawful for any drug manufacturer or licensee thereof, excluding a point of sale retail seller, to sell or supply for sale or impose minimum resale requirements for a patented prescription drug that results in the prescription drug being sold in the District for an excessive price.

D.C.Code § 28-4553. The legislation was adopted after the Council determined that:

The excessive prices of prescription drugs in the District of Columbia is threatening the health and welfare of the residents of the District as well as the District government's ability to ensure that all residents receive the health care they need, and these excessive prices directly and indirectly cause economic harm to the District and damage the health and safety of its residents.... [I]t is incumbent on the government of the District of Columbia to take action to restrain the excessive prices of prescription drugs.

Id. § 28-4551. The Council's response to that finding was passage of the challenged legislation. Following signature by the Mayor and the expiration of the statutorily prescribed period for Congress to review D.C. statutes, see D.C.Code § 1-206.02(c)(1), the Act took effect on December 10, 2005. The statutory term "excessive price" is not specifically defined. The statute states that "[a] prima facie case of excessive pricing shall be established where the wholesale price of a patented prescription drug in the District is over 30% higher than the comparable price in any high income country in which the product is protected by patents or other exclusive marketing rights." Id. § 28-4554(a). If such prima facie excessive pricing is shown, the burden shifts to the defendant to prove:

that a given prescription drug is not excessively priced given demonstrated costs of invention, development and production of the prescription drug, global sales and profits to date, consideration of any government funded research that supported the development of the drug, and the impact of price on access to the prescription drug by residents and the government of the District of Columbia.

Id. § 28-4554(b). A "high income countr[y]" is defined as one of "the United Kingdom, Germany, Canada, or Australia." Id. § 28-4552(2). The Act provides for both public and private enforcement: "Any affected party, including the District of Columbia, shall have standing to file a civil suit in a court of competent jurisdiction for a violation of this chapter and to seek a remedy, including declaratory and injunctive relief." Id. § 28-4555(a). The term "affected party" is itself broadly defined as "any person directly or indirectly affected by excessive prices of patented prescription drugs, including any organization representing such persons or any person or organization representing the public interest." Id. § 28-4552(1). The Act provides for a wide array of remedies:

(1) Temporary, preliminary, or permanent injunctions to enjoin the sales of prescription drugs in the District at excessive prices;

(2) Appropriate fines for each violation;

(3) Damages, including treble damages;

(4) Reasonable attorney's fees;

(5) The cost of litigation; or

(6) Any other relief the court deems proper.

Id. § 28-4555(b).

B. Procedural history

On October 12, 2005, plaintiff Pharmaceutical Research and Manufacturers of America ("PhRMA") filed suit in the United States District Court for the District of Columbia, alleging that the Act was invalid in light of the Commerce Clause of the Constitution and that it was preempted by the federal patent laws. Fifteen days later, plaintiff Biotechnology Industry Organization ("BIO") filed a similar suit. Both plaintiffs are industry organizations whose membership includes manufacturers of patented pharmaceuticals. The district court consolidated the two actions, heard oral argument, and on December 22, 2005 issued an opinion and order finding the Act to be preempted by the patent laws and enjoining its enforcement. Pharm. Research & Mfrs. of Am. v. District of Columbia, 406 F.Supp.2d 56 (D.D.C.2005).

The district court concluded that the plaintiffs had established their standing since they represented members who complained of "realistic and imminent" injuries. Id. at 62-63. Noting that "Congress' regulation of our nation's pharmaceutical industry is grounded in large part in a complex balance of economic forces and regulatory exclusivity designed to encourage and reward the innovation, research, and development of new drugs," id. at 65, the district court concluded that the Act did not "square with the congressional purpose and objectives" of the patent laws, id. at 66. Accordingly, the district court found that "the D.C. Act is preempted and therefore facially unconstitutional." Id. at 67. It also found that the Commerce Clause of the Constitution invalidated the Act as applied to transactions between parties not located within the District's borders, id. at 71, a conclusion which the District does not appeal. Finally, the district court rejected the plaintiffs' claim that the Foreign Commerce Clause of the Constitution facially preempted the Act as a whole, finding it valid only "to the extent that future plaintiffs are able to establish a prima facie case to the satisfaction of a Superior Court judge without any reference to the wholesale price of the same drug in any foreign country." Id. at 72.

The District timely appealed to the United States Court of Appeals for the District of Columbia Circuit. On August 23, 2006, that court granted the District's unopposed motion to transfer the case to the Federal Circuit.

II. DISCUSSION

A. Statutory subject matter jurisdiction

Any appeal taken to a federal appeals court must be within its jurisdiction. Because this case does not pose the typical questions of patent law — infringement, validity, enforceability, and the like — which this court normally reviews under our jurisdictional statute (28 U.S.C. § 1295), and because the parties' briefing on our jurisdiction was limited, we raised the issue of whether our statutory grant of jurisdiction encompasses this case sua sponte at oral argument. See Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986) ("Federal courts are not courts of general jurisdiction; they have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto. For that reason, every federal appellate court has a special obligation to satisfy itself ... of its own jurisdiction." (citation omitted)).

This court has exclusive jurisdiction to review cases which arise under the patent laws. Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 807, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988). Our jurisdiction is created and constrained by statute. Congress has granted this court "exclusive jurisdiction ... of an appeal from a final decision of a district court of...