Janssen Ortho, LLC v. United States

995 F.3d 981

JANSSEN ORTHO, LLC, Plaintiff-Appellee

v.UNITED STATES, Defendant-Appellant

2020-1663

United States Court of Appeals, Federal Circuit.

Sealed Opinion Issued: April 13, 2021

Public Opinion Issued: April 26, 2021^*

Gregory Diskant, Patterson Belknap Webb & Tyler LLP, New York, NY, argued for plaintiff-appellee. Also represented by Andrew D. Cohen, Daniel M. Eisenberg, Emma Ellman-Golan, Joshua A. Kipnees, Amy Vegari; Lars-Erik Arthur Hjelm, Akin Gump Strauss Hauer & Feld LLP, Washington, DC.

Guy Eddon, International Trade Field Office, United States Department of Justice, New York, NY, argued for defendant-appellant. Also represented by Jeffrey B. Clark, Jeanne Davidson, Jason M. Kenner, Patricia M. McCarthy, Monica Perrette Triana; Alexandra Khrebtukova, Office of Assistant Chief Counsel, United States Bureau of Customs and Border Protection, New York, NY.

Before Prost, Chief Judge, Mayer and Wallach, Circuit Judges.

Wallach, Circuit Judge.

Appellee, Janssen Ortho, LLC ("Janssen"), filed suit against Appellant, the United States ("the Government"), in the U.S. Court of International Trade ("CIT"), challenging U.S. Customs and Border Protection's ("Customs" or "CBP") classification of Janssen's darunavir ethanolate, the active ingredient in Prezista ®, a medication for the treatment of the human immunodeficiency virus ("HIV"), under the Harmonized Tariff Schedule of the United States ("HTSUS") and the Pharmaceutical Appendix to the Tariff Schedule ("Pharmaceutical Appendix").¹ Janssen alleges that it has paid approximately $100 million in duties for entries of darunavir ethanolate that should have received duty-free treatment. Following a bench trial, the CIT concluded that the subject merchandise was properly classified under HTSUS subheading 2935.00.60 and subject to duty-free treatment under the Pharmaceutical Appendix. Janssen Ortho LLC v. United States , 425 F. Supp. 3d 1352, 1355 (C.I.T.), as amended (Feb. 19, 2020), judgment entered , 429 F. Supp. 3d 1383 (C.I.T. 2020) ; see J.A. 36 (Judgment).

The Government appeals the CIT's decision as to darunavir ethanolate's duty-free treatment. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5). We affirm.

BACKGROUND

I. Statutory Framework

The HTSUS governs the classification of merchandise imported into the United States. See Wilton Indus., Inc. v. United States , 741 F.3d 1263, 1266 (Fed. Cir. 2013). "The HTSUS scheme is organized by headings, each of which has one or more subheadings; the headings set forth general categories of merchandise, and the subheadings provide a more particularized segregation of the goods within each category." Id. "The first four digits of an HTSUS provision constitute the heading, whereas the remaining digits reflect subheadings." Schlumberger Tech. Corp. v. United States , 845 F.3d 1158, 1163 n.4 (Fed. Cir. 2017). "[T]he headings and subheadings ... are enumerated in chapters 1 through 99 of the HTSUS (each of which has its own section and chapter notes)[.]" R.T. Foods, Inc. v. United States , 757 F.3d 1349, 1353 (Fed. Cir. 2014). There are two types of HTSUS headings, "eo nomine [and] use provisions." Schlumberger , 845 F.3d at 1164. "[A]n eo nomine provision ... describes an article by a specific name." CamelBak Prods., LLC v. United States , 649 F.3d 1361, 1364 (Fed. Cir. 2011) (citation omitted). A use provision describes an article by its principal or actual use. See Aromont USA, Inc. v. United States , 671 F.3d 1310, 1313 (Fed. Cir. 2012).

The HTSUS is "considered ... [a] statutory provision[ ] of law for all purposes." 19 U.S.C. § 3004(c)(1). "The legal text of the HTS[US] includes all provisions enacted by Congress or proclaimed by the President," HTSUS, Preface 1 (22d ed. 2010), including the headings, subheadings, "General Rules of Interpretation" ("GRI"), "Additional [U.S.] Rules of Interpretation" ("ARI"), "General Notes," and "various appendices for particular categories of goods." R.T. Foods , 757 F.3d at 1353 (footnote omitted); see Chemtall, Inc. v. United States , 878 F.3d 1012, 1026 (Fed. Cir. 2017) (explaining that "the tenth-digit statistical suffixes ... are not statutory," as those suffixes are not incorporated in the HTSUS's legal text).²

"In 1995, the United States and [twenty-one] other countries" entered into the "Pharmaceutical Zero-for-Zero Initiative," agreeing "to [reciprocally] eliminate tariffs on pharmaceutical products, their derivatives, and certain chemical intermediates used to manufacture pharmaceuticals." Advice Concerning the Addition of Certain Pharm. Prods. & Chem. Intermediates to the Pharm. Appendix to the [HTSUS] ("USITC Pharma. Advice "), Inv. No. 332-476, USITC Pub. 3883, 2006 WL 2950495, at *1 (2006). The United States codified this agreement through HTSUS General Note 13 and the Pharmaceutical Appendix. Id. at *6. "General Note 13 permits duty free treatment of certain pharmaceutical products[.]" Forest Labs., Inc. v. United States , 476 F.3d 877, 882 (Fed. Cir. 2007). It provides that "[w]henever" an HTSUS heading or subheading has the "symbol ‘K’ in parentheses" in the " ‘Special’ [duty rate] subcolumn," "any product (by whatever name known) classifiable in such provision which is the product of a country eligible for tariff treatment ... shall be entered free of duty, provided that such product is included in the [P]harmaceutical [A]ppendix." HTSUS, General Note 13 (emphasis omitted); see USITC Pharma. Advice , 2006 WL 2950495, at *6 (similar).

Table 1 of the Pharmaceutical Appendix "enumerates products described by International Non-proprietary Names [(‘INN’)],"³ with "[t]he Chemical Abstracts Service [(‘CAS’)] registry numbers also set forth ... to assist in the identification of the products concerned,"⁴ to "be entered free of duty under [G]eneral [N]ote 13 to the [HTSUS]." Pharmaceutical Appendix at 2 (Table 1 Chapeau). The chapeau to Table 1 further provides that, "[f]or purposes of the [HTSUS], any references to a product enumerated in [Table 1] includes such product by whatever name known." Id. Table 1 lists "darunavir," along with the CAS registry number "206361-99-1." Pharmaceutical Appendix at 15. Table 2 of the Pharmaceutical Appendix provides that the "[s]alts, esters[,] and hydrates of the products enumerated in [T]able 1 ... that contain in their names any of the prefixes or suffixes listed [in Table 2] shall also be entered free of duty under [G]eneral [N]ote 13" so long as they are "classifiable in the same" HTSUS heading "enumerated in [T]able 1." Pharmaceutical Appendix at 57 (Table 2 Chapeau); see id. (providing that Table 2 similarly covers "such product by whatever name known").

II. The Subject Merchandise

This appeal involves multiple entries of darunavir ethanolate, made by Janssen at the port of San Juan, Puerto Rico, between September 2010 and March 2012. J.A. 1246, 4452–55; see J.A. 1246–50 (Stipulated Facts), 4452–55 (Summons); see also Janssen , 425 F. Supp. 3d at 1355, 1361.⁵ Janssen is a subsidiary of Johnson & Johnson and the owner of U.S. Patent No. 7,700,645 ("the ’645 patent"), which discloses darunavir ethanolate. J.A. 1247; see ’645 patent, col. 29 l. 62–col. 30 l. 65 (claims 1–8) (expressly claiming darunavir ethanolate solvate).

"[D]arunavir in the form of darunavir ethanolate" is "[t]he active pharmaceutical ingredient in Prezista," a medication for the treatment of HIV. Janssen , 425 F. Supp. 3d at 1357 ; see id. ("Prezista is a human [HIV-1] protease inhibitor indicated for the treatment of HIV-1 Infection."); J.A. 1247 ("Darunavir is the non-proprietary or generic name for Prezista [.]"). "Darunavir" is the INN assigned to TMC-114, a compound developed by Janssen's predecessor in interest to the ’645 patent, for the treatment of HIV. J.A. 1280–81 (INN Application), 1348–49 (INN Assignment). "Darunavir" is also the INN for Prezista and darunavir ethanolate. Janssen , 425 F. Supp. 3d at 1357.

Darunavir ethanolate has the chemical names "Carbamic acid, N-[(1S,2R)-3-[[(4-aminophenyl)sulfonyl](2-methylpropyl)amino]-2-hydroxy-1-(phenylmethyl)propyl]-, (3R,3aS,6aR)-hexahydrofuro[2,3-b]furan-3-yl ester, compd. with ethanol (1:1)" and "Carbamic acid, [(1S,2R)-3-[[4-ami-nophenyl)sulfonyl](2-methylpropyl)amino]-2-hydroxy-1-(phenylmethyl)propyl]-, (3R,3aS,6aR)-hexahydrofuro[2,3-b]furan-3-yl ester, compd. with ethanol (1:1) (9CI)." Janssen , 425 F. Supp. 3d at 1356 ; see J.A. 1347; see also J.A. 1249 (stipulating to the same). It is a sulfonamide. Janssen , 425 F. Supp. 3d at 1356 ; see id. ("Darunavir contains a sulfonamide moiety."). Further, as indicated by its chemical names, darunavir ethanolate is darunavir compounded with ethanol. Id. at 1356 ; see J.A. 1249. Darunavir ethanolate is produced "by crystallizing darunavir and ethanol molecules into a crystal lattice structure." Janssen , 425 F. Supp. 3d at 1356 ; see id. ("Darunavir is crystalized in an ethanol bath to form darunavir ethanolate."). "Darunavir ethanolate is a channel solvate," id. , that presents as a "white powder," J.A. 355; see J.A. 280–81 (explaining that, prior to crystallization, darunavir is a yellow liquid at normal temperature and pressure).

In June 1998, CAS assigned darunavir CAS registry number 206361-99-1. J.A. 1248 ("CAS assigned the CAS registry no. 206361-99-1 to darunavir on June 4, 1998."); see J.A. 1185. In January 2004, following publication of the application that led to the ’645 patent, CAS assigned darunavir ethanolate CAS registry number 635728-49-3. J.A. 1248 ("CAS assigned the CAS registry no. 635728-49-3 to darunavir ethanolate on January 9, 2004."); see ’645 patent, Title Page; J.A. 1286 (parent PCT application); see also J.A. 1661 (CAS Registry). Generally, CAS does not separately index solvates, J.A. 1150, unless, for example the solvate is specifically patented, J.A. 1151–52, 1179–80.

In 2006, the U.S. Food and Drug Administration ("FDA") approved Prezista. J.A. 1415–16, 1420. The FDA adopted Prezista's existing INN, "darunavir," as the...