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The United States Court of Appeals for the Federal Circuit is now open and in session.

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God save the United States and this honorable court.

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The first case for argument this morning is 20-1663 Jansen Ortho versus United States.

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Mr. Edden, whenever you're ready.

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Good morning.

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May it please the court?

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The trial court erred when it disregarded the plain language of General Note 13 to grant the imported product, which is Darunavir, the duty-free status that Congress, by statute, and the President, by proclamation, have afforded only to Darunavir.

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This case presents a straightforward issue of plain language.

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This is Judge Wallach.

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I have a couple of questions for you, if you don't mind.

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On page of the blue brief,

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You argued that the CIT erroneously conserved table one to the pharmaceutical appendix, the international non-proprietary name durinovir, uniquely identifies the durinovir molecule, not durinovir ethylate.

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Are you challenging the CIT's conclusion that table one covers products

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described by the INN durinavir, or are you challenging the CIT's finding that the INN for durinavir ethylate is durinavir?

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I believe the latter, Your Honor.

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The Table 1 clearly says that it covers product, the preface of Table 1.

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So Table 1 covers the product.

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We are challenging the CIT's

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legal interpretation of the statutory phrase derunivir with the CAS number on table one.

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The trial court read that statutory phrase to cover a different product, the derunivir ethanolate product, not derunivir.

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Mr. Head, on page 14 of the blue brief, you say, and I'm quoting, without explanation,

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The CIT erroneously disregarded the CAS registry number identified in Table 1.

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Then you argue that even if not dispositive, the registry number must be evaluated in the course of identifying the covered products.

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What do you believe the CIT should have done differently?

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That is, if registry numbers are not dispositive, would the outcome be any different?

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Could it be any more than harmless error?

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Yes, Your Honor, it is more than harmless error.

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There are two pieces of information here, two statutory pieces of information.

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Do you agree that the registry numbers are not dispositive?

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It says so right there.

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Your Honor, the registry numbers are not dispositive of the product that is entitled to duty-free treatment.

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General Note 13 provides a framework, including Tables 1 and 2, and 3, of the pharmaceutical appendix.

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So Table 1 tells you what is the product that is duty-free by Table 1 alone.

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And there are two pieces of information for that.

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The INN, the International Nonproprietary Name,

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and the chemical abstract service number, the CAS number.

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Let me drill down on that.

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Is it your position that all products or just derivatives have to meet the requirements of both tables one and two?

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I'm not sure I understand your question, Your Honor.

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I apologize.

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OK.

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You say the purpose of table two is, and I'm quoting you, to identify

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the specific derivative forms of the products listed in Table 1 that are afforded duty-free treatment.

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In order for Janssen's product to receive duty-free treatment, it has to be listed in both Tables 1 and 2.

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And so my first question is, is it your position that all products or just derivatives have to meet the requirements of both Tables 1 and 2?

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Just derivatives, Your Honor.

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Janssen could import Darunavir, the sticky oil product that it has, and it could import that duty three under table one alone.

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The INN, the International Non-Proprietary Name, and the CAS number, the CAS number, both identify, both statutory pieces of information that we have on table one identify Janssen's Darunavir sticky oil product.

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So your position then is that ethanol,

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is a derivative of INN durinavir rather than, as the CIT found, INN durinavir.

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That's correct, Your Honor.

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There is no INN for the derivative product.

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You can use the INN for the base molecule, the sticky oil product, and refer to a product containing it

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Darunavir ethanolate is manufactured by crystallizing Darunavir, the sticky oil, with ethanol.

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And that creates the derivative product, the new form of Darunavir, Darunavir ethanolate.

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But there is no separate name for the, there is no separate international non-proprietary name for the derivative product.

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There is a separate CAS number.

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There is a separate CAS number that uniquely identifies the derivative product.

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One housekeeping question.

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Although it's a messy housekeeping question.

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On page 57 of the Red Breed, Janssen says that Puerto Rico is founded on an antiquated structure based on the duties they collect.

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And they alleged that customs changed its tariff classification to make up for a $30 million budget shortfall.

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What have you got on that?

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That refers, Your Honor, to Janssen's claim of bias at the administrative level.

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I know.

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Go ahead.

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There was no bias at the administrative level, Your Honor.

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But even if there had been bias, which there is no evidence of here, that has been cured by a de novo review at the Court of International Trade.

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This is not an APA case where we have record review.

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The Court of International Trade held a three-day bench trial on this matter.

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There was fact-finding.

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There was legal interpretation, which we'll hear about today.

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and any bias that could have been, although there was none, has been cured at the CIT level.

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There is also no remedy that Janssen seeks for that alleged bias.

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Janssen seeks only the refund of duties that it paid on the imported darunavirithanilate.

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There is no... You're avoiding my question, unfortunately.

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I apologize.

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Did it happen, factually?

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No, Your Honor, there was no bias at the administrative level.

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There was no change in order to make up a budget shortfall?

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That's correct, Your Honor.

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There was no change to make up a budget shortfall.

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Janssen's claims in its protest and its application for further review were reviewed in detail, and there is a 20-plus page

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a custom ruling letter that is persuasive on all of Janssen's different claims that it made.

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And there was no bias that went into that determination.

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Thank you.

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Just one other point on that.

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CBP's operations and customs operations in Puerto Rico are, in fact, as Janssen alleges, funded in part by duties collected there.

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And that is also true of the Virgin Islands

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and other funding structures like that, and that is a statutory framework.

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Your Honor, the statute of issue here is detailed, it is specific, and it leaves no room for ambiguity.

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Well, let me ask you about that, Mr. Endon.

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This is Judge Prox.

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Table one is long and it doesn't look to me to be particularly selective.

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In fact, I can't figure out how many products aren't on it rather than those that are.

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Doesn't it strike you at least as a policy matter that your position would be odd?

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Surely you agree that

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It would make no practical sense if your view that the liquid version of this chemical that no one in the world uses was on the list, but the marketed version was not.

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Isn't that an odd conclusion to reach?

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No, Your Honor, and I disagree with the premise of that.

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There is a use for darunavir, the sticky oil.

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The use for that is to make the darunavir ethanolate crystalline powder.

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And no one ingests the darunavir ethanolate crystalline powder that Janssen imports.

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That is further manufactured into a finished pharmaceutical product, several different finished pharmaceutical products, including some Tusa, Preskovic,

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and Prasista at least, those are the FDA approved products that contain the crystalline darunavir ethanolate.

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So there is a definite commercial use for darunavir and Janssen chose to manufacture that and then after it manufactures that, it then manufactures it, it crystallizes it with ethanol to make darunavir ethanolate and it imports that form.

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As to the other part of your question, your honor, about the detailed list,

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Table 1 is extremely detailed and includes thousands of different products by their international non-proprietary name and their CAS number.

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And both of those pieces of information refer to a set of information including the molecular formula and the chemical structure of each of those products.

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And the CAS number likewise refers to, gives you the molecular formula and the chemical structure.

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So both pieces of information

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point to the same thing, which is Darunavir, not Darunavir Ethanolase.

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As to why that might be the case, Your Honor, the Euro-Way-Round Agreements Act gives the President the authority to negotiate trade agreements with our trading partners and then to permit reciprocal duty reductions as a result of advice of the International Trade Commission, the U.S.

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Trade Representative, and other congressional committees.

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And so then a presidential proclamation is issued granting a specific product duty-free treatment under the table.

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That's an authority that Congress specifically delegated to the president and the court should not usurp that negotiation authority by granting a product that is clearly not listed on the table duty-free treatment under the table, under the table's entry for a different product.

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So what kind of deference do we give the CIT here?

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They held a three-day trial.

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There were lots of experts that spoke directly to the question that we're debating this morning, whether the two are the same or significantly different.

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Doesn't that fact-finding deserve deference by our court?

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There's no facts at issue here, Your Honor.

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We are not here disputing the facts.

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We are here disputing, speaking de novo, review of the court's legal interpretation of the statute of General Note 13 of Table 1.

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There's no dispute.

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There's loads of evidence from experts presented in this three-day trial about the products and the terminology.

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and the Court of International Trade judge heard all of those experts and reached a conclusion, right?

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Your Honor, if I may, the experts in the trial primarily were directed to Janssen's other claim that the product was a mixture of darunavir and ethanol and that the chemical bonds between those two products were not sufficiently strong to make it a new chemical substance, but rather it was simply a mixture that should be classified under Chapter 30.

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And so there were multiple PhDs and experts that testified on those issues.

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And the Court of International Trade found against Janssen on that claim and found that darunavir ethanolate is a chemical substance separate and apart from darunavir.

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And so most of the experts testified on that matter and found in favor of the government.

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And that's not an issue that Janssen appeals here.

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OK, I think, did we hear your buzzer go off?

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Okay, why don't we hear from the other side and we'll reserve your time for rebuttal.

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Thank you.

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May I proceed, Your Honor?

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Yes, please.

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Good morning.

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Thank you.

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This is Greg Diskant representing Janssen.

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This was basically a very straightforward case of undisputed facts applied to a statutory language whose meaning is plain under Table 1.

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Products described by international non-proprietary names are duty-free.

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Mr. Diskant, this is Judge Wallet.

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I have a couple of questions for you.

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Sure.

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Has Janssen ever imported any other form of Dorinovir?

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No, Your Honor.

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Has any other form ever been commercially available?

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Not in the United States, no.

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OK.

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On page 19 of the Blue Brief, the government says,

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Janssen had multiple opportunities to seek to add the ethanol form to the Pharmaceutical Appendix when updates occurred in 2006 and 10, but neglected to participate and only belatedly in 2013 applied.

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Why 2013 and why not before?

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That's quite easy to explain, Your Honor.

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Before, Janssen correctly, I believe, understood that the listing of darunavir on Table 1 under its international non-proprietary name darunavir included darunavir ethanolate.

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That's exactly what the district of the CIT found.

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So there was no need to have the ethanolate listed.

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In 2011, customs abruptly changed its position after years of allowing darunavir ethanolate to be imported duty-free.

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under Table 1.

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And as a result, Janssen both began litigating this case and in order to protect itself, it also sought to add it to the Pharmaceutical Appendix.

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Explicitly, the Pharmaceutical Appendix has not been updated, however, since 2010.

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So that never came to pass.

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But to my mind, the important point is that to root of here, finally,

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is known by its INN, Derunavir.

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This is a fact finding.

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The CIT found, quote, the INN for Derunavir ethanally is Derunavir.

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That's finding number 19.

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That means that when you read the name INN Derunavir on table one, it includes Derunavir ethanally.

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What deference does the district court's fact finding get?

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Well, first, there's been no challenge to its fact finding.

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So that's a fact.

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Likewise, it's a fact that the CIT found that Darunivir is a name by which Darunivir is known.

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It's also a fact that fits squarely into the language of the Shepho of Table 1.

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So there is no factual dispute, but the facts fit squarely into the language of the Shepho.

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Now, there's a question about is Table 1 and Table 2, are they intended to be inclusive

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because they have, or do they actually intentionally exclude anything?

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I think the answer has to be they do not intentionally exclude anything.

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The President called Congress in 1994 that he wanted all pharmaceuticals, including new pharmaceuticals as they're developed, to be duty free.

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He said he would use Section 111B to implement that goal, that intent, where possible, such as in Chapter 30,

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He's made the entire chapter duty-free.

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He hasn't gone through and said this one's in and this one's out.

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All goods under Chapter 30 are medicaments.

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They're all duty-free.

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He could not do that for Chapter 29 because that's organic chemicals.

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So there are many organic chemicals that are not used as, are not pharmaceuticals.

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They're not duty-free.

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And so the pharmaceutical appendix is an attempt at a comprehensive listing.

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This one happens to be an easy case because the nomenclature for solvates is that the solvate form is dropped from the name.

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Derunavir at all times has included all of its solvate forms, which is Derunavir ethylene.

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So, you know, there really is no support to the argument that any pharmaceutical was intentionally excluded.

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And there's no thought that Derunavir Athanaly, on the fact finding the district court based on undisputed facts, which you can look at in the record, is duty free.

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I'd like to just say a word about Judge Wallach's questions about the due process claim.

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Because we view that as a very, very serious claim.

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And you can look at some of the documents in the record in which customs officials

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explicitly noted that, for example, page 4641, if this decrease of funding increases into the year, CPB will not be able to perform duty collection at the current level in Puerto Rico.

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Why does that fact have anything to do with whether we are or are not duty free?

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These were, in my view, shocking facts.

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We had only limited discovery and then the trial court severed

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the due process claim.

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But this, I think, is a serious problem, and it would, in my view, enhance the public good, but the court noted the antiquated nature of the funding structure of the Puerto Rico court.

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It is a 19th century relic.

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Let me just be clear.

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This is Judge Prouse.

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Sorry to interrupt, but we don't reach that.

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We affirm the CIT's conclusion in this case, right?

[00:20:23] Speaker 03:
That's correct, Your Honor.

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I'm sorry.

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I just got... Judge Wallace was interested, and I thought I... No, of course.

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No, as far as other questions, I think this is a very simple case of plain meaning of a statute correctly applied on undisputed facts by the CIT.

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Hearing none, thank you.

[00:20:43] Speaker 00:
Thank you, Your Honor.

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Mr. Edden, you've got some time left on rebuttal.

[00:20:50] Speaker 01:
Thank you, Your Honor.

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Just two or three brief points.

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There would be no pharmaceutical appendix if all pharmaceutical products were duty free.

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Congress here and the President have set up a detailed framework of multiple tables listing thousands of chemicals, hundreds of forms of those chemicals on Table 2.

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If all pharmaceutical products were duty free, it would just say that.

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We would not need this sophisticated table structure to set that up.

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Clearly, the President and Congress in the You're Going Round Agreements Act have set up a framework for negotiating duty discounts with our trading partners.

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And the trial court's interpretation of Table 1, Derunavir, and the CAS number as covering a different product completely writes Table 2 out of existence, because all of the forms of Derunavir are now duty free under Table 1.

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And to the second point about the commercial forms of the darunavir, right now Janssen makes darunavir abroad and then it crystallizes it into darunavir ethanolate abroad and it imports that form into the United States.

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Janssen had multiple options.

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It also had darunavir hydrate, which it chose not to import for various reasons that it preferred the stability of the ethanolate form and there's testimony about that at the trial record.

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And one last point, if I may, just about the customs in Puerto Rico.

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Customs in Puerto Rico did not change its mind about Janssen's product.

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Janssen imported this under the wrong CAS number and that came to customs attention at a later point in 2011 when it looked into that matter and issued the ruling.

[00:22:50] Speaker 00:
Thank you.

[00:22:51] Speaker 00:
We thank both sides and the case is submitted.

[00:22:54] Speaker 01:
.

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.