On Sep 11, 2017, Chief Judge Leonard P. Stark of District of Delaware issued
an opinion in Eliquis®; (Apixaban) case regarding motion to
dismiss for improper venue by Mylan Pharmaceuticals Inc.
(MPI) in
light of the Supreme Court's recent decision in TCI Heartland LLC v. Kraft Food Group Brands (2017).
The venue motions are procedural - and therefore governed by
the law of the regional circuit, even though the substantive questions at issue
may be controlled exclusively by Federal Circuit law. Accordingly, the Court
applied Third Circuit law to the procedural aspects of Defendant's improper
venue motion, which places the burden on Defendant to prove improper venue. MPI,
which has submitted an ANDA to the USFDA for permission to market and sell a
generic version of one of Plaintiffs' (BMS/Pfizer) patent-protected drug
products, bears the burden to show that it does not satisfy the requirements of
the second prong of§ 1400(b).
The patent venue statute, 28 U.S.C. § 1400(b), provides:
Any civil action for patent infringement may
be brought in the judicial district [1] where the defendant resides, or [2]
[(a)] where the defendant has committed acts of infringement and [(b)] has a
regular and established place of business.
On May 22, 2017, the
Supreme Court issued its decision in TC Heartland, "hold[ing] that a domestic corporation 'resides' only in
its State of incorporation for purposes of the patent venue statute,"
adding that "amendments to § 1391 did not modify the meaning of§
1400(b)." The Supreme Court did not construe the second prong of§ 1400(b),
which makes venue in a patent case proper where a defendant "has
committed acts of infringement and has a regular and established place of
business”.
It is undisputed
that under the Supreme Court's decision in TC
Heartland, venue in this case is not proper in Delaware under the
"resides" portion of the statute, as MPI is incorporated in West
Virginia. MPI, therefore, "resides" in West Virginia, not Delaware.
The parties'
dispute, then, is whether venue is proper in Delaware in accordance with the second
prong of§ 1400(b). Venue in
Delaware is proper under this portion of the statute unless MPI can show either
that (a) MPI has not committed acts of infringement in Delaware, or (b)
MPI does not have a regular and established place of business in Delaware.
( a)
Acts of Infringement:
The first
requirement of the second prong of § 1400(b) is that "the defendant has committed acts of
infringement" in this District. The issue appears to be one of first
impression because neither party nor court is aware of any case law related to
this.
In a Hatch Waxman
suit, the subject of the dispute is the generic drug product that the defendant
will manufacture and sell and
offer for sale in the future
(after obtaining FDA approval) & not about a generic product the defendant has sold or is selling (Acorda
Therapeutics Inc. v. Mylan Pharm. Inc., 817 F.3d 755, 760 (Fed. Cir. 2016). Thus,
on the surface there appears to be a complete mismatch between the
backward-looking nature of the patent venue statute and the forward-looking
nature of Hatch-Waxman litigation.
What, then, does
Hatch-Waxman define as an act of infringement? It is the submission of an ANDA to the FDA, if the
ANDA seeks approval before the expiration of a patent covering the branded drug
to which the generic product is bioequivalent (artificial-act of
infringement). An
applicant submits an ANDA with full knowledge of the effect of its application
and with the objective of marketing its drug product in the event that the
application is approved. Thus, "Mylan' s [and MPI' s] ANDA filings,
including, its certifications regarding the patents at issue here, were
thus suit-related, and they had a substantial connection with Delaware because
they reliably, non-speculatively predicted
Delaware activities by Mylan”. This can be sufficient to demonstrate that
the ANDA-filing Defendant "has
committed" "acts of infringement" in this District.
( b)
Regular and Established Place of Business:
In order for venue
to be proper under the second prong of § 1400(b), the defendant must also have
"a regular and established place of business" in the district.
In its mandamus
petition, Cordis (Fed. Cir.
1985) invoked its lack of a fixed physical location as dispositive of the
question whether it had a regular and established place of business in Minnesota.
The Federal Circuit explicitly rejected this contention, holding that "in
determining whether a corporate defendant has a regular and established place
of business in a district, the appropriate inquiry is whether the corporate
defendant does its business in that district through a permanent and continuous presence there and not ... whether it
has a fixed physical presence
in the sense of a formal office or
store."
But in holding that
no fixed physical presence in the sense of a formal office or store is required,
Cordis should not be understood as eliminating the statutory requirement that a
defendant have some regular and established ''place of business" in the venue. Consistent with what
Judge had already determined before Cordis, the Court understands Cordis to
mean that while no fixed space in the sense of a formal office or store is necessary,
some physical presence is
nevertheless required. Cordis' analysis focused on the defendant's physical
presence in the district. Cordis' explanation that there needs to be a "permanent and continuous presence"
in a district further confirms that the corporate defendant is required to have
some sort of meaningful physical manifestation in the district. But as Cordis also
demonstrates, this inquiry is factually driven and dependent on the
circumstances of the case.
Pulling all of this
together, the Court proceeded to analyze whether a defendant has a regular
and established place of business in Delaware in the following manner.
Based on both the statutory language of§ 1400(b) and Cordis, 729 F.2d at 737,
the Court must determine whether a defendant has a regular and established
place of business by conducting a fact intensive inquiry focused on
whether the defendant does its business in this District through a permanent
and continuous presence here. If all that is revealed by the record is that the
defendant is registered to do business here, or only maintains a website that
is accessible in Delaware, or simply ships goods to unaffiliated individuals or
third-party entities here, then this District is an improper venue for the
lawsuit.
Turning to the
record presently before the Court, the Court is unable to determine whether
MPI has a regular and established place of business in Delaware. Before the
Court will evaluate whether MPI can show that it lacks a regular and
established place of business here, the Court will provide BMS an
opportunity to take venue-related discovery.
Such discovery will
include understanding the relationships among the 40 Delaware Mylan entities
and MPI. Venue in a patent infringement case [may be] proper with regard to one
corporation by virtue of the acts of another intimately connected, corporation.
It will also consider whether MPI (or any Mylan entity) has sales
representatives who come to Delaware, who meet with doctors and hospitals here,
what they do here, and how often they do it. The venue-related discovery may
also include attempting to understand "the way that the industry operates,
the way that sales are made, [and how] marketing and promotions are done."
Further, it will explore details of MPI's (or another Mylan entity's)
operations with wholesalers like McKesson, Americsource Bergen, or Cardinal
Health. Finally, discovery will consider the extent to which MPI has
relationships with "end users," such as pharmacies and physicians in
Delaware, "that are aimed at incentivizing them to purchase MPI products
from wholesalers and distributors.
CONCLUSION: For
the reasons stated above, the Court denied without prejudice MPI' s motion
to dismiss for improper venue. MPI has committed acts of infringement in Delaware
based on its submission of an ANDA to the FDA, with the intention and for the
purpose of selling products in Delaware that would allegedly infringe BMS'
patents. The Court was not yet able to determine whether MPI lacks a regular
and established place of business in Delaware. Hence, the Court will permit venue-related
discovery and allow MPI to renew its venue challenge after such discovery is
completed.