Frequent Participation in Hatch-Waxman Litigation in a Forum May Be Relevant to Whether...
Thursday, October 19, 2017
Frequent Participation in Hatch-Waxman Litigation in a Forum May Be Relevant to Whether a Defendant Can Be Sued in that Forum for Patent Infringement
By John Paul, Brian Kacedon, and Sonja Sahlsten
Edited by Cecilia Sanabria and Robert MacKichan
(Authors and editors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.)
Abstract: Submitting an Abbreviated New Drug Application (ANDA) and subsequent prospective infringement can be sufficient to show an act of infringement under the venue statute. And frequent participation in Hatch-Waxman litigation in a forum may be a factor in establishing that the defendant had a “regular and established place of business” in that forum, sufficient to establish the courts of that forum as a proper venue for patent infringement litigation. If necessary, courts may permit discovery to be taken to determine whether a “regular and established place of business” exists in that forum.
A court may be an appropriate venue for patent infringement litigation if the infringer “resides” in that venue or if the infringer has a “regular and established place of business” in that venue. The Supreme Court’s recent TC Heartland LLC v. Kraft Food Group Brands LLC decision provided guidance only on the first condition—where a defendant “resides.” As a result, district courts have continued to grapple with determining whether an infringer has a “regular and established place of business.”
Hatch-Waxman litigation involving infringement of pharmaceutical patents adds another level of complexity to this analysis. By its nature, such litigation is based on what a generic drug manufacturer may do in the future, and the patent venue statute is drafted to address acts that have already occurred and to determine whether those acts are sufficiently connected to a particular district so as to make venue for a lawsuit proper in that district. Thus, the determination of the proper venue for such suits may be even more difficult.
After Mylan submitted an ANDA to market and sell a generic version of Bristol-Myers’ patented drug, Bristol-Myers sued Mylan in Federal court in Delaware under the Hatch-Waxman Act, alleging prospective patent infringement. Mylan, a West Virginia Corporation with its principal place of business in West Virginia, asked the Delaware court to dismiss the case, contending that Delaware was an improper venue for the lawsuit because Mylan did not have a regular and established place of business in Delaware.
The Bristol-Myers Decision
The Delaware court analyzed what gives rise to an “act of infringement” and what is sufficient to show “a regular and established place of business” under the venue statute in the Hatch-Waxman context. The court noted that venue challenges are procedural in nature and that the law of the regional circuit court of appeals would apply as to who had the burden of proof. Acknowledging the majority view that the plaintiff bears the burden of establishing it chose the proper venue, the court nonetheless applied Third Circuit precedent holding that the party challenging the venue of the court bears the burden of proving venue is not proper.
The court next turned to interpreting the meaning of “acts of infringement” for venue purposes in Hatch-Waxman litigation. In an issue of first impression, the court analyzed whether the prospective act of infringement created by the Hatch-Waxman Act was an act of infringement for purposes of the patent venue statute.
Recognizing the backward-looking nature of the patent venue statute, which considers where the defendant “has committed” acts of infringement, and the forward-looking nature of Hatch-Waxman litigation, which inherently involves future acts of infringement, the court found that the submission of an ANDA along with other acts the defendant intends to take if it receives final FDA approval can satisfy the “act of infringement” requirement of the venue statue. That analysis, however, does not end the inquiry because a defendant residing outside of Delaware must also have a “regular and established place of business” in the district of Delaware for venue to be proper.
When addressing what it means to have a “regular and established place of business,” the court explained that simply being registered to do business in Delaware, shipping goods to Delaware, having an exclusive distributorship in Delaware, or having a website that Delaware customers visit, without more, is not enough. While a fixed physical location, such as a formal office or store, is not necessary, some physical presence is required to show a “regular and established place of business.”
Here, Mylan did not have its corporate offices, manufacturing plants, facilities, or any real property in Delaware; nor did it have employees working in Delaware or sell products to distributors or wholesalers in Delaware. Instead, Mylan’s activities in Delaware boiled down to its registration to do business in Delaware, license to be a pharmacy wholesaler and distributor, and receipt of certain promotional payments to physicians in Delaware—three things that, in isolation, would not have been sufficient to establish venue in Delaware. Nevertheless, the court found that Mylan may still have a regular and established place of business in Delaware because Mylan is part of a corporate family with 40 Delaware entities, and also because Mylan is a frequent participant in Hatch-Waxman litigation in Delaware, which was an important part of Mylan’s success in the generic pharmaceutical business.
To evaluate whether venue was appropriate in Delaware, the court permitted Bristol Myers to take discovery on Mylan’s business operations and corporate affiliates. Because two dozen related cases where venue was not at issue were pending in the district, the court allowed the case to move forward on the merits while the parties conducted venue-related discovery.
Strategy and Conclusion
This case provides important guidelines for evaluating whether venue for patent infringement exists in Delaware for Hatch-Waxman litigation. Evaluating venue is fact-intensive and may require discovery before the court decides whether Delaware is an appropriate venue for the litigation. And although the court did not expressly hold that participation in Hatch-Waxman litigation in Delaware automatically creates a regular and established place of business, it found that such practice was a relevant consideration.
This article is for informational purposes and does not constitute legal advice. The views expressed do not necessarily reflect the views of LES (U.S.A. and Canada) or Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.