Federal Circuit Panel Holds Hatch-Waxman Venue Under the Second Prong of § 1400(b) is Based on Actions Related to ANDA Submission

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Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals Inc.

Last Thursday, a Federal Circuit panel issued a decision applying a narrow reading of the patent venue statute, 28 U.S.C. § 1400(b), in a Hatch-Waxman case.  In Valeant,[1] the Court held that “acts of infringement” in Hatch-Waxman cases under § 1400(b) occur “where actions related to the ANDA submission occur,” not where “a generic product specified in an ANDA is likely to be distributed.”[2]  Although it acknowledged “strong policy reasons” for a broader reading of the venue statute—such as judicial efficiency and preventing gamesmanship by defendants—the Court ultimately settled on a narrow reading based on the statutory text.[3]

Getting venue right carries great weight in Hatch-Waxman suits.  Under the compromise embodied in the Hatch-Waxman Act,[4] submitting an ANDA with a so-called “Paragraph IV certification” pursuant to Section 505(j)[5] is an act of patent infringement.[6]  This “highly artificial act of infringement” was designed to enable patent holders to “establish[] in court that there has been an act of infringement” where there has yet to be any manufacture, use, sale, or offers for sale of infringing products.[7]  If a branded company initiates an infringement action against a generic company within 45 days of receiving notice of ANDA submission, this triggers a 30-month stay during which FDA cannot issue a final approval for the ANDA.[8]  And if there is no 30-month stay, FDA has discretion to move forward with ANDA approval.  If a branded company gets venue wrong, it risks a motion to dismiss for improper venue.  And while most courts find transfer is the appropriate remedy for a successful venue motion, there is some risk of the case being dismissed and loss of the 30-month stay.[9]  The Valeant decision is thus one that litigants in Hatch-Waxman cases should be aware of.

How did we get here?

The patent venue statute is codified in 28 U.S.C. § 1400(b), which provides two prongs for finding proper venue:

Any civil action for patent infringement may be brought in the judicial district
[1] where the defendant resides, or
[2] where the defendant has committed acts of infringement and has a regular and established place of business.

For many years, the Federal Circuit held that a corporation “resides” in any judicial district in which the corporation was subject to personal jurisdiction, consistent with the general venue statute 28 U.S.C. § 1391.[10]  As a result, venue in most patent cases rose and fell with personal jurisdiction, and could be established broadly under personal jurisdiction law for corporations that sold products nationwide.[11]

In 2017, the U.S. Supreme Court changed the venue analysis significantly in TC Heartland.  In that case, the Court held that the definition of “resides” in the general venue statute does not apply to the patent venue statute.  Instead, the Supreme Court held: “for purposes of § 1400(b) a domestic corporation ‘resides’ only in its State of incorporation.”[12]

TC Heartland caused a renewed focus on the second prong of § 1400(b).  Litigants attempting to sue a corporation somewhere other than its state of incorporation now had to rely on that prong and show that the defendant (1) had committed acts of infringement in the venue, and (2) had a regular and established place of business there.

In the Hatch-Waxman context, this forced several district courts to tackle the “impenetrable problem in the particular context of Hatch–Waxman patent litigation” of where the “artificial act of infringement” of submitting an ANDA with a Paragraph IV certification occurs.[13]  Some district courts viewed “acts of infringement” under the second prong as encompassing potential future infringing acts where the generic company intended to sell its ANDA products, as the first prong did before TC Heartland.[14]  Other district courts viewed “acts of infringement” more narrowly, considering only the act of submitting the ANDA itself.[15]

What happened in Valeant?

In 2018, Valeant Pharmaceuticals North America LLC et al. (“Valeant”) filed a Hatch-Waxman suit in New Jersey against generic drug makers Mylan Pharmaceuticals Inc. et al. (“Mylan”) for infringing Valeant’s patents protecting Jublia®, a fungal infection treatment medication.  The Mylan defendants included two U.S.-based entities incorporated in West Virginia and Pennsylvania, and one foreign entity based in India.

Mylan moved to dismiss for improper venue.  In response, Valeant alleged that venue for the U.S.-based entities was appropriate in New Jersey under the second prong of § 1400(b) because they allegedly had a regularly established place of business in New Jersey and planned future acts, i.e., the sale of Mylan’s ANDA products across the U.S., including in New Jersey.  Valeant conceded that Mylan’s actions related to its ANDA submission itself did not occur in New Jersey.  The court granted Mylan’s motion, reasoning that planned future sales were not “acts of infringement” under § 1400(b).[16]

On appeal, the Federal Circuit panel affirmed the district court’s decision as to the Mylan U.S. entities.  The Court held: “acts of infringement” in Hatch-Waxman cases under § 1400(b) occurs “where actions related to the ANDA submission occur,” not merely where “a generic product specified in an ANDA is likely to be distributed.”[17]  The Court also noted: “[a] plain language reading of [§ 1400(b)] directs us to the conclusion that it is the submission of the ANDA, and only the submission, that constitutes an act of infringement in this context.”[18]

However, the Federal Circuit also acknowledged “strong policy reasons” for a broader reading of § 1400(b), including “lost judicial efficiencies” and potential gamesmanship[19]:

For example, a generic company may game the system to avoid venue in certain jurisdictions.  And brand name drug companies may be required to file and maintain largely identical suits in multiple districts causing an increase in time and expense to resolve the cases and resulting in inconsistent judgments.

Despite this, the Court ultimately found that the plain reading of statutory text required a narrow interpretation.[20]  Hence, the Federal Circuit affirmed the dismissal of infringement claims against two U.S.-based defendants for improper venue.  The Court also vacated and remanded the district court’s dismissal of action against the foreign defendant for which “venue was unquestionably proper.”[21]

Valeant Written Decision
Valeant Oral Argument

[1] Valeant Pharm. N. Am. LLC v. Mylan Pharm. Inc.,  No. 2019-2402, 2020 WL 6495091 (Fed. Cir. Nov. 5, 2020).

[2] Id. at *6.

[3] Id. at *8.

[4] i.e., the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98–417, 98 Stat. 1585.

[5] 21 U.S.C. § 355(j).

[6] 35 U.S.C. § 271(e)(2).

[7] Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 677–78, 110 S. Ct. 2683, 2692–93, 110 L. Ed. 2d 605 (1990).

[8] 21 U.S.C. §§ 355(c)(3)(C), (j)(5)(B)(iii).

[9] Novartis Pharm. Corp. v. Accord Healthcare Inc., No. CV 18-1043-LPS, 2019 WL 2502535, at *1 (D. Del. June 17, 2019).

[10] VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990), abrogated by TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 197 L. Ed. 2d 816 (2017).

[11] See Acorda Therapeutics Inc. v. Mylan Pharmaceuticals Inc., 817 F.3d 755 (Fed. Cir. 2016); VE Holding, 917 F.2d at 1584.

[12] TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 197 L. Ed. 2d 816 (2017).

[13] Bristol-Myers Squibb Co. v. Mylan Pharm. Inc., No. CV 17-379-LPS, 2017 WL 3980155, at *6–*8 (D. Del. Sept. 11, 2017).

[14] See, e.g., Bristol-Myers Squibb, 2017 WL 3980155; Celgene Corp. v. Hetero Labs Ltd., No. 17-cv-3387-ES-MAH, 2018 WL 1135334 (D.N.J. Mar. 2, 2018).

[15] See, e.g., Galderma Labs., L.P. v. Teva Pharms. USA, Inc., 290 F. Supp. 3d 599 (N.D. Tex. 2017).

[16] Valeant Pharm. N. Am. LLC v. Zydus Pharm. (USA) Inc., No. 18CV13635PGSLHG, 2019 WL 4179832 (D.N.J. Aug. 14, 2019), aff’d in part, rev’d in part and remanded sub nom. Valeant Pharm. N. Am. LLC v. Mylan Pharm. Inc., No. 2019-2402, 2020 WL 6495091 (Fed. Cir. Nov. 5, 2020).

[17] Valeant, 2020 WL 6495091 at *6–*8.

[18] Id. at *6.

[19] Id. at *8–*9 (internal citations removed).

[20] Id. at *8.

[21] Id. at *1.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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