Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2020)

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Somewhat remarkably, there is no settled Federal Circuit precedent regarding where a patentee can bring suit against a generic competitor in Hatch-Waxman litigation under 35 U.S.C. § 271(e)(2).  While recognizing that this situation has arisen in large part to the disruption created by the Supreme Court in TC Heartland LLC v. Kraft Foods Grp. Brands LLC of prior Federal Circuit interpretations that venue was coincident with personal jurisdiction, last Thursday the Federal Circuit arrived at a decision regarding where proper venue does not lie in ANDA litigation, in Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals Inc.

The issue arose in ANDA litigation brought in the District of New Jersey by Valeant Pharmaceuticals against a trio of Mylan entities:  Mylan Pharmaceuticals, Inc., (MPI) "a West Virginia corporation with a principal place of business in Morgantown, West Virginia"; Mylan Laboratories Ltd. (MLL), "Indian corporation with a principal place of business in Hyderabad, India"; and Mylan Inc., "a Pennsylvania corporation with a principal place of business in Canonsburg, Pennsylvania."  The underlying dispute involves Dow Pharmaceutical Sciences' anti-fungal drug Jublia® (efinaconazole) protected by nine Orange Book-listed patents.  Because geography is important to the venue issue, the opinion notes that MPI "executed" its ANDA in its West Virginia corporate headquarters and filed at the FDA in White Oak, Maryland.  Valeant's suit was supported by several allegations that venue was proper in New Jersey, including:

• Each Mylan defendant "directly, or indirectly, develops, manufactures, markets, and sells generic drug products throughout the United States and in this judicial district, and this judicial district is a likely destination for Mylan's generic efinaconazole topical solution." . . .
• Each Mylan defendant does business in New Jersey and is registered to do so. . . .
• Each defendant has previously submitted to the jurisdiction of the court and has a place of business in New Jersey.
• MPI applied for FDA approval of its generic drug, which will be "purposefully directed at, upon information and belief, New Jersey and elsewhere.  [MPI's] ANDA filings constitute formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs."  And MPI plans to market and sell its generic drug in into New Jersey upon FDA approval[.]

The Mylan defendants moved to dismiss under Fed. R. Civ. P. 12(b)(3) for improper venue (and under Rule 12(b)(6) as to the MLL and Mylan Inc. defendants for failure to state a claim).  Mylan did not dispute Valeant's assertions as set forth above; rather, the basis for the motion was that venue was improper under 28 U.S.C. § 1400(b) because none of the defendants resided in New Jersey, was incorporated there, or has "regular and established places of business" in the state, and no act of infringement occurred there.  Valeant argued in response that infringement under § 271(e)(2) was prospective, intended to address "planned future [infringing] conduct," an argument supported by Bristol-Myers Squibb Co. v. Mylan Pharmaceuticals Inc. from the District Court in Delaware.  And with regard to the (12)(b)(6) motion, Valeant argued that infringement liability under the statute was not limited to the ultimate ANDA filer in these situations, citing In re Rosuvastatin Calcium Patent Litig., 703 F.3d 511, 527–28 (Fed. Cir. 2012).

The District Court granted the Mylan motions on improper venue grounds, based on Federal Circuit precedent in In re Cray and In re ZTE, for the principle that "requirements of the venue statute are specific, unambiguous, and not amenable to liberal construction based on policy concerns . . ." (although the opinion notes that the District Court did not address the (12)(b)(6) motion directly).

The Federal Circuit affirmed in part, reversed in part, and remanded, in an opinion by Judge O'Malley joined by Judges Newman and Taranto.  The panel first considered as a "case of first impression" the question of the situs of proper venue in Hatch-Waxman litigation (in view of the TC Heartland decision).  The Court performed this analysis by first assessing where the infringing act occurred (a requirement expressly recited in the statute).  This raised the issue of the nature of the infringing act under § 271(e)(2), which specifies that it is an act of infringement to submit an ANDA for a drug protected by an Orange Book-listed patent.  While the litigation is focused on infringement vel non of a defendant's future approval and sale of a generic drug, the act of infringement set forth in the statute is an ANDA filing itself.  The effects on venue of these two infringing acts formed the basis for the Court's decision.

Prior to TC Heartland, the opinion recounted, the Federal Circuit had found venue to be proper where personal jurisdiction against the defendant was proper, citing Acorda Therapeutics Inc. v. Mylan Pharmaceuticals Inc., 817 F.3d 755 (Fed. Cir. 2016), and VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990), and thus considered "planned future acts" of infringement.  These precedents were overturned by TC Heartland according to the opinion, and thus the venue question before the Court in this case became unsettled.  The opinion noted that other cases involving venue questions post-TC Heartland (Cray, ZTE) were decided narrowly, given the specific statutory language.  Other attempts by the Court to address venue in ANDA cases (pre-TC Heartland) had recognized the issue that the statute recites "where the defendant has committed acts of infringement" (emphasis added) regarding "potential future acts" of infringement.  Cases like Bristol-Myers Squibb concluded that the statute was directed towards such future acts of infringement and not the administrative act of filing the ANDA and that thus venue was proper in a district in which infringing generic drugs were intended to be sold.  This precedent has been followed (Celgene Corp. v. Hetero Labs Ltd., No. 17-cv-3387-ES-MAH, 2018 WL 1135334, at *3 (D.N.J. Mar. 2, 2018)) and abjured (Galderma Labs., L.P. v. Teva Pharms. USA, Inc., 290 F. Supp. 3d 599, 606–09 (N.D. Tex. 2017)) in practice and here the Court resolved the issue by deciding that the District Court was correct that venue was improper in New Jersey under these circumstances in view of TC Heartland.

The basis for this decision followed the (narrow) statutory construction rubrics followed in other post-TC Heartland venue cases, particularly the plain meaning of the language of the statute.  This includes the clear object that venue was proper where infringement had occurred (identified through the use of the present perfect verb tense by Congress, particularly in view of the statute's use of the present tense regarding "where the defendant resides" and "where the defendant . . . has a regular and established place of business").  This returned the opinion to the question of the act of infringement embodied in § 271(e)(2), which the panel identified as the act of submitting the ANDA.  The Court rejected Valeant's arguments to the contrary on the grounds that the venue statute should be narrowly construed and not affected by policy determinations.  Thus, arguments regarding the "artificiality" of infringement under § 271(e)(2) fell on deaf ears, even while the opinion conceded that the Supreme Court, the Federal Circuit itself, and district courts had termed § 271(e)(2) to recite an "artificial act of infringement," citing Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 678 (1990); Acorda, 817 F.3d at 760; and Belcher Pharms., LLC v. Int'l Medication Sys., Ltd., 379 F. Supp. 3d 326, 330 (D. Del. 2019).  Despite this precedent, the opinion asserted that the statute evinced no such ambiguity; submitting an ANDA "is the infringing act" (emphasis in opinion) according to the Court, noting the paradox that the complementary section of the statute, § 271(e)(1) "declares certain very real acts of infringement to be non-infringing acts."  The panel also rejected any effects of the focus of Hatch-Waxman litigation on future approval and infringing generic drug sales, saying that "[t]he content of the litigation does not, however, turn potential future acts into past infringement" (and of course there is no post-litigation infringement in any case, either because approval is stayed until the patent(s) expire or they are found invalid, unenforceable, or not infringed).  And Valeant's arguments regarding Congressional intent foundered on the Supreme Court's understanding that Congress could have expressed differing intent when amending § 1400(b) in 1988 (post-Hatch-Waxman) or again when adopting a general venue statute in 2011.  Even arguments the Court clearly found appealing on policy grounds (the possibility that generic companies could "game" the system to avoid venue in some jurisdictions, and that innovator companies might need to bring and maintain suit in multiple districts) could not overcome the plain meaning of the statute in view of Supreme Court precedent.  Thus the opinion stated succinctly:

Accordingly, we hold that, in Hatch-Waxman cases, venue is not proper in all judicial districts where a generic product specified in an ANDA is likely to be distributed.  It is proper only in those districts that are sufficiently related to the ANDA submission—in those districts where acts occurred that would suffice to categorize those taking them as a "submitter" under § 271(e).

(It must be recognized, however, that in a footnote the opinion asserts: "The district court's suggestion that an act of infringement for purposes of this case may have occurred in the District of Maryland where the FDA received the ANDA is not challenged in this appeal.  While it may well be that the District of Maryland satisfies the test for venue that we have laid out here, we do not resolve that question.  We also do not define what all relevant acts involved in the preparation and submission of an ANDA might be, leaving those questions for other cases where the precise contours are presented and briefed.")

Finally, the Federal Circuit reversed the District Court with regard to the MLL defendant, on the grounds that a foreign defendant can be sued in any judicial district, and remanded for the District Court to consider whether this defendant was sufficiently involved to overcome the motion to dismiss under Rule 12(b)(6).

Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals Inc. (Fed. Cir. 2020)
Panel: Circuit Judges Newman, O'Malley, and Taranto
Opinion by Circuit Judge O'Malley

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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