Since the Supreme Court’s ruling in TC Heartland1, there has been increased litigation over appropriate venue in patent litigation, including Hatch-Waxman cases. 28 U.S.C. § 1400(b) provides that venue in patent infringement cases is proper “in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.”2 TC Heartland determined that “resides” in § 1400(b) is limited to a domestic corporation’s state of incorporation.3 Accordingly, a domestic corporation4 in a patent infringement action may only be sued in the judicial districts of the state(s) where the corporation:
- is incorporated; or
- (i) has committed acts of infringement and (ii) has a regular and established place of business.
On November 5, 2020, the Federal Circuit in Valeant Pharms. v. Mylan Pharms. Inc.5 addressed the issue of where “acts of infringement” under § 1400(b) occur to determine proper venue for patent infringement claims brought pursuant to the Hatch-Waxman Act.6 It concluded that, consistent with 35 U.S.C. § 271(e)(2)7, “acts of infringement” for venue purposes take place only in districts “where actions related to the submission of an Abbreviated New Drug Application (“ANDA”) occur, not in all locations where future distribution of the generic products specified in the ANDA is contemplated.”8
The Federal Circuit in In re Cray Inc.9 previously interpreted that a “regular and established place of business” under § 1400(b) requires that: (1) there must be “a physical, geo-graphical location in the district from which the business of the defendant is carried out”; (2) the defendant’s presence “must for a meaningful time period be stable, established”; and (3) “it must be a place of the defendant.”10 Additionally, In re Google LLC11 clarified that venue under § 1400(b) should be determined in accordance with Federal Circuit law rather than individual Circuit law and that the plaintiff bears the burden of proof.12
I. Acts of Infringement: What Does it Mean to Submit an ANDA?
Valeant held that venue is not established in “judicial districts where a generic product specified in an ANDA is likely to be distributed.”13 Rather, acts of infringement occur only in “those districts that are sufficiently related to the ANDA submission[.]”14 After Valeant, the open question is: “what all relevant acts involved in the preparation and submission of an ANDA might be[.]”15
Valeant stated that “acts protected by the safe harbor provisions in § 271(e) are non-infringing” for the purposes of venue.16 The safe harbor provision of § 271(e)(1) provides, in pertinent part: “It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention . . . solely for uses reasonably related to the development and submission of information [to the FDA].”17 Generic companies will likely seek a narrow reading of Valeant and a broad reading of § 271(e)(1), perhaps going so far as to seek to limit acts of infringement to electronically sending the ANDA to the FDA with a paragraph IV certification. The Federal Circuit has previously provided some guidance on safe harbor activities under § 271(e)(1). For example, it expressed that “[u]nder a proper construction of 35 U.S.C. § 271(e)(1), [if] testing is carried out to ‘satisfy the FDA’s requirements’ means it falls within the scope of the safe harbor, even though the activity is carried out after approval.”18 It further recognized that “[a party] cannot be liable for the [Active Pharmaceutical Ingredient (“API”)] it sold the ANDA defendants . . . as an API supplier, [when it] has thus far done nothing more than provide material for use by the ANDA defendants in obtaining FDA approval. [Such activities] are protected by the safe harbor of § 271(e)(1)[.]”19
Valeant, however, also explained that venue is proper in “those districts where acts occurred that would suffice to categorize those taking them as [an ANDA] ‘submitter’ under § 271(e).”20 An ANDA submitter likely includes entities that actively participate in the preparation of an ANDA and intend to directly benefit from the ANDA by selling the drug product in the United States upon FDA approval.21 Some district courts suggested that “whether the entity is a submitter depends on whether it is also going to engage in the commercial manufacture, use, or sale of the proposed generic drug product” and “financially benefit, in a significant manner, from the FDA’s approval of the application.”22 As opposed to “an entity that merely assists in collecting materials for submission to the FDA, signs the ANDA, presents the ANDA to the FDA for approval, and acts in an ongoing manner as the liaison between the FDA and the applicant during the regulatory process, but will have no involvement with the ANDA product following FDA approval, is not a submitter.”23
II. A Regular and Established Place of Business: What is Required to Satisfy the Cray Factors?
In re Cray identified three factors to determine whether a regular and established place of business is located in the district: “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.”24
For the first Cray factor, “[a] ‘place’ merely needs to be a ‘physical, geographical location in the district from which the business of the defendant is carried out.’”25 A “physical ‘place of business’” does not require “real property ownership or a leasehold interest in real property.”26 This factor is used to distinguish a physical space versus “merely  a virtual space” or “electronic communication from one person to another . . . .”27 A physical place of business could be as simple as a “table at a flea market” or “leased shelf space or rack space.”28
As for the second Cray factor, the defendant’s business “must for a meaningful time period be stable, established.”29 In other words, the business must be “steady[,] uniform[,] orderly[, and] methodical” rather than sporadic, and it must be “settle[d] certainly, or fix[ed] permanently” as opposed to temporary.30 Moreover, “a ‘regular and established place of business’ requires the “regular, physical presence of an employee or other agent of the defendant conducting the defendant’s business at the . . . ‘place of business.’”31 Google left open the issue of whether a machine could qualify as an agent.32 Nonetheless, the “agent[’s] activities . . . that are merely connected to, but do not themselves constitute, the defendant’s conduct of business” will not satisfy this factor.33
Regarding the third Cray factor, “[a place of business] must be a place of the defendant, not solely a place of the defendant’s employee.”34 Relevant considerations include:
- “whether the defendant owns or leases the place, or exercises other attributes of possession or control over the place.”35
- “whether the defendant conditioned employment on an employee’s continued residence in the district or the storing of materials at a place in the district [from where such materials] can be distributed or sold.”36
- whether “the defendant represent[s] that it has a place in the district.” In that, “whether the defendant lists the alleged place of business on a website, or in a telephone or other directory; or places its name on a sign associated with or on the building itself.”37
- “the nature and activity of the alleged places of business of the defendant in the district in comparison with that of other places of business of the defendant in other venues.”38
Frequently this factor is used to distinguish between a company’s place of business and an employee’s private home in the district where the employee conducts the company’s business.
Additionally, a parent-subsidiary, principal-agent, or employer-employee relationship alone would not be sufficient to establish the Cray factors.39 That is, merely because a parent company has a place of business in the district, does not on its own establish that a subsidiary also has a place of business. Moreover, attempts to pierce the corporate veil to impute a parent’s or subsidiary’s place of business to another company or entity is a high bar that is not frequently met.40 But if a parent or subsidiary actually conducts business from the parent’s or subsidiary’s place of business, that location may count as a place of business for both.41
The Cray factors pose a fact intensive inquiry. As a result, some courts order venue-related discovery and require a showing that the plaintiff can articulate specific allegations before ordering such discovery.42
In sum, what it means to submit an ANDA or determining a regular and established place of business are fact intensive questions and will continue to be developed in future litigation on a case-by-case basis. Any plaintiff concerned about venue dispute would be wise to investigate and plead the basis for venue with specific factual allegations. Further, given the evolving law and fact intensive nature of such dispute, a plaintiff concerned about protecting its 30-month regulatory stay should also consider filing a protective suit where the defendant is incorporated.
1TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017).
228 U.S.C. § 1400(b).
3TC Heartland, 137 S. Ct. at 1521.
4For a foreign corporation, “a defendant not resident in the United States may be sued in any judicial district[.]” 28 U.S.C. § 1391(c)(3); see also In re HTC Corp., 889 F.3d 1349, 1358 (Fed. Cir. 2018).
5Valeant Pharms. v. Mylan Pharms. Inc., No. 19-2402 (Fed. Cir. Nov. 5, 2020) (“Slip Op.”), available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/19-2402.OPINION.11-5-2020_1681030.pdf
6Id. at 2–3.
735 U.S.C. § 271(e)(2), in relevant part, states that “[i]t shall be an act of infringement to submit . . . an [ANDA] . . . for drugs claimed in a patent or the use of which is claimed in a patent[.]”
8Slip Op. at 3.
9In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017).
10Id. at 1362–63 (emphasis in original).
11In re Google LLC, 949 F.3d 1338 (Fed. Cir. 2020).
12See id.. District courts are still determining what the burden of proof should be. For instance, one court recently stated that “[i]f the court relies on pleadings and affidavits, the plaintiff need only make a prima facie showing of venue. If the court holds an evidentiary hearing, however, the plaintiff must demonstrate venue by a preponderance of the evidence.” Celgene Corp. v. Hetero Labs Ltd., No. 17-cv-03387-ES-MAH, slip op. at 7, 14 (D.N.J. Sept. 2, 2020) (internal citations omitted).
13Slip Op. at 18.
15Id. at 19, n.8.
1735 U.S.C. § 271(e)(1).
18Momenta Pharm., Inc. v. Amphastar Pharm., Inc., 686 F.3d 1348, 1359 (Fed. Cir. 2012); but see Momenta Pharm., Inc. v. Teva Pharm. USA Inc., 809 F.3d 610, 619 (Fed. Cir. 2015) (“Despite the broad contours of the exemption, some activities are outside its protection. For example, § 271(e)(1) ‘does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained.’ [Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1070 (Fed.Cir.2011).] In addition, research tools or devices that are not themselves subject to FDA approval may not be covered. Proveris Sci. Corp. v. Innovasystems, Inc., 536 F.3d 1256, 1265–66 (Fed.Cir.2008).”).
19Shire LLC v. Amneal Pharm., LLC, 802 F.3d 1301, 1310 (Fed. Cir. 2015).
20Slip Op. at 18.
21See In re Rosuvastatin Calcium Patent Litig., MDL No. 08-1949, 2008 WL 5046424, at *10–11 (D. Del. Nov. 24, 2008), aff’d 703 F.3d 511, 527 (Fed. Cir. 2012); Memorandum Order at 3, Otsuka Pharm. co. et al v. Hetero USA, Inc. et al, No. 19-1954-LPS (D. Del.).
22Adverio Pharma GmbH v. Alembic Pharm. Ltd., No. CV 18-73-LPS, 2019 WL 581618, at *4–5 (D. Del. Feb. 13, 2019) (emphasis omitted); Memorandum Order at 3, Otsuka, No. 19-1954-LPS.
23Adverio, No. CV 18-73-LPS, 2019 WL 581618, at *5; Memorandum Order at 3, Otsuka, No. 19-1954-LPS.
24Cray, 871 F.3d at 1360.
25Google, 949 F.3d at 1343.
27Cray, 871 F.3d at 1362.
28Google, 949 F.3d at 1343–44.
29Cray, 871 F.3d at 1363.
30Id. at 1362–63.
31Google, 949 F.3d at 1345.
32Id. at 1347.
33Id.; see, e.g., Mantissa Corp. v. Great Am. Bancorp, Inc., 446 F. Supp. 3d 398, 404 (C.D. Ill. 2020) (“Plaintiff does little other than speculate that [Defendant] “must have personnel based in [the District] to offer and provide ATM Managed Services to customers’ . . . . Plaintiff does not cite any evidence that such maintenance exists, who performs the maintenance, or how it is connected to [Defendant’s] business. Plaintiff failed to establish venue exists over its claim against [Defendant] on the basis of the existence of ATMs, ATM services, or maintenance of ATMs in this District.”).
34Cray, 871 F.3d at 1363 (emphasis in original).
37Id. at 1363–64.
38Id. at 1364 (emphasis in original).
39Id. at 1363–64.
40See, e.g., Google, 949 F.3d at 1345–47 (“The venue statute should be read to exclude agents’ activities, such as maintenance, that are merely connected to, but do not themselves constitute, the defendant’s conduct of business in the sense of production, storage, transport, and exchange of goods or services.”).
41See, e.g., Mallinckrodt IP v. B. Braun Medical Inc., No. 17-365-LPS, 2017 U.S. Dist. LEXIS 205593, at *2, *7, *10 (D. Del. December 14, 2017) (denying defendant’s motion to dismiss for improper venue because the court found “[p]laintiffs' theory – that the ‘places’ of any of [defendant’s] entit[ies], including [defendant’s] affiliates, subsidiaries, parents, or alter egos, may be attributable to [defendant] for purposes of venue . . . – [was] not frivolous . . . . In the [c]ourt's view, it follows from Cray that the ‘place’ of a corporate affiliate or subsidiary of a named defendant may, in at least some circumstances, and similar to the place of a defendant's employee, be treated as a ‘place of the defendant.’”).
42See Novartis Pharm. Corp. v. Accord Healthcare Inc., No. 18-cv-01043-LPS, 2019 WL 2502535, at *3 (D. Del. June 17, 2019) (“[W]here issues arise as to jurisdiction or venue, discovery is available to ascertain the facts bearing on such issues.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, n.13 (1978). “[U]nless a plaintiff’s claim is ‘clearly frivolous,’ jurisdictional discovery should be allowed.” Rocke v. Pebble Beach Co., 541 Fed. Appx. 208, 212 (3d Cir. 2013)); Eastman Chem. Co. v. AlphaPet, Inc., No. 09-971-LPS-CJB, 2011 WL 6004079, at *2 (D. Del. Nov. 4, 2011) (“If a plaintiff makes factual allegations that suggest the possible existence of requisite contacts between the defendant and the forum state with reasonable particularity, the court should order jurisdictional discovery.” (citations omitted)); see also Celgene Corp. v. Hetero Labs Ltd., No. 17-03387-ES-MAH, 2018 WL 1135334, at *4 (D.N.J. Mar. 2, 2018) (permitting venue-related discovery based on the strength of the parties’ arguments and the factual nature of the inquiry).