The Hatch-Waxman Act provides a cause of action for infringement based on the submission of an abbreviated new drug application (ANDA) to FDA. 35 U.S.C. § 271(e)(2). Following the Supreme Court’s ruling in TC Heartland LLC v. Kraft Foods Group, 137 S. Ct. 1514 (2017), and the Federal Circuit’s application of it in Valeant Pharms. N. Am. LLC v. Mylan Pharms. Inc., 978 F.3d 1374 (Fed. Cir. 2020), this narrow definition of infringement can create venue problems for name-brand pharmaceutical manufacturers.
The Federal Circuit in Celgene Corp. v. Mylan Pharms., Inc. recently clarified venue law for such actions, and in doing so, also addressed venue principles generally applicable in typical patent cases. —F.4th—, 2021 WL 5143311 (Fed. Cir. Nov. 5, 2021).
The key takeaways from Celgene are these:
Celgene markets pamolidomide as a multiple myeloma drug under the brand name Pomalyst®. Id. at *1. Mylan submitted an ANDA, seeking to market a generic version of pamolidomide. Id. Celgene twice sued in New Jersey, where it is headquartered. Id. But the defendants, including various Mylan corporate entities, were headquartered in West Virginia, Pennsylvania, and the Netherlands. Id. After two years of venue-related discovery, the district court dismissed Celgene’s suit against the domestic defendants for lack of proper venue and against the international defendant for failure to state a claim. Id. at *1, 3.
The Federal Circuit affirmed the dismissals. Id. at *1. The Court began with the domestic defendants. Venue for patent infringement may be satisfied by showing either that the defendant “resides” in a particular district or “has committed acts of infringement and has a regular and established place of business there.” 28 U.S.C. § 1400(b). The defendants were clearly not residents of New Jersey, and thus Celgene had to prove the second prong of § 1400(b). 2021 WL 5143311, at *4. Celgene argued that the act of infringement (submission of the ANDA) occurred in New Jersey because Mylan sent its paragraph IV notice letter to Celgene there. According to Celgene, receipt of the paragraph IV letter was “sufficiently related to the ANDA submission” to create proper venue in New Jersey. Id. The Federal Circuit rejected this argument, noting that receipt of the letter occurs after and apart from submission of the ANDA. Id. at *5. The Court further emphasized that the submission of the ANDA containing a paragraph IV certification, not the paragraph IV notice letter, is what creates the cause of action for infringement. Id.
The Court next analyzed whether the domestic defendants had a “regular and established place of business” in New Jersey. Id. There are three requirements for this showing: 1) a physical location in the district; 2) that location must be a regular and established place of business; and 3) the defendant must be at that location. The Court looked to the third requirement; that the location must be “of the defendant” and not just of the defendant’s employees. Id. (citing In re Cray, 871 F.3d 1355, 1362-63 (Fed. Cir. 2017). Mylan did not have any physical presence in New Jersey, so Celgene instead argued two theories for venue.
First, Celgene contended that Mylan’s employees had homes in New Jersey. Id. at *6. But Celgene failed to prove that any of those homes were places of business. Id. The Court noted that of Mylan’s tens of thousands of employees, only seventeen lived in New Jersey. Moreover, the Mylan defendants produced undisputed evidence showing that Mylan never required or instructed those employees to live in New Jersey, never paid for those employees’ homes, never required those employees to store materials in their homes or in New Jersey, and never paid for support staff to work at their homes. Id. Celgene ultimately failed to prove that Mylan ratified these employees’ homes as Mylan’s own place of business. Id. And, while Celgene did identify Mylan job postings asking candidates to live in New Jersey or within reasonably driving distance, the Court criticized these postings because they were undated and not specific to the time the suit was filed. Id. Celgene also argued, for the first time on appeal, that because the Mylan employees could accept service of process on behalf of Mylan at their homes in New Jersey, venue was proper there. Id. at *6 fn. 7. The Court first found that by failing to raise this argument at the district court, Celgene waived it. The Court further commented that under 28 U.S.C. § 1694, although a defendant’s regular and established place of business in a district implies that service on their agents there is proper, that does not mean that the reverse is true. Id. That is, just because Mylan’s employees could accept service in their homes does not mean that those homes are Mylan’s regular place of business for the purpose of venue. Id.
Celgene’s second properly presented theory relied on two small storage lockers rented by Mylan employees to store product samples. Id. at *7. The Court emphasized that there was no evidence these lockers were used as warehouses, or that Mylan required its employees to rent the lockers. Id. The Court accordingly concluded that Celgene had failed to show that any of the employee-associated locations were a regular and established place of business of Mylan under § 1400(b). Id.
Celgene proposed one additional venue theory for the domestic Mylan defendants: imputing venue from a defunct Mylan subsidiary that once had a physical office in New Jersey. Id. Under this alter ego theory, venue may only be imputed: 1) to prevent fraud, illegality, or injustice; 2) when failing to impute would defeat public policy or shield someone from liability for a crime; or 3) when the parent company so dominates the subsidiary that it functionally had no separate existence. Id. (citing Pearson v. Component Tech. Coro., 247 F.3d 471, 484 (3d Cir. 2001)). Celgene offered some evidence on this third point, identifying shared marketing, branding, and trade names, Mylan’s involvement in procuring pamolidomide for ANDA preparation, a Mylan employee signing the subsidiary’s lease termination when it dissolved, and the subsidiary’s sole officer being a member of Mylan’s board. Id. at *8. But the Court found this evidence at most showed “collaboration, not commonality” and rejected Celgene’s alter ego argument. Id.
Separate from these venue issues, the Court addressed the international Mylan defendant and whether Celgene adequately pleaded that it had “submitted” the ANDA under § 271(e)(2). Id. at *9. The Court began by noting that the international defendant had neither signed nor physically submitted the ANDA. Id. Celgene argued that either the international defendant had actively worked with the domestic ones to submit the ANDA and benefitted from that submission or that the international defendant was an alter ego. While the international defendant was ultimately the parent company of the domestic ones, that alone was not sufficient to establish liability. Id. at *10 (citing Pearson, 247 F.3d at 484). And the Court found the rest of Celgene’s allegations to be legal conclusions that failed to suggest how the international defendant was actually involved in the ANDA process or satisfied the alter ego test. Id. at *10-11. The Court therefore affirmed the dismissal of the international defendant for failure to state a claim.
In sum, Celgene failed to establish venue in New Jersey over the domestic Mylan defendants because the ANDA was not submitted there, and the paragraph IV notice letter mailed to Celgene in New Jersey was insufficient to establish venue. Celgene further failed to show that Mylan had any actual place of business in New Jersey, and the employee’s homes and employee-owned storage lockers failed to qualify. Finally, Celgene failed to meet the high bar of proving that a former subsidiary was so completely controlled by Mylan as to justify venue in New Jersey. As to the international Mylan defendant, dismissal for failure to state a claim was appropriate because Celgene only included legal conclusions, and not any alleged facts tending to showing that it was actively involved in submitting the ANDA or completely controlled its domestic subsidiaries.