Article written by Clyde Shuman
The U.S. Court of Appeals for the Federal Circuit has addressed venue and pleading requirements for Hatch-Waxman cases, affirming a district court ruling that plaintiff Celgene Corporation failed to show that domestic defendants, including Mylan Pharmaceuticals Inc. (“MPI”), committed acts of infringement in New Jersey and have a regular and established place of business there. The Court also affirmed the district court’s ruling that, for the foreign defendant, Mylan N.V., Celgene’s pleadings failed to state a claim upon which relief could be granted. Celgene Corp. v. Mylan Pharmaceuticals Inc., et al, No. 2021-1154.
By way of background, in 2017 MPI submitted an Abbreviated New Drug Application (“ANDA”) seeking approval to market a generic version of Celgene’s multiple-myeloma drug, Pomalyst, before the expiration of four relevant Orange-Book-listed patents. MPI included aa paragraph IV certification as to those patents. In turn, Celgene sued MPI and the other defendants (including Mylan, N.V.) under the Hatch-Waxman Act, for infringement of those patents.
Celgene subsequently obtained (and asserted) five more related patents, suing the same group of defendants twice, asserting two of the additional patents. All three cases were consolidated at the district court level. Celgene later filed yet another suit against the same defendants, asserting the remaining three later-issued patents. The parties stipulated that resolution of motions to dismiss the consolidated six-patent case would govern the later-filed three patent case.
In the six-patent case, following two years of venue-related discovery, the defendants filed a renewed motion to dismiss for improper venue (domestic defendants) and failure to state a claim (foreign defendant). The district court, relying on the Federal Circuit’s decision in In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017), concluded that venue was improper. That is, Celgene failed to show a “regular and established place of business” of the defendants in the district under 28 U.S.C. § 1400(b). The district court also concluded that, for Mylan N.V., Celgene had failed to state a claim upon which relief could be granted, noting that the ANDA that Celgene included with its complaint sought approval only on behalf of MPI, and holding that Celgene’s pleadings with respect to the involvement of Mylan N.V. in that submission were simply too speculative and conclusory.
Turning first to the dismissal for improper venue, the Federal Circuit pointed to the undisputed fact that the domestic defendants did not reside in New Jersey. Thus, under the statute, Celgene was required to show that the domestic defendants, including MPI, “[have] committed acts of infringement and [have] a regular and established place of business” there. 28 U.S.C. § 1400(b).
As to whether the domestic defendants had committed acts of infringement in New Jersey, the Court concluded that they did not. Reiterating the proposition—restated by the Court as recently as 2020—that the requirements of venue in patent cases are narrowly construed, the Court repeated that: (i) venue in Hatch-Waxman cases must be predicated on past acts of infringement; and (ii) the only act of infringement is the submission of the ANDA.
The Court rejected Celgene’s argument that ANDA-based infringement extends nationwide, so that the effects would be “felt” in New Jersey. The Court noted that its recent precedent, namely, Valeant Pharms. N. Am. LLC v. Mylan Pharms. Inc., 978 F.3d 1374 (Fed. Cir. 2020), limited venue in Hatch-Waxman cases to “where an ANDA-filer submits its ANDA to the FDA,” not “wherever future distribution of the generic is contemplated.”
The Court also rejected Celgene’s argument that MPI’s sending of a paragraph IV notice letter to Celgene’s headquarters in New Jersey was an “essential part of the ANDA submission,” and thus constituted an act of infringement in New Jersey. The Court reiterated that the act of infringement is submission of the ANDA itself and noted that the relevant statute and regulations treat the infringing ANDA submission and the notice letter as different things, saying “[u]nder the statute and regulations, then, receipt of the notice letter occurs after and apart from the submission of the ANDA.”
The Court also rejected Celgene’s argument that infringement under 35 U.S.C. § 271(e)(2) occurs only once the ANDA filing contains a paragraph IV certification—and that receiving the notice letter is part of the infringing act because it “triggers the patent owner’s infringement claim.” Inter alia, the Court noted that the paragraph IV certification precedes the notice letter and that the letter itself does not establish the cause of action for patent infringement. The ANDA submission does.
The Federal Circuit also concluded that the domestic defendants here, including MPI, did not have a “regular and established place of business” in New Jersey. Noting the three requirements for a regular and established place of business, under Cray, the Court focused in particular on the third requirement, that the place must be “of the defendant, not solely . . . of the defendant’s employee.” Per the Court, quoting Cray, “the defendant must establish or ratify the place of business,” and it is “not enough that the employee does so on his or her own.”
The Court rejected Celgene’s first theory for imputing venue to the domestic defendants, namely, that certain employee-associated locations (including employee homes in New Jersey) should be imputed to MPI and Mylan Inc. The Court pointed out that, of the tens of thousands of employees of MPI and Mylan Inc., seventeen live in New Jersey. The defendants also presented undisputed evidence that neither of them required employees to live in New Jersey or paid for their homes, or even paid for secretarial or support staff to work from the homes. The Court found Celgene’s other evidence, including business cards with employee names and New Jersey home addresses and LinkedIn profiles mentioning New Jersey, too speculative to be probative.
Analogizing the facts here to those in Cray, the Court noted that, even if evidence might suggest that MPI or Mylan Inc. “believed a location within [New Jersey] to be important to the business performed, ”there is no evidence that either defendant “had any intention to maintain some place of business in that district” if the employees were to “decide[] to terminate their residences.” The Court also noted, inter alia, the lack of evidence that MPI or Mylan Inc. requires its employees to store materials anywhere in New Jersey.
The Federal Circuit also rejected Celgene’s second theory for imputing venue, namely, that a now-defunct Mylan entity—Mylan Laboratories Inc. (“MLI”)—had a physical office in New Jersey. The Court noted that MLI, before it, was a Delaware corporation with an office in New Jersey, and was indirectly wholly owned by MPI. The Court further rejected Celgene’s “alter ego” theory predicated on the defendants’ disregard of corporate formalities, contending that all the Mylan entities were effectively operating as a single company, finding no supporting evidence. Like the district court, the Federal Circuit found Celgene’s evidence, including shared marketing, branding, and trade names, as well as MLI’s involvement in procuring pomalidomide for ANDA preparation, insufficient to support an “alter ego” argument. As the district court pointed out, there was no evidence showing dominion of MLI’s finances, policy, or business practices, or that MLI was “undercapitalized or insolvent, that its officers and directors are strawmen, or that MLI lacks its own books and records.”
Notably, the Court found that Celgene did not argue that MPI or Mylan Inc. ratified MLI’s New Jersey office, or that MLI was MPI’s or Mylan Inc.’s agent there.
As for the adequacy of pleading with respect to Mylan N.V., the Court agreed with the district court’s dismissal, noting that Celgene hadn’t made any nonconclusory allegations that Mylan N.V. “submitted” the ANDA under the meaning of § 271(e)(2). Further noting that it was undisputed that MPI, not Mylan N.V., was the entity that signed and physically submitted the ANDA, the Court found that Celgene did not plead sufficient facts that either (1) Mylan N.V. was actively involved in and directly benefited from the ANDA (including in the agent–principal sense) or (2) MPI acted as Mylan N.V.’s “alter ego.”
The Court specifically rejected Celgene’s argument that MPI was wholly owned by Mylan Inc., and Mylan Inc. by Mylan N.V., saying that this chain of ownership alone, was insufficient to state a claim against Mylan N.V. based on MPI’s ANDA submission. The Court also agreed that Celgene’s other relevant allegations—including allegations of corporate control by Mylan N.V.—were too conclusory to be probative. The Court said: “[T]he complaint in this case is too conclusory to establish a plausible claim of liability as to Mylan N.V. Were it otherwise, an allegation that one corporation filed an ANDA coupled with a bare assertion of cooperation or control by another would open the door to discovery for the entire parent-subsidiary chain in any Hatch-Waxman case.”
