Article by Clyde Shuman
Continuing to address unanswered venue questions in the wake of the Supreme Court’s decision in TC Heartland,[1] the Federal Circuit, in a precedential decision, has held that, with respect to patent infringement claims brought under the Hatch-Waxman Act, “acts of infringement” for venue purposes occur 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. Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals Inc., Case No. 2019-2402. The Court affirmed a district court’s order dismissing claims against the two U.S.-based defendants on the basis of improper venue.[2]
By way of background, the patent venue statute, 28 U.S.C. § 1400(b), provides that a civil action for patent infringement may be brought 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. In TC Heartland, the Supreme Court held that “resides” in § 1400(b) refers only to a corporation’s state of incorporation. As a result, a corporation may be sued for patent infringement only in judicial districts (i) in the state in which it is incorporated or (ii) in which it has a regular and established place of business and an act of infringement has occurred.
Here, plaintiff Dow Pharmaceutical Sciences, Inc. (“Dow”) held a New Drug Application the FDA-approved drug Jublia®, used to treat fungal infections (onychomycosis) of toenails. There are nine patents listed in the Orange Book for Jublia®.
In June 2018, defendant Mylan Pharmaceuticals Inc. (“MPI”), a generic drug company incorporated in West Virginia, executed an ANDA seeking approval to market a generic version of Jublia®. MPI sent the ANDA from its West Virginia corporate office to the FDA, in White Oak, Maryland. The ANDA included a Paragraph IV certification that the Orange-Book-listed patents for Jublia® were invalid, unenforceable, or would not be infringed by the ANDA product. MPI notified plaintiffs (including Dow) of the ANDA submission in August 2018.
The next month, plaintiffs filed suit against defendants, all Mylan entities, in the District of New Jersey, alleging infringement of Dow’s Orange Book patents pursuant to the Hatch-Waxman Act and requesting declaratory judgment of validity of the Orange Book patents. The complaint contained several allegations about defendants’ connection to New Jersey, including, inter alia, New Jersey is “a likely destination for [defendants’] generic [product],” defendant MPI’s generic drug will be “purposefully directed at…New Jersey and elsewhere” and MPI plans to market and sell its generic drug into New Jersey upon FDA approval.
Defendants moved to dismiss the complaint against MPI and defendant Mylan Inc., a Pennsylvania corporation, for improper venue. Defendants argued that venue was improper under § 1400(b) because no defendant resided in New Jersey, the only alleged act of infringement—submission of the ANDA—did not occur in New Jersey, and the defendants did not have regular and established places of business in New Jersey.
The district court granted defendants’ motion to dismiss the complaint against all defendants based on improper venue. The lower court found that the ANDA was submitted from West Virginia, rendering venue proper there. The court rejected plaintiffs’ arguments about the relevance of planned future acts to the venue analysis under § 1400(b), concluding that the two places where an act of infringement might have occurred before the filing of the action were West Virginia and Maryland, not New Jersey.
On appeal, on the previously unanswered question of where a defendant has committed acts of infringement in the Hatch-Waxman context, the Court began by considering its pre-TC Heartland case law discussing infringement actions under Hatch-Waxman, including its holding in Acorda Therapeutics Inc. v. Mylan Pharmaceuticals Inc., 817 F.3d 755 (Fed. Cir. 2016), that planned future acts were sufficient to justify the exercise of specific personal jurisdiction over a defendant in ANDA cases. Although not addressing venue, this holding was important to the then-extant venue analysis because, at that point in time, Federal Circuit case law effectively had equated personal jurisdiction with venue by incorporating the definition of “reside” in § 1391(c)(2), into § 1400(b). Thus, if personal jurisdiction over an ANDA filer could be obtained in any district where that filer intended to market the generic product, venue would be proper in the same district because the filer would be deemed to “reside” there for venue purposes.
Following TC Heartland, the Court noted that it has narrowly construed the requirements of venue in patent cases, including § 1400(b)’s requirement of a “regular and established place of business,” holding 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.”
However, the Court said that it had not had a chance since TC Heartland to address the question of where infringement occurs in an ANDA case, leaving the district courts to struggle with the question and allowing two competing views to emerge: (i) potential future conduct that might infringe a valid patent is relevant to the venue analysis; and (ii) § 1400(b) requires past infringement and the plain language of Hatch-Waxman does not identify any act of infringement other than the ANDA submission, thus potential future acts are speculative and cannot control venue.
The Federal Circuit agreed with the second view, as well as the district court here, and held that venue in Hatch-Waxman cases must be predicated on past acts of infringement—i.e., acts that occurred before the action alleging infringement was filed. The Court further held that those acts occur only in districts where actions related to the ANDA submission occur. Accordingly, venue in New Jersey was improper with respect to the U.S.-based defendants here.
The Court rejected plaintiffs’ argument that the ANDA submission is an “artificial” act of infringement, and that courts must look to planned future conduct to define what is really infringing. Per the Court, however, Hatch-Waxman “speaks in real terms—submission of the ANDA is the infringing act.”
The Court also rejected plaintiffs’ litigation-based argument that the act of infringement must encompass more than submission of the ANDA. Per the Court, “Under the plain language of the statute, the only past infringing act is the ANDA submission, which creates the right to bring suit in the first instance.” The Court further noted that the result of virtually all Hatch-Waxman litigation is no post-submission infringement. Sales and offers for sale of the ANDA product are either non-infringing per the litigation, or never occur.
The Court rejected plaintiffs’ congressional intent argument as contrary to the statutory language. Per the Court, “we [ ] must assume that, when Congress enacted the Hatch-Waxman Act [ ], it did so with a clear understanding of where § 1400(b) allowed patent actions to be commenced at that time. And, we must assume that, when it excepted Hatch-Waxman cases from the new joinder provisions for patent cases, Congress understood that it was not sub silentio also excepting Hatch-Waxman cases from 1400(b).”
The Court also rejected plaintiffs’ argument that an ANDA submission is a nationwide act of infringement based on a “conceptual” aspect beyond the literal act defined in the statute. Referring to its own precedent, the Court said that, “[t]here is no analogous common law here that would compel a conclusion that submitting an ANDA has a purely conceptual effect of causing infringement everywhere in the United States.”
[1] TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514 (2017).
[2] The Court also vacated remanded that portion of the district court’s order dismissing the action against the foreign defendant—as to which venue was proper—for failure to state a claim, because the lower court failed to address the substance of that motion. That portion of the Court’s ruling is not discussed herein.
