Since the Supreme Court’s decision in TC Heartland (137 S. Ct. 1514 (2017)), the venue statute for patent cases, 28 U.S.C. § 1400(b), has been interpreted to mean that venue is proper only where the defendant “resides” or where the defendant “has committed acts of infringement and has a regular and established place of business.” Recently in Celgene Corp. v. Mylan Pharmaceuticals, Inc., No. 2021-1154, 2021 U.S. App. LEXIS 32996 (Fed. Cir. Nov. 5, 2021) the Federal Circuit analyzed the second prong of the patent venue statute in the context of Hatch-Waxman cases.
In Celgene, the Federal Circuit reiterated its holding in Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals, Inc. (978 F.3d 1374 (Fed. Cir. 2020)), that the sending and receipt of a paragraph IV notice letter to the target forum does not satisfy the “has committed acts of infringement” requirement for proper venue. Instead, it is “actions related to the submission” of an ANDA, and only the submission, that constitutes an act of infringement under the venue statute. As to establishing a “regular and established place of business” the Federal Circuit relied on its previous holding in In re Cray Inc. (871 F.3d 1355 (Fed. Cir. 2017)) and held that neither the residence of a handful of defendants’ employees nor a physical office location of a defunct affiliate of defendants’ would satisfy this requirement.
Celgene markets pomalidomide as a multiple-myeloma drug under the brand name Pomalyst. Id. at *1. Celgene has patents related to Pomalyst, which several other drug companies challenged the validity of and sought to bring their own generic pomalidomide products to market. Id. One such company was Mylan Pharmaceuticals Inc. (“MPI”) who, in 2017, submitted an Abbreviated New Drug Application (“ANDA”) seeking approval to market a generic version of Pomalyst before the expiration of Celgene’s four Orange-Book-listed patents. Id. at *6. In its ANDA, MPI included a paragraph IV certification, which generally provide that the patent at issue is invalid, unenforceable, or not infringed by the generic drug seeking to come on market. Id. In response to MPI’s ANDA filing, Celgene sued MPI, Mylan Inc., and Mylan N.V. under the Hatch-Waxman Act, asserting its four Orange-Book listed patents. Id. Celgene also sued the same defendants on later-acquired patents also listed in the Orange Book for Pomalyst. Id.
Both cases were brought by Celgene against the Mylan entities in the District of New Jersey. Id. Celgene is based in New Jersey, MPI in West Virginia, Mylan Inc. in Pennsylvania, and Mylan N.V. in Pennsylvania and the Netherlands. Id. at *2. In the first case, the defendants moved to dismiss for improper venue and failure to state a claim. Id. at *7. The parties stipulated that the resolution of the motion to dismiss in the first case would govern in the second case. Id. at *6–7. The district court denied the motion without prejudice in order to allow the parties to conduct venue-related discovery. Id. After this discovery ended, the defendants renewed their motion, which the district court reviewed under In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017), and concluded that, although the defendants had committed acts of infringement in the district, venue in the District of New Jersey was improper under the “regular and established place of business” requirement. Id. The district court relied upon two cases that pre-dated the Federal Circuit’s Valeant decision to find acts of infringement had been committed in the district because acts include ones that “the ANDA applicant nonspeculatively intends to take if its ANDA receives final FDA approval, plus steps already taken by the applicant indicating its intent to market the ANDA product in this District.” As to Celgene’s failure to show that the defendants maintained a “regular and established place of business” in the district as required by 28 U.S.C. § 1400(b), the district court specifically found that the presence of affiliated entities and employees of the defendant in New Jersey was insufficient to support venue. Id. at *7. Celgene appealed this decision to the Federal Circuit. Id. at *8.
A. Venue Generally
To establish venue in a patent case under 28 U.S.C. § 1400(b), a plaintiff may show either that: (1) the defendant “resides” in a particular district; or (2) the defendant “has committed acts of infringement and has a regular and established place of business” there. Celgene did not argue that defendants resided in New Jersey under the first prong of the venue test, and therefore had the burden of proving the second prong of the venue test. Id.
B. “Committed Acts of Infringement”
At the outset of their analysis of this element of the venue test, the Federal Circuit reiterated their holding in Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals, Inc. (978 F.3d 1374 (Fed. Cir. 2020)) that “venue in Hatch-Waxman cases must be predicated on past acts of infringement,” and that “it is the submission of the ANDA, and only the submission, that constitutes an act of infringement in this context.” Id. at *9 (quoting Valeant, 978 F.3d at 1381). The Federal Circuit further stressed that plaintiffs cannot rely on the contemplated future conduct of the generic-drug sponsor to establish venue. Id. (citing Valeant, 978 F.3d at 1381–83).
Celgene’s first argument as to this element was that the “artificial act of infringement stemming from the ANDA submission extends nationwide (i.e., wherever the generic drug will be marketed and sold)” and that the effects of the ANDA submission would be “felt” in New Jersey. Id. at *9–10. The Federal Circuit summarily rejected this argument, again citing Valeant for the proposition that venue must be based on past acts of infringement, and in the Hatch-Waxman context, this means that venue is proper where the defendant filed its ANDA to the FDA not where future distribution of the drug is contemplated. Id. at *10 (citing Valeant, 978 F.3d at 1378–79, 1381).
Celgene’s second argument as to this element was that because MPI sent a paragraph IV notice to Celgene in New Jersey, acts of infringement occurred in New Jersey. Id. Further, because the notice letter is mandatory and the ANDA must be amended later to include proof that it was delivered, Celgene argued that their receipt of the letter was part of the “act of infringement” for venue purposes. Id. The Federal Circuit also found this argument unavailing. Id.
Again relying on Valeant, the Federal Circuit noted that “[u]nder 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.” Id. (quoting Valeant, 978 F.3d at 1382). Although Celgene argued that infringement for venue purposes includes all “acts that are ‘sufficiently related to the ANDA submission,’” the Federal Circuit reiterated that this element of § 1400(b) restricts venue to where the defendants have committed acts of infringement, not where the defendants have committed acts related to (but not part of) acts of infringement. Id. at *10–11. While Celgene further argued that the notice letter is an essential part of the ANDA submission and that defendants had to undertake an act in New Jersey to fulfill the requirements of the ANDA filing, the Federal Circuit noted that the relevant laws and regulations treat ANDA submissions and notice letters as different things. Id. at *11–12.
Lastly related to whether “acts of infringement” had occurred in New Jersey, Celgene argued that infringement under the relevant statute only occurs when the ANDA filing contains the proper paragraph IV certification and thus receipt of the notice letter is part of the infringing act because it triggers the infringement claim. Id. at *13. The Federal Circuit noted that while the receipt of the letter influences the timing of an infringement lawsuit by setting a 45-day cutoff after which the patentee cannot obtain an automatic 30-month stay of approval, the ANDA is what gives rise to cause of action for infringement, not the notice letter. Id. Further to this point, the court noted that Celgene had cited no authority that a non-complaint ANDA does not infringe or that if a generic does not comply with the notice provision, that Celgene could never sue for infringement. Id.
The court concluded their analysis of this element by reiterating that under the relevant statute, submitting an ANDA is the act of infringement and that “although the ANDA applicant must later send a notice letter and inform the FDA of the letter’s receipt, that all happens after the infringing submission. Sending a paragraph IV notice letter does not fall within ‘submitting’ the ANDA under the meaning of Valeant.” Id. at *13–14.
C. “Regular and Established Place of Business”
Under In re Cray, there are three requirements to show that a defendant has a regular and established place of business in a 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.” 871 F.3d at 1360. Further as to the third requirement, the “place” must be that of the defendant and not solely of the defendant’s employee. Id. at 1362–63. Likewise, the defendant must ratify the place of business, it is not enough for an employee to do so on his or her own. Id. Although no precise rule has been laid down and each case depends on its own facts as to the venue inquiry, the Federal Circuit has identified a non-exhaustive list of relevant factors as to what constitutes “the place of the defendant”: (1) “whether the defendant owns or leases the place, or exercises other attributes of possession or control over the place”; (2) “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 so that they can be distributed or sold from that place”; (3) “a defendant’s representations” about that place, including advertisements; and (4) “the nature and activity of the alleged place of business of the defendant in the district in comparison with that of other places of business of the defendant in other venues.” Id. at 1363–64.
Celgene’s two theories for establishing a “regular and established place of business” of the defendants in New Jersey relied first on places associated with Mylan employees, and second on places associated with Mylan affiliates. Celgene, 2021 U.S. App. LEXIS 32996, at *15.
To support their first theory, Celgene identified 17 Mylan employees that live in New Jersey. Id. at *15–16. In response, the defendants presented evidence that out of the “tens of thousands” of people that Mylan employs that “neither MPI nor Mylan Inc. (1) required or instructed those employees to live in New Jersey, (2) pays for their homes, (3) requires the employees to store materials in the homes or in New Jersey, or (4) pays for secretarial or support staff to work at the homes.” Id. at *16. The Federal Circuit further noted that Celgene had not pointed to advertising or marketing identifying the employees’ personal homes as defendants’ places of business. Id.
Further to this theory, Celgene identified an undated job listing asking that candidates live in New Jersey or “within reasonable driving distance,” and two small storage lockers rented by MPI sales or marketing employees to store product samples. Id. at *17–19. And Celgene argued that if the homes or lockers could not individually be considered regular and established places of business, they should be considered together. Id. at *20. None of these facts under this first theory convinced the Federal Circuit, and they found that none of the defendants had a regular and established place of business in New Jersey. Id.
Celgene’s second theory relied on the defunct Mylan Laboratories Inc.’s (“MLI”) physical office in New Jersey as an alter ego of defendants. Id. at *20–21. In support of their alter ego theory, Celgene pointed to “shared marketing, branding, and trade names, as well as MLI’s involvement in procuring pomalidomide for ANDA preparation (as well as other unspecified preparatory aspects).” Id. at *23. But, as the Federal Circuit noted, “courts have refused to pierce the veil even when subsidiary corporations use the trade name of the parent, accept administrative support from the parent, and have a significant economic relationship with the parent.” Id. (quoting Pearson v. Component Tech. Corp., 247 F.3d 471, 485 (3d Cir. 2001)). Celgene further pointed to the fact that “MLI’s sole officer was also an officer of Mylan Inc. and that the corporations all sit in a common web of ownership.” Id. In dismissing this evidence, the Federal Circuit pointed out that it is a “well established principle” of corporate law “that directors and officers holding positions with a parent and its subsidiary can and do ‘change hats’ to represent the two corporations separately, despite their common ownership.” Id. at *23–24 (quoting U.S. v. Bestfoods, 524 U.S. 51, 69 (1998)). The Federal Circuit held that at most, Celgene’s evidence showed collaboration, not commonality and therefore that Celgene had failed to show that corporate separateness had not been maintained with respect to MLI. Id. at *24. In the alternative, Celgene argued that absent a showing of alter ego, there was enough interrelatedness to impute venue from a subsidiary to its parent. Id. However, the Federal Circuit noted that Celgene’s cited cases did not support the wholesale imputation of venue and it had not identified any authority showing that affiliation or shared activities alone are enough. Id. at *26.