Venue in Hatch-Waxman Litigation: What Courts Decided and What Litigants are Still Fighting Over
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:
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
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
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:
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.