On September 11, 2017, the District of Delaware (Stark, J.) denied a motion to dismiss for improper venue in Bristol-Myers Squibb Co. v. Mylan Pharmaceuticals Inc., C.A. No. 17-379-LPS (D. Del. Sept. 11, 2017). The court's 45-page opinion touched on numerous significant issues that have arisen in the wake of TC Heartland. First, the court held that a defendant bears the burden of affirmatively showing that venue is improper on a motion to dismiss. Second, the court found that a generic drug company "has committed acts of infringement" sufficient to establish venue in Delaware so long as the company intends to sell infringing products in Delaware in the future. Third, the court held that a generic drug company may have a "regular and established place of business" in Delaware as a result of its frequent involvement in Hatch-Waxman litigation. Overall, Judge Stark's decision is welcome news for branded pharmaceutical companies that wish to continue consolidating cases against generic drug makers in Delaware.
Burden of proof
The court noted that there is a split in authority “as to which party bears the burden of proof with respect to venue.” (Slip Op. at 6.) The court acknowledged that the “majority view” is that the plaintiff has the burden of establishing venue once the defendant has raised an objection. (Id.) The Third Circuit, however, ascribes to the minority view that the moving party has the burden of affirmatively showing venue is improper. (Id.) Because the burden of proof “is a procedural, non-patent issue controlled by the law of the regional circuit” (id. at 8), the court held that the defendant, Mylan Pharmaceuticals, Inc. (“MPI”), was required to show that venue is improper. Ultimately, the burden of proof played a significant – possibly dispositive – role in the case. In particular, the court found that MPI failed to present sufficient evidence that venue is improper: “[T]he Court is unable to determine at this time whether MPI can show that venue is improper in Delaware. The apparent facts on which MPI relies are not dispositive of whether MPI has a regular and established place of business here.” (Slip Op. at 38.)
Acts of infringement
Under the 28 U.S.C. § 1400(b), a patent infringement case may be brought in a judicial district “where the defendant has committed acts of infringement and has a regular and established place of business.” “Acts of infringement” are defined in the Patent Act and generally include making, using, offering to sell, selling, and importing a patented invention. See 35 U.S.C. § 271(a). The general definition of “acts of infringement,” however, does not apply in the context of Hatch-Waxman litigation. Indeed, under § 271(e)(1), making, using or selling a product “shall not be an act of infringement” if done “solely for uses reasonably related to the development and submission of information” as part of an Abbreviated New Drug Application (“ANDA”). Instead, § 271(e)(2) provides that the submission of an ANDA “shall be an act of infringement.”
Based on § 271(e), MPI argued that it has not “committed acts of infringement” in Delaware. Rather, MPI noted that the relevant ANDA “was prepared in West Virginia by MPI and electronically submitted by MPI to the FDA in Maryland.” (Slip Op. at 25.) The court, however, found that MPI was interpreting “acts of infringement” too narrowly in the context of Hatch-Waxman litigation. Instead, the court held that “an ANDA filer’s future, intended acts must be included as part of the ‘acts of infringement’ analysis for purposes of determining if venue is proper.” (Id. at 18.) In support of this holding, the court relied on Acorda Therapeutics Inc. v. Mylan Pharmaceuticals, Inc., 817 F.3d 755 (Fed. Cir. 2016), which addressed the personal jurisdiction analysis in ANDA cases. In Acorda, the Federal Circuit held that a defendant in Hatch-Waxman litigation may have “minimum contacts” with a judicial district based on the defendant’s “planned future conduct” in the state. (Slip Op. at 17.) Here, because MPI planned to sell the allegedly infringing drug in Delaware in the future, the court held that MPI “has committed acts of infringement” sufficient to establish venue. (Id. at 25.)
Regular and established place of business
The court also addressed whether MPI maintains a “regular and established place of business” in Delaware sufficient to establish venue. The court repeated the recitation of law from its recent decision in Boston Scientific Corp. v. Cook Group, Inc., 15-cv-980 (D. Del. Sept. 11, 2017). See Judge Stark Finds Temporary Sales Representatives Do Not Create a Regular and Established Place of Business for Purposes of Venue. The court thus reiterated that “while no fixed space in the sense of a formal office or store is necessary, some physical presence is nevertheless required” for a regular and established place of business. (Slip Op. at 30.) In this vein, MPI argued that it does not maintain a place of business in Delaware because it “does not own or lease any manufacturing plants, corporate offices, facilities or other real property in Delaware.” (Id. at 38.) MPI also noted that it does not have any employees working in Delaware and it does not sell products to any distributors or wholesalers in Delaware. (Id.) The court, however, held that MPI may nonetheless have a “regular and established place of business” in Delaware because (i) MPI is a frequent participant in Hatch-Waxman litigation and (ii) MPI belongs to a corporate family that includes 40 Delaware entities. On the first point, the court explained that “a key to Mylan’s success in the generic drug business is its constant involvement in Hatch-Waxman litigation. Historically, the largest number of Hatch-Waxman cases each year are filed in the District of Delaware. These facts must weigh into the assessment of whether MPI has a continuous and permanent presence, and therefore a regular and established place of business, in Delaware.” (Id. at 37.)
Perhaps recognizing the aggressive nature of its findings, the court did not expressly hold that participation in litigation creates a regular and established place of business. Instead, the court held that litigation activity is a “relevant” consideration. The court denied MPI’s motion to dismiss without prejudice, but expressly noted that MPI can re-file the motion after venue-related discovery. At that time, “[i]t may turn out that MPI can ultimately meet its burden to show it lacks a regular and established place of business” in Delaware.
The Bristol-Myers Squibb Co. decision is perhaps best viewed through the lens of judicial realism. The practical concern animating the court’s decision appears to be reflected in footnote 17, where the court notes that restricting venue in Delaware would require plaintiffs to “maintain largely identical [ANDA] suits in multiple districts,” rather than suing all generic filers in Delaware. (Slip Op. at 24, n.17.) “This will increase the time and expense that is required to resolve these cases on the merits and could result in inconsistent judgments.” (Id.)