In companion cases Acorda Therapeutics Inc v Mylan Pharm Inc (2015-1456) and AstraZeneca AB v Mylan Pharm Inc (2015-1460), the Federal Circuit recently held that the District of Delaware could exercise specific jurisdiction over generic pharmaceutical company Mylan because its abbreviated new drug application (ANDA) filings and distribution capabilities proved that it planned to market generic versions of Acorda's and AstraZeneca's drug products in Delaware.
The majority opinion declined to consider whether Mylan's compliance with Delaware's statute requiring that foreign corporations that register to do business in the state appoint an agent for service of process was a valid form of consent to general personal jurisdiction.
Acorda markets Ampyra to help individuals with multiple sclerosis to walk. It owns four patents and exclusively licenses another patent from Alkermes, each of which is listed in the Orange Book for Ampyra. Mylan:
- filed an ANDA seeking Food and Drug Administration (FDA) approval to market generic versions of Ampyra; and
- certified under Paragraph IV of 21 USC Section 355(b)(1) that the five Orange Book-listed patents were invalid or would not be infringed by Mylan's marketing of the drug.
Acorda and Alkermes then sued Mylan for patent infringement in the District of Delaware under 35 USC Section 217(e)(2)(A), under which the submission of a Paragraph IV certification may be deemed an act of infringement.
AstraZeneca markets Onglyza and Kombiglyze, which are indicated in patients with Type 2 diabetes. AstraZeneca owns three patents listed in the Orange Book for those drugs. Mylan:
- filed two ANDAs seeking FDA approval to market generic versions of Onglyza and Kombiglyze; and
- certified under Paragraph IV that AstraZeneca's three patents were invalid or would not be infringed by Mylan's marketing of the drugs.
AstraZeneca sued Mylan for patent infringement under Section 217(e)(2)(A) in the District of Delaware.
Mylan filed motions to dismiss the two lawsuits on the grounds that the State of Delaware (and therefore the District of Delaware) could not exercise jurisdiction over Mylan consistent with the due process clause of the 14th Amendment. The due process clause permits a state to exercise general jurisdiction over a defendant on any and all claims against it, but limits specific personal jurisdiction to adjudication of claims connected to the state. The facts underlying the motions were not in material dispute. Mylan is incorporated and has its principal place of business in West Virginia. It is registered to do business in Delaware, which requires it to appoint an agent to accept service in Delaware. It filed its ANDAs with the FDA in Maryland and mailed Paragraph IV certifications:
- to Acorda in New York;
- to Alkermes in Ireland;
- to AstraZeneca's subsidiary in Delaware; and
- to AstraZeneca in Sweden.
Both Acorda and AstraZeneca's subsidiary are incorporated in Delaware.
Chief Judge Stark in Acorda and Judge Sleet in AstraZenca denied Mylan's motions to dismiss. Both judges agreed that the court could exercise specific jurisdiction over Mylan based on sufficient suit-related contacts with Delaware, but disagreed as to whether the court could exercise general jurisdiction. In both cases, the district court certified its jurisdictional decisions for interlocutory review by the Federal Circuit.
The Federal Circuit affirmed the district court decisions, finding that the District of Delaware could exercise specific personal jurisdiction over Mylan. The Federal Circuit majority opinion did not consider the question of whether general personal jurisdiction was proper.
The majority opinion, authored by Judge Taranto and joined by Judge Newman, started with the basic constitutional requirement that specific personal jurisdiction be exercised only if the defendant "[h]as certain minimum contacts with [the forum] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice'" (Int'l Shoe Co v Washington, 326 US 310, 316 (1945)). The 'minimum contact' requirement focuses on whether the defendant's suit-related conduct creates a substantial connection with the forum; the requirement is met when a defendant "purposefully direct[s]" activities at the forum causing the alleged injury underlying the suit.
The Federal Circuit reasoned that if Mylan had already begun marketing its generic products in Delaware, there would be no doubt that it could be sued in Delaware. Thus, the majority decision focused on tying Mylan's ANDA filing activities to the future marketing and sales in Delaware that, if they took place, would provide a basis for specific jurisdiction. Mylan's activities had a "substantial connection" with Delaware because, the majority reasoned that: "Mylan's ANDA filings constitute formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs" and "Delaware is undisputedly a State where Mylan will engage in that marketing if the ANDAs are approved". The majority found that Mylan's activities were "suit-related" because the questions of patent validity and scope would directly affect the period in which Mylan could begin marketing its generic products in Delaware.
Although an "artificial act of infringement", ANDA filing and Paragraph IV certification have a "sufficiently close connection" to the "real-world acts" of ANDA approval and the marketing of a generic product that will harm the patent owner. The majority noted that Congress had enacted Section 271(e)(2) to allow parties to litigate patent scope and validity "only when such a declaration has been made by an ANDA filer – which has, by its filing, confirmed its plan to commit real-world acts". The majority also reasoned that the economic realities of a defendant's commitment to preparing an ANDA (eg, ANDA filing fees, clinical studies to prove bioequivalence, and preparation of manufacturing facilities) confirmed a concrete plan to market in the future. The majority further noted that Mylan:
- was prepared to market and sell its generic drugs upon FDA approval of its ANDAs;
- was registered with the Delaware Board of Pharmacy as a licensed pharmacy wholesaler and distributor or manufacturer; and
- had a network of wholesalers and distributors that it contracted with to market drugs in Delaware.
Thus, the majority concluded that Mylan's ANDA-filing activities were "soundly linked" to its entry into the market to compete with the brand-name manufacturers. In short, the majority found that Mylan's actions met the minimum contacts requirement because it had "taken the costly, significant step of applying to the FDA for approval to engage in future activities – including the marketing of its generic drugs – that will be purposefully directed at Delaware (and, it is undisputed, elsewhere)".
Finally, the majority found that the exercise of specific jurisdiction over Mylan was "reasonable" because Mylan was a large generic manufacturer that had litigated in Delaware before, sometimes of its own choosing, and the judicial system had an interest in efficiently resolving the multiple lawsuits pending in Delaware against other generic defendants based on the same patents.
Judge O'Malley concurred with the majority's judgement, but would have found that Mylan was subject to specific jurisdiction in Delaware under an "effects" test for specific jurisdiction. O'Malley concluded that Mylan's ANDA filing and Paragraph IV certification had the "effect" in Delaware of questioning the validity of and value of property rights of two Delaware corporations (ie, Acorda and AztraZeneca's subsidiary): "[T]he targeted nature of an ANDA filing – which is intended to challenge a particular patent owned by a known party with a known location" is sufficient for specific jurisdiction because "the harm is targeted only to these Delaware companies, occurs only in Delaware, and is only triggered by the filing of the ANDA."
O'Malley also would have considered the question of general jurisdiction, which she found to be more straightforward and less fact intensive than the question of specific jurisdiction. The question was whether compliance with a state statute that requires a foreign corporation to appoint an agent for service of process in order to register to do business in the state remained a valid form of consent to general jurisdiction. Mylan argued that it was not valid, in light of the Supreme Court's recent decision in Daimler AG v Bauman (134 S Ct 746 (2014)), which held that – absent exceptional circumstances – general jurisdiction is proper where a corporation is "essentially at home" (ie, where it is incorporated and where it has its principal place of business). O'Malley rejected Mylan's argument. She cited a long line of Supreme Court case law, including key case Pennsylvania Fire Insurance Co v Gold Issue Mining & Miling Co (243 US 93 (1917)), which held that appointment of an agent by a foreign corporation for service of process could subject the corporation to general jurisdiction. O'Malley noted that the Supreme Court has not reconsidered this holding, despite opportunities to do so; she opined that Daimler did not disturb this line of case law, as Daimler expressly confined its holding to scenarios that did not involve consent to jurisdiction. O'Malley appeared to concede that there may well be reasons to revisit Pennsylvania Fire, but held that this was a task for the Supreme Court, not the Federal Circuit.
For further information on this topic please contact Christopher E Loh or Shannon K Clark at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100) or email (firstname.lastname@example.org or email@example.com). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.