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Bristol-Myers Squibb Co. v. Mylan Pharmaceuticals Inc.

United States District Court, D. Delaware

September 11, 2017

BRISTOL-MYERS SQUIBB COMPANY and PFIZER INC., Plaintiffs,
v.
MYLAN PHARMACEUTICALS INC., Defendant.

          Joseph J. Farnan, Jr., Brian E. Farnan, and Michael J. Farnan, FARNAN LLP, Wilmington, DE Amy K. Wigmore, Gregory H. Lantier, Tracey C. Allen, Heather M. Petruzzi, and Jeffrey T. i Hanston, WILMER CUTLER PICKERING HALE AND DORR LLP, Washington, DC j Andrew J. Danford, Timothy A. Cook, and Kevin M. Yurkerwich, WILMER CUTLER | PICKERING HALE AND DORR LLP, Boston, MA Attorneys for Plaintiffs.

          Stamatios Stamoulis and Richard C. Weinblatt, STAMOULIS & WEINBLATT LLC, Wilmington, DE Robert L. Florence, Micheal L. Binns, Karen L. Carroll, and Sharad K. Bijanki, PARKER POE ADAMS & BERNSTEIN LLP, Atlanta, GA Melanie Black Dubis, Christopher M. Thomas, and Catherine R. L Lawson, PARKER POE ADAMS & BERNSTEIN LLP, Raleigh, NC Katherine H. Graham, PARKER POE ADAMS & BERNSTEIN LLP, Charlotte, NC Brandon M. White, PERKINS COIE LLP, Washington DC Attorneys for Defendant.

          OPINION

          STARK, U.S. DISTRICT JUDGE

         Presently before the Court is Mylan Pharmaceuticals Inc.'s ("MPI" or "Defendant") motion to dismiss for improper venue in light of the Supreme Court's recent decision in TC Heartland LLC v. Kraft Food Group Brands LLC, 137 S.Ct. 1514 (2017). (D.I. 14)

         It is undisputed that after TC Heartland, which held that a corporate defendant "resides" only in its state of incorporation for purposes of determining where venue is proper in a patent case, see 28 U.S.C. § 1400(b), MPI, a West Virginia corporation, can no longer be said to "reside" in Delaware. TC Heartland did not, however, address the second prong of § 1400(b), which makes venue proper in a district "where the defendant has committed acts of infringement, and has a regular and established place of business."

         MPI, which has submitted an Abbreviated New Drug Application ("ANDA") to the United States Food and Drug Administration ("FDA") for permission to market and sell a generic version of one of Plaintiffs' patent-protected drug products, bears the burden to show that i it does not satisfy the requirements of the second prong of § 1400(b). Given the language of the statute giving rise to Plaintiffs' cause of action, 35 U.S.C. § 271(e)(2), as well as the unique realties of ANDA-related patent litigation, MPI has failed to meet its burden to show that it has not committed acts of infringement in Delaware. However, the record is less clear with respect to whether MPI has a "regular and established place of business" here. Accordingly, the Court will permit expedited venue-related discovery so that it may thereafter determine if venue is proper here. In the meantime, this case - which is related to two dozen other cases relating to the same branded pharmaceutical, Eliquis® - will proceed on the merits.

         Therefore, for the reasons set forth below, the Court will deny MPI's motion to dismiss for improper venue, without prejudice to MPI having an opportunity to renew its motion should it believe, after expedited venue-related discovery is complete, it can meet its burden to show that it does not have a "regular and established place of business" in Delaware.

         I. BACKGROUND

         This is a patent infringement action brought by Bristol-Myers Squibb Co. and Pfizer Co. (collectively, "BMS" or "Plaintiffs") under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the "Hatch-Waxman Act." 21 U.S.C. § 3550). Defendant MPI submitted an AND A to market a generic version of BMS' Eliquis®, 2.5 mg and; 5 mg strength apixaban tablets ("ANDA product"). (D.I. 1 at ¶ 2) BMS asserts Orange Book-listed[1] U.S. Patent Nos. 6, 967, 208 and 9, 326, 945, which generally describe and claim chemical compounds, including apixaban, and apixaban formulations.

         MPI is a corporation organized under the laws of West Virginia, having its principal place of business in Morgantown, West Virginia. (D.I. 16 at ¶ 3) MPI "is in the business of making and selling generic pharmaceutical products, which it distributes in the State of Delaware and throughout the United States." (D.I. 1 at ¶ 10) MPI is registered with the Delaware Board of Pharmacy as a licensed "Pharmacy - Wholesale" and "Distributor/Manufacturer CSR." (Id. at ¶ 9) However, MPI does not have any manufacturing plants, corporate offices, facilities, other real property, telephone listings, mailing addresses, or employees in Delaware. (See D.I. 16 at ¶2)[2]

         On March 2, 2017, MPI notified BMS that it had submitted its AND A to the FDA pursuant to § 505(j) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 355(j), (D.L 1 at ¶ 20) The notice letter stated that MPI seeks approval from the FDA to engage in the commercial manufacture, use, and sale of the MPI ANDA product before the expiration of the patents-in-suit. (Id..'at ¶2 I)

         On April 5, 2017, BMS initiated the present action by filing the complaint here in the District of Delaware. BMS' complaint alleges that MPFs submission of the ANDA "to obtain approval to engage in the commercial manufacture, use, offer to sell, or sale of the [MPI] ANDA product prior to the expiration" of BMS' patents constituted a technical act of infringement under 35 U.S.C. § 271(e)(2)(A). (Id. at ¶¶ 28, 34) The complaint further alleges that, upon FDA, approval of MPI's ANDA, MPI will infringe, either literally or under the doctrine of equivalents, BMS' patents "by making, using, offering to sell, and selling the [MPI] ANDA product in the United States and/or importing said product into the United States, or by actively inducing and contributing to infringement... by others, under 35 U.S.C. § 271(a)-(c), unless enjoined by the Court." (Id., at ¶¶ 31, 36)

         Also in the complaint, BMS alleges that "[v]enue is proper in this Court under 28 U.S.C. §§ 1391 and/or 1400(b), including because, inter alia, [MPI] is subject to personal jurisdiction in this district, as set forth above, has committed an act of infringement and will commit further acts of infringement in this judicial district... [and] has a regular and established place of business in this judicial district." (Id. at ¶ 15) BMS further alleges that MPI "has committed an act of patent infringement under 35 U.S.C. § 271 (e)(2) and intends a future course of conduct that includes acts of patent infringement in Delaware, " elaborating that MPI "will make, use, import, sell, and/or offer for sale the [MPI] ANDA product in the United States, including in Delaware, prior to the expiration of the patents-in-suit" (Id. at ¶ 12)

         On May 10, 2017, MPI answered the complaint and, among other things, asserted improper venue as an affirmative defense. (See D.I. 10 at 12)

         On May 22, 2017, the Supreme Court issued its decision in TC Heartland, "hold[ing] that a domestic corporation 'resides' only in its State of incorporation for purposes of the patent venue statute, " adding that "amendments to § 1391 did not modify the meaning of § 1400(b)." 137 S.Ct. at 1517. The Supreme Court did not construe the second prong of § 1400(b), which makes venue in a patent case proper where a defendant "has committed acts of infringement and has a regular and established place of business." On July 25, 2017, MPI moved to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3), contending that venue is not proper under either the residency or place of business prongs of § 1400(b). (D.I. 14) Plaintiffs do not contend that MPI's motion is untimely.

         Briefing on the motion was completed on August 18, 2017. (See D.I. 15, 21, 25) The Court heard oral argument on August 24, 2017. (See D.I. 35 ("Tr."))[3]

         II. LEGAL STANDARDS

         Generally, "venue provisions are designed, not to keep suits out of the federal courts, but merely to allocate suits to the most appropriate or convenient federal forum." Brunette Mach. Works, Ltd. v. Kockum Indus., Inc., 406 U.S. 706, 710 (1972). Rule 12(b)(3) authorizes a party to move to dismiss a lawsuit for improper venue. When such a motion is filed, the Court must determine whether venue is proper in accordance with the applicable statutes. See Albright v. W.L. Gore & Assocs., Inc., 2002 WL 1765340, at *3 (D. Del. July 31, 2002). Venue in a patent infringement action is governed solely and exclusively by the patent venue statute, 28 U.S.C. § 1400(b). See TC Heartland, 137 S.Ct. at 1516. The general venue statute, 28 U.S.C. § 1391(c), does not have any application in a patent case. See Id. at 1521.

         If the Court grants a Rule 12(b)(3) motion based on improper venue, the Court "shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a).[4]

         Generally, "it is not necessary for the plaintiff to include allegations in his complaint showing that venue is proper." Great W. Mining & Mineral Co. v. ADR Options, Inc., 434 F.App'x 83, 86-87 (3d Cir. 2011). Hence, when confronted with a motion to dismiss for improper venue, the Court may consider both the complaint and evidence outside the complaint. See 14D Wright & Miller, Federal Practice & Procedure § 3826 (4th ed. 2017). The Court will accept any venue-related allegations in the complaint as true, unless those allegations are contradicted by the defendant's affidavits. See Bockman v. First Am. Mktg. Corp., 459 F.App'x 157, 158 n.l (3d Cir. 2012); In re First Solar, Inc. Derivative Litig., 2013 WL 817132, at *2 (D. Del. Mar. 4, 2013). In addition, the Court may consider affidavits submitted by the plaintiff. See Bockman, 459 F.App'x at 161 (affirming District Court's dismissal of complaint "because Defendants satisfied their burden of showing improper venue by offering evidence that the wrongful acts alleged in the Complaint did not occur in Pennsylvania, and Plaintiffs failed to rebut that evidence").

         Courts are not uniform in their views as to which party bears the burden of proof with respect to venue. Some hold that a plaintiff must prove that venue is proper in its chosen district, while others hold instead that a defendant must prove that such district is an improper venue. See 14D Wright & Miller, Federal Practice & Procedure § 3826 (4th ed. 2017) ("There are many cases - predominantly, but not exclusively, from the Third and Fifth Circuits - holding that the burden is on the objecting defendant to establish that venue is improper, because venue rules are for the convenience and benefit of the defendant."). At present, it appears the majority view is that "when the defendant has made a proper objection, the burden is on the plaintiff to establish that the chosen district is a proper venue." Id. Notably, however, the Court of Appeals for the Third Circuit - the Circuit in which this District is located - has expressly held that the moving party has the burden of proving that venue is improper. See Myers v. Am. Dental Ass'n, 695 F.2d 716, 724 (3d Cir. 1982) ("[O]n a motion for dismissal for improper venue under Rule 12 the movant has the burden of proving the affirmative defense asserted by it."); see also Great W. Mining, 434 F.App'x at 87 ("Because improper venue is an affirmative defense, the burden of proving lack of proper venue remains - at all times - with the defendant.").

         While the parties here are in agreement as to what the Third Circuit has held with respect to the burden on venue motions, they disagree as to whether Third Circuit law governs the pending motion. BMS contends that Third Circuit law applies, while MPI insists that, rather, the Court must apply the law of the Court of Appeals for the Federal Circuit. Notably, however, MPI concedes that there is no Federal Circuit precedent as to either (i) whether Federal Circuit law controls a motion to dismiss for improper venue, or (ii) which party bears the burden of proof on such a motion.

         MPI does cite to Hoover Group, Inc. v. Custom Metalcraft, Inc., 84 F.3d 1408 (Fed. Cir. 1996), which observed that "[v]enue is based on the facts alleged in the well-pleaded complaint, " id. at 1410 (citing Dody v. Brown, 659 F.Supp. 541, 544 n.2 (W.D. Mo. 1987); McGhan v. F.C. Hayer Co., 84 F.Supp. 540, 541 (D. Minn. 1949)). But Hoover does not purport to answer the questions this Court faces now. In Hoover, the Federal Circuit did not make clear whether it was applying Federal Circuit law or regional-circuit law.[5] Nor did Hoover make any statement as to which party bears the burden of proof on venue issues. Thus, there appears to be no binding Federal Circuit decision on these points.

         The Federal Circuit, when reviewing a district court's decision, applies the law of the regional circuit where that district court sits for non-patent issues but applies its own law for issues of substantive patent law. See In re Queen's Univ. at Kingston, 820 F.3d 1287, 1290 (Fed. Cir. 2016). Thus, to determine whether Federal Circuit law controls which party has the burden here, the Court must examine whether the issue is one that is unique to patent law.

         Procedural matters generally are not considered to be unique to patent law. See Versata Software, Inc. v. Callidus Software, Inc., 780 F.3d 1134, 1136 (Fed. Cir. 2015); Bd. of Trs. of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832, 840 (Fed. Cir. 2009). Still, "a procedural issue that is not itself a substantive patent law issue is nonetheless governed by Federal Circuit law if the issue pertains to patent law, if it bears an essential relationship to matters committed to [the Federal Circuit's] exclusive control by statute, or if it clearly implicates the jurisprudential responsibilities of [the Federal Circuit] in a field within its exclusive jurisdiction." Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999) (internal citations, alterations, and quotation marks omitted).

         In the Court's view, the issue of which party bears the burden of proof on a venue challenge is a procedural, non-patent issue controlled by the law of the regional circuit. Such a challenge must comply with, and is brought pursuant to, the Federal Rules of Civil Procedure. By operation of the Federal Rules of Civil Procedure, the venue challenge must be brought in a responsive pleading or as a separate motion under Rule 12(b)(3) - and the burden-of-proof allocation is properly viewed as simply another procedural aspect of a venue dispute. A motion for improper venue under Rule 12(b)(3) is akin to other motions authorized by the Federal Rules of Civil Procedure, such as Rule 12(b)(6) motions to dismiss for failure to state a claim and motions for judgment as a matter of law. The procedural aspects of these types of motions are controlled by regional-circuit law. SeeK-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 (Fed. Cir. 2013) ("Because it raises a purely procedural issue, an appeal from an order granting a motion to dismiss for failure to state a claim upon which relief can be granted is reviewed under the applicable law of the regional circuit."); Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1202 (Fed. Cir. 2010) (reviewing "denial of post-trial motions for JMOL and new trial under regional circuit law").

         That venue motions are procedural - and therefore governed by the law of the regional circuit - is true even though the substantive questions at issue may be controlled exclusively by Federal Circuit law. See, e.g., In re TLI Commc 'ns LLC Patent Litig., 823 F.3d 607, 610 (Fed. Cir. 2016) (applying "regional circuit law to the review of motions to dismiss for failure to state a claim under Rule 12(b)(6)" on issue of whether Rule 12's plausibility standard had been met, even where motion to dismiss was based on purported failure of patentee to claim patent-eligible subject matter under 35 U.S.C. § 101). Hence, while the substance of a venue challenge in a patent case will turn on § 1400(b), subject matter that is controlled by Federal Circuit law, the Federal Rules - as opposed to a patent-unique statute - provide the procedural vehicle for such a challenge.[6] Cf. Atlas IP, LLC v. Medtronic, Inc., 809 F.3d 599, 604-05 (Fed. Cir. 2015) (applying Federal Circuit law to issues of finality because applicable statute, 28 U.S.C. § 1295(a)(1), is unique to patent law).

         Accordingly, the Court will apply Third Circuit law to the procedural aspects of Defendant's improper venue motion, which places the burden on Defendant to prove improper venue. See, e.g., Koninklijke Philips N. V. v. ASUSTeK Comput. Inc., 2017 WL 3 055517, at *2 (D. Del. July 19, 2017); Graphics Props. Holdings Inc. v. Asus Comput. Int'l, Inc., 964 F.Supp.2d 320, 324 (D. Del. 2013). However, all issues of interpretation of § 1400(b), a patent-specific statute, are controlled by Federal Circuit law. See Midwest Indus., 175 F.3d at 1359; see also D.I. 25 at 9-10 (Defendant agreeing on this point); Tr. at 49-50 (Plaintiffs agreeing on this point).[7] Therefore, the Court will look to Federal Circuit precedent to understand and apply the provisions of § 1400(b). See In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985).

         III. DISCUSSION

         The patent venue statute, 28 U.S.C. § 1400(b), provides:

Any civil action for patent infringement may be brought in the judicial district [1] where the defendant resides, or [2] [(a)] where the defendant has committed acts of infringement and [(b)] has a regular and established place of business.

         It is undisputed that under the Supreme Court's recent decision in TC Heartland, venue in this case is not proper in Delaware under the "resides" portion of the statute, as MPI is incorporated in West Virginia. (See D.I. 21 at 3, 8 n.7) MPI, therefore, "resides" in West Virginia, not Delaware.

         The parties' dispute, then, is whether venue is proper in Delaware in accordance with the second prong of § 1400(b). Venue in Delaware is proper under this portion of the statute unless MPI can show either that (a) MPI has not committed acts of infringement in Delaware, or (b) MPI does not have a regular and established place of business in Delaware. The Court will address each of these requirements in turn.

         A. Acts of Infringement

         1. Analysis

         The first requirement of the second prong of § 1400(b) is that "the defendant has committed acts of infringement" in this District. The parties do not point to any cases applying this statutory language to a patent infringement case brought under the Hatch-Waxman Act. Nor is the Court aware of any case on point. The issue appears to be one of first impression.

         The Court begins with the language of the statute, which is written in the present perfect tense: "where the defendant has committed acts of infringement." § 1400(b) (emphasis added). The Supreme Court has emphasized the importance of analyzing "Congress' choice of verb tense to ascertain a statute's temporal reach." Carr v. United States, 560 U.S. 438, 448-49 (2010); see also Cullen v. Pinholster, 563 U.S. 170, 182 (2011) ("This backward-looking language requires an examination of the state-court decision at the time it was made."); United States v. Wilson, 503 U.S. 329, 333 (1992) ("Congress' use of a verb tense is significant in construing statutes. By using these verbs in the past and present perfect tenses, Congress has indicated that computation of the credit must occur after the defendant begins his sentence.") (internal citations omitted).

         But Congress' choice of verb tense in the patent venue statute creates an almost impenetrable problem in the particular context of Hatch-Waxman patent litigation. This is because the temporal focus of the Hatch-Waxman infringement analysis is the future, not - as is true in essentially all other patent infringement suits - the past, or even the present. In a Hatch-Waxman suit, the subject of the dispute is the generic drug product that the defendant will manufacture and sell and offer for sale in the future (after obtaining FDA approval); a Hatch- Waxman suit is not about a generic product the defendant has sold or is selling. See Acorda Therapeutics Inc. v. Mylan Pharm. Inc., 817 F.3d 755, 760 (Fed. Cir. 2016). Thus, on the surface there appears to be a complete mismatch between the backward-looking nature of the patent venue statute and the forward-looking nature of Hatch-Waxman litigation.[8]

         One aspect of the temporal mismatch between § 1400(b) and the Hatch-Waxman Act bears particular emphasis: much of the backward-looking, historical conduct that constitutes patent infringement in a typical patent lawsuit is expressly and statutorily deemed non-infringing in the context of Hatch-Waxman litigation. This is due to the "safe harbor" provision of Hatch- Waxman, 35 U.S.C. § 271(e)(1), which provides:

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 under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.

(Emphasis added) Thus, a generic drug company that "has committed" the otherwise infringing acts of making, using, offering to sell, selling, or importing infringing drug products is deemed by statute not to have committed an act of infringement so long as these actions are reasonably related to the anticipated or actual submission of an ANDA. See Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193, 202 (2005) ("[W]e think it apparent from the statutory text that § 271(e)(1)'s exemption from infringement extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the [Federal Food, Drug, and Cosmetic Act].").

         What, then, does Hatch-Waxman define as an act of infringement? The submission of an ANDA to the FDA, if the AND A seeks approval before the expiration of a patent covering the branded drug to which the generic product is bioequivalent. Thus, § 271 (e)(2) provides:

It shall be an act of infringement to submit... [an ANDA] for a drug claimed in a patent or the use of which is claimed in a patent . . . if the purpose of such submission is to obtain approval [from the FDA] to engage in the commercial manufacture, use, or sale of a drug ... claimed in a patent or ...

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