United States: Impact Of TC Heartland On ANDA And Biosimilar Litigation

In TC Heartland, the Supreme Court held that its 1957 decision in Fourco was still good law that limited the definition of "residence" under 28 U.S.C. § 1400(b) to the state of incorporation for domestic corporate defendants, thus reaffirming its position that the patent venue statute § 1400 (b) "is the sole and exclusive provision controlling venue in patent infringement actions, and is not to be supplemented by § 1391(c)"¹. TC Heartland overturned decades of venue regime under the Federal Circuit's 1990 decision in VE Holding that applied § 1391(c)'s definition of "resides" to § 1400(b)². Pursuant to § 1391(c)(2), "[f]or all venue purposes, an entity... shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court's personal jurisdiction with respect to the civil action in question..."

Following TC Heartland, the brand manufacturer, in the context of abbreviated new drug applications (ANDAs) under the Hatch-Waxman Act, or the reference product sponsor (RPS), in the context of abbreviated Biologic License Applications (aBLAs), under the Biologics Price Competition and Innovation Act (BPCIA) can bring infringement actions against domestic defendants in a district court only under two scenarios: (1) if the court sits in the defendant's state of incorporation; or (2) if the court sits in a district (a) where the defendant has committed acts of infringement; and (b) where the defendant has "a regular and established place of business." TC Heartland's limited reading of § 1400(b) will inevitably shift the focus to the second alternate prong of § 1400.

1. "Where defendant has committed acts of infringement"

The location of the infringing act will inevitably become an important source of litigation in future ANDA and biosimilar cases following TC Heartland. Because the artificial acts of infringement associated with the filing of an ANDA or aBLA occur prior to any commercial sale of an actual product, they present unique venue considerations. Due to the unique nature of ANDAs and aBLAs, TC Heartland will likely cause a focus shift to determining the location of act of infringement in such cases. In this context, how district courts have addressed specific personal jurisdiction is insightful.

The Federal Circuit has taken a broad and forward-looking position on specific personal jurisdiction in ANDA cases. In Acorda Therapeutics Inc. v. Mylan Pharm. Inc., the Federal Circuit found specific personal jurisdiction over the Mylan defendants because the act of ANDA filing indicates plans to engage in the future marketing of the proposed generic drugs in the forum state, and also finding that the paragraph IV certifications "confirm [the] plan to engage in real-world marketing" sufficient to fulfill the minimum contacts requirement for personal jurisdiction³. It is likely to be the subject of debate whether the act of filing the ANDA or aBLA should employ a prospective perspective for ascertaining an infringing act for venue is inevitable in a post TC Heartland era in ANDA and biosimilar litigation. Thus, focus on where the ANDA filer or aBLA applicant is likely to target sales or marketing efforts, based on past activities, may be highly relevant to determining the location of the infringing act for venue purposes.

Some district courts have also looked at past acts in determining specific personal jurisdiction. Although the location of where the ANDA product was developed and tested has been addressed in the context of specific personal jurisdiction, such activity is likely exempt under the "safe harbor" provisions of 35 U.S.C. § 271(e)(1) as "acts of infringement." Similarly, the acts of preparing the ANDA and aBLA materials, strategic decisions concerning the applications, and signing would also likely be exempt under safe harbor. On the other hand, the acts of filing both the ANDA and the aBLA have been declared by Congress as "acts of infringement."

Furthermore, in Acorda, the Federal Circuit expanded its interpretation of the act of filing the ANDA as confirming future intent to market the generic product throughout the United States. Mailing of the paragraph IV letter has been considered a critical factor and sometime sufficient by itself in finding specific personal jurisdiction in ANDA cases because it directly leads to the plaintiff's cause of action⁴. Similarly, the aBLA applicant's mailing of confidential materials when opting to participate in the patent dance should be considered an important factor in determining the location of the infringing act for venue in a post-TC Heartland era.

Several district courts use the location of where the claim arose as one of several private interest factors in analyzing venue transfer under 28 U.S.C. § 1404(a), which may be also be instructive for determining venue in ANDA cases. In reviewing where the claim arose for venue transfer in ANDA cases, the district courts apply a nearly identical set of factors when determining whether personal jurisdiction exists. In this context, district courts have started considering forward-looking activity, such as where the ANDA filer is likely to manufacture its generic product, consistent with future intent a position adopted by the Federal Circuit post Acorda⁵. Although the venue transfer analysis in ANDA cases does not typically rely on a "sales approach" because actual sales have yet to occur, the location where the ANDA filer or the aBLA applicant intends to sell and market their respective products based on past activity will nevertheless play a role in determining venue under § 1400(b).

2. "Where defendant has a regular and established place of business"

TC Heartland's narrow reading of § 1400(b) will also require analysis of where the defendant has a "regular and established place of business"⁶. The Federal Circuit has interpreted "regular and established place of business" as requiring "a permanent and continuous presence" and not necessarily "a fixed physical presence in the sense of a formal office or store "⁷. Although several factors have emerged, the focus is on the "nature of the defendant's presence with the district"8. Although a fixed physical presence is not essential, many courts have found that "the physical location over which defendant exercises control and where defendant engages in a substantial part of its ordinary business in a continuous manner" is sufficient. While registration as a foreign corporation to do business standing alone is not considered sufficient;" a physical office location, phone lines, employees, and/or bank accounts may be sufficient to qualify as a "regular and established business."

Because of the unique artificial nature of infringement in ANDA and biosimilar cases, focus on actual sales and marketing efforts is inapplicable. In this context, lessons from how district courts have addressed general personal jurisdiction in ANDA cases may be insightful. Several factors emerge: (1) sale of past generic products; (2) marketing efforts directed to the district, including internet websites accessible from the district; and (3) registration to do business. Other factors that may be relevant in the ANDA and biosimilar context include: (a) license to distribute and manufacture drugs in the district; and (b) contracts with wholesalers and distributors within the district to market drugs⁹. Infringement complaints in non-ANDA cases filed after TC Heartland have already started covering in great detail factors including physical offices, websites that promote allegedly infringing product and services, and sales within the district¹⁰.

3. Anticipated Trends in ANDA and Biosimilar Cases

Impacting current cases, Supreme Court precedent suggests that TC Heartland should apply retroactively¹¹. In pending cases, one of the critical questions that will apply is whether the defense of improper venue was properly preserved to avoid waiver under Rule 12. Fed. R. Civ. P. 12(h)(1) provides that a party that fails to preserve the defense by filing a Rule 12 motion to dismiss for improper venue, or a motion to transfer venue, or raising the defense in a responsive pleading, waives the right to object. Parties that have failed to adequately preserve the defense are likely to avail of Rule 15's request for leave to amend pleadings. Finally, even if the Court determines there has been a waiver, an exception may apply based on an "intervening change" in the law. However, one district court has already refused to apply the "intervening change" exception, finding that TC Heartland was not a new rule, but rather, re-confirmed the viability of Fourco, which was always good law¹².

Furthermore, because TC Heartland is limited to domestic corporations, the venue law is likely unchanged for foreign corporations¹³. As such, patent owners may elect to sue foreign parents in order to avail the broader reach over foreign entities for venue purposes. On the other hand, we may see an increase in the creation of U.S. subsidiaries for generic and biosimilar manufacturers with a physical office in a district of choice that would control the filing of the ANDA and aBLA applications.

ANDA and biosimilar cases involving the same product, patents, and multiple groups of defendants will likely see an upsurge in the number of protective suits filed in the different districts, depending on where individual defendants are incorporated.

Consequently, in an effort to conserve resources and avoid inconsistent results, there will likely be an increase in the use of judicial panels on Multidistrict Litigation (MDL) to consolidate pretrial proceedings to a single district under 28 U.S.C. § 1407. Historically, MDL panels have been used in ANDA cases to consolidate pretrial proceedings, representing an efficient way to litigate cases involving multiple defendants with similar issues¹⁴.

In declaratory judgement actions for invalidity or non-infringement, the general venue provision set forth in 28 U.S.C. § 1391 applies rather than 28 U.S.C. § 1400(b)¹⁵. As a consequence, the generic filer proceeding with a Declaratory Judgment action can still itself avail of the broader personal jurisdiction regime to support venue against the brand manufacturer.

Lastly, the proposed Senate Bill 2733 – Venue Equity and Non-Uniformity Elimination Act was introduced in 2016 in order to ensure fairness in patent venue cases, but it was not enacted. In a post TC Heartland regime, patent owners, brand manufacturers, RPSs, and other entities that support the broadening of §1400(b)'s reach are likely to advocate in support of reintroducing Senate Bill 2733 in the 115th Congress.

Footnotes

1. TC Heartland LLC v. Kraft Foods Group Brands LLC, 16-341, 2017 WL 2216934, at *5 (U.S. May 22, 2017) (quoting Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 229 (1957)).

2. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed. Cir. 1990).

3. Acorda Therapeutics Inc. v. Mylan Pharm. Inc., 817 F.3d 755, 760, 761 (Fed. Cir. 2016), cert. denied sub nom. Mylan Pharm. v. Acorda Therapeutics, 137 S. Ct. 625 (2017).

4. See, e.g., AstraZeneca AB v. Mylan Pharm., Inc., 72 F. Supp. 549, 559 (D. Del. 2014), aff'd sub nom. Acorda Therapeutics Inc. v. Mylan Pharm. Inc., 817 F.3d 755, 559 (Fed. Cir. 2016).

5. Teva Pharm. USA, Inc. v. Sandoz Inc., CV 17-275(FLW), 2017 WL 2269979, at *7 (D.N.J. May 23, 2017).

6. French-Brown W.D., "TC Heartland's Restraints on ANDA Litigation Jurisdiction," Law360, March 29, 2016, at 2.

7. In re Cordis Corp., 769 F.2d 733, 737 (Fed. Cir. 1985).

8. MAGICorp. v. Kinetic Presentations, Inc., 718 F. Supp. 334, 337, 341 (D.N.J. 1989).

9. French-Brown W.D., "TC Heartland's Restraints on ANDA Litigation Jurisdiction," Law360, March 29, 2016, at 2-3.

10. See, e.g., Uniloc USA, Inc. et al. v. Apple Inc., Civ. A. No. 2:17-cv-00469, D.I. 1 at 1-2 (E.D.Tex. Jun. 2, 2017); Uniloc USA, Inc. et al. v. Google Inc., Civ. A. No. 2:17-cv-00465, D.I. 1 at 2-32- (E.D.Tex. Jun. 1, 2017).

11. Harper v. Virginia Dept. of Taxation., 509 U.S. 86, 97 (1993) ("When [the Supreme Court] applies a rule of federal law . . ., that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.").

12. Cobalt Boats, LLC v. Sea Ray Boats, Inc., et al., No. 2:15-cv-21, 2017 WL 2556679, at *3 (E.D. Va. June 7, 2017).

13. TC Heartland LLC v. Kraft Foods Group Brands LLC, 16-341, 2017 WL 2216934, at *7, n.2.

14. See, e.g., In re: Nebivolol ('040) Pat. Litig., 867 F. Supp. 2d 1354, 1355–56 (U.S. Jud. Pan. Mult. Lit. 2012); In re: Fenofibrate Pat. Litig., 787 F. Supp. 2d 1352, 1353 (U.S. Jud. Pan. Mult. Lit. 2011); In re Cyclobenzaprine Hydrochloride Extended-Release Capsule Pat. Litig., 693 F. Supp. 2d 409, 412, n.2 (D. Del. 2010); In re Rosuvastatin Calcium Pat. Litig., CIV. A. No. 07-805-JJF-LPS, 2008 WL 5046424, at *7 (D. Del. Nov. 24, 2008).

15. Pro Sports Inc. v. West, 639 F. Supp. 2d 475, 483 (D.N.J. 2009) (citing Horne v. Adolph Coors Co., 684 F.2d 255, 260 (3d Cir. 1982)).

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