Abstract

In determining where patent infringement actions may be brought against ANDA filers, a Texas court declined to follow the ruling in a Delaware court decision. Instead, it strictly interpreted the venue statute, finding that venue for a patent infringement lawsuit is proper in a district where a defendant "has committed" acts of infringement and not where the ANDA filer intends to market the accused product in the future. 

Under the venue statute, a defendant may only be sued in a district where it "resides," or, alternatively, where it committed acts of infringement and has a regular and established place of business. In  Galderma Labs. L.P. v. Teva Pharm. USA, Inc., a Texas court declined to find an act of infringement occurs wherever an ANDA filer intends to market the accused product.

Background

The Hatch-Waxman Act establishes that filing an Abbreviated New Drug Application (ANDA) and accompanying certification (paragraph IV certification) is an "artificial" act of infringement that opens the door for (i) the patent owner to pursue litigation or (ii) the generic manufacturer to pursue declaratory judgment relief. 

Teva USA submitted an ANDA seeking approval to manufacture, use, and sell a generic drug for treating rosacea. In response, Galderma, the patent owner, filed suit in the Northern District of Texas against Teva USA and Teva Israel. Both Teva USA and Teva Israel moved to dismiss the litigation. 

Teva USA argued that the Northern District of Texas was not a proper venue for the litigation because it  was incorporated in Delaware, prepared its ANDA in New Jersey, and submitted the ANDA to the FDA in Maryland.  Teva Israel argued that Galderma failed to state a claim upon which relief could be granted because the allegations in Galderma's complaint failed to establish that Teva Israel was responsible for the alleged infringement. 

Relying on the Federal Circuit's precedential decision in  In re Cray, Inc., which clarified the venue analysis, the Texas court allowed limited discovery relevant to Teva's motions on venue and then held oral argument on the issue. After considering all the evidence, the court granted both Teva USA and Teva Israel's motions to dismiss the litigation. 

The Galderma Decision

Because Teva USA was incorporated in Delaware and therefore "resides" there, the Northern District of Texas would be a proper venue for litigation only if Teva USA (a) committed acts of infringement in the district  and (b) has a regular and established place of business there. Galderma urged the court to follow a Delaware court decision which found the filing of an ANDA and the ANDA filer's intent to market the products in the district where a patent infringement litigation was brought constituted an act of infringement in that district, making district a proper venue for the litigation.

The Texas court declined to follow the Delaware court decision, noting that the Federal Circuit's recent decision in  In re Cray, Inc.  struck down a patent venue test that was "not sufficiently tethered" to the statutory language. The Texas court also declined to find that Teva USA had committed an act of infringement in Texas when submitting its ANDA paragraph IV challenge to Galderma's patents. While Galderma resided in the Northern District of Texas, venue is not based on the plaintiff's residence, and Galderma failed to carry its burden to show an act of infringement occurred in the district. Ultimately, the court concluded Teva USA had no regular and established place of business in the Northern District of Texas.

  As an additional and alternative basis to grant Teva USA's motion to dismiss, the court also analyzed whether venue was proper under Section 1400(b). Again relying on  In re Cray, Inc., the court explained the Federal Circuit clarified that Section 1400(b) imposes three requirements:  (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. 

While Galderma argued that Teva USA employed dozens of people who live and work in the district, all but two were actually employed by a subsidiary of Teva USA. As the court explained, so long as the two entities maintain formal corporate separateness, presence of a separate corporate subsidiary in the district cannot be imputed to the parent for venue purposes. Further, while two employees who reside in the district were employed by Teva USA, there was no evidence that (1) Teva USA conditioned their employment on their residence, (2) the employees maintained inventories in their homes or distributed  Teva-branded drugs to customers; or (3) Teva USA  owned, leased, or rented their homes,  or otherwise held their homes out as the company's place of business. 

The court also rejected Galderma's arguments that Teva USA's recent activities created venue because venue is determined based on facts that existed at the time the complaint was filed.   Further, revenue that Teva USA's received from a network of authorized distributors in the district did not establish a physical presence in a district. 

In addition to granting Teva USA's motion to dismiss the litigation for failing to establish that the Texas court was a proper venue, the court also found that Galderma failed to establish Teva Israel was responsible for the alleged infringement. Galderma's allegations in the complaint were lumped together against all the defendants and were not specific to Teva Israel. However,  the court permitted Galderma to amend its allegations in the complaint to correct to address these deficiencies.

Strategy and Conclusion

This case provides guidance on the requirements for determining where ANDA filers may be sued for patent infringement Hatch-Waxman litigation and the possible significance of where an ANDA is prepared and filed. Courts may permit limited discovery on facts relating to venue issues before determining where suit may be brought.

The Galderma  opinion can be found  here.

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