The US District Court for the Northern District of Texas found that venue was not proper under 28 USC § 1400(b) because Teva Pharmaceuticals USA did not commit any act of infringement in the Northern District of Texas, nor did Teva USA have a regular and established place of business in the district. Galderma Laboratories, L.P., et al. v. Teva Pharmaceuticals USA, et al., Civil Action No. 3:17-cv-01076-M (ND Texas, Nov. 17, 2017) (Lynn, J).
Analysis
Venue in a patent infringement case is governed by a special patent venue statute, which provides that a patent infringement case may be brought in the judicial district where (1) the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. 28 USC § 1400(b). In TC Heartland LLC v. Kraft Foods Grp. Brands LLC, the Supreme Court of the United States held that, for purposes of the patent venue statute, a domestic corporation "resides" only in its state of incorporation. 137 S. Ct. 1514, 1519 (2017). Because Teva USA is a Delaware corporation, the question before the district court was: did Teva USA (1) commit acts of infringement in the district and (2) have a regular and established place of business in the district? The district court reasoned that if the answer was yes, venue would be proper in the Northern District of Texas.
Teva USA contended that venue was improper because the alleged act of infringement—the abbreviated new drug application (ANDA) submission—did not occur in the Northern District of Texas. Teva USA argued that the ANDA was prepared at its offices in New Jersey and electronically submitted to the US Food and Drug Administration (FDA) in Maryland. Galderma argued, on the other hand, that an act of infringement also occurs wherever an ANDA filer intends to market the accused generic product, and in this case, Teva USA intended to market the accused product in the Northern District of Texas. Thus, venue was proper in the district. Galderma further contended that Teva USA committed an act of infringement in the district when it sent a paragraph IV certification to Galderma, which is located in the district.
Acts of Infringement
The court began its analysis by recognizing the undisputed fact that, under the Hatch-Waxman Act, filing an ANDA containing a paragraph IV certification, such as Teva USA did with respect to its generic product, constitutes an act of infringement. 35 USC § 271(e)(2). The court recognized, however, that it was an open question whether an act of infringement also occurs wherever an ANDA filer intends to market the accused product. Only a single recent court decision in the District of Delaware addressed the issue. Bristol-Myers Squibb Co. v. Mylan Pharms. Inc., Case No. 2017 WL 3980155 (D Del., Sept. 11, 2017) (discussed further in this issue of ANDA Update). In Bristol-Myers, the court held:
An applicant's submission of an ANDA, in conjunction with other acts the ANDA applicant non-speculatively intends to take if its ANDA receives final FDA approval, plus steps already taken by the applicant indicating its intent to market the ANDA product in [a particular] District, must all be considered for venue purposes, and can be sufficient to demonstrate that the ANDA-filing Defendant "has committed" "acts of infringement" in [the particular] District.
2017 WL 3980155, at *13.
Galderma urged the court to adopt the Delaware court's reasoning and find that an act of infringement had occurred in the Northern District of Texas because Teva filed an ANDA and intended to market a generic product in the district. While noting that the Delaware court's decision was very thorough, the court identified several issues with the decision that counseled away from adopting it and holding that an act of infringement occurs in any district where the ANDA filer intends to market the ANDA product after it receives FDA approval.
First, the court concluded that such a holding was at odds with the plain language of the patent venue statute, which provides that venue is proper "where the defendant has committed acts of infringement." The court reasoned that there was an irreconcilable conflict between the backward-looking nature of the patent venue statute and the forward-looking nature of the Hatch-Waxman Act. In the Hatch-Waxman context, the only act of infringement that actually had occurred was the filing of the ANDA, not future sales of the ANDA product. Noting that the US Court of Appeals for the Federal Circuit had recently struck down a patent venue test crafted by a district court because the test "was not sufficiently tethered" to the statutory language (In re: Cray, Inc., Case No. 871 F.3d 1355, 1362 (Fed. Cir. 2017)), the district court concluded that relying on future sales of the ANDA product to establish venue is a liberal interpretation of the venue statute inconsistent with the Federal Circuit's guidance.
Second, the Delaware court's opinion borrowed heavily from the Federal Circuit's analysis in Acorda Therapeutics Inc. v. Mylan Pharms. Inc., Case No. 817 F.3d 755 (Fed. Cir. 2016). The court, however, discounted the reliance on Acorda because it was a personal jurisdiction decision, not a venue decision. The district court cited the Federal Circuit's warning in In re: Cray to "be careful not to conflate showings that may be sufficient for other purposes, e.g., personal jurisdiction or the general venue statute, with the necessary showing to establish proper venue in patent cases." 871 F.3d at 1361.
Galderma also argued that its interpretation was not only consistent with the statute, but also required to give effect to the second part of Section 271(e)(2), which holds that the submission of an ANDA will be an act of infringement if the purpose of the submission is to obtain approval to engage in the commercial sale of a patented drug before patent expiration. The court disagreed, stating that the Hatch-Waxman Act itself recognizes the forward-looking nature of the litigation and identifies the ANDA submission as an artificial act of infringement on which a lawsuit can be based. The court reasoned that because commencement of the lawsuit effectuates the purpose of the Hatch-Waxman Act, it was not necessary to recognize additional speculative acts of infringement (future sales of the ANDA product) to give the statute effect.
After rejecting Galderma's argument that venue was proper because Teva USA intended to sell its ANDA product in the district, the court looked to where the ANDA was prepared and submitted to determine where venue was proper. The court found that there was no evidence—much less an allegation—that Teva USA prepared or submitted its ANDA in or from the Northern District of Texas. Thus, the court concluded that venue was not proper in the Northern District of Texas because no act of infringement occurred there.
Regular and Established Place of Business
As an additional basis for granting Teva USA's motion to dismiss, the court found that Galderma failed to show that Teva USA has a regular and established place of business in the district. After reviewing all the evidence, the court found that only two Teva USA employees worked and lived in the district. There was no evidence, however, that the employees kept any inventory at their homes or distributed Teva USA drugs directly to customers. In addition, there was no evidence that their employment was conditioned on residence in the district or that Teva USA owned, leased or rented any portion of the employees' homes. Finally, the court rejected Galderma's argument that because Teva USA had a network of authorized dealers throughout the district from which Teva USA derived economic benefit, Teva USA had a regular and established place of business in the district. Citing several cases, the court concluded that although Teva USA may derive revenue from sales activities in the district, this did not establish a physical place of business in the district, as required by the patent venue statute.
Determining Venue for ANDAs Containing Paragraph IV Certification
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