On Sep 11, 2017, Chief Judge Leonard P. Stark of District of Delaware issued an opinion in Eliquis®; (Apixaban) case regarding motion to dismiss for improper venue by Mylan Pharmaceuticals Inc. (MPI) in light of the Supreme Court’s recent decision in TCI Heartland LLC v. Kraft Food Group Brands (2017).
The venue motions are procedural – and therefore governed by the law of the regional circuit, even though the substantive questions at issue may be controlled exclusively by Federal Circuit law. Accordingly, the Court applied Third Circuit law to the procedural aspects of Defendant’s improper venue motion, which places the burden on Defendant to prove improper venue. MPI, which has submitted an ANDA to the USFDA for permission to market and sell a generic version of one of Plaintiffs’ (BMS/Pfizer) patent-protected drug products, bears the burden to show that it does not satisfy the requirements of the second prong of§ 1400(b).
The patent venue statute, 28 U.S.C. § 1400(b), provides:
Any civil action for patent infringement may be brought in the judicial district  where the defendant resides, or  [(a)] where the defendant has committed acts of infringement and [(b)] has a regular and established place of business.
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).” 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”.
It is undisputed that under the Supreme Court’s 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. 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.
( a) Acts of Infringement:
The first requirement of the second prong of § 1400(b) is that “the defendant has committed acts of infringement” in this District. The issue appears to be one of first impression because neither party nor court is aware of any case law related to this.
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) & not about a generic product the defendant has sold or is selling (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.
What, then, does Hatch-Waxman define as an act of infringement? It is the submission of an ANDA to the FDA, if the ANDA seeks approval before the expiration of a patent covering the branded drug to which the generic product is bioequivalent (artificial-act of infringement). An applicant submits an ANDA with full knowledge of the effect of its application and with the objective of marketing its drug product in the event that the application is approved. Thus, “Mylan’ s [and MPI’ s] ANDA filings, including, its certifications regarding the patents at issue here, were thus suit-related, and they had a substantial connection with Delaware because they reliably, non-speculatively predicted Delaware activities by Mylan”. This can be sufficient to demonstrate that the ANDA-filing Defendant “has committed” “acts of infringement” in this District.
( b) Regular and Established Place of Business:
In order for venue to be proper under the second prong of § 1400(b), the defendant must also have “a regular and established place of business” in the district.
In its mandamus petition, Cordis (Fed. Cir. 1985) invoked its lack of a fixed physical location as dispositive of the question whether it had a regular and established place of business in Minnesota. The Federal Circuit explicitly rejected this contention, holding that “in determining whether a corporate defendant has a regular and established place of business in a district, the appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not … whether it has a fixed physical presencein the sense of a formal office or store.”
But in holding that no fixed physical presence in the sense of a formal office or store is required, Cordis should not be understood as eliminating the statutory requirement that a defendant have some regular and established ”place of business” in the venue. Consistent with what Judge had already determined before Cordis, the Court understands Cordis to mean that while no fixed space in the sense of a formal office or store is necessary, some physical presence is nevertheless required. Cordis’ analysis focused on the defendant’s physical presence in the district. Cordis’ explanation that there needs to be a “permanent and continuous presence” in a district further confirms that the corporate defendant is required to have some sort of meaningful physical manifestation in the district. But as Cordis also demonstrates, this inquiry is factually driven and dependent on the circumstances of the case.
Pulling all of this together, the Court proceeded to analyze whether a defendant has a regular and established place of business in Delaware in the following manner. Based on both the statutory language of§ 1400(b) and Cordis, 729 F.2d at 737, the Court must determine whether a defendant has a regular and established place of business by conducting a fact intensive inquiry focused on whether the defendant does its business in this District through a permanent and continuous presence here. If all that is revealed by the record is that the defendant is registered to do business here, or only maintains a website that is accessible in Delaware, or simply ships goods to unaffiliated individuals or third-party entities here, then this District is an improper venue for the lawsuit.
Turning to the record presently before the Court, the Court is unable to determine whether MPI has a regular and established place of business in Delaware. Before the Court will evaluate whether MPI can show that it lacks a regular and established place of business here, the Court will provide BMS an opportunity to take venue-related discovery.
Such discovery will include understanding the relationships among the 40 Delaware Mylan entities and MPI. Venue in a patent infringement case [may be] proper with regard to one corporation by virtue of the acts of another intimately connected, corporation. It will also consider whether MPI (or any Mylan entity) has sales representatives who come to Delaware, who meet with doctors and hospitals here, what they do here, and how often they do it. The venue-related discovery may also include attempting to understand “the way that the industry operates, the way that sales are made, [and how] marketing and promotions are done.” Further, it will explore details of MPI’s (or another Mylan entity’s) operations with wholesalers like McKesson, Americsource Bergen, or Cardinal Health. Finally, discovery will consider the extent to which MPI has relationships with “end users,” such as pharmacies and physicians in Delaware, “that are aimed at incentivizing them to purchase MPI products from wholesalers and distributors.
CONCLUSION: For the reasons stated above, the Court denied without prejudice MPI’ s motion to dismiss for improper venue. MPI has committed acts of infringement in Delaware based on its submission of an ANDA to the FDA, with the intention and for the purpose of selling products in Delaware that would allegedly infringe BMS’ patents. The Court was not yet able to determine whether MPI lacks a regular and established place of business in Delaware. Hence, the Court will permit venue-related discovery and allow MPI to renew its venue challenge after such discovery is completed.
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