The patent venue statue, 28 U.S.C. § 1400(b), states that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business.” See 28 U.S.C. § 1400(b). Recently, in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, the United States Supreme Court held, in a unanimous 8-0 decision, that the broad definition of corporate “residence” in the general venue statute 28 U.S.C. 1391(c) does not apply in patent infringement cases involving domestic corporations.
For the last twenty-seven years, since the Federal Circuit’s ruling in VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (1990), patent infringement litigation has functioned under the premise that the “residence” provisions of §1391(c) apply to §1400(b), and thus, venue was proper for a defendant domestic corporation wherever it was subject to personal jurisdiction at the time of the action.
The Supreme Court’s recent ruling affirmatively rejected such a flexible approach to the patent venue statute. The Supreme Court emphasized that its prior decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U. S. 222, 226, 77 S. Ct. 787, 1 L. Ed. 2d 786 (1957), which held that the word “resides” in §1400(b) as applied to domestic corporations refers only to the entity’s state of incorporation, still applies. In TC Heartland, the Court reasoned that Congress’ 2011 amendments to § 1391 show no indication of an intent to disturb its previous holding or alter the meaning of § 1400(b). As such, the Supreme Court again rejected the notion that §1391(c) defines residence for the purposes of §1400(b). The patent venue statute thus provides that a domestic corporation only “resides” in its state of incorporation.
After TC Heartland, in a patent infringement case where the defendant is a domestic corporation, a defendant may be sued only: (1) in its state of incorporation (where it “resides”); or (2) where the defendant “has performed acts of infringement and has a regular and established place of business.” See 28 U.S.C. § 1400(b). A variety of questions remain as to the potential impact this decision will have on pharmaceutical litigation for small molecules arising under Hatch-Waxman, and for litigation for large molecules arising under the BPCIA, because of the unique venue issues present in these types of cases.
Prior to the Supreme Court’s recent decision, patentees in pharmaceutical cases had a great amount of flexibility when it came to choice of venue. Indeed, patent owners essentially had free reign to file a lawsuit in any state where an ANDA or BLA applicant ultimately intended to market its final product. For example, in Acorda Therapeutics Inc. v. Mylan Pharms. Inc., 817 F.3d 755 (Fed. Cir. 2016), the Federal Circuit recently affirmed that Mylan was subject to specific personal jurisdiction in Delaware because it had registered to do business in the state, authorized an agent to accept service of process in the state, and had filed an ANDA seeking approval to direct sales of the product across the United States, including Delaware. The TC Heartland decision, however, separated the idea of residency in the venue statute from personal jurisdiction, and it remains uncertain how the facts impacting the Federal Circuit’s decision in Acorda will be interpreted and applied to the “regular and established place of business” prong of the venue statute after TC Heartland.
The Supreme Court’s decision seemingly narrows a patentee’s choice of forums in Hatch-Waxman and BPCIA cases. After TC Heartland, defendants can clearly still be sued in their state of incorporation. However, it remains to be seen where else patentees will be permitted to bring suit in these cases. The answer to this question will depend on how the courts interpret the phrase “where the defendant has performed acts of infringement and has a regular and established place of business” in 35 U.S.C. 1400(b).
The act of infringement in both Hatch-Waxman litigation and litigation arising under the BPCIA is not based on actual sales of the final product. Rather, in both types of cases, the Patent Act allows the filing of an infringement suit before any actual sales have occurred based on a statutorily created “artificial” act of infringement. In these types of cases, a claim for infringement is permitted based solely on the submission of an abbreviated new drug application containing a paragraph IV certification to the FDA, or the filing of an abbreviated biologics license application with the FDA under the 351(k) pathway. See 35 U.S.C. § 271 (e)(2). Thus, courts are now faced with the issue of deciding where an artificial act of infringement occurs for purposes of these cases – in other words, does the act of infringement occur where the application is prepared, only where the application is filed, or is it deemed to occur anywhere the application seeks approval to market the final product?
Delaware and New Jersey have traditionally been the most popular venues selected by patent owners for Hatch-Waxman litigation. Although the sample size for cases arising under the BPCIA is much smaller, BCPIA cases have been filed in those courts as well. In fact, the Generic Pharmaceutical Association filed an amicus brief in support of the Petitioner in TC Heartland, arguing that the concentration of so many patent cases in these two districts, followed by appeal to a single appeals court, causes delay due to overcrowded dockets and further “deprives patent law of the diversity of approaches needed to advance the law.” See Brief Amicus Curiae of Generic Pharmaceutical Association in Support of Petitioner in TC Heartland LLC v. Kraft Foods Grp. Brands LLC.
Because many pharmaceutical companies are incorporated in or have established headquarters in New Jersey or Delaware, those locations will likely remain popular venue choices. However, until the ambiguity over where the defendant has performed the “artificial” act of infringement is resolved, and the questions of what is required to show a “regular and established place of business” is further clarified, it is possible that patent owners will resume the practice of filing duplicate suits in multiple jurisdictions to “protect” their rights under Hatch-Waxman and the BPCIA.
TC Heartland may also impact the ability of multiple generic companies sued on the same product to engage in joint defense groups if all defendants are not properly sued in the same venue. Generally, if a patentee sues several generic companies in a single court, the cases are consolidated and the parties can achieve efficiencies and decrease costs (compared to multiple individual litigations) by cooperating as a joint defense group. In the aftermath of the Supreme Court’s ruling, a patentee may be unable (or unwilling) to sue all generic defendants in a single venue, thereby potentially increasing costs for both sides. Having concurrent litigations involving the same product against multiple generic companies in more than one court would also increase the possibility of inconsistent decisions on issues such as claim construction, infringement, and validity. Separate litigation against multiple generics in different venues could also have a significant impact on the timing of approvals if cases operate on different schedules or proceed at different paces.
The potential for inconsistent decisions and the impact on timing could be eliminated if cases filed against multiple generic defendants or multiple biosimilar applicants in different location are consolidated for pre-trial proceedings through the use of multi-district litigation (“MDL”). Cases that involve “one or more common questions of fact” can be consolidated by a panel for MDL pursuant to 28 U.S.C. § 1407. Interestingly, when Congress enacted the America Invents Act, it expressly restricted joinder rules such that defendants may only be joined in one action if “(1) any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process; and (2) questions of fact common to all defendants or counterclaim defendants will arise in the action.” See 35 U.S.C. § 299. However, Congress expressly created an exception for ANDA and BPCIA litigation, and the statute does not apply to acts of infringement based on the filing of an ANDA or BLA under § 271(e)(2). As such, Congress has already shown a willingness to treat these cases differently, and section 299 would not prohibit the use of MDL in litigation under Hatch-Waxman or the BPCIA.
Finally, as stated above, TC Heartland applies to domestic corporations and the decision did not address venue as it applies to foreign entities or LLCs. Indeed, in a footnote, the Supreme Court expressly declined to address the implications of the petitioner’s arguments on foreign corporations. According to 1391(c), “a defendant not resident in the United States may be sued in any judicial district, and the joinder of such a defendant shall be disregarded in determining where the action may be brought with respect to other defendants.” For now, the general venue statute will continue to be the rule for foreign defendants, allowing them to be sued in any judicial district. See 28 U.S.C. § 1391(c).
The limited scope of the decision may create a “loophole” for choice of venue in patent cases generally (i.e., not limited to cases arising under Hatch-Waxman or the BPCIA) if the defendant is a foreign corporation with a U.S. subsidiary. In the past, when potential defendants included both a foreign parent corporation and U.S. subsidiary, plaintiffs would generally bring a lawsuit against both entities. However, as a way to alleviate the venue restrictions of TC Heartland and engage in more favorable foreign shopping, plaintiffs may now elect to only file a lawsuit against the foreign parent corporation in order to have the ability to sue in any judicial district.
We will continue to keep you informed as these issues continue to develop.