Federal Circuit Affirms Dismissal of Hatch-Waxman Defendants for Lack of Venue and Failure to State a Claim

On November 5, 2021, the U.S. Court of Appeals for the Federal Circuit in Celgene Corp. v. Mylan Pharmaceuticals Inc., Case No. 21-1154, affirmed a decision from the District Court of New Jersey dismissing a suit brought by Celgene Corporation (“Celgene”) under Rule 12(b)(6) for improper venue as to defendants Mylan Pharmaceuticals Inc. (“MPI”) and Mylan Inc. and for the failure to state a claim against defendant Mylan N.V. Celgene had brought suit after MPI submitted an ANDA seeking approval to market a generic version of the drug Pomalyst used to treat multiple myeloma. In assessing venue, the court held that it was MPI’s ANDA submission to the U.S. Food and Drug Administration (“FDA”), and not the sending of a notice letter to Celgene in New Jersey, that was the artificial act of infringement pursuant to the Hatch-Waxman Act. The district court thus held, and the Federal Circuit affirmed, that venue in New Jersey was improper.

In early 2017, MPI submitted an ANDA seeking approval to market its generic version of Pomalyst before the expiration of four Orange-Book-listed patents. Celgene sued the Mylan defendants on those four patents in May 2017 and the defendants immediately filed a motion to dismiss for improper venue and failure to state a claim. That motion was denied in March 2018 without prejudice to allow the parties time to engage in venue-related discovery. Celgene subsequently obtained five more related patents and asserted them in separate subsequent civil actions that were then consolidated with the 2017 one. The parties then stipulated that the resolution of the motions to dismiss in the original case would govern.

After two years of discovery, the Mylan defendants renewed their motion to dismiss, which the district court reviewed under the Federal Circuit’s In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017) decision, and concluded that venue was improper. The Federal Circuit affirmed that “the thin set of facts that Celgene had gathered after those two years,” which included citing to the presence of affiliated entities and employees in New Jersey, failed to show a “regular and established place of business” in the district under 28 U.S.C. § 1400(b). The Court also affirmed the district court’s conclusion that the involvement of Mylan N.V. in the submission of the ANDA application was “simply too speculative and conclusory” and determined that Celgene had failed to state a claim upon which relief could be granted as to Mylan N.V.

The Federal Circuit noted that to establish venue, Celgene needed to show either that the defendant “resides” in a particular district or that it “has committed acts of infringement and has a regular established place of business” there. Noting that “no one argues that the defendants-appellees reside in New Jersey,” the Federal Circuit analyzed the district court’s decision as to whether Celgene had committed acts of infringement in New Jersey and had a regular and established place of business there. On the issue of infringement, Celgene contended that the “artificial act of infringement stemming from the ANDA submission extended nationwide” and that the effects of that submission would be “felt” throughout the country, including in New Jersey. The Federal Circuit held that its previous decision, Valeant Pharms. N. Am. LLC v. Mylan Pharms. Inc., 978 F.3d 1374, 1381–82 (Fed. Cir. 2020), “squarely forecloses Celgene’s position.” (See our prior coverage of the Valeant decision, here.)The Federal Circuit also rejected Celgene’s argument that MPI’s sending of a paragraph IV notice letter from West Virginia to Celgene headquarters in New Jersey, constituted an act of infringement in New Jersey. The Court stated that the controlling Hatch-Waxman statute and regulations treat the ANDA submission and notice letter as different things and that, while receipt of the notice letter influences the timing of the subsequent lawsuit by establishing a 45-day cutoff for obtaining a 30-month stay, “the letter itself does not establish the cause of action.” The Court held that cause of action is established by the ANDA submission and, although the applicant must later send a notice letter and inform the FDA of the letter’s receipt, that all happens after the infringing submission.

The Federal Circuit also went on to affirm the district court’s conclusion that there was no regular and established place of business for the MPI or Mylan Inc. defendants in the District of New Jersey. Where venue requires that (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, the Court noted that Celgene’s identification of Mylan employees working within New Jersey was not enough. Citing to its decision, In re Cray Inc., 871 F.3d 1355 (Fed. Cir. 2017), the court stated that although MPI and Mylan Inc. allowed employees to work from the district, there was “no indication” that they “own[], lease[], or rent[]” those employees’ homes or that they played a role “in selecting the [homes’] location, stored inventory or conducted demonstrations there, or conditioned . . . employment or support on the maintaining of a home in New Jersey.” (See our prior coverage of the District of Delaware applying In re Cray to dismiss an earlier Hatch-Waxman suit against MPI, here.) The Court specifically noted that out of tens of thousands of defendants’ employees, only seventeen were identified as living in New Jersey. The Court also declined to impute the existence of storage lockers and the existence of a “defunct” Mylan entity in the district to MPI and Mylan Inc. for the purposes of showing a regular and established place of business under § 1400(b).

The Federal Circuit also affirmed the district court’s determination that Celgene had failed to state a claim upon which relief could be granted against Mylan N.V. where MPI signed and physically submitted the ANDA. The Court determined that Celgene’s pleading had not sufficiently established either that (1) Mylan N.V. was actively involved in and directly benefited from the ANDA or (2) that MPI acted as Mylan N.V.’s alter ego in derogation of the corporate form. The Federal Circuit also determined that the district court did not abuse its discretion by denying Celgene’s motion to amend the Complaint where Celgene knew for years that the original allegations were conclusory and insufficient yet made no attempt to amend them in a timely manner.

The Federal Circuit’s decision in this case reinforces its holdings in Valeant and Cray and serves as a reminder that the controlling act of infringement in Hatch-Waxman cases for the purposes of venue is the solely the ANDA submission and acts involved in its preparation.

To learn more from the Mintz IP team, follow us on LinkedIn and check out our Exclusive Rights podcast.

Subscribe To Viewpoints