Federal Circuit Affirms Dismissal of Celgene’s Hatch-Waxman Suit Against Mylan

“[T]he Federal Circuit noted that venue in Hatch-Waxman cases is predicated on past acts of infringement instead of planned future conduct, and that such past acts can only happen in districts related to the submission of the ANDA filing.”

On November 5, the US Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision in Celgene Corp. v. Mylan Pharmaceuticals Inc. affirming a ruling of the District of Delaware, which dismissed a Hatch-Waxman lawsuit against related Mylan entities for either improper venue or failure to state a claim upon which relief could be granted. In issuing the decision, the Federal Circuit found that Mylan’s submission of a notice letter to Celgene regarding Mylan’s paragraph IV certification to the US Food and Drug Administration (FDA) stating that Mylan’s generic version of the multiple myeloma treatment Pomalyst would not infringe Celgene’s patents was not itself an act of infringement for purposes of the patent venue statute.

District of Delaware Finds No ‘Regular and Established Place of Business’ For Venue

The present case stems back to early 2017, when Mylan Pharmaceuticals filed an abbreviated new drug application (ANDA) with the FDA seeking approval for the Pomalyst generic. That ANDA filing included a paragraph IV certification not indicating that the generic treatment would infringe Celgene’s patents covering Pomalyst, or that those patents were instead invalid or unenforceable. Mylan sent notice of the paragraph IV certification to Celgene as required by the Hatch-Waxman Act, after which Celgene filed two lawsuits asserting different groups of patents, the second of which was filed in 2019 and resulted in the present. While not consolidated, both cases shared Rule 12 briefing on venue-related discovery.

After Mylan renewed its Rule 12(b)(3) motion to dismiss for improper venue, the Delaware district court, reviewing the motion in light of the Federal Circuit’s venue standard outlined in In re: Cray Inc. (2017), granted Mylan’s motion to dismiss after finding that the presence of Mylan-affiliated entities and employees in New Jersey did not show a “regular and established place of business” for the purposes of the patent venue statute found at 28 USC § 1400) b).

Because Celgene did not argue that the Mylan defendants themselves resided in New Jersey, which would have satisfied the first part of the Section 1400(b) statute to find the proper venue in patent cases, the company was required to prove that Mylan both committed acts of infringement and maintained a regular and established place of business in New Jersey. Celgene had argued to the Federal Circuit that policy grounds supported the use of the general venue provision at 28 USC § 1391(c) for Hatch-Waxman suits, but the appellate court nixed that argument in a footnote under the US Supreme Court’s 2017 ruling in TC Heartland v. Kraft Foods Group Brandsfinding that Section 1400(b) was the sole statute governing venue in all patent cases.

Federal Circuit: Notice Letters are Distinct from Infringing ANDA Submissions

At the outset, the Federal Circuit disagreed that Mylan had committed infringing acts in New Jersey. Citing to Valeant Pharmaceuticals North America v. Mylan Pharmaceuticals (2020), the Federal Circuit noted that venue in Hatch-Waxman cases is predicated on past acts of infringement instead of future conduct, and that such planned past acts can only happen in districts related to the submission of the ANDA filing. Celgene, however, did not establish that any acts related to the ANDA submission itself were committed by the defendants in New Jersey.

Celgene had argued to the Federal Circuit that Mylan’s sending a paragraph IV notice to Celgene’s New Jersey headquarters, as mandated by 21 CFR § 314.95, constituted an act of infringement within the district. However, the appellate court was not persuaded by Celgene that the notice letter was an essential part of the ANDA submission itself. The Federal Circuit noted that the relevant Hatch-Waxman statutes treat the ANDA submission and the notice letter as different things, pointing out that a generic drugmaker cannot even send a paragraph IV notice letter until the FDA confirms receipt of the ANDA submission.

Under § 271(e)(2), submitting an ANDA is the act of infringement. And although the ANDA applicant must later send a notice letter and inform the FDA of the letter’s receipt, that all happens after the infringing submission. Sending a paragraph IV notice letter does not fall within ‘submitting’ the ANDA under the meaning of Valeant.”

Next, assessing the In re: Cray factors, the Federal Circuit agreed with the district court that the Mylan defendants did not operate a “regular and established place of business” as required by Section 1400(b). In particular, the appellate court found that Celgene failed to satisfy that New Jersey was the home of the defendant and not just the defendant’s employees. First, Celgene had pointed to the presence of 17 homes in New Jersey owned by Mylan employees, but the Federal Circuit noted that Celgene produced no evidence that any Mylan advertising or marketing materials identified those homes as places of business. While Celgene presented a 2017 job listing asking prospective Mylan employees to live in New Jersey or “within reasonable driving distance,” there was no requirement to live in New Jersey or remain within the state. Celgene also argued that process upon Mylan could be effectuated by service upon the employees at their homes, but the Federal Circuit noted that Celgene didn’t raise this argument at the district court and that even if Celgene didn’t forfeit that argument, process of service upon an employee at their home does not necessarily convert the house into a place of business.

Chain of Ownership Arguments Cannot Pierce Corporate Veil in Hatch-Waxman Suits

Celgene alternatively argued that venue was established by the presence of another wholly-owned Mylan subsidiary, Mylan Laboratories (MLI), that operated offices in New Jersey before the subsidiary was dissolved in 2017. While the Federal Circuit recognized venue may be imputed under alter -ego or veil-piercing theories found in corporate law, such imputation cannot be made where the entities maintain corporate separateness. Despite Celgene’s evidence that the entities shared marketing and trade names, and that Mylan Labs was involved in procuring pomalidomide for preparing the ANDA submission, the Federal Circuit found that this evidence showed collaboration and not commonality. “[T]here is no evidence showing, for instance, dominion of MLI’s finances, policy, or business practices,” Circuit Judge Sharon Prost’s opinion reads. “Nor did Celgene show that MLI is ‘undercapitalized or insolvent, that its officers and directors are strawmen, or that MLI lacks its own books and.”” The Federal Circuit was also unpersuaded by a line of cases cited by Celgene for the premise that enough interrelatedness between a subsidiary and a parent company imputes venue even absent a showing of alter ego.

Finally, the Federal Circuit affirmed the district court’s ruling that Celgene failed to state a claim against Mylan NV and denying Celgene leave to its complaint on that point. The district court had held that Celgene only made conclusory claims that Mylan NV submitted the ANDA as required under Section 271(e)(2). Because Mylan Pharmaceuticals signed the ANDA, Celgene had to establish that either Mylan NV was actively involved in the ANDA and directly benefited from the filing in the agency-principle sense, or that Mylan Pharmaceuticals acted as Mylan NV’s alter ego in derogation of the corporate form . The Federal Circuit again nixed Celgene’s chain of ownership arguments and found that Celgene’s other suggested suggested how Mylan NV was involved in the ANDA process or how the corporate form was bypassed to make Mylan Pharmaceuticals its alter ego. Under Celgene’s theory, the Federal Circuit noted that any allegation that one corporation filed an ANDA submission with bare allegation of cooperation or control by another entity “would open the door to discovery for the entire parent-subsidiary chain in any Hatch-Waxman case.”

Affirming the district court’s denial of leave to amend Celgene’s complaint, the Federal Circuit found that Celgene’s request came after the district court’s scheduling deadline for such amendments. Further, Celgene had demonstrated no good cause for modifying the schedule as required by Federal Rule of Civil Procedure 16(b)(4) despite being on notice of Mylan’s claims of inadequate pleadings since 2017. Because of the stipulation on sharing Rule 12 briefing between the two cases brought by Celgene against Mylan, the Federal Circuit found that it made little sense to apply a different scheduling order in the second case when all the briefing and the issue offered on appeal were resolved in the first case. Further, the Federal Circuit noted that this argument was not raised by Celgene at the district court.

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