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If Hatch-Waxman cases are governed by TC Heartland, will that lead to “generic friendly” districts?

Zachary Silbersher

Mylan ($MYL) recently prevailed on a motion to dismiss for improper venue in a pending Hatch-Waxman case for the drug Eliquis®.  Mylan successfully argued that Delaware was an improper venue under the recently test for venue in patent cases enunciated by the Supreme Court in TC Heartland.  What are the implications of TC Heartland governing venue in all Hatch-Waxman cases?  Will it lead to “generic friendly” judicial districts?

In early 2017, Bristol-Meyers Squibb ($BMY) commenced a series of Hatch-Waxman cases against ANDA-filers for its drug, Equilis®.  The cases were each brought within the District of Delaware, and were consolidated for discovery purposes.  Many of the cases remain pending, and the parties remain jointly engaged in claim construction and discovery.

Meanwhile, in September 2017, Mylan moved to dismiss the action against it on the grounds of improper venue under TC Heartland.  The Court ordered the parties to conduct further discovery on whether the Mylan entity named in the complaint, Mylan Pharmaceuticals, Inc. (“MPI”), had a regular and established place of business in Delaware.  Eight months later, in May 2018, Mylan renewed its motion to dismiss.  On October 18, 2018, the District Court in Delaware granted the motion, thereby, dismissing Mylan from the suit. 

Under TC Heartland, venue is proper in a district where the defendant is incorporated.   Unlike many companies, including most of the generics sued in the Equilis® cases, MPI is not incorporated in Delaware.  The Court found that residency of a Mylan affilidate, which was incorporated in Delaware, could not be imputed to MPI.  As a result, the Court dismissed the case against Mylan. 

Bristol-Meyers can, and most certainly will, re-file its case against Mylan within a district where venue is unlikely to be disputed.  Yet, this case raises a several conundrums that will likely read-through to other Hatch-Waxman cases.  They may alter the playing field for litigating Hatch-Waxman cases.

The first question is whether Hatch-Waxman cases are, in fact, subject to the venue provision discussed in TC Heartland, namely, 35 U.S.C. § 1400(b).  Bristol-Meyers argued that they are not.  Section 1400(b) generally applies to civil actions for patent infringement.  Yet, Hatch-Waxman cases are at least arguably a unique breed. 

Bristol-Meyers argued that the history and general policy behind the Hatch-Waxman Act dictates that they be governed by a separate, more general venue provision, namely § 1391.  Hatch-Waxman cases result from an artificial mechanism to address whether a generic drug will infringe a brand’s patents even before any sales take place.  They are, in that sense, actions for future infringement.  Even though the generics are nominally the defendant, the actions are in practice initiated by the generic’s filing of an ANDA.  In that sense, arguably, they are more akin to declaratory judgment actions, and Bristol Meyers argued they should therefore be governed by § 1391. 

The Court disagreed, and held that § 1391 was not applicable to Hatch-Waxman cases.  Rather, § 1400(b) governed patent cases, and a Hatch-Waxman case is undeniably an action for patent infringement.  The weight of authority is likely against Bristol-Meyers’ position on this issue.  Yet, there are many policy wrinkles that could bubble up and force the Federal Circuit, and possibly even the Supreme Court, to weigh in shortly.

For instance, if a brand is forced to sue generics all over the country, that could have far-reaching consequences.  Hatch-Waxman cases often involve a single plaintiff, the brand, suing multiple defendants at once, the ANDA generic filers.  The cases are often, though not always, filed at or near the same time.  That is because each Hatch-Waxman case is triggered by a generic’s filing of an ANDA, and FDA guidelines dictate when certain ANDAs can be filed. 

As an example, for NCE drugs (new chemical entities), generics typically cannot file an ANDA until after four years of the brand’s exclusivity.  And because the generics are often racing to be the first-filer, in order to win six months exclusivity, it is not uncommon for multiple Hatch-Waxman suits to be commenced within days of each other. 

If a brand is forced to sue generics all over the country, it will be much harder to consolidate cases for the purposes of discovery and claim construction.  That could, technically, lead to inconsistent rulings in different fora for the same patent.  A generic in one jurisdiction relying a non-infringement argument unique to its formulation may pursue a claim construction that blows up another generic’s invalidity position in a different jurisdiction.  How that will be resolved remains to be seen. 

The irony here is that, forcing brands to spread ANDA suits throughout the country could inure to the benefit of the brands, not the generics.  Consolidated cases in the same district are typically speedier and more efficient.  By contrast, cases spread throughout the country are likely to give the brand repeated reasons to slow things down, or make motions to stay cases pending resolution of issues in parallel litigations.  More litigation delay leads to more delay for generic entry, which is presumably a windfall for brands.

Delays may result further from resolving venue questions at the outset.  Brands may tactically decide to file in jurisdictions where venue is at least debatable.  That may force the generic to move to dismiss for improper venue.  And as occurred in the Eliquis® case, that may require months of venue-related discovery to properly tee-up the motion.  That delay could also slow down generic entry, thus encouraging its practice.  For instance, if the Eliquis® case were against Mylan alone, then Bristol-Meyers would now be forced to restart the suit elsewhere.  But it would have successfully burned through eight-months of delay, where the case is no closer to resolution. 

Another conundrum may arise from generic entry being predicated upon one Judge’s docket versus another Judge’s docket.  When multiple Hatch-Waxman cases are consolidated, and the cases are all tried at once before the same Judge, no one generic can game that Judge’s docket against another generic.   

Yet, if parallel Hatch-Waxman cases are pending before different judges, one generic may obtain a result before another generic—but only because the Judge in the first case issued a decision on the merits sooner.  Judges can be highly variable in how long they take to issue decisions following a bench trial, and that discrepancy can easily be on the order of several months. 

This may in turn raise the premium on non-infringement arguments in a Hatch-Waxman case over invalidity arguments.  If one generic obtains a speedy decision invalidating an Orange-Book patent, all generics can presumably take advantage of that result.  By contrast, a speedy result on non-infringement is not a public common in which all generics will share.  (For this reason, there is, surely, already a premium on non-infringement arguments, but injecting venue tactics into the mix may raise this premium.)

On the other hand, TC Heartland still provides that venue is proper where a defendant is incorporated.  Given that so many generic defendants are incorporated in Delaware, none of these concerns may materialize.  That is, unless, generics start changing their State of incorporation to forum-shop favorable districts.

This would create another irony about TC Heartland in the context of Hatch-Waxman cases.  One of the background issues in TC Heartland was that certain districts had become forums of choice for patent-litigation plaintiffs.  The Eastern District of Texas was viewed to be patent friendly.  The Eastern District of Virginia was viewed to have a rocket docket.  If generics begin altering States of incorporation to pigeon-hole select districts, that in turn may create a new crop of districts catering to and vying for Hatch-Waxman lawsuits.  They may attract generics by informally promoting that Hatch-Waxman cases will get to trial quickly. 

This is where Bristol-Meyers’ arguments that § 1391 should govern venue in Hatch-Waxman suits may have some teeth.  Generics are technically the defendants in Hatch-Waxman cases, but in reality, they initiate the lawsuits.  They file the ANDAs, and that triggers the brand to file the lawsuit.  Indeed, the generics know they will be sued before the brand knows, which is unusual for patent litigation.

And that leads to perhaps the biggest irony.  TC Heartland, when applied to Hatch-Waxman cases, permits the party initiating the suit to choose the forum.  That is a bit backwards to what TC Heartland now effectively governs for garden-variety patent cases. 

For many generics, their litigation budgets and time to entry are material factors affecting their bottom line.  If altering a State of incorporation to a “friendly” and “speedy” district can impact that bottom line, it soon become a no-brainer.  And if that happens, we may soon see “generic friendly” districts prop up for Hatch-Waxman cases. 

That would be much like Eastern District of Texas was for several years for non-pharma patent cases.  That is, until, TC Heartland had presumably stamped it out.