How will the CAFC’s Valeant v. Mylan venue case change the landscape of pharmaceutical patent litigation?
Zachary Silbersher
In 2018, after the Supreme Court’s TC Heartland decision, we wrote a piece discussing whether that decision may lead to the “generic friendly” districts. On November 5, 2020, the Federal Circuit issued a precedential decision, Vaeleant Pharmaceuticals v. Mylan Pharmaceuticals, that is likely to have a significant impact on the litigation of Hatch-Waxman cases—including the possible development of “generic-friendly” districts. In short, if this decision stands, the future of patent pharma litigation against multiple generics for the same drug will likely be spread out, difficult to consolidate, subject to multiple forums determining in parallel common issues related to infringement and invalidity. Costs for brands are likely to go up along with settlement leverage for generics. Although, exactly who wins and who loses from this decision remains to be seen.
The facts of the case are straightforward and not uncommon for patent pharmaceutical litigation. On the side of the plaintiffs, there are various Valeant entities as well as Dow Pharmaceutical Sciences, Inc. and Kaken Pharmaceutical Co., Ltd. Dow holds an NDA for the drug Jublia®, which treats fungal infections of toenails. On the side of the defendants, there are three Mylan entities—one located in West Virginia, one located in Pennsylvania and a third located abroad, in India.
A host of approximately nineteen prospective generics for Jublia® filed ANDAs, and Valeant sued them all in the District of New Jersey. Mylan objected to venue. It argued that under the Supreme Court’s 2017 decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, venue was not proper in New Jersey. The district court agreed, and dismissed the case.
TC Heartland fundamentally altered how venue is analyzed in patent cases. The venue rules essentially dictate where a lawsuit can be maintained, regardless of the underlying merits of the suit. There are general venue provisions for garden-variety civil and commercial suits, but the Patent Statute has its own venue rules. In TC Heartland, the Supreme Court held that those rules require that a defendant in a patent litigation can be sued, subject to certain exceptions, only where it has an established business and acts of infringement are alleged to have occurred.
The TC Heartland case germinated not from the pharmaceutical context, but rather from patent cases outside of pharma. For several years, patent litigation plaintiffs frequently filed suit in the Eastern District of Texas and other purportedly patent “friendly” forums. The prevailing interpretation of the venue rules did not stop them from doing so, and defendants grew disgruntled. In TC Heartland, the Supreme Court interpreted the venue rules for patent cases to significantly narrow the number of forums where accused infringers could be sued. While most champions of the TC Heartland campaign may not have contemplated, or cared, how the decision would impact pharma cases, that impact is now happening.
One key takeaway from the TC Heartland case is that a party accused of infringing a patent may only be sued in a forum where that party is alleged to have committed infringing acts. In garden-variety patent cases, that typically boils down to where the defendant has sold the allegedly-infringing product. But Hatch-Waxman cases are different. They are technically an exception to the general rule that you cannot sue someone for patent infringement until they have made an affirmative infringing act—most often in the form of sales. In Hatch-Waxman cases, by contrast, the brand pharma company can sue the generic before the generic launches its product—in fact, before the generic has even received FDA approval. Indeed, that exemplifies the policy behind the Hatch-Waxman statute, namely, by offering a mechanism for brands and generics to clear out their patent-infringement grievances before the generic alternative is even launched.
Yet, that all begs a very important question—if a generic can be sued for patent infringement before it actually launches, then for the purposes of deciding venue, where can it be said to have committed infringing acts? If the generic does not yet have any sales, then how can courts identify the appropriate venue? The Hatch-Waxman Act itself provides an answer. It states that the generic’s act of filing an ANDA constitutes an act of infringement that gives the brand company standing to sue the generic.
In earlier cases, brand companies objected to this line of reasoning. They argued that the whole spirit of the Hatch-Waxman statute is to address contemplated future patent disputes so that companies are not discouraged from pursuing generics formulations and launching them under a cloud of patent uncertainty. Thus, the brands have argued that the location of the generic’s anticipated future sales should dictate the venue question for Hatch-Waxman cases. At least one court agreed with that reasoning. (See Bristol-Myers Squibb. See Celgene Corp. v. Hetero Labs Ltd., No. 17-cv-3387-ES-MAH, 2018 WL 1135334, at *3 (D.N.J. Mar. 2, 2018)).
But now the Federal Circuit has disagreed. It held that the language of the statutes are clear. The Hatch-Waxman statute defines the submission of an ANDA as an act of infringement, and the patent venue statute asks where past acts of alleged infringement have occurred. The statute does not ask where acts of infringement are expected to occur, likely to occur, or probably will occur—even if, after all, we all know that generics often file ANDAs so that they can sell drugs nationwide.
This case is an example of a court holding that the plain reading of the relevant laws necessitate a particular result, even if the court recognizes sound policy considerations may marshal against it. In fact, the Federal Circuit acknowledged it was “sympathetic” to policy concerns articulated by Valeant that weighed against the Court’s interpretation of the venue rules. (Slip Op. at 17).
What are those policy concerns? Given that popular drugs often face generic competition from multiple companies, brand companies may be forced to maintain multiple, parallel lawsuits litigating substantially similar issues throughout the country. That is not only inefficient for an overburdened court system, but also fosters the hazard of inconsistent rulings. On the other hand, in our earlier post on this topic, we discussed how the inefficiencies of forcing brands to litigate multiple parallel Hatch-Waxman suits at once may cost more for brands, but it may ironically inure to the benefit of brands. More lawsuits, more risks of overlapping decisions, more venue disputes may cause everyone a lot more headaches, but it may inescapably lead to one simple thing—more delay. And more delay is money in the pocket of the brands, and money out of the pocket for consumers.
Another potential concern with the Court’s ruling is that it creates an opportunity for generics to “game” the system to avoid certain jurisdictions. This concern gives rise to a peculiar irony. The TC Heartland case reached the Supreme Court because technology companies were supposedly tired of being sued in remote districts, such as the Eastern District of Texas, that were purportedly friendly to patent holders. The claim was that these districts lured patent plaintiffs with promises of rocket-dockets and other purportedly “friendly” patent rulings.
But generic pharmaceutical companies are a different type of patent-defendant. Their business model involves and expects to be sued for patent-infringement on a regular basis. The Court’s Valeant decision may therefore motivate generic pharmaceutical companies to take steps to limit the forums where they can be sued. For instance, that may lead generics not to incorporate in traditional States such as Delaware (which can be another basis for venue.) And it may coincide with a rise of perceived “generic-friendly” districts that attempt to lure Hatch-Waxman cases to their courts. And that may itself eventually influence the shape taken by different laws impacting the outcome of pharmaceutical patent cases.
The Federal Circuit’s Valeant decision is an important case that will undoubtedly alter the landscape of pharmaceutical patent litigation within the U.S. There are a lot of policy considerations both for and against the Court’s interpretation of venue for Hatch-Waxman cases. And even if this decision is upheld by the Supreme Court, there is the possibility for Congress to intervene and change the result. What is ultimately at stake, however, is whether this case will expedite lower-cost generic drugs to consumers, who unfortunately, may not have a seat at the table when these important considerations are decided.