Restrictions on Venue in Hatch-Waxman Litigation

Since the enactment of the Hatch-Waxman Act in 1984, courts have held that brand companies can sue generics wherever they plan on making sales, which is everywhere in the U.S. In practice, most suits have been filed in Delaware and New Jersey, with suits against multiple generic companies over the same drug consolidated in one proceeding.

In November 2020, the Federal Circuit upended this settled practice when it issued its opinion in Valeant Pharmaceuticals v. Mylan Pharmaceuticals, No. 19-2402 (Fed. Cir. 2020), holding that venue is not established by contemplated future acts of infringement, but instead on where the submission of the ANDA occurs, reasoning that the technical act of infringement in Hatch-Waxman cases is the submission of the ANDA. On December 7, 2020 Valeant Pharmaceuticals urged the Federal Circuit to rehear its decision en banc arguing that the panel’s opinion “if left untouched, would effect a detrimental and seismic shift in Hatch-Waxman pharmaceutical litigation that will increase uncertainty, delay and costs, all at the expense of judicial economy.”

The Valeant decision is the first time since the U.S. Supreme Court’s 2017 TC Heartland decision that the Federal Circuit has addressed the issue of venue specific to Hatch-Waxman litigation. TC Heartland made it clear that a corporation may be sued “in the state in which it is incorporated and [where] it has a regular and established place of business and an act of infringement has occurred.” TC Heartland, however, was not specific to the Hatch-Waxman context.

Valeant filed its patent infringement lawsuit in the District of New Jersey against three Mylan entities: one with it principal place of business and state of incorporation in West Virginia, one with its principal place of business and state of incorporation in Pennsylvania, and one with its principal place of business and country of incorporation in India. Mylan challenged venue, and the district court granted Mylan’s motion to dismiss based on improper venue, holding that the two places where infringement might have occurred were West Virginia (from which Mylan submitted its ANDA) and Maryland (where the FDA received Mylan’s ANDA).

The Federal Circuit affirmed the district court’s holding with respect to Mylan’s two U.S. entities because neither of the two actions described above took place in New Jersey. The Court held “venue is not proper in all judicial districts where a generic product specified in an ANDA is likely to be distributed,” but rather only “in those districts that are sufficiently related to the ANDA submission—in those districts where acts occurred that would suffice to categorize those taking them as a ‘submitter’ under §271(e).”

With respect to the Mylan entity based in India, the Federal Circuit affirmed that the district court holding that venue was proper because a foreign entity is subject to venue in any judicial district.

The key takeaway from Valeant is that, for purposes of venue, “acts of infringement” cannot be rooted only in future distribution and/or sales of the generic drug. While venue is guaranteed at the generic defendant’s place of incorporation, it remains to be seen how broadly courts will interpret “actions related to the ANDA submission.”

For years, the Districts of Delaware and New Jersey have seen an outsized share of Hatch-Waxman litigation. The Valeant decision may alter this landscape significantly. For generic pharmaceutical companies that are not incorporated in Delaware or New Jersey and do not prepare their ANDAs in Delaware or New Jersey, Valeant provides a new basis for potential venue challenges. Because the Federal Circuit keyed in on Mylan’s ANDA being received by the FDA in Maryland, it also raises the possibility that the District of Maryland may see an increase in Hatch-Waxman cases. While foreign generic pharmaceutical companies may be sued in any judicial district, the decision may lead to future disputes regarding the extent of involvement by the foreign generic company.

Finally, the Federal Circuit was sympathetic to Valeant’s public policy argument based on judicial efficiency, particularly given the frequency in which Hatch-Waxman cases involving multiple defendants are consolidated in one proceeding. However, instead of departing from its strict adherence to the text of the venue statute, the Federal Circuit noted that multi-district litigation (MDL) under 28 U.S.C. §1407 while “cumbersome” was a potential solution to the legitimate efficiency concerns.