Federal Circuit Upholds Broad Hatch-Waxman Venue Options for Innovator Pharmaceutical Companies

Federal Circuit Upholds Broad Hatch-Waxman Venue Options for Innovator Pharmaceutical Companies

On March 18, 2016, the United States Court of Appeals for the Federal Circuit issued a combined opinion in Acorda Therapeutics Inc. v. Mylan Pharmaceuticals Inc., No. 2015-1456, and AstraZeneca AB v. Mylan Pharmaceuticals Inc., No. 2015-1460, holding that an Abbreviated New Drug Application ("ANDA") filer is subject to specific personal jurisdiction in any state where the filer will engage in post-approval marketing and sales of its ANDA product.

This decision marks the first time the Federal Circuit has addressed the issue of personal jurisdiction in the Hatch-Waxman context since the Supreme Court's 2014 decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014). Daimler held that general jurisdiction over a defendant is limited to those "exceptional" situations where the defendant's contacts are such that it is "at home" in the forum. Daimler was interpreted by some legal commentators as limiting brand-name companies' venue options in bringing Hatch-Waxman suits against generic manufacturers. Acorda suggests that, even after Daimler, personal jurisdiction over ANDA filers in Hatch-Waxman cases may be proper in any jurisdiction in which an innovator company can reasonably allege that the generic manufacturer intends to market and sell its proposed ANDA product.

District Court Proceedings

The opinion addressed separate actions filed in the United States District Court for the District of Delaware against Mylan. These cases related to Mylan's ANDAs seeking approval to market generic versions of the multiple sclerosis drug Ampyra® (sold by Acorda) and the type II diabetes drug Onglyza® (manufactured by AstraZeneca). In both ANDAs, Mylan certified under 21 U.S.C. § 355(j)(2)(A)(vii)(IV) that the patents listed in the Food and Drug Administration's ("FDA") Orange Book for the two innovator products were invalid, unenforceable, and/or would not be infringed by Mylan's proposed generic products ("Paragraph IV certifications").

In both cases, the brand name company filed a patent infringement suit against Mylan in Delaware under 35 U.S.C. § 271(e)(2)(A). Mylan, which is incorporated and has its principal place of business in West Virginia, moved to dismiss both suits, arguing that it was not subject to personal jurisdiction in Delaware. Mylan's motions were denied in each case, with different judges in Delaware reaching opposite conclusions on general jurisdiction but ultimately both holding that Mylan was subject to specific jurisdiction. Specifically, in AstraZeneca, Chief Judge Stark ruled that Mylan's compliance with a Delaware statute requiring appointment of an agent for service of process as a precondition to conducting business in Delaware was not sufficient to establish general jurisdiction. In contrast, in Acorda, Judge Sleet found that Mylan consented to general jurisdiction when it complied with that statute and registered to conduct business in Delaware. Yet in both cases, the court found that Mylan had sufficient contacts with Delaware related to the subject of the cases to allow the court to exercise specific jurisdiction over Mylan.

Both judges certified their decisions for interlocutory appeal. The issues before the Federal Circuit were: (i) whether Mylan consented to general personal jurisdiction in Delaware by registering to conduct business and appointing an agent for service of process in that state; and (ii) whether the act of filing an ANDA application with the FDA—seeking approval to market a generic product throughout the United States—satisfies the "minimum contacts" standard required for a state to exercise specific personal jurisdiction over a defendant.

The Majority Opinion

In an opinion by Judge Taranto, the Federal Circuit affirmed the two decisions below. The Federal Circuit's decision rested on specific personal jurisdiction and did not address the issue of general personal jurisdiction. Recounting the standard set forth by the Supreme Court, the Federal Circuit noted that the exercise of personal jurisdiction over a defendant does not violate Due Process where the defendant has "certain minimum contacts" with the forum such that "maintenance of suit does not offend traditional notions of fair play and substantial justice." Acorda Therapeutics v. Mylan Pharms. Inc., No. 2015-1460, slip op. at 7-8 (Fed. Cir. Mar. 8, 2016) (internal citations omitted). The "minimum contacts" standard, the Federal Circuit stated, is met where the defendant "purposefully direct[s] activities at the forum" and creates a substantial connection with the forum state through its "suit-related conduct." Id. According to the Federal Circuit, Mylan's ANDA filing was such conduct, and the court explained as follows:

Mylan has taken the costly, significant step of applying to the FDA for approval to engage in future activities—including the marketing of its generic drugs— that will be purposefully directed at Delaware (and, it is undisputed, elsewhere). If Mylan had already begun its deliberate marketing of these drugs in Delaware, there is no doubt that it could be sued for infringement in Delaware. Its Delaware sales would be acts committed in the State that are wrongful—if the plaintiffs here are right about infringement and validity—and would concretely injure Acorda and AstraZeneca in the State by displacing some of their Delaware sales and likely lowering the price they could charge there. In our view, the minimum-contacts standard is satisfied by the particular actions Mylan has already taken—its ANDA filings—for the purpose of engaging in that injury-causing and allegedly wrongful marketing conduct in Delaware.

Id. at 8-9 (emphasis added).

ANDA filings, according to the Federal Circuit, constitute "formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs." Id. at 9. The Federal Circuit noted that the "Hatch-Waxman Act recognizes the close connection between an ANDA filing" and the post-approval real-world acts and harm to "patent-owning brand-name manufacturers." Id. Further, the Federal Circuit pointed to the "economic realities of preparing an ANDA" in support of its reasoning, such as the $76,030 current filing fee and the costly research required to show bioequivalence to the brand-name drug. Id. at 11. Therefore, the Federal Circuit concluded, "Mylan's ANDA filings, including its certifications regarding the patents at issue here, are thus suit-related, and they have a substantial connection with Delaware because they reliably, non-speculatively predict Delaware activities by Mylan." Id. at 13.

The Federal Circuit refused to accept Mylan's argument that a "rigid past/future dividing line governs the minimum contacts standard," or that a state is forbidden from exercising its judicial power until a defendant's planned conduct actually occurs. Id. Such a rule, reasoned the Federal Circuit, "would run counter to the legal tradition of injunctive actions to prevent a defendant's planned, non-speculative harmful conduct before it occurs." Id.

According to the Federal Circuit, other factors identified by the Supreme Court—such as burden on the defendant, the forum state's interest in adjudicating the dispute, and the plaintiff's interest in obtaining convenient and effective relief—do not render exercising jurisdiction unreasonable:

The burden on Mylan will be at most modest, as Mylan, a large generic manufacturer, has litigated many ANDA lawsuits in Delaware, including some that it initiated. Delaware has an interest in providing a forum to resolve the disputes before us because they involve the pricing and sale of products in Delaware and harms to firms doing business in Delaware, some of them incorporated or with principal places of business in Delaware. And upholding personal jurisdiction will serve the interests of the plaintiffs and the judicial system in efficient resolution of litigation, because multiple lawsuits against other generic manufacturers on the same patents are pending in Delaware. Indeed, Mylan sent its required notice to Acorda after those actions had already begun. In these cases, there is no substantial argument that considerations of unfairness override the minimum-contacts basis for Delaware's exercise of specific personal jurisdiction over Mylan.


Judge O'Malley's Concurring Opinion

Judge O'Malley concurred in the judgment, but wrote separately that the Federal Circuit should reach the question of general jurisdiction. See Acorda Therapeutics v. Mylan Pharms. Inc., No. 2015-1460 (Fed. Cir. Mar. 8, 2016) (O'Malley, J., concurring). Judge O'Malley would have held that compliance with a state statute requiring registration and appointment of an in-state agent for service of process in order to conduct business constitutes express consent to general personal jurisdiction. "The relevant inquiry is not whether Mylan voluntarily consented to jurisdiction in Delaware, but whether it voluntarily elected to do business in Delaware and to register and elect an agent for service of process in that state. It undoubtedly did." Id. at 11. The Judge observed that Daimler did not change the law on the issue of consent to jurisdiction. Id. at 10.

As to specific personal jurisdiction, Judge O'Malley noted that both AstraZeneca and Acorda are corporations organized under the laws of the State of Delaware. Thus, Mylan's filing of its Paragraph IV certifications were not random acts but rather were "calculated and directed to cause harm to the intellectual property rights of a known party with a known location," and triggered "an obligation [for the innovator companies] to quickly file an expensive 'infringement' action." Id. at 16. The Judge reasoned that "the harm is targeted only to these Delaware companies, occurs only in Delaware, and is only triggered by the filing of an ANDA," which therefore satisfies the minimum-contacts requirement. Id. at 16-17.

Impact of the Decision

The Federal Circuit's decision appears to give brand-name companies wide latitude to bring suit under the Hatch-Waxman Act anywhere they can reasonably allege that an ANDA filer plans on marketing and selling its proposed drugs. It also potentially reduces legal costs and fees by eliminating the need for protective suits to counter jurisdictional challenges. It remains to be seen whether courts will interpret this decision as providing for nationwide jurisdiction in Hatch-Waxman cases, or whether additional factors identified by the majority—such as burden on the defendant, the forum state's interest in adjudicating the dispute, or the interest of the plaintiff and the judicial system in efficient resolution of litigation—might alter the outcome in some cases. Further, because Mylan retains the right to seek rehearing en banc or certiorari to the Supreme Court, this opinion may not be the final word on this important jurisdictional decision in Hatch-Waxman cases.

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