Jurisdiction In Hatch-Waxman Actions Against Foreign Entities

Jurisdiction In Hatch-Waxman Actions Against Foreign Entities Law360, New York (October 19, 2015, 10:36 AM ET) - The 2014 U.S. Supreme Court decision in Daimler AG v. Bauman[1] has increased challenges for establishing personal jurisdiction in Hatch-Waxman infringement actions against foreign entities. Daimler makes it significantly more difficult to establish general jurisdiction over foreign entities lacking a place of business in the United States. In addition, the implications of Daimler call into question the viability of consent jurisdiction based on a foreign entity s compliance with state business statutes requiring the designation of a registered agent within the state for service. Adding to the problem, the proper location of specific jurisdiction based on the artificial act of infringement under 35 U.S.C. 271(e)(2) has been (and remains) far from clear. As discussed here, however, in the face of shrinking and uncertain jurisdictional options, a reliable hook remains for Hatch- Waxman actions against foreign entities. In Daimler, the Supreme Court explained that general jurisdiction requires more than continuous and systematic contacts: The inquiry... is not whether a foreign corporation s in-forum contacts can be said to be in some sense continuous and systematic, it is whether that corporation s affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum state. [2] The court identified only two places that satisfy this requirement: (1) where a defendant is incorporated or (2) where a defendant has its principle place of business.[3] This articulation of general jurisdiction poses increased challenges in actions against foreign abbreviated new drug application filers. By definition, foreign filers do not have a principle place of business in the United States and are not incorporated in the United States. In addition, they often do not have sufficient continuous presence in any one state sufficient to render the state a de facto principle place of business. As a result, there is often no reliable hook for general jurisdiction over such entities under the Daimler framework.[4] Daimler also has implications with respect to certain types of consent jurisdiction. Consent jurisdiction has been found where a defendant has registered to do business in the state and designated an agent for service of process. By virtue of such registration, many courts have held that the defendant has consented to general jurisdiction in the state i.e., it has availed itself of the forum.[5] Thus, if the ANDA filer is registered to do business in certain states, courts have found that registration constitutes consent to be sued in that state, sufficient to establish personal jurisdiction.[6] However, other courts have ruled that certain general business statutes do not confer general jurisdiction, leaving the issue unsettled.[7] After Daimler, the viability of consent jurisdiction has been further called into question. In AstraZeneca AB v. Mylan Pharm. Inc., Judge Gregory M. Sleet in the District of Delaware rejected AstraZeneca s argument that Mylan consented to be subject to Delaware s general jurisdiction by registering to do business in the state and by appointing a registered agent to accept service of process.[8] Judge Sleet reasoned that Daimler does weigh on this issue. Both consent and minimum contacts... are rooted in due process. Just as minimum contacts must be present so as not to offend traditional notions of fair play and substantial justice, the defendant s alleged consent to jurisdiction must do the same. [9] Judge Sleet determined that for the same reasons the the Supreme Court [in Daimler] rejected the idea that a company could be haled into court merely for doing business in a state, consent through general business statutes must also be rejected as a basis for general jurisdiction.[10] But, two months later, the same court, with Judge Stark presiding, upheld consent jurisdiction by the same party Mylan.[11] Both cases are on appeal,[12] with the parties and amici weighing in on whether this type of consent jurisdiction survives Daimler. The Federal Circuit has yet to address

consent jurisdiction either before or after Daimler but will hear oral argument for the duo of cases in early 2016.[13] Given the uncertainty surrounding consent jurisdiction,[14] and the severe repercussions of a NDA holder suing in the wrong place potential loss of the 30-month stay[15] relying strictly on consent jurisdiction comes with significant risks pending a more definitive ruling from the courts. Specific jurisdiction[16] in the context of Hatch-Waxman infringement actions provides no greater clarity. As the Supreme Court acknowledged, 271(e)(2) creates a highly artificial act of infringement.[17] This creates a dilemma: The injury is abstract, making it difficult to point to a location out of which the injury arises for jurisdictional purposes. At the same time, defending against an infringement lawsuit is an inherent and expected part of the ANDA filer s business. To put it simply: A lawsuit is often inevitable, but it is not clear where it should be held. [18] In Zeneca Ltd. v. Mylan Pharmaceuticals Inc., the Federal Circuit held that the act of filing the ANDA with the U.S. Food and Drug Administration in Maryland does not create personal jurisdiction there.[19] With that basis ruled out, district courts have relied on a variety of other actions related to the ANDA to find specific jurisdiction each potentially subject to criticism. For example, several courts have held that specific jurisdiction exists where the ANDA was prepared.[20] But, especially given the short 45-day window to file suit,[21] it can be very difficult for NDA holders to do sufficient diligence to definitively determine where the ANDA was prepared. Compounding the problem, foreign ANDA filers may prepare their ANDAs abroad. Moreover, it is not clear whether the harm created by the filing of the ANDA necessarily stems from its preparation.[22] Other courts have held that personal jurisdiction exists in the state to which the Paragraph IV notice letter is sent.[23] But, this necessarily places the focus of the jurisdictional inquiry on the location of the plaintiff, not defendant. The Supreme Court recently warned that the focus must remain on defendants, explaining: The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant s conduct connects him to the forum in a meaningful way. [24] Whether the location of the ANDA preparation or location of the Paragraph IV recipient are viable bases for specific jurisdiction are issues in the Acorda and AstraZeneca appeals currently pending before the Federal Circuit. Thus, there is at present considerable uncertainty as to whether these factors can support specific jurisdiction. In contrast to the shrinking and uncertain jurisdictional options, there remains at least one sound basis for jurisdiction in actions against a foreign ANDA filer. The FDA regulations for ANDAs require: The applicant, or the applicant s attorney, agent, or other authorized official shall sign the application. If the person signing the application does not reside or have a place of business within the United States, the application is required to contain the name and address of, and be countersigned by, an attorney, agent, or other authorized official who resides or maintains a place of business within the United States.[25] Similarly the regulations governing the content of the Paragraph IV notice require: If the applicant does not reside or have a place of business in the United States, the name and address of an agent in the United States authorized to accept service of process for the applicant. [26] Thus, for every ANDA filed by a foreign company, there will be at least one designated agent with a place of business in the United States.

Several courts that have considered this regulation have held that the agent co-signing an application qualifies as a submitter for purposes of liability and therefore, there is personal jurisdiction for purposes of the suit where the co-signor is located in the United States. For example, the District of Delaware explained: [Congress s] goals are furthered by treating a whollyowned subsidiary of a foreign ANDA applicant, which signs an ANDA as the agent of its parent-applicant, and which intends to benefit directly if the ANDA is approved by participating in the manufacture, importation, distribution, and/or sale of the generic drug as subject to suit under 271(e) as one who has submitted an ANDA. [27] The Eastern District of Virginia has similarly held that this Court does not think serving as [the Paragraph IV designated] agent who verifies the applicant s identity before the FDA is a meaningless role... [and there is] no support for its assertion that a United States agent filing on behalf of a foreign company is nothing more than a mailbox. [28] Rather, through its designation as an agent, role in the application, and position as a subsidiary, it should be treated as a submitter and liable for infringement.[29] The District of Maryland has echoed the Eastern District of Virginia in finding that a co-signor is a submitter, and thus not only shares liability for infringement but provides a basis for personal jurisdiction over the cosigner and the foreign ANDA filer.[30] Indeed, if the foreign ANDA holder decides to designate two agents located in different states in its ANDA application and then in its Paragraph IV notice, the regulations can provide for up to two potential locations for suit.[31] The FDA regulations requiring the designation of an agent located in the United States are not unique. For example, 35 U.S.C. 293 contains a similar provision in the context of foreign patent holders; it allows foreign patent holders to designate a U.S. agent for purposes of litigation involving the patent.[32] If the foreign patent holder does not designate an agent, there is personal jurisdiction by default in the Eastern District of Virginia.[33] As courts have reasoned in analyzing personal jurisdiction under 293, by filing for a patent a party purposefully avails itself of the benefits and protections this country affords and therefore, it is fair and reasonable to require such a party to respond to suit brought in the designated location.[34] A similar rationale applies here in the context of ANDAs filed in the FDA by foreign entities. In the aftermath of Daimler and the state of flux with respect to consent jurisdiction and ANDA activitybased specific jurisdiction, the FDA requirement for designation of an agent in the United States (in the ANDA and Paragraph IV Notice) will remain a significant hook in the quest for establishing a reliable basis for personal jurisdiction in Hatch-Waxman patent litigation. Thus, it is important for any NDA holder counting down the 45-day clock to file suit to ensure that it obtains a copy of the ANDA filed by a foreign entity in order to determine the entity that signed and thus where at least one possible forum lies. By Paul Zegger and Anna Weinberg, Sidley Austin LLP Paul Zegger is a partner and Anna Weinberg is an associate in Sidley Austin's Washington, D.C., office. The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 134 S. Ct. 746, 760-62 (2014). [2] Id. at 761. [3] Id. at 761-62. The Court did not foreclose the possibility that in an exceptional case, a corporation s operations in a forum other than its formal place of incorporation or principle place of business may be so substantial and of such a nature as to render the corporation at home in that state. Id. at 761 n.19 (citations omitted). [4] Prior to Daimler, a party could rely on the broad, permissive scope of general jurisdiction to assert jurisdiction over ANDA applicants based on certain contacts with the district, such as sales and distribution in the forum, development and testing of drugs in the district, registration to do business or licenses held in the forum, prior litigation brought by the party in the forum, or even a website accessible from the forum to suffice for purposes of general jurisdiction. See, e.g., Pfizer Inc. v. Apotex, Inc., No. 08-cv-00948-LDD, 2009 WL 2843288, at *3 n.5 (D. Del. Aug. 13, 2009); Pfizer Inc. v. Synthon Holdings, B.V., 386 F. Supp. 2d 666, 674-75 (M.D.N.C. 2005); see also Intendis, Inc. v. River s Edge Pharm., LLC, No. 11-2838 (FSH)(PS), 2011 WL 5513195, at *4 (D.N.J. Nov. 10, 2011). [5] See Pennsylvania Fire Ins. Co. v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95 (1917) (registration under state business statutes is a voluntary act that leaves no doubt of the jurisdiction of the state court over a foreign corporation); see also Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxite de Guinee, 456 U.S. 694, 704 (1982) remanded and rev d on other grounds, 724 F.2d 369 (3d Cir. 1983) ( voluntary use of certain state procedures constitutes consent to jurisdiction). [6] See, e.g., Acorda Therapeutics, Inc. v. Mylan Pharm., 78 F. Supp. 3d 572 (D. Del. 2015); Forest Labs., Inc. v. Amneal Pharm. LLC, No. 14-508-LPS, 2015 WL 880599, at *10 (D. Del. Feb. 26, 2015) report and recommendation adopted, 2015 WL 1467321 (D. Del. Mar. 30, 2015); Novartis Pharm. Corp. v. Mylan Inc., No. 14-777-RGA, 2015 WL 1246285 (D. Del. Mar. 16, 2015) Otsuka Pharma Co., Ltd. v. Mylan, Inc., -- F. Supp. 3d, No. 14-4508 (JBS/KMW), 2015 WL 1305764, at *8-12 (D. N.J. 2015); Senju Pharm Co. v. Metrics, Inc. et al, -- F. Supp. 3d. --, 2015 WL 1472123, at *5-8 (D.N.J. 2015). [7] E.g., Wenche Siemer v. Learjet Acquisition Corp., 966 F.2d 179, 183 (5th Cir. 1992) (Texas); Smith v. Lloyd s of London, 568 F.2d 1115, 1118 & n.7 (5th Cir. 1978) (Georgia): Samuelson v. Honeywell, 863 F. Supp. 1503, 1507 (E.D. Okl 1994) (Oklahoma). [8] AstraZeneca AB v. Mylan Pharm., Inc., 72 F. Supp. 3d 549 (D. Del. 2014). [9] Id. at 556. [10] Id. [11] Acorda, 78 F. Supp. 3d at 583-592. [12] Appeal Nos. 15-1456 (Acorda) and 15-1460 (AstraZeneca). [13] Briefing is complete, but parties have submitted scheduling conflicts covering the majority of the November and December argument schedule.

[14] There is an apparent circuit split among the other circuits that have considered this issue (prior to Daimler). Compare Bane v. Netlink, Inc., 925 F.2d 637, 640 (3d Cir. 1991) ( We need not decide whether authorization to do business in Pennsylvania is a continuous and systematic contact with the Commonwealth... because such registration by a foreign corporation carries with it consent to be sued in Pennsylvania courts. ), and Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196 (8th Cir. 1990) ( We conclude that appointment of agent for service of process under [the Minnesota statute] gives consent to the jurisdiction of Minnesota courts for any cause of action... ), and Holloway v. Wright & Morrissey, Inc., 739 F.2d 695, 697 (1st Cir. 1984), with Ratliff v. Cooper Labs., Inc., 444 F.2d 745 748 (4th Cir. 1971) ( The principles of due process require firmer foundation than mere compliance with state domestication statutes. ), and Wilson v. Humphreys (Cayman) Ltd., 916, F.2d 1239, 1245 (7th Cir. 1990). [15] See 21 U.S.C. 355(j)(5)(B)(iii). [16] Specific jurisdiction exists if the claims arise from the defendant s particular contacts in the state related to the cause of action. See, e.g., Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1017 (Fed. Cir. 2009). In the patent context, specific jurisdiction often exists by virtue of licenses, cease and desist letters, sales, and internet based commerce related to the asserted patents or allegedly infringing products. [17] Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 678 (1990). [18] AstraZeneca, 72 F. Supp. 3d at 558. [19] Zeneca Ltd. v. Mylan Pharm., Inc., 173 F.3d 829, 883-84 (Fed. Cir. 1999). That ruling is not likely to be revisited. Although the panel disagreed on the legal rationale, the holding was unanimous. No doubt, a reluctance to inundate Maryland with Hatch-Waxman infringement actions played a role as well. [20] See, e.g., Pfizer Inc. v. Synthon Holding, B.V., 386 F. Supp. 2d 666, 675 76 (M.D.N.C. 2005) (finding specific jurisdiction existed because the preparation of the ANDA... was conducted primarily in North Carolina and rejecting argument that such activities should not be considered for jurisdictional purposes because the preparation of an ANDA is not considered infringement under 35 U.S.C. 271(e)); Intendis, Inc. v. River s Edge Pharm., LLC, No. 11-2838 (FSH)(PS) 2011 WL 5513195, at *3-*4 (D.N.J. Nov. 10, 2011). [21] See 21 U.S.C. 355(j)(5)(B)(iii). [22] It is similarly unclear whether the harm created by filing the ANDA can be imputed onto speculative future sales or production in the forum, which gives rise to a separate (but not yet ripe) basis for liability. Cf. Allergan, Inc. v. Actavis, Inc., Nos. 2:14-cv-638, 2:14-cv-188, 2014 WL 7336692, *6-7 (E.D. Tex. Dec. 23, 2014) (considering ANDA filer s anticipated sales in forum); Intendis, 2011 WL 5513195 at 4. [23] See, e.g., Eli Lilly & Co. v. Mylan Pharm., Inc., -- F.3d --, 2015 WL 1125032, at *6 (D. Ind. Mar. 12, 2015); AstraZeneca, 2014 WL 5778016 at *7. [24] Walden v. Fiore, 134 S. Ct. 1115, 1125 (2014). For similar reasons, it may be improper to rely on the plaintiffs injury in a state (resulting through the marketing of a generic drug), or plaintiffs incorporation

in a state as a basis for specific jurisdiction. Cf. Allergan, 2014 WL 7336692, at *6 (looking at NDA filer s contacts with state and distinguishing Walden); Acorda, 78 F. Supp. 3d at 595-96. [25] 21 C.F.R. 314.50(a)(5) (emphases added). [26] 21 C.F.R. 314.52(c)(7). [27] In re Rosuvastatin Calcium Patent Litig., Nos. 07-805-JJF-LPS, 07-806-JJF-LPS, 07-807-JJF-LPS, 07-808-JJF-LPS, 07-809-JJF-LPS, 07-810-JJF-LPS, 07-811-JJF-LPS, 08-359-JJF-LPS, 08-426-JJF-LPS, 2008 WL 5046424, at *6, *10 (D. Del. Nov. 24, 2008) report and rec. adopted, 2009 WL 87409 (D. Del. 2009). [28] Aventis Pharma Deutschland GMBH v. Lupin Ltd., 403 F. Supp. 2d 484, 493-94 (E.D.Va.2005), rev d on other grounds, 499 F.3d 1293 (Fed. Cir. 2007). [29] Id. at 493. [30] Wyeth v. Lupin Ltd., 505 F. Supp. 2d 303, 306-07 (D. Md. 2007) (agreeing with Aventis to hold that Lupin Pharma was liable for infringement resulting from the Paragraph IV application and explaining when a wholly-owned U.S. subsidiary of a foreign corporation exists to distribute foreign-produced generic drugs in the U.S. and is actively involved in the ANDA process, the subsidiary also submits an ANDA application. ) [31] Id. at 490 (finding jurisdiction existed in Maryland based on defendant s designated agent in the application but that jurisdiction also existed in Virginia based on the designated agent in the Paragraph IV Notice). [32] See 35 U.S.C. 293 ( Every patentee not residing in the United States may file in the [PTO] a written designation stating the name and address of a person residing within the United States on whom may be served process or notice of proceedings affecting the patent or rights thereunder. ). [33] Previously, the District Court for the District of Columbia was designated the court of last resort, but the AIA changed the location to the Eastern District of Virginia. [34] See Nat l Patent Dev. Corp. v. T.J. Smith & Nephew Ltd., 877 F.2d 1003, 1009-10 (D.C. Cir. 1989) (Ginsburg, J.). All Content 2003-2015, Portfolio Media, Inc.