New Frontiers In Pharmaceutical Patent Litigation Benjamin Hsing Irene Hudson Wanda French-Brown
Agenda 1 Developments in Hatch-Waxman Post-TC Heartland 2 Inter Partes Review 3 Sovereign Immunity Baker & Hostetler LLP 2
1 HATCH-WAXMAN DISPUTES POST TC Heartland Baker & Hostetler LLP 3
TC Heartland v. Kraft Foods The issue presented was whether the broad residency definition of 1391(c) applies to modify and expand the resides language of 1400(b). Baker & Hostetler LLP 4
28 U.S.C. 1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. Baker & Hostetler LLP 5
Patent Venue -vs- Venue Generally 28 U.S.C. 1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides... 28 U.S.C. 1391(c)(2): Venue Generally an entity... shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court s personal jurisdiction with respect to the civil action in question... Baker & Hostetler LLP 6
TC Heartland v. Kraft Foods Baker & Hostetler LLP 7
Where Do Defendants Reside? 28 U.S.C. 1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. Baker & Hostetler LLP 8
Where Do Defendants Reside? Entity U.S. Corporations Limited Liability Corporations (LLCs) Unincorporated Entities Foreign Corporations Location State where incorporated State where organized Look to the principal place of business* In any district *Sperry Products v. Association of American RR, 132 F.2d 408, 412(2d Cir. 1942) ( For these reasons we think that if a patentee chooses to sue an unincorporated association under the doctrine of United Mine Workers v. Coronado Coal Co., supra, 259 U.S. 344, he must do so either at its principal place of business, or at any of the regular and established places of its business where it may have infringed. ). Baker & Hostetler LLP 9
Where Else Can a Defendant Be Sued? 28 U.S.C. 1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. Baker & Hostetler LLP 10
Committed Acts of Infringement for Hatch-Waxman Litigation Under 271(e)(2), it is an act of infringement to submit an ANDA to the FDA with the intent to market a generic version of an innovator drug before the expiration of patents listed in the Orange Book. The Supreme Court has described 271(e)(2) as creating a highly artificial act of infringement because it permits an innovator drug company to bring suit before the ANDA filer brings its generic product to market. Baker & Hostetler LLP 11
For an Artificial Infringement, Where Does the Act of Infringement Occur? A Retrospective Approach Facts in Hatch-Waxman cases suggest that venue under 1400(b) may be proper in those districts where: 1. The ANDA was prepared; 2. The ANDA was filed with the FDA, which is located in Maryland; 3. The Paragraph-IV notice letter was received; and/or 4. Where the proposed generic drug batch submitted with the ANDA was manufactured. Baker & Hostetler LLP 12
For an Artificial Infringement, Where Does the Act of Infringement Occur? A Prospective Approach A district court may likely look to the future in Hatch-Waxman cases when determining proper venue: 1. Congress deemed the ANDA filing to have a nonspeculative causal connection to the ANDA filer s future infliction of real-world market injury. 2. Upon prevailing on invalidity or noninfringement, an ANDA filer would indubitably distribute and/or sell its proposed generic drug. 3. The Federal Circuit has taken a prospective approach to personal jurisdiction in ANDA cases. Baker & Hostetler LLP 13
Where Does the Act of Infringement Occur?: Judge Stark s Decision Judge Stark s Decision BMS v. Mylan, C.A. No. 17-379-LPS (D. Del. Sept. 11, 2017) [T]he Court concludes that in the context of Hatch-Waxman litigation, the acts of infringement an ANDA filer has committed includes all of the acts that would constitute ordinary patent infringement if, upon FDA approval, the generic drug product is launched into the market. Despite the fact that allegedly-infringing products have yet to be approved and marketed, the patent infringement inquiry concerns the real-world impact and consequences that would flow from the approval of an ANDA, the submission of which is the triggering act that allows for the infringement suit in the first instance. Baker & Hostetler LLP 14
What Is A Regular and Established Place of Business? 28 U.S.C. 1400(b) Any civil action for patent infringement may be brought in the judicial district where the defendant resides or where the defendant has committed acts of infringement and has a regular and established place of business. Baker & Hostetler LLP 15
What Is a Regular and Established Place of Business? Judge Stark s Opinion Simply doing business in a district or being registered to do business in a district is insufficient, without more, is not enough. Simply demonstrating that a business entity has sufficient minimum contacts with a district for purposes of personal jurisdiction does not necessarily mean that the entity has a regular and established place of business in the district. Maintaining a website that allows consumers to purchase a defendant's goods or products by itself is not enough. Simply shipping goods into a district whether to an individual or for distribution by third parties is not enough Baker & Hostetler LLP 16
What Is a Regular and Established Place of Business? Judge Stark s Opinion Mylan is a frequent litigant in federal court in Delaware. In the past ten years, Mylan has appeared in more than 100 cases in the District of Delaware. Mylan's business model is in large part predicated upon participating in a large amount of litigation. It appears that a key to Mylan' s success in the generic drug business is its constant involvement in Hatch-Waxman litigation. These facts must weigh into the assessment of whether Mylan has a continuous and permanent presence, and therefore a regular and established place of business, in Delaware. Judge Stark allowed BMS an opportunity to take discovery, and denied Mylan s motion to dismiss without prejudice to Mylan. Baker & Hostetler LLP 17
In Re Cray Three Part Test 1. There must be a physical place in the district. While the place need not be a fixed physical presence in the sense of a formal office or store, there must still be a physical, geographical location in the district from which the business of the defendant is carried out. In Re Cray, No. 2017-129, 11 (Fed. Cir. Sept. 21, 2017). 2. Must be a regular and established place of business. [O]perates in a steady, uniform, orderly, and methodical manner... sporadic activity cannot create venue. Id. at 11-12. 3. Must be a place of the defendant. It is not enough that the employee does so on his or her own. Id. at 13. Baker & Hostetler LLP 18
In Re Cray s New Patent Venue Test Quickly Spurs Transfers Talsk Research Inc. v. Evernote Corp., No. 16-cv-2167 (N.D. Ill. Sept. 26, 2017) The court held that venue was not proper against California-based Evernote Corp., and transferred the case to N.D. Ca. The Federal Circuit s decision in Cray leaves no room for plaintiff to argue that the handful of non-employee, independent contractors present in this district constitute a regular and established place of business. Evernote does not have the necessary control over community members to say that their physical presence in the district is equivalent to Evernote's presence, and the members activities are not sufficiently stable or established to be a place of business. Symbology Innovations, LLC v. Lego Systems, Inc., No. 2:17-cv-86 (E.D. Va. Sept. 28, 2017) The court held venue was not proper against Connecticut-based Lego Systems Inc. The judge noted that while Lego has three retail stores in the Eastern District of Virginia, those stores do not constitute a regular and established place of business under the Federal Circuit's test because they are not operated by Lego Systems Inc., but by a subsidiary, Lego Brand Retail Inc. Lego Brand Retail's three Lego Store locations cannot be attributed to Lego Systems because formal corporate separateness is maintained... Therefore, Symbology has failed to adequately demonstrate that Lego Systems has a regular and established place of business in this district, and venue does not lie here. Baker & Hostetler LLP 19
Who Has The Burden? Third Circuit Defendant Has The Burden: BMS v. Mylan Pharmaceuticals, Inc., C.A. No. 17-379-LPS (D. Del. Sept. 11, 2017) (Stark) (noting that it is Mylan s burden to show that it does not have a regular and established place of business in Delaware. ). Under Fed. R. Civ. P. 12(b)(3), it is [Defendant s] burden to establish venue is improper. Prowire LLC v. Apple, Inc., No. CV 17-223, 2017 WL 3444689, at *6, n.38 (D. Del. Aug. 9, 2017). Our court of appeals held in a 12(b)(3) motion, the movant has the burden to establish venue is improper. Id. Seventh & Fifth Circuits Plaintiff Has The Burden: When a defendant challenges venue under Rule 12(b)(3), it is the plaintiff's burden to establish that venue is proper. Faur v. Sirius Int'l Ins. Corp., 391 F. Supp. 2d 650, 657 (N.D. Ill. 2005). Once a defendant raises a 12(b)(3) motion to dismiss for improper venue, the burden of sustaining venue lies with the plaintiff. ATEN Int l Co. Ltd. v. Emine Tech. Co., Ltd., 261 F.R.D. 112, 120 (E.D. Tex. 2009). Baker & Hostetler LLP 20
2 Inter Partes Review Update Baker & Hostetler LLP 22
IPR Update i. Will IPRs survive Oil States Energy v. Greene s Energy? ii. Will the PTAB allow amendments? iii. Will the PTAB curtail multiple petitions? Baker & Hostetler LLP 23
Will IPRs Go Away? Baker & Hostetler LLP 24
Supreme Court Grants Cert. in Oil States Energy v. Greene s Energy Whether inter partes review an adversarial process used by the Patent and Trademark Office to analyze the validity of existing patents violates the Constitution by extinguishing private property rights through a non-article III forum without a jury. Baker & Hostetler LLP 25
Procedural Background 2012: Oil States sues Greene Energy in ED Texas for infringement of US Patent No. 6,179,053 2013: Greene files IPR 2015: PTAB invalidates 053 Patent May 2016: Fed. Cir. affirms (Rule 36) July 2016: Motion for rehearing denied June 12, 2017: Sup. Ct. grants cert. August 24, 2017: Petitioner s Brief October 23, 2017: Respondents Briefs November 20, 2017: Reply Brief November 27, 2017: Oral Argument Baker & Hostetler LLP 26
Patents are private property rights. Petitioner s Position McCormick Harvesting Machine Co. v. C. Aultman & Co. (1898): [W]hen a patent has [been granted], [it] is not subject to be revoked or cancelled by the President, or any other officer of the Government. It has become the property of the patentee, and as such is entitled to the same legal protection as other property. The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent. Article III and Seventh Amendment apply. Baker & Hostetler LLP 27
Petitioner s Position (c ntd) IPR scheme violates Seventh Amendment right to a jury trial. In suits at common law, where the value in controversy shall exceed twenty dollars, the right of a trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of common law. Patentees have a right to an Article III forum for invalidation proceedings. The judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish. The judges, both of the supreme and inferior courts, shall hold their offices during good behavior, and shall, at stated times, receive for their services, a compensation, which shall not be diminished during their continuance in office. Baker & Hostetler LLP 28
What About Ex Parte / Inter Partes Reexaminations? Petitioner distinguishes reexaminations as not being adversarial: Ex parte reexaminations: between the patent owner and PTO; no discovery Inter partes reexaminations: limited role for third parties Baker & Hostetler LLP 29
Respondent s Position Patents are public rights because the right is integrally related to particular federal government action Congress may remove from Article III court matters involving public rights Congress may delegate private right dispute to non-article III courts Seventh Amendment only applicable to claims that Congress assigns to Article III court If Congress assigns to Article I court, Seventh Amendment not applicable Baker & Hostetler LLP 30
Respondent s Position (c ntd) Congress may delegate private right dispute to non-article III courts Where Congress has acted for a valid legislative purpose pursuant to its constitutional powers under Article I, it may delegate even a seemingly private right to non-article III courts if the right is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution. In support of its position that it can invalidate patents, PTO points to Murray's Lessee v. Hoboken Land & Improvement Co. (1856), which held that there are exceptions to the general rule that only Article III courts can exercise judicial power, such as when a case involves public rights. Not entitled to jury because remedy for IPR does not include monetary damages, only equitable relief (cancellation) Baker & Hostetler LLP 31
Amendments In The PTAB Baker & Hostetler LLP 32
Amendments Before The PTAB Amendments Have Been Rarely Granted Patentee bears the burden of showing that its proposed amendments would overcome prior art of record, and over prior art not of record but known to the patent owner. Idle Free Systems, Inc. v. Bergstrom, Inc., IPR2012-00027, 2013 WL 5947697 (PTAB June 11, 2013); see also Microsoft Corp. v. Proxyconn, Inc., 789 F.3d 1292 (Fed. Cir. 215); Nike, Inc. v. Adidas AG, 812 F.3d 1353 (Fed. Cir. 2015) Baker & Hostetler LLP 33
In Re Aqua Products Inc. (Oct. 4, 2017) Holding: It is improper for the PTAB to place the burden of persuasion on the Patentee relative to the patentability of new or amended claims. Going forward, this burden of persuasion will rest with Petitioners (as it does for originally challenged claims 35 USC 316(e)) Baker & Hostetler LLP 34
Will The PTAB Curtail Multiple / Serial / Me Too Petitions Baker & Hostetler LLP 35
Multiple / Serial / Me Too Petitions Petitioner can file multiple or serial petitions to cover different set of claims or to present different prior art combinations (get around page or word limitations) Follow-on petitions run the risk of undue inequities and prejudices to patent owners, and petitioner s submission of multiple, staggered petitions constituted an inefficient use of the inter partes review process and the Board s resources. Under 35 U.S.C. 314(a) and 325(d), the PTAB has broad discretion in deciding whether or not to institute an IPR proceeding. Me Too Petitions: Lead Petitioner files a petition and petitioners copy it word for word 36
General Plastic Indus. Co. v. Canon Kabushiki Kaisha Informative Decision (Sept. 6, 2017) U.S. Patent Nos. 9,046,820 and 8,909,094 directed to a toner supply container for an image forming apparatus September 2015: Petitioner filed petitions challenging both patents March 2016: PTAB denied each petition on the merits July 2016, Petitioner filed 5 follow-on petitions against same patents using both new art and arguments Petitions denied based on review of factors articulated in Nvidia Corp. v. Samsung Elec. Co., IPR2016-00134 (May 4, 2016) 37
General Plastic Indus. Co. v. Canon Kabushiki Kaisha Informative Decision (Sept. 6, 2017) Nvidia Corp. v. Samsung Elec. Co. Factors: 1. whether the same petitioner previously filed a petition directed to the same claims of the same patent; 2. whether at time of filing of the first petition the petitioner knew of (or should have known of) the prior art asserted in the second petition; 3. whether at the time of filing of the second petition the petitioner already received the patent owner s preliminary response to the first petition or received the Board s decision on whether to institute review in the first petition; 4. the length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition; 5. whether the petitioner provides adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent; 6. the finite resources of the Board; and 7. requirement under 35 U.S.C. 316(a)(11) to issue a final determination not later than 1 year after date on which the Director notices institution of review. 38
General Plastic Indus. Co. v. Canon Kabushiki Kaisha Informative Decision (Sept. 6, 2017) Board clarified that the standard is not whether the new art should have been known sooner, but rather why petitioner failed to uncover it when the first petition was filed and presumably after a reasonably diligent search was performed Held: new grounds presented in follow-on petitions attempted to cure deficiencies previously identified in the earlier institution denials and that the Petitioner had also enjoyed the opportunity to study the Patent Owner s preliminary responses to the initial petitions; Petitioner used the denials as a roadmap 39
3 SOVEREIGN IMMUNITY Baker & Hostetler LLP 41
Sovereign Immunity Under the Eleventh Amendment The Eleventh Amendment of the United States Constitution provides that the Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State. Supreme Court has interpreted sovereign immunity under the Eleventh Amendment to include immunity in administrative proceedings, depending on the nature of the proceedings. Fed. Mar. Comm n v South Carolina State Ports Auth., 535 U.S. 743, 753 761 (2002) ( FMC ). Federal Circuit has applied FMC to interference proceedings and observed that contested interference proceedings in the PTO bear strong similarities to civil litigation,... and the administrative proceeding can indeed be characterized as a lawsuit Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376, 1383 (Fed. Cir. 2007). Baker & Hostetler LLP 42
Sovereign Immunity Applies to IPRs Covidien v. University of Florida, IPR2016-01274 (Jan. 25, 2017) Eleventh Amendment immunity applies to IPR proceedings. University of Florida is an arm of the State of Florida. PTAB granted the University s motion to dismiss IPRs. Baker & Hostetler LLP 43
Sovereign Immunity Applies to IPRs Neochord, Inc. v. University of Maryland, IPR2016-00208 (May 23, 2017) Although Covidien is not binding precedent, the panel decided to follow Covidien and granted the University s motion to dismiss IPR. University did not waive immunity by participating in IPR up until the Oral Hearing without ever mentioning sovereign immunity. University did not waive immunity by its licensing activity. Harpoon Medical is the exclusive licensee and also a real partyin-interest PTAB cannot proceed without the University, which is an indispensable party University retained rights under the license Baker & Hostetler LLP 44
Indian Tribes Enjoy the Same Immunity as Sovereign Powers American Indian tribes enjoy the same immunity from suit enjoyed by sovereign powers and therefore are subject to suit only where Congress has authorized the suit or the tribe has waived its immunity. Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., 523 U.S. 751, 751 (1998). Baker & Hostetler LLP 45
Allergan Deal Allergan transferred the patents for its dry eye treatment Restasis to the Saint Regis Mohawk tribe. Allergan will pay the tribe $13.75 million upfront with the potential for $15 million in annual royalties. Restasis has sales of about $1.5 billion in 2016. Saint Regis then granted back to Allergan an exclusive license. Saint Regis Mohawk tribe has filed a motion to dismiss pending IPRs on the Restasis patents based on sovereign immunity. Baker & Hostetler LLP 46
Allergan Deal (c ntd) In pending district court case in the Eastern District of Texas, defendants opposed Allergan s motion to join the Saint Regis Mohawk tribe as a coplaintiff. Senior U.S. Circuit Judge William C. Bryson, sitting by designation, ordered the parties to submit briefs outlining why the tribe belongs in the suit, or whether the assignment of the patents to the tribe should be disregarded as a sham. Court asked Allergan to identify what the good and valuable consideration was when assigning the patent to the Saint Regis tribe, including any payments made by the tribe for such considerations. Baker & Hostetler LLP 47
Waiver of Sovereign Immunity Ericsson Inc. v. Regents of the University of Minnesota, IPR2017-01186 PTAB to address whether the University waived sovereign immunity by filing an infringement suit. Baker & Hostetler LLP 48
Waiver of Sovereign Immunity Regents of University of New Mexico v. Knight, 321 F.3d 1111 (Fed. Cir. 2003) Court held that when a state brings suit on a patent claim, it waives sovereign immunity for all compulsory counterclaims to its claim. We thus hold that when a state files suit in federal court to enforce its claims to certain patents, the state shall be considered to have consented to have litigated in the same forum all compulsory counterclaims, i.e., those arising from the same transaction or occurrence that gave rise to the state's asserted claims. Baker & Hostetler LLP 49
Waiver of Sovereign Immunity May Not Extend to Separate Suits Biomedical Patent Management Corp. v. California, Dept. of Health Services, 505 F.3d 1328 (Fed. Cir. 2007) (noting that where a state intervenes in an action and asserts its own declaratory judgment claims it waives sovereign immunity in that suit for a patentee's infringement counterclaims, but that waiver does not necessarily extend to separate suits later filed even if the later suit involves the same subject matter as the earlier suit). A123 Sys., Inc. v. Hydro-Quebec, 626 F.3d 1213 (Fed. Cir. 2010) ( [University s] waiver of Eleventh Amendment immunity in a patent infringement suit in the Northern District of Texas did not result in a waiver of immunity in this separate infringement action. ). Tegic Communications Corp. v. Board of Regents of University of Texas Sys., 458 F.3d 1335 (Fed. Cir. 2006) ( Although here the University obviously made itself a party to the litigation to the full extent required for its complete determination, it did not thereby voluntarily submit itself to a new action brought by a different party in a different state and a different district court. ). Baker & Hostetler LLP 50
Waiver of Sovereign Immunity Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007) A State waives immunity for judicial review of State-initiated interference proceedings We have concluded that when the University initiated and participated in the interference, its participation included the ensuing statutory review procedures; the University cannot invoke Eleventh Amendment immunity, after it prevailed, to shield the agency decision from review. Appellate court is a separate forum. Baker & Hostetler LLP 51
Tribal Waiver of Sovereign Immunity Must Be Unequivocal Florida v. Seminole Tribe of Florida,181 F.3d 1237 (11th Cir. 1999) Waiver of sovereign immunity cannot be implied on the basis of a tribe s actions. C & L Enters. Inc. v. Citizen Band Potawatomi Tribe of Okla., 532 U.S. 411 (2001) To relinquish its immunity, a tribe s waiver must be clear. Pan Am. Co. v. Sycuan Band of Mission Indians, 884 F.2d 416 (9th Cir. 1989) Arbitration clause does not contain that unequivocal expression of tribal consent to suit necessary to effect a waiver of the [tribe s] sovereign immunity. Baker & Hostetler LLP 52
Congress May Abrogate Tribal Sovereign Immunity Congress may abrogate a tribe s immunity from suit by statute. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978). To abrogate a tribe s immunity, Congress must unequivocally express that purpose. C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 U.S. 411, 418 (2001). Senator McCaskill (D-MO) has introduced a bill to abrogate the sovereign immunity of Indian tribes as a defense in IPR proceedings. Baker & Hostetler LLP 53
Unresolved Questions Was the Allergan deal a sham? Can filing of an IPR petition be considered a compulsory counterclaim? Allergan is enforcing the Restasis patents against the IPR petitioners in Eastern District of Texas. IPR petitions were filed after Allergan brought patent infringement suit. IPR may not be instituted more than 1 year after an infringement suit is brought against the petitioner. 35 U.S.C. 315(b). IPR may not be instituted if petitioner filed a civil action challenging validity before filing IPR. 35 U.S.C. 315(a). Has the Tribe implicitly waived sovereign immunity by purchasing patents that it knew were being challenged before a Federal District Court and PTAB? Will Federal Circuit have a chance to weigh in on tribal sovereign immunity? Baker & Hostetler LLP 54
Questions? Baker & Hostetler LLP 55
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