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Galderma Laboratories L.P. v. Teva Pharmaceuticals USA, Inc.

United States District Court, N.D. Texas, Dallas Division

November 17, 2017

GALDERMA LABORATORIES, L.P., GALDERMA S.A., and NESTLÉ SKIN HEALTH S.A., Plaintiffs,
v.
TEVA PHARMACEUTICALS USA, INC. and TEVA PHARMACEUTICALS INDUSTRIES LTD., Defendants.

          MEMORANDUM OPINION AND ORDER

          BARBARA M.G. LYNN CHIEF JUDGE

         Before the Court are (1) a Rule 12(b)(3) motion to dismiss for improper venue [ECF #21], filed by Defendant Teva Pharmaceuticals USA, Inc. (“Teva USA”) [ECF #21]; and (2) a Rule 12(b)(6) motion to dismiss for failure to state a claim [ECF #25], filed by Defendant Teva Pharmaceutical Industries Ltd. (“Teva Israel”). For the following reasons, both Motions are GRANTED.

         Background

         Plaintiffs Galderma Laboratories, L.P., Galderma S.A., and Nestlé Skin Health S.A. bring this civil action under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), asserting infringement of U.S. Patent Nos. 8, 815, 816 (the “‘816 Patent”); 9, 089, 587 (the “‘587 Patent”); 9, 233, 117 (“the “‘117 Patent”); 9, 233, 118 (the “‘118 Patent”); and U.S. Patent Nos. 8, 362, 069 (the “‘069 Patent”). The patents-in-suit relate to compositions, methods, and regimens for the treatment of rosacea, using ivermectin, an anti parasitic medication used to treat infections caused by roundworms, threadworms, and other parasites.

         The patents-in-suit are listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”) as covering Soolantra® (ivermectin) Cream 1% (“Soolantra®”), a topical prescription drug that contains ivermectin for the treatment of inflammatory lesions of rosacea. Plaintiff Galderma Laboratories, L.P. is the owner and exclusive beneficial holder of the rights to market Soolantra® under the FDA approval of New Drug Application (“NDA”) No. 206255, approved December 19, 2014. When a party files an NDA, the FDA requires the applicant to submit certain information regarding any patent that claims the drug, or a method of using the drug, that is the subject of the NDA. See 21 C.F.R. §314.53. Upon approval of the NDA, the FDA lists the drug in the Orange Book, along with all official and proprietary names of the drug; and, when the NDA holder submits patent information for the drug in accordance with 21 C.F.R. § 314.53, the patent information is also included in the Orange Book.

         A generic drug manufacturer may obtain FDA approval of a generic drug through the Abbreviated New Drug Application (“ANDA”) process, if the generic drug is a bioequivalent of a drug previously granted NDA approval. The ANDA process permits a generic drug manufacturer to bypass the costly clinical trials and lengthy delays associated with the NDA process. As part of the ANDA process, the applicant must make a patent certification with respect to each patent that claims the listed drug or a use of such drug for which the applicant is seeking approval. See 21 C.F.R. §314.94(a)(12)(i)(A). Specifically, with respect to each patent, the ANDA applicant must certify that:

(1) the NDA holder submitted no patent to the FDA; or
(2) any patent submitted has expired; or
(3) the date the applicable patent expires; or
(4) that the patent is invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the drug product for which the abbreviated application is submitted.

See 21 C.F.R. §314.94(a)(12)(i)(A); 21 U.S.C. §355(j)(2)(A)(I)-(IV). If the ANDA applicant certifies that a patent is invalid, unenforceable, or will not be infringed (a “paragraph IV certification”), it must notify the NDA holder of its assertion. 21 C.F.R. §314.95. The NDA holder then has 45 days to file suit against the ANDA applicant for patent infringement. 35 U.S.C. §271(e)(2)(A).

         Generally, patent infringement occurs when an infringer makes, uses, offers for sale, sells, or imports an invention into the United States. Under Section 271(e)(2)(A) of the Hatch-Waxman Act, however, the submission of an ANDA application with a paragraph IV certification constitutes an artificial act of infringement, which can form the basis of a claim for injunctive relief to prevent the approval, sale, or use of the generic drug until after the NDA holder's patent expires. Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 566 U.S. 399, 404-405 (2012) (“The patent statute treats [the filing of a paragraph IV certification] as itself an act of infringement, which gives the brand an immediate right to sue.”). An NDA holder's timely-filed lawsuit automatically stays the ANDA process for a period of thirty months. See 21 C.F.R. §314.107(b)(3)(i)(A). If the NDA holder fails to bring suit within 45 days, the ANDA applicant may file a declaratory judgment action to adjudicate its paragraph IV challenge. See 21 C.F.R. §355(j)(5)(C)(i)(II).

         In this lawsuit, Plaintiffs allege that Teva USA submitted ANDA No. 210019 to the FDA seeking, approval to engage in the commercial manufacture, use, and sale of a generic ivermectin cream 1% prior to the expiration of the patents-in-suit. Plaintiffs seek declaratory relief that Defendants have and will infringe the patents-in-suit by filing the ANDA and by making or selling their accused generic creams. Plaintiffs also seek an order that the effective date of any FDA approval of the ANDA shall not be earlier than the expiration of the patents-in-suit, and other injunctive relief. Defendants generally contend the claims of the patents-in-suit are invalid, unenforceable, and/or will not be infringed by the commercial manufacture, use, offer for sale, sale, or importation of their accused generic ivermectin creams.

         Teva USA has filed a motion to dismiss under Rule 12(b)(3) [ECF #21], arguing venue is not proper in this district under the patent venue statute, because Teva USA (1) is incorporated in Delaware, (2) has not committed any acts of infringement in the Northern District of Texas, and (3) does not maintain a regular and established place of business in this district.[1] Teva Israel has filed a Rule 12(b)(6) motion to dismiss on the ground that Plaintiffs' First Amended Complaint (“FAC”), which is the live pleading in this action, fails to plead sufficient facts to state a plausible case that Teva Israel is responsible for the alleged infringement, because the only alleged act of infringement is the submission of the ANDA, and Teva Israel had no role in submitting the ANDA.

         With respect to Teva USA's Rule 12(b)(3) motion, the Federal Circuit issued a precedential opinion on the patent venue statute, In re Cray, Inc., 871 F.3d 1355 (Fed. Cir. 2017), after the venue motion was fully-briefed. Because the Cray holding clarifies the venue analysis, which is particularly fact-specific, the Court allowed Plaintiffs to conduct limited venue-related discovery. Both parties filed additional evidence on the venue issue, and the Court held oral argument on Defendants' motions on November 6, 2017. The issues have been fully briefed and argued, and the motions are ripe for determination.

         Rule 12(b)(3) Motion to Dismiss for Improper Venue

         Legal Standards

         Teva USA brings its motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3). Courts are divided on which party bears the burden of proof on a motion to dismiss for improper venue. The Fifth Circuit has not ruled on which party bears the burden on a Rule 12(b)(3) motion. However, most district courts within this circuit have imposed the burden of proving that venue is proper on the plaintiff once a defendant has objected to the plaintiff's chosen forum. See, e.g., Broadway Nat'l Bank v. Plano Encryption Techns., LLC, 173 F.Supp.3d 469, 473 & n.2 (W.D. Tex. 2016); Graham v. Dyncorp Intern., Inc., 973 F.Supp.2d 698, 700 (S.D. Tex. 2013); Asevedo v. NBC Universal Media, LLC, 921 F.Supp.2d 573, 589 (E.D. La 2013); Praetorian Specialty Ins. Co. v. Auguillard Const. Co., Inc., 829 F.Supp. 2d. 456, 470 (W.D. La. 2010); EnviroGLAS Products, Inc. v. EnviroGLAS Products, LLC, 705 F.Supp. 2d. 560, 566 (N.D. Tex. 2010); ATEN Intern. Co. Ltd. v. Emine Techn. Co., Ltd., 261 F.R.D. 112, 120 (E.D. Tex. 2009). This Court, in particular, has consistently held that the plaintiff bears the burden of sustaining venue in the district in which the suit was brought. See Nuttall v. Juarez, 984 F.Supp.2d 637, 642 & n.3 (N.D. Tex. 2013) (Lynn, J.); Emelike v. L-3 Communications Corp., 2013 WL 1890289, at *1 (N.D. Tex. May 7, 2013) (Lynn, J.); Tracfone Wireless, Inc. v. Stone, 2008 WL 648942, at *3 (N.D. Tex. Feb. 26, 2008) (Lynn, J.); Nayani v. Horseshoe Entm't, 2007 WL 1062561, at *2 (N.D. Tex. Apr. 10, 2007) (Lynn, J.).

         In ruling on Teva USA's Rule 12(b)(3) motion, the Court initially accepts as true all of the well-pleaded allegations in the FAC and resolves any factual conflicts in Plaintiffs' favor. Nuttall, 984 F.Supp.2d at 642 (citing Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 F. App'x 612, 615 (5th Cir. 2007)). However, the Court may consider evidence in the record beyond the facts alleged in the FAC and its attachments, including affidavits or evidence submitted by Teva USA in support of its motion to dismiss, or by Plaintiffs in response to the motion. Ginter ex rel. Ballard v. Belcher, Prendergast & Laporte, 536 F.3d 439, 449 (5th Cir. 2008). Where the defendant submits affidavits or evidence controverting specific facts alleged in the complaint, the Court is no longer required to accept those controverted facts as true; rather, the Court may make factual findings in the context of a Rule 12(b)(3) venue challenge based upon an evidentiary hearing. See id. (citing Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138-40 (9th Cir. 2004) (holding that affidavits and other evidence submitted in response to a Rule 12(b)(3) motion are viewed in the light most favorable to the non-movant only in the absence of factual findings made by the district court based on an evidentiary hearing); see also Kranos IP Corp. v. Riddell, Inc., 2017 WL 3704762, at *2 (E.D. Tex. Aug. 8, 2017) (observing that the court assumes venue allegations are true only to the extent such facts are not contradicted by other evidence). In this case, the Court held an evidentiary hearing on November 6, 2017, and both sides submitted evidence in support of their venue arguments. As set forth herein, the Court made factual findings with respect to certain venue-related allegations, but only to the extent the allegations were contradicted by the evidence in the record.

         If venue is improper, the Court has broad discretion to dismiss the case or, in the interest of justice, transfer the case to any district where venue is proper. 28 U.S.C. § 1406(a); Caldwell v. Palmetto State Savs. Bank of S.C., 811 F.2d 916, 919 (5th Cir. 1987).

         Analysis

         Venue in a patent infringement action is governed by a special patent venue statute, which provides that a patent infringement case may be brought in the judicial district where (1) the defendant resides, or (2) where the defendant has committed acts of infringement and has a regular and established place of business. 28 U.S.C. §1400(b). The Supreme Court recently clarified that, for purposes of the patent venue statute, a domestic corporation “resides” only in its state of incorporation. TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1514, 1519 (2017). Because Teva USA is a Delaware corporation, venue is proper in this district only if Teva USA (a) has committed acts of infringement in this district and (b) has a regular and established place of business in this district. 28 U.S.C. §1400(b).

         Acts of Infringement

         Teva USA contends that venue is improper in the Northern District of Texas because the alleged act of infringement-the ANDA submission-did not occur in this district. Rather, the ANDA was prepared in New Jersey at Teva USA's offices and electronically submitted in Maryland at the FDA. Def. App., Jungreis Decl. at 2, ¶8. Plaintiffs respond that venue is proper in this district because, under the Hatch-Waxman Act, an act of infringement also occurs wherever an ANDA filer intends to market the accused product, and in this case, Defendants allegedly intend to market the accused generic drug in the Northern District of Texas. Plaintiffs further contend that Teva USA committed an act of infringement in this district when it sent the paragraph IV certification to Plaintiffs, who are located in the district.

         It is undisputed that, under the Hatch-Waxman Act, filing an ANDA containing a Paragraph IV certification, such as Teva USA did with respect to Soolantra®, constitutes an act of infringement. 35 U.S.C. § 271(e)(2) (“It shall be an act of infringement to submit an [ANDA] for a drug claimed in a patent … if the purpose of such a submission is to obtain approval … to engage in the commercial manufacture, use, or sale of a drug … claimed in a patent … before the expiration of such patent.”). It is an open question, however, as to whether an act of infringement also occurs wherever an ANDA filer intends to market the accused product. The only court decision directly addressing the issue is the District of Delaware's recent opinion in Bristol-Myers Squibb Company v. Mylan Pharmaceuticals Inc., which held:

an applicant's submission of an ANDA, in conjunction with other acts the ANDA applicant non-speculatively intends to take if its ANDA receives final FDA approval, plus steps already taken by the applicant indicating its intent to market the ANDA product in [a particular] District, must all be considered for venue purposes, and can be sufficient to demonstrate that the ANDA-filing Defendant “has committed” “acts of infringement” in [the particular] District.

2017 WL 3980155, at *13 (D. Del. Sept. 11, 2017) (emphasis added).

         In arriving at its decision, the Delaware court observed that the choice of verb tense in the patent venue statute-“has committed”-is problematic in the context of the Hatch-Waxman Act, where the infringement analysis is focused on whether infringement will occur in the future, and not on past or present acts. Id., at *6. Because Hatch-Waxman Act litigation is forward-looking in nature, the court concluded “an ANDA filer's future, intended acts must be included as part of the ‘acts of infringement' analysis for purposes of determining if venue is proper.” Id., at *9. The Delaware court relied heavily on the Federal Circuit's decision in Acorda Therapeutics, Inc. v. Mylan Pharm., Inc., 817 F.3d 755 (Fed. Cir. 2016), which held that an ANDA filer's planned future conduct that would be purposefully directed at the state satisfies the minimum contacts standard for personal jurisdiction. Acorda, 817 F.3d at 762-63. The Delaware court concluded that the defendant's submission of the ANDA, the future acts the defendant intended to take upon ANDA approval, plus steps already taken by the applicant indicating its intent to market the ANDA product in the district, were sufficient to show that the defendant “has committed” acts of infringement in the district. Bristol-Myers Squibb, 2017 WL 3980155, at *13.

         Plaintiffs urge the Court to adopt the Delaware court's reasoning and find that an act of infringement has occurred in the Northern District of Texas because Teva USA filed an ANDA and intends to market a generic version of Soolantra® in this district. Plaintiffs' argument closely follows the framework of the Delaware court's decision, pointing out the forward-looking nature of ANDA litigation and drawing heavily from the Federal Circuit's Acorda decision on specific personal jurisdiction.

         While the Delaware court's opinion is very thorough, there are several issues with the decision that counsel this Court away from adopting the holding that an act of infringement occurs in any district where the ANDA filer intends to market the ANDA product after it receives FDA approval. “First, and most prominently, ” as the opinion itself concedes, is that the plain language of the patent venue statute provides that venue is proper “where the defendant has committed acts of infringement.” Bristol-Myers Squibb, 2017 WL 3980155, at *12 (emphasis added). In the Hatch-Waxman Act context, because the generic drug is not yet being marketed, the only act of infringement that actually has occurred is the filing of the ANDA. The Delaware court discerned an irreconcilable conflict between what the court characterized as the backward-looking nature of the patent venue statute and the forward-looking nature of Hatch-Waxman Act litigation. To give the Hatch-Waxman Act full effect, the Delaware court determined that the acts of infringement an ANDA filer has committed must include all of the acts that would constitute ordinary patent infringement if, upon FDA approval, the generic drug product is launched into the market. This rationale is inconsistent with the plain language of the statute, which does not identify any artificial act of infringement other than the ANDA submission. The Federal Circuit recently struck down a patent venue test crafted by a district court because the test was “not sufficiently tethered” to the statutory language. In re Cray, 871 F.3d at 1362. The Federal ...


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