new frontiers in pharmaceutical patent litigation · new frontiers in pharmaceutical patent...

New Frontiers In

Pharmaceutical Patent

Litigation

Benjamin HsingIrene Hudson

Wanda French-Brown

Developments in Hatch-Waxman Post-TC

Heartland

Inter Partes Review

Sovereign Immunity

Baker & Hostetler LLP 2

Agenda

2

1

3

HATCH-WAXMAN DISPUTES

POST TC Heartland


1

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).



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.


Patent Venue -vs- Venue Generally



where the defendant resides . . .

28 U.S.C. § 1400(b)

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 . . .

28 U.S.C. § 1391(c)(2): Venue Generally

TC Heartland v. Kraft Foods


Where Do Defendants Reside?







28 U.S.C. § 1400(b)


Where Do Defendants Reside?

Entity Location

U.S. Corporations State where incorporated

Limited Liability

Corporations (LLCs)

State where organized

Unincorporated Entities Look to the principal place

of business*

Foreign Corporations 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.”).


Where Else Can a Defendant Be Sued?




or where the defendant has

committed acts of infringement and

has a regular and established place of

business.

28 U.S.C. § 1400(b)


“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.


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.


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 non-speculative 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.


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.”

What Is A “Regular and

Established Place of Business”?







28 U.S.C. § 1400(b)


What Is a “Regular andEstablished 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

What Is a “Regular andEstablished 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.

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.


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.”

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).

2Inter Partes Review Update


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?

Will IPRs Go Away?


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.”

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

Petitioner’s Position


• Patents are private property rights.

• 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.

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.”

What About Ex Parte / Inter PartesReexaminations?


• 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

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

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)

Amendments In The PTAB


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)

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))

Will The PTAB Curtail Multiple / Serial / Me Too Petitions


36

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

37

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)

38



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.

39



• 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

3


SOVEREIGN IMMUNITY

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).

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.

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 party-

in-interest

• PTAB cannot proceed without the University, which is an

indispensable party

• University retained rights under the license

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).

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.

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 co-

plaintiff.

• 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.”

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.



• 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.”

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.”).



• 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.

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.”

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.

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?

Questions?


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