CAFC discusses venue in CELGENE CORPORATION v. MYLAN PHARMACEUTICALS INC. ; Celgene loses
The outcome:
Celgene filed that suit in New Jersey. Celgene is headquartered there, but none of the defendants are. Rather, MPI is based in West Virginia, Mylan Inc. in Pennsylvania, and Mylan N.V. in Pennsylvania and the Netherlands. The district court ultimately dismissed this case for improper venue (as to MPI and Mylan Inc.) and for failure to state a claim (as to Mylan N.V.). Celgene appeals. For the reasons below, we agree with the district court that venue was improper in New Jersey for the domesticcorporation defendants, MPI and Mylan Inc. That is, Celgene did not show that those defendants committed acts of infringement in New Jersey and have a regular and established place of business there. We also agree that, as to the foreign-corporation defendant, Mylan N.V., Celgene’s pleadings failed to state a claim upon which relief could be granted. We therefore affirm.
The crux:
Celgene argues that the defendants have committed acts of infringement in New Jersey. Here, the alleged infringing act is the submission of the ANDA. See 35 U.S.C. § 271(e)(2); Valeant, 978 F.3d at 1381. The question is where the submission occurred and what acts it includes. First, Celgene argues that the “artificial act of infringement stemming from the ANDA submission extends nationwide” (i.e., wherever the generic drug will be marketed and sold). Relatedly, it contends that the effects of the ANDA submission will be “felt” in New Jersey. But Valeant squarely forecloses Celgene’s position. Venue must be “predicated on past acts of infringement.” Valeant, 978 F.3d at 1381. For Hatch-Waxman cases, this means venue is proper “where an ANDA-filer submits its ANDA to the FDA,” not “wherever future distribution of the generic is contemplated.” Id. at 1378–79; see also id. at 1384
(...)
Under § 271(e)(2), submitting an ANDA is the act of infringement. And although the ANDA applicant must later send a notice letter and inform the FDA of the letter’s receipt, that all happens after the infringing submission. Sending a paragraph IV notice letter does not fall within “submitting” the ANDA under the meaning of Valeant. Accordingly, we conclude that Celgene did not establish that the defendants-appellees committed an act of infringement in New Jersey.
LinkedIn is mentioned:
Celgene instead points to a roster of employees who live in the state, a handful of business cards with employee names and New Jersey home addresses, and two LinkedIn profiles mentioning New Jersey. Without more, this is all too speculative to show ratification of those addresses as MPI’s or Mylan Inc.’s places of business (much less that the employees themselves regularly conducted business specifically at their homes). Indeed, it is not enough “that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer.” Id. at 1366.
Cray arises
Cray, 871 F.3d at 1363.
At bottom, this case is like Cray. There, the defendant did not rent or own an office or any property in the district, but it allowed two employees to work remotely from their homes there. Cray, 871 F.3d at 1357. The company identified the employees’ home numbers in business communications, and they worked as local territory managers and sales executives in the region. See id. But the company did not maintain products at their homes, the company did not pay for their homes, and no one advertised their homes as the company’s place of business. Id. Similarly, MPI and Mylan Inc. “allowed” its employees to work from the district. But there was “no indication” that MPI or Mylan Inc. “own[], lease[], or rent[]” their homes, that they “played a part in selecting the [homes’] location, stored inventory or conducted demonstrations there, or conditioned . . . employment or support on the maintaining of” a home in New Jersey. See id. at 1365. And even if evidence here might suggest that MPI or Mylan “believed a location within [New Jersey] to be important to the business performed,” there is no evidence that MPI or Mylan Inc. “had any intention to maintain some place of business in that district” if the employees were to “decide[] to terminate their residences.” Id. In view of the specific evidence here, the employee homes here are not places “of the defendant.”7
Service of process arises in footnote 7
The patent service provision, 28 U.S.C. § 1694, states that an agent “conducting” the defendant’s business can accept service in a district in which the defendant “has a regular and established place of business.” But courts considering the question have held that § 1694 is not the exclusive basis for service of process in a patent-infringement action. Rule 4 of the Federal Rules of Civil Procedure provides for service of process not necessarily predicated on a regular and established place of business of the defendant. See, e.g., Welch Sci. Co. v. Human Eng’g Inst., Inc., 416 F.2d 32, 34 (7th Cir. 1969); 14D Wright & Miller, Federal Practice & Procedure § 3823 (4th ed., Apr. 2021 update). We therefore tend to agree with the appellees that, although the presence of a defendant’s regular and established place of business in a district implies that service is proper on agents there, the presence of employees who can accept service does not by itself establish the existence of the defendant’s regular and established place of business at those employees’ location. Regardless, given Celgene’s argument forfeiture and evidentiary failures, we need not decide the issue
Corporate separateness
Venue may be imputed under an alter-ego or veil-piercing theory. See Andra, 6 F.4th at 1289; Minn. Min. & Mfg. Co. v. Eco Chem, Inc., 757 F.2d 1256, 1265 (Fed. Cir. 1985) (“3M”). But “where related companies have maintained corporate separateness, the place of business of one corporation is not imputed to the other for venue purposes.” Andra, 6 F.4th at 1289. Corporate separateness is an issue of regional-circuit law. See Wechsler v. Macke Int’l Trade, Inc., 486 F.3d 1286, 1295 (Fed. Cir. 2007). The relevant veil-piercing theory in the Third Circuit is called the “alter ego” doctrine, among other names. See Pearson v. Component Tech. Corp., 247 F.3d 471, 484 & n.2 (3d Cir. 2001). Under that doctrine, courts will disregard the corporate form to “prevent fraud, illegality, or injustice,” “when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime,” or “when the parent so dominated the subsidiary that it had no separate existence.” Id. at 484 (first quoting Zubik v. Zubik, 384 F.2d 267, 272 (3d Cir. 1967); and then quoting N.J. Dep’t of Env’t Prot. v. Ventron Corp., 468 A.2d 150, 164 (N.J. 1983)).8 Among other possible considerations, the Third Circuit looks at “gross undercapitalization, failure to observe corporate formalities, nonpayment of dividends, insolvency of the [subsidiary] corporation, siphoning of funds from the [subsidiary] corporation by the dominant stockholder, nonfunctioning of officers and directors, absence of corporate records, and whether the corporation is merely a facade for the operations of the dominant stockholder.” Id. at 484–85 & n.2; see also Trinity Indus., Inc. v. Greenlease Holding Co., 903 F.3d 333, 365 (3d Cir. 2018). In the end, this is an inquiry into whether the entities’ separateness “is little more than a legal fiction”—a “notoriously difficult” burden. Pearson, 247 F.3d at 485. Plaintiffs “must essentially demonstrate that in all aspects of the business, the two corporations actually functioned as a single entity.” Id. A court “consider[s] whether veil piercing is appropriate in light of the totality of the circumstances.” Trinity Indus., 903 F.3d at 365.
Celgene filed that suit in New Jersey. Celgene is headquartered there, but none of the defendants are. Rather, MPI is based in West Virginia, Mylan Inc. in Pennsylvania, and Mylan N.V. in Pennsylvania and the Netherlands. The district court ultimately dismissed this case for improper venue (as to MPI and Mylan Inc.) and for failure to state a claim (as to Mylan N.V.). Celgene appeals. For the reasons below, we agree with the district court that venue was improper in New Jersey for the domesticcorporation defendants, MPI and Mylan Inc. That is, Celgene did not show that those defendants committed acts of infringement in New Jersey and have a regular and established place of business there. We also agree that, as to the foreign-corporation defendant, Mylan N.V., Celgene’s pleadings failed to state a claim upon which relief could be granted. We therefore affirm.
The crux:
Celgene argues that the defendants have committed acts of infringement in New Jersey. Here, the alleged infringing act is the submission of the ANDA. See 35 U.S.C. § 271(e)(2); Valeant, 978 F.3d at 1381. The question is where the submission occurred and what acts it includes. First, Celgene argues that the “artificial act of infringement stemming from the ANDA submission extends nationwide” (i.e., wherever the generic drug will be marketed and sold). Relatedly, it contends that the effects of the ANDA submission will be “felt” in New Jersey. But Valeant squarely forecloses Celgene’s position. Venue must be “predicated on past acts of infringement.” Valeant, 978 F.3d at 1381. For Hatch-Waxman cases, this means venue is proper “where an ANDA-filer submits its ANDA to the FDA,” not “wherever future distribution of the generic is contemplated.” Id. at 1378–79; see also id. at 1384
(...)
Under § 271(e)(2), submitting an ANDA is the act of infringement. And although the ANDA applicant must later send a notice letter and inform the FDA of the letter’s receipt, that all happens after the infringing submission. Sending a paragraph IV notice letter does not fall within “submitting” the ANDA under the meaning of Valeant. Accordingly, we conclude that Celgene did not establish that the defendants-appellees committed an act of infringement in New Jersey.
LinkedIn is mentioned:
Celgene instead points to a roster of employees who live in the state, a handful of business cards with employee names and New Jersey home addresses, and two LinkedIn profiles mentioning New Jersey. Without more, this is all too speculative to show ratification of those addresses as MPI’s or Mylan Inc.’s places of business (much less that the employees themselves regularly conducted business specifically at their homes). Indeed, it is not enough “that there exists within the district a physical location where an employee of the defendant carries on certain work for his employer.” Id. at 1366.
Cray arises
Cray, 871 F.3d at 1363.
At bottom, this case is like Cray. There, the defendant did not rent or own an office or any property in the district, but it allowed two employees to work remotely from their homes there. Cray, 871 F.3d at 1357. The company identified the employees’ home numbers in business communications, and they worked as local territory managers and sales executives in the region. See id. But the company did not maintain products at their homes, the company did not pay for their homes, and no one advertised their homes as the company’s place of business. Id. Similarly, MPI and Mylan Inc. “allowed” its employees to work from the district. But there was “no indication” that MPI or Mylan Inc. “own[], lease[], or rent[]” their homes, that they “played a part in selecting the [homes’] location, stored inventory or conducted demonstrations there, or conditioned . . . employment or support on the maintaining of” a home in New Jersey. See id. at 1365. And even if evidence here might suggest that MPI or Mylan “believed a location within [New Jersey] to be important to the business performed,” there is no evidence that MPI or Mylan Inc. “had any intention to maintain some place of business in that district” if the employees were to “decide[] to terminate their residences.” Id. In view of the specific evidence here, the employee homes here are not places “of the defendant.”7
Service of process arises in footnote 7
The patent service provision, 28 U.S.C. § 1694, states that an agent “conducting” the defendant’s business can accept service in a district in which the defendant “has a regular and established place of business.” But courts considering the question have held that § 1694 is not the exclusive basis for service of process in a patent-infringement action. Rule 4 of the Federal Rules of Civil Procedure provides for service of process not necessarily predicated on a regular and established place of business of the defendant. See, e.g., Welch Sci. Co. v. Human Eng’g Inst., Inc., 416 F.2d 32, 34 (7th Cir. 1969); 14D Wright & Miller, Federal Practice & Procedure § 3823 (4th ed., Apr. 2021 update). We therefore tend to agree with the appellees that, although the presence of a defendant’s regular and established place of business in a district implies that service is proper on agents there, the presence of employees who can accept service does not by itself establish the existence of the defendant’s regular and established place of business at those employees’ location. Regardless, given Celgene’s argument forfeiture and evidentiary failures, we need not decide the issue
Corporate separateness
Venue may be imputed under an alter-ego or veil-piercing theory. See Andra, 6 F.4th at 1289; Minn. Min. & Mfg. Co. v. Eco Chem, Inc., 757 F.2d 1256, 1265 (Fed. Cir. 1985) (“3M”). But “where related companies have maintained corporate separateness, the place of business of one corporation is not imputed to the other for venue purposes.” Andra, 6 F.4th at 1289. Corporate separateness is an issue of regional-circuit law. See Wechsler v. Macke Int’l Trade, Inc., 486 F.3d 1286, 1295 (Fed. Cir. 2007). The relevant veil-piercing theory in the Third Circuit is called the “alter ego” doctrine, among other names. See Pearson v. Component Tech. Corp., 247 F.3d 471, 484 & n.2 (3d Cir. 2001). Under that doctrine, courts will disregard the corporate form to “prevent fraud, illegality, or injustice,” “when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime,” or “when the parent so dominated the subsidiary that it had no separate existence.” Id. at 484 (first quoting Zubik v. Zubik, 384 F.2d 267, 272 (3d Cir. 1967); and then quoting N.J. Dep’t of Env’t Prot. v. Ventron Corp., 468 A.2d 150, 164 (N.J. 1983)).8 Among other possible considerations, the Third Circuit looks at “gross undercapitalization, failure to observe corporate formalities, nonpayment of dividends, insolvency of the [subsidiary] corporation, siphoning of funds from the [subsidiary] corporation by the dominant stockholder, nonfunctioning of officers and directors, absence of corporate records, and whether the corporation is merely a facade for the operations of the dominant stockholder.” Id. at 484–85 & n.2; see also Trinity Indus., Inc. v. Greenlease Holding Co., 903 F.3d 333, 365 (3d Cir. 2018). In the end, this is an inquiry into whether the entities’ separateness “is little more than a legal fiction”—a “notoriously difficult” burden. Pearson, 247 F.3d at 485. Plaintiffs “must essentially demonstrate that in all aspects of the business, the two corporations actually functioned as a single entity.” Id. A court “consider[s] whether veil piercing is appropriate in light of the totality of the circumstances.” Trinity Indus., 903 F.3d at 365.
posted by Lawrence B. Ebert at 8:29 AM
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