Clarity Emerging on Personal Jurisdiction in Pharma and Biologics Litigation: The Federal Circuit's Mylan Decisions

Personal Jurisdiction was Once a Settled Issue

Prior to the Supreme Court decision in Daimler and its predecessor Goodyear (both decisions were penned by Justice Ginsburg), plaintiffs relied upon general jurisdiction over ANDA filers who sold products at the national level, and neither specific jurisdiction nor state long-arm statutes often came into play. Sometimes, branded companies hedged their bets by filing a second protective suit in the defendant's state of incorporation, in case the primary suit was dismissed on jurisdictional bases. By and large, the defendant's substantial, continuous, and systematic business activities in the particular forum chosen by plaintiffs sufficed for general jurisdiction.

On the other hand, specific jurisdiction was rarely proposed as a basis to exercise jurisdiction over generic pharmaceutical companies in Hatch-Waxman litigation. The Hatch-Waxman Act, more properly known as the Drug Price Competition and Patent Term Restoration Act of 1984, ⁴ created the ANDA process to encourage development of generic drugs—yet at the same time, the Act sought to protect innovators by establishing a statutory cause of action in patent infringement before such generic drugs were allowed on the market. Due to the “highly artificial act of infringement” ⁵ created by the statute, there is no actual injury upon which litigation is based, only an abstract future one that cannot be readily attributed to any apparent location for purposes of jurisdiction. The allegedly infringing product has yet to be made, used, or sold at the time the suit is filed in a federal district court.

Similarly, the Biologic Price Competition and Innovation Act (2009), part of the Patient Protection and Affordable Care Act (2010), ⁶ created an abbreviated pathway to approve biosimilars, which are biological products approved by FDA because they are highly similar to a previously approved biological product (the reference product), and shown to have no clinically meaningful differences. ⁷ While the patent procedures for a biosimilar differ from the ANDA process, the two pathways complement each other and reference product manufacturers will be able to benefit from the Federal Circuit's holding in the Mylan cases. ⁸

The Development of Personal Jurisdiction

As promulgated by the Supreme Court in 1945, International Shoe expanded the states' reach beyond their borders: “due process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” ⁹ Surprisingly, the court has issued decisions on general jurisdiction over out-of-state corporate defendants' in-state contacts only twice in the intervening decades before the court's recent decisions.

First, in Perkins v. Benguet Consolidated Mining Co., the court held general jurisdiction existed over a foreign corporation due to its president's in-state “continuous and systematic supervision of the necessarily limited wartime activities of the company” during World War II, even though the Philippine company was not incorporated in and did not have its principal place of business in Ohio, it was not registered to do business in the state, the claim arose from activities outside Ohio, and the claim did not relate to the company's activities in the state. ¹⁰ Second, in Helicopteros Nacionales de Colombia, S.A. v. Hall, the Supreme Court held that there was no general jurisdiction over a Columbian corporation in a Texas wrongful death suit regarding a helicopter crash in Peru; that the corporation purchased helicopters and trained pilots in Texas were not continuous and systematic contacts and did not suffice to confer jurisdiction. ¹¹ While these two cases made some headway in defining the limits of general jurisdiction, only in the last few years did the court clarify those metes and bounds.

In 2011, the Supreme Court decided Goodyear Dunlop Tires Operations v. Brown, in which the families of two North Carolina boys killed in a French bus accident brought suit in NC against Goodyear, whose foreign subsidiaries manufactured the allegedly defective tires. The foreign entities were incorporated outside the U.S., did not have a place of business in North Carolina, and did not make or sell tires in NC directly. However, some small percentage of the foreign entities' tires were distributed in North Carolina by other Goodyear subsidiaries. The unanimous court held, “[a] connection so limited between the forum and the foreign corporation, we hold, is an inadequate basis for the exercise of general jurisdiction. Such a connection does not establish the ‘continuous and systematic’ affiliation necessary to empower North Carolina courts to entertain claims unrelated to the foreign corporation's contacts with the State.” ¹²

Justice Ginsburg then coalesced the concept of a corporation's home in relation to a finding of general jurisdiction: “For an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.” ¹³ She explained that while the defendant in Perkins conducted the company's business in Ohio during the war as if it was the corporation's temporary home, Goodyear's ties to North Carolina resembled those in Helicopteros, where mere Texas purchases and training were insufficient to form continuous and systematic contacts.

Thus, the court began to codify a stringent test for general jurisdiction in Goodyear, rejecting the more expansive boundaries embraced by lower courts. In holding, “[a] court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State,” ¹⁴ the Supreme Court formulated the “essentially at home” standard for general jurisdiction.

Daimler Sets the Bar

Finally, in Daimler v. Bauman, the Supreme Court explored and clarified the concept of a defendant's “home” forum, and again reduced the limits of general jurisdiction, explaining that a corporation's state of incorporation and principal place of business are paradigms for “home” forums. The Daimler plaintiffs were workers and families of workers in the Argentinian subsidiary of the German car manufacturer Mercedes Benz, bringing allegations of Argentinian human rights abuses to a district court in California, where Mercedes Benz has subsidiaries and offices and sells luxury vehicles daily. However, since Daimler was a foreign corporation and its wholly owned U.S. subsidiary, Mercedes Benz USA (MBUSA), was incorporated in Delaware and had its principal place of business in New Jersey, the court found California could not exercise general personal jurisdiction over Daimler, which was not “at home” in the state: “If Daimler's California activities sufficed to allow adjudication of this Argentinian-rooted case in California, the same global reach would presumably be available in every other State in which MBUSA's sales are sizable. No decision of this court sanctions a view of general jurisdiction so grasping.” ¹⁵ Justice Ginsburg did allow that there could be an “exceptional case” where “a corporation's operations in a forum other than its formal place of incorporation or principal place of business may be so substantial and of such a nature as to render the corporation at home in that State.” ¹⁶ The court did not find Daimler to be an example of such a case, and no lower court has found such an exceptional case to date.

Daimler is understood to limit general jurisdiction, the former bedrock of plaintiffs' personal jurisdiction analysis, to forums that embody a corporation's “home.” In the aftermath of the Supreme Court's decision, Hatch-Waxman defendants began to argue they must be sued in their “home” forum, being either their state of incorporation or principal place of business. For many defendants, those “home” forums lie outside of Delaware and New Jersey, where a majority of ANDA litigations are commenced. Securing some control over where an ANDA filer would defend a case has obvious advantages—perhaps the generic firm may perceive a home court advantage in jury selection; or the company may want to avoid consolidation with related cases and have its own day in court; or it could want to avoid forums like Delaware and New Jersey where it might have had a losing track record in the past. In addition, if the plaintiff had failed to file a protective suit in the defendant's home forum, a dismissal of the litigation could end the statutory 30-month stay for approval of the generic product, which would be a huge benefit to an ANDA filer.

However, since Daimler, not much has changed in ANDA litigation, and district courts have continued to find personal jurisdiction, albeit not general personal jurisdiction based on a defendant's “home” state. In addition to Acorda and AstraZeneca, other district courts have found personal jurisdiction in ANDA cases. For example, in Otsuka Pharmaceutical Co. v. Mylan, Inc., ¹⁷ the court found general jurisdiction based on registration to do business and appointment of registered agents to receive service of process in New Jersey, side-stepping the Daimler “at home” issue in the end. In the Eastern District of Texas, ¹⁸ Judge Rodney Gilstrap held specific jurisdiction existed due to Texas being the location of the branded drug company's manufacturing and distribution. ¹⁹

The Federal Circuit Decides the Mylan Cases

The Federal Circuit held that Mylan was subject, under Delaware's long arm statute, to specific personal jurisdiction due to sufficient minimum contacts with the state. The fact that Mylan's suit-related conduct was to file its ANDAs with the intent to market its proposed drugs in Delaware (and other states) upon approval by FDA satisfied due process standards, according to the majority opinion authored by Judge Richard Taranto, joined by Judge Pauline Newman, and with a separate concurrence from Judge Kathleen O'Malley. This decision settles the confusion in ANDA litigation regarding personal jurisdiction brought about by the Daimler holding, resolving the dust-up until, and if, the Supreme Court decides to weigh in again. Notably, the majority opinion did not decide the issue of general personal jurisdiction, but in her concurrence, Judge O'Malley wrote that Mylan consented to general jurisdiction by registering to do business and appointing an agent for service of process in Delaware.

The court was not swayed by Mylan's argument that no personal jurisdiction exists outside the ANDA filer's home state until actual sales occur, due to the artificial act of filing an ANDA, where no goods for sale yet exist. The court noted that filing an ANDA application was an expensive and significant step in the approval process that in the future will result in marketing and sales of generic drug products in Delaware and elsewhere:

Mylan's ANDA filings constitute formal acts that reliably indicate plans to engage in marketing of the proposed generic drugs. Delaware is undisputedly a State where Mylan will engage in that marketing if the ANDAs are approved. And the marketing in Delaware that Mylan plans is suit-related: the suits over patent validity and coverage will directly affect when the ANDA can be approved to allow Mylan's Delaware marketing and when such marketing can lawfully take place. ²⁰

Though no generic product has been manufactured or marketed, the court found that since ANDA litigation is authorized by 35 U.S. § 271(e)(2), a case or controversy has been created by the filing of an ANDA that will lead to real-world future injury to the patent holder:

Those activities will unquestionably take place in Delaware (at least). The subject of the cases before us is whether those activities will infringe valid patents and should be stopped under the remedial provisions of the Hatch–Waxman Act. Mylan's ANDA filings, including its certifications regarding the patents at issue here, are thus suit-related, and they have a substantial connection with Delaware because they reliably, non-speculatively predict Delaware activities by Mylan. ²¹

Once minimum contacts with Delaware were established, the court considered whether any other due process factors make jurisdiction unreasonable, but concisely concluded:

The burden on Mylan will be at most modest, as Mylan, a large generic manufacturer, has litigated many ANDA lawsuits in Delaware, including some that it initiated. Delaware has an interest in providing a forum to resolve the disputes before us because they involve the pricing and sale of products in Delaware and harms to firms doing business in Delaware, some of them incorporated or with principal places of business in Delaware. ²²

Judge O'Malley concurred with the majority in finding personal jurisdiction over Mylan in these cases, but put forth different legal theories. She believed general jurisdiction should be found due to Mylan's registration to do business in Delaware and its appointment of an agent for service of process. Relying upon the Delaware case Sternberg v. O'Neill, ²³ and the nearly 100-year old Penn. Fire Ins. Co. v. Gold Issue Mining, ²⁴ she “conclude[d] that Mylan is subject to general personal jurisdiction in Delaware by virtue of its voluntary, express consent to such jurisdiction.” ²⁵

Regarding specific personal jurisdiction, Judge O'Malley would have predicated jurisdiction under Calder v. Jones, ²⁶ because the filing of an ANDA “causes harm to the intellectual property rights of a known party with a known location,” ²⁷ noting that Acorda and AstraZeneca are organized under Delaware law, and that “the harm is targeted only to these Delaware companies, occurs only in Delaware, and is only triggered by the filing of the ANDA.” ²⁸ Judge O'Malley would not have relied, as the majority did, upon Mylan's future intent to direct its products into Delaware.

Given the majority holding that specific jurisdiction exists over the generic defendant in an ANDA case, the issue of general jurisdiction, while unsettled, may prove unnecessary. Plaintiffs will be able to comfortably rely upon specific jurisdiction whether or not the ANDA filer has consented to jurisdiction through compliance with statutory registration filings for foreign corporations.

Since the approval pathway for generic pharmaceuticals and biosimilars are comparable, the Federal Circuit's decision in these two cases offers branded companies in both ANDA and BPCIA litigation, respectively, the broad ability to decide their forum of choice. It will be likely that branded companies continue to choose a state where they may enjoy a home field advantage, and that New Jersey and Delaware will remain popular venues for plaintiffs. Whether this decision will spur additional forum shopping, particularly in the plaintiff-friendly Eastern District of Texas, is an open question. For defendants, questions remain regarding general jurisdiction, particularly if they are not registered in the state where the patent litigation is commenced, or if they do not have any products yet on the market in the U.S. It is yet to be seen if Mylan will request reconsideration en banc, or appeal to the Supreme Court, which may be unlikely to revisit personal jurisdiction so soon after the recent Goodyear and Daimler decisions.