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Chief Judge Stark Grants Motion to Dismiss for Improper Venue in Hatch-Waxman Litigation

In September 2017, Chief Judge Stark denied a motion filed by Mylan Pharmaceuticals Inc. (MPI) to dismiss for lack of proper venue in light of TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514, 1519 (2017). That dismissal was without prejudice because Judge Stark found that he could not determine whether venue was proper on the record before him. Accordingly, the Court ordered expedited, venue-related discovery into whether MPI had a “regular and established place of business,” as required by 28 U.S.C. § 1400(b). After expedited discovery, including three hearings of various discovery disputes, MPI renewed its motion to dismiss. On October 18, Judge Stark issued his decision on the renewed motion.

Although discovery was directed to the “regular and established place of business” inquiry under the second prong of § 1400(b), Judge Stark’s decision addressed both prongs of § 1400(b). Under the first prong—“where the defendant resides”—Plaintiff BMS argued that Delaware was the proper venue, despite the parties agreeing that MPI is incorporated in West Virginia. Specifically, BMS argued that the Delaware incorporation of a separate Mylan entity could be imputed to MPI as a corporate affiliate that had disregarded corporate formalities of separateness. Memo. Op. at 3-5.

Judge Stark “agree[d] with BMS that residency may be imputed under the first prong of the venue statute,” id. at 5, but emphasized that the “Court is not holding that one entity necessarily is a resident of two places . . . [i]nstead, the Court is allowing for the possibility that, for the purposes of venue in patent cases, there are circumstances under which it is appropriate to impute the residence of one entity to another entity – where there is an alter ego relationship or piercing of the corporate veil – and in those circumstances the law allows the Court to treat one entity as if it were a resident in a second district.” Id. at 6.

On the record before the Court, however, Judge Stark found that BMS had not met its burden of showing an alter ego relationship. The evidence “received over several months of discovery” showed “a close relationship between MPI and Mylan Securitization” but was “insufficient to pierce the corporate veil.” Id. at 8. More specifically, establishing an alter ego relationship would require more than showing that the Delaware entity “(1) is wholly-owned by MPI; (2) does not have its own employees, revenue, profits, Delaware tax filings, or facilities; (3) is represented by the same counsel as MPI in transactions with MPI; (4) has ‘tiny’ costs of operations; and (5) shares one overlapping director with MPI.” Id. “Even considering all of these factors together and in the light most favorable to BMS, they do not support disregarding MPI’s separate corporate status, as Plaintiffs have not shown any evidence of fraud, unfairness, or injustice.” Id. at 9.

Judge Stark also rejected BMS’s contention that the general venue statute of 28 U.S.C. § 1391 applied rather than the patent venue statute of § 1400 because “the text of § 1400(b), uses of the term ‘civil action for patent infringement’ elsewhere in the U.S. Code, the patent venue statute’s legislative history, the structure of and policy behind the Hatch-Waxman Act, and general policy considerations all ‘support treating Hatch-Waxman actions as different from traditional infringement actions for venue purposes.’” Id. at 11. Judge Stark explained, however, that not only had BMS waived this argument, but the TC Heartland decision had “clearly articulated that ‘the patent venue statute alone should control venue in patent infringement proceedings,’” and BMS’s Hatch-Waxman action unquestionably was a patent infringement proceeding. Id. at 11-12.

Finally, Judge Stark found that any further venue discovery was “unwarranted” in light of the substantial discovery that had already occurred, which led the Court to the conclusion that further discovery “could amount to a fishing expedition, and might not soon end nor ever satisfy Plaintiffs.” Id. at 10.

Bristol-Myers Squibb Co., et al. v. Mylan Pharmaceuticals Inc., et al., C.A. No. 17-379-LPS (D. Del. Oct. 18, 2018).

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