Hatch-Waxman Litigation 24 April 2017

Part I: Registration-Based General Jurisdiction in ANDA Litigation

The Daimler Decision

A corporation generally may only be subject to general jurisdiction in situations where it is "at home" in the forum state

  • The state of incorporation
  • The principal place of business

Rationales:

  • Render the defendant amenable to general jurisdiction solely on sizable activities ("unacceptably grasping")
  • Clear notice to both parties

Acorda Therapeutics, Inc. v. Mylan Pharms. Inc.

Registration-based consent:

  • A generic company has consented to general jurisdiction in the state based on compliance with the state's mandatory corporate registration statute
  • Sternberg & Pennsylvania Fire: compliance with Delaware's registration statute and appointment of an agent for service of process constitute a foreign corporation's consent to general personal jurisdiction

Consistent with Daimler: does not eliminate consent as a basis for general jurisdiction

Jurisdictional Split

Corporate registration confers all-purpose general jurisdiction over the corporation

Corporate registration confers specific jurisdiction over the corporation with respect to its relevant in-forum business activities

Corporate registration is only a procedural requirement to ensure service of process with no implication of independent jurisdictional effect

Traditional Forms of Consent

  • Forum Selection Clause
  • Submission (e.g. participating in a court proceeding effectively concedes to the court's legitimate practice of authority)
Difference between Registration-Based and Traditional Consent

Coercive Consent

Lack of Notice:

  • The registration statute does not contain any notice to foreign corporations that compliance equals consent to general jurisdiction in the state

No Legitimate Alternatives:

  • A mandatory statute for all fifty states in the US
  • Failure to consent is not a legal option
  • Noncompliance equals: (1) illegal business conduct, or (2) not to do business

Inconsistent with Daimler:

  • Nationwide jurisdiction based solely on compliance with a mandatory statute is "unacceptably grasping"
  • Registration-based consent exceeds due process boundaries (one cannot circumvent Daimler by avoiding minimum contact analysis)

Implications of Acorda

  • Nationwide jurisdiction for generic companies
  • Forum-shopping
  • Decreased foreseeability in ANDA litigation
  • Chilling effects on generic activity: inconsistent with the purposes of the Hatch-Waxman Act

Part II: Collaboration vs. Competition: Private Negotiations to Extend Market Exclusivity in the Pharmaceutical Industry

“[A] patent by its very nature is affected with a public interest ... [It] is an exception to the general rule against monopolies and to the right to access to a free and open market. The far-reaching social and economic consequences of a patent, therefore, give the public a paramount interest in seeing that patent monopolies spring from backgrounds free from fraud or other inequitable conduct and that such monopolies are kept within their legitimate scope.”

Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 816 (1945).

The Advent of Reverse Payment Settlements

Faced with high costs and large risks, would-be competitors may seek a settlement that benefits both parties.

  • The cost of preparing an ANDA is approximately $1 million. If the ANDA contains a Paragraph IV certification that later results in district court litigation, the litigation expenses raise the cost of the challenge to $10 million or more
  • The risk of losing a critical patent may prompt a branded firm to bargain with its generic rival than take a chance in litigation

Paying for Delay: Impact of Actavis

Facing a circuit split between the 11th and 3rd Circuits, the Supreme Court took up the issue of Pay for Delay settlements in its landmark Actavis decision.

  • Debate between per se, quick look, and rule of reason standards of review
  • Setting a muddy and amorphous standard for lower courts to apply

Unresolved Issues

In the wake of Actavis, lower courts have struggled to determine the scope of the Court's opinion:

  • Cash payments required
  • Side-deals, authorized generics, and No-AG clauses

Importance of the 180-day stay:

  • Without the promise of 180-days of exclusivity, future challenges to weak patents are unlikely following a settlement between the brand and the first-to-file generic
  • Litigation bottlenecks may still occur in the absence of a settlement of the patent claim

The Emerging Role of the PTAB

The Patent Trial & Appeal Board may serve as a viable alternative to District Court litigation in eliminating weak patents covering branded pharmaceuticals

Congressional Intent of Hatch-Waxman

  • Create a period of exclusivity for patented drugs receiving FDA approval to incentivize innovation
  • Encourage generic competitors to enter the market and drive down costs for necessary therapies

Questions?

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