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16 Jun 2017
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TC Heartland and the Hatch-Waxman Act

The U.S. Supreme Court unanimously issued a decision on May 22, 2017 in TC Heartland LLC v. Kraft Food Group Bands LLC, No. 16-341 to clarify patent litigation venues. Kraft (Respondent) filed a patent infringement suit against TC Heartland (Petitioner) for allegedly infringing one of their patents for flavored water mixes. The issue regarding patent venues arose when Petitioner moved to either dismiss the case or change the venue from Delaware to Indiana because Petitioner’s headquarters are in Indiana and the company is organized under Indiana law, whereby Respondent is organized under Delaware law but primarily works out of Illinois.

Why has the location of patent litigations become such a problem? For the past 27 years, patent holders have primarily filed cases in only select jurisdictions (which they do not necessarily have a connection with), in hopes of a favorable outcome. The New York Times reports that over 40 percent of patent lawsuits are filed in East Texas federal courts, and one judge in particular in Marshall, Texas has heard over one quarter of U.S. patent cases. The benefit? Fairly consistent verdicts. The point of contention in TC Heartland is whether the meaning of “resides” in the patent venue statute, 28 U.S.C. §1400(b) should be construed narrowly or broadly.

The Supreme Court re-affirmed an earlier decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), that “reside” in the patent venue statute §1400(b) should be interpreted to mean that “a domestic corporation “resides” only in its State of incorporation” as opposed to “the broader definition of corporate “residence” contained in the general venue statute, 28 U.S.C. § 1391(c).” (Justice Thomas, Opinion of the Court, p.1). Bob Stoll, former Commissioner for Patents, USPTO, explains the decision is twofold: the venue now depends on “where the defendant: (1) resides which now means where the defendant is incorporated and, (2) where the defendant has committed acts of infringement and has a regular established place of business.”

In light of the Supreme Court’s decision last month, the pharmaceutical industry worries that this will disrupt Hatch-Waxman cases. The Hatch-Waxman Act, officially known as the Drug Price Competition and Patent Term Restoration Act (Public Law 98-417), is a 1984 federal law that encourages greater manufacturing of generic drugs by easing their access into the market. The law permits generic drug manufacturers to submit an Abbreviated New Drug Application (ANDA) to demonstrate the new drug’s biosimilarity to the original drug (with an expired patent) as opposed to going through the lengthy and expensive process with the U.S. Food and Drug Administration. However, if a generic manufacturer infringes on a company’s patent for a drug, the FDA will delay approval of the application for 30 months.

Many generic manufacturers are incorporated in Delaware and New Jersey, where they are familiar with the judges and court rules. For all generic manufacturers not located in jurisdictions that are accustomed to these Hatch-Waxman cases, it would be too costly and time consuming to contest a venue for an infringement suit. The issue that will arise is that inexperienced courts in multi-jurisdictions run the risk of creating a string of inconsistent verdicts.

 

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