Otsuka Pharm. Co., Ltd. v. Mylan Inc.

Defendants’ motion to dismiss for lack of personal jurisdiction is denied because defendants consented to specific jurisdiction by registering to do business in the forum state and maintaining an agent to accept service of process there.

Spring 2015

GENERICally Speaking

Case Name:  Otsuka Pharm. Co., Ltd. v. Mylan Inc., No. 14-4508 (JBS/KMW), 2015 U.S. Dist. LEXIS 35679 (D.N.J. Mar. 23, 2015) (Simandle, C.J.) 

Drug Product and Patent(s)-in-Suit: Abilify® (aripiprazole); U.S. Patents Nos. 8,017,615 (“the ’615 patent”), 8,580,796 (“the ’796 patent”), 8,642,760 (“the ’760 patent”), 7,053,092 (“the ’092 patent”) and 8,642,600 (“the ’600 patent”)

Nature of the Case and Issue(s) Presented:  Defendants Mylan Inc., Mylan Pharms. Inc., and Mylan Labs. move to dismiss Otsuka’s complaint for lack of personal jurisdiction in light of the Supreme Court’s recent decision in Daimler AG v. Bauman, 134 S. Ct. 746 (2014).

Mylan Inc. is a Pennsylvania corporation having a principal place of business also in Pennsylvania. It manufactures, markets, imports, and sells generic pharmaceutical products throughout the United States, including in New Jersey. In 2006, the State of New Jersey authorized Mylan Inc. to “transact business” as a “foreign profit corporation” pursuant to N.J.S.A. §§ 14A:13-4, 14-1, -2. In connection with New Jersey’s authorization, Mylan Inc. identified its registered office in New Jersey and designated an in-state agent for service process of process. In addition to being registered in New Jersey, Mylan held a wholesale-distribution license, and generated annual revenues in excess of $100 million in the state. Mylan Inc. had actively litigated, as both plaintiff and defendant, over 30 cases in the D.N.J. But Mylan Inc. maintained no permanent, physical presence in the State of New Jersey.

Mylan Inc.’s subsidiary, Mylan Pharms. “does not have any manufacturing plants, corporate offices, facilities, or other real property in New Jersey.” Mylan Pharms. existed and operated in the State of West Virginia. But Mylan Pharms., like its parent, was registered to do business in New Jersey and had appointed an in-state agent for service of process. Mylan Pharms. held a wholesale distribution license in New Jersey, and generated annual revenues in excess of $50 million in the state. Mylan Pharms. had been an equally active litigant in this District, having litigated over 30 cases, as both plaintiff and defendant. Mylan Labs. was Mylan Inc.’s Indian subsidiary. Unlike its parent and sister corporations, however, Mylan Labs. had not registered as a foreign corporation in New Jersey, nor appointed an agent for service of process. Mylan Labs. did, however, hold a wholesale distribution license in New Jersey, generate revenues “attributable to sales in New Jersey,” and had been involved in at least three cases in the D.N.J.

Otsuka countered that Mylan’s compliance with the State of New Jersey’s foreign-corporation licensing and registration statute constituted consent to the court’s jurisdiction; that Mylan’s future intent to market and distribute its generic products in New Jersey sufficed for purposes of specific jurisdiction; and that Mylan’s compliance with licensing and/or registration requirements, revenue generation, and related activities otherwise constituted “continuous and systematic” contacts with New Jersey for purposes of general jurisdiction.

The court held that it may exercise general jurisdiction over Mylan Inc. and Mylan Pharms. Because Mylan Labs., however, lacked sufficient jurisdictional contacts with New Jersey, Mylan Labs. was dismissed.

Why Otsuka Prevailed:  Federal Circuit law unquestionably governs the issue whether due process would be offended in the event the court were to exercise personal jurisdiction over defendants in the context of a patent infringement action under the Hatch-Waxman Act. But the Federal Circuit has not addressed the issue and there is a split in circuit law and even within the same judicial District.

Prior to Daimler, general, all-purpose jurisdiction had long been construed to require only that the defendant have “continuous and systematic general business contacts” with the forum state. In a post-Daimler world, the operative inquiry is whether a corporation’s affiliations with the State are so “continuous and systematic” as to render it “essentially at home” in the forum state. The Supreme Court explained that a defendant’s place of incorporation and principal place of business constitute the “paradigm, and seemingly exclusive, bases for finding a corporate defendant ‘at home.’” Here, even though the facts of this case cannot be more different from those in Daimler, the court found that the factual circumstances of this litigation “satisfy neither of the paradigmatic scenarios for ‘at home’ general jurisdiction under Daimler.”

Instead, the court premised its finding of personal jurisdiction over Mylan Inc. and Mylan Pharms. on the basis of consent. Relying on two Supreme Court cases, the court held that a corporation’s appointment of an agent for service of process constitutes, under certain circumstances, consent to the forum’s personal jurisdiction. Mylan’s argument, that the seminal Supreme Court personal jurisdiction case International Shoe, which post-dates the two cases relied on by the court, compels a contrary conclusion, lacked merit. First, the Supreme Court, including in Daimler, never overruled those cases; and second, at least one Court of Appeals, the Ninth Circuit, has expressly recognized the continued vitality of the two pre-International Shoe Supreme Court decisions. In addition, the Third, Eighth, and First Circuits have all held that a corporate defendant consents to jurisdiction when it purposefully avails itself of the privilege of conducting business within the forum state.  The same is true according to NJ state law. Thus, Mylan Inc. and Mylan Pharms. consented to jurisdiction by registering to do business in New Jersey, by appointing an in-state agent for service of process in New Jersey, and by actually engaging in a substantial amount of business in New Jersey.

The same could not be said for Mylan Labs. Otsuka argued for exercising jurisdiction on the basis of Mylan’s integrated nature, the international scope of Mylan Labs.’s operations, and the in-state activities of its independent subsidiary. But “Mylan Labs. would appear to have no appreciable connection to the alleged infringement issues that give rise to this action. Moreover, Otsuka has not alleged, or demonstrated, that Mylan Labs. itself purposefully directed any relevant claims-based contact towards this forum. Nor has Otsuka provided any basis for, much less addressed, the relevant standard, to impute the alleged jurisdictional contacts of Mylan Labs.’s subsidiaries to Mylan Labs. itself for purposes of specific jurisdiction in this litigation.”

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