Opinion
Civil Action 20-cv-03254-RM-MEH
01-26-2021
FRESENIUS KABI USA, LLC, Plaintiff, v. CUSTOPHARM, INC., Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
MICHAEL E. HEGARTY, UNITED STATES MAGISTRATE JUDGE.
Defendant applied to the FDA for permission to sell a form of the thyroid medication, levothyroxine. The type of application used permits an applicant to rely on clinical studies that a third party already submitted to the FDA to show that the drug is safe and effective. However, that third party-the holder of the patent to the underlying “reference drug”-may intervene if it perceives an infringement of its patent. The mechanism to do so is to bring a patent infringement lawsuit pursuant to 35 U.S.C. § 271(e)(2)(A). Plaintiff has filed such a lawsuit in this and two other district courts (District of New Jersey and Western District of Texas) to challenge Defendant's application. Defendant moved to dismiss the New Jersey lawsuit for improper venue, and that motion remains pending. Defendant also moves to dismiss this Colorado lawsuit for improper venue. Defendant prefers to litigate the dispute in Texas.
LEGAL STANDARD
Fed. R. Civ. P. 12(b)(3) permits a defendant to move to dismiss a lawsuit for improper venue. A plaintiff's chosen forum generally should not be disturbed unless the balance strongly favors the defendant. The test is not where venue is best or what district has the most, or most significant, contacts with plaintiff's claims. “Nevertheless, courts will accord little weight to a plaintiff's choice of forum where the facts giving rise to the lawsuit have no material relation or significant connection to the plaintiff's chosen forum.” Sanchez v. Miller, No. 15-cv-01615-REB-MEH, 2016 WL 675816, at *3 (D. Colo. Feb. 19, 2016) (internal citation omitted). It is the plaintiff's burden to establish that venue is proper in the chosen district, and if the defendant challenges venue, the plaintiff must present specific facts to support its allegations. The plaintiff may rest on well-pleaded facts but only to the extent defendant leaves them uncontroverted. A court may examine facts outside the complaint but must draw all reasonable inferences and resolve all factual conflicts in the plaintiff's favor. Aspen Corps., Inc. v. Gorman, No. 18-cv-01325-CMA-SKC, 2019 WL 1281211, at *4 (D. Colo. Mar. 20, 2019); RMH Tech LLC v. PMC Indus., Inc., No. 16-cv-01762-CMA-KMT, 2018 WL 1566839, at *2 (D. Colo. Mar. 30, 2018).
Additionally, as a general matter, a court may consider documents referenced in the complaint that are central to the issue and whose authenticity is not disputed, N.E.L. v. Gildner, 780 Fed.Appx. 567, 571 (10th Cir. 2019), as well as take judicial notice of public records, Tal v. Hogan, 453 F.3d 1244, 1264 n.24 (10th Cir. 2006).
Consequently, the Court may consider Defendant's incorporation filings because they are directly relevant to the venue dispute, are public records, and their authenticity is undisputed.
ANALYSIS
I. Venue in Patent Cases
Title 28 U.S.C. § 1400(b) defines venue for a patent infringement lawsuit. RMH Tech, 2018 WL 1566839 at *2. It limits venue to the judicial district where the defendant (1) resides or (2) has committed acts of infringement and has a regular and established place of business. 28 U.S.C. § 1400(b).
Plaintiff does not assert venue on the basis of the second § 1400(b) factor. The second factor is met by filing the lawsuit in the state where the new drug application was filed, Valeant Pharms. N. Am. LLC v. Mylan Pharms., Inc., 978 F.3d 1374, 1375 (Fed. Cir. 2020), which Defendant says was California (ECF 36 at 3). The dispositive issue instead is the first factor and whether Defendant resides in Colorado. For § 1400(b) purposes, a corporate defendant “resides” only in the state where it is incorporated. RMH Tech, 2018 WL 1566839 at *3.
In its complaint, Plaintiff pleads that Defendant “is a corporation organized and existing under the laws of the state[] of Colorado.” ECF 1 at ¶ 3. The records that Defendant attaches to its Motion to Dismiss show that in July 2017, it had filed Articles of Incorporation with the State of Colorado and periodically filed reports through September 2020. ECF 15-3. Therefore, Defendant was a Colorado corporation on October 3, 2020 when Plaintiff filed the lawsuit. To that extent, the record supports Plaintiff's position that venue exists here.
Defendant explains that the listing resulted from a clerical error, which it later corrected. ECF 36 at 2. Through filings dated December 2 and December 8, 2020, it converted its status from a domestic to a foreign corporation. ECF 15-3. Defendant argues that a corporation may have only one place of incorporation, and for it, that is Texas where it incorporated as a domestic for-profit corporation first, in June 2005. ECF 15-1 and 15-2. In its complaint, Plaintiff concedes that Defendant “is also incorporated under the laws of the state of Texas.” ECF 1 at ¶ 4.
Citing Ajaj v. U.S., No. 15-cv-02849-RM-KLM, 2020 WL 747013, at *7 (D. Colo. Feb. 13, 2020), report and recommendation adopted in part, rejected in part, 2020 WL 5758521 (D. Colo. Sept. 28, 2020), Plaintiff responds that venue should be determined at the time of the complaint, but Ajaj is distinguishable. Ajaj considered venue under the general venue statute of 28 U.S.C. § 1391, and it held that the pro se prisoner plaintiff's later transfer to an out-of-state prison did not defeat venue. Id. at *7 (adding that a substantial portion of the events also occurred in Colorado). Here, by contrast, venue is governed by the stricter standard of 28 U.S.C. § 1400(b), and the inquiry dispositive to the instant Motion only concerns Defendant's place of incorporation. Nor does Rule 12(b)(3) limit consideration to only what Plaintiff pleads. Instead, as explained above, the Court may look beyond the pleadings and consider the public records concerning Defendant's incorporation status in determining whether Plaintiff establishes venue here.
The complex procedural posture of this case also warrants a broader consideration of venue. Plaintiff brings the same lawsuit simultaneously in three different districts because it is not readily apparent where the patent infringement claim should be litigated. Determining exactly where Defendant has its place of incorporation is part of that greater inquiry into where Plaintiff should litigate.
Plaintiff complains that Defendant adjusted its status in reaction to the lawsuit, but that fact does not necessarily undermine Defendant's objection to venue. Defendant acted quickly, adjusting its status with the State of Colorado soon after it was served with this lawsuit on November 25, 2020, and before any of the three pending lawsuits had progressed beyond the service of process stage. The adjustment brings Defendant's status with the State of Colorado in line with the fact that it was incorporated in Texas first. Plaintiff does not show that Defendant's status adjustment is inconsistent with its actions during the past three years when it was registered as a domestic Colorado corporation.
The Court finds that Defendant does not reside in Colorado for § 1400(b) purposes, and consequently, Plaintiff does not establish that the District of Colorado has venue for its patent infringement lawsuit.
II. Transfer
The next issue is the remedy. When a district court finds venue to be lacking, it either “shall dismiss, or if it be in the interest of justice, transfer such case to any district . . . in which it could have been brought.” 28 U.S.C. § 1406(a). Neither side makes a substantive argument over whether the result should be dismissal or transfer, if venue is found not to be in Colorado. Defendant simply asks for dismissal or in the alternative transfer to the Western District of Texas; Plaintiff simply asks that the motion be denied. Given the limited arguments, the Court finds transfer to be more appropriate. Party and witness convenience is less a factor at this early stage; little substantive litigation has occurred in this case yet. However, a transfer avoids the “time consuming and justice defeating” effects of a dismissal. Aspen, 2019 WL 1281211 at *6.
The remaining question is the transfer destination. Plaintiff has the same lawsuit pending in the Western District of Texas and the District of New Jersey. However, the parties have argued their dispute over Colorado venue only in reference to Texas and not New Jersey. Because the Western District of Texas is a district where the lawsuit “could have been brought, ” as 28 U.S.C. § 1406(a) requires, and because Plaintiff already has a lawsuit filed there, the Court finds that Defendant's request to transfer this case to the Western District of Texas should be granted. In reaching that conclusion, the Court makes no ruling on any other potential venue dispute that the parties may have concerning the Western District of Texas or the District of New Jersey.
CONCLUSION
When Plaintiff filed this lawsuit, Defendant was incorporated in both Texas and Colorado. However, it was incorporated in Texas first, and it amended its status with the State of Colorado to reflect that. Therefore, the Court agrees with Defendant that it does not reside in Colorado, and as such, the District of Colorado does not meet Section 1400(b)'s venue requirement.
ACCORDINGLY, the Court respectfully RECOMMENDS that Defendant's Motion to Dismiss [filed December 16, 2020; ECF 15] be granted and that this case be transferred to the Western District of Texas where Case No. 20-cv-01091 already is pending between the parties.
Be advised that all parties shall have fourteen (14) days after service hereof to serve and file any written objections in order to obtain reconsideration by the District Judge to whom this case is assigned. Fed.R.Civ.P. 72. The party filing objections must specifically identify those findings or recommendations to which the objections are being made. The District Court need not consider frivolous, conclusive or general objections. A party's failure to file such written objections to proposed findings and recommendations contained in this report may bar the party from a de novo determination by the District Judge of the proposed findings and recommendations. United States v. Raddatz, 447 U.S. 667, 676-83 (1980); 28 U.S.C. § 636(b)(1). Additionally, the failure to file written objections to the proposed findings and recommendations within fourteen (14) days after being served with a copy may bar the aggrieved party from appealing the factual findings of the Magistrate Judge that are accepted or adopted by the District Court. Thomas v. Arn, 474 U.S. 140, 155 (1985); In re Garcia, 347 F. App=x 381, 382-83 (10th Cir. 2009).