California Cases April 29, 2019: Genentech, Inc. v. Eli Lilly & Co.

Case Description

ORDER GRANTING IN PART AND DENYING IN PART GENENTECH'S MOTION REGARDING PROPER SCOPE OF VENUE DISCOVERY

[ECF No. 42]

Presently before the Court is a motion regarding proper scope of venue discovery filed by plaintiff Genentech, Inc. ("Genentech"), which seeks to compel further discovery responses related to venue. (ECF No. 42.) Defendant Eli Lilly and Company ("Lilly") opposes. (ECF No. 43.) For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Genentech's motion to compel further responses related to venue.

I. BACKGROUND

On July 2, 2018, Genentech filed a complaint alleging patent infringement against Lilly. (ECF No. 1.) On October 17, 2018, Genentech filed an amended and supplemental complaint ("FAC") against Lilly. (ECF No. 29.) In its FAC, Genentech alleges that Lilly is infringing its U.S. Patent No. 10,011,654 ("the '654 patent'") by manufacturing, using,

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importing, and/or offering for sale Taltz, a prescription medicine containing ixekizumab as its active ingredient. ( Id . at ¶¶ 3, 26-43.)

On November 13, 2018, Lilly filed a motion to dismiss the FAC under Federal Rule of Civil Procedure 12(b)(3) for improper venue or, in the alternative, to transfer the case to the United States District Court for the Southern District of Indiana pursuant to 28 U.S.C. § 1406. (ECF No. 30.) The motion was made on grounds that this Court "is not the proper venue for [Genentech's] patent infringement suit under 28 U.S.C. section 1400 and TC Heartland LLC v . Kraft Food Group Brands LLC , 137 S. Ct. 1514, 1518 (2017)." ( Id . at 2.) Lilly specifically argues:

The Supreme Court in TC Heartland LLC v . Kraft Foods Group Brands LLC , 137 S. Ct. 1514, 1518 (2017), reaffirmed that 28 U.S.C. § 1400(b) alone governs venue for infringement suits. Venue is improper here because Genentech cannot establish that Lilly (1) "resides," or (2) has "committed acts of infringement" and maintains a "regular and established place of business" within this District to satisfy the patent venue statute. 28 U.S.C. § 1400(b). In response to this Rule 12(b)(3) challenge, Genentech bears the burden of establishing venue is proper. In re ZTE (USA) Inc ., 890 F.3d 1008, 1013-15 (Fed. Cir. 2018). It cannot.

Lilly does not deny having a facility in San Diego, California, called the Lilly Biotechnology Center ("LBC"), dedicated solely to research and development. Genentech relies exclusively on the LBC in pleading venue, but fails to adequately identify any legally cognizable "act[] of infringement" to satisfy § 1400(b). Because Genentech is suing on its U.S. Patent No. 10,011,654 ("the '654 patent")—issued on July 3, 2018, more than two years after Lilly's Taltz® (ixekizumab) was approved by the FDA and marketed in the United States—prior research and development cannot be considered an "act[] of infringement" sufficient for § 1400(b). For venue purposes, Genentech was obligated to plead something more than alleged past research and development activities at the LBC from before the patent-in-suit existed, yet even when this deficiency was exposed by Lilly, Genentech could not establish venue in its amended and supplemented pleadings.

Moreover, threadbare, conclusory allegations elsewhere in the Complaint that Lilly is promoting and marketing the use of, offering for sale, and selling Taltz® in this District ( e . g ., ECF No. 29, ¶ 7) are inapplicable to venue, because these acts are not performed in the LBC, which is a research and development facility. To effectuate the language and intent of § 1400(b),

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courts have required showing that the alleged "committed acts of infringement" occur at the "established place of business" for patent venue, which Genentech cannot show here. E . g ., Scaramucci v . FMC Corp ., 258 F. Supp. 598, 600 (W.D. Okla. 1966); Jeffrey Galion , Inc . v . Joy Mfg . Co ., 323 F. Supp. 261, 263 (N.D. W. Va. 1971).

(ECF No. 30-1 at 9-10 (emphasis in original).)

On November 16, 2018, Genentech filed an ex parte motion for leave to seek expedited venue discovery. (ECF No. 34.) On November 30, 2018, the Honorable Janis L. Sammartino granted Genentech's ex parte motion for expedited venue discovery, stating:

In its Motion to Dismiss, Defendant argues venue is improper in this district, asserting that its alleged infringing activities in this district are insufficient to establish venue. See generally Mot. Plaintiff requests leave to conduct discovery regarding venue before filing its Opposition to Defendant's Motion. See generally Mot. for Discovery. The Court finds that discovery may be useful in this matter, and therefore permits discovery on this issue. See Hayashi v . Red Wing Peat Corp ., 396 F.2d 13, 14 (9th Cir. 1968) (holding a trial court should permit discovery on a motion to dismiss for improper venue where discovery may be useful in resolving issues of fact presented by the motion). The Court refers the Motion to Magistrate Judge Burkhardt to determine proper scope of the venue discovery.

(ECF No. 39.)

On December 6, 2018, the parties left a joint voicemail with Judge Burkhardt's chambers and informed the Court that there were no outstanding discovery disputes related to venue discovery at that time and they did not need the Court's assistance regarding Judge Sammartino's order. ( See ECF No. 40.) On January 30, 2019, the parties contacted Judge Burkhardt's chambers again and this time requested the Court's assistance to resolve a discovery dispute related to venue discovery. (ECF No. 41.) The Court set a briefing schedule. ( Id .)

On February 6, 2019, Genentech filed a motion regarding proper scope of venue discovery. (ECF No. 42.) Thereafter, Lilly filed an opposition and Genentech filed a reply. ( See ECF Nos. 43, 44.)

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II. LEGAL STANDARD

Federal Rule of Civil Procedure 26(d) states:

A party may not seek discovery from any source before the parties have conferred as required by Rule 26(f), except in a proceeding exempted from initial disclosure under Rule 26(a)(1)(B), or when authorized by these rules, by stipulation, or by court order.

Fed. R. Civ. P. 26(d)(1).

In this Circuit, courts must find "good cause" to determine whether to permit discovery before the Rule 26(f) conference. See Semitool , Inc . v . Tokyo Electron Am ., Inc ., 208 F.R.D. 273, 276 (N.D. Cal. 2002); U . S . v . Distribuidora Batiz CGH , S . A . De C . V ., No. 07-cv-370-WQH-JMA, 2009 WL 2487971, at *10 (S.D. Cal. Aug. 10, 2009). Good cause exists where the need for expedited discovery, in consideration of the administration of justice, outweighs the prejudice to the responding party. See , e . g ., Arista Records , LLC v . Does 1-43 , No. 07-cv-02357-LAB-POR, 2007 WL 4538697, at *1 (S.D. Cal. Dec. 20, 2007). In considering whether good cause exists, factors courts may consider include "(1) whether a preliminary injunction is pending; (2) the breadth of the discovery request; (3) the purpose for requesting the expedited discovery; (4) the burden on the defendants to comply with the requests; and (5) how far in advance of the typical discovery process the request was made." Palermo v . Underground Sols ., Inc., No. 12-cv-01223-WQH-BLM, 2012 WL 2106228, at *2 (S.D. Cal. June 11, 2012).

III. DISCUSSION

Here, Genentech has already obtained a court order finding there is good cause to obtain expedited discovery. ( See ECF No. 39.) The only issue before this Court is the scope of the expedited discovery. ( See id .) In considering the appropriate scope, the Court will consider the breadth of the discovery requests and the burden on Lilly to comply with the discovery requests. See Wi-LAN Inc . v . Lenovo (United States) , Inc ., No. 17CV365-BEN-MDD, 2017 WL 3194692, at *2-3 (S.D. Cal. July 27, 2017) (finding good cause for expedited venue discovery but limiting the requests after considering whether the requests

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were overbroad and whether the need for the requested discovery outweighed the prejudice to the opposing party).

The parties do not dispute that 28 U.S.C. § 1400(b) governs the scope of the present dispute regarding venue. ( See FAC at ¶ 8; ECF Nos. 34-1 at 4-5; 42 at 6; 43 at 5.) Section 1400(b) provides:

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

28 U.S.C. § 1400(b).

As no party suggests that Lilly resides in this District ( see FAC at ¶ 2; ECF No. 43 at 6), the parties' briefing is focused on the statute's provision that a civil action for patent infringement may be brought in the judicial district "where the defendant has committed acts of infringement and has a regular and established place of business." ( See ECF Nos. 42-44.) The Court will address each of these requirements below.

A. Regular and Established Place of Business

The Federal Circuit has set forth a three-part test for analyzing "the regular and established place of business" prong: "(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant." In re Cray Inc ., 871 F.3d at 1360. Each requirement must be met. Id .

Lilly concedes that the LBC is "a regular and established place of business" in this District. ( See ECF Nos. 42-3 at 16 (Lilly admitting that the LBC is a "regular and established place of business" under Section 1400(b)); 43 at 9.) Genentech does not

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contend that it needs discovery to determine whether another regular and established place of business exists in this District. Accordingly, the Court turns to the next requirement.

B. Acts of Infringement

Genentech claims that Lilly has committed acts of infringement in this District. ( See ECF No. 34-1 at 2-3.) Genentech alleges, inter alia , that Lilly has infringed its patent by promoting, marketing, selling, and offering to sell Taltz in this District, in violation of 35 U.S.C. § 271. ( See id . (citing FAC at ¶¶ 7-8).)

In response to Genentech's requests for admissions relating to venue, Lilly admitted the following: (1) Taltz has been sold or offered for sale in the Southern District of California on or after July 3, 2018; (2) Lilly has promoted or authorized third parties to promote the use of Taltz in the Southern District of California on or after July 3, 2018; and (3) Lilly has marketed or authorized third parties to market the use of Taltz in the Southern District of California on or after July 3, 2018. ( See ECF No. 42-3 at 9-11.) In light of these admissions, Lilly concedes that if it does not prevail on its nexus argument, venue would be proper in this District. ( See ECF No. 43 at 5, 9.)

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However, Lilly claims that if it does prevail on its nexus argument, any further discovery would be unnecessary because its "sworn declarations and certified discovery responses have addressed all relevant factual issues." ( Id .) The Court addresses this claim below.

1. Current Status of Venue Discovery

Following meet and confer efforts, Genentech served amended interrogatories, requests for production, requests for admission, and a Rule 30(b)(6) deposition notice on Lilly. Lilly responded to each request, subject to objections, and stated that it would not provide a Rule 30(b)(6) witness. ( See ECF No. 42-1 at ¶¶ 10-13, Exhs. 1-4.) Lilly's objections included, inter alia , the following:

• Lilly objects to Genentech's requests to the extent they seek documents, information, and admissions on matters that pre-date the July 3, 2018 issuance of the '654 patent, insamuch as the right to exclude others begins on the date the patent is granted.

• Lilly objects to Genentech's requests to the extent they seek documents, information, and admissions regarding Lilly activities beyond the LBC.

• Lilly objects to Genentech's requests to the extent they seek documents, information, and admissions regarding matters outside the relevant window created by the dates of the Complaints in this case— i . e ., before July 2, 2018, and after October 17, 2018, insamuch as venue is assessed at the time of filing.

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• Lilly objects to Genentech's requests to the extent they seek documents, information, and admissions for products other than Taltz as marketed and sold in the United States.

( See id .)

Subject to its objections, including those listed above, Lilly responded as follows ( see id .):

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2. Motion to Compel Further Responses

In its present motion, Genentech requests that this Court order Lilly to provide further discovery responses so that it can assess whether there is "any reasonable relationship between Taltz and the LBC." (ECF No. 42 at 9-10.) In support of this position, Genentech points to two of the cases Lilly cited in support of its nexus argument, Scaramucci v . FMC Corp ., 258 F. Supp. 598, 602 (W.D. Okla. 1966) and Jeffrey Gallon , Inc . v . Joy Mfg . Co ., 323 F. Supp. 261 (N.D. W. Va. 1971). ( Id .) A dispute over the scope of the holding in Scaramucci appears to be central to the parties' dispute over whether Lilly should be required to provide further responses to Genentech's discovery requests. ( See ECF Nos. 42 at 9-12; ECF No. 42 at 12 n.9.)

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In Scaramucci , the court determined that the defendant maintained in the district (1) a sales representative of the accused valve who worked out of his home, and (2) a division that manufactured and sold a line of equipment different from the accused valve (OCT Division). Scaramucci , 258 F. Supp. at 600. The court further determined that the defendant had committed an act of infringement in the district with reference to the accused valve involved because it sold the valve in the district within the meaning of 35 U.S.C. § 271(a), and actively induced infringement regarding the valve in the district within the meaning of 35 U.S.C. § 271(b). Id . at 600-01.

However, turning to the next requirement, the Scaramucci court concluded that the defendant did not have a regular and established place of business in the district "within the intent, purpose and meaning of 28 U.S.C. § 1400(b)." Id . at 601. First, the court held that the activities of the sales representative did not constitute a "regular and established place of business." Id . Next, the court held that the OCT Division that manufactured and sold a line of equipment different from the accused valve could not satisfy the venue statute. Id . The court reasoned:

As to the OCT Division and its office in this judicial district the question is more difficult. At first blush this would seem to satisfy the venue statute. But this is a special patent venue statute and a consideration of the history of patent venue, this statute, its predecessor statute and the apparent purpose and intent of the present statute, leads the Court to the conclusion that this requirement is lacking in this case notwithstanding the defendant has another Division with a regular and established place of business in this judicial district . The former patent venue statute allowed suit wherever the offender could be served. The present statute was intended to narrow or restrict this venue.

Id . (emphasis added).

The Scaramucci court then cited cases discussing the purpose of the patent venue statute. Id . at 602 (citing Morse v . Master Specialties Co ., 239 F. Supp. 641, 642 (D.N.J. 1964); Ruth v . Eagle-Picher Co ., 225 F.2d 572, 577 (10th Cir. 1955)). In conclusion, the court stated:

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It is therefore concluded that for the special purpose of patent infringement venue, the OCT Division office of the defendant in this judicial district, which Division and office has absolutely nothing to do with the accused valve or its manufacture, sale, service or distribution here or anywhere else, will not satisfy the requirement of said special patent venue statute that the defendant have 'a regular and established place of business' in this judicial district. It is the opinion of the Court that there must be some reasonable or significant relationship between the accused item and any regular and established place of business of the accused in the judicial district .

Id . at 602 (emphasis added).

Based on the foregoing, Genentech contends that any "reasonable or significant relationship" between Taltz and the LBC ("or its predecessor") is relevant to establishing a nexus, without any restriction as to time or activity. ( See ECF Nos. 42 at 8-12; 44 at 2.) Lilly, on the other hand, argues that Genentech has taken the Scaramucci court's words out of context, stating:

This language cannot render the "nexus" analysis so broad as to admit as "acts of infringement" activities legally unavailable and/or not cognizable under § 271. Such are not "reasonable or significant" for purposes of the § 1400(b) analysis. Scaramucci 's very facts demonstrate it was addressing contemporary manufacturing and sales, not activities pre-dating by many years the patent-in-suit or the filing of the case, . . . so this language cannot possibly be read as Genentech wants.

(ECF No. 42 at 12 n.9.)

For purposes of the present motion, the Court finds that resolving the dispute is unnecessary. With one exception, the Court finds that Lilly has already sufficiently responded to Genentech's discovery requests in a manner that will enable the district judge, if necessary, to determine whether a nexus exists between the alleged acts of infringement and the LBC. ( See ECF No. 42-1 at ¶¶ 10-13, Exhs. 1-4.) The one exception concerns Interrogatory No. 2. In Interrogatory No. 2, Genentech requests that Lilly "[d]escribe all completed, ongoing, and planned activities related to Taltz, including its active ingredient ixekizumab, taking place at the Lilly Biotechnology Center." (ECF No. 42-5 at 9.) Lilly

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limited its response to research, development, and clinical work for Taltz at the LBC. ( Id . at 9-10.) However, the request is broader than research, development, or clinical work. Accordingly, Lilly shall supplement its response and describe all activities related to Taltz, including its active ingredient ixekizumab, taking place at the LBC between July 2, 2018 and October 17, 2018.

As to the remaining discovery requests, Genentech does not adequately explain why additional detail is required for resolution of the venue motion pending before the district judge. Moreover, the Court finds that requiring Lilly to further respond to Genentech's discovery requests, as well as produce a Rule 30(b)(6) witness, would be unduly burdensome.

The Court also finds that Genentech's discovery requests relating to any purported transfer motion to be overbroad and lacking in relevancy at this stage. Lilly's pending motion seeks to dismiss this action for improper venue under Rule 12(b)(3) or, in the alternative, to transfer it to the Southern District of Indiana pursuant to 28 U.S.C. § 1406. ( See ECF Nos. 30 at 2; 30-1 at 13, 22, 25.) Section 1406(a) provides: "The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28. U.S.C. § 1406(a). Therefore, if the district judge

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determines that this District is an improper venue, the case can only be dismissed or transferred to a district "in which it could have been brought" under Section 1400(b), such as the Southern District of Indiana, where Lilly is incorporated. ( See FAC at ¶ 2.) If, however, the district judge determines that venue is proper in this District, there is no motion presently before this Court pursuant to 28 U.S.C. § 1404, which permits a district judge to transfer the case to another district "[f]or the convenience of parties and witnesses" and "in the interest of justice." 28 U.S.C. § 1404(a).

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART and DENIES IN PART Genentech's motion to compel further responses. As set forth above, Lilly shall further respond to Interrogatory No. 2 within five (5) court days of the date of this Order.

IT IS SO ORDERED.

Dated: April 29, 2019

/s/ _________
Hon. Jill L. Burkhardt
United States Magistrate Judge