Purdue Pharma L.P. et al v. Varam, Inc. et al

Filing 94

OPINION & ORDER. For the reasons set forth above, KVK's motion to dismiss is construed as a motion for summary judgment and denied. Defendants' motion to transfer this action to the Eastern District of Pennsylvania or in the alternative st ay this action is denied to the extent it seeks transfer, but granted to the extent this action is stayed in favor of No. 11 Civ. 766, the essentially identical action already transferred into this multidistrict litigation from the Eastern District of Pennsylvania. (Signed by Judge Sidney H. Stein on 10/19/2012) Filed In Associated Cases: 1:04-md-01603-SHS, 1:10-cv-06038-SHS(lmb)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: OXYCONTIN ANTITRUST LITIGATION
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PURDUE PHARMA L.P., P.F. LABORATORIES, :
INC., PURDUE PHARMACEUTICALS, L.P.,
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and RHODES TECHNOLOGIES,
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Plaintiffs,
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-against:
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VARAM, INC., and KVK-TECH, INC.
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Defendants.
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04-MD-1603 (SHS)

This document relates to:
10 Civ. 6038 (SHS)
OPINION & ORDER

SIDNEY H. STEIN, U.S. District Judge.
This action for patent infringement pursuant to 35 U.S.C. § 271(e) arises from defendant
Varam, Inc.’s submission of Abbreviated New Drug Application (“ANDA”) number 20-1523 to
the Food and Drug Administration through defendant KVK-Tech, Inc. (“KVK”) and its staff.
Pursuant to 21 U.S.C. § 355(j), defendants sought FDA approval to manufacture and market a
generic version of plaintiffs’ OxyContin-branded oxycodone hydrochloride extended release
tablets before certain patents underlying OxyContin expired.1 In conjunction with the ANDA,
defendants certified that plaintiffs’ OxyContin patents are “invalid or will not be infringed” by
defendants’ proposed generic, within the meaning of 21 U.S.C. § 355(j)(2)(A)(vii)(IV)—termed
the “paragraph IV certification.” Plaintiffs claim that their patents are valid, that the proposed
generic will infringe the patents, and thus that submitting the ANDA constitutes infringement.
See 35 U.S.C. § 271(e)(2)(A) (“It shall be an act of infringement to submit [an ANDA] . . . for a

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The contents of the patents at issue are not relevant to the motions the Court decides here.

drug claimed in a patent . . . if the purpose of such submission is to obtain approval . . . to engage
in the commercial manufacture, use, or sale of a drug . . . before the expiration of such patent.”).
Three motions by defendants are now before the Court. First, KVK has moved pursuant
to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) to dismiss the claims against it for lack
of subject matter jurisdiction and failure to state a claim for which relief can be granted. Second,
Varam has moved pursuant to Rule 12(b)(2) to dismiss the claims against it for lack of personal
jurisdiction over it. Third, defendants have jointly moved to transfer this action to the Eastern
District of Pennsylvania, or in the alternative stay proceedings pending the resolution of a
parallel action filed in the Eastern District of Pennsylvania. For the reasons set forth below,
KVK’s motion to dismiss the claims against it is considered as a motion for summary judgment
and denied, and the Court grants defendants the alternative relief sought in their transfer motion,
staying this action, which defers consideration of, and a hearing on, Varam’s motion to dismiss
for lack of personal jurisdiction.
I. BACKGROUND
As discussed in more detail below, KVK’s motion to dismiss for lack of subject matter
jurisdiction is more properly considered as alleging that plaintiffs fail to state a claim. Because
that Rule 12(b)(6) motion relies on matters outside the pleadings, the Court must consider it as a
motion for summary judgment. See Fed. R. Civ. P. 12(d). Accordingly, the following facts are
drawn from the testimony and documentary evidence that accompanies the parties’ submissions.
A. The Parties
1. Plaintiffs
Plaintiffs are three partnerships and a corporation, each of which jointly owns some of
the patents that are allegedly essential to OxyContin and to the generic product at issue in the
ANDA.
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2. KVK-Tech, Inc.
KVK researches, develops, manufactures, distributes, and sells generic pharmaceuticals.
(Compl. ¶¶ 8, 11-14; Dep. of Frank Ripp, Jr., dated Oct. 27, 2010 (“Ripp Dep.”) at 91:14-92:5,
Ex. 2 to Decl. of Thomas Wang dated Jan. 10, 2011 (“Wang Decl.”), Dkt. No. 36.) The company
has developed at its Pennsylvania facilities approximately ten different generic pharmaceuticals
(Ripp Dep. 92:6-21), including a generic immediate-release oxycodone pill (id. at 94:17-24).
KVK itself manufactures some of the products it has developed, and has distributed and sold all
of them throughout the United States. (Id. at 95:10-20, 101:3-16.) Frank Ripp, Jr. is KVK’s
President and Treasurer, overseeing its staff of approximately seventy-five people, largely out of
facilities in Newtown, Pennsylvania. (Id. at 18:22-19-6, 54:17-22.)
3. Varam, Inc.
Varam’s sole shareholder, director, officer and employee, Frank Nekoranik, incorporated
the company in Pennsylvania in early February 2010. (Compl. ¶ 6; Dep. of Frank Nekoranik
dated Oct. 25, 2010 (“Nekoranik Dep.”) at13:12-24-15:6, Ex. 1 to Wang Decl.) Nekoranik
created Varam in order to own the extended release oxycodone ANDA (Nekoranik Dep. 87:2588:5), which he had received from KVK about one week earlier (Wang Decl. Ex. 8). Varam has
no other business activity aside from pursuing, through KVK, FDA approval of the ANDA.
(Nekoranik Dep. 167:12-16.)
Varam does business at three different addresses: KVK’s Newtown offices as its
registered address with the Pennsylvania Department of State (Wang Decl. Ex. 3); shared space
in the Lahaska, Pennsylvania, offices of Biz-Visors, Inc., a company Ripp owns (Decl. of Frank
Nekoranik dated Sept. 2, 2010 at ¶ 5, Dkt. No. 13; Ripp Dep. 28:24-29:3); and Nekoranik’s
home in Pennsylvania (Nekoranik Dep. at 161:11-164:20). Varam does not pay KVK for the use
of its address, and pays only $25 per month for the Biz-Visors space. (Id. at 45:23-46:24.)
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B. Defendants’ Submission of the Abbreviated New Drug Application
The parties essentially agree that KVK and its employees performed all of the work
necessary to submit the ANDA except for Nekoranik’s review, approval, and signature. In fact,
KVK began researching and developing its generic version of extended release oxycodone in
2006, years before Varam existed. (Ripp Dep. 170:24-171:4.) By late 2009, KVK had developed
the product, tested it, and drafted the ANDA, but then decided not to move forward with the
ANDA. (Id. at 175:2-22.) However, KVK subsequently agreed on February 2, 2010, to assign its
rights to the draft “ANDA dossier” to Nekoranik in exchange for Nekoranik’s promise to pay
KVK $1 million “upon marketing approval [by the FDA], sales and distribution by Nekoranik.”
(Wang Decl. Ex. 8.) In that agreement, KVK also promised to perform all the work necessary to
complete the ANDA process. (Id.) In other words, KVK gave Nekoranik the draft ANDA free of
charge, except that Nekoranik would pay KVK $1 million if, by KVK’s efforts, the ANDA were
approved. One week later, Nekoranik incorporated Varam, and on February 17, 2010, Nekoranik
assigned the same ANDA dossier to Varam in exchange for 100% of Varam’s common stock.
(Wang Decl. Ex. 9.) Nekoranik has no scientific or technical expertise, and so relied entirely on
KVK to conduct the research and assemble the data into the form required for an ANDA.
(Nekoranik Dep. 224-25.) After KVK prepared the ANDA, Nekoranik merely “glanced at” the
scientific documents (id. at 223:6-12) and “reviewed” the overall ANDA application (id. at
224:4). He relied on KVK’s assurance, through Ripp, that everything was “in order.” (Id. at
224:17-22).
As originally filed with the FDA in Rockville, Maryland, on March 8, 2010, the ANDA
identified Varam as the applicant in some places and KVK as the applicant in others. (See Wang
Decl. Exs. 14, 16, & 21.) The summary form, FDA Form 356h, lists Varam as the applicant, and
KVK as the “authorized U.S. agent,” and lists KVK’s Newtown facilities as the address for both
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Varam and KVK. (Wang Decl. Ex. 21 at 1.) A KVK employee, Ashvin Panchal, signed Form
356h as Varam’s agent. (Id. at 2.) Nekoranik’s cover letter also identifies KVK as the
manufacturer and prospective distributor of the drug product, as do the sample labels submitted
as part of the ANDA. (Wang Decl. Ex. 19 at 2; Wang Decl. Ex. 23.) Nekoranik further requested
that the FDA direct all communications to KVK’s office. (Wang Decl. Exs. 19, 21.) After the
FDA wrote to Panchal expressing confusion over Varam’s role in the ANDA (Wang Decl. Ex.
15), a new Form 356h was submitted on May 19, 2010. That form listed Varam’s address as the
Biz-Visors office, and Nekoranik himself, rather than Panchal, signed as the responsible official.
(Wang Decl. Ex. 22.) KVK personnel have continued to handle all interactions with the FDA
regarding the ANDA, pursuant to KVK’s agreement with Nekoranik.
C. Procedural History
Based on the ANDA and the accompanying assertion that plaintiffs’ patents are invalid or
would not be infringed by the proposed generic, plaintiffs filed suit here and simultaneously in
the Eastern District of Pennsylvania. See Complaint, Purdue Pharma L.P. v. Varam, Inc., No. 10
Civ. 4028 (E.D. Pa. Aug. 10, 2010). After defendants filed the motions now before the Court, the
Joint Panel on Multidistrict Litigation transferred the Pennsylvania action to this Court for
consolidated pretrial proceedings with In re OxyContin Antitrust Litigation, No. 04 MDL 1603.
See MDL Transfer Order, Purdue Pharma L.P. v. Varam, Inc., No. 11 Civ. 766 (S.D.N.Y. Feb.
3, 2011). In that action, KVK filed a motion to dismiss the claims against it that is materially
indistinguishable from the motion to dismiss decided here. While these motions were pending,
defendants submitted another ANDA seeking FDA approval of other dosage strengths for
essentially the same drug. Purdue responded in 2012 by again filing suit both in this district (see
Complaint, Purdue Pharma L.P. v. Varam, Inc., No. 12 Civ. 2814) and the Eastern District of
Pennsylvania, with the Joint Panel again transferring the latter to this Court over defendant’s
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objections (see Transfer Order, In re OxyContin Antitrust Litig., No. 04 MDL 1603 (S.D.N.Y.
Aug. 3, 2012). The latter case is now docketed as Purdue Pharma L.P. v. Varam, Inc., No. 12
Civ. 6047. The parties have filed substantially the same motions, raising the same arguments, in
those 2012 cases, and the Court’s reasoning here applies with equal force to those motions.
II. DISCUSSION
A. KVK’s Liability Pursuant to section 271(e)
KVK moves the Court to dismiss the claims against it, contending that subject matter
jurisdiction is lacking and no valid claim can be stated because only Varam—not KVK—
actually “submit[ted]” the ANDA within the meaning of 35 U.S.C. § 271(e)(2). As an initial
matter, “[s]ection 271(e)(2) is not a jurisdictional statute in the strict sense.” Allergan, Inc. v.
Alcon Labs., Inc., 324 F.3d 1322, 1330 (Fed. Cir. 2003). The provision creates a cause of action,
and hence a case or controversy, for “a highly artificial act of infringement.” Eli Lilly & Co. v.
Medtronic, Inc., 496 U.S. 661, 676 (1990). Because federal courts generally have jurisdiction
over patent infringement claims pursuant to 28 U.S.C. § 1338(a), “section 271(e)(2) makes it
possible for the district court to exercise its section 1338(a) jurisdiction in the situation in which
an ANDA has been filed.” Allergan, 324 F.3d at 1330. As the Federal Circuit has recently
reiterated, “nothing more” than an allegation of section 271(e)(2) infringement by submitting an
ANDA “was required to establish the district court’s subject matter jurisdiction pursuant to
§ 1338(a).” See AstraZeneca Pharm. LP v. Apotex Corp., 669 F.3d 1370, 1377 (Fed. Cir. 2012).
KVK’s motion concerns the proper construction of the infringement cause of action, not the
predicate of federal jurisdiction, and so is properly considered as a Rule 12(b)(6) motion.
However, plaintiffs and KVK both rely extensively on materials outside the pleadings. Because
the Court does not exclude those matters, Rule 12(d) requires that “the motion must be treated as
one for summary judgment under Rule 56.”
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1. Legal Standard
“Summary judgment is appropriate ‘if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.’” Lexion
Medical, LLC v. Northgate Technologies, Inc., 641 F.3d 1352, 1358 (Fed. Cir. 2011) (quoting
Fed. R. Civ. P. 56(a)). The Federal Circuit looks to the regional circuit for the summary
judgment standard. MicroStrategy, Inc. v. Bus. Objects, S.A., 429 F.3d 1344, 1349 (Fed. Cir.
2005). Thus, this Court must “resolve all ambiguities, and credit all factual inferences that could
rationally be drawn, in favor of the party opposing summary judgment.” Kessler v. Westchester
Cnty. Dep’t of Soc. Servs., 461 F.3d 199, 206 (2d Cir. 2006). Nonetheless, the party opposing
summary judgment “must do more than simply show that there is some metaphysical doubt as to
the material facts, and may not rely on conclusory allegations or unsubstantiated speculation.”
Brown v. Eli Lilly & Co., 654 F.3d 347 (2d Cir. 2011) (citations and quotation marks omitted).
2. KVK’s section 271(e) Submitter Liability
It is generally “not . . . an act of infringement to make, use, offer to sell, or sell” patented
products if done “solely for uses reasonably related to the development and submission” of
regulatory filings. 35 U.S.C. § 271(e)(1) (emphasis added). That protection notwithstanding,
[i]t shall be an act of infringement to submit . . . an [ANDA] . . . for a drug
claimed in a patent or the use of which is claimed in a patent . . . if the purpose of
such submission is to obtain approval under such Act to engage in the commercial
manufacture, use, or sale of a drug . . . claimed in a patent or the use of which is
claimed in a patent before the expiration of such patent.
35 U.S.C. § 271(e)(2)(A). In sum, generic manufacturers are shielded from liability when they
deal in would-be infringing products solely for the purposes of regulatory filings, but they cross
the line into unprotected conduct if they submit an ANDA with a paragraph IV certification, see
21 U.S.C. § 355(j)(2)(A)(vii)(IV), claiming the right to sell the generic before a valid patent
expires. See generally Allergan, 324 F.3d at 1325-27.
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The facts of KVK’s involvement in the ANDA are not even in material dispute. KVK’s
staff has taken every relevant action save for the final review, signing and mailing of the ANDA;
KVK has researched and developed the product, produced the samples, prepared the ANDA on
Varam’s behalf, and subsequently communicated about the ANDA with the FDA as Varam’s
official agent. Moreover, although KVK is neither Varam’s parent nor the owner of the ANDA,
it holds a direct stake in the ANDA’s success. KVK has given the draft ANDA and subsequent
labor to Nekoranik for free, subject only to the requirement that Nekoranik pay KVK $1 million
if KVK’s staff succeeds in getting the ANDA approved and Nekoranik distributes the product.
Nekoranik admits he cannot understand the content of the ANDA, and his only role in its
submission has been to periodically review and sign papers based on KVK’s recommendation.
KVK contends that only one entity can “submit” the ANDA to the FDA and thus incur
section 271(e)(2) liability and that said entity must be the named applicant. The statute’s text
does not define the term, “submit,” and neither the Federal Circuit nor the Supreme Court has
construed the term in this context. The parties point the Court to two lines of cases in the federal
district courts considering whether a party who is not the named applicant on an ANDA can be
liable pursuant to section 271(e)(2) for “submit[ting]” the ANDA. KVK relies on two cases
where courts found that the manufacturer of the active ingredient for a patented product could
not be held liable as a submitter. See SmithKline Beecham Corp. v. Geneva Pharm., Inc., 287 F.
Supp. 2d 576, 583-85 (E.D. Pa. 2002); SmithKline Beecham Corp. v. Pentech Pharm., Inc., No.
00 C 2855, 2001 U.S. Dist. LEXIS 1935, at *8-*10 (N.D. Ill. Feb. 16, 2001). Plaintiffs
distinguish those cases and rely on cases where courts have found that the corporate relative and
U.S. agent of the named, foreign applicant could be held liable for submitting the ANDA on the
applicant’s behalf. See In re Rosuvastatin Calcium Patent Litig. (“Rosuvastatin”), 719 F. Supp.

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2d 388, 396-98 (D. Del. 2010) (collecting cases).2 Although the facts here are unique, the Court
finds the Rosuvastatin court’s reasoning the most applicable and persuasive.
The active-ingredient manufacturers in Geneva and Pentech confined their work for the
ANDA applicants to a support role distinct from KVK’s management of, and financial stake in,
the ANDA. In each case, the third parties provided ingredients and information that were used in
the ANDA, as specifically protected by section 271(e)(1), but they did not take the extra step of
handling the ANDA process for the named applicant as KVK did. Nor did they have the direct
financial stake in the ANDA that KVK has. Cf. Geneva, 287 F. Supp. 2d at 583-85; Pentech,
2001 U.S. Dist. LEXIS 1935, at *8-*10.
This case is much closer to the circumstances that the Rosuvastatin court confronted.
There, the U.S. agent and the foreign named applicant had largely overlapping ownership, and
the agent both signed the forms and listed its address and contact information in the filings. Id. at
397. The agent also “intend[ed] to directly benefit from the approval of the ANDA [as] the
marketing arm of” the applicant. More importantly, the agent “actively participated in activities
related to the ANDA submission.” Id. The court noted that “[p]arties ‘actively involved’ in
preparing the ANDA are deemed to have ‘submitted’ the ANDA, regardless of whether they are
the named applicant.” Id. at 396 (quoting Cephalon, Inc. v. Watson Pharm., Inc., 629 F.Supp.2d
338, 349 (D. Del. 2009)).
While “active involvement” would suffice under the District of Delaware’s test, this
Court need not adopt that low a threshold to conclude that KVK can be liable as a submitter.
KVK has been more than actively involved in the submission; it has taken every relevant action

2

See also In re Cyclobenzaprine Hydrochloride Extended–Release Capsule Patent Litig., 693 F. Supp. 2d
409, 417-18 (D. Del. 2010); Cephalon, Inc. v. Watson Pharm., Inc., 629 F. Supp. 2d 338, 349 (D. Del. 2009); Wyeth
v. Lupin Ltd., 505 F. Supp. 2d 303, 306-307 (D. Md. 2007); Aventis Pharma Deutschland GMBH v. Lupin Ltd., 403
F. Supp. 2d 484, 492-494 (E.D. Va. 2005).

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except the final formalities. In these circumstances, to find Varam but not KVK has
“submit[ted]” the ANDA pursuant to section 271(e)(2) would be to elevate form over substance.
Accordingly, the Court finds that the record reasonably supports a conclusion that KVK
has submitted the ANDA within the meaning of section 271(e)(2), and plaintiffs are not entitled
to summary judgment that only Varam—and not KVK—“submitted” the ANDA.
B. Staying this Action
Because the Court has accepted the parallel action filed in the Eastern District of
Pennsylvania into this multidistrict litigation for coordinated pretrial proceedings, pursuant to 28
U.S.C. § 1407, transferring this action to that District would be counterproductive at this time.
Defendants also request that the Court stay this action, pending resolution of the parallel action.
That action is materially indistinguishable from this action, except that Varam concedes personal
jurisdiction in Pennsylvania and vigorously contests it here in New York. That difference is
decisive as to which action will proceed to the merits of the dispute more efficiently.
“[T]he power to stay proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy of time and effort for itself, for
counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936); accord TradeWinds
Airlines, Inc. v. Soros, Nos. 08 Civ. 5901 & 10 Civ. 8175, 2011 U.S. Dist. LEXIS 9432, at *7-8
(S.D.N.Y. Feb. 1, 2011). The factors courts consider on a motion to stay include
“(1) the private interests of the plaintiffs in proceeding expeditiously with the civil
litigation as balanced against the prejudice to the plaintiffs if delayed; (2) the
private interests of and burden on the defendants; (3) the interests of the courts;
(4) the interests of persons not parties to the civil litigation; and (5) the public
interest.” In balancing these factors, “the basic goal is to avoid prejudice.”
Soros, 2011 U.S. Dist. LEXIS 9432, at *8 (quotation marks omitted) (quoting Kappel v.
Comfort, 914 F. Supp. 1056, 1058 (S.D.N.Y. 1996)). In this rare circumstance where two
identical actions are proceeding before one judge, a stay of one action for the duration of pretrial
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proceedings will not prejudice any party. Unlike in Landis, there is no risk here that “a litigant in
one cause [will] be compelled to stand aside while a litigant in another settles the rule of law that
will define the rights of both.” 299 U.S. at 255. The parties, claims, and applicable substantive
law are identical in the two actions. Given that the Pennsylvania action would still proceed to the
merits in this Court, granting defendants’ request to stay this action would occasion no delay and
so would not prejudice plaintiffs.
Therefore, the interests of the Court, the public, and non-parties determines whether the
New York action should be stayed, see Soros, 2011 U.S. Dist. LEXIS 9432, at *8, and those
interests weigh in favor of a stay. Proceeding with this action, in which Varam contests personal
jurisdiction, would require a hearing on the facts relevant to the personal jurisdiction inquiry.
Proceeding with the Pennsylvania action would not, and the hearing would prove unnecessary if
the matter is resolved on other grounds or settled before trial. Potentially avoiding that hearing
conserves the Court’s resources and saves the time of any witnesses who might be called to
testify—as well as the expense of such a hearing for the parties. Thus, the Court finds that it is
within its discretion to stay this action in favor of the essentially identical action already
transferred to this Court from the Eastern District of Pennsylvania, No. 11 Civ. 766.

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III. CONCLUSION
For the reasons set forth above, KVK's motion to dismiss is construed as a motion for
summary judgment and denied. Defendants' motion to transfer this action to the Eastern District
of Pennsylvania or in the alternative stay this action is denied to the extent it seeks transfer, but
granted to the extent this action is stayed in favor of No. 11 Civ. 766, the essentially identical
action already transferred into this multidistrict litigation from the Eastern District of
Pennsylvania.
Dated: New York, New York
October 19, 2012

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