Alleging Infringement by Corporate Officers Requires More Than Just Bare Allegations

  • Nacre AS v. Silynx Communications, Inc., No. 07-cv-02676, filed Oct. 2, 2007; assigned to J. Williams.

     Plaintiff Nacre AS is a Norwegian company that alleges ownership of U.S. registered trademark QUIETPRO, as well as U.S. Patent No. 7,039,195 (“Ear Terminal”) and U.S. Patent No. 6,567,524 (“Noise Protection Verification Device”). In September 2007, Nacre filed a trademark opposition proceeding against Rockville, MD-based Silynx Communications' QUIETOPS mark before the U.S. Trademark Trial and Appeal Board. That proceeding was stayed when, in October 2007, Nacre filed the above lawsuit against Silynx and its CEO, Gil Limonchik, alleging trademark and patent infringement. On June 12, 2008, the infringement allegations against Limonchik were dismissed without prejudice. Memorandum and Opinion (June 12, 2008). Limonchik, who according to court papers was a former Nacre consultant, had filed a motion to dismiss with prejudice under Rule 12(b)(6) (failure to state a claim).

     In granting the motion as to Count I (trademark infringement), Judge Williams stated that in order for a trademark claim against a corporate officer to survive a Rule 12(b)(6) motion, a plaintiff must allege, in addition to a corporation's infringing activity, that the individual corporate officer played an active role in the infringing activity. In this case, Judge Williams found Nacre's complaint failed to state factual allegations to indicate what actions Limonchik had taken in an individual capacity to infringe upon the QUIETPRO (R) mark. The only relevant allegations in Nacre's complaint, Judge Williams said, were "Defendant have and are infringing the rights of Nacre in QUIETPRO (R) under 15 U.S.C. 1125 and the common law" and "Defendants' infringement of Nacre's rights in QUIETPRO (R) is and has been willful."  Neither of those statements mentioned what specific role Limonchik played in the infringement, Williams found.      

     In granting the motion as to Counts II and III (patent infringement), Judge Williams found Nacre's complaint failed to allege facts sufficient to preclude dismissal of these counts. No part of the complaint, he wrote, offered facts to justify piercing the corporate veil, to demonstrate Limonchik's specific intent or action to induce infringement or facts to support contributory infringement liability.

     Nacre's case is not completely lost, however. Judge Williams' dismissal was made, as noted above, without prejudice as to Nacre's right to amend its complaint to add more factual allegations:

"Plaintiff has walked a fine line in drafting the complaint. It is possible to conjecture facts which would support Defendant Limonchik's liability in this case. However, the law requires a plaintiff to allege enough facts to put the defendant on notice of the claims and the grounds for those claims. Here, Plaintiff has not stated clear grounds for the claims alleged in the complaint."

     Judge Williams noted that "[Limonchik] has not offered any evidence that he would be prejudiced by an amendment [of the complaint], that an amendment would be futile, or that Plaintiff engaged in undue delay. * * * Defendant asks for dismissal with prejudice solely on the grounds that Plaintiff has failed to allege sufficient facts."

Wyeth v. Lupin: Maryland District Court Denies Motion to Dismiss

     In Wyeth v. Lupin, Ltd. and Lupin Pharmaceuticals, Inc., No. 07, Civ. 0632 (D. Md Sep. 11, 2007), the District Court for the District of Maryland denied Baltimore-based Lupin Pharmaceuticals, Inc.'s (LPI) motion to dismiss an action against it and its parent, Mumbai, India-based Lupin Ltd. (Lupin), brought by pharmaceutical giant Wyeth. In reaching its decision, the District Court concluded that "when a wholly-owned U.S. subsidiary of a foreign corporation exists to distribute foreign-produced generic drugs in the U.S. and is actively involved in the ANDA process, the subsidiary also 'submits' an ANDA application" making it subject to the Hatch-Waxman Act like its parent.

     This case began when Lupin filed an Abbreviated New Drug Application (“ANDA”) with the FDA seeking approval to market a generic version of EFFEXOR® in the U.S. Under the Hatch-Waxman Act, the filing of an ANDA is an act of infringement. Accordingly, Wyeth, which owns U.S. Patents 6,274,171; 6,403,120; and 6,419,958 for venlafaxine hydrochloride (marketed by Wyeth as EFFEXOR® XR capsules), sued LPI and Lupin within the statutory 45-day period after receiving Lupin's "Paragraph IV" Notice Letter on January 30, 2007.

LPI's Motion to Dismiss

     LPI moved, under F.R.C.P. Rule 12(b)(6), to dismiss the complaint against it, arguing that under the Hatch-Waxman Act, the only act of direct infringement under 35 U.S.C. § 271(e)(2)(A) was Lupin's filing of the ANDA with the FDA. Wyeth sought to maintain LPI in the lawsuit, arguing that there is no “one-defendant-per-ANDA” rule under the Hatch-Waxman Act. LPI, Wyeth said, acted in concert with Lupin to violate Wyeth’s patents.

     The District Court began its analysis by noting that Lupin had made the same arguments, unsuccessfully, in Aventis Pharma Deutschland GMBH v. Lupin Ltd., 403 F. Supp. 2d 484, 494 (E.D. Va. 2005). In that case, the district court found:

"LPI’s relationship with Lupin was that of a subsidiary of the applicant and that subsidiary
submitted the ANDA application to the FDA as agent on the foreign company’s behalf."

     The Maryland District Court also noted that in the Aventis case, LPI had countersigned Lupin's ANDA, which provided further indication that LPI was more than a “mailbox” for Lupin’s U.S. business interests. The District Court then distinguished the present case from SmithKline Beecham Corp. v. Geneva Pharms., Inc., 287 F. Supp. 2d 576 (E.D. Pa. 2002), where an innovator sought to amend it complaint by adding a third-party manufacturer that was supplying an active ingredient for the generic drugs at issue in the disputed ANDA. Concluding that LPI had not met its burden, the Maryland District Court then found:

"LPI is actively involved with filing Lupin’s ANDAs with the FDA, and marketing and distributing the approved generic drugs in the United States. LPI’s role in filing the ANDA is distinct from the future promises of support made by the third-party manufacturers in the SmithKline cases. The Court does not read § 271(e)(2) as broadly as the Aventis court, which placed significance on LPI’s countersignature as part of its agent-principal relationship with Lupin. But when a wholly-owned U.S. subsidiary of a foreign corporation exists to distribute foreign-produced generic drugs in the U.S. and is actively involved in the ANDA process, the subsidiary also 'submits' an ANDA application."

     LPI also moved, unsuccessfully, to dismiss the induced infringement claims against it. In its analysis of LPI's arguments, the District Court noted that the Federal Circuit has recognized a cause of action for induced infringement under § 271(e)(2), Allergan, Inc. v. Alcon Labs., Inc., 324 F.3d 1322, 1331 (Fed. Cir. 2003) (per curiam), and also acknowledged that other district courts before and after Allergan have disagreed about whether inducement liability exists for entities that were not the named ANDA filers (citing S.D. New York., D. of Delaware, N.D. West Virginia, E.D. Pennsylvania, N.D. Illinois). Based on the pleadings in this case, the Court sided with Wyeth: 

"Wyeth has sufficiently alleged that LPI actively induced infringement under § 271(e)(2). Wyeth alleges that LPI was actively involved in the ANDA submission process, aided and
abetted the inducement of the patents-in-suit, and upon FDA approval, will infringe the patents-in-suit 'by making, using, offering to sell, selling and/or importing' Lupin’s proposed generic capsules. As Wyeth’s claim is not foreclosed by § 271(e)(2) and has adequately alleged an inducement claim against LPI, Wyeth has satisfied the notice pleading requirements."

Held:  LPI's motion to dismiss was denied.

Comments:

  • Had the Maryland District Court decided this matter differently, Wyeth would be left suing a foreign entity in a U.S. forum (Maryland) where personal jurisdiction would be based on Lupin's filing of its ANDA with the FDA (which just happens to be located in Rockville, MD), and based on whatever other contacts Lupin has in the forum through its subsidiary, LPI.  See Personal Jurisdiction and the Foreign Defendant, by Lisa Savitt and Melissa Pierre for a good summary of personal jurisdiction issues related to foreign defendants.

  • It's unclear from this case whether a U.S. subsidiary that exists simply to distribute foreign-produced generic drugs in the U.S. and is not actively involved in the ANDA process would prevail on a motion to dismiss in Maryland.