CHAPTER § 4.02 Brand/Generic Antitrust Issues
| Jurisdiction | United States |
§ 4.02 Brand/Generic Antitrust Issues
[1] Antitrust Counterclaims to Patent Lawsuits
Antitrust liability premised on an attempt to obtain or enforce a patent strikes at the heart of the inherent conflict between the patent and antitrust laws. Patent laws govern statutory grants of exclusivity in the form of patents; antitrust laws regulate and limit certain kinds of exclusionary behavior.49
To find antitrust liability—whether for sham litigation, regulatory abuse, or fraud or inequitable conduct before the Patent and Trademark Office ("PTO")—the challenge for the courts is to distinguish between lawful and unlawful patent-related activities.50
Patents are presumed valid.51 In general, "behavior conforming to the patent laws oriented towards procuring or enforcing a patent enjoys immunity from the antitrust laws."52 Under certain circumstances, however, patent litigation may violate Section 2 of the Sherman Act. A patent holder seeking to enforce a patent through litigation may be exposed to antitrust counterclaims, including claims of sham litigation and misconduct before the PTO. Liability in this area balances the competing interests of free competition established under the antitrust laws and the incentive system provided for under patent laws.53 In addition to establishing the elements of a counterclaim, a counterclaimant must provide clear and convincing evidence to rebut the presumption that a patentee's infringement suit is in good faith.54
[a] Sham Litigation
Based on the First Amendment's protection of the right to petition, the Noerr-Pennington doctrine immunizes the conduct of individuals or entities from antitrust liability where the conduct is part of an effort to solicit government action or authorization—even where the petitioner seeks authorization of an anticompetitive act or activity.55 The doctrine originated with the Supreme Court's decisions in E.R.R. Presidents' Conference v. Noerr Motor Freight, Inc., which held that the Sherman Act does not prohibit efforts to influence the passage and enforcement of laws,56 and United Mine Workers of America v. Pennington,57 which extended the scale of the activities protected under Noerr to include joint efforts to persuade administrative agencies and influence executive action.
In California Motor Transport Co. v. Trucking Unlimited,58 the Supreme Court further expanded the Noerr-Pennington doctrine to protect the good-faith initiation of litigation from serving as the basis for antitrust liability. Under California Motor Transport, a litigant seeking to protect a patent in court will only be held liable under the antitrust laws if the patent litigation is a mere sham used to disguise an attempt to interfere with a competitor's business.59
[i] Definition
In the seminal case of Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc. ("PRE"), the Supreme Court outlined a two-part analysis to identify sham litigation.60 First, the lawsuit must be "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits."61 Under the second part of the analysis, the court examines the subject intent motivating the litigation, that is whether the lawsuit conceals an attempt to "interfere directly with the business relationships of a competitor . . . through the use of the governmental process—as opposed to the outcome of that process."62 If the court determines the litigation to be objectively baseless at the outset, the court will not even consider the subjective aspect of the suit.63 If a plaintiff or counterclaimant demonstrates both the objective and subjective components set forth in PRE, a plaintiff may deprive a defendant of Noerr-Pennington protection. However, in order to sustain an antitrust claim against the defendant, the plaintiff or counterclaimant must still prove a substantive antitrust violation.64
A defendant may refute allegations of sham litigation allegations by demonstrating that the defendant's suit was "reasonably calculated to elicit a favorable outcome."65 Although certainly helpful,66 a defendant does not have to secure a favorable outcome in the underlying case to demonstrate that the litigation has merit.67 Even where a defendant has been unsuccessful, a court evaluating sham litigation claims will conduct its own independent assessment of whether the defendant had reasonable grounds for filing a suit.68 Courts have held that a patent-infringement suit does not violate the Sherman Act even where the patent at issue is ultimately ruled invalid, provided the patent holder reasonably believed the patent would be upheld.69
[ii] Regulatory Abuse
Aside from allegations of sham litigation, patent holders may risk antitrust liability under Section 2 of the Sherman Act through strategic manipulation of the provisions of the Hatch-Waxman Act ("Hatch-Waxman"). One tactic used by patent holders is to submit an improper patent to the FDA for listing in the Orange Book,70 an FDA publication that identifies drug products approved as safe and effective by the FDA under the Federal Food, Drug, and Cosmetic Act.71 Since 2000, the FTC and private litigants have pursued actions against multiple pharmaceutical companies for fraudulent Orange Book listings.72 One case of alleged abuses of Orange Book listings involves the anxiety medication buspirone, marketed by Bristol-Myers Squibb ("BMS") as BuSpar.73 The last of the patents covering the use of buspirone as an anxiety treatment was set to expire in November 2000.74 In anticipation of the patent's expiration, the FDA had already granted approval to several manufacturers for the marketing of generic buspirone.75 However, 1 day before the patent's expiration, BMS listed a patent in the Orange Book covering the use of the molecule created when buspirone breaks down in the body.76 In response to the listing, the approved generic manufacturers filed challenges with the FDA.77 Shortly after, BMS filed patent-infringement suits against the manufacturers based on the new listing.78 By filing suit in response to generic manfactuers' challenge, BMS triggered a provision of Hatch-Waxman which stays final FDA approval of the generic products for 30 months.79 The FTC later began an investigation into BMS' conduct, resulting in a number of charges, including the improper listing of patents in the Orange Book in order to delay generic competition.80 As a condition of the eventual settlement agreement, BMS was no longer eligible to obtain a 30-month stay on later-listed patents for a period of 10 years.81
Orange Book listing has not been the only administrative procedure that can potentially be manipulated for strategic gain. An individual or a company may file a citizen petition with the FDA, requesting that the agency "issue, amend, or revoke a regulation or order, or take or refrain from taking any other form of administrative action."82 Upon receiving a citizen petition, the FDA may delay approval of a generic drug for up to 150 days pending the review. However, following complaints regarding abuse of the petition process for anticompetitive purposes,83 Congress amended the Federal Food, Drug, and Cosmetic Act in October 2018 to allow the FDA to dismiss a petition outright if the agency determines a petition was "submitted with the primary purpose of delaying the approval of an application and the petition does not on its face raise valid scientific or regulatory issues."84 It remains to be seen whether these changes will result in fewer anticompetitive petitions.
[b] Misconduct Before the PTO
[i] Walker Process Fraud
Beyond the use of sham litigation and other tactics to delay or prevent generic entry, patent holders may also risk antitrust liability where a patent has been procured on the basis of fraud or other misconduct before the PTO. Under Walker Process Equipment, Inc. v. Food Machinery and Chemical Corp., attempts to enforce a patent (e.g., patent-infringement litigation) may be considered an illegal attempt at monopolization in violation of Section 2 of the Sherman Act where the patent was obtained through fraud or other misconduct.85 In Walker Process, the patent holder filed suit against a competitor for patent infringement.86 In response to the suit, the competitor challenged the validity of the patent, arguing that it was obtained in bad faith as the patent holder denied any awareness of prior use, when in fact the patent holder was a party to such prior use.87 Under the decision in Walker Process, intentional misconduct such as misrepresentations in patent applications suffice to strip a patent holder of their protection from antitrust scrutiny.88 Provided the other elements of a Section 2 claim are present, the patent holder may then be found liable under the Sherman Act.89
The Federal Circuit later elucidated the holding in Walker Process, creating a concrete definition of Walker Process fraud that has since been adopted as the standard elements of such claims.90 To prove a Walker Process claim, an antitrust plaintiff must show: (1) the patentee obtained the patent by knowingly and willfully misrepresenting facts to the PTO; (2) the patentee was aware of the misrepresentation when bringing the "sham" patent-infringement suit; (3) independent and clear evidence of the patentee's deceptive intent; and (4) reliance by the PTO, such that the patent would not have issued but for the misrepresentation or omission.91 Lesser misrepresentations or omissions, such as failures to cite all prior art, are unlikely to satisfy a finding of Walker Process fraud without additional evidence of the patentee's deceptive intent.92
As Walker Process claims involve allegations of fraudulent conduct, they are subject to the heightened pleading requirements of Federal Rule of Civil Rule 9(b), meaning that plaintiffs must "state with particularity the circumstances constituting fraud or misake," though general allegations of "malice, intent, [and]...
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