Category: Intellectual Property & Licensing
District Court Rejects Intel’s Claims, but Leaves Door Open to Patent “Aggregation” Theories of Antitrust Liability
Last month, we wrote a post on the patent “aggregation” suit Intel had filed against various entities affiliated with the investment firm Fortress. The post was timely; the next day, Judge Chen granted Fortress’s motion to dismiss with prejudice and entered judgment for the defendants. The opinion dismissing the action was sealed until October 7.
There have been several developments since we last wrote about Intel and Apple’s suit against Fortress and several of its so-called “patent assertion entities” (collectively, “Fortress”) based on the allegedly anticompetitive practice of patent “aggregation.” Recall that the plaintiffs’ first amended complaint was dismissed without prejudice in January 2021 because Judge Chen of the U.S. District Court for the Northern District of California found that certain of the alleged product markets were too broad and that the complaint lacked adequate allegations of Fortress’s market power in any of those markets. The court held that plaintiffs did not sufficiently allege that Fortress was charging supracompetitive prices to license its patents, or that there were no substitute patents that could be licensed instead of Fortress’s patents.
On April 13, 2021, the Court of Appeals for the Fifth Circuit issued its long-anticipated decision in Impax v. FTC, marking the first time an appellate court has weighed in on the merits of a so-called reverse payment case prosecuted by the Federal Trade Commission (“FTC”) since the Supreme Court’s Actavis decision in 2013. The case resulted in a validation of the FTC’s approach to policing reverse payment agreements. Specifically, the Court affirmed the Commission’s conclusions that (1) large, unjustified reverse payments are anticompetitive regardless of the strength of the underlying patent litigation, and (2) reverse payment settlements are more anticompetitive than procompetitive if a less-restrictive alternative exists, and that a less-restrictive alternative can be an agreement without a payment that results in an earlier generic entry.
Intel and Apple’s challenge to Fortress’s allegedly anticompetitive practice of patent “aggregation,” which we discussed previously on this blog, suffered another setback earlier this month. The Northern District of California dismissed the plaintiffs’ first amended complaint, although it granted them leave to amend again.
Stop me if you’ve heard this one before: the FTC is suing pharmaceutical manufacturers Endo and Impax over an alleged “reverse payment” agreement to reduce competition in the market for Opana ER, an oxymorphone extended release product. In fact, the FTC’s complaint follows quickly on the heels of the Commission’s decision that a 2010 agreement between the same manufacturers to settle Impax’s patent litigation against Endo for a $112 million payment constituted an illicit “reverse payment” that delayed the entry of Impax’s generic version of Opana ER. (Click here for background on that decision.) Oral argument on Impax’s appeal of the FTC’s decision happened six months ago; the Fifth Circuit’s decision will mark the first time a Circuit Court weighs in on the FTC’s interpretation of the Supreme Court’s 2013 decision in FTC v. Actavis. (Click here for analysis of the oral argument)
Antitrust litigation has been ongoing for several years in the U.S. District Court for the Northern District of Alabama against one of the biggest business associations in America, the Blue Cross Blue Shield Association (“BCBSA”) and its members. We previously wrote about this litigation here and here. BCBSA is comprised of independent health insurers that license the “Blue Cross” and “Blue Shield” trademarks from BCBSA. As a condition of their licenses, BCBSA members grant each member exclusive geographic territories where each is allowed to use the Blue trademarks; some BCBSA members also happen to enjoy very high market shares in a number of their respective jurisdictions. There are also licensing rules that limit how much revenue each member can derive from lines of business that do not use the Blue trademarks. One of these rules was the “National Best Efforts Rule.” This rule required that two-thirds of each member’s national revenue be derived from Blue-branded plans. In other words, while each member could theoretically compete in others’ territories using brands that did not include the “Blue Cross” and “Blue Shield” trademarks, there was a cap on how much business a member could generate this way. These restrictions allegedly reduced competition between BCBSA members
For years, antitrust commentators have warned of threats to innovation and competition posed by “thickets” of patents—the “dense web[s] of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology.” See Carl Shapiro, “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting” (March 2001), available at https://www.nber.org/chapters/c10778.pdf. At least one judge on the Federal Circuit has also noted concern about this issue. E.g. Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307, 1328-29 (Fed. Cir. 2016) (Mayer, J., concurring) (calling for elimination of “generically-implemented software patents” to “clear the patent thicket”).
On June 9, the United States Court of Appeals for the Fifth Circuit heard oral argument in Impax Laboratories, Inc., Etc. v. Federal Trade Commission. The appeal by pharmaceutical manufacturer Impax marks the first time a court will review the Federal Trade Commission’s (“FTC”) interpretation of the Supreme Court’s watershed decision on reverse payment settlements, FTC v. Actavis, 570 U.S. 136 (2013).
With the Democratic primary process in full swing, we thought it fitting to take a look at where the candidates stand with respect to antitrust issues. As it turns out, this is a fairly active election cycle for antitrust, with most Democratic candidates invoking antitrust laws (and proposed laws) in connection with their visions for the future. The increased focus on antitrust has not been lost on other observers.
Alabama Federal Court Will Analyze Blue Cross Blue Shield Antitrust Claims Under Per Se Standard; Defers Decision on “Single Entity” Defense
A court’s decision regarding the proper standard of review in a Sherman Act Section 1 case—whether to analyze the defendant’s conduct as a per se antitrust violation or under the “rule of reason”—is highly significant. The rule of reason requires a plaintiff to show that the anticompetitive effects of the conduct are not outweighed by its procompetitive benefits—often, a factually intensive analysis. But under the per se standard a plaintiff (and the court) may dispense with this balancing test; it is necessary only to prove that the conduct actually happened.
AAG Delrahim on the Intersection of Antitrust and Intellectual Property Law: Strong Patent Rights Spur – Not Suppress – Competition
On March 16, 2018, Assistant Attorney General for the Antitrust Division Makan Delrahim gave a speech at the University of Pennsylvania Law School titled “The ‘New Madison’ Approach to Antitrust and Intellectual Property Law.” The speech provided insight concerning his views on the role of antitrust law in the field of intellectual property, and the Antitrust Division’s priorities under his leadership. AAG Delrahim explained four basic premises that govern how he believes antitrust enforcement should impact intellectual property law; in short, his view is that patent rights are a boon to consumers and competition and antitrust law should not stand in the way of patent-holders exercising their rights.
As Germany Targets Facebook’s Data Collection, DOJ Antitrust Division Suggests Friendlier Approach to Data-Powered Digital Market Leaders
Information can be an invaluable asset. This is especially evident in the technology sector, where companies use increasingly sophisticated methods to collect, aggregate, and analyze data. Exclusive possession of data can, of course, confer significant competitive advantages—but may also prompt legal challenges from competitors or scrutiny from regulators. Authorities in France and Germany have investigations underway into whether the collection and use of consumer data by major online platforms including Facebook and Google are having anticompetitive effects. And on December 19, 2017, Germany’s competition authority—the Bundeskartellamt— informed Facebook that it “holds the view that Facebook is abusing [a dominant market position] by making the use of its social network conditional on its being allowed to limitlessly amass every kind of data generated by using third-party websites and merge it with the user’s Facebook account.”
Senators and court complain of ‘anti-competitive’ transfer of patent rights to American Indian tribe
We have previously discussed antitrust implications of pharmaceutical companies’ efforts to maximize patent protection for their drugs. Consumers and generic drug makers, for instance, have alleged antitrust violations based on “product hopping” and “pay-for-delay” settlements. Recently, a patent owner’s creative technique to avoid possible invalidation of its patent by the Patent and Trademark Office has drawn sharp criticism from lawmakers and one district court.
The Third Circuit recently affirmed the grant of summary judgment to GlaxoSmithKline (“GSK”) in the nearly 10-year-old Wellbutrin XL Antitrust Litigation, which challenged the lawfulness of settlement agreements resolving patent disputes over Wellbutrin XL. In determining that GSK had not violated the Sherman Act, the court determined that GSK’s settlement of patent infringement lawsuits did not reflect that GSK had engaged in sham litigation, or that GSK made unlawful “reverse payments” to settle that litigation. To reach these conclusions, the court carefully picked apart years of evidence
Last Monday, the court denied Qualcomm, Inc.’s motion to dismiss the Federal Trade Commission’s suit against it for allegedly using anticompetitive tactics to maintain a monopoly in baseband modem chips for cell phones. The FTC contends that Qualcomm is using its standard-essential patents (SEPs) to extract monopoly prices from cell phone and other cellular device manufacturers in violation of its commitment to license its patents on a “fair, reasonable, and non-discriminatory” (FRAND) basis.
Last week, the FTC filed a complaint against Qualcomm, a manufacturer of baseband processors, which are chips included in cell phones and other products with cellular connectivity that allow the devices to connect to cell networks. Qualcomm holds patents to technologies incorporated in the standards that allow all cell phones to communicate with one another, referred to as standard-essential patents or SEPs. Qualcomm’s patents mostly relate to older, 3G-CDMA cellular technologies, which are still necessary for modern cell phones to work as consumers expect. As a condition of declaring its patents standard-essential, Qualcomm committed to the telecommunications industry’s standard-setting organizations that it would license its patents on a “fair, reasonable, and non-discriminatory” (FRAND) basis.
It has been over three years since the Supreme Court’s Actavis decision. Since then, numerous putative class actions alleging harm to competition as a result of “reverse-payment” settlements have flooded the courts. The complexity of these cases, along with the vague guidance provided by the Supreme Court, has given rise to intricate questions about how courts should apply Actavis and scrutinize settlements of Hatch-Waxman litigation.
How explicitly must a complaint sounding in antitrust allege causation? At oral argument last week, the Court of Appeals for the Second Circuit evaluated the sufficiency of the plaintiffs’ allegations that certain Takeda entities, in their representations to the FDA, falsely described patents for the antidiabetic drug ACTOS in order to delay the entry of generic competitors into the market—specifically, whether the plaintiffs had pleaded enough facts to show that these representations plausibly caused the delay.
The District Court for the Northern District of California granted defendant SanDisk’s motion for summary judgment yesterday in Giuliano, et al v. SanDisk Corp., et al, 4:10-cv-02787 (N.D. Cal. June 25, 2010).
Direct and indirect purchasers of Nexium recently appealed District of Massachusetts Judge William Young’s denial of a request for a new trial in In re: Nexium to the First Circuit.
Courts continue to evaluate the degree to which “reverse payments” are permitted post-Actavis. In the latest of these decisions, issued on February 22, 2016, the First Circuit held that non-cash payments may run afoul of the antitrust laws.
Better Early than Never: SDNY Dismisses Lawsuit over Patent Settlement where Generics were Granted Early-Entry Licenses with Acceleration Clauses
On September 22, Judge Ronnie Abrams of the Southern District of New York dismissed an antitrust lawsuit against Takeda Pharmaceuticals and three generic drug manufacturers based on settlements they had reached regarding a patent dispute over the drug ACTOS. The court held that the settlements were not illicit “reverse payments” warranting scrutiny under the Sherman Act because there was no plausible basis for holding that the settlements reduced competition for the drug. In the settlements, the generics did not receive any cash payments and primarily gained early entry licenses with acceleration clauses.
Our Antitrust practice group recently co-authored a series of articles in Inside Counsel discussing major antitrust issues facing in-house counsel today. Our articles expand on topics that we have covered in this blog, including the Actavis litigation, the change in the competition landscape across the globe and antitrust reforms in Europe and Asia, antitrust enforcement in e-commerce, the implications of the Supreme Court’s decision in North Carolina State Board of Dental Examiners on antitrust liability for professional boards, and the Department of Justice’s recent guidance on antitrust compliance programs.
We have been following developments in People of the State of New York v. Actavis, the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”). Now, an FTC Commissioner and a D.C. Circuit Judge have weighed in as well—and they are criticizing a key portion of the Second Circuit’s ruling.
We have previously posted about the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”), including our analysis of the District Court’s opinion enjoining Actavis from discontinuing sales of the Alzheimer’s drug Namenda IR, and of the Second Circuit’s decision affirming the district court’s ruling. The Second Circuit panel that heard the appeal has now denied rehearing, and the active members of the Second Circuit have also denied rehearing en banc.
Portions of a reverse payment suit against Endo Pharmaceuticals and others were recently dismissed by Judge William H. Orrick of the Northern District of California. The case was brought by plaintiffs who allege that a settlement agreement resolving a patent dispute over the drug Lidoderm illegally delayed the release of a generic version.
On July 16, the European Court of Justice issued a decision stating that standard essential patent (“SEP”) owners that seek injunctions against companies willing to license intellectual property on fair and reasonable terms may be illegally abusing their dominance. The dispute between Huawei Technologies Co. Ltd. (“Huawei”) and ZTE Corp. (“ZTE”) arises from Huawei’s patent on Long Term Evolution (“LTE”), a technology that is used in mobile phones and was developed by the European Telecommunications Standards Institute (“ETSI”).
On June 26, 2015, the Third Circuit extended Actavis to non-cash settlements and held that Actavis can cover a no-AG agreement – “a settlement in which the patentee drug manufacturer agrees to relinquish its right to produce an ‘authorized generic’ of the drug” during the statutorily guaranteed 180 days of market exclusivity for the first-filing generic drug manufacturer.
We’ve previously covered the New York State Attorney General’s (“NYS AG”) lawsuit against Actavis PLC and Forest Laboratories seeking to prevent them from discontinuing sales of the Forest drug Namenda IR, which is used to treat Alzheimer’s disease. New York has alleged that Actavis and Forest are engaging in “product hopping”—attempting to force prescribers and patients to switch to a new extended-release version of Namenda (Namenda XR) before a generic version can be launched.
Yesterday, the FTC announced that it reached a settlement in its pay-for-delay lawsuit, FTC v. Cephalon Inc. in the U.S. District Court for the Eastern District of Pennsylvania, with Teva Pharmaceuticals Industries, Ltd., which acquired Cephalon in 2012. This case is the first FTC case to be resolved since the Supreme Court’s 2013 decision in FTC v. Actavis, in which the Court announced that reverse-payment patent settlements could be subject to antitrust challenges.
Following Actavis, California Supreme Court Crafts “Structured Rule of Reason” Test for Evaluating Pay-for-Delay Settlements
Last Thursday the Supreme Court of California decided In re Cipro Cases I & II, No. S198616 (Cal. May 7, 2015), holding that reverse payment, or “pay-for-delay,” settlements can be challenged as unreasonable restraints on trade. In so doing, it followed the U.S. Supreme Court’s 2013 decision in Federal Trade Commission v. Actavis, Inc., 133 S.Ct. 2223 (2013).
In today’s technology-heavy world, technical interoperability standards are quite common. Because those standards are often patented, patent owners may have the ability to extract a monopoly price and some argue those owners can “reduce the number of competitors practicing the standard.”
On April 13, 2015 the Second Circuit (Hon. Walker, Raggi, Droney) heard oral argument in People of the State of New York v. Actavis PLC.
Allegations of conspiracy to restrain trade and exclusive dealing may read like textbook antitrust claims, but if the allegations are made by a plaintiff who is not an “efficient enforcer” of the antitrust laws, the complaint is vulnerable to a motion to dismiss.
In In re Lipitor Antitrust Litigation, No. 12 Civ. 2389 (D.N.J.), U.S. District Judge Peter G. Sheridan has confirmed his prior ruling that under the Supreme Court’s decisions in Twombly, Iqbal, and FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013), plaintiffs claiming an antitrust violation based on a non-monetary settlement must allege the value of the settlement to survive dismissal of their complaint.
On Friday the Solicitor General filed an amicus brief in Kimble v. Marvel Enterprises. As we previously noted, in Kimble, the Supreme Court will consider whether to overturn Brulotte v. Thys Co., a 50-year-old precedent holding that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”
Will the European Court of Justice Conclude that Antitrust Law Prohibits Royalties for Invalid Patents?
The European Court of Justice recently announced that it will issue a decision in Genentech Inc. v. Hoechst GmbH, in response to a request from the Paris Court of Appeals for clarification on whether European antitrust law precludes payment of royalties on a patent licensing agreement after the invalidation of the patent. This case could have important implications for European antitrust law, particularly if the ECJ determines that the EU’s antitrust laws must be interpreted as curbing enforcement of private licensing agreements.
Second Circuit Agrees to Earlier Oral Arguments in Actavis, Although Preliminary Injunction Will Remain in Place
The Second Circuit announced on Monday that it would hear Actavis PLC’s appeal to overturn the preliminary injunction issued by Judge Robert Sweet of the Southern District of New York as soon as possible, with a projected date for oral argument during the week of April 13.
On February 16, American Needle Inc. reached an agreement in principle with the National Football League to settle its claims. A settlement between the parties would mark the end of an antitrust litigation that has been pending since 2004.
The expedited appeal to the Second Circuit pits New York State’s arguments for facilitating competition in a “molecule market” (a product market defined by the active ingredient of a prescription drug) against the brand name manufacturer’s arguments about innovation and compelled support of potential competitors.
As we reported earlier, the jury in In re: Nexium found that AstraZeneca had violated the antitrust laws by acting to keep generics off the market but that no generic would have been introduced earlier in the market even without the violation. Thus, the jury found that the plaintiffs were not entitled to relief.
Following the S.D.N.Y.’s award to the New York State Attorney General of an injunction requiring Actavis to continue distributing the immediate-release tablet version of its dementia drug, Namenda, the Second Circuit Court of Appeals has denied Actavis’ request for a stay of the injunction pending appeal.
As reported previously, the first post-Actavis jury verdict in a “reverse payment” antitrust case handed a win to the defendants. Now, plaintiffs in In re: Nexium (Esomeprazole) Antitrust Litigation have moved for a new trial, arguing that the Massachusetts federal district court committed error in formulating the jury charge and in excluding some of plaintiffs’ evidence.
The Federal Trade Commission staff recently issued a report detailing the number of “potential pay-for-delay settlements” that took place in fiscal year 2013. The FTC is a staunch opponent of so-called “pay-for-delay”—also known as “reverse payment”—settlements.
Last week, we briefly reported on the injunction granted by the U.S. District Court for the Southern District of New York in the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC. On Monday, the court held a hearing on the injunction and released a copy of its decision (portions of which are redacted from public view).
In July of this year, the European Commission imposed fines on French pharmaceutical company Servier and five generic drug makers, including Lupin Ltd., totaling €427.7 million. The fines were the result of a five-year investigation into alleged anticompetitive agreements that prevented generic versions of perindopril, Servier’s best-selling blood pressure medication, from entering the market.
Yesterday, Judge Robert Sweet granted the New York Attorney General’s request to block Actavis and its New York-based subsidiary Forest Laboratories LLC from pulling Namenda, a dementia drug commonly used to treat Alzheimer’s, off the market. In this “product hopping” case brought in the Southern District of New York, the Attorney General has alleged that the defendants are attempting to force prescribers and patients to switch to a new extended-release version of Namenda before a generic version of the drug can be introduced into the market.
After six weeks of trial and two days of deliberation, the jury has returned its verdict in favor of the defendants in In re: Nexium. This trial began as a challenge to the allegedly anticompetitive effects of the settlements of prior patent infringement litigations between AstraZeneca and Teva and between AstraZeneca and Ranbaxy concerning AstraZeneca’s Nexium.
Last Friday, Magistrate Judge Paul S. Grewal of the Northern District of California denied a motion by Oracle to dismiss three counterclaims based on a tying theory in Oracle America, Inc. v. Terix Computer Co. In doing so, the court followed (if begrudgingly) the Supreme Court’s decision in its seminal tying case, Eastman Kodak Co. v. Image Technical Services, Inc.
How does a court explain the complicated area of law at the intersection of patent settlements and antitrust law to a group of lay-jurors in the wake of Actavis? The district court’s approach to preliminary jury instructions in the on-going Nexium “reverse payment” trial provides one solution. The instructions also raise questions concerning the significance of direct evidence of market power that we previously discussed in connection with the Amex and Cephalon cases.
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