Antitrust Update Blog

First Post-Actavis Jury Verdict Goes to Defendants on Causation Question

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. As we previously reported, Judge William Young of the District of Massachusetts gave jurors extensive preliminary instructions in October. In part, those instructions informed the jurors that this inquiry would turn partially on whether Teva could have defeated AstraZeneca’s patents in the prior patent infringement litigation that led to the AstraZeneca-Teva settlement.

Five weeks into the trial and after Teva had settled with the plaintiffs, Judge Young informed the parties and the jury that he had come to a different understanding about the theory of the plaintiffs’ case. The court had previously ruled on summary judgment that the plaintiffs could not base their antitrust claim solely on Ranbaxy’s settlement with AstraZeneca (because Ranbaxy’s inability to bring a generic version of Nexium to market within the relevant time frame precluded a finding that the AstraZeneca-Ranbaxy settlement caused the plaintiffs’ alleged injuries). The court had also made evidentiary rulings throughout the trial that followed its summary judgment opinion. But contrary to those rulings, the summary judgment opinion, and the preliminary instructions, Judge Young ultimately charged the jury to decide whether the AstraZeneca-Ranbaxy settlement was anticompetitive and provided a basis for antitrust liability.

In another change from the preliminary instructions, Judge Young told the jury he had decided the plaintiffs did not need to show whether the AstraZeneca patents in the prior infringement litigation were invalid. Because In re: Nexium is the first reverse payment case to go to trial following the Actavis decision, there has been great interest in how Judge Young would direct the jury in light of the rule of reason framework laid out by the Supreme Court. In Actavis, the Court stated, “it is normally not necessary to litigate patent validity to answer the antitrust question” because “[a]n unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent’s survival.” The Supreme Court went on to explain that this type of reverse payment is indicative of anticompetitive conduct between the patent holder and challenger who appear to share monopolistic profits rather than face a potentially competitive market.

The final verdict form required the jury to answer the following questions about the non-cash AstraZeneca-Ranbaxy patent settlement:

1.) Did AstraZeneca have market power?

2.) Did Ranbaxy receive a large and unjustified payment from AstraZeneca?

3.) Do the anticompetitive effects of the AstraZeneca-Ranbaxy settlement outweigh its procompetitive benefits?

4.) Assuming the AstraZeneca-Ranbaxy settlement had never taken place, would Ranbaxy and AstraZeneca have agreed that Ranbaxy could enter the market at an earlier date; what would that entry date have been; would Ranbaxy and Teva have agreed to let Teva introduce a generic Nexium into the market; and when would Teva have introduced the generic, assuming the hypothetical Ranbaxy-Teva agreement took place?

5.) Would AstraZeneca have introduced its own generic Nexium (an authorized generic) if another generic Nexium had entered the market?

The fourth question concerned AstraZeneca’s assertion that it owned still other patents that protected Nexium and that were not part of the prior patent litigation settlement as well as the fact that even on the date of the AstraZeneca and Ranbaxy agreement, neither Ranbaxy nor Teva had received FDA preliminary approval to introduce a generic version of Nexium.

Although the jury found in favor of the defendants, the jury answered the first three questions in the plaintiffs’ favor—including the “large and unjustified payment” question for a non-cash settlement. But ultimately, the jury concluded that AstraZeneca would not have granted Ranbaxy and Teva entry dates earlier than the expiration of the Nexium patents that were not included in the prior patent infringement litigation. Thus, the plaintiffs failed to establish causation because they could not convince the jury their but-for world of an earlier generic would have existed despite the anticompetitive settlement.

This jury’s findings offer both encouragement and concern for future pay-for-delay litigants. The defendants here argued, and several lower courts have decided, that the framework laid out in Actavis  requires direct cash settlements. This jury, however, concluded that the AstraZeneca-Ranbaxy settlement, which consisted of an exclusive license and manufacturing and distribution agreements, qualified as a large and unjustified payment to the alleged infringer. Thus, pay-for-delay plaintiffs can conclude they can persuade a jury to treat various non-cash deal structures as “payments.” On the other hand, the facts in this case presented an insurmountable obstacle to the plaintiffs when it came to proving causation. The complexities of patent infringement litigations, regulatory hurdles, and the scope of the settlement deal terms may frustrate pay-for-delay plaintiffs at the causation stage even if they do not frustrate plaintiffs at the “large and unjustified payment” stage.