The District of Delaware recently denied a motion to dismiss an
antitrust counterclaim in a patent infringement action in the wake
of defendant Mylan, Inc. ("Mylan") having filed an
Abbreviated New Drug Application ("ANDA") with the
Federal Drug Administration ("FDA"). Shionogi Pharma,
Inc. v. Mylan, Inc., United States District Court, District of
Delaware, Civil Action No. 10-1077, August 31, 2011. The decision
raises a host of interesting and provocative issues relating to the
"sham" exception for petitioning activity immunity under
the Noerr doctrine. See Eastern R.R. Presidents
Conference v. Noerr Motor Freight, 365 U.S. 127 (1961)
("Noerr") and Professional Real Estate Investors v.
Columbia Pictures Industries, 508 U.S. 49 (1993)
("PRE"). In essence, the court held that plaintiff and
counter-defendant Shionogi Pharma, Inc. ("Shionogi")
could not maintain that Mylan lacked standing to prosecute an
antitrust counterclaim by virtue of Shionogi's filing of the
underlying patent infringement action, which automatically
triggered an ANDA automatic 30-month stay of FDA approval of
Mylan's submission.
Shionogi is the owner and/or owner of exclusive licensing rights
to U.S. Patent No. 6,740,341 BI. ("'341 patent"),
entitled "Taste Masking Rapid Release Coating System."
The '341 patent relates to the tablet design for masking a
pharmaceutical's ill taste. Shionogi holds and is listed in the
FDA "Orange Book" as the owner of a new drug application
for Orapred ODT®, an orally disintegrating tablet.
Mylan filed an ANDA with the FDA for a "prednisolone phosphate
orally disintegrating tablet", which it intended to market as
a therapeutic equivalent to, or generic formulation of,
Shionogi's patented Orapred ODT® product. Upon receiving
notice of Mylan's FDA filing for a non-infringing proposed
product before the expiration of the '341 patent, Shionogi
filed suit alleging '341 infringement. Mylan had attached to
its certification that the proposed product has no "spacing
layer", and would not infringe the '341 patent. This is
because the '341 patent allegedly excludes tablets without a
"spacing layer". Shionogi received samples from Mylan,
which confirmed the absence of a spacing layer. In response to
Shionogi's patent infringement action, Mylan filed an antitrust
counterclaim alleging that the infringement action was a
"sham" and constituted monopolization and attempted
monopolization under Section 2 of the Sherman Act, and a
combination and conspiracy in restraint of trade in violation of
Section 1.
Shionogi moved to dismiss the amended antitrust counterclaim on the
ground that Mylan lacked "antitrust standing". It argued
that Mylan was neither a consumer or competitor in a relevant
market, and therefore lacked antitrust standing, and had failed to
properly allege "antitrust injury". The linchpin of
Shionogi's argument was that, upon the filing of Shionogi's
patent infringement complaint, the FDA was statutorily unable to
grant tentative approval to Mylan's ANDA application, and
therefore Mylan could not demonstrate that it was ready to enter
the market. Accordingly, Shionogi argued Mylan lacked standing, and
could not have suffered "antitrust injury". By this
argument, one would conclude that even if Shionogi had filed a sham
patent infringement action designed to misuse the adjudicatory
process, Mylan would be unable to assert an antitrust counterclaim,
simply because Shionogi's complaint automatically triggered an
FDA stay of approval. Mylan argued that the filing of the '341
infringement action was "objectively baseless", and
intended to harm Mylan as a potential competitor in the relevant
market by imposing anticompetitive barriers to entry, citing the
Supreme Court's seminal decision in PRE. In
PRE, the Supreme Court held that a petitioning lawsuit is
"objectively baseless" if no reasonable litigant could
expect a favorable outcome on the merits. The PRE test is
whether the petitioning plaintiff has probable cause to sue. 508
U.S. at 63.
In denying Shionogi's motion to dismiss the amended antitrust
counterclaim, the District Court noted first that "antitrust
standing" is a "prudential, rather than
constitutional" limitation on its jurisdiction. The court
noted Shionogi's argument that the absence of FDA approval of
Mylan's proposed product, rather than Shionogi's
monopolistic behavior, impeded Mylan's entry into the market.
The court observed, however, that this argument was at odds with
its recent decision in In re Metoprolol Succinate Direct
Purchaser Antitrust Litigation, Civ. A. Nos. 06-52 (GMS), 2010
WL 1485328, D. Del. April 13, 2010. There, it was held that the FDA
approval process was simply one element of a factual analysis of
antitrust standing. In support, it cited Andrx Pharmaceuticals,
Inc. v. Biovail Corp. International, 256 F.3d 799 (D.C. Cir.
2001) and Hecht v. Pro-Football, Inc., 570 F.2d 982, 994
(D.C. Cir. 1977).
The Delaware District Court held that it would suffice for Mylan
to allege that although FDA approval was a regulatory prerequisite
to entering the market, it could allege that it had the intent and
preparedness to enter the market, by claiming that FDA approval was
probable. Not discussed, but nevertheless a presence, were the
allegations by Mylan that its ANDA certification clearly claimed
that its proposed product had no "spacing layer", and
thus would not infringe the terms of the '341 patent, which
specifically excluded products formulated without such a
"spacing layer". These allegations would clearly raise
the specter that Shionogi's argument was "too cute by
half", and that it was on notice that Mylan's ANDA
certification could not "plausibly" be infringing, or
that Mylan was not poised for entry into the market. See also
Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059
(Fed. Cir. 1998), for an exhaustive treatment of the
interrelationship between the various aspects of the Noerr
"sham" exception to the concept of petitioning activity
immunity.
The Shionogi court noted that Mylan had alleged in its
ANDA its intention and preparedness to enter the market, and had
demonstrated that it was a potential competitor. Mylan also alleged
a sufficient causal connection between the alleged violation
– the patent litigation itself, and the alleged harm to
the competitive process, which was artificially keeping Mylan out
of the market, and thus preventing the transfer of producer rents
for the benefit of augmenting consumer welfare through the lower
prices of generics. The court also noted the absence of more direct
victims who could file suit, and the lack of any potential of
duplicative recovery.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
