Antitrust
Subscribe to Antitrust's Posts

Fourth Circuit Breathes New Life into Monopolization Suit

The US Court of Appeals for the Fourth Circuit revived an antitrust suit alleging that a pharmaceutical manufacturer illegally maintained its monopoly for its innovator drug by precluding competition beyond the expiration date of the patent covering the drug. The Court found that the case was filed within the statute of limitations because the antitrust claims did not accrue until the consumers were injured by paying supracompetitive prices for the drug after the patent expired. Baltimore v. Actelion Pharm., Ltd., Case No. 19-2233 (4th Cir. Apr. 13, 2021) (Niemeyer, J.)

Actelion received an exclusive license under a patent issued in 1994 for Tracleer, the “only oral treatment for pulmonary arterial hypertension.” Although Actelion’s patent for Tracleer expired in November 2015, no competitor brought a generic version of Tracleer to market. The mayor of Baltimore and Baltimore’s Government Employees Health Association (collectively, Baltimore) alleged that Actelion intended to “preclud[e] competition from generic drug manufacturers” by orchestrating a “multi-year scheme” to prevent multiple manufacturers from attempting to bring a generic version of the drug to market. According to the complaint, from 2009 to 2012, four generic drug manufacturers repeatedly requested samples of Tracleer from Actelion to develop generic versions of the drug. Potential entrants must obtain samples of a branded drug to demonstrate that a generic drug is bioequivalent to the branded drug—in this case, Tracleer. Baltimore alleged that Actelion refused consistently, stating it had the right to elect with whom it did business. Actelion also allegedly prevented distributors from selling Tracleer samples to generic drug manufacturers.

Baltimore alleged that by precluding generic competitors from the market, Actelion was able to maintain an illegal monopoly over Tracleer for three years after its patent expired and charge inflated prices for the drug in violation of § 2 of the Sherman Act and various state antitrust and consumer protection laws. Baltimore alleged that but for Actelion’s conduct, consumers would have purchased less expensive generic alternatives instead of branded Tracleer. Baltimore filed suit on November 19, 2018. The district court dismissed Baltimore’s complaint, finding that the majority of the claims were barred by the four-year statute of limitations. The district court found that the last overt anticompetitive act occurred in February 2014, when Actelion executed settlement agreements with several generic manufacturers. The district court rejected Baltimore’s argument that the claims accrued on the date of patent expiration (November 2015) or, in the alternative, from each sale of Tracleer at supracompetitive prices. Baltimore appealed.

The Fourth Circuit determined that the November 2018 suit was not time-barred by the statute of limitations. The Court found that although Actelion’s last overt anticompetitive act took place in 2014, the alleged harm to the plaintiffs did not begin until November 2015 when the patent expired. Section 4 of the Clayton Act provides a private right of action for violations of federal antitrust laws and states that any such action is “barred unless commented within four years after the cause of action accrued.” The Court further noted that the Supreme Court [...]

Continue Reading




Standard Essential Patent Licensing Practices Do Not Violate Antitrust Laws

The US Court of Appeals for the Ninth Circuit vacated a district court decision that found Qualcomm’s patent licensing practices violate antitrust laws and reversed a permanent, worldwide injunction against several of Qualcomm’s business practices. Fed. Trade Comm’n v. Qualcomm Inc., Case No. 19-16122 (9th Cir. Aug. 11, 2020) (C.J. Callahan).

Qualcomm sells modem chips that are incorporated into cellular handsets (i.e., smartphones) made by companies such as Samsung, Huawai, Apple and others. Qualcomm also holds a number of standard essential patents (SEPs) implemented by modem chips that are essential to cellular communication standards. A core part of Qualcomm’s business model is that it only licenses its SEPs to smartphone makers, i.e., its original equipment manufacturer (OEM) customers, not to rival modem chip suppliers—even though its rivals’ chips practice Qualcomm’s SEPs. Doing this allows Qualcomm to maximize its profits by charging royalty rates based on the value of the end-product smartphones rather than just the modem chip. In addition, Qualcomm will not supply modem chips to OEM customers unless they first pay to license Qualcomm’s SEPs (“no license, no chips”). OEMs must pay this licensing fee to Qualcomm even if they source chips from another supplier.

In January 2017, the FTC filed suit against Qualcomm in the Northern District of California, alleging that Qualcomm’s licensing practices violate the antitrust laws and unfairly protect its monopoly power as a modem chip supplier. Following a two-week bench trial, the district court issued a lengthy opinion ruling in favor of the FTC and ordering extensive injunctive relief requiring Qualcomm to change its business practices. The court made a number of findings, including: (1) Qualcomm’s refusal to license its SEPs to rival chipmakers violates both its FRAND commitments to standard-setting organizations (SSOs) and an antitrust duty to deal; (2) Qualcomm’s royalty rates for its SEPs are unreasonably high because they are based on the value of end products and (3) Qualcomm’s royalties, in conjunction with its “no license, no chips” policy, imposes an anticompetitive “surcharge” on the price of its rivals’ chips. Qualcomm appealed.

The Ninth Circuit reversed the district court’s decision in its entirety and vacated the injunctive relief which had been ordered, finding that Qualcomm’s licensing practices amount to “hypercompetitive,” not anticompetitive, behavior. The Court recognized that Qualcomm’s licensing practices are designed to maximize its profits, but concluded that they do not unfairly distort competition within the modem chip markets. According to the Court, the district court improperly extended the reach of the antitrust laws in issuing its injunction.

The Ninth Circuit addressed and rejected each of the district court’s findings. First, the Court concluded that Qualcomm does not have an antitrust “duty to deal” with its rival chipmakers. The Court emphasized that the Supreme Court has recognized only a narrow exception to the general rule that a business need not deal with its competitors, and concluded that the exception was not met here. The Court also concluded that whether Qualcomm breached a FRAND commitment to license its SEPs to rivals was [...]

Continue Reading




Antitrust Liability Risk When Listing Patents in Orange Book

The US Court of Appeals for the First Circuit held that pharmaceutical companies that wrongly list patents in FDA’s Orange Book must prove they acted in good faith to avoid antitrust liability. In re Lantus Direct Purchaser Antitrust Litigation, Case No. 18-2086 (1st Cir. Feb. 13, 2020) (Kayatta, J).

In applying for FDA approval to market new drugs, drug manufacturers must list all patents that “claim” the drug or the method of using the drug in FDA’s “Orange Book.” Listing a patent in the “Orange Book” allows the drug manufacture to trigger an automatic 30-month stay of FDA approval of any application for a competing drug product.

(more…)




Federal Circuit Leaves Controversial Noerr-Pennington Trial Court Decision Untouched

The US Court of Appeals for the Federal Circuit denied counterclaim plaintiff’s petition for panel rehearing and rehearing en banc with respect to its decision that the counterclaim plaintiff was estopped from bringing antitrust counterclaims in a patent infringement suit. Intellectual Ventures 1, LLC v. Capital One Financial Corporation, Case No. 18-1367 (Fed. Cir. Dec. 11, 2019) (per curium). In its decision, the Federal Circuit determined that the counterclaim plaintiff could not invoke Tuttle v. Arlington County School Board (4th Cir. 1999) to save its counterclaim and left unaddressed the trial court’s decision with respect to the scope of the Noerr-Pennington doctrine, which was an alternative trial court basis for dismissal of Capital One’s counterclaim.

In its prior decision applying Fourth Circuit law, the Federal Circuit determined that Capital One, the counterclaim plaintiff, could not bring an antitrust counterclaim against Intellectual Ventures based on the doctrine of collateral estoppel. Intellectual Ventures 1, LLC v. Capital One Financial Corporation, (IP Update, Vol. 22, No. 10). In that decision, the Court reviewed Capital One’s appeal of the trial court’s denial of its counterclaims against a prior litigated case in which Capital One’s identical antitrust counterclaim had been denied by the trial court. In bringing its initial appeal, Capital One argued that the antitrust issues related to market definition and Intellectual Ventures’ market power in the initial case were different from the market definition and Intellectual Ventures’ market power issues in the instant case. In its prior decision, the Federal Circuit disagreed and held that the doctrine of collateral estoppel applied as (1) the issues in the instant case was identical to the issues in the prior case; (2) the issues were actually decided in the prior proceeding; (3) the issues were critical and necessary to the judgment in the prior proceeding; (4) the judgment was valid and final; and (5) Capital One had a full and fair opportunity to litigate the issues.

(more…)




BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES