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August 01, 2009 (Vol. 29, No. 14)

Ninth Circuit Rules on IP and Antitrust Issues

Sham Litigation and Willful Deceit of USPTO Were among the Allegations

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    Christine Garrett Devlin

    In a closely watched pharmaceutical case, the U.S. Court of Appeals for the Ninth Circuit recently held that there was sufficient evidence for a plaintiff’s Walker Process claim to survive summary judgment, based on a pay-for-delay agreement between a patent holder and a generic manufacturer. However, the Court upheld dismissal of the plaintiff’s sham litigation claim in Kaiser Foundation Health Plan Inc. v. Abbott Laboratories, Inc.

    Kaiser sued defendants Abbott and Geneva Pharmaceuticals, alleging a Sherman Act Section 1 restraint of trade claim against both defendants and Sherman Act Section 2 monopolization and attempt to monopolize claims against Abbott.

    Under the Hatch-Waxman Act, a drug manufacturer seeking approval for a generic form of a patented brand-name drug may file an Abbreviated New Drug Application (ANDA). The ANDA applicant must inform the patent holder of its filing, which then may bring an action for patent infringement against the applicant.

    Geneva and other generic manufacturers filed a series of ANDA applications for variations of Abbott’s terazosin hydrochloride, used for treating hypertension. Abbott then brought patent infringement claims against these generic manufacturers.

    Abbott and Geneva subsequently entered into an agreement in which Geneva agreed to keep its generic product off the market until a final judgment on Abbott’s ‘207 patent. Kaiser claimed that this agreement was a per se unlawful restraint of trade under Section 1 of the Sherman Act. Kaiser based its Section 2 claim on Abbott’s allegedly fraudulent behavior before the USPTO in filing its ‘207 patent.

    A jury found against Kaiser on the Section 1 claim due to lack of causation, and the district court entered summary judgment against Kaiser on the Section 2 claim based on a lack of evidence to proceed to the jury. Kaiser appealed.

    The Ninth Circuit affirmed the jury’s verdict on the Section 1 claim, concluding that the lower court did not abuse its discretion in making several rulings that prevented certain evidence from reaching the jury.

    On the Section 2 claim, the Ninth Circuit affirmed one part of the claim and reversed the other. Kaiser first argued that Abbott improperly attempted to extend its patent monopoly by engaging in a pattern of filing sham lawsuits. Under the Noerr-Pennington doctrine, a party is immune from antitrust liability for petitioning any branch of the government. An exception to this immunity, however, is a sham lawsuit, in which a plaintiff uses the judicial process itself, as opposed to the outcome of the process, to harm competition.

    When dealing with a series of sham lawsuits, the Ninth Circuit uses a prospective inquiry to determine whether the series of lawsuits were based on a pattern of harassment, regardless of whether some of the individual lawsuits may have been proper. Kaiser claimed that Abbott’s 17 lawsuits against would-be generic manufacturers between 1993 and 1998 qualified as a pattern of sham litigation.

    The Ninth Circuit, however, held that Abbott won seven of those seventeen lawsuits and had plausible arguments for prevailing on the remaining lawsuits. Further, the Ninth Circuit concluded that while Abbott was litigious, the high number of lawsuits Abbott filed were a product of the Hatch-Waxman Act, which required Abbott to file several lawsuits quickly to preserve its rights under the Act.

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    William Diaz

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