Third Circuit Requires Patent Validity Analysis In Adjudicating Antitrust Causation
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  • Third Circuit Requires Patent Validity Analysis In Adjudicating Antitrust Causation
     
    01/26/2021
    On January 11, 2021, the United States Court of Appeals for the Third Circuit vacated a district court order granting defendants’ summary judgment motion, finding that the court erred in concluding that defendants’ patent position barred plaintiff’s antitrust damages claims without evaluating plaintiff’s challenges to the patent’s validity and infringement as to plaintiff’s product.  Fresenius Kabi USA, LLC v. Par Sterile Prods., LLC, No. 20-1618, 2021 WL 80616 (3d Cir. Jan. 11, 2021).  Where the defendant has raised its patent rights as a defense to the assertion of antitrust damages, the Third Circuit held, a court must analyze the plaintiff’s challenges to validity and infringement of the patent regardless of whether patent litigation or a Food and Drug Administration (“FDA”) application relating to the product has been filed.
     
    The case arises out of the development of vasopressin injection (“vasopressin”), a drug used to increase blood pressure in adults.  In 2012, defendants filed the first New Drug Application (“NDA”) for vasopressin with the FDA.  The FDA approved the NDA in 2014.  At that point, the FDA required plaintiffs and other manufacturers who previously sold vasopressin without FDA approval to withdraw their products from the market, pending approval of an Abbreviated New Drug Application (“ANDA”) for their generic versions of the drug.  Plaintiff alleged that it then sought to develop its generic version and file an ANDA but found that the suppliers of the active pharmaceutical ingredient (“API”) needed to manufacture generic vasopressin and obtain FDA approval were already bound by exclusivity arrangements or in discussions to enter exclusivity agreements with defendants.  Plaintiffs were therefore unable to secure another API supplier in a timely fashion and unable to submit an ANDA for its generic vasopressin until 2019.
     
    Plaintiff brought an action asserting violations of Sections One and Two of the Sherman Act, as well as state law claims, alleging that defendants’ exclusivity arrangements with the API suppliers unlawfully excluded competition, delaying plaintiff’s entry into the vasopressin market and injuring plaintiff.  In response, defendants argued that vasopressin-related patents they obtained in 2016 and 2017 would have prevented plaintiff’s entry irrespective of the exclusivity arrangements and, therefore, broke the “causation chain” between the exclusivity agreements and the alleged antitrust injury.  The district court sided with defendants, declining to consider plaintiff’s claims that the patents were invalid and that plaintiff’s product would not have infringed because there was “no actual patent litigation or a filed ANDA on which a jury could consider these claims and thus the Court would be undertaking a purely hypothetical patent exercise.”
     
    The Third Circuit reversed.  The Third Circuit agreed with the district court that, as a matter of law, a valid patent can break the “causation chain” required to show antitrust injury.  The district court erred, however, in declining to analyze the validity of the patent or the infringement issue simply because no patent litigation or ANDA had been filed.  To the contrary, where the defense argues on summary judgment that a patent would have blocked competitive entry, and the plaintiff responds that the patent is invalid or not infringed, the district court must “examine the record to determine whether a reasonable jury could find that [defendants’] patents would have blocked [plaintiff’s] market entry,” regardless of whether there is patent litigation or an ANDA.  Thus, the Court remanded to the district court for consideration of that issue.
     
    Although this decision is unpublished, it provides useful and clear guidance on the important issue of the degree to which courts must consider underlying patent issues raised in the prosecution or defense of Sherman Act claims.  As a practical matter, it reduces the burden of a plaintiff facing a patent defense to its antitrust claims by enabling it to challenge validity and infringement without the expense of a separate patent litigation.  Also of note, the Third Circuit’s opinion includes a lengthy footnote discussing the issue of foreclosure in the context of the specific facts of the case, and expressly suggesting that the district court “may choose to consider whether the exclusivity agreement even constitutes anticompetitive conduct because if it does not, then no patent analysis is needed.”  Thus, notwithstanding the remand, the case may well be resolved without a patent analysis after all.

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