Federal Circuit Clarifies Application of Antitrust Law to Patent Infringement Litigation

August 6, 2014


What This Means to You

  • If you receive a Paragraph IV letter stating that a competitor intends to seek approval from the FDA to market a generic version of one of your patented pharmaceutical products, perform a detailed infringement analysis before filing a Hatch-Waxman suit.
  • An ANDA infringement analysis is not strictly limited to the content of the ANDA itself—also consider evidence that the product your competitor intends to bring to market will differ from the product described in the ANDA.
  • Consider including antitrust counterclaims when responding to a patent infringement complaint, but be aware that such claims will almost certainly be stayed pending resolution of infringement and validity.

Overview

The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) has clarified how antitrust laws apply to patent infringement litigation. In Tyco Healthcare Group LP v. Mutual Pharmaceutical Company, Inc., the Federal Circuit considered an appeal of the District of New Jersey’s rejection of antitrust counterclaims brought during a Hatch-Waxman litigation. The court confirmed that bringing a patent infringement suit may give rise to antitrust liability under the theory of “sham litigation” if the suit is (1) objectively baseless and (2) motivated by a desire to interfere with the business relationships of a competitor. The Federal Circuit affirmed the district court’s rejection of two of the defendant’s four antitrust arguments, and remanded the remaining two arguments.

Case Background

This case arose out of Hatch-Waxman litigation. On February 2, 2007, Mutual Pharmaceutical Company sent Tyco Healthcare Group a Paragraph IV certification letter providing notice that it intended to market a generic version of Tyco’s insomnia drug Restoril. The letter claimed that the generic would not infringe Tyco’s patents.

Tyco filed an action alleging infringement, and Mutual counterclaimed for, among other things, a violation of antitrust law. The antitrust counterclaims were stayed pending resolution of questions of infringement and validity. Following a grant of summary judgment of noninfringement and invalidity, the district court denied all antitrust counterclaims. Mutual appealed this denial to the Federal Circuit.

Decision Analysis

Mutual raised four antitrust arguments before the district court. First, it argued that Tyco’s patent infringement litigation was objectively baseless because the product described in Mutual’s Abbreviated New Drug Application (ANDA) clearly did not infringe Tyco’s patents. The Federal Circuit rejected this argument due to the possibility that “the as-marketed ANDA product will infringe, even though the hypothetical product specified in the ANDA could not infringe.” The Federal Circuit remanded, instructing the district court to determine whether Tyco’s theory of infringement was objectively baseless.

Second, Mutual argued that Tyco lacked a reasonable prospect of success in defending the validity of its patents due to the presence of invalidating prior art. The Federal Circuit rejected this argument, citing the presumption of patent validity and the burden on the patent challenger to prove invalidity by clear and convincing evidence.

Third, Mutual argued that an administrative petition Tyco filed with the U.S. Food and Drug Administration opposing the ANDA was a sham, giving rise to antitrust liability. The Federal Circuit remanded to determine whether Tyco’s petition was objectively baseless.

Finally, Mutual argued that the infringement litigation was a sham because Tyco knew or should have known that the asserted patents were fraudulently obtained from the U.S. Patent and Trademark Office. The Federal Circuit rejected this argument, holding that, at worst, Tyco was “aware that relevant prior art existed that could impact the validity or enforceability of the patents.”

Takeaways


Under the Hatch-Waxman act, a patentee must file an infringement action within 45 days of receipt of a Paragraph IV notice letter to trigger an automatic 30-month stay of the ANDA. In spite of this relatively tight deadline, the Federal Circuit has confirmed that an exceptionally weak infringement suit could give rise to antitrust liability under the theory of “sham litigation.” It is important to carefully investigate any potential infringement, and avoid filing a lawsuit as a knee-jerk response to trigger the stay.

Additionally, the Federal Circuit acknowledged that the infringement analysis is not limited to the text of the ANDA, and the patentee may present evidence that the to-be-marketed product will infringe while the product described in the ANDA would not infringe. Therefore, a Hatch-Waxman plaintiff should investigate whether the marketed product may differ from the product described in the ANDA.

Finally, the Federal Circuit noted that antitrust liability for sham litigation is not strictly limited to litigation—a baseless administrative filing such as a sham petition could give rise to an antitrust violation.