United States: Antitrust Liability For Protecting Patent Rights: Where’s The "Clear And Convincing" Evidentiary Standard At The Summary Judgment Stage?

Last Updated: August 20 2014
Article by Thomas W. Pippert and Vivian Storm

The Federal Circuit recently permitted Mutual Pharmaceutical to proceed with counterclaims that Tyco's patent enforcement litigation and FDA citizen's petition violated the antitrust laws.  Yet neither the majority nor the dissent discussed whether Mutual had presented evidence at the summary judgment stage that could satisfy the "clear and convincing" standard for Mutual's antitrust counterclaims.  Tyco briefed the issue, but did the Federal Circuit ignore the standard or apply it without comment?

After Mutual Pharmaceutical filed an ANDA seeking to market a generic version of Tyco's Restoril product, Tyco filed a patent infringement suit.  Shortly after Tyco lost that suit, it filed a citizen's petition with the FDA arguing that Mutual's generic should be subject to further bioequivalency testing in light of the differences the court found between Mutual's product and Restoril.

Mutual responded with antitrust counterclaims.  Mutual alleged that Tyco's patent litigation and citizen's petition were not entitled to Noerr-Pennington immunity because they were objectively baseless and because Mutual's patent was obtained through fraud on the patent office.  See Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993); Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965).  Specifically, Mutual alleged that: (1) Tyco's patent infringement action was objectively baseless because Mutual's ANDA relied on a different specific surface area than Tyco's patent; (2) Tyco lacked a reasonable prospect of defending the validity of its patent because Tyco knew it was obvious; and (3) Tyco's citizen's petition claiming that Mutual's product was not bioequivalent to Restoril was objectively baseless.

The requirement that antitrust claims based on sham patent litigation must be proved by clear and convincing evidence emerged from the Ninth Circuit's decision in the Handgards case.  The Handgards court held that "a patentee's infringement suit is presumptively in good faith and . . . this presumption can be rebutted only by clear and convincing evidence."  Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 996 (9th Cir. 1979).   The Federal Circuit adopted this standard and held that it applied both to antitrust claims premised on patent invalidity and claims premised on lack of infringement.  See Loctite Corp. v. Ultraseal, Ltd., 781 F.2d 861, 876-77 (Fed. Cir. 1985).

Further, where the clear-and-convincing evidence standard applies at trial, a district court must also apply the standard at the summary judgment stage.  See Anderson v. Liberty Lobby, 477 U.S. 242 (1986).  The Federal Circuit expressly recognized that obligation when summary judgment is sought on a patent's alleged invalidity in AK Steel Corp. v. Sollac & Ugine, 344 F.3d 1234, 1238-39 (Fed. Cir. 2003).

The district court granted summary judgment in favor of Tyco on all three grounds of antitrust liability without relying on the "clear and convincing" standard.  The Federal Circuit reversed on two of the grounds.  While the Federal Circuit agreed that it was not objectively baseless for Tyco to defend the validity of its patent, it found that there was potential antitrust liability based on Mutual's sham patent infringement and citizen's petition counterclaims.

First, the Federal Circuit rejected Tyco's argument that it was justified in asserting infringement despite differences between the specific surface areas identified in its patent and Mutual's ANDA.  The Federal Circuit directed the district court to consider whether the scientific principles behind measuring specific surface area created an issue of fact concerning whether Tyco's infringement theory was baseless.

Second, the Federal Circuit found that the Noerr-Pennington sham litigation exception applies to administrative petitions like Tyco's citizen's petition to the FDA.  The Federal Circuit then found that there were issues of fact regarding whether Tyco's petition was objectively baseless that precluded summary judgment.

According to the majority there was some evidence that Tyco's infringement suit and citizen's petition were objectively baseless.  But could that evidence satisfy the clear and convincing standard applicable at trial?  Even though Tyco argued that a clear and convincing standard applies to Mutual's counterclaims, neither the majority opinion nor the dissent acknowledged the standard or weighed Mutual's evidence against that standard.  Instead, Judge Newman's dissent focused on her concern that the majority had created new grounds for antitrust liability.

The absence of any discussion of the clear and convincing standard in the opinions is curious.  There is clear precedent for applying the standard at the summary judgment stage, and Tyco tried to use it to its advantage.  Future litigants may conclude that the relevant standard needs greater emphasis in trial court and appellate court briefs.

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.

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