United States: ‘Sham Litigation' Sufficiently Plead When Generic Provides Detailed Statement And Access To ANDA

Otsuka Pharm. Co., Ltd. v. Torrent Pharms. Ltd., Inc., (D.N.J. June 22, 2015)

Explaining the differences between the pleading standards for antitrust and patent misuse defenses, the U.S. District Court for the District of New Jersey denied Otsuka's motion to dismiss Torrent's antitrust counterclaim but granted Otsuka's motion dismissing a counter claim for patent misuse. Otsuka Pharm. Co., Ltd. v. Torrent Pharms. Ltd., Inc., No. 2014-1078, __ F.Supp.3d ___, 2015 WL 3869677 (D.N.J. June 22, 2015) (Simandle, C.J.).

Otsuka brought over 25 patent infringement actions seeking to block generic versions of Otsuka's antipsychotic drug Abilify® (aripiprazole) from the market. Torrent brought antitrust and patent misuse counterclaims alleging Otsuka monopolized the aripiprazole market by bringing objectively baseless and sham litigation in order to delay and eliminate competition and improperly maintain its exclusive monopoly over the aripiprazole market. Otsuka moved to dismiss Torrent's antitrust and patent misuse counterclaims under Rule 12(b)(6) arguing Torrent: (1) failed to allege an anticompetitive injury required for antitrust standing; (2) failed to overcome the presumption of Noerr-Pennington immunity; and (3) failed as a matter of law to state a claim for patent misuse.

Otsuka challenged only the "antitrust injury" factor of the multi-factor test used by the U.S. Court of Appeals for the Third Circuit to determine antitrust standing. Otsuka argued that its infringement lawsuit has not caused Torrent to suffer any anticompetitive injury, because Torrent voluntarily chose to delay seeking regulatory approval until after the main compound patent for aripiprazole expired and Torrent's allegations of delayed market entry lacked the immediacy required for antitrust standing. In rejecting these arguments, Chief Judge Jerome B. Simandle found a real and immediate injury because expiration of the compound patent did not create a present barrier for Torrent to enter the market, and the U.S. Food and Drug Administration (FDA) had already approved Torrent's generic application for Abilify. The only barrier to market entry for Torrent was the lawsuit brought by Otsuka.

The court then found that Torrent pleaded sufficient facts to confer antitrust standing. The court focused on the "hallmark" for evaluating an allegation of antitrust injury—whether the actions alleged to be anticompetitive affect the overall market, rather than only an individual competitor. The court determined that pursuit of litigation that prevents generic competition constitutes anticompetitive behavior. It also found that Torrent's counterclaim sufficiently alleged injury because Otsuka's "pursuit of 'objectively baseless and sham judicial proceedings' has adversely affected competition in the overall aripiprazole market by encumbering the path of generic entry and effectively extending Otsuka's long-held monopoly." The district court stated that the pendency of the instant lawsuit against Torrent—and the 24 other lawsuits against other generic defendants—constituted the only encumbrance to Torrent's and other generic manufacturers' free ability to enter the market, making the injuries to these generic companies both real and immediate.

Next, the district court analyzed Otsuka's argument that it was immune—under the Noerr-Pennington doctrine. Under that doctrine, Supreme Court precedent holds that a patent owner is presumptively immune from an antitrust violation when it initiates patent infringement litigation. Parties filing sham litigations, however, do not receive the benefit of the immunity. Judge Simandle determined that Torrent alleged specific facts that the lawsuit was objectively baseless and that the lawsuit was an attempt to interfere with the business of a competitor. Torrent specifically alleged that it provided a detailed statement setting forth why Torrent's generic product would not infringe Otsuka's Orange Book-listed patents. It further alleged that it provided its abbreviated new drug application (ANDA) to Otsuka, yet Otsuka still brought the lawsuit after viewing the detailed statement and Torrent's ANDA. The court, accepting the allegations as true for purposes of Otsuka's Rule 12(b)(6) motion, found these fact sufficient to overcome the Noerr-Pennington doctrine. The court noted that the ultimate question of whether Otsuka undertook reasonable investigation in advance of filing the lawsuit, whether it bought the lawsuit for an anticompetitive purpose and whether a reasonable litigant could have expected success on the merits were all questions of fact that could not be resolved prior to discovery and on a motion to dismiss under Rule 12(b)(6).

Judge Simandle granted each party's request to bifurcate the antitrust portion of the case until after the patent infringement claims were tried, since if Otsuka prevailed on the patent infringement claims, their counterclaim for antitrust violations would be rendered moot. The court also stayed discovery of the antitrust counterclaim pending resolution of the infringement claims.

Finally, the court granted Otsuka's motion to dismiss Torrent's counterclaim for patent misuse. Making short work of the patent misuse defense, the court concluded that Torrent failed to plead a key element of the defense—that the patentee attempted to impermissibly broaden the physical or temporal scope of the patent by extending the term of the monopoly beyond that granted by law. Accordingly, the court dismissed the patent misuse claim without prejudice and allowed Torrent 14 days to submit an amended counterclaim.

'Sham Litigation' Sufficiently Plead When Generic Provides Detailed Statement And Access To ANDA

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