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United States Court of Appeals for the Federal Circuit
IN RE CIPROFLOXACIN HYDROCHLORIDE ANTITRUST LITIGATION
ARKANSAS CARPENTERS HEALTH AND WELFARE FUND, PAPER, A.F. OF L. -
A.G.C. BUILDING TRADES WELFARE PLAN, MARK ASTON, BOARD OF TRUSTEES
OF THE UNITED FOOD & COMMERCIAL WORKERS OF ARIZONA HEALTH AND
WELFARE FUND, ADELE BRODY, MICHELLE CROSS, DONNA FRANCK, KRISTINE
GADDIS, DAVID GREEN, IBEW-NECA LOCAL 505 HEALTH & WELFARE PLAN,
JOHN H. IRONS, LOCAL 1199 NATIONAL BENEFIT FUND FOR HEALTH AND
HUMAN SERVICES EMPLOYEES, MARIA LOCURTO, CAROLINE M. LOESCH,
KIMBERLY MCCULLAR, LINDA K. MCINTYRE, MECHANICAL CONTRACTORS-UA LOCAL 119 WELFARE PLAN, THERESA MEYERS, PATRICIA NELSON, FRANCES
NORRIS, PAPER, ALLIED-INDUSTRIAL, CHEMICAL AND ENERGY WORKERS
INTERNATIONAL UNION, AFL-CIO, CLC, MARY ANN SCOTT, SHEET METAL
WORKERS LOCAL 441 HEALTH & WELFARE PLAN, MAURICE STEWART, ANN
STUART, UNITED FOOD & COMMERCIAL WORKERS AND PARTICIPATING FOOD
INDUSTRY EMPLOYERS TRI-STATE HEALTH & WELFARE FUND, and
HOECHST MARION ROUSSEL, INC., THE RUGBY GROUP, INC. (doing business as
Rugby Laboratories, Inc.), and WATSON PHARMACEUTICALS, INC.,
J. Douglas Richards, Pomerantz Haudek Block Grossman & Ross LLP, of New
York, New York, argued for all plaintiffs-appellants. With him on the brief were
Christopher J. McDonald, Labaton Sucharow LLP, of New York, New York, and Patrick E. Cafferty, Cafferty Faucher LLP, of Ann Arbor, Michigan. Of counsel were Dan Drachler, Zwerling, Schachter & Zwerling, LLP, of Seattle, Washington; Robert S. Schachter and Joseph Lipofsky, of New York, New York; Eric B. Fastiff and Joseph R. Saveri, Lieff Cabraser Heiman & Bernstein, LLP, of San Francisco, California; and David Kalow and Scott D. Locke, Kalow & Springut LLP, of New York, New York.
Fred H. Bartlit, Jr., Bartlit Beck Herman Palenchar & Scott LLP, of Chicago,
Illinois, argued for all defendants-appellees. With him on the brief were Peter B. Bensinger, Jr., Michael J. Valaik, and Paul J. Skiermont, for Bayer AG, et al. Of counsel on the brief were Phillip A. Proger, Kevin D. McDonald, and Lawrence D. Rosenberg, Jones Day, of Washington, DC.
Karen N. Walker, Kirkland & Ellis LLP, of Washington, DC, for defendant-
appellee Barr Laboratories, Inc. With her on the brief were Edwin John U, Bridget K. O’Connor and Gregory L. Skidmore.
David E. Everson, Stinson Morrison Hecker LLP, of Kansas City, Missouri, for
defendants-appellees Hoechst Marion Roussel, Inc., et al. With himon the brief were Heather S. Woodson and Victoria L. Smith.
Cheryl L. Johnson, Deputy Attorney General, United States Department of
Justice, of Los Angeles, California, for amici curiae The State of Alabama, et al. With her on the brief were Manuel Medeiros, Solicitor General; Janet Gaard, Chief Assistant Attorney General; Kathleen Foote, Senior Assistant Attorney General; and Edmund G. Brown, Jr., Attorney General, of The State of California, of Sacramento, California.
Professor Mark A. Lemley, Stanford Law School, of Stanford, California, for amici
curiae, Law Professors John R. Allison, et al.
Imad D. Abyad, Attorney, Federal Trade Commission, of Washington, DC, for
amicus curiae Federal Trade Commission. With him on the brief were William Blumenthal, General Counsel; John D. Graubert, Principal Deputy General Counsel, and John F. Daly, Deputy General Counsel for Litigation. Of counsel were Jeffrey Schmidt, Director, Suzanne T. Michel, Assistant Director; and Elizabeth R. Hilder, Attorney.
Bruce B. Vignery, AARP Foundation Litigation, of Washington, DC, for amici
Don L. Bell, II, National Association of Chain Drug Stores, of Alexandria, Virginia,
for amicus curiae National Association of Chain Drug Stores.
Elizabeth M. Locke, Kirkland & Ellis LLP, of Washington, DC, for amicus curiae
Generic Pharmaceutical Association. With her on the brief was Susan E. Engel. Appealed from: United States District Court for the Eastern District of New York Senior Judge David G. Trager
United States Court of Appeals for the Federal Circuit
IN RE CIPROFLOXACIN HYDROCHLORIDE ANTITRUST LITIGATION
ARKANSAS CARPENTERS HEALTH AND WELFARE FUND, PAPER,
A.F. OF L. – A.G.C. BUILDING TRADES WELFARE PLAN, MARK ASTON, BOARD OF
TRUSTEES OF THE UNITED FOOD & COMMERCIAL WORKERS OF ARIZONA
HEALTH AND WELFARE FUND, ADELE BRODY, MICHELLE CROSS, DONNA
FRANCK, KRISTINE GADDIS, DAVID GREEN, IBEW-NECA LOCAL 505 HEALTH &
WELFARE PLAN, JOHN H. IRONS, LOCAL 1199 NATIONAL BENEFIT FUND FOR
HEALTH AND HUMAN SERVICES EMPLOYEES, MARIA LOCURTO, CAROLINE M.
LOESCH, KIMBERLY MCCULLAR, LINDA K. MCINTYRE,
MECHANICAL CONTRACTORS –UA LOCAL 119 WELFARE PLAN,
THERESA MEYERS, PATRICIA NELSON, FRANCES NORRIS,
PAPER, ALLIED-INDUSTRIAL, CHEMICAL AND ENERGY WORKERS
INTERNATIONAL UNION, AFL-CIO, CLC, MARY ANN SCOTT,
SHEET METAL WORKERS LOCAL 441 HEALTH & WELFARE PLAN,
MAURICE STEWART, ANN STUART, UNITED FOOD & COMMERCIAL WORKERS
AND PARTICIPATING FOOD INDUSTRY EMPLOYERS TRI-STATE HEALTH &
WELFARE FUND, and VISTAHEALTHPLAN, INC.,
HOECHST MARION ROUSSEL, INC., THE RUGBY GROUP, INC. (doing business as
Rugby Laboratories, Inc.), and WATSON PHARMACEUTICALS, INC.,
Appeal from the United States District Court for the Eastern District of New York, in 1:00-MD-01383, Senior Judge David G. Trager. __________________________
Before SCHALL and PROST, Circuit Judges, and WARD, District Judge. PROST, Circuit Judge.
This case under the Hatch-Waxman Act presents the issue of whether a
settlement agreement between a patent holder and a generic manufacturer violates the
antitrust laws. The agreements here involve a reverse payment from the patent holder
to the generic manufacturer, but do not implicate the 180-day exclusivity period.
Indirect purchasers of Cipro and several advocacy groups (“appellants”) appeal the
grant of summary judgment of their federal antitrust claims and dismissal of their state
antitrust claims against the patent holders and brand-name manufacturers, Bayer AG
and Bayer Corp. (collectively “Bayer”), and the generic manufacturers, Barr Labs., Inc.
(“Barr”), Hoechst Marion Roussel, Inc. (“HMR”), The Rugby Group, Inc. (“Rugby”), and
Watson Pharmaceuticals, Inc. (“Watson”) (collectively “generic defendants”). The
United States District Court for the Eastern District of New York granted Bayer’s and the
generic defendants’ motion for summary judgment, holding that any anti-competitive
effects caused by the settlement agreements between Bayer and the generic
defendants were within the exclusionary zone of the patent, and thus could not be
redressed by federal antitrust law. In re Ciprofloxacin Hydrochloride Antitrust Litigation,
Honorable T. John Ward, District Judge, United States District Court for
the Eastern District of Texas, sitting by designation.
363 F. Supp. 2d 514 (E.D.N.Y. 2005) (“Cipro II”). The court further granted Bayer’s
motion to dismiss the state antitrust claims. For the reasons set forth below, we affirm.
Bayer is the owner of U.S. Patent No. 4,670,444 (“the ’444 patent”). The patent
relates to certain quinoline- and napthyridine-carboxylic acid compounds with
antibacterial properties and methods of administering the compounds to combat
bacterial illnesses. ’444 patent, col.1 ll.13-17, col.2 ll.28-32, claims 1, 21. More
particularly, the patent is directed to ciprofloxacin hydrochloride, the compound that is
the active ingredient in Cipro® (“Cipro”). Id., claim 12. The patent issued on June 2,
1987, and Bayer’s predecessor obtained approval from the Food and Drug
Administration (“FDA”) to market Cipro in October 1987. The FDA granted Bayer an
additional six-month period of marketing exclusivity (pediatric exclusivity) following the
expiration of the patent on December 9, 2003.
In October 1991, Barr filed an abbreviated new drug application (“ANDA”) for a
generic version of Cipro. The ANDA included a Paragraph IV certification indicating
that Barr sought to market its generic drug before expiration of the ’444 patent on the
grounds that the patent was invalid and unenforceable. Specifically, Barr asserted that
the patent was invalid based on obviousness under 35 U.S.C. § 103 and obviousness
type double patenting under 35 U.S.C. § 101, and unenforceable due to inequitable
The filer of a Paragraph IV ANDA certifies that the patent is invalid or will
not be infringed by the generic drug. 21 U.S.C. § 355(j)(2)(A)(vii)(IV).
Barr did not certify that its product did not infringe the ’444 patent.
conduct. Under the Hatch-Waxman Act, the first filer of a Paragraph IV ANDA is
automatically entitled to a 180-day period of market exclusivity, which, in the version of
the Act in effect at the time, begins to run either on the date that the first ANDA filer
begins to market its drug or on the date of a final court decision finding the patent to be
invalid or not infringed, whichever is earlier. 21 U.S.C. § 355(j)(4)(B)(iv) (1988). Thus,
as the first Paragraph IV ANDA filer, Barr was entitled to the 180-day exclusivity period.
On January 16, 1992, Bayer sued Barr for patent infringement in the Southern
District of New York. Barr answered and counterclaimed for a declaratory judgment that
the ’444 patent is invalid and unenforceable and that its generic ciprofloxacin would not
infringe the ’444 patent. In 1996, Rugby (a subsidiary of HMR) and Barr entered into
the “Litigation Funding Agreement,” in which Rugby agreed to help Barr fund its
litigation against Bayer in exchange for half of any profits realized from Barr’s sale of
ciprofloxacin. Also, in 1996, Bayer entered into settlement discussions with HMR and
Just before trial, Bayer, Barr, HMR, and Rugby entered into the following
agreements (collectively “the Agreements”): (1) the “Barr Settlement Agreement”
between Bayer and Barr; (2) the “HMR/Rugby Settlement Agreement” among Bayer,
HMR, and Rugby; (3) the “Apotex Settlement Agreement” among Bayer, Bernard
Sherman (Barr’s principal shareholder), and Apotex (another company controlled by
Sherman); and (4) the “Cipro Supply Agreement” among Bayer, Barr, and HMR.
The first three agreements provided that Barr, HMR, Rugby, Apotex, and Bernard
Sherman would not challenge the validity or enforceability of the ’444 patent. Pursuant
to the Barr Settlement Agreement, Barr agreed to convert its Paragraph IV ANDA to a
Paragraph III ANDA, thus certifying that it would not market its generic version of Cipro
until after the ’444 patent expired. See 21 U.S.C. § 355(j)(2)(A)(vii)(III). In exchange,
Bayer agreed to make a settlement payment to Barr of $49.1 million.
Under the Cipro Supply Agreement, Bayer agreed to either supply Barr with
Cipro for resale or make quarterly payments (referred to as “reverse payments” or
“exclusion payments”) to Barr until December 31, 2003. In return, Barr agreed not to
manufacture, or have manufactured, a generic version of Cipro in the United States.
Beginning at least six months before the ’444 patent expired, Bayer agreed to allow Barr
to sell a competing ciprofloxacin product. Bayer and Barr then entered into a consent
judgment, whereby Barr affirmed the validity and enforceability of the ’444 patent and
Notably, the Agreements were entered into before the 2003 amendments
to the Hatch-Waxman Act, requiring a patent holder and a first Paragraph IV ANDA filer who settle their patent litigation to file their agreement with the Federal Trade Commission and Department of Justice for review, and if the agreement is found to violate the antitrust laws, the first ANDA filer loses its right to the 180-day exclusivity period. Pub. L. No. 108-173, § 1112; see 21 U.S.C. § 355(j)(5)(D)(i)(V).
Barr, however, preserved the option to reamend its ANDA to a Paragraph
IV certification—in order to reclaim the 180-day exclusivity period—in the event a court declared the ’444 patent to be invalid or unenforceable.
Added to the $49.1 million initial payment, the payments from Bayer to
Barr totaled $398.1 million. Barr shared the payments equally with HMR.
On July 25, 1997, Bayer filed for reexamination. Bayer cancelled and amended
certain claims, and the validity of the remaining claims of the ’444 patent was reaffirmed
by the Patent and Trademark Office (“PTO”) in the reexamination certificate. In
particular, the patentability of claim 12, directed to ciprofloxacin hydrochloride, was
Thereafter, four other companies—Ranbaxy, Mylan, Schein, and Carlsbad—filed
Paragraph IV ANDAs for a generic version of Cipro. Bayer sued each of them for
infringement of the reexamined ’444 patent. The issue of inequitable conduct was not
adjudicated in any of the actions. Bayer defeated Schein and Mylan’s challenges to the
validity of the ’444 patent on summary judgment. Bayer AG v. Schein Pharm., Inc., 129
F. Supp. 2d 705 (D.N.J. 2001), aff’d, 301 F.3d 1306 (Fed. Cir. 2002). The validity of the
’444 patent was upheld after a bench trial in the Carlsbad case. Bayer AG v. Carlsbad
Tech., Inc., No. 01CV0867-B (S.D. Cal. June 7, 2002 & Aug. 7, 2002). The Ranbaxy
case was dismissed after Ranbaxy withdrew its Paragraph IV certification.
In 2000 and 2001, direct and indirect purchasers of Cipro and advocacy groups
filed several antitrust actions in federal courts challenging the Agreements. The cases
were consolidated in the Eastern District of New York pursuant to 28 U.S.C. § 1407. In
re Ciprofloxacin Hydrochloride Antitrust Litig., No. 1383, 2001 WL 253240 (J.P.M.L. Jan.
10, 2001). Thereafter, the plaintiffs filed a consolidated complaint containing Counts I-
IV, which alleged that the Agreements constituted an illegal market allocation in violation
of the prohibition on contracts in restraint of trade contained in sections 1 and 2 of the
Sherman Act and in violation of various state antitrust and consumer protection laws.
On May 20, 2003, the district court denied the plaintiffs’ motion for partial
summary judgment that the Agreements were per se unlawful under the Sherman Act
and under the state antitrust and consumer protection laws. In re Ciprofloxacin
Hydrochloride Antitrust Litig., 261 F. Supp. 2d 188 (E.D.N.Y. 2003) (“Cipro I”).
The plaintiffs then amended their complaint to add Count V, a state law Walker
Process type antitrust claim, alleging that Bayer unlawfully monopolized the
ciprofloxacin market in violation of state antitrust laws by enforcing a patent obtained by
fraud. Specifically, they alleged that Bayer violated state antitrust and/or consumer
protection laws through fraud on the PTO and sham litigation in enforcing the ’444
The parties filed cross-motions for summary judgment regarding whether the
Agreements had anti-competitive effects under section 1 of the Sherman Act. The
district court denied the plaintiffs’ motion and granted Bayer’s and the generic
defendants’ motion. Cipro II, 363 F. Supp. 2d at 548. Employing a rule of reason
analysis, the district court first determined that the relevant market is ciprofloxacin and
that Bayer had market power within that market. Id. at 520-23. The court then
determined that any adverse effects on competition stemming from the Agreements
were within the exclusionary zone of the ’444 patent, and hence could not be redressed
by antitrust law. Id. at 523-40. In so concluding, the court considered recent decisions
by the Second Circuit, as well as other regional circuits, and rejected the plaintiffs’
Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp.,
382 U.S. 172 (1965), the Supreme Court held that the enforcement of a patent procured by fraud on the patent office may be a violation of the Sherman Act provided that the other elements necessary to a Sherman Act claim are present. Id. at 177. Here, however, the plaintiffs alleged a violation of state antitrust laws.
argument that the exclusionary power of the patent, for the purpose of the anti-
competitive effects analysis, should be tempered by the patent’s potential invalidity. Id.
Given the absence of evidence that the Agreements created a bottleneck on challenges
to the ’444 patent or otherwise restrained competition beyond the scope of the patent,
the court concluded that the plaintiffs had failed to show that the Agreements had any
anti-competitive effects on the market for ciprofloxacin beyond that permitted under the
patent. Id. at 540. Thus, the court found it unnecessary to address the second and
third steps of the rule of reason analysis. Id. at 541.
Bayer also filed a motion to dismiss Count V as preempted by federal patent law
and barred by the statute of limitations. The district court agreed that Count V is
preempted by federal patent law because the plaintiffs alleged no theory for a Walker
Process claim or sham litigation claim that does not depend on a showing of misconduct
before the PTO. Id. at 542-46. The court noted that Count V does not allege any
misconduct other than misconduct before the PTO, i.e., there is no allegation of
marketplace misconduct. Id. Thus, the court concluded that Count V rests entirely on
patent law. Id. The court also reasoned that Bayer’s success in its litigation against
Schein, Mylan and Carlsbad foreclosed any argument that its lawsuits were shams. Id.
at 547. Because the court granted Bayer’s motion to dismiss on preemption grounds, it
did not reach whether Count V was barred by the statute of limitations. Id. at 547-48.
This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
The court further noted that there was a serious question whether the
indirect purchasers even had standing to assert a Walker Process claim. Id. at 547.
Count V is subject to exclusive federal court jurisdiction under 28 U.S.C.
§ 1338(a) because the determination of fraud before the PTO necessarily involves a
This court reviews the district court’s grant of summary judgment de novo,
applying the same legal standards applied by the district court. Innogenetics, N.V. v.
Abbott Labs., 512 F.3d 1363, 1378 (Fed. Cir. 2008); U.S. Phillips Corp. v. Iwasaki Elec.
Co., 505 F.3d 1371, 1374 (Fed. Cir. 2007). Summary judgment is appropriate where,
after drawing all reasonable inferences in favor of the non-movant, there are no genuine
issues of material fact and the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Rubens v. Mason, 527 F.3d 252, 254 (2d Cir. 2008).
This court also reviews the district court’s grant or denial of a motion to dismiss
de novo. Adenta GmbH v. OrthoArm, Inc., 501 F.3d 1364, 1368 (Fed. Cir. 2007); Univ.
of W. Va. Bd. of Trs. v. Vanvoorhies, 278 F.3d 1288, 1295 (Fed. Cir. 2002). Whether
federal patent law preempts a state law claim is a question of law which we review de
novo. Ultra-Precision Mfg., Ltd. v. Ford Motor Co., 411 F.3d 1369, 1376 (Fed. Cir.
The appellants allege that the district court erred in its determination that the
Agreements did not constitute an unreasonable restraint of trade in violation of section 1
of the Sherman Act, and in its grant of Bayer’s and the generic defendants’ motions for
summary judgment on Counts I-IV, as follows: (1) by not finding the Agreements to be
per se unlawful, or at least applying a proper rule of reason analysis; (2) by finding the
substantial question of patent law. See Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808 (1988).
Agreements to be lawful because they fell within the “exclusionary zone” of the ’444
patent; (3) by not considering the law of the regional circuits and government agencies
in evaluating the Agreements; (4) by failing to appreciate the effects of the Agreements
on other generic manufacturers; and (5) by not considering evidence showing that the
Agreements preserved Barr’s claim to the 180-day exclusivity period. We address each
According to the appellants, the Agreements allowed Bayer to exclude a
horizontal competitor from the market not by enforcing its rights as a patentee, but
instead by ceasing to enforce its rights and paying the competitor $398 million. The
appellants contend that the district court should have concluded that the Agreements
were per se unlawful or should have applied a proper rule of reason analysis. At a
minimum, the appellants assert, the court should not have resolved the case on
summary judgment, but instead should have presented it to a fact-finder to determine
whether the Agreements constituted an unreasonable restraint on trade.
The Sherman Act provides that “[e]very contract, combination in the form of trust
or otherwise, or conspiracy, in restraint of trade or commerce among the several States,
or with foreign nations, is declared to be illegal.” 15 U.S.C. § 1. Although by its terms,
the Act prohibits any “restraint of trade,” the Supreme Court “has long recognized that
Congress intended to outlaw only unreasonable restraints.” State Oil Co. v. Khan, 522
Specifically, the appellants contend that there are genuine issues of
material fact relating to whether the defendants received far more under the Agreements then they could have had Barr won the litigation against Bayer, invalidated the ’444 patent, and entered the market. Further, the appellants aver that the court needs to assess the apparent strength of the patent at the time of the Agreements.
U.S. 3, 10 (1997). Courts will presumptively apply a “rule of reason” analysis to
determine whether an agreement imposes an unreasonable restraint on competition.
Texaco, Inc. v. Dagher, 547 U.S. 1, 5 (2006). Only agreements that have a “predictable
and pernicious anticompetitive effect, and . . . limited potential for procompetitive
benefit” are deemed to be per se unlawful under the Sherman Act. State Oil, 522 U.S.
at 10. A finding of per se unlawfulness “is appropriate ‘[o]nce experience with a
particular type of restraint enables the Court to predict with confidence that the rule of
reason will condemn it.’” Id. (quoting Arizona v. Maricopa County Med. Soc’y, 457 U.S.
332, 344 (1982)). The Supreme Court has expressed reluctance to adopt per se rules
where the economic impact is not immediately obvious. Id.
Since there was no basis for the district court to confidently predict that the
Agreements at issue here would be found to be unlawful under a rule of reason
analysis, we find no error by the court in declining to find them to be per se unlawful.
Instead, the court properly went through a rule of reason analysis to determine whether
the Agreements were in fact an unreasonable restraint of trade.
Under the law of the Second Circuit, the rule of reason analysis is a three-step
First, the plaintiff bears the initial burden of showing that the challenged action has had an actual adverse effect on competition as a whole in the relevant market. Then, if the plaintiff succeeds, the burden shifts to the defendant to establish the pro-competitive redeeming virtues of the action. Should the defendant carry this burden, the plaintiff must then show that the same pro-competitive effect could be achieved through an alternative means that is less restrictive of competition.
Clorox Co. v. Sterling Winthrop, Inc., 117 F.3d 50, 56 (2d Cir. 1997) (citations and
internal quotations omitted). Typically, the starting point is to define the relevant market,
Geneva Pharms. Tech. Corp. v. Barr Labs., Inc., 386 F.3d 485, 495-96 (2d Cir. 2004),
and to determine whether the defendants possess market power in the relevant market.
United States v. Visa U.S.A., Inc., 344 F.3d 229, 238 (2d Cir. 2003). Although the
precise role that market power plays in the rule of reason analysis is unclear, it may be
a highly relevant factor. Id. at 238 n.4; Capitol Imaging Assocs., P.C. v. Mohawk Valley
Med. Assocs., 996 F.2d 537, 546 (2d Cir. 1993).
Contrary to the contentions of the appellants, the court did undertake a full rule of
reason analysis. It first determined that the relevant market is ciprofloxacin and that
Bayer had market power within that market. Cipro II, 363 F. Supp. 2d at 523. It then
determined that there was no evidence that the Agreements created a bottleneck on
challenges to the ’444 patent or otherwise restrained competition outside the
“exclusionary zone” of the patent. Id. at 540. Thus, the court concluded that the
plaintiffs had failed to demonstrate that the Agreements had an anti-competitive effect
on the market for ciprofloxacin beyond that permitted by the patent. Id. Because the
court concluded that the plaintiffs failed to meet their burden under the first step of the
rule of reason analysis, it did not find it necessary to consider the second or third steps
The appellants assert, however, that the district court erred in concluding that the
Agreements were within the “exclusionary zone” of the ’444 patent, in essence treating
them as per se legal. According to the appellants, the patentee’s right to exclude
competition is not defined by the facial scope of the patent, but rather is limited to the
right to exclude others from profiting from the patented invention. Under the
Agreements, the appellants argue, Bayer is seeking not simply to enforce its patent
rights, but to insulate itself from competition and avoid the risk that the patent is held
The district court did not treat the Agreements as per se legal. Rather, the court
simply recognized that any adverse anti-competitive effects within the scope of the ’444
patent could not be redressed by antitrust law. United States v. Gen. Elec. Co., 272
U.S. 476, 485 (1926); E. Bement & Sons v. Nat’l Harrow Co., 186 U.S. 70, 91 (1902);
see In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187, 201-02 (2d Cir. 2006); Valley
Drug Co. v. Geneva Pharms., Inc., 344 F.3d 1294, 1312 (11th Cir. 2003); United States
v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1127 (D.C. Cir. 1981). This is
because a patent by its very nature is anticompetitive; it is a grant to the inventor of “the
right to exclude others from making, using, offering for sale, or selling the
invention . . . .” 35 U.S.C. § 154(a)(1); Dawson Chem. Co. v. Rohm & Haas Co., 448
U.S. 176, 215 (1980) (“[T]he essence of a patent grant is the right to exclude others
from profiting by the patented invention.”). Thus, “a patent is an exception to the
general rule against monopolies and to the right of access to a free and open market.”
Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 816 (1945).
The district court appreciated this underlying tension between the antitrust laws and the
patent laws when it compared the anti-competitive effects of the Agreements with the
“zone of exclusion” provided by the claims of the patent. See In re Tamoxifen, 466 F.3d
at 201-02; Andrx Pharms., Inc. v. Elan Corp., 421 F.3d 1227, 1235 (11th Cir. 2005);
Schering-Plough Corp. v. FTC, 402 F.3d 1056, 1066 (11th Cir. 2005); Valley Drug, 344
F.3d at 1312. Because the court found no anti-competitive effects outside the
exclusionary zone of the patent, it concluded that the Agreements were not violative of
section 1 of the Sherman Act. Cipro II, 363 F. Supp. 2d at 540-41.
We find no error in the court’s analysis. Pursuant to the Agreements, the generic
defendants agreed not to market a generic version of Cipro until the ’444 patent
expired and not to challenge the validity of the ’444 patent, and Bayer agreed to make
payments and optionally supply Cipro for resale. Thus, the essence of the Agreements
was to exclude the defendants from profiting from the patented invention. This is well
within Bayer’s rights as the patentee. Furthermore, there is a long-standing policy in the
law in favor of settlements, and this policy extends to patent infringement litigation.
Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362, 1368 (Fed. Cir. 2001); Foster v. Hallco Mfg.
Co., 947 F.2d 469, 477 (Fed. Cir. 1991). Settlement of patent claims by agreement
between the parties—including exchange of consideration—rather than by litigation is
not precluded by the Sherman Act even though it may have some adverse effects on
competition. Standard Oil Co. v. United States, 283 U.S. 163, 171 & n.5 (1931).
We disagree with the appellants that the fact that the generic defendants agreed
not to challenge the validity of the ’444 patent renders the Agreements violative of the
antitrust laws. According to the appellants, there is a vital public interest in patent
validity challenges to ensure that consumers are not burdened by unwarranted patent
monopolies. Appellants assert that Congress underscored this public interest by
providing in 35 U.S.C. § 282 that an issued patent carries only a rebuttable presumption
Under the Cipro Supply Agreement, however, Barr was allowed to sell a
competing ciprofloxacin product six months before the ’444 patent expired.
of validity, which can be challenged in court. In fact, appellants argue, at the preliminary
injunction stage, the patentee has the burden of establishing the likelihood of success
on the merits of the patent’s validity. Furthermore, the appellants contend, in the Hatch-
Waxman Act, Congress provided the incentive of a 180-day exclusivity period to the first
generic manufacturer to challenge a patent.
Settlements in patent cases, however, frequently provide that the alleged
infringer will not challenge the validity of the patent. See, e.g., Flex-Foot, 238 F.3d at
1367, 1370; Diversey Lever, Inc. v. Ecolab, Inc., 191 F.3d 1350, 1351 (Fed. Cir. 1999);
Interspiro USA, Inc. v. Figgie Int’l, Inc., 18 F.3d 927, 932 (Fed. Cir. 1994). Thus, the
mere fact that the Agreements insulated Bayer from patent validity challenges by the
generic defendants was not in itself an antitrust violation. Indeed, there is no evidence
that the Agreements prevented challenges by other generic drug manufacturers to the
validity of the ’444 patent. In fact, four other generic manufacturers—Ranbaxy, Mylan,
Schein, and Carlsbad—filed Paragraph IV ANDAs and initiated challenges of the validity
The appellants urge this court to consider the legal standards applied by the
regional circuits and government agencies in addressing Agreements involving
exclusion payments in the context of the Hatch-Waxman Act, all of which, they assert,
encompass greater antitrust scrutiny than the standard adopted by the district court. In
particular, the appellants point to the Sixth Circuit’s decision in In re Cardizem CD
Indeed, a sizable exclusion payment from the patent holder to the generic
manufacturer is not unexpected under the Hatch-Waxman Act, where the relative risks of litigation are redistributed. Schering-Plough, 402 F.3d at 1074; see infra pp. 23-24.
Antitrust Litigation, 332 F.3d 896 (6th Cir. 2003), upholding a summary judgment ruling
by the district court that a reverse payment agreement is per se illegal. Further, the
appellants assert that although the Eleventh Circuit in Valley Drug reversed the district
court’s ruling of per se illegality, it provided a more extensive analytical framework within
which to review the settlement agreements on remand. And, in Schering-Plough, the
appellants assert the Eleventh Circuit adhered to the standard in Valley Drug and
recognized the need to evaluate the strength of the patent in determining whether
reverse payments are unlawful. The appellants contend that the Federal Trade
Commission (“FTC”) advocates a rule of reason inquiry focusing on the amount of the
payment and several other factors, although not requiring consideration of the validity of
the patent. Finally, the appellants note that the Solicitor General has suggested that a
reverse payment should be evaluated using a rule of reason approach and that “the
strength of the patent as it appeared at the time at which the parties settled” should be
considered in the analysis, citing Brief for the United States as Amicus Curiae at *12,
Joblove v. Barr Labs., 127 S. Ct. 3001 (2007) (No. 06-830), 2007 WL 1511527.
According to the appellants, only the Second Circuit in In re Tamoxifen, has concluded
that a settlement between a patent holder and an alleged infringer in Hatch-Waxman
litigation does not violate the antitrust laws provided the litigation is not baseless,
although it recognized that such an approach shields settlement agreements involving
“fatally weak” patents. Therefore, the appellants assert, the district court’s treatment of
the Agreements here was not in line with that of the other circuits, the FTC, and the
Solicitor General, and we should reject the district court’s approach in lieu of those other
We find, however, the district court’s analysis to be sound. As noted above, the
district court applied a rule of reason analysis in assessing the lawfulness of the
Agreements. In that analysis, it considered whether there was evidence of sham
litigation or fraud before the PTO, and whether any anticompetitive effects of the
Agreements were outside the exclusionary zone of the patent. The application of a rule
of reason analysis to a settlement agreement involving an exclusion payment in the
Hatch-Waxman context has been embraced by the Second Circuit, and advocated by
the FTC and the Solicitor General. And, although the Sixth Circuit found a per se
violation of the antitrust laws in In re Cardizem, the facts of that case are distinguishable
from this case and from the other circuit court decisions. In particular, the settlement in
that case included, in addition to a reverse payment, an agreement by the generic
manufacturer to not relinquish its 180-day exclusivity period, thereby delaying the entry
of other generic manufacturers. In re Cardizem, 332 F.3d at 907. Furthermore, the
agreement provided that the generic manufacturer would not market non-infringing
versions of the generic drug. Id. at 908 n.13. Thus, the agreement clearly had anti-
competitive effects outside the exclusion zone of the patent. See Brief for the United
States at *16 n.7, Joblove, 127 S. Ct. 3001 (No. 06-830); Brief for the United States as
Amicus Curiae at *17, FTC v. Schering-Plough Corp., 548 U.S. 919 (2006) (No. 05-
273), 2006 WL 1358441. To the extent that the Sixth Circuit may have found a per se
antitrust violation based solely on the reverse payments, we respectfully disagree.
The Eleventh Circuit in Valley Drug reversed a finding by the district court that
settlement agreements constituted a per se violation of the antitrust laws because the
court failed to consider the exclusionary power of the patent in its antitrust analysis. 344
F.3d at 1306, 1312. Although it rejected the court’s condemnation of the agreements as
a per se antitrust violation, it did not advocate application of a rule of reason analysis,
finding such an analysis to be inappropriate given that the anticompetitive effects of the
exclusionary zone of a patent are not subject to debate. Id. at 1312 n.27. In so holding,
it emphasized that the subsequent declaration of invalidity did not render the patent’s
potential exclusionary effects irrelevant to the antitrust analysis. Id. at 1309. It did leave
open the possibility, however, that an antitrust violation could be found in the extreme
situation where there was evidence of fraud on the PTO or sham litigation. Id. at 1309
& n.21. On remand, it ordered the district court to consider the exclusionary potential of
the patent, the extent to which provisions of the settlement agreement exceeded the
scope of the patent, and the anticompetitive effects of those provisions. Id. at 1312.
This approach was followed by the Eleventh Circuit in Schering-Plough and
Andrx Pharmaceuticals and by the Second Circuit in In re Tamoxifen. In re Tamoxifen,
466 F.3d at 212; Andrx Pharms., 421 F.3d at 1235; Schering-Plough, 402 F.3d at 1066.
In Schering-Plough, the Eleventh Circuit set aside the decision by the FTC that the
settlement agreements constituted an unreasonable restraint of trade. 402 F.3d at
1058. It noted that there was no evidence that the patent was invalid or that the
litigation was a sham, and thus the proper analysis was whether the agreements
restricted competition beyond the exclusionary effects of the patent. Id. at 1068. After
reviewing the terms of the settlement agreements, it found that they were within the
exclusionary zone of the patent and therefore protected by patent law. Id. at 1072. The
Second Circuit, in In re Tamoxifen, similarly concluded that the validity of the patent
need not be considered in the analysis of whether the settlement agreement violates the
antitrust laws unless the infringement suit was objectively baseless. 466 F.3d at 213.
In that case, the patent holder settled with the generic manufacturer after losing on
validity before the district court and while on appeal to this court. Id. at 193. In so
holding, the Second Circuit recognized that alleged Sherman Act violations are
generally evaluated under a rule of reason analysis. Id. at 201 n.13. It concluded that
the presence of a reverse payment, or the size of a reverse payment, alone is not
enough to render an agreement violative of the antitrust laws unless the anticompetitive
effects of the agreement exceed the scope of the patent’s protection. Id. at 212-13.
Because the agreement did not extend to non-infringing products and did not create a
bottleneck for other generic manufacturers, the court held that any anticompetitive
effects were within the exclusionary power of the patent. Id. at 213-16.
We conclude that in cases such as this, wherein all anticompetitive effects of the
settlement agreement are within the exclusionary power of the patent, the outcome is
the same whether the court begins its analysis under antitrust law by applying a rule of
reason approach to evaluate the anti-competitive effects, or under patent law by
analyzing the right to exclude afforded by the patent. The essence of the inquiry is
whether the agreements restrict competition beyond the exclusionary zone of the
patent. This analysis has been adopted by the Second and the Eleventh Circuits and
by the district court below and we find it to be completely consistent with Supreme Court
precedent. See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S.
172, 175-77 (1965) (holding that there may be a violation of the Sherman Act when a
patent is procured by fraud, but recognizing that a patent is an exception to the general
In addition, we agree with the Second and Eleventh Circuits and with the district
court that, in the absence of evidence of fraud before the PTO or sham litigation, the
court need not consider the validity of the patent in the antitrust analysis of a settlement
agreement involving a reverse payment. The FTC has also rejected the application of
a post hoc analysis of the validity of the patent as part of the antitrust analysis. In its
decision that led to the Eleventh Circuit appeal in Schering-Plough, the FTC concluded
that “it would not be necessary, practical, or particularly useful for the Commission to
embark on an inquiry into the merits of the underlying patent dispute when resolving
antitrust issues in patent settlements.” In re Schering-Plough Corp., No. 9297, 2003 WL
22989651, slip op. at 19 (F.T.C. Dec. 8, 2003). However, on petition for writ of
certiorari, the FTC criticized the Eleventh Circuit’s approach to evaluating the
exclusionary potential of the patent because it “ignore[d] the most salient factor that
gives rise to patent litigation and settlements, the existence of uncertainty regarding
whether a patent is valid or . . . infringed by particular products.” Petitioner’s Opening
Brief at *15, Schering-Plough, 548 U.S. 919 (2006) (No. 05-273), 2005 WL 2105243.
Similarly, here, the FTC argues that the district court erred by equating the exclusionary
power of the patent with the scope of the patent claims without consideration of the
uncertainty of patent validity. Corrected Br. of Amicus Curiae FTC in Supp. of
Appellants 19. Apparently, the FTC, in recognizing the “probabilistic” nature of the
statements by the Eleventh Circuit have been interpreted
to mean that it advocated consideration of the validity of the patent, Brief for the United States at *16, Joblove, 127 S. Ct. 3001 (No. 06-830); Brief for the United States at *17-19, Schering-Plough 548 U.S. 919 (No. 05-273), the district court correctly noted that the Eleventh Circuit did not consider or rely on evidence of patent invalidity in either Valley Drug or Schering-Plough. Cipro II, 363 F. Supp. 2d at 525, 529.
patent interest, recommends that the “expected value” of the lawsuit at the time of the
settlement be considered in the antitrust analysis. Petitioner’s Opening Brief at *16,
Schering-Plough, 548 U.S. 919 (No. 05-273); Reply Brief for the Petitioner at *6,
Schering-Plough, 548 U.S. 919 (No. 05-273), 2005 WL 2652617.
The Solicitor General advocates that an appropriate antitrust analysis “should
take into account the relative likelihood of success of the parties’ claims, viewed ex
ante.” Brief for the United States at *12, Joblove, 127 S. Ct. 3001 (No. 06-830); Brief for
the United States at *11, Schering-Plough, 548 U.S. 919 (No. 05-273). Practically, the
Solicitor General proposes that, while the court need not conduct a full trial, it could
conduct a limited evaluation of the merits of the patent claims. Brief for the United
States at *13, Joblove, 127 S. Ct. 3001 (No. 06-830); Brief for the United States at *11
n.1, Schering-Plough, 548 U.S. 919 (No. 05-273). While the expected value of the
lawsuit (considered in the approach advocated by the FTC) should relate directly to the
relative strength of the claim (considered in the approach advocated by the Solicitor
General), the distinction between the approaches advocated by the FTC and the
Solicitor General may lie in the fact that the expected value of the lawsuit depends on
the subjective views of the parties as opposed to objective evidence of validity. See
Brief for the United States at *12, Schering-Plough, 548 U.S. 919 (No. 05-273).
We disagree that analysis of patent validity is appropriate in the absence of fraud
or sham litigation. Pursuant to statute, a patent is presumed to be valid, 35 U.S.C. §
282, and patent law bestows the patent holder with “the right to exclude others from
profiting by the patented invention.” Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S.
176, 215 (1980). A settlement is not unlawful if it serves to protect that to which the
patent holder is legally entitled—a monopoly over the manufacture and distribution of
the patented invention. In re Tamoxifen, 466 F.3d at 208-09. Thus, the district court
correctly concluded that there is no legal basis for restricting the right of a patentee to
choose its preferred means of enforcement and no support for the notion that the Hatch-
Waxman Act was intended to thwart settlements. Cipro II, 363 F. Supp. 2d at 531-32.
As Judge Posner remarked, if “there is nothing suspicious about the circumstances of a
patent settlement, then to prevent a cloud from being cast over the settlement process a
third party should not be permitted to haul the parties to the settlement over the hot
coals of antitrust litigation.” Asahi Glass Co. v. Pentech Pharms., Inc., 289 F. Supp. 2d
Accordingly, we find the analysis by the district court to be fully supported in law
and to demonstrate that it was cognizant of the legal standards applied by the regional
circuits and government agencies in addressing agreements involving exclusion
payments in the context of the Hatch-Waxman Act.
The appellants next contend that the district court erred in reasoning that even
though Bayer settled with Barr, other generic companies could still challenge the ’444
patent and their incentive to challenge the patent would grow with the chance that the
patent would be held invalid, rendering any anticompetitive effects of the Agreements
short-lived. According to the appellants, while that reasoning may make sense outside
the Hatch-Waxman context, it does not apply under Hatch-Waxman, where they allege
generic manufacturers are less motivated to initiate and vigorously challenge a patent.
The appellants contend that the incentives are significantly reduced in the Hatch-
Waxman context because any generic manufacturer that wishes to challenge the patent
must first undertake the effort, time, and expense of filing a Paragraph IV ANDA. The
appellants further assert that few generic manufacturers are capable of initiating such a
challenge and any challenge would be significantly delayed. Thus, the appellants argue
that the brand name manufacturer, by paying off the first Paragraph IV ANDA filer, can
protect its monopoly from competition for years—particularly near the end of the patent
term—even if its patent is “fatally weak.” It is that delay in challenge by generic
manufacturers that is emphasized by the appellants here, since there is no dispute that
four other generic manufacturers ultimately challenged the validity of the ’444 patent.
While we recognize that the Hatch-Waxman Act creates certain burdens for
generic manufacturers, it also provides significant benefits. First, it streamlines the
process of obtaining FDA approval to market a generic version of a drug without having
to go through the rigorous new drug application (“NDA”) process that the patent holder
is required to do. Compare 21 U.S.C. § 355(j)(2)(A) with 355(b)(1). See Eli Lilly & Co.
v. Medtronic, Inc., 496 U.S. 661, 676 (1990). Thus, the generic drug manufacturers can
piggyback on the safety and efficacy studies conducted by the patent holder. Second, it
allows the generic manufacturers to challenge the validity of a patent simply by filing a
Paragraph IV ANDA. 21 U.S.C. § 355(j)(2)(A)(vii), (5)(C)(i); see Eli Lilly, 496 U.S. at
677. Thus, as explained by the Eleventh Circuit, the Hatch-Waxman Act redistributes
the relative risks between the patent holder and generic manufacturers, allowing generic
manufacturers to challenge the validity of the patent without incurring the costs of
market entry or the risks of damages from infringement. Schering-Plough, 402 F.3d at
1074. Thus, the district court reasonably concluded that the incentive to mount a
challenge would increase with the chance that the patent would be held invalid. Cipro
II, 363 F. Supp. 2d at 534. Further, the district court noted that there was no evidence
that the Agreements created a bottleneck preventing generic challenges to the ’444
patent. Id. at 540. Indeed, the patent was subsequently challenged by four other
generic manufacturers and was upheld as valid.
Finally, the appellants contend that the district court erred in not considering
evidence showing that the Agreements preserved Barr’s claim to the 180-day exclusivity
period, which served the defendants’ joint interest in protecting the Cipro monopoly from
generic competition. According to the appellants, the district court refused to consider
the evidence in Cipro II because it had earlier denied the plaintiffs’ motions for partial
summary judgment in Cipro I. But, the appellants assert, the district court should have
considered the evidence anew in Cipro II, because: (1) the plaintiffs were now the non-
moving parties and thus the evidence should have been considered in the light most
favorable to the plaintiffs; and (2) at issue was whether the Agreements had an actual
adverse effect on competition in the relevant market, whereas in Cipro I the issue was
the per se illegality of the Agreements. The appellants aver that the evidence raised
genuine issues of material fact regarding whether the Agreements preserved Barr’s
claim to the 180-day exclusivity period, delayed and deterred other generic
manufacturers from entering the ciprofloxacin market, and thus had an actual adverse
Again, we find no error in the district court’s analysis. In addressing whether the
Agreements restrained competition outside the scope of the ’444 patent, the court
observed that the only legitimate allegation by the plaintiffs was that the 180-day
exclusivity period had been manipulated by Barr. Cipro II, 363 F. Supp. 2d at 540.
However, the court noted that that theory had already been addressed in Cipro I.
Specifically, in Cipro I, the court determined that the Agreements did not create a
“bottleneck” for future Paragraph IV ANDA filers because Barr had no right to the 180-
day exclusivity period. 261 F. Supp. 2d at 243. That was because at the time of the
Agreements, the FDA regulation in effect conditioned the first Paragraph IV ANDA filer’s
right to the 180-day exclusivity period on a “successful defense” of its Paragraph IV
ANDA against the patent holder. Id.; see 21 C.F.R. § 314.107(c)(1) (1998), revoked 63
Fed. Reg. 59710, 59711 (Nov. 5, 1998). However, Barr acknowledged in the consent
judgment both its infringement and the validity of the ’444 patent, thereby ending the
underlying litigation. Cipro I, 261 F. Supp. 2d at 243. More importantly, as part of the
Agreements, Barr converted its Paragraph IV ANDA to a Paragraph III ANDA. Id.
Thus, the court concluded that Barr had failed to satisfy the successful defense
requirement necessary to be eligible for the 180-day exclusivity period. Id.
We do not know what evidence the plaintiffs believe would have created a
genuine issue of material fact had it been considered by the district court in Cipro II.
There appears to be no dispute about the contents of the consent judgment and the
Agreements, and there does not appear to be a dispute about what was contained in
the FDA regulation that was in effect at the time. Although the appellants make much of
the uncertainty in the law regarding the validity of the “successful defense”
requirement, we find no merit to that argument. The district court acknowledged that
two circuit courts issued opinions in April 1998, more than a year after the Agreements
were executed, striking down the FDA regulation. Cipro I, F. Supp. 2d at 243-44 (citing
Mova Pharm. Corp. v. Shalala, 140 F.3d 1060 (D.C. Cir. 1998); Granutec, Inc. v.
Shalala, 139 F.3d 889 (4th Cir. 1998)). The court further noted that the FDA ultimately
removed the successful defense requirement from the regulation in November 1998.
Cipro I, F. Supp. 2d at 244 (citing 63 Fed. Reg. 59710, 59711 (Nov. 5, 1998)).
Nevertheless, the court correctly concluded that “the fact still remains that the
requirement was in effect at the time of the [Agreements].” Cipro I, F. Supp. 2d at 244;
see Tamoxifen, 466 F.3d at 218 (concluding that because the established law at the
time of the settlement agreement required that a generic manufacturer must
successfully defend an infringement lawsuit in order to obtain exclusivity, the generic
manufacturer had no claim to the exclusivity period despite the terms of the agreement).
Furthermore, the court appreciated that even without the successful defense
requirement, there was still no support for the claim that Barr retained the 180-day
exclusivity period after amending from a Paragraph IV ANDA to a Paragraph III
ANDA.14 Cipro I, F. Supp. 2d at 247. Finally, the court recognized that since the
At oral argument, the appellants emphasized that Mylan was delayed for
two-and-a-half years in filing its ANDA and challenging the patents because it believed that Barr was entitled to the 180-day exclusivity period. Oral Arg. at 5:56-6:29, 6:49-7:02, available at http://www.cafc.uscourts.gov/oralarguments/mp3/2008-1097.mp3. They further asserted that because of the delay, none of the generic challengers raised the iss
Although the Agreements apparently did contain a provision preserving
the option for Barr to reamend to a Paragraph IV ANDA (presumptively for the purpose of reclaiming the 180-day exclusivity period) if the ’444 patent was subsequently declared by a court to be invalid or unenforceable, that provision does not change the
Agreements were executed, Bayer has sued four other generic manufacturers that filed
ANDAs and defended against invalidity counterclaims; thus, the Agreements did not
prevent other generic manufacturers from challenging the ’444 patent. Id. We find no
error by the district court in declining to consider anew the evidence allegedly showing
that the Agreements preserved Barr’s claim to the 180-day exclusivity period, and in
concluding that the Agreements did not create a “bottleneck” for other generic
Accordingly, we affirm the district court’s grant of summary judgment on Counts
I-IV, holding that the Agreements were not violative of section 1 of the Sherman Act
since all anticompetitive effects were within the exclusionary power of the ’444 patent.
Count V alleges that Bayer violated state antitrust and consumer protection laws
by fraudulently obtaining the ’444 patent and enforcing it through sham litigation. The
district court dismissed Count V as preempted by federal patent law. Cipro II, 363 F.
The appellants challenge the district court’s dismissal of Count V, arguing under
Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), and
Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed. Cir. 1998), that the
court erred in concluding that their state law monopolization claims are preempted by
federal patent law because preemption does not apply when the patent was procured
analysis. Under the FDA regulations in effect at the time of the Agreements, the first generic manufacturer was not entitled to the 180-day exclusivity period unless it had satisfied the successful defense requirement. Furthermore, since the option was never exercised, there was no evidence of an actual adverse effect on competition due to that provision. See Clorox, 117 F.3d at 56.
by fraud. Further, the appellants contend that the district court erroneously concluded
that no tortious conduct in the marketplace had been alleged, ignoring Bayer’s lawsuit
against Barr seeking to enforce a fraudulently procured patent. According to the
appellants, the district court’s reliance on Semiconductor Energy Laboratory Co. v.
Samsung Electronics Co., 204 F.3d 1368 (Fed. Cir. 2000), and Abbott Laboratories v.
Brennan, 952 F.2d 1346 (Fed. Cir. 1991), is misplaced because neither case involves a
state law antitrust claim based on wrongful enforcement of a patent procured by fraud.
The appellants assert that an antitrust claim under Walker Process is distinguishable
from an inequitable conduct claim because it contains the additional elements of an
antitrust claim, namely, market power and antitrust injury. The monopolization claims
here, the appellants contend, like those in Dow Chemical Co. v. Exxon Corp., 139 F.3d
1470 (Fed. Cir. 1998), have elements other than inequitable conduct before the PTO—
and therefore are not preempted by federal patent law. Finally, the appellants argue
that because antitrust is a field traditionally regulated by the states, there is a
presumption against preemption of state law, and Congress has made no express
legislative statement to overcome that presumption.
It is not clear that the district court considered the portions of Hunter Douglas and
Nobelpharma that the appellants rely on in their brief. However, the result in this case
would not change even if we were to adopt the appellants’ interpretation of these cases
because the district court determined, and we agree, that no fraud occurred. In light of
this, the district court’s disposition of Count V was not erroneous.
For the foregoing reasons, we affirm the grant of summary judgment by the
District Court for the Eastern District of New York that the Agreements were not in
violation of section 1 of the Sherman Act because any anti-competitive effects caused
by the Agreements were within the exclusionary zone of the patent. We further affirm
the court’s dismissal of the state antitrust claims.
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