Case offers lessons on the importance of facts that adequately allege the critical elements of a monopolization claim.
AbbVie Inc., which owns the patent on the global blockbuster drug, Humira, has again defeated a pair of claims by welfare-health plans that the company violated Sections 1 and 2 of the Sherman Antitrust Act. On Aug. 1 the Seventh Circuit U.S. Court of Appeals affirmed a district court’s dismissal of the antitrust suit against the drug maker (Mayor and City Council of Baltimore, et al. v. AbbVie Inc., et al., No. 20-2402, 7th Cir.).
Appearing on the World Health Organization’s list of “essential drugs,” Humira is used to treat various forms of arthritis, ulcerative colitis, Crohn’s disease, and other diseases. AbbVie’s patent on the drug expired in 2016, but the company obtained 132 additional patents related to the drug’s manufacture and administration, the last of which does not expire until 2034. On the basis of the additional patents, AbbVie sued to block several would-be entrants who had received approval from the FDA to market a “biosimilar” drug, patent litigation that has since been settled.
A group of health benefits plans, led by Baltimore’s mayor and city council, then sued AbbVie for its prolific patenting activity, claiming that the sheer number of arguably applicable patents scared off competitors and enabled AbbVie to continue to monopolize the market and collect monopoly profits on their original Humira patent in violation of Section 2 of the Sherman Act, which prohibits monopolization and monopoly maintenance. Additionally, the welfare plans also claimed that the AbbVie’s settlement with its rivals in the related patent litigation violated Section 1 of the Sherman Act, outlawing agreements that unreasonably restrain trade.
‘What’s wrong with having lots of patents?’
On the Section 2 claim based on AbbVie’s “over-patenting,” Judge Frank Easterbrook, who wrote the opinion for the Seventh Circuit panel, was at a loss to find the necessary anticompetitive conduct element of a monopolization claim. “[W]hat’s wrong with having lots of patents?” he asked, saying, “The patent laws do not set a cap on the number of patents any one person can hold – in general, or pertaining to a single subject.”
The Court noted that, had AbbVie committed some fraud on the Patent and Trademark Office, as occurred in the Walker Process case, the outcome well could have been different. But the plaintiffs abjured reliance on a theory of fraudulent petitioning, arguing instead that AbbVie’s numerous patents were too “weak” to maintain AbbVie’s monopoly over such an important drug, a notion that left the court “cold.” Even weak patents are valid, the court said. Whether patents are “too marginal” to earn protection is something to argue to the PTO. Because the plans didn’t allege Walker Process fraud, it “makes it hard to see how AbbVie can be penalized for its successful petitions to the Patent Office.” In any case, the court observed, the Noerr-Pennington doctrine prevents antitrust liability for legitimate and successful petitioning of the government.
0 + 0 = 0
“Unsuccessful petitioning can be a source of liability when the petitioner runs up rivals’ costs and so stifles competition independent of a petition’s success,” Judge Easterbrook wrote, adding that “it is possible to use properly issued patents in a way that Noerr-Pennington does not protect,” such as asserting “irrelevant patents against producers of biosimilar drugs …” But the plaintiffs alleged only that AbbVie asserted “some” irrelevant patents against its rivals, not that they were all irrelevant, which the court held was not enough to amount to anticompetitive abuse of process. In any case, the validity or weakness of the patents, the court noted, involves “the sifting of the wheat from the chaff [that] is a job for the judges hearing those patent cases.” But, the panel held, “a separate antitrust suit by strangers to the patent litigation does not justify an effort to adjudicate by proxy what might have happened in the patent litigation, but didn’t.”
The welfare-benefit plans’ Section 1 claim had alleged that the settlement of the patent litigation between AbbVie and its potential competitors constituted a market allocation agreement which the plaintiffs characterized as a form of “reverse payment” scheme. The plans maintained that AbbVie gave rival biosimilar makers more than four years of profits in Europe providing they didn’t enter the U.S. market until 2023. “If this is a cartel,” the court wrote, “… then all settlements of patent cases violate the Sherman Act, yet the Supreme Court has said repeatedly that normal settlements of patent litigation are lawful.”
“In the United States AbbVie struck a normal settlement without any payment to the entrants, a settlement of the kind that [FTC v. Actavis] says is not problematic. In Europe AbbVie and the potential entrants struck the same kind of deal, which is proper for the same reason. In each [settlement] AbbVie agreed to entry before the last patents expired and didn’t pay anyone to delay entry. As the district judge saw things, 0 + 0 = 0. We see this the same way.”
The Importance of Facts
The case offers lessons on the importance of facts that adequately allege the critical elements of a monopolization claim (the anticompetitive conduct) and a Section 1 claim (the unlawful agreement). But one cannot be completely unsympathetic to the plaintiffs’ attempt to frame the effects of what is essentially disfunction at the Patent Office as anticompetitive. Abuse by patentees of the patent grant process to raise the cost of market entry by rivals is as commonplace as abuse of the litigation process by well-heeled litigants. Nonetheless, it should be beyond debate that anticompetitive outcomes in patent controversies—even where there is an assist from the Patent Office—must be scrutinized under the antitrust laws and subject to appropriate antitrust enforcement. However, the Seventh Circuit in this case did not consider the conduct by AbbVie alleged by the plaintiffs to have amounted to antitrust violations or the cause of an anticompetitive outcome.
Edited by Tom Hagy for MoginRubin LLP
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Originally Published At The JD Supra Platform