IP Law Daily, PATENT—3rd Cir.: Generic drug companies’ antitrust claims based on alleged “sham litigation” barred by preexisting settlement, (Jul 22, 2022)

By Lee P. Dunham, J.D.

A settlement between the parties, generic and brand name makers of a drug used to treat hypogonadism, barred the claims.

A suit brought in 2020 by manufacturers of a generic version of the drug AndroGel, against brand name AndroGel patent holders and distributors, which were based on alleged “sham” patent infringement litigation begun in 2011 (the “Litigation”) that had delayed the release of the generic drug, had accrued on the date the Litigation suit was filed, and were therefore barred by the terms of a settlement agreement between the parties that occurred in 2012, settling the Litigation. In 2011 the patent holders and distributors of brand name AndroGel filed the Litigation—an allegedly baseless patent infringement suit against makers of the generic version of the drug. The Litigation delayed the release of the generic drug, and ultimately resulted in the 2012 settlement. The plaintiff generic drug companies filed this suit in 2020 against the defendant brand name AndroGel patent holders and distributors, for violating Section 2 of the Sherman Act, claiming that the Litigation was a “sham” that delayed the plaintiffs’ launch of its generic version of AndroGel 1%. The Third Circuit held that the generic drug makers’ subsequent antitrust suit was barred by the terms of the settlement. The generic drug makers’ damages resulting from the alleged “sham litigation” were not too speculative, on the date the patent infringement suit had been filed, to prevent the antitrust claims from accruing on that date, which was prior to the settlement’s effective date (Perrigo Co. v. AbbVie, Inc., July 21, 2022, Shwartz, P.).

Background. Defendants, (“Brand Name Entities”) were the patent holders and distributors of AndroGel, a brand name drug used to treat hypogonadism. Plaintiffs, (“Generic Entities”), were related companies producing a generic version of the drug. In 2011, the Generic Entities sent the Brand Name Entities a notice, pursuant to the Hatch-Waxman Act, giving notice that the generic drug did not infringe on the patent for the brand name drug. Within 45 days of receiving the notice, the Brand Name Entities sued the Generic Entities for patent infringement, triggering an automatic stay on the FDA’s ability to approve the generic drug. The parties settled and entered into a mutual release, releasing each other from claims arising out of the patent litigation that accrued prior to March 27, 2012. In 2013, the FDA approved the generic drug.

Antitrust litigation in the district court. In 2020, the Generic Entities sued the Brand Name Entities in New Jersey federal district court for violating Section 2 of the Sherman Act, 15 U.S.C. § 2, alleging that the patent infringement litigation had been a “sham” that delayed the launch of the generic drug, and that because of the sham lawsuit, the Brand Name Entities had been able to maintain monopoly power. The Brand Name Entities moved for judgment on the pleadings, asserting that the claims were barred by the 2012 settlement agreement because they had accrued prior to March 27, 2012. The district court granted the motion with prejudice, finding that the release barred Plaintiffs’ claim because (1) the claim accrued before March 27, 2012, (2) the absence of FDA approval on the generic did not preclude Plaintiffs from establishing an injury when the Litigation was filed, and (3) the speculative damages exception to the general accrual rule did not apply because Plaintiffs faced only uncertainty that related to the scope of their damages, not whether they had, in fact, suffered an injury. The Generic Entities appealed.

On Appeal, the Third Circuit held that the Generic Entities’ sham litigation claim accrued before the settlement’s effective date. “Sham litigation” is an exception to the Noerr-Pennington doctrine, which holds that a party who petitions the government for redress generally is immune from antitrust liability. The Generic Entities’ antitrust claims were based on allegations that their market entry was blocked by the Brand Name Entities’ filing of the patent litigation on October 31, 2011. Because the alleged “sham litigation” was filed prior to the March 27, 2012, claims based on it were released by the settlement.

The court rejected the Generic Entities’ argument that their sham litigation claim could not have accrued before March 27, 2012 because their damages at the time were “speculative.” The court held that in the sham litigation context, the injury generally occurs when the lawsuit, which is alleged to have been a sham, is filed. Moreover, the court held that the Generic Entities’ damages as of the date the Litigation was filed were not “too speculative” for their cause of action to have accrued. The Generic entities’ damages as of the date the Litigation was filed did not fall under the speculative damages exception. Whether damages are speculative is based on uncertainty as to whether a party will suffer damages at all, not the uncertainty as to the amount of the damages suffered. Because the FDA approval of the generic drug was put on hold as soon as Defendants filed the Litigation because of Hatch-Waxman’s automatic stay, it was clear at that point that damages in some amount would be suffered.

The Case is No. 21-3026.

Attorneys: Nicholas M. Centrella (Conrad O'Brien PC) for Perrigo Co. Mariel A. Brookins (Kirkland & Ellis LLP) for Abbvie Inc.

Companies: Perrigo Co.; Abbvie Inc.

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