IP Law Daily, PATENT—SDNY: Drug Company Acted Within Patent Rights, Monopoly Claims Dismissed, (Mar 14, 2013)

By Jeffrey May, J.D.

The manufacturer of Adderall XR, a prescription drug popular in the treatment of attention-deficit-hyperactivity-disorder (ADHD), was entitled to dismissal of a drug wholesaler’s monopoly claims that were based on the manufacturer’s conduct with respect to agreements settling patent infringement litigation with generic drug companies, the federal district court in New York City has decided. Notwithstanding the alleged conduct of the defending manufacturer—Shire LLC—under the agreements, the wholesaler’s claims failed because the terms of those settlement agreements did not exceed the scope of the patents in question (Louisiana Wholesale Drug Co. v. Shire LLC, March 6, 2013, Marrero, V.).

The complaining wholesaler, Louisiana Wholesale Drug Company, alleged that it purchased Adderall XR and its generic equivalents from Shire and other parties at inflated prices as a result of Shire’s monopolistic conduct.

Under Second Circuit precedent, a settlement agreement that does not exceed the scope of the patent does not violate the antitrust laws. As a result, the wholesaler argued that, while the terms of the settlements as written might not have constituted an antitrust violation, Shire acted outside the boundaries of its Adderall XR patents when it executed the agreements.

Shire had entered into the patent settlement agreements with Teva Pharmaceuticals Industries Ltd. and Impax Pharmaceuticals after Teva and Impax attempted to introduce generic versions of the ADHD drug. The settlements prohibited the generic manufacturers from launching their own products into the Adderall XR market for roughly three years in return for Shire’s agreement to grant Teva and Impax patent licenses to sell generic Adderall XR once a three year no-competition window closed. Shire agreed to supply all of Teva and Impax’s needs for generic Adderall XR under separate requirements contracts.

The wholesaler alleged that Shire, instead of supplying Teva and Impax with all the Adderall XR they demanded, intentionally breached the contracts to keep supplies artificially low and prices artificially high. Shire allegedly engaged in these actions with the intent to subvert competition in the Adderall XR market by sacrificing bona fide profits under the requirements contracts in favor of charging monopoly prices on its own sales.

According to the wholesaler, Shire effectively abandoned its right to a monopoly by granting patent licenses to Teva and Impax, and violated antitrust laws by acting with anticompetitive malice in refusing to deal with Teva and Impax after the settlement agreements effectively established a duty to do so.

The court noted the originality of the wholesaler’s theory but was not persuaded that it stated an antitrust claim. The wholesaler would be no worse off than had Shire decided not to license at all, the court explained.

“The Court is not convinced that where, as here, a patent holder granting multiple licenses that by their terms do not extend the scope of the patents in question, would nevertheless be subject to antitrust claims based on its conduct under those otherwise unchallenged licenses where that same patent holder would not face such liability if it refused outright to issue a license in the first instance.”

“[N]ot every sharp-elbowed business practice—though potentially wrongful as a breach of contract or even fraud—necessarily amounts to an antitrust violation, as indeed, Shire’s actions in this case do not,” the court noted.

This is Case 1:12-cv-03711-VM.

Attorneys: Bruce E. Gerstein (Garwin Gerstein & Fisher, L.L.P.) for Louisiana Wholesale Drug Company, Inc. John F Collins (Dewey & LeBoeuf, L.L.P.) for Shire LLC.

Companies: Louisiana Wholesale Drug Company, Inc.; Teva Pharmaceuticals Industries Ltd.; Impax Pharmaceuticals; Shire LLC

Cases: Patent NewYorkNews