United Food & Commercial Workers Local 1776 & Participating Emp'rs Health & Welfare Fund v. Teikoku Pharma United States
296 F. Supp. 3d 1142
N.D. Cal.2017Background
- This is a pretrial order resolving cross-motions for summary judgment and multiple Daubert/motions in limine in an antitrust suit challenging a reverse-payment settlement that delayed generic entry for Endo's Lidoderm (5% lidocaine patches).
- Plaintiffs claim the Settlement (including a large transfer of value and other terms) unlawfully delayed Watson's generic entry and caused antitrust injury; defendants contend patents and other defenses would have blocked earlier entry.
- Key disputed factual topics: (1) whether Watson would have prevailed on invalidity/noninfringement/unenforceability of the '529 patent; (2) whether an alternate "no-payment" settlement would have occurred in the but‑for world; (3) the relevant antitrust product market; and (4) expert opinions on causation, damages, and industry practices.
- The court denied defendants' summary judgment that the '529 patent broke the chain of antitrust causation, and denied summary judgment as to all claims overall, but granted limited Rule 56(g) findings (e.g., Watson could not have launched earlier than Dec. 17, 2012).
- The court granted plaintiffs' partial summary judgment defining the relevant product market as 5% lidocaine patches (Lidoderm and generics) and found the Settlement satisfies the "agreement/conspiracy" element of Section 1 and related claims.
- The order resolves numerous expert challenges: some experts were excluded in part (e.g., Schaede), others were admitted with limits (e.g., Carlton, Moffitt), and many Daubert motions were denied subject to trial objections.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unenforceability / inequitable conduct of the '529 patent | Watson likely would have prevailed because Teikoku failed to disclose Teikoku Hydrogel prior art and made misleading PTO submissions | Defendants: outcome mirrors obviousness dispute; Judge Sleet's credibility findings and trial record undercut inequitable-conduct theory | Court: Plaintiffs presented "some evidence" of unenforceability; summary-judgment denial on causation ground related to '529 record |
| Causation — alternate "no-payment" settlement but-for theory | Plaintiffs' experts (Elhauge, Leffler) model rational parties reaching a no-payment early-entry settlement supported by profit-maximizing assumptions and record evidence | Defendants: theory legally infirm or speculative; experts' methods unreliable and based on unreasonable assumptions | Court: Alternate-settlement theory cognizable; experts' methods admissible here; defendants failed to show their conclusions contradicted undisputed record — MSJ denied |
| Relevant product market | Plaintiffs: market limited to 5% lidocaine patches because no significant cross-elasticity with other pain drugs | Defendants: market should include various therapeutically similar oral/topical pain drugs; cross-elasticity not required in pharma context | Court: As matter of law, market is Lidoderm and 5% lidocaine patches only; plaintiffs' MSJ granted |
| Expert admissibility / scope (multiple Daubert motions) | Plaintiffs challenge several defense experts as legally or factually untethered or offering improper legal conclusions | Defendants challenge several plaintiff experts as speculative, untested, or relying on non-trial materials | Court: Mixed rulings — several experts admitted with limits (e.g., Carlton may not opine on legal effect of cash vs non-cash payments), Schaede excluded as irrelevant, others denied exclusion; trial objections preserved |
Key Cases Cited
- F.T.C. v. Actavis, Inc., 570 U.S. 136 (2013) (Supreme Court rule-of-reason framework for reverse-payment settlements)
- Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (but‑for materiality standard for inequitable conduct)
- In re Cipro Cases I & II, 61 Cal.4th 116 (Cal. 2015) (discussing requirements for Cartwright Act claims involving reverse payments)
- In re Wellbutrin XL Antitrust Litig., 133 F. Supp. 3d 734 (E.D. Pa. 2015) (district court rejecting alternate-settlement theory for lack of factual support; Third Circuit recognized viability but required evidentiary support)
- Multilayer Stretch Cling Film Holdings, Inc. v. Berry Plastics Corp., 831 F.3d 1350 (Fed. Cir. 2016) (claim construction principles cited)
- Times-Picayune Publ'g Co. v. United States, 345 U.S. 594 (1953) (product-market boundary and cross-elasticity principle)
- Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (practical indicia for defining submarkets)
- United States v. Archer-Daniels-Midland Co., 866 F.2d 242 (8th Cir. 1988) (low cross-elasticity can warrant narrow market definition)