In Re Terazosin Hydrochloride Antitrust Litigation
OMNIBUS ORDER ON SIX MOTIONS FOR SUMMARY JUDGMENT RE: PLAINTIFFS’ SECTION ONE (AND ANALOGOUS) CLAIMS 1
THIS MATTER is before the Court on six summary judgment motions relating to the Sherman Act Class Plaintiffs and Plaintiff Kaiser Foundation Health Plan, Inc.’s (“Kaiser”) claims arising under Section One of the Sherman Antitrust Act,
The Court has considered the Motions, the responses and replies thereto, the applicable case law, all supporting exhibits,
1. FACTUAL BACKGROUND
This multi-district antitrust litigation (“MDL”) originates at the intersection of antitrust and patent law. At its core, this case revolves around Abbott’s attempts to protect its patents’ exclusivity with respect to the brand name drug Hytrin, and the competing efforts of generic manufacturers to develop and launch bioequivalent drugs for entry in the terazosin hydrochloride market. Between May 31, 1977, and August 13, 1999, pursuant to several patents, Abbott exclusively manufactured and marketed terazosin hydrochloride under the brand name of Hytrin. Hytrin is a drug prescribed for the treatment of high blood pressure and benign prostatic hyper-plasia (“BPH”), an enlargement of the prostate gland that surrounds the urinary canal. Hytrin proved to be a lucrative drug for Abbott; for example, in 1998, Hytrin generated $540 million in sales, which accounted for more than twenty percent of Abbott’s sales of pharmaceutical products in the United States that year. Geneva, Zenith Goldline Pharmaceuticals, Inc. (“Zenith”), 3 — now known as IVAX Pharmaceuticals, Inc. (“IVAX”) — and other generic drug manufacturers developed generic versions of Hytrin for sale in the United States to compete for the Hytrin market. Whereas the first generic drug manufacturer, Geneva, began the regulatory process to enter the market in January 1993, generic entry only occurred in August 1999. Generic market entry not only provides less expensive bioequivalent drugs for consumers, but also eliminates a brand name drug company’s patent monopoly.
Plaintiffs Kaiser, the Sherman Act Class Plaintiffs, Individual Direct Purchasers, Indirect Purchaser Class Plaintiffs, and State Plaintiffs (collectively, “Plaintiffs”)
4
sued Defendants alleging,
inter alia,
claims under Section One of the Sherman Act (“Section One”)
5
and analogous state
To place the ’207 patent infringement litigation in context, it is necessary to set out the pertinent framework for drug regulation in the United States and then discuss the parties’ undisputed material facts as to Abbott’s ’207 patent, the ’207 patent litigation, and the Abbott-Geneva Agreement upon which Plaintiffs’ Section One claims are based.
A. The FDA Regulatory Framework Under Hatch-Waxman
A drug patent gives its owner the right to attempt to exclude others from making, using, or selling the drug in the United States for the duration of the patent. Before a drug company can sell a drug in the United States, it must apply for and obtain approval from the Food and Drug Administration (“FDA”), which regulates the domestic sale of drugs pursuant to the Federal Food, Drug and Cosmetic Act,
In 1984, Congress amended the laws governing pharmaceutical sales and enacted the Drug Price Competition and Patent Term Restoration Act,
On the other side of the balance, Hatch-Waxman provides that five years after the FDA has approved a new drug, a generic pharmaceutical company may seek approval to sell a generic version of the drug by filing an Abbreviated New Drug Application (“ANDA”). S. ¶ 7. A generic pharmaceutical manufacturer, such as Geneva, may not market a generic drug until the FDA approves the ANDA for that company’s generic product, and must also meet certain validation requirements before it can legally market its product. S. ¶ 7. To secure FDA approval for an ANDA, a generic manufacturer must demonstrate that the proposed generic drug is the bioe-quivalent of the corresponding brand-name drug. S. ¶ 8.
When filing an ANDA, FDA regulations require the ANDA applicant to certify that either: (I) no patent is listed in the Orange Book relevant to its ANDA; or (II) the patent listed in the Orange Book has expired; or (III) the listed patent will expire on a particular date, and the ANDA filer does not seek FDA approval before that date (a “Paragraph III Certification”); or (IV) the listed patent is invalid or will not be infringed by the manufacture, use, dr sale of the proposed generic drug (a “Paragraph IV Certification”). S. ¶ 9. If the ANDA filer makes a Paragraph III Certification, the ANDA cannot receive final approval until the expiration of the relevant patent(s). S. ¶ 10. If the ANDA filer makes a Paragraph IV Certification, however, it is required to provide a notice to the innovator company of the certification, including “a statement of the factual and legal basis of the applicant’s opinion that the patent is not valid or will not be infringed.” S. ¶ 11. The Hatch-Waxman and FDA regulations do not require the ANDA applicant to provide a sample of its proposed generic product. S. ¶ 11.
During the time period relevant to this case, if the generic company filed a Paragraph TV Certification and the innovator company filed a patent infringement lawsuit in federal court within forty-five days of the innovator company’s receipt of the generic company’s Paragraph IV Certification, the filing of such a lawsuit would trigger a “thirty month stay” of final FDA approval. S. ¶ 12. Under Hatch-Wax-man’s stay provision, the FDA is prohibited from granting final approval for the ANDA until
the earlier of:
(1) thirty (30) months after the date of the innovator company’s receipt of the generic’s notice regarding its Paragraph IV Certification; or (2) issuance of a “court decision”
7
relating to the specific ANDA that holds the
B. Abbott’s ’207 Patent and the ’207 Patent Litigation
Of Abbott’s numerous terazosin hydrochloride patents, only the 5,504,207 patent (“the ’207 patent”) is directly relevant to the instant motions. Abbott is the as-signee of the ’207 patent on a crystalline polymorph of anhydrous terazosin hydrochloride with a certain x-ray diffraction pattern (Form IV) and a process for the preparation of terazosin hydrochloride dihydrate using Form IV as an intermediary. S. ¶ 49. The application for the ’207 patent was filed on October 18, 1994. Id. The patent issued on April 2, 1996, and was submitted to the FDA for listing in the Orange Book on the same day. Id.
Geneva fried two ANDAs for terazosin hydrochloride. It filed ANDA 74-315 on January 12, 1993, for terazosin hydrochloride tablets using Form II anhydrous tera-zosin. S. ¶ 29. In June 1995, it switched to Form IV anhydrous terazosin. S. ¶ 58. Geneva obtained tentative approval for its tablet ANDA on June 17, 1997, and final approval on December 31, 1998. S. ¶ 29. Geneva came to market with its tablet product in May 2001. Id. Geneva also filed ANDA 74-823 on December 29, 1995, for terazosin hydrochloride capsules employing Form IV anhydrous terazosin and obtained final approval on March 30, 1998. Geneva came to market with its generic capsules on August 13,1999. S. ¶ 30.
In connection with these two ANDAs, Geneva provided Abbott with two notices, both dated April 29, 1996, of Paragraph IV Certifications with respect to the ’207 patent. These certifications asserted that claims 1 through 3 of the patent were not infringed and that claim 4 of the patent was invalid under
On January 15, 1997, Geneva moved for summary judgment
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on the grounds that claim 4 of the ’207 patent (the only claim of the patent asserted against Geneva) was
On September 1, 1998, the district court granted Geneva’s summary judgment motion, finding claim 4 of the ’207 patent (claiming Form IV terazosin hydrochloride) invalid because of the “on-sale bar.”
Abbott Labs. v. Geneva Pharms., Inc.,
No. 96-C-3331,
C. The Abbott-Geneva Agreements
On April 1, 1998, when Geneva’s motion for summary judgment had been fully briefed for nearly one year, Abbott and Geneva entered into the agreement that is the subject of Plaintiffs’ claims (“Agreement” or “Abbott-Geneva Agreement”). S. ¶ 178. The Agreement provided, in relevant part, that:
Geneva shall not sell, offer for sale, donate, or otherwise distribute in the United States any Terazosin Hydrochloride Product until after the earlier of (1) the Generic Entry Date, or (2) the Appellate Judgment.
S. ¶ 179. The term “Generic Entry Date,” as used in the Agreement, was defined as the earlier of the date of sale of generic Hytrin by a third party, or the expiration date of Abbott’s ’532 patent for dihydrate terazosin hydrochloride — February 18, 2000. S. ¶ 180. In turn, the term “Appellate Judgment” referred to the conclusion
The Agreement provided, inter alia, that Abbott would pay Geneva $4.5 million per month beginning on April 30, 1998. The Agreement also provided that in the event of “Final Judgment in Geneva’s Favor,” 9 Abbott’s monthly payments to Geneva would stop and Abbott would pay into escrow $4.5 million per month until the earlier of the “Generic Entry Date,” the “Appellate Judgment,” or the date of “Final Judgment in Abbott’s Favor.” 10 The Agreement further provided that Geneva would receive the amount in escrow if Geneva prevailed in any appeal. Otherwise, the amount in escrow would be returned to Abbott. Under the Agreement, upon a Final Judgment in Abbott’s favor, Abbott would have no obligation to make any payment to Geneva. S. ¶ 182. Finally, the Agreement provided that Abbott had the option to terminate payments if the Generic Entry Date had not occurred on or before February 18, 2000. S. ¶ 183.
In August 1999, Abbott and Geneva terminated the Agreement. As of the date of termination, Abbott had paid a total of $49.5 million into escrow. As part of the termination agreement, $45 million in escrow funds were returned to Abbott. Had Geneva launched on August 13, 1999, without first having terminated the Agreement, Abbott would have asserted that Geneva was in breach of the Agreement. S. ¶ 186. Geneva launched its generic product on August 13, 1999. S. ¶ 187. Since going to market with a generic form of terazosin hydrochloride in August 1999, Geneva has been an actual competitor of Abbott. S. ¶ 188. The activities of Abbott and Geneva being challenged in this action have occurred in, and have had a substantial effect on, interstate commerce. S. ¶ 189.
D. The December 2000 Per Se Ruling and the Eleventh Circuit’s Reversal
On December 13, 2000, this Court granted Plaintiffs’ motion for partial summary judgment, concluding that the Abbott-Geneva Agreement was a
per se
violation of Section One.
See In re Terazosin Hydrochloride Antitrust Litig.,
E. The Parties ’ Motions
Based on these undisputed facts, the parties collectively filed six motions for summary judgment 11 relating to Plaintiffs’ Section One claims. These motions can be divided into two categories: those that relate to the threshold examination of the exclusionary potential of the ’207 patent, and those that relate to the subsequent antitrust scrutiny of the anticompetitive impact of the challenged restraint.
Falling into the first category are: (1) the Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment for an Order Declaring that the Abbott-Geneva Agreement Exceeded the Exclusionary Potential of the ’207 Patent; (2) Kaiser’s Motion for Summary Judgment on Section One Claims 12 ; and (3) Defendants’ Motion for Summary Judgment on Sherman Act Section One (and Analogous) Claims. In their motions, the Sherman Act Class Plaintiffs and Kaiser argue that the Abbott-Geneva Agreement exceeded the scope of the ’207 patent by delaying generic competition for terazosin hydrochloride through the date of a final appellate judgment as to the validity of the ’207 patent. Defendants’ motion, in turn, contends that the Agreement was within the potential exclusionary power of the patent because: (a) it only limited competition for a small subset of the natural life of the patent, which at the time of the Agreement had not been invalidated and was not set to expire until October 2014; and (b) it was reasonably likely that Abbott could have obtained a preliminary injunction or stay pending appeal to keep Geneva off the market past the date of the district court’s order invalidating the patent. These Section One motions require, pursuant to the Eleventh Circuit’s opinion and its instructions on remand, the development of an appropriate framework for assessing the exclusionary potential of the ’207 patent.
In the second category of motions are: (1) the Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment for a Finding that the Abbott-Geneva Agreement Violates Section One of the Sherman Act or in the Alternative for a Finding that a “Quick-Look” Analysis Applies to the Agreement (hereinafter, “the Quick-Look Motion”); and (2) the Sherman Act Class Plaintiffs’ Motion for Partial Summary
The Court will begin with the first category of motions, addressing the exclusionary potential of the ’207 patent, in Section III of this Order. The latter category of motions will be considered in Section IV, below.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate, in accordance with
These standards apply equally to antitrust cases, where “the usual entanglement of legal and factual issues ... may be particularly well-suited for
III. THE EXCLUSIONARY POTENTIAL OF THE PATENT
The Eleventh Circuit found this Court’s characterization of the AbbotWGeneva Agreement as a
per se
violation of Section One to be “premature” absent consideration of the protections afforded by the ’207 patent.
Valley Drug Co.,
Although earlier in this case, Plaintiffs challenged several provisions of the Ab-botWGeneva Agreement, since the Eleventh Circuit’s decision they have narrowed their Section One claims to a single provision of the Agreement — the prohibition of Geneva’s marketing its generic terazosin products between the September 1, 1998, district court judgment in the ’207 patent litigation and the Federal Circuit’s mandate on August 12, 1999 (hereinafter, “the challenged provision” or “the appellate-stay provision”).
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With regard to that provision, the Eleventh Circuit considered
In the absence of an articulated analytical framework from the Eleventh Circuit, the Court finds guidance in the writings of Professor Herbert Hovenkamp. In a recent article on the antitrust implications of settlements in intellectual property (“IP”) disputes, Professor Hovenkamp addresses the complex issues that arise when parties enter into a settlement agreement that would potentially constitute an antitrust violation in the absence of claimed IP rights. In such a situation, “once conduct is found that would likely be an antitrust violation in the absence of a settlement, some care must be taken to ensure (1) that the parties did have a bona fide dispute, (2) that the settlement is a reasonable accommodation, and (3) that the settlement is not more anticompetitive than a likely outcome of the litigation.” See Herbert Hovenkamp, Mark D. Janis & Mark A. Lemley, The Interface Bettveen Intellectual Property Law and Antitrust Law: Anticompetitive Settlement of Intellectual Property Disputes, 87 Minn. L.Rev. 1719, 1727 (2003). Like the Eleventh Circuit’s decision, Professor Hovenkamp’s three-part test urges this Court to consider the likely outcomes of the underlying patent litigation, and in so doing, requires at least a limited inquiry into the merits of the parties’ respective positions regarding the application of the “on-sale bar” and the validity of the ’207 patent, viewed as of the date on which the Agreement was entered into.
Taking into account both the Eleventh Circuit’s opinion and Professor Hoven-kamp’s analytical approach, the Court has adopted a three-part test to evaluate whether the challenged provision of the AbbotNGeneva Agreement was a reasonable implementation of the exclusionary potential of the ’207 patent. First, the Court will examine the exclusionary scope of the ’207 patent, and determine the extent of the protections afforded to Abbott by its patent and the relevant law. Because this determination, as discussed more fully below, requires an analysis of the underlying patent litigation and the potential for Abbott to extend its terazosin monopoly by requesting a preliminary injunction, step two requires an evaluation of the likely outcomes of the ’207 patent litigation, including the likelihood of Abbott obtaining injunctive relief to keep Geneva off the market pending appeal of the patent validity issue, judged as of April 1, 1998. Finally, once the likelihood of such relief has been addressed, the Court next must determine whether the settlement represented a reasonable implementation of the protections afforded by the ’207 patent, in light of the applicable law, the
A. The Exclusionary Scope of the ’207 Patent
The starting point for the Court’s analysis on remand is to define the exclusionary scope of the ’207 patent. As a basic matter of patent law, the ’207 patent granted Abbott the lawful right to exclude others.
See Valley Drug,
However, the patent’s exclusionary right cannot be exploited in every way.
Id.
(citations omitted);
see also
Carl Shapiro,
Antitrust Limits to Patent Settlements,
34 RAND J. Econ. 391, 395 (2003) (theorizing that a patent “does not give the patentee ‘the right to exclude’ but rather the more limited ‘right to
try
to exclude’ by asserting its patent in court”). It is well-settled that a patent holder’s protections are limited by the precise terms of the patent grant, and cannot be extended by agreement.
See Valley Drug,
The legal scope of the ’207 patent, like that of any patent, is measured by its numbered claims.
15
See Merck & Co., Inc. v. Teva Pharms. USA, Inc.,
As their summary judgment submissions reflect, the parties disagree as to whether the temporal scope of the patent’s exclusions may be defined merely by reference to its expiration date, or whether a more searching analysis of the strength of the patent in the face of validity challenges is required. Defendants argue that the exclusionary scope of the patent permitted Abbott to keep Geneva’s generic product off the market through appellate review of the District Court’s patent validity ruling by virtue of the fact that the patent was not set to expire until October 2014. Abbott notes that “the ’207 patent had the potential ‘to exclude others from making, using or selling anhydrous terazosin hydrochloride until October of 2014, when it [was] due to expire.’ ”
See
Defs.’ Sect. One Brief at 7 (citing
Valley Drug Co.,
Defendants’ argument, however facially appealing, represents an overly simplistic approach to the Eleventh Circuit’s opinion. It fails to take into account the advanced stage of the underlying patent litigation and the substantial questions that Geneva had asserted regarding the ’207 patent’s validity. At the time that the Agreement was entered into, Defendants were nearly two years into their patent infringement litigation, and Geneva’s Motion for Summary Judgment — in which it asserted a strong legal challenge to the validity of the ’207 patent under the “on-sale bar” — had been fully briefed for approximately one year. As will be addressed more fully in step two of the Court’s analysis, Geneva’s challenge to the patent represented a substantial question as to validity, and was premised' on solid legal precedent ~ in the Federal Circuit. The chance that the ’207 patent would be held valid' — an essential part of the equation for defining the legitimate exclusionary value of the patent — was not high as of April 1, 1998. Given the significant likelihood that Geneva would prevail and that the patent would be held invalid, the mere fact that the patent was, at the time, not set to expire until October 2014 cannot immunize Defendants from antitrust scrutiny of their Agreement. Indeed, any construction of the patent’s exclusionary scope as of April 1, 1998, that fails to take into account the chances of the patent being held invalid would essentially afford pioneer drug manufacturers an unbridled power to exclude others without regard to the strength of their patent rights. Such an interpretation would give the patent holder rights beyond those granted by the Patent Act, and beyond the structure contained in the Hatch-Waxman Act.
Further, Abbott’s reliance on the PTO examiner’s prior rejection of Geneva’s “on-sale bar” argument is unpersuasive. First, “the question whether the on sale bar applies is a question of law,
UMC Elecs. Co. v. United States,
B. The Likely Outcomes of the Patent Litigation
For the reasons stated above, it is clear that any definitive construction of the exclusionary scope of the patent requires at least a limited assessment of the underlying patent infringement case. Therefore, the second step of the Court’s analysis focuses on the likely outcomes of the patent litigation that was pending at the time the parties entered into the Agreement.
See Valley Drug,
1. The Preliminary Injunction Analogy
To evaluate the likely outcomes of the patent infringement litigation, the Eleventh Circuit specifically directed this Court to consider the analogy of the Agreement being like a preliminary injunction or stay pending appeal. Specifically, the Eleventh Circuit considered that “the ’207 patent may have allowed Abbott to obtain preliminary injunctive relief or a stay of an adverse judgment pending appeal, which also would have prevented Geneva from marketing its terazosin hydrochloride products during [the relevant] period.”
Valley Drug,
As discussed above, Defendants theorize that the Court need not reach this preliminary injunction analogy because the temporal scope of the patent’s protections extended through its expiration date in October 2014, without regard to the pending infringement action. Having already considered and rejected that argument, the Court turns to Defendants’ alternative theory, that Abbott could have obtained a preliminary injunction or stay pending appeal to keep Geneva’s product off the market until after an appellate court ruling on the patent’s validity. Defendants argue that such provisional relief would have had an exclusionary effect reasonably equivalent to that of the Geneva Agreement and, therefore, the challenged provision of the Agreement should not be subject to antitrust analysis. Plaintiffs, however, argue that at the time the Agreement was entered into, Abbott had no chance of obtaining a preliminary injunction to keep Geneva off the market even if the district court in the ’207 patent case later held the patent invalid on summary judgment.
As a threshold matter, the parties fundamentally disagree as to what degree of certainty is required for Abbott to establish that it could have obtained a preliminary injunction. Central to their arguments is the language from the Eleventh Circuit’s opinion suggesting that the challenged provision “should be compared to the protections afforded by the preliminary injunction and stay mechanisms and considered in light of
the likelihood
of Abbott’s obtaining such protections.”
Valley Drug Co.,
Defendants, on the other hand, interpret the Eleventh Circuit’s opinion to require only that provisional relief be a “reasonable possibility” in the ’207 litigation. Defendants base their interpretation, in part, on a section of the Hovenkamp treatise cited in the Eleventh Circuit’s opinion. In section 2046 of
Antitrust Law: An Analysis of Antitrust Principles and their Application
(1999), Hovenkamp began with the premise that the legal system encourages settlement of conflicting intellectual property claims, especially “where the settlement is certainly no more anti-competitive than [a] possible outcome” of the litigation and whei'e “each party’s claim seemed reasonably legitimate but also seemed subject to a reasonable risk of failure — that is, each party was in a posi
There is some degree of ambiguity in the word “likelihood,” and there is no clear guidance in the Eleventh Circuit’s opinion as to which of the parties’ interpretations is more accurate. The Court therefore looks to prior opinions of this Circuit for guidance on the appropriate use of the word “likelihood.” The Eleventh Circuit and the former Fifth Circuit
19
have previously held, albeit in different contexts, that “the word likelihood is synonymous with probability.”
Shatel Corp. v. Mao Ta Lumber & Yacht Corp.,
2. The Federal Circuit’s Standard for Injunctive Relief
Having resolved the meaning of the word “likelihood” in the Eleventh Circuit’s opinion, the Court turns to one of the primary issues presented on remand: whether it was more likely than not that Abbott could have obtained a preliminary injunction or stay pending appeal to keep Geneva off the market until after the Federal Circuit had reviewed the District Court’s invalidity decision. Because any motion for injunctive relief would have been reviewed by the Federal Circuit, it is undisputed that Federal Circuit law provides the appropriate precedent for this analysis. In the Federal Circuit, the party seeking the “extraordinary relief’ of a preliminary injunction must demonstrate: (1) a reasonable likelihood of success on the merits; (2) irreparable harm if the injunction were not granted; (3) the balance of the hardships; and (4) the impact of the injunction on the public interest.
Reebok Int’l Ltd. v. J. Baker, Inc.,
a. Likelihood of Success on the Merits for Patent Injunctions
In the patent context, “a reasonable likelihood of success” requires a showing of validity and infringement.
Reebok,
Abbott argues, however, that if it alleges irreparable harm that is “sufficiently serious, it is only necessary that there be a fair chance of success on the merits.”
See Standard Havens Prods, v. Gencor Indus., Inc.,
An assessment of the likelihood that Abbott could have obtained injunctive relief, therefore, requires that this Court consider the likelihood of Abbott prevailing on the merits of the ’207 patent litigation, gauged as of the date on which the Agreement was entered into.
See Valley Drug Co.,
Because the reasonableness of the Agreement is to be assessed as of the date on which it was entered into, this Court may not rely on the District Court’s analysis of the ’207 patent or on its ultimate conclusion that the patent was invalid under the “on-sale bar.” To a certain extent, this Court is placed in the difficult position of having to “unring the bell”; although the District Court and Federal Circuit decisions in the underlying ’207 patent litigation have been scrutinized in relation to other portions of this case, for purposes of this analysis, the Court must, in essence, act as if they had not yet been issued.
20
Indeed, the Court cannot be swayed by the subsequent invalidity of the patent.
See Valley Drug,
b. The “Ortr-Sale Bar” Issue in the ’207 Suit
The primary issue presented in Geneva’s motion for summary judgment in the patent infringement action was whether the “on-sale bar” of
The application for the ’207 patent was filed on October 18, 1994. Therefore, the critical date for purposes of the “on-sale bar” was October 18, 1993. Through its summary judgment submissions, Geneva effectively demonstrated that prior to October 18, 1993, there had been at least three sales involving anhydrous terazosin hydrochloride that Byron Chemical Company (“Byron”) bought from its overseas supplier and then sold to Geneva in the United States. In light of those sales, it is evident that the “on-sale bar” applied absent some exception to the rule. Once Geneva raised this substantial question regarding the validity of the patent, Abbott — in order to avoid invalidation of the ’207 patent — had the burden of challenging the application of the “on-sale bar” based on the pre-1993 sales. In a creative effort to meet that burden, Abbott argued that: (1) application of the bar to this case was not supported by any of the policies underlying
However, none of Abbott’s challenges to the application of the “on-sale bar” in the ’207 patent litigation demonstrated that Geneva’s position lacked substantial merit. As to the policy issue, the first policy underlying
Second, Abbott’s argument that the subject matter of the sales did not fully anticipate the claimed invention was also without significant support. Abbott premised its argument on the fact that the parties to the transactions did not appreciate that Form IV terazosin was involved. However, it is undisputed that the parties knew that the sale embodied, and in fact requested, anhydrous terazosin hydrochloride. Abbott had no persuasive legal support for its argument that the parties had to anticipate the particular crystal form of the anhydrous terazosin hydrochloride.
And third, while Abbott argued that the invention was not complete and “known to work for its intended purpose,” the record was undisputed that the lots of terazosin hydrochloride that Geneva purchased were acceptable for “development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs”- — -the articulated purpose for which Geneva purchased the anhydrous terazosin. Abbott’s ’207 summary judgment papers, therefore, failed to demonstrate that Geneva’s “on-sale bar” challenge was substantially without merit.
This is not to say that Abbott’s arguments were legally frivolous or in bad faith. To the contrary, in the Order granting Defendants’ Motion for Summary Judgment on Section Two of the Sherman Act, the Court found that the undisputed evidence did not support the legal conclusion that the ’207 litigation was a sham or that it was objectively baseless. See supra n. 17. The focus of the analysis here, however, is not whether the litigation was frivolous and baseless, but rather on whether, upon Geneva’s assertion of “substantial questions” regarding the validity of the ’207 patent, Abbott was able to demonstrate that Geneva’s arguments were substantially without merit. Because the Court concludes that Abbott’s challenge to Geneva’s “on-sale bar” argument, judged as of April 1, 1998, was weak and unlikely to result in a District Court finding that the ’207 patent was valid, it follows that Abbott was unlikely to obtain a preliminary injunction to keep Geneva off the market through appellate resolution of the “on-sale bar” issue. 25
3. The Likely Outcomes of the ’207 Patent Litigation
The Eleventh Circuit’s focus, with respect to the likely outcomes of the litigation, was on whether Abbott could have obtained injunctive relief. For that reason, the Court has primarily addressed whether Abbott would have been able to meet the exacting requirements for obtaining the “extraordinary relief’ of a preliminary injunction at that time. However, the foregoing analysis of the strength of Abbott’s position in the underlying patent infringement case also indicates that there was only one likely ultimate outcome of
C. The Challenged Provision Was Not a Reasonable Implementation of the Patent’s Protections
Having concluded that Abbott was not likely to qualify for a preliminary injunction as of April 1, 1998, the Court must examine whether the settlement, or significant parts of it, was a reasonable implementation of the protections afforded by the ’207 patent and the relevant law.
See Valley Drug,
In this case, Abbott has suggested that the Agreement as a whole represented a reasonable implementation of the patent’s protections
27
because,
inter alia,
(1) the parties were operating against “a backdrop of mutual risk and uncertainty,” as an immediate launch by Geneva of its capsule product would have created substantial legal and financial risks for both Abbott and
First, most of the private and public benefits that generally come with settlements materialize primarily when the settlement terminates the entire litigation between the parties.
See Tamoxifen,
Second, although settlements are favored over litigation because they allow litigants to avoid risk and uncertainty, this alone cannot insulate a settlement agreement from antitrust scrutiny.
30
It is
Third, Defendants’ argument that the challenged provision was ancillary to a reasonable, efficiency-enhancing settlement agreement is belied by the realities of what the Agreement actually resolved and the remaining terms of the Agreement. The Eleventh Circuit noted that particular provisions of the Agreement should not be considered in isolation, as “agreements that are anticompetitive when considered in isolation (such as covenants not to compete) can still be lawful, if they are viewed as ancillary to another agreement and, when viewed in combination, will have the overall effect of enhancing competition.”
Valley Drug,
IY. ANTITRUST ANALYSIS
Having concluded that the appellate-stay provision exceeds the exclusionary scope of the patent, the next step is to define the parameters of the appropriate antitrust analysis.
See Valley Drug,
A. Per Se, Quick Look, and The Rule of Reason
In assessing whether an agreement unreasonably restrains trade such
The first approach,
per se
analysis, permits courts to make “categorical judgments” that certain practices, including price fixing, horizontal output restraints, and market-allocation agreements, are illegal without the need for any elaborate inquiry as to the precise harm they have caused or the business excuse for their use.
Broad. Music, Inc. v. Columbia Broad. Sys.,
At the other end of the spectrum, antitrust tribunals routinely apply the more lenient rule of reason to practices that present some potential for competitive harm but also hold out the promise of social gains. Under the rule of reason, the “test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.”
Retina
Assocs.,
P.A. v. S. Baptist Hosp. of Fla.,
B. The Agreement is Per Se Unlawful
In their Quick-Look Motion, the Sherman Act Class Plaintiffs urge the Court to either condemn the Agreement as a
per se
violation of the Sherman Act, or to apply the quick-look approach as a matter of law.
33
The premise underlying both of
The Court begins with the recognition that horizontal agreements between competitors are antitrust’s most “suspect” classification, which as a group provoke closer scrutiny than any other arrangement.
See
Hovenkamp Treatise ¶ 1902a. Even further, eases such as this — involving settlement agreements with payments from a patentee to a potential competitor to delay market entry — are highly suspicious and require particularly close scrutiny to ensure that firms do not cloak anticompetitive behavior under the guise of a settlement agreement.
See
Ho-venkamp,
et al,
87 Minn. L.Rev. at 1749. As a general class, agreements between competitors to allocate markets are clearly anticompetitive, with the obvious tendency to diminish output and raise prices.
Valley Drug,
Such concerted action is usually termed a ‘horizontal’ restraint/ in contradistinction to combinations of persons at different levels of the market structure, e.g., manufacturers and distributors, which are termed ‘vertical’ restraints. This Court has reiterated time and time again that ‘[h]orizontal territorial limitations ... are naked restraints of trade with no purpose except stifling of competition.’ Such limitations are per se violations of the Sherman Act.
Id. (citations omitted).
Because of the obvious anticompetitive tendencies of such arrangements, the Eleventh Circuit, in its remand order, commented that it would “readily affirm” this Court’s Order condemning the Agreement as a
per se
violation if it were not for the complicating factor that Abbott owned a then-presumptively valid patent that Geneva’s ANDA undisputedly infringed.
Valley Drug,
In evaluating the question of whether the Agreement here was
per se
illegal, the Court must inquire into whether the restraint, on its face, is a naked restraint of trade that always or almost always tends to restrict output, or an ancillary restraint that results in an efficiency-enhancing integration among the parties to the agreement.
Nat’l Bancard,
For purposes of this analysis, the following relevant facts are undisputed and dis-positive. It is undisputed that Abbott and Geneva were actual or potential competitors
34
at the time the Agreement was executed. It is also undisputed that pursuant to the Agreement, Abbott agreed to pay Geneva $4.5 million per month in exchange for Geneva’s agreement not to market its generic terazosin hydrochloride products in the United States until a final appellate judgment on the merits of the ’207 patent infringement action. The Agreement, therefore, guaranteed Abbott that its only potential competitor at the time would, for a substantial price, refrain from marketing its FDA-approved generic version of Hyt-rin even after an adverse district court ruling as to the validity of ’207 patent. This restraint exceeded the scope of the ’207 patent, and had the effect of keep
C. Defendants’ Arguments Against Per Se Treatment are Unavailing
None of Defendants’ attempts to avoid
per se
treatment are persuasive. Defendants’ primary argument is that
per se
condemnation is inappropriate because the appellate-stay provision, viewed in the context of the entire Agreement, is reasonably ancillary to the Agreement’s pro-competitive core. Defendants focus on the Eleventh Circuit’s direction that any provisions found to have exceeded the exclusionary potential of the patent not be considered “in isolation,” but rather in combination with the entire agreement in order to judge the Agreement’s overall effect on competition.
Valley Drug,
In support of their argument, Defendants identify the following allegedly competition-enhancing qualities of the Agreement to which they contend the appellate-stay provision was “reasonably ancillary”: (1) the Agreement maintained the status quo pending appeal, permitting Abbott to
Before addressing the merits of these arguments, the Court notes that once a naked restraint of trade is found, any alleged procompetitive justifications are irrelevant and should not be considered.
See Topeo,
Defendants’ first argument, that the Agreement permitted Abbott to exploit its patent rights and allowed the parties to eliminate uncertainty pending resolution of the ’207 litigation, does not remove the challenged portion of the Agreement from the category of naked restraints. As discussed earlier in this Order, while a patent affords the patent holder considerable protections, a patent’s exclusionary right cannot be exploited in every way.
See supra
Section III.A. It is well-settled that a patent holder’s protections are limited by the precise terms of the patent grant, and cannot be extended by agreement.
37
Id.
Further, “[t]he legitimate exclusion value of a pharmaceutical patent [like the ’207
Further, the terms of the Abboth-Ge-neva Agreement, while analogized by Defendants to a preliminary injunction or stay pending appeal, went beyond what is generally available under a court-ordered injunction. The Agreement: (1) barred Geneva’s entry into the market beyond resolution of the patent suit in the district court without any determination of whether Abbott was likely to succeed on the merits of any appeal; (2) provided large interim payments to Geneva — in a sum that exceeded Geneva’s total revenues for 1997 — that did not have a demonstrable link to the amount of damages that Geneva would incur if Abbott obtained an injunction but was ultimately unsuccessful in the infringement action, as a bond under
Similarly, Defendants’ second and third arguments fail to establish that the Agreement was reasonably ancillary to an overall procompetitive purpose. The mere fact that the Agreement allowed for generic entry long before the ’207 patent’s October 2014 expiration date does not render the Agreement procompetitive. This is particularly so given the fact that the patent, judged as of April 1, 1998, was of questionable validity in light of the “on-sale bar” and was likely to be invalidated by the district court. Further, to the extent that the Agreement did not terminate the pending litigation and preserved Geneva’s ability to continue its challenge to the ’207 patent’s validity, Defendants have not demonstrated how or why the appellate-stay provision was essential to achieving this goal.
See
Hovenkamp Treatise ¶ 1908b (in assessing whether a restraint is ancillary, “some determination must be made whether the challenged agreement is an essential part of [the procompetitive] arrangement, or whether it is completely unnecessary,”
ie.
whether it is an “inherent feature” of the procompetitive arrangement or “simply an unnecessary, output-
Defendants’ fourth argument regarding the Agreement’s procompetitive nature also must fail. Defendants contend that the Agreement was consistent with the policies underlying the Hatch-Wax-man regulatory regime, and the FDA’s proposed ANDA regulations, because it allowed for resolution of the patent infringement action before generic entry. Although the Court recognizes the fiscal prudence of foregoing market entry in the face of uncertainty regarding the legality of a patent, such considerations cannot take precedence over the anticompetitive effect that continued improper exclusion has on the market.
See Valley Drug,
Finally, under established precedent, true “ancillary” restraints only escape the
per se
rule because they are “counterbalanced by otherwise unattainable procompetitive benefits” from some joint integrated activity.
Nat’l Bancard,
D. Proof of Actual Anticompetitive Effects is Unnecessary
Because the appellate-stay provision evidences a “naked restraint of trade”
Y. CONCLUSION
After careful review of the undisputed material facts in the light most favorable to the non-moving parties, and analyzing those facts under the appropriate legal framework, the Court concludes that the Sherman Act Class Plaintiffs and Kaiser are entitled to summary judgment as a matter of law on the Section One and analogous claims. Judged as of April 1, 1998, the appellate-stay provision of the Abbott-Geneva Agreement exceeded the scope of the protections afforded Abbott under the ’207 patent and the applicable law. Further, because horizontal market allocations among competitors have the strong tendency to diminish output and raise prices, the Agreement is so obviously anticompetitive that it violates the Sherman Act under a per se analysis. In light of these rulings, the Court will instruct the jury, in accordance with Eleventh Circuit Pattern Jury Instruction No. 3.1, that the Agreement constitutes a per se violation of Section One of the Sherman Antitrust Act and is, in and of itself, an “unreasonable” restraint of trade. The trial will proceed, therefore, on the issue of whether the Plaintiffs suffered antitrust injury as a proximate result of Defendants’ collusive behavior in violation of Section One. Accordingly, it is hereby
ORDERED that:
(1) The Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment for an Order Declaring that the Abbott-Geneva Agreement Exceeded the Exclusionary
(2) Plaintiff Kaiser Foundation Health Plan Inc.’s Motion for Summary Judgment on Section One Claims [D.E. 1161] is GRANTED;
(3) Defendants’ Motion for Summary Judgment on Sherman Act Section One (and Analogous) Claims [D.E. 1188] is DENIED;
(4) The Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment for a Finding that the Abbott^Geneva Agreement Violates Section One of the Sherman Act [D.E. 1190-1] is GRANTED;
(5) The Sherman Act Class Plaintiffs’ Alternative Motion for Partial Summary Judgment for a Finding that a Quick-Look Analysis Applies to the Agreement [D.E. 1190-2] is DENIED AS MOOT;
(6) The Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment Seeking a Ruling that Proof of Actual Anticompetitive Effects is Sufficient to Establish a Violation of Section One of the Sherman Act [D.E. 1194] is DENIED AS MOOT.
Notes
. Specifically, this Order: (1) grants the Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment Declaring that the Abbott-Geneva Agreement Exceeded the Exclusionary Potential of the 207 Patent [D.E. 1192]; (2) grants Plaintiff Kaiser’s Motion for Summary Judgment on Section One Claims [D.E. 1161]; (3) denies Defendants’ Motion for Summary Judgment on Sherman Act Section One (and Analogous) Claims [D.E. 1188]; (4) grants the Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment for a Finding that the Abbott-Geneva Agreement Violates Section One of the Sherman Act [D.E. 1190-1]; (5) denies as moot the Sherman Act Class Plaintiffs' alternative Motion for Partial Summary Judgment for a Finding that a Quick-Look Analysis Applies to the Agreement [D.E. 1190-2]; and (6) denies as moot the Sherman Act Class Plaintiffs’ Motion for Partial Summary Judgment for a Ruling that Proof of Actual Anticompetitive Effects is Sufficient to Establish a Violation of Section One of the Sherman Act [D.E. 1194]. Although the parties filed five summary judgment motions as to the Section One claims, because the motion regarding the appropriate antitrust scrutiny has two alternative requests for relief, this Court's ruling effectively relates to six separate motions.
. On July 16, 2004, the parties submitted their Joint Statement of Facts Not in Dispute. [DE-1386]. For the purposes of conciseness and clarity, references to that Statement will be indicated as "S. ¶_" In addition, references to the Federal Food, Drug, and Cosmetics Act,
. Zenith settled this action and is no longer a party to this multi-district litigation.
. The Individual Direct Purchasers are large entities
(e.g.,
Walgreens, Shop-Rite) that purchased Hytrin directly from Abbott. The Indirect Purchaser classes are seventeen certified state classes of end payers for Hytrin consisting of Third Party Payers (e.g., insurance companies) and individual consumers.
See In re Terazosin Hydrochloride,
.Section One of the Sherman Antitrust Act prohibits "[ejveiy contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the
. The legislative policy behind Hatch-Wax-man was to balance the need to preserve the incentive for brand name drug companies to develop new drugs with the public's interest in buying less expensive generic bioequivalent drugs. See Federal Trade Commission, Generic Drug Entry Prior to Patent Expiration: An FTC Study (July 2002) (noting that as of 2002, generics comprised 47% of the prescriptions filled in the United States, up from 19% in 1984).
. Until July 2000, FDA regulations provided that a "court decision,” in the context of the 30 month stay, meant a decision of an appellate court or a decision of a district court from which no appeal was taken. S. ¶ 15 (citing
. The Geneva litigation was consolidated with a case in which Abbott sued Novopharm— another generic drug manufacturer — also for infringement of the '207 patent. S. ¶¶ 112— 13. As with Geneva, Novopharm admitted that its product contained Form IV terazosin hydrochloride but denied that the '207 patent was valid or enforceable. S. ¶ 113. Within a week of one another, both Geneva and No-vopharm filed motions for summary judgment in their respective litigation with Abbott, on the same grounds. S. ¶¶ 114-15. Nearly ten months later, in October 1997, Abbott sued a third generic drug manufacturer, Invamed,
. "Final Judgment in Geneva’s Favor” was defined as "the entry pursuant to
. "Final Judgment in Abbott’s Favor” was defined as “the entry pursuant to the
. See supra n. 1.
. The Sherman Act Class Plaintiffs’ Motion seeks partial summary judgment — specifically, an order declaring that the Abbott-Geneva Agreement exceeded the exclusionary scope of the '207 patent — while Kaiser captioned its motion as one for summary judgment on the Section One claims, without any limitations. However, upon review of the Motions, it is apparent that the Sherman Act Class Plaintiffs and Kaiser all seek the same relief: a ruling, in accordance with the Eleventh Circuit's directions on remand, that the challenged provision of the Abbott-Geneva Agreement delayed generic entry longer than the '207 patent would otherwise permit, and that the Agreement cannot be justified by the likely outcome of the '207 patent litigation.
. The Eleventh Circuit adopted as precedent decisions of the former Fifth Circuit rendered prior to October 1, 1981.
See Bonner v. City of Prichard,
. In their Motion for Partial Summary Judgment, the Sherman Act Class Plaintiffs acknowledge that "[s]ince the Eleventh Circuit's ruling ... Plaintiffs have focused their case (with respect to alleged actual anti-competi-live effects) on the Agreement’s prohibition on Geneva's entering the market regardless of whether the district court presiding over the '207 litigation found the patent invalid on summary judgment.”
See
DE-1192 at n. 14.
. Although the '207 patent includes four claims, in the underlying patent litigation, Abbott only asserted infringement of claim 4, which defines the claimed crystalline form of anhydrous terazosin hydrochloride (Form IV) in terms of an analytical method called x-ray powder diffractometry.
. The Agreement prevented Geneva from selling, offering for sale, donating or otherwise distributing in the United States "any Terazosin Hydrochloride Product” until after the earlier of the Generic Entry Date or the Appellate Judgment (as both terms are defined in Section I.C., above). See Ex. 1, Tab A at ¶ 20, Exs. to Defs.’ Mot. for Summ. J. on Sherman Act Section One (and Analogous Claims). In turn, "Terazosin Hydrochloride Product” is defined as "any pharmaceutical product, regardless of formulation or dosage form (tablet, capsule, etc.) containing terazo-sin hydrochloride.” Although the restriction on Geneva’s marketing of any terazosin hydrochloride product appears to extend well beyond the protections of the patent, this issue is not before the Court at this time given Plaintiffs’ narrowing of their Section One claims. See supra n. 14. However, because the Eleventh Circuit directed the Court to assess whether the challenged provision may be justified as ancillary to another agreement (which, together with the challenged provision, could have the overall effect of enhancing competition), the Court will briefly address this issue later in its analysis.
. On August 31, 2004, this Court granted Defendants’ Motion for Summary Judgment on Sherman Act Section Two (and Analogous) Claims, and denied Kaiser's Motion for Summary Judgment on Sham Litigation.
See In re Terazosin Hydrochloride Antitrust Litig.,
.
Walker Process Equip., Inc. v. Food Mach. & Chem. Corp.,
. See supra n. 13.
. The Court thus rejects Plaintiffs’ reliance, in assessing Abbott's chances of obtaining a preliminary injunction pending appeal, on the District Court's decision regarding invalidity. While the decision is strong evidence that the District Court would not have issued a preliminary injunction, the relevant analysis requires this Court to situate itself in the world as it existed on April 1, 1998, when no decision as to validity had been rendered.
. The Eleventh Circuit went on to explain the justification for its decision that the Court cannot be guided by the subsequent invalidity of the patent. "[E]xposing settling parties to antitrust liability for the exclusionary effects of a settlement reasonably within the scope of the patent merely because the patent is subsequently declared invalid would undermine the patent incentives. Patent litigation is too complex and the results too uncertain for parties to accurately forecast whether enforcing the exclusionary right through settlement will expose them to treble damages if the patent immunity were destroyed by the mere invalidity of the patent.”
Valley Drug,
. The four policies underlying § 102(b) are: (1) discouraging removal of inventions from the public domain that the public reasonably has come to believe are freely available; (2) encouraging the prompt and widespread disclosure of inventions; (3) allowing an inventor a reasonable amount of time following sales activity to determine the potential economic value of a patent; and (4) prohibiting an inventor from commercially exploiting his invention beyond the statutorily prescribed time.
In re Mahurkar Double Lumen Hemo-dialysis Catheter,
. Plaintiffs argue that
LaPorte
barred Abbott's "conception” argument in the 207 case.
See
D.E. 1192 at 15 (citing
LaPorte,
On November 4, 1980, LaPorte's president ordered the cutter extension from the consulting engineer; the consulting engineer notified the inventor of this transaction to which the inventor replied: "no problem.” Id. Ultimately, the inventor, the consulting engineer, and LaPorte agreed to seek a patent for the cutter extensions and the application was" filed on December 7, 1981. Id. The court held that the "on-sale bar” applied because: (1) there had been a sale in November 1980, more than one year prior to the patent application date; (2) the fact that the sale occurred between third parties was not relevant; and (3) importantly, the invention had been produced from the embodiment of the original invention (i.e., the photograph). Id. at 1583.
. Indeed, as the Sherman Act Class Plaintiffs note in their Motion for Partial Summary Judgment, acceptance of Abbott's argument— that a sale under § 102(b) must disclose all particulars of an invention, not just the invention itself — not only would have contravened LaPorte, but also would have plainly frustrated the first policy underlying 102(b). "Under Abbott’s argument, if Geneva had been buying and using terazosin for ten, fifteen or twenty years, but did not know its x-ray diffraction pattern ... Abbott could still come along one day, snap its special x-ray pictures, file a patent and force Geneva off the market.” See Pis.' Mot. for Part. Summ. J., at 17. Such a result would certainly run afoul of the policy discouraging removal of inventions from the public domain that the public had come to rely upon.
. Although there are three other elements that courts examine in deciding whether a preliminary injunction should issue, the failure to demonstrate likelihood of success on the merits is fatal to Abbott’s chances of obtaining injunctive relief.
See New England Braiding,
. Further, given the record in the patent infringement action, once the District Court found the patent to be invalid, it was even less likely that Abbott could obtain a stay pending appeal. The standard for obtaining a stay pending appeal is essentially the same as that for obtaining a preliminary injunction, only the movant is required to demonstrate a "strong showing that he is likely to succeed on the merits.”
See Standard Havens Prods., Inc. v. Gencor Indus., Inc.,
. Of course, Defendants most prominent argument for the reasonableness of the challenged provision is that injunctive relief was a reasonable possibility in the '207 patent litigation, and that the delay of generic entry through appellate resolution of the infringement action was therefore within the exclusionary potential of the patent. As this argument has been addressed extensively earlier in this Order, it is not repeated here in the third step of the Court's analysis.
. Expanding on the “backdrop of mutual risk and uncertainty,” Defendants state that Abbott's risk was that if it failed to obtain injunctive relief, it would have suffered enormous financial damages at the bands of a small generic company that might well not be able to satisfy a judgment in Abbott’s favor if Abbott ultimately prevailed in the litigation. See Defs.' Brief at 4. Geneva's risk, in turn, was that if it defeated preliminary injunctive relief and marketed its product, it would have put itself at risk of a ruinous damages award against it in the litigation. And, if Geneva had brought its product to market and subsequently been preliminarily enjoined, it would have lost forever its claim to the 180-day exclusivity period once it had been triggered.
. Defendants object to the Court's consideration of what the Agreement actually settled, arguing that because the Eleventh Circuit did not identify it as a factor to be addressed on remand, it is inappropriate for this Court to do so. However, the Eleventh Circuit's opinion was not a precise delineation of factors to be considered on remand. In fact, the Circuit noted that its holding at that early stage of the litigation was "appropriately narrow,” and it was merely “offer[ing] several observations with respect to the framework to be developed on remand for deciding the appropriate antitrust analysis.”
Valley Drug,
.Affording such deference to settlements would ignore the realities of patent litigations and disregard the competitive implications of settlement accords. As Hovenkamp recognized, uncertainty may itself encourage collusive agreements; therefore, where the parties are in a position of uncertainty regarding the
. The question of whether the challenged provision is reasonably ancillary to the Agreement's procompetitive core is more appropriately addressed in Section IV, below, in
. The Supreme Court has held that it is the court's experience with the type of restraint that is relevant in applying the
per se
rule, not the industry or the precise factual circumstances of the case.
Arizona v. Maricopa County Med. Soc’y,
. The Sherman Act Class Plaintiffs ask the Court not only to apply the quick look approach, but also to conclude that the Agreement violates Section One of the Sherman Act under such an analysis. See Quick-Look Motion at p. 2. As a fallback approach, if the Court finds that any factual questions preclude summary judgment, the Sherman Act Class Plaintiffs request that the Court merely hold that the quick-look approach applies to the Agreement, leaving the question of whether the Agreement actually violates the Sherman Act under such an analysis to the jury. Id. at n. 2.
. There is no question here that this case presents a "horizontal” agreement. For purposes of this analysis, no distinction is made between actual competitors
ii.e.,
those currently competing in the same market) and potential competitors.
See Palmer,
. Other courts have recognized the negative effect on competition where a settlement creates a "bottleneck” for future ANDA filers.
See Ciprofloxacin,
. The Eleventh Circuit disagreed with the Sixth Circuit’s approach in
Cardizem,
because that Court did not conduct an analysis of the exclusionary potential of the patent and also placed considerable reliance on the size of the exit payments. Nonetheless, the
Cardizem
court's analysis of the likely anticompetitive effects of the challenged agreement and the application of the
per se
rule remains relevant to this Court's analysis. The agreement in that case, like the Abbott-Geneva Agreement here, did not resolve the underlying patent litigation but rather represented what the parties termed an "interim settlement.” Further, the
Cardizem
agreement resulted in a "bottleneck” for future ANDA filers. In these respects, the facts of the
Cardizem
case are factually closer to this case than those that other courts reviewing patent settlements in the pharmaceutical context have addressed.
See Ciprofloxacin,
. Defendants rely on
Troxel Mfg. Co.
v.
Schwinn Bicycle Co.,
. It is also important to note that the Agreement did not "maintain the status quo,” but rather provided for a large payment from the patent holder to its competitor to delay generic entry. A true "status quo” situation would have emerged if Geneva, recognizing the potential for a "ruinous” damages award, agreed not to market its generic product until resolution of the '207 appeals without any payments from Abbott. Instead, the parties altered the "status quo” through an agreement that included significant reverse payments.
. The Court's focus primarily has been on whether one particular provision of the Agreement, the appellate-stay provision, exceeded the scope of the patent. However, the challenged provision, in accordance with the Eleventh Circuit's opinion, cannot be viewed "in isolation” but rather in the context of the Agreement as a whole. This inclusive approach lends itself to two different possible conclusions: (1) if the larger Agreement as a whole has a procompetitive or efficiency-enhancing purpose, then the challenged provision may be justified as ancillary to such a purpose; or (2) if the Agreement has no over
. That being said, the Court is persuaded that Abbot has power in the relevant market, which is the market for Hytrin and its generic bioequivalent forms of terazosin hydrochloride. Indeed, in cases such as this, "[t]he very fact that the pioneer finds it worthwhile to pay a large exclusion payment tends to establish market power.” Herbert Hovenkamp, Mark D. Janis & Mark A. Lem-ley, IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property Law (2004) at 7-37. Although the Court does not find the mere size of the exclusion payment, based on the limited record presented on the issue, to support a finding of illegality, such a significant payment as part of an interim settlement agreement does indicate that the pioneer exercises substantial power in the market. "It also suggests some inherent uncertainty as to the validity or scope of the patent.” Id.