In a closely watched pharmaceutical case, the U.S. Court of Appeals for the Ninth Circuit recently held that there was sufficient evidence for a plaintiff’s Walker Process claim, based on a pay-for-delay agreement between a patent holder and a generic manufacturer, to survive summary judgment.   The Court also upheld dismissal of the plaintiff’s sham litigation claim.  Kaiser Foundation Health Plan Inc. v. Abbott Laboratories, Inc., 2009 U.S. App. LEXIS 584 (9th Cir., Jan. 13, 2009) (Fletcher, J.)

Kaiser sued defendants Abbott and Geneva Pharmaceuticals alleging a Sherman Act Section 1 restraint of trade claim against both defendants and Sherman Act Section 2 monopolization and attempt to monopolize claim against Abbott.

Under the Hatch-Waxman Act, a drug manufacturer seeking approval for a generic form of a patented brand-name drug may file an Abbreviated New Drug Application (ANDA).   The ANDA applicant must inform the patent holder of its filing; the patent holder then may bring an action for patent infringement against the applicant.  Geneva and other generic manufacturers filed a series of ANDA applications for variations of Abbott’s terazosin hydrochloride for treating hypertension.  Abbott then brought patent infringement claims against the generic manufacturers.  Abbott and Geneva subsequently entered into an agreement under which Geneva agreed to keep its generic product off the market until a final judgment on Abbott’s ’207 patent.  Kaiser claimed that this agreement was a per se unlawful restraint of trade under Section 1 of the Sherman Act.  Kaiser based its Section 2 claim on Abbott’s allegedly fraudulent behavior before the U.S. Patent and Trademark Office (USPTO) when filing its ’207 patent.

A jury found against Kaiser on the Section 1 claim due to lack of causation, and the district court entered summary judgment against Kaiser on the Section 2 claim based on a lack of evidence to proceed to the jury.   Kaiser appealed. 

The Ninth Circuit affirmed the jury’s verdict on the Section 1 claim, concluding that the lower court did not abuse its discretion in making several rulings that prevented certain evidence from reaching the jury. 

On the Section 2 claim, the Ninth Circuit affirmed one part of the claim and reversed the other.   Kaiser first argued that Abbott improperly attempted to extend its patent monopoly by engaging in a pattern of filing sham lawsuits.  Under the Noerr-Pennington doctrine, a party is immune from antitrust liability for petitioning any branch of the government.  An exception to this immunity, however, is a “sham” lawsuit in which a plaintiff uses the judicial process itself, as opposed to the outcome of the process, to harm competition.  Kaiser claimed that Abbott’s 17 lawsuits against would-be generic manufacturers between 1993 and 1998 qualified as a pattern of sham litigation. 

The Ninth Circuit, however, noted that Abbott won seven of those 17 lawsuits and had plausible arguments for prevailing on the remaining lawsuits.   Further, the Ninth Circuit concluded that while Abbott was litigious, the high number of lawsuits Abbott filed were a product of the Hatch-Waxman Act, which required Abbott to file several lawsuits quickly to preserve its rights under the Act.  Ultimately, the Ninth Circuit determined that “there is insufficient evidence in this record to allow a jury to conclude that Abbott’s seventeen lawsuits constituted ‘sham’ litigation.” 

Kaiser also argued that Abbott committed Walker Process fraud by enforcing the ’207 patent, alleging Abbott knew it had been procured through fraud on the USPTO.   In support of its allegations, Kaiser claimed that Abbott failed to provide an English translation of an earlier Japanese patent application involving a substantially similar crystal form as the one reported in the ’207 patent, as well as that Abbott’s in-house attorney failed to reference a key Federal Circuit decision that was harmful to Abbott’s position on an on-sale bar issue. 

The Ninth Circuit held that Kaiser presented sufficient evidence to allow its Walker Process claim to survive summary judgment and reversed the lower court’s ruling.   In reaching its decision, the Ninth Circuit, citing the Federal Circuit's 2006 decision in Purdue Pharma L.P. v. Endo Pharms. Inc., applied the Federal Circuit jurisprudence that “[d]irect evidence of intent to deceive or mislead the PTO is rarely available but may be inferred from clear and convincing evidence of the surrounding circumstances.”

Practice Note:   A petition for certiorari filed by Aventis Pharma is presently pending at the Supreme Court.  The petition stems from the U.S. Court of Appeals for the Federal Circuit ruling in Aventis Pharma v. Amphastar Pharmaceuticals (see IP Update, Vol. 11, No. 6)  and asks the Supreme Court to consider whether the mens rea for inequitable conduct can be satisfied by a “sliding scale” under which “less intent” is required as the materiality of an omission or misrepresentation increases.