Digest of Tyco Healthcare Group LP v. Mutual Pharmaceutical Co., No. 2013-1386 (Fed. Cir. Aug. 6, 2014) (precedential). On appeal from D.N.J. Before Newman, Bryson, and Moore.

Procedural Posture: In a first appeal, the CAFC affirmed an order of the district court that granted summary judgment on defendant Mutual’s invalidity counterclaim and held the asserted claims of Tyco’s patent invalid for obviousness. Following the CAFC disposition, the district court lifted the stay of Mutual’s antitrust counterclaims. Mutual then asserted that Tyco should be stripped of its Noerr-Pennington antitrust immunity, based on the sham exception. The district court granted summary judgment to patent holder Tyco on all of the antitrust counterclaims. CAFC affirmed in part, vacated in part, and remanded.

  • Antitrust Sham-Litigation Exception, Infringement: The CAFC held that in determining whether an infringement suit against a competitor is “objectively baseless” and therefore within the sham-litigation exception to Noerr-Penningtonimmunity, courts must consider whether it is possible that a drug constructed in accordance with the ANDA could infringe based on faulty testing or screening procedures. The CAFC found that it was not “objectively baseless” for patent owner Tyco to allege infringement under section 271(e)(2)(A) if Tyco had evidence that the as-marketed commercial ANDA product will infringe, even though the specific hypothetical product specified in the ANDA could not infringe. However, Tyco’s infringement theory required subjecting the ANDA product to a higher outgassing temperature, which Tyco asserted would reduce the product’s surface area to a size within a range claimed by its patents. The CAFC found Tyco’s infringement theory to be flawed as evidence suggested that a higher outgassing temperature would increase, instead of decrease, the surface area of the ANDA product. CAFC remanded in order to determine the effect of testing procedures used on the ANDA product and further whether the theory related to these procedures was objectively baseless.
  • Antitrust Sham-Litigation Exception, Validity: CAFC stated that “it will be a rare case in which a patentee’s assertion of its patent in the face of a claim of invalidity will be so unreasonable as to support a claim…[of] sham litigation.” Patents have a strong presumption of validity and to prove invalidity a patent challenger must present clear and convincing evidence. For a patentee to lose its Noerr-Penningtonimmunity, the exacting standards of PRE must be satisfied. In this case, patent holder Tyco offered to meet its burden of production by providing sufficient evidence for rebutting invalidity claims that was not objectively baseless, even if Tyco’s validity arguments were ultimately unsuccessful. Therefore, the CAFC found that Tyco did not engage in sham-litigation by defending the validity of its patents and affirmed the district court’s grant of summary judgment with respect to the invalidity portion of the sham-litigation counterclaim.
  • Antitrust Sham-Litigation Exception, Administrative Petitions: The district court had concluded that the sham exception to Noerr- Pennington immunity was “expressly limited to litigation” and granted summary judgment to patent holder Tyco with respect to Mutual’s claim that the citizen petition to the FDA stripped Tyco of its immunity. CAFC found that the sham exception is not limited to court litigation and that it is applicable to administrative petitions, including FDA citizen petitions. The CAFC then considered whether Tyco’s filing of a citizen’s petition was “objectively baseless,” or reasonable by reviewing the FDA’s response, expert opinions, and subjective evidence indicating whether patent holder Tyco’s action was an attempt to interfere directly with Mutual’s business relationships. The CAFC found that Mutual had the necessary factual evidence sufficient to satisfy the subjective element for proving that Tyco’s citizen petition was a sham. Therefore, the CAFC vacated the district court’s grant of summary judgment with respect to the claim that the patentee’s citizen petition was within the sham-litigation exception. The CAFC also considered whether antitrust injury resulted from Tyco’s filing of the administrative petition. As further investigation was necessary to settle pending disputed issues of material fact regarding antitrust injury, the CAFC remanded to determine whether Mutual suffered an anticompetitive harm due to Tyco filing the citizen petition with the FDA.
  • Antitrust Sham-Litigation Exception, Fraud on the PTO: Tyco had acquired the patents-in-suit from a company that had defrauded the PTO during the patent prosecution process. Although prior to its acquisition of the patents Tyco had conducted a due-diligence review, there was insufficient evidence that Tyco knew, at the time this suit was initiated, that it was “seeking to enforce patents which had been procured by knowing and willing fraud.” The CAFC held that a patent holder that files a patent infringement suit with mere knowledge that relevant prior art exists is not stripped of its immunity from the antitrust laws. Thus, CAFC affirmed the district court’s judgment that Tyco had not committed fraud on the PTO as asserted in the Walker Process counterclaim.

Newman, dissenting:

  • Judge Newman argued that the majority improperly intermingled antitrust and patent issues, and that by doing so, the majority has contravened precedent and the Constitution. She argued that the case does not raise antitrust issues and found that the district court was correct to dismiss the antitrust counterclaims.
  • Antitrust Sham-Litigation Exception, Infringement: Judge Newman argued that the Hatch-Waxman infringement suit was not a “sham.” She reasoned that any question of sham litigation is decided as of when the complaint is filed, and therefore the majority, by seeking new evidence, is converting a routine patent infringement case into an antitrust case.
  • Antitrust Sham-Litigation Exception, Validity: Judge Newman argued that the majority properly determined that the presumption of validity of a patent negates the ruling that a defense of a patent’s validity constitutes “sham” litigation. She disagreed, however, with what she asserted was the majority’s newly created “burden of production.” She argued that the creation of the “burden of production” was improper and that it imposed yet another new antitrust violation on patent owners that do not produce additional affirmative evidence of validity.
  • Antitrust Sham-Litigation Exception, Administrative Petitions: Judge Newman argued that the majority improperly characterized a fact based communication to a government entity as a communication seeking to bar the Defendant from obtaining FDA permission to market its generic drug. She reasoned that an accurate communication to the government regarding public information cannot be an antitrust violation. Judge Newman further argued that the majority has improperly sought a determination of antitrust injury prior to a determination of antitrust violation and that a finding of an “[a]ntitrust violation is a prerequisite to [a] determination of antitrust injury.”