The largest award in a litigated FTC antitrust case was just issued. It is a warning to brand pharma to take their Hatch-Waxman case filings seriously and may encourage generics to more often plead sham litigation counterclaims. The defendants, AbbVie, Inc., a pharmaceutical brand company and its partner, Besins Healthcare, Inc., were found liable for instituting a sham patent litigation under the Hatch-Waxman Act. On June 29, 2018, Judge Bartle of the Eastern District of Pennsylvania ordered them to repay $448 million to the FTC to be distributed to consumers who were overcharged because the sham litigation delayed generic entry of AndroGel, a topical testosterone drug. Given the size of this award, we can expect an appeal.

This action was brought under Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), which prohibits “[u]nfair methods of competition in or affecting commerce.” The FTC claimed that defendants maintained their AndroGel monopoly through filing sham litigation against Teva and Perrigo. The FTC proved that defendants possessed monopoly power in the relevant market, topical testosterone replacement therapies, and that defendants willfully acquired or maintained that power through the filing of sham litigation against Teva and Perrigo, even though Teva and Perrigo had settled the cases1.

In September 2017, Judge Bartel found as a matter of law that the actions against Teva and Perrigo were objectively baseless because their 502(b) products did not contain the penetration enhancer claimed in the patent-in-suit and prosecution history estoppel barred applying the doctrine of equivalents.

Judge Bartel then conducted a trial to determine whether AbbVie and Besins subjectively intended to file baseless lawsuits against Teva and Perrigo. He held that the standard for establishing the subjective intent prong of sham litigation is actual knowledge that the patent suit filing was baseless and that must be proved by clear and convincing evidence. There was no direct evidence of subjective intent because the attorneys responsible for approving the filing of the lawsuit did not testify at trial. However, it was not disputed that these attorneys had received the Teva and Perrigo notice letters explaining that their products did not infringe the patent-at-issue because they did not contain the claimed penetration enhancer and that prosecution history estoppel barred asserting the doctrine of equivalents. Judge Bartel inferred that these attorneys, who were experienced practitioners, knew the law on prosecution history estoppel and understood that prosecution history estoppel barred the lawsuits against Teva and Perrigo. Thus, he concluded, “that they intended the natural and probable consequences of acts they knowingly did,” leading to “an inference that the subjective intent of the decision-makers was to file the sham litigation.”

Federal Trade Commission Chairman Joe Simons, stated: “This decision is a double victory, both for patients who rely on Androgel and for competition more broadly. It sends a clear signal that pharmaceutical companies can’t use baseless litigation to forestall competition from low-cost generics.”

The decision in this case is particularly striking because other recent antitrust cases against brand companies, such as, In Re Lantus Direct Purchase Antitrust Litigation (D. Mass. January 10, 2018) and United Food (D. Mass. June 30, 2017), have been dismissed for failing to adequately plead a prima facie case of sham litigation.