06-5525-cv
In re: DDAVP Direct Purchaser Antitrust Litigation
1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3
4 August Term 2008
5 (Argued: September 15, 2008 Decided: October 16, 2009)
6 Docket No. 06-5525-cv
7
8 -----------------------------------------------------x
9
10 In Re: DDAVP DIRECT PURCHASER ANTITRUST LITIGATION
11
12 MEIJER, INC., MEIJER DISTRIBUTION, INC., on behalf of
13 themselves and all others similarly situated,
14
15 Plaintiffs-Appellants,
16
17 ROCHESTER DRUG CO-OPERATIVE, INC., LOUISIANA
18 WHOLESALE DRUG CO., INC.,
19
20 Consolidated-Plaintiffs-Appellants,
21
22 -- v. --
23
24 FERRING B.V., FERRING PHARMACEUTICALS, INC., AVENTIS
25 PHARMACEUTICALS, INC.,
26
27 Defendants-Appellees,
28
29 -- v. --
30
31 VISTA HEALTHPLAN, INC., on behalf of itself and all
32 others, PENNSYLVANIA EMPLOYEES BENEFIT TRUST FUND, on
33 behalf of itself and all others, PAINTERS DISTRICT
34 COUNCIL NO. 30 HEALTH AND WELFARE FUND, PHILADELPHIA
35 FEDERATION OF TEACHERS HEALTH AND WELFARE FUND,
36
37 Consolidated Plaintiffs.
38
39 -----------------------------------------------------x
40
41 B e f o r e : FEINBERG, WALKER, and LIVINGSTON, Circuit Judges.
42 Appeal by Plaintiffs Meijer, Inc., Meijer Distribution,
43 Inc., Rochester Drug Co-operative, Inc., and Louisiana Wholesale
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1 Drug Co., Inc., from the dismissal of their class action
2 antitrust complaint in the United States District Court for the
3 Southern District of New York (Charles L. Brieant, Judge) for
4 lack of standing and failure to state a claim upon which relief
5 can be granted. We hold that the district court erred in
6 dismissing the complaint, because the plaintiffs have antitrust
7 standing and have adequately stated a claim upon which relief can
8 be granted.
9 VACATED and REMANDED.
10 DAVID F. SORENSEN, (Daniel
11 Berger, Daniel C. Simons, on
12 the brief), Berger & Montague,
13 P.C., Philadelphia, PA, Bruce
14 Gerstein, Adam Steinfeld,
15 Garwin Gerstein & Fisher, LLP,
16 New York, NY, Linda P.
17 Nussbaum, Kaplan Fox &
18 Kilsheimer, LLP, New York, NY,
19 for Plaintiffs-Appellants.
20
21 DOUGLAS L. WALD, (William J.
22 Baer, Barbara H. Wootton, Jon
23 J. Nathan, on the brief),
24 Arnold & Porter LLP,
25 Washington, DC, for
26 Defendants-Appellees Ferring
27 B.V. and Ferring
28 Pharmaceuticals, Inc.
29
30 JULIA E. MCEVOY, (Donald B.
31 Ayer, John M. Majoras, Donald
32 Earl Childress III,
33 Christopher R. Farrell, on the
34 brief), Jones Day, Washington,
35 DC, for Defendant-Appellee
36 Aventis Pharmaceuticals, Inc.
37
38 JAMES J. FREDERICKS, (Thomas
39 O. Barnett, Assistant Attorney
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1 General, Gerald F. Masoudi,
2 Deputy Assistant Attorney
3 General, Robert B. Nicholson,
4 Attorney, on the brief), U.S.
5 Department of Justice,
6 Washington, DC, William
7 Blumental, General Counsel,
8 Federal Trade Commission,
9 Washington, DC, for Amici
10 Curiae United States and
11 Federal Trade Commission.
12
13 J. Douglas Richards, Pomerantz
14 Haudek Block Grossman & Gross
15 LLP, New York, NY, for Amici
16 Curiae the American Antitrust
17 Institute, AARP, the Consumer
18 Federation of America,
19 Consumers Union, and Families
20 USA.
21
22 Andrew W. Cuomo, Attorney
23 General of the State of New
24 York, Barbara D. Underwood,
25 Solicitor General, Benjamin N.
26 Gutman, Deputy Solicitor
27 General, Jay L. Himes, Chief,
28 Antitrust Bureau, Robert L.
29 Hubbard, Director of
30 Litigation, Antitrust Bureau,
31 of counsel, New York, NY, for
32 Amici Curiae the States of New
33 York, Alaska, Arizona,
34 Arkansas, California,
35 Colorado, Connecticut,
36 Delaware, Florida, Hawaii,
37 Idaho, Illinois, Iowa, Kansas,
38 Kentucky, Louisiana, Maine,
39 Maryland, Massachusetts,
40 Michigan, Minnesota,
41 Mississippi, Montana, New
42 Hampshire, New Jersey, New
43 Mexico, North Dakota, Ohio,
44 Oklahoma, Oregon,
45 Pennsylvania, South Carolina,
46 Tennessee, Texas, Utah,
47 Vermont, Washington, West
48 Virginia, Wisconsin, and
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1 Wyoming, and the District of
2 Columbia and Puerto Rico.
3
4 Margaret M. Zwisler, Charles
5 R. Price, Latham & Watkins
6 LLP, Washington, DC, Diane E.
7 Bieri, Pharmaceutical Research
8 and Manufacturers of America,
9 Washington, DC, Thomas
10 DiLenge, Biotechnology
11 Industry Organization,
12 Washington, DC, for Amici
13 Curiae the Pharmaceutical
14 Research and Manufacturers of
15 America and the Biotechnology
16 Industry Organization.
17 JOHN M. WALKER, JR., Circuit Judge:
18 This case presents a novel question of standing that lies at
19 the junction of antitrust and patent law. The plaintiffs, direct
20 purchasers of desmopressin acetate tablets (sold under the name
21 DDAVP), filed this class action in the Southern District of New
22 York (Charles L. Brieant, Judge) against the defendants Ferring
23 B.V., Ferring Pharmaceuticals (collectively, “Ferring”), and
24 Aventis Pharmaceuticals (“Aventis”), alleging that Ferring and
25 Aventis abused the patent system to unlawfully maintain a
26 monopoly over DDAVP. Ferring developed, patented, and
27 manufactures DDAVP, and Aventis holds FDA approval for DDAVP
28 tablets as well as a license from Ferring to market and sell the
29 drug. The plaintiffs alleged that Ferring and Aventis inflated
30 the price of DDAVP by suppressing generic competition for the
31 tablets in violation of the antitrust laws. The district court
32 dismissed the suit, concluding that the plaintiffs both lacked
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1 antitrust standing and had failed to state a claim upon which
2 relief could be granted. This appeal followed.
3 BACKGROUND
4 The facts that follow are either undisputed or, because they
5 are properly pled, presumed true for the purposes of this appeal
6 at the pleading stage. See Diaz v. Paterson, 547 F.3d 88, 91 (2d
7 Cir. 2008).
8 DDAVP is an antidiuretic prescription medication used to
9 manage a form of diabetes, excessive urination, excessive thirst,
10 and bed wetting. Ferring developed and manufactures DDAVP and
11 owns U.S. Patent No. 5,047,398 (the “‘398 patent”), which claims
12 the compound in tablet form. Ferring filed its application for
13 the ‘398 patent on December 17, 1985, and the Patent and Trade
14 Office (“PTO”) issued the patent on September 10, 1991. Ferring
15 granted an exclusive license to Aventis to market and sell the
16 patented tablets under the DDAVP name. In addition to its
17 license from Ferring, Aventis also holds an approved New Drug
18 Application (“NDA”) from the FDA for the tablets. A manufacturer
19 seeking to market a new drug must file an NDA to demonstrate the
20 drug’s safety and efficacy.
21 In 2002, Ferring filed a patent infringement suit against
22 Barr Laboratories, Inc. (“Barr”), which came before the same
23 district judge who later presided over this action. Earlier that
24 year, Barr had filed an Abbreviated New Drug Application (“ANDA”)
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1 for a generic version of the compound. An ANDA filing
2 accelerates the approval process for a generic drug by allowing
3 the manufacturer to rely on the safety and efficacy data provided
4 in the NDA for the drug’s branded counterpart. As part of the
5 ANDA, Barr filed a certification (called a “paragraph IV
6 certification”) stating that the ‘398 patent was invalid,
7 unenforceable, and/or would not be infringed by Barr’s generic
8 product. This filing triggered Ferring’s infringement action
9 against Barr pursuant to 35 U.S.C. § 271(e)(2).
10 Ferring’s suit failed. On summary judgment, the district
11 court found that the ‘398 patent, rather than having been
12 infringed by Barr, was unenforceable due to inequitable conduct
13 before the PTO by Ferring and its agents. Ferring B.V. v. Barr
14 Labs., Inc., No. 7:02-CV-9851, 2005 WL 437981, at *10 (S.D.N.Y.
15 Feb. 7, 2005). The Federal Circuit affirmed. See Ferring B.V.
16 v. Barr Labs., Inc. (“Ferring I”), 437 F.3d 1181 (Fed. Cir.
17 2006).
18 The inequitable conduct that crippled the ‘398 patent
19 occurred on the patent’s troubled path to approval. In November
20 1986, PTO examiners rejected certain of the ‘398 patent’s claims
21 as anticipated by or obvious from U.S. Patent No. 3,497,491 (the
22 “‘491 patent”), a patent exclusively licensed to Ferring that
23 subsequently expired in 1987. See id. at 1183-84. The Board of
24 Patent Appeals and Interferences (“BPAI”) affirmed the examiners’
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1 rejection in September 1990, but on slightly different grounds:
2 relying only on the ‘491 patent, the BPAI concluded that the ‘491
3 patent rendered the ‘398 patent “obvious” when considered “in
4 light of” a 1973 article written by Ivan Vavra. Id. at 1184. In
5 November 1990, in an effort to persuade the examiners of the ‘398
6 patent’s novelty, the applicants, two Ferring employees who
7 assigned their prospective patent rights to Ferring, submitted
8 declarations from several scientists stating that the ‘491 patent
9 and Vavra article did not suggest the ‘398 patent. Id. at 1185.
10 It turned out, however, that four of the five declarants
11 previously had either “been employed or had received research
12 funds from Ferring,” facts that the submissions failed to
13 disclose to the PTO. See id. On the strength of these
14 declarations, the earlier rejection notwithstanding, the PTO
15 issued the ‘398 patent in September 1991. See id. at 1185, 1188-
16 89. The district judge found this non-disclosure to be
17 inequitable conduct in the Barr litigation, and determined the
18 patent to be unenforceable. See id. at 1194-95.
19 Upon de novo review, the Federal Circuit held both that the
20 undisclosed affiliations would have been material to the
21 examiners’ decision to issue the ‘398 patent, see id. at 1187-90,
22 and that the evidence suggested that the affiants’ previous
23 relationships with Ferring were “deliberately concealed,” id. at
24 1193. The Federal Circuit therefore concluded that the district
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1 court had not abused its discretion in finding inequitable
2 conduct, see id. at 1194-95, rendering the ‘398 patent
3 unenforceable as against Barr and all other parties.
4 Less than two months after the Federal Circuit’s February
5 2006 ruling, the direct purchaser plaintiffs filed the instant
6 suit. The plaintiffs argue that the defendants’ conduct, in
7 addition to making the ‘398 patent unenforceable, violated the
8 antitrust laws. They allege that defendants Ferring and Aventis
9 “engaged in an exclusionary scheme” that included (1)
10 “[p]rocuring the ‘398 patent by committing fraud and/or engaging
11 in inequitable conduct before the PTO,” (2) “[i]mproperly listing
12 the fraudulently obtained ‘398 patent in the [FDA’s] Orange
13 Book,” thereby enabling patent infringement claims against
14 potential competitors, (3) prosecuting sham infringement
15 litigation against generic competitors, and (4) “filing a sham
16 citizen petition to further delay FDA final approval of Barr’s
17 ANDA.” Compl. ¶ 144. The plaintiffs claim that the lack of
18 competing, generic versions of DDAVP injured them by forcing them
19 to pay monopolistic prices for the drug.
20 Ferring and Aventis jointly moved to dismiss the complaint
21 on the basis that, inter alia, the plaintiffs lacked standing to
22 assert their claimed antitrust violations. Aventis separately
23 moved to dismiss the case on the ground that the plaintiffs had
24 not sufficiently alleged misconduct against it. The district
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1 court granted both motions and dismissed the antitrust action.
2 See In re DDAVP Direct Purchaser Antitrust Litig., No. 05 Cv.
3 2237, slip op. at 15 (S.D.N.Y. Nov. 2, 2006).
4 The district court acknowledged that, while conduct in
5 obtaining and enforcing a patent is generally protected from
6 antitrust liability by the First Amendment, a patentee loses this
7 immunity and can incur antitrust liability for enforcing a patent
8 if the patent was obtained by fraud on the PTO. See id. at 5-6
9 (citing Walker Process Equip., Inc. v. Food Mach. & Chem. Corp.,
10 382 U.S. 172, 173 (1965)). However, the district court held that
11 the plaintiffs failed to plead fraud on the PTO with sufficient
12 particularity, noting that fraud requires a greater showing of
13 culpability than the inequitable conduct that can render a patent
14 unenforceable. See id. at 7-8. The district court concluded
15 that, “[f]or this reason alone, granting the motions to dismiss
16 is appropriate.” Id. at 8.
17 However, “in the interest of completeness,” the district
18 court also considered the plaintiffs’ standing. Id. As an
19 initial matter, the district court noted the lack of binding
20 precedent “with regard to the specific issue of whether purchaser
21 plaintiffs like those in this case have standing to assert a
22 Walker Process claim.” Id. at 10-11. The district court then
23 held that the plaintiffs lacked antitrust standing for their
24 Walker Process claim because the ‘398 patent had not been
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1 enforced against them, and they were not competitors of Ferring
2 or Aventis. Id. at 11-12 (citing In re Ciprofloxacin
3 Hydrochloride Antitrust Litig., 363 F. Supp. 2d 514 (E.D.N.Y.
4 2005); Walgreen Co. v. Organon, Inc. (In re Remeron Antitrust
5 Litig.), 335 F. Supp. 2d 522 (D.N.J. 2004)).
6 With little discussion, the district court also rejected the
7 plaintiffs’ non-Walker Process claims — the Orange Book listing,
8 the sham infringement litigation, and the sham citizen’s petition
9 — on the basis that the defendants had not acted “in subjective
10 bad faith.” Id. at 13. Finally, the district court granted
11 Aventis’s separate motion to dismiss, concluding that the
12 plaintiffs had failed to sufficiently allege that Aventis was
13 complicit in Ferring’s fraud upon the PTO. Id. at 14-15.
14 The plaintiffs now appeal the district court’s decision in
15 its entirety. They argue that the district court erred in
16 dismissing the complaint and, in doing so, violated their due
17 process rights. The defendants moved in this court to transfer
18 the case on the basis that the Federal Circuit has exclusive
19 jurisdiction over this appeal. We reserved decision on that
20 motion.
21 DISCUSSION
22 I. Jurisdiction
23 We disagree that this appeal properly belongs in the Federal
24 Circuit. The Federal Circuit has exclusive jurisdiction over
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1 appeals where the district court’s jurisdiction is “based, in
2 whole or in part, on section 1338 of [title 28],” 28 U.S.C. §
3 1295(a)(1), which in turn gives district courts “original
4 jurisdiction of any civil action arising under any Act of
5 Congress relating to patents,” id. § 1338(a). Such jurisdiction
6 exists if a case “arises under” patent law, such that “a
7 well-pleaded complaint establishes either [1] that federal patent
8 law creates the cause of action or,” as is relevant here, “[2]
9 that the plaintiff’s right to relief necessarily depends on
10 resolution of a substantial question of federal patent law, in
11 that patent law is a necessary element of one of the well-pleaded
12 claims.” Christianson v. Colt Indus. Operating Corp., 486 U.S.
13 800, 808-09 (1988). However, “as long as there is at least one
14 alternative theory supporting the claim that does not rely on
15 patent law, there is no ‘arising under’ jurisdiction under 28
16 U.S.C. § 1338.” In re Tamoxifen Citrate Antitrust Litig., 466
17 F.3d 187, 199 (2d Cir. 2006). In such a scenario, because “there
18 are reasons completely unrelated to the provisions and purposes
19 of federal patent law why petitioners may or may not be entitled
20 to the relief they seek under their monopolization claim, the
21 claim does not arise under federal patent law.” Id. (quoting
22 Christianson, 486 U.S. at 812).
23 In this case, because the plaintiffs have filed an antitrust
24 suit, patent law does not create the cause of action. The
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1 Federal Circuit’s jurisdiction over this case, if it exists, must
2 rest upon the second part of the Christianson test: that “the
3 plaintiff’s right to relief necessarily depends on resolution of
4 a substantial question of federal patent law.” 486 U.S. at 809.
5 The plaintiffs argue that their right to relief can stand on any
6 one of four different theories: (1) the defendants committed
7 Walker Process fraud in obtaining and securing the ‘398 patent;
8 (2) the defendants listed the ‘398 patent in the FDA’s Orange
9 Book despite knowing the patent was fraudulently procured and
10 therefore invalid; (3) the defendants, knowing the ‘398 patent
11 was invalid, prosecuted sham patent infringement litigation
12 against generic competitors in order to delay FDA approval of the
13 competitors’ generic DDAVP equivalent; and (4) the defendants
14 filed a sham citizen petition, asking the FDA to require
15 additional testing of a generic DDAVP equivalent (thus delaying
16 its approval) despite knowing that such testing was unnecessary.
17 The first three of the plaintiffs’ four theories plainly
18 “depend[] on resolution of a substantial question of federal
19 patent law,” as they all turn on how the ‘398 patent was
20 procured. In the absence of any fraud, actions taken by Ferring
21 and Aventis in obtaining, maintaining, and enforcing the ‘398
22 patent would be exempt from antitrust liability. See Walker
23 Process, 382 U.S. at 177 & n.5; SCM Corp. v. Xerox Corp., 645
24 F.2d 1195, 1206 (2d Cir. 1981). The plaintiffs’ antitrust claim,
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1 under their first three theories, requires that the ‘398 patent
2 had been fraudulently procured. See Walker Process, 382 U.S. at
3 177 & n.5. In this context, fraud requires (1) a false
4 representation or deliberate omission of a fact material to
5 patentability, (2) made with the intent to deceive the patent
6 examiner, (3) on which the examiner justifiably relied in
7 granting the patent, (4) but for which misrepresentation or
8 deliberate omission the patent would not have been granted. See
9 C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1364 (Fed. Cir.
10 1998). Materiality, justifiable reliance, and but-for causation
11 each implicate the issue of patentability, namely, whether the
12 patent would have been granted in the absence of the fraudulent
13 representations or omissions. Because the first three theories
14 turn on substantial questions of patent law, appellate
15 jurisdiction would lie exclusively with the Federal Circuit if
16 the plaintiffs’ success solely depended on one or more of these
17 theories.
18 The plaintiffs’ fourth theory, however, does not turn on a
19 substantial question of patent law. Under this theory, Ferring
20 violated the antitrust laws when it filed a sham citizen petition
21 with the FDA, requesting that the FDA require Barr to conduct
22 extra testing to establish that its generic product was
23 bioequivalent to DDAVP, thereby delaying approval of Barr’s ANDA.
24 Generally, under the Noerr-Pennington doctrine, citizen petitions
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1 are immune from antitrust liability in light of the First
2 Amendment. See E.R.R. Presidents Conference v. Noerr Motor
3 Freight, Inc., 365 U.S. 127, 136 (1961) (“[T]he Sherman Act does
4 not prohibit two or more persons from associating together in an
5 attempt to persuade the legislature or the executive to take
6 particular action with respect to a law that would produce a
7 restraint or a monopoly.”); United Mine Workers of Am. v.
8 Pennington, 381 U.S. 657, 670 (1965) (“Joint efforts to influence
9 public officials do not violate the antitrust laws even though
10 intended to eliminate competition.”); Primetime 24 Joint Venture
11 v. Nat’l Broad. Co., 219 F.3d 92, 99 (2d Cir. 2000) (explaining
12 that “concerted actions before courts and administrative
13 agencies” are generally shielded from the Sherman Act by “the
14 right to petition the legislature”) (citing Cal. Motor Transp.
15 Co. v. Trucking Unlimited, 404 U.S. 508, 510-11 (1972)).
16 Noerr-Pennington protection is not absolute, however. When
17 petitioning activity “ostensibly directed toward influencing
18 governmental action[] is a . . . sham to cover what is . . .
19 nothing more than an attempt to interfere directly with the
20 business relationships of a competitor[, then] the application of
21 the Sherman Act would be justified.” Noerr, 365 U.S. at 144.
22 This sham exception requires that the petition be “(i)
23 ‘objectively baseless,’ and (ii) ‘an attempt to interfere
24 directly with the business relationships of a competitor through
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1 the use of the governmental process — as opposed to the outcome
2 of that process — as an anticompetitive weapon.’” Primetime 24,
3 219 F.3d at 100-01 (quoting Prof’l Real Estate Investors, Inc. v.
4 Columbia Pictures Indus., Inc. (“PRE”), 508 U.S. 49, 60 (1993)).
5 The plaintiffs claim that the citizen petition was a sham
6 because its sole purpose was “to delay the entry of generic
7 competitors into the market.” Compl. ¶ 105. Whether the
8 petition was a sham is an issue independent of patent law; the
9 substance of Ferring’s citizen petition did not rest on the
10 issuance or validity of a patent. A single lawsuit can violate
11 antitrust law as long as it is both an objective and subjective
12 sham. BE&K Constr. Co. v. NLRB, 536 U.S. 516, 526 (2002); see
13 also Tamoxifen, 466 F.3d at 213 (citing PRE, 508 U.S. at 60).
14 Administrative petitions, while less susceptible than lawsuits to
15 the sham exception, still carry the potential for antitrust
16 liability. See Kottle v. Nw. Kidney Ctrs., 146 F.3d 1056, 1062
17 (9th Cir. 1998) (noting that “the exact scope of the sham
18 exception to the Noerr-Pennington doctrine has not always been
19 clear in the administrative context” but finding it applicable to
20 “a sufficiently circumscribed form of administrative authority”
21 that is not “essentially political”).
22 The fact that a single citizen petition may trigger the sham
23 exception does not end our jurisdictional inquiry. Even if
24 Ferring’s citizen petition was a sham, “[p]roof of a sham merely
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1 deprives the defendant of immunity; it does not relieve the
2 plaintiff of the obligation to establish all other elements of
3 his claim.” PRE, 508 U.S. at 61. Thus we must determine if any
4 of these elements turn on a question of patent law, in which case
5 the sham petition theory cannot be our basis for jurisdiction.
6 “[T]o state a claim for monopolization under Section 2 of
7 the Sherman Act, a plaintiff must establish ‘(1) the possession
8 of monopoly power in the relevant market and (2) the willful
9 acquisition or maintenance of that power as distinguished from
10 growth or development as a consequence of a superior product,
11 business acumen, or historic accident.’” PepsiCo, Inc. v. Coca-
12 Cola Co., 315 F.3d 101, 105 (2d Cir. 2002) (per curiam) (quoting
13 United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)).
14 The plaintiffs also must demonstrate an antitrust injury and
15 damages. See Cordes & Co. Fin. Servs., Inc. v. A.G. Edwards &
16 Sons, Inc., 502 F.3d 91, 105 (2d Cir. 2007).
17 The defendants argue that, because the citizen petition was
18 filed over a year before the ‘398 patent was ruled unenforceable,
19 the plaintiffs cannot prove the necessary intent to monopolize
20 without showing that the patent was foreseeably unenforceable —
21 an issue that raises questions of patent law. However, the ‘398
22 patent became unenforceable almost five months before the FDA
23 rejected the citizen petition. During that time, the defendants
24 were free to “supplement, amend, or withdraw” the petition, 21
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1 C.F.R. § 10.30(g), which at that point they knew to be based upon
2 an unenforceable patent. Even if the defendants’ intent when
3 filing the petition raises questions of patent law, their intent
4 in maintaining the petition after they lost the infringement
5 litigation does not. And because the defendants’ failure to
6 address the citizen petition after the ‘398 patent became
7 unenforceable could plausibly constitute a Sherman Act violation,
8 the citizen petition supports a patent-independent theory of
9 liability. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 566
10 (2007) (suggesting that either “action or inaction” could be
11 plausibly alleged as an antitrust violation).
12 The failed infringement suit also dooms the defendants’
13 suggestion that the ‘398 patent’s status might impact the
14 potential for antitrust injury from the citizen’s petition. If
15 the ‘398 patent had been valid, Barr’s ANDA might have been
16 denied regardless of the citizen petition. But the ‘398 patent
17 had already been held unenforceable due to inequitable conduct,
18 and the ANDA denial was plainly not inevitable (as evidenced by
19 its ultimate approval). Thus, the plaintiffs’ antitrust claim
20 can stand on the citizen petition theory without raising
21 questions of patent law.
22 Finally, the defendants argue that jurisdiction properly
23 lies with the Federal Circuit because the plaintiffs’ citizen
24 petition theory is a minor part of the overall allegations.
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1 Indeed, the plaintiffs themselves see the petition as only a
2 single piece of a larger anticompetitive scheme of which the ‘398
3 patent is the linchpin. But the relief sought by the plaintiffs
4 is not tied inextricably to this larger scheme. The plaintiffs
5 simply ask for a judgment declaring the defendants’ actions to
6 have violated the Sherman Act. See Compl. 37-38. The question
7 of whether the Federal Circuit has jurisdiction “focuses on
8 claims, not theories, and just because an element that is
9 essential to a particular theory might be governed by federal
10 patent law does not mean that the entire monopolization claim
11 ‘arises under’ patent law.” Christianson, 486 U.S. at 811
12 (internal citations omitted). The defendants stress that the
13 plaintiffs’ patent-related theories are essential to the overall
14 relief the plaintiffs seek, because the citizen petition theory
15 covers a time period shorter than the overall allegations, but
16 this fact lacks jurisdictional significance. Focusing on claims,
17 not theories, we have jurisdiction as long as any one of the
18 theories can support the claim without raising substantial
19 questions of patent law. The citizen petition theory satisfies
20 this requirement, and therefore we have jurisdiction over this
21 appeal.
22 II. Antitrust Standing
23 The defendants argue that the plaintiffs lack standing to
24 pursue this action. We review questions of standing de novo.
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1 Comer v. Cisneros, 37 F.3d 775, 787 (2d Cir. 1994). In addition
2 to demonstrating Article III standing, an antitrust plaintiff
3 must also establish antitrust standing. See Paycom Billing
4 Servs., Inc. v. Mastercard Int’l, Inc., 467 F.3d 283, 290 (2d
5 Cir. 2006). We analyze antitrust standing under a two-part test:
6 a plaintiff must show (1) antitrust injury, which is “injury of
7 the type the antitrust laws were intended to prevent and that
8 flows from that which makes defendants’ acts unlawful,”
9 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489
10 (1977), and (2) that he is a proper plaintiff in light of four
11 “efficient enforcer” factors:
12 (1) the directness or indirectness of the asserted injury;
13 (2) the existence of an identifiable class of persons whose
14 self-interest would normally motivate them to vindicate the
15 public interest in antitrust enforcement; (3) the
16 speculativeness of the alleged injury; and (4) the
17 difficulty of identifying damages and apportioning them
18 among direct and indirect victims so as to avoid duplicative
19 recoveries.
20
21 Volvo N. Am. Corp. v. Men’s Int’l Prof’l Tennis Council, 857 F.2d
22 55, 66 (2d Cir. 1988) (citing Associated Gen. Contractors v. Cal.
23 State Council of Carpenters (“AGC”), 459 U.S. 519, 540-45
24 (1983)).
25 In this case, the plaintiffs are purchasers of the
26 defendants’ product who allege being forced to pay supra-
27 competitive prices as a result of the defendants’ anticompetitive
28 conduct. Such an injury plainly is “of the type the antitrust
29 laws were intended to prevent.” Brunswick, 429 U.S. at 489; see
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1 also AGC, 459 U.S. at 530 (“Congress was primarily interested in
2 creating an effective remedy for consumers who were forced to pay
3 excessive prices by the giant trusts and combinations that
4 dominated certain interstate markets.”). Although the
5 defendants’ conduct at issue targeted their competitors, such as
6 Barr, the plaintiffs’ claimed injury of higher prices was
7 “inextricably intertwined” with the conduct’s anti-competitive
8 effects and thus “flow[ed] from that which makes defendants’ acts
9 unlawful.” Blue Shield of Va. v. McCready, 457 U.S. 465, 484
10 (1982) (internal quotation marks omitted). Antitrust injury is
11 therefore present.
12 As for the “efficient enforcer” factors that bear on whether
13 the plaintiffs are “proper” antitrust plaintiffs, spelled out in
14 Volvo, each favors granting antitrust standing. With respect to
15 the first factor, directness of injury, even though the
16 plaintiffs’ injuries were derivative of the direct harm
17 experienced by the defendants’ competitors, harming competitors
18 was simply a means for the defendants to charge the plaintiffs
19 higher prices. See id. at 478-79; In re Warfarin Sodium
20 Antitrust Litig., 214 F.3d 395, 400-01 (3d Cir. 2000). This
21 factor supports the plaintiffs’ standing.
22 As to the second factor, motivation, the defendants argue
23 that their competitors are the parties most motivated to enforce
24 the antitrust laws, because the competitors were most directly
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1 impacted by the alleged anticompetitive behavior. They note that
2 we declined to find antitrust standing in Paycom in part because
3 the plaintiff there was “not an entity whose self-interest would
4 most ‘motivate [it] to vindicate the public interest in antitrust
5 enforcement.’” 467 F.3d at 294 (quoting AGC, 459 U.S. at 542)
6 (alteration in original). But this argument overlooks the fact
7 that the Paycom court asked if the plaintiff was an entity most
8 motivated by self-interest, not the entity most motivated by
9 self-interest. See id. The second factor simply looks for a
10 class of persons naturally motivated to enforce the antitrust
11 laws. “Inferiority” to other potential plaintiffs can be
12 relevant, but it is not dispositive. See Andrx Pharms., Inc. v.
13 Biovail Corp., Int’l, 256 F.3d 799, 816 (D.C. Cir. 2001). Even
14 if the competitors might be the most motivated, the plaintiffs
15 are also significantly motivated due to their “natural economic
16 self-interest” in paying the lowest price possible. See Daniel
17 v. Am. Bd. of Emergency Med., 428 F.3d 408, 444 (2d Cir. 2005)
18 (internal quotation marks omitted).
19 Moreover, the defendants’ competitors, unlike the
20 plaintiffs, would be seeking lost profits, not overcharges. Lost
21 profits are the difference between the competitive price and what
22 the competitors’ costs would have been, while overcharges are the
23 difference between the defendants’ supra-competitive price and
24 the competitive price. Denying the plaintiffs a remedy in favor
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1 of a suit by competitors would thus be “likely to leave a
2 significant antitrust violation undetected or unremedied.” AGC,
3 459 U.S. at 542; see also Andrx Pharms., 256 F.3d at 817 (noting
4 that lost profits and overcharges are distinct injuries). The
5 second factor supports standing.
6 Turning to speculativeness, the third factor, the defendants
7 argue that the plaintiffs’ allegations rest upon tenuous
8 assumptions about the beneficial effects of generic competition.
9 The assumptions are not as speculative as the defendants suggest.
10 That no other manufacturer would have obtained a patent on the
11 drug is a fair assumption, we think, given that “[t]he reluctance
12 of the PTO to issue the ‘398 patent was evident” in advance of
13 the defendants’ inequitable conduct. Ferring I, 437 F.3d at
14 1186. And that generic manufacturers would have decided to
15 compete for DDAVP sales is self-evident: manufacturers sought
16 approval for generic DDAVP when the ‘398 patent was still
17 enforceable. It may be difficult to account precisely for the
18 likely effects of generic competition, but we have little doubt
19 that those effects can be sufficiently estimated and measured
20 here. See Geneva Pharms. Tech. Corp. v. Barr Labs. Inc., 386
21 F.3d 485, 499 (2d Cir. 2004) (listing literature analyzing
22 generic drug competition). This is especially so when “[t]he
23 most elementary conceptions of justice and public policy require
24 that the wrongdoer shall bear the risk of the uncertainty which
-22-
1 his own wrong has created.” Bigelow v. RKO Radio Pictures, 327
2 U.S. 251, 265 (1946). Like the first two factors, the third
3 factor supports the plaintiffs’ antitrust standing.
4 As for the fourth factor, the potential for duplicative
5 recovery, the difference between lost profits and overcharges is
6 again relevant. Even assuming some overlap between lost profits
7 and overcharges (as could occur if generic manufacturers charged
8 more than the competitive price), the two are conceptually
9 different measures that we think can be fairly apportioned in
10 order to avoid duplicative recoveries. See Andrx Pharms., 256
11 F.3d at 817. This factor also supports the plaintiffs’ antitrust
12 standing.
13 In sum, then, although the relative weight given to each
14 factor is imprecise, see, e.g., Daniel, 428 F.3d at 443, the
15 plaintiffs would be efficient enforcers under any formulation.
16 What complicates the standing question, however, is the
17 centrality of the alleged Walker Process fraud to the plaintiffs’
18 case. Walker Process claims are based on a fraudulently obtained
19 patent, and are typically brought as counterclaims in patent
20 infringement suits: the plaintiff claims the defendant infringed
21 his patent, and the defendant responds that the patent was
22 invalid as fraudulently obtained, and that the plaintiff’s
23 enforcement efforts violate Walker Process. See Nobelpharma AB
24 v. Implant Innovations, Inc., 141 F.3d 1059, 1067 (Fed. Cir.
-23-
1 1998). If a patent is valid, a Walker Process claim cannot
2 stand.
3 Outside of an infringement suit counterclaim, a patent’s
4 validity can be challenged only by a party (1) producing or
5 preparing to produce the patented product, and (2) being
6 threatened or reasonably likely to be threatened with an
7 infringement suit. See, e.g., Cordis Corp. v. Medtronic, Inc.,
8 835 F.2d 859, 862 (Fed. Cir. 1987). As purchasers of DDAVP, the
9 plaintiffs do not satisfy these requirements and cannot directly
10 challenge the ‘398 patent’s validity. As the district court
11 noted, whether the plaintiffs have standing to bring their Walker
12 Process claim, when a court has yet to find the ‘398 patent
13 fraudulently obtained, is a question of first impression.
14 The defendants acknowledge that Walker Process standing
15 might be warranted for a purchaser when a patent has already been
16 held to have been fraudulently procured. But the defendants urge
17 us to hold that, when dealing with a patent not yet found to be
18 fraudulently obtained, a party has Walker Process standing only
19 if that party also has standing to challenge the patent’s
20 validity. They argue that giving Walker Process standing to the
21 plaintiffs, who cannot directly challenge the ‘398 patent’s
22 validity, could result in an avalanche of patent challenges,
23 because direct purchasers otherwise unable to challenge a
24 patent’s validity could do so simply by dressing their patent
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1 challenge with a Walker Process claim. It would be relatively
2 easy, the defendants argue, for these purchasers to allege an
3 antitrust injury, as patent protection inherently leads to supra-
4 competitive prices. See Zenith Radio Corp. v. Hazeltine
5 Research, Inc., 395 U.S. 100, 135 (1969) (“A patentee has the
6 exclusive right to manufacture, use, and sell his invention.”).
7 Given that Walker Process fraud converts this fundamental feature
8 of the patent system into a potential antitrust violation, the
9 defendants contend that finding purchaser standing could
10 significantly increase the costs of defending and enforcing
11 patents by greatly expanding the universe of potential
12 challenges. They insist that “[i]f the threat of treble damage
13 liability . . . were imbedded in the minds of potential patent
14 holders as a likely prospect . . . , the efficacy of the economic
15 incentives afforded by our patent system might be severely
16 diminished.” SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1206 (2d
17 Cir. 1981).
18 Walker Process itself, of course, reflects a willingness to
19 let antitrust liability impact the patent system. However, the
20 defendants argue that Walker Process is the product of the
21 Supreme Court’s careful balancing of antitrust and patent
22 policies, a balance which should not be upset and under which
23 Walker Process plaintiffs must be independently able to first
24 prove the patent’s fraudulent procurement. Yet the language of
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1 Walker Process does not necessarily suggest such a limit:
2 While one of [the claim’s] elements is the fraudulent
3 procurement of a patent, the action does not directly seek
4 the patent’s annulment. The gist of Walker’s claim is that
5 since Food Machinery obtained its patent by fraud it cannot
6 enjoy the limited exception to the prohibitions of § 2 of
7 the Sherman Act, but must answer under that section . . . to
8 those injured by any monopolistic action taken under the
9 fraudulent patent claim. Nor can the interest in protecting
10 patentees from ‘innumerable vexatious suits’ be used to
11 frustate the assertion of rights conferred by the antitrust
12 laws.
13
14 382 U.S. at 176 (emphasis added). To be sure, the Walker Process
15 Court also noted that allowing antitrust recovery “accord[ed]”
16 with the “long-recognized procedures” that controlled how parties
17 could challenge a patent’s validity, 382 U.S. at 176-77, thereby
18 suggesting that the Court may not have envisioned expanding the
19 universe of potential patent challengers.
20 Nonetheless, we are reluctant to embrace the defendants’
21 position because we are wary of creating the potential “to leave
22 a significant antitrust violation undetected or unremedied.”
23 AGC, 459 U.S. at 542. As the defendants would have it, direct
24 purchasers would be able to recover antitrust damages from a
25 fraudulent patentee only after that patentee first loses on a
26 fraudulent procurement claim. This asks too much of the generic
27 competitors and other potential patent challengers, who may not
28 have the strategic interest or the resources to start or win such
29 a battle, or who may be presented with strong incentives to
30 settle their challenge by patent holders seeking not only to
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1 preserve their patent’s enforceability, but also to avoid
2 potential Walker Process liability. See C. Scott Hemphill,
3 Paying for Delay: Pharmaceutical Patent Settlement as a
4 Regulatory Design Problem, 81 N.Y.U. L. Rev. 1553, 1616 (2006)
5 (noting how “an innovator has an especially strong incentive to
6 pay to neutralize . . . potential competition” when a generic
7 manufacturer first files an ANDA).
8 Although settlements between patent holders and generic
9 manufacturers that delay generic entry into the market may
10 themselves invite antitrust liability, a plaintiff must be able
11 to show the settled litigation to have been a sham in order to
12 succeed. See Tamoxifen, 466 F.3d at 208-09 (“In such a case, so
13 long as the patent litigation is neither a sham nor otherwise
14 baseless, the patent holder is seeking to arrive at a settlement
15 in order to protect that to which it is presumably entitled: a
16 lawful monopoly over the manufacture and distribution of the
17 patented product.”). A purchaser seeking to challenge the
18 settlement by showing the underlying infringement litigation to
19 be a sham would need to attach antitrust liability to the patent
20 enforcement efforts — a move that would raise the same standing
21 issues presented by this case. Thus, not only are there strong
22 potential settlement incentives, but these settlements could be
23 shielded from purchaser attack.
24 The difference between inequitable conduct and fraud also
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1 bears on the question. Inequitable conduct is a lesser showing
2 than fraud, but is sufficient to render a patent unenforceable.
3 A generic competitor interested simply in selling its product may
4 not value the higher showing of fraud enough to pursue it,
5 especially if the competitor’s antitrust damages would be minor
6 or difficult to prove. Again, relying on generic competitors to
7 lead the antitrust charge may ask too much of them.
8 On the other hand, we do not pass lightly over the
9 defendants’ objections to expanding the universe of patent
10 challengers. The risk of disturbing the incentives for
11 innovation dictates that we tread carefully. As a result, we
12 decline to decide whether purchaser plaintiffs per se have
13 standing to raise Walker Process claims. In this case, the
14 plaintiffs are challenging an already tarnished patent. We are
15 able to grant them antitrust standing without altering the
16 typical limits on who can start a challenge to a patent’s
17 validity. We therefore hold only that purchaser plaintiffs have
18 standing to raise Walker Process claims for patents that are
19 already unenforceable due to inequitable conduct. The district
20 court erred by concluding to the contrary.
21 III. Was the Antitrust Claim Adequately Pled?
22 Granting standing to the plaintiffs does not resolve this
23 appeal, because the district court also concluded that the
24 plaintiffs had failed to state a claim. “We review the district
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1 court’s dismissal of a complaint for failure to state a claim de
2 novo, accepting as true all facts alleged in the complaint and
3 drawing all inferences in favor of the plaintiff . . . .”
4 Faulkner v. Beer, 463 F.3d 130, 133 (2d Cir. 2006) (internal
5 quotation marks omitted). “[O]nly a complaint that states a
6 plausible claim for relief survives a motion to dismiss.”
7 Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). We believe that
8 the plaintiffs meet this standard for their antitrust claim under
9 each of their four theories.
10 Walker Process fraud, the plaintiffs’ first theory,
11 requires:
12 (1) a representation of a material fact, (2) the falsity of
13 that representation, (3) the intent to deceive or, at least,
14 a state of mind so reckless as to the consequences that it
15 is held to be the equivalent of intent (scienter), (4) a
16 justifiable reliance upon the misrepresentation by the party
17 deceived which induces him to act thereon, and (5) injury to
18 the party deceived as a result of his reliance on the
19 misrepresentation.
20
21 Nobelpharma, 141 F.3d at 1069-70. A fraudulent omission, which
22 “can be just as reprehensible as a fraudulent misrepresentation,”
23 can be sufficient to “support a finding of Walker Process fraud.”
24 Id. at 1070.
25 A party “alleging fraud or mistake . . . must state with
26 particularity the circumstances constituting fraud or mistake.”
27 Fed. R. Civ. P. 9(b). The plaintiffs argue that they have pled
28 each element with sufficient specificity. They alleged a series
29 of “highly material” omissions, without which “the ‘398 patent
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1 would not have issued.” Compl. ¶ 74. The Federal Circuit agreed
2 on the “high[] material[ity]” of the omissions when it found the
3 ‘398 patent unenforceable. Ferring I, 437 F.3d at 1194. The
4 Ferring I litigation also addressed the third element of intent,
5 as the district court found “clear and convincing evidence of an
6 intent to mislead the examiners.” Ferring B.V., 2005 WL 437981,
7 at *9. Reliance and injury, the fourth and fifth elements, are
8 straightforward here: the PTO was justified in relying on the
9 information the defendants provided, and injury is a “matter of
10 course whenever the other four elements are met.” Unitherm Food
11 Sys., Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1361 (Fed. Cir.
12 2004), rev’d on other grounds, 546 U.S. 394 (2006). Thus, the
13 plaintiffs contend the district court’s dismissal on the
14 pleadings was erroneous.
15 The defendants respond that the district judge’s rejection
16 of the plaintiffs’ claim must be affirmed because he was also the
17 district judge in the initial infringement litigation, in which
18 he held the ‘398 patent unenforceable. The defendants argue that
19 the judge’s involvement in both cases enabled him to validly
20 conclude that his previous findings could not support a claim of
21 fraudulent procurement in the instant case. This is a logical
22 non sequitur. The district judge could be correct in determining
23 that inequitable conduct occurred and yet mistaken that such
24 conduct did not amount to fraud. Moreover, the defendants’
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1 argument ignores the distinction between findings and pleadings.
2 Even if the district judge was correct that the earlier record
3 did not show fraud, the record in this case could be different
4 following discovery.
5 The defendants contend that simply adding a conclusory
6 allegation of fraud to the previous findings is inadequate to
7 meet the plaintiffs’ obligation to “allege facts that give rise
8 to a strong inference of fraudulent intent.” Acito v. IMCERA
9 Group, Inc., 47 F.3d 47, 52 (2d Cir. 1995). We are, however,
10 “lenient in allowing scienter issues to withstand summary
11 judgment based on fairly tenuous inferences,” because such issues
12 are “appropriate for resolution by the trier of fact.” Press v.
13 Chem. Inv. Servs. Corp., 166 F.3d 529, 538 (2d Cir. 1999). The
14 same holds true for allowing such issues to survive motions to
15 dismiss. The district court found “an intent to deceive” in the
16 patent litigation. Ferring B.V., 2005 WL 437981, at *9.
17 Granting the plaintiffs all favorable inferences as we must on a
18 motion to dismiss, and given that the omissions at issue occurred
19 repeatedly over a period of years, this intent is sufficient to
20 plausibly support a finding of Walker Process fraud.
21 The defendants next argue that the plaintiffs must allege
22 evidence of intent distinct from the omission itself. While a
23 false or clearly misleading statement can permit an inference of
24 deceptive intent, a misrepresentation in the form of an omission
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1 is more likely to be innocent and cannot support Walker Process
2 fraud without “evidence of intent separable from the simple fact
3 of the omission.” Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337,
4 1347 (Fed. Cir. 2007). The issue in the initial infringement
5 litigation was inequitable conduct, not Walker Process fraud.
6 Moreover, the district court in that litigation correctly noted
7 that high materiality could overcome a lesser showing of intent.
8 Ferring B.V., 2005 WL 437981, at *9; see Brasseler, U.S.A. I,
9 L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380-81 (Fed. Cir.
10 2001). While such balancing is impermissible with Walker Process
11 claims, we think the plaintiffs’ allegations are nonetheless
12 sufficient. Dippin’ Dots concerned findings, not pleadings, see
13 476 F.3d at 1341-42; even if the district court’s findings in the
14 Ferring I litigation could not satisfy Dippin’ Dots, the
15 plaintiffs’ pleadings could plausibly lead to additional findings
16 that would satisfy Dippin’ Dots, which is all that is required at
17 this stage of the litigation.
18 The defendants additionally argue that the allegations of
19 materiality are insufficient. Specifically, they contend that
20 the plaintiffs do not dispute the ‘398 patent’s patentability on
21 the merits or claim that, but for the alleged fraud, no patent
22 could have been issued to anyone. For antitrust purposes,
23 whether a patent could be issued matters more than who would
24 possess it; if a patent could still “have been issued to
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1 someone,” its market power would still have been concentrated
2 (properly) in one party. Brunswick Corp. v. Riegel Textile
3 Corp., 752 F.2d 261, 265 (7th Cir. 1984). As a result, Walker
4 Process fraud must concern a material issue of patentability;
5 otherwise, a patent would have issued regardless of any fraud,
6 and potential plaintiffs would have suffered the same monopoly
7 effects (but legitimately).
8 Although the plaintiffs do not address patentability
9 directly in the complaint, the issue is implicit in their
10 allegations. The defendants’ allegedly fraudulent affidavits
11 were attempts to explain away prior art. The Federal Circuit
12 found them “absolutely critical” to the defendants’ overcoming
13 the patent application’s initial rejection. Ferring I, 437 F.3d
14 at 1189. Whether or not these declarations, if accompanied by
15 full disclosure, would have resulted in an enforceable patent is
16 debatable, but we think that, at the pleading stage, the fact of
17 non-disclosure is sufficient to properly allege materiality.
18 Overall, then, the plaintiffs have sufficiently alleged Walker
19 Process fraud to survive the defendants’ motion to dismiss on the
20 pleadings.
21 We likewise conclude that the sham litigation claim has been
22 adequately alleged. In order to state a claim for sham
23 litigation, the plaintiffs need to allege that “the litigation in
24 question is: (i) ‘objectively baseless,’ and (ii) ‘an attempt to
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1 interfere directly with the business relationships of a
2 competitor through the use of the governmental process . . . as
3 an anticompetitive weapon.’” Primetime 24 Joint Venture v. Nat’l
4 Broadcasting Co., 219 F.3d 92, 100-01 (2d Cir. 2000) (citing
5 Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus.,
6 Inc., 508 U.S. 49, 60 (1993)). Based on the same facts alleged
7 to sustain a Walker Process claim, we find that in the
8 circumstances of this case, the plaintiffs’ allegations are also
9 sufficient to make out a sham litigation claim. The defendants
10 effectively concede as much. See Brief of Defendants-Appellees
11 Ferring B.V. and Ferring Pharms. at 38 (“[A] sham litigation
12 claim here not only requires proof that defendants defrauded the
13 PTO, but also that they knew their misconduct before the PTO had
14 rendered the patent invalid. . . . [Plaintiffs’] ‘sham’
15 litigation allegation is thus substantively duplicative of their
16 patent fraud claim . . . .”).
17 The plaintiffs also may proceed on their Orange Book claim.
18 The defendants all but concede that the plaintiffs would have a
19 basis for contending the Orange Book listing was fraudulent if
20 the ‘398 patent is found to have been fraudulently procured. See
21 id. at 41 (“[T]he allegations regarding the Orange Book listing
22 are – like the sham litigation claims – purely derivative of the
23 underlying claim that the ‘398 patent was fraudulently
24 procured.”). Indeed, the Orange Book listing’s validity flows
-34-
1 from the patent’s validity. Having determined that the Walker
2 Process and sham litigation theories are still in play, we
3 similarly conclude that the plaintiffs have adequately alleged
4 that the defendants improperly listed the ‘398 patent in the
5 FDA’s Orange Book.
6 The final theory is the plaintiffs’ citizen petition theory,
7 which, as we have explained, stands apart from the ‘398 patent’s
8 validity. The district court dismissed this theory on the basis
9 that it concerned petitioning activity protected by the First
10 Amendment. Id. To reach this conclusion, the district court
11 presumably reasoned that the plaintiffs could not plausibly show
12 the petition to be a sham, i.e., objectively and subjectively
13 baseless, a proposition with which we disagree. The FDA found
14 that the citizen petition “had no convincing evidence” and lacked
15 “any basis” for its arguments. Compl. ¶ 115 (internal quotation
16 marks and emphasis omitted). In the Ferring I litigation, the
17 district court suggested that the petition might have been
18 “nothing more than a hardball litigation tactic, motivated by a
19 desire to keep out competition for as long as possible after the
20 expiration of the patent and raise transactional costs for Barr.”
21 Ferring B.V., 2005 WL 437981, at *17. Together, these findings
22 indicate the plaintiffs could plausibly show the citizen petition
23 to have been a sham.
24 Finally, the defendants contend that the citizen petition
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1 cannot give rise to antitrust liability because it could not have
2 impacted the FDA’s decision, as the FDA ultimately rejected the
3 petition. But this ignores the possibility that the sham
4 petition caused a delay in generic competition, a possibility
5 reinforced by the fact that the FDA approved the generic drug on
6 the same day that it rejected the petition. See 21 C.F.R. §
7 10.35(d)(1) (enabling a stay of FDA action after the filing of a
8 petition). Whether the ‘398 patent was valid on the date the
9 petition was filed is immaterial to this theory’s success,
10 because the plaintiffs can plausibly show the patent to have been
11 fraudulently procured. It may turn out at trial that this
12 petition was not a sham, or that the FDA’s approval of the
13 generic drug was not delayed by the petition, but the possibility
14 that the petition was a sham, and that it impacted the FDA’s
15 decision, is sufficiently plausible to defeat the motion to
16 dismiss.
17 Overall, the plaintiffs have stated an antitrust claim upon
18 which relief may be granted. Based on the pleadings, each of
19 their four theories could plausibly succeed. The district court
20 erred by concluding to the contrary.
21 IV. Can Aventis Be Kept in the Case?
22 The district court also granted Aventis’s separate motion to
23 dismiss, concluding that the plaintiffs had not alleged fraud
24 with sufficient particularity to satisfy Rule 9 of the Federal
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1 Rules of Civil Procedure. “Although Rule 9(b) permits knowledge
2 to be averred generally, plaintiffs must still plead the events
3 which they claim give rise to an inference of knowledge.”
4 Devaney v. Chester, 813 F.2d 566, 568 (2d Cir. 1987). In a case
5 involving multiple defendants, plaintiffs must plead
6 circumstances providing a factual basis for scienter for each
7 defendant; guilt by association is impermissible. See id. This
8 can consist of allegations as to who “possessed . . . knowledge”
9 of the fraud, “when and how they obtained [that] knowledge,” or
10 even why they “should have known” of the fraud. Id. The
11 district court concluded that the plaintiffs fell short of this
12 standard. We disagree.
13 In the district court’s view, “[t]hat Aventis would pay to
14 license a patent which it knew to be unenforceable flies in the
15 face of reason.” In re DDAVP, slip op. at 15. However, we find
16 the plaintiffs’ allegations plausible, and sufficient to survive
17 a motion to dismiss on the pleadings. At the time Aventis filed
18 its NDA and listed DDAVP in the Orange Book, the ‘398 patent’s
19 validity was already in question with the patent having been
20 rejected twice, and the PTO having raised concerns of bias. See
21 Ferring I, 437 F.3d at 1190. Yet, the plaintiffs assert that
22 Aventis apparently made no effort to independently investigate
23 and attest to the validity of the ‘398 patent. Rule 9(b)
24 requires only the circumstances of fraud to be stated with
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1 particularity; knowledge itself can be alleged generally.
2 Especially considering the long-standing relationship between
3 Aventis and Ferring, the plaintiffs have adequately stated
4 circumstances that give rise to a plausible inference of
5 knowledge and liability. At this early stage, the plaintiffs
6 need only state a plausible claim of monopolization, and they
7 have alleged enough for their suit against Aventis to proceed.
8 Because the dismissal as to both Ferring and Aventis was in
9 error, we have no cause to address the plaintiffs’ claim that
10 their due process rights were violated.
11
12 CONCLUSION
13 For the foregoing reasons, we VACATE the district court’s
14 dismissal of the plaintiffs’ case and REMAND for further
15 proceedings.
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