United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 12, 2001 Decided July 31, 2001
Nos. 00-5050 & 00-5396
Andrx Pharmaceuticals, Inc.,
Appellee
v.
Biovail Corporation International,
Appellant
Appeals from the United States District Court
for the District of Columbia
(No. 98cv00099)
Richard J. Leighton argued the cause for the appellant.
John B. Dubeck, Douglas J. Behr and Eric H. Singer were on
brief.
Louis M. Solomon argued the cause for the appellee.
Eugene M. Pfeifer, James D. Miller and Peter M. Todaro
were on brief.
Before: Henderson, Randolph and Garland, Circuit
Judges.
Opinion for the court filed by Circuit Judge Henderson.
Karen LeCraft Henderson, Circuit Judge: Appellant Bio-
vail Corporation (Biovail) appeals two district court decisions.
One dismissed with prejudice its antitrust counterclaim
against appellee Andrx Pharmaceuticals, Inc (Andrx). The
second denied its motion for reconsideration of the court's
dismissal. For the reasons that follow, we affirm the district
court's dismissal of the counterclaim but reverse its decision
to do so with prejudice.
I. Statutory Background
A company wishing to market a new drug must seek the
approval of the United States Food & Drug Administration
(FDA) by completing a "New Drug Application" (NDA). See
American Bioscience, Inc. v. Thompson, 243 F.3d 579, 580
(D.C. Cir. 2001); Mova Pharm. Corp. v. Shalala, 140 F.3d
1060, 1063 (D.C. Cir. 1998); see also 21 U.S.C. s 355(a) ("No
person shall introduce or deliver for introduction into inter-
state commerce any new drug, unless an approval of an
application filed pursuant to (b) or (j) of this section is
effective with respect to such drug."). An NDA is time-
consuming and costly to prepare because it must include data
from studies showing the drug's safety and effectiveness. See
Mova, 140 F.3d at 1063. In 1984 the Congress enacted the
Hatch-Waxman Amendments to the Food, Drug and Cosmet-
ic Act (Amendments) to, inter alia, simplify the procedure for
FDA approval. See Drug Price Competition and Patent
Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat.
1585 (1984) (codified in various sections of titles 21, 35 & 42
U.S.C.); see generally Allan M. Fox & Allan R. Bennett, The
Legislative History of the Drug and Patent Term Restora-
tion Act of 1984, at 259 (1987); James J. Wheaton, "Generic
Competition and Pharmaceutical Innovation: the Drug Price
Competition and Patent Term Restoration Act of 1984," 35
Cath. Univ. L. Rev. 433 (1986). Under the Amendments, the
original applicant for FDA approval (the "pioneer" applicant)
must still prepare an NDA. Subsequent applicants who wish
to manufacture generic versions1 of the pioneer drug, howev-
er, need only complete an Abbreviated New Drug Application
(ANDA) that relies on the FDA's previous determination that
the drug is safe and effective.2 See Mova, 140 F.3d at 1063.
The generic drug share of the prescription drug market has
grown from 19 per cent in 1983 to over 40 per cent in 1995.
See Congressional Budget Office, How Increased Competition
from Generic Drugs Has Affected Prices and Returns in the
Pharmaceutical Industry ix (1998). In addition, almost all of
the most popular pioneer drugs with expired patents now
have generic versions available. Id. at xii.
Although the Congress was interested in increasing the
availability of generic drugs, it also wanted to protect the
patent rights of the pioneer applicants. See David A. Balto,
"Pharmaceutical Patent Settlements: The Antitrust Risks,"
55 Food & Drug L.J. 321, 324 (2000). The Amendments,
therefore, require that an NDA contain a list of any patents
"which claim[ ] the drug ... or which claim[ ] a method of
using such drug and with respect to which a claim of patent
infringement could reasonably be asserted if a person not
licensed by the owner engaged in the manufacture, use, or
sale of the drug." 21 U.S.C. s 355(b)(1). The FDA main-
tains a record of such information in its publication entitled
Approved Drug Products with Therapeutic Equivalence,
commonly known as the Orange Book. See 21 U.S.C.
s 355(j)(7)(A). For each patent applicable to the pioneer drug
listed in the Orange Book, an ANDA applicant must certify
__________
1 A generic version of a pioneer drug (often described as a brand-
name drug) contains the same active ingredients, but not necessari-
ly the same inactive ingredients, as the pioneer drug. A generic
drug, as the name implies, is ordinarily sold without a brand name
and at a lower price. See United States v. Generix Drug Corp., 460
U.S. 453, 454-55 (1983).
2 Before the Amendments, an earlier version of the ANDA proce-
dure was available to a generic drug manufacturer of a pioneer
drug approved before 1962. A generic version of a pioneer drug
approved after 1962, however, could be approved only through a full
NDA. See Fox & Bennett, supra, at 95.
whether the proposed generic drug would infringe that patent
and, if not, why not. An ANDA applicant has four certifica-
tion options. It may certify (1) that the required patent
information has not been filed, (2) that the patent has expired,
(3) that the patent has not expired but will expire on a
particular date or (4) that the patent is invalid or will not be
infringed by the drug for which the applicant seeks approval.
See 21 U.S.C. s 355(j)(2)(A)(vii). The last of these options,
and the one relevant here, is the Paragraph IV certification.
After an applicant makes a Paragraph IV certification, the
statute provides a 45-day window during which the patent
holder may bring suit against the applicant. If the patent
holder brings a timely suit, the statute bars the FDA from
approving the applicant's ANDA, or any subsequent ANDA,
for thirty months or until the successful resolution of the
patent infringement suit, whichever is earlier, at which time
the first ANDA applicant is eligible for FDA approval and
upon such approval is awarded a 180-day exclusivity period in
which to market its generic version. See 21 U.S.C.
s 355(j)(5)(B)(iii). The statute permits the court to lengthen
or shorten the 30-month waiting period if it determines that
either party has failed to "reasonably cooperate in expediting
the action." Id.3
__________
3 The full text of section 355(j)(5)(B)(iii) provides:
If the applicant made a certification described in subclause (IV)
of paragraph (2)(A)(vii), the approval shall be made effective
immediately unless an action is brought for infringement of a
patent which is the subject of the certification before the
expiration of forty-five days from the date the notice provided
under paragraph (2)(B)(i) is received. If such an action is
brought before the expiration of such days, the approval shall
be made effective upon the expiration of the thirty-month
period beginning on the date of the receipt of the notice
provided under paragraph (2)(B)(i) or such shorter or longer
period as the court may order because either party to the
action failed to reasonably cooperate in expediting the action,
except that--
(I) if before the expiration of such period the court decides
that such patent is invalid or not infringed, the approval shall
be made effective on the date of the court decision,
II. Background
Hoechst Marion Roussel, Inc. (HMRI) is the manufacturer,
marketer and patent holder of the brand name prescription
drug Cardizem CD, which consists of a once-daily dosage of
the chemical compound dilitiazem hydrochloride. Cardizem
CD is widely prescribed for the treatment of chronic chest
pains (angina) and hypertension and for the prevention of
heart attacks and strokes. See In re Cardizem CD Antitrust
Litig., 105 F. Supp. 2d 618, 622 (E.D. Mich. 2000). On
September 22, 1995 Andrx filed an ANDA with the FDA
seeking approval to manufacture and sell a generic form of
Cardizem CD. On December 31, 1995 it made the Paragraph
IV certification with regard to all unexpired patents included
in the Orange Book's Cardizem CD entry and certified that
its generic form of Cardizem CD did not infringe the patents
owned or controlled by HMRI or its affiliates. See 21 U.S.C.
s 355(j)(2)(A)(vii)(IV); 21 C.F.R. s 314.94(a)(12)(i)(A)(4). In
early 1996 HMRI filed a timely suit against Andrx for patent
__________
(II) if before the expiration of such period the court
decides that such patent has been infringed, the approval
shall be made effective on such date as the court orders
under section 271(e)(4)(A) of Title 35, or
(III) if before the expiration of such period the court
grants a preliminary injunction prohibiting the applicant
from engaging in the commercial manufacture or sale of the
drug until the court decides the issues of patent validity and
infringement and if the court decides that such patent is
invalid or not infringed, the approval shall be made effective
on the date of such court decision.
In such an action, each of the parties shall reasonably
cooperate in expediting the action. Until the expiration of
forty-five days from the date the notice made under para-
graph (2)(B)(i) is received, no action may be brought under
section 2201 of Title 28, for a declaratory judgment with
respect to the patent. Any action brought under section
2201 shall be brought in the judicial district where the
defendant has its principal place of business or a regular
and established place of business.
infringement.4 The filing of the suit triggered the statutory
30-month waiting period during which any subsequent ANDA
applicant, including Biovail, could not receive final approval of
its generic version of Cardizem CD. See 21 U.S.C.
s 355(j)(5)(B)(iii).
In June 1997 Biovail filed an ANDA with the Paragraph IV
certification for its generic version of Cardizem CD but
HMRI filed no patent infringement suit against it. On
September 15, 1997 the FDA issued its tentative approval of
Andrx's ANDA.5 Nine days later, on September 24, 1997,
HMRI and Andrx entered into an agreement (Agreement or
HMRI-Andrx Agreement) purporting to maintain the status
quo pending the outcome of HMRI's patent infringement suit
against Andrx. Under the terms of the Agreement, Andrx
agreed not to sell its generic version of Cardizem CD until a
specific time agreed upon by the parties. It also agreed to
diligently prosecute its ANDA and not to relinquish or other-
wise compromise any right accruing thereunder. HMRI
agreed to make interim payments to Andrx in the amount of
$40 million per year, payable quarterly, beginning on the date
Andrx's generic version of Cardizem CD received FDA ap-
proval and ending on the date Andrx either began to sell its
generic version or was adjudged liable for patent infringe-
ment.
In early 1998 Andrx filed suit against the FDA and certain
ANDA applicants (including Biovail) to clarify its right as the
first to file an ANDA for Cardizem CD. The suit sought
injunctive relief requiring the FDA to provide Andrx with "a
period of 180 days of marketing exclusivity for its controlled-
release generic formulations of the drugs Dilacor XR and
Cardizem CD." JA 13. It also requested injunctive relief
prohibiting the FDA "from approving any ANDA submitted
by defendant Biovail ... for a generic version of Cardizem
CD that contains a paragraph 4 certification until 180-days
after Andrx begins marketing its generic formulation of Car-
__________
4 Later in 1996 Faulding Inc. filed an ANDA with a Paragraph IV
certification for its generic version of Cardizem CD. In January
1997 HMRI also filed suit against Faulding for patent infringement.
5 The FDA issued tentative, as opposed to final, approval due to
the pending infringement suit and the resulting 30-month statutory
waiting period.
dizem CD or a court enters a judgment in the patent litiga-
tion brought by HMRI in the Southern District of Florida,
whichever is earlier." JA 22. Biovail counterclaimed, alleg-
ing that Andrx had violated sections 1 and 2 of the Sherman
Act as well as New Jersey common law.6
On July 3, 1998 the FDA granted final approval to Andrx's
ANDA for a generic version of Cardizem CD. JA 44. By
then, the 30-month waiting period had expired and Andrx
was no longer restricted under the statutory scheme from
marketing and selling its generic drug. Andrx, however, did
not do so and on July 9, 1998, pursuant to the Agreement,
HMRI began making quarterly payments of $10 million to
Andrx. By not marketing its generic version of Cardizem
CD, Andrx did not trigger the 180-day market exclusivity
period, which in turn prevented the FDA from giving final
approval to any subsequently filed applications for competing
generic versions of Cardizem CD.
Approximately one year later, HMRI and Andrx terminat-
ed their Agreement and entered into a stipulation settling the
patent litigation. On June 23, 1999, Andrx then began to
market its generic version and its 180-day exclusivity period
began to run. In October 1999 the FDA gave tentative
approval to Biovail's ANDA and final approval on December
__________
6 On July 14, 1998 the FDA published a notice entitled "Guidance
for Industry on 180-Day Generic Drug Exclusivity Under the
Hatch-Waxman Amendments to the Federal Food, Drug, and Cos-
metic Act; Availability," interpreting the Hatch-Waxman Amend-
ments so as to give Andrx the relief it sought in its complaint. The
Guidance explained that the FDA intended to delete the "successful
defense" provisions from s 314.107(c)(1) and that the FDA would
not enforce the "successful defense" provisions in the interim. See
63 Fed. Reg. 37,890 (July 14, 1998); see also JA 62 (Federal
Defendant's Motion to Dismiss); JA 198 (Notice of Dismissal).
Accordingly, the district court subsequently dismissed the com-
plaint. See JA 199. Andrx had earlier moved to dismiss Biovail's
counterclaim for failure to state a claim upon which relief may be
granted because, inter alia, Biovail lacked standing to assert an
antitrust violation.
23, 1999.7 Neither Andrx nor Biovail, however, informed the
district court of these developments. On January 6, 2000 the
district court granted Andrx's Rule 12(b)(6) motion to dismiss
Biovail's counterclaim, the federal antitrust counts with preju-
dice and the state law claims without prejudice. The court
concluded that Biovail did not, and in fact could not, plead an
antitrust injury causally linked to Andrx's alleged anticompet-
itive behavior. Andrx Pharm., Inc. v. Friedman, 83 F. Supp.
2d 179, 185-87 (D.D.C. 2000) ("Court cannot find that Biovail
can establish that it has suffered 'antitrust injury.' "). On
February 2, 2000 Biovail moved for reconsideration under
FRCP 60(b) and on February 4, 2000 it filed a notice of
appeal (No. 00-5050). The district court subsequently denied
the motion for reconsideration and Biovail noticed its appeal
of that decision (No. 00-5396) on November 3, 2000. This
court granted Biovail's motion to consolidate the appeals.
III. Analysis
We give de novo review to a Rule 12(b)(6) dismissal. See
NRA v. Reno, 216 F.3d 122, 126 (D.C. Cir. 2000); see also
Amarel v. Connell, 102 F.3d 1494, 1507 (9th Cir. 1997)
(holding that antitrust standing is question of law reviewed de
novo). "The complaint should not be dismissed unless plain-
tiffs can prove no set of facts in support of their claim which
would entitle them to relief." Kowal v. MCI Communica-
tions Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). We liberally
construe the complaint in the plaintiff's favor and grant the
plaintiff the benefit of all inferences that can be derived from
the facts alleged. "However, the court need not accept
inferences drawn by plaintiffs if such inferences are unsup-
ported by the facts set out in the complaint. Nor must the
court accept legal conclusions cast in the form of factual
allegations." Id. The court reviews the denial of the appel-
lant's Rule 60(b) motion for abuse of discretion "unless the
decision is 'rooted in an error of law.' " United Mine Work-
__________
7 In a letter dated October 22, 1999 the FDA explained to Biovail
that it had "completed review" of its ANDA and found its generic
"safe and effective." JA 322. It gave tentative, rather than final,
approval because of "the exclusivity granted by the agency to
Andrx." JA 323; see also JA 327.
ers of Am. 1974 Pension v. Pittston Co., 984 F.2d 469, 476
(D.C. Cir. 1993) (citation omitted).
Section 4 of the Clayton Act provides that a private person
"injured in his business or property by reason of anything
forbidden in the antitrust laws ... shall recover threefold the
damages by him sustained, and the cost of suit, including a
reasonable attorney's fee." 15 U.S.C. s 15(a). The Clayton
Act includes the Sherman Act8 as one of the "antitrust laws."
See 15 U.S.C. s 12. A person "threatened [with] loss or
damage by a violation of the antitrust laws" can seek injunc-
tive relief under section 16 of the Clayton Act. 15 U.S.C.
s 26. The availability of a private antitrust action, and its
accompanying treble damages remedy, serves both to com-
pensate private persons for their injuries and to punish
wrongdoers. See 2 Phillip E. Areeda, Herbert Hovenkamp &
Roger D. Blair, Antitrust Law p 330, at 273 (2d. ed. 2000).
Private enforcement of the nation's antitrust laws also in-
creases the likelihood that violators will be discovered. See
Blue Shield of Va. v. McCready, 457 U.S. 465, 473 n.10 (1982)
("Only by requiring violators to disgorge the 'fruits of their
illegality' can the deterrent objectives of the antitrust laws be
fully served.") (citation omitted). In fact, private enforce-
ment actions account for the overwhelming majority of anti-
trust litigation in the United States. See William F. Dolan,
Developments in Private Antitrust Enforcement in 1999,
1181 PLI/Corp 971, 975 (2000).
"On its face, s 4 contains little in the way of restrictive
language." Reiter v. Sonotone Corp., 442 U.S. 330, 337
(1979). "The statute does not confine its protection to con-
__________
8 Section 1 of the Sherman Act prohibits contracts, combinations
or conspiracies "in restraint of trade or commerce among the
several States, or with foreign nations." 15 U.S.C. s 1. Section 2
states that "[e]very person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or
persons, to monopolize any part of the trade or commerce among
the several States, or with foreign nations, shall be deemed guilty of
a felony." 15 U.S.C. s 2. In its counterclaim, Biovail alleged that
Andrx violated both sections 1 and 2 of the Sherman Act. JA 20-
21.
sumers, or to purchasers, or to competitors, or to sellers....
The Act is comprehensive in its terms and coverage, protect-
ing all who are made victims of the forbidden practices by
whomever they may be perpetrated." Mandeville Island
Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236
(1948). The Supreme Court, however, has recognized that
"the potency of the remedy implies the need for some care in
its application" and does not construe the section 4 language
to allow suit by every party affected by an antitrust violator's
"ripples of harm." McCready, 457 U.S. at 476-77. An anti-
trust plaintiff must establish an injury-in-fact or a threatened
injury-in-fact caused by the defendant's alleged wrongdoing.
See Associated Gen. Contractors of Cal., Inc. v. California
State Council of Carpenters, 459 U.S. 519, 535 (1983). More-
over, the injury must affect the plaintiff's business or proper-
ty and must be the kind of injury the antitrust laws were
intended to prevent; it must "flow[ ] from that which makes
defendants' acts unlawful." Brunswick Corp. v. Pueblo
Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Additional
factors to be considered in determining whether the plaintiff
has "antitrust standing" include: the directness of the injury,
whether the claim for damages is "speculative," the existence
of more direct victims, the potential for duplicative recovery
and the complexity of apportioning damages. See Associated
Gen. Contractors, 459 U.S. at 542-45; see also Adams v. Pan
Am. World Airways, Inc., 828 F.2d 24, 26 (D.C. Cir. 1987).
We review the district court's decision dismissing Biovail's
antitrust counterclaim with prejudice in light of these stand-
ing requirements.
A. Injury-in-Fact and Causation
As in any civil action for damages, the plaintiff in a private
antitrust lawsuit must show that the defendant's illegal con-
duct caused its injury. See 2 Areeda et al., supra, p 338, at
316; see also Restatement (Second) of Torts ss 431, 433
(1965). The plaintiff's first step is to plead an injury-in-fact or,
in a suit for equitable relief, a threatened injury-in-fact to
business or property.9 See Hecht v. Pro-Football, Inc., 570
__________
9 Section 4 of the Clayton Act authorizes a private suit only for
injury to "business or property." 15 U.S.C. s 15; see 2 Areeda et
F.2d 982, 993 (D.C. Cir. 1977). The "burden of proving the
fact of damage under s 4 of the Clayton Act is satisfied by [ ]
proof of some damage flowing from the unlawful conspiracy;
inquiry beyond this minimum point goes only to the amount
and not the fact of damage." Zenith Radio Corp. v. Hazel-
tine Research, Inc., 395 U.S. 100, 114 n.9 (1969) (emphasis
original). The district court held that Biovail not only failed
to plead an injury or a threatened injury but also was unable
to do so because Biovail had yet to receive FDA approval for
its generic version of Cardizem CD and gave no assurance
that it would have entered the market had it gained approval.
Cf. Indium Corp. of Am. v. Semi-Alloys, Inc., 781 F.2d 879,
882 (Fed. Cir. 1985) (because plaintiff was not prepared to
enter market, defendant's conduct caused no injury).
When competitors violate the antitrust laws and another
competitor is forced from a market, the latter suffers an
injury-in-fact. A competitor that has not yet entered the
market may also suffer injury but courts require a "potential"
competitor to demonstrate both its intention to enter the
market and its preparedness to do so. See Hecht, 570 F.2d at
987, 994 ("[A] potential competitor cannot achieve standing
merely by demonstrating his intention to enter a field; he
must also demonstrate his preparedness to do so." (emphasis
original)); see Indium Corp., 781 F.2d at 882 (no injury if
plaintiff not prepared to enter market). "Indicia of prepared-
ness include adequate background and experience in the new
field, sufficient financial capability to enter it, and the taking
of actual and substantial affirmative steps toward entry, 'such
as the consummation of relevant contracts and procurement
of necessary facilities and equipment.' " Hecht, 570 F.2d at
994 (footnote and citation omitted). Thus, in evaluating
whether Biovail sufficiently pleaded or can sufficiently plead
__________
al., supra, p 336, at 303. At the very least, "business or property"
includes "commercial interests or enterprises." Hawaii v. Stan-
dard Oil Co., 405 U.S. 251, 264 (1972). In Reiter v. Sonotone Corp.,
the Supreme Court noted that "the word 'property' has a naturally
broad and inclusive meaning." Id. at 338. On appeal, the parties
do not raise the issue of whether Biovail sufficiently alleged an
injury to "business or property."
an injury or threatened injury, we must examine its intent
and preparedness to enter the market from which it alleges it
was excluded, that is, the Cardizem CD, or controlled-release
dilitiazem-based drug, market.
In the pharmaceutical industry, FDA approval is a prereq-
uisite to enter any drug market. See 21 U.S.C. s 355(a) ("No
person shall introduce or deliver for introduction into inter-
state commerce any new drug, unless an approval of an
application filed pursuant to subsection (b) or (j) of this
section is effective with respect to such drug."). The district
court concluded that Biovail suffered no injury as a result of
the HMRI-Andrx Agreement "because even today, Biovail
could not go to market with a generic version of Cardizem,
because it had not received FDA approval."10 Andrx
Pharm., 83 F. Supp. 2d at 186 (emphasis original). The only
facts Biovail alleged to support its claim of injury were that
the Agreement "prevent[ed] generic Cardizem CD products
by Biovail and others from reaching the market as soon as
they would otherwise be allowed," JA 44 (p 19), and that
Biovail had filed an ANDA for a generic version of Cardizem
CD, JA 50 (p 41). Biovail did not explicitly allege that it was
prepared to bring a generic version of Cardizem CD to
market or that it anticipated FDA approval. In addition,
when the FDA eventually approved its ANDA, Biovail inex-
plicably failed to inform the district court. Based on Biovail's
failure to plead sufficient intent and preparedness to enter
the market, the district court dismissed Biovail's antitrust
counterclaim.11 See Andrx Pharm., 83 F. Supp. 2d at 187.
__________
10 By the time of the district court's decision, however, the FDA
had approved Biovail's ANDA for its generic version of Cardizem
CD although the court was not apprised of that development.
11 The issues of injury-in-fact and causation are closely linked on
this point. By not alleging facts indicating its intent and prepared-
ness to enter the Cardizem CD market, Biovail failed to allege both
an injury (no loss of profits because not prepared to enter market)
and causation (any damages not related to HMRI-Andrx Agree-
ment because Agreement did not cause loss of profits).
The district court, however, went beyond dismissing the
counterclaim based on the pleading's insufficiency. It dis-
missed Biovail's antitrust counterclaim with prejudice. In so
doing it decided, as a matter of law, that Biovail was unable to
set forth any set of facts that would entitle it to the relief it
sought. "[D]ismissal with prejudice should be granted only
when a trial court determines that 'the allegation of other
facts consistent with the challenged pleading could not possi-
bly cure the deficiency.' " Jarrell v. United States Post.
Serv., 753 F.2d 1088, 1091 (D.C. Cir. 1985) (quoting Bonnano
v. Thomas, 309 F.2d 320, 322 (9th Cir. 1962)). The district
court did not conclude that Biovail did not intend to enter the
market or that it was not sufficiently prepared to do so but
instead that it had not sufficiently alleged its intent and
capacity to enter the market. See Andrx Pharm., Inc., 83
F. Supp. 2d at 184-85. Its statement that the FDA had not
yet approved Biovail's ANDA as of the date of its ruling was
understandable in light of the parties' failure to inform the
court to the contrary but the statement was nonetheless
erroneous and not a ground to dismiss with prejudice.
As its motion for reconsideration manifests, Biovail can
allege facts sufficient to indicate its intent and preparedness.
See JA 297, 300-02. And even before the FDA approved
Biovail's ANDA, Biovail could have alleged its intent and
preparedness to enter the market by claiming that FDA
approval was probable. Andrx's original suit, which sought to
enjoin the FDA from approving Biovail's ANDA, suggests
that Biovail (or so Andrx believed) may have intended and
been sufficiently prepared to enter the market. See Zenith
Radio, 395 U.S. at 130 ("[Section 16] authorizes injunctive
relief upon the demonstration of 'threatened' injury. That
remedy is characteristically available even though the plaintiff
has not yet suffered actual injury; he need only demonstrate
a significant threat of injury from an impending violation of
the antitrust laws or from a contemporary violation likely to
continue or recur.") (citation and footnote omitted); L.A.
Mem'l Coliseum Comm'n v. National Football League, 468
F. Supp. 154, 159 (C.D. Cal. 1979). And unlike the plaintiffs
in Confederate Memorial Association, Inc. v. Hines, 995 F.2d
295 (D.C. Cir. 1993), where this court upheld the trial court's
dismissal with prejudice of the plaintiffs' RICO claims be-
cause the plaintiffs failed to allude to facts "entitling them to
recover," Biovail has (in its motion for reconsideration) allud-
ed to facts--FDA approval and intent to enter market--that
may entitle it to relief. Id. at 299; cf. Askins v. District of
Columbia, 877 F.2d 94, 99 (D.C. Cir. 1989) (dismissal with
prejudice of unripe legal claim is legal error). Because
Biovail may be able to cure its pleading deficiency, we
conclude that dismissal with prejudice was erroneously grant-
ed.
Andrx responds, however, that an independent legal
ground supports dismissal with prejudice. It argues Biovail
is unable to allege causation. To sufficiently plead causation,
a plaintiff must allege that the defendant violated the anti-
trust laws, that the defendant's alleged violation "had a
tendency to injure" the plaintiff's business or property, Amer-
inet, Inc. v. Xerox Corp., 972 F.2d 1483, 1495 (8th Cir. 1992),
and that the plaintiff suffered a decline in its business or
property "not shown to be attributable to other causes."
Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264
(1945). The Supreme Court has explained "[i]t is enough that
the illegality is shown to be a material cause of the injury; a
plaintiff need not exhaust all possible alternative sources of
injury in fulfilling his burden of proving compensable injury
under [section 4 of the Clayton Act]." Zenith Radio, 395
U.S. at 114 n.9.
The district court found that Biovail failed to establish the
requisite causal connection between its injury and the alleged
anticompetitive conduct. It concluded that any injury Biovail
may have suffered was caused not by the HMRI-Andrx
Agreement but instead by the lack of FDA approval of its
generic version of Cardizem CD and by the delay period
prescribed by the Hatch-Waxman Amendments. We dis-
agree. Although we affirm the district court's dismissal to
the extent Biovail failed to allege an injury-in-fact, we dis-
agree with its conclusion that any injury Biovail might plead
would be caused by "the existence of a troublesome statutory
scheme that prohibits it from marketing a drug until the first
ANDA recipient goes to market, and which places no restric-
tions on when, or even whether, that applicant must to [sic]
go to market." Andrx Pharms., 83 F. Supp. 2d at 185. We
also reject Andrx's argument that any rational actor like itself
would not market its generic drug until the patent infringe-
ment suit against it was resolved, making any loss of profits
caused by Biovail's exclusion from the market a result of the
statutory scheme, not Andrx's conduct. A reasonable juror
could conclude that Andrx's argument contradicts the very
premise of the HMRI-Andrx Agreement. Under the Agree-
ment, HMRI paid Andrx 10 million dollars per quarter effec-
tively not to enter the market. One can fairly infer from
these facts, which were alleged in the counterclaim, that but
for the Agreement, Andrx would have entered the market.
As one commentator has noted, "[a] payment flowing from
the innovator to the challenging generic firm may suggest
strongly the anticompetitive intent of the parties in entering
the agreement and the rent-preserving effect of that agree-
ment." Balto, supra, at 335.
Andrx, however, argues that it "did nothing other than to
act in accordance with rights granted to it under the Hatch-
Waxman [Amendments]. The exercise of these statutory
rights, exclusionary though they may be, cannot support a
claim under the antitrust laws." Appellee Br. 31. Andrx
may be correct that "[a] plaintiff cannot be injured in fact by
private conduct excluding him from the market when a stat-
ute prevents him from entering that market in any event."
City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 268
(3d Cir. 1998) (quoting Philip E. Areeda & Herbert Hoven-
kamp, Antitrust Law, p 363(b) at 222 (1995)). Although the
Hatch-Waxman Amendments provide a 180-day period of
market exclusivity to the first applicant to file an ANDA for a
generic version of a pioneer drug, see 21 U.S.C.
s 355(j)(5)(B)(iv),12 through the Amendments, "Congress
__________
12 Section 355(j)(5)(B)(iv) provides:
If the application contains a certification described in subclause
(IV) of paragraph (2)(A)(vii) and is for a drug for which a
previous application has been submitted under this subsection
continuing such a certification, the application shall be made
effective not earlier than one hundred and eighty days after--
sought to get generic drugs into the hands of patients at
reasonable prices--fast." In re Barr Lab., Inc., 930 F.2d 72,
76 (D.C. Cir. 1991). We disagree with Andrx that "its
conduct was not only permitted under but clearly contemplat-
ed by the Hatch-Waxman" Amendments. Appellee Br. 32.
Although it is true that the first to file an ANDA is permitted
to delay marketing as long as it likes, the statutory scheme
does not envision the first applicant's agreeing with the
patent holder of the pioneer drug to delay the start of the
180-day exclusivity period. See Mova Pharm., 140 F.3d at
1072 (acknowledging and describing as anomaly fact situation
here presented).13
By accepting payments from HMRI, Andrx received the
benefit of the 180-day exclusivity period without starting the
clock. By agreeing with HMRI to share HMRI's profits
from the sale of Cardizem CD, it was able to exclude other
competitors from entering the market. Andrx's commitment
__________
(I) the date the Secretary receives notice from the applicant
under the previous application of the first commercial market-
ing of the drug under the previous application, or
(II) the date of a decision of a court in an action described in
clause (iii) holding the patent which is the subject of the
certification to be invalid or not infringed,
whichever is earlier.
13 The court stated in a footnote:
An amicus brief filed by Biovail Corporation International
dramatically illustrates an analogous risk, not necessarily in-
volving collusion. Biovail was the second applicant to file a
paragraph IV ANDA for a generic version of a heart medi-
cation. Biovail was not sued by the pioneer drug company.
The first applicant and the pioneer drug company are now in
litigation, and, Biovail claims, the pioneer is paying the first
applicant some $10 million per quarter in exchange for the first
applicant's agreement not to sell its product after the 30-month
waiting period expires. Under these circumstances, neither
party would seem to have maximum incentive to bring the
litigation to a close.
Id. at 1072 n.14.
not to trigger the running of the 180-day exclusivity period
could have caused Biovail's injury (assuming FDA approval
was probable and it was sufficiently prepared to enter the
market) by denying it the ability to proceed to market with
its own generic version. Although the 180-day provision of
the Hatch-Waxman Amendments legally barred it from sell-
ing its product, Andrx's manipulation of the exclusivity period
trigger date extended the legal bar.
Andrx maintains that the Agreement was not a restraint
cognizable under the antitrust laws because, under the FDA
regulations in effect at the time, it could not have caused the
delay of FDA approval of Biovail's ANDA. In September
1997 (when the Agreement was signed) Andrx contends that
the FDA regulations provided that the first ANDA applicant
to file a Paragraph IV certification would not be granted a
180-day exclusivity period unless it had "successfully defend-
ed" any patent infringement action brought by the patent
holder "before a subsequent applicant's ANDA was ready to
be approved." Appellee Br. 37-38 (citing 21 C.F.R.
s 314.107(c)(i) (1997)). We rejected the FDA's "successful
defense" regulation in Mova Pharm., 140 F.3d at 1076.
Andrx argues that before the court invalidated the regulation,
it could have done nothing to prolong its exclusivity period by
delaying FDA approval of Biovail's ANDA because it was
entitled to the exclusionary period only if it successfully
defended the patent litigation before the FDA approved a
subsequent applicant's ANDA. Had the FDA approved Bio-
vail's ANDA, Andrx asserts, the Agreement would not have
prevented Biovail from entering the market under the old
regulation.
We reject this argument. On January 23, 1997 the district
court in Mova issued a preliminary injunction against the
FDA, holding that its "successful defense" regulation was
inconsistent with the plain language of the statute and there-
fore unenforceable. See Mova Pharm. Corp. v. Shalala, 955
F. Supp. 128, 131-32 (D.D.C. 1997). HMRI and Andrx did
not enter into their agreement until September 1997, almost
nine months after the court's ruling. On April 14, 1998 this
court affirmed the district court. Mova, 140 F.3d at 1076.
The Agreement did not go into effect until three months
later, in July 1998. The timing of the Agreement and of the
demise of the successful defense requirement defeats Andrx's
argument on this point.
Andrx nevertheless relies on the holding in Polk Bros., Inc.
v. Forest City Enters., Inc., 776 F.2d 185 (7th Cir. 1985). In
Polk Bros., two companies, one that sold appliances and home
furnishings and the other that sold building materials, lum-
ber, tools and related products, reached an agreement to
build on a large parcel of land one building, partitioned on the
interior, to house both stores. Id. at 187. The arrangement
was attractive to both firms due to the complementary nature
of their products. They feared, however, that one day com-
petition might replace cooperation so they negotiated a cove-
nant restricting the products each could sell. Id. Years later
one of the firms wanted to sell certain products in violation of
the covenant and challenged the covenant on antitrust
grounds when the other firm sought to enforce it. Id. at 187-
88. Although the case arose under Illinois antitrust law, state
law used federal antitrust law as a guide. Id. at 188. The
Seventh Circuit upheld the validity of the covenant on the
ground that, although "naked" restraints on trade are unlaw-
ful per se, ancillary restraints that facilitate productive activi-
ty are not. The court provided the following example:
If A hires B as a salesman and passes customer lists to
B, then B's reciprocal covenant not to compete with A is
"ancillary." At the time A and B strike their bargain,
the enterprise (viewed as a whole) expands output and
competition by putting B to work. The covenant not to
compete means that A may trust B with broader respon-
sibilities, the better to compete against third parties.
Covenants of this type are evaluated under the Rule of
Reason as ancillary restraints, and unless they bring a
large market share under a single firm's control they are
lawful. See United States v. Addyston Pipe & Steel Co.,
85 F. 271, 280-83 (6th Cir. 1898) (Taft, J.), aff'd, 172 U.S.
211 (1899).
Id. at 189. Thus even were we to adopt Andrx's characteriza-
tion of the Agreement as "designed to preserve the status
quo by duplicating relief that the court could have ordered
had HMR[I] proceeded with" its motion for a preliminary
injunction in the patent infringement litigation, the Agree-
ment's allegedly anticompetitive provisions, including Andrx's
pledge to continue to pursue its ANDA so as to forestall other
applicants from receiving final FDA approval, were not neces-
sarily ancillary restraints but rather could reasonably be
viewed as an attempt to allocate market share and preserve
monopolistic conditions.
Finally, Andrx contends that there were reasonable alter-
natives available to Biovail that could have avoided the exclu-
sionary effect of the Agreement by triggering the 180-day
period. Andrx relies on CBS Broad. Sys., Inc. v. ASCAP, 620
F.2d 930, 935 (2d Cir. 1980), which held that "a practice that
is not a per se violation ... does not restrain trade when the
complaining consumer elects to use it in preference to realis-
tically available marketing alternatives." There the court
found that to avoid injury, the consumer plaintiff had only to
do nothing "more extraordinary than offer to buy from com-
peting sellers." Id. at 936. Andrx argues that Biovail had
two alternatives in lieu of waiting for Andrx to market its
generic version of Cardizem CD. First, Biovail could have
triggered the start of the 180-day exclusivity period itself
under the "court decision" prong of the Hatch-Waxman
Amendments, 21 U.S.C. s 355(j)(5)(B)(iv)(II), by seeking a
declaratory judgment of non-infringement or invalidity of
HMRI's patent. The successful resolution (or dismissal) of
the declaratory judgment action would have started the 180-
day exclusivity period. See Teva Pharm. USA, Inc. v. FDA,
182 F.3d 1003, 1007-08 (D.C. Cir. 1999). Alternatively, Bio-
vail could have petitioned the FDA to nullify Andrx's 180-day
exclusivity period. FDA regulations provide that "if FDA
concludes that the applicant submitting the first application is
not actively pursuing approval of its abbreviated application,
FDA will make the approval of subsequent abbreviated appli-
cations immediately effective if they are otherwise eligible for
an immediately effective approval." 21 C.F.R.
s 314.107(c)(3).
The CBS holding is easily distinguishable; the language on
which Andrx relies appears in the context of determining
whether an agreement determined not to be per se unlawful
nonetheless restrains trade on the facts. There the agree-
ment benefitted the consumer by bundling various music
copyright licenses, relieving the consumer of having to negoti-
ate licenses with every individual artist. Andrx has cited no
consumer benefit here. Biovail could have sought a declarato-
ry judgment; however, as evidenced by the HMRI-Andrx
patent infringement litigation, the time involved to obtain
such a judgment made this option less than "fully available."
CBS, 620 F.2d at 935. Likewise, as long as Andrx was
pursuing FDA approval, Biovail could not use 21 C.F.R.
s 314.107(c)(3) to revoke the 180-day exclusivity period. In-
deed, according to the HMRI-Andrx Agreement, Andrx was
to continue to pursue approval, which prevented the FDA
from denying it the 180-day exclusivity period. Accordingly,
we conclude the district court erred in dismissing with preju-
dice Biovail's counterclaim for failure to plead injury caused
by Andrx's alleged unlawful restraint of trade. See supra
note 8.
B. Antitrust Injury
"A private antitrust plaintiff does not acquire standing
merely by showing that it was injured in a proximate and
reasonably measurable way by conduct of the defendant
violating the antitrust laws (injury-in-fact). Nor is it enough
that the injury be causally connected to the acts that violate
the antitrust laws (causation)." 2 Areeda et al., supra, p 337a,
at 305. In Brunswick, the Supreme Court explained that
"[p]laintiffs must [also] prove antitrust injury, which is to say
injury of the type the antitrust laws were intended to prevent
and that flows from that which makes defendants' acts unlaw-
ful." 429 U.S. at 489 (emphasis original). "The injury should
reflect the anticompetitive effect either of the violation or of
anticompetitive acts made possible by the violation. It should,
in short, be 'the type of loss that the claimed violations ...
would be likely to cause.' " Id. (quoting Zenith Radio, 395
U.S. at 125).14 The Supreme Court has declared that the
antitrust laws "were enacted for 'the protection of competi-
tion not competitors.' " Id. at 488 (quoting Brown Shoe Co.
v. United States, 370 U.S. 294, 320 (1962)) (emphasis original).
Thus a competitor may not claim an injury resulting from
competition even when such competition was actually caused
by conduct that violates the antitrust laws. See 2 Areeda et
al., supra, p 337, at 306; see also Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 596 n.20 (1986) (competi-
tors suffer no harm from conspiracy to raise prices); J.
Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 568
(1981) (violation of antitrust laws not enough to confer stand-
ing).
In asserting that Biovail cannot assert an antitrust injury,
Andrx compares it to the Brunswick plaintiffs. In Bruns-
wick, the plaintiffs, three bowling alleys, complained that the
defendant's acquisition of several financially troubled bowling
centers violated section 7 of the Clayton Act. In seeking
damages, the plaintiffs "attempted to show that had [the
defendant] allowed the defaulting centers to close, [the plain-
tiffs'] profits would have increased." Brunswick, 429 U.S. at
481. The Supreme Court held that even though the plaintiffs'
injury--loss of profits--was caused by the defendant's poten-
tially unlawful acquisitions, the plaintiffs suffered no antitrust
injury because the increased competition resulting from the
defendant's purchase and operation of competing bowling
alleys was not an injury antitrust laws were designed to
prevent. Id. at 488. The Court explained that the plaintiffs'
injury resulted from competitive, not anticompetitive, con-
duct. Further, because the plaintiffs would have suffered the
same injury had their rivals been lawfully acquired by some-
__________
14 In a suit for equitable relief under section 16 of the Clayton
Act, the plaintiff must also establish an antitrust injury, although
the injury need only be threatened. See Zenith Radio, 395 U.S. 130
(section 16 "invokes traditional principles of equity and authorizes
injunctive relief upon the demonstration of 'threatened' injury");
see also Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 122
(1986).
one else, their injury did not occur " 'by reason of anything
forbidden in the antitrust laws': while [plaintiffs'] loss oc-
curred 'by reason of' the unlawful acquisitions, it did not
occur 'by reason of' that which made the acquisitions unlaw-
ful." Id. Unlike the Brunswick plaintiffs' injury, Biovail's
alleged injury is the type the antitrust laws were designed to
prevent. If Biovail's allegations are correct, the Andrx-
HMRI Agreement neither enhanced competition nor benefit-
ted consumers; if anything, it accomplished just the opposite
by preserving HMRI's monopoly. Moreover, Biovail alleged
that its exclusion from the market occurred not only by
reason of the unlawful Agreement but also by reason of that
which made the Agreement unlawful, that is, an illegal re-
straint of trade. See Brunswick, 429 U.S. at 488.
Andrx next argues that it could have lawfully excluded
Biovail from the Cardizem CD market by deciding, on its
own, to delay marketing of its generic version of Cardizem
CD and therefore Biovail's alleged injury does not constitute
an antitrust injury. It contends that because its underlying
conduct was legal, the fact that it combined to act that way
cannot give rise to an antitrust violation. See ES Dev., Inc. v.
RWM Enters., Inc., 939 F.2d 547, 553 (8th Cir. 1991) (explain-
ing that "[t]he evidence must also establish that the alleged
participants combined or conspired to 'achieve an unlawful
objective' "). Under the Hatch-Waxman Amendments,
Andrx was lawfully entitled to unilaterally delay marketing its
product until the patent infringement claims against it were
resolved. Although its unilateral decision not to market its
generic version of Cardizem CD would have prevented others,
including Biovail, from entering the market, the counterclaim
alleges that Andrx entered into an anticompetitive agreement
with HMRI in order to exclude others; HMRI's ten million
dollar quarterly payments were presumably in return for
something that Andrx would not otherwise do, that is, delay
marketing of its generic. Andrx's argument that any rational
actor would wait for resolution of the patent infringement suit
is belied by the quid of HMRI's quo. See 54 Fed. Reg.
42,873, 42,882-83 ("[I]t can be mutually beneficial for the
innovator and the generic company that is awarded 180 days
of generic exclusivity to enter into agreements that block
generic competition for extended periods. This delayed com-
petition harms consumers by slowing the introduction of
lower priced products into the market and thwarts the intent
of the Hatch-Waxman Amendments.").15
Antitrust law looks at entry into the market as one mecha-
nism to limit and deter exploitation of market power by those
who may temporarily possess it. "Existing firms know that if
they collude or exercise market power to charge supracom-
petitive prices, entry by firms currently not competing in the
market becomes likely, thereby increasing the pressure on
them to act competitively." FTC v. H.J. Heinz Co., 246 F.3d
708, 717 n.13 (D.C. Cir. 2001). The FDA acknowledges that
"[u]nder current regulatory provisions, the first generic appli-
cant to file a substantially complete ANDA with a paragraph
IV certification can delay generic competition by entering into
certain commercial arrangements with an innovator compa-
ny." 64 Fed. Reg. 42,882.16 Such an arrangement can
__________
15 The statutorily granted monopoly of patent rights is similar.
Like a drug's 180-day exclusive market period, a patent grant in
and of itself is "an exception to the general rule against monopolies
and to the right to a free and open market." Walker Process
Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965)
(quoting Precision Instrument Mfg. Co. v. Automotive Mainte-
nance Mach. Co., 324 U.S. 806, 816 (1945)). But even a patent-right
holder is not immune from antitrust liability. In United States v.
Singer Mfg. Co., 374 U.S. 174 (1963), two competitors, Singer and
Gegauf, entered into a cross-licensing agreement to settle a Patent
Office interference proceeding involving their conflicting patent
claims. Although Singer (like Andrx) had no obligation to pursue a
patent grant and could have, on its own, withdrawn from the
interference proceeding, it nevertheless acted unlawfully when it
agreed with a competitor to settle the dispute, suppress information
and exclude others from the market. See id. at 196; see also
American Cyanimid Co., 72 F.T.C. 623 (1967), aff'd sub nom.
Charles Pfizer & Co. v. FTC, 401 F.2d 574 (6th Cir. 1968) (Tetracy-
cline case).
16 The FDA has proposed a "triggering period" during which
there must exist either a favorable court decision regarding the
manipulate the statutory grant of a monopoly to bar competi-
tive entries. See Balto, supra, at 331 ("The competitive
concern is that the 180-day exclusivity provision can be used
strategically by a patent holder to prolong its market power
in ways that go beyond the intent of the patent laws and the
Hatch-Waxman Act by delaying generic entry for a substan-
tial period."). Andrx argues that the Agreement merely
preserved the status quo--in effect a stipulated preliminary
injunction--until the conclusion of the patent infringement
suit. When the court grants preliminary injunctive relief,
however, it does so only after considering the public interest
and the likelihood of success on the merits. See Washington
Metro. Area Transit Comm'n v. Holiday Tours, Inc., 559
F.2d 841, 842-43 (D.C. Cir. 1977); accord Serono Labs., Inc.
v. Shalala, 158 F.3d 1313, 1317-18 (D.C. Cir. 1998); CityFed
Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746-47
(D.C. Cir. 1995).17 Moreover, even if Andrx's agreement to
maintain the status quo was lawful, its commitment to contin-
ue to prosecute its ANDA and do nothing to jeopardize its
180-day exclusivity period went beyond preserving the status
quo. "To be ancillary, and hence exempt from the per se
rule, an agreement eliminating competition must be subor-
__________
alleged infringed patent or the first applicant must begin commer-
cial marketing. If the first applicant does neither, it forfeits its
180-day exclusivity period. See 64 Fed. Reg. 42,877. "In most
cases, the triggering period would begin to run on the day a
subsequent ANDA applicant with a paragraph IV certification
receives a tentative approval stating that but for the first appli-
cant's exclusivity, the subsequent ANDA would receive final approv-
al." Id. The triggering period would also begin to run upon
expiration of any 30-month stay in place.
17 By contrast, a private agreement purporting to maintain the
status quo may not be in the public interest or may have little
likelihood of success on review. See generally Sheila F. Anthony,
Prepared Remarks before the ABA "Antitrust and Intellectual
Property: The Crossroads" Program, Riddles and Lessons from
the Prescription Drug Wars: Antitrust Implications of Certain
Types of Agreements Involving Intellectual Property (June 1, 2000),
available at www.ftc.gov/speeches/anthony/sfip000601.htm.
dinate and collateral to a separate, legitimate transaction....
If [the restraint] is so broad that part of the restraint
suppresses competition without creating efficiency, the re-
straint is, to that extent, not ancillary." Rothery Storage &
Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (D.C. Cir.
1986). As Biovail has pleaded the facts, HMRI and Andrx
combined to achieve an unlawful objective, namely, the exten-
sion of the exclusivity period granted under the Hatch-
Waxman Amendments. Accordingly, we conclude that Bio-
vail can allege an antitrust injury, that is, one the antitrust
laws were designed to prevent and that flows from that which
makes the defendant's conduct unlawful.
C. Speculative Nature of Harm
Standing may yet be denied if damages "rest[ ] at bottom
on some abstract conception or speculative measure of harm."
McCready, 457 U.S. at 475 n.11. In Associated General
Contractors, the Court denied standing because the plaintiff's
damages claim was "highly speculative." 459 U.S. at 542;
accord Adams, 828 F.2d at 30. It noted that the plaintiff
union did not allege (1) that any of its collective bargaining
agreements were terminated as a result of the defendant's
alleged anticompetitive acts, (2) that union firms' aggregate
share of the contracting market had been diminished and (3)
that its revenue from dues and initiation fees had decreased.
On the other hand, in Bigelow, the Court held that the
plaintiff's damages were not too speculative to support the
jury's verdict of damages. 327 U.S. at 265. There, the movie
theater owner plaintiffs claimed that defendant distributors
and affiliated movie theaters conspired to prevent the plain-
tiffs from obtaining movies for their theaters until after the
defendant theaters had shown them. Id. at 254. The Court
permitted the jury to consider evidence of decline in prices,
profits and values not shown to be attributable to other
causes to calculate the quantum of damage caused by the
defendants' unlawful acts. Id. at 264.
We find Biovail's damages claim, assuming it can plead its
intent and preparedness to enter the market, more like that
in Bigelow than in Associated General Contractors. Accord-
ing to its counterclaim, Biovail was not an inexperienced
newcomer; it already manufactured generic pharmaceuticals.
It had already developed its product and, once FDA gave
tentative approval to its ANDA, was simply waiting out
Andrx's 180-day exclusivity period.18 Although damages may
be difficult to quantify, "[t]he most elementary conceptions of
justice and public policy require that the wrongdoer shall
bear the risk of the uncertainty which his own wrong has
created." Bigelow, 327 U.S. at 265; see Story Parchment Co.
v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931).
Biovail may ultimately fail to establish the amount of dam-
ages beyond a nominal amount, see Associated Gen. Contrac-
tors, 459 U.S. at 544-45, but Biovail could continue to seek (if
not moot) injunctive relief. See Blue Cross & Blue Shield of
Wis. v. Marshfield Clinic, 152 F.3d 588, 595 (7th Cir. 1998).19
__________
18 Biovail received tentative approval in October 1999. On Novem-
ber 5, 1999 Andrx petitioned for reconsideration and for a stay of
the FDA's tentative approval. The parties dispute the effect of the
petition on the timing of Biovail's final approval on December 23,
1999. Even if Biovail's damages period were relatively short,
Biovail would nevertheless be able to seek recovery. Moreover,
"[d]ifficulty of ascertainment [should not be] confused with right of
recovery." McCready, 457 U.S. at 475 n.11 (quoting Bigelow, 327
U.S. at 265).
19 Antitrust standing also requires proximity between the alleged
cause and the alleged injury. See Associated Gen. Contractors, 459
U.S. at 540; McCready, 457 U.S. at 476-77 (" '[D]espite the broad
wording of s 4 there is a point beyond which the wrongdoer should
not be held liable.' " (citation omitted)); 2 Areeda et al., supra,
p 339, at 325-26. In evaluating whether an injury is too remote,
"we look (1) to the physical and economic nexus between the alleged
violation and the harm to the plaintiff, and (2), more particularly, to
the relationship of the injury alleged with those forms of injury
about which Congress was likely to have been concerned in making
defendant's conduct unlawful and in providing a private remedy
under s 4." McCready, 457 U.S. at 478; see In re Multidistrict
Vehicle Air Pollution M.D.L., 481 F.2d 122, 129 (9th Cir. 1973). In
McCready, the Supreme Court held that health insurance subscrib-
ers had standing to sue their insurance company for colluding with
physicians and psychiatrists to deny them reimbursement for pay-
D. Existence of More Appropriate Plaintiff
In evaluating standing, courts also consider whether there
exists a more directly injured plaintiff to vindicate the public
interest. See Associated Gen. Contractors, 459 U.S. at 544.
"Inferiority" to another plaintiff does not necessitate that we
deny standing but it is a relevant factor. See 2 Areeda et al.,
supra, p 339, at 332. We are more likely to find no standing
if the plaintiff's injury both derives from and is measured by
another's more direct injury. See Adams, 828 F.2d at 30-31
(existence of superior plaintiffs--employer airline as well as
consumers of transatlantic air transportation--militated
against employees' standing). Additionally, lack of standing
is more likely as layers of superior plaintiffs increase. See 2
Areeda et al., supra, p 339, at 332.
The district court held that "[t]hose most directly affected
by [Andrx's] violation would be the consumers faced to pay
artificially high prices for Cardizem." Andrx Pharm., 83
F. Supp. 2d at 186. It reasoned that "[i]f Andrx's activity
violates the antitrust laws, it is because it is keeping others
out of the market and thereby maintaining artificially high
costs for generic drugs." Id. But Biovail's alleged injury is
not derived from or measured by the injury to consumers;
instead it is measured by the loss of profits it would have
otherwise made had it not been excluded from the market.
See Story Parchment, 282 U.S. at 562-64; Eastman Kodak
Co. v. Southern Photo Co., 273 U.S. 359, 378-79 (1927).
__________
ments made to psychologists. The Court acknowledged that while
the psychologists (not the patients) were the targets of the conspir-
acy, standing "cannot reasonably be restricted to those competitors
whom the conspirators hoped to eliminate from the market."
McCready, 457 U.S. at 479. It thus affirmed the subscribers'
standing. Applying the same reasoning, we conclude that Biovail's
alleged injury is "so integral an aspect" of the alleged anticompeti-
tive behavior, "there can be no question but that the loss was
precisely 'the type of loss that the claimed violations ... would be
likely to cause.' " Id. (quoting Brunswick, 429 U.S. at 489). When
a competitor is excluded from a market by the collusive acts of its
rivals, its loss of profits is directly caused by that anticompetitive
behavior.
Biovail does not seek damages for profits it would have
earned at higher, less competitive prices. See, e.g., Atlantic
Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 337 (1990);
Brunswick, 429 U.S. at 487-89. It seeks damages to compen-
sate for profits it would have earned by competing in the
market. Irrespective of consumer injury, an excluded com-
petitor like Biovail suffers a distinct injury if it is prevented
from selling its product. "[A] rival has clear standing to
challenge the conduct of rival(s) that is illegal precisely
because it tends to exclude competitors from the market." 2
Areeda et al., supra, p 348, at 387. Unlike the "high probabil-
ity of substantial overlap" the Adams court found between
the injury the plaintiffs there alleged (employees' lost jobs
and lower wages) and those of more direct victims (company's
loss of profits and transatlantic passengers' increased airfare),
Biovail's alleged injury is not measured by or derived from
consumer plaintiffs. Adams, 828 F.2d at 30 n.12. And to the
extent Biovail seeks injunctive relief, its standing is plainly
not derivative.
E. Duplicative Recovery and Complex Apportionment of
Damages
In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the
Supreme Court held that antitrust suits brought by indirect
purchasers increased both the risk of multiple recoveries and
the difficulty of apportionment of damages. The Court ex-
plained that in addition to adding complexity to the case,
apportionment pares the direct purchasers' recovery, thereby
diminishing their incentive to bring treble damage actions
under section 4 of the Clayton Act. Id. at 737-47; see
McCready, 457 U.S. at 475 n.11.
The district court concluded that the existence of both
consumer suits and Biovail's own suit against HMRI raised
"the potential here for duplicative recoveries and inconsistent
holdings." Id. As we have explained, however, Biovail's
injuries are neither derived from nor measured by injuries
consumers may have suffered. Any injury to consumers
would result from paying a supracompetitive price for Cardiz-
em CD. Biovail's injury, on the other hand, is the result of
foregone profits, i.e., the difference between the competitive
market price it would have charged had it been in the market
and its total costs. See Eastman Kodak, 273 U.S. at 378-79.
Moreover, Biovail has settled its suit with HMRI. See Bio-
vail Corp. Int'l v. Aktiengesellschaft, Civ. No. 98-1434 (D.N.J.
Jan. 31, 2001).20
F. Noerr-Pennington Doctrine
Having concluded that dismissal with prejudice was errone-
ously granted, we must consider Andrx's claim that the
Agreement is litigation-related conduct exempted from anti-
trust liability by the Noerr-Pennington doctrine. The Noerr-
Pennington doctrine insulates from antitrust challenge com-
petitors' decision to combine to petition the government, even
if their underlying intention is to restrain competition or gain
advantage over competitors. See United Mine Workers of
Am. v. Pennington, 381 U.S. 657, 670 (1965); see also City of
Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 379-80
(1991) ("The federal antitrust laws also do not regulate the
conduct of private individuals in seeking anticompetitive ac-
tion from the government."). The doctrine is rooted in First
Amendment law and "rests ultimately upon a recognition that
the antitrust laws, 'tailored as they are for the business world,
are not at all appropriate for application in the political
arena.' " Omni, 499 U.S. at 380 (citation omitted).21
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20 Moreover, the Federal Trade Commission has withdrawn its
complaint against HMRI and Andrx and entered into consent
agreements with both manufacturers prospectively barring them
from entering into certain anticompetitive agreements and requir-
ing that future interim settlements of patent litigation be approved
by the court with notice to the Commission. See 66 Fed. Reg.
18,636 (proposed consent decree).
21 The doctrine derives its name from two Supreme Court deci-
sions. The first, Eastern Railroad Presidents Conference v. Noerr
Motor Freight, Inc., 365 U.S. 127 (1961), held that the antitrust laws
do not apply to conduct resulting from valid government actions.
The Supreme Court held that attempts by railroads to influence
legislation designed to restrict competition from the trucking indus-
try were exempt from antitrust liability. The Court remarked, "no
In California Motor Transport Co. v. Trucking Unlimited,
the Court extended the right to petition all departments of
the government, including the "courts, the third branch of
Government." 404 U.S. 508, 510 (1972) ("The right of access
to the courts is indeed but one aspect of the right of peti-
tion."). Whether conduct falls with "[t]he scope of this pro-
tection depends, however, on the source, context, and nature
of the anticompetitive restraint at issue." Allied Tube &
Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499 (1988).
If anticompetitive harm is caused by the decision of a court,
even though granted at the request of a private party, no
private restraint of trade occurs because the intervening
government action breaks the causal chain. See 1 Phillip
Areeda & Herbert Hovenkamp, Antitrust Law p 202c, at 159-
62 (2d ed. 2000).
Andrx argues that its Agreement should receive the same
protection as threatened litigation or an offer of settlement.
See, e.g., Coastal States Mktg., Inc. v. Hunt, 694 F.2d 1358,
1367 (5th Cir. 1983) (extending doctrine to cover activities not
necessarily part of petitioning process, but reasonably inci-
dent or normally attendant to it, e.g., genuine litigation
threat); McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552, 1560
(11th Cir. 1992) (same).22 We disagree. Although certain
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violation of the [Sherman] Act can be predicated upon mere at-
tempts to influence the passage or enforcement of laws." Id. at
135. The Court came to the same conclusion in Pennington, 381
U.S. 657 (1965). There, mine operators and workers petitioned the
Executive Branch to induce the Tennessee Valley Authority to
curtail spot market purchases and to increase minimum wages.
The Court explained that "[j]oint efforts to influence public officials
do not violate the antitrust laws even though intended to eliminate
competition. Such conduct is not illegal, either standing alone or as
a part of a broader scheme itself violative of the Sherman Act." Id.
at 670.
22 See also 1 Areeda & Hovenkamp, supra, p 205e, at 238 ("Most
lawsuits are prefaced by various communications, such as demand
letters that expressly or impliedly threaten suit unless the address-
ee alters its conduct or provides other relief. Such prelitigation
communications provide useful notice and facilitate the resolution of
litigation conduct is protected under the doctrine, it does not
extend to the HMRI-Andrx Agreement. See California Mo-
tor Transp., 404 U.S. at 512-13 (examples of unprotected
litigation conduct include perjury by witnesses and fraudu-
lently obtained patent); cf. Omni, 499 U.S. at 380 ("sham"
petitioning such as filing frivolous objections to license appli-
cation of a competitor to impose expense and delay not
protected). In In re Cardizem CD Antitrust Litigation, 105
F. Supp. 2d 618, the district court found the alleged anticom-
petitive harm stemming from the Agreement separate from
any anticompetitive effects that may have resulted from
resolution of the HMRI patent infringement suit. The harm,
the court declared, was not the result of a court decision.
"Rather, it is the result of purely private conduct and thus
constitutes a private restraint of trade subject to liability
under the antitrust laws." Id. at 635; see also In re Brand
Name Prescription Drugs Antitrust Litig., 186 F.3d 781, 789
(7th Cir. 1999) ("[T]he doctrine does not authorize anticom-
petitive action in advance of government's adopting the in-
dustry's anticompetitive proposal. The doctrine applies when
such action is the consequence of legislation or other govern-
mental action, not when it is the means for obtaining such
action (or in this case inaction)." (emphasis original)). The
Agreement is not unlike a final, private settlement agreement
resolving the patent infringement litigation by substituting a
market allocation agreement. Such a settlement agreement
would not enjoy Noerr-Pennington immunity and neither
does the Agreement here.
IV. Conclusion
In sum, although the district court correctly dismissed
Biovail's antitrust counterclaim for failure to sufficiently al-
lege injury caused by the HMRI-Andrx Agreement, it should
have granted the dismissal without prejudice to allow Biovail
the opportunity to replead. Accordingly, appeal No. 00-5050
__________
controversies. It would be foolish to adopt antitrust rules encour-
aging suit before communication by penalizing the communication
but not the suit.").
is remanded to the district court for proceedings not inconsis-
tent with this opinion. In light of our holding, we dismiss as
moot appeal No. 00-5396.
So ordered.