Routine Patent Litigation Giving Rise to Antitrust Liability

On Aug. 6, in Tyco Healthcare Group LP v. Mut. Pharm. Co., Case No. 2013-1386, the Federal Circuit looked at whether antitrust liability can arise from routine patent litigation and suggested that a patent owner can face antitrust liability resulting from bringing patent infringement claims and administrative petitions.

In Tyco, the patent owner of a drug, Tyco Healthcare Group, filed a claim for patent infringement against a generic drug manufacturer, Mutual Pharmaceutical Co., after Mutual filed an application with the Food and Drug Administration (FDA) to manufacture and sell a generic version of Tyco’s drug.  In response, Mutual filed antitrust counterclaims against Tyco.

In 2009, the district court entered a judgment of non-infringement and the following day, Tyco filed a Citizen Petition with the FDA urging the FDA to change the criteria for evaluating the bioequivalence of the proposed generic product to ensure therapeutic equivalence of the generic drug to the brand name drug.  Ultimately, the FDA approved Mutual’s application to manufacture and sell the generic drug and denied Tyco’s Citizen Petition.

Mutual moved for summary judgment on its antitrust counterclaims against Tyco, arguing Tyco was not immune from liability.  The district court held Tyco was not liable for antitrust violations as alleged by Mutual, however, on appeal, the Federal Circuit vacated the district court’s ruling in part and remanded it for further consideration as to whether Tyco’s patent infringement claim and Citizen Petition were shams.

Ordinarily, a party is exempt from antitrust liability for bringing a lawsuit against a competitor under the Noerr-Pennington doctrine.  This doctrine is not limited to just lawsuits, but can also apply to administrative petitions.  There is an exception to immunity for sham litigation.  In determining whether litigation is a “sham,” a court will look at objective and subjective elements: (1) the litigation must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits; and (2) the litigation must be motivated by a desire to interfere directly with the business relationships of a competitor.

In its decision, the Federal Circuit concluded that Tyco may not be immune from antitrust liability because there are issues of factual dispute as to whether Tyco’s patent infringement claim was objectively baseless and whether the Citizen Petition was objectively baseless and intended to interfere with the FDA approving Mutual’s application to manufacture and sell the drug.

So what does this mean for patent enforcement?  There is concern that the Federal Circuit has inserted antitrust liability into patent litigation, which could result in antitrust penalties for routine patent enforcement.  Further, the case could have a possible chilling effect on patentees’ communications with administrative agencies, such as the filing of a Citizen Petition with the FDA.  However, because the Noerr-Pennington doctrine continues to live, patentees are still protected unless the party alleging antitrust violations can present facts to show the litigation activity was a sham.