In NCLA Amicus Win, and FTC Amicus Loss, Second Circuit Upholds Decision Dismissing Antitrust Suit
May 13 2024 - 6:14PM
Today the U.S. Court of Appeals for the Second Circuit unanimously
upheld a district court decision dismissing the In re Bystolic
antitrust lawsuit over reverse payments. The New Civil Liberties
Alliance encouraged this outcome in its amicus curiae brief
supporting the Defendants, but the Federal Trade Commission filed
an amicus brief for the Plaintiffs even though FTC itself had
declined to file suit. NCLA argued that an antitrust plaintiff
seeking to prove that a patent owner has made a prohibited “large
and unjustified” payment to potential competitors must show it was
a large net payment (the cash paid minus the value of services
provided), not merely a large gross payment. The Second Circuit
affirmed the district court’s dismissal, deciding Plaintiffs failed
to state a claim on which relief could be granted. NCLA celebrates
this correct antitrust liability ruling alongside amicus co-signer,
the International Center for Law and Economics (ICLE).
Plaintiffs’ lawsuit alleged that the Bystolic
patentholder, Forest Labs (now a part of AbbVie), settled its
patent-infringement litigation against several generic competitors
via a conspiracy in restraint of trade—in violation of antitrust
laws. Judge Lewis Liman of the U.S. District Court for the Southern
District of New York dismissed the suit in February 2023, citing
NCLA and ICLE’s first amicus brief in the case. As NCLA advised,
the Second Circuit affirmed the district court’s dismissal, finding
appellants failed to show Forest’s settlement payments to
generic-drug manufacturers were “unjustified” under the Supreme
Court’s FTC v. Actavis, Inc. precedent.
NCLA and ICLE pointed out that Congress has long
required courts to strive to maintain a balance between the
sometimes-competing claims of patent law and antitrust law, which
should not be used to shortchange the rights of patent holders. The
Second Circuit was convinced, concurring that before Plaintiffs’
lawyers are permitted to get into court to challenge the legality
of a patent litigation settlement, they ought to bear the burden of
demonstrating a “large” and “unjustified” net payment made for the
purpose of restraining trade.
As part of the settlement with seven
generic-drug manufacturers, Forest agreed to permit the generic
companies to begin competition several months before the expiration
of Forest’s patent, and the generics agreed not to enter the market
before that date. The settling parties also entered into “side
deals,” whereby Forest paid the generic companies in return for
providing substantial goods and services, such as ingredients for
the drug’s manufacture. Plaintiffs alleged that Forest made these
payments for the sole purpose of inducing the generics not to
compete (thereby violating antitrust law) and that Forest ought to
bear the burden of proving it paid no more than fair value for the
goods and services it received. NCLA commends the Second Circuit
for rejecting this specious argument.
NCLA released the following statements:
“Today’s decision was a stunning rebuke of the
Federal Trade Commission, which sought to overturn the district
court’s dismissal. The FTC has for years worked to undermine
patent rights by using its authority under the antitrust laws to
prevent drug companies from agreeing to reasonable settlements of
their patent-infringement disputes.”— Richard Samp, NCLA Board
of Advisors Member
“The Second Circuit’s unanimous decision is not only an
important vindication of the property rights of patent holders, but
a much-needed corrective to the FTC. America is a leader in
intellectual innovation, and the rewards of such innovation should
not be held hostage to an agency’s misuse of its enforcement power
under the antitrust laws.”
— Peggy Little, Senior Litigation Counsel,
NCLA
For more information visit the amicus
page here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights
group founded by prominent legal scholar Philip Hamburger to
protect constitutional freedoms from violations by the
Administrative State. NCLA’s public-interest litigation and other
pro bono advocacy strive to tame the unlawful power of state and
federal agencies and to foster a new civil liberties movement that
will help restore Americans’ fundamental rights.
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Ruslan Moldovanov
New Civil Liberties Alliance
202-869-5237
ruslan.moldovanov@ncla.legal