Federal Trade Commission et al v. Watson Pharmaceuticals, Inc. et al
Filing
698
OPINION AND ORDER DENYING Solvay's (620) Motion for Summary Judgment on the FTCs Claims; DENYING Solvays (1550) Motion for Summary Judgment for Lack of Antitrust Injury Against the Private Plaintiffs; DENYING Solvay's (1551)/(621) Motion fo r Summary Judgment as to the Par/Paddock Settlement; GRANTING Solvay's (1552) Motion for Summary Judgment as to Retailer's Damages Claims on AndroGel 1.62% Purchases; DENYING Actavis, Inc. and Solvay's (1553)/(622) Motion to Exclu de Plaintiffs' Proposed Patent Law Expert Jack C. Goldstein, Esq.; DENYING Actavis and Actavis Holdcos (1556)/(625)Motion for Summary Judgment; DENYING Defendants Par and Paddocks (1559) Motion for Summary Judgment; GRANTING IN PART AND DENYING IN PART Solvay, Par, and Paddocks (1562)/(630) Motion to Exclude in Part Plaintiffs' Expert James R. Bruno. Signed by Judge Thomas W. Thrash, Jr. on 6/14/18. Associated Cases: 1:09-md-02084-TWT, 1:09-cv-00955-TWT(jkl)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
IN RE: ANDROGEL ANTITRUST
LITIGATION (NO. II)
MDL DOCKET NO. 2084
ALL CASES
1:09-MD-2084-TWT
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
CIVIL ACTION FILE
NO. 1:09-CV-955-TWT
ACTAVIS, INC., et al.,
Defendants.
OPINION AND ORDER
This is an antitrust action brought by the Federal Trade Commission and
private antitrust actions transferred to this Court by the Judicial Panel on
Multidistrict Litigation. They are before the Court on the Defendant Solvay’s
Motion for Summary Judgment on the FTC’s Claims [FTC Doc. 620], Solvay’s
Motion for Summary Judgment as to the Par/Paddock Settlement [FTC Doc.
621, MDL Doc. 1551], the Defendants Actavis and Actavis Holdco’s Motion for
Summary Judgment [FTC Doc. 625, MDL Doc. 1556], Solvay’s Motion for
Summary Judgment for Lack of Antitrust Injury Against the Private Plaintiffs
[MDL Doc. 1550], Solvay’s Motion for Summary Judgment as to Retailer’s
Damages Claims on AndroGel 1.62% Purchases [MDL Doc. 1552], the
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Defendants Par and Paddock’s Motion for Summary Judgment [MDL Doc.
1559], the Defendants Actavis, Inc. and Solvay’s Motion to Exclude Plaintiffs’
Proposed Patent Law Expert Jack C. Goldstein, Esq. [FTC Doc. 622, MDL Doc.
1553], and the Defendants Solvay, Par, and Paddock’s Motion to Exclude in Part
Plaintiffs’ Expert James R. Bruno [FTC Doc. 630, MDL Doc. 1562].
For the reasons set forth below, Solvay’s Motion for Summary Judgment
on the FTC’s Claims [FTC Doc. 620] is DENIED, Solvay’s Motion for Summary
Judgment as to the Par/Paddock Settlement [FTC Doc. 621, MDL Doc. 1551] is
DENIED, Actavis and Actavis Holdco’s Motion for Summary Judgment [FTC
Doc. 625, MDL Doc. 1556] is DENIED, Solvay’s Motion for Summary Judgment
for Lack of Antitrust Injury Against the Private Plaintiffs [MDL Doc. 1550] is
DENIED, Solvay’s Motion for Summary Judgment as to Retailer’s Damages
Claims on AndroGel 1.62% Purchases [MDL Doc. 1552] is GRANTED, the
Defendants Par and Paddock’s Motion for Summary Judgment [MDL Doc. 1559]
is DENIED, Actavis, Inc. and Solvay’s Motion to Exclude Plaintiffs’ Proposed
Patent Law Expert Jack C. Goldstein, Esq. [FTC Doc. 622, MDL Doc. 1553] is
DENIED, and Solvay, Par, and Paddock’s Motion to Exclude in Part Plaintiffs’
Expert James R. Bruno [FTC Doc. 630, MDL Doc. 1562] is GRANTED in part
and DENIED in part.
I. Background
In the early nineties, Besins Healthcare, S.A. developed the pharmaceutical formulation for AndroGel, a prescription topical gel used to treat low
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testosterone in men. In August 1995, Besins granted Solvay Pharmaceuticals,
Inc., a license to sell AndroGel in the United States.1 Besins also agreed to
manufacture AndroGel and supply it to Solvay once Solvay received FDA
approval to sell the drug.
At this point, it is important to understand how new drugs enter the
market in the United States. In order to sell a new drug in the United States,
a pharmaceutical firm must file a New Drug Application (“NDA”) with the Food
and Drug Administration.2 The NDA must contain a complete report about the
drug, including safety and efficacy studies, the composition of the drug, a
description of how the drug is produced, and proposed labeling.3 The process to
approve new proprietary drugs – known as “brand name” drugs – is both time
consuming and costly.
Although the possibility for large profits after FDA approval is often an
incentive for pharmaceutical companies to pursue the NDA process for brand
name drugs, the cost associated with it may also serve as a significant barrier
to entry by generic formulations of the same drug. These high barriers limit
competition, which in turn may hurt consumers. This concern led Congress to
1
Technically speaking, Unimed entered into the Agreements with
Besins. Solvay, now known formally as Abbvie Products LLC, later acquired
Unimed. However, in order to reduce confusion, the Court will simply use the
name Solvay throughout this Opinion.
2
21 U.S.C. § 355(a).
3
21 U.S.C. § 355(b).
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enact the Hatch-Waxman Act in 1984.4 The Hatch-Waxman Act enables
companies that want to market and sell a generic version of a brand-name drug
to avoid filing an NDA. As long as the generic and the brand-name drug are
effectively the same thing, generic manufacturers can file a substantially
shorter Abbreviated New Drug Application (“ANDA”). This reduces costs for
generics manufacturers, which may allow them to charge much lower prices
than brand name drugs, therefore benefitting consumers.
In order to prevent generic manufacturers from completely cutting into
the profitability of brand name drugs, thereby reducing the incentive for brand
name manufacturers to go through the cost and risk of the NDA process, federal
law provides two ways for brand name pharmaceutical manufacturers to protect
their investment. First, the FDA can grant brand name manufacturers periods
of “exclusivity,” which means that the FDA will not approve another application
to sell the same drug until the exclusivity period (usually three or five years)
ends. Second, brand name manufacturers can patent their new drug. Just like
any other patent, drug patents grant brand name manufacturers a legal
monopoly for a limited period of time. If there are any patents that cover the
brand name drug, a generic manufacturer’s ANDA must contain an additional
certification. The ANDA must certify that (1) the patent has not been listed with
the FDA, (2) the patent has expired, (3) the patent will expire on a certain date,
4
Pub.L. No. 98–417, 98 Stat. 1585 (1984).
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or (4) the patent is invalid or will not be infringed by the generic drug.5 The last
certification is known as a Paragraph IV certification. For any ANDA with a
Paragraph IV certification, the applicant must also notify the patent holder of
the ANDA.6 If the patent holder decides to file an infringement suit after
receiving notice of the Paragraph IV certification, the FDA is then prohibited
from approving the generic for market entry for up to thirty months while the
litigation proceeds.
In April 1999, Solvay filed an NDA for AndroGel. It was approved by the
FDA in February 2000, and Solvay received three years of exclusivity. Solvay
was also issued a patent on AndroGel, U.S. Patent No. 6,503,894 (‘894 patent).
Although AndroGel was not the only available method of testosterone replacement therapy, other methods were not as effective or as popular as AndroGel.
The protection afforded Solvay by the exclusivity period and Solvay’s patent
helped AndroGel to quickly become the most popular form of testosterone
replacement therapy. From 2000 to 2007, sales of AndroGel in the United
States were over $1.8 billion.
In the meantime, other pharmaceutical companies were developing
generic versions of AndroGel. Once Solvay’s new drug product exclusivity
expired in February 2003, the FDA was authorized to approve generic versions
5
See 21 U.S.C. § 355(j)(2)(A)(vii).
6
21 U.S.C. § 355(j)(2)(B).
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of AndroGel. In May 2003, two companies each submitted ANDAs with
Paragraph IV certifications for generic AndroGel. Actavis, Inc.7 submitted the
first ANDA, and Paddock Laboratories, Inc. submitted the second. Both
companies also sent notice of their ANDAs to Solvay and Besins. In July 2003,
Paddock reached an agreement with Par Pharmaceuticals. Par agreed to share
any litigation costs with Paddock, and to sell Paddock’s generic AndroGel. In
return, Paddock agreed to share profits with Par.
Solvay responded to the ANDAs by asserting its rights under the ‘894
patent. In August 2003, Solvay’s subsidiary, Unimed Pharmaceuticals, Inc., filed
patent infringement actions against Watson and Paddock (the “Generics”) in
this Court.8 Solvay alleged infringement based on the filing of the ANDAs.9
Because Solvay filed infringement actions against the Generics within the
forty-five day window of receiving notice, the FDA stayed approval of their
ANDAs for thirty months.
7
Originally known as Watson Pharmaceuticals, the company has
since split into two separate entities now known as Actavis, Inc. and Actavis
Holdco US, Inc. For the purposes of this Opinion, the Court will refer to these
as just Actavis. And while the Court continues to call Solvay by its original
name, it will use Actavis’ new name to minimize confusion in light of the
Supreme Court’s opinion in FTC v. Actavis, Inc., 570 U.S. 136 (2013).
See Unimed Pharm., Inc. v. Watson Pharm., Inc., No. 1:03-CV2501-TWT, 2003 WL 23824320 (N.D. Ga. Aug. 21, 2003); Unimed Pharm., Inc.
v. Paddock Labs., Inc., No. 1:03-CV-2503-TWT, 2003 WL 23824347 (N.D. Ga.
8
Aug. 21, 2003).
See 35 U.S.C. § 271(e)(2)(A)(submitting an ANDA is an act of
infringement if the branded drug is covered by a patent).
9
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For the next few years, Solvay and the Generics litigated the infringement actions. Both followed a similar schedule. From late 2003 to the middle of
2005, the parties engaged in discovery, scheduling, and other initial litigation
matters. By August 2005, the parties had filed motions for claim construction.
By December 2005, the Generics had filed motions for summary judgment on
the validity of the ‘894 patent as well as claims construction briefs. All of the
motions were fully briefed and ready for decision in early 2006.
While the motions were pending, Actavis and Paddock moved toward
entering the market with generic AndroGel. In January 2006, the thirty month
stay ended, and the FDA approved Actavis’ ANDA. The FDA, however,
continued to stay approval of Paddock’s ANDA. The first firm to file an ANDA
with a Paragraph IV certification receives generic exclusivity upon FDA
approval, which is similar to brand-name exclusivity, but shorter. Generic
exclusivity means that the FDA will not approve a subsequent ANDA for the
same drug until 180 days after the earlier of (1) the date the first filer begins
commercial marketing of its generic drug, or (2) the date a district court enters
judgment that the patent is invalid or not infringed, whichever date is earlier.10
Because Actavis was the first to file an ANDA for generic AndroGel, it received
generic exclusivity over Paddock. In February 2006, Actavis prepared a report
predicting that it would sell generic AndroGel by January 2007 and that the
10
21 U.S.C. § 355(j)(5)(B)(iv).
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price would be 75 percent less than brand name AndroGel. In the same month,
Par prepared a report predicting that Actavis would sell generic AndroGel as
early as March 2006 and that Par and Paddock would follow in September 2006.
But before the Court decided the pending motions in the infringement
actions, and before anyone entered the market with generic AndroGel, Solvay
and the Generics settled the cases. Under the September 13, 2006 settlement
between Solvay and Actavis, Solvay agreed to voluntarily dismiss the infringement action, and Actavis agreed not to market generic AndroGel until the
earlier of August 31, 2015 or the date another company marketed generic
AndroGel.11 And under the September 13, 2006 settlement between Solvay and
Par/Paddock, Solvay agreed to a consent judgment dismissing the infringement
action, and Par/Paddock agreed not to market generic AndroGel until the
earliest of August 31, 2015 (but only if Actavis did not assert its 180 day generic
exclusivity period), the date another company launched generic AndroGel, or
February 28, 2016.12
On the same day as the settlements, Solvay also entered into business
promotion agreements with Actavis, Par, and Paddock. Under the agreement
between Solvay and Actavis, Solvay agreed to share profits of AndroGel with
11
FTC’s Statement of Additional Material Facts (“SAMF”) ¶ 174
[FTC Doc. 689].
12
Id. at ¶ 186.
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Actavis, and Actavis agreed to promote AndroGel to urologists.13 Under the
agreement between Solvay and Par, Solvay agreed to share profits of AndroGel
with Par, and Par agreed to promote AndroGel to primary care physicians.14 And
under the agreement between Solvay and Paddock, Solvay agreed to share
profits of AndroGel with Paddock, and Paddock agreed to serve as a backup
supplier of AndroGel.15
Together, these types of settlements are called “reverse payment”
settlements, and they have recently become popular in pharmaceutical
litigation. Reverse payment settlements are so called because they are the
reverse of traditional patent infringement settlements. In a traditional
settlement, the party with the claim – in this case, the brand name manufacturer – receives a payment from the defendant – in this case the generic – either
equal to or less than the value of its claim.16 But in a reverse settlement, “a
party with no claim for damages (something that is usually true of a paragraph
IV litigation defendant) walks away with money simply so it will stay away from
the patentee’s market.”17
13
Id. at ¶¶ 180-183.
14
Id. at ¶ 185.
15
Id.
16
Actavis, 570 U.S. at 152.
17
Id.
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The reverse payment settlements prompted an investigation by the
Federal Trade Commission for violations of antitrust laws. That investigation
was completed in 2008. In 2009, the FTC and a number of private parties filed
these antitrust actions against Solvay, Actavis, Par, and Paddock. All of the
actions were filed in other federal district courts and then transferred to this
Court either by change of venue or by order of the United States Judicial Panel
on Multidistrict Litigation. On February 22, 2010, applying settled Eleventh
Circuit precedent, this Court dismissed the FTC action for failure to state a
claim.18 On appeal, the Eleventh Circuit affirmed.19 However, the Supreme
Court granted certiorari, and eventually reversed and remanded the cases in
2013.20
So, after five years, everything started all over.21 The Plaintiffs are
divided into three groups: the FTC, the Direct Purchaser Class Plaintiffs, and
In re Androgel Antitrust Litig. (No. II), 687 F. Supp. 2d 1371 (N.D.
Ga. 2010). The Court also dismissed the Private Plaintiffs’ per se claims, and
later granted the Defendants’ motion for summary judgment on the “sham
litigation” claims of the Private Plaintiffs. In re Androgel Antitrust Litig. (No.
II), 888 F. Supp. 2d 1336 (N.D. Ga. 2012).
18
FTC v. Watson Pharm., Inc., 677 F.3d 1298 (11th Cir. 2012), rev’d
and remanded sub nom. FTC v. Actavis, Inc., 570 U.S. 136 (2013).
19
20
See Actavis, 570 U.S. at 160.
21
Now, after five more years, it remains to be seen whether this case
or I will first confirm Queen Gertrude’s observation: “Thou know’st ‘tis common;
all that lives must die, passing through nature to eternity.” WILLIAM SHAKESPEARE, HAMLET, act 1, sc. 2.
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the Retailers.22 The Direct Purchaser Class Plaintiffs and the Retailers
constitute the Private Plaintiffs. All of the Plaintiffs allege that the Defendants
violated federal antitrust law.23 The Defendants now move for summary
judgment on various grounds.
II. Legal Standards
A. Daubert Motions
Federal Rule of Evidence 702 governs the admission of expert opinion
testimony. Pursuant to that rule, before admitting expert testimony a court
must consider: (1) whether the expert is competent to testify regarding the
matters he intends to address; (2) whether the methodology used to reach his
conclusions is sufficiently reliable; and (3) whether the testimony is relevant, in
that it assists the jury to understand the evidence or determine a fact in issue.24
In ruling on the admissibility of expert testimony, “[t]he focus must be ‘solely’
on the expert’s ‘principles and methodology, not on the conclusions that they
22
The Direct Purchaser Plaintiffs include Rochester Drug CoOperative, Inc., Louisiana Wholesale Drug Co., Inc., Meijer Inc., and Meijer
Distribution, Inc. The Retailers include Rite Aid Corp., Rite Aid Hdqtrs. Corp.,
JCG (PJC) USA, LLC, Maxi Drug, Inc., Eckerd Corp., CVS Pharmacy, Inc.,
Caremark L.L.C., Walgreens Co., Safeway, Inc., American Sales Co., Inc., HEB
Grocery Co., LP, Supervalu, Inc., and Giant Eagle, Inc.
See Sherman Antitrust Act §§ 1–2, 15 U.S.C. §§ 1–2; Federal Trade
Commission Act § 5(a), 15 U.S.C. § 45(a).
23
Fed. R. Evid. 702; Daubert v. Merrell Dow Pharm., Inc., 509 U.S.
579, 589 (1993).
24
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generate.’”25 If the expert predicates his testimony on an assumption that is
belied by the evidence, the expert’s testimony is properly excluded.26 The party
offering the expert's testimony has the burden to prove it is admissible by a
preponderance of the evidence.27
B. Summary Judgment
Summary judgment is appropriate only when the pleadings, depositions,
and affidavits submitted by the parties show no genuine issue of material fact
exists and that the movant is entitled to judgment as a matter of law.28 The
court should view the evidence and any inferences that may be drawn in the
light most favorable to the nonmovant.29 The party seeking summary judgment
must first identify grounds to show the absence of a genuine issue of material
fact.30 The burden then shifts to the nonmovant, who must go beyond the
pleadings and present affirmative evidence to show that a genuine issue of
KW Plastics v. United States Can Co., 131 F. Supp. 2d 1289, 1292
(M.D. Ala. 2001) (quoting Daubert, 509 U.S. at 594-95).
25
26
Ferguson v. Bombardier Services Corp., 244 Fed. Appx. 944, 949
(11th Cir. 2007).
27
Allison v. McGhan Medical Corp., 184 F.3d 1300, 1306 (11th Cir.
28
FED. R. CIV. P. 56(a).
29
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).
30
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
1999).
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material fact does exist.31 “A mere ‘scintilla’ of evidence supporting the opposing
party’s position will not suffice; there must be a sufficient showing that the jury
could reasonably find for that party.”32
III. Discussion
The FTC and the Private Plaintiffs allege that the Defendants violated
federal antitrust law by entering into the reverse settlement agreements.
Section 1 of the Sherman Act states that “[e]very contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is declared to be illegal.”33
Section 2 of the Sherman Act likewise prohibits agreements to monopolize
trade.34 And Section 5 of the Federal Trade Commission Act states that “unfair
methods of competition” are illegal,35 a prohibition which has long been held to
encompass the violations of the Sherman Act.36 Thus, the different claims can
be analyzed together.
31
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
32
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).
33
15 U.S.C. § 1.
34
Id. at § 2.
35
Id. at § 45(a).
36
See, e.g., FTC v. Cement Institute, 333 U.S. 683, 691-93 (1948) (“In
other cases this Court has pointed out many reasons which support interpretation of the language ‘unfair methods of competition’ in [Section] 5 of the Federal
Trade Commission Act as including violations of the Sherman Act. . . . We
adhere to our former rulings.”).
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A. Daubert Motions
1. Jack Goldstein
Solvay and Actavis move to exclude the testimony of Jack Goldstein. The
Private Plaintiffs will call Goldstein to testify at trial as to how a reasonable and
competent patent attorney would have advised litigants in Solvay’s or the
Generics’ positions at the time they settled the underlying patent litigation on
(1) the likelihood of success in the litigation; (2) the likely timing of the
litigation’s resolution if the parties had not settled; and (3) each of the parties’
likely litigation costs had they not settled.37 The Defendants argue that
Goldstein is not qualified to give these opinions, and that his methodology is
unreliable. Both arguments are without merit.
The Defendants challenge Goldstein’s qualifications, arguing that he does
not have the requisite firsthand experience to properly assess the likely
outcome, cost, or timing of the litigation. But the Defendants mistakenly argue
that in order to testify about these issues, Goldstein needs to have recent,
repeated, and specialized experience litigating patent cases arguing the specific
legal and factual issues that were at issue in the underlying patent litigation.
Goldstein does not need such specialized experience at all. “It is not necessary
that the witness be recognized as a leading authority in the field in question .
. . . Gaps in an expert witness’s qualifications or knowledge generally go to the
37
Goldstein Rep. ¶ 2 [Doc. 1564-33].
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weight of the witness's testimony—not its admissibility.”38 Further, Goldstein
is testifying as to what a reasonable and competent patent attorney would have
thought at the time of the settlements. The question, therefore, is whether
Goldstein has experience as a reasonable and competent patent attorney.39
There can be no doubt that the answer to that question is yes. Goldstein
has had a long and distinguished career in the field of patent law. He has
studied, interacted with, and litigated patent issues for fifty years.40 After
earning his law and engineering degrees, Goldstein began his legal career as a
clerk for a judge on the U.S. Court of Customs and Patent Appeals, one of the
predecessor courts to the Federal Circuit.41 He then went on to work for a law
firm specializing in intellectual property for almost thirty years, during which
time he also taught patent and copyright law as an adjunct professor at South
Texas College of Law in Houston.42 After leaving the firm in 1997, Goldstein
became president of an intellectual property holding company, during which
time he enforced the company’s IP rights through patent litigation multiple
Leathers v. Pfizer, Inc., 233 F.R.D. 687, 692 (N.D. Ga. 2006)
(quoting 29 Charles Alan Wright & Victor James Gold, Federal Practice and
Procedure; Evidence § 6265 (West 1997)).
38
39
“Competent representation requires the legal knowledge, skill,
thoroughness and preparation reasonably necessary for the representation.”
MODEL RULES OF PROF’L CONDUCT r. 1.1 (AM. BAR ASS’N 2018).
40
Goldstein Rep. ¶ 4.
41
Id. at ¶¶ 5, 7.
42
Id. at ¶ 8.
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times.43 Goldstein now serves as a mediator, arbitrator, counsel, and expert in
intellectual property matters.44 In addition, he serves or has served in numerous
national intellectual property law professional groups, including as President
of the American Intellectual Property Law Association.45 The experience the
Court lists here is only a fraction of that listed on Goldstein’s curriculum vitae.
Goldstein clearly “possess[es] skill or knowledge greater than the average
layman,”46 and is qualified to testify as to what a reasonable and competent
attorney would have considered the likely outcome, length, and cost of pursuing
the underlying litigation to a complete and final end.
The Defendants also seek to exclude Goldstein’s testimony on the grounds
that his methodology is unreliable. First, the Defendants argue that Goldstein
had no methodology at all for his opinion that a reasonable and competent
patent attorney would have advised Solvay that it had a 20% chance of winning
the litigation. This is incorrect. Goldstein began his analysis by using two
studies available at the time of the settlement to assess what the average
outcomes were in patent cases involving a generic defendant.47 Using these
43
Id. at ¶ 12.
44
Id.
45
Id.
Waldorf v. Shuta, 142 F.3d 601, 625 (3d Cir. 1998) (quoting Aloe
Coal Co. v. Clark Equip. Co., 816 F.2d 110, 114 (3d Cir.1987)).
46
47
Goldstein Rep. ¶¶ 40-46.
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studies, it is Goldstein’s opinion that on average a brand manufacturer plaintiff
would have about a 25-30% chance of winning a Hatch-Waxman patent
infringement case.48 Goldstein then examined the merits of the underlying
patent litigation in this case to determine whether Solvay’s position was
stronger or weaker than the average Hatch-Waxman plaintiff.49 Goldstein found
that it was weaker than the average, although not by a lot. Goldstein estimated
that a reasonable and competent patent attorney would have discounted
Solvay’s chances of success by about 10%, meaning that it would have had
between a 15-20% chance of succeeding in the underlying litigation.50 Goldstein
clearly has a methodology, even if the Defendants believe it to be a weak one.
Similarly, Goldstein’s opinions on the merits, cost, and timing of the
litigation are reliable enough to be put to a jury. Although the Defendants argue
that his views on the law are unreliable because they are incorrect, that is
something on which reasonable and competent patent attorneys can disagree.
Indeed, the only people who can say with true 100% certainty what the law is
are the Justices of the United States Supreme Court. Further, while using
survey data and the Court’s statements to estimate cost and timing are not
foolproof, they are reliable enough for reasonable jurors to consider. The
48
Id. at ¶ 46.
49
Id. at ¶¶ 46, 53.
50
Id. at ¶¶ 179-181.
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Defendants’ arguments basically boil down to the fact that they disagree with
Goldstein’s opinions, not their reliability. Such arguments are better addressed
through the traditional means of “vigorous cross-examination, presentation of
contrary evidence, and careful instruction on the burden of proof.”51 For these
reasons, the Defendants’ motion to exclude Goldstein’s testimony is denied.
2. James Bruno
The Defendants also seek to exclude testimony of the Plaintiffs’ expert
James Bruno. In particular, the Defendants seek to exclude Bruno’s opinions
and testimony on the valuation of the Backup Manufacturing Agreement
(“BMA”) between Solvay and Par/Paddock, including whether Solvay’s
compensation to Par/Paddock was fair value for services or constituted a large
and unjustified payment. The Court agrees, and the Plaintiffs concede, that
Bruno does not offer a quantitative valuation of the BMA.52 As such, Bruno does
not and cannot offer testimony as to a specific monetary value for the BMA. To
the extent that other experts assign one to the BMA based on Bruno’s testimony,
such testimony would be inappropriate and should be excluded.
However, the Defendants are incorrect in saying that all of Bruno’s
testimony regarding the BMA should be excluded. Although Bruno does not offer
a specific monetary value to the BMA, such testimony is not necessary to show
51
Daubert, 509 U.S. at 596.
52
Pls.’ Resp. to Defs.’ Mot. to Exclude, at 13 [MDL Doc. 1616].
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that a payment is “large and unjustified” under Actavis. As discussed later in
this Opinion, the key inquiry in determining whether the reverse payment
settlements violated the antitrust laws is whether they were entered into for the
purpose of avoiding the risk of competition. Bruno’s other testimony regarding
the BMA, including his opinions that the BMA was out of step with industry
practice and the Generics’ regular business practices, is certainly relevant to
answering that question.53 Thus, while Bruno’s testimony cannot support a
specific, monetary valuation for the purpose of mathematically comparing the
value of services, his testimony is relevant to answering what the “value” of the
settlement was to the Defendants, whether its value was actually in the services
provided, or in avoiding the risk of competition. On those grounds, Bruno’s
testimony would be helpful to the jury, and is allowed.
B. Antitrust Conspiracy
Turning now to the summary judgment motions, Actavis first moves for
summary judgment on the theory that the Plaintiffs have failed to demonstrate
that Actavis conspired to restrain trade.54 Under the Sherman Act, Section 1
claims and Section 2 conspiracy to monopolize claims “require the same
threshold showing – the existence of an agreement to restrain trade.”55 A written
53
FTC’s SAMF at ¶¶ 278-81, 290-93 [FTC Doc. 689].
54
See Actavis’ Mot. for Summ. J. [FTC Doc. 625, MDL Doc. 1556].
55
Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d 1555, 1576 (11th
Cir. 1991).
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contract satisfies this requirement “only if it embodies an agreement to
unlawfully restrain trade.”56
Actavis argues that the settlement agreements do not meet this standard
because “they evince no agreement or understanding by [Actavis] to ‘delay its
entry’ in exchange for a share of Solvay’s monopoly profits . . .”57 Actavis cites a
number of cases that find that the mere existence of a contract between two
parties is not sufficient to establish a conspiracy between them.58 In those cases,
however, the contracts were merely indirect evidence of a conspiracy from which
the factfinder could infer an agreement to violate the antitrust laws. Finding a
conspiracy on such indirect evidence raises the concern that “contractual
partners would potentially be on the hook for any future conduct the other party
engages in under color of the contract.”59
But that concern is not present in cases with direct evidence, such as this
one. “Direct evidence of a conspiracy ‘obviates the need’ for evidence that
56
Procaps S.A. v. Patheon, Inc., 845 F.3d 1072, 1081 (11th Cir. 2016).
57
Actavis’ Mot. for Summ. J. at 13 [MDL Doc. 1556, FTC Doc. 625].
58
See Procaps, 845 F.3d at 1081 (finding that an agreement which
was legal at its conception could not on its own conclusively demonstrate a
conspiracy related to later unlawful conduct); Merced Irrigation District v.
Barclays Bank PLC, 165 F. Supp. 3d 122, 139-40 (S.D.N.Y. 2016) (finding that
a series of contracts in furtherance of one party’s monopolization efforts could
support a Section 2 claim, but not a Section 1 claim because there was no
evidence of an agreement on the ultimate objective).
59
Id.
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excludes the possibility of independent action.”60 In this case, the settlement
agreements specifically address the conduct the Plaintiffs argue is unlawful. The
parties negotiated and agreed that in exchange for dropping the patent
litigation, providing some services, and delaying generic introduction until 2015,
the Generics would receive compensation.61 Whether that common objective –
dropping the patent litigation in exchange for compensation – was an illegal
restraint of trade is a separate question. But if it was, then the settlements are
clear, direct evidence of an agreement to unlawfully restrain trade.62 Not only
is there enough evidence for a jury to find that there was an agreement, it is
doubtful that a reasonable jury could find otherwise. Therefore, Actavis’ motion
for summary judgment on the issue of conspiracy is denied.
C. Anticompetitive Effect
Having disposed of Actavis’ conspiracy argument, the Court now turns to
what has been the central issue in this case all along: whether the reverse
settlement agreements were unlawful.63 The antitrust laws prohibit conduct
In re Wellbutrin XL Antitrust Litig., 133 F. Supp. 3d 734, 770 (E.D.
Pa. 2015), aff’d, 868 F.3d 132 (3d Cir. 2017) [hereinafter Wellbutrin Summary
Judgment].
60
61
See, e.g., FTC’s SAMF ¶¶ 174-82 [FTC Doc. 689].
62
Wellbutrin Summary Judgment, 133 F. Supp. 3d at 770 (finding
settlement agreement to be direct evidence of conspiracy where manufacturer
was involved in settlement negotiations, provided sublicenses, and waived its
right to launch an authorized generic).
63
This is also why this case is different in that there is direct
evidence of an agreement to restrain trade. Unlike other cases, where it is “rare.
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that is “unreasonable and anticompetitive.”64 “A restraint is unreasonable if it
has an adverse impact on competition and cannot be justified as a procompetitive measure.”65 Usually this is determined by balancing the effects
under the test known as the “rule of reason.” “[T]he rule of reason standard
hinges the ultimate legality of a restraint on whether the plaintiff has
demonstrated an anticompetitive effect which is not offset by a need to achieve
a procompetitive benefit or justification.”66 Sometimes, however, conduct is so
blatantly anticompetitive that courts have found it to be illegal per se.67
When this case was before the Supreme Court on appeal, the FTC and the
Defendants took starkly opposing views on the question of the settlements’ effect
on competition. The Defendants argued that the settlements were not
anticompetitive because they did not delay generic entry past the life of the ‘894
patent. In other words, as long as the ‘894 patent would have independently
blocked generic entry, the settlements could not possibly be anticompetitive. If
. .that a plaintiff can establish a conspiracy by showing an explicit agreement,”
Gulf States Reorganization Group, Inc. v. Nucor Corp., 822 F. Supp. 2d 1201,
1218 (N.D. Al. 2011), the parties here explicitly and openly agreed to the course
of conduct. The real question is whether that conduct was illegal.
64
Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006).
65
Seagood, 924 F.2d at 1569.
66
Id. (citing Kestenbaum v. Falstaff Brewing Corp., 575 F.2d 564, 571
(5th Cir. 1978)).
67
Id. at 1567 (“Some violations of section 1, however, are illegal per
se because of their pernicious effect on competition and lack of any redeeming
virtue . . .”) (quotations omitted).
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anything, the settlements should be considered procompetitive by allowing entry
earlier than the expiration of patented exclusivity. The FTC, by contrast, took
the view that reverse payment settlements are by their very definition
anticompetitive, and should be subject to the per se rule of illegality, because
they explicitly and openly involve sharing the profits of a monopoly to buy off
competitors and delay generic entry in order to restrict competition.
The Supreme Court took a middle road between these two extremes.
While recognizing that a valid patent certainly would have excluded generics
from the market, the Court noted that “an invalidated patent carries with it no
such right. And even a valid patent confers no right to exclude products or
processes that do not actually infringe.”68 Thus, the existence of a patent does
not necessarily say anything about whether competition was restricted.
At the same time, the Court said abandoning the rule of reason in favor
of the FTC’s per se approach was not appropriate, because “the likelihood of a
reverse payment bringing about anticompetitive effects depends upon its size,
its scale in relation to the payor’s anticipated future litigation costs, its
independence from other services for which it might represent payment, and the
lack of any other convincing justification.”69 Instead, the Court held that when
68
Actavis, 570 U.S. at 147 (emphasis original).
69
Id. at 159.
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it comes to scrutinizing reverse payment settlements, the “FTC must prove its
case as in other rule-of-reason cases.”
The parties disagree about what constitutes an anticompetitive harm and
what the Plaintiffs must demonstrate to prove it. The Defendants argue that the
relevant anticompetitive harm is an actual harm to consumers in the form of
higher prices through the delay of generic entry into the market. Thus, the
Defendants argue the Plaintiffs must show that the settlements actually caused
a delay in the sale of generic versions of AndroGel.70 But as the FTC points out,
the Supreme Court made clear in Actavis that avoiding even the possibility of
competition, however small, is itself an antitrust violation.71 Rather than having
to litigate the merits of any underlying patent suits or establish a theory of
causation, the Supreme Court said that courts can look to the “size of the
payment . . . [to] be able to assess its likely anticompetitive effects . . . .”72 Where
See Defs.’ Mot. for Summ. J., at 5-9. See also Solvay’s Mot. for
Summ. J. as to the Par/Paddock Settlement, at 19-27 [FTC Doc. 621, MDL Doc.
1551]; and Par/Paddock’s Mot. for Summ. J., at 23-24 [MDL Doc. 1559].
70
71
Actavis, 570 U.S. at 157 (“The owner of a particularly valuable
patent might contend, of course, that even a small risk of invalidity justifies a
large payment. But, be that as it may, the payment (if otherwise unexplained)
likely seeks to prevent the risk of competition. And, as we have said, that
consequence constitutes the relevant anticompetitive harm.”). Candidly, it
seems unlikely that many reverse payments will survive such scrutiny.
Virtually all settlements are, to some extent, designed to avoid the risk of
competition. See also id. at 173 (Roberts, C.J. dissenting) (Under the majority’s
opinion, “taking away any chance that a patent will be invalidated is itself an
antitrust problem . . . .”) (emphasis in original).
72
Id. at 158.
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the size of a reverse payment “reflects traditional settlement considerations,
such as avoided litigation costs or fair value for services, there is not the same
concern that a patentee is using its monopoly profits to avoid the risk of patent
invalidation or a finding of noninfringement.”73 But where a payment is “large
and unjustified” by these traditional settlement concerns, it is likely directed
toward avoiding the risk of competition. Thus, if the settlement payments are
shown to be larger than what could reasonably be expected to cover such
traditional settlement concerns as future litigation costs or the value of services
rendered, the Plaintiffs will have satisfied their burden in showing that the
settlements violated the antitrust laws.74
73
Id. at 156.
74
See In re Lipitor Antitrust Litigation, 868 F.3d 231, 251-52 (3d Cir.
2017) (articulating a similar standard at the motion to dismiss stage). Solvay
argues that this amounts to a “quick look” test, which the Supreme Court
expressly rejected in Actavis, 570 U.S. at 158-59, because all the FTC has to do
is show that Solvay made a reverse payment. See Solvay Reply in Supp. of Mot.
for Summ. J., at 9 [FTC Doc. 681]. But under this standard, the FTC has to
prove much more than the simple fact that a reverse payment occurred; it also
has to prove that the payment was “large” relative to traditional settlement
concerns. See In re K-Dur Antitrust Litig., No. 01CV1652SRCCLW, 2016 WL
755623, at *12 (D.N.J. Feb. 25, 2016) (“the burden must be on Plaintiffs to show
that the settlement delayed the generic company's entry onto the market, that
the brand-name company paid the generic company consideration of some kind,
and that the consideration exchanged in the settlement exceeded the estimated
cost of litigation and the costs of other services and products, in order to
establish a prima facie case.”).
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In this case, the Defendants entered into two separate settlement
agreements.75 The first, between Solvay and Actavis, provided that Solvay would
drop its patent claims against Actavis and pay Actavis 60 to 70% of AndroGel’s
profits in exchange for co-promoting AndroGel and delaying generic entry until
2015.76 The second, between Solvay, Paddock, and Par, likewise had Solvay drop
its patent claims and pay $12 million to Par per year in exchange for a delay in
generic entry until 2015, as well as co-promotion and manufacturing help from
Paddock and Par.77 Clearly, Solvay agreed to pay the Generics significant sums
of money. The only remaining question, therefore, is whether these payments
were “large” relative to the services provided or the cost of avoided litigation.
According to the Plaintiffs, Solvay determined that it would be much
better off if the Generics delayed entering the market until 2015.78 However,
Solvay also figured out that the Generics would see a loss in value of generic
75
The two settlements actually contained multiple agreements within
them. For example, the Solvay-Actavis settlement included three agreements:
a Final Settlement and Release Agreement, a Patent License Agreement, and
a Co-Promotion Agreement. FTC’s SAMF ¶ 172 [FTC Doc. 689]. The parties do
not argue that these should be considered separately, so for simplicity’s sake,
the Court will refer to the constituent agreements collectively, unless otherwise
noted.
76
FTC’s SAMF ¶¶ 178-79, 181-82 [FTC Doc. 689]. Beginning at 60%
in 2006, Actavis’ share of AndroGel’s profits was to increase over time to 70% by
2012. Id. at ¶181.
77
Id. at ¶¶ 307, 308
78
See FTC’s Resp. to Defs.’ Mot. for Summ. J., at 8 [FTC Doc. 657].
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entry compared to continuing the litigation if entry was delayed that long.79 This
made it unlikely that the Generics would agree to such a settlement without
added incentives.80 Consequently, Solvay offered the Co-Promotion Agreements
(“CPAs”) and Backup Manufacturing Agreement (“BMA”) in order to entice the
Generics to settle their claims.
The Plaintiffs present significant evidence from the negotiation of the
settlements to suggest that the services were merely an afterthought to the
Defendants, the proverbial lipstick on the pig that was the delay in generic
entry.81 But even if taken at face value, the Plaintiffs’ experts opine that Solvay
vastly overpaid for the services it was receiving.82 The Plaintiffs’ experts also
will testify that the side agreements did not make much business sense on their
own.83
The Defendants respond in two ways. First, they argue that the FTC
failed to show that the settlements actually delayed entry.84 That may well be
true, but that is not what the FTC needs to prove in order to show an antitrust
79
80
Id.
81
See, e.g., FTC’s SAMF at ¶¶ 88, 100, 109, 133-34 [FTC Doc. 689].
82
Id. at ¶ 231.
83
Id. at ¶¶ 232-34.
84
681].
Id.
Solvay’s Reply in Support of its Mot. for Summ. J., at 3 [FTC Doc.
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harm. As discussed above, the FTC only needs to prove that the Defendants
entered into the settlements in order to avoid the risk of a competitive market.
The Defendants’ second argument focuses only on Solvay’s settlement
with Par and Paddock. The Defendants argue that the Plaintiffs have failed to
show that the Par/Paddock settlement was “large and unjustified” because the
Plaintiffs did not supply their own valuation of some of the services in those
contracts. While the Plaintiffs’ expert valued the CPA between Solvay and
Par/Paddock, the Defendants point out that the Plaintiffs’ expert never
quantitatively valued the BMA, which the Defendants argue must be considered
jointly with the CPA. Without their own valuation of the BMA, the Plaintiffs
must rely on the defense expert’s valuation of the CPA in order to show that the
agreements were out of step with the value of the services provided. This, the
Defendants argue, inappropriately shifts the burden onto them.
However, comparative valuations of services are not a necessary
requirement to show that a reverse payment is “large and unjustified.” Helpful,
certainly, but not necessary. The size of the payment is merely the Supreme
Court’s proxy for reaching the ultimate question: whether the agreement was
entered into for the purpose of avoiding the risk of competition. If a settlement
was agreed to for that purpose, it is “large and unjustified.”
As discussed above, the Plaintiffs have provided evidence to suggest that
the BMA and CPA in the Par/Paddock settlement were merely vehicles to
facilitate payment to the Generics for delaying entry. In addition to the size of
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the settlement – $12 million per year – the Plaintiffs’ experts opine that the
BMA was out of step with industry practice and the Generics’ regular business
practices.85 In particular, the Plaintiffs’ experts criticize the loose oversight over
Paddock, the lack of any assurance that Paddock could meet Solvay’s manufacturing needs, Solvay’s inability under the contract to cancel if Paddock did not
meet its manufacturing needs, and the fact that Paddock was unable to
manufacture AndroGel for the vast majority of the agreement’s term.86 In
addition, there is evidence that the Defendants agreed to the reverse payment
amount before negotiating the specifics of any services Par/Paddock were going
to render.87 A reasonable jury could infer from such evidence that the BMA and
CPA were merely post-hoc justifications when the true purpose of the settlement
was to avoid the risk of competition. This evidence is enough to shift the burden
to the Defendants to justify the payments as being procompetitive.
Solvay’s counsel suggested at oral argument that one way the Defendants
plan to justify the settlements as procompetitive is to argue that the patents
were valid and infringed; in other words, the settlements were procompetitive
because they allowed generic entry earlier than the patent would have allowed.
There are two ways to make this argument. One way would be to provide
85
FTC’s SAMF at ¶¶ 278-81, 290-93 [FTC Doc. 689].
86
Id. at ¶¶ 290-96.
87
Id. at ¶¶ 131-33, 135, 139.
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evidence that shows what Solvay thought at the time about the strength of its
patents. The other is to argue that Solvay would have won the underlying patent
litigation.
While the former is acceptable, the latter is problematic for two reasons.
First, as discussed above, the actual validity of the patent is irrelevant to the
question of whether the reverse payments violated the antitrust laws. Paying
the Generics to stay out of the market for the purpose of avoiding the risk of
competition is an antitrust harm, regardless of whether or not the patent is
actually valid and infringed.88 Put another way, even if the patent was valid and
infringed, the Defendants took away the opportunity to know that for sure by
settling before the end of the litigation. If they did so for the purpose of avoiding
the risk that a court would find otherwise, however small a risk they considered
it to be, that is an antitrust violation under Actavis.89
Second, for reasons explained more fully elsewhere in this Opinion, even
if the actual validity of the patent was relevant, determining the ultimate
outcome of the underlying patent litigation is both fundamentally unknowable
88
Actavis, 570 U.S. at 157 (“The owner of a particularly valuable
patent might contend, of course, that even a small risk of invalidity justifies a
large payment. But, be that as it may, the payment (if otherwise unexplained)
likely seeks to prevent the risk of competition. And, as we have said, that
consequence constitutes the relevant anticompetitive harm.”).
Id. at 173 (Roberts, C.J. dissenting) (Under the majority’s opinion,
“taking away any chance that a patent will be invalidated is itself an antitrust
89
problem . . . .”) (emphasis in original).
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and procedurally impossible. The underlying litigation was assigned to me.
There is no one who can say how I would have ruled on the summary judgment
motions, how I would have construed the claims, and whether I would have
found infringement. There is no one who can say how the Federal Circuit would
have ruled upon any unknowable judgment that may have been rendered. In
Actavis, the Supreme Court said “it is normally not necessary to litigate patent
validity to answer the antitrust question (unless, perhaps, to determine whether
the patent litigation is a sham...).”90 I will accept the Court’s invitation to
“structure [this] antitrust litigation so as to avoid, on the one hand, the use of
antitrust theories too abbreviated to permit proper analysis, and, on the other,
consideration of every possible fact or theory irrespective of the minimal light
it may shed on the basic question—that of the presence of significant unjustified
anticompetitive consequences.”91 Any evidence or argument on actual outcome
would be far too speculative to aid a jury in making a reasoned decision. Thus,
any arguments based on the actual validity or invalidity of the patent, or about
what would have happened in the underlying patent litigation, are inappropriate and will be disallowed regarding the antitrust violation question.
In sum, the Court finds that the Plaintiffs have provided enough evidence
for a reasonable jury to find that, by overvaluing these side agreements in the
90
Id. at 157.
91
Id. at 159-60.
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settlement, the Defendants were able to reach agreements that left them better
off than any party would have been had the Generics won the patent litigation.
A reasonable jury could find that the settlements were structured so as to be
more beneficial to everyone involved than a competitive market; everyone, that
is, except the consumer. Settling for that purpose is an antitrust harm. Of
course, the Defendants may still justify the settlements by demonstrating that
the payments were for “traditional settlement considerations, such as avoided
litigation costs or fair value for services,”92 but they may not justify the
payments on the grounds that the patent was valid and infringed because such
an argument is irrelevant and, in any case, impossible to know without relitigating to their conclusion the underlying patent cases. I do not plan to do
that. Because the Plaintiffs have shown enough to satisfy their prima facie
burden, the Defendants’ motions for summary judgment on these issues are
denied.
D. Antitrust Standing
Unlike the FTC, which only needs to prove an antitrust violation, private
plaintiffs asserting a private right of action under the Clayton Act must also
establish antitrust standing.93 This is separate from Article III standing.94
92
Id. at 156.
93
15 U.S.C. § 15(a).
Associated Gen. Contractors of California, Inc. v. California State
Council of Carpenters, 459 U.S. 519, 535 n.31 (1983).
94
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“Harm to the antitrust plaintiff is sufficient to satisfy the constitutional
standing requirement of injury in fact, but the court must make a further
determination whether the plaintiff is a proper party to bring a private antitrust
action.”95
The Eleventh Circuit employs a two-prong test for antitrust standing.
“First, the plaintiff must establish that it has suffered an antitrust injury.”96
This means the plaintiff must have suffered an “injury of the type that the
antitrust laws were intended to prevent and that flows from that which makes
the defendants’ acts unlawful.”97 “The injury should reflect the anticompetitive
effect . . . of the violation . . . .”98 “Second, the plaintiff must be an ‘efficient
enforcer’ of the antitrust laws.”99 The Defendants move for summary judgment
only on the first prong.
In this case, the harm “that flows from that which makes the defendants’
acts unlawful” – the avoidance of the risk of competition – is higher drug prices.
The Private Plaintiffs must therefore prove that they suffered an injury in the
95
Id.
96
Sunbeam Television Corp. v. Nielsen Media Research, Inc., 711
F.3d 1264, 1271 (11th Cir. 2013).
97
Id. at n.16 (quoting Brunswick Corp. v. Pueblo Bowl–O–Mat, Inc.,
429 U.S. 477, 489 (1977)).
98
Brunswick, 429 U.S. at 489.
99
Sunbeam, 711 F.3d at 1271.
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form of higher drug prices because of the delay in generic entry caused by the
reverse payment settlements. The Private Plaintiffs have offered, at various
times, three alternative theories for why the Generics would have entered the
market prior to 2015: (1) the Generics ultimately would have prevailed in the
underlying patent litigation; (2) the Generics would have come to the market “at
risk” during the patent litigation; and (3) the parties would have reached an
alternative settlement with an earlier entry date than 2015.
1. Success on the Patent Merits and At-Risk Entry
During oral argument, the Private Plaintiffs disavowed the argument
that they would have won the underlying patent litigation, leaving only the
latter two theories to show causation. However, the Private Plaintiffs’ at-risk
theory of causation still ultimately depends on showing that the Generics would
have won the underlying patent litigation. The Wellbutrin district court stated
this point clearly. “The existence of a valid and uninfringed patent would
interfere with the plaintiffs’ chain of causation: a valid patent independently
preclude[s] competition apart from any agreement and an ‘at risk’ launch is
unlawful absent a later finding of patent invalidity or non-infringement.”100 In
other words, if the patent was valid, any at-risk launch would have been
unlawful if it infringed on the patent, and the law will not allow the Private
100
omitted).
Wellbutrin Summary Judgment, 133 F. Supp. 3d at 764 (quotations
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Plaintiffs to use illegal behavior as a link in their chain of causation.101 At least
three other courts have reached similar results.102 In order to show that the
Generics could have successfully – i.e., legally – launched at-risk, the Private
Plaintiffs would therefore need to show that the patent would ultimately have
been found either invalid or uninfringed in the underlying patent litigation.
This raises again the central problem raised by Actavis: how to determine
what the outcome of the underlying patent litigation would have been in a way
that is manageable. Do the parties need to accomplish what Judge Carnes called
the “turducken task” of litigating “a patent case within an antitrust case about
the settlement of the patent case?”103 Alternatively, can they offer experts to
testify as to what would have happened in the but-for world, neatly summarized
into each party’s percent chance of winning?104 Is it even possible to do either?
It is the Court’s opinion that it is not. At least in relation to this
particular case, arguments which depend on determining what the ultimate
Id. at 765 (“Where a regulation—such as patent law—precludes
competition, that regulation cuts off the chain of causation.”).
101
102
See In re Nexium (Esomeprazole) Antitrust Litig., 842 F.3d 34, 63
(1st Cir. 2016) (stating that at-risk entry theories ultimately depend on the
outcome of the patent litigation); In re Wellbutrin, 868 F.3d 132, 165 (3d Cir.
2017) [hereinafter Wellbutrin Appeal] (same); Apotex, Inc. v. Cephalon, Inc.,
2017 WL 2473148, at *8 (E.D. Pa. June 8, 2017) (same).
103
FTC v. Watson, 677 F.3d at 1315.
See, e.g., Wellbutrin Appeal, 868 F.3d at 169 (finding that plaintiffs
could not show generics would have won where expert testified they only had a
20% chance of winning).
104
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outcome of the underlying patent litigation would have been are simply too
procedurally burdensome and speculative to serve as valid theories of causation
under Actavis. Consider for a moment the particularly thorny issues that would
be raised were the Court to consider such a theory at trial. Would the Private
Plaintiffs be allowed to make any argument that was potentially available to the
Generics, or would they be limited to the arguments the Generics had actually
made up to the point the parties settled? The Defendants at various points in
their papers assume the latter, but the underlying litigation never came to a
final, preclusive decision. It did not even reach summary judgment. Who knows
what arguments may have been raised as the litigation went forward?
Further, is the outcome of the underlying litigation a question of fact or
law, and who would decide what the outcome would have been – the Court or
the jury? If the latter, how could a jury determine what the outcome of a bench
trial would have been? Unlike the issue of an antitrust violation, a jury cannot
estimate the likelihood of the Generics’ success on the patent merits by simply
looking to the size of the reverse payment as a proxy.105 Instead, a jury would
have to answer that question by determining how the judge – in this case, me
– would have found on the merits. Thus, when combined with the standard of
proof in this case, this means that to survive summary judgment, the Private
105
For a discussion of why the size of the reverse payment does not
serve well as a proxy for what the parties thought of the merits, see Wellbutrin
Appeal, 868 F.3d at 167-69.
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Plaintiffs would have to provide enough evidence to show that a reasonable jury
could find it more likely than not that a judge would have found it more likely
than not that the Generics did not infringe or that the ‘894 patent was invalid.106
On top of that, a jury would have to determine how the judge would have
decided various legal issues, including claim construction and summary
judgment. If that sounds ridiculously unwieldy, that’s because it is. And even if
a jury could comprehend that standard, how would the inevitable appeal be
handled? Would the case be split, with the antitrust issues going to the Eleventh
Circuit, but the patent issues going to the Federal Circuit? Clearly, actually
litigating the underlying merits would be a procedural and administrative
nightmare.
But let us assume for a moment that the procedural issues could somehow
be worked out. At least with regard to this case, it is impossible to say what the
court would have actually done in the underlying case. Any experts who testify
otherwise, like the expert relied upon in Wellbutrin,107 are coming up with
probabilities out of whole cloth. Unlike the antitrust issues, where we can
assume that the parties would have acted in their best economic interest, such
assumptions cannot necessarily be made about courts and juries. One court is
Id. at 169 (using the preponderance of the evidence standard with
regard to the patent merits).
106
107
Wellbutrin Appeal, 868 F.3d at 169.
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not the same as another. Much of a patent case depends on how a claim is
construed, and no one can say how I would have construed the claims at issue.
Nor can one simply estimate what would have happened based on other cases.
Every patent case is inherently different, with numerous variable affecting the
outcome. And the issue here is not what would have happened in a generic case,
but what would have happened in this case.
By contrast, most of the cases which have considered this question and
decided otherwise have differed from this case in at least one of two ways. First,
at least two of those cases relied upon what this Court views was an improper
causation standard, finding that the plaintiffs only needed to show that the
generics could have won, not that they would have won.108 Obviously it is much
easier to provide substantive proof of what could have happened as opposed to
what would have happened. Second, the experts offering testimony in those
cases had at least some concrete outcome in the underlying litigation on which
to base their opinions. For example, in the Lidoderm litigation, the defendants
had actually gone to trial on the case, but settled before the judge issued his
See In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No.
CV 14-MD-02503, 2018 WL 563144, at *14 (D. Mass. Jan. 25, 2018); United
Food & Commercial Workers Local 1776 & Participating Employers Health &
Welfare Fund v. Teikoku Pharma USA, Inc. (Lidoderm), 296 F. Supp. 3d 1142,
108
2017 WL 50682533, at *5 (N.D. Cal. 2017). The Court views this standard as
inappropriate because evidence that the Generics could have won gets us no
closer than we are now to answering the question of whether the Generics would
have been able to enter the market in a but-for world, or if a valid patent
would have prevented them.
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opinion.109 Thus, the expert was able to rely on statements made by the judge,
as well as his claim construction order.110 And in Wellbutrin, where there were
two underlying patent suits, the court in one of them had also entered claim
construction and summary judgment orders (the plaintiffs did not argue the
generic could have won the other).111 In this case, however, the Court never
entered a claim construction or summary judgment order in the underlying
patent litigation in this case, let alone actually tried the issues. Any opinion that
would purport to state how a particular piece of litigation would turn out
without any evidence from the court in question on how it would rule can only
be characterized as pure speculation. Such attenuated evidence cannot possibly
serve as the basis of a reasonable decision by a jury.
Although this eliminates two of the Private Plaintiffs’ theories of
causation, as well as a possible procompetitive justification for the settlements,
the Court feels it is justified in light of Actavis, the other theories available to
the parties, and the desire for a logical congruency of outcome. First, as noted
earlier, Justice Breyer explicitly states that:
[a]s in other areas of law, trial courts can structure antitrust
litigation so as to avoid, on the one hand, the use of antitrust
theories too abbreviated to permit proper analysis, and, on the
109
Lidoderm, 74 F. Supp. 3d 1052, 1063 (N.D. Cal. 2014).
110
Lidoderm, 296 F. Supp. 3d 1142, 2017 WL 50682533, at *28-29
(N.D. Cal. 2017).
111
Wellbutrin Summary Judgment, 133 F. Supp. 3d at 766-67.
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other, consideration of every possible fact or theory irrespective of
the minimal light it may shed on the basic question—that of the
presence of significant unjustified anticompetitive consequences.112
Admittedly, Justice Breyer was speaking only in the context of an antitrust
violation, not causation. But his concern for the ability of trial courts to manage
the cases before them extends here.
Second, not all theories of causation are now out of bounds for the Private
Plaintiffs. As discussed in more detail below, they still have the ability to show
that the Defendants would have reached alternative, legal settlements that
would have allowed for earlier generic entry without the reverse payments.
Indeed, this theory is less attenuated than any theory based on the outcome of
the underlying patent litigation because a factfinder can rely on the assumption
that the parties are economic actors who would have done what was in their best
financial interest.
Lastly, precluding such a basis of causation avoids potentially inconsistent outcomes. As discussed above, the FTC does not need to prove causation to
win its case. The Supreme Court was clear, for better or worse, that it merely
needs to prove that the Defendants entered into the settlements for the purpose
of avoiding the risk, however small, of competition. Consider the incongruity,
then, if the FTC should win its case on those grounds, while the Private
Plaintiffs lose because the Defendants are able to show the patent would have
112
Actavis, 570 U.S. at 159-60.
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been declared valid and infringed. How can the Defendants both have a valid
patent, and commit an antitrust violation? Such an outcome makes no sense.
The Court recognizes that this solution is not the most appetizing, but it
benefits from the sheer distastefulness of the other options available. To quote
Churchill, “[i]t has been said that democracy is the worst form of Government
except all those other forms that have been tried from time to time.”113 The same
is true here. The Court can simply see no way of entertaining arguments that
purport to say what the outcome would have been in the underlying patent
litigation without relying on wholly speculative evidence or untying a Gordian
knot of procedural problems. With that in mind, it is the Court’s opinion that
such arguments are simply unworkable, and should not be considered further
in this litigation.
2. Alternative Settlement Scenario
The Private Plaintiffs’ remaining causation theory is that but-for the
reverse payment the Defendants would have come to an alternative, legal
settlement that would have allowed for generic entry earlier than 2015. In
Actavis, the Supreme Court endorsed patent litigation settlements that do not
involve reverse payments.114 The Defendants argue that this alternative
113
444 Parl Deb HC (5th ser.) (1947) col. 207.
Actavis, 570 U.S. at 158 (Defendants “may, as in other industries,
settle in other ways, for example, by allowing the generic manufacturer to enter
the patentee's market prior to the patent's expiration, without the patentee
114
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settlement theory is ultimately dependent on the outcome of the patent merits
because “if the ‘894 patent was valid and infringed, then Plaintiffs are
complaining about the inability to buy an infringing product.”115
This argument is unpersuasive. Unlike the at-risk theory of causation,
the Private Plaintiffs are not arguing that they would have done something
illegal. Instead, their theory is that Solvay, faced with the uncertain prospect of
continuing the litigation and acting in its economic best interest, still would
have granted the Generics a license to enter the market before the expiration of
the patent. Without a payment, however, the Generics, if confident in their
chances at trial and on appeal, would have required an earlier entry date than
2015, the entry date under the actual reverse settlement. Using leverage to
negotiate an earlier settlement date is obviously legal. Further, focusing upon
the difference between 2015 and a hypothetical earlier entry date results in the
type of injury intended to be prevented by the antitrust laws as interpreted by
the Supreme Court in Actavis. If the Private Plaintiffs can show that, but-for an
illegal reverse payment intended to avoid the risk of a competitive market place,
the Generics would have entered earlier, they will have shown they have
suffered an antitrust injury.
paying the challenger to stay out prior to that point.”).
115
Solvay’s Mot. for Summ. J., at 8 [Doc. 1566-1].
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Other courts have endorsed this approach. In Wellbutrin, the district
court accepted the plausibility of an alternative settlement scenario, although
it granted summary judgment to the defendants because the brand manufacturer had “expressly and unwaveringly refused to settle” without the allegedly
anticompetitive provision of the actual settlement.116 In Lidoderm, the court also
found that the alternative settlement theory was cognizable, and found there
to be sufficient evidence to submit the issue to a jury.117 And in Solodyn, the
district court also allowed the plaintiffs to proceed on an alternative settlement
theory.118
In order to prove this theory, of course, the Private Plaintiffs must have
evidence that an alternative settlement would have occurred in the but-for
world. To do so, the Private Plaintiffs offer three expert opinions, as well as
some direct evidence. The first, that of Jack Goldstein, thoroughly evaluates the
merits of the underlying patent litigation, comparing it to the average patent
case, and concludes that a reasonable and competent attorney would have
advised Solvay and the Generics that Solvay had about a 20% chance of
winning, if not less.119
Wellbutrin Summary Judgment, 133 F. Supp. 3d at 757. On appeal,
the Third Circuit agreed. Wellbutrin Appeal, 868 F.3d at 167 & n.57.
116
117
Lidoderm, 296 F. Supp. 3d 1142, 2017 WL 5068533, at *10-13.
118
Solodyn, 2018 WL 563144, at *21-23.
119
Goldstein Rep. ¶¶ 181, 193.
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Independently of Goldstein, the Private Plaintiffs’ other two experts, Dr.
Leffler and Prof. Elhauge, each reach their own conclusions on what the
Defendants considered their chances to be.120 Dr. Leffler looked to the terms of
the actual settlement, and concluded that Solvay likely viewed its chances of
winning to be at about 33%.121 Likewise, Prof. Elhauge looked to the actual
terms of the settlement agreement and determined that it would only have been
economically rational for Solvay to agree to the actual settlements at issue if it
believed its chances of winning were at best 48.8%.122 This is consistent with the
“Project Tulip” evidence which shows that Solvay’s executives crafted the
settlement with Actavis around a 50% chance of winning the patent litigation.123
With these expectations in mind, Dr. Leffler and Prof. Elhauge each agree
that it would have been economically rational for Solvay to settle, even without
a reverse payment. Using Goldstein’s estimate of Solvay’s chance of winning the
litigation, Dr. Leffler concludes that the Defendants would have agreed to an
alternative settlement that allowed for generic entry on January 1, 2008, while
Prof. Elhauge concludes the Generics would have entered on May 22, 2009.124
120
Elhauge.
The Defendants do not move to exclude either Dr. Leffler or Prof.
121
Leffler Rep. ¶ 83 [Doc. 1564-22].
122
Elhauge Rep. ¶ 149 [Doc. 1564-31].
123
Private Pls.’ SAMF ¶ 49 [Doc. 1598].
124
Id. at ¶¶ 15, 26.
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And using his own estimate of Solvay’s belief about the strength of the patent,
based upon the actual settlement, Dr. Leffler concludes that the Generics would
have entered on October 1, 2010.125 Under all of these scenarios, the Generics
would have entered the market earlier than 2015.
The Defendants argue that the Private Plaintiffs’ evidence is not
sufficient because they do not have actual, direct evidence that the Defendants
ever negotiated a different date.126 “Requiring such evidence, however, would be
an almost impossible standard to require of Plaintiffs, given that this is a but-for
scenario.”127 “Because this case is set in a but-for world, it is not surprising that
no evidence shows that defendants were contemplating anything other than the
actual settlement.”128 If Solvay and the Generics “were acting unlawfully to
eliminate competition throughout their settlement negotiations, then it is
unreasonable to expect a paper trail signifying rational, lawful business
choices.”129 Any criticism the Defendants have of the experts’ methodologies or
conclusions are best handled through cross-examination and the production of
contrary evidence.
125
Id. at ¶ 14.
126
Solvay’s Mot. for Summ. J., at 33-34 [MDL Doc. 1566].
127
Solodyn, 2018 WL 563144, at *21.
128
Lidoderm, 296 F. Supp. 3d 1142, 2017 WL 5068533, at *34.
129
Solodyn, 2018 WL 563144, at *21.
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The Defendants also mistakenly argue that Dr. Leffler’s and Prof.
Elhauge’s models assume that a reverse payment always causes delay. Their
models assume nothing of the sort. Rather, both experts use their experience
and knowledge in the field to conclude that reverse payments cause delay, and
they confirm that conclusion in their models addressing the specific settlement
at issue in this case.
Indeed, such a conclusion is economically logical, especially at the
causation stage, in which the Private Plaintiffs will have already proven that
the purpose of the reverse payment was to avoid the risk of competition. It
would make no sense for Solvay to pay the Generics tens of millions of dollars
if it could get the Generics to enter on the same date without paying them all of
that money. Nor would it make sense for the Generics to agree to delay entry for
free if they could receive tens of millions of dollars to do the same thing. Solvay
paid the Generics a lot of money for something, and if it was not for services or
saved litigation costs, it is logical to conclude it was for delay.130
Lastly, Par/Paddock argue that even if the Private Plaintiffs prove their
case as to the Actavis settlement, they cannot show causation regarding Solvay’s
settlement with Par/Paddock because Par/Paddock could not have entered before
Other courts have come to the same conclusion. See, e.g., In re
Niaspan Antitrust Litig., 42 F. Supp. 3d 735, 752 (E.D. Pa. 2014) (“One can
logically infer that, all else equal, with a [reverse payment], a generic would be
willing to agree to a later entry date than it would otherwise agree to in order
to settle a patent-infringement case.”).
130
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Actavis did.131 But the fact that Actavis would have had to agree to a settlement
before Par/Paddock could have does not vitiate causation, it merely adds another
step. If the Private Plaintiffs can show that Solvay and Actavis would have
settled earlier without a reverse payment, then they might also be able to show
that Par/Paddock would have done so as well. And for all the reasons discussed
above regarding the Actavis settlement, the Private Plaintiffs have produced
evidence that indeed Par/Paddock and Solvay also would have settled earlier.
For these reasons, the Court finds that the Private Plaintiffs have provided
enough evidence for an alternative settlement theory of causation to survive
summary judgment.
3. Lack of Injury Regarding AndroGel 1.62%
The final antitrust injury related argument involves AndroGel 1.62%. All
of the Private Plaintiffs in this case are seeking damages regarding the original
AndroGel formula, AndroGel 1%. However, one group of plaintiffs – the
Retailers – is also seeking damages related to purchases of a newer formulation,
AndroGel 1.62%.132
131
Par/Paddock’s Mot. for Summ. J., at 16-18 [MDL Doc. 1559].
132
AndroGel 1.62% was developed in order to increase the ease of
application and reduce drying time, thereby increasing patient satisfaction. See
Solvay’s Mot. for Summ. J., at 5 [MDL Doc. 1552].
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AndroGel 1.62% was not introduced until 2011, five years after the
challenged settlements.133 It was developed in order to improve upon AndroGel
1%, namely by increasing the ease of application and reducing drying time,
thereby increasing patient satisfaction.134 When it was introduced, AndroGel
1.62% quickly became the leading testosterone replacement therapy.135 Even
after generic versions of AndroGel 1% were introduced to the market, consumers
still continued to prefer AndroGel 1.62% by a wide margin despite its significantly higher price.136
The Retailers argue that the settlements delayed the launch of generic
AndroGel 1% long enough that Solvay could “switch the market” to AndroGel
1.62%.137 This argument can only work under one of two theories: either Solvay
engaged in an anticompetitive “product hop,” or AndroGel 1.62% is essentially
the same product as AndroGel 1%. The Retailers are adamant that they are not
pursuing a “product hop theory,” so the Court need not address it.138 As for the
133
Solvay’s SMF ¶ 23 [MDL Doc. 1567-2].
134
See Solvay’s Mot. for Summ. J., at 5 [MDL Doc. 1552].
135
Solvay’s SMF ¶¶ 27, 29-30 [MDL Doc. 1567-2].
136
Id. at ¶¶ 30, 35.
137
Retailer Pls.’ Resp. to Solvay’s Mot. for Summ. J., at 1 [MDL Doc.
1610]. The Retailers do not allege that the introduction of AndroGel 1.62% was
itself in anyway anticompetitive.
138
Id. at 5-6, 9.
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latter theory, there can be no doubt that AndroGel 1.62% is a different product
than AndroGel 1%. AndroGel 1.62% is covered by eight different patents that
do not cover AndroGel 1%.139 This is further supported by the fact that, if the
products were the same, one would expect consumers in a competitive market
place to choose the less expensive of two identical products. But as mentioned
above, even when faced with a fully competitive market after 2015 that includes
AndroGel 1.62%, and branded and generic AndroGel 1%, consumers have still
chosen the significantly higher priced AndroGel 1.62% over generic AndroGel
1% by a wide margin.140
In essence, then, the Retailers are arguing that the alleged delay in entry
of one product caused them damages by forcing them to pay higher prices for a
different, better product. This is the Retailer’s “shifting the market” argument,
meaning that the reverse settlements gave Solvay the time to “shift the market”
to AndroGel 1.62%. But courts generally presume that the introduction of new,
better products is a good thing for competition. “The attempt to develop superior
products is . . . an essential element of lawful competition.”141 Plus, if the ‘894
patent was valid, the patent itself would have given Solvay the time to “shift the
market” by introducing a new product. This is further proof that “shifting the
139
Solvay’s SMF ¶ 25 [MDL Doc. 1567-2].
140
Solvay’s Mot. for Summ. J., at 4 [MDL Doc. 1567-1].
141
Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 286 (2d
Cir. 1979).
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market” is not, in and of itself, a problem.142 Instead, the proper measure of
injury is and must be the comparison between like-products. Given that
AndroGel 1.62% and AndroGel 1% are different products, the Retailers cannot
claim that they were injured by purchasing AndroGel 1.62% simply because that
is what consumers wanted.
E. FTC’s Available Remedies
Should the FTC successfully prove that the reverse payment settlements
were anticompetitive and violated the antitrust laws, the FTC is seeking broad
equitable relief, including preventing the Defendants from entering into any
reverse payment agreements in the future, as well as compulsory generic
licenses for AndroGel 1.62%.143 The Defendants argue that these remedies are
far too broad, and that they would inappropriately restrain lawful conduct.
142
It can potentially be a problem if brand name manufacturers tweak
a drug and pull the older version off the shelf just as a generic is about to enter
the market. This is the “product hopping” referenced above. It is problematic
because it extends a manufacturer’s monopoly at the expense of consumer
choice. Again, however, the Retailers were clear that they were not pursuing
this kind of theory. But even if they were, such an argument would have failed
because Solvay never pulled AndroGel 1% off the shelf.
143
The FTC abandoned any damages claims it had when it applied for
certiorari with the Supreme Court. See Petition for Writ of Certiorari, FTC v.
Watson Pharmaceuticals, Inc., 2012 WL 4750283, at *31 (U.S.) (“here the FTC
seeks only declaratory and prospective injunctive relief . . . .”).
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But federal courts have extensive authority to order equitable relief in
antitrust cases.144 The goal of an equitable antitrust suit is not to simply punish
past behavior, “nor is it merely to end specific illegal practices.”145 The goal is to
“effectively pry open to competition a market that has been closed by defendants’
illegal restraints.”146 In other words, the goal is to prevent anticompetitive
activity in the future, and the courts have a wide range of means at their
disposal to do so.147 “[I]t is not necessary that all of the untraveled roads to that
end be left open and that only the worn one be closed.”148 Sometimes, this may
even mean that otherwise legal activity may have to be enjoined.149 “The
standard against which the order must be judged is whether the relief
represents a reasonable method of eliminating the consequences of the illegal
Int’l Salt Co. v. United States, 332 U.S. 392, 400–01 (1947)
abrogated by Illinois Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006)
144
(District Courts “are invested with large discretion to model their judgments to
fit the exigencies of the particular case.”).
145
Id. at 401.
146
Id.
147
Fed. Trade Comm’n v. Nat’l Lead Co., 352 U.S. 419, 430 (1957)
(Courts are “obliged not only to suppress the unlawful practice but to take such
reasonable action as is calculated to preclude the revival of the illegal practices.”).
148
Int’l Salt Co., 332 U.S. at 400.
149
Nat’l Lead Co., 352 U.S. at 430 (“...decrees often suppress a lawful
device when it is used to carry out an unlawful purpose.”).
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conduct.”150 Because the appropriate remedy fundamentally depends on the
nature and scope of any wrongful conduct, it is premature to determine what
may or may not be an appropriate remedy at this stage in the litigation, where
there has not yet been a decision on liability.
IV. Conclusion
For the reasons stated above, Solvay’s Motion for Summary Judgment on
the FTC’s Claims [FTC Doc. 620] is DENIED, Solvay’s Motion for Summary
Judgment as to the Par/Paddock Settlement [FTC Doc. 621, MDL Doc. 1551] is
DENIED, Actavis and Actavis Holdco’s Motion for Summary Judgment [FTC
Doc. 625, MDL Doc. 1556] is DENIED, Solvay’s Motion for Summary Judgment
for Lack of Antitrust Injury Against the Private Plaintiffs [MDL Doc. 1550] is
DENIED, Solvay’s Motion for Summary Judgment as to Retailer’s Damages
Claims on AndroGel 1.62% Purchases [MDL Doc. 1552] is GRANTED, the
Defendants Par and Paddock’s Motion for Summary Judgment [MDL Doc. 1559]
is DENIED, Actavis, Inc. and Solvay’s Motion to Exclude Plaintiffs’ Proposed
Patent Law Expert Jack C. Goldstein, Esq. [FTC Doc. 622, MDL Doc. 1553] is
DENIED, and Solvay, Par, and Paddock’s Motion to Exclude in Part Plaintiffs’
Expert James R. Bruno [FTC Doc. 630, MDL Doc. 1562] is GRANTED in part
and DENIED in part.
150
(1978).
Nat’l Soc. of Prof’l Engineers v. United States, 435 U.S. 679, 698
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SO ORDERED, this 14 day of June, 2018.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
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