By
Kevin E. Noonan —

Joining
the parties and amici with clear interests in resolving the circuit split
created by the Third Circuit opinion in the K-Dur
case (In re K-Dur Antitrust Litigation), two "public interest"
groups have also filed amicus briefs urging the Supreme Court to grant
certiorari.  These groups, the New York
Intellectual Property Law Association (NYIPLA) and the Washington Legal
Foundation, like every other brief, urge the Court to review the Third Circuit
decision.  Each brief also presents
supplemental questions or alternative points of view that may pique the Court's
interest enough to support the certiorari grant.  The NYIPLA's brief will be discussed in this
post.

The
NYIPLA's brief opens by characterizing the Questions Presented by the branded
(Merck) and generic (Upsher-Smith Labs) petitioners as "accurately and
fairly characteriz[ing] the ultimate issue" for the Court to resolve by
granting certiorari.  The brief also presents four "subsidiary
questions" for the Court's consideration:

Subsidiary
Question 1. Whether the Third Circuit erred in presuming, in a private Clayton
Act antitrust action alleging a Sherman Act Section 1 violation, that a
potential seller of generic pharmaceuticals would have entered the market "at
risk" absent an earlier settlement of a Hatch-Waxman patent infringement
suit which included a "reverse payment" provision;

Subsidiary Question 2. In the absence of proof that
a patent infringement suit brought under the Hatch-Waxman Act was "objectively
baseless in the sense that no reasonable litigant could realistically expect
success on the merits", and after an entry date for a generic manufacturer
is specified in a settlement agreement that also contains a reverse payment
term, whether the Third Circuit erred in determining hypothetically that some
earlier alternative entry date would have represented "an otherwise
logical litigation compromise" in the absence of the reverse payment term;

Subsidiary Question 3. In a private Clayton Act antitrust
action alleging a Sherman Act Section 1 violation, did the Third Circuit err by
applying a "quick look" rule of presumptive illegality to a
complicated fact pattern presenting both patent-antitrust interface and
Hatch-Waxman issues extremely similar if not identical to those presented in
eight previous federal appellate court cases in which, as properly interpreted,
a full-blown rule of reason inquiry was required; and

Subsidiary Question 4. Would application of the
Third Circuit panel's decision interfere directly with the ability of the
generic manufacturers to effectively manage their Hatch-Waxman litigation
dockets and eventually frustrate the Congressional objective of maximizing
patent challenges.

In addition to legal argument and citation to case
law, the NYIPLA's brief provides as appendices studies (by Pricewaterhouse
Cooper, GPhA and RBC Capital Markets) relating to the cost of ANDA litigation
and the positive impact of generic drug substitution for branded drugs
consequent to the Hatch-Waxman Act.  In
addition to supporting these questions, the NYIPLA's brief addresses some of the assumptions
(express and implicit) in the Third Circuit's reasoning.

The brief questions the Third Circuit panel's "implicit
inference" that generic drug makers would have entered the market "at
risk" in the absence of settlements that were free of the type of
antitrust attack pressed by the FTC and antitrust plaintiffs.  The brief argues that there is no empirical
evidence that a generic drug maker would enter the market at risk, inter alia,
because any actual damages (even without consideration of the risk of treble
damages from a finding of willful infringement) would likely be much greater
than any profits the generic drugmaker could make from sales of generic substitutes
for branded drugs.  In fact, the empirical evidence is to the contrary:  of 158
ANDA litigations that settled from 2003-2009, only 28 of the generic drugs were
launched at risk (and these at-risk launches were by the largest generic drug
manufacturers).  The brief also sets
forth the launch of Apotex's generic Plavix drug product, which resulted in
damage and pre-judgment interest award of $551 million.  And the brief argues that "delay"
cannot merely be presumed, but rather that the FTC or antitrust plaintiffs must
establish that there would have been a delay in the first place (which is
controverted by the empirical evidences discussed above).  Nor can the FTC, antitrust plaintiffs or the Court presume (as the brief asserts the Third Circuit did) that there was a "causal
nexus" between the reverse payment settlement agreement and any alleged
delay.  Finally in this regard the brief
argues:

The
facts regarding at risk entry while Hatch-Waxman patent litigations remain
unresolved are not subject to dispute.  The uncertainties of patent litigation
and the asymmetric litigation and settlement economics imposed by the
Hatch-Waxman Act mandate that at risk entry remains unusual and subject to
risk.  Indeed, only the largest of the generic manufacturers seem willing to
undertake that risk on a regular though still unusual basis.  As illustrated by
the decision of Apotex to launch its generic Plavix, moreover, expensive
mistakes are sometimes made.  As the magnitude of the Plavix damages indicate, a
miscalculation regarding anat risk launch might well bankrupt a smaller generic
manufacturer.

The brief then explicitly addresses the question of
whether the Supreme Court's Professional
Real Estate case is controlling.  That case set forth a two-prong test for the application of antitrust
liability in patent infringement litigation:  first, that the patent
infringement lawsuit must be "objectively baseless"; and second, the
subjective intent of the parties was to enter into an agreement "in
restraint of trade."  The brief
characterizes the Third Circuit opinion as disregarding the objective prong of
the test, a result that requires certiorari for correction.

The brief directly identifies the Third Circuit's
decision as coming "at the behest of the enforcement agencies," an
accurate characterization in view of how completely the Third Circuit panel
adopted the FTC's rationales and based its decision on policy and position
papers promulgated by the Commission during its decade-long attack on reverse
payment settlement agreements.  The brief
specifically urges the Court to rule on whether the Third Circuit's "quick
look" rule of reason analysis is consistent with Supreme Court precedent.

Finally, the brief argues that the Court should
consider the "unintended consequence" of applying the rule of
presumptive illegality on these agreements, in view of the evidence that
instead of promoting generic drug entry the rule would frustrate efforts to
provide generic substitutes for branded drugs, based on "interfere[nce]
with litigation resource allocation by the generic manufactures."  These arguments are presented in the context
of a general argument that the Hatch-Waxman regime has been "enormous[ly]
success[ful]," saving consumers almost $1 billion from 2001-2010
alone.  Contrary to the Third Circuit's
assumptions, the brief argues that empirical evidence (from the 2012
Pricewaterhouse Coopers study) indicates that "the majority of ANDA
litigation[] continue to end in settlement."  Adopting the Third Circuit's "presumptively
illegality" standard, NYIPLA argues, would "inevitably result in loss
of the litigation management and financing flexibility that is critical to the
success of the generic manufacturers and, eventually, would frustrate the
Congressional objective by forcing a reduction in the net number of
Hatch-Waxman challenges" (and the brief notes that the FTC has
acknowledged this expected outcome, citing a footnote in the Commission's 2010
study, "Pay-for- Delay: How Drug Company Pay-Offs Cost Consumers Billions."

The Washington Legal Foundation's brief will be
discussed in a later post.  In the
interim since these briefs were filed, however, the FTC has filed a petition
for certiorari in FTC v. Watson, a case the Commission
argues is better positioned for the Court's review of the question of the
legality of reverse payment settlement agreements.  The Court could grant certiorari in that case and hold petitions in the K-Dur case in abeyance or could
consolidate these cases for review.  In
view of the Court's grant of certiorari in
Bowman v. Monsanto, however (and that
in the face of views of the Solicitor General that certiorari should not be granted in Bowman), it is likely that the Court will not only grant certiorari but also continue its recent
penchant of deciding cases to limit the scope of patent protection.