By
Kevin E. Noonan —

The
Supreme Court, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), has in recent years focused the
requirements for pleadings under the Federal Rules of Civil Procedure and,
concoimitantly, increased the scope of the bases a party can argue to dismiss a
claim or counterclaim under Fed. R. Civ. Pro. 12(b)(6) for failure to state a
legally cognizable claim.  In the latest
development in the Myriad Genetics v.
Ambry Genetics case, Myriad argues that this legal precedent, as well as
the principles first enunciated by the Supreme Court in Eastern R.R.
Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and
Mine Workers v. Pennington, 381 U.S. 657 (1965) (known as the Noerr-Pennington doctrine), preclude
Ambry from pursuing its counterclaims that Myriad violated Sections 1 and 2 of
the Sherman Antitrust Act in bringing suit on several of its BRCA gene genetic
diagnostics patents (see Myriad's Motion to Dismiss Antitrust Counterclaims).

Earlier
this summer, Myriad sued Ambry for patent infringement for offering
genetic diagnostic tests (including its
BRCA1, BRCA2, BRCAPlus, BreastNext, OvaNext, and CancerNext products) that
allegedly infringed claims of U.S. Patent Nos. 5,654,155;
5,709,999;
5,747,282;
5,750,400;
5,753,441;
5,837,492;
6,033,857;
6,951,721;
and 7,250,497 (see "Myriad Genetics Files Suit Against Ambry Genetics for Genetic Diagnostic Testing of BRCA Genes").  Ambry answered, and in addition to denying
Myriad's allegations asserted as affirmative defenses that Myriad's suit
amounted to violations of the Sherman Act (see "Ambry Responds to Myriad Lawsuit").  In its counterclaims, Ambry asserted the following allegations in
support of its Sherman Act allegations:

• Myriad is maintaining its monopoly in
violation of the antitrust laws through "bad faith" enforcement of
its patents,

• Myriad
eschews considerations of affordability, test accuracy and recommendations for
genetic testing,

• There
exists significant opposition to Myriad's business model of patenting gene
sequences and establishing a private database, and

• Myriad
is aware that its asserted claims on BCRA1 and BCRA2 genes are invalid under
recent Supreme Court and Federal Circuit cases.

Specifically,
Count 1 of Ambry's counterclaims is brought under Section 2 of the Sherman
Antitrust Act (against Myriad only).  According to this counterclaim:

126.  Myriad is willfully maintaining
its monopoly through exclusionary conduct as distinguished from growth or
development as a consequence of a superior product, business acumen, or
historic accident.  Myriad seeks to maintain its monopoly position through
various anticompetitive conducts described above, including through the bad
faith enforcement of its facially invalid patents.

127.  Myriad was aware before filing its
Complaint in this action that the claims it was asserting are invalid per Myriad
and Prometheus.

128. 
Through its exclusionary and anticompetitive conduct, Myriad has acquired and
maintained its monopoly in the relevant market for genetic testing for patients
seeking analysis of their full BRCA1 and BRCA2 gene sequences. 
Myriad has operated in this manner free from competition because of the high
barriers to entry that exist in the market, including Myriad's invalid patents,
the technological know-how to design and run genetic tests, and the actions of
Myriad's employees.

Count
2 is brought under the Sherman Act for "attempted" monopolization for
substantially the same market behavior, Ambry alleging that Myriad acted "with
a specific intent to monopolize the relevant market through the assertion of
facially invalid patent claims and the anticompetitive conduct of its
employees."

Significantly,
Ambry did not expressly assert that the patents were obtained through fraud, or
that the litigation was brought as a sham, but rather that the effects of Myriad's
assertion of patent claims Ambry asserts are invalid under recent Federal
Circuit or Supreme Court precedent should incur antitrust liability.  This failure to allege fraud or sham
litigation, as well as Myriad's disagreement with Ambry's characterization of
the scope of judicial opinions on its patents, forms the basis of its motion to
dismiss.  In its argument, Myriad first
distinguishes pled facts, which are "accepted as true and viewed in the
light most favorable to Defendant as the nonmoving party," citing 1-800
Contacts, Inc. v. Memorial Eye, P.A., Case No. 2:08-CV-983, 2010 WL 988524,
at *2 (D. Utah Mar. 15, 2010), and legal conclusions, which are not.  Motions to dismiss are properly evaluated on
the grounds that the asserted claim is "legally sufficient" and "plausible
on its face," citing Iqbal.  Under the Iqbal standard, "a claim is facially plausible 'when the
plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.'"  Iqbal,
556 U.S. at 678.

Having
set out this standard, Myriad then argues that its claims are immune from
antitrust liability under the Noerr-Pennington
doctrine, which immunizes actions constituting a petition to the government for
redress of grievances.  Myriad's claims
do not fall under the limited exceptions to the doctrine, according to Myriad,
because they are not "objectively baseless" and the litigation is
neither a sham nor an attempt to enforce patents obtained by fraud.  In
particular, Myriad cites to cases, such as Asahi Glass Co., Ltd. v. Pentech
Pharmaceuticals, Inc., 289 F. Supp. 2d 986, 993 (N.D. Ill. 2003), where
courts have dismissed sham litigation allegations because "efforts to
commercialize and/or enforce issued U.S. patents do not give rise to a claim of
sham litigation absent unusual circumstances such as fraud or known invalidity:

A firm that has received a patent from the patent office . . . and thus enjoys
the presumption of validity that attaches to an issued patent, is
entitled to defend the patent's validity in court, to sue alleged infringers,
and to settle with them, whatever its private doubts, unless a neutral
observer would reasonably think either that the patent was almost certain to be
declared invalid, or the defendants were almost certain to be found not to have
infringed it, if the suit went to judgment.  It is not "bad faith"
to assert patent rights that one is not certain will be upheld in a suit for
infringement pressed to judgment and to settle the suit to avoid risking the
loss of the rights.  No one can be certain that he will prevail in a patent
suit.

(emphasis added in opinion).  Myriad asserts that its infringement
allegations are "more than colorable" and that they are "substantially
likely to prevail on [its] claim."

Expanding
on this argument, Myriad argues that only the "extraordinary circumstances"
of sham litigation is enough to vitiate Noerr-Pennington
immunity.  However, mere allegations that
litigation is a sham is not sufficient; rather, Myriad argues that the Supreme
Court established a two-prong test for establishing that litigation is a sham,
in Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,
508 U.S. 49, 62 (1993) (abbreviated as "PREI" in Myriad's
brief).  These prongs constitute an "objective"
component, established by successfully challenging the legal viability of a
claim, and a "subjective" component, based on the lawsuit's "economic
viability" according to Myriad.  The
"objectively baseless" standard requires a showing that "no
reasonable litigant could realistically expect success on the merits" and
that "[i]f an objective litigant could conclude that the suit is reasonably
calculated to elicit a favorable outcome, the suit is immunized under Noerr,
and an antitrust claim premised on the sham exception must fail," as this
test has been applied, inter alia, in
Bio Technology General Corp. v. Genentech, Inc., 267 F.3d 1325, 1333
(Fed. Cir. 2001); Cornucopia Prod., LLC v. Dyson, Inc., 881 F.Supp.2d
1086, 1102-03 (D. Ariz. July 27, 2012); Avery Dennison Corp. v. Continental
Datalabel, Inc., Case No. 10c2744, 2010 WL 4932666, at *5-6 (N.D. Ill. Nov.
30, 2010), and Asahi Glass Co.

The
existence of "probable cause" (of prevailing) is enough to defeat the
objective prong of the standard, Myriad asserts, citing PREI ("The existence of probable cause to institute legal
proceedings precludes a finding that an antitrust defendant has engaged in sham
litigation . . . [and] irrefutably demonstrates that an antitrust plaintiff has
not proved the objective prong of the sham exception.").  Satisfaction of this standard does not
require certainty but rather "a reasonable belief that there is a chance
that a claim may be held valid upon adjudication" which will be sufficient
if the action is "one where 'a similarly situated reasonable litigant
could have perceived some likelihood of success' [] "even in the absence
of supporting authority where the action is 'based on an objectively good faith
argument for the extension, modification, or reversal of existing law.'"

Applying
these standards, Myriad argues that Ambry has not alleged, nor can Ambry "plausibly
allege" that Myriad's suit is objectively baseless.  This argument is based on the parties'
different interpretations of the Federal Circuit and Supreme Court opinions in AMP v. Myriad Genetics.  According to Myriad, "only one of the
patent claims at issue in AMP — claim 6 of U.S. Patent No. 5,747,282 —
is asserted against Ambry in this case, and that claim was upheld by the
Supreme Court."  In addition, that
claim was considered by the Federal Circuit on remand in view of the Supreme
Court's decision in Mayo v. Prometheus and the Court found that this claim was
"patent-eligible [] under §101 [and that] Mayo does not change that
result."  Further, Myriad argues
that the Supreme Court held that "all claims directed to 'cDNA' are
patentable (an assertion that is at the least open to interpretation) and that
the Court "specifically referenced claim 6 (of the '282 patent) with
regard to patent eligibility as reciting cDNA.

With
this background, Myriad then argues that "[t]o motion to dismiss, Ambry
must allege sufficient facts to support its claim that it was objectively
unreasonable for Myriad to have asserted claim 6 of the '282 Patent and other
similar such claims in this lawsuit despite the fact that claim 6 was upheld by
the Supreme Court and the Federal Circuit (twice)" which it cannot do because
"'so long as at least one claim in the lawsuit has objective merit,' a
lawsuit will not be deemed a sham," citing Trustees of Univ. of Penn.
v. St. Jude Children's Research Hosp., Civil Action No. 12-4122, 2013 WL
1499518, at *12, __ F.Supp.2d __ (E.D. Penn. Apr. 12, 2013).  This is also true for the other claims Myriad
asserts because they were duly issued by the U.S. Patent and Trademark Office
and thus are entitled to a presumption of validity and were not challenged by the
plaintiffs in the AMP litigation (and thus not invalidated by the Court).  And, in a footnote, Myriad cites the portion
of the Court's Myriad opinion where Justice Thomas states that "this case
does not involve patents on new applications of knowledge about the BRCA1 and
BRCA2 genes.  Judge Bryson [of the Federal Circuit] aptly noted that, '[a]s
the first party with knowledge of the [BRCA1 and BRCA2] sequences, Myriad was
in an excellent position to claim applications of that knowledge.  Many of its
unchallenged claims are limited to such applications.'"  AMP, 133 S.Ct. at
2120 (citing Ass'n for Molecular Pathology, 689 F. 3d at 1349)."  There is also no basis for the District Court
to find Myriad's allegations on its remaining claims to be objectively baseless
because, according to Myriad, the Federal Circuit had the opportunity to
invalidate similar claims post-Mayo
and did not.  Specifically, Myriad cites
the second Federal Circuit opinion in the AMP v. Myriad case where the Court
stated that:

[P]erforming operations,
even known types of steps, on, or to create novel, i.e.,
transformed subject matter is the stuff of which most process or method
invention consists.  . . .  Thus, once one has determined that a claimed
composition of matter is patent-eligible subject matter, applying
various known types of procedures to it is not merely applying conventional
steps to a law of nature.

Ass'n for Molecular Pathology, 689 F. 3d at 1349 (emphasis
added).  In summary, Myriad argues that:

The patent claims asserted by Plaintiffs in this action cover either
synthetically made compositions of matter — namely, specially-engineered
synthetic DNA synthesized in a laboratory based upon knowledge about the BRCA1
and BRCA2 genes — or methods of using such synthetic compositions, the
patentability of which is expressly supported by Supreme Court and Federal
Circuit authority.  While reasonable minds may be able to differ over the
precise parameters of these decisions in an evolving area of law, labeling
either side's view on such issues as "bad faith," "objectively
baseless," or a "sham" is unsustainable.  Because Ambry's
antitrust counterclaims are premised on just such facially implausible
allegations, they are barred by Noerr-Pennington and should be
dismissed.

This
being district court litigation, it can be expected that the parties will
continue to pursue procedural and substantive advantages in pressing their
claims and counterclaims.  This case, and
the issues surrounding patent eligibility of generic diagnostic testing, is not
only far from over but it is only beginning, once again making overstated claims
of "victory" by the opponents of gene patenting pathetically premature.

For additional information
regarding this and other related topics, please see:

• "Amici Submit Brief in Support of Ambry Genetics and Gene by Gene," August 27, 2013
• "Ambry Responds to Myriad Lawsuit," August 7, 2013
• " Why Does Myriad Think It Can Win BRCA Gene
Lawsuits?" July 30, 2013
• "Myriad Genetics Files Infringement Suit
Against Gene by Gene for Genetic Diagnostic Testing of BRCA Genes," July
10, 2013
• "Myriad Genetics Files Suit Against Ambry
Genetics for Genetic Diagnostic Testing of BRCA Genes," July 9, 2013
•
"Association for Molecular Pathology
v. Myriad Genetics, Inc. (2013)," June 13, 2013
•
"Supreme Court Issues Decision in AMP
v. Myriad," June 13, 2013