“Although there was no direct evidence of AbbVie’s subjective intent, the district court inferred subjective intent from the fact that AbbVie’s lawyers were very experienced with patent matters and would know that litigation would delay generic competition.”
On Wednesday, May 19, the response brief of the Federal Trade Commission (FTC) was filed with the US Supreme Court in AbbVie v. FTC. The petition for writ of certiorari filed by AbbVie asks the nation’s highest court to decide whether lower courtserred in finding that AbbVie’s district court litigation involving patents covering its AndroGel testosterone treatment met the sham litigation exception to Noerr-Pennington doctrine. The FTC’s brief urged the Supreme Court to deny AbbVie’s petition for writ, a decision that arguably could cast into doubt pharmaceutical firms’ ability to enforce their patent rights under decades-old meant to balance the economic interests of innovative drug developers with the public interests served by generic drug makers.
AbbVie Faces FTC Antitrust Action After Settling Hatch-Waxman Suits Against Teva and Perrigo
The present appeal stems back to patent infringement litigation filed by AbbVie in 2011 against generic drug makers Teva Pharmaceuticals and Perrigo Company over Paragraph IV certifications those companies made in their abbreviated new drug applications (ANDAs) for generic versions of AbbVie’s AndroGel that Teva and Perrigo filed with the US Food and Drug Administration (FDA). By certifying to the FDA that their generic testosterone treatments would not infringe AbbVie’s AndroGel patents, or in the alternative that those patents were invalid, Teva and Perrigo provoked district court litigation under the Hatch-Waxman Act, legislation implemented by Congress in 1984 to incentivize branded drugmakers to quickly bring suits to adjudicate infringement claims after a Paragraph IV certification. The Paragraph IV certifications filed by Teva and Perrigo noted that their generic testosterone treatment didn’t literally infringe AbbVie’s Androgel patent claims, which covered the use of isopropyl myristate, and that any doctrine of equivalents argument advanced by AbbVie would be overcome by prosecution history estoppel as AbbVie had amended its patent from claiming the use of any penetration enhancer to claim only isopropyl myristate.
Although both the Teva and Perrigo suits were ultimately settled by AbbVie, the FTC filed a September 2014 lawsuit in the Eastern District of Pennsylvania alleging that AbbVie’s lawsuits were sham lawsuits meant purely to delay the market entry of generic versions of AndroGel. The district court ordered AbbVie to pay $448 million in disgement, finding that the lawsuits met the sham exception to Noerr-Pennington doctrine, which immunizes private companies from federal antitrust suits under an interpretation of the First Amendment when those companies are litigating valid rights that create anticompetitive effects. The sham litigation exception to Noerr-Pennington required the FTC to prove (1) that AbbVie’s lawsuits were objectively meritless; and (2) that AbbVie’s subjective intent in filing the suits was only to interfere with the business interests of its competitors.
The district court found objective baselessness in AbbVie’s suits as AbbVie had “no plausible argument to overcome… the application of prosecution history estoppel” asd by Teva and Perrigo in their FDA filings. Although there was no direct evidence of AbbVie’s subjective intent, the district court inferred subjective intent from the fact that AbbVie’s lawyers were very experienced with patent matters and would know that litigation would delay generic competition. On appeal to the US Court of Appeals for the Third Circuit, the district court’s ruling was upheld in part on the reasoning that the objective and subjective elements of the sham litigation are interrelated and the objective baselessness of the suit, coupled with the experience of AbbVie’s attorneys, satisfied the subjective element.
FTC Argues Proper Application of Noerr-Pennington Sham Litigation Exception Should Prevent Appeal
In the agency’s brief in opposition, counsel for the FTC argued that the Supreme Court could simply deny AbbVie’s petition based on the Court’s regular practice of interlocutory review in cases where further lower court proceedings could affect the issues in AbbVie’s petition. Although the Third Circuit affirmed the district court’s sham litigation finding, it reversed the finding that AbbVie’s settlement with Teva constituted an illegal reverse-payment agreement and remanded for further dates on that claim. “The current interlocutory posture of the case is a sufficient reason to deny the petition for a writ of certiorari,” the FTC argued.
Should the Supreme Court disagree on that point, the FTC argues that both the district and circuit courts properly found subjective intent in the circumstantial evidence of the case, including AbbVie’s lawyers’ knowledge of prosecution history estoppel, their knowledge of AndroGel’s commercial success, and the regulatory context in which AbbVie’s Hatch-Waxman suit triggered an automatic 30-month stay of FDA approval for generic competitors. The FTC also addressed AbbVie’s arguments on petition that the lower courts’ application of the Noerr-Pennington sham litigation exception conflicted with Supreme Court precedent. Lower courts were free to credit objective baselessness as having evidentiary weight for the subjective prong of the test, the FTC argued, and that the collateral injury inflicted by the 30-month stay under the Hatch-Waxman framework was evidence that AbbVie was abusing a governmental process to directly interfere with competitors’ business relationships. Even if AbbVie is correct that the subject prong of the sham litigation exception required evidence of actual knowledge or belief of the meritless nature of the Teva and Perrigo suits, the FTC noted that the district ruled that AbbVie acted with “actual knowledge that the suits lacked merit” and “with no expectation of prevailing.” Further, there was no conflict with circuit court precedent because the Federal Circuit’s presumption that patent suits are brought in good faith can be overcome by circumstantial evidence of acting in bad faith.
The FTC’s response brief decisions also mitigated raised concerns by AbbVie’s petitions that the lower courts’ would harm innovation by patenting negatively impact and attorney-client privilege. AbbVie’s petition noted that 10% of all patent litigation filed in US district courts is filed under the Hatch-Waxman regulatory process and by relying on objective evidence upon which reasonable decisionmakers could disagree, pharmaceutical firms now face heightened antitrust scrutiny diminishing their incentive to innovate even if they subjectively believe that their patent suit has merit. As well, the court of appeals shifted the burden onto AbbVie to prove subjective intent by presenting evidence of the opinions and mental impressions of AbbVie’s patent lawyers, which would have required the waiving of privilege. In response, the FTC contended that AbbVie raised no argument that the vast majority of Hatch-Waxman litigation would be objectively baseless. Further, AbbVie’s privilege argument relies on the unusually facts of the underlying case, in which no business executives signed off on the Teva and Perrigo lawsuits. While the attorney-client privilege is an important concern to balance, the FTC argued that barring courts from inferring subjective intent could lead pharmaceutical firms to simply delegate all legal decisions to in-house attorneys in order to invoke privilege.
FTC Enforcement Actions Against AbbVie Are Far from Over
AbbVie’s patent portfolio has taken a great deal of flak in Washington in recent weeks, especially regarding the company’s blockbuster anti-inflammatory drug Humira. On May 18, a group of House Democrats called for an FTC inquiry into AbbVie’s patent practices which have delayed market entry for a generic version of Humira, and the House Oversight Committee grilled AbbVie CEO Richard Gonzalez on those same practices. “We want drug companies to be successful, but abusive, unfair pricing and anticompetitive practices mean these medicines are out of reach for too many Americans,” said Representative Carolyn Maloney (D-NY), one of the House Democrats calling for an FTC into AbbVie’s Humira, at the House Oversight Committee hearing. Although President Biden has yet to nominate someone for the FTC Chair, Acting Chair Rebecca Kelly Slaughter’s comments surrounding Qualcomm’s successful appeal of antitrust against that company’s patent licensing practices indicates that the FTC under President Biden may become very active in raising antitrust charges against patent owners.