Antitrust Claims Alleging Bad Faith Settlement Agreement to Exclude Marketing Generic Drug Should Be Allowed to Proceed

Case: Andrx Pharm. Inc. v. Elan Corp. (11th Cir. 8/29/05 - No. 03-13605)

The One Sentence Summary: Antitrust claims arising out of an alleged bad faith settlement agreement that precluded competitors from marketing a generic drug should have been allowed to proceed, but antitrust claims alleging bad faith patent litigation were properly dismissed under Noerr-Pennington doctrine.


What They Were Fighting About: Defendant Elan held a patent on a controlled release from of the drug naproxen. A third party, SkyePharma, filed an abbreviated new drug application ("ANDA") for a generic version, and subsequently entered a settlement with Elan. This settlement agreement triggered the 180 day exclusion period for the first competitor to file an ANDA to market a generic drug, and required SkyePharm to forego marketing the generic drug. Plantiff Andrx also filed an ANDA, and was sued by Elan for patent infringement. Andrx sued Elan alleging violation of federal and state antitrust laws, alleging that the patent was invalid and the patent litigation in bad faith due to the on-sale bar, and that the settlement agreement with SkyePharm was an illegal contract in restraing of trade. The district court granted Elan's motion for judgment on the pleadings, and denied permission to amend. The Eleventh Circuit affirmed in part and reversed in part.

Eleventh Circuit Holdings:

• The Noerr Pennington doctrine protected Elan from claims that its patent claims against Andrx were a violation of the anti-trust laws, and the sham litigation exception did not apply: "The United States Constitution expressly permits the government to grant exclusive monopolies in the form of patents, see U.S. CONST. art. I, § 8, cl. 8, and therefore the Sherman Act cannot be read to impede a litigant from seeking to defend constitutionally-permitted patent rights. See Prof’l Real Estate Investors, 508 U.S. at 56, 113 S. Ct. at 1926 (declining to impute an unconstitutional purpose to Sherman Anti-Trust Act). Moreover, as the Supreme Court has noted, engaging in litigation to seek an anticompetitive outcome from a court is First Amendment activity that is immune from antitrust liability. See Cal. Motor Transp. Co., 404 U.S. at 510, 92 S. Ct. at 611-12. Thus, we conclude Noerr- Pennington immunity was triggered by Elan’s filing suit against Andrx. In addition, we conclude that the sham litigation exception is inapplicable. Andrx’s main contention in its complaint that the patent litigation was a sham hinged on its claim that the on-sale bar found in 35 U.S.C. § 102 was triggered by Elan’s naproxen advertisement in the publication SCRIP World Pharmaceutical News. Two courts have subsequently rejected that argument. See Elan Corp., PLC, 272 F. Supp. 2d at 1340 (rejecting argument that the SCRIP advertisement triggered on-sale bar); Elan Corp., PLC, 366 F.3d at 1342 (rejecting the argument that the on-sale bar was triggered). Thus, while Elan may not have won its infringement lawsuit at this point, it certainly has made a winning argument against Andrx’s contentions of patent invalidity. Cf. Prof’l Real Estate Investors, 508 U.S. at 60 n.5, 113 S. Ct. at 1928 n.5. Thus, it is manifest that Elan’s patent infringement proceedings were not objectively baseless, and therefore not a sham. Accordingly, because the Noerr-Pennington doctrine applies, and the sham litigation exception is inapplicable, the district court properly found that Elan was immunized from antitrust liability for filing infringement proceedings against Andrx."
• The district court erred in dismissing the claims challenging the settlement agreement with SkyePharm as an illegal restraint of trade: "In sum, then, while the allegations regarding Elan’s infringement suits against Andrx were immunized under the Noerr-Pennington doctrine, Andrx did sufficiently state a claim under both §1 and §2 of the Sherman Anti-Trust Act that Elan’s settlement agreement with SkyePharma, coupled with SkyePharma’s putative agreement not to market, violated antitrust law."
  
• The district court did not clearly err in denying leave to amend the complaint when Andrx delayed in seeking amendment and it sought to change its legal theory.