On June 8, 2020, an Illinois Federal District Court Judge dismissed without prejudice a Complaint by indirect purchasers of the autoimmune disorder biologic product, Humira. Plaintiffs alleged that AbbVie Inc. and its subsidiary, AbbVie Biotechnology, Ltd. (collectively, AbbVie), violated Sections 1 and 2 of the Sherman Act and state laws by engaging in allegedly anticompetitive conduct to protect AbbVie's share of the "market for Humira" in the United States. In particular, the Complaint asserted that AbbVie unlawfully obtained and asserted patents against potential biosimilar competitors, and then entered into settlements with those potential competitors (also named as Defendants in the lawsuit) as part of a market allocation scheme.

The court's decision is notable in that it roundly rejects allegations that AbbVie's lawful enforcement of patent rights violated the antitrust laws, and confirms there is no "one size fits all" requirement for settling patent litigations in different jurisdictions.

The Complaint

In March 2019, the initial Indirect Purchaser Plaintiffs' (IPPs) class action complaint against AbbVie related to Humira was filed by a New York grocery union. That action was joined later by other indirect purchasers of Humira in a consolidated action, In re Humira (Adalimumab) Antitrust Litigation, in the Northern District of Illinois.1

Filed in August 2019, the consolidated IPP amended Complaint alleged that in the years leading up to the expiration of Humira's main patent in 2016, AbbVie sought intellectual property protection to create "a thicket of intellectual property protection so dense that it prevented would-be challengers from entering the market with cheaper biosimilar alternatives."2 IPPs alleged that AbbVie filed a total of 247 patent applications covering the uses of Humira, as well as manufacturing processes, ingredients, and alternative formulations. AbbVie ultimately obtained 132 patents—more than 90% of which were issued two years before expiration of Humira's main patent. 

According to the Complaint, AbbVie then allegedly leveraged that "patent thicket" during negotiations with other Defendants—potential Humira competitors—to force them to agree to delay biosimilar entry in the United States in return for licensing agreements to permit those competitors to launch in Europe sooner.

While AbbVie secured patent protection for Humira, the other Defendants filed applications with the Food & Drug Administration (FDA) for approval of their biosimilar products. Amgen filed the first application for a biosimilar in November 2015. AbbVie then filed a patent infringement suit against Amgen, which settled in the fall of 2017. AbbVie sued and settled actions against other manufacturers seeking to market Humira biosimilars, including Defendants Samsung Bioepsis, Sandoz, and Fresenius Kabi USA. According to IPPs, the settlement agreements required those manufacturers to delay product launch of their Humira biosimilars in the United States until at least 2023, and in Europe until the second half of 2018.

IPPs asserted that the assertion of AbbVie's so-called "patent thicket" constituted monopolization in violation of Section 2 of the Sherman Act as well as state laws. In addition, IPPs alleged that AbbVie's agreements with Amgen, Samsung Bioepis, Sandoz, and Fresenius Kabi USA were market allocation and so-called "pay-for-delay" schemes in violation of Section 1 of the Sherman Act as well as state laws.

The Decision

On June 8, 2020, Judge Manish S. Shah of the US District Court for the Northern District of Illinois dismissed IPPs' Complaint without prejudice.

Sherman Act Section 2 Claims

The court first addressed IPPs' Sherman Act Section 2 claims and held that AbbVie's patent assertion activity was protected under Noerr-Pennington since the actions it initiated were not "objectively baseless."

The Noerr-Pennington doctrine protects some conduct that may otherwise violate the antitrust laws but that relates to government petitioning, including litigation.3Noerr-Pennington protection does not extend, however, to sham litigation, or "a pattern of baseless, repetitive claims."4 Sham litigation is identified through a two-part test: (1) "the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits"; once the lawsuit has been found to be "objectively baseless," the court asks (2) "whether the baseless lawsuit conceals an attempt to interfere directly with the business relationship of a competitor, through the use of the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon."5

The court considered allegations relating to three types of proceedings AbbVie had engaged in that were alleged to be subject to sham litigation: (1) AbbVie's patent prosecution and inter partes review proceedings before the United States Patent and Trademark Office; (2) the biologic licensing process before the FDA; and (3) the patent infringement actions in federal district court. The court ultimately found that AbbVie had not engaged in "objectively baseless" conduct, because AbbVie's rate of patent success (132 of 247) exceeded 50% and thus was "too high to plausibly allege sham petitioning as a matter of law."6 AbbVie's rate of success in the inter partes review process was even higher: a 73% success rate. Indeed, other courts had rejected sham petitioning allegations when the success rate was comparable to AbbVie's here.7

Although the court entertained that a limited portion of AbbVie's conduct may have been objectively baseless, to the extent some of AbbVie's actions did not run afoul of the antitrust laws while others possibly did, the court stated "the vast majority of the alleged scheme is immunized from antitrust scrutiny, and what's left are a few sharp elbows thrown at sophisticated competitors participating in regulated patent and biologic-drug regimes."8

As a result, the court concluded that it did not need to address the second element of a sham litigation analysis. 

Sherman Act Section 1 Claims

The court next addressed IPPs' Sherman Act Section 1 claims of market allocation and "pay-for-delay". First, the court held that the agreements between AbbVie and its competitors should be analyzed under the rule of reason and "do not justify per se treatment because they are not facially anticompetitive in any way that would always or almost always tend to restrict competition."9 Applying that rule of reason analysis, the court rejected IPPs' market allocation allegations as the Complaint here did not allege any agreement by AbbVie to stop selling Humira in Europe or impose any limitation on its ability to compete there. Further, the court noted that the Defendants had legitimate reasons for the different settlement terms in different jurisdictions. The court described how patents are treated differently when "it comes to geographic restrictions," and under the Patent Act, "an agreement to permit entry into a market previously protected by a patent does not become a per se invalid market allocation agreement just because it is specific to one territory (or one country)."10

In addition, the court noted that under FTC v. Actavis, AbbVie's patent litigation settlements should be analyzed under the rule of reason.11 In Actavis, the Supreme Court found that patent litigation settlements between patent holders and alleged infringers that allowed the alleged infringer to compete before expiration of the at-issue patent and transferred some value from the patent holder to the alleged infringer are subject to the rule of reason. In general, the Supreme Court identified the following factors that courts should consider when analyzing so-called "reverse payment" patent litigation settlements: the reverse-payment's "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."12

The court found that the patent litigation settlement agreements allowed for the biosimilar products to enter without AbbVie paying the biosimilar competitors to delay entry into the market. The Supreme Court has stated that "is not an antitrust problem."13 In particular, the court found that the settlements with "one early entry date for the European market and a different early entry date for the U.S. market" were "both permissible under Actavis."14 That is, the settlements both allowed for entry before patent expiration and did not include a large and unjustified payment because they had the effect of increasing competition in Europe, when patents otherwise may have prevented that competition. The court further highlighted that these agreements increased competition in the U.S. and European market—a benefit for consumers—as compared to so-called "No-AG" settlement agreements that feature a commitment from the brand drug manufacturer not to compete against the generic with an authorized generic product.15

Antitrust Injury

After addressing the merits of the IPPs' allegations, the court then found that the IPPs had not alleged antitrust injury. IPPs alleged that they were forced to pay monopoly prices for Humira for longer than they would have if Humira faced generic competition. The delay allegedly was the result of both AbbVie's litigation to enforce its patents and the agreements with other Defendants which allegedly delayed those competitors' entry. The court rejected both theories of antitrust injury because of AbbVie's success in prosecuting its patent portfolio. The court noted that IPPs failed to allege an injury because given AbbVie's "impassable" patent portfolio, the many inter partes review challenges it had survived, and the fact that "it would have taken one valid and infringed patent to preclude market entry[,] it [was] not plausible that these agreements prevented an even earlier entry date in the U.S. market for biosimilars."16

State Law Claims

IPPs had agreed that if their Sherman Act claims failed, then so too did their state law antitrust and consumer protection claims. The court also dismissed IPPs' state law claims based on unfair and unconscionable conduct because once the antitrust theories "fall out of the case it becomes difficult to assess how the allegations satisfy the unfair or unconscionable standards of the various states' laws."17

Implications

The court's decision confirms that patent holders may lawfully obtain and enforce patents against alleged infringers and protects their ability to settle. This is even true when additional patents are obtained near the expiration of initial patents protecting the patent holder's exclusivity. Here, the court's emphasis on Abbvie's success rate in patent litigation suggests that, while such a strategy can be lawful, a company seeking additional patent protections for its products should be mindful to seek and enforce patents for which it has a reasonable chance of success. Although not determinative, an antitrust defendant can point to the Humira decision as rejecting liability when the defendant has successfully petitioned the government for patent protection—even when that occurs frequently or near the loss of exclusivity. The Humira decision suggests that successful petitioning will not only overcome allegations of baselessness but also limit plaintiffs' ability to show antitrust injury.

In addition, the court's rejection of the IPPs' market allocation and "pay-for-delay" allegations are notable for two reasons. First, although not specifically addressed in its opinion, the court applied the same rule of reason analysis to patent litigation related to biologic products as the Supreme Court applied to small molecule drugs in Actavis. Second, the Humira decision acknowledged that parties may have legitimate, independent reasons for settling patent litigation related to the same products in different jurisdictions and that different entry dates in those settlements can be procompetitive. To the extent one settlement is more favorable to the potential infringer, it does not necessarily indicate the sort of "payment" prohibited by Actavis. In light of this decision, biologic product manufacturers must abide by the same rules as small molecule drug manufacturers when settling patent litigation—but they can take each litigation separately when evaluating the antitrust risk of a particular settlement.

Footnotes

1. Complaint, In re Humira (Adalimumab) Antitrust Litigation, No. 1:19-cv-01873, Dkt. No. 1 (N.D. Ill. March 18, 2019). IPPs seek injunctive relief under the federal antitrust laws and damages under state laws with Illinois Brick  repealer statutes. Although Illinois Brick  precludes IPPs from recovering damages under federal antitrust law, Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), they are not precluded from seeking injunctive relief under the same laws. See Apple Inc. v. Pepper, 139 S. Ct. 1514, 1520 n.1 (2019) (declining to address whether Illinois Brick  extends to injunctive relief). IPPs may recover damages from state antitrust laws. California v. ARC America Corp., 490 U.S. 93 (1989).

2. Memorandum and Opinion, In re Humira (Adalimumab) Antitrust Litigation, No. 19-cv-1873-MS, Dkt. No. 170, at 4 (N.D. Ill June 8, 2020).

3. E. R. R. Presidents Conference v. Noerr Motor Freight, Inc. 365 U.S. 127 (1961); United Mine Workers of Am. v. Pennington 381 U.S. 657 (1965). 

4. California Motor Transp. Co. v. Trucking Unlimited 404 U.S. 508, 513 (1972).

5. Sham litigation is identified through a two-part test: (1) "the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits"; once the lawsuit has been found to be "objectively baseless," the court asks (2) "whether the baseless lawsuit conceals an attempt to interfere directly with the business relationship of a competitive, through the use of the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon." Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc.,  508 U.S. 49, 51, 60–61 (1993).

6. Memorandum and Opinion, In re Humira (Adalimumab) Antitrust Litigation, No. 19-cv-1873-MS, Dkt. No. 170, at 25 (N.D. Ill. June 8, 2020).

7. Compare  Waugh Chapel S., LLC v. United Food & Commercial Workers Union Local 27 728 F.3d 354, 365 (4th Cir. 2013) (one out of fourteen (7%) success rate suggests a sham) with SS-POSCO Indus. v. Contra Costa Cnty. Bldg. & Const. Trades Council, AFL-CIO 31 F.3d 800, 811(9th Cir. 1994) (no sham litigation when fifteen of twenty-nine (52%) of the lawsuits were successful); Kaiser Found. Health Plan, Inc. v. Abbott Labs., Inc. 552 F.3d 1033, 1046–47 (9th Cir. 2009) (no sham litigation when seven out of seventeen (41%) of the lawsuits were successful and where, in the other ten, the defendants had plausible arguments on which they could have prevailed); Twin City Bakery Workers & Welfare Fund v. Astra Aktiebolag 207 F.Supp.2d 221, 224 (S.D.N.Y. 2002) (no sham litigation when "claimsof infringement of four of the six asserted patents … proceed{ed} beyond summary judgment, and two of the four … proceed{ed}through trial").

8. Id.  at 21.

9. Id.  at 36.

10. Id.  at 39.

11. 570 U.S. 136 (2013).

12. Id.  at 159.

13. Id.  at 148.

14. Memorandum and Opinion, In re Humira (Adalimumab) Antitrust Litigation, No. 19-cv-1873-MS, Dkt. No. 170, at 45 (N.D. Ill. June 8, 2020).

15. Id.  at 46–48.

16. Id.  at 57.

17. Id. at 60.

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