A New Antitrust Approach After Humira 'Patent Thicket' Ruling

The U.S. District Court for the Northern District of Illinois recently found in the Humira antitrust litigation that AbbVie Inc.’s so-called patent thicket surrounding its Humira product does not violate the antitrust laws,[1] raising questions about what conduct is anti-competitive in the pharmaceutical industry.

And the problem is potentially exacerbated where the product in question is a biological drug or device, where the stakes, and profits associated with the product, are much higher. In view of the Humira decision, parties concerned with the potential anti-competitive conduct of a biologic reference product sponsor should reframe their analysis.

Focus on specific conduct; the overall scheme is secondary.

The Humira court stated:

The complaint brings together a disparate set of aggressive but mostly protected actions to allege a scheme to harm competition and maintain high prices. The allegations—even when considered broadly and together for their potential to restrain trade—fall short of alleging the kind of competitive harm remedied by antitrust law.[2]

This quote illustrates the difficulty that can be faced in demonstrating that a company is using anti-competitive methods to protect its highly profitable pharmaceutical product. The plaintiffs in the Humira case were arguing a novel theory: that AbbVie’s patent thicket was so large that it was itself anti-competitive and that it resulted in competition-defeating settlement agreements.

But at the heart of every antitrust complaint is an allegation of a small group of actions that are by themselves anti-competitive. In view of the Humira ruling, antitrust allegations should be refocused away from the macroscopic level. As attorneys, we want to tell stories — and we should as the story is important to the trier of fact’s understanding of the real-world impact of the anti-competitive actions.

But while the overall scheme of the reference sponsor should be discussed, the alleged anti-competitive conduct is what should be driving the narrative. The focus of the allegations, therefore, should be the actual anti-competitive action — for example the asserting of patents known to be not infringed or invalid, or demonstrating a pattern of obtaining weak patents — rather than the fact the reference sponsor obtained some number of patents.

The anti-competitive actions should not be presented as merely a part of an overall scheme of conduct that is largely permissible.

Fair, reasonable and nondiscriminatory patent licensing[3] cases that involve allegations of tying or bundling with standard-setting patents provide a good analogy.

In those cases, a plaintiff may allege that the holder of a standard-setting patent required a competitor to license other patents that are weak and not related to the FRAND patent or to license other unpatented products. The overall goal of the holder of the reference-setting patent is to increase their market power and therefore monopoly pricing, but the focus is on the specific improper tying.

Similarly, in a biological products scenario, instead of focusing on the vast patent landscape a reference sponsor might have and all the litigation it is involved in with respect to the product, the focus could instead be on a number of facially improperly obtained and asserted patents.

Any attempts to assert, license or settle such patents along with other patents in the portfolio contaminates the entire process. The permissible conduct that restrained trade, if could be said, was all an attempt to legitimize or obtain value from the improper conduct.

Actions not constituting petitioning activity can be fertile grounds.

As part of focusing on the specific anti-competitive actions, look at conduct that is not considered permissible petitioning activities — such as negotiations between competitors — to support antitrust allegations. Obtaining and asserting patents have traditionally been viewed as protected petitioning of the government that can only be found to be anti-competitive if the petitioner’s actions were objectively baseless.[4]

But, as the Humira court found, the information exchange required by the Biologics Price Competition and Innovation Act[5] does not involve the reference sponsor petitioning the government in any way.

The information exchange stage of the BPCIA can be a key time for fruitful settlement discussions between the parties, but it also can be a time where the reference sponsor could attempt to exert its superior market position with respect to the biologic in question, or a related product, all with an eye toward short-term but lucrative market preservation.

So attempts to improperly leverage patents during the information exchange could constitute anti-competitive behavior.

This scenario is a natural extension of cases where antitrust liability resulted from objectively improperly listing patents in the Orange Book with the intent that competition be delayed or restrained.[6] With the information exchange, the improper conduct — be it the threat of asserting a patent known to be invalid or an attempt to extract anti-competitive licensing terms — is done to impair competition.

Many antitrust actions in the pharmaceutical world have a difficult time with the required showing of antitrust injury. But the antitrust injury in the information exchange context could be any resulting delay in market access, delay in competition or rise in price.

And of course, as seen in the Humira opinion, settlement negotiations or agreements are not petitioning activity, and any conduct such as improper attempts at tying or enforcement of exclusivities could rise to the level of anti-competitive conduct.

Embrace alternative legal theories.

While not nearly as sexy as antitrust allegations, certain conduct may allow a complainant to allege violation of other pertinent laws. These alternative legal theories may not allow for treble damages as in the antitrust world, but successful pleading of these alternative theories might cease the improper conduct or lead to a settlement.

For example, if the patentee’s actions improperly extend the scope or temporal coverage of the patent, than the complainant may have a patent misuse cause of action.

Or, the patentee’s actions could constitute a violation of state unfair business practices laws. Many untoward actions might not rise to the level of anti-competitive business conduct, but those same actions could violate these other legal theories and should be fully considered.

Conclusion

Demonstrating that a reference sponsor violated the antitrust laws can be a difficult proposition. But focusing on the improper conduct, looking beyond the actual obtaining and assertion of patents, and considering alternative legal theories could begin to level the playing field.

This article is reprinted with permission from Law360, June 26, 2020, www.Law360.com.

[1] In Re: Humira (Adalimumab) Antitrust Litigation , No. 19-cv-01873, Slip. Op. (N.D. Ill. Jun. 8, 2020).

[2] Id. at 18.

[3] FRAND stands for Fair, Reasonable, and Non-Discriminatory pricing. When a company’s intellectual property has become an industry technical standard, often that industry’s standards organization will request that company commit to provide licenses to its intellectual property at fair, reasonable and non-discriminatory prices.

[4] Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc. , 508 U.S. 49, 51 (1993).

[5] The “information exchange” required by the BPCIA is often referred to as the “patent dance.” The process, however, involves the exchange of more than just patents. In addition, the process is adversarial, and dances are only adversarial in junior high or the in the movie Footloose.

[6] See, e.g., In Re: Lantus Direct Purchaser Antitrust Litigation , 950 F.3d 1, 10-14 (1st Cir. 2020).