By E. Darius Sturmer, J.D.
Pharmaceuticals giant Novartis AG and two subsidiaries should not face antitrust liability stemming from their alleged misuse of patent protection for a component necessary for the manufacturing of Novartis’ branded leukemia drug, Gleevec, to delay the introduction of a generic equivalent, the U.S. Court of Appeals in Boston has ruled. The two putative classes of purchasers bringing the suit failed to plausibly allege fraudulent patent procurement or sham enforcement that would invoke an exception to the Noerr-Pennington immunity otherwise afforded to the defendants for enforcing their patent through litigation. Dismissal of the putative classes’ federal and state antitrust claims was affirmed (United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund v. Novartis Pharmaceuticals Corp., August 21, 2018, Barron, D.).
The respective plaintiffs in the consolidated actions consisted of a direct purchaser of Gleevec, raising claims under the Sherman Act, and a group of "end-payor" health plans that purchased Gleevec on behalf of their beneficiaries, that brought their claims under the antitrust laws of 23 states and the District of Columbia. Despite these different postures, the misconduct they alleged was the same. According to the plaintiffs, Novartis committed antitrust violations by obtaining through a fraud on the U.S. Patent and Trademark Office (USPTO) a patent for a particular form of Gleevec’s active ingredient—a compound called imatinib—that was necessary to make the drug and by then seeking to enforce that patent, through sham infringement litigation, against manufacturers trying to enter the market with generic versions of the drug.
The plaintiffs alleged that the defendants’ scheme began with the issuance of Gleevec’s original patent, which claimed imatinib along with the compound’s "corresponding salts," in 1996. Four years later, Novartis filing an application for another patent, this one pertaining to one of these "corresponding salts," the mesylate salt of imatinib. The application claimed a certain beta-crystalline form of that salt. Although the USPTO initially ruled that the form was anticipated by Novartis’ existing patent, the Patent Trial and Appeal Board (PTAB) reversed that ruling, clearing the way for the patent office to issue Novartis a patent for the beta-crystalline form of imatinib mesylate in 2005. That patent is set to expire in 2019.
However, competitive pressures soon ensued that gave rise to the present action, the plaintiffs averred. In 2006, a would-be generic competitor named Sun Pharma filed an abbreviated new drug application (ANDA) with the Food and Drug Administration (FDA), seeking to market a generic version of Gleevec in the United States. In the application, Sun certified that Novartis’ second patent on Gleevec was invalid; thus, it sought FDA approval to market its generic as soon as the original Gleevec patent expired in July 2015. While waiting, Sun sued for a declaratory judgment that the second patent was indeed invalid, and Novartis counterclaimed, alleging infringement of that patent and seeking a declaration that it was valid. Before any substantive rulings were reached in that litigation, however, Novartis and Sun entered into a settlement—the financial terms of which were undisclosed—that permitted Sun to launch its generic version of Gleevec in February 2016, seven months after the expiration of the original patent.
The plaintiffs’ lawsuits each contended that Novartis had fraudulently procured the later patent by falsely representing, first, that the prior art did not disclose imatinib mesylate and, second, that the discovery of its beta-crystalline form was "surprising." The complaints further charged that Novartis’ subsequent infringement litigation against manufacturers of generic versions to enforce that patent was a sham for anticompetitive conduct, given that Novartis could not reasonably expect that patent to withstand an invalidity defense. The plaintiffs argued that this Walker Process-type fraud and sham enforcement activity each warranted the application of an exception to Noerr-Pennington immunity, thus subjecting Novartis’ conduct to antitrust scrutiny.
The federal district court in Boston rejected each of these arguments and agreed with Novartis that it was entitled to Noerr-Pennington immunity. On appeal, the plaintiffs contended that the trial court had erred in concluding they had not plausibly alleged that Novartis had engaged in Walker Process fraud in obtaining the patent at issue or in sham litigation in enforcing it.
Walker Process fraud. Considering the strength of the plaintiffs’ arguments pertaining to whether Novartis had engaged in fraud within the meaning of Walker Process or in sham enforcement activity, the appellate court found no error in the lower court’s conclusions. Regarding fraudulent procurement, the plaintiffs failed to plausibly allege that either of the allegedly false representations by Novartis in its application for the second patent was material to the issuance of the patent, the appellate court said. "As the district court observed and even the plaintiffs accepted," the appellate court explained, "Novartis eventually actually did submit prior art to the Patent Office that disclosed imatinib mesylate," and there was no basis for disputing that the patent examiner then considered it.
As for Novartis’s use of the word "surprising" in conjunction with the beta-crystalline discovery, the plaintiffs did not show that this characterization was "anything more than an assertion of non-obviousness," the appellate court stated. "The bare assertion that an invention is not obvious—which, of course, is implicit in any patent application—is not in and of itself a material misrepresentation for purposes of Walker Process," the court continued, but "a legal assertion that the patent examiner is free to assess in light of the prior art that is available to the examiner."
Sham litigation. The plaintiffs’ allegation that Novartis "sham" litigation exposed it to antitrust liability was equally untenable, in the appellate court’s view, because they failed to plausibly challenge the infringement litigation as "objectively baseless." To the contrary, the PTAB’s ruling in favor of Novartis with respect to the beta-crystalline prior art was significant for purposes of determining whether Novartis could have reasonably expected success in its patent infringement litigation, insofar as any defense to that infringement litigation was based on the invalidity of the patent. Furthermore, the plaintiffs identified no authority to support their contention that their allegations sufficed "to plausibly allege that, despite the Board’s ruling and the patent’s issuance, Novartis’s litigation to enforce the patent was a sham."
The case is No. 17-1714.
Attorneys: Thomas M. Sobol (Hagens Berman Sobol Shapiro LLP) and John D. Radice (Radice Law Firm, PC) for United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund, Laborers Health and Welfare Trust Fund for Northern California and RXDN, Inc. Saul P. Morgenstern (Arnold & Porter Kaye Scholer LLP) and William A. Zucker (McCarter & English LLP) for Novartis Pharmaceuticals Corp., Novartis Corp. and Novartis AG.
Companies: United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund; Laborers Health and Welfare Trust Fund for Northern California; RXDN, Inc.; Novartis Pharmaceuticals Corp.; Novartis Corp.; Novartis AG
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