Antitrust Law Daily Noerr-Pennington immunity causes dismissal of antitrust counterclaim in drug patent dispute
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Tuesday, July 27, 2021

Noerr-Pennington immunity causes dismissal of antitrust counterclaim in drug patent dispute

By Robert B. Barnett Jr., J.D.

An antitrust counterclaim was dismissed under the Noerr-Pennington immunity doctrine because the original patent infringement suit was neither objectively nor subjectively baseless.

A generic drug manufacturer’s antitrust counterclaim in a patent infringement suit involving Prevacid filed by the name brand drug manufacturer was dismissed because of Noerr-Pennington immunity, given that the alleged antitrust act was the filing of the patent infringement lawsuit itself, the New Jersey federal district court has ruled. The generic manufacturer, Zydus Pharmaceuticals, did not qualify for the exception to the Noerr-Pennington doctrine involving baseless lawsuits because Zydus failed to demonstrate that the brand name manufacturer, Takeda Pharmaceutical Company, filed an objectively or substantively baseless lawsuit. The Noerr-Pennington doctrine applied as long as the plaintiff perceived that it had some chance of winning the lawsuit (Takeda Pharmaceutical Co. Ltd. v. Zydus Pharmaceuticals [USA] Inc., July 26, 2021, Wolfson, F.).

Background. Takeda manufactures Prevacid, a drug that treats gastroesophageal reflux. Prevacid enjoyed a reign as the only drug on the market for that condition for many years. Zydus obtained an Abbreviated New Drug Application (ANDA) for a generic version of Prevacid in 2010, which triggered a lawsuit filed by Takeda.

Even though the 30-month stay created by the filing of the lawsuit ended in 2014, Zydus did not obtain final FDA approval for its generic until 2018 because of various problems with the ANDA application. During that period, the FDA rejected more than one of Zydus’s ANDAs. At one point, when Zydus reapplied for a new ANDA to produce a generic version of Prevacid, Zydus notified Takeda that it was re-applying, as it was required to do. Takeda sued Zydus again for patent infringement, triggering a new 30-month stay. Zydus then filed its answer with a counterclaim alleging that Takeda’s filing of the suit was an antitrust act designed to preserve its monopoly in the market. After testing the FDA-approved generic during the course of the lawsuit, however, Takeda satisfied itself that no patent infringement had occurred, and it voluntarily dismissed its lawsuit. Zydus, however, refused to dismiss its counterclaim. Takeda then filed a motion for summary judgment, asserting Noerr-Pennington immunity, whichimmunizes citizens who petition the government for redress from antitrust liability.

Immunity. The Noerr-Pennington doctrine contains a single exception to the general rule that the filing of a complaint cannot constitute an antitrust act—if the complaint is sham litigation. Thus, if Zydus was to avoid summary judgment on its counterclaim, it would have to establish that Takeda’s patent infringement suit constituted sham litigation. The Noerr-Pennington exception, however, is narrowly drawn. All that a plaintiff has to show is that it had some chance of winning the lawsuit. The test is applied both objectively and subjectively.

Objective baselessness. The test for determining objective baselessness is the same as probable cause. Probable cause means a reasonable belief that there is a chance that a claim may be held valid upon adjudication.

The court rejected Zydus’s argument that its 2018 Certification foreclosed all reasonable grounds for suit because the Certification stated that the generic did not infringe Prevacid. Takeda, the court said, was not required to take Zydus’s statement at face value. It had the right, especially given the parties’ history, to question its accuracy. The fact that the patent at issue had been previously litigated did not help Zydus’s argument either, because much had happened involving the drug applications since that litigation, particularly with the FDA’s rejection of Zydus’s earlier ANDA.

The court concluded that, even if Takeda had no information at the time it filed suit that the generic infringed Prevacid, it had a potentially meritorious claim under the Doctrine of Equivalents (DOE). The DOE claim had never been previously litigated. A "possible, albeit nebulous, DOE argument" was enough to establish Noerr-Pennington immunity under the objective standard. As a result, the court said, there "is enough evidence in the record here to establish probable cause to sue, even if failure was more likely than not." The court also rejected all of Zydus’s additional arguments for avoiding immunity, which had to do with Takeda’s alleged delays in the trial, ruling instead that Takeda’s actions, including its quick turnaround on testing of the generic and voluntary dismissal, gave no objective indication that the litigation was a sham.

Subjective baselessness. Subjective baselessness looks at the plaintiff’s motives in filing the suit. Thus, the claim will be baseless if Zydus filed it for antitrust reasons rather than to win the lawsuit. Even if a party harbors animosity toward the other side, the claim will not be baseless if the party intends to succeed.

Zydus argued that the suit was filed, not to win, but slow down the FDA’s review process and keep the ANDA pending for as long as possible to help Takeda’s profits. Unlike in most cases, however, Takeda’s motives were known in this case because of a letter written by outside counsel setting them forth. The letter, which recommended that the infringement suit be filed, recited several legitimate reasons for filing the suit, which included that it was Takeda’s usual practice regardless of the assertions in the ANDA, its potential DOE claim, the parties’ prior litigation and testing history, and the attorney’s experience with other generics. The fact that Takeda may have increased its profits as a result did not render the filing of the lawsuit subjectively baseless. The allegation that Takeda slowed down the litigation to help itself was not borne out either, for the same reason as under the objective standard. Within five months, Taked asked for drug samples, received them, tested them, and voluntarily dismissed the suit based on its testing results. Those were not the actions of a company intent on delaying matters. For all of those reasons, the complaint was deemed not to be subjectively baseless.

The court, therefore, granted Takeda’s summary judgment motion because of Noerr-Pennington immunity, given that Takeda’s patent infringement suit was neither objectively nor subjectively baseless, and it dismissed Zydus’s antitrust counterclaims.

The case is No. 3:18-cv-01994-FLW-TJB.

Attorneys: Cynthia Stencel Betz (McCarter & English, LLP) for Takeda Pharmaceutical Co Ltd., Takeda Pharmaceuticals U.S.A., Inc., Takeda Pharmaceuticals America, Inc. Marc D. Youngelson (Cosner Cosner & Youngelson) for Zydus Pharmaceuticals [USA] Inc. and Cadila Healthcare Ltd.

Companies: Takeda Pharmaceutical Co Ltd.; Takeda Pharmaceuticals U.S.A., Inc.; Takeda Pharmaceuticals America, Inc.; Zydus Pharmaceuticals [USA] Inc.; Cadila Healthcare Ltd.

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