FTC Files Amicus in Third Circuit in Effexor XR Antitrust Litigation

The Federal Trade Commission recently weighed in on the application of the Noerr-Pennington doctrine to consent judgments entered as part of the settlement of patent litigation.  The FTC filed an amicus brief in the Third Circuit in In re Effexor XR Antitrust Litigation advocating that the filing and entry of a consent judgment by a district judge in connection with an alleged reverse payment settlement in a patent litigation does not constitute First Amendment protected petitioning activity that, under the Noerr-Pennington doctrine, would immunize the settlement agreement from antitrust scrutiny.  The FTC’s position is consistent with that espoused by Plaintiffs in the Effexor XR antitrust litigation, and with the prevailing caselaw.

In Effexor XR, private plaintiffs are challenging an agreement between Wyeth Pharmaceuticals (now Pfizer) and Teva Pharmaceuticals entered in connection with the settlement of patent litigation over Effexor XR.  Plaintiffs alleged that the agreement was an unlawful reverse payment agreement in violation of the Sherman Act because Wyeth agreed that it would not compete against Teva with an authorized generic version of Effexor XR in exchange for Teva agreeing to delay market entry with its generic.  Judge Sheridan, in the United States District Court for the District of New Jersey, granted a motion to dismiss plaintiffs’ claims as to the reverse payment agreement for failing to adequately allege the value of the reverse payment.  Judge Sheridan did not address the defendants’ argument that the settlement agreement was protected under Noerr-Pennington.

On appeal, the Effexor XR defendants pressed the argument that because their settlement did not become effective and binding until after the district court in the patent case vacated certain rulings, dismissed the action as required in the agreement, and entered the permanent injunction outlined in the agreement, the challenged agreement was entirely dependent upon the court’s decision to enter the requisite orders.  Defendants claimed any anticompetitive effects arising from the settlement therefore were due to the court’s orders, not the reverse payment agreement.  Thus, the defendants contended the reverse payment agreement was protected under the Noerr-Pennington doctrine as protected petitioning activity.

In its amicus brief, the FTC criticized defendants’ Noerr-Pennington argument as contrary to long-standing precedent.  Citing, among other things, United States v. Singer Mfg. Co., 374 U.S. 174 (1963), the FTC argued that defendants were engaged in private commercial activity in settling the patent litigation.  Indeed, the parties’ private settlement actually involved the withdrawal of a petition for government intervention.   The FTC observed that the seminal reverse payment opinion of the Supreme Court, FTC v. Actavis, Inc., 133 S. Ct.  2223, 2232 (2013), made clear that patent litigation settlements can be subject to antitrust scrutiny.   And, the mere fact that the patent court entered a privately negotiated consent judgment did not render the private settlement agreement state action in response to First Amendment petitioning.  Citing Local No. 93, International Association of Firefighters v. City of Cleveland, 478 U.S. 501 (1986), the FTC noted that the Supreme Court has held that a consent judgment is akin to private action,  as it is “the parties’ agreement that serves as the source of the court’s authority to enter any judgment at all.” Id. at 522.

The FTC argued that allowing private settlements to implement anticompetitive agreements so long as the parties in litigation were able to gain district court approval of a consent judgment embodying their terms would be bad policy.  The conditions in a consent judgment are a function of the parties’ agreement, they are not imposed by court.  If they can be used to immunize anticompetitive conduct, the FTC contended it would impose an unreasonable burden on a district judge to scrutinize every consent judgment to ensure it caused no untoward impact on competition; and, any such inquiry would require the court to conduct an analysis unaided by adversarial parties.  Unsurprisingly, the FTC noted that every court asked to apply Noerr-Pennington to reverse payment agreements embodied in consent judgments has found the immunity does not apply.

The FTC has been active in advocating the contours of reverse payment law, frequently weighing in with amicus briefs, or pursuing actions directly.  This latest amicus effort is consistent with the FTC’s commitment to ensuring that its views on the bounds of conduct in settling pharmaceutical patent litigation be heard.

Briefing is expected to be completed shortly, and the case will be then set for argument in the Third Circuit.  Faruqi & Faruqi, LLP serves on the executive committee leading the case on behalf of Direct Purchaser Plaintiffs in the Effexor XR litigation.

About Faruqi & Faruqi, LLP

Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, and consumer class actions as well as shareholder derivative and merger and transactional litigation.  The firm is headquartered in New York, and maintains offices in California, Delaware and Pennsylvania.

Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, consumers and employees.

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About Joe Lukens

Joe Lukens is a partner in the firm’s antitrust practice group, resident in the firm’s Pennsylvania office.  He has represented plaintiffs in antitrust litigation for over 20 years.

Posted by Joseph T. Lukens

Partner at Faruqi & Faruqi, LLP
Pennsylvania Office
Tel: (215) 277-5770
Fax: (215) 277-5771
Email: jlukens@faruqilaw.com
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