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Justices Weigh Taking AbbVie Fight Over ‘Sham’ Patent Lawsuit

June 17, 2021, 9:46 AM

A Supreme Court case over whether AbbVie Inc. levied a sham patent lawsuit to stifle competition could complicate drugmakers’ ability to defend their protected inventions.

AbbVie wants the justices to undo a lower court ruling that its infringement suit against rival Perrigo Co.—to stave off a generic version of its AndroGel testosterone drug—violated antitrust law. The U.S. Court of Appeals for the Third Circuit last year said the “objective baselessness” of AbbVie’s claims showed the drugmaker had no hope to win the case but rather intended to use the litigation process for anticompetitive leverage.

The ruling, if allowed to stand, “sets a dangerous precedent” for patent rights and a decades-old law known as the Hatch Waxman Act that enables companies to sue generic producers for infringement, according to AbbVie.

“Where patent-holders face uncertainty about their ability to enforce their patent rights in court, their incentive to innovate in the first place is correspondingly diminished,” the drugmaker said in its petition.

Some lawyers and industry trade groups say the Third Circuit decision threatens investment incentives for drugmakers that embark on creating life-saving treatments by dissuading them from using routine avenues to defend their patent rights. But the government says AbbVie was using litigation as a weapon merely to keep rivals out of the market and that the ruling was in line with court precedent.

“The Third Circuit’s resolution of the question presented here is correct and does not conflict with any decision of this Court or another court of appeals. Further review is not warranted,” the Federal Trade Commission said in a brief.

The justices are slated to consider AbbVie’s request on Thursday.

Canceling Competition

The fight stems from Teva Pharmaceuticals USA and Perrigo’s 2011 applications with the Food and Drug Administration to market generic versions of AbbVie’s AndroGel. Both companies told the FDA they wouldn’t infringe AbbVie’s patent because their generics contained a different ingredient than that found in AndroGel.

Those certifications trigger infringement lawsuits under Hatch-Waxman. AbbVie sued, claiming differences in the product were insignificant. The parties eventually settled, with Teva and Perrigo agreeing to delay the launch of their products in exchange for licenses to AbbVie’s intellectual property.

The activity caught the eye of the FTC. The agency sued AbbVie in 2014 for allegedly filing “sham” litigation for monopolization purposes. The district court ruled in favor of the FTC and noted that AbbVie had top-notch patent attorneys with “actual knowledge that the infringement lawsuits” were baseless.

The Third Circuit, however, had mixed views. It held that the lawsuit against Teva was genuine, but the one against Perrigo was a sham. “What matters is the intent to thwart competition,” the court said.

The appeals court “inferred that, because these experienced lawyers knew that the lawsuit was baseless, their motive for filing it ‘could not have been success on the merits,’” the FTC said in its brief to the Supreme Court. “The attorneys must have been motivated by a desire” to hold off generic entry, the agency said.

AbbVie’s suit “commenced for an improper purpose,” and the drugmaker’s lawyers knew that “the lawsuit was baseless,” the FTC said.

AbbVie told the Supreme Court that the Third Circuit misapplied a “two-prong” test requiring proof that a patent owner “was subjectively indifferent to the outcome of the suit” as long as it hindered competition.

“That decision is irreconcilable with this Court’s precedent and will have a substantial chilling effect on parties seeking to petition the government for redress of grievances,” AbbVie said. “That consequence will be particularly pronounced in the Hatch-Waxman context.”

‘Chilling Effects’

The decision as it stands could “have detrimental chilling effects on Hatch-Waxman lawsuits and settlements,” a group of law professors said in an amicus brief. The purpose of the Hatch Waxman “regime” is “to encourage the prompt filing of patent infringement suits by innovators and the quick settlement of such claims,” they said.

It also “will discourage pharmaceutical innovation and harm our innovation economy—an acutely undesirable result in an era where the need for rapid pharmaceutical innovation is paramount,” the law professors said.

Trade groups representing the drug industry are alarmed as well.

The decision ”exposes biopharmaceutical companies to significant antitrust liability for filing good-faith patent infringement lawsuits,” Pharmaceutical Research and Manufacturers of America and the Biotechnology Innovation Organization told the Justices in a brief.

“To continue the extraordinary investments in research and development necessary to offer new life-saving and life enhancing treatments, innovators must be able to enforce their rights under the patent laws,” they said.

The U.S. Chamber of Commerce is also urging the high court to take the case, claiming its impact stretches “far beyond the patent litigation context” and into different industries.

“Litigants, including members of the Chamber, will be deterred from filing suit to vindicate their rights, for fear that courts may declare their lawsuits a ‘sham’—even where, as here, a trial produced no evidence of subjective unlawful intent,” the business group said.

The case is AbbVie Inc. v. FTC, U.S., No. 20-1293, Conference 6/17/21.

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com

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