The legal battle over AbbVie’s control of a testosterone gel patent poses a test of the Federal Trade Commission’s power to reclaim profits from companies that benefited from unfair competition.
The U.S. Court of Appeals for the Third Circuit will hear oral arguments Wednesday in a widely watched case that will determine whether the commission will be stripped of much of its broad enforcement powers, which are enshrined in the FTC Act.
A victory for the companies could gut the FTC’s enforcement powers. Restitution is an important tool for the commission, though it used it sparingly until 2012, when it changed the policy on seeking monetary remedies in competition cases. The FTC sued AbbVie and Besins Healthcare Inc. in 2014 alleging that they filed patent infringement suits that were outside the scope of their patent.
AbbVie and Besins Healthcare Inc., which share a patent for the AndroGel testosterone drug, are appealing a decision by the U.S. District Court for the Eastern District of Pennsylvania that ordered the companies to pay $462 million and $31.5 million, respectively. The court found the two companies pursued lawsuits against rivals for no other reason than to stifle competition.
The FTC, which is cross-appealing, says the companies filed sham patent infringement lawsuits against Teva Pharmaceutical Industries Ltd. and Perrigo Co. to delay competition from generic versions entering the market—effectively extending a monopoly on the product.
The FTC also said that Teva accepted illegal payments from AbbVie to drop its patent challenge and hold off from bringing a competing testosterone drug to the market.
The district court concluded that the patent suits brought by AbbVie and Besins were objectively and subjectively sham litigation. However, the district court dismissed the FTC’s claims on the Teva deal, finding it didn’t violate the law.
“The most important part of the case is sham litigation,” said Michael Carrier, a law professor at Rutgers Law who is watching the case. “It’s really hard to show a sham litigation case. Plaintiffs almost always lose.”
The standard for subjective intent is “really high” because you have to show the patent holder filed a lawsuit for the purpose of harming a competitor rather than for the merits of the case, he added.
“In this case, even though the bar was set very high, the FTC passed it,” Carrier said. “And lawyers will be curious to know if this was a correct application of the sham litigation standard, or if the appellate court thinks it was not the appropriate standard.”
Much at Stake
AbbVie and Besins are asking the court to strip the FTC of its ability to use disgorgement—the clawback of profits—as an enforcement tool to recoup money for consumers who were victims of systemic business scams or alleged anticompetitive conduct.
Since 2012, the FTC has increasingly filed court cases seeking restitution for alleged anticompetitive actions instead of using its administrative process to go after that behavior.
All aspects of the district court’s decision are at issue in the appeal and cross-appeal.
The companies contend that the court couldn’t order injunctive relief, including disgorgement, on completed past actions that won’t recur—such as settled patent lawsuits.
The companies also argue that the FTC Act doesn’t authorize disgorgement, which they contend is a penalty rather than a remedy for the unlawful behavior. The FTC is limited to such “equitable remedies,” unlike the Justice Department, which has broad legal authority to impose a variety of penalties on antitrust violators.
AbbVie and Besins maintain that their patent litigation was neither subjectively nor objectively a “sham.”
“We believe the district court’s ruling against us was incorrect,” AbbVie said in a statement. “On the sham litigation issue, we cited several cases showing that the patent infringement arguments we made in the underlying litigation were not only reasonable ones, but potentially winning ones.
“The fact that the sophisticated generic manufacturers on the other side acknowledged a meaningful risk of loss and settled further proves this point.”
“We think this and the other errors we raised in our appellate briefs are clear and compelling,” the drugmaker said.
The case is FTC v. AbbVie, 3d Cir., No. 18-2748, oral argument 1/15/20.