Reverse-Payment Plaintiffs Mine Patent Litigation Record to Survive Summary Judgment

We pointed out in a recent article that, based on recent decisions by the Courts of Appeals for the First and Third Circuits, private antitrust plaintiffs seeking damages from so-called “reverse-payment” settlement agreements faced the challenge of establishing that the generic manufacturer would have prevailed in patent infringement litigation against the brand manufacturer. Although this requirement undoubtedly poses a significant challenge, plaintiffs seeking damages for delay in release of lidocaine transdermal patches generic to the brand product Lidoderm have already shown, at the summary judgment stage, that the hurdle may not be insurmountable.

In a decision released on November 3, 2017, Judge William H. Orrick of the U.S. District Court for the Northern District of California ruled that plaintiffs in reverse-payment cases can establish that their injuries were caused by the allegedly anticompetitive settlement agreement by presenting “some evidence” in response to a summary judgment motion that the generic manufacturer “could have won at trial” if the defendants had not settled their patent infringement litigation. Judge Orrick rejected the defendants’ arguments, based on the First and Third Circuit decisions, that the plaintiffs had to show that the generic manufacturer “would have” established that the brand manufacturer’s patent was invalid or not infringed.

Based on this standard, Judge Orrick denied defendants’ motion for summary judgment, observing that “plaintiffs have put forth significant evidence that [the generic manufacturer] could have prevailed in the [patent] litigation.”

Because the patent-infringement litigation settled after the close of evidence following a six-day trial and submission of post-trial briefing, the plaintiffs challenging the settlement as an antitrust violation possessed an unusually large and well-organized record from which to draw “some evidence” that the generic manufacturer “could have” prevailed. Based on that record, Judge Orrick determined that the plaintiffs presented “strong” evidence that the generic challenger “could have” won based on invalidity for obviousness and unenforceability for inequitable conduct. Reflecting the procedural posture of the case and the standards for adjudicating motions for summary judgment, Judge Orrick did not find that plaintiffs presented strong evidence that the generic would have won on these grounds, but only that it could have won on these grounds. At trial, presumably, plaintiffs here would have to convince the finder of fact by a preponderance of evidence that the generic would have prevailed in the underlying patent case.

Apart from the legal issues, Judge Orrick’s discussion of the parties’ respective factual arguments and evidence presented on the summary judgment motion shows the interesting nature of advocacy and adjudication in this type of case. For example, the evidence included comments and observations made by Judge Sleet in the course of the underlying trial before him in Delaware, with the parties either relying on Judge Sleet’s statements as indicating the likely outcome of the trial, or discounting them as not reliably predicting the outcome. The parties also distinguished between the likely outcome of the trial and the ultimate resolution of the case, largely agreeing for example that Judge Sleet’s claim-construction ruling would have supported a judgment of noninfringement, but that the claim-construction ruling would likely have been reversed on appeal.