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Fed. Cir. Finds Some Antitrust in Patent Infringement Claims

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By Mark Wilson, Esq. on August 07, 2014 4:47 PM

A lawsuit about an insomnia medication has kept lawyers awake at night for the last five years. Who would have thought?

Tyco Healthcare manufactures Restoril, an insomnia medication. The patent covers formulations of Restoril with a particular surface area. Its competitor, Mutual Pharmaceutical, wanted to make a generic version of Restoril with a larger surface area. Tyco sued for patent infringement, but a district court agreed with Mutual, finding that a generic version of Restoril with a larger surface area couldn't possibly infringe on Tyco's patent. It also ultimately invalidated Tyco's patent, which it acquired from another company, as being prior art.

After that lawsuit didn't work, Tyco filed a citizen petition with the FDA, urging it to reconsider its guidelines for generic makers of Restoril -- and conveniently, those guidelines suggested that the same larger surface area that Mutual wanted to manufacture shouldn't be approved for use. For safety, you know. The FDA denied the petition, which "reli[ed] entirely on uncorroborated generalities and theoretical speculation." Mutual then counterclaimed that Tyco was engaging in "sham" litigation and antitrust behavior to keep Mutual from selling generic Restoril.

The Majority Opinion

The U.S. District Court for the District of New Jersey granted summary judgment for Tyco on four claims, finding: (1) Tyco's original infringement claim wasn't frivolous; (2) Tyco reasonably believed that its original patent was valid; (3) Tyco's citizen petition to the FDA was not a sham attempt to interfere with Mutual's business; and (4) Tyco's awareness that there was prior art in the Restoril patent didn't subject it to antitrust liability.

In a 2-1 decision, the Federal Circuit reversed on two of the claims. Whether Tyco's infringement claim was frivolous and whether its FDA petition was a sham were issues that should be submitted to a jury, the court said. It agreed with the district court that Tyco reasonably believed its patent was valid, and that Tyco's knowledge didn't constitute fraud so as to subject it to antitrust liability.

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The Dissent

Judge Pauline Newman dissented, believing that the majority was "creat[ing] several new grounds of antitrust liability." She was concerned that the majority's decision transformed an FDA complaint into a cause for antitrust speculation. After all, patent holders have a constitutional right to petition the government when they suspect infringement, so why should exercising that right arouse such suspicion?

That's true -- but Tyco's FDA petition was a little too convenient. While Judge Newman is happy to ascribe good intentions to Tyco, we know that companies can, and do, use the patent system as an offensive weapon against their competitors. Where Judge Newman sees honest questions about safety, the majority (rightly) raises its eyebrow, unconvinced that Tyco's "won't someone please think of the children!" plea is slightly less than sincere.

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