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(BQ) Part 2 book Antitrust law and intellectual property rights has contents: The antitrust implications of horizontal agreements involving intellectual property, the antitrust implications of vertical agreements involving intellectual property, injury, remedies, jurisdiction and procedural issues. CHAPTER 11 Pharmaceutical Settlements and Reverse Payments In re Cardizem CD Antitrust Litigation, 332 F.3d 896 (6th Cir 2003) OBERDORFER, District Judge This antitrust case arises out of an agreement entered into by the defendants, Hoescht Marion Roussel, Inc (“HMR”), the manufacturer of the prescription drug Cardizem CD, and Andrx Pharmaceuticals, Inc (“Andrx”), then a potential manufacturer of a generic version of that drug The agreement provided, in essence, that Andrx, in exchange for quarterly payments of $10 million, would refrain from marketing its generic version of Cardizem CD even after it had received FDA approval (the “Agreement”) The plaintiffs are direct and indirect purchasers of Cardizem CD who ﬁled complaints challenging the Agreement as a violation of federal and state antitrust laws After denying the defendants’ motions to dismiss, see In re Cardizem CD Antitrust Litigation, 105 F.Supp.2d 618 (E.D.Mich.2000) (“Dist.Ct.Op I”) and granting the plaintiffs’ motions for partial summary judgment, id., 105 F.Supp.2d 682 (E.D.Mich.2000) (“Dist.Ct.Op II”), the district court certiﬁed two questions for interlocutory appeal: *** (2) In determining whether Plaintiffs’ motions for partial judgment were properly granted, whether the Defendants’ September 24, 1997 Agreement constitutes a restraint of trade that is illegal per se under section of the Sherman Antitrust Act, 15 U.S.C § 1, and under the corresponding state antitrust laws at issue in this litigation *** Answer to Second Certiﬁed Question: Yes The Agreement whereby HMR paid Andrx $40 million per year not to enter the United States market for Cardizem CD and its generic equivalents is a horizontal market allocation agreement and, 387 388 Antitrust Law and Intellectual Property Rights as such, is per se illegal under the Sherman Act and under the corresponding state antitrust laws Accordingly, the district court properly granted summary judgment for the plaintiffs on the issue of whether the Agreement was per se illegal I Background *** A Statutory Framework In 1984, Congress enacted the Hatch-Waxman Amendments, see Drug Price Competition & Patent Term Restoration Act of 1984, Pub L No 98-417, 98 Stat 1585 (1984), to the Federal Food, Drug, and Cosmetic Act, 21 U.S.C §§ 301-399 Those amendments permit a potential generic1 manufacturer of a patented pioneer drug to ﬁle an abbreviated application for approval with the Food and Drug Administration (“FDA”) (known as an Abbreviated New Drug Application (“ANDA”)) See 21 U.S.C § 355(j)(1) Instead of submitting new safety and efﬁcacy studies, an ANDA may rely on the FDA’s prior determination, made in the course of approving an earlier “pioneer” drug, that the active ingredients of the proposed new drug are safe and effective Id § 355(j)(2)(A) Every ANDA must include a “certiﬁcation that, in the opinion of the applicant and to the best of his knowledge, the proposed generic drug does not infringe any patent listed with the FDA as covering the pioneer drug.” Id § 355(j)(2)(A)(vii) That certiﬁcation can take several forms Relevant here is the so-called “paragraph IV certiﬁcation” whereby the applicant certiﬁes that any such patent “is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.” Id § 355(j) (2)(A)(vii)(IV) An applicant ﬁling a paragraph IV certiﬁcation must give notice to the patent-holder, id § 355(j)(2)(B); the patent-holder then has forty-ﬁve days to ﬁle a patent infringement action against the applicant Id § 355(j)(5)(B)(iii) If the patent-holder ﬁles suit, a thirty-month stay goes into effect, meaning that unless before that time the court hearing the patent infringement case ﬁnds that the patent is invalid or not infringed, the FDA cannot approve the generic drug before the expiration of that thirty-month period Id § 355(j)(5)(B)(iii)(I) In order to encourage generic entry, and to compensate for the thirty-month protective period accorded the patent holder, the ﬁrst generic manufacturer to submit an ANDA with a paragraph IV certiﬁcation receives a 180-day period of exclusive marketing rights, during which time the FDA will not approve subsequent ANDA applications Id § 355(j)(5)(B)(iv) The 180-day period of exclusivity begins either (1) when the ﬁrst ANDA applicant begins commercial marketing of its generic drug (the marketing trigger) or (2) when there is a court decision ruling that the patent is invalid or not infringed (the court decision trigger), whichever is earlier Id A “generic” drug contains the same active ingredients but not necessarily the same inactive ingredients as a “pioneer” drug sold under a brand name Pharmaceutical Settlements and Reverse Payments 389 B Facts Unless otherwise noted, the following facts are undisputed HMR manufactures and markets Cardizem CD, a brand-name prescription drug which is used for the treatment of angina and hypertension and for the prevention of heart attacks and strokes The active ingredient in Cardizem CD is diltiazem hydrochloride, which is delivered to the user through a controlled-release system that requires only one dose per day HMR’s patent for diltiazem hydrochloride expired in November 1992 On September 22, 1995, Andrx ﬁled an ANDA with the FDA seeking approval to manufacture and sell a generic form of Cardizem CD On December 30, 1995, Andrx ﬁled a paragraph IV certiﬁcation stating that its generic product did not infringe any of the patents listed with the FDA as covering Cardizem CD Andrx was the ﬁrst potential generic manufacturer of Cardizem CD to ﬁle an ANDA with a paragraph IV certiﬁcation, entitling it to the 180-day exclusivity period once it received FDA approval In November 1995, the United States patent ofﬁce issued Carderm Capital, L.P (“Carderm”) U.S Patent No 5, 470, 584 (“′584 patent”), for Cardizem CD’s “dissolution proﬁle,” which Carderm licensed to HMR [citation omitted] The dissolution proﬁle claimed by the ′584 patent was for 0–45% of the total diltiazem to be released within 18 hours (“45%–18 patent”) In January 1996, HMR and Carderm ﬁled a patent infringement suit against Andrx in the United States District Court for the Southern District of Florida, asserting that the generic version of Cardizem CD that Andrx proposed would infringe the ′584 patent [citation omitted] The complaint sought neither damages nor a preliminary injunction Id However, ﬁling that complaint automatically triggered the thirty-month waiting period during which the FDA could not approve Andrx’s ANDA and Andrx could not market its generic product In February 1996, Andrx brought antitrust and unfair competition counterclaims against HMR [citation omitted] In April 1996, Andrx amended its ANDA to specify that the dissolution proﬁle for its generic product was not less than 55% of total diltiazem released within 18 hours (“55%–18 generic”) HMR nonetheless continued to pursue its patent infringement litigation against Andrx in defense of its 45%–18 patent On June 2, 1997, Andrx represented to the patent court that it intended to market its generic product as soon as it received FDA approval [citation omitted] On September 15, 1997, the FDA tentatively approved Andrx’s ANDA, indicating that it would be ﬁnally approved as soon as it was eligible, either upon expiration of the thirty-month waiting period in early July 1998, or earlier if the court in the patent infringement action ruled that the ′584 patent was not infringed Nine days later, on September 24, 1997, HMR and Andrx entered into the Agreement [citation omitted] It provided that Andrx would not market a bioequivalent or generic version of Cardizem CD in the United States until the earliest of: (1) Andrx obtaining a favorable, ﬁnal and unappealable determination in the patent infringement case; (2) HMR and Andrx entering into a license agreement; or (3) HMR entering into a license agreement with a third party Andrx also agreed to dismiss its antitrust and unfair competition counterclaims, to diligently prosecute 390 Antitrust Law and Intellectual Property Rights its ANDA, and to not “relinquish or otherwise compromise any right accruing thereunder or pertaining thereto,” including its 180-day period of exclusivity In exchange, HMR agreed to make interim payments to Andrx in the amount of $40 million per year, payable quarterly, beginning on the date Andrx received ﬁnal FDA approval.32HMR further agreed to pay Andrx $100 million per year,43less whatever interim payments had been made, once: (1) there was a ﬁnal and unappealable determination that the patent was not infringed; (2) HMR dismissed the patent infringement case; or (3) there was a ﬁnal and unappealable determination that did not determine the issues of the patent’s validity, enforcement, or infringement, and HMR failed to reﬁle its patent infringement action.54HMR also agreed that it would not seek preliminary injunctive relief in the ongoing patent infringement litigation.65 On July 8, 1998, the statutory thirty-month waiting period expired On July 9, 1998, the FDA issued its ﬁnal approval of Andrx’s ANDA Pursuant to the Agreement, HMR began making quarterly payments of $10 million to Andrx, and Andrx did not bring its generic product to market On September 11, 1998, Andrx, in a supplement to its previously ﬁled ANDA, sought approval for a reformulated generic version of Cardizem CD Andrx informed HMR that it had reformulated its product; it also urged HMR to reconsider its infringement claims On February 3, 1999, Andrx certiﬁed to HMR that its reformulated product did not infringe the ′584 patent On June 9, 1999, the FDA approved Andrx’s reformulated product That same day, HMR and Andrx entered into a stipulation settling the patent infringement case and terminating the Agreement At the time of settlement, HMR paid Andrx a ﬁnal sum of $50.7 million, bringing its total payments to $89.83 million On June 23, 1999, Andrx began to market its product under the trademark Cartia XT, and its 180-day period of marketing exclusivity began to run Since its release, Cartia XT has sold for a much lower price than Cardizem CD and has captured a substantial portion of the market The payments were scheduled to end on the earliest of: (1) a ﬁnal and unappealable order or judgment in the patent infringement case; (2) if HMR notiﬁed Andrx that it intended to enter into a license agreement with a third party, the earlier of: (a) the expiration date of the required notice period or (b) the date Andrx effected its ﬁrst commercial sale of the Andrx product; or (3) if Andrx exercised its option to acquire a license from HMR, the date the license agreement became effective HMR and Andrx stipulated that, for the purposes of the Agreement, Andrx would have realized $100 million per year in proﬁts from the sale of its generic product after receiving FDA approval HMR had to notify Andrx within thirty days of such a determination that it continued to believe that Andrx’s generic version of the drug infringed its patent and that it intended to reﬁle its patent infringement action HMR also agreed that it would give Andrx copies of changes it proposed to the FDA regarding Cardizem CD’s package insert and immediate container label, that it would notify Andrx of any labeling changes pending before or approved by the FDA, and that it would grant Andrx an irrevocable option to acquire a nonexclusive license to all intellectual property HMR owned or controlled that Andrx might need to market its product in the United States Pharmaceutical Settlements and Reverse Payments 391 C Procedural History *** [T]he district court denied the defendants’ motions to dismiss for failure to allege antitrust injury The plaintiffs then moved for partial summary judgment on the issue of whether the Agreement was a per se illegal restraint of trade The district court concluded that the Agreement, speciﬁcally the fact that HMR paid Andrx $10 million per quarter not to enter the market with its generic version of Cardizem CD, was a naked, horizontal restraint of trade and, as such, per se illegal [citation omitted] II Discussion *** [W]e address ﬁrst whether the Agreement was a per se illegal restraint of trade before considering whether the plaintiffs adequately alleged antitrust injury A Per Se Illegal Restraint of Trade *** Relevant Antitrust Law Section of the Sherman Act provides that “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal .” 15 U.S.C § Read “literally,” section “prohibits every agreement in restraint of trade.” Arizona v Maricopa Cty Medical Soc., 457 U.S 332, 342 (1982) However, the Supreme Court has long recognized that Congress intended to outlaw only “unreasonable” restraints State Oil Co v Khan, 522 U.S 3, 10 (1997) [citation omitted] Most restraints are evaluated using a “rule of reason.” State Oil, 522 U.S at 10 Under this approach, the “ﬁnder of fact must decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors, including speciﬁc information about the relevant business, its condition before and after the restraint was imposed, and the restraint’s history, nature, and effect.” Id [citation omitted] Other restraints, however, “are deemed unlawful per se” because they “have such predictable and pernicious anticompetitive effect, and such limited potential for procompetitive beneﬁt.” Id [citation omitted] “Per se treatment is appropriate ‘[o]nce experience with a particular kind of restraint enables the Court to predict with conﬁdence that the rule of reason will condemn it.’ “Id [citation omitted] The per se approach thus applies a “conclusive presumption” of illegality to certain types of agreements, Maricopa Cty., 457 U.S at 344; where it applies, no consideration is given to the intent behind the restraint, to any claimed pro-competitive justiﬁcations, or to the restraint’s actual effect on competition.116 11 The risk that the application of a per se rule will lead to the condemnation of an agreement that a rule of reason analysis would permit has been recognized and tolerated as a necessary cost of this approach See, e.g., Maricopa Cty., 457 U.S at 344 (“As in every rule of general application, the match between the presumed and the actual is imperfect For the sake of business certainty and litigation efﬁciency, we have tolerated the invalidation of some agreements that a full-blown inquiry might have proved to be reasonable.”); United States v Topco Associates, Inc., 405 U.S 596, 609 (1972) 392 Antitrust Law and Intellectual Property Rights National College Athletic Ass’n (“NCAA”) v Board of Regents, 468 U.S 85, 100 (1984) As explained by the Supreme Court, “[t]he probability that anticompetitive consequences will result from a practice and the severity of those consequences must be balanced against its procompetitive consequences Cases that not ﬁt the generalization may arise, but a per se rule reﬂects the judgment that such cases are not sufﬁciently common or important to justify the time and expense necessary to identify them.” Continental T.V., Inc v GTE Sylvania Inc., 433 U.S 36, 50 n (1977) The Supreme Court has identiﬁed certain types of restraints as subject to the per se rule The classic examples are naked, horizontal restraints pertaining to prices or territories [citation omitted] Application In answering the question whether the Agreement here was per se illegal, the following facts are undisputed and dispositive The Agreement guaranteed to HMR that its only potential competitor at that time, Andrx, would, for the price of $10 million per quarter, refrain from marketing its generic version of Cardizem CD even after it had obtained FDA approval, protecting HMR’s exclusive access to the market for Cardizem CD throughout the United States until the occurrence of one of the end dates contemplated by the Agreement (In fact, Andrx and HMR terminated the Agreement and the payments in June 1999, before any of the speciﬁed end dates occurred.) In the interim, however, from July 1998 through June 1999, Andrx kept its generic product off the market and HMR paid Andrx $89.83 million By delaying Andrx’s entry into the market, the Agreement also delayed the entry of other generic competitors, who could not enter until the expiration of Andrx’s 180-day period of marketing exclusivity, which Andrx had agreed not to relinquish or transfer There is simply no escaping the conclusion that the Agreement, all of its other conditions and provisions notwithstanding, was, at its core, a horizontal agreement to eliminate competition in the market for Cardizem CD throughout the entire United States, a classic example of a per se illegal restraint of trade None of the defendants’ attempts to avoid per se treatment is persuasive As explained in greater detail in the district court’s opinion, [citation omitted] the Agreement cannot be fairly characterized as merely an attempt to enforce patent rights or an interim settlement of the patent litigation As the plaintiffs point out, it is one thing to take advantage of a monopoly that naturally arises from a patent, but another thing altogether to bolster the patent’s effectiveness in inhibiting competitors by paying the only potential competitor $40 million per year to stay out of the market Nor does the fact that this is a “novel” area of law preclude per se treatment, see Maricopa Cty., 457 U.S at 349 To the contrary, the Supreme Court has held that “‘[w]hatever may be its peculiar problems and characteristics, the Sherman Act, so far as price-ﬁxing agreements are concerned, establishes (“Whether or not we would decide this case the same way under the rule of reason used by the District Court is irrelevant to the issue before us.”) Pharmaceutical Settlements and Reverse Payments 393 one uniform rule applicable to all industries alike.’” Id at 349 [citation omitted] We see no reason not to apply that rule here, especially when the record does not support the defendants’ claim that the district court made “errors” in its analysis Finally, the defendants’ claims that the Agreement lacked anticompetitive effects and had procompetitive beneﬁts are simply irrelevant See, e.g., Maricopa Cty., 457 U.S at 351 To reiterate, the virtue/vice of the per se rule is that it allows courts to presume that certain behaviors as a class are anticompetitive without expending judicial resources to evaluate the actual anticompetitive effects or procompetitive justiﬁcations in a particular case As the Supreme Court explained in Maricopa County: The respondents’ principal argument is that the per se rule is inapplicable because their agreements are alleged to have procompetitive justiﬁcations The argument indicates a misunderstanding of the per se concept The anticompetitive potential inherent in all price-ﬁxing agreements justiﬁes their facial invalidation even if procompetitive justiﬁcations are offered for some Those claims of enhanced competition are so unlikely to prove signiﬁcant in any particular case that we adhere to the rule of law that is justiﬁed in its general application 457 U.S at 351 Thus, the law is clear that once it is decided that a restraint is subject to per se analysis, the claimed lack of any actual anticompetitive effects or presence of procompetitive effects is irrelevant Of course, our holding here does not resolve the issues of causation and damages, both of which will have to be proved before the plaintiffs can succeed on their claim for treble damages under the Clayton Act III Conclusion For the foregoing reasons, we answer  the district court’s certiﬁed question as follows: it properly grant[ed] the plaintiffs’ motions for summary judgment that the defendants had committed a per se violation of the antitrust laws Comments and Questions Does the court hold that all reverse payment settlements are per se illegal? If not all reverse payment settlements warrant per se condemnation, which features of this settlement tipped the balance in favor of per se treatment? Would making reverse payment settlements per se illegal be good policy? If reverse payments were per se illegal, how might parties try to craft settlements in order to circumvent the per se rule? Could those settlements be more anticompetitive than reverse payments? Sitting by designation as a district court judge, Judge Richard Posner asserted: “A ban on reverse-payment settlements would reduce the incentive to challenge patents by reducing the challenger’s settlement options should he be sued for infringement, and so might well be thought anticompetitive.” Asahi Glass Co v Pentech Pharm., Inc., 289 F.Supp.2d 986, 992 (N.D Ill 2003) (Posner., J.) What you think of Judge Posner’s argument? Would a per se rule against reversepayment settlements reduce competition and innovation? 394 Antitrust Law and Intellectual Property Rights It appears unusual that a plaintiff would pay a defendant to settle a lawsuit After all, if the plaintiff wants the litigation to end, it can seek to voluntarily dismiss its lawsuit See Fed R Civ Proc 41(a) Are there legitimate—not anticompetitive— reasons why a patentholder would pay an accused infringer to settle? Some have advanced the argument that reverse-payment settlements are a legitimate mechanism for patentholders to any uncertainty associated with infringement litigation, including the risk that their patents could be invalidated See ABA Section of Antitrust Law, Intellectual Property and Antitrust Handbook 10 (2007) Does this justify removing such settlements from the per se illegal category? If so, does it mean that such agreements should be per se legal? Why or why not? Schering-Plough Corp v F.T.C 402 F.3d 1056 (11th Cir 2005) FAY, Circuit Judge: Pharmaceutical companies Schering-Plough Corp and Upsher-Smith Laboratories, Inc petition for review of an order of the Federal Trade Commission (“FTC”) that they cease and desist from being parties to any agreement settling a patent infringement lawsuit, in which a generic manufacturer either (1) receives anything of value; and (2) agrees to suspend research, development, manufacture, marketing, or sales of its product for any period of time The issue is whether substantial evidence supports the conclusion that the Schering-Plough settlements unreasonably restrain trade in violation of Section of the Sherman Antitrust Act, 15 U.S.C § 1, and Section of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C § 45(a) We have jurisdiction pursuant to 15 U.S.C § 45(c), and, for the reasons discussed below, we grant the petition for review and set aside and vacate the FTC’s order I Factual Background A The Upsher Settlement Schering-Plough (“Schering”) is a pharmaceutical corporation that develops, markets, and sells a variety of science-based medicines, including antihistamines, corticosteroids, antibiotics, anti-infectives and antiviral products Schering manufactures and markets an extended-release microencapsulated potassium chloride product, K-Dur 20,which is a supplement generally taken in conjunction with prescription medicines for the treatment of high blood pressure or congestive heart disease The active ingredient in K-Dur 20, potassium chloride, is commonly used and unpatentable Schering, however, owns a formulation patent on the extended-release coating, which surrounds the potassium chloride in K-Dur 20, patent number 4,863,743 (the “ ‘743 patent”) The ‘743 patent expires on September 5, 2006 The ‘743 patent claims a pharmaceutical dosage unit in tablet form for oral administration of potassium chloride The tablet contains potassium chloride Pharmaceutical Settlements and Reverse Payments 395 crystals coated with a cellulose-type material The novel feature in the ‘743 patent is the viscous coating, which is applied to potassium chloride crystals The coating provides a sustained-release delivery of the potassium chloride In late 1995, Upsher-Smith Laboratories (“Upsher”), one of Schering’s competitors, sought Food and Drug Administration (“FDA”) approval to market Klor Con M20 (“Klor Con”), a generic version of K-Dur 20 Asserting that Upsher’s product was an infringing generic substitute, Schering sued for patent infringement K-Dur 20 itself was the most frequently prescribed potassium supplement, and generic manufacturers such as Upsher could develop their own potassium-chloride supplement as long as the supplement’s coating did not infringe on Schering’s patent In 1997, prior to trial, Schering and Upsher entered settlement discussions During these discussions, Schering refused to pay Upsher to simply “stay off the market,” and proposed a compromise on the entry date of Klor Con Both companies agreed to September 1, 2001, as the generic’s earliest entry date, but Upsher insisted upon its need for cash prior to the agreed entry date Although still opposed to paying Upsher for holding Klor Con’s release date, Schering agreed to a separate deal to license other Upsher products Schering had been looking to acquire a cholesterol-lowering drug, and previously sought to license one from Kos Pharmaceuticals (“Kos”) After reviewing a number of Upsher’s products, Schering became particularly interested in Niacor-SR (“Niacor”), which was a sustained-release niacin product used to reduce cholesterol Upsher offered to sell Schering an exclusive license to market Niacor worldwide, except for North America The parties executed a conﬁdentiality agreement in June 1997, and Schering received licenses to market ﬁve Upsher products, including Niacor In relation to Niacor, Schering received a data package, containing the results of Niacor’s clinical studies The cardiovascular products unit of Schering’s Global Marketing division, headed by James Audibert (“Audibert”) evaluated Niacor’s proﬁtability and effectiveness According to the National Institute of Health, niacin was the only product known to have a positive effect on the four lipids related to cholesterol management Immediate-release niacin, however, created an annoying-but innocuousside effect of “ﬂushing,” which reduced patient compliance On the other hand, previous versions of sustained-release niacin supplements, like Niacor, had been associated with substantial elevations in liver enzyme levels Schering knew of the effects associated with niacin supplements, but continued with its studies of Niacor because it had passed the FDA’s medical review and determined that it would likely be approved More important, the clinical trials studied by Audibert demonstrated that Niacor reduced the ﬂushing effect to one-fourth of the immediate-release niacin levels and only increased liver enzymes by four percent, which was generally consistent with other cholesterol inhibitors Based on this data, Audibert constructed a sales and proﬁtability forecast, and concluded that Niacor’s net present value at that time would be between $245–265 million On June 17, 1997, the day before the patent trial was scheduled to begin, Schering and Upsher concluded the settlement The companies negotiated a three-part license deal, which called for Schering to pay (1) $60 million in initial royalty fees; 396 Antitrust Law and Intellectual Property Rights (2) $10 million in milestone royalty payments; and (3) 10% or 15% royalties on sales Schering’s board approved of the licensing transaction after determining the deal was valuable to Schering This estimation corresponds to the independent valuation that Schering completed in relation to Kos’ Niaspan, a substantially similar product to Niacor That evaluation ﬁxed Niaspan’s net present value between $225–265 million The sales projections for both the Kos and Upsher products are substantially similar Raymond Russo (“Russo”) estimated Niaspan (Kos’ supplement) sales to reach $174 million by 2005 for the U.S market Comparably, and more conservatively, Audibert predicted Niacor (Upsher’s supplement) to reach $136 million for the global market outside the United States, Canada, and Mexico, which is either equal to or larger than U.S market alone After acquiring the licensing rights to Niacor, Schering began to ready its documents for overseas ﬁlings In late 1997, however, Kos released its ﬁrst-quarter sales results for Niaspan, which indicated a poor performance and lagging sales Following this announcement, Kos’ stock price dramatically dropped from $30.94 to $16.56, and eventually bottomed out at less than $6.00 In 1998, with Niaspan’s disappointing decline as a precursor, Upsher and Schering decided further investment in Niacor would be unwise B The ESI Settlement In 1995, ESI Lederle, Inc (“ESI”), another pharmaceutical manufacturer, sought FDA approval to market its own generic version of K-Dur 20 called “Micro-K 20.” Schering sued ESI in United States District Court *** The trial court appointed U.S Magistrate Judge Thomas Rueter (“Judge Rueter”) to mediate the ﬁfteenmonth process, which resulted in nothing more than an impasse Finally, in December 1997, Schering offered to divide the remaining patent life with ESI and allow Micro-K 20 to enter the market on January 1, 2004-almost three years ahead of the patent’s September 2006 expiration date.67ESI accepted this offer, but demanded on receiving some form of payment to settle the case At Judge Rueter’s suggestion, Schering offered to pay ESI $5 million, which was attributed to legal fees, however, ESI insisted upon another $10 million Judge Rueter and Schering then devised an amicable settlement whereby Schering would pay ESI up to $10 million if ESI received FDA approval by a certain date Schering doubted the likelihood of this contingency happening, and Judge Rueter intimated that if Schering’s prediction proved true, it would not have to pay the $10 million The settlement was signed in Judge Rueter’s presence on January 23, 1998 C The FTC Complaint On March 30, 2001, more than three years after the ESI settlement, and nearly four years after the Schering settlement, the FTC ﬁled an administrative complaint There was also a side agreement in this settlement that provided for a payment of $15 million in return for the right to license generic enalpril and buspirone from ESI Table of Cases 667 W Walgreen Co v AstraZeneca Pharms 254 Walker Process Equip v Food Mach & Chem Corp 89, 92–93, 99, 122, 646 Wallace v International Bus Machs Corp 338 Warriner Hermetics, Inc v Copeland Refrigeration Corp 158 Western Elec Co.; United States v 322 Westinghouse Elec Corp v Bulldog 489 Westinghouse Elec Corp.; United States v 42n23 Z Zenith Radio Corp v Hazeltine Research, Inc 543, 549, 559 This page intentionally left blank INDEX A ABA Section on Antitrust Law See American Bar Association (ABA), Section on Antitrust Law Abandonment of trademarks, 16, 20 Abbreviated New Drug Approval (ANDA) system, 430 Acquisition of intellectual property rights Clayton Act, 433 conspiracy to restrain trade, 433–44 competition, impact on, 443 cross-licensing arrangements, 443 FTC interference proceedings, anticompetitive settlements in, 443–44 market power, 443 patent infringement, relevance of, 443 per se rules re, 442–43 rule of reason analysis, 442–43 validity of patent, relevance of, 443 DOJ/FTC Antitrust Guidelines, 645–46 mergers, 444–58 divestiture requirements, 458 goods markets, 449 innovation markets, 449–50 technology markets, 449 patents generally, 5–7 Sherman Act, 433, 444 Advisory opinions, 321 Aftermarkets circumvention in, 201–2 DMCA, 200–202 market power in, 199–200 Alienation, restraints on, 479 American Bar Association (ABA), Section on Antitrust Law on grantbacks, 534 on market allocation and trademarks, 371 on reverse payment settlements, 394 on SSOs, 261 ANDA (Abbreviated New Drug Approval) system, 387–430 Andewelt, Roger B., 43–44, 311 Antitrust Division See Justice Department Antitrust Guidelines for the Licensing of Intellectual Property (DOJ/FTC) For reprint of text, see pages 617–646 acquisition of intellectual property rights, 645–46 cross-licensing arrangements, 305–6, 642–44 efﬁciency, 636–37 enforcement of invalid rights, 646 exclusive dealing arrangements, 635–36, 641–42 general principles, 619–23 goods markets, 624 grantbacks, 533–34, 644–45 horizontal restraints, 639–40 innovation markets, 626–29 issuance, 45 licensing of intellectual property, 511–12, 527–28 market power, 46–47, 621 mergers, 444 669 670 Index Antitrust Guidelines for the Licensing of Intellectual Property (DOJ/FTC) (cont.) modes of analysis, 623–33 patent pooling, 315 pooling arrangements, 642–44 price ﬁxing, 305–6 rule of reason analysis, 634–39 “safety zone,” 637–39 technology markets, 625–26 tying arrangements, 131–32, 641 unilateral refusals to license or deal, 167 vertical price restraints, 640 Antitrust law generally competitor standing in, 557–64 concerted refusals to license or deal in, 459–62 consumer standing in, 564–67 copyright misuse, relationship with, 65 efﬁciency, maximizing of, 72–73 fraudulently procured patents in, 103 generally, 23–35 historical background, 25 jurisdiction of Federal Circuit, 577–88 market allocation See Market allocation patent misuse, relationship with, 60–61 predatory innovation See Predatory innovation price discrimination See Price discrimination price ﬁxing See Price ﬁxing remedies See Remedies in antitrust law reverse payment settlements See Pharmaceuticals royalty structuring See Royalty structuring tension with intellectual property, 39–46 trademark misuse, relationship with, 67 tying arrangements See Tying arrangements vertical price restraints See Vertical price restraints Antitrust Modernization Commission on mergers, 444–49 on price discrimination, 70–71 Arbitrage, 68–70 Atomic Energy Act, 574 Attempted monopolization, 31–32, 36 Attorney General’s National Committee to Study the Anti-trust Laws, 587–88 Atwood, James R., 119 Auctions by SSOs, 347 B Barnett, Thomas O., 72–73 Barriers to entry, 30 Baxter, William F., 43 Bifurcation of trials, 587–88 Black markets, 55–56 Blanket licensing of copyrighted works See Price ﬁxing Block-booking, 139–48 Clayton Act, 146 coercion in, 140 competition, impact on, 140 motion pictures, 139–46 per se rules re, 146 price discrimination, 140–41 rule of reason analysis, 141 Sherman Act, 146 split arrangements compared, 378–81 television, 141–49 tying arrangements, 140 Blocking patents, 7, 313–14 Bork, Robert, 135 Business Review Letters, 321–22 Buyers’ cartels, 488 C Cartels buyers’ cartels, 488 competition, impact on, 24 price ﬁxing See Price ﬁxing Causation antitrust law, 559 price ﬁxing, 305 Cease and desist orders under FTCA §5, 285 “Cellophane Fallacy,” 30 Chicago School, 135–37 Circumvention, 201–2 Civil penalties See Penalties Clayton Act acquisition of intellectual property rights, 433 block-booking, 146 excerpts, 592–94 exclusive dealing arrangements, 34 FTCA compared, 35, 287 mergers, 34–35, 444–45 overview, 33–35 treble damages, 560 tying arrangements, 33–34, 40, 146 Clean Air Act, 574 Clinical trials of drugs, 449 Closed patent pools, 465 Compensatory pricing, 228 Competition acquisition of intellectual property rights, impact of, 443 block-booking, impact of, 140 cartels, impact of, 24 dynamic competition, 23–24 grantbacks, impact of, 531–32 patent misuse, 61 patent pooling, impact of, 312–14 Index 671 predatory innovation, impact of, 241 reverse payment settlements, impact of, 393 static competition, 23 tying arrangements, impact of, 135 unfair competition, 119, 284–87 Competitor standing in antitrust law, 557–64 Complementary copyrights, 336–37 Complementary patents, 322, 327 Compulsory counterclaims in patent infringement cases, 586–87 Compulsory licensing as remedy, 569–76 Computer hardware SSOs for, 257–61 unilateral refusals to license or deal in, 203–13 Concerted refusals to license or deal, 459–72 antitrust law, 459–62 copyrights, 465–72 Noerr-Pennington doctrine, 462 patent pooling, 462–65 patents, 462–65 Sherman Act, 462 Conditional refusals to license or deal, 198 Conspiracy acquisition of intellectual property rights as conspiracy to restrain trade See Acquisition of intellectual property rights monopolization, 32–33 price ﬁxing See Price ﬁxing Constitution intellectual property in, 56 patents in, Consumer protection, 36–37 Consumer standing in antitrust law, 564–67 Consumer welfare standard, 229 Contract law, relationship with patents, 543 Copyright Act excerpts, 604–14 price ﬁxing, 336 unilateral refusals to license or deal, 173–77, 193–95 Copyright infringement, 13–14 circumvention as, 201–2 defenses to, 14, 61–65 encryption as, 201–2 remedies, 13 sham litigation re, 128 Copyright Ofﬁce, 11 Copyrights acquisition of protection, 11–12 blanket licensing See Price ﬁxing block-booking See Block-booking complementary rights, 336–37 concerted refusals to license or deal, 465–72 duration of protection, 12–13 ﬁrst sale doctrine, 495–96 fraudulent procurement, patents contrasted, 92–93 group boycotts, 465–72 infringement See Copyright infringement market allocation, 371, 378–81 misuse, 61–65 overview, 11–14 price discrimination, 69 price ﬁxing through blanket licensing See Price ﬁxing scope of protection, 12 split arrangements, 378–81 SSO standards, protection of, 349 substitute rights, 336–37 tying arrangements block-booking See Block-booking software, 149–53 vertical price restraints, 489–96 Cost curve, 650–52 Cotter, Thomas F., 61 Counterclaims in patent infringement cases, 583–88 Cournot, Augustin, 313 Court of Appeals for the Federal Circuit, 577–88 Covenants not to compete, 61 Creighton, Susan A., 128–29 Criminal violations, 36, 569 Cross-licensing arrangements acquisition of intellectual property rights as conspiracy to restrain trade, 443 DOJ/FTC Antitrust Guidelines, 305–6, 642–44 DOJ/FTC Promoting Innovation and Competition, 311–12 patent pooling distinguished, 311–12 D Damages antitrust law, 559 monopolization, for, 560 predatory innovation, for, 240 price ﬁxing, for, 560 treble damages, 35–36, 560, 569 tying arrangements, for, 560 Davis, Mary J., 429 Deadweight loss, 24, 552 Deceptive conduct before SSOs See Standardsetting organizations (SSOs) Defenses copyright infringement, to, 14, 61–65 copyright misuse as, 61–65 patent infringement, to See Patent infringement patent misuse as, 10–11, 55–61, 63 trademark misuse as, 66–67 Delacourt, John T., 118, 128 672 Index Demand curve, 647–50 Design changes See Predatory innovation Digital Millennium Copyright Act (DMCA), 200–202 Digital rights management (DRM), 20 Dilution of trademarks, 17 Disclosure predatory innovation, duty of disclosure, 227–28 SSO requirements, 262, 282 Discount Pricing Consumer Protection Act of 2009, 509 Discovery in reverse payment settlement cases, 428 Distributors, vertical price restraints by See Vertical price restraints Divestiture, 458 DMCA (Digital Millennium Copyright Act), 200–202 DOJ See Justice Department Downstream markets circumvention in, 201–2 DMCA, 200–202 market power in, 199–200 DRM (Digital rights management), 20 Drug Price Competition and Patent Term Restoration Act of 1984, 254, 430 Drug safety laws, 429–31 Drugs See Pharmaceuticals Dynamic competition, 23–24 Dynamic efﬁciency, 24, 72 E Efﬁciency DOJ/FTC Antitrust Guidelines, 636–37 dynamic efﬁciency, 24, 72 overview, 72–73 price ﬁxing, effect of, 298 static efﬁciency, 24, 72 Efﬁcient equilibrium, 653–57 Encryption, 201–2 Enforcement of intellectual property rights, 89–129 fraudulently procured patents See Fraudulently procured patents inequitable conduct, effect of, 99 patent infringement, 93 sham litigation See Sham litigation Essential facilities doctrine, 207–13 Exclusionary rights, 4–5, 54–55 Exclusive dealing arrangements Clayton Act, 34 DOJ/FTC Antitrust Guidelines, 635–36, 641–42 Sherman Act, 34 tying arrangements contrasted, 158 Exhaustion doctrine, 515—517 F Fair, reasonable, and non-discriminatory (FRAND) terms, 262–74, 323 FDCA (Food, Drug, and Cosmetic Act), 429 Federal Circuit Court of Appeals, 577–88 Federal Courts Improvement Act of 1982, 577 Federal Trade Commission (FTC) Antitrust Guidelines for the Licensing of Intellectual Property See Antitrust Guidelines for the Licensing of Intellectual Property (DOJ/FTC) enforcement powers, 36 interference proceedings, anticompetitive settlements in, 443–44 Merger Guidelines, 445–48 mergers and acquisitions, authority to challenge, 34 Promoting Innovation and Competition See Promoting Innovation and Competition (DOJ/FTC) on reverse payment settlements, 411–12 on SSOs, 283–84 Federal Trade Commission Act (FTCA) cease and desist orders, 285 civil penalties, 285 Clayton Act compared, 35, 287 §5 actions, 284–87 injunctive relief, 35–36 overview, 35–36 Sherman Act compared, 35, 287 unfair competition, 284–87 Field-of-use restrictions, 517–27 First sale doctrine, 495–96 Food, Drug, and Cosmetic Act (FDCA), 429 Food safety laws, 429–31 Franchises and tying arrangements, 154–65 exclusive dealing arrangements compared, 158 lists of approved suppliers, 165 quality assurance, 158 separate product requirement, 157–58, 162 FRAND See Fair, reasonable, and non-discriminatory (FRAND) terms Fraudulently procured patents, 89–104 antitrust law, 103 copyrights contrasted, 92–93 Handgards claims, 92–93 inequitable conduct distinguished, 99, 119 invalidity distinguished, 94 monopolization, 93, 99 Noerr-Pennington doctrine, 119 sham litigation, relationship with, 119 Sherman Act, 93 theft of patents, 103 Index 673 trade secrets contrasted, 92–93 trademarks contrasted, 92–93 “Free riding,” 242, 315 FTC See Federal Trade Commission FTCA See Federal Trade Commission Act G Gene therapy, 450–58 General public licenses (GPL), 339–39 Generic drugs overpayment by brand-name ﬁrms, 412–13 reverse payment settlements See Pharmaceuticals safety laws, 429–31 underpayment by generic ﬁrms, 413 Gilbert, Richard, 229 Goods markets, 449, 624 GPL (General public licenses), 339–39 Grantbacks ABA Section on Antitrust Law, 534 antitrust law, 532–33 competition, impact on, 531–32 deference to, 532 DOJ/FTC Antitrust Guidelines, 533–34, 644–45 patent pooling, 315 patents, 528–34 per se rules re, 533 SSOs, 534 Grinnell test, 31–32 Group boycotts copyrights, 465–72 movie splits as, 472 H Handgards claims, 92–93 Hart–Scott–Rodino Antitrust Improvements Act, 34, 445 Hatch–Waxman Act, 254, 430 Hemphill, C Scott, 412–13 Herﬁndahl–Hirschman Index (HHI), 446, 449, 458 Hoffman, D Bruce, 128–29 Holman, Christopher M., 411 Horizontal restraints DOJ/FTC Antitrust Guidelines, 639–40 market allocation, 362, 385–86 Sherman Act, 27 Hovenkamp, Herbert, 140, 158, 189, 196–97, 213, 410 I Inequitable conduct fraudulent procurement of patents distinguished, 99, 119 patent infringement, as defense to, 10, 99 Infringement copyrights See Copyright infringement patents See Patent infringement trademarks, 17 Injunctive relief FTCA, 35–36 predatory innovation, against, 245 requests for, 569 unilateral refusals to license or deal, against, 203–13 Innovation efﬁciency and, 73 patent pooling, effect of, 315–16 predatory innovation See Predatory innovation Promoting Innovation and Competition See Promoting Innovation and Competition (DOJ/FTC) Innovation markets, 449–50, 626–29 Intellectual property generally acquisition of rights See Acquisition of intellectual property rights Constitutional authority, 56 copyrights See Copyrights deﬁned, enforcement of rights See Enforcement of intellectual property rights exclusionary rights, 4–5, 54–55 generally, 3–5 licensing See Licensing of intellectual property market power, relationship with, 46–56 nonrivalrous consumption, 3–4, 20–21 other property rights compared, 56 patents See Patents tension with antitrust law, 39–46 trade secrets See Trade secrets trademarks See Trademarks Intent market allocation and trademarks, relevance to, 369, 377 predatory innovation, relevance to, 240–41 sham litigation, relevance to, 118–19, 195 unilateral refusals to license or deal, relevance to, 195 Interference proceedings, 443–44 International intellectual property regimes, market allocation in, 381–85 Invalidity of patents acquisition of intellectual property rights as conspiracy to restrain trade, relevance to, 443 extent of, 93–94 fraud distinguished, 94 patent infringement, as defense to, 9–10 674 Index Invalidity of patents (cont.) reverse payment settlements, relevance to, 428 sham litigation, effect on, 119 unilateral refusals See Unilateral refusals to license or deal Lobanoff, Marcy L., 429 Lobbying as basis of antitrust injury, 111–13 J Janis, Mark, 196–97, 213, 410 Jurisdiction of Federal Circuit, 577–88 Justice Department (DOJ) advisory opinions, 321 Antitrust Guidelines for the Licensing of Intellectual Property See Antitrust Guidelines for the Licensing of Intellectual Property (DOJ/FTC) Business Review Letters, 321–22 enforcement powers, 36 Merger Guidelines, 445–48 mergers and acquisitions, authority to challenge, 34 “Nine No-No’s,” 42–46 Promoting Innovation and Competition See Promoting Innovation and Competition (DOJ/FTC) reverse payment settlements, 411–12 M Manufacturers, vertical price restraints by See Vertical price restraints Market allocation, 351–86 copyrights, 371, 378–81 historical background, 41 horizontal restraints, 362, 385–86 international intellectual property regimes, 381–85 movie splits as, 472 patents, 351–55 trademarks, 355–78 ABA Section on Antitrust Law on, 371 copyrights compared, 371 intent, relevance of, 369, 377 intrabrand competition versus interbrand competition, 369 “merely incidental” restraints, 356 monopolization, 377–78 parent/subsidiary relationship, 356 per se rules re, 362, 369, 371 rule of reason analysis, 362, 371 Sherman Act, 357, 369 sports leagues, 357 vertical versus horizontal restraint, 362 Market power acquisition of intellectual property rights as conspiracy to restrain trade, 443 aftermarkets, 199–200 black markets, 55–56 DOJ/FTC Antitrust Guidelines, 46–47, 621 downstream markets, 199–200 intellectual property, relationship with, 46–56 patents, 55 pharmaceuticals, 55 price discrimination, 68, 71 royalty structuring, 553 software, 55 tying arrangements, 46–56, 153 unilateral refusals to license or deal, 197–200 Market share, 29 Medical technology, predatory innovation in, 236–43 Medicare Modernization Act of 2003, 430 Mergers acquisition of intellectual property rights in, 444–58 divestiture requirements, 458 K Kefauver–Harris Amendment, 429 Krattenmaker, Thomas G., 128–29 L Lanham Act excerpts, 614–15 trademarks, 15, 17 Legal expenses as antitrust injury, 110–11 Legitimate business justiﬁcation, 176—177 Leibowitz, Jon, 431 Lemley, Mark A., 196–97, 213, 410 Leslie, Christopher R., 69–70 Leverage School, 135–37 Licensing of intellectual property blanket licensing of copyrighted works See Price ﬁxing compulsory licensing as remedy, 569–76 concerted refusals See Concerted refusals to license or deal conditional refusals, 198 DOJ/FTC Antitrust Guidelines, 511–12, 527–28, 617–46 general public licenses (GPL), 339–39 non-price restrictions See Non-price licensing restrictions royalty-free licenses and SSOs, 274, 282, 347–48 unconditional refusals, 198 Index 675 goods markets, 449 innovation markets, 449–50 technology markets, 449 Antitrust Modernization Commission on, 444–49 Clayton Act, 34–35, 444–45 DOJ/FTC Antitrust Guidelines, 444 DOJ/FTC Merger Guidelines, 445–48 Meurer, Michael, 69 Microeconomic analysis, 647–58 Miller-Tydings Act, 497–500 Misappropriation of trade secrets, 18–19 Misuse of intellectual property copyrights, 61–65 patents See Patent misuse trademarks, 66–67 MNF (Most favored nations) clauses, 137 Monopolization attempted monopolization, 31–32, 36 barriers to entry, 30 “Cellophane Fallacy,” 30 conspiracy to monopolize, 32–33 damages, 560 fraudulently procured patents, 93, 99 Grinnell test, 31–32 market allocation and trademarks, 377–78 market share, 29 monopoly conduct, 30–31 monopoly leveraging doctrine, 227 network effects, 83–84, 261 non-price licensing restrictions as, 517–27 overview, 28–33 patents, exclusionary rights contrasted, 54–55 possession of monopoly power in relevant market, 28–30 price discrimination, 68, 70–71 royalty structuring as, 538 Spectrum Sports test, 31–32 SSOs, 345–46 trade secrets, 110 tying arrangements, 135–36 unilateral refusals to license or deal as, 176–178, 196–97 Monopoly leveraging doctrine, 227 Monopoly pricing, 24 Most favored nations (MNF) clauses, 137 Motion pictures black markets in, 55–56 block-booking, 139–46 movie splits, 378–81, 472 sham litigation re, 113–19 vertical price restraints in, 489–92 Mueller, Janice, 575 Music industry, black markets in, 55–56 N Nagata, Ernest A., 128–29 National Cooperative Research Act of 1984 enactment of, 44 excerpts, 594–601 National Cooperative Research and Production Act of 1993, 594–601 National Recovery Administration, 41 Nelson, Philip B., 313–14 Network effects, 73–84 monopolization, 83–84, 261 non-price licensing restrictions, 84 “Nine No-No’s,” 42–46 “No economic sense” test, 230 Noerr-Pennington doctrine concerted refusals to license or deal, 462 sham litigation, 111–13, 119, 121–23 Non-price licensing restrictions, 511–34 exhaustion doctrine, 515–517 ﬁeld-of-use restrictions, 517–27 grantbacks, 528–34 monopolization, 517–27 network effects, 84 patent misuse, 512–15 Noncompetition covenants, 61 Nonobviousness of patents, Nonrivalrous consumption, 3–4, 20–21 Novelty of patents, O Oil industry, price ﬁxing in, 307–16 Open patent pools, 465 Ordover, Janusz A., 228–29, 254 P Parent/subsidiary relationship and market allocation, 356 Patent Act of 1790, Patent Act of 1952 enactment of, excerpts, 601–4 Patent and Trademark Ofﬁce (PTO) fraudulently procured patents See Fraudulently procured patents interference proceedings, 443–44 patents, 5–6 trademarks, 15 “Patent holdup,” 273–74, 282, 314 Patent infringement conspiracy to restrain trade, relevance to, 443 counterclaims, 586–588 defenses to, 9–11 inequitable conduct, 10, 99 invalidity, 9–10 676 Index Patent infringement (cont.) non-infringement, patent misuse, 10–11, 55–61, 63 enforcement of intellectual property rights, 93 overview, 8–11 predatory innovation, relevance to, 242 remedies, sham litigation re, 120–23 Patent misuse antitrust law, relationship with, 60–61 competition, 61 copyright misuse compared, 63 defense to patent infringement, 10–11, 55–61, 63 historical background, 41–42 non-price licensing restrictions, 512–15 per se misuse, 61 royalty structuring, 538, 548–49 trademark misuse compared, 66 tying arrangements as, 44 unilateral refusals to license or deal, 197 Patent Misuse Reform Act of 1988, 44, 197 Patent pooling blocking patents, 313–14 closed patent pools, 465 collusion, 314 competition, impact on, 312–14 concerted refusals to license or deal, 462–65 cross-licensing arrangements distinguished, 311–12 deﬁned, 311 DOJ/FTC Antitrust Guidelines, 315, 642–44 DOJ/FTC Promoting Innovation and Competition, 311–12, 315 “free riding,” 315 grantbacks, 315 innovation, impact on, 315–16 integrating complementary technologies, 312–13 open patent pools, 465 overview, 39–40 “patent holdup,” 314 price ﬁxing See Price ﬁxing royalties, 314–15, 323 Sherman Act, 314–15 Patents acquisition of rights, 5–7 blocking patents, 7, 313–14 complementary patents, 322, 327 concerted refusals to license or deal, 462–65 Constitutional authority, contract law, relationship with, 543 deference to patent holders, 39–41, 43 disclosure, duration of protection, exhaustion doctrine, 515—517 ﬁeld-of-use restrictions, 517–27 fraudulent procurement See Fraudulently procured patents grantbacks, 528–34 historical background, infringement See Patent infringement invalidity acquisition of intellectual property rights as conspiracy to restrain trade, relevance to, 443 extent of, 93–94 fraud distinguished, 94 patent infringement, as defense to, 9–10 reverse payment settlements, relevance to, 428 sham litigation, effect on, 119 jurisdiction of Federal Circuit, 577–88 market allocation, 351–55 market power, 55 misuse See Patent misuse monopolization, exclusionary rights contrasted, 54–55 “Nine No-No’s,” 42–46 nonobviousness, novelty, overview, 5–11 “patent holdup,” 273–74, 282, 314 pooling arrangements See Patent pooling price ﬁxing See Price ﬁxing priority of, PTO authority, 5–6 royalty structuring See Royalty structuring scope of protection, 7–8 statutory bars, substitute patents, 322, 327 theft of, 103 tying arrangements See Tying arrangements unilateral refusals to license or deal, 167–213 utility, vertical price restraints, 479–89 Penalties cartels imposing, 300 FTCA §5, 285 Per se rules block-booking, 146 grantbacks, 533 market allocation and trademarks, 362, 369, 371 patent misuse, 61 predatory innovation, 253 price ﬁxing Index 677 blanket licensing of copyrighted works, 336 cartels, 305 SSOs, 348 reverse payment settlements, 393, 410–11, 428 royalty structuring, 541 Sherman Act, 26 tying arrangements, 138, 146 unilateral refusals to license or deal, 197 vertical price restraints, 42–43, 475–80 Permissive counterclaims in patent infringement cases, 586–87 Pharmaceuticals, 387–432 Abbreviated New Drug Approval (ANDA) system, 387–430 black markets in, 55–56 clinical trials, 449 generic drugs overpayment by brand-name ﬁrms, 412–13 safety laws, 429–31 underpayment by generic ﬁrms, 413 market power in, 55 predatory innovation, 245–55 reverse payment settlements ABA Section on Antitrust Law on, 394 after expiration of patent, 428 competition, impact on, 393 discovery in, 428 DOJ on, 411–12 exclusionary effects, 427–28 FTC on, 411–12 invalidity of patent, relevance of, 428 per se rules re, 393, 410–11, 428 plaintiffs’ reasons for, 394 probabilistic property rights, 411 quick look analysis, 410 royalties, 410 rule of reason analysis, 410 safety laws, 429–31 vertical price restraints, 475–80 Photocopiers, unilateral refusals to license or deal in, 178–90 Photography industry, predatory innovation in, 215–36 Pooling arrangements See Patent pooling Predatory innovation, 215–55 business judgment, deference to, 254–55 chilling effect on innovation, 241–42 coercion requirement, 235 compensatory pricing, 228 competition, impact on, 241 consumer welfare standard, 229 damages, 240 disclosure, duty of, 227–28 free consumer choice, 254–55 “free riding,” 242 injunctive relief against, 245 intent, relevance of, 240–41 judicial quality assessment, necessity of, 230–31 medical technology, 236–43 monopoly leveraging doctrine, 227 “no economic sense” test, 230 patent infringement, relevance of, 242 per se rules re, 253 pharmaceuticals, 245–55 photography industry, 215–36 price discrimination, 236 proﬁt sacriﬁce test, 229–30, 254 simultaneous product releases, 228 technological incompatibility, 235 total economic welfare standard, 229 tying arrangements, 235–36 Preserve Access to Affordable Generics Act, 430–31 Price discrimination block-booking as, 140–41 consumer demand, 68–69 copyrights, 69 market power, 68, 71 monopolization, 68, 70–71 predatory innovation, 236 Robinson–Patman Act, 70–71 tying arrangements, 69–70, 136 Price ﬁxing, 291–350 blanket licensing of copyrighted works, 327–38 cartels compared, 338 complementary rights, 336–37 justiﬁcation of, 337 new product concept, 337 nonexclusive rights, 337 per se rules re, 336 rule of reason analysis, 336 Sherman Act, 337 substitute rights, 336–37 Business Review Letters, 321–22 cartels, 291–305 agreement requirement, 300 blanket licensing of copyrighted works compared, 338 causation, 305 competition, impact on, 305 coordination problems, 299 defection problems, 299–300 difﬁculty in establishing, 299 efﬁciency, effect on, 298 678 Index Price ﬁxing (cont.) instability, 299–300 per se rules re, 305 SSOs compared, 345–46 unpatented products, 300 damages, 560 general public licenses (GPL), 339–39 historical background, 41 maximum price, 338–39 oil industry, 307–16 patent pooling, 305–27 blocking patents, 313–14 collusion, 314 competition, impact on, 312–14 complementary patents, 322, 327 cross-licensing arrangements distinguished, 311–12 DOJ/FTC Antitrust Guidelines, 305–6, 315 DOJ/FTC Promoting Innovation and Competition, 311–12, 315 “free riding,” 315 grantbacks, 315 innovation, impact on, 315–16 integrating complementary technologies, 312–13 “patent holdup,” 314 realistic opportunity to obtain licenses, 322–23 remedies, 323 royalties, 314–15, 323 Sherman Act, 314–15 substitute patents, 322, 327 software, 300–305 SSOs, 339–49 auctions by, 347 cartels compared, 345–46 DOJ/FTC Promoting Innovation and Competition, 340, 345–48 joint ex ante licensing, 345–47 monopolization, 345–46 per se rules re, 348 procedural deﬁciencies, 349 royalties, 345–46 royalty-free licenses, 347–48 screening, 348 Sherman Act, 339, 345–46, 349 tying arrangements, 137–38 V-chip, 340–49 vertical price restraints See Vertical price restraints Price-protection clauses, 136–38 Probabilistic property rights, 411 Proﬁt sacriﬁce test, 229–30, 254 Promoting Innovation and Competition (DOJ/FTC) cross-licensing arrangements, 311–12 patent pooling, 311–12, 315 SSOs, 262, 274, 283–84, 340, 345–48 tying arrangements, 131 unilateral refusals to license or deal, 195–98 PTO See Patent and Trademark Ofﬁce Publicity rights, 19 Punitive damages, 35 Q Quick look analysis reverse payment settlements, 410 Sherman Act, 27 R Refusals to license or deal concerted refusals See Concerted refusals to license or deal conditional refusals, 198 unconditional refusals, 198 unilateral refusals See Unilateral refusals to license or deal Relevant market, 176–77, 189–90 Remedies in antitrust law, 569–76 compulsory licensing as, 569–76 copyright infringement, for, 13 criminal violations, 36, 569 damages See Damages injunctive relief FTCA, 35–36 predatory innovation, against, 245 requests for, 569 unilateral refusals to license or deal, against, 203–13 patent infringement, for, price ﬁxing, for, 323 punitive damages, 35 treble damages, 35–36, 560, 569 unilateral refusals to license or deal, for, 199, 212 Repetitive petitioning, 128–29 Resale price maintenance See Vertical price restraints Restatement of the Law of Unfair Competition, 18 Restraint of trade See Monopolization Restraints on alienation, 479 Reverse payment settlements See Pharmaceuticals Robinson–Patman Act, 70–71 Royalties patent pooling, 314–15, 323 SSOs, 345–46 Index 679 Royalty-free licenses and SSOs, 274, 282, 347–48 Royalty structuring, 535–53 after expiration of patent, 541, 552–53 bundling of patents, 553 deferred payments, 541 differential rates, 553 before issuance of patent, 542–43 market power, 553 monopolization, 538 patent misuse, 538, 548–49 per se rules re, 541 protesting, 549 Sherman Act, 541 total output, based on, 538–39, 549 trade secrets, 542 tying arrangements compared, 541 unpatented products, incorporating, 538, 542 voluntary versus coerced agreements, 549 Rule of reason analysis acquisition of intellectual property rights as conspiracy to restrain trade, 442–43 block-booking, 141 DOJ/FTC Antitrust Guidelines, 634–39 market allocation, 362, 371 price ﬁxing, 336 reverse payment settlements, 410 Sherman Act, 26–27 tying arrangements, 141 vertical price restraints, 500–509 S “Safety zone,” 637–39 Schumpeter, Joseph, 72 Settlements FTC interference proceedings, anticompetitive settlements in, 443–44 reverse payment settlements See Pharmaceuticals Sham litigation, 104–29 copyright infringement, re, 128 fraudulently procured patents, relationship with, 119 intent, relevance of, 118–19, 195 invalidity of patent, effect of, 119 legal expenses as antitrust injury, 110–11 lobbying compared, 111–13 motion pictures, re, 113–19 Noerr-Pennington doctrine, 111–13, 119, 121–23 objective baselessness, 118 patent infringement, re, 120–23 prevailing in litigation, effect of, 118 repetitive petitioning, 128–29 Sherman Act, 120 subjective motivation, 118–19, 195 television, re, 123–129 trade secrets, re, 110–11 Sherman Act acquisition of intellectual property rights, 433, 444 agreement requirement, 26 block-booking, 146 concerted refusals to license or deal, 462 criminal violations, 36 essential facilities doctrine, 212–13 excerpts, 591 exclusive dealing arrangements, 34 foreign-based conduct, 385 fraudulently procured patents, 93 FTCA compared, 35, 287 horizontal restraints, 27 market allocation and trademarks, 357, 369 monopolization See Monopolization overview, 25–33 per se rules, 26 price ﬁxing blanket licensing of copyrighted works, 337 patent pooling, 314–15 SSOs, 339, 345–46, 349 quick look analysis, 27 royalty structuring, 541 rule of reason analysis, 26–27 SSOs, deceptive conduct before, 257 tying arrangements, 33–34, 40, 146 unreasonable restraints of trade, 26–27 vertical price restraints, 27, 491 Sidak, Joseph Gregory, 236 Software market power in, 55 price ﬁxing in, 300–305 SSOs for, 274–84 tying arrangements in, 149–53 unilateral refusals to license or deal in, 167–78, 190–99 Spectrum Sports test, 31–32 Split arrangements, 378–81 Sports leagues, market allocation in, 357 Standard-setting organizations (SSOs), 257–88 ABA Section on Antitrust Law on, 261 auctions by, 347 computer hardware, for, 257–61 copyright protection of standards, 349 disclosure requirements, 262, 282 DOJ/FTC Promoting Innovation and Competition, 262, 274, 283–84, 340, 345–48 fair, reasonable, and non-discriminatory (FRAND) terms, 273–74 680 Index Standard-setting organizations (SSOs) (cont.) FTC on, 283–84 FTCA §5 actions, 284–87 government agencies, relationship with, 349 grantbacks, 534 licensing requirements, 282–83 monopolization, 345–46 monopoly conduct before, 274 “patent holdup,” 273–74, 282 price ﬁxing See Price ﬁxing royalty-free licenses, 274, 282, 347–48 Sherman Act, 257 software, for, 274–84 wireless communications, for, 262–73 Standards Development Organization Advancement Act of 2004 enactment of, 44 excerpts, 594–601 overview, 348–49 Standing in antitrust law, 557–67 competitor standing, 557–64 consumer standing, 564–67 Static competition, 23 Static efﬁciency, 24, 72 Stigler, George J., 140–41 Structuring royalties See Royalty structuring Subsidiaries and market allocation, 356 Substitute copyrights, 336–37 Substitute patents, 322, 327 Supply curve, 652–53 T Technology markets, 449, 625–26 Television block-booking, 141–49 sham litigation re, 123–29 Tension between antitrust law and intellectual property, 39–46 Theft of patents, 103 Tortious interference with contract, 479 Total economic welfare standard, 229 Trade secrets acquisition of protection, 18 duration of protection, 19 fraudulent procurement, patents contrasted, 92–93 misappropriation, 18–19 monopolization, 110 overview, 18–19 royalty structuring, 542 scope of protection, 18 sham litigation re, 110–11 vertical price restraints, 479, 489 Trademarks abandonment of, 20 acquisition of protection, 15 dilution of, 17 distinctiveness, 15–16 duration of protection, 16–17 fraudulent procurement, patents contrasted, 92–93 infringement, 17 Lanham Act, 15, 17 market allocation See Market allocation misuse, 66–67 non-functionality, 16 overview, 14–17 PTO authority, 15 requirements, 15 scope of protection, 17 tying arrangements, 154–65 exclusive dealing arrangements compared, 158 lists of approved suppliers, 165 quality assurance, 158 separate product requirement, 157–58, 162 use in commerce, 16 vertical price restraints, 479, 489, 496–500 Treble damages, 35–36, 560, 569 Tying arrangements, 131–65 block-booking See Block-booking Clayton Act, 33–34, 40, 146 copyrights block-booking See Block-booking software, 149–53 damages, 560 deﬁned, 131–32 DOJ/FTC Antitrust Guidelines, 131–32, 641 DOJ/FTC Promoting Innovation and Competition, 131 exclusive dealing arrangements contrasted, 158 franchises, 154–65 exclusive dealing arrangements compared, 158 lists of approved suppliers, 165 quality assurance, 158 separate product requirement, 157–58, 162 historical background, 39–41 market power, 46–56, 153 patent misuse, 44 patents, 132–38 Chicago School on, 135–37 competition, impact on, 135 goodwill arrangements, 137 Leverage School on, 135–37 market share, 136 monopolization, 135–36 Index 681 most favored nations (MNF) clauses, 137 per se rules re, 138 price discrimination, 136 price ﬁxing, 137–38 price-protection clauses, 136–38 price regulation, evading, 137 Volume Tying Theory, 138 per se rules re, 138, 146 predatory innovation, 235–36 price discrimination, 69–70 royalty structuring compared, 541 rule of reason analysis, 141 separate product requirement, 153, 157–58, 162 Sherman Act, 33–34, 40, 146 software, 149–53 trademarks, 154–65 exclusive dealing arrangements compared, 158 lists of approved suppliers, 165 quality assurance, 158 separate product requirement, 157–58, 162 unilateral refusals to license or deal as, 196–97 U Unconditional refusals to license or deal, 198 Unfair competition, 119, 284–87 Uniform Trade Secrets Act, 18 Unilateral refusals to license or deal, 167–214 aftermarkets, market power in, 199–200 computer hardware, 203–13 conditional refusals, 198 Copyright Act, 177 DOJ/FTC Antitrust Guidelines, 167 DOJ/FTC Promoting Innovation and Competition, 195–98 downstream markets, market power in, 199–200 essential facilities doctrine, 212–13 injunctive relief against, 203–13 intellectual property justiﬁcation, 196 intent, relevance of, 195 legitimate business justiﬁcation, 176–77 market power, 197–200 monopolization, 176–78, 196–97 patent misuse, 197 per se rules re, 197 photocopiers, 178–90 presumptive validity, 176–77 relevant market, deﬁning, 176–77, 189–90 remedies for, 199, 212 scope of patent, relevance of, 196 software, 167–78, 190–99 subjective motivation, 195 tying arrangements, 196–97 unconditional refusals, 198 unpatented products, 190 V V-chip, 340–49 Vertical price restraints, 475–509 antitrust law, 475–80 buyers’ cartels, 488 copyrights, 479, 489–96 DOJ/FTC Antitrust Guidelines, 640 Dr Miles case, 475–80 ﬁrst sale doctrine, 495–96 General Electric rule, 480–89 historical background, 41 Leegin case, 475, 500–509 motion pictures, 489–92 patents, 479–89 per se rules re, 42–43, 475–80 pharmaceuticals, 475–80 rule of reason analysis, 500–509 Sherman Act, 27, 491 trade secrets, 479, 489 trademarks, 479, 489, 496–500 video games, 492–95 waivers, 489 Video games, vertical price restraints in, 492–95 Volume Tying Theory, 138 W Willig, Robert D., 228–29, 254 Wireless communications, SSOs for, 262–73 ... with a third party Andrx also agreed to dismiss its antitrust and unfair competition counterclaims, to diligently prosecute 390 Antitrust Law and Intellectual Property Rights its ANDA, and to not... 20 17, 90 L.Ed.2d 445 (1986) (quoting Board of Trade of City of Chicago v United States, 24 6 U.S 23 1, 23 8, 38 S.Ct 24 2, 24 4, 62 L.Ed 683, (1918)) Both the ALJ’s initial decision and the Commission’s... 414 Antitrust Law and Intellectual Property Rights was about to be infringed, and the suit’s subsequent settlement, requires us to address issues at the intersection of intellectual property law - Xem thêm -
Xem thêm: Ebook Antitrust law and intellectual property rights: Part 2, Ebook Antitrust law and intellectual property rights: Part 2, D. International Intellectual Property Regimes and Market Allocation, C. Scott Hemphill, An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition, 109 COLUMBIA LAW REVIEW 629 (2009), A. Acquisition of IP as a Conspiracy to Restrain Trade, B. Agreements to Acquire Intellectual Property and Merger Law, A. Antitrust Treatment of Concerted Refusals to Deal, B. Concerted Refusals to Deal with a Patentee, C. Group Boycotts and Copyrights, A. The Foundation of Antitrust’s Treatment of Vertical Price Restraints, B. General Electric and the Ability of Patent Owners to Set Resale Prices, C. Vertical Price Fixing and Copyrighted Works, D. Resale Price Maintenance and Trademarked Goods, Christianson v. Colt Industries Operating Corp.