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Automotive Bearings Price-Fixing Allegations Survive FTAIA Defense

Posted in Private Litigation

On August 26, 2014, the Eastern District of Michigan denied a motion by a Japanese manufacturer and its U.S.-based subsidiary (NTN Corporation and NTN USA Corporation) to dismiss the direct and indirect purchaser complaints in In re Bearings, 2:12-cv-00500-MOB-MKM (E.D. Mich. Aug. 26, 2014), one of the cases in the In re Automotive Parts Antitrust Litigation MDL, No. 12-md-02311.  Following an investigation by the Japan Fair Trade Commission in 2013, NTN admitted to participating in a conspiracy to fix prices for bearings, which the complaints describe as “friction-reducing devices that allow one moving part to glide past another moving part.”

According to NTN, the plaintiffs were trying to use NTN’s participation in a price-fixing conspiracy in Japan to “link NTN to a different conspiracy in the United States” simply because NTN had “knowledge that some of its bearings sold in foreign markets would enter the United States market.”  This “theory of global United States antitrust jurisdiction,” NTN contended, is prohibited by the Foreign Trade Antitrust Improvements Act (FTAIA).

The court was unpersuaded.  The plaintiffs’ allegations depicting foreign investigations were not merely attempts to recover for conduct that occurred in other countries; rather, the existence of foreign investigations and guilty pleas was what “render[ed] Plaintiffs’ claims of a conspiracy directed at the United States plausible.”  According to the court, the FTAIA arguments did not apply to NTN USA, which was alleged to have manufactured and sold bearings in the United States.  And “[w]ith respect to NTN, Plaintiffs allege[d] that NTN USA manufactured and sold price-fixed bearings directly into the United States market at the direction of NTN.”  The court concluded that “[t]he conduct at issue in this case is not the type of conduct Congress sought to exclude from the Sherman Act’s reach.”

New York Proposes Revised Regulations for Health Care Collaborations

Posted in Healthcare Antitrust

Today, New York health regulators proposed revised rules that would allow health care providers to merge or cooperate with one another without being subject to federal or state antitrust scrutiny.

The state’s Department of Health proposed regulations establishing a process for entities to obtain a Certificate of Public Advantage (COPA) pursuant to Public Health Law Article 29-F.  Article 29-F sets forth the State’s policy of encouraging appropriate collaborative arrangements among health care providers who might otherwise be competitors, if the benefits of such arrangements outweigh any disadvantages likely to result from a reduction of competition.  The statute requires the Department to establish a regulatory structure allowing it to engage in active state supervision as necessary to promote state action immunity under state and federal antitrust laws.

The proposed regulations were initially published in the State Register on September 18, 2013, and have been revised in light of public comments received.  The revised regulations will be open for public comment for 30 days and will take effect upon publication of a notice of adoption.  A Notice of Revised Rulemaking appears in the today’s State Register, and a copy of the full text of the regulatory proposal is available on the Department’s website.

Physicians Write Letter to FDA Regarding Biosimilar Naming Concerns

Posted in Healthcare Antitrust

On Thursday, August 14, 2014, several physicians wrote a letter to Commissioner Hamburg of the U.S. Food and Drug Administration (FDA) expressing their concerns regarding the naming of biosimilar products in light of the implementation of the Biologics Price Competition and Innovation Act (BPCIA).

Unlike traditional small-molecule prescription drugs, most biologics are complex and are typically made from human or animal materials.  The BPCIA provides an abbreviated licensure pathway for biologics that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biologic.  A biologic may be demonstrated to be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved biologic.  Unlike “generic” versions of small-molecule prescription drugs, biosimilars are not bioequivalent to their reference biologics.  To date, the FDA has not approved any biosimilar products.

The licensure pathway contemplated by the BPCIA is meant to reduce the time and cost of bringing competing biosimilar products to consumers.  As the FDA begins evaluating the first U.S. applications for the licensing of biosimilars, concerns have arisen as to how approved biosimilars will be named.  In their letter to Commissioner Hamburg, the physicians argued that biosimilars “must have distinguishable nonproprietary names” from their reference biologics.  The physicians wrote that distinct names are needed to avoid confusion: if a biologic and its biosimilars share a common name, physicians may incorrectly assume that the products are approved for all of the same indications, even if the FDA disagrees.  The physicians also argued that unique names for biosimilars will help doctors track adverse events by allowing them to correctly identify what product caused the event.

However, not everyone agrees with the physicians’ position.  On July 1, 2014, a group of pharmacies, insurers and unions wrote a letter to Commission Hamburg asking the FDA to require that biologics and biosimilars share the same name.  This group argued, among other things, that requiring distinct names for biosimilars may slow the uptake of biosimilar products as substitutes for brand-name biologics, thereby limiting significant potential cost savings.

Judge Upholds Poaching Claims in Pharmaceutical Data Antitrust Case

Posted in Healthcare Antitrust, IP Antitrust, Private Litigation

On Friday, August 15, 2014, Judge Gerald McHugh of the Eastern District of Pennsylvania let stand several counterclaims that IMS Health Inc. (IMS) made against Symphony Health Solutions Corp. (Symphony) in connection with related to allegations that Symphony had poached IMS employees to steal trade secrets.

In July 2013, Symphony brought a complaint against IMS, the largest pharmaceutical data and analytics company in the world, alleging that IMS unlawfully abused its monopoly power in pharmaceutical data markets and violated the antitrust laws through various types of horizontal and vertical exclusionary conduct, including entering into exclusive long-term agreements with data suppliers, requiring data suppliers to sign most-favored-nation clauses, acquiring rivals to eliminate competition, and bundling its products.  In response to the complaint, IMS filed multiple counterclaims alleging that Symphony poached IMS employees to steal IMS’s trade secrets. Symphony then filed a motion to dismiss IMS’s counterclaims.

After reviewing Symphony’s motion to dismiss, Judge McHugh dismissed IMS’s trade secret misappropriation claims as to two former IMS employees as barred by res judicata.  Specifically, a prior consent order already addressed concerns that Symphony gained access to IMS’s trade secrets through the two former IMS employees.  Judge McHugh also dismissed IMS’s claim of tortious interference regarding a vendor because IMS’s “prediction” of future harm could not sustain its claim.

However, Judge McHugh let IMS’s poaching claims go forward and refused to dismiss IMS’s claims of improper procurement of confidential information and unfair competition.  As to improper procurement, Judge McHugh highlighted IMS’s allegation that its former employee hired by Symphony made a public presentation with IMS materials.  With respect to unfair competition, Judge McHugh ruled that IMS had stated facts sufficient to support its claim when it alleged that “Symphony targeted for hire groups of employees who worked in parts of IMS’s business that Symphony wished to duplicate, with the purpose of appropriating IMS’s trade secrets.”

District Court Denies Summary Judgment in Broadcast Rights Class Action

Posted in Private Litigation

On Friday, August 8, 2014, the Southern District of New York denied motions for summary judgment filed by the National Hockey League, Major League Baseball, Comcast Corp. and DirecTV LLC in suits alleging that these organizations and television providers conspired to hinder competition in television and internet sports broadcasting.  In two class action suits brought by consumers of broadcast sports, plaintiffs claimed that the leagues and television providers agreed to “black out” games so that regional sports networks faced limited competition to broadcast live events.  This purportedly anti-competitive agreement forced plaintiffs to buy “out of market” packages offered by defendants, such as MLB Extra Innings, to watch live games on television or the internet if they did not live within the regional provider’s viewing territory.  Laumann, et al. v. National Hockey League, et al., case number 1:12-cv-01817; Lerner v. Office of the Commissioner of Baseball, et al., case number 1:12-cv-03704.  District Judge Shira Scheindlin determined that the questions of whether plaintiffs have provided evidence of collusion among the leagues and providers and evidence of a tacit agreement between the providers should be decided at trial by a fact finder.  In addition, Judge Scheindlin refused to apply the rule established in Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200, 208 (1922), that exempted Major League Baseball from the antitrust laws.  She explained that Major League Baseball’s exemption did not extend to the league’s contracts for television broadcast services.  A trial date has not been set.

Judge Rules NCAA Ban on Student-Athlete Compensation Violates Antitrust Law

Posted in Private Litigation

On Friday, August 8, 2014, the Northern District of California determined that the National Collegiate Athletic Association’s (NCAA’s) rules banning student-athletes for being compensated for the use of their names, images and likenesses violated antitrust laws.  In re Student-Athlete Name & Likeness Licensing Litigation, case number 4:90-cv-01967.  During the three week-long bench trial in June 2014, the student athletes argued that the NCAA and its member schools and conferences conspired to fix compensation for the use of athletes’ likenesses at zero.  The NCAA countered by contending that not paying athletes stopped some schools from being able to compensate students more than others, that athletes received benefits, such as an education and room and board, for playing college sports, that the rule protected these students’ amateur status, that paying athletes would cause tension with non-athlete classmates, and that fans would not watch college sports if athletes were paid.  District Judge Wilken was unpersuaded by the NCAA’s arguments.  In her ruling, Judge Wilken stated that the NCAA did not provide credible evidence that fans would abandon supporting their teams if athletes were paid.  Moreover, because schools compete for recruits with impressive facilities and highly-paid coaches, the NCAA undercut its argument that not compensating student-athletes leveled the competitive playing field between colleges.  Instead, Judge Wilken determined that without these rules, Division I basketball and Football Bowl Subdivision schools would compete for recruits’ athletic talents and licensing rights as well as compete to offer athletic and educational opportunities for students.

In entering an injunction against the NCAA, Judge Wilken suggested that NCAA member schools should increase the stipends paid to students to cover the full cost of attending college, and she also recommended that schools hold money collected from the use of students’ likenesses in a trust for the students until they graduate.  At the same time, however, she refused to allow student athletes to receive money from product endorsements.  On Monday, August 11, 2014, the NCAA asked Judge Wilken to clarify the application of her order, which stated that the injunction prohibiting the NCAA’s ban on compensating players would begin with athletes who enroll after July 1, 2016.  The NCAA requested that Judge Wilken explain whether the injunction applied to current student athletes beginning in July 2016 or whether it only applied to recruits who start college after that date.

This case originated in 2009 when two former NCAA student-athletes filed class action suits against the NCAA, Electronic Arts Inc. and Collegiate Licensing Co., alleging that these organizations profited from student-athlete likenesses on television, in video games and on merchandise while prohibiting the athletes from receiving payment.  The NCAA previously settled with plaintiffs for $20 million over the use of students’ likenesses in video games, and Electronic Arts and Collegiate Licensing also reached a settlement with both plaintiff groups for $40 million.  Both settlements received preliminary approval from Judge Wilken in July 2014.

FTC Employs SAFE WEB Act to Assist Canada’s Competition Bureau

Posted in FTC Developments

On July 30, 2014, the U.S. District Court for the District of Maryland denied Aegis Mobile LLC’s motion to quash a Federal Trade Commission (FTC) subpoena seeking information related to an investigation by the Competition Bureau of Canada (Competition Bureau).  Aegis, based in Columbia, Maryland, contracted with the Canadian Wireless Telecommunications Association (CWTA) to collect and analyze the advertising used to promote the CWTA’s digital content.  The Competition Bureau, alleging the advertising was false and misleading, asked the FTC to seek information from Aegis Mobile about its work for the CWTA.  The FTC issued a subpoena for documents relating to the project using its power under the SAFE WEB Act.

The SAFE WEB Act enhances the FTC’s investigative and enforcement functions in information sharing, investigative assistance, cross-border jurisdictional authority and enforcement relationships.  The FTC advocated the reauthorization of the Act by Congress in 2012, pointing to over 100 investigations with international components that the FTC had already performed.  The FTC also pointed to figures suggesting cross-border fraud problems, including over 100,000 U.S. consumer complaints against foreign business in 2011.

One of the provisions of the SAFE WEB Act, 15 U.S.C. § 46(j), gives the FTC the authority to assist foreign authorities in investigating fraudulent and deceptive commercial practices, with certain exceptions.  The FTC employed the SAFE WEB Act here, and in response Aegis Mobile, sought to quash the FTC’s subpoena on the grounds that Aegis Mobile was a “common carrier,” and would therefore be exempted from the subpoena.  The court held that Aegis Mobile was not a common carrier and was subject to the FTC’s investigation.

Contractual Duty to Deal Does Not Equal Antitrust Duty to Deal

Posted in Healthcare Antitrust, IP Antitrust, Monopolization/Abuse of Dominance

Addressing for the first time whether a patent holder under a contractual duty to deal is also subject to an antitrust duty to deal, the U. S. Court of Appeals for the Second Circuit upheld dismissal of a putative antitrust class action challenge to a drug manufacturer’s refusal to fully supply competitors’ requested quantities under patent settlement agreements.  In re Adderall XR® Antitrust Litigation, Case No. 13-1232 (2d Cir., June 9, 2014) (Sack, J.).

The defendants, Shire, hold patents covering Adderall XR.  Previously, Shire sued generic drug manufacturers Teva and Impax for patent infringement after those manufacturers—seeking U.S. Food and Drug Administration (FDA) approval to produce generic Adderall XR—argued that Shire’s patents were “invalid or will not be infringed.”  Shire settled with Teva and Impax in 2006 with variants of the traditional reverse-payment agreement.  In these settlement agreements, Teva and Impax agreed to stay out of the Adderall XR market for three years (even if FDA approval came earlier), but unlike a traditional reverse-payment agreement (where the patent holder pays money to the potential entrant), Shire agreed to grant licenses starting in 2009 for making and selling the drug and, if FDA approval had not yet occurred, to supply Teva and Impax’s requirements of unbranded Adderall XR for resale.  The 2d Circuit summarized the arrangement as follows: “Shire undertook to give its competitors both the rights and the supplies necessary to participate in the market for [Adderall XR].”  By the time Shire’s contractual exclusivity expired, the FDA had not approved either Teva or Impax’s applications, so Teva and Impax began purchasing from Shire.  Shortly thereafter, both companies alleged that Shire breached the settlement agreement obligations by refusing to fully fulfil their requirement orders.  However, both companies eventually settled with Shire.

In the present case, drug wholesaler and plaintiff Louisiana Wholesale Drug Company (LWD) brought a putative class action against Shire.  It alleged antitrust violations stemming from the effect of the supply shortfall on the prices the proposed class of drug wholesalers paid.  LWD argued that Shire’s “ordinary breach of contract” became “an unlawful act of monopolization” because, by entering into the agreements, Shire “relinquish[ed] its monopoly control over” Adderall XR vis-à-vis Teva and Impax and thereby created a “duty to deal” with its competitors under the Supreme Court’s 1985 Aspen Skiing decision.  Specifically, LWD alleged that Shire artificially inflated prices by holding back some of its supply from generic manufacturers/patent licensees Teva and Impax, from whom LWD purchased Adderall XR.  After the district court dismissed the complaint on a R. 12(b)(6) motion to dismiss, LWD appealed.

The 2d Circuit affirmed the district court’s dismissal for failure to state a claim, concluding that LWD’s “allegations amount to the self-defeating claim that Shire monopolized the market by ceding its monopoly” and that “the complaint does little more than attach antitrust ‘labels and conclusions’ to what is, at most, an ordinary contract dispute to which the plaintiffs are not even parties.”  The court reasoned that “‘the sole exception to the broad right of a firm to refuse to deal with its competitors’ comes into play only ‘when a monopolist seeks to terminate a prior (voluntary) course of dealing with a competitor’” (emphasis added), and that unlike Aspen Skiing, “the agreements here were explicitly unprofitable—they introduced price competition into a market where none would otherwise have existed” (emphasis in original).  As such, the 2d Circuit concluded that “[t]he mere existence of a contractual duty to supply goods does not by itself give rise to an antitrust ‘duty to deal.’”

Practice Note:  Last year (while the Adderall case was on appeal), the Supreme Court in F.T.C. v. Actavis found that reverse-payment settlements are not immune from antitrust scrutiny merely because they may “fall within the scope of the exclusionary potential of the patent” at issue and that such agreements are subject to the antitrust law rule of reason.  Patent holders should note, therefore, that the 2d Circuit’s holding in Adderall, while it appears to be on firm jurisprudential ground, does not immunize them from all antitrust claims relating to reverse-payment settlement agreements—or, for that matter, from breach of contract claims.  In fact, Shire faced (and settled) breach of contract suits from both Teva and Impax.  The 2d Circuit expressly based its decision only on “the plaintiff’s theory of the case” (i.e., the alleged existence and violation of an antitrust “duty to deal”) and stressed that it expressed no view regarding “the potentially anticompetitive effects, if any,” of the Shire/Teva/Impax settlement agreements.

For more articles on additional intellectual property cases, please click here.

Chinese Magnesite Producers Antitrust Class Action Complaint Dismissed

Posted in Chinese Developments, Energy/Commodities, Private Litigation

On July 24, 2014, the district court in Animal Sci. Prod., Inc. et al. v. China Nat’l Metals & Minerals Imp. and Exp. Corp. et al., Case No. 2:05-cv-04376 (D.N.J.), dismissed direct purchaser plaintiff’s Amended Complaint without prejudice in favor of magnesite producers accused of engaging in a price fixing scheme for magnesite and magnesite products sold in the United States.  The court found that the direct purchaser plaintiff, Resco, did not plausibly plead facts to establish antitrust standing as a direct purchaser.  The analysis was complicated by the fact that Resco inherited its claim from an assignor, Possehl (US), and the Amended Complaint contained no facts supporting the allegation that Possehl made direct purchases from the defendants.  The court recommended amending the complaint to identify specific transactions and the governing agreements for those purchases.

The dismissal is another setback for the plaintiffs, who filed suit in 2005 against 17 foreign companies, 16 of which are located in China.  None of the Chinese defendants responded to the complaint and in 2007, and plaintiffs filed a motion for a default judgment.  Seven of the companies responded in 2008 with a motion to compel arbitration.  However, before any of the motions were resolved, the case was administratively closed while the Third Circuit determined the appropriate standard for analyzing whether the district court had jurisdiction to hear the case under the Foreign Trade Antitrust Improvements Act.  The case was reopened in April 2012 and the district court asked for briefing on antitrust standing issues, which resulted in the dismissal of the Amended Complaint.

FTC Promotes Competition Among Professionals Through Advocacy, Enforcement

Posted in FTC Developments

On July 16, 2014, Andrew Gavil, Director of the Office of Policy Planning at the Federal Trade Commission (FTC), testified on the subject of “Competition and the Potential Costs and Benefits of Professional Licensure” before the House Committee on Small Business.  Gavil explained the FTC’s rationale for evaluating the competitive effects of different licensing regimes and described its strategy of promoting competition among professionals through a combination of advocacy and enforcement.

The FTC’s approach in this area is to evaluate the pros and cons of specific licensure regulations on a case-by-case basis.  In a nutshell, the agency recognizes that, “although licensure may be designed to provide consumers with minimum quality assurances, licensure provisions do not always increase service quality,” and indeed “may . . . discourage innovation and entrepreneurship” and “impede the flow of labor or services.”  Advocacy is an important component of the FTC’s strategy because state and local licensing regimes are often not actionable under the federal antitrust laws.  Instead, the agency utilizes tools such as comments, testimony, workshops, reports and amicus briefs to encourage policymakers to consider the likely competitive effects of proposed regulations.  Gavil noted a recent example in which, at the request of Chicago Alderman Brendan Reilly, FTC staff provided a comment assessing the potential competitive effects of a proposed Chicago ordinance creating a licensing scheme to regulate mobile ride-sharing apps.  The comment, available here, details how certain provisions of the ordinance might “unnecessarily impede competition in these services without providing any apparent consumer protection benefits,” for example, by placing licensees at a competitive disadvantage to traditional transportation services or by restricting innovative pricing models.

The FTC also keeps an eye out for opportunities to flex its enforcement muscle and discourage anticompetitive conduct by independent regulatory boards that are not protected by the state action doctrine.  For example, the Fourth Circuit last year sided with the FTC in a suit challenging the North Carolina Board of Dental Examiners’ practice of issuing cease-and-desist letters to non-dentist providers of teeth-whitening services.  See N.C. State Bd. of Dental Examiners v. FTC, 717 F.3d 359 (4th Cir. 2013), cert. granted, No. 13-564, 5014 WL 801099 (U.S. Mar. 3, 2014).  In particular, state agencies comprised mostly of industry participants who are chosen by other industry participants must take special precautions to avoid violating the antitrust laws.  Many of the examples of enforcement actions Gavil provided in his testimony concerned the healthcare arena, which is consistent with the FTC’s ongoing commitment to promote competition in that sector.

The text of the Commission’s prepared statement is available here.