Sherman Antitrust Act Archives

In the Weeds? Humira “Patent Thicket” Isn’t an Antitrust Violation

The US Court of Appeals for the Seventh Circuit affirmed that welfare benefit plans that bought the drug Humira did not have valid antitrust claims against the patent owner. The Court found that amassing patents by itself is not enough to give rise to an antitrust claim, and that the welfare benefit plans would need to prove that the patents were invalid. Mayor and City Council of Baltimore, et al. v. AbbVie Inc., et al., Case No. 20-2402 (7th Cir. Aug. 1, 2022) (Easterbrook, Wood, Kirsch, JJ.)

AbbVie owns a patent covering Humira, which is a drug used to treat arthritic and inflammatory diseases. Humira is not covered by the Hatch-Waxman Act because it is a biologic drug, rather than a synthetic drug. Biologics are covered by the Biologics Price Competition and Innovation Act (BPCIA), under which a competitor must ask the US Food and Drug Administration for permission to sell a “biosimilar” drug based on certain guidelines. From the first sale of the original drug, the competitor must wait 12 years to enter the market. If the original drug seller believes that a patent blocks competition and initiates litigation, the competitor is still free to sell its biosimilar drug. The competitor sells at risk of an adverse outcome in the litigation.

The original Humira patent expired in 2016, but AbbVie obtained 132 additional patents related to the drug. After the 12-year BPCIA requirement passed, none of AbbVie’s competitors chose to launch a biosimilar. Instead, competitors settled with AbbVie on terms to enter the US market in 2023. In exchange, AbbVie agreed that enforcement of all 132 of its patents would end in 2023 even if they were not set to expire.

Welfare benefit plans that pay for Humira on behalf of covered beneficiaries accused AbbVie of violating Sections 1 and 2 of the Sherman Antitrust Act. The payors argued that AbbVie’s settlements with potential competitors established a conspiracy that restrained competition in violation of Section 1, and that AbbVie’s “patent thicket” allowed AbbVie to reap unlawful monopoly profits from Humira after expiration of the original patent in violation of Section 2. The district court dismissed the complaint. The payors appealed.

The issue on appeal with respect to Section 2 was whether the payors had to prove that all of AbbVie’s Humira-related patents were invalid. Under the Walker Process antitrust doctrine, a party may be liable for an antitrust violation if it knowingly asserts a fraudulently procured patent in an attempt to monopolize a market. The payors did not argue that all 132 of AbbVie’s patents were fraudulent. The Seventh Circuit reasoned that because the patent laws do not set a cap on the number of patents a person (or company) can hold, the payors would need to prove that each of AbbVie’s 132 Humira-related patents were invalid to succeed in showing a violation under Section 2. Not only did the payors fail to prove that all 132 patents were invalid, but they did not even offer to do so. [...]

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Fifth Circuit Takes U-Turn, But Still Concludes Automotive Supplier Can’t Force SEP Holder to Issue License

In response to a petition for panel rehearing, the US Court of Appeals for the Fifth Circuit withdrew its prior decision finding that an automotive parts supplier did not have constitutional standing to pursue an antitrust lawsuit against owners of standard essential patents (SEPs). The Court issued a new opinion summarily affirming the district court’s original decision finding constitutional standing but dismissed the case based on lack of antitrust standing. Continental Automotive Systems, Inc. v. Avanci, LLC et al., Case No. 20-11032 (5th Cir. June 21, 2022) (Stewart, Ho, Engelhardt, JJ.) (per curiam).

Continental sued several SEP holders and their licensing agent, Avanci, for violation of Sections 1 and 2 of the Sherman Antitrust Act based on Avanci’s refusal to license the SEPs on fair, reasonable and nondiscriminatory (FRAND) terms. Avanci moved to dismiss, arguing that Continental lacked both constitutional standing and antitrust standing. The district court found that Continental had constitutional standing because its lack of success obtaining licenses on FRAND terms was an injury. However, the district court found that Continental lacked antitrust standing and therefore dismissed the lawsuit. Continental appealed.

The Fifth Circuit issued its original opinion in March 2022, finding that Continental’s theory of injury was insufficient to confer constitutional standing. The Court explained that Avanci’s refusal to sell licenses did not result in a cognizable injury to Continental, and that Continental had no rights to enforce FRAND contracts between the individual patent holders and the standard setting organization (SSO) since Continental was not part of the SSO to which the SEP holders belonged. The Court also found that even if Continental was contractually entitled to a license on FRAND terms, the SSO contract had not been breached because the individual patent holders fulfilled their obligations to the SSO by actively licensing Continental’s customer, which meant that the SEP licenses were (derivatively) available to Continental on FRAND terms. Finding that Continental lacked constitutional standing, the Court did not reach the issue of whether Continental lacked antitrust standing.

Continental filed a petition for panel rehearing and rehearing en banc. Numerous third parties, including legal and economic scholars, industry associations and tech companies, also filed amici briefs supporting Continental, arguing that the Fifth Circuit wrongly found that Continental was not an intended beneficiary of the FRAND obligations that the SEP owners made to the relevant SSO.

On June 14, 2022, the Fifth Circuit issued an order withdrawing its March 2022 opinion. A week later, the Court issued a new opinion summarily stating that “[h]aving reviewed the district court’s detailed order, and considered the oral arguments and briefs filed by the parties and amicus curiae, we AFFIRM the judgment of the district court that Continental failed to state claims under Sections 1 and 2 of the Sherman Act.”

Practice Note: Although the ultimate outcome did not change, the Fifth Circuit withdrew its previous finding that third-party beneficiaries to SSOs did not have constitutional standing to file a lawsuit.