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IP Antitrust

FTC’s Reporting Rule for Pharmaceutical Patent Transfers Upheld

by Daniel Powers | Jun 4, 2014 | FTC Developments, IP Antitrust

On May 30, 2014, the U.S. District Court for the District of Columbia ruled in favor of the Federal Trade Commission (FTC) in a dispute with the Pharmaceutical Research and Manufacturers of America (PhRMA) regarding the Commission’s authority to require the pharmaceutical industry to report certain transfers of exclusive patent rights under the Hart-Scott-Rodino (HSR) Act.

The dispute centered on a Final Rule promulgated by the FTC in November 2013. Patents are considered assets by the FTC and their transfer may be reportable. Some transactions provide for the transfer of certain exclusive patent rights without implicating the transfer of the patent in its entirety. The FTC maintains that the exclusive right to commercially use all or part of a patent is, in substance, identical to a full acquisition of the patent. The challenged rule was intended to clarify the circumstances when a transfer of exclusive rights to a pharmaceutical patent is considered a potentially reportable acquisition of an asset under the HSR Act.

PhRMA sued to have the new rule set aside. PhRMA contended in its complaint that the FTC lacked the statutory authority to issue rules that target a single industry, as opposed to rules of general effect. The trade organization also contended that the FTC failed to establish a rational basis for an industry-specific rule and that it failed to comply with legally required procedures in instituting the rule. PhRMA and the FTC both filed motions for summary judgment.

In granting summary judgment to the FTC, Judge Beryl Howell agreed that Congress had never spoken in the HSR Act to the specific issue of whether the FTC was authorized to issue industry-specific rules: “Nothing in this text restricts the FTC to generating only general rules rather than industry specific rules.” Given the congressional silence on this specific question, the court next considered whether the FTC’s interpretation of the statue was a permissible one. Under the applicable legal standard, an agency’s rule is entitled to deference “as long as it is a permissible construction of the statute.” The FTC contended that the Final Rule did not expand “‘HSR requirements to parties or transactions not covered by the Act,’ but ‘simply clarif[ied] the types of transactions that constitute asset transfers for which the Act requires prior notification.’” The court concluded this was a permissible construction of the authority granted to the FTC under the HSR Act.

FTC Asks Court to Reverse Payment Decision

by Emily Townsend | May 12, 2014 | FTC Developments, IP Antitrust

On May 2, 2014, the Federal Trade Commission (FTC) filed an amicus brief with the U.S. Court of Appeals for the Third Circuit requesting that the court reverse the district court’s decision in Lamictal Direct Purchaser Antitrust Litigation, finding that a “no authorized generic” agreement between branded and generic drug makers does not qualify as a “payment,” and is therefore not an antitrust violation. Such agreements arise in patent settlements when a branded drug maker agrees to not issue its own authorized-generic alternative when the generic company begins to compete.

The FTC has taken the position that the “no authorized generic” agreements are akin to reverse payment settlements. In FTC v. Actavis, Inc., the Supreme Court clarified that reverse payment settlements can violate the antitrust laws and are to be reviewed under the rule of reason. In a reverse payment settlement, the branded drug maker pays the generic drug maker to drop its patent claim and not sell the generic drug.

In the Lamictal case, the issue in question was what constituted a payment and therefore, what types of settlements are considered to be subject to antitrust scrutiny. On one hand, the FTC holds the position that a “no authorized generic” agreement is valuable compensation to the generic drug maker in exchange for abandoning a patent challenge. The FTC is concerned that unless “no authorized generic” agreements are subject to antitrust laws, drug makers will simply avoid Actavis by structuring patent settlements to exclude cash payments.

The district court, on the other hand, found that a “no authorized generic” agreement is not a cash or other payment that would make the settlement subject to antitrust scrutiny. One of the primary concerns of classifying this type of agreement as a payment is that nearly all patent settlements include valuable compensation for a party, so almost every patent settlement would raise concerns that the agreement is anticompetitive.

Patent Enforcement Protected by First Amendment?

by Michelle Lowery | Apr 24, 2014 | FTC Developments, IP Antitrust

After receiving a draft complaint and a stipulated order from the Federal Trade Commission (FTC) banning its allegedly deceptive letters to infringers of its scanning technology, MPHJ Technology Investments LLC (MPHJ) filed suit against the FTC in the Western District of Texas, alleging violations of the First Amendment. The complaint alleged that the FTC’s investigation prevented MPHJ from its government-granted right to enforce its patent, a form of free speech under the Bill of Rights. On March 28, 2014, the FTC filed a motion to dismiss the complaint, and MPHJ filed its response on April 18, 2014.

The FTC argued in its motion to dismiss that the controversy was not ripe for suit because there had been no final agency action, that MPHJ was not immune from suit because patent enforcement activity is not protected by the First Amendment and that the FTC is not looking to prevent MPHJ from sending letters, only looking to prevent the deceptive statements within those letters.

MPHJ contended in its response that the FTC’s draft complaint was a sufficient “credible threat” of suit to make the case ripe for adjudication. MPHJ’s patent enforcement conduct included a threat to sue the alleged infringers, and it was this conduct, in part, that was subject to the FTC investigation and also protected by the First Amendment. MPHJ argued that in order to sue it under Section 5 of the FTC Act, the FTC must overcome the First Amendment protection for plaintiffs in a lawsuit from allegations of misconduct related to bringing that suit, which applies unless the suit brought was “objectively baseless.” MPHJ argued that the FTC has not overcome the burden of showing objective baselessness, because in its investigation of MPHJ’s conduct, it concluded only that the letters threatening to sue infringers were “deceptive.” According to MPHJ, allowing the type of enforcement activity pursued by the FTC would prevent patent holders like MPHJ from threatening to sue infringers. MPHJ further argued that the District of Nebraska entered a preliminary injunction against the attorney general when faced with identical facts.

The case is MPHJ Tech. Inv., LLC v. FTC, case number 6:14-cv-00011, pending before the U.S. District Court for the Western District of Texas.

Non-Direct Competitors May Sue Under the Lanham Act, Doctrine of Prudential Standing Eliminated

by McDermott Will & Emery, John J. Dabney and McDermott Will & Emery | Apr 3, 2014 | IP Antitrust, Private Litigation

The Supreme Court of the United States swept away the different standards for Lanham Act prudential standing previously applied by the courts of appeals, and expressly discarded the amorphous concept of prudential standing in all federal statutory cases.

Read the full article.

Wisconsin Legislators Pass Bill to Thwart “Patent Trolls”

by Young Cynn | Mar 24, 2014 | IP Antitrust

On March 20, 2014, Wisconsin lawmakers passed a bill in an attempt to limit the ability of non-practicing entities (NPE) – also commonly referred to as “patent trolls” – to file claims demanding patent licensing payments. Wisconsin Senate Bill 498 applies to all patent owners who wish to file patent infringement claims, but provides exceptions for institutions of higher learning; federally funded health care or research institutions with annual expenditures over $10 million; and owners of certain food, drug or biological product patents.

The bill requires that any notification seeking to enforce a patent must include comprehensive patent information, including detailed facts forming the basis for the infringement allegations and an identification of any pending or completed court or administrative proceeding related to each asserted patent. After a 30-day period to cure any defects in the demand, the bill authorizes the Attorney General to file an injunction and to recover a forfeiture of up to $50,000 per violation. The court is also given discretion to award compensatory damages to any person for losses suffered as a result of the violation. Additionally, the bill allows private parties to recover punitive damages up to $50,000. The full text of the bill is available here.

Vermont and Oregon also recently passed legislation in an attempt to curb “patent troll” litigation, while many other states are considering enacting similar laws.

Lawmakers Go Hunting for “Patent Trolls”

by McDermott Will & Emery | Mar 5, 2014 | IP Antitrust

Oregon has now become the second state to take aim at non-practicing entities (NPEs), more colorfully called “patent trolls,” with laws addressing patent enforcement. On February 25, 2014, the state attorney general announced that the legislature had passed a measure making it a violation of the Oregon Unlawful Trade Practices Act to send a demand letter that fails to identify the patent and the violation, or that insists the recipient make a licensing payment in an “unreasonably short” amount of time.

The Oregon law is only the latest, however, in a flurry of activity. Vermont passed a similar measure last year and Nebraska is considering doing so now. Also last year, the U.S. House of Representatives passed a bill designed to raise the stakes for NPEs that threaten or engage in patent litigation. The House bill would force plaintiffs to include in complaints the identity of their parent companies and greater detail regarding the alleged infringement. The bill further imposes restraints on discovery to prevent plaintiffs from using discovery costs to pressure defendants for a settlement early in the litigation. In some circumstances, costs could be imposed on losing plaintiffs. The U.S. Senate has not yet acted on the legislation. However, U.S. Senator McCaskill introduced a bill on February 27, 2014 called the Transparency in Assertion of Patents Act that, like the state laws, particularly focuses on making it harder for patent assertion entities to issue demand letters to small companies.

Finally, President Obama is implementing new measures to reduce the prevalence of NPE patent litigation in the future by raising the overall quality of patents. These measures include additional training for patent examiners and crowdsourcing “prior art” from the public.

Lawmakers and commentators disagree over whether NPEs stifle innovation or perform a useful role by creating a broader market for patents. But the movement toward greater regulation of the enforcement and litigation tactics that some NPEs favor is unlikely to lose steam.

FTC Hit with Lawsuit by Target of its Fraudulent Patent Enforcement Investigation

by Michelle Lowery | Jan 27, 2014 | FTC Developments, IP Antitrust

On January 13, 2014, MPHJ Technology Investment LLC (MPHJ) filed a seven-count complaint against the Federal Trade Commission (FTC) alleging various constitutional and other violations, including violations of MPHJ’s First Amendment rights and violations of the Separation of Powers Doctrine.

The FTC began an investigation into MPHJ’s business practices and in December 2013 served MPHJ with a draft complaint. The FTC’s complaint alleges that MPHJ sent 16,000 demands to small companies to pay $1,000 per employee to license MPHJ’s patents over document scanning equipment. In particular, the FTC took issue with two statements in the demands. The first was that MPHJ would file suit if the company did not respond and the second was that many companies with similar technology promptly paid licensing fees upon notification of the infringement. These statements were both false, according to the FTC, because MPHJ never intended to file suit and never actually filed suit against any recipient and also because MPHJ only sold 17 out of the 16,000 demanded licenses. Therefore, the FTC contends MPHJ’s demand letters constitute deceptive business practices.

MPHJ filed its complaint against the FTC in response to the FTC’s draft complaint. MPHJ alleges that its patents are valid, that they are being infringed by thousands of companies, that it has a right to enforce those patents, that the first step to doing so is sending demand letters to infringers, and that those demands may legally contain a threat to sue for infringement. MPHJ’s complaint states that the FTC has not contradicted or even disagreed with any of these assertions. Instead, according to MPHJ, the FTC’s position is that a litigation threat not followed by a prompt lawsuit is a violation on its own. In any event, MPHJ alleges the FTC does not have jurisdiction to interfere with MPHJ’s patent activity because the letters at issue do not meet the commerce requirement for Section 5 enforcement. Moreover, MPHJ alleges that the right to enforce a federally granted patent is covered under the First Amendment right to petition the government. As such, its patent enforcement activity is a petition to the government, and protected by the Noerr-Pennington doctrine. MPHJ also charges the FTC with failing to do the requisite pre-suit investigation to find infringement as required under Federal Rule of Civil Procedure 11.

MPHJ’s complaint was filed in the Western District of Texas as MPHJ Tech. Inv. LLC v. FTC et. al., Case No. 6:14-cv-00011.

FTC Focuses Enforcement Efforts on Health Care, Technology and Energy Sectors

by McDermott Will & Emery | Nov 25, 2013 | Energy/Commodities, FTC Developments, Healthcare Antitrust, IP Antitrust, Monopolization/Abuse of Dominance

On November 15, 2013, Chairwoman Edith Ramirez testified on behalf of the Federal Trade Commission (FTC) before the House Subcommittee on Regulatory Reform on the topic of antitrust oversight and enforcement. Ramirez explained that the FTC “focuses its enforcement efforts on sectors that most directly affect consumers, such as health care, technology and energy.”

The FTC has identified health care provider consolidation as a significant component of increasing health care costs, and overseeing provider combinations has remained a key priority for the agency. The FTC has also undertaken efforts to promote competition between manufacturers of generic and brand-name drugs. In addition to litigating “pay-for-delay” settlements, the Commission has filed amicus briefs to advocate against other practices it considers anticompetitive, such as “product hopping,” the practice of altering the formula of a brand-name drug in a minor, non-therapeutic way in order to preserve monopoly power in the face of generic competition.

In the technology arena, the FTC has targeted the problem of patent hold-up. The Commission has pursued enforcement actions aimed at preventing holders of standard essential patents from rescinding agreements to license the patents on reasonable and non-discriminatory (RAND) terms. The FTC is also actively looking into the potential harms and efficiencies of “patent assertion entities,” which are companies “with a business model focused primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technology.”

The Chairwoman noted that the Commission utilizes “all the powers at its disposal” to police competition in the energy sector, and it considers merger review “essential to preserving competition in these markets.” The agency also monitors gasoline and diesel fuel prices on a daily basis for unusual pricing activity, which could be a sign of anticompetitive conduct.

FTC Initiates Inquiry Into Patent Assertion Entities

by Emily Townsend | Oct 4, 2013 | DOJ Developments, FTC Developments, IP Antitrust

by William Diaz

Last week, the Federal Trade Commission (FTC) announced its decision to seek public comment on a proposal to gather information from approximately 25 patent assertion entities (PAE). The agency defines a PAE as a company whose business model focuses primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies. The FTC also anticipates seeking information from approximately 15 other entities asserting patents in the wireless communications sector, including manufacturers and other non-practicing entities or licensing organizations. None of the PAEs or other firms has been identified by the FTC.

In late 2012, the FTC and Department of Justice conducted an industry workshop on the impact of PAEs on innovation and competition. Workshop participants identified numerous potential harms, but noted the lack of empirical data on PAE activities. The FTC now proposes to collect such data pursuant to its information-gathering authority under Section 6(b) of the FTC Act. The full scope of the information the FTC will seek is described in the official notice, which is can be found here. Public comments will be accepted for 60 days following publication in the Federal Register.

NCAA Argues For Dismissal of Athletes’ Latest Antitrust Complaint

by Irina Denisova | Sep 24, 2013 | IP Antitrust

by Megan Morley

Last week, the NCAA asked the Northern District of California to throw out a suit initiated in 2009 on behalf of former and current NCAA athletes. NCAA Student-Athlete Names & Likeness Licensing Litigation, case number 4:09-cv-01967. The athletes claim that the NCAA, its member schools, video game creator Electronic Arts (“EA”), and the Collegiate Licensing Company (“CLC”) conspired not to compensate athletes for the use of their names, images, and likenesses in video games and television broadcasts. Specifically, the third amended complaint alleges that the NCAA and its member schools agreed not to offer athletes licensing revenues and that EA and CLC agreed to follow the NCAA’s no compensation rule so as not to undermine the scheme. As a result of this conspiracy, the athletes were deprived of compensation for defendants’ use of their names and likenesses and were excluded from entering the market for the licensing, use, and sale of their names and images.

In response, the NCAA moved to dismiss the action. It told the court that in light of the Supreme Court’s opinion in NCAA v. Board of Regents of the University of Oklahoma, 468 U.S. 85 (1984), the athletes cannot allege any facts that can allow the action to survive. In that case, the Supreme Court upheld the prohibition on paying student-athletes as procompetitive because the ban preserved amateurism in collegiate sports. Id. at 117. In addition, the NCAA argued that its rules did not deny any rights the athletes had to license their names and likenesses in broadcast games because the law does not recognize these rights in sporting events. The NCAA further pointed out that it did not provide any licenses to EA for use in EA’s video games. Lastly, the NCAA disputed the former athletes’ claims that the compensation ban prevented these individual’s ability to license their names and likenesses because the amateurism rules only apply to current student-athletes.

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