The Sham Litigation Exception After AbbVie - Is The Subjective Element A Sham?

• Published date: 22 October 2021
• Law Firm: Haug Partners
• Author: Mr David Shotlander and Nisha Gera

Background: The Federal Trade Commission ("FTC") sued AbbVie and Besins Healthcare, co-owners of a patent that covered brand AndroGel, in 2017. The FTC claimed that the manufacturers had brought "sham" patent infringement litigation in 2011 against Teva and another generic supplier, Perrigo.¹ AndroGel is a blockbuster testosterone replacement therapy. The FTC also claimed that the December 2011 Teva settlement constituted an illegal reverse payment settlement under FTC v. Actavis, in violation of Section 5 of the FTC Act.² The settlement permitted Teva to launch its generic version of AndroGel in November 2012 and also provided Teva a license for a different cholesterol drug.³ The District Court dismissed the reverse payment claim and later granted summary judgment to the FTC on the sham claim, finding that AbbVie's patent lawsuits were objectively baseless in that AbbVie could not reasonably have expected to prevail in any of its patent infringement cases.⁴

After a bench trial, the District Court found that AbbVie's patent lawsuits were actually an attempt to interfere with its rivals' business relationships.⁵ The District Court also found that AbbVie exercised monopoly power and, therefore, violated ' 5 of the FTC Act.⁶ In the following proceedings, the FTC prevailed on its monopolization claim against AbbVie. The District Court ordered Defendants to disgorge $448 million in ill-gotten profits but denied the FTC's request for an injunction.⁷ On appeal, the Third Circuit held that the District Court erred in rejecting the reverse-payment theory and in concluding that litigation against Teva was a sham⁸ The District Court did not err, according to the Third Circuit, in concluding that litigation against Perrigo, was a sham, that defendants had monopoly power in the relevant market, or in denying FTC's request for an injunction.⁹ The Court also held that the FTC had overstepped its authority in seeking disgorgement, because Section 13(b) of the FTC Act contained no provision authorizing this kind of remedy, thus forestalling any remedy against defendants unless the district court found antitrust liability on the reverse payment theory on remand.¹⁰

This article focusses on Third Circuit's analysis with respect to sham litigation inquiry and the issues raised in the petition for a writ of certiorari.

Appeal: On appeal, among other items, AbbVie and Besins argued that the District Court erred in concluding the infringement suits against Teva and Perrigo met either prong of the sham-litigation standard, and that AbbVie had monopoly power in the relevant market.¹¹

Sham litigation and Noerr-Pennington immunity: Generally, lawsuits are immune from antitrust challenges under the Noerr-Pennington doctrine, which protects parties' first amendment right to petition the government.¹² However, the immunity is not absolute and an exception arises if a lawsuit is "a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor."¹³

The Third Circuit found that the district court erred in concluding that AbbVie/Besins's litigation against Teva was a sham.¹⁴ Specifically, the opinion noted that the Supreme Court has recognized two prongs for determining an exception to the Noerr-Pennington doctrine:

First, the lawsuit must be...