A federal trial has cleared the way for an Italian drug manufacturer – Chemi SpA – to sue drug maker GlaxoSmithKline (“GSK”) for unlawful monopolization of the market for nabumetone, an anti-inflammatory drug. Chemi SpA v. GlaxoSmithKline, 2005 WL 300067 (E.D. Pa. February 8, 2005). The court rejected the defendant’s arguments that Chemi lacked standing and that its claims were barred by the statute of limitations.

Defendant was the assignee of a drug patent for nabumetone. Because GSK had listed the patent in the FDA’s “Orange Book,” would-be sellers of competing drugs needed to file abbreviated drug approval applications with FDA certifying that the GSK patent was invalid, or that the new drug would not infringe the patent. Upon such filings, the FDA would be enjoined from granting approval for the new drug for 30 months. 21 U.S.C. § 355(j)(2)(A)(vii)(IV).

After Chemi made plans to market its competing nabumetone product in the United States through Teva Pharmaceuticals and Eon Labs Manufacturing, all three companies made filings with the FDA to obtain approval. New applications filed by Teva, Eon and other manufacturers certified that GSK’s nabumetone patent was invalid. GSK then filed patent infringement actions against, Teva, Eon and others, which caused the automatic 30-month injunction to go into effect. Ultimately, the court held that the nabumetone patent was invalid because it was obtained through fraudulent misrepresentations to the Patent and Trademark Office.

Chemi then filed suit for unlawful monopolization, contending that GSK (1) obtained the patent unlawfully in order to maintain its monopoly on the sale of nabumetone, and (2) filed the infringement actions to trigger the 30-month injunction and thereby frustrate Chemi’s sales of nabumetone in the United States.

1. Chemi’s Standing under the Antitrust Laws

For standing to exist in an antitrust case the plaintiff must prove (1) injury of the type the antitrust laws were intended to prevent, and (2) injury that flows from that which makes the defendants’ acts unlawful. In concluding that Chemi had standing, the trial court applied the following five-factor test used by the Third Circuit Court of Appeals: (a) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing, (b) whether the plaintiff’s alleged injury is of the type for which the antitrust laws were intended to provide redress, (c) the directness of the injury, which addresses the concerns that liberal application of standing principles might produce speculative claims, (d) the existence of more direct victims of the alleged antitrust violations, and (e) the potential for duplicative recovery or complex apportionment of damages.

The first factor was met based on Chemi’s contention that its injury was directly caused by GSK’s anticompetitive action in filing a baseless patent infringement suit. The second factor existed because the extension of the nabumetone monopoly through sham patent infringement litigation allegedly prevented competition and thereby thwarted the antitrust law’s central interest in protecting the economic freedom of participants in the relevant market. The third and fourth factors applied because the injury suffered by Chemi was not merely an indirect or remote consequence of GSK’s actions. “Even though Chemi was not a direct competitor of GSK, its alleged injury was ‘inextricably intertwined with the injury [GSK] sought to inflict on [the nabumetone] market.'” (Citation omitted). Assuming Chemi’s allegations were true, Chemi was prevented from selling nabumetone to these vendors when GSK brought a bogus patent infringement suit against them with the very purpose of perpetuating its monopoly with respect to nabumetone. Therefore, “Chemi’s injury is direct, and its claim is not speculative.” Finally, the fifth factor was met because Chemi’s alleged damages were distinct from those suffered by GSK’s direct U.S. competitors, Eon and Teva. Specifically, any suit Eon or Teva brought against GSK to recover lost profits would necessarily exclude the amount they would have paid Chemi for the nabumetone.

2. Action Not Barred by 4-Year Statute of Limitations

The statute of limitations for antitrust claims is four years. 15 U.S.C. § 15(b). However, the limitations period does not commence until the damages are inflicted and ascertainable. Moreover, each time a plaintiff is injured by an act of defendants, a cause of action accrues and the statute of limitations runs from the commission of the act. The court held that the limitations period did not commence until the underlying court held GSK’s patent to be invalid. The court reasoned that an antitrust action based on a prior sham litigation is analogous to the common law tort of malicious prosecution. Such claims do not accrue for statute of limitations purposes until the underlying litigation has terminated. Similarly, an antitrust claim based on baseless litigation requires proof that the litigation was unsuccessful, which can only be determined upon the termination of the initial action. In rejecting GSK’s contention that the action accrued when GSK filed its sham patent infringement actions or upon expiration of the 30-month injunction against FDA acting on the new drug applications, the court emphasized that “Chemi should have been clairvoyant at an earlier point in time about the invalidity of GSK’s patent and its fraudulent misrepresentations.”

Authored by:
Roy Goldberg