Third and Seventh Circuits Issue Favorable Decisions in Line with AAI Amicus Briefs

In re K-Dur Antitrust Litigation, No. 10-2078 (3d Cir. July 16, 2012). A panel of the Third Circuit has bucked the recent trend in reverse payment cases and rejected the “scope of the patent” test for assessing when a patent infringement settlement involving a payment made by a branded drug manufacturer to a generic competitor may violate Section 1 of the Sherman Act. The Third Circuit declined to follow the rule of virtual per se legality of the Second, Eleventh, and Federal Circuits, and instead adopted a presumption that a reverse payment is anticompetitive, which can be rebutted by a showing that the payment was for a purpose other than delayed entry or that the payment is pro-competitive. In so doing, the Third Circuit supported the positions of the Department of Justice, Federal Trade Commission, and the American Antitrust Institute, among others. The Court was influenced by the fact that the Supreme Court’s patent jurisprudence in general recognizes that the public interest supports judicial testing and elimination of weak patents, and that the Hatch Waxman Act in particular was intended to encourage litigated challenges by generic manufacturers against the holders of weak or narrow patents. The AAI’s amicus brief was written by AAI Advisory Board Member Michael Carrier with the assistance of Advisory Board Member Ellen Meriwether and AAI Director of Legal Advocacy Rick Brunell.

Minn-Chem, Inc. v. Agrium Inc., No. 10-1712 (7th Cir. June 27, 2012). In an en banc decision, the Seventh Circuit rejected a demanding interpretation of the Foreign Trade Antitrust Improvements Act (FTAIA) of 1982, concluding that a class action complaint alleging price fixing in the world-wide potash industry stated a claim for relief. In an opinion by Judge Wood, the Court held that: (1) the FTAIA did not affect a court’s subject matter jurisdiction (reversing an earlier holding by the Seventh Circuit); (2) “import commerce” (to which the “extra layer” of FTAIA rules does not apply) plainly includes sales made by foreign cartel members to U.S. importers; and (3) as to non-import trade, for which the FTAIA requires a showing of “direct, substantial, and reasonably foreseeable effect” on U.S. commerce, the word “direct” did not mean that the effect had to “follow[] as an immediate consequence of the defendant’s . . . activity,” as the Ninth Circuit has held. AAI had filed an amicus brief addressing the latter two points and urging the plaintiff-friendly position adopted by the Seventh Circuit. The AAI’s amicus brief was written by AAI Director of Legal Advocacy Rick Brunell.