Retractable Techs., Inc. v. Becton Dickinson & Co.

• Decision Date: 02 December 2016
• Docket Number: No. 14-41384,14-41384
• Parties: Retractable Technologies, Incorporated; Thomas J. Shaw, Plaintiffs–Appellees v. Becton Dickinson & Company, Defendant–Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

842 F.3d 883

Retractable Technologies, Incorporated; Thomas J. Shaw, Plaintiffs–Appellees
v.
Becton Dickinson & Company, Defendant–Appellant

No. 14-41384

United States Court of Appeals, Fifth Circuit.

Filed December 2, 2016

Roy W. Hardin, Paul Featherstone Schuster, Esq., Cynthia Keely Timms, Esq., Stephen David Wilson, Locke Lord LLP, Dallas, TX, for Plaintiffs–Appellees.

Robert A. Atkins, Attorney, William B. Michael, Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P., New York, NY, Samuel Franklin Baxter, Senior Litigation Counsel, McKool Smith, P.C., Marshall, TX, Robert David Daniel, Alistair Byrne Dawson, Russell S. Post, Beck Redden, L.L.P., Houston, TX, Robert Elkin, Rosemary Tyson Snider, Senior Litigation Counsel, McKool Smith, P.C., Dallas, TX, for Defendant–Appellant.

Before JONES, WIENER, and HIGGINSON, Circuit Judges.

EDITH H. JONES, Circuit Judge:

This appeal is the latest chapter in the long-running legal disputes between Becton Dickinson & Co. ("BD") and Retractable Technologies, Inc. ("RTI"), competitors in the market for syringes of various types and IV catheters. It arises from a $340 million jury verdict (after trebling) entered against BD for its alleged attempt to monopolize the United States safety syringe market in violation of § 2 of the Sherman Antitrust Act. The jury also found BD liable for false advertising under § 43(a) of the Lanham Act. Relying on principles of equity, the district court held that the treble damage award subsumed BD's liability to disgorge profits from the false advertising, but the court enjoined BD to stop using those ads and notify customers, employees, distributors, and others about the false claims.

We affirm in part, reverse in part, and vacate and remand in part. The § 2 claim for attempt to monopolize is infirm as a matter of law. First, patent infringement, which operates to increase competition, is not anticompetitive conduct. Second, false

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advertising is a slim, and here nonexistent, reed for a § 2 claim. Third, the allegation that BD "tainted" the market for retractable syringes while surreptitiously plotting to offer its own retractable a few years later is unsupported and incoherent. We affirm the Lanham Act judgment of liability for false advertising but must reverse and remand for a redetermination of disgorgement damages, if any. Finally, in light of the foregoing, we must vacate and remand the injunctive relief for reconsideration.

BACKGROUND

BD and RTI are two major competitors, along with Covidien Ltd. ("Covidien") and Smiths Medical ("Smiths"), in the U.S. product market for safety syringes. Safety syringes are designed to prevent the transmission of blood-borne diseases like AIDS and hepatitis C to medical professionals or others who are accidentally pricked. The safety syringe market comprises four main products—shielding needles, pivoting needles, sliding sleeve needles, and retracting needles—each of which is best used in specific hospital, clinical, or office settings. BD produced all four types of safety syringes and was the major manufacturer of conventional syringes. RTI produced a conventional syringe and a safety IV catheter during some parts of the relevant period, but its principal product was the VanishPoint retractable syringe. The VanishPoint syringe has a fixed, albeit retracting needle, which provides admirable protection for injections but is not adaptable for a number of other hospital and clinical uses.

The parties' dispute began before the 2004–2010 period covered by this lawsuit. In 1989 RTI's founder, Thomas Shaw ("Shaw"), developed and patented retractable syringe technology, a groundbreaking innovation in which the needle automatically retracts into the body of the syringe after an injection. Congress passed the Effective Needlestick and Safety Prevention Act effective in 2001 to encourage hospitals to use devices that would minimize needlesticks, and spurred the safety syringe industry. In 2002, approximately five years after RTI introduced the VanishPoint, BD created its own retractable syringe, the Integra. RTI contends that BD had to work around RTI's patents to design the Integra. Moreover, BD's Integra suffered from design flaws such as leaking and "premature plunger rod collapse," which prevented the syringe from delivering a full dose of medicine.

RTI outsold BD in the retractable syringe sub-market. BD sold no less than one-third of retractable syringes during the period in question, while RTI had a retractable syringe market share that increased to two-thirds. By 2010, in the relevant product market for all safety syringes, BD had a market share of 49%, Covidien a 30% share, Smiths a 10% share, and RTI a 6% share.

After it experienced initial difficulties persuading hospitals, clinics, and pharmaceutical operators like Walmart to purchase its VanishPoint, RTI sued BD in 2001 in the Eastern District of Texas for antitrust violations and product disparagement (the latter claim based on the same advertising issues litigated here). The parties settled the suit on July 2, 2004, BD paid RTI $100 million, and the parties executed a mutual release of claims "which accrued on or at any time prior" to the agreement's signing.

Barely three years later, RTI filed this suit alleging patent infringement and antitrust and Texas common law violations. The district court in the Eastern District of Texas bifurcated the litigation, tried the patent case first, and rendered judgment (including a mere $5 million in damages)

842 F.3d 890

for RTI on claims that BD's 1mL and 3mL versions of the Integra infringed the VanishPoint patents. On appeal, the Federal Circuit upheld the judgment only as to the 1mL Integra, which BD then removed from the market. Retractable Techs., Inc. v. Becton, Dickinson & Co., 653 F.3d 1296 (Fed. Cir. 2011) ; see also 659 F.3d 1369, 1370 (denying reh. en banc), cert. denied , ––– U.S. ––––, 133 S. Ct. 833, 184 L.Ed.2d 651 (2013).

The district court reactivated RTI's non-patent claims in 2010. RTI amended its complaint and asserted that BD: monopolized and attempted to monopolize the markets for hypodermic syringes, safety needles and syringes, IV catheters, and safety IV catheters in violation of § 2 of the Sherman Act, 15 U.S.C. § 2 ; excluded RTI from these markets in violation of the Clayton Act § 3, 15 U.S.C. § 14 (later amended to include a Sherman Act § 1 exclusive dealing claim); violated similar provisions of Texas antitrust law; engaged in false advertising contrary to the Lanham Act § 43(a), 15 U.S.C. § 1125(a)(1)(B) ; and committed Texas common law torts of product disparagement, interference with prospective contract or business relations, and unfair competition.

RTI's evidence during the multi-day trial in September 2013 emphasized BD's contract practices that allegedly foreclosed competition by offering customers sole source contracts, loyalty discounts, and market share rebates. RTI additionally complained of BD's false advertising (in three separate promotional claims), patent infringement, and unfair competition.

At the close of evidence, RTI dropped its claim for Lanham Act damages and dismissed the state law claims. The court submitted twelve separate antitrust interrogatories covering four liability theories—monopolization, attempted monopolization, contractual restraint of trade, and exclusive dealing—each pertinent to three products—safety syringes, conventional syringes, and safety IV catheters. Antitrust damages were submitted on two bases—"anticompetitive contracting damages" (for each of the three products) and "deception damages" regarding only safety syringes. Finally, the Lanham Act false advertising claim was submitted for representations that BD produced the "world's sharpest needle" and its syringes have "low waste space."

The jury returned a verdict rejecting all but one of the twelve antitrust claims; it held BD liable for attempted monopolization in the market for safety syringes. While rejecting all damages for "anticompetitive contracting," the jury found that RTI suffered "deception damages" exceeding $113,500,000, and it found liability on all the misrepresentations.

The district court wrote a brief opinion rejecting BD's motion for judgment as a matter of law. It trebled the Sherman Act damages, added statutory attorneys' fees, declined on equitable grounds to award disgorgement of profits for BD's false advertising, and enjoined BD as previously noted. BD appealed.

DISCUSSION

Among the many grounds BD has raised, we need consider only four: whether judgment as a matter of law was required on the Sherman Act § 2 or Lanham Act § 43(a) claims, whether the district court abused its discretion in ordering BD to disgorge profits for false advertising, and the propriety of injunctive relief. We discuss each in turn.¹

842 F.3d 891

I. Section 2 Attempted Monopolization Claim

BD unsuccessfully sought judgment as a matter of a law on the § 2 attempted monopolization claim. We review the denial of a JMOL de novo, considering the facts in the light most favorable to the verdict. Abraham & Veneklasen Joint Venture v. Am. Quarter Horse Ass'n , 776 F.3d 321, 327 (5th Cir. 2015). "We can reverse a denial...