Molecular Diagnostics Lab. v. Hoffmann-La Roche

• Decision Date: 01 December 2005
• Docket Number: No. CIV.A.04-01649 HHK.,CIV.A.04-01649 HHK.
• Citation: 402 F.Supp.2d 276
• Parties: MOLECULAR DIAGNOSTICS LABORATORIES, Plaintiff, v. HOFFMANN-LA ROCHE INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

402 F.Supp.2d 276

MOLECULAR DIAGNOSTICS LABORATORIES, Plaintiff, v. HOFFMANN-LA ROCHE INC., et al., Defendants.

No. CIV.A.04-01649 HHK.

United States District Court, District of Columbia.

December 1, 2005.

COPYRIGHT MATERIAL OMITTED

Michael Hausfeld, Brian A. Ratner, Cohen, Milstein, Hausfeld & Toll, P.L.L.C., Washington, DC, for Plaintiff.

Joanne M. Guerrera, John E. Scribner, Weil, Gotshal & Manges, L.L.P., Washington, DC, David J. Lender, Weil, Gotshal & Manges, L.L.P., New York, NY, for Defendants.

MEMORANDUM OPINION & ORDER

KENNEDY, District Judge.

Molecular Diagnostics Laboratories ("MDL") brings this action against Hoffmann-La Roche, Inc., Roche Molecular Systems, Inc. (collectively, "Roche"), PE Corporation, PE Biosystems Group, the Perkin-Elmer Corporation, PE Applied Biosystems, and Applera Corporation (collectively, "Applera"), on behalf of itself and a class of all those similarly situated, alleging that Roche and Applera violated the Sherman Act, 15 U.S.C. §§ 1 et seq. MDL claims that it was forced to pay an artificially inflated price for Thermus aquaticus DNA polymerase ("Taq") as a result of the enforcement by Applera and Roche of a patent allegedly obtained by fraud. Currently before the court are Roche's and Applera's motions to dismiss MDL's complaint. Upon consideration of the motions, the opposition thereto, and the record of this case, the court concludes that the motions must be denied.

I. BACKGROUND

Taq is a thermostable enzyme derived from Thermus aquaticus bacteria and an important component of a process known as "polymerase chain reaction" ("PCR"). PCR is a technique used to replicate DNA, allowing small DNA samples to yield larger quantities that can then be studied or manipulated. During the PCR process, a sample of DNA is subjected to rapid fluctuations between extreme temperatures — Taq is able to withstand these volatile temperature changes and still remain an effective catalyst for the replication of DNA.

Thermus aquaticus was discovered in the 1960s and, because it is able to survive in high temperature environments, its potential application in the PCR process was quickly recognized. Cetus Corporation ("Cetus") was among the scientific teams that attempted to isolate a thermostable polymerase from Thermus aquaticus. As early as 1985, Cetus and the Perkin-Elmer Corporation¹ entered into a joint venture called PECI, created "to commercialize Cetus's DNA amplification technology." Compl. ¶ 21. After a number of unsuccessful patent applications, on December 26, 1989, the United States Patent & Trademark Office ("PTO") issued Cetus U.S. Patent No. 4,889,818 (" '818 patent") for the DNA polymerase contained in Thermus aquaticus.

In 1991 Cetus assigned the '818 patent to Roche as part of a transaction valued at approximately $300 million.² Compl. ¶ 17. Roche also purchased Cetus's ownership interest in PECI, thereby assuming Cetus's position in the partnership. Compl. ¶ 22. In addition, various members of the Applera and Roche defendants subsequently entered into a distribution agreement used to facilitate the production, sale, and distribution of Taq.

Both Roche and Applera currently remain active in the Taq-market.

MDL, a direct purchaser of Taq, alleges that the market dominance enjoyed by Roche and Applera results from a fraudulently obtained patent. According to MDL, the application for the '818 patent "materially misrepresented[ed] facts, omitt[ed] specific and important contrary data, misstat[ed] scientific principles, mispresent[ed] the content of prior art, and falsely report[ed] data." Compl. ¶ 29.

On September 23, 2004 MDL filed the instant action. MDL claims that Applera and Roche, through the enforcement of the '818 patent and "a variety of schemes and agreements,"³ have conspired to monopolize the market for Taq, and restrained trade to the detriment of competitors and consumers. As a result of Applera's and Roche's allegedly anticompetitive behavior, MDL asserts that it has suffered antitrust injury by being forced to pay "supra-competitive prices for Taq and PCR-related products." Compl. ¶ 61.

II. DISCUSSION

Applera and Roche each move to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b) on a variety of grounds. The court will address their arguments in turn.

A. Standing

A grant of a patent exempts the holder from the normal prohibition against monopolies. See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965) ("A patent ... is an exception to the general rule against monopolies and to the right to access to a free and open market.") (quoting Precision Instrument Mfg. Co. v. Auto. Maintenance Mach. Co., 324 U.S. 806, 816, 65 S.Ct. 993, 89 L.Ed. 1381 (1945)). This immunity from federal antitrust laws, however, is stripped away when a patent is procured by fraudulent conduct.

In Walker Process, the Supreme Court permitted plaintiffs to seek treble damages under the antitrust laws when the fraudulent procurement of a patent is coupled with a violation of section 2 of the Sherman Act. Id. at 178. Here, MDL maintains that Applera and Roche used the '818 patent, procured by fraud, to monopolize the market for Taq. Because MDL is a direct consumer of Taq, MDL asserts that it has standing to prosecute a Walker Process claim as an injured party under the antitrust laws. In response, both Applera and Roche argue that the Walker Process decision did not contemplate direct consumers as suitable plaintiffs in this type of action. Rather, they contend, the only entity with standing to bring a Walker Process claim is a competitor or, more specifically, an entity against whom a fraudulently obtained patent is, or could be, enforced.⁴

Applera and Roche rely on In re Remeron Antitrust Litig., 335 F.Supp.2d 522 (D.N.J.2004), and Carrot Components Corp. v. Thomas & Betts Corp., 229 U.S.P.Q. 61 (D.N.J.1986), in support of the proposition that Walker Process claims are available exclusively to those against whom a patent is enforced. The court finds that neither of these authorities is controlling, nor in this instance, persuasive.

Carrot Components is factually distinguishable. Unlike here, the plaintiff in Carrot Components was not a customer of the defendant, but rather claimed to be a competitor. The court dismissed the complaint because the plaintiff "failed to establish that defendant had sought to enforce the patent against plaintiff, or that plaintiff had some reasonable basis for fearing such attempted enforcement." 229 U.S.P.Q. at 64. The ruling was limited to the facts of that case, and did not purport to establish a rule of general applicability.

The court in In re Remeron, by comparison, did find that a direct purchaser lacked standing to bring a Walker Process claim. However, the court offered little justification for its holding, stating:

Plaintiffs, as direct purchasers, neither produced mirtzapine nor would have done so; moreover, Plaintiffs were not party to the initial patent infringement suits. Plaintiffs may not now claim standing to bring a Walker Process claim by donning the cloak of a Clayton Act monopolization claim.

335 F.Supp.2d at 529. The holding cites no controlling precedent, nor offers any compelling justification for its conclusion.

The inclusion of the fact that the plaintiffs were not parties in the initial patent infringement suits suggests that the court confused the harm addressed through a Walker Process claim. The court appears to believe that, standing alone, the enforcement of the fraudulently procured patent is the relevant injury in a Walker Process claim, hence the court's assertion that a plaintiff must be an actual or potential competitor. This, however, is not the case. Walker Process claims are intended to address antitrust injury, thus the requirement that a plaintiff be able to allege a violation of Section 2 of the Sherman Act.⁵ See Walker Process, 382 U.S. at 179, 86 S.Ct. 347 (holding that an action for treble-damages maybe maintained under § 4 of the Clayton Act if "(1) the relevant patent is shown to have been procured by knowing and willful fraud ... and (2) all the elements otherwise necessary to establish a § 2 monopolization charge are proved.") (emphasis added). A Walker Process claim is not a fraud claim, as the court intonates, but an antitrust violation. The harm is not the invalid patent, but the use of the invalid patent to establish a monopoly.⁶

Viewed properly as an antitrust claim, there is little reason to think that standing requirements for Walker Process claims differ from standing requirements in more conventional antitrust actions. See Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1362 (Fed.Cir.2004) (holding that, with respect to the Walker Process standing inquiry, "[o]nce we have determined ... that a patentee deserves no antitrust immunity, our inquiry shifts to apply the substantive antitrust laws...."). As plaintiff notes, direct purchasers are generally recognized as having standing to prosecute antitrust claims. See 2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law, ¶ 345 (2d ed. 2000) ("Because protecting consumers from monopoly prices is the central concern of antitrust, buyers have usually been preferred plaintiffs in private antitrust litigation. As a result, consumer standing to recover for an overcharge paid directly to an illegal cartel or monopoly is seldom doubted."); Illinois Brick Co. v. Illinois, 431 U.S. 720, 734-35, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) (recognizing that antitrust laws will be effectively enforced by "concentrating the full recovery for the overcharge in the direct purchasers ..."). In the absence of a compelling reason to the contrary, the court is hesitant to restrict a direct purchaser's ability to sue for treble damages under § 4 of the Clayton Act. See Blue Shield of Virginia v. McCready, 457 U.S. 465, 476, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982) (...