United Food & Commercial Workers Local 1776 & Participating Emp'rs Health & Welfare Fund v. Teikoku Pharma United States, Case No. 14–md–02521–WHO

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
Citation296 F.Supp.3d 1142
Decision Date03 November 2017
Docket NumberCase No. 14–md–02521–WHO

Brian O. O'Mara, David W. Mitchell, Robbins Geller Rudman & Dowd LLP, Ralph B. Kalfayan, Krause Kalfayan Benink & Slavens, San Diego, CA, Christina H. Sharp, Daniel C. Girard, Scott M. Grzenczyk, Girard Gibbs LLP, Joseph R. Saveri, Joshua P. Davis, Joseph Saveri Law Firm, Inc., Ryan James McEwan, Joseph Saveri Law Firm, Inc., San Francisco, CA, Gregory S. Asciolla, Labaton Sucharow LLP, J. Douglas Richards, Sharon K. Robertson, Cohen, Milstein, Sellers and Toll PLLC, Domenico Minerva, John Andrew Ioannou, New York State Attorney General's Office, Lee Albert, Glancy Prongay & Murray LLP, Michael Morris Buchman, Motley Rice LLC, Peter G.A. Safirstein, Safirstein Metcalf LLP, New York, NY, Jeffrey L. Kodroff, Spector Roseman & Kodroff, P.C., Robert Samuel Kitchenoff, Weinstein Kitchenoff and Asher LLC, Robert William Sink, Law Offices of Robert W. Sink, Deborah R. Willig, Willig Williams & Davidson, Joseph C. Kohn, Kohn, Swift and Graf, P.C., Krishna Brian Narine, Noah Axler, Stephen C. Richman, Markowitz & Richman, William E. Hoese, Kohn Swift & Graf PC, Philadelphia, PA, Lori A. Fanning, Marvin Alan Miller, Miller Law LLC, Chicago, IL, Renae Diane Steiner, Vincent J. Esades, Heins Mills & Olson, P.L.C., Minneapolis, MN, Andrew Michael Purdy, Greenberg Gross LLP, Costa Mesa, CA, David S. Nalven, Hagens Berman Sobol Shapiro LLP, Cambridge, MA, Michael P. Thorton, Thornton Naumes LLP, Boston, MA, Douglas R. Plymale, James R. Dugan, II, The Dugan Law Firm, New Orleans, LA, Garrett D. Blanchfield, Jr., Reinhardt Wendorf & Blanchfield, St. Paul, MN, Jacob Alexander Goldberg, The Rosen Law Firm, P.A., Jenkintown, PA, Jayne Arnold Goldstein, Shepherd Finkelman Miller & Shah LLP, Ft. Lauderdale, FL, Natalie Finkelman Bennett, Shepherd, Finkelman, Miller & Shah, LLP, Media, PA, Stephen E. Connolly, Connolly Wells & Gray LLP, King of Prussia, PA, Steve D. Shadowen, Hilliard Shadowen, LLP, Austin, TX, William H. London, Freed Kanner London & Millen LLC, Bannockburn, IL, Lionel Z. Glancy, Glancy Prongay & Murray LLP, Los Angeles, CA, for Plaintiffs.

David S. Elkins, Joseph Anthony Meckes, Noriyuki Shimoda, Rafael Matias Langer–Osuna, Squire Patton Boggs (US) LLP, Palo Alto, CA, Amy L. Brown, Steven C. Sunshine, Skadden Arps Slate Meagher and Flom LLP, Eric J. Hamilton, Benjamin M. Greenblum, Heidi K. Hubbard, Stanley E. Fisher, Monika Beata Jasiewicz, Jonathan L. Stern, Mahnu V. Davar, Ryan Z. Watts, Steven G. Reade, Arnold Porter LLP, Williams and Connolly LLP, Elise M. Baumgarten, Washington, DC, Daniel B. Asimow, Arnold & Porter Kaye Scholer LLP, Marc N. Bernstein, Will Barnett Fitton, The Business Litigation Group, P.C., Emily H. Wood, Ryan J. Casamiquela, Soumitra Deka, Arnold & Porter Kaye Scholer LLP, San Francisco, CA, Brigid M. Carpenter, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Nashville, TN, John A. Tarantino Adler Pollock & Sheehan P.C., Providence, RI, Stephen J. McConnell, Reed Smith LLP, Philadelphia, PA, for Defendants.


William H. Orrick, United States District JudgeCurrently before me are the parties' motions for summary judgment and motions to exclude expert testimony. Defendants move for summary judgment as to all of plaintiffs' claims, but as described below plaintiffs have significant evidence that Watson could have (if not would have) ultimately prevailed in the '529 litigation and a cognizable (if not disputed) theory of alternate injury in a but-for world. Defendants' motion is DENIED.1 Plaintiffs more narrowly move for partial summary judgment that they have satisfied the "contract, combination, or conspiracy" element of their Section 1 and Section 2 claims (defendants do not oppose) and also to define the relevant antitrust market as the market for generic and brand 5% lidocaine patches. Rejecting defendants' arguments in support of an essentially unlimited market for pain relief products, I agree that plaintiffs have shown on undisputed material facts that the relevant market is the market for 5% lidocaine patches and GRANT their motion.2

The general background and history of this litigation is well known and laid out in my prior orders. Dkt. Nos. 117, 670. The facts material to the determination of these motions, both undisputed and disputed, will be addressed below.


Summary judgment on a claim or defense is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. See Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify "specific facts showing there is a genuine issue for trial." Id. The party opposing summary judgment must then present affirmative evidence from which a jury could return a verdict in that party's favor. Anderson v. Liberty Lobby, 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant. Id. at 255, 106 S.Ct. 2505. In deciding a motion for summary judgment, "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to defeat summary judgment. See Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir.1979).


A. Defendants' Motion for Summary Judgment on All Claims

Plaintiffs' case rests on two theories of antitrust injury causation: (i) absent the large reverse payment, Watson would have launched at-risk; and (ii) absent the large reverse payment the parties would have reached an alternative "no payment settlement" giving Watson early entry into the market. Pls. Oppo. to MSJ [Dkt. No. 819] at 1. Defendants argue that summary judgment must be granted in their favor on plaintiffs' first theory because Watson's infringement of the '529 patent breaks the "chain of causation" as illegal activity and cannot support an antitrust claim. Plaintiffs counter that under Ninth Circuit case law, the chain cannot be broken by the '529 patent, but even it if could, plaintiffs have ample evidence from which a reasonable juror could determine that Watson would have prevailed in the patent litigation. As to plaintiffs' second theory, defendants argue that the "hypothetical" settlement proposed by plaintiffs is not legally cognizable and not supported by evidence in the record. Plaintiffs counter that numerous courts have recognized that hypothetical settlements are an acceptable basis for causation and that there is significant evidence in the record that a reasonable juror could rely on to find that, absent the reverse-payment settlement agreed-to in this case (hereafter Settlement), another settlement would have been reached to allow Watson early-entry to the market.

1. At–Risk Launch Theory
a. Necessity to Address Watson's Chances of Success in the '529 Patent Litigation

Plaintiffs argue that they need not show that Watson would have likely won the '529 patent litigation in order to prevail at trial in this case. They rely primarily on the Supreme Court's decision in F.T.C. v. Actavis, Inc. , 570 U.S. 136, 133 S.Ct. 2223, 186 L.Ed.2d 343 (2013). There, the Court explained that "it is normally not necessary to litigate patent validity to answer the antitrust question (unless, perhaps, to determine whether the patent litigation is a sham....An unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent's survival." Id. at 2236 ; see also 3 Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 2046d2 (Supp. 2016) ("The size of the payment operates as a surrogate for direct patent-law-based questions about patent quality. Indeed, payment size may actually be a more reliable indicator to the extent it reflects the settling parties' market-based judgment about the patent's prospects in a fully litigated infringement suit."). According to plaintiffs, that is exactly the shape of this case; the reverse settlement payments are unexplained by legitimate factors (such as avoidance of litigation costs or the provision of other services) and are indisputably large. Plaintiffs also rely on their expert, Professor Einer Elhauge, who opined that if Endo thought it had more than a 15.1% chance of winning, Endo would not have rationally agreed to the Settlement because its expected profits from continuing to litigate would have exceeded its profits from the settlement. Elhauge Report, Declaration of Dena Sharp [Dkt. No. 819] Ex. 1 [Dkt. No. 819–2] ¶¶ 6, 8, 147–48.

Recent decisions have limited the use of sole reliance on a large and unexplained reverse payment as a proxy for the weakness of the underlying patents to cases, like Actavis , that are brought by the FTC. In a detailed analysis, the district court in In re Wellbutrin XL Antitrust Litig. , 133 F.Supp.3d 734 (E.D. Pa. 2015), as affirmed by the Third Circuit, concluded that the Supreme Court's admonition in Actavis that "it is normally not necessary to litigate patent validity to answer the antitrust question" was limited to the context of an action brought by the FTC under the FTC Act's "more...

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