California’s New Scrutiny of Patent Litigation Settlements Will Not Stand Under Federal Law

cali sealThe California Supreme Court earlier this month issued an opinion that subjects litigants who settle their patent disputes to scrutiny under state antitrust law. The court reasoned that such settlements may create unreasonable restraints on trade. While the decision in In re Cipro Cases I & II to reinstate antitrust claims was not overly surprising—after all, the U.S. Supreme Court had previously held in FTC v. Actavis, Inc. that some patent litigation settlements might violate federal antitrust law—the breadth of the California Supreme Court’s decision could have a particularly negative impact on the free-enterprise system. Indeed, the decision suggests that parties to a patent litigation settlement will have great difficulty ever avoiding California antitrust liability if the settlement entails transferring anything of value from the patent holder to the alleged infringer. Because Cipro’s new state-law antitrust standard is so much more exacting than the standard announced by the U.S. Supreme Court in Actavis, federal antitrust law may well trump California’s standard. Indeed, were Cipro to reach the U.S. Supreme Court, the Court likely would reverse on federal preemption grounds.

“Reverse-Payment” Patent Settlements

When parties to litigation enter into a settlement, one would normally expect that any cash payments would flow from the defendant to the plaintiff. The normal expectations have been reversed in the context of litigation involving prescription-drug patents, however, as a result of financial incentives created by the Hatch-Waxman Act, a federal statute designed to ensure that generic versions of prescription drugs enter the market more quickly. The Act includes a provision that permits generic companies, by declaring to the Food and Drug Administration a belief that the patent held by a brand-name drug company is invalid, to essentially force the patentee to immediately file a patent infringement suit. It also grants huge financial awards to generic companies that successfully challenge drug patents. Continue reading

End of the Road in the Long-running “FTC v. Phoebe Putney” Saga

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Goodwin Proctor LLP

Many months ago, I wrote about the ongoing saga that was the Federal Trade Commission’s (“FTC”) attempt to unwind the acquisition of Palmyra Park Hospital (“Palmyra”) by Phoebe Putney Health System Inc. (“Phoebe”) in Albany, Georgia. There were visits to all three levels of the federal court system (yes, even the Supremes!), as well as unexpected detours through various Georgia regulatory bodies. With the FTC’s announcement late last month that it was settling its administrative litigation with a behavioral remedy, we now know how this story ends.

Where We’ve Been

This journey began back in early-2011 with the FTC’s attempt to block the deal outright on the grounds that the combined entity would have had market shares in excess of 85% in the provision of acute care services in a six-county region. The FTC initially secured a preliminary injunction at the district court level but Phoebe successfully argued that despite the concentration levels, its acquisition was legal under the state action doctrine. The state action doctrine provides that where (1) there is a clearly articulated state policy to displace competition and (2) there is active supervision by the state of the policy or activity, otherwise anticompetitive activity will be permitted. Here, Phoebe argued the acquisition was immune under both prongs of the test because it was owned by the Hospital Authority of Albany-Dougherty County, and operated under Georgia’s Hospital Authorities Law.

Continue reading

Five Lessons: Ninth Circuit Upholds Decision to Block Idaho Healthcare Merger

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati*

On February 10, the United States Court of Appeals for the Ninth Circuit affirmed a lower court ruling blocking the merger of St. Luke’s Health Systems, Ltd. (St. Luke’s) and Saltzer Medical Group (Saltzer), and handed the Federal Trade Commission (FTC) yet another victory in its efforts to halt consolidation in the healthcare sector.  This opinion is instructive both because of what it reveals on the macro-level about merger review today, and for what it may portend in future healthcare consolidation cases. Continue reading

Will the High Court Permit Backdoor Regulation of Natural Gas Industry Via State-Law Antitrust Suits?

oneokEarlier this month, the Supreme Court heard oral argument in ONEOK v. Learjet, an important case that hinges on the scope of the Federal Energy Regulatory Commission’s (FERC) field preemption under the Natural Gas Act (NGA). I attended to hear the argument in person because Washington Legal Foundation has been quite active in the case.

While it is undisputed that the NGA preempts state-law claims directed at conduct affecting the wholesale rates for natural gas, the Court must now consider whether such claims are preempted when the same alleged conduct affects both wholesale and retail rates. Reversing the district court, the Ninth Circuit rejected ONEOK’s preemption argument on the basis that the state-law claims brought by the plaintiff-purchasers arose from retail gas transactions.

On behalf of ONEOK, Neal Katyal argued that even though the alleged conduct at issue in this case affected both retail and wholesale rates, it still counts as a practice that affects wholesale rates for preemption purposes. The only relevant question, then, is whether plaintiffs’ state-law claims are directed at conduct in the field that the NGA occupies—and they are. The United States, representing FERC’s regulatory interests, filed an amicus brief and argued on the merits in support of ONEOK’s position.

From his questions, Justice Breyer seemed to appreciate the difficulty in setting a strict boundary between wholesale and retail sales in cases where the retail and wholesale prices are both affected by the same conduct. He could prove to be the decisive vote in the case.

Plaintiffs’ attorney Jeffrey Fisher insisted that FERC has no power over antitrust claims tied to retail prices, which the NGA excepts from federal regulation. The State of Kansas as amicus curiae, joined by 20 other states, argued in support of Plaintiffs, with attorney Steven McAllister emphasizing the states’ strong interest in policing antitrust violations.

Justice Kagan seemed fully prepared to side with the Plaintiffs, explaining that so long as no conflict exists between state antitrust liability and regulation by FERC, “I don’t really see a reason … why you would exclude the state entirely, even if nothing the state was doing was conflicting with federal regulation or federal policy.”

In all likelihood, the Supreme Court will issue its decision within the next few months. As WLF’s amicus brief argued, the stakes for the natural gas industry are high. The NGA promotes uniformity, not random regulation by jury verdicts in 50 states. Permitting private plaintiffs to pursue state-law antitrust remedies that second-guess FERC—including in states where antitrust remedies dwarf those available under federal law—would create industry-wide chaos and an unnecessary drag on investment in a vibrant and growing sector of the economy.

The Court agreed to grant review in the case following WLF’s brief in support of the petition for certiorari—and WLF’s separate online analysis of the Solicitor General’s unusual advice to the Supreme Court about (not) granting review in the case. WLF’s brief on the merits provides the Court with additional policy reasons to overrule the Ninth Circuit.

Also published by Forbes.com at WLF’s contributor page

Seventh Circuit Sheds Light on Foreign Reach of Federal Antitrust Laws

Dugan_Brady-WEB135AlfanoFeatured Expert Contributor – Antitrust & Competition, U.S. Department of Justice

Sitting in for Featured Expert Contributor Mark J. Botti on this post are Squire Patton Boggs partner J. Brady Dugan and associate Peter C. Alfano, both in the firm’s DC office.

Whether U.S. antitrust laws reach wholly foreign conduct is a question that has been addressed by all levels of the federal court system over the past decade, including by the U.S. Supreme Court.1 Nevertheless, it is a question as to which many companies, in the U.S. and abroad, may feel there is not a clear answer. Consider, for example, a corporation that purchases a product in the U.S. that was finished or assembled overseas. If the finished product includes a component that the assembler purchased at a price that had been inflated by an overseas price-fixing conspiracy among the component manufactures, can the U.S. purchaser of the finished product sue the component seller in U.S. court for treble damages? Can the overseas assembler recover damages from the overseas component manufacturer in the U.S.? Or to put it another way, can a foreign corporation that manufactured and sold a product overseas, to an overseas assembler, be sued for price-fixing in the U.S. by a U.S. customer of the foreign assembler? It will come as no surprise that the answers to these questions are very fact-specific. But recently, a panel of the U.S. Court of Appeals for the Seventh Circuit issued a decision that helps clarify the law. Continue reading

Antitrust and Health Care: FTC’s Off-Again, On-Again Challenge to Georgia Hospital Merger

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

Consolidation in the health care industry, and the Federal Trade Commission’s (“FTC” or “Commission”) perspective on such activity, are being closely watched in antitrust law and policy circles. In April 2011, the FTC challenged the acquisition of Palmyra Park Hospital by Phoebe Putney Health System Inc. (“Phoebe”) in Albany, Georgia. The Commission argued that the combination would result in unduly high market shares (>85%) in the provision of acute care services in a six-county region and result in anticompetitive price increases. Shortly thereafter, the FTC sought and obtained a preliminary injunction (“PI”) from the United States District Court for the Middle District of Georgia halting the transaction pending trial. Typical enough. But here’s where our story starts to take some strange twists. What began that April in a federal district court is an adventure leading from the Supreme Court to local Georgia healthcare regulatory bodies…and possibly, back again. Here’s what happened.

Phoebe responded to the PI not by throwing itself into a trial on the merits, but rather by filing a motion to dismiss on the grounds that by virtue of the state action doctrine, Phoebe’s conduct was permissible. Generally, the state action doctrine provides that where (1) there is a clearly articulated state policy to displace competition and (2) there is active supervision by the state of the policy or activity, otherwise anticompetitive activity will be permitted. Here, Phoebe argued that because it was owned by the Hospital Authority of Albany-Dougherty County, and operated under Georgia’s Hospital Authorities Law, it was immune. Phoebe prevailed on its motion to dismiss in the district court and then again at the U.S. Court of Appeals for the Eleventh Circuit. Phoebe then completed its purchase of Palmyra, closing the transaction. Continue reading

U.S. Officals Continue Push for Broader International Consensus on Competition Enforcement

Botti2Featured Expert Contributor – Antitrust & Competition, U.S. Department of Justice

Mark J. Botti, Squire Patton Boggs (US) LLP with Anthony W. Swisher, Squire Patton Boggs (US) LLP

*Editor’s Note: With this post we welcome the participation in The WLF Legal Pulse of Featured Expert Contributor on Justice Department-related competition law and policy matters, Mark Botti. Mark is co-leader of Squire Patton Boggs’s Global Antitrust & Competition Practice Group and previously spent 13 years at DOJ’s Antitrust Division. 

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In 2001, the Department of Justice Antitrust Division (DOJ) declined to block the proposed merger of General Electric and Honeywell, allowing the deal to proceed with certain limited divestitures. Announced in October of 2000, that deal would bring together two significant players in a number of related market segments, including aircraft engines, avionics, and landing gear. Despite DOJ’s decision not to block the deal outright, the European Union reached a different result, forbidding the transaction under a “conglomerate merger” theory that has long been out of favor in the United States and has drawn significant criticism in the economic and legal literature.

These diverging enforcement decisions spawned a wave of criticism directed at both jurisdictions. How were multinational businesses in a global economy to order their affairs in the face of such conflicting enforcement theories and outcomes? Were they facing a “race to the bottom,” where the most aggressive enforcers effectively held a veto over the decisions of other competition agencies? Continue reading