in the United States following approval by the FDA.
In March 1993, defendant brought an action against plaintiffs in the U.S. International Trade Commission (ITC) alleging that plaintiffs' product, Norditropin, infringed four of its patents: the '832, '980, '246, and '619 patents. The ITC proceeding was dismissed with prejudice as a sanction for defendant's discovery-related misconduct. As a result of this proceeding, plaintiffs incurred substantial expenses in defending against this action. The Administrative Law Judge (ALJ) determined that two of defendant's patents were invalid, one of the patents was not infringed, and one would be infringed. The very day the ALJ's determination was available plaintiffs filed this action here. The very next day defendant filed an action against plaintiffs in Delaware District Court. Defendant made a motion for transfer which was denied by this Court.
In plaintiffs' complaint, there are four causes of action: non-infringement of the four patents, invalidity of the four patents, antitrust claim based on fraudulent procurement of the '619 patent, and an antitrust claim based on enforcement of patents known to be invalid.
In defendant's motion to dismiss pursuant to Rule 12(b)(6), defendant seeks to have plaintiffs' third and fourth causes of action dismissed. The third claim of the complaint seeks antitrust damages against defendant. It charges two things: the '619 patent is invalid because defendant committed fraud against the patent office by concealing evidence of failed experiments and that plaintiffs suffered an antitrust injury by the costs it ran up in its efforts to defend itself in the ITC proceeding. Plaintiffs' fourth claim makes the allegation that all four of defendant's patents are invalid due to illegal misuse. Specifically, the complaint alleges that defendant misused these patents by including them in certain license agreements that it entered into in 1978 (one with KabiGen AB (Kabi) and the other with Eli Lilly & Company). These license agreements contained illegal "tying" provisions by which defendant could terminate the agreements if Kabi sold or sold rhGH, Lilly recombinantly produced insulin, without using either unpatented defendant microorganisms or defendant's patent technology.
I. The Standard For Dismissal Under Rule 12 (b) (6).
A motion to dismiss pursuant to Rule 12 (b) (6) should be granted only if it appears beyond doubt that plaintiffs can prove no set of facts in support of their claims which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-45, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985); Seagoing Uniform Corp. v. Texaco, Inc., 705 F. Supp. 918, 927 (S.D.N.Y. 1989). Therefore, on a motion to dismiss, all factual allegations of the complaint must be accepted as true, Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.) cert. denied, 130 L. Ed. 2d 63, 115 S. Ct. 117 (1994); Frasier v. General Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991), and all reasonable inferences must be made in plaintiffs' favor. Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); D'Orange v. Feely, 877 F. Supp. 152, 1995 WL 72374, *4 (S.D.N.Y. 1995); Meilke v. Constellation Bancorp, 1992 U.S. Dist. LEXIS 2368, No. 90-3915, 1992 WL 47342, at *1 (S.D.N.Y. Mar. 4, 1992). "The court's function on a Rule 12(b) (6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d at 1067 (citation omitted).
For the reasons set forth below, this Court grants defendant's motion to dismiss in part.
II. Plaintiffs' standing to assert Handgards antitrust claim under the "sham" litigation exception to Noerr-Pennington Immunity.
Defendant argues that plaintiffs lack standing to assert an antitrust claim because without FDA marketing approval, plaintiffs are in no position to allege any interference by defendant with plaintiffs' ability to receive income from prospective sales of its human growth hormone product. Defendant cites to National Ass'n of Pharmaceutical Mfrs., Inc. v. Ayerst Lab., 850 F.2d 904, 913 (2d Cir. 1988) for this proposition.
However, plaintiffs' complaint does not allege this sort of antitrust injury. Rather, the complaint alleges as the antitrust injury the costs incurred in connection with defending a litigation in which a patentee attempts to enforce patents that are invalid and unenforceable. This is a well recognized type of antitrust injury which comprises the costs incurred in defending a "sham" litigation filed in violation of the antitrust laws. Rickards v. Canine Eye Registration Foundation, 783 F.2d 1329, 1334-35 (9th Cir.), cert. denied, 479 U.S. 851, 93 L. Ed. 2d 115, 107 S. Ct. 180 (1986). In the patent field, this principle was established in the Handgards I and Handgards II cases, Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, cert. denied, 444 U.S. 1025, 62 L. Ed. 2d 659, 100 S. Ct. 688, 100 S. Ct. 689 (1980), on remand, 552 F. Supp. 820, aff'd, 743 F.2d 1282 (9th Cir.), cert. denied, 469 U.S. 1190, 105 S. Ct. 963, 83 L. Ed. 2d 968 (1985). These cases established the recoverability of damages by victims of bad faith patent infringement suits. The Ninth Circuit explicitly held that pleading the costs of defending such suits alleges a cognizable antitrust injury.
Plaintiff must show that the injury for which it seeks to recover is "the type the antitrust laws were intended to prevent" and "flows from that which makes defendant's acts unlawful." In a suit alleging antitrust injury based upon a bad faith prosection theory it is obvious that the costs incurred in defense of the prior patent infringement suit are an injury which "flows" from the antitrust wrong.