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Bayer Schera Pharma AG v. Sandoz

March 30, 2010

BAYER SCHERA PHARMA AG AND BAYER HEALTHCARE PHARMACEUTICALS INC., PLAINTIFFS,
v.
SANDOZ, INC., WATSON PHARMACEUTICALS, INC., AND WATSON LABORATORIES, INC., DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.

MEMORANDUM OPINION AND ORDER

These two patent infringement actions arise from Defendants' filing of Abbreviated New Drug Applications concerning two of Plaintiffs' brand-name oral contraceptive prescription drugs: Yasmin and Yaz.

Bayer Schera Pharma AG and Bayer Healthcare Pharmaceuticals Inc. ("Bayer") have moved to dismiss six counterclaims which Defendant Sandoz, Inc. asserts in its answers. These counterclaims allege violations of the Sherman Act and claims under New York law for unfair competition, tortious interference with prospective economic advantage, and malicious prosecution.*fn1 For the reasons set forth below, Bayer's motions to dismiss will be GRANTED.

I. LEGAL STANDARD

"To survive a motion to dismiss," a counterclaim "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In making this determination here, this Court is mindful of two corollary rules. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. In other words, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555). "Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 1950 (citing Twombly, 550 U.S. at 556). The Supreme Court has noted that "[d]etermining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. (citation omitted).

II. BAYER'S MOTIONS TO DISMISS WILL BE GRANTED

A. Sandoz's Counterclaims for Monopolization, Conspiracy to Monopolize, and Conspiracy in Restraint of Trade Will Be Dismissed

In each action, Sandoz alleges four types of antitrust violations: (1) monopolization in violation of § 2 of the Sherman Act*fn2 (Yasmin Cntrcl. ¶¶ 71, 77-78; Yaz Cntrcl. ¶¶ 73, 75-76); (2) conspiracy to monopolize in violation of § 2 of the Sherman Act*fn3 (Yasmin Cntrcl. ¶¶ 77-78; Yaz Cntrcl. ¶¶ 73-74); (3) conspiracy in restraint of trade in violation of § 1 of the Sherman Act*fn4 (Yasmin Cntrcl. ¶ 79; Yaz Cntrcl. ¶ 77); and (4) attempted monopolization in violation of § 2 of the Sherman Act.*fn5

(Yasmin Cntrcl. ¶¶ 71-72, 78; Yaz Cntrcl. ¶¶ 73-74, 78)

"'In order to survive a motion to dismiss, a claim under Sections 1 and 2 of the Sherman Act must allege a relevant geographic and product market in which trade was unreasonably restrained or monopolized.'" Arista Records LLC v. Lime Group LLC, 532 F. Supp. 2d 556, 575 (S.D.N.Y. 2007) (quoting Xerox Corp. v. Media Sciences Int'l, Inc., 511 F. Supp. 2d 372, 382-82 (S.D.N.Y. 2007)). Because Bayer does not object to the geographic market Sandoz alleges -- the United States -- the only issue before the Court is whether Sandoz has properly defined a relevant product market.

Bayer argues that Sandoz's antitrust counterclaims must be dismissed because Sandoz has alleged a relevant product market that is implausibly narrow. For three of its antitrust counterclaims -- i.e., monopoly, conspiracy to monopolize, and conspiracy in restraint of trade -- Sandoz asserts narrow market definitions based on each drug's active ingredients. Accordingly, Sandoz's market definitions are effectively based on brand.

For Yasmin, Sandoz claims that the relevant product market is "the drospirenone*fn6 (=dihydrospirorenone)/ethinylestradiol*fn7 market" ("Yasmin Active Ingredient Market") (Yasmin Cntrcl. ¶¶ 71-73). For Yaz, Sandoz asserts that the relevant market is "the ethinylestradiol/drospirenone market, including any low-dose of ethinylestradiol/drospirenone submarket." ("Yaz Active Ingredient Market") (Yaz Cntrcl. ¶ 70) Bayer argues that by limiting the relevant product markets to each drug's active ingredients, Sandoz has pleaded "strange red-haired, bearded, one-eyed man with a limp[-type]" markets, Belfiore v. The New York Times Co., 654 F. Supp. 842, 846 (D. Conn. 1986), aff'd, 826 F.2d 177 (2d Cir. 1987)), which are markets so narrow that they cannot sustain an antitrust claim. Bayer further argues that Sandoz has not pled sufficient facts to support a unique market for each drug, and notes that courts are reluctant to accept single-brand or unique markets. Finally, Bayer contends that the relevant product markets posited by Sandoz are illogical and irrational, and require dismissal of Sandoz's antitrust counterclaims.

Sandoz argues that it acted properly in defining the relevant product markets by the active ingredients in Yasmin and Yaz, because it is these active ingredients that give these drugs their unique therapeutic properties. For example, Sandoz alleges that -- because of its unique active ingredients -- Yasmin is the only contraceptive that prevents both acne and reduces fluid retention. Similarly, Sandoz alleges that Yaz, because of its unique active ingredients, is the only birth control agent that is efficacious for moderate acne and premenstrual dysphoric disorder. Sandoz argues that courts have accepted unique markets in the past and that unique markets are appropriate here in light of the unique properties of each contraceptive.

1. Legal Framework

"The relevant market for purposes of antitrust litigation is the 'area of effective competition' within which the defendant operates." AD/SAT, a Division of Skylight, Inc., 181 F.3d at 227 (quoting Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327-28 (1961)). In other words, "[t]he goal in defining the relevant market is to indentify market participants and competitive pressures that restrain an ...


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