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In Re Ciprofloxin Hydrochloride Antitrust Litigation

January 30, 2012

IN RE CIPROFLOXIN HYDROCHLORIDE ANTITRUST LITIGATION


The opinion of the court was delivered by: Block, Senior District Judge:

MEMORANDUM AND ORDER

Defendants' motions for summary judgment in this antitrust action were granted and affirmed on appeal. Plaintiffs now move this court to vacate the award of $127,558.55 in costs imposed by the Clerk of the Court pursuant to Federal Rule of Civil Procedure 54(d)(1). For the reasons that follow, that motion is granted.

I

Defendant Bayer AG and its subsidiary, Bayer Corporation (collectively "Bayer"), possess the patent for the active ingredient in the antibiotic ciprofloxacin hydrochloride ("Cipro"). The patent was issued in June 1987 and scheduled to expire in December 2003, with an additional six-month period of pediatric exclusivity until June 2004.

In 1991, defendant Barr Laboratories, Inc. ("Barr") filed an Abbreviated New Drug Application ("ANDA") seeking approval to market a generic version of Cipro. Barr included a pre-expiration challenge ("ANDA-IV" certification), through which it sought permission to market the generic drug before Bayer's patent expired on the grounds that the patent was invalid or would not be infringed. See 21 U.S.C. § 355(j)(2)(B). An ANDA-IV certification is an act of infringement, see 35 U.S.C. § 271 (e)(2)(A); Arkansas Carpenters Health and Welfare Fund v. Bayer AG, 604 F.3d 98, 101 (2d Cir. 2010), and Bayer responded by suing Barr for patent infringement in January 1992 in the Southern District of New York. To fund the litigation, Barr entered into an agreement with defendant The Rugby Group ("Rugby"), then a subsidiary of defendant Hoechst Marion Roussel, Inc. ("HMR"),*fn1 under which Barr agreed to share its potential profits from the generic drug with Rugby in exchange for Rugby's agreement to finance a portion of the litigation.

In January 1997, Bayer and Barr settled the patent litigation by agreeing to what is known as a "reverse exclusionary payment" -- Bayer, the patent holder, payed Barr, the alleged infringer, to stay off the market and end the litigation. Bayer agreed to pay Barr $49.1 million upfront, plus either quarterly payments of $12.5 million to $17.125 million until six months prior to the patent's expiration or a license to sell Bayer-manufactured Cipro, and it gave the generic manufactures permission to sell Cipro at a reduced rate for six months before the patent's expiration.

As a result of this settlement, purchasers of Cipro filed over 30 antitrust actions in 2000, which were consolidated in the Eastern District of New York before Judge David Trager. In 2005, the court granted defendants' summary judgment motions and held that because the agreements did not restrain competition beyond the scope of the patent they had no anti-competitive effect. See In re Ciprofloxcin Hydrochloride Antitrust Litigation, 363 F. Supp. 2d 514 (E.D.N.Y. 2005) ("Cipro I"). Plaintiffs appealed.

The Second Circuit retained jurisdiction over the direct purchaser plaintiffs' appeals, but transferred the indirect purchaser plaintiffs' appeal, which included claims arising out of patent law, to the Federal Circuit. The Federal Circuit affirmed, holding that the district court applied an appropriate level of antitrust scrutiny "because any anti-competitive effects . . . were within the exclusionary zone of the patent" and that the state antitrust claims were properly dismissed. In re Ciprofloxacin Hydrochloride Antitrust Litigation, 544 F.3d 1323, 1341 (2008) ("Cipro II"). The Second Circuit also affirmed, emphasizing that it was bound by its decision in Joblove v. Barr Labs. Inc., (In re Tamoxifen Citrate Antitrust Litig.), 466 F..3d 187 (2d Cir. 2006) ("Tamoxifen"). See Arkansas Carpenters Health and Welfare Fund v. Bayer AG, 604 F.3d 98 (2010) ("Cipro III").

Defendants filed their requests for bills of costs on December 1, 2010.

Plaintiffs filed no objections. On May 13, 2011, Magistrate Judge Steven Gold directed the clerk to tax costs in the full amount sought. On May 18, 2011, the Clerk taxed plaintiffs $53,066.80 in favor of Bayer; $36,952.75 in favor of Barr; and $37,539.00 in favor of HMR, Rugby, and Watson. On May 20, 2011, plaintiffs filed the motion to vacate costs now before the Court.

II

a. Timeliness.

Federal Rule of Civil Procedure 54(d)(1) provides that, after a clerk taxes costs, a district court may review the clerk's action "[o]n motion served within the next 7 days." Plaintiffs complied with this rule, as their motion was filed within seven days of the Clerk's entry. Local Rule 54.1(b), however, imposes an additional procedural requirement: "A party objecting to any cost item shall serve objections . . . prior to or at the date and time scheduled for taxation." If no objections are filed, "any item listed may be taxed within the discretion of the Clerk." Local Rule 54.1(b).

Plaintiffs' failure to object prior to entry of costs thus constitutes a default under the local rules. See Dejesus v. Starr Technical Risks Agency, Inc., No. 03 Civ. 1298, 2005 WL 957389 at *1 (S.D.N.Y. 2005) ("Court finds that plaintiff defaulted under Local Rule 54.1 by not objecting to the bill of costs prior to [date of hearing]."]); Weisbart v. U.S. Dept. of Taxation, No. 97 Civ. 6020, 2001 WL 1782873 at *4 (E.D.N.Y. 2001) (declining to consider the merits of an objection to the Clerk's award of costs where the losing party failed to comply with Local Rule 54.1(b)). Plaintiffs' explanation for missing the deadline is that their counsel contacted the ...


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