SigmaPHARM, INC. v. MUTUAL PHARMACEUTICAL COMPANY No. 11-1734.
SIGMAPHARM, INC., Appellant, v. MUTUAL PHARMACEUTICAL COMPANY, INC.; UNITED RESEARCH LABORATORIES, INC.; KING PHARMACEUTICALS, INC.
United States Court of Appeals, Third Circuit.
Opinion Filed: December 12, 2011.
Andrea L. D'Ambra, Esq., Gregory J. Lavorgna, Esq., Drinker, Biddle & Reath, 18th & Cherry Streets, One Logan Square, Suite 2000, Philadelphia, PA 19103.
James W. Dabney, Esq. [ARGUED], Stephen S. Rabinowitz, Esq., Fried, Frank, Harris, Shriver & Jacobson, Once New York Plaza, New York, NY 10004, Counsel for Appellant.
Robert T. Cahill, Esq., Cooley Godward Kronish, 11951 Freedom Drive, Suite 1500, Reston, VA 20190, Counsel for Appellees, Mutual Pharmaceutical Co. Inc., United Research Laboratories and King Pharmaceuticals Inc.
Michael J. Klisch, Esq., Cooley Godward Kronish, 777 6 th Street, N.W., Suite 1100, Washington, DC 20001.
Lori R. Mason, Esq., Cooley Godward Kronish, 3000 El Camino Real, 5 Palo Alto Square, Palo Alto, CA 94306.
James J. Rodgers, Esq., Dilworth Paxson, 1500 Market Street, Suite 3500E, Philadelphia, PA 19102.
T. Joel Zuercher, Esq., Pepper Hamilton, 18 th & Arch Streets, 3000 Two Logan Square, Philadelphia, PA 19103, Counsel for Appellees, Mutual Pharmaceutical Co. Inc. and United Research Laboratories.
Debra S. Clayman, Esq., Shay Dvoretzky, Esq., Christopher R. Farrell, Esq., Phillip Proger Esq., William V. O'Reilly, Esq. [ARGUED], Jones Day, 51 Louisiana Avenue, N.W., Washington, D.C. 20001.
Murray S. Levin, Esq., Deirdre E. McInerney, Esq., T. Joel Zuercher, Esq., Pepper Hamilton, 18 th & Arch Streets, 3000 Two Logan Square, Philadelphia, PA 19103, Counsel for Appellee, King Pharmaceuticals Inc.
Before: RENDELL, AMBRO and NYGAARD, Circuit Judges.
OPINION OF THE COURT
RENDELL, Circuit Judge.
This case comes to us on appeal from the District Court's order granting Defendants' motion to dismiss Plaintiff's amended complaint for failure to state a claim. The District Court dismissed Plaintiff's federal antitrust causes of action for failure to adequately plead antitrust standing and declined to exercise supplemental jurisdiction over Plaintiff's state law claims.
Plaintiff, SigmaPharm, Inc., is a Delaware corporation that develops pharmaceutical technologies and products, and enters into agreements with other entities to commercialize them. Defendants Mutual Pharmaceuticals Company, Inc. and United Research Laboratories, Inc. (collectively, "Mutual") are Pennsylvania corporations that develop, manufacture, market, sell, and distribute pharmaceutical drugs. Defendant King Pharmaceuticals, Inc. ("King") is a Tennessee corporation that develops, manufactures, markets, sells, and distributes pharmaceutical drugs.
In March 1999, SigmaPharm and Mutual entered into a "development agreement," pursuant to which SigmaPharm granted Mutual certain rights in future "innovations" developed by SigmaPharm in exchange for payments from Mutual. "Innovations" are inventions, improvements, or enhancements to Mutual's pharmaceutical products developed by SigmaPharm for which Mutual secures a patent or which Mutual otherwise deems to be an "innovation." (App. 121.) The development agreement states that Mutual "shall be the sole and exclusive owner of all right, title and interest in and to the Innovations in the United States market." (App. 73, 122.) Likewise, it states that SigmaPharm "shall remain the sole and exclusive owner of all right, title and interest in and to the Innovations in all markets other than the United States market." (App. 73, 122.)
For generic equivalents of name-brand drugs developed by SigmaPharm that required approval under the Food and Drug Administration's ("FDA") Abbreviated New Drug Application ("ANDA") process, SigmaPharm was to receive 20% of the gross profits from Mutual's U.S. sales. But if additional generic competitors entered the market, the royalties would decrease based on the number of competitors. The development agreement further provided that if Mutual licensed or sold the right to sell a product incorporating a SigmaPharm "innovation," or "agree[d] to refrain from selling such product," SigmaPharm was to receive 25% of the gross profit from the licensing fees or royalties from that license, sale, or agreement. (App. 74, 123.)
Pursuant to the development agreement, SigmaPharm developed a generic equivalent of the brand-name muscle relaxant SKELAXIN, which is owned and marketed by King.
In March 2004, King brought a patent infringement lawsuit against Mutual in the District Court for the Eastern District of Pennsylvania and petitioned the FDA to require that those seeking to market a generic version of SKELAXIN include information on the generic product's label that implicated King's method patents. King also asked the FDA to stay approval of any ANDAs for generic competitors to SKELAXIN until it had decided the petition. Mutual opposed each of these requests in multiple filings with the FDA between April 2004 and February 2005.
King and Mutual's adversarial behavior seemed to end on December 6, 2005, when King agreed to pay tens of millions of dollars for co-exclusive licensing rights for one of Mutual's metaxalone-related patents. Two days later, Mutual withdrew its opposition to King's petition for labeling requirements for generic SKELAXIN, even though that petition would have threatened Mutual's ability to market its generic product without infringing certain of King's patents. Then, in 2007, when King made a supplemental submission to the FDA in support of its petition and request for a stay of approval of any generic SKELAXIN ANDAs, Mutual submitted comments in support of King.
Meanwhile, following a joint filing under seal on May 15, 2006, an indefinite stay of the proceedings was issued in the patent case between Mutual and King. Despite the fact that another district court had found the relevant patents to be invalid in January 2009, see King Pharm., Inc. v. Eon Labs, Inc.,
Based on these facts, SigmaPharm's amended complaint alleges that, sometime between February 2005 and December 2005, Mutual and King entered into an agreement "to restrict the output of, and thereby to raise the price of, pharmaceutical products that are bioequivalent to" SKELAXIN. (App. 82.) SigmaPharm claims this agreement was a horizontal restraint of trade in violation of Section 1 of the Sherman Act (Count I), Pennsylvania common law barring restraint of trade (Count II), and California statutes barring unlawful and unfair competition (Count III). The amended complaint also asserts that Mutual breached its contract with SigmaPharm by failing to pay SigmaPharm 25% of the revenues it received from King pursuant to the allegedly unlawful agreement (Count IV). SigmaPharm's amended complaint sought injunctive and monetary relief, including treble damages under the federal antitrust laws.
The defendants moved to dismiss Counts I through III of the amended complaint because, inter alia, SigmaPharm's pleadings failed adequately to allege antitrust injury, a necessary component of so-called "antitrust standing." In a thorough and thoughtful opinion, the District Court found that SigmaPharm had failed adequately to plead antitrust injury, dismissed Count I of the amended complaint without prejudice, and declined to exercise supplemental jurisdiction over the remaining state law claims. SigmaPharm did not seek to amend its complaint, but instead filed the instant appeal.
Since the Supreme Court's decision in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
The Supreme Court has articulated a number of factors to consider in determining whether a plaintiff has antitrust standing:
In re Lower Lake Erie Iron Ore Antitrust Litig.,
The District Court was correct to note that SigmaPharm is neither a consumer nor a competitor in the United States market for products that are bioequivalent to SKELAXIN. SigmaPharm does not allege that it marketed or manufactured a generic version of SKELAXIN, nor could it under its development agreement with Mutual. See App. 73, 122 ("[Mutual] shall be the sole and exclusive owner of all right, title and interest in and to the Innovations in the United States market."); Barton & Pittinos, Inc. v. SmithKline Beecham Corp.,
In Barton & Pittinos, we held that a plaintiff, B&P, was not a competitor of the defendant for antitrust standing purposes because what the plaintiff provided to the market was not "reasonably interchangeable" with what was offered by those in the relevant market. Id. at 182. This was because B&P, a provider of marketing services, did not actually sell the product whose market was allegedly restrained: a vaccine. Id. at 179-80, 182-83. Instead, B&P participated in a "program" in which the vaccine-maker paid B&P to market the vaccine to, and solicit orders from, nursing homes and then pass those orders on to a third-party, which would buy the vaccine from the manufacturer and sell it to the nursing homes. Id. We held as a matter of law that B&P's reliance on the third-party to participate in the vaccine-market rendered it not a competitor in that market for purposes of antitrust standing. Id. at 182-83.
Like B&P, SigmaPharm was not providing a product or service that was "reasonably interchangeable" with an existing product or service in the relevant market— here, the market for SKELAXIN-equivalent products. See id. at 182. Its reliance on a third-party—viz. Mutual—to sell the product in the relevant market, like B&P's, renders SigmaPharm a non-competitor in the relevant market for purposes of antitrust standing.
Although not a competitor in the market for SKELAXIN-equivalent products, SigmaPharm provided an input into what could have been Mutual's entrée into that market. This input—the formulation for a drug that is bioequivalent to SKELAXIN—is certainly a crucial one, but this does not transform SigmaPharm into a competitor in that market for purposes of our antitrust-standing analysis. See Asahi Glass Co. v. Pentech Pharm., Inc.,
The District Court was also correct in finding that SigmaPharm did not adequately plead that its injuries were "the means by which the defendants [sought] to achieve their anticompetitive ends." W. Penn Allegheny Health Sys., 627 F.3d at 102; see Blue Shield of Va. v. McCready,
Id. at 479 (quoting Brunswick, 429 U.S. at 489). Here, defendants could have effectuated their conspiracy even if SigmaPharm did not exist. See Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc.,
Undoubtedly, SigmaPharm alleges that it was injured by the claimed anticompetitive agreement because it did not receive royalties. This, however, does not mean that they have pled antitrust injury, even if the alleged anticompetitive conduct is a per se violation of the antitrust laws. See Atlantic Richfield Co. v. USA Petroleum Co.,
Finally, SigmaPharm argues that the District Court erred by not telling it that it had leave to amend its complaint and not telling it that curative amendments to its complaint would be inequitable or futile. We have held that a dismissal without prejudice will be treated as a final order if the plaintiff has elected to "stand upon the original complaint" by not offering or seeking to amend the complaint and instead filing a notice of appeal and arguing that the allegations in the complaint were legally sufficient. Frederico v. Home Depot,
For the reasons stated above, we will affirm the District Court's order dismissing SigmaPharm's amended complaint in its entirety.
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