Can a Large Patent Portfolio Violate the Sherman Antitrust Act?

In a recent federal case, AbbVie Inc. successfully defended a claim for antitrust violations arising from its aggressive patent strategy relating to the drug Humira, a prescription medication used to treat arthritis, Crohn’s disease, and related conditions.  In re Humira (Adalimumab) Antitrust Litig., No. 19 CV 1873, 2020 WL 3051309, at *1 (N.D. Ill. June 8, 2020).  The case addressed the underlying issue of when a company’s patent portfolio can rise to the level of a monopoly.  The court dismissed the complaint ultimately finding that the plaintiff could not establish a cause of action because the allegations in the complaint could not support a finding of liability under federal antitrust laws.

History of the Sherman Antitrust Act

The first Federal act to outlaw monopolistic business practices was the Sherman Antitrust Act, approved on July 2, 1890.  Section 1 of this Act mentions, “Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce, among the several states or with foreign nations, is hereby declared to be illegal.”  Section 2 declares, “Every person who shall monopolize, or attempt to monopolize, any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a misdemeanor.”  The effects of these specific sections on controlling the monopolistic privileges secured to inventors by patent laws are often a subject of litigation.

Article 1, Section 8, Subdivision 8 of the Constitution provides that Congress shall have power “to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”  This constitutional guaranty seems to contradict the sections of the Sherman Act mentioned above.  However, as noted by the federal courts, the Sherman Act should not be construed to interfere with rights established by the Constitution and granted via patent law.  That is why the constitutional guaranty must prevail, and the owner of a patent should be allowed to exclude others from the use of the patent and from manufacturing or selling the patented article.  Although the acts of the patent owner may be an inherent violation of the Sherman Act, the Constitution and the various patent laws shield the patent owner from liability.

Relationship Between the Sherman Act and a Portfolio

In the case In re Humira, Judge Shah of the Northern District of Illinois addressed the question of how the Sherman Act should be applied to AbbVie’s patent portfolio which consisted of more than 100 patents relating to the drug Humira.  The plaintiffs were indirect purchasers of the drug and brought suit against AbbVie for “cornering the market for Humira through anticompetitive conduct.”  They alleged that AbbVie applied for and obtained patents to gain enough power to drive out competitors from the Humira market in the United States, violating Section 2 of the Sherman Act.  They further asserted that AbbVie entered into agreements with those competitors to keep competing drugs off the market, violating Section 1 of the Sherman Act.  The court ruled that the complaint was not an antitrust violation.  AbbVie had “exploited advantages” that were available to them through legal practices, and to the extent that this kept Humira prices high, the existing antitrust doctrine does not prohibit such conduct.  Ultimately, most of AbbVie’s petitioning was considered to be protected by the Noerr-Pennington doctrine, and the plaintiffs’ theory of antitrust injury was considered to be too speculative.

AbbVie’s portfolio of patents included patents on the different uses of Humira, the process for manufacturing it, and the ingredients and formulations that were anticipated to be used by competitors.  It was estimated that AbbVie filed for roughly 247 patent applications related to Humira and obtained 132 of those patents, a 53 percent approval rating.  All of these published patents could be traced back to 20 root patents, forming 20 patent trees.  By targeting those root patents, plaintiffs attempted to identify a large number of patents in AbbVie’s portfolio that should not have issued.  As a result, plaintiffs alleged a new type of antitrust claim.  Plaintiffs alleged that AbbVie abused its monopoly over the U.S. market for Humira by obtaining and asserting “swaths of invalid, unenforceable, or uninfringed patents without regard to the patents’ merits.”  The plaintiffs further alleged that by repeatedly asserting these patents on competitors, AbbVie was able to delay its competitors and avoid any real examination of the patent’s validity long enough to reap a few years’ worth of profit on its monopoly.  The court noted that the plaintiffs were not relying on the Noerr-Pennington doctrine, which assigns antitrust liability to “objectively baseless” petitioning, or the ruling in Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., which held that obtaining a patent by fraud can violate Section 2 of the Sherman Act.  The refusal to utilize the Noerr-Pennington doctrine is what ultimately led to the plaintiff’s downfall.  It was necessary for the plaintiffs to show that AbbVie’s petitions (i.e., patent applications, infringement lawsuits, etc.,) were objectively baseless.  The court analyzed the success of AbbVie’s petitions to determine if they were objectively baseless and found that obtaining patents on 53 percent of the applications was sufficient.  The court noted that other courts had found a 41 percent success rate to be sufficient evidence that the petitions were not objectively baseless.

The Violation Explained

The violation of Section 1 of the Sherman Act was based on AbbVie granting competitors the right to an early launch in Europe.  The plaintiffs alleged that this was a form of pay-for-delay and an attempt at market allocation.  The early launch dates in Europe were extremely valuable to the competitors and plaintiffs say that AbbVie used those dates as bargaining chips during negotiations to encourage the competing companies to delay the entry dates in the U.S. market.  The court found that AbbVie did not agree to withdraw from the European market, none of the bio-similar companies received payment for delayed entry in the U.S. market, and the agreement allowed for entry into the U.S. market.  Therefore, the court noted that the settlement between AbbVie and similar companies included elements that actually promoted competition.  For all of these reasons, the complaint was ultimately dismissed.

In conclusion, simply having a large patent portfolio and promoting an aggressive patent strategy is insufficient to trigger antitrust liability or the Sherman Act.  Using the patents against competing companies and leveraging settlements with those companies does not trigger liability, unless there is evidence of the petitions being objectively baseless.  These are all legal avenues that can be taken by any company that is trying to protect its product.

Jonah Clark is a technical advisor and law clerk at Suiter Swantz IP. Jonah received his B.S. in Industrial Engineering and minor in Business from Iowa State University.

Jonah currently attends the University of Nebraska College of Law and is expected to receive his Juris Doctor May 2022.

Learn more about Jonah

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