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In This Issue
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Federal
Circuit Declines Jurisdiction Over Walker-Process Fraud Claim Appeal
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Impax
Pays $35M to Partially Settle Acne Drug Complaint, While Heading to Trial to
Defend Acne Drug Pacts
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Federal Circuit Declines Jurisdiction
Over Walker-Process Fraud Claim Appeal
In Xitronix Corp. v.
KLA-Tencor Corp., the Court of Appeals for the Federal Circuit (“CAFC”)
declined to exercise jurisdiction over an appeal from the Western District of
Texas’ summary judgment dismissing Xitronix’ antitrust Walker-Process Fraud
claims (“Walker Process claims”)
because such claims do not arise under the patent laws of the United
States.
By way of background, the CAFC has exclusive jurisdiction over any
“appeal from a final decision of a district court … any Act of Congress
relating to patents or plant variety protection…” 28 U.S.C. §1295(a)(1). Further, Walker Process claims are different than typical claims of
inequitable conduct before the USPTO based upon misrepresentations/omissions
of facts material to patentability, and presents a
higher threshold of proof requiring a showing of actual fraud as well as other
antitrust elements. Walker Process claims stem from the
Supreme Court’s 1965 holding in Walker
Process Equipment, Inc. v. Food Machinery & Chemical Corp. that
enforcement of a fraudulently procured patent violated the antitrust laws and
thereby provided grounds to award treble damages if such enforcement caused a
substantial anticompetitive effect. To
prove Walker Process fraud and
subject a patentee to antitrust liability, the claimant must show that (i)
the patent-in-question was fraudulently obtained as well as (ii) all of the
other necessary elements for a Sherman Act claim.
Turning to the Xitronix’ Walker
Process claims, the district court granted summary judgment in favor of KLA
dismissing the Walker-Process
claims. Xitronix thereafter appealed
to the CAFC, and although KLA conceded jurisdiction, the CAFC raised and
analyzed the jurisdictional issue sua
sponte. After several rounds of
briefing, the CAFC declined to exercise jurisdiction over Xitronix’ appeal,
transferring it to the Fifth Circuit.
The CAFC based its decision primarily upon the Supreme Court’s
holding in Gunn v. Minton that a
patent issue subsumed within a state law legal malpractice claim was
insufficient to confer federal question jurisdiction. The CAFC analyzed and compared the (i)
statutory provisions in Gunn, (ii)
the patent federal question statute and (iii)
Section 1295(a)(1). Citing Gunn, the CAFC held that although Xitronix’
Walker Process claims would
potentially involve “analysis of the [patent] claims and specifications and
may require application of patent claim construction principles,” the federal
question jurisdiction statute required more than “mere resolution of a patent
issue.” In so doing, the CAFC observed
that the “underlying patent issue in this case, while important to the
parties and necessary for resolution of the claims, does not present a
substantial issue of patent law,” that the “patent claims will not be
invalidated or revived based on the result of this case,” and that patent law
would only be relevant to one element of the claim, i.e., determining if KLA
committed actual fraud before the USPTO.
This holding would appear limited in impact as it would likely only
apply to appeals involving Walker Process Fraud claims, with no substantial issue
of patent law, such as infringement or invalidity of a patent.
Impax Pays
$35M to Partially Settle Acne Drug Complaint, While Heading to Trial to
Defend Acne Drug Pacts
Impax Laboratories Inc. has agreed to pay $35 million to settle anti-trust
claims with a class of people who bought its blockbuster acne drug Solodyn,
bringing a portion of its four-year In
re Solodyn Antitrust Litigation to a close. This partial settlement does not resolve
the claims of big pharmacy chains like CVS and Walgreens.
That class, separate from the customers who paid cash for Solodyn,
alleges that Impax illegally agreed with Medicis Pharmaceutical Corp. to
thwart competition by agreeing to delay a generic version of the acne
drug. The trial will be only the
second since the U.S. Supreme Court ruled that big payments from name brand
drug makers to generic makers might violate the antitrust laws. In such arrangements, known as “pay-for-delay”
the two parties split up the profits for a delayed generic drug under cover
of a patent settlement, but note that proving such payments are actually
intended to maintain market dominance of the branded product is difficult.
Impax
is the last defendant company remaining in the suit. Medicis’s parent, Valeant Pharmaceuticals
Intl Inc., settled with the big buyers for an undisclosed amount. In early March, Medicis also settled with
direct buyers for $35 million and the class of “end players” (health plans
and pharmacies) for $23 million.
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