morning runners james dabney fried frank new york new york representing the plaintiff appellant sigma farm inc i like to reserve five minutes for a vote all right we may hold you to your ten minutes if you reserve five nine years ago two companies jointly set out to develop a pharmaceutical product that would be bio equivalent to a branded drug called school x well there was a contract  yes you've got to it looks like a pretty good contract if you take the defendants at their word the plaintiff has no contract claim at all if you take the defendants at their word the only possibility that the pla has to recover anything for the loss of its profit participation interest is under any trust law profit participation interest yes exactly that's this is what this this product was developed under written understand this thing isn't there a gateway provision that you have to be a competitor work consumer to to make the kind of an address standing claims that you're making your honor the supreme court and this court has over and over again expressly held that there is no bright line test that excludes from recovery anybody who doesn't meet one or the other of those too late the standard as is the injury one that was caused by an anti competitive or competition reducing effect of the challenge agreement that's the brunswick test the second test is the injury direct or  a in agreement that resulted in mutual receiving from what they say publicly three hundred million dollars and they say that they never agreed not to sell what they did was they took money from king being a share of king school lacks in revenues so that it was more profitable for mutual not to sell then they go into honest competition now mutual do not is that they got any how did the if you're saying that's in restraint of trade yes you had to had them have competitive injury so if this had to have an anti competitive impact on you such that you know maybe who had to pay more for something because they were restraining trade how does the fact that because you were an of left at the at the altar and didn't get royalties because they went  another route if you will how does that how is that an anti competitive of injury and effect and injury the there is no effect more anticompetitive in an address law  agreement that results in the artificial restriction of the output of a product but that's not what you're claiming you're not claiming that the artificial restriction of the output damage to you you're claiming that because they did what they did you didn't get royalties under your contract quite the contrary your honor i'm glad you asked i make routines that is the the royalties that sigma farm was entitle to were ten percent of the profits made using an innovation ten percent of the profits made if the product was manufactured so in other words of king made payments to mutual that you're entitled to a portion of those no the claim the interest claim in this case is that there would have been profits made on sales by mutual of the product we go back to four four c of the bellman agreement let's assume for the moment that mutual didn't breach that wouldn't see the firm stand to profit from king's payments the mutual absolutely not mutual contends that the monies it received were all received for the grant of rights to make use of certain information in a patent application and therefore there was no agreement not to sell and there was no contractual breach at written agreement that king and mutual entered into was a sham the agreement that mutual and king entered into purported to say that all the money that mutual got was all just consideration for rights under a pending patent application for mutual so mutual in this court denials that it ever agreed not to sell mutual feels they assert that they are voided both regulatory scrutiny and interest liability and cigna farms contract pay by characterizing the payments as license royalties to that what is sigma form here then is it a competitor a consumer a supplier or what does it signify are is a co owner of economic rights in the product the agreements it says first of all if an effort yields an innovation a technological innovation correct then certain legal and economic carets vest in both parts with option but in the united states the contract provided that profits made using the innovation in the united states were to be split yes if mutual decided to go with that innovation well mutual is alleged to have decided to go with the innovation indeed it took the innovation it applied for a patent on the innovation and it triggered the economic rights of signify and the problem here is that having taken legal title to the innovation subject in a signature arms writes the allegation is that because of a corrupt illegal horizontal agreement with king usual did not sell and the result was that mutual ation did not sell it did not exploited it and the result was a figment i wound up with nothing there can't be a more direct cause result of an interest violation than what we but for the agreement we say there would have been profits the allegation here there were no profits why not because the challenged agreement made it more profitable for mutual to sit back and one one twenty two of the record it basically provides that outside the united states sigma farm owns everything and inside the united states mutual holds title subject to the rule the obligation to share profits in specified percentages were understood the the profit loss profits claim says i was entitled to receive profits on the restraint product itself and i lost those profits because of a corrupt illegal agreement between my treacherous former co ben courts consistently and routinely dismiss an excess claims by plaintiffs like sigma farm who are neither consumers nor competitors in the allegedly restrained market what's the status by the way of the contract action  is because such plaintiffs have not suffered and i trust injury and the reason why those plaintiffs have not suffered and i trust injury is because under the standard articulated in brunswick they need to establish excuse me both that their injury was type of injury that the end of trust laws are intended to prevent and that the injury flows from the anti competitive aspects of the agreement on the latter how could the you know we should normally wel a competitor how could there be any competitors in this restraint market i mean the one of one of the allegations in the complaint your honor is that the part of the restraint part of the aim of the restraint was to make it more difficult for others to to be able to sell generic equivalents to to metabo to school x and to the that the king branded product there aren't really a lot of facts in the on the face of it you enter into a an agreement a development agreement with sigma farm for innovations relating to generic drugs and then you in effect abandon that because of a subsequent deal you enter into with king and it there's got to be some sort of remedy for sigma farm and they're claiming that what was done here was you know a competitive the maybe it's primarily contractual i'm not sure but one could make an argument that it isn't a competitive good but we're not one could make an argument that under the allegations of the complaint by a now put restriction agreed to by horizontal competitors could in some sense be anti competitive right that's not the issue here and the allegations in the complaint  that what sigma farm is suing for is an agreement by mutual not to sell its generic metaxa one product under paragraph four c of the development agreement as you were discussing earlier with si farm council that provision in title sigma farm to be paid in the event of such an agreement so the idea is that the agreement not to sell should have been with it rather than with king sorry i don't the agreement not to sell or the you know the agreement regarding this product should have been with it sigma farm rather than with king i mean that's their contention no good no their contention is that if mutant is able to let's look at the development agreement it has several different ways in which sim a farm might be compensated if mutual is able to successfully derive some value right from the from the turner product one of them is sales one of them is licensing one of them is selling the rights to the product and one of them is agreeing not to sell the product what's in it contemplated by the contract is that it's if mutual is able to do any one of those things and derive some value from an from an example if if if other competitors enter if other generics and that is right the reason why courts have limited and i trust injury to competitors and consumers is because the central interest of the in a trust law is in protecting the economic interests of market participants and that's why this court in the western allegheny health system case for example said that a supplier who complains about a downstream restriction in a downstream market has not suffered and i trust injury because it's injury is as the court concluded merely a byproduct of the allegedly anti competitive restraint seems to be by the very nature of royalties the minute you say royalties it seems like there's a difference already a different level in play you're you're not a competitor somebody is playing somebody else royalties that's not the kind of thing that happens in the same marketplace the same playing field if you well i agree one hundred percent your honor and i would also point back to the language of the development agreement itself which explicitly says it paragraph three of the development agreement which is that page a one twenty two of the record explicitly states that mutual is the sole and exclusive owner of all right title and interest in and the the concept of limiting these types of actions to consumers or competitors or because they're the ones most likely to suffer harm from an antitrust violation but why can't others suffer in the first injury as well the reason for limiting the scope of the remedy to or the remedy to consumers and competitors is because they are the ones who are who will suffer antitrust injury those who are outside of the market are unlikely to suffer and i trust injury because the injury they suffer is not the type of injury that the antitrust laws were intended to prevent the in a trust laws are intended again to intended to protect the interests of competitors and consumers of market protect participants in economic freedom and so the types of injuries sought to be prevented are the injuries that reflect in some way some limitations on the economic freedoms of those consumers or competitors simmers wouldn't have access to product or would have to pay more for a product or something yes or competitor might be for close from a market for example sigma farm here was not foreclosed in any way from competing  whatever market or markets it competes and again it was similar to the supplier taking the innovation somewhere else it could not have taken this innovation and anywhere else because it belongs to mutual the two appear to be seemingly on the face and i thought you know opposite each other one you're going to work with somebody to do something in the second is they're going to pay you not to have anything that's going to be generically equivalent to skill x if there has to be a remedy have a couple of points on that first is that an agreement by a generic company not to sell an infringing product is not anti competitive and it's not unlawful if you came up with innovations that would be an infringing product that in this case the product wasn't infringing product and that's why the parties that letter mutual in king were engaged in patent litigation in the eastern district of pennsylvania the the generic product infringed patents that were held but i'm sorry it's almost like in the vernacular can somebody say that you're in the middle and you get bought off but no i don't believe so your honor because again an agreement by a generic not to for an agreement not to sell it's generic it's entitled to contract damages there and that's and that's an interesting point for two reasons an important point for two reasons one is i think it addresses your honour's concern that perhaps there may not be a remedy here but i think more importantly it establishes that any injury here to sigma farm a rose not from the conduct itself but from the fact that it was not paid for what it believes is its share of that conduct and that negates any causation at all for the injury that's that it says it suffered at the time the agreement was allegedly entered into according to signify arm that entitled it to money under its contract it now had a product that had been that it now had helped to develop a product that belonged to mutual that mutual had been able to get some value for and soon the farm was entitled to a piece of that they enter into a contract with your client if they come up with innovation innovations and you manufacture and sell it they get a portion then there is a contract you enter into with someone else that says that you're not going to enter into or put anything out in the market that competes with skelaxin right the allegation in the complaint is that mutual will not sell the sky lacson product that is the subject of the development agreement right side metaxa long product and again the contract is that development agreement itself provides that if that happens then sigma farm is compensated for that agreement s contemplated precisely what it is challenging here which is that mutual would be able to get some value for the product by agreeing not to sell it and if in fact that is the case then under the terms of the development agreement paragraph or c and similar form is not injured at all by that conduct they may be injured if as they say they were never paid what they were entitled to receive it or that i saw a statute hasn't run from for a contract action ye nothing further unless you'd like to make a point i don't believe so your honor thank you thank you the characterization of of seeing far as rights as royalties has to be looked at very carefully in this specific case these were not your usual royalties what sigma farm was entitle to w percentage share of profits made using a potentially patentable innovation because you had a right under contract to those moneys correct that's exactly right the contracts specified that sigma farm was entitled to receive ten percent of any property made using the innovation and have and they were sued that contract claims the claim that we have pleaded in the alternative that's been misstated here again and again and again the n t trust injury here does not arise from mutuals retention of bribe monies it got from king the interest injury claimed here is lost profits that were never made because it was made more economically worthwhile for mutual not to sell then to sell that is completely different and distinct injury from the contract client huge you will deny us that it agreed not to sell it wants the court to treat it as if it made a completely different agreement with king then it made its agreement with king s will get thirty five million up front and are running share of king's royalties period and all were given for that is a right under a pending patent application that's it if that's right if you take them at your word then sigma farm has no contract claim they say the only thing they did was to take money for rights under a patent they would have the court find that this was just folly on kings park king paid three hundred million dollars for rights to use technology that turned out to have no value but that doesn't give rights any claim for breach of contract it signifies they sa that there was no breach of contract they say the money was for something else ok that means as judge ambrose says the only chance sigma farm has the only chance of any trust lobbying imports in this market  product is this lawsuit the statute of limitations on the n interest claim has passed this patent license was done there either we cleverly it's an incredibly sophisticated scheme by structuring it the way they did they didn't have to file it with the c so the government didn't know about it it didn't settle any litigation so the government didn't know what is that what is the status of your contract complaint the contract claim is on is is is part of this case but i mean ok but the court this case but i cannot over state the point that the claim for breach of contract forms a completely different alternate and inconsistent remedy from the any trust point we do knowledge that it ever contemplated this potentially criminal illegal per se agreement entered into by these defendants the the provisions a judge rufe referred to were provisions that would have come into effect if usual instead of making the product itself had licensed it to someone else so it agreed not to sell it because it had granted exclusive rights to someone else and in that contingency signifying was entitled to a different share of profits than would have happened if mutual had manufactured itself that's what that contract was for but to say that because they entered into a a per se illegal horizontal output limitation agreement whose obvious per se violations underlining doesn't mean doesn't necessarily mean yes and i trust and i completely agree but in this case the per se effect was output limitation that's why we were injured the output wasn't made no sales were made no profits were big there is direct correspondence between the any competitive effect i e output limitation and the loss so there is clear liability under any less true and tortious injury does not get any more direct