06-5525-cv 

 

 

IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT 

 

IN RE DDAVP DIRECT PURCHASER ANTITRUST LITIGATION

 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

 

BRIEF FOR THE UNITED STATES AND FEDERAL TRADE COMMISSION

AS AMICI CURIAE SUPPORTING PLAINTIFFS-APPELLANTS

 

WILLIAM BLUMENTHAL THOMAS O. BARNETT

 General Counsel Assistant Attorney General

 Federal Trade Commission

 Washington, D.C. 20580 GERALD F. MASOUDI

Deputy Assistant Attorney General

ROBERT B. NICHOLSON

JAMES J. FREDRICKS

 Attorneys

 U.S. Department of Justice

 950 Pennsylvania Avenue NW, Room 3224

 Washington, D.C. 20530

 (202) 307-1403

 

 
-iTABLE OF CONTENTS

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

STATEMENT OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

QUESTION PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

I. THE PLAINTIFFS HAVE ANTITRUST STANDING .............5

A. Antitrust Standing Is Well Established for Direct 

Purchasers Seeking Overcharge Damages Caused by 

an Antitrust Violation .....................................5

B. Direct Purchasers Are Not Deprived of Standing 

Merely Because Their Monopoly Maintenance Claim 

Rests On Walker Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

CERTIFICATION OF COMPLIANCE WITH TYPE 

VOLUME LIMITS, TYPE FACE & STYLE REQUIREMENTS, 

AND ANTI-VIRUS SCAN REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 18

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-iiTABLE OF AUTHORITIES

CASES

Addyston Pipe & Steel Co. v. United States, 175 U.S. 211 (1899) ........... 7

Associated Gen. Contractors of Cal., Inc. v. 

California State Council of Carpenters, 459 U.S. 519 (1983) . . . . . . . 8, 9

Balaklaw v. Lovell, 14 F.3d 793 (2d Cir. 1994) . . . . . . . . . . . . . . . . . . . . . . . 9, 10

Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982) . . . . . . . . . . . 8, 9, 14

Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477 (1977) ............. 8

Carrot Components Corp. v. Thomas & Betts Corp., 

229 U.S.P.Q. 61 (D.N.J. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Chattanooga Foundry & Pipe Works v. Atlanta, 203 U.S. 390 (1906) ........ 7

In re Ciprofloxacin Hydrochloride Antitrust Litigation, 

363 F. Supp. 2d 514 (E.D.N.Y. 2005) . . . . . . . . . . . . . . . . . . . . 11, 12, 15

Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337 (Fed. Cir. 2007) . . . . . . . . . . . . . . 16

E & L Consulting, Ltd. v. Doman Indus. Ltd., 472 F.3d 23 (2d Cir. 2006) ..... 2

Edward Katzinger Co. v. Chicago Metallic Manufacturing Co.,

329 U.S. 394 (1947) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Ferring B.V. v. Barr Labs., Inc., No. 7:02-CV-9851, 2005 WL 437981 

(S.D.N.Y. Feb. 7, 2005), aff'd, 437 F.3d 1181 (Fed. Cir.), cert. denied, 

127 S. Ct. 515 (2006) ......................................... 3

Food Mach. & Chem. Corp. v. Walker Process Equip., Inc., 

335 F.2d 315 (7th Cir. 1964) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

G.K.A. Beverage Corp. v. Honickman, 55 F.3d 762 (2d Cir. 1995) .......... 9
-iiiGeorgia v. Evans, 316 U.S. 159 (1942) ................................ 7

Hydril Co. v. Grant Prideco LP, 474 F.3d 1344 (Fed. Cir. 2007) . . . . . . . . . . . 14

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) ........................ 9

Indium Corp. of America v. Semi-Alloys Inc., 

566 F. Supp. 1344 (N.D.N.Y. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Indium Corp. of America v. Semi-Alloys Inc., 

591 F. Supp. 608 (N.D.N.Y. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Kansas v. Utilicorp United Inc., 497 U.S. 199 (1990) .................... 9

Lear, Inc. v. Adkins, 395 U.S. 653 (1969) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Loeb v. Eastman Kodak, Co., 183 F. 704 (3d Cir. 1910) ................... 9

Molecular Diagnostics Labs. v. Hoffmann-La Roche Inc.,

402 F. Supp. 2d 276 (D.D.C. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Paycom Billing Servs., Inc. v. Mastercard Int’l, Inc., 

467 F.3d 283 (2d Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Pfizer Inc. v. Gov’t of India, 434 U.S. 308 (1978) . . . . . . . . . . . . . . . . 6, 7, 8, 16

Reiter v. Sonotone Corp., 442 U.S. 330 (1979) . . . . . . . . . . . . . . . . . . . . . . . 8, 17

In re Remeron Antitrust Litigation, 335 F. Supp. 2d 522 (D.N.J. 2004) . . . 12, 13

Southwest Suburban Bd. of Realtors, Inc. v. Beverly Area Planning Ass’n, 

830 F.2d 1374 (7th Cir. 1987) .................................. 9

United States v. American Bell Tel. Co., 128 U.S. 315 (1888) . . . . . . . . . . . . . 14
-ivUnitherm Food Systems, Inc. v. Swift Eckrich, Inc., 375 F.3d 1341

(Fed. Cir. 2004), rev'd on other grounds, 546 U.S. 394 (2006) . . . . . . . 12

Walker Process Equip. Inc. v. Food Mach. & Chem. Corp., 

382 U.S. 172 (1965) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 12, 15, 16, 17

STATUTES & RULES 

Fed. R. App. P.:

Rule 29(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Rule 29(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Rule 32(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Rule 32(a)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Rule 32(a)(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Rule 32(a)(7)(B)(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Fed. R. Civ. P.: 

Rule 9(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Rule 12(b)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2d Cir. R. 32(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Section 2, Sherman Act, 15 U.S.C. § 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Section 4, Clayton Act, 15 U.S.C. § 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

15 U.S.C. § 12(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-vMISCELLANEOUS 

2 Philip E. Areeda & Herbert Hovenkamp, Antitrust Law (2d ed. 2000) ...... 6

2 Philip E. Areeda & Donald F. Turner, Antitrust Law (1978) .............. 6

Earl E. Pollock, Standing to Sue, Remoteness of Injury, 

and the Passing-On Doctrine, 32 Antitrust L.J. 5, 7 (1966) ........... 6
-1-

STATEMENT OF INTEREST

The United States and the Federal Trade Commission have the primary

responsibility for enforcing the federal antitrust laws and so have a significant

interest in both the substantive and procedural aspects of those laws. This interest

includes the proper interpretation of section 4 of the Clayton Act, 15 U.S.C. § 15,

which authorizes civil antitrust suits by “any person who shall be injured in his

business or property” by an antitrust violation. This case presents a significant

issue of first impression in the courts of appeals: whether section 4 authorizes

direct purchasers to sue to recover monopoly overcharge damages resulting from

maintenance of a monopoly by enforcement of a fraudulently obtained patent. The

district court erroneously held that section 4 does not permit such a suit. The

United States and the Federal Trade Commission disagree with this ruling and ask

the Court not to affirm it. We express no views on the ultimate merits or any other

issues in this case. We file pursuant to the first sentence of Federal Rule of

Appellate Procedure 29(a).
1

 Since the ruling under review is the grant of a motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6), the complaint’s factual allegations are

accepted as true and all inferences therefrom are drawn in plaintiffs-appellants’

favor for present purposes. See E& L Consulting, Ltd. v. Doman Indus. Ltd., 472

F.3d 23, 28 (2d Cir. 2006).

2 JA refers to the Joint Appendix, and SA to the Special Appendix.

-2-

QUESTION PRESENTED

Whether section 4 of the Clayton Act allows direct purchasers of a patented

product to recover damages from overcharges resulting from a monopoly

maintained by the enforcement of a patent obtained through intentional fraud on

the U.S. Patent and Trademark Office.

STATEMENT

1. Plaintiffs-appellants Meijer, Inc., and others in this putative class action

purchased tablets of the anti-diuretic desmopressin acetate under the brand name

DDAVP directly from the defendants, Ferring B.V., Ferring Pharmaceuticals, Inc.,

and Aventis Pharmaceuticals.1

 Consol. Am. Class Action Compl. ¶¶ 2, 9-11, 15

(Am. Compl.) (JA 1-4).2

 The plaintiffs charge that the defendants maintained a

monopoly in the United States market for desmopressin acetate tablets in violation

of section 2 of the Sherman Act, 15 U.S.C. § 2, and that, as a result, purchasers

paid supracompetitive prices for the drug. Am. Compl. ¶¶ 1, 4 (JA 1-2). 

Specifically, the plaintiffs allege that the defendants enforced a “fraudulently
3

 The patent is U.S. Patent No. 5,407,398 (the ‘398 patent). The alleged

fraud rests on Ferring’s failure to disclose to the U.S. Patent and Trademark Office

its past relationships with several persons who submitted declarations supporting

Ferring’s contention that a prior patent did not anticipate the invention. Am.

Compl. ¶¶ 50-74 (JA 15-20). In an earlier patent infringement suit brought by

defendants here against a generic drug maker, that failure was held to be

“inequitable conduct” rendering the patent unenforceable. Ferring B.V. v. Barr

Labs., Inc., No. 7:02-CV-9851, 2005 WL 437981 (S.D.N.Y. Feb. 7, 2005)

(Brieant, J.), aff’d, 437 F.3d 1181 (Fed. Cir.), cert. denied, 127 S. Ct. 515 (2006).

4

 The plaintiffs also allege that the enforcement of the patent eliminated

competition by requiring other drug companies to challenge the ‘398 patent before

obtaining FDA approval, and by causing under Hatch-Waxman a 180-day generic

exclusivity period for the first generic applicant who challenged the Orange Booklisted patent. Am. Compl. ¶¶ 39, 83-85, 133 (JA 12, 22, 34).

-3-

obtained” patent3 on desmopressin tablets to prevent and delay lower-priced

generic equivalents of DDAVP from entering the market. Am. Compl. ¶ 3 (JA 2). 

The enforcement, plaintiffs allege, consisted of improperly listing the patent in the

Food and Drug Administration’s (FDA) Orange Book and filing and prosecuting

patent infringement suits against generic drug makers that applied to market a

generic equivalent of DDAVP. Id. Under the Hatch-Waxman Act, once the patent

was listed in the Orange Book, the filing of infringement suits against the generic

drug makers seeking FDA approval to market the drug triggered an automatic 30-

month stay of that approval.4

 Am. Compl. ¶¶ 21-35, 88, 98 (JA 6-11, 23, 26).

Defendants’ actions, the complaint alleges, “deprived Plaintiffs . . . of

access to substantially lower-priced generic versions of desmopressin acetate
-4-

tablets, thereby causing Plaintiffs . . . to pay supra-competitive prices for DDAVP

and its generic equivalents.” Am. Compl. ¶ 4 (JA 2). The plaintiffs sustained

substantial losses and damage to their business and property in the form of these

overcharges, and they seek treble damages for these injuries. Am. Compl. ¶¶ 6,

134 (JA 3, 34).

2. The defendants jointly moved to dismiss the direct purchasers’ complaint

for failure to state a claim, arguing that the plaintiffs lacked antitrust standing

under section 4 of the Clayton Act. Aventis separately moved to dismiss for

failure to plead with particularity facts showing Aventis’ knowledge of, or

involvement in, the alleged fraud on the U.S. Patent and Trademark Office (PTO),

as required by Federal Rule of Civil Procedure 9(b).

3. The district court granted both motions. Memorandum and Order (Nov. 2,

2006) (Op.) (SA 1-16). It recognized that under Walker Process Equipment Inc. v.

Food Machinery & Chemical Corp., 382 U.S. 172 (1965), the enforcement of a

patent obtained by intentional fraud on the PTO may be the basis for a violation of

the Sherman Act and a damages action under the Clayton Act. Op. at 5-6 (SA 5-

6). The district court, however, concluded that the direct purchasers’ Walker

Process claim failed here for three reasons. First, based on its findings in the prior

infringement action, see supra note 3, the court held that the defendants’ conduct
-5-

did not rise to the level of fraud required by Walker Process. Id. at 8 (SA 8). 

Second, the plaintiffs did not plead fraud with the particularity required by Rule

9(b). Op. at 8, 13-15 (SA 8, 13-15).

The district court’s third reason was that the plaintiffs are not “‘proper’

antitrust plaintiffs” and therefore did not have antitrust standing to bring a socalled Walker Process claim. Id. at 8 (SA 8). The court recognized that the

plaintiffs were direct purchasers and that they were harmed by the “monopoly,

which kept generic versions of DDAVP off of the market and resulted in

overcharges to Plaintiffs.” Id. at 9 (SA 9). Nonetheless, it concluded that they

lacked standing because they did not compete, and would not have competed, with

defendants, nor were they sued or threatened with an infringement suit by the

defendants. Id. at 9-12 (SA 9-12).

ARGUMENT

I. THE PLAINTIFFS HAVE ANTITRUST STANDING 

A. Antitrust Standing Is Well Established for Direct Purchasers Seeking

Overcharge Damages Caused by an Antitrust Violation 

Section 4 of the Clayton Act provides that “any person who shall be injured 

in his business or property by reason of anything forbidden in the antitrust laws

may sue therefor.” 15 U.S.C. § 15. The section’s dual purpose is “to deter”
-6-

violators by “depriv[ing] them of the fruits of their illegality and to compensate

victims of antitrust violations for their injuries.” Pfizer Inc. v. Gov’t of India, 434

U.S. 308, 314 (1978) (Pfizer) (internal quotation marks and citations omitted). The

plaintiffs’ complaint on its face fits comfortably within the standing requirements

and purposes of section 4 as interpreted by the Supreme Court. The plaintiffs are

“persons” within the meaning of the Clayton Act. 15 U.S.C. § 12(a). They directly

purchased DDAVP from the defendants. And they sought to recover overcharges

resulting from a monopoly allegedly maintained by the defendants through conduct

violating the antitrust laws.

It is long-settled section 4 law that direct purchasers such as plaintiffs have

antitrust standing to recover overcharges. As the leading commentators have

explained: “Because protecting consumers from monopoly prices is the central

concern of antitrust, buyers have usually been preferred plaintiffs in private

antitrust litigation. As a result, consumer standing to recover for an overcharge

paid directly to an illegal cartel or monopoly is seldom doubted.” 2 Philip E.

Areeda & Herbert Hovenkamp, Antitrust Law ¶ 345, at 356 (2d ed. 2000); see 2

Philip E. Areeda & Donald F. Turner, Antitrust Law ¶ 345, at 183 (1978); Earl E.

Pollock, Standing to Sue, Remoteness of Injury, and the Passing-On Doctrine, 32

Antitrust L.J. 5, 7 (1966).
-7-

The antitrust standing of direct purchasers seeking to recover overcharges

from those who raised price by restraining or monopolizing trade in violation of the

Sherman Act was established as early as Chattanooga Foundry & Pipe Works v.

Atlanta, 203 U.S. 390 (1906). The city of Atlanta, which had purchased water pipe

at supracompetitive prices from a member of the pipe cartel (see Addyston Pipe &

Steel Co. v. United States, 175 U.S. 211 (1899)), sued for treble damages under

section 7 of the Sherman Act, the direct and substantively identical (see Pfizer, 434

U.S. at 311) predecessor of the current section 4 of the Clayton Act. The Court

succinctly explained why the plaintiff had antitrust standing: It had purchased the

pipe directly from a cartel member; because of the cartel’s violations of sections 1

and 2 of the Sherman Act, the plaintiff paid a supracompetitive price; and the

payment of that inflated price injured the city in its property. Chattanooga

Foundry, 203 U.S. at 395-96. 

Subsequent decisions reaffirmed the antitrust standing of direct purchasers. 

In Georgia v. Evans, 316 U.S. 159, 162 (1942), the Court held that states that

purchased directly from the defendants had the same standing to sue as injured

persons under section 4 “which is available to other purchasers who suffer through

violation of the Act.” In Pfizer, 434 U.S. at 310, 319, the Court held that, like a

private person or a state, a foreign government that had directly purchased goods
-8-

from a cartel had standing to sue under section 4. And in Reiter v. Sonotone Corp.,

442 U.S. 330, 339-42 (1979), the Court unanimously rejected an argument that a

direct purchaser of price-fixed hearing aids may sue under section 4 only if the

purchaser is engaged in a commercial venture, and held that a direct purchaser who

is an actual user has equally clear antitrust standing. Direct purchaser standing is

thus at the center of what the Court has called the “‘expansive remedial purpose’”

of section 4. Blue Shield of Virginia v. McCready, 457 U.S. 465, 472 (1982),

quoting Pfizer, 434 U.S. at 313.

Notwithstanding that “expansive remedial purpose,” the Supreme Court has

held that section 4 is not to be read literally and does not “encompass every harm

that can be attributed directly or indirectly to the consequences of an antitrust

violation.” Associated General Contractors of California, Inc. v. California State

Council of Carpenters, 459 U.S. 519, 529 (1983) (AGC). Most importantly, in

Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477, 489 (1977), the Court held

that section 4 permits recovery only for antitrust injury, which the Court defined as

“injury of the type the antitrust laws were intended to prevent and that flows from

that which makes defendants’ acts unlawful,” adding that injury giving rise to

standing “should reflect the anticompetitive effect either of the violation or of

anticompetitive acts made possible by the violation.”
5

 Moreover, injuries to indirect purchasers from the passing-on of

overcharges do not give rise to damages claims under section 4. See Illinois Brick

Co. v. Illinois, 431 U.S. 720 (1977); Kansas v. Utilicorp United Inc., 497 U.S. 199

(1990).

-9-

In addition, the courts have long held that section 4 does not permit recovery

for “indirect, remote, and consequential” injuries.5 Loeb v. Eastman Kodak, Co.

183 F. 704, 709 (3d Cir. 1910) (denying standing to shareholders); see G.K.A.

Beverage Corp. v. Honickman, 55 F.3d 762, 766-77 (2d Cir. 1995) (denying

standing to distributors for a soft drink bottler that allegedly was the target of

exclusionary conduct); Southwest Suburban Bd. of Realtors, Inc. v. Beverly Area

Planning Ass’n, 830 F.2d 1374, 1378 (7th Cir. 1987) (“Merely derivative injuries

sustained by employees, officers, stockholders, and creditors of an injured company

do not constitute ‘antitrust injury’ sufficient to confer antitrust standing.”). Rather,

damage recovery is available under section 4 only when the injuries complained of

were proximately caused by the antitrust violations. AGC, 459 U.S. at 532-34,

540-43; McCready, 457 U.S. at 476-78.

This Court has reduced the analysis of AGC to a two-part test for standing:

1) whether there is antitrust injury; and 2) whether other factors, mainly directness

of injury and identifiability of that injury, prevent the plaintiff from being an

efficient enforcer of the antitrust laws. Balaklaw v. Lovell, 14 F.3d 793, 797 & n.9
-10-

(2d Cir. 1994); see Paycom Billing Servs., Inc. v. Mastercard Int’l, Inc., 467 F.3d

283, 290-91 (2d Cir. 2006). Section 4 requires that the plaintiff be “an efficient

enforcer,” rather than “the most efficient enforcer,” and the possibility that the

generic drug makers may also have antitrust standing—though they have not

brought antitrust suits—does not detract from the current plaintiffs’ standing under

section 4 to recover for their antitrust injuries. See Molecular Diagnostics Labs. v.

Hoffmann-La Roche Inc., 402 F. Supp. 2d 276, 281 (D.D.C. 2005). The recovery

by direct purchasers would not duplicate the recovery by competitors because each

group suffers direct, but distinct injuries with non-overlapping measures of

damages. The direct purchasers’ damages are the overcharges they paid, measured

as the difference between the monopoly price and the but-for price, while

competitors’ damages are their lost profits, measured as the difference between that

but-for price and their costs.

None of the limitations on the application of section 4 poses an obstacle to

recovery in this case. Assuming, arguendo, the underlying merit of the plaintiffs’

claims, they plainly suffered antitrust injury when they paid prices elevated by the

monopoly illegally maintained by enforcing a fraudulently obtained patent. And

the injuries suffered by plaintiffs were proximately caused by the allegedly

unlawful conduct.
-11-

B. Direct Purchasers Are Not Deprived of Standing Merely Because

Their Monopoly Maintenance Claim Rests On Walker Process

The century-old body of Supreme Court and court of appeals antitrust

standing law is not made inapplicable by the plaintiffs’ allegations that the

monopoly was maintained by enforcing a fraudulently obtained patent. Nor do

these allegations transform plaintiffs’ antitrust claim into a patent claim. If a seller

unlawfully maintains a monopoly whether by enforcing a fraudulently obtained

patent or engaging in some other form of exclusionary conduct and that seller

charges direct customers supracompetitive prices as a result, these customers suffer

core antitrust injuries. And thus they have antitrust standing to make an antitrust

claim and seek damages for the antitrust violation, regardless of what form the

exclusionary conduct took or whether it violated patent or some other law.

The district court largely ignored this body of antitrust standing law: the

court cited little of it and applied none. Op. at 10 (SA 10) (citing the two-part

Balaklaw test, supra p. 9, but not applying it). Rather, the district court tersely, but

mistakenly, rested its holding on two recent district court decisions in Walker

Process suits—one of which did not even rule on section 4 standing and the other

of which ignored settled antitrust standing law. Op. at 11-12 (SA 11-12) (citing In

re Ciprofloxacin Hydrochloride Antitrust Litigation, 363 F. Supp. 2d 514
-12-

(E.D.N.Y. 2005) (Cipro), and In re Remeron Antitrust Litigation, 335 F. Supp. 2d

522 (D.N.J. 2004) (Remeron)). The district court also erroneously seemed to share

the defendants’ dissatisfaction with the balance between antitrust and patent law

struck in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp.,

382 U.S. 172 (1965). 

1. Whatever the merits of the Cipro decision, the claims addressed there rest

on different factual and legal theories. The Cipro plaintiffs’ federal antitrust

challenge was based on an allegedly anticompetitive agreement settling an

infringement suit between a patentee and its competitors and did not include an

allegation that the patent was obtained by intentional fraud on the PTO. The

district court in Cipro concluded that the plaintiffs failed to show any

anticompetitive effect beyond the scope of the patent. 363 F. Supp. 2d at 541. The

only Walker Process-type claims in Cipro were brought by indirect purchasers

under state law, and those claims were held preempted by federal patent law. 363

F. Supp. 2d at 542-43. While patent law may be relevant to whether fraud was

perpetrated on the PTO, antitrust standing under section 4 of the Clayton Act is a

question of federal antitrust law independent of patent law. See Unitherm Food

Systems, Inc. v. Swift Eckrich, Inc., 375 F.3d 1341, 1349 (Fed. Cir. 2004), rev’d on

other grounds, 546 U.S. 394 (2006); see also Walker Process, 382 U.S. at 176.
-13-

The court in Remeron based its conclusion that direct purchasers lacked

antitrust standing on its misreading of two district court cases holding that an actual

or potential competitor did not have standing to bring a Walker Process claim

unless it was excluded from the market by the defendant’s unlawful conduct. 

Remeron, 335 F. Supp. 2d at 529 (citing Carrot Components Corp. v. Thomas &

Betts Corp., 229 U.S.P.Q. 61, 64 (D.N.J. 1986); Indium Corp. of Am. v. SemiAlloys Inc., 566 F. Supp. 1344 (N.D.N.Y. 1983) (Indium I); and Indium Corp. of

Am. v. Semi-Alloys Inc., 591 F. Supp. 608, 614-15 (N.D.N.Y. 1984) (Indium II)). 

These cases have nothing to do with direct purchaser antitrust standing. They stand

for the proposition that standing under section 4 requires a causal relationship

between the allegedly unlawful acts and the plaintiff’s injury. See Carrot

Components, 229 U.S.P.Q. at 64 (Walker Process claim cannot be based on

enforcement that caused no “detriment” to plaintiff); Indium I, 566 F. Supp. at

1352-53 (Walker Process claim requires a causal link between injury and

patentee’s enforcement conduct); Indium II, 591 F. Supp. at 614-15 (amended

complaint alleged sufficient causal link).

A causal relationship is, of course, required for Walker Process damages

claims, just like other section 4 claims; as we observed above, the antitrust

violation must be the proximate cause of the plaintiffs’ injuries, see supra p. 9. 
-14-

The causation requirement does not, however, dictate that only plaintiffs against

whom the fraudulently obtained patent was enforced have standing to make a

Walker Process claim. In Hydril Co. v. Grant Prideco LP, 474 F.3d 1344, 1350

(Fed. Cir. 2007), for example, the court of appeals held that “a valid Walker

Process claim may be based upon enforcement activity directed against the

plaintiff’s customers” if that enforcement causes the plaintiff the kind of harm that

the antitrust laws were intended to prevent. While competitors failing to allege that

enforcement caused them injury (as in Carrot Components and Indium I) cannot

state a Walker Process claim, competitors alleging that the enforcement against

their customers caused them antitrust injury (as in Hydril) can state a claim. 

Similarly, purchasers alleging that enforcement against the defendants’ competitors

caused the purchasers’ injury in the form of overcharges have standing to recover

for those overcharges. Cf. McCready, 457 U.S. at 478-79 (finding antitrust

standing for purchaser of psychological services foreseeably injured by

exclusionary conduct directed at psychologists). 

2. The defendants may argue that allowing antitrust suits by direct

purchasers would amount to private suits to cancel patents based on fraud, despite

the rule that only the United States can sue to cancel a patent for fraud on the patent

office, United States v. American Bell Telephone Co., 128 U.S. 315, 369-70 (1888). 
-15-

This argument has no logical connection to section 4 and boils down to a

disagreement with Walker Process. In that case, the Supreme Court made clear

that the lack of statutory authority for a private suit to cancel a patent on the basis

of fraud does not bar “those injured by monopolistic actions taken under the

fraudulent patent claim” from bringing an antitrust action seeking damages “under

the Clayton Act, not the patent laws.” 382 U.S. at 176. “While one of [the antitrust

action’s] elements is the fraudulent procurement of a patent, the action does not

directly seek the patent’s annulment.” Id. Denying standing because of the rule

that private parties cannot sue to cancel a patent commits the error the court of

appeals made, and the Supreme Court corrected, in Walker Process. See Food

Machinery & Chemical Corp. v. Walker Process Equipment, Inc., 335 F.2d 315,

316 (7th Cir. 1964); Walker Process, 382 U.S. at 175-76.

3. The defendants may also argue that allowing direct purchasers to sue in

cases like this will lead to litigation against patent holders that may retard the

research and development stimulated by the patent system. See Defendants’ Reply

Memorandum at 1-2 (JA 233-34); Cipro, 363 F. Supp. 2d at 541-42. Patents

obtained by fraud and used to maintain a monopoly, however, undermine both the

patent system and the “important public interest in permitting full and free

competition in the use of ideas which are in reality a part of the public domain.” 
-16-

Lear, Inc. v. Adkins, 395 U.S. 653, 670 (1969); see Edward Katzinger Co. v.

Chicago Metallic Mfg. Co., 329 U.S. 394, 400 (1947) (noting the “necessity of

protecting our competitive economy by keeping open the way for interested

persons to challenge the validity of patents which might be shown to be invalid”).

 Moreover, the factual reliability of defendants’ prediction is open to serious

question. Walker Process “deal[s] only with a special class of patents, i.e., those

procured by intentional fraud,” not “honest mistake” amounting to a mere

“technical fraud.” 382 U.S. at 176-77; cf. Walker Process, 382 U.S. at 180 (“[T]his

private antitrust remedy should not be deemed available to reach § 2 monopolies

carried on under a nonfraudulently procured patent.”) (Harlan, J., concurring). The

need to plead with particularity and prove a knowing and intentional fraud on the

PTO may discourage many direct purchasers from bringing Walker Process claims

and defeat most of those who do. See Fed. R. Civ. P. 9(b); see, e.g., Dippin’ Dots,

Inc. v. Mosey, 476 F.3d 1337, 1346-48 (Fed. Cir. 2007). This may explain why

Walker Process-type claims by direct purchasers, while not unheard of before

Remeron—the direct purchasers in Pfizer, for example, alleged that defendants

engaged in “fraud upon the United States Patent Office” to monopolize the market

for broad spectrum antibiotics, 434 US. at 310—are rare.

Lastly, the defendants’ concern cannot “be used to frustrate the assertion of
-17-

rights conferred by the antitrust laws.” Walker Process, 382 U.S. at 176. As

Justice Rehnquist pointed out in his concurrence in Sonotone, “the problem, if there

is one, is for Congress and not for the courts.” 442 U.S. at 346; id. at 344-45

(rejecting argument that under section 4 only commercial (as opposed to noncommercial) direct purchasers should be allowed to sue because otherwise there

would be a costly increase in litigation).

CONCLUSION

The dismissal of the Walker Process claim should not be affirmed on the

basis that the plaintiffs lack antitrust standing as direct purchasers to bring such a

claim.

Respectfully submitted.

WILLIAM BLUMENTHAL THOMAS O. BARNETT

General Counsel Assistant Attorney General

 Federal Trade Commission

 Washington, D.C. 20580 GERALD F. MASOUDI

 Deputy Assistant Attorney General

ROBERT B. NICHOLSON

JAMES J. FREDRICKS

 Attorneys

 U.S. Department of Justice

 950 Pennsylvania Avenue NW Suite 3324

 Washington, D.C. 20530

May 25, 2007 (202) 307-1403
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CERTIFICATION OF COMPLIANCE

WITH TYPE VOLUME LIMITS, 

TYPE FACE & STYLE REQUIREMENTS, 

AND ANTI-VIRUS SCAN REQUIREMENTS

1. I James J. Fredricks, certify that this brief complies with the type-volume

limitations of Federal Rules of Appellate Procedure 32(a)(7) and 29(d) because it

contains 3852 words, excluding the parts of the brief exempted by Federal Rule of

Appellate Procedure 32(a)(7)(B)(iii), as counted by the WordPerfect 10 word

processor program used to prepare it.

2. I, James J. Fredricks, further certify that this brief complies with the typeface

requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type style

requirements of Federal Rule of Appellate Procedure 32(a)(6) because it has been

prepared in a proportionally spaced typeface using the WordPerfect 10 word

processor program in 14-point Times New Roman.

3. I, James J. Fredricks, further certify that the electronic copy of this brief

submitted in Portable Document Format (PDF) as an email attachment to

briefs@ca2.uscourts.gov pursuant to Local Rule 32(a)(1)(A) complies with Local

Rule 32(a)(1)(E) because it has been scanned for viruses by the anti-virus detector

Norton AntiVirus Corporate Edition version 7.60.926 (Virus Definition File

version 5/22/2007 rev. 19) and no virus has been detected.

___________________________

James J. Fredricks
-19-

CERTIFICATE OF SERVICE

I, James J. Fredricks, certify that I caused two copies of the accompanying BRIEF

FOR THE UNITED STATES AND THE FEDERAL TRADE COMMISSION AS

AMICI CURIAE SUPPORTING PLAINTIFFS-APPELLANTS to be sent via

overnight Fedex service and an electronic copy of this brief in pdf format to be sent

via email on the 25th of May, 2007, to each of the following:

Bruce E. Gerstein

Garwin, Bronzaft, Gerstein & Fisher

1501 Broadway

New York, NY 10036

bgerstein@gbgf-law.com

(212) 398-0055

Counsel for Plaintiff Louisianna Wholesale Drug Co., Inc.

Daniel Berger

David F. Sorensen

Berger & Montague PC

1622 Locust St

Philadelphia, PA 19103

dsorensen@bm.net

(215) 875-5705

Counsel for Plaintiff Rochester Drug Co-Operative, Inc.

Linda P. Nussbaum 

Kaplan Fox & Kilsheimer LLP

805 Third Ave

New York, NY 10022

lnussbaum@kaplanfox.com

(212) 687-1980

Counsel for Plaintiffs Meijer, Inc. et al.
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Donald B. Ayer

Jones Day

51 Louisiana Ave NW

Washington, DC 20001

dbayer@jonesday.com

(202) 879-4689

Counsel for Defendant Aventis Pharmaceuticals, Inc.

Barbara H. Wootton

Arnold & Porter, LLP

555 Twelfth Street NW

Washington, DC 20004

barbara_wootton@aporter.com

(202) 942-6545

Counsel for Defendants Ferring B.V. & Ferring Pharmaceuticals, Inc.

___________________________

James J. Fredricks