arguing that: (1) it has failed to allege sufficient facts to support its unfair competition counterclaim;
(2) it has failed to allege sufficient facts to support its antitrust counterclaims; and (3) the antitrust
counterclaims are barred by the Noerr-Pennington doctrine.

Unfair Competition Counterclaim

Defendant TEVA’s first counterclaim alleges “unfair competition” based on Plaintiffs’
prosecution of this lawsuit. It is unclear whether TEVA brings this counterclaim under state or
federal law. TEVA has not cited any federal statute which would give rise to such a cause of action.
Likewise, TEVA has failed to cite an Illinois case “in which an unfair competition claim was
successfully asserted on the basis that the defendant had improperly used litigation as a means of
competition.” Harris Custom Builders, Inc. v. Hoffmeyer, 834 F.Supp. 256, 261 (N.D.III 1993). “In
fact, courts applying IHinois law have concluded that the only causes of action that can arise from
the wrongful filing of a lawsuit ... are malicious prosecution and abuse of process.” Jd. It is clear
that Defendant’s “Unfair Competition” counterclaim fails under FED.R.Civ.P. 12(6)(6).

In its response to Plaintiffs’ Motion to Dismiss, TEVA attempts to convert its first
counterclaim into one for abuse of process. However, even if this counterclaim is construed as one
for abuse of process, it fails under FED.R.Civ.P. 12(b)(6). “To state a claim for abuse of process, a
{claimant] must allege an ulterior purpose and an act in the use of legal process not proper in the
regular prosecution of the proceedings.” Harris Custom Builders, 834 F.Supp. at 261 (citing Erlich
y. Lopin-Erlich, 195 lll.App.3d 537, 538, 553 N.E.2d 21, 22 (Ill. App. Ct. 1990)). TEVA’s
counterclaim does not state a claim for abuse of process because it fails to allege that Plaintiffs
committed an act in “the use of legal process not proper in the regular prosecution of the

proceedings.” Plaintiffs’ simple act of filing this lawsuit cannot be considered improper in “the

4.


proof...” Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 174
(1965).
Plaintiffs’ Motion to Dismiss is denied as to Counterclaims II and III.
Noerr-Pennington Doctrine

Plaintiffs argue that Defendant’s Counterclaims II and III based on the filing of this suit
should be dismissed because they are barred by the Noerr-Pennington doctrine. The Noerr-
Pennington doctrine protects plaintiffs from antitrust liability for anticompetitive harm resulting
from litigation. Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499 (1988).

However, there is an exception to the Noerr-Pennington doctrine for “sham litigation,” i.e.
litigation which is ostensibly aimed at seeking legal redress but is actually “a mere sham to cover...
an attempt to interfere directly with the business relationships of a competitor.” Professional Real
Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 54, 113 S.Ct. 1920, 1925
(1993). In order for these antitrust counterclaims to survive Plaintiffs’ Motion to Dismiss based on
the Noerr-Pennington doctrine, TEVA must allege that: (1) Plaintiffs’ lawsuit is “objectively
baseless in the sense that no reasonable litigant could realistically expect success on the merits,” and
(2) the present litigation is subjectively motivated by an “attempt to interfere directly with the
business relationships of a competitor.” Jd.

Defendant has adequately plead its antitrust counterclaims under the Noerr-Pennington
doctrine. First, Defendant has alleged that the present lawsuit is “objectively baseless.” TEVA has
alleged that previous to the filing of this lawsuit, it sent Plaintiffs a letter stating that all six of the
claims of the 252 Patent were invalid and unenforceable. (A.Answer 11). TEVA further alleges that

Plaintiffs “had no reasonable justification” for their belief that the 252 Patent would be enforced,

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Defendant’s third counterclaim, “Attempt to Monopolize,” seeks an injunction and damages
resulting from the present litigation. This counterclaim alleges that Plaintiffs’ lawsuit violates
Section 2 of the Sherman Act since it constitutes “objectively baseless litigation” intended to
monopolize the relevant market. This counterclaim further alleges that Plaintiffs have “engaged in
such exclusionary and predatory conduct [the present litigation] with a specific intent to monopolize
the relevant market(s), and with a dangerous probability of success in monopolizing such market(s).”
It further alleges that this “unlawful attempted monopolization has worked, and threatens to continue
to work, a substantial adverse impact on competition in the aforesaid relevant market(s).”
(A.Answer, 18).

LEGAL STANDARD

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the sufficiency of the
claim, not to decide the merits of the case. In ruling on a motion to dismiss, a court must construe
the claim’s allegations in the light most favorable to the claimant, and it must take all well-pleaded
facts and allegations as true. Bontkowski v. First Natl. Bank of Cicero, 998 F.2d 459, 461 (7th Cir.
1993), cert. denied, 510 U.S. 1012, 114 $.Ct. 602 (1993). Allegations should not be dismissed for
failure to state a claim “unless it appears beyond a doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46,
78 S.Ct. 99 (1957). Nonetheless, in order to withstand a motion to dismiss, a claim must allege facts
sufficiently setting forth the essential elements of the cause of action. Lucien y. Preiner, 967 F.2d
1166, 1168 (7th Cir. 1992).

DISCUSSION

Plaintiffs Knoll and Arnold have moved to dismiss Defendant TEVA’s counterclaims,

3-


regular prosecution of the proceedings.” Plaintiffs’ Motion to Dismiss is granted as to Defendant’s
Counterclaim I.
Antitrust Counterclaims

To withstand Plaintiffs’ Motion to Dismiss, Defendant’s Counterclaims II and IT must
include allegations regarding all the material elements of the alleged antitrust violations. The
Seventh Circuit discussed the application of FED.R.Civ.P. 12(b)(6) to antitrust claims in Car
Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1105-6 (7th Cir. 1984). It stated:

In practice, “a complaint ... must contain either direct or inferential allegations

respecting all the material elements necessary to sustain a recovery under some viable

legal theory.” (Citation omitted).
Pred

The pleader may not evade these requirements by merely alleging a bare legal

conclusion; if the facts “do not at least outline or adumbrate” a violation of the

Sherman Act, the plaintiffs “will get nowhere merely by dressing them up in the

language of antitrust.” (Citation omitted).

To state a counterclaim for monopolization under § 2 of the Sherman Act (Counterclaim I),
Defendant will have to allege that: (1) Plaintiffs possessed monopoly power in the relevant market
and (2) “the willful acquisition or maintenance of that power as distinguished from growth or
development as a consequence of a superior product, business acumen, or historic accident.”
Endsley v. City of Chicago, 230 F.3d 276, 281 (7th Cir. 2000)(citing Eastman Kodak Co. v. Image
Technical Servs., 504 U.S. 451, 481 (1992)).

To state a counterclaim for attempted monopolization under § 2 of the Sherman Act
(Counterclaim I), Defendant will have to allege that: (1) Plaintiff intended to monopolize the

relevant market, (2) Plaintiff engaged in “anticompetitive or predatory conduct designed to further

that intent,” and (3) a “dangerous probability of success.” Abcor Corp. v. AM Intl., Inc., 916 F.2d


a

Id. Second, Defendant has alleged that the present lawsuit was filed with the sole intention of
prolonging its monopoly over the market for hydrocodone bitartrate/ibuprofen dur during the time this
lawsuit is pending. Since Defendant’s second and third counterclaims contain allegations fulfilling
the elements of the “sham exception” to the Noerr Pennington doctrine, Plaintiffs’ Motion to
Dismiss Counterclaims II and II is DENIED.

CONCLUSION
For the reasons set forth above, Plaintiffs Knoll and Armnold’s Motion to Dismiss Defendant TEVA’s

counterclaims is GRANTED as to Counterclaim I and DENIED as to Counterclaims II and OL

Defendant TEVA’s Counterclaim I is dismissed without prejudice tg refile within 28 days hereof.

IT IS SO ORDERED. XK Level

Cow. Darrah, Judge
United States District Court

Date: ag44, 26? fo


Minute Osder Form (06/97)

United States District Court, Northern District of Illinois

ner Magitate Judee John W. Darrah “than Assigned Sadge

CASE NUMBER 01 C 1646 DATE 8/21/2001
CASE KNOLL PHARMACEUTICALS vs. THE TEVA PHARMACEUTICALS
TITLE

Lin the following box (a) indicate the party filing the motion, e.g, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.)

MOTION:
DOCKET ENTRY:
(1) o Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due.
(3) Qo Answer brief to motion due__. Reply to answer brief. due.
(4) Oo Ruling/Hearingon___setfor__—_at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on setfor at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on —__setfor at.
(7) Oo Trial[set for/re-set for] on__—_at.
(8) Oo [Bench/Jury trial] [Hearing] held/continued to___—_at
(9) i] This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) (General Rule21 OFRCP41(a)(1) Oi FRCP41(a)(2).
do) =o [Other docket entry] Status hearing held. Enter Memorandum And Order. Plaintiffs motion to

dismiss defendant TEVA’s counterclaims I, II, and II is granted as to counterclaim I and denied as to
counterclaims I and II. Defendant TEVA’s counterclaim Lis dismissed without prejudice to refile within
28 days hereof.

(11)

‘No notices required, advised in open court.

[For further detail see order attached to the original minute order.]

No notices required. number of notices

AUG 24 2001)

Notices mailed by judge's staff.

Notified counsel by telephone.

v | Docketing to mail notices,

Mail AO 450 form,

Copy to judge/magistrate judge.
courtroom date mailed note
LG deputy’s
initials
Date/time received in
central Clerk’s Office railing deputy initia



924, 926 (4th Cir. 1990).

Plaintiffs argue that Defendant has failed to state claims for monopolization or attempted
monopolization because it has failed to allege “market power” in a “relevant market.” “[T]o survive
a motion to dismiss, [Defendant] still must set forth facts sufficient to create an inference that
[Plaintiffs] had enough market power to create a monopoly.” Endsley, 230 F.3d at 282. Defendant
TEVA responds by noting that the counterclaims allege that Plaintiffs’ rights under the 252 Patent
and status as the sole provider of hydrocodone bitartrate/ibuprofen constitute allegations of market
power in a relevant market under FED.R.Clv.P. 12(b)(6).

Therefore, Defendant’s antitrust counterclaims (II and II]) contain facts sufficient to allow
an inference of market power in a relevant market. Although a “patent alone does not demonstrate
market power,” In Re Independent Service Organizations Antitrust Litigation CSU, L.L.C., 203 F.3d
1322, 1325 (Fed. Cir. 2000), in some cases “one brand of a product can constitute a separate
market.” Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 480 (1992). TEVA’s
counterclaims define the relevant market as the “U.S. market for the sale of hydrocodone
bitartrate/ibuprofen.” (A.Answer 14). TEVA’s counterclaims further allege that Plaintiff Knoll is
the sole supplier of hydrocodone bitartrate/ibuprofen to consumers in the United States. (A.Answer
14).

These allegations are sufficient at the pleading stage. “Our notice pleading system requires
only that such allegations give notice of what markets are being brought into issue. Whether or not
the alleged market is in fact the relevant one ... is a matter for proof and not pleading.” AG Fur
Industrielle Elektronik AGIE v. Sodick Co. LTD., 748 F.Supp. 1305, 1316 (N.D.IlI 1990). “There

may be effective substitutes for the [product] which do not infringe the patent. This is a matter of

-6-


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

KNOLL PHARMACEUTICALS
COMPANY, INC.,

Case No. 01 C 1646
Hon. John W. Darrah

and

THE JOHN AND LOIS ARNOLD
LIMITED LIABILITY PARTNERSHIP,

Plaintiffs,

Vv.

DOGKETFR

TEVA PHARMACEUTICALS USA, ;
AUG 2 4 2001

INC.,

Defendant.

weve we ewer ewer

MEMORANDUM AND ORDER

This matter comes before the Court on Plaintiffs’ Motion to Dismiss Defendant TEVA’s
Counterclaims I, II, and Il. For the reasons set forth below, Plaintiffs’ Motion is GRANTED as to
Counterclaim I and DENIED as to Counterclaims II and II.

BACKGROUND

Plaintiffs, Knoll Pharmaceuticals (“Knoll”) and the John and Lois Arnold Family Limited
Liability Partnership (“Arnold”), filed a one-count Complaint for patent infringement against
Defendant TEVA Pharmaceuticals on March 8, 2001. Specifically, the Complaint alleges that
Defendant has infringed on United States Patent No. 4,587, 252 (the “252 Patent”), which is held

by Plaintiff Arnold and licensed to Plaintiff Knoll. (Compl. ¥ 10, 11).

: 2


Plaintiff Knoll currently holds a New Drug Application (“NDA”) for the product
“VICOPROFEN” (hydrocodone bitartrate/ibuprofen), which Plaintiffs allege is covered by the “252
Patent.” (Compl. { 12). Plaintiffs further allege that Defendant submitted an Abbreviated New Drug
Application (the “ANDA”) to the U.S. Food & Drug Administration (“FDA”) on November 10,
2000 for a generic equivalent to “VICOPROFEN.” (Compl. § 13). Plaintiffs allege that this ANDA
infringes on the 252 Patent because it seeks “FDA approval to engage, prior to the expiration of the
252 Patent, in the commercial manufacture, sale, offer for sale, and/or use of the invention as
claimed in the 252 Patent.” (Compl. 15).

TEVA filed its “Answer, Affirmative Defenses, and Counterclaims” to Plaintiffs’ Complaint
on March 29, 2001. TEVA filed its “Amended Answer, Affirmative Defenses, and Counterclaims”
on April 27, 2001. In its Amended Answer, TEVA made three counterclaims: (I) “Unfair
Competition,” (I) “Unlawful Monopolization,” and (IM) “Attempt to Monopolize.” (A.Answer, 13-
17). Plaintiffs have moved to dismiss Counterclaims I through II.

Defendant’s first counterclaim, “Unfair Competition,” seeks an injunction and damages
resulting from the present litigation. This counterclaim alleges that Plaintiffs’ lawsuit constitutes
“sham litigation” filed with the sole intention of preventing Defendant from entering the
hydrocodone bitartrate/ibuprofen market. (A.Answer, 15,16).

Defendant’s second counterclaim, “Unlawful Monopolization,” seeks an injunction and
damages resulting from the present litigation. This counterclaim alleges that Plaintiffs’ lawsuit
violates Section 2 of the Sherman Act since it constitutes “objectively baseless litigation” intended
to “willfully pursue and maintain [Knoll’s] monopoly” in the relevant market for the sale of

hydrocodone bitartrate/ibuprofen. (A.Answer, 17).

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