2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-16-2012

In Re: K-Dur Antitrust

Precedential or Non-Precedential: Precedential

Docket No. 10-2077

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 10-2077

_____________

In Re: K-DUR ANTITRUST LITIGATION

Louisiana Wholesale Drug Co., Inc.,

on behalf of itself and all others similarly situated,

 Appellants

_____________

No. 10-2078

_____________

In Re: K-DUR ANTITRUST LITIGATION

 

CVS Pharmacy, Inc.; Rite Aid Corporation,

 Appellants

_____________

No. 10-2079

_____________

In Re: K-DUR ANTITRUST LITIGATION

Walgreen Co., Eckerd Corporation, The Kroger Co.,

Safeway Inc., Albertson's Inc., Hy-Vee, Inc., 

and Maxi Drug, Inc.,

 Appellants

_____________

No. 10-4571

_____________

In Re: K-DUR ANTITRUST LITIGATION 
2

Merck & Co., Inc.;

Upsher-Smith Laboratories, Inc.,

 Appellants

________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 2-01-cv-01652)

District Judge: Honorable Garrett E. Brown, Jr.

_______

Argued December 12, 2011

Before: SLOVITER, VANASKIE, Circuit Judges

and STENGEL*

, District Judge

(Filed: July 16, 2012)

______

Daniel Berger

Daniel C. Simons

David Francis Sorensen (Argued)

Berger & Montague

Philadelphia, PA l9l03

Bruce E. Gerstein

Kimberly Hennings

Joseph Opper

Barry S. Taus

Garwin Gerstein & Fisher

New York, NY 10036

Peter S. Pearlman

Cohn, Lifland, Pearlman, Herrmann & Knopf

Saddle Brook, NJ 07663

 * Hon. Lawrence F. Stengel, United States District Court 

for the Eastern District of Pennsylvania, sitting by 

designation.
3

Attorneys for Appellants, No. 10-2077

Barry L. Refsin

Hangley, Aronchick, Segal, Pudlin & Schiller

Philadelphia, PA l9l03

Steve D. Shadowen (Argued) 

Hangley, Aronchick, Segal, Pudlin & Schiller

Harrisburg, PA 17101

Attorneys for Appellants, Nos. 10-2078, 10-4571

Deborah S. Corbishley

Scott E. Perwin

Lauren C. Ravkind

Kenny Nachwalter

Miami, FL 33131

Attorneys for Appellants, Nos. 10-4571, 10-2079

Gage Andretta

William E. Goydan

Robert L. Tchack

Wolff & Samson

West Orange, NJ 07052

Jennifer K. Conrad

Steven W. Copley

A. Gregory Grimsal

Gordon, Arata, McCollam, Duplantis & Eagan

New Orleans, LA 70170

Jaime M. Crowe

Christopher M. Curran

White & Case

Washington, DC 20005

Ashley E. Bass

Thomas A. Isaacson

John W. Nields, Jr. (Argued)

Alan M. Wiseman
4

Covington & Burling

Washington, DC 20004

Mark A. Cunningham

David G. Radlauer

Jones Walker

New Orleans, LA 70170

Richard H. Gill

George W. Walker

Copeland Franco Screws & Gills

Montgomery, AL 36101

Richard Hernandez

William J. O’Shaughnessy

McCarter & English

Newark, NJ 07102

Charles A. Loughlin

Baker Botts

Washington, DC 20004

 Attorneys for Appellees, Nos. 10-2077, 10-2078

Ellen Meriwether

Cafferty Faucher

Philadelphia, PA l9l03

Attorney for Amicus Appellant 

American Antitrust Institute

Proposed Amicus Appellants, Nos. 10-2077, 10-2078

Adam R. Lawton

Jeffrey I. Weinberger

Munger, Tolles & Olson

Los Angeles, CA 90071

Attorneys for Amicus Appellee Pharmaceutical 

Research and Manufacturers of America, No. 10-2077

Imad D. Abyad
5

John F. Daly

Federal Trade Commission

Washington, DC 20580

Attorneys for Amicus Appellant Federal Trade 

Commission, No. 10-2077

Richard A. Samp

Washington Legal Foundation

Washington, DC 20036

Attorney for Amicus Appellee Washington Legal 

Foundation, No. 10-2077

Werner L. Margard, III

Office of Attorney General

Columbus, OH 43266

Attorney for Amicus Appellants, No. 10-2077

Catherine G. O’Sullivan

United States Department of Justice

Appellate Section

Washington, DC 20530

David Seidman

United States Department of Justice

Antitrust Division

Washington, DC 20530

Malcolm L. Stewart (Argued)

United States Department of Justice

Office of Solicitor General

Washington, DC 20530

Attorneys for Amicus Appellant United States, 

No. 10-2077

Donald L. Bell, II

National Association of Chain Drug Stores,

Alexandria, VA 22314
6

Attorney for Amicus Appellant Nat’l Ass’n Chain 

 Drug Stores, Inc., Nos. 10-2077, 10-2078

___________

OPINION OF THE COURT

____________

SLOVITER, Circuit Judge.

In this appeal, we consider the antitrust implications of 

an agreement by a manufacturer of a generic drug that, in 

return for a payment by the patent holder, agrees to drop its 

challenge to the patent and refrain from entering the market 

for a specified period of time.

A secondary issue concerns the certification by the 

District Court of a class of antitrust plaintiffs. Specifically, 

we must determine whether the antitrust injury allegedly 

suffered by class members can be shown through common 

proof, i.e. proof applicable to all plaintiffs, and whether there 

are insurmountable conflicts preventing named plaintiffs from 

adequately representing the members of the class. 

These appeals arise out of the settlement of two patent 

cases involving the drug K-Dur 20 (“K-Dur”), which is 

manufactured by Schering-Plough Corporation (“Schering”).

Plaintiffs are Louisiana Wholesale Drug Company, Inc., on 

behalf of a class of wholesalers and retailers who purchased 

K-Dur directly from Schering and nine individual plaintiffs, 

including CVS Pharmacy, Inc., Rite Aid Corporation, and 

other pharmacies. Defendants are Schering and UpsherSmith Laboratories (“Upsher Smith”).1

 1 In appeals numbered 10-2077, 10-2078, and 10-2079, 

Appellants challenge the District Court’s grant of summary 

judgment on behalf of defendants, relying on their patents. In 

No. 10-4571, defendants challenge the District Court’s 

certification of a class of plaintiffs.
7

I. STATUTORY AND REGULATORY 

FRAMEWORK 

K-Dur is Schering’s brand-name sustained-release 

potassium chloride supplement.2 Sustained-release potassium 

chloride is used to treat potassium deficiencies, including 

those that arise as a side effect of the use of diuretic products 

to treat high blood pressure. 

Schering did not hold a patent for the potassium 

chloride salt itself, as that compound is commonly known and 

not patentable. Instead, Schering held a formulation patent on 

the controlled release coating it applied to the potassium 

chloride crystals. Schering identified patent number 

4,863,743 (“the ‘743 patent”) as the patent that would be 

infringed by the production of a generic version of K-Dur. 

Schering assigned the ‘743 patent to its subsidiary Key 

Pharmaceuticals, Inc. The ‘743 patent was set to expire on 

September 5, 2006. 

By statute, a pharmaceutical company must obtain 

from the Food and Drug Administration (“FDA”) approval 

before it may market a prescription drug. 21 U.S.C. § 355(a). 

For a new drug, the approval process requires submission of a 

New Drug Application (“NDA”), which includes exhaustive 

information about the drug, including safety and efficacy 

studies, the method of producing the drug, and any patents 

issued on the drug’s composition or methods of use. Id. § 

355(b)(1). The FDA publishes the patent information 

submitted in NDAs in the “Approved Drug Products with 

Therapeutic Equivalence Evaluations,” otherwise known as 

the “Orange Book.” See FDA Electronic Orange Book, 

http://www.fda.gov/cder/ob/.

In 1984, attempting to jumpstart generic competition 

with name brand pharmaceuticals, Congress passed the Drug 

 2 After the facts at issue in this case, Merck & Co. 

acquired Schering, the named defendant in these actions. 

However, in keeping with the practice of the parties and 

amici, the court will refer to Schering. 
8

Price Competition and Patent Term Restoration Act, 

commonly known as the Hatch-Waxman Act. Pub. L. No. 

98-417, 98 Stat. 1585 (1984). The Hatch-Waxman Act 

amended the Federal Food, Drug, and Cosmetic Act, 21 

U.S.C. §§ 301-399, to permit a potential manufacturer of a 

generic version of a patented drug to file an abbreviated 

application for approval with the FDA. See 21 U.S.C. § 

355(j). This short form application, known as an Abbreviated 

New Drug Application (“ANDA”), may rely on the FDA’s 

prior determinations of safety and efficacy made in 

considering the application of the patented drug. Id. § 

355(j)(2)(A).

When a generic manufacturer files an ANDA, it is also 

required to file a certification that, “in the opinion of the 

applicant and to the best of his knowledge,” the proposed 

generic drug does not infringe any patent listed with the FDA 

as covering the patented drug. Id. § 355(j)(2)(A)(vii). The 

generic manufacturer can satisfy this requirement by 

certifying one of the following four options with respect to 

the patent for the listed drug: “(I) that such patent 

information has not been filed, (II) that such patent has 

expired, (III) [by certifying] the date on which such patent 

will expire, or (IV) that such patent is invalid or will not be 

infringed by the manufacture, use, or sale of the new drug for 

which the application is submitted.” Id. § 355(j)(2)(A)(vii). 

The generic manufacturers at issue here, Upsher and ESI, 

used the fourth of these certification options, the so-called 

“paragraph IV certification.” Id. § 355(j)(2)(A)(vii)(IV). 

When a would-be generic manufacturer submits a paragraph 

IV certification, it must consult the Orange Book and provide 

written notice to each listed patent owner impacted by the 

ANDA. Id. § 355(j)(2)(B)(iii)(I). By statute, a paragraph IV 

certification constitutes a technical act of patent infringement. 

35 U.S.C. § 271(e)(2)(A).

Upon receiving notice of a paragraph IV certification 

with respect to one of its pharmaceutical patents, the patent 

holder may initiate an infringement suit based on the filing of 

the paragraph IV certification alone within forty-five days 

after the generic applicant files its ANDA and paragraph IV 
9

certification. 21 U.S.C. § 355(j)(5)(B)(iii). Filing suit by the 

patent holder within that window effects an automatic stay 

that prevents the FDA from approving the generic drug until

the earlier of (1) thirty months have run or (2) the court 

hearing the patent challenge finds that the patent is either 

invalid or not infringed. Id. § 355(j)(5)(B)(iii)(I). 

Congress explained that the purpose of the HatchWaxman Act is “to make available more low cost generic 

drugs.” H.R. Rep. No. 98-857(I), at 14-15, reprinted in 1984 

U.S.C.C.A.N. 2647, 2647-48. In order to encourage generic 

entry and challenges to drug patents, the Hatch-Waxman Act 

rewards the first generic manufacturer who submits an 

ANDA and a paragraph IV certification by providing it with a 

180-day period during which the FDA will not approve 

subsequent ANDA applications. 21 U.S.C. § 

355(j)(5)(B)(iv). The 180-day exclusivity period is triggered 

on the date on which the first ANDA applicant begins 

commercial marketing of its drug. Id. Notably, the 180-day 

exclusivity window is only available to the first filer of an 

ANDA with a paragraph IV certification, meaning that even 

if the first filer never becomes eligible to use its 180-day 

exclusivity period because it settles, loses, or withdraws the 

litigation, that potential benefit will not pass to subsequent 

filers. 21 U.S.C. § 355(j)(5)(D)(iii). It has been suggested 

that the first filer is usually the most motivated challenger to 

the patent holder’s claimed intellectual property. See C. Scott 

Hemphill, Paying for Delay: Pharmaceutical Patent 

Settlement as a Regulatory Design Problem, 81 N.Y.U. L.

Rev. 1553, 1583 (2006) (noting “a sharp difference in 

incentives . . . between [the first paragraph IV] filer and all 

other generic firms”).

As explained further below, in the years after the 

passage of Hatch-Waxman, some of the patent infringement 

suits occurring under the Hatch-Waxman framework were 

resolved through settlement agreements in which the patent 

holder paid the would-be generic manufacturer to drop its 

patent challenge and refrain from producing a generic drug 

for a specified period. These agreements are known as 

“reverse payment agreements” or “exclusion agreements.” 
10

Concerned about the possible anticompetitive effects of 

reverse payment agreements, see S. Rep. No. 107-167, at 4 

(2002), Congress amended Hatch-Waxman as part of the 

Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003. Those amendments require 

branded and generic pharmaceutical companies who enter 

into patent litigation settlements to file those settlement 

agreements with the Federal Trade Commission (“FTC”) and 

the Department of Justice (“DOJ”) for antitrust review. Pub. 

L. No. 108-173, §§ 1111-1118, 117 Stat. 2066, 2461-64 

(codified as amended at 21 U.S.C. § 355(j)). 

II. FACTUAL AND PROCEDURAL 

BACKGROUND

A. Approval of the ‘743 Patent

The patented invention claims a controlled-release 

dispersible potassium chloride tablet. The ‘743 patent was 

developed using a technique called “microencapsulation,” a 

process in which small particles of a drug are coated to make 

them disperse over time. The research supporting the ‘743 

patent built on work that Schering had done for an earlier 

patent for a controlled-release aspirin tablet, Patent No. 

4,555,399 (“the ‘399 patent”). The application for what 

became the ‘743 patent was initially rejected by the Patent 

and Trademark Office (“PTO”) as obvious in light of the ‘399 

patent and other prior art. In order to circumvent the prior art, 

Schering amended its application for what became the ‘743 

patent to clarify that the controlled release coating in the 

invention contained ethylcellulose with a viscosity of greater 

than 40 cp,3 whereas the ‘399 patent called for the use of 

ethylcellulose with a viscosity of 9-11 cp. Schering argued 

that a coating containing ethylcellulose of greater than 40 cp 

was not obvious under the prior art. After this amendment, 

the PTO granted the ‘743 patent on September 5, 1989. 

 3 Centipoise, abbreviated “cp”, is a measure of viscosity. 

McGraw-Hill Dictionary of Scientific and Technical Terms 

354 (6th ed. 2003).
11

B. The Schering-Upsher Litigation and 

Settlement

In August 1995, Upsher filed the first ANDA seeking 

approval to produce a generic version of K-Dur to be called 

Klor-Con M20. Upsher provided a paragraph IV certification

to Schering in November 1995, certifying that its generic 

would not infringe Schering’s ‘743 patent. On December 15, 

1995, within the forty-five-day window provided by HatchWaxman, Schering sued Upsher in the District of New Jersey 

for patent infringement, triggering the 30-month automatic 

stay in FDA approval of Upsher’s generic. 

Upsher’s defense against Schering’s patent 

infringement suit was based on differences between the 

chemical composition of the controlled release coating in its 

generic product and that of the invention claimed in the ‘743 

patent. Throughout the litigation, Upsher vigorously 

defended against Schering’s infringement claims, at one point 

telling the court that Schering’s claims of infringement “are 

baseless and could not have been made in good faith.” App. 

at 3610. 

The parties began trying to settle the infringement case 

at least as early as May 1997. During settlement negotiations, 

Upsher requested both a cash payment and an early entry date 

for its generic product. However, Schering expressed 

concern about possible antitrust problems that might arise if it 

made a reverse payment. 

In the early morning of June 18, 1997, just hours before 

the District Court was to rule on the pending cross motions for 

summary judgment and begin, if necessary, a patent trial, 

Upsher and Schering agreed to settle the case. The settlement 

was memorialized in an eleven-page short-form agreement dated 

June 17, 1997 (“the Schering-Upsher agreement”). That 

agreement provided that, while Upsher did not concede the 

validity, infringement, or enforceability of the ‘743 patent, it 

would refrain from marketing its generic potassium chloride 

supplement or any similar product until September 1, 2001, at 

which point it would receive a non-royalty non-exclusive license 
12

under the ‘743 patent to make and sell a generic form of KlorCon. Additionally, Upsher granted Schering licenses to make 

and sell several pharmaceutical products Upsher had developed, 

including Niacor-SR, a sustained-release niacin product used to 

treat high cholesterol. In return, Schering promised to pay 

Upsher sixty million dollars ($60,000,000) over three years, plus 

additional smaller sums depending upon its sales of Niacor-SR

in defined markets. While the parties to this litigation dispute 

whether the payment was solely for the licensing of Upsher 

products or instead formed part of the consideration for 

dropping the patent action, the agreement lists Upsher’s 

promises to dismiss the patent infringement action and not to 

market any sustained-release microencapsulated potassium 

chloride tablet until September 1, 2001, as part of the 

consideration for the payment.

The settlement agreement and the acquisition of 

licenses from Upsher were ratified by Schering’s board of 

directors on June 24, 1997. Subsequent to the settlement, 

Upsher and Schering abandoned plans to make and market 

Niacor-SR. 

In this action, the parties dispute the facts related to the 

Niacor-SR license. Plaintiffs contend that the license was a 

sham and that the $60 million paid as royalties for Niacor-SR 

was actually compensation for Upsher’s agreement to delay 

the entry of its generic extended-release potassium tablet. On 

the other hand, defendants contend that Schering’s board 

valued the license deal separately and that $60 million was its 

good faith valuation of the licenses at the time. 

C. The Schering-ESI Litigation and 

Settlement

In December 1995, ESI Lederle4

 4 ESI is the generic division of American Home Products, 

Inc., which changed its name to Wyeth in 2002. Melody 

Peterson, American Home Is Changing Name to Wyeth, New 

York Times, Mar. 11, 2002. Wyeth was subsequently 

(“ESI”) filed an 

ANDA seeking FDA approval to make and sell a generic 
13

version of K-Dur along with a paragraph IV certification 

stating that its proposed generic did not infringe the ‘743 

patent. Within the forty-five-day period provided by the 

Hatch-Waxman Act, Schering sued ESI for patent 

infringement in the Eastern District of Pennsylvania. ESI 

defended on the ground that, unlike K-Dur, its generic 

equivalent did not employ a “coating material with two 

different ingredients” as specified by the ‘743 patent, but 

rather was made by a “different technology which produces a 

multi-layered coating with each layer comprised of a separate 

material having only a single ingredient.” App. at 1696-97.

In the fall of 1996, Schering and ESI agreed to 

participate in court-supervised mediation before a magistrate 

judge. The settlement agreement the parties eventually 

reached (“the Schering-ESI agreement”) called for Schering 

to grant ESI a royalty-free license under the ‘743 patent 

beginning on January 1, 2004. In exchange, Schering would 

pay ESI $5 million up front and a varying sum depending on 

when ESI’s ANDA was approved by the FDA. Specifically, 

Schering agreed to pay ESI an amount ranging from a 

maximum of $10 million if ESI’s ANDA was approved 

before July 1999 down to a minimum of $625,000 if the 

ANDA was not approved until 2002. As part of the 

settlement, ESI also represented that it was not developing 

and had no plans to develop any other potassium chloride 

product.

The FDA approved ESI’s generic K-Dur product in 

May 1999, and Schering paid ESI the additional $10 million 

as required under the settlement agreement. 

D. The FTC Action

 

acquired by Pfizer, Inc. in 2009. Pfizer, “Wyeth 

Transaction,” http://www.pfizer.com/investors/

shareholder_services/wyeth_transaction.jsp (last visited May 

8, 2012). Plaintiffs settled their claims against ESI’s 

corporate parent Wyeth in January 2005. 
14

In March 2001, the FTC filed a complaint against 

Schering, Upsher, and ESI alleging that Schering’s 

settlements with Upsher and ESI unreasonably restrained 

commerce in violation of Section 5 of the Federal Trade 

Commission Act, 15 U.S.C. § 45. Specifically, the FTC 

alleged that the settlement payments from Schering to Upsher 

and ESI constituted reverse payments intended to delay 

generic entry and improperly preserve Schering’s monopoly. 

In June 2002, after a lengthy trial, the Administrative 

Law Judge (“ALJ”) issued an initial decision dismissing the 

FTC’s complaint and finding that neither agreement violated 

Section 5 of the FTC Act. In re Schering-Plough Corp., 

Initial Decision, 136 F.T.C. 1092, 1263 (2002). The ALJ 

found that there was no reverse payment in the ScheringUpsher agreement because the licensing deal included in that 

agreement was separately valued and was not a payment to 

Upsher to delay generic entry. Id. at 1243. The ALJ also 

found that the Schering-ESI agreement was not an attempt to 

unlawfully preserve Schering’s monopoly power in the 

market. Id. at 1236, 1262-63.

In December 2003, the FTC unanimously reversed the 

ALJ’s ruling, finding that there was a “direct nexus between 

Schering’s payment and Upsher’s agreement to delay its 

competitive entry” and that this agreement “unreasonably 

restrain[ed] commerce.” In re Schering-Plough Corp., Final 

Order, 136 F.T.C. 956, 1052 (2003). The FTC likewise found 

that the ESI settlement violated antitrust law, noting that 

Schering had not attempted to rebut the natural presumption 

that the payment to ESI was for delay in generic entry, except 

to argue unpersuasively that the parties felt judicial pressure 

to settle. Id. at 1056-57. In making these determinations, the 

FTC found that it was “neither necessary nor helpful to delve 

into the merits of the [underlying patent disputes].” Id. at 

1055. Rather, the FTC determined that, where a name brand 

pharmaceutical maker pays a generic manufacturer as part of 

a settlement, “[a]bsent proof of other offsetting consideration, 

it is logical to conclude that the quid pro quo for the payment 

was an agreement by the generic to defer entry beyond the 

date that represents an otherwise reasonable litigation 
15

compromise.” Id. at 988. In applying the rule of reason, the 

FTC concluded that the possible existence of a reverse 

payment raises a red flag and can give rise to a prima facie 

case that an agreement is anticompetitive. Id. at 991, 1000-

01. The FTC concluded that the reverse payment at issue was 

illegal because the settling parties could show neither (1) that 

the payment was for something other than delay of generic 

entry nor (2) that the payment had pro-competitive effects. 

Id. at 988-89, 1061.

Schering appealed the FTC’s ruling to the Eleventh 

Circuit, which reversed in Schering-Plough Corp. v. FTC, 

402 F.3d 1056 (11th Cir. 2005). The Eleventh Circuit’s 

ruling in Schering-Plough is discussed in Section III(C) infra.

E. The Instant Litigation

Separate from the FTC’s challenge, various private 

parties filed antitrust suits attacking the settlements. Those 

suits, the matters giving rise to this appeal, were 

consolidated in the District of New Jersey by the Judicial 

Panel on Multidistrict Litigation. In 2006, by consent of the 

parties, the District Court appointed Stephen Orlofsky as 

Special Master with responsibility to handle all motions,

including motions for class certification and summary 

judgment.5

 

 5 Because there was no objection to the appointment of a 

Special Master, we have no occasion to address the use of 

Special Master to prepare Reports and Recommendations on 

summary judgment motions. See In re Bituminous Coal 

Operators’ Ass’n, Inc., 949 F.2d 1165, 1168 (D.C. Cir. 1991)

(“Rule 53 of the Federal Rules of Civil Procedure authorizes 

the appointment of special masters to assist, not to replace, 

the adjudicator, whether judge or jury, constitutionally 

indicated for federal court litigation.”) (emphasis in original) 

(citing La Buy v. Howes Leather Co., Inc., 352 U.S. 249, 256 

(1957)).
16

On April 14, 2008, the Special Master certified a class 

of plaintiffs consisting of forty-four wholesalers and retailers 

who purchased K-Dur directly from Schering. The District 

Court adopted that decision on December 30, 2008.6

 

In February 2009, the Special Master issued a Report 

and Recommendation granting defendants’ motions for 

summary judgment and denying plaintiffs’ motions for partial 

summary judgment. In his Report and Recommendation, the 

Special Master applied a presumption that Schering’s ‘743 

patent was valid and that it gave Schering the right to exclude 

infringing products until the end of its term, including 

through reverse payment settlements. Under this analysis, the 

settlements in this case would only be subject to antitrust 

scrutiny if (1) they exceeded the scope of the ‘743 patent or 

(2) the underlying patent infringement suits were objectively 

baseless. The Special Master determined that neither of these 

exceptions applied. The District Court subsequently adopted 

the Report and Recommendation in its entirety. 

F. Economic Background and the History 

of Reverse Payment Settlements 

Reverse payment settlements appear to be unique to 

the Hatch-Waxman context, and the FTC has made them a 

top enforcement priority in recent years. A 2010 analysis by 

the FTC found that reverse payment settlements cost 

consumers $3.5 billion annually. FTC, Pay-for-Delay: How 

Drug Company Pay-Offs Cost Consumers Billions 2 (2010), 

available at http://www.ftc.gov/os/2010/01/100112

payfordelayrpt.pdf. The FTC estimates that about one year 

after market entry an average generic pharmaceutical product 

takes over ninety percent of the patent holder’s unit sales and 

sells for fifteen percent of the price of the name brand 

product. Id. at 8. This price differential means that 

consumers, rather than generic producers, are typically the 

biggest beneficiaries of generic entry. 

 6 The class certification decision is discussed in Section 

IV infra.
17

III. THE ANTITRUST ISSUE (Appeals Nos. 

 10-2077, 10-2078, 10-2079)

A. Jurisdiction and Standard of Review

The District Court had jurisdiction pursuant to 15 

U.S.C. § 15(a) and 28 U.S.C. §§ 1331 and 1337. This court 

has jurisdiction over the antitrust appeals pursuant to 28 

U.S.C. § 1291.

This court exercises plenary review of the District 

Court’s grant of summary judgment, applying the same 

summary judgment standard that guides the District Court. 

Eichenlaub v. Twp. of Indiana, 385 F.3d 274, 279 (3d Cir. 

2004).

B. General Antitrust Standard

The Sherman Act provides, in part, that “[e]very 

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 declared to be 

illegal.” 15 U.S.C. § 1. Under a literal reading, this provision 

would make illegal every agreement in restraint of trade. See 

Arizona v. Maricopa Cnty. Med. Soc’y, 457 U.S. 332, 342 

(1982). However, it has not been so interpreted. Rather the 

Supreme Court has long construed it to prohibit only 

unreasonable restraints. See State Oil Co. v. Khan, 522 U.S. 

3, 10 (1997). Whether a restraint qualifies as unreasonable 

and therefore conflicts with the statute is normally evaluated 

under the “rule of reason.” Id. Applying this approach, “the 

finder of fact must decide whether the questioned practice 

imposes an unreasonable restraint on competition, taking into 

account a variety of factors, including specific information 

about the relevant business, its condition before and after the 

restraint was imposed, and the restraint’s history, nature, and 

effect.” Id. This inquiry has been divided into three parts. 

First, the plaintiff must show that the challenged conduct has 

produced anti-competitive effects within the market. United 

States v. Brown Univ., 5 F.3d 658, 668 (3d Cir. 1993). If the 

plaintiff meets the initial burden, “the burden shifts to the 
18

defendant to show that the challenged conduct promotes a 

sufficiently pro-competitive objective.” Id. at 669. Finally,

the plaintiff can rebut the defendant’s purported procompetitive justification by showing that the restraint is not 

reasonably necessary to achieve the pro-competitive 

objective. Id. 

Courts have recognized, however, that “[s]ome types 

of restraints . . . have such predictable and pernicious 

anticompetitive effect, and such limited potential for 

pro-competitive benefit, that they [should be] deemed 

unlawful per se.” State Oil Co., 522 U.S. at 10. Examples of 

agreements that have been held unlawful pursuant to the per 

se rule include horizontal price fixing, output limitations, 

market allocation, and group boycotts. See Copperweld 

Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984); 

N. Pac. Ry. v. United States, 356 U.S. 1, 5 (1958). The per se

rule is applied where a “practice facially appears to be one 

that would always or almost always tend to restrict 

competition or decrease output.” Broad. Music, Inc. v. CBS, 

Inc., 441 U.S. 1, 19-20 (1979). 

In some situations, courts apply an antitrust analysis 

that falls between the full rule of reason inquiry on the one

hand and the rigid per se approach on the other. This socalled “quick look” or “truncated rule of reason” analysis 

applies where the plaintiff has shown that the defendant has 

engaged in practices similar to those subject to per se

treatment. See Brown Univ., 5 F.3d at 669. Having so 

shown, plaintiff is not required to make a full showing of 

anti-competitive effects within the market; rather defendant 

has the burden of demonstrating pro-competitive 

justifications. Id.

C. Precedent from Other Circuits

Neither this court nor the Supreme Court has yet 

weighed in on the legality of reverse payment settlements. 

However, five other circuits have addressed the question. 

Two of those courts – the first two to consider the question –

concluded that such agreements should be subject to strict 
19

antitrust scrutiny, at least where the settling parties attempted 

to manipulate the 180-day exclusivity period to block all 

potential generic competition. The three courts to address the 

question of reverse payments more recently have reached a 

contrary result, ruling that such agreements are permissible so 

long as they do not exceed the potential exclusionary scope of 

the patent.

 

1. D.C. Circuit – Andrx Pharms., Inc. v. 

Biovail Corp. Int’l, 256 F.3d 799 

(D.C. Cir. 2001)

The D.C. Circuit considered a reverse payment in 

Andrx Pharmaceuticals, Inc. v. Biovail Corp. International,

256 F.3d 799 (D.C. Cir. 2001), cert. denied, 535 U.S. 931 

(2002). Unlike the instant case, that case did not involve a 

settlement resolving patent litigation. Rather, while allowing 

the patent litigation to continue, the name brand manufacturer 

agreed to compensate the would-be generic producer to delay 

marketing a generic product.

In September 1995, Andrx Pharmaceuticals (“Andrx”) 

filed an ANDA seeking to manufacture and sell a generic 

form of Cardizem CD, a heart drug for which Hoechst Marion 

Russell, Inc. (“HMRI”) held the patent. Id. at 803. Andrx 

filed a paragraph IV certification and was timely sued for 

patent infringement by HMRI. Id. The filing of the patent 

infringement suit triggered the thirty-month waiting period 

during which the FDA could not give final approval to Andrx 

or any subsequent ANDA applicants seeking to make a 

generic version of Cardizem CD. Id. (citing 21 U.S.C. 

§ 355(j)(5)(B)(iii)). In June 1997, a second generic 

manufacturer, Biovail Corp. International (“Biovail”), filed an 

ANDA and a paragraph IV certification to produce generic 

Cardizem CD. Shortly thereafter, the FDA issued a tentative 

approval of Andrx’s ANDA. Id. 

Soon after the tentative approval was issued, HMRI 

and Andrx entered into an agreement pursuant to which 

HMRI would pay Andrx $40 million per year beginning on 

the date that Andrx received final approval from the FDA and 
20

ending on the date that Andrx either began selling generic 

Cardizem CD or was adjudged liable for patent infringement 

in the pending suit. Id. The apparent purpose of this 

agreement was to create a bottleneck by delaying the 

triggering of Andrx’s 180-day period of exclusivity, and 

thereby delaying generic entry not only by Andrx but also by 

any other potential generic manufacturer. Id. at 804.

The D.C. Circuit reversed the district court’s dismissal 

with prejudice of Biovail’s antitrust claims, holding that the 

agreement between HMRI and Andrx could “reasonably be 

viewed as an attempt to allocate market share and preserve 

monopolistic conditions.” Id. at 811. The D.C. Circuit 

treated the payment from HMRI to Andrx as prima facie

evidence of an illegal agreement not to compete, noting that 

“Andrx’s argument that any rational actor would wait for 

resolution of the patent infringement suit [before triggering 

the 180-day exclusivity period] is belied by the quid of 

HRMI’s quo.” Id. at 813.

 

2. Sixth Circuit – In re Cardizem CD 

Antitrust Litig., 332 F.3d 896 (6th 

Cir. 2003)

The Sixth Circuit’s decision of In re Cardizem CD 

Antitrust Litigation concerned the same agreement considered 

by the D.C. Circuit in Andrx. 332 F.3d 896 (6th Cir. 2003), 

cert. denied, 543 U.S. 939 (2004). The Sixth Circuit case was 

brought by direct and indirect purchasers of Cardizem CD 

who alleged that they suffered antitrust harm as a result of 

Andrx’s agreement with HRMI to delay market entry. Id. at 

903-04. The Sixth Circuit held that the Andrx-HRMI 

agreement was “a horizontal agreement to eliminate 

competition in the market for Cardizem CD throughout the 

entire United States, a classic example of a per se illegal 

restraint of trade.” Id. at 908. 

While both Cardizem and Andrx concerned an 

agreement that caused a bottleneck by preventing other 

generic manufactures from entering the market by delaying 

the triggering of the first filer’s 180-day exclusivity period, 
21

much of the Sixth Circuit’s reasoning in Cardizem is equally 

applicable to cases, like the instant one, that do not involve 

bottlenecking. Specifically, the Sixth Circuit emphasized its 

concern that, even setting aside the bar to subsequent generic 

applicants, HMRI had paid Andrx not to enter the market 

itself, stating, “it is one thing to take advantage of a monopoly 

that naturally arises from a patent, but another thing 

altogether to bolster the patent’s effectiveness in inhibiting 

competitors by paying the only potential competitor $40 

million per year to stay out of the market.” Id. at 908.

3. Eleventh Circuit – Valley Drug Co. v. 

Geneva Pharms., Inc., 344 F.3d 1294 

(11th Cir. 2003) and Schering-Plough 

Corp. v. FTC, 402 F.3d 1056 (11th 

Cir. 2005)

The Eleventh Circuit has also considered the question 

of reverse payments settlements in three significant cases. 

The first of these, Valley Drug Co. v. Geneva 

Pharmaceuticals, Inc., 344 F.3d 1294 (11th Cir. 2003), cert.

denied, 543 U.S. 939 (2004), concerned two agreements 

arising out of cases where a name brand drug manufacturer 

sued generic manufacturers for patent infringement and the 

generic manufacturers defended on the ground of patent 

invalidity.7

 7 One of these agreements was a final settlement of certain 

claims, the other was structured, like the agreements in Andrx

and Cardizem, to take effect even as the litigation continued. 

See Valley Drug, 344 F.3d at 1300.

 Id. at 1299-301. In the two agreements at issue, 

the name brand manufacturer agreed to pay the generic 

manufacturer substantial sums to refrain from entering the 

market until the end of the name brand manufacturer’s patent 

term. Id. at 1300. The patent at issue was subsequently 

declared invalid in another case. Id. at 1306-07. The district 

court granted summary judgment to antitrust plaintiffs, 

holding that the settlements were per se violations of the 

Sherman Act. Id. at 1301. The Eleventh Circuit reversed on 

the ground that the name brand manufacturer held a patent 

that gave it the right to exclude competitors. Id. at 1306. In 
22

so ruling, the court emphasized the fact that the name brand 

manufacturer might have prevailed in the underlying patent 

litigation, id. at 1309, and highlighted policy considerations 

favoring the settlement of patent litigation, id. at 1308 n.20. 

The court applied neither a per se nor rule of reason analysis 

to the agreements as a whole; rather, it directed the district 

court to first determine whether any part of the agreement 

went beyond the protections afforded by the name brand 

manufacturer’s patent and, if so, to apply traditional antitrust 

scrutiny only to those portions of the agreement. Id. at 1311-

1312. 

A subsequent Eleventh Circuit case, Schering-Plough 

Corp. v. FTC, arose out of the same settlement agreement as 

the instant appeal.8

 8 Defendants argue in passing that this court should begin 

its analysis in this case with a strong presumption in favor of 

following the Eleventh Circuit’s decision in Schering-Plough. 

However, none of the cases cited by defendants employs such 

a presumption; rather, they stand for the unsurprising 

proposition that this court will follow the decisions of its 

sister courts where it finds them persuasive. See, e.g.,

Ramadan v. Chase Manhattan Corp., 229 F.3d 194, 197-203 

(3d Cir. 2000) (following the rulings of other courts of appeal 

on similar facts but conducting an independent analysis). As 

explained below, we do not find the Eleventh Circuit’s 

decision in Schering-Plough persuasive, and thus decline to 

follow it.

402 F.3d 1056 (11th Cir. 2005), cert.

denied, 548 U.S. 919 (2006). After the FTC found that both 

agreements violated antitrust laws, the defendants appealed to 

the Eleventh Circuit. Applying the test articulated in Valley 

Drug, the Eleventh Circuit set aside the ruling of the FTC. Id.

at 1065-66, 1076. The court rejected the FTC’s conclusion 

that Schering’s $60 million payment to Upsher was for 

something other than the licenses it obtained, finding by 

“overwhelming evidence” that the payment was only for the 

licenses. Id. 1069-71. As such, the court found that there 

was no reverse payment from Schering to Upsher and thus 

necessarily no antitrust violation in that agreement. Id. With 

respect to the ESI settlement, the court acknowledged the
23

presence of a reverse payment but concluded that the payment 

was acceptable in light of judicial policy favoring settlements 

and the court’s finding that the settlement terms “‘reflect[ed]

a reasonable implementation’ of the protections afforded by 

patent law.” Id. at 1072 (quoting Valley Drug, 344 F.3d at 

1312).9

Plaintiffs construe Valley Drug and Schering-Plough 

as requiring courts to conduct an ex post evaluation of the 

strength of the underlying patent before determining whether 

the patent shields an agreement from antitrust scrutiny. 

However, following oral argument in this case, the Eleventh 

Circuit explicitly rejected that interpretation of its prior 

holdings. In FTC v. Watson Pharmaceuticals, Inc., the 

Eleventh Circuit clarified that its prior opinions did not call 

for an evaluation of the strength of the patent but rather only a 

determination whether, absent sham litigation or fraud in 

obtaining the patent, the settlement agreement exceeded the 

scope of the patent. FTC v. Watson Pharms, Inc., No. 10-

12729, 2012 WL 1427789, at *11 n.8, *12 (11th Cir. Apr. 25,

2012). Thus the standard applied by the Eleventh Circuit is 

identical to the scope of the patent test applied by the Second 

Circuit to which we now turn.

 

4. Second Circuit – In re Tamoxifen 

Citrate Antitrust Litig., 466 F.3d 187 

(2d Cir. 2006)

The Second Circuit’s decision of In re Tamoxifen 

Citrate Antitrust Litigation arose out of an agreement settling 

a patent infringement suit over the drug tamoxifen, then the 

most widely prescribed drug for the treatment of breast 

cancer. 466 F.3d 187, 190 (2d Cir. 2006), cert. denied, 551 

U.S. 1144 (2007). That settlement was reached while the 

patent case was on appeal after the district court had ruled the 

 9 The Eleventh Circuit subsequently applied, without 

further significant explication, the scope of the patent test 

announced in Valley Drug and Schering-Plough in another 

case, Andrx Pharmaceuticals, Inc. v. Elan Corporation, PLC, 

421 F.3d 1227 (11th Cir. 2005).
24

patent invalid. Id. The settlement called for the name brand 

manufacturer to grant the generic manufacturer a license to 

sell an unbranded version of tamoxifen and make a reverse 

payment of $21 million to the generic manufacturer. The 

settlement was contingent on obtaining a vacatur of the 

district court’s judgment holding the patent to be invalid, 

which was subsequently obtained. Id. 

Affirming the district court’s dismissal of antitrust 

plaintiffs’ claims, the Second Circuit applied a presumption 

of patent validity and held that “there is no injury to the 

market cognizable under existing antitrust law, as long as 

competition is restrained only within the scope of the patent.”

Id. at 213 (internal citations and quotation marks omitted). 

The only exceptions to this rule, the court held, occur where

there is evidence that the patent was procured by fraud or that 

the enforcement suit was objectively baseless. Id. This test is 

commonly referred to as the “scope of the patent test” or the 

“Tamoxifen test.” The Second Circuit conceded that there 

was a potentially troubling result of such a rule in that “[t]he 

less sound the patent or the less clear the infringement, and 

therefore the less justified the monopoly enjoyed by the 

patent holder, the more a rule permitting settlement is likely 

to benefit the patent holder by allowing it to retain the 

patent.” Id. at 211. The court determined, however, that this 

risk was counterbalanced by the judicial preference for 

settlement. Id. 

In reaching this conclusion, the Second Circuit 

concluded that “the Hatch-Waxman Act created an 

environment that encourages [reverse payments]” because, 

unlike traditional infringement suits where the patent holder 

can negotiate by agreeing to forego the infringement damages 

it expects to recover, there usually are no infringement 

damages in Hatch-Waxman suits. Id. at 206. The Second 

Circuit thus reasoned that the “reverse payments” common in 

Hatch-Waxman suits are less troubling because they take the 

place of infringement damages that the patent holder might 

have otherwise waived in order to reach a settlement. Id.
25

Judge Pooler dissented from the decision in 

Tamoxifen, contending that the scope of the patent rule 

applied by the majority “is not soundly grounded in Supreme 

Court precedent and is insufficiently protective of the 

consumer interests safeguarded by the Hatch-Waxman Act 

and the antitrust laws.” Id. at 224 (Pooler, J., dissenting). 

Judge Pooler argued, inter alia, that judicial reevaluation of 

patent validity is a public good that reverse payment 

settlements undercut, id. at 225-26, and suggested that the 

proper antitrust standard is one of reasonableness considering 

all the circumstances affecting a restrictive agreement 

including (1) the strength of the patent as it appeared at the 

time of settlement, (2) the amount of the reverse payment, (3) 

the amount the generic manufacturer would have made during 

its 180-day exclusivity period, and (4) any ancillary anticompetitive effects of the agreement. Id. at 228.

In a subsequent reverse payment case, Arkansas 

Carpenters Health & Welfare Fund v. Bayer AG, the Second 

Circuit applied the Tamoxifen standard and rejected an 

antitrust challenge to a Hatch-Waxman settlement involving a 

reverse payment. 604 F.3d 98 (2d Cir. 2010), cert. denied,

131 S. Ct. 1606 (2011). However, the judges on the Arkansas 

Carpenters panel made clear that they thought that Tamoxifen

was wrongly decided and invited appellants to petition for 

rehearing en banc. Id. at 108-10. Among other things, the 

Arkansas Carpenters court noted its concern about evidence 

suggesting that the number of reverse payment settlements 

had increased dramatically in the wake of the Tamoxifen

decision. Id. at 109. Rehearing en banc was subsequently 

denied over a dissent from Judge Pooler. Ark. Carpenters 

Health & Welfare Fund v. Bayer AG, 625 F.3d 779 (2d Cir. 

2010).

5. Federal Circuit – In re Ciprofloxacin

Hydrochloride Antitrust Litig., 544 

F.3d 1323 (Fed. Cir. 2008)

In In re Ciprofloxacin Hydrochloride Antitrust 

Litigation the Federal Circuit considered a case related to 

those confronted by the Second Circuit in Arkansas 
26

Carpenters. 544 F.3d 1323 (Fed. Cir. 2008), cert. denied, 

129 S. Ct. 2828 (2009).

10

 

 The Federal Circuit applied the 

scope of the patent test explicated in Tamoxifen and other 

cases, stating, “[t]he essence of the inquiry is whether the 

agreements restrict competition beyond the exclusionary zone 

of the patent.” Id. at 1336. The court further “agree[d] with 

the Second and Eleventh Circuits . . . that, in the absence of 

evidence of fraud before the PTO or sham litigation, the court 

need not consider the validity of the patent in the antitrust 

analysis of a settlement agreement involving a reverse 

payment.” Id.

D. Analysis

While the first two courts of appeal to address the 

issue of reverse payments subjected those agreements to 

antitrust scrutiny, later courts have gravitated toward the 

scope of the patent test under which reverse payments are 

permitted so long as (1) the exclusion does not exceed the 

patent’s scope, (2) the patent holder’s claim of infringement 

was not objectively baseless, and (3) the patent was not 

procured by fraud on the PTO. The scope of the patent test 

was applied by the Special Master in this case and has been 

applied by at least one other district court in this circuit. See 

King Drug Co. of Florence, Inc. v. Cephalon, Inc., 702 F. 

Supp. 2d 514, 528-29, 533 (E.D. Pa. 2010) (applying scope of 

the patent test but denying defendants’ motion to dismiss 

where plaintiffs pleaded facts supporting their claim that the 

underlying patent suit was objectively baseless). As a 

practical matter, the scope of the patent test does not subject 

reverse payment agreements to any antitrust scrutiny. As the 

antitrust defendants concede, no court applying the scope of 

the patent test has ever permitted a reverse payment antitrust 

case to go to trial. 

 10 That case was severed by the Second Circuit and 

transferred to the Federal Circuit because it involved a claim 

arising out of patent law. See Order, No. 05-2863 (2d Cir. 

Nov. 7, 2007).
27

After consideration of the arguments of counsel, the 

conflicting decisions in the other circuits, the Report of the 

Special Master, and our own reading, we cannot agree with 

those courts that apply the scope of the patent test. In our 

view, that test improperly restricts the application of antitrust 

law and is contrary to the policies underlying the HatchWaxman Act and a long line of Supreme Court precedent on 

patent litigation and competition.

First, we take issue with the scope of the patent test’s 

almost unrebuttable presumption of patent validity. This 

presumption assumes away the question being litigated in the 

underlying patent suit, enforcing a presumption that the patent 

holder would have prevailed. We can identify no significant 

support for such a policy. While persons challenging the 

validity of a patent in litigation bear the burden of defeating a 

presumption of validity, this presumption is intended merely 

as a procedural device and is not a substantive right of the 

patent holder. See Stratoflex, Inc. v. Aeroquip Corp., 713 

F.2d 1530, 1534 (Fed. Cir. 1983) (“The presumption, like all 

legal presumptions, is a procedural device, not substantive 

law.”). Moreover, the effectively conclusive presumption 

that a patent holder is entitled to exclude competitors is 

particularly misguided with respect to agreements – like those 

here – where the underlying suit concerned patent 

infringement rather than patent validity: In infringement cases 

it is the patent holder who bears the burden of showing 

infringement. See Egyptian Goddess, Inc. v. Swisa, Inc., 543 

F.3d 665, 679 (Fed. Cir. 2008). 

Rather than adopt an unrebuttable presumption of 

patent validity, we believe courts must be mindful of the fact 

that “[a] patent, in the last analysis, simply represents a legal 

conclusion reached by the Patent Office.” Lear, Inc. v. 

Adkins, 395 U.S. 653, 670 (1969). Many patents issued by 

the PTO are later found to be invalid or not infringed, and a 

2002 study conducted by the FTC concluded that, in HatchWaxman challenges made under paragraph IV, the generic 

challenger prevailed seventy-three percent of the time. See 

FTC, Generic Drug Entry Prior to Patent Expiration 16 

(2002), available at http://www.ftc.gov/os/2002/07/
28

genericdrugstudy.pdf; Kimberly A. Moore, Judges, Juries, 

and Patent Cases – An Empirical Peek Inside the Black Box, 

99 Mich. L. Rev. 365, 385 (2000) (noting that between 1983 

and 1999 the alleged infringer prevailed in forty-two percent 

of patent cases that reached trial).11 These figures add force 

to the likelihood – conceded by the Tamoxifen majority – that 

reverse payments enable the holder of a patent that the holder 

knows is weak to buy its way out of both competition with 

the challenging competitor and possible invalidation of the 

patent. 466 F.3d at 211 (“The less sound the patent or the less 

clear the infringement, and therefore the less justified the 

monopoly enjoyed by the patent holder, the more a rule 

permitting settlement is likely to benefit the patent holder by 

allowing it to retain the patent.”). 

Moreover, we question the assumption underlying the 

view of the Second Circuit and other courts that subsequent 

challenges by other generic manufacturers will suffice to 

eliminate weak patents preserved through a reverse payment 

to the initial challenger. Cf., e.g., id. at 211-12. We note that 

the initial generic challenger is necessarily the most 

motivated because, unlike all subsequent challengers, it 

stands to benefit from the 180-day exclusivity period of 21 

U.S.C. § 355(j)(5)(B)(iv). Additionally, as the experience of 

at least one court in this Circuit confirms, the high profit 

margins of a monopolist drug manufacturer may enable it to 

pay off a whole series of challengers rather than suffer the 

 11 The Pharmaceutical Research and Manufacturers of 

America points to a more recent study concluding that, in the 

years from 2000 to 2009, generics prevailed in slightly less 

than half of their challenges. RBC Capital Mkts., 

Pharmaceuticals: Analyzing Litigation Success Rates 4 

(2010), available at http://www. amlawdaily.typepad. 

com/pharmareport.pdf. Even if the industry’s own figures are 

accepted, they show that a substantial fraction of HatchWaxman patent challenges succeed on the merits. Moreover, 

the study cited by the industry further states that “when you 

take into account patent settlements and cases that were 

dropped, the success rate for generics jumps to 76%, 

substantially in favor of challenging patents.” Id.
29

possible loss of its patent through litigation. See King Drug 

Co. of Florence, Inc., 702 F. Supp. 2d at 521-22 (drug 

manufacturer settled infringement suits by four generic firms, 

which agreed to delay market entry “in exchange for 

significant payments . . . for various licensing agreements, 

supply agreements and research and development deals”).

This practical analysis is supported by a long line of 

Supreme Court cases recognizing that valid patents are a 

limited exception to a general rule of the free exploitation of 

ideas. It follows that the public interest supports judicial 

testing and elimination of weak patents. See Cardinal Chem. 

Co. v. Morton Int’l, Inc., 508 U.S. 83, 100-01 (1993) 

(explaining the “importance to the public at large of resolving 

questions of patent validity” and noting the danger of 

“grant[ing] monopoly privileges to the holders of invalid 

patents”); Bonito Boats, Inc. v. Thundercraft Boats, Inc., 489 

U.S. 141, 146 (1989) (noting that the patent laws embody “a 

careful balance between the need to promote innovation and 

the recognition that imitation and refinement through 

imitation are both necessary to invention itself and the very 

lifeblood of a competitive economy”); United States v. 

Masonite Corp., 316 U.S. 265, 277 (1942) (a patent “affords 

no immunity for a monopoly not fairly or plainly within the 

grant”); id. at 280 (patents are to be “strictly construed” 

because they are “privileges restrictive of a free economy”);

Pope Mfg. Co. v. Gormully, 144 U.S. 224, 234 (1892) (“It is 

as important to the public that competition should not be 

repressed by worthless patents, as that the patentee of a really 

valuable invention should be protected in his monopoly.”).

That reasoning underlies the decision of the Supreme 

Court in Edward Katzinger Co. v Chicago Metallic 

Manufacturing Co., where the Court considered whether a 

patent licensor could be contractually estopped from 

challenging the validity of the patent under a licensing 

agreement that also contained a price fixing term. 329 U.S. 

394 (1947). The Court reasoned that if the patent was invalid, 

the price fixing provision would violate federal antitrust law 

and that, as such, the licensor could not be estopped from 

challenging the patent. Id. at 399, 401-02. In reaching this 
30

conclusion the Court emphasized “the broad public interest in 

freeing our competitive economy from the trade restraints 

which might be imposed by price-fixing agreements 

stemming from narrow or invalid patents.” Id. at 400 (citing 

Sola Elec. Co. v. Jefferson Elec. Co., 317 U.S. 173, 177 

(1942)). The Court additionally stated: “It is the public 

interest which is dominant in the patent system and . . . the 

right to challenge [a patent] is not only a private right to the 

individual, but it is founded on public policy which is 

promoted by his making the defence, and contravened by his 

refusal to make it.” Id. at 401 (internal citations and 

quotation marks omitted). 

This logic is persuasive with respect to the situation at 

bar because reverse payments permit the sharing of monopoly 

rents between would-be competitors without any assurance 

that the underlying patent is valid. See also United States v. 

Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1136 (D.C. 

Cir. 1981) (suggesting an agreement might be anticompetitive 

if it “give[s] potential competitors incentives to remain in 

cartels rather than turning to another product, inventing

around the patent, or challenging its validity”). It appears that 

these aspects of the Supreme Court’s general patent 

jurisprudence had been overlooked by the Special Master and 

others adopting the scope of the patent test. 

We caution that our decision today is limited to reverse 

payments between patent holders and would be generic 

competitors in the pharmaceutical industry. As the Supreme 

Court has made clear, “antitrust analysis must sensitively 

recognize and reflect the distinctive economic and legal 

setting of the regulated industry to which it applies.” Verizon 

Commc’ns. Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 

U.S. 398, 411-12 (2004); see also IA Phillip E. Areeda & 

Herbert Hovenkamp Antitrust Law, ¶ 240d, 289 (3d ed. 

2006) (“[T]he presence of regulation in some instances limits 

the antitrust role and in some instances simply changes it or 

even enlarges it.”). The Supreme Court’s admonition is 

particularly relevant in an industry, like the pharmaceutical 

industry, that is subject to extensive regulation in which 

Congress has balanced the protection of intellectual property 
31

and the need for competition. Specifically, in passing the 

Hatch-Waxman Act, Congress drew a careful line between 

patent protection and the need to provide incentives for 

competition in the pharmaceutical industry. See 130 Cong. 

Rec. 24425 (Sept. 6, 1984) (statement of Rep. Waxman 

underscoring the “fundamental balance of the bill”); H.R. 

Rep. No. 98-857, pt. 2, at 30 (1984) (emphasizing that the bill 

achieves “what the Congress has traditionally done in the area 

of intellectual property law[:] balance the need to stimulate 

innovation against the goal of furthering the public interest”), 

reprinted in 1984 U.S.C.C.A.N. 2686, 2715. The line that 

Congress drew between these competing objectives strongly 

supports the application of rule of reason scrutiny of reverse 

payment settlements in the pharmaceutical industry. 

The goal of the Hatch-Waxman Act is to increase the 

availability of low cost generic drugs. H.R. Rep. No. 98-857, 

pt. 1, at 14, reprinted in 1984 U.S.C.C.A.N. 2647, 2647. One 

method Congress employed was to encourage litigated 

challenges by generic manufacturers against the holders of 

weak or narrow patents. See 21 U.S.C. § 355(j)(5)(B)(iv) 

(establishing 180-day exclusivity period as reward for 

successfully challenging a patent); S. Rep. No. 107-167, at 4 

(2002) (“Under Hatch-Waxman, manufacturers of generic 

drugs are encouraged to challenge weak or invalid patents on 

brand name drugs so consumers can enjoy lower drug 

prices.”). That goal is undermined by application of the 

scope of the patent test which entitles the patent holder to pay 

its potential generic competitors not to compete. As one 

commentator has noted, this approach nominally protects 

intellectual property, not on the strength of a patent holder’s 

legal rights, but on the strength of its wallet. See Hemphill, 

Paying for Delay, supra at 1614 (“In the Hatch-Waxman Act 

. . . the promotion and delay of litigation are central 

preoccupations of the regulatory regime. An open-ended 

permission for innovators to set innovation policy by selfhelp [through reverse payments] is less plausible, as Congress 

has taken explicit steps to fill those gaps.”) As the Second 

Circuit acknowledged in its Tamoxifen decision, the principal 

beneficiaries of such an approach will be name brand 

manufacturers with weak or narrow patents that are unlikely 
32

to prevail in court. See 466 F.3d at 211. Thus while such a 

rule might be good policy from the perspective of name brand 

and generic pharmaceutical producers, it is bad policy from 

the perspective of the consumer, precisely the constituency 

Congress was seeking to protect.

In rejecting the scope of the patent test, we are 

cognizant that such a test encourages settlement, an objective 

our decisions generally support. See, e.g., Ehrheart v. 

Verizon Wireless, 609 F.3d 590, 595 (3d Cir. 2010) 

(“Settlement agreements are to be encouraged because they 

promote the amicable resolution of disputes and lighten the 

increasing load of litigation faced by the federal courts.”). 

However, the judicial preference for settlement, while 

generally laudable, should not displace countervailing public 

policy objectives or, in this case, Congress’s determination –

which is evident from the structure of the Hatch-Waxman Act 

and the statements in the legislative record – that litigated 

patent challenges are necessary to protect consumers from 

unjustified monopolies by name brand drug manufacturers. 

We also emphasize that nothing in the rule of reason test that 

we adopt here limits the ability of the parties to reach 

settlements based on a negotiated entry date for marketing of 

the generic drug: the only settlements subject to antitrust 

scrutiny are those involving a reverse payment from the name 

brand manufacturer to the generic challenger. Data analyzed 

by the FTC suggest that this will leave the vast majority of 

pharmaceutical patent settlements unaffected. See FTC, 

Bureau of Competition, Agreements Filed with the Federal 

Trade Commission under the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003: Overview of 

Agreements Filed in FY 2010, 2 (2011) (showing that nearly 

seventy-five percent of Hatch-Waxman Act infringement 

suits that settled in 2010 did so without reverse payments), 

available at http://www.ftc.gov/os/2011/05/1105 

mmagreements.pdf. 

For all of these reasons we reject the scope of the 

patent test. In its place we will direct the District Court to 

apply a quick look rule of reason analysis based on the 

economic realities of the reverse payment settlement rather 
33

than the labels applied by the settling parties. Specifically, 

the finder of fact must treat any payment from a patent holder 

to a generic patent challenger who agrees to delay entry into 

the market as prima facie evidence of an unreasonable 

restraint of trade, which could be rebutted by showing that the 

payment (1) was for a purpose other than delayed entry or (2) 

offers some pro-competitive benefit. 

In holding that a reverse payment is prima facie

evidence of an unreasonable restraint of trade, we follow the 

approach suggested by the DC Circuit in Andrx and embrace 

that court’s common sense conclusion that “[a] payment 

flowing from the innovator to the challenging generic firm 

may suggest strongly the anticompetitive intent of the parties 

entering the agreement . . . .” 256 F.3d at 809 (internal 

quotation marks and citation omitted). 

We agree, moreover, with the FTC that there is no 

need to consider the merits of the underlying patent suit 

because “[a]bsent proof of other offsetting consideration, it is 

logical to conclude that the quid pro quo for the payment was 

an agreement by the generic to defer entry beyond the date 

that represents an otherwise reasonable litigation 

compromise.” In re Schering-Plough Corp., Final Order, 136 

F.T.C. at 988. Of course, a patent holder may attempt to 

rebut plaintiff’s prima facie case of an unreasonable restraint 

of trade by arguing that there is in fact no reverse payment 

because any money that changed hands was for something 

other than a delay in market entry. Alternatively, the patent 

holder may attempt to rebut the prima facie case by 

demonstrating that the reverse payment offers a competitive 

benefit that could not have been achieved in the absence of a 

reverse payment. This second possible defense attempts to 

account for the – probably rare – situations where a reverse

payment increases competition. For example, a modest cash 

payment that enables a cash-starved generic manufacturer to 

avoid bankruptcy and begin marketing a generic drug might 

have an overall effect of increasing the amount of competition 

in the market. For the reasons set forth, we will reverse the 

judgment of the District Court and remand for further 

proceedings in accordance with the foregoing.
34

IV. THE CLASS CERTIFICATION ISSUE 

(Appeal No. 10-4571)

A. Procedural Background

The other issue before us on this appeal concerns 

plaintiffs’ effort to certify a class of persons who purchased 

K-Dur directly from Schering between November 20, 1998 

and September 1, 2001 and subsequently purchased a generic 

version of K-Dur. As identified by the parties’ experts, the

class consists of forty-four wholesalers and retailers. The 

Special Master recommended granting plaintiffs’ motion to 

certify the class. The District Court adopted the Special 

Master’s Report and Recommendation and formally certified 

the class.

 

Defendants sought interlocutory review of the District 

Court’s order under Federal Rule of Civil Procedure 23(f). 

While that petition was pending, the District Court ruled on 

the cross motions for summary judgment and entered final 

judgment in defendants’ favor. Plaintiffs filed a notice of 

appeal, and defendants filed a cross appeal, which this court 

dismissed as untimely. See Order, In re K-Dur Antitrust 

Litig., No. 10-2727 (3d Cir. Nov. 24, 2010). However, this 

court accepted defendants’ Rule 23(f) petition, see Order, In 

re K-Dur Antitrust Litig., No. 09-8006 (3d Cir. Nov. 16, 

2010), and we therefore have jurisdiction pursuant to 28 

U.S.C. § 1292(e).12

 12 Plaintiffs argue that because defendants’ cross appeal 

was dismissed as untimely defendants’ 23(f) petition should 

have been dismissed also. An appeals court has discretion to 

consider an interlocutory appeal even after the entry of final 

judgment. Cf. In re Coordinated Pretrial Proceedings in 

Petroleum Prods. Antitrust Litig., 788 F.2d 1571, 1573-74 

(Temp. Emer. Ct. App. 1986). Moreover, in granting 

defendants’ 23(f) petition, this court has already considered 

the issue of the appropriateness of review, and we see no 

reason to reconsider the decision to hear this appeal.
35

B. Standard of Review

This court reviews class certification orders “for abuse 

of discretion, which occurs if the district court’s decision rests 

upon a clearly erroneous finding of fact, an errant conclusion 

of law or an improper application of law to fact.” In re 

Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312 (3d 

Cir. 2008) (internal quotation marks and citation omitted).

C. Defendants’ Arguments

In order to certify a class under Rule 23(b)(3), a 

plaintiff must satisfy both the general class action 

prerequisites – numerosity, commonality, typicality, and 

adequacy of representation – and the additional requirements 

of predominance and superiority. Fed. R. Civ. P. 23(a), 

(b)(3). The Special Master, in a report adopted in full by the 

District Court, discussed the class requirements in detail;

defendants challenge only a few of those findings. 

Defendants assert that (1) plaintiffs cannot use common 

evidence to prove that the class members suffered an actual 

injury from defendants’ conduct because showing actual 

injury means demonstrating lost profits damages, which 

defendants argue necessarily requires individualized 

assessments, (2) even assuming that overcharges are an 

acceptable form of injury, the District Court erred in its 

conclusion that there was common evidence of injury to all 

class members, and (3) the class should not have been 

certified because of inherent conflicts between members. 

Defendants’ first two arguments challenge the District 

Court’s finding with respect to the predominance 

requirement, while the third goes to the adequacy 

requirement. We address these arguments in order. 

1. Predominance Issues

In order for the predominance requirement to be 

satisfied “[i]ssues common to the class must predominate 

over individual issues.” In re Hydrogen Peroxide, 552 F.3d 

at 311 (internal citations and quotation marks omitted). Class 

certification calls for the district court to conduct a “rigorous 
36

assessment of the available evidence,” id. at 312, and is only 

appropriate in antitrust cases where plaintiffs can show, by a 

preponderance of the evidence, that proof of the essential 

elements of the cause of action, including antitrust injury, do 

not require individual treatment. Id. at 307, 311. 

It is plaintiffs’ thesis that they will prove that class 

members paid more for K-Dur because of Schering’s antitrust 

violations, and that this constitutes the required antitrust 

impact. The Special Master accepted this based on Third 

Circuit law, stating:

The Third Circuit has held that “when an 

antitrust violation impacts upon a class of 

persons who do have standing, there is no 

reason in doctrine why proof of impact cannot 

be made on a common basis, so long as the 

common proof adequately demonstrates some 

damage to each individual.” 

App. at 7980 (quoting Bogosian v. Gulf Oil Corp., 561 F.2d 

434, 454 (3d Cir. 1977)). Because all of the class members 

purchased some of the generic versions of K-Dur, plaintiffs 

have satisfactorily explained their theory of impact. 

Plaintiffs proposed to prove antitrust injury through 

common proof consisting largely of the declarations and 

report of their expert, Dr. Leitzinger. Dr. Leitzinger offered 

statistical and economic analyses of the overall brand-name 

and generic drug market and of the specific entry of generic 

potassium chloride in the market to show that, but for the 

challenged reverse payment agreements, “all (or virtually all) 

members of the proposed class” would have purchased at 

least some less expensive generic potassium chloride earlier, 

and therefore suffered an antitrust injury as a result of the 

delay in generic entry. The Special Master considered Dr. 

Leitzinger’s proposed methodology and the criticisms of it 

made by defendants’ expert, Dr. Rubinfeld, in detail. After

slightly narrowing the class definition to accommodate a 
37

criticism made by defendants’ expert,13 the Special Master 

found that plaintiffs had satisfied their burden of showing that 

antitrust impact may be proven by evidence common to all 

class members. 

In December 2008, several months after the Special 

Master’s Report and Recommendation, this court issued its 

decision in In re Hydrogen Peroxide Antitrust Litigation, 

which clarified the standard to be applied when certifying a 

class of plaintiffs in an antitrust action. 552 F.3d 305. In that 

case, we held that the preponderance requirement demands 

more than a mere threshold showing by a party seeking to 

certify a class and that, in considering a motion for class 

certification, a district court is required to resolve any factual 

or legal disputes necessary to determine whether a plaintiff 

will be able to show antitrust injury for all plaintiffs with 

common evidence. Id. at 316-18.

a. Whether Lost Profits Are the Relevant Antitrust 

Injury

Defendants argue first that the predominance 

requirement of Rule 23(b)(3) is not satisfied because, in order 

to prove actual injury from delayed generic entry, plaintiffs 

must produce evidence of lost profits, which necessarily 

requires an individual assessment for each class member. 

Defendants contend specifically that some of the wholesalers 

lost substantial sales volumes after generic entry, and that, for 

such wholesalers, generic entry caused a decrease in profits. 

Defendants’ lost profits argument is unavailing 

because it is simply a version of the so-called “passing-on 

defense” that was rejected by the Supreme Court in Hanover 

Shoe, Inc. v. United Shoe Machinery Corporation. 392 U.S. 

481 (1968). In that case, the Supreme Court held that 

demonstrating antitrust injury does not require a showing of 

 

13 Specifically, the Special Master excluded from the class 

direct purchasers who did not purchase a generic version of 

K-Dur after generic entry. 
38

lost profits. Id. at 494. Rather, the Supreme Court ruled that 

a plaintiff suffers an antitrust injury where it is overcharged 

for a product, regardless of whether it can show lost profits. 

Id. at 492-95. In reaching this conclusion, the Court noted 

that requiring plaintiffs to show lost profits was too 

burdensome on both courts and litigants and would undercut 

the effectiveness of private antitrust suits as an enforcement 

mechanism. Id. at 492-94; see also Bogosian, 561 F.2d at 

456 (noting that a lost-profits inquiry would be “enormously 

complicated, posing a tremendous burden on the presentation 

of plaintiffs’ case” and that “it is precisely for this reason that 

the Supreme Court eliminated the ‘passing-on defense’ in 

Hanover Shoe”). 

Defendants argue that the Hanover Shoe rule should 

not apply here because that case involved an overcharge for 

an identical product whereas this one involves two different 

products, a name brand drug with a higher price and a lower 

priced generic drug. However, defendants cite no authority 

distinguishing Hanover Shoe on that basis, and their own 

expert conceded that the generic supplement that Schering 

began manufacturing after Upsher entered the market was 

made in the same plant as K-Dur and chemically identical to 

K-Dur. Moreover, in In re Warfarin Sodium Antitrust 

Litigation, this court affirmed class certification where 

plaintiffs sought overcharges – not lost profits – stemming 

from anti-competitive behavior that hindered their access to 

generic pharmaceuticals. 391 F.3d 516, 532 (3d Cir. 2004).

In sum, defendants’ contention that plaintiffs are 

required to show lost profits in order to demonstrate antitrust 

injury is without support in law or the facts of this case. As 

such, we reject it. 

b. Whether There Was Common Evidence of Injury to 

All Class Members

Defendants argue that because of discrepancies in the 

pricing of K-Dur and variations in purchaser behavior, 

plaintiffs cannot prove injury to all class members by 

common evidence, even if lost profits are not required to 
39

show antitrust injury. They contend further that the District 

Court applied the wrong standard in evaluating plaintiffs’ 

evidence that antitrust injury could be proven by common 

evidence. 

In support of their argument that antitrust injury 

requires an individualized assessment for each class member, 

defendants point to two places where purportedly conflicting 

evidence demonstrates the need for individualized assessment 

of antitrust harm. Defendants point out that they did not sell 

K-Dur to all customers at a single list price; rather, the price 

paid varied considerably among class members. 

Additionally, defendants argue that, for certain customers at 

certain times, Schering offered rebates which caused further 

price variation among customers. Defendants contend that 

these pricing variations caused several class members to have 

zero or negative damages under the formula applied by 

plaintiffs’ expert. Finally, defendants point out that not all 

class members purchased generic potassium chloride as soon 

as it became available and argue that, in light of this variation 

in purchase timing, plaintiffs need to make an individualized 

showing that each plaintiff would have purchased a generic 

product earlier if one had been available. 

We do not read Hydrogen Peroxide as precluding a 

class because of variations in purchasing by a very small 

percentage of those who purchased K-Dur. As the Special 

Master recognized, defendants conceded “that 45 of the 

proposed Class members purchased some amount of generic 

K-Dur.” App. at 7984 (emphasis in original). He noted that 

defendants’ arguments “relate to the quantum of damages, 

rather than the fact of injury.” Id. Indeed, in Hydrogen

Peroxide itself, we focused on what was really at issue – that 

for certification plaintiff need not prove antitrust injury 

actually occurred.

Plaintiffs’ burden at the class certification stage 

is not to prove the element of antitrust impact, 

although in order to prevail on the merits each 

class member must do so. Instead, the task for 

plaintiffs at class certification is to demonstrate 
40

that the element of antitrust impact is capable of 

proof at trial through evidence that is common 

to the class rather than individual to its 

members.

552 F.3d at 311-12. To the extent that there were minor 

variations, they can be handled at trial in the context of 

damages. 

With regard to both the price-variation and purchasetiming issues, the Special Master conducted an exceedingly 

thorough review of plaintiffs’ proposal for demonstrating 

antitrust impact through common evidence and determined 

that defendants’ objections were without support. Critically, 

the Special Master recognized his obligation to “probe 

beyond the pleadings” and to conduct a “rigorous analysis” of 

the available evidence. App. at 7960 (internal citations and 

quotation marks omitted). 

Our review confirms that the Special Master applied 

the appropriate standard. In contrast to Hydrogen Peroxide, 

where the court found that there was “no tendency for prices . 

. . to move together,” 552 F.3d at 314 (internal quotation 

marks omitted), plaintiffs in this case presented evidence, 

credited by the Special Master, of significant, industry-wide 

price drops after generic entry. Such evidence of an industrywide price drop after generic entry supports the Special 

Master’s rejection of defendants’ arguments about limited 

price variations and purchase-timing variations between 

plaintiffs.

First, concerning the price-variation argument, the 

Special Master carefully considered the conflicting opinions 

of plaintiffs’ and defendants’ experts and credited the theories 

of plaintiffs’ expert over that of defendants. The Special 

Master concluded that “Plaintiffs have satisfied their burden 

of adducing sufficient evidence and a plausible theory to 

convince me that impact may be proven by evidence common 

to all class members.” App. at 7988 (internal citations and 

quotation marks omitted). Our review of the record confirms 

that plaintiffs presented a comprehensive and detailed means 
41

of proving impact through common means, notwithstanding 

some very limited pricing variation, and that the Special 

Master conducted an appropriately searching evaluation of 

this evidence.

With regard to defendants’ argument about variations 

in the timing of the purchase of generic K-Dur, the Special 

Master explicitly rejected that argument and concluded that 

“[e]vidence that all (or virtually all) class members 

substituted a lower priced generic for some of their K-Dur 20 

purchases gives rise to the inference that they would have 

similarly done in the but-for world.” App. at 7984. This,

combined with plaintiffs’ theory of damages, means that 

impact could be proven on a class-wide basis via common 

evidence. Here again, the Special Master conducted a 

thorough evaluation of the available evidence and resolved all 

significant disputes between conflicting evidence as required 

under the standard set forth in Hydrogen Peroxide.

2. Adequacy Issue – Whether the Class 

Faces Inherent Conflicts

Defendants next contend that the District Court erred 

in certifying a class because the class faces inherent conflicts 

that preclude adequacy of representation. “The inquiry that a 

court should make regarding the adequacy of representation 

requisite of Rule 23(a)(4) is to determine that the putative 

named plaintiff has the ability and the incentive to represent 

the claims of the class vigorously, . . . and that there is no 

conflict between the individual’s claims and those asserted on 

behalf of the class.” In re Cmty. Bank of N. Va., 622 F.3d 

275, 291 (3d Cir. 2010) (quoting Hassine v. Jeffes, 846 F.2d 

169, 179 (3d Cir. 1988)). Only a fundamental conflict will 

defeat adequacy of representation. See, e.g., id. at 303 

(adequacy defeated by “obvious and fundamental intra-class 

conflict of interest”); Ward v. Dixie Nat. Life Ins. Co., 595 

F.3d 164, 180 (4th Cir. 2010).

Defendants contend that three members of the class, all 

national wholesalers, were net beneficiaries of the absence of 

generic competition in the potassium chloride supplement 
42

market because once generics came on the market those class 

members saw decreased sales volumes and lower per-pill 

profits. Defendants argue that, because these three class 

members have financial incentives to delay generic entry, 

there is an inherent conflict between them and the rest of the 

class. 

The case law on defendants’ argument reveals a split 

in authority. A large number of district courts, including 

some in this Circuit, have rejected defendants’ argument. 

See, e.g., Teva Pharms USA, Inc. v. Abbott Labs., 252 F.R.D. 

213, 226-27 (D. Del. 2008) (Robinson, J.); Meijer, Inc. v. 

Abbott Labs., 251 F.R.D. 431, 435 (N.D. Cal. 2008); but see

Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 

1190 (11th Cir. 2003).14 

We reject the Valley Drug decision for two reasons. 

First, requiring plaintiffs to show that no class member 

benefitted from the challenged conduct in the form of greater 

profits is contrary to the Supreme Court’s decision in 

Hanover Shoe. In Hanover Shoe, the Supreme Court 

permitted antitrust plaintiffs to seek overcharge damages 

rather than lost profits damages precisely because proving 

lost profits was too complicated and burdensome. 392 U.S. at 

493; Bogosian, 561 F.2d at 456. The same logic applies 

equally, if not more strongly, in the class certification setting

because under defendants’ proposed approach, plaintiffs 

would not only have to assess their own lost profits but also 

those of potential class members. Moreover, because 

Hanover Shoe sets the amount of the overcharge as plaintiffs’ 

damages, all of the class members have the same financial 

incentive for purposes of the litigation – i.e. proving that they 

were overcharged and recovering damages based on that 

overcharge. See 7A Charles Alan Wright, Arthur R. Miller & 

Mary Kay Kane, Federal Practice and Procedure § 1768 (3d 

ed. 2005) (“[A] potential conflict between the representatives 

and some class members should not preclude the use of the 

class-action device if the parties appear united in interest 

 14 This is a different appeal than Valley Drug, 344 F.3d 

1294 (11th Cir. 2003), discussed supra. 
43

against an outsider at the beginning of the case.”). 

Defendants have not pointed to any plausible scenario in 

which the class members might seek conflicting forms of 

relief. For these reasons, we conclude that defendants’ 

conflict argument fails. 

D. Conclusion – Class Certification Issues

In sum, with respect to the class certification issues, 

we reject defendants’ arguments and will affirm the District 

Court’s determination approving maintenance of the class 

action.