Source: http://www.dailyreportingsuite.com/antitrust/news/patent_infringement_false_advertising_did_not_support_attempted_monopolization_claims
Timestamp: 2019-04-21 14:11:30
Document Index: 391927325

Matched Legal Cases: ['§ 43', '§ 2', '§ 2', '§2', 'art 4', 'art 3', 'art 6']

Patent infringement, false advertising did not support attempted
From Antitrust Law Daily, December 2, 2016
Patent infringement, false advertising did not support attempted monopolization claims
The U.S. Court of Appeals in New Orleans today overturned a $340 million verdict (after trebling) based a jury’s finding that Becton, Dickinson and Company (BD) attempted to monopolize the safety syringe market through patent infringement, false advertising, and efforts to "taint the market." The jury's finding that BD was liable to complaining rival Retractable Technologies, Inc. (RTI) for false advertising under § 43(a) of the Lanham Act, was upheld; however, the matter was remanded for a redetermination of any disgorgement damages. The injunctive relief also was remanded for reconsideration (Retractable Technologies, Inc. v. Becton, Dickinson and Co., December 2, 2016, Jones, E.).
In 2013, the jury found BD liable for attempted monopolization in the market for safety syringes. It determined that RTI suffered "deception damages" exceeding $113,500,000, and found liability on all the misrepresentations. BD's motion for judgment as a matter of law, or for new trial, was denied. The appeal followed.
Monopolization. The appellate court held that judgment as a matter of law was required on the Sherman Act § 2 claim. RTI failed to demonstrate that BD engaged in anticompetitive or exclusionary conduct that violated the Sherman Act based on three types of "deception" by its rival: (1) BD’s patent infringement; (2) BD's false claims that its needles were the "world’s sharpest" and had "low waste space"; and (3) BD’s alleged efforts to "taint the market" for retractable syringes in which it alone competed with RTI.
Patent infringement. Patent infringement is not anticompetitive conduct for purposes of a Sherman Act § 2 claim, the court held. "By definition, patent infringement invades the patentee’s monopoly rights, causes competing products to enter the market, and thereby increases competition." Thus, the jury’s verdict could not be legally supported by BD’s infringement on RTI patents.
False advertising. The appellate court noted its skepticism of antitrust claims predicated on false advertising. BD did not appeal the jury’s finding that BD falsely advertised throughout the period under litigation that BD needles were the "world’s sharpest" (a proxy for patient comfort) and had "low waste space" (allowing more medicine to be dispensed from the syringe), and BD’s data proves the claims.
A six-part test is often used to determine whether conduct is ordinary false advertising or rises to a course of conduct that could actually exclude competition. In order to support an antitrust claim premised on false advertising, the plaintiff must satisfy that the statements at issue are: (1) clearly false; (2) clearly material; (3) clearly likely to induce unreasonable reliance; (4) made to unsophisticated parties; (5) continued for long periods; and (6) not readily cured by rivals.
RTI could not uphold a §2 verdict for BD’s false advertising under the six-part test, according to the appellate court. BD’s false claims were not made to unsophisticated parties (part 4), but to purchasers who had experience with the competing products. The advertising claims were not shown to be "clearly likely to induce unreasonable reliance" (part 3) on the part of customers. Finally, there was no showing that the "world’s sharpest needle" and "lower waste space" claims could not be readily disproved, as they were at this trial, by rivals (part 6). In addition, RTI did not show that BD’s advertising in fact harmed competition.
Tainting the market theory. RTI’s theory that BD "tainted the market" for certain retractable syringes in which it alone competed with RTI was illogical as a vehicle to prove exclusionary conduct, the appellate court ruled. As explained by the court, RTI alleged anticompetitive conduct based on BD's (1) continued marketing of its flawed Integra retractable needles during the years, and (2) refusal to make needed engineering fixes, (3) for the purpose of persuading purchasers that all retractable syringes, including those of RTI, were inherently unreliable, so that (4) BD would lie in wait for RTI’s patents to expire in 2015, avail itself of RTI’s (then-unprotected) superior technology, create and unveil a new and superior retractable syringe, and take over the market by 2019.
The appellate court noted that, while the first two parts of the theory had some support in the record, there was no direct evidentiary basis for the illogical third part of the theory. Moreover, it was incoherent when considered with the fourth part. The fourth part—BD’s longer-term plan to compete with a new retractable syringe after RTI’s patents expired—even if true, could not constitute anticompetitive conduct because it was precisely the type of activity to be expected from competitors, according to the appellate court.
Lanham Act claim. RTI’s Lanham Act claim was not barred based on the affirmative defenses of res judicata. The appellate court explained that a claim in a subsequent suit will be barred under res judicata principles if: (1) the prior suit involved identical parties; (2) the prior judgment was rendered by a court of competent jurisdiction; (3) the prior judgment was a final judgment on the merits; and (4) the same claim or cause of action was involved in both cases. In this case, the only issue was whether the settlement of RTI’s first lawsuit against BD involved the same claims or causes of action as the second lawsuit. The court held that RTI could not have brought the later claims during the pendency of the first lawsuit, and the new advertisements and sales tactics of BD created new causes of action that were not barred by res judicata.
In addition, the district court did not abuse its discretion in rejecting the affirmative defense of laches. BD had argued that Texas’s two-year statute of limitations for unfair competition should be employed and that a strong presumption that any lawsuit filed outside of the statute of limitations was barred by laches should be applied. However, the appellate court concluded that BD suffered no prejudice in facing the suit. BD knew from the parties’ earlier litigation that RTI objected to the needle sharpness and waste space claims, and BD had every reason to know that its ongoing advertisements of the same claims were inaccurate.
Disgorgement, injunctive relief. BD also challenged the district court’s conclusion that it was required to remedy the Lanham Act violations by disgorging a portion of its profits. The appellate court found no clear error in the district court’s conclusion that at least some of BD’s profits were attributable to the false advertising. Because the antitrust judgment was overturned, the appellate court remanded to the district court to determine whether and how much profit BD should disgorge to compensate for the Lanham Act violations. Further, injunctive relief that was granted apparently to remedy the purported antitrust violations also had to be reconsidered on remand.
The case is No. 14-41384.
Attorneys: Roy W. Hardin (Locke Lord LLP) for Retractable Technologies, Inc. Robert A. Atkins (Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P.), Samuel Franklin Baxter (McKool Smith, PC) and Alistair Byrne Dawson (Beck Redden, L.L.P.) for Becton Dickinson & Co.
Companies: Retractable Technologies, Inc.; Becton Dickinson & Co.