Opinion ID: 618715
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: Plaintiff, SigmaPharm, Inc., is a Delaware corporation that develops pharmaceutical technologies and products, and enters into agreements with other entities to commercialize them. Defendants Mutual Pharmaceuticals Company, Inc. and United Research Laboratories, Inc. (collectively, “Mutual”) are Pennsylvania corporations that develop, manufacture, market, sell, and distribute pharmaceutical drugs. Defendant King Pharmaceuticals, Inc. (“King”) is a Tennessee corporation that develops, manufactures, markets, sells, and distributes pharmaceutical drugs. In March 1999, SigmaPharm and Mutual entered into a “development agreement,” pursuant to which SigmaPharm granted Mutual certain rights in future “innovations” developed by SigmaPharm in exchange for payments from Mutual. “Innovations” are inventions, improvements, or enhancements to Mutual’s pharmaceutical products developed by SigmaPharm for which Mutual secures a patent or which Mutual otherwise deems to be an “innovation.” (App. 121.) The development agreement states that Mutual “shall be the sole and exclusive owner of all right, title and interest in and to the Innovations in the United States market.” (App. 73, 122.) Likewise, it states that SigmaPharm “shall remain the sole and exclusive owner of all right, title and interest in and to the Innovations in all markets other than the United States market.” (App. 73, 122.) 2 As we write primarily for the parties, we discuss only those facts necessary for our disposition of this appeal. We borrow heavily from the District Court’s recitation of the facts. 4 For generic equivalents of name-brand drugs developed by SigmaPharm that required approval under the Food and Drug Administration’s (“FDA”) Abbreviated New Drug Application (“ANDA”) process, SigmaPharm was to receive 20% of the gross profits from Mutual’s U.S. sales. But if additional generic competitors entered the market, the royalties would decrease based on the number of competitors. The development agreement further provided that if Mutual licensed or sold the right to sell a product incorporating a SigmaPharm “innovation,” or “agree[d] to refrain from selling such product,” SigmaPharm was to receive 25% of the gross profit from the licensing fees or royalties from that license, sale, or agreement. (App. 74, 123.) Pursuant to the development agreement, SigmaPharm developed a generic equivalent of the brand-name muscle relaxant SKELAXIN, which is owned and marketed by King. 3 SKELAXIN’s active ingredient, metaxalone, is no longer protected by patent. In March 2003, Mutual filed an ANDA for this SigmaPharm-developed generic product, including a certification that one of King’s patents did not claim a use for which Mutual was seeking approval. In January 2004, after King received another method patent related to SKELAXIN, Mutual filed a certification with the FDA that its generic product would not infringe that patent. In March 2004, King brought a patent infringement lawsuit against Mutual in the District Court for the Eastern District of Pennsylvania and petitioned the FDA to require 3 This was, in fact, the second generic SKELAXIN product that SigmaPharm had developed. The relevant product for this appeal is the second product SigmaPharm developed, so we will not discuss the first generic product. 5 that those seeking to market a generic version of SKELAXIN include information on the generic product’s label that implicated King’s method patents. King also asked the FDA to stay approval of any ANDAs for generic competitors to SKELAXIN until it had decided the petition. Mutual opposed each of these requests in multiple filings with the FDA between April 2004 and February 2005. King and Mutual’s adversarial behavior seemed to end on December 6, 2005, when King agreed to pay tens of millions of dollars for co-exclusive licensing rights for one of Mutual’s metaxalone-related patents. Two days later, Mutual withdrew its opposition to King’s petition for labeling requirements for generic SKELAXIN, even though that petition would have threatened Mutual’s ability to market its generic product without infringing certain of King’s patents. Then, in 2007, when King made a supplemental submission to the FDA in support of its petition and request for a stay of approval of any generic SKELAXIN ANDAs, Mutual submitted comments in support of King. Meanwhile, following a joint filing under seal on May 15, 2006, an indefinite stay of the proceedings was issued in the patent case between Mutual and King. Despite the fact that another district court had found the relevant patents to be invalid in January 2009, see King Pharm., Inc. v. Eon Labs, Inc., 593 F. Supp. 2d 501, 515 (E.D.N.Y. 6 2009), Mutual did not inform the district court handling its patent litigation with King of this development until August 2010, in a court-ordered status report. 4 Based on these facts, SigmaPharm’s amended complaint alleges that, sometime between February 2005 and December 2005, Mutual and King entered into an agreement “to restrict the output of, and thereby to raise the price of, pharmaceutical products that are bioequivalent to” SKELAXIN. (App. 82.) SigmaPharm claims this agreement was a horizontal restraint of trade in violation of Section 1 of the Sherman Act (Count I), Pennsylvania common law barring restraint of trade (Count II), and California statutes barring unlawful and unfair competition (Count III). The amended complaint also asserts that Mutual breached its contract with SigmaPharm by failing to pay SigmaPharm 25% of the revenues it received from King pursuant to the allegedly unlawful agreement (Count IV). SigmaPharm’s amended complaint sought injunctive and monetary relief, including treble damages under the federal antitrust laws. The defendants moved to dismiss Counts I through III of the amended complaint because, inter alia, SigmaPharm’s pleadings failed adequately to allege antitrust injury, a necessary component of so-called “antitrust standing.” In a thorough and thoughtful opinion, the District Court found that SigmaPharm had failed adequately to plead antitrust injury, dismissed Count I of the amended complaint without prejudice, and 4 The Federal Circuit affirmed the holding of the District Court for the Eastern District of New York that the patents at issue in the King-Mutual dispute were invalid. King Pharm., Inc. v. Eon Labs, Inc., 616 F.3d 1267 (Fed Cir. 2010). 7 declined to exercise supplemental jurisdiction over the remaining state law claims. SigmaPharm did not seek to amend its complaint, but instead filed the instant appeal.