Opinion ID: 1728383
Heading Depth: 3
Heading Rank: 1

Heading: General patent law principles

Text: ¶ 85 In order to adequately address the defendants' motion to dismiss the complaint, there are certain general principles of federal patent law that must be recognized. That recognition is necessary before a court can evaluate a complaint wherein a patent owner is sued, in order to sort out which allegations are factual allegations of a type that must be accepted for purposes of a motion to dismiss, which allegations contain facts not accepted as true, and which allegations are actually legal conclusions. ¶ 86 A civil state court claim against a patent owner, such as Bayer, that alleges conduct relating to the patented invention and requests damages, must assume that the patent is valid and it must allege conduct that falls outside of the rights accorded under the patent. This is so because if the complaint were to allege that the patent is invalid, there would be no subject matter jurisdiction in Wisconsin state courts to hear the claim. 28 U.S.C. § 1338(a); [8] Schecher v. Purdue Pharma L.P., 317 F.Supp.2d 1253, 1257 (D.Kan. 2004); [9] see also Vill. of Trempealeau v. Mikrut, 2004 WI 79, ¶ 8 n. 2, 273 Wis.2d 76, 681 N.W.2d 190. [10] And, if all the conduct that is alleged falls within the rights granted by the federal government to the patentee, the conduct is not illegal nor is its effect illegal. United States v. General Elec. Co., 272 U.S. 476, 489-90, 47 S.Ct. 192, 71 L.Ed. 362 (1926). It is important to continue to note that only illegal conduct or conduct that has an illegal effect violates Wis. Stat. § 133.03. Olstad, 284 Wis.2d 224, ¶ 85, 700 N.W.2d 139; Prentice, 176 Wis.2d at 721, 500 N.W.2d 658. ¶ 87 Antitrust law generally forbids agreements that restrict output and raise prices above that which would be achieved in normal market competition. See Phillip Areeda & Herbert Hovenkamp, Vol. X Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 1780a (2d ed.2004). However, if a patent owner acts solely within the rights granted under the patent, the patent owner has a lawful monopoly and is freed from competition of price, service, quality or otherwise. United States v. Line Material Co., 333 U.S. 287, 300, 68 S.Ct. 550, 92 L.Ed. 701 (1948). ¶ 88 As the United States Supreme Court has explained: A patent by its very nature is affected with a public interest . . . [It] is an exception to the general rule against monopolies and to the right to access to a free and open market. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 816, 65 S.Ct. 993, 89 L.Ed. 1381 (1945)). It is black letter law that a patent is an exception to the general rule against monopolies. Ciprofloxacin, 363 F.Supp.2d at 523 (quoting Precision, 324 U.S. at 816, 65 S.Ct. 993). ¶ 89 Therefore, agreeing to operate as a monopoly that fixes price for a patented invention is not illegal because monopoly rights exercised within the confines of the patent are granted by the federal government with the patent. As the United States Supreme Court has explained: [T]he general rule is absolute freedom in the use or sale of rights under the patent laws of the United States. The very object of these laws is monopoly, and the rule is, with few exceptions, that any conditions which are not in their very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee for the right to manufacture or use or sell the article, will be upheld by the courts. The fact that the conditions in the contracts keep up the monopoly or fix prices does not render them illegal. Bement, 186 U.S. at 91, 22 S.Ct. 747 (emphasis added). In support of this monopoly, the federal law grants to a patent owner the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States. 35 U.S.C. § 154(a)(1). The essence of a patent grant is the right to exclude others from profiting by the patented invention. Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 215, 100 S.Ct. 2601, 65 L.Ed.2d 696 (1980). The rationale for granting such monopolies to patent owners is to encourage inventions. Brenner v. Manson, 383 U.S. 519, 534, 86 S.Ct. 1033, 16 L.Ed.2d 69 (1966). [11] ¶ 90 The monopoly rights accorded to a patent owner also include the right to control the price charged for the patented invention by a licensee of the patent owner. General Elec., 272 U.S. at 489-90, 47 S.Ct. 192. In General Electric, the government alleged that General Electric was engaged in illegal price-fixing of lamps through an agreement with Westinghouse. Id. at 478, 47 S.Ct. 192. General Electric owned the patents necessary for the construction of certain tungsten filament lamps. Id. at 480-81, 47 S.Ct. 192. Westinghouse was one of General Electric's licensees to sell the lamps as part of a nationwide sales and distribution plan. Id. at 481-82, 47 S.Ct. 192. In considering the government's allegation that General Electric imposed a price-fixing condition on Westinghouse's sales, the Court concluded price-fixing on sales by a licensee was permissible so long as the price-fixing stopped with the licensee and did not continue to fix the prices charged by those who purchased from the licensee for subsequent sale. Id. at 485, 47 S.Ct. 192. The court explained: [U]nder the patent law the patentee is given by statute a monopoly of making, using and selling the patented article. The extent of his monopoly in the articles sold and in the territory of the United States where sold is not limited in the grant of his patent, and the comprehensiveness of his control of the business in the sale of the patented article is not necessarily an indication of illegality of his method. As long as he makes no effort to fasten upon ownership of the articles he sells control of the prices at which his purchaser shall sell, it makes no difference how widespread his monopoly. It is only when he adopts a combination with others, by which he steps out of the scope of his patent rights and seeks to control and restrain those to whom he has sold his patented articles in their subsequent disposition of what is theirs, that he comes within the operation of the Anti-Trust Act. Id. ¶ 91 Therefore, as we examine the complaint, we must: (1) presume Bayer's Cipro patent is valid because the plaintiffs claims are before a Wisconsin state court; and (2) assess whether any factual allegation relating to the Bayer-Barr agreement falls outside Bayer's right to maintain a monopoly on the price Bayer or its licensee charges for Cipro. With these general principles of patent law in mind, I turn to Wisconsin antitrust law.