LOUISIANA HEALTH SERVICE & INDEMNITY COMPANY v. JANSSEN BIOTECH, INC.

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

LOUISIANA HEALTH SERVICE &

INDEMNITY COMPANY D/B/A/ BLUE

CROSS AND BLUE SHIELD OF

LOUISIANA, AND HMO LOUISIANA,

INC., ET AL. ON BEHALF OF

THEMSELVES AND ALL OTHERS

SIMILARLY SITUATED,

Civ. No. 19-cv-14146 (KM) (ESK)

Plaintiffs,

OPINION

v.

JANSSEN BIOTECH, INC., JANSSEN

ONCOLOGY, INC., JANSSEN

RESEARCH & DEVELOPMENT, LLC,

and BTG INTERNATIONAL LIMITED,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

To extend its exclusivity as the sole seller of profitable prostate cancer

drug, Zytiga, Janssen Biotech (“Janssen”), along with BTG International

Limited (“BTG”), obtained a follow-on combination therapy patent that was

later invalidated. Now, Louisiana Health Service & Indemnity Company

(“BCBSLA”) brings this antitrust action, in which it seeks to represent a class

of indirect purchasers of Zytiga who allegedly overpaid for the drug during the

period in which Janssen’s1 infringement litigation delayed the entrance of

generic versions of Zytiga into the market. Defendants move to dismiss the

currently operative complaint. (DE 155.)2 For the following reasons, defendants’

motion to dismiss (DE 155) is GRANTED.

1 The defendants in this action were plaintiffs in the earlier patent infringement

litigation. For convenience, I refer to them together as “Janssen.”

2 Certain citations to the record are abbreviated as follows:

DE = docket entry in this case

I. BACKGROUND

In 1997, BTG obtained a patent (U.S. Patent No. 5,604,213, the “’213

patent”) on a therapeutic compound called abiraterone acetate. (SCCAC ¶ 3,

113.) BTG licensed this patent to Cougar Biotechnology in 2004, and Cougar

was purchased by Janssen in 2009. (Id. ¶ 114.) Abiraterone acetate is the key

ingredient in Janssen’s drug Zytiga, which in 2011 was approved by the FDA

as a treatment for prostate cancer. (Id. ¶ 127.) Zytiga was widely prescribed for

prostate cancer and earned Janssen billions of dollars in sales revenue. (Id. ¶

130.) The original ’213 patent, however, was set to expire in 2016. (Id. ¶ 3,

151.) Anticipating generic competition and lower profits, Janssen sought to

parlay its patent protection by (to simplify a bit) patenting a combined therapy.

Its initial attempts to obtain a new patent on the combined use of abiraterone

and a steroid, prednisone, were repeatedly rejected by the United States Patent

and Trademark Office (“PTO”) as obvious. (Id. ¶ 115–25, 131–148.) In 2013,

however, Janssen did obtain a new patent for combined abiraterone

acetate/prednisone therapy (United States Patent No. 8,822,438, the “’438

patent”), relying substantially on the argument that obviousness was rebutted

by the prior commercial success of Zytiga. (Id. at ¶ 152–67.) Janssen, however,

allegedly never disclosed to the PTO that Zytiga’s commercial success was

attributable to the ’213 “blocking patent,” dating back to 1997, which had

blocked any other company from manufacturing and selling any drug that

contained abiraterone acetate. (Id. at ¶ 166.)3

Infringement Action DE = Docket Entry in BTG Int’l Ltd., et al., v. Amneal

Pharmaceuticals LLC, et al., 15-cv-5909 (D.N.J.)

SCCAC= Second Consolidated Class Action Complaint (DE 147)

Mot. = Defendants’ brief in support of their motion to dismiss (DE 155-1)

Opp. = Plaintiffs’ brief in opposition to the motion to dismiss (DE 158)

Reply = Defendants’ reply in support of motion to dismiss (DE 160)

3 Janssen contests this (Opp. at 5), but at this stage I take all well-pleaded

allegations as true. Morrow v. Balaski, 719 F.3d 160, 165 (3d Cir. 2013) (en banc).

In 2015, a number of generic companies filed Abbreviated New Drug

Applications (“ANDAs”) with the FDA, claiming that Janssen’s new ’438 patent

was invalid and that they should be permitted to sell generic versions of Zytiga

when the first, ’213, patent expired in 2016. (Id. ¶ 168–69.) Janssen, exercising

its rights under the Hatch-Waxman Act, then filed an action (the “infringement

action”, 15cv5909 (D.N.J.)), against the generic manufacturers, triggering a 30-

month stay of the approval of the ANDAs. (Id. ¶ 170.)4 The infringement action

and its appeals lasted for more than four years. In that action, Janssen filed a

complaint and two amended complaints, and was denied leave to file a third

amended complaint. (Infringement Action DE 279.) The parties briefed

numerous motions, including three motions in limine and a motion for

summary judgment. (Infringement Action DE 364–66, 369, 387, 389, 408.)

Oral argument was held on summary judgment. (Infringement Action DE 420.)

The motion for summary judgment was administratively terminated, however,

and an 8-day bench trial took place (Infringement Action DE 483, 522–31.) As

it happened, both the Patent Trial and Appeal Board (“PTAB”) and this Court

ultimately determined that Janssen’s second patent was invalid for

obviousness. (SCCAC ¶ 203–35.)5 Janssen made every effort to enjoin generic

competition, but the Federal Circuit and the Supreme Court denied those

attempts and generic competition began on November 21, 2018 (Id. ¶ 238–43.)

In May 2019, the Federal Circuit upheld the decision of the PTAB, a ruling

which required it also to dismiss the appeal from this Court. (Id. ¶¶ 247–50).6

By engaging in this extended litigation, Janssen allegedly delayed the

entrance of generics onto the market. (Id. ¶ 251–53.) And as a result of that

delay, indirect purchasers paid much more for Zytiga in the interim than they

would have paid for a generic substitute. (Id. ¶ 11.) In this action, Plaintiffs

4 The suit was BTG Int’l Ltd., et al., v. Amneal Pharmaceuticals LLC, et al., 15-cv-

5909 (D.N.J.).

5 BTG Int’l Ltd. v. Amneal Pharms. LLC, 352 F. Supp. 3d 352 (D.N.J. 2018).

6 BTG Int’l Ltd. v. Amneal Pharms. LLC, 923 F.3d 1063 (Fed. Cir. 2019).

allege that by bringing “sham litigation,” Janssen violated the Sherman Act, 15

U.S.C. § 2, as well as a number of state antitrust and consumer protection

laws. They seek to represent a class of indirect purchasers of Zytiga.

BCBSLA initially filed this suit in the United States District Court for the

Eastern District of Virginia on April 18, 2019. (DE 1.) On May 24, 2019,

Janssen moved to change venue to this court. (DE 30.) On May 31, 2019,

BCBSLA moved to consolidate this case and to appoint interim class counsel.

(DE 35, 37.) On June 21, 2019, the Eastern District of Virginia transferred the

case to this court, which granted the motion to consolidate and appoint interim

co-lead class counsel. (DE 54.) On August 20, 2019, Self-Insured Schools of

California, the plaintiff in a related case, moved to consolidate cases. (DE 92.)7

This second motion to consolidate was granted on September 27, 2019. (DE

108.) On February 10, 2021, I granted BCBSLA’s motion to appoint class

counsel. (DE 146.)

On February 22, 2021, plaintiffs filed their Second Consolidated Class

Action Complaint. (DE 147.) On April 6, 2021, Janssen moved to dismiss. (DE

155.) Plaintiffs filed a brief in opposition (DE 158) and Janssen filed a reply (DE

160). This motion is fully briefed and ripe for decision.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a) does not require that a pleading

contain detailed factual allegations, but it must assert “more than labels and

conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The

allegations must raise a claimant’s right to relief above a speculative level, so

that a claim is “plausible on its face.” Id. at 570. That standard is met when

“factual content [] allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009). Rule 12(b)(6) provides for the dismissal of a complaint if it fails to

state a claim. The defendant bears the burden to show that no claim has been

stated. Davis v. Wells Fargo, 824 F.3d 333, 349 (3d Cir. 2016). I accept facts in

7 Self-Insured Schools of California v. Janssen Biotech, Inc., 19-cv-14291 (D.N.J).

the complaint as true and draw reasonable inferences in the plaintiffs’ favor.

Morrow v. Balaski, 719 F.3d 160, 165 (3d Cir. 2013) (en banc).

III. DISCUSSION

a. Standing

Plaintiffs bring 58 numbered claims, all essentially based on the

allegation that Janssen engaged in “sham litigation.” (SCCAC ¶ 287–823.)8

Count 58 is a federal claim under the Sherman Act, 15 U.S.C. § 2. (Id. ¶ 803–

23.). Counts 1–29 bring claims under the antitrust laws of a number of states,

plus the District of Columbia and Puerto Rico. (Id. ¶ 287–488.) Counts 29–56

bring claims under many jurisdictions’ consumer protection laws. (Id. ¶ 489–

755.) Finally, count 57 asserts unjust enrichment claims under the laws of 41

jurisdictions. (Id. ¶ 756–801.) The named plaintiffs, however, allege that they

purchased or were reimbursed for Zytiga in only 22 states. (Id. ¶ 20–24.)

Janssen does not contest that plaintiffs have standing to bring their own

federal claims, and may assert claims under the laws of states where they

purchased or reimbursed insurance policy holders for Zytiga. Janssen argues,

however, that plaintiffs lack standing to assert state-law claims under the laws

of states where the named plaintiffs did not purchase Zytiga. (Mot. at 39–44.)

After first outlining the law of standing in putative class actions, I rule

that plaintiffs’ claims should not be dismissed on standing grounds.

Class actions, governed in federal court by Federal Rule of Civil

Procedure 23, are a form of representative litigation. One or more class

representatives litigate on behalf of absent class members and, if a class is

certified, both the named plaintiffs and the absent class members will be

bound by the court’s decision.

A named class representative, like any federal-court plaintiff, must

establish personal standing under the relevant constitutional standard. See

8 Unjust enrichment claims under the laws of 39 states, Puerto Rico, and

Washington, D.C. are grouped under count 57. (SCCAC ¶ 130–46.)

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).9 Thus it is not enough that

absent class members suffered injuries; rather, “the representative herself

must have standing.” William B. Rubenstein, 1 Newberg on Class Actions § 2:3

(5th ed.); see also Simon v. E. Kentucky Welfare Rts. Org., 426 U.S. 26, 40 n.20

(1976). Here, there is no question that the plaintiffs properly alleged personal

standing, in that they were themselves allegedly overcharged for Zytiga.

Next comes the murky issue of so-called “class standing,” invoked by

defendants here. Plaintiffs argue that their claims under the laws of states in

which they did not purchase Zytiga should not be dismissed, because they

have personal standing and there is no separate “class standing” requirement.

(Opp. at 36–37 (quoting In re Prudential Ins. Co. Am. Sales Prac. Litig. Agent

Actions, 148 F.3d 283, 306 (3d Cir. 1998).) It is true that once the class

representative demonstrates that he or she possesses standing, for him or her

“there remains no further separate class standing requirement in the

constitutional sense.” Prudential Ins. Co., 148 F.3d at 306–07. Nor are absent

class members required to prove that they independently have standing. Such

a requirement would defeat the purpose of representative litigation. See Parko

v. Shell Oil Co., 739 F.3d 1083, 1084–85 (7th Cir. 2014). Rather, once the class

representative has shown he or she has standing, “the issue [becomes] one of

compliance with the provisions of Rule 23, not one of Article III standing.”

Prudential Ins. Co., 148 F.3d at 307 (quoting Goodman v. Lukens Steel Co., 777

F.2d 113, 122 (3d Cir.1985), aff’d, 482 U.S. 656 (1987)).10

9 Standing requires “(1) an injury-in-fact, which is an invasion of a legally

protected interest that is (a) concrete and particularized, and (b) actual or imminent,

not conjectural or hypothetical; (2) a causal connection between the injury and the

conduct complained of; and (3) that it must be likely, as opposed to merely

speculative, that the injury will be redressed by a favorable decision.” Winer Family

Trust v. Queen, 503 F.3d 319, 325 (3d Cir. 2007).

10 A related problem that has spurred a great deal of debate, but is not relevant

here, is the issue of class members who have not suffered an injury. For more on that

debate, see 1 Newberg on Class Actions § 2.3; Tyson Foods, Inc. v. Bouaphakeo, 577

U.S. 442, 461–62 (2016).

Janssen, however, is making a different point. Janssen argues that

named plaintiffs—not absent class members—lack standing because in a suit

with multiple claims “at least one named class representative must have

standing with respect to each claim.” 1 Newberg on Class Actions § 2.5; Long v.

SEPTA, 903 F.3d 312, 323 (3d Cir. 2018) (“A plaintiff must demonstrate

standing for each claim [he or she] seeks to press.”). If, for example, no named

plaintiff alleges that it purchased Zytiga in California, Janssen maintains that

all California law counts must be dismissed. (Mot. at 40.) This argument,

however, misunderstands the meaning of “claim” in this context and, if

accepted, would undermine the ability of plaintiffs to bring nationwide class

actions.11

The cases cited by Janssen concern different issues, and personal

standing. In Long v. SEPTA, for example, the issue was the named plaintiff’s

individual standing to bring federal claims under the Fair Credit Reporting Act

(“FCRA”). The Third Circuit held that the named plaintiff had standing to bring

an FCRA claim related to SEPTA’s failure to provide him and the absent class

members with copies of their consumer reports. He did not have standing,

however, to bring an FCRA claim related to SEPTA’s failure to provide him and

the absent class members with notice of their rights under the FCRA, because

that was a “bare procedural violation, divorced from any concrete harm.” Long

v. SEPTA, 903 F.3d at 325 (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 341

(2016), as revised (May 24, 2016)). In short, as to that second issue, no one

had standing; it was not a matter of divergent statutory claims, or named

plaintiffs vs. absent class members.

Having standing with respect to “each claim” relates to the facts

underlying the claim of injury and whether they rise to the Constitutional

standing threshold, not the label of each cause of action. One court has glossed

11 Janssen cites a number of cases holding that named plaintiffs cannot rely on

injuries of absent class members to establish their own standing. (Mot. 39-41.) As

explained above, however, these standing issues are conceptually distinct.

this requirement as follows: “So long as the class representatives have

constitutional standing to raise a particular issue before the court, no further

constitutional standing requirements exist for the remainder of the class.” In re

Warfarin Sodium Antitrust Litig., 212 F.R.D. 231, 246 (D. Del. 2002), aff’d, 391

F.3d 516 (3d Cir. 2004) (emphasis added). Here, there is, factually, one issue

and thus one claim: Janssen engaged in sham litigation to delay generic

competition and overcharge for Zytiga.12 Plaintiffs unquestionably have

standing to bring that claim and the standing inquiry, at this stage, stops

there.

To illustrate this principle, imagine a product defect class action

involving two allegedly defective products (products A and B), but where the

sole named plaintiff has only purchased product A. The named plaintiff then,

would not have standing to bring claims regarding product B, because her

alleged injury relates only to product A. Thus, all claims related to product B

would be dismissed. She could, however, bring a nationwide class action that

makes claims regarding product A’s defects under the laws of any state where

absent class members purchased product A. Because she was allegedly injured

by product A, the question is no longer one of standing. Rather the question is

whether it is appropriate for the named plaintiff to represent a nationwide

class, despite the differences in state law. In this case, the class comprises

indirect purchasers of Zytiga under state antitrust and consumer protection

laws. Once plaintiffs are found to have standing, the issue becomes a Rule 23

issue. “As long as the named plaintiffs have standing to sue the named

defendants, any concern about whether it is proper for a class to include out-

of-state, nonparty class members with claims subject to different state laws is a

question of predominance under Rule 23(b)(3).” Langan v. Johnson & Johnson

Consumer Companies, Inc., 897 F.3d 88, 93 (2d Cir. 2018).13

12 The fact that there is one claim means that the whole case rises and falls

together, as discussed below.

13 Although Langan is the clearest statement of this rule, many other courts have

reached the same conclusion. See, e.g., In re Warfarin Sodium Antitrust Litig., 391 F.3d

What may really be at issue here, as plaintiffs acknowledge, is the timing

of the standing inquiry. (Reply at 17–18.) In Amchem Products, Inc. v. Windsor,

the Supreme Court held that it may be appropriate to handle class certification

issues in advance of standing issues when certification is “logically antecedent

to the existence of any Article III issues.” 521 U.S. 591, 612 (1997). The named

plaintiffs, as noted, surely cannot be dismissed from the case for lack of

standing, because they do possess standing in their own right. Now it is true

that the named plaintiffs may also end up representing absent plaintiffs from

other states—if the class is certified in the manner requested.14 At the motion

to dismiss stage, however, such standing issues are speculative and

contingent. It might be found, for example, that common issues do not

predominate.15 Thus, it is appropriate to defer standing issues until class

certification and consider them as part of the broader Rule 23 analysis. See In

516, 529 (3d Cir. 2004) (upholding the certification of a nation-wide antitrust class

that brought claims under the laws of all fifty states and finding that the issues of

different state laws was one of predominance); Morrison v. YTB Int’l, Inc., 649 F.3d 533,

536 (7th Cir. 2011) (stating that whether plaintiff could represent a class of out of

state plaintiffs based on different state laws “has nothing to do with standing, though

it may affect whether a class should be certified”) (emphasis in original); Ramirez v. STi

Prepaid LLC, 644 F. Supp. 2d 496, 505 (D.N.J. 2009) (stating that once plaintiff has

established individual standing, “the fact that the named Plaintiffs may not have

individual standing to allege violations of consumer protection laws in states other

than those in which they purchased Defendants’ calling cards is immaterial. The issue

Defendants raise is one of predominance” not of standing.); In re Grand Theft Auto

Video Game Consumer Litig. (No. II), 2006 WL 3039993, at *3 (S.D.N.Y. Oct. 25, 2006)

(stating that where named plaintiffs have established individual standing, the relevant

question is not “whether the Named Plaintiffs have standing to sue Defendants… but

whether their injuries are sufficiently similar to those of the purported Class to justify

the prosecution of a nationwide class action” and thus should be dealt with at the

class certification stage).

14 And if it is later revealed, for example, that no class member purchased or was

reimbursed for Zytiga in Wyoming, the Wyoming law counts will be dismissed.

15 Or, for that matter, that a class action is not a superior means of adjudicating

the conflict, that plaintiffs’ claims are not typical, that plaintiffs are not appropriate

representatives, or that the action does not meet any of the other Rule 23

requirements.

re Remicade Antitrust Litig., 345 F. Supp. 3d 566, 585 (E.D. Pa. 2018); In re

FieldTurf Artificial Turf Mktg. & Sales Pracs. Litig., 2018 WL 4188459, at *8

(D.N.J. Aug. 31, 2018); In re Grand Theft Auto Video Game Consumer Litig. (No.

II), 2006 WL 3039993, at *2 (S.D.N.Y. Oct. 25, 2006) (stating that it is better “to

treat class certification as logically antecedent to standing where class

certification is the source of the potential standing problems”); Langan, 897

F.3d at 96.

Because plaintiffs themselves have standing, which is enough to justify

the action’s going forward, I deny the motion to dismiss plaintiffs’ claims on

standing grounds, without prejudice to consideration of how these and related

issues may be altered in light of the class certification process.

b. Illinois Brick and Indirect Purchasers

Plaintiffs’ Sherman Act claim must be dismissed because it runs afoul of

the Illinois Brick direct purchaser rule. Illinois Brick Co. v. Illinois, 431 U.S. 720

(1977). That is a judge-made, bright-line rule that limits the class of potential

plaintiffs in an antitrust action.

In Illinois Brick, the Supreme Court limited antitrust actions “to suits

brought by parties that are the direct purchasers of the product.” Warren Gen.

Hosp. v. Amgen Inc., 643 F.3d 77, 84 (3d Cir. 2011) (citing Illinois Brick, 431

U.S. 720)). The Supreme Court reasoned that allowing indirect purchaser suits

would expose defendants to the risk of multiple liability and raise intractable

questions as to how much of an overcharge had been passed down the

distribution chain. More generally, the Court made a policy determination that

antitrust laws would be more effectively enforced by direct purchasers. Illinois

Brick, 431 U.S. 730–34.16 In the aftermath of Illinois Brick, however, many

16 The Illinois Brick direct purchaser rule has been interpreted as a standing

doctrine. See McCarthy v. Recordex Service, Inc., 80 F.3d 842, 847–48 (3d Cir. 1996)

(“[T]he Supreme Court articulated the so-called ‘direct purchaser’ rule, an antitrust

standing doctrine that barred downstream indirect purchasers from bringing an

antitrust claim.”) The short of it is that indirect purchasers cannot maintain an action

under the Sherman Act unless they fall into one of the exceptions to Illinois Brick.

states amended their own antitrust laws to allow indirect purchaser suits. See,

e.g., Cal. Bus. & Prof. Code § 16750(a); Haw. Rev. Stat. § 480-3.

In a footnote to Illinois Brick, the Supreme Court acknowledged an

exception to the direct purchaser rule, which applies “where the direct

purchaser is owned or controlled by its customer.” 431 U.S. at 736 n.16. The

logic of this exception, known as the “control exception,” is that if the initial

sale is from a parent to a subsidiary, and then the subsidiary sells to the

plaintiff, the plaintiff is, in essence, a direct purchaser. Jewish Hosp. Ass’n of

Louisville, Ky. v. Stewart Mech. Enters., 628 F.2d 971, 975 (6th Cir. 1980)

(stating that the exception applies when “there effectively has been only one

sale”). The Third Circuit has applied this exception only when the initial seller

actually owned the initial purchaser. Howard Hess Dental Lab’ys Inc. v.

Dentsply Int’l, Inc., 424 F.3d 363, 371 (3d Cir. 2005). Other circuits have found

the exception to apply outside of the parent/subsidiary context when there is a

relationship of “fundamental economic or other unity” between the seller and

the initial purchaser. Jewish Hosp. Ass’n, 628 F.2d at 975; see also Fisher v.

Wattles, 639 F. Supp. 7, 9 (M.D. Pa. 1985) (to fall within the control exception,

plaintiffs must show “such significant control” that the two companies are

“virtually the same entity”). Examples of such unity include “interlocking

directorates, minority stock ownership, loan agreements that subject the

wholesalers to the manufacturers’ operating control, [or] trust agreements.” In

re Brand Name Prescription Drugs Antitrust Litig., 123 F.3d 599, 605 (7th Cir.

1997); see also In re G-Fees Antitrust Litig., 584 F. Supp. 2d 26, 33 (D.D.C.

2008). One court in this district has gone so far as to extend the rationale of

the control exception to an agency relationship. In re Mercedes-Benz Anti-Trust

Litig., 157 F. Supp. 2d 355, 366 (D.N.J. 2001). Still, the control exception,

though well-established, remains narrow and is not generously construed. Sun

Microsystems Inc. v. Hynix Semiconductor Inc., 608 F. Supp. 2d 1166, 1180

(N.D. Cal. 2009) (observing “there are few authoritative cases that clearly define

the legal showing required to justify application of the control exception”); In re

G-Fees, 584 F. Supp. 2d at 33 (stating that the “control exception is construed

narrowly”); see also 6 Newberg on Class Actions § 20:8.

Here, plaintiffs claim that this case falls within the control exception by

virtue of Janssen’s close relationship with the pharmacies that purchased

Zytiga from Janssen and then resold it to the members of the putative indirect-

purchaser class here.17 (Opp. at 23–27.) Plaintiffs allege that these were

“specialty” pharmacies whose economic interests aligned with Janssen’s to

such a degree that they were Janssen’s “agents,” were controlled by Janssen,

and would have no ability or incentive to assert antitrust claims against

Janssen on their own account. (Id. at 25.) The pharmacies at issue included

CVS/Caremark, and Alliance/Walgreens. (SCCAC ¶ 822.)

This argument falls short. Plaintiffs do not sufficiently allege that

Janssen controlled the specialty pharmacies to such a degree that there was in

essence only one sale, i.e., the sale from the pharmacies to their customers.

Aligned incentives are not enough. The exception, only grudgingly extended,

applies only when the original seller had a degree of control over a buyer

analogous to that of a parent corporation over a subsidiary. Plaintiffs do not,

and perhaps cannot, allege that Janssen and the pharmacies functioned as an

economic unit. They do not allege that the business relationship between

Janssen and, for example, CVS/Caremark is anything akin to a

parent/subsidiary relationship. Nor have they alleged that these entities were

so intertwined that a transaction between them should not count as a true

purchase/sale for purposes of Illinois Brick. Absent plausible allegations of

17 Plaintiffs analogize to Albers v. Mercedes-Benz USA, LLC, 2020 WL 1466359

(D.N.J. Mar. 25, 2020) in an attempt to fit their claim into the control exception. In

Albers, I declined to apply the analogous RICO direct purchaser rule to dismiss claims

against Robert Bosch GmbH by purchasers of Mercedes cars with Bosch-made

engines. I determined, however, that the close relationship between Mercedes and

Bosch in creating the automobiles, as well as Bosch’s substantial control over the

engines, meant that plaintiffs established a “sufficiently direct relationship” between

Bosch and their RICO injury. Albers, 2020 WL 1466359 at *7.

such control, plaintiffs remain indirect purchasers, and they lack the capacity

to bring claims under the Sherman Act.

Plaintiffs also argue that the control exception applies because the

relationship between Janssen and the pharmacies was that of principal and

agent. Even assuming arguendo that an agency relationship would invoke the

exception, see supra, the complaint does not allege the key requisites of an

agency relationship: that “the agent shall act on the principal’s behalf and

subject to the principal’s control”. Restatement (Third) Of Agency § 1.01

(2006).18 Plaintiffs allege only that the business relationship between Janssen

and the pharmacies was profitable and that the pharmacies thus “will not bite

the hand that feeds them.”19 (Opp. at 26.) A mutually profitable business

relationship is a far cry from the “fundamental economic … unity” required for

plaintiffs to fall into this narrow exception to Illinois Brick’s direct purchaser

rule. Jewish Hosp. Ass’n, 628 F.2d at 975.

All that remains is plaintiffs’ assertion that Janssen controlled the price

at which Zytiga was sold by the pharmacies. (Opp. at 26; SCCAC ¶ 817–18.)

Although plaintiffs specifically disclaim that their control argument is based on

price-setting, I briefly address the issue. (Id. at 27.) Both the Supreme Court

and the Third Circuit have rejected price-setting as the relevant criterion for

determining whether the Illinois Brick direct purchaser rule applies. What

matters is whose hands the products pass through on the way to the

consumer. Only the first pair of hands are deemed to be those of a direct

18 Plaintiffs do allege generally that Janssen “controlled” the pharmacies. This

language is conclusory in that it is not backed by facts sufficient to establish “control”

within the specialized meaning of the Illinois Brick exception. “Threadbare recitals of

the elements of a cause of action, supported by mere conclusory statements, do not

suffice” to survive a motion to dismiss. Iqbal, 556 U.S. at 678. (Opp. at 25–26.)

19 As Janssen points out, this argument is undermined by the fact that one of the

specialty pharmacies, KPH Healthcare Services, Inc., has indeed sued Janssen for

antitrust violations related to Zytiga. (Mot. at 31 n.9.) KPH, albeit as the assignee of

McKesson Corporation, brought a direct purchaser antitrust case against Janssen.

KPH Healthcare Services, Inc. v. Janssen Biotech, Inc., 2021 WL 4739601, at *2 (D.N.J.

Oct. 12, 2021). (Mot. at 34.)

purchaser. Apple Inc. v. Pepper, 139 S. Ct. 1514, 1522 (2019); In re Hypodermic

Prod. Antitrust Litig., 484 F. App’x 669, 675 (3d Cir. 2012) (citing Warren Gen.

Hosp., 643 F.3d at 88).

Because plaintiffs do not allege that Janssen exercised such a degree of

control over the pharmacies that there was an economic unity between them,

the plaintiffs’ Sherman Act claim must be dismissed under the Illinois Brick

direct purchaser rule.

c. Noerr-Pennington Doctrine

Setting aside the Illinois Brick issue, defendants argue in the alternative

that the Noerr-Pennington doctrine, rooted in the First Amendment, insulates

Janssen’s litigative efforts from antitrust scrutiny.

The Noerr-Pennington doctrine is a Constitutional defense to antitrust

liability. Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 123 (3d Cir. 1999).

Generally, a party that exercises its First Amendment right to petition the

government for redress is shielded from antitrust liability based on such

petitioning. Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S.

127 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965).

That immunity extends to persons who petition all types of government

entities, including courts. California Motor Transport Co. v. Trucking Unlimited,

404 U.S. 508, 510 (1972) (“The right of access to the courts is indeed but one

aspect of the right of petition.”) A court may decide the applicability of the

Noerr–Pennington doctrine on a motion to dismiss under Fed. R. Civ. P. 12(b)(6)

in the absence of factual issues. Indivior Inc. v. Dr. Reddy's Lab’ys S.A., 2020

WL 4932547, at *8 (D.N.J. Aug. 24, 2020) (citing Trustees of Univ. of Pa. v. St.

Jude Children’s Res. Hosp., 940 F. Supp. 2d 233, 242–43 (E.D. Pa. 2013)); see

also Pro. Real Est. Invs., Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 63

(1993) (“PRE”) (“Where, as here, there is no dispute over the predicate facts of

the underlying legal proceeding, a court may decide probable cause as a matter

of law.”)

So a company does not violate the Sherman Act if, for example, it

exercises its First Amendment right to lobby an administrative agency to

publish a rule that will injure a competing company. See PRE, 508 U.S. at 57–

58 (“evidence of anticompetitive intent or purpose alone cannot transform

otherwise legitimate activity into a sham”). In the Hatch-Waxman context, the

doctrine means that antitrust liability will usually not attach to a patentee who

sues generic manufacturers after receiving a Paragraph IV notice letter and

thereby obtains the benefit of the automatic thirty-month stay on generic

competition. 21 U.S.C. § 355 (j)(5)(iii). That is so even if the patentee harbors

the anticompetitive motive to delay generic competition.

But Noerr-Pennington immunity, as applied to litigation, does have a

limit. It does not apply to a lawsuit so lacking in merit that it is a “mere sham

to cover what is actually nothing more than an attempt to interfere directly

with the business relationships of a competitor.” Noerr, 365 U.S. at 144.

Plaintiffs argue that Janssen’s 2015 patent infringement action against generic

manufacturers was such a “sham lawsuit.” (SCCAC ¶ 823; Opp. at 10–23; BTG

Int’l Ltd., et al., v. Amneal Pharmaceuticals LLC, et al., 15-cv-5909 (D.N.J.).) To

be considered sham litigation, a lawsuit must be both objectively and

subjectively baseless. PRE, 508 U.S. at 60–61. “Only if challenged litigation is

objectively meritless may a court examine the litigant’s subjective motivation.”

Id. at 60. Because I find that the litigation was not objectively baseless, I do not

examine Janssen’s subjective motivation for filing suit.

The Supreme Court has held that a lawsuit is objectively baseless only if

“no reasonable litigant could realistically expect success on the merits. If an

objective litigant could conclude that the suit is reasonably calculated to elicit a

favorable outcome, the suit is immunized… and an antitrust claim premised on

the sham exception must fail.” PRE, 508 U.S. at 60. “The existence of probable

cause to institute legal proceedings precludes a finding that an antitrust

defendant has engaged in sham litigation.” Id. at 62. The Court went on to

clarify that “probable cause,” as used here, is not the concept familiar from

criminal law: “Probable cause to institute civil proceedings requires no more

than a reasonable belief that there is a chance that a claim may be held valid

upon adjudication.... [T]he existence of probable cause is an absolute defense.”

Id. at 62–63 (emphasis added); see also Cheminor Drugs, 168 F.3d at 122. If the

plaintiff reasonably believes that there is a chance it could prevail in court, its

bringing of a lawsuit is immunized under the Noerr-Pennington doctrine.

It is rightly difficult to prove that a lawsuit is a mere sham. The hurdle is

higher still in ANDA cases, because the Hatch-Waxman Act deems it an act of

infringement to submit an ANDA for a drug covered by a duly issued patent.

“Since the submission of an ANDA is, by statutory definition, an infringing act,

an infringement suit filed in response to an ANDA with a paragraph IV

certification could only be objectively baseless if no reasonable person could

disagree with the assertions of noninfringement or invalidity in the

certification.” In re Wellbutrin XL Antitrust Litig. Indirect Purchaser Class, 868

F.3d 132, 149 (3d Cir. 2017).20 In addition, the Third Circuit has recently

stated that “we must not penalize a brand-name manufacturer whose

litigiousness was a product of Hatch-Waxman” because “[d]oing so would

punish behavior that Congress sought to encourage.” Fed. Trade Comm’n v.

AbbVie Inc., 976 F.3d 327, 361 (3d Cir. 2020), cert. denied, 141 S. Ct. 2838

(2021) (quoting Wellbutrin, 868 F.3d. at 158) (cleaned up).

To clear this doctrinal hurdle, plaintiffs argue that Janssen knew that its

patent was invalid and had been granted only because the ’213 blocking patent

had not been revealed to the PTO. It follows, they say, that any reasonable

litigant in Janssen’s position would have known that it had absolutely no

chance to prevail in its infringement action. (Opp. at 12–13.)21 In plaintiffs’

20 In addition, the Third Circuit has stated that the serial petitioning exception to

Noerr-Pennington, which derives from California Motor, 404 U.S. 508, does not apply in

the Hatch-Waxman context. Fed. Trade Comm’n v. AbbVie Inc, 976 F.3d 327, 361 (3d

Cir. 2020), cert. denied, 141 S. Ct. 2838 (2021).

21 Here the plaintiffs are walking a tightrope. The patent did issue, and they

specifically disclaim a Walker Process theory that Janssen committed fraud on the

telling, Janssen knew that the second, ’438, patent rested on an unstable

foundation and was certain to be invalidated as soon as it faced an adversarial

process. Yet Janssen filed suit anyway, unconcerned with the outcome, solely

to obtain the benefit of the thirty-month stay. (Id. at 11–12.)

There is no straightforward test or bright line rule to determine whether

a losing lawsuit was objectively baseless. (A winning lawsuit, of course, is not a

sham.) The Supreme Court has warned against the “‘understandable

temptation to engage in post hoc reasoning by concluding’ that an ultimately

unsuccessful ‘action must have been unreasonable or without foundation.’”

PRE, 508 U.S. at 61 n.5 (quoting Christiansburg Garment Co. v. EEOC, 434 U.S.

412, 421–422 (1978)). There are numerous indicia that I can look at to

determine whether a lawsuit was a sham, including my personal experience

presiding over the first case and its bench trial. Asahi Glass Co. v. Pentech

Pharms., Inc., 289 F. Supp. 2d 986, 993 (N.D. Ill. 2003).

I find that Janssen’s infringement action, though unsuccessful, was not

objectively baseless. Just to set up the issues required a 30-page Markman

opinion construing the term “treatment.” The case was a triable one, in my

view, and was hard fought by both parties. After an eight-day bench trial, I

found the patent invalid in a 70-page opinion setting forth findings of fact and

conclusions of law. The obviousness issue required close analysis of multiple

factors. One strand of that argument, commercial success, was undermined by

the effect of the blocking patent. Although I wrote that “there can be no dispute

that ZYTIGA® has yielded billions of dollars in sales,” I recognized that the

existence of the blocking patent “would have discouraged entry at the very time

when the obviousness of combination therapy was manifesting itself.” BTG Int’l

Ltd. v. Amneal Pharms. LLC, 352 F. Supp. 3d 352, 386, 387 (D.N.J. 2018).

Although Janssen claimed that it attempted to license the patent, I found that

PTO. (Opp. at 11.) Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp.,

382 U.S. 172 (1965).

those efforts were “desultory,” and further found that “the sales of ZYTIGA may

not be wholly attributable to the patented combination therapy.” Id. at 387.

On another strand, Janssen put forward a substantial if ultimately

unavailing argument that the patent was not obvious from prior art. After

analyzing the arguments and published research, I found that prior art had

identified abiraterone as a cancer treatment and that it was superior to a

similar compound ketoconazole. Id. at 384. I also analyzed a paper that,

though flawed, found that prednisone was also an anti-cancer agent that

reduced PSA levels. Id. I thus found that, based on the prior art and even

considering potential side effects, there was “more than sufficient motivation

for a [person of ordinary skill in the art] to combine abiraterone with

prednisone.” Id. at 385. In addition, I found that the professional-approval

factor weighed in Janssen’s favor. Id. at 389. Overall, Janssen presented a

plausible case, if not a winning one. I did not doubt then and do not doubt now

that it had probable cause to bring the case and a real, if not strong, chance of

prevailing.22

Plaintiffs discuss a recent case in which the Third Circuit upheld a

determination that a patent infringement suit was objectively baseless. (Opp. at

8, 13 (citing AbbVie, 976 F.3d at 360, 370).) If anything, however, the

differences between that case and this one confirm that Janssen’s infringement

action was not objectively baseless. In AbbVie, the Third Circuit upheld the

district court’s finding that a lawsuit was objectively baseless because of

prosecution history estoppel. After its first attempt to obtain a patent was

denied, AbbVie amended its patent claim to include only one “penetration

enhancer” chemical rather than the 24 it had included the first time. AbbVie,

976 F.3d at 366. The alleged infringer used a penetration enhancer chemical

22 Plaintiffs cite a study showing that those challenging pharmaceutical patents

under Hatch-Waxman prevail 76% of the time. (Opp. at 12.) Of course, success in a

patent lawsuit is not a probabilistic event, like repeated tosses of a coin; it depends on

the merits of the individual action. But even indulging the statistical approach, if

Janssen reasonably believed it had a 24% chance of prevailing in the lawsuit, it could

not have been a sham.

that was included among the original 24 chemicals, but which AbbVie had

specifically removed from its second patent application. The alleged infringer

pointed out in its Paragraph IV notice that it had used one of the penetration

enhancers that was dropped from the second patent application, and that the

prosecution history estopped AbbVie from asserting infringement based on that

no-longer-claimed chemical.23 Id. Thus, the court found, any reasonable

litigant in AbbVie’s position should have realized that it had literally no chance

of prevailing in its infringement suit. Id. at 366–68. Here, there is no such

clear-cut reason that Janssen should have been certain that its lawsuit would

fail. Plaintiffs claim that with the blocking patent revealed, Janssen’s patent

would automatically have been invalidated for obviousness, but, as stated

above, I find that the non-obviousness argument was plausible and not

frivolous.

I find that Janssen had probable cause to bring its patent infringement

action and that it was therefore not objectively baseless. Because that

infringement action was not objectively baseless, the Noerr-Pennington doctrine

immunizes Janssen from antitrust liability based on that action. Plaintiffs’

Sherman Act claim based on “sham litigation” must be dismissed for this

reason.

Dismissing the Sherman Act claim still leaves plaintiffs with 57

numbered state law counts. These, too, must be dismissed under the Noerr-

Pennington doctrine. Plaintiffs allege no anti-competitive activity other than the

infringement litigation, which I have determined was not a sham litigation.

Their state law antitrust, consumer protection, and unjust enrichment claims

rest on the same basis as their federal claim—and it is the merit, or not, of the

prior federal infringement claim, not particulars of the state law claims now

asserted, that controls the Noerr-Pennington issue. Because the Noerr-

Pennington doctrine is a Constitutional doctrine based on the First Amendment

23 On the well-established law of prosecution history estoppel see Festo Corp. v.

Shoketsu Kinzoku Kogyo Kabushiki Co., 344 F.3d 1359, 1366–67 (Fed. Cir. 2003).

right to petition, it bars Sherman Act and analogous state law claims alike.24

Many state courts have so held. See Coll v. First Am. Title Ins. Co., 642 F.3d

876, 896 n.18 (10th Cir. 2011) (collecting cases from 23 states). The Third

Circuit, too, has acknowledged that the Noerr-Pennington bar is not limited to

federal antitrust claims, but applies to state law claims as well. Cheminor

Drugs, 168 F.3d at 128 (stating “we have been presented with no persuasive

reason why these state tort claims, based on the same petitioning activity as

the federal claims, would not be barred by the Noerr–Pennington doctrine” and

applying the doctrine to dismiss tortious interference and unfair competition

claims). A state cannot hold defendants liable, whether in antitrust, tort, or

equity, for activities that are protected by the First Amendment.25

Thus, counts 1–57 must be dismissed along with plaintiffs’ Sherman Act

claim.

IV. CONCLUSION

For the reasons set forth above, defendants’ motion to dismiss (DE 155)

is GRANTED. A separate order will issue.

Dated: October 27, 2021

/s/ Kevin McNulty

___________________________________

Hon. Kevin McNulty

United States District Judge

24 It has long been recognized, of course, that the First Amendment is

incorporated as against the states via the due process clause of the Fourteenth

Amendment. E.g., Gitlow v. New York, 268 U.S. 652 (1925).

25 Because I find that the state claims must be dismissed under Noerr-Pennington,

I do not address Janssen’s arguments that the claims must also be dismissed under

Copperweld, 467 U.S. 752 (1984), and for other, state-specific reasons. (Mot. at 36–

65.)