Andrx Pharmaceuticals, Inc. v. Biovail Corp. International

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 12, 2001 Decided July 31, 2001

Nos. 00-5050 & 00-5396

Andrx Pharmaceuticals, Inc.,

Appellee

v.

Biovail Corporation International,

Appellant

Appeals from the United States District Court

for the District of Columbia

(No. 98cv00099)

Richard J. Leighton argued the cause for the appellant.

John B. Dubeck, Douglas J. Behr and Eric H. Singer were on

brief.

Louis M. Solomon argued the cause for the appellee.

Eugene M. Pfeifer, James D. Miller and Peter M. Todaro

were on brief.

Before: Henderson, Randolph and Garland, Circuit

Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: Appellant Bio-

vail Corporation (Biovail) appeals two district court decisions.

One dismissed with prejudice its antitrust counterclaim

against appellee Andrx Pharmaceuticals, Inc (Andrx). The

second denied its motion for reconsideration of the court's

dismissal. For the reasons that follow, we affirm the district

court's dismissal of the counterclaim but reverse its decision

to do so with prejudice.

I. Statutory Background

A company wishing to market a new drug must seek the

approval of the United States Food & Drug Administration

(FDA) by completing a "New Drug Application" (NDA). See

American Bioscience, Inc. v. Thompson, 243 F.3d 579, 580

(D.C. Cir. 2001); Mova Pharm. Corp. v. Shalala, 140 F.3d

1060, 1063 (D.C. Cir. 1998); see also 21 U.S.C. s 355(a) ("No

person shall introduce or deliver for introduction into inter-

state commerce any new drug, unless an approval of an

application filed pursuant to (b) or (j) of this section is

effective with respect to such drug."). An NDA is time-

consuming and costly to prepare because it must include data

from studies showing the drug's safety and effectiveness. See

Mova, 140 F.3d at 1063. In 1984 the Congress enacted the

Hatch-Waxman Amendments to the Food, Drug and Cosmet-

ic Act (Amendments) to, inter alia, simplify the procedure for

FDA approval. See Drug Price Competition and Patent

Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat.

1585 (1984) (codified in various sections of titles 21, 35 & 42

U.S.C.); see generally Allan M. Fox & Allan R. Bennett, The

Legislative History of the Drug and Patent Term Restora-

tion Act of 1984, at 259 (1987); James J. Wheaton, "Generic

Competition and Pharmaceutical Innovation: the Drug Price

Competition and Patent Term Restoration Act of 1984," 35

Cath. Univ. L. Rev. 433 (1986). Under the Amendments, the

original applicant for FDA approval (the "pioneer" applicant)

must still prepare an NDA. Subsequent applicants who wish

to manufacture generic versions1 of the pioneer drug, howev-

er, need only complete an Abbreviated New Drug Application

(ANDA) that relies on the FDA's previous determination that

the drug is safe and effective.2 See Mova, 140 F.3d at 1063.

The generic drug share of the prescription drug market has

grown from 19 per cent in 1983 to over 40 per cent in 1995.

See Congressional Budget Office, How Increased Competition

from Generic Drugs Has Affected Prices and Returns in the

Pharmaceutical Industry ix (1998). In addition, almost all of

the most popular pioneer drugs with expired patents now

have generic versions available. Id. at xii.

Although the Congress was interested in increasing the

availability of generic drugs, it also wanted to protect the

patent rights of the pioneer applicants. See David A. Balto,

"Pharmaceutical Patent Settlements: The Antitrust Risks,"

55 Food & Drug L.J. 321, 324 (2000). The Amendments,

therefore, require that an NDA contain a list of any patents

"which claim[ ] the drug ... or which claim[ ] a method of

using such drug and with respect to which a claim of patent

infringement could reasonably be asserted if a person not

licensed by the owner engaged in the manufacture, use, or

sale of the drug." 21 U.S.C. s 355(b)(1). The FDA main-

tains a record of such information in its publication entitled

Approved Drug Products with Therapeutic Equivalence,

commonly known as the Orange Book. See 21 U.S.C.

s 355(j)(7)(A). For each patent applicable to the pioneer drug

listed in the Orange Book, an ANDA applicant must certify

__________

1 A generic version of a pioneer drug (often described as a brand-

name drug) contains the same active ingredients, but not necessari-

ly the same inactive ingredients, as the pioneer drug. A generic

drug, as the name implies, is ordinarily sold without a brand name

and at a lower price. See United States v. Generix Drug Corp., 460

U.S. 453, 454-55 (1983).

2 Before the Amendments, an earlier version of the ANDA proce-

dure was available to a generic drug manufacturer of a pioneer

drug approved before 1962. A generic version of a pioneer drug

approved after 1962, however, could be approved only through a full

NDA. See Fox & Bennett, supra, at 95.

whether the proposed generic drug would infringe that patent

and, if not, why not. An ANDA applicant has four certifica-

tion options. It may certify (1) that the required patent

information has not been filed, (2) that the patent has expired,

(3) that the patent has not expired but will expire on a

particular date or (4) that the patent is invalid or will not be

infringed by the drug for which the applicant seeks approval.

See 21 U.S.C. s 355(j)(2)(A)(vii). The last of these options,

and the one relevant here, is the Paragraph IV certification.

After an applicant makes a Paragraph IV certification, the

statute provides a 45-day window during which the patent

holder may bring suit against the applicant. If the patent

holder brings a timely suit, the statute bars the FDA from

approving the applicant's ANDA, or any subsequent ANDA,

for thirty months or until the successful resolution of the

patent infringement suit, whichever is earlier, at which time

the first ANDA applicant is eligible for FDA approval and

upon such approval is awarded a 180-day exclusivity period in

which to market its generic version. See 21 U.S.C.

s 355(j)(5)(B)(iii). The statute permits the court to lengthen

or shorten the 30-month waiting period if it determines that

either party has failed to "reasonably cooperate in expediting

the action." Id.3

__________

3 The full text of section 355(j)(5)(B)(iii) provides:

If the applicant made a certification described in subclause (IV)

of paragraph (2)(A)(vii), the approval shall be made effective

immediately unless an action is brought for infringement of a

patent which is the subject of the certification before the

expiration of forty-five days from the date the notice provided

under paragraph (2)(B)(i) is received. If such an action is

brought before the expiration of such days, the approval shall

be made effective upon the expiration of the thirty-month

period beginning on the date of the receipt of the notice

provided under paragraph (2)(B)(i) or such shorter or longer

period as the court may order because either party to the

action failed to reasonably cooperate in expediting the action,

except that--

(I) if before the expiration of such period the court decides

that such patent is invalid or not infringed, the approval shall

be made effective on the date of the court decision,

II. Background

Hoechst Marion Roussel, Inc. (HMRI) is the manufacturer,

marketer and patent holder of the brand name prescription

drug Cardizem CD, which consists of a once-daily dosage of

the chemical compound dilitiazem hydrochloride. Cardizem

CD is widely prescribed for the treatment of chronic chest

pains (angina) and hypertension and for the prevention of

heart attacks and strokes. See In re Cardizem CD Antitrust

Litig., 105 F. Supp. 2d 618, 622 (E.D. Mich. 2000). On

September 22, 1995 Andrx filed an ANDA with the FDA

seeking approval to manufacture and sell a generic form of

Cardizem CD. On December 31, 1995 it made the Paragraph

IV certification with regard to all unexpired patents included

in the Orange Book's Cardizem CD entry and certified that

its generic form of Cardizem CD did not infringe the patents

owned or controlled by HMRI or its affiliates. See 21 U.S.C.

s 355(j)(2)(A)(vii)(IV); 21 C.F.R. s 314.94(a)(12)(i)(A)(4). In

early 1996 HMRI filed a timely suit against Andrx for patent

__________

(II) if before the expiration of such period the court

decides that such patent has been infringed, the approval

shall be made effective on such date as the court orders

under section 271(e)(4)(A) of Title 35, or

(III) if before the expiration of such period the court

grants a preliminary injunction prohibiting the applicant

from engaging in the commercial manufacture or sale of the

drug until the court decides the issues of patent validity and

infringement and if the court decides that such patent is

invalid or not infringed, the approval shall be made effective

on the date of such court decision.

In such an action, each of the parties shall reasonably

cooperate in expediting the action. Until the expiration of

forty-five days from the date the notice made under para-

graph (2)(B)(i) is received, no action may be brought under

section 2201 of Title 28, for a declaratory judgment with

respect to the patent. Any action brought under section

2201 shall be brought in the judicial district where the

defendant has its principal place of business or a regular

and established place of business.

infringement.4 The filing of the suit triggered the statutory

30-month waiting period during which any subsequent ANDA

applicant, including Biovail, could not receive final approval of

its generic version of Cardizem CD. See 21 U.S.C.

s 355(j)(5)(B)(iii).

In June 1997 Biovail filed an ANDA with the Paragraph IV

certification for its generic version of Cardizem CD but

HMRI filed no patent infringement suit against it. On

September 15, 1997 the FDA issued its tentative approval of

Andrx's ANDA.5 Nine days later, on September 24, 1997,

HMRI and Andrx entered into an agreement (Agreement or

HMRI-Andrx Agreement) purporting to maintain the status

quo pending the outcome of HMRI's patent infringement suit

against Andrx. Under the terms of the Agreement, Andrx

agreed not to sell its generic version of Cardizem CD until a

specific time agreed upon by the parties. It also agreed to

diligently prosecute its ANDA and not to relinquish or other-

wise compromise any right accruing thereunder. HMRI

agreed to make interim payments to Andrx in the amount of

$40 million per year, payable quarterly, beginning on the date

Andrx's generic version of Cardizem CD received FDA ap-

proval and ending on the date Andrx either began to sell its

generic version or was adjudged liable for patent infringe-

ment.

In early 1998 Andrx filed suit against the FDA and certain

ANDA applicants (including Biovail) to clarify its right as the

first to file an ANDA for Cardizem CD. The suit sought

injunctive relief requiring the FDA to provide Andrx with "a

period of 180 days of marketing exclusivity for its controlled-

release generic formulations of the drugs Dilacor XR and

Cardizem CD." JA 13. It also requested injunctive relief

prohibiting the FDA "from approving any ANDA submitted

by defendant Biovail ... for a generic version of Cardizem

CD that contains a paragraph 4 certification until 180-days

after Andrx begins marketing its generic formulation of Car-

__________

4 Later in 1996 Faulding Inc. filed an ANDA with a Paragraph IV

certification for its generic version of Cardizem CD. In January

1997 HMRI also filed suit against Faulding for patent infringement.

5 The FDA issued tentative, as opposed to final, approval due to

the pending infringement suit and the resulting 30-month statutory

waiting period.

dizem CD or a court enters a judgment in the patent litiga-

tion brought by HMRI in the Southern District of Florida,

whichever is earlier." JA 22. Biovail counterclaimed, alleg-

ing that Andrx had violated sections 1 and 2 of the Sherman

Act as well as New Jersey common law.6

On July 3, 1998 the FDA granted final approval to Andrx's

ANDA for a generic version of Cardizem CD. JA 44. By

then, the 30-month waiting period had expired and Andrx

was no longer restricted under the statutory scheme from

marketing and selling its generic drug. Andrx, however, did

not do so and on July 9, 1998, pursuant to the Agreement,

HMRI began making quarterly payments of $10 million to

Andrx. By not marketing its generic version of Cardizem

CD, Andrx did not trigger the 180-day market exclusivity

period, which in turn prevented the FDA from giving final

approval to any subsequently filed applications for competing

generic versions of Cardizem CD.

Approximately one year later, HMRI and Andrx terminat-

ed their Agreement and entered into a stipulation settling the

patent litigation. On June 23, 1999, Andrx then began to

market its generic version and its 180-day exclusivity period

began to run. In October 1999 the FDA gave tentative

approval to Biovail's ANDA and final approval on December

__________

6 On July 14, 1998 the FDA published a notice entitled "Guidance

for Industry on 180-Day Generic Drug Exclusivity Under the

Hatch-Waxman Amendments to the Federal Food, Drug, and Cos-

metic Act; Availability," interpreting the Hatch-Waxman Amend-

ments so as to give Andrx the relief it sought in its complaint. The

Guidance explained that the FDA intended to delete the "successful

defense" provisions from s 314.107(c)(1) and that the FDA would

not enforce the "successful defense" provisions in the interim. See

63 Fed. Reg. 37,890 (July 14, 1998); see also JA 62 (Federal

Defendant's Motion to Dismiss); JA 198 (Notice of Dismissal).

Accordingly, the district court subsequently dismissed the com-

plaint. See JA 199. Andrx had earlier moved to dismiss Biovail's

counterclaim for failure to state a claim upon which relief may be

granted because, inter alia, Biovail lacked standing to assert an

antitrust violation.

23, 1999.7 Neither Andrx nor Biovail, however, informed the

district court of these developments. On January 6, 2000 the

district court granted Andrx's Rule 12(b)(6) motion to dismiss

Biovail's counterclaim, the federal antitrust counts with preju-

dice and the state law claims without prejudice. The court

concluded that Biovail did not, and in fact could not, plead an

antitrust injury causally linked to Andrx's alleged anticompet-

itive behavior. Andrx Pharm., Inc. v. Friedman, 83 F. Supp.

2d 179, 185-87 (D.D.C. 2000) ("Court cannot find that Biovail

can establish that it has suffered 'antitrust injury.' "). On

February 2, 2000 Biovail moved for reconsideration under

FRCP 60(b) and on February 4, 2000 it filed a notice of

appeal (No. 00-5050). The district court subsequently denied

the motion for reconsideration and Biovail noticed its appeal

of that decision (No. 00-5396) on November 3, 2000. This

court granted Biovail's motion to consolidate the appeals.

III. Analysis

We give de novo review to a Rule 12(b)(6) dismissal. See

NRA v. Reno, 216 F.3d 122, 126 (D.C. Cir. 2000); see also

Amarel v. Connell, 102 F.3d 1494, 1507 (9th Cir. 1997)

(holding that antitrust standing is question of law reviewed de

novo). "The complaint should not be dismissed unless plain-

tiffs can prove no set of facts in support of their claim which

would entitle them to relief." Kowal v. MCI Communica-

tions Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). We liberally

construe the complaint in the plaintiff's favor and grant the

plaintiff the benefit of all inferences that can be derived from

the facts alleged. "However, the court need not accept

inferences drawn by plaintiffs if such inferences are unsup-

ported by the facts set out in the complaint. Nor must the

court accept legal conclusions cast in the form of factual

allegations." Id. The court reviews the denial of the appel-

lant's Rule 60(b) motion for abuse of discretion "unless the

decision is 'rooted in an error of law.' " United Mine Work-

__________

7 In a letter dated October 22, 1999 the FDA explained to Biovail

that it had "completed review" of its ANDA and found its generic

"safe and effective." JA 322. It gave tentative, rather than final,

approval because of "the exclusivity granted by the agency to

Andrx." JA 323; see also JA 327.

ers of Am. 1974 Pension v. Pittston Co., 984 F.2d 469, 476

(D.C. Cir. 1993) (citation omitted).

Section 4 of the Clayton Act provides that a private person

"injured in his business or property by reason of anything

forbidden in the antitrust laws ... shall recover threefold the

damages by him sustained, and the cost of suit, including a

reasonable attorney's fee." 15 U.S.C. s 15(a). The Clayton

Act includes the Sherman Act8 as one of the "antitrust laws."

See 15 U.S.C. s 12. A person "threatened [with] loss or

damage by a violation of the antitrust laws" can seek injunc-

tive relief under section 16 of the Clayton Act. 15 U.S.C.

s 26. The availability of a private antitrust action, and its

accompanying treble damages remedy, serves both to com-

pensate private persons for their injuries and to punish

wrongdoers. See 2 Phillip E. Areeda, Herbert Hovenkamp &

Roger D. Blair, Antitrust Law p 330, at 273 (2d. ed. 2000).

Private enforcement of the nation's antitrust laws also in-

creases the likelihood that violators will be discovered. See

Blue Shield of Va. v. McCready, 457 U.S. 465, 473 n.10 (1982)

("Only by requiring violators to disgorge the 'fruits of their

illegality' can the deterrent objectives of the antitrust laws be

fully served.") (citation omitted). In fact, private enforce-

ment actions account for the overwhelming majority of anti-

trust litigation in the United States. See William F. Dolan,

Developments in Private Antitrust Enforcement in 1999,

1181 PLI/Corp 971, 975 (2000).

"On its face, s 4 contains little in the way of restrictive

language." Reiter v. Sonotone Corp., 442 U.S. 330, 337

(1979). "The statute does not confine its protection to con-

__________

8 Section 1 of the Sherman Act prohibits contracts, combinations

or conspiracies "in restraint of trade or commerce among the

several States, or with foreign nations." 15 U.S.C. s 1. Section 2

states that "[e]very person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other person or

persons, to monopolize any part of the trade or commerce among

the several States, or with foreign nations, shall be deemed guilty of

a felony." 15 U.S.C. s 2. In its counterclaim, Biovail alleged that

Andrx violated both sections 1 and 2 of the Sherman Act. JA 20-

21.

sumers, or to purchasers, or to competitors, or to sellers....

The Act is comprehensive in its terms and coverage, protect-

ing all who are made victims of the forbidden practices by

whomever they may be perpetrated." Mandeville Island

Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236

(1948). The Supreme Court, however, has recognized that

"the potency of the remedy implies the need for some care in

its application" and does not construe the section 4 language

to allow suit by every party affected by an antitrust violator's

"ripples of harm." McCready, 457 U.S. at 476-77. An anti-

trust plaintiff must establish an injury-in-fact or a threatened

injury-in-fact caused by the defendant's alleged wrongdoing.

See Associated Gen. Contractors of Cal., Inc. v. California

State Council of Carpenters, 459 U.S. 519, 535 (1983). More-

over, the injury must affect the plaintiff's business or proper-

ty and must be the kind of injury the antitrust laws were

intended to prevent; it must "flow[ ] from that which makes

defendants' acts unlawful." Brunswick Corp. v. Pueblo

Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). Additional

factors to be considered in determining whether the plaintiff

has "antitrust standing" include: the directness of the injury,

whether the claim for damages is "speculative," the existence

of more direct victims, the potential for duplicative recovery

and the complexity of apportioning damages. See Associated

Gen. Contractors, 459 U.S. at 542-45; see also Adams v. Pan

Am. World Airways, Inc., 828 F.2d 24, 26 (D.C. Cir. 1987).

We review the district court's decision dismissing Biovail's

antitrust counterclaim with prejudice in light of these stand-

ing requirements.

A. Injury-in-Fact and Causation

As in any civil action for damages, the plaintiff in a private

antitrust lawsuit must show that the defendant's illegal con-

duct caused its injury. See 2 Areeda et al., supra, p 338, at

316; see also Restatement (Second) of Torts ss 431, 433

(1965). The plaintiff's first step is to plead an injury-in-fact or,

in a suit for equitable relief, a threatened injury-in-fact to

business or property.9 See Hecht v. Pro-Football, Inc., 570

__________

9 Section 4 of the Clayton Act authorizes a private suit only for

injury to "business or property." 15 U.S.C. s 15; see 2 Areeda et

F.2d 982, 993 (D.C. Cir. 1977). The "burden of proving the

fact of damage under s 4 of the Clayton Act is satisfied by [ ]

proof of some damage flowing from the unlawful conspiracy;

inquiry beyond this minimum point goes only to the amount

and not the fact of damage." Zenith Radio Corp. v. Hazel-

tine Research, Inc., 395 U.S. 100, 114 n.9 (1969) (emphasis

original). The district court held that Biovail not only failed

to plead an injury or a threatened injury but also was unable

to do so because Biovail had yet to receive FDA approval for

its generic version of Cardizem CD and gave no assurance

that it would have entered the market had it gained approval.

Cf. Indium Corp. of Am. v. Semi-Alloys, Inc., 781 F.2d 879,

882 (Fed. Cir. 1985) (because plaintiff was not prepared to

enter market, defendant's conduct caused no injury).

When competitors violate the antitrust laws and another

competitor is forced from a market, the latter suffers an

injury-in-fact. A competitor that has not yet entered the

market may also suffer injury but courts require a "potential"

competitor to demonstrate both its intention to enter the

market and its preparedness to do so. See Hecht, 570 F.2d at

987, 994 ("[A] potential competitor cannot achieve standing

merely by demonstrating his intention to enter a field; he

must also demonstrate his preparedness to do so." (emphasis

original)); see Indium Corp., 781 F.2d at 882 (no injury if

plaintiff not prepared to enter market). "Indicia of prepared-

ness include adequate background and experience in the new

field, sufficient financial capability to enter it, and the taking

of actual and substantial affirmative steps toward entry, 'such

as the consummation of relevant contracts and procurement

of necessary facilities and equipment.' " Hecht, 570 F.2d at

994 (footnote and citation omitted). Thus, in evaluating

whether Biovail sufficiently pleaded or can sufficiently plead

__________

al., supra, p 336, at 303. At the very least, "business or property"

includes "commercial interests or enterprises." Hawaii v. Stan-

dard Oil Co., 405 U.S. 251, 264 (1972). In Reiter v. Sonotone Corp.,

the Supreme Court noted that "the word 'property' has a naturally

broad and inclusive meaning." Id. at 338. On appeal, the parties

do not raise the issue of whether Biovail sufficiently alleged an

injury to "business or property."

an injury or threatened injury, we must examine its intent

and preparedness to enter the market from which it alleges it

was excluded, that is, the Cardizem CD, or controlled-release

dilitiazem-based drug, market.

In the pharmaceutical industry, FDA approval is a prereq-

uisite to enter any drug market. See 21 U.S.C. s 355(a) ("No

person shall introduce or deliver for introduction into inter-

state commerce any new drug, unless an approval of an

application filed pursuant to subsection (b) or (j) of this

section is effective with respect to such drug."). The district

court concluded that Biovail suffered no injury as a result of

the HMRI-Andrx Agreement "because even today, Biovail

could not go to market with a generic version of Cardizem,

because it had not received FDA approval."10 Andrx

Pharm., 83 F. Supp. 2d at 186 (emphasis original). The only

facts Biovail alleged to support its claim of injury were that

the Agreement "prevent[ed] generic Cardizem CD products

by Biovail and others from reaching the market as soon as

they would otherwise be allowed," JA 44 (p 19), and that

Biovail had filed an ANDA for a generic version of Cardizem

CD, JA 50 (p 41). Biovail did not explicitly allege that it was

prepared to bring a generic version of Cardizem CD to

market or that it anticipated FDA approval. In addition,

when the FDA eventually approved its ANDA, Biovail inex-

plicably failed to inform the district court. Based on Biovail's

failure to plead sufficient intent and preparedness to enter

the market, the district court dismissed Biovail's antitrust

counterclaim.11 See Andrx Pharm., 83 F. Supp. 2d at 187.

__________

10 By the time of the district court's decision, however, the FDA

had approved Biovail's ANDA for its generic version of Cardizem

CD although the court was not apprised of that development.

11 The issues of injury-in-fact and causation are closely linked on

this point. By not alleging facts indicating its intent and prepared-

ness to enter the Cardizem CD market, Biovail failed to allege both

an injury (no loss of profits because not prepared to enter market)

and causation (any damages not related to HMRI-Andrx Agree-

ment because Agreement did not cause loss of profits).

The district court, however, went beyond dismissing the

counterclaim based on the pleading's insufficiency. It dis-

missed Biovail's antitrust counterclaim with prejudice. In so

doing it decided, as a matter of law, that Biovail was unable to

set forth any set of facts that would entitle it to the relief it

sought. "[D]ismissal with prejudice should be granted only

when a trial court determines that 'the allegation of other

facts consistent with the challenged pleading could not possi-

bly cure the deficiency.' " Jarrell v. United States Post.

Serv., 753 F.2d 1088, 1091 (D.C. Cir. 1985) (quoting Bonnano

v. Thomas, 309 F.2d 320, 322 (9th Cir. 1962)). The district

court did not conclude that Biovail did not intend to enter the

market or that it was not sufficiently prepared to do so but

instead that it had not sufficiently alleged its intent and

capacity to enter the market. See Andrx Pharm., Inc., 83

F. Supp. 2d at 184-85. Its statement that the FDA had not

yet approved Biovail's ANDA as of the date of its ruling was

understandable in light of the parties' failure to inform the

court to the contrary but the statement was nonetheless

erroneous and not a ground to dismiss with prejudice.

As its motion for reconsideration manifests, Biovail can

allege facts sufficient to indicate its intent and preparedness.

See JA 297, 300-02. And even before the FDA approved

Biovail's ANDA, Biovail could have alleged its intent and

preparedness to enter the market by claiming that FDA

approval was probable. Andrx's original suit, which sought to

enjoin the FDA from approving Biovail's ANDA, suggests

that Biovail (or so Andrx believed) may have intended and

been sufficiently prepared to enter the market. See Zenith

Radio, 395 U.S. at 130 ("[Section 16] authorizes injunctive

relief upon the demonstration of 'threatened' injury. That

remedy is characteristically available even though the plaintiff

has not yet suffered actual injury; he need only demonstrate

a significant threat of injury from an impending violation of

the antitrust laws or from a contemporary violation likely to

continue or recur.") (citation and footnote omitted); L.A.

Mem'l Coliseum Comm'n v. National Football League, 468

F. Supp. 154, 159 (C.D. Cal. 1979). And unlike the plaintiffs

in Confederate Memorial Association, Inc. v. Hines, 995 F.2d

295 (D.C. Cir. 1993), where this court upheld the trial court's

dismissal with prejudice of the plaintiffs' RICO claims be-

cause the plaintiffs failed to allude to facts "entitling them to

recover," Biovail has (in its motion for reconsideration) allud-

ed to facts--FDA approval and intent to enter market--that

may entitle it to relief. Id. at 299; cf. Askins v. District of

Columbia, 877 F.2d 94, 99 (D.C. Cir. 1989) (dismissal with

prejudice of unripe legal claim is legal error). Because

Biovail may be able to cure its pleading deficiency, we

conclude that dismissal with prejudice was erroneously grant-

ed.

Andrx responds, however, that an independent legal

ground supports dismissal with prejudice. It argues Biovail

is unable to allege causation. To sufficiently plead causation,

a plaintiff must allege that the defendant violated the anti-

trust laws, that the defendant's alleged violation "had a

tendency to injure" the plaintiff's business or property, Amer-

inet, Inc. v. Xerox Corp., 972 F.2d 1483, 1495 (8th Cir. 1992),

and that the plaintiff suffered a decline in its business or

property "not shown to be attributable to other causes."

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251, 264

(1945). The Supreme Court has explained "[i]t is enough that

the illegality is shown to be a material cause of the injury; a

plaintiff need not exhaust all possible alternative sources of

injury in fulfilling his burden of proving compensable injury

under [section 4 of the Clayton Act]." Zenith Radio, 395

U.S. at 114 n.9.

The district court found that Biovail failed to establish the

requisite causal connection between its injury and the alleged

anticompetitive conduct. It concluded that any injury Biovail

may have suffered was caused not by the HMRI-Andrx

Agreement but instead by the lack of FDA approval of its

generic version of Cardizem CD and by the delay period

prescribed by the Hatch-Waxman Amendments. We dis-

agree. Although we affirm the district court's dismissal to

the extent Biovail failed to allege an injury-in-fact, we dis-

agree with its conclusion that any injury Biovail might plead

would be caused by "the existence of a troublesome statutory

scheme that prohibits it from marketing a drug until the first

ANDA recipient goes to market, and which places no restric-

tions on when, or even whether, that applicant must to [sic]

go to market." Andrx Pharms., 83 F. Supp. 2d at 185. We

also reject Andrx's argument that any rational actor like itself

would not market its generic drug until the patent infringe-

ment suit against it was resolved, making any loss of profits

caused by Biovail's exclusion from the market a result of the

statutory scheme, not Andrx's conduct. A reasonable juror

could conclude that Andrx's argument contradicts the very

premise of the HMRI-Andrx Agreement. Under the Agree-

ment, HMRI paid Andrx 10 million dollars per quarter effec-

tively not to enter the market. One can fairly infer from

these facts, which were alleged in the counterclaim, that but

for the Agreement, Andrx would have entered the market.

As one commentator has noted, "[a] payment flowing from

the innovator to the challenging generic firm may suggest

strongly the anticompetitive intent of the parties in entering

the agreement and the rent-preserving effect of that agree-

ment." Balto, supra, at 335.

Andrx, however, argues that it "did nothing other than to

act in accordance with rights granted to it under the Hatch-

Waxman [Amendments]. The exercise of these statutory

rights, exclusionary though they may be, cannot support a

claim under the antitrust laws." Appellee Br. 31. Andrx

may be correct that "[a] plaintiff cannot be injured in fact by

private conduct excluding him from the market when a stat-

ute prevents him from entering that market in any event."

City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 268

(3d Cir. 1998) (quoting Philip E. Areeda & Herbert Hoven-

kamp, Antitrust Law, p 363(b) at 222 (1995)). Although the

Hatch-Waxman Amendments provide a 180-day period of

market exclusivity to the first applicant to file an ANDA for a

generic version of a pioneer drug, see 21 U.S.C.

s 355(j)(5)(B)(iv),12 through the Amendments, "Congress

__________

12 Section 355(j)(5)(B)(iv) provides:

If the application contains a certification described in subclause

(IV) of paragraph (2)(A)(vii) and is for a drug for which a

previous application has been submitted under this subsection

continuing such a certification, the application shall be made

effective not earlier than one hundred and eighty days after--

sought to get generic drugs into the hands of patients at

reasonable prices--fast." In re Barr Lab., Inc., 930 F.2d 72,

76 (D.C. Cir. 1991). We disagree with Andrx that "its

conduct was not only permitted under but clearly contemplat-

ed by the Hatch-Waxman" Amendments. Appellee Br. 32.

Although it is true that the first to file an ANDA is permitted

to delay marketing as long as it likes, the statutory scheme

does not envision the first applicant's agreeing with the

patent holder of the pioneer drug to delay the start of the

180-day exclusivity period. See Mova Pharm., 140 F.3d at

1072 (acknowledging and describing as anomaly fact situation

here presented).13

By accepting payments from HMRI, Andrx received the

benefit of the 180-day exclusivity period without starting the

clock. By agreeing with HMRI to share HMRI's profits

from the sale of Cardizem CD, it was able to exclude other

competitors from entering the market. Andrx's commitment

__________

(I) the date the Secretary receives notice from the applicant

under the previous application of the first commercial market-

ing of the drug under the previous application, or

(II) the date of a decision of a court in an action described in

clause (iii) holding the patent which is the subject of the

certification to be invalid or not infringed,

whichever is earlier.

13 The court stated in a footnote:

An amicus brief filed by Biovail Corporation International

dramatically illustrates an analogous risk, not necessarily in-

volving collusion. Biovail was the second applicant to file a

paragraph IV ANDA for a generic version of a heart medi-

cation. Biovail was not sued by the pioneer drug company.

The first applicant and the pioneer drug company are now in

litigation, and, Biovail claims, the pioneer is paying the first

applicant some $10 million per quarter in exchange for the first

applicant's agreement not to sell its product after the 30-month

waiting period expires. Under these circumstances, neither

party would seem to have maximum incentive to bring the

litigation to a close.

Id. at 1072 n.14.

not to trigger the running of the 180-day exclusivity period

could have caused Biovail's injury (assuming FDA approval

was probable and it was sufficiently prepared to enter the

market) by denying it the ability to proceed to market with

its own generic version. Although the 180-day provision of

the Hatch-Waxman Amendments legally barred it from sell-

ing its product, Andrx's manipulation of the exclusivity period

trigger date extended the legal bar.

Andrx maintains that the Agreement was not a restraint

cognizable under the antitrust laws because, under the FDA

regulations in effect at the time, it could not have caused the

delay of FDA approval of Biovail's ANDA. In September

1997 (when the Agreement was signed) Andrx contends that

the FDA regulations provided that the first ANDA applicant

to file a Paragraph IV certification would not be granted a

180-day exclusivity period unless it had "successfully defend-

ed" any patent infringement action brought by the patent

holder "before a subsequent applicant's ANDA was ready to

be approved." Appellee Br. 37-38 (citing 21 C.F.R.

s 314.107(c)(i) (1997)). We rejected the FDA's "successful

defense" regulation in Mova Pharm., 140 F.3d at 1076.

Andrx argues that before the court invalidated the regulation,

it could have done nothing to prolong its exclusivity period by

delaying FDA approval of Biovail's ANDA because it was

entitled to the exclusionary period only if it successfully

defended the patent litigation before the FDA approved a

subsequent applicant's ANDA. Had the FDA approved Bio-

vail's ANDA, Andrx asserts, the Agreement would not have

prevented Biovail from entering the market under the old

regulation.

We reject this argument. On January 23, 1997 the district

court in Mova issued a preliminary injunction against the

FDA, holding that its "successful defense" regulation was

inconsistent with the plain language of the statute and there-

fore unenforceable. See Mova Pharm. Corp. v. Shalala, 955

F. Supp. 128, 131-32 (D.D.C. 1997). HMRI and Andrx did

not enter into their agreement until September 1997, almost

nine months after the court's ruling. On April 14, 1998 this

court affirmed the district court. Mova, 140 F.3d at 1076.

The Agreement did not go into effect until three months

later, in July 1998. The timing of the Agreement and of the

demise of the successful defense requirement defeats Andrx's

argument on this point.

Andrx nevertheless relies on the holding in Polk Bros., Inc.

v. Forest City Enters., Inc., 776 F.2d 185 (7th Cir. 1985). In

Polk Bros., two companies, one that sold appliances and home

furnishings and the other that sold building materials, lum-

ber, tools and related products, reached an agreement to

build on a large parcel of land one building, partitioned on the

interior, to house both stores. Id. at 187. The arrangement

was attractive to both firms due to the complementary nature

of their products. They feared, however, that one day com-

petition might replace cooperation so they negotiated a cove-

nant restricting the products each could sell. Id. Years later

one of the firms wanted to sell certain products in violation of

the covenant and challenged the covenant on antitrust

grounds when the other firm sought to enforce it. Id. at 187-

88. Although the case arose under Illinois antitrust law, state

law used federal antitrust law as a guide. Id. at 188. The

Seventh Circuit upheld the validity of the covenant on the

ground that, although "naked" restraints on trade are unlaw-

ful per se, ancillary restraints that facilitate productive activi-

ty are not. The court provided the following example:

If A hires B as a salesman and passes customer lists to

B, then B's reciprocal covenant not to compete with A is

"ancillary." At the time A and B strike their bargain,

the enterprise (viewed as a whole) expands output and

competition by putting B to work. The covenant not to

compete means that A may trust B with broader respon-

sibilities, the better to compete against third parties.

Covenants of this type are evaluated under the Rule of

Reason as ancillary restraints, and unless they bring a

large market share under a single firm's control they are

lawful. See United States v. Addyston Pipe & Steel Co.,

85 F. 271, 280-83 (6th Cir. 1898) (Taft, J.), aff'd, 172 U.S.

211 (1899).

Id. at 189. Thus even were we to adopt Andrx's characteriza-

tion of the Agreement as "designed to preserve the status

quo by duplicating relief that the court could have ordered

had HMR[I] proceeded with" its motion for a preliminary

injunction in the patent infringement litigation, the Agree-

ment's allegedly anticompetitive provisions, including Andrx's

pledge to continue to pursue its ANDA so as to forestall other

applicants from receiving final FDA approval, were not neces-

sarily ancillary restraints but rather could reasonably be

viewed as an attempt to allocate market share and preserve

monopolistic conditions.

Finally, Andrx contends that there were reasonable alter-

natives available to Biovail that could have avoided the exclu-

sionary effect of the Agreement by triggering the 180-day

period. Andrx relies on CBS Broad. Sys., Inc. v. ASCAP, 620

F.2d 930, 935 (2d Cir. 1980), which held that "a practice that

is not a per se violation ... does not restrain trade when the

complaining consumer elects to use it in preference to realis-

tically available marketing alternatives." There the court

found that to avoid injury, the consumer plaintiff had only to

do nothing "more extraordinary than offer to buy from com-

peting sellers." Id. at 936. Andrx argues that Biovail had

two alternatives in lieu of waiting for Andrx to market its

generic version of Cardizem CD. First, Biovail could have

triggered the start of the 180-day exclusivity period itself

under the "court decision" prong of the Hatch-Waxman

Amendments, 21 U.S.C. s 355(j)(5)(B)(iv)(II), by seeking a

declaratory judgment of non-infringement or invalidity of

HMRI's patent. The successful resolution (or dismissal) of

the declaratory judgment action would have started the 180-

day exclusivity period. See Teva Pharm. USA, Inc. v. FDA,

182 F.3d 1003, 1007-08 (D.C. Cir. 1999). Alternatively, Bio-

vail could have petitioned the FDA to nullify Andrx's 180-day

exclusivity period. FDA regulations provide that "if FDA

concludes that the applicant submitting the first application is

not actively pursuing approval of its abbreviated application,

FDA will make the approval of subsequent abbreviated appli-

cations immediately effective if they are otherwise eligible for

an immediately effective approval." 21 C.F.R.

s 314.107(c)(3).

The CBS holding is easily distinguishable; the language on

which Andrx relies appears in the context of determining

whether an agreement determined not to be per se unlawful

nonetheless restrains trade on the facts. There the agree-

ment benefitted the consumer by bundling various music

copyright licenses, relieving the consumer of having to negoti-

ate licenses with every individual artist. Andrx has cited no

consumer benefit here. Biovail could have sought a declarato-

ry judgment; however, as evidenced by the HMRI-Andrx

patent infringement litigation, the time involved to obtain

such a judgment made this option less than "fully available."

CBS, 620 F.2d at 935. Likewise, as long as Andrx was

pursuing FDA approval, Biovail could not use 21 C.F.R.

s 314.107(c)(3) to revoke the 180-day exclusivity period. In-

deed, according to the HMRI-Andrx Agreement, Andrx was

to continue to pursue approval, which prevented the FDA

from denying it the 180-day exclusivity period. Accordingly,

we conclude the district court erred in dismissing with preju-

dice Biovail's counterclaim for failure to plead injury caused

by Andrx's alleged unlawful restraint of trade. See supra

note 8.

B. Antitrust Injury

"A private antitrust plaintiff does not acquire standing

merely by showing that it was injured in a proximate and

reasonably measurable way by conduct of the defendant

violating the antitrust laws (injury-in-fact). Nor is it enough

that the injury be causally connected to the acts that violate

the antitrust laws (causation)." 2 Areeda et al., supra, p 337a,

at 305. In Brunswick, the Supreme Court explained that

"[p]laintiffs must [also] prove antitrust injury, which is to say

injury of the type the antitrust laws were intended to prevent

and that flows from that which makes defendants' acts unlaw-

ful." 429 U.S. at 489 (emphasis original). "The injury should

reflect the anticompetitive effect either of the violation or of

anticompetitive acts made possible by the violation. It should,

in short, be 'the type of loss that the claimed violations ...

would be likely to cause.' " Id. (quoting Zenith Radio, 395

U.S. at 125).14 The Supreme Court has declared that the

antitrust laws "were enacted for 'the protection of competi-

tion not competitors.' " Id. at 488 (quoting Brown Shoe Co.

v. United States, 370 U.S. 294, 320 (1962)) (emphasis original).

Thus a competitor may not claim an injury resulting from

competition even when such competition was actually caused

by conduct that violates the antitrust laws. See 2 Areeda et

al., supra, p 337, at 306; see also Matsushita Elec. Indus. Co.

v. Zenith Radio Corp., 475 U.S. 574, 596 n.20 (1986) (competi-

tors suffer no harm from conspiracy to raise prices); J.

Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 568

(1981) (violation of antitrust laws not enough to confer stand-

ing).

In asserting that Biovail cannot assert an antitrust injury,

Andrx compares it to the Brunswick plaintiffs. In Bruns-

wick, the plaintiffs, three bowling alleys, complained that the

defendant's acquisition of several financially troubled bowling

centers violated section 7 of the Clayton Act. In seeking

damages, the plaintiffs "attempted to show that had [the

defendant] allowed the defaulting centers to close, [the plain-

tiffs'] profits would have increased." Brunswick, 429 U.S. at

481. The Supreme Court held that even though the plaintiffs'

injury--loss of profits--was caused by the defendant's poten-

tially unlawful acquisitions, the plaintiffs suffered no antitrust

injury because the increased competition resulting from the

defendant's purchase and operation of competing bowling

alleys was not an injury antitrust laws were designed to

prevent. Id. at 488. The Court explained that the plaintiffs'

injury resulted from competitive, not anticompetitive, con-

duct. Further, because the plaintiffs would have suffered the

same injury had their rivals been lawfully acquired by some-

__________

14 In a suit for equitable relief under section 16 of the Clayton

Act, the plaintiff must also establish an antitrust injury, although

the injury need only be threatened. See Zenith Radio, 395 U.S. 130

(section 16 "invokes traditional principles of equity and authorizes

injunctive relief upon the demonstration of 'threatened' injury");

see also Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 122

(1986).

one else, their injury did not occur " 'by reason of anything

forbidden in the antitrust laws': while [plaintiffs'] loss oc-

curred 'by reason of' the unlawful acquisitions, it did not

occur 'by reason of' that which made the acquisitions unlaw-

ful." Id. Unlike the Brunswick plaintiffs' injury, Biovail's

alleged injury is the type the antitrust laws were designed to

prevent. If Biovail's allegations are correct, the Andrx-

HMRI Agreement neither enhanced competition nor benefit-

ted consumers; if anything, it accomplished just the opposite

by preserving HMRI's monopoly. Moreover, Biovail alleged

that its exclusion from the market occurred not only by

reason of the unlawful Agreement but also by reason of that

which made the Agreement unlawful, that is, an illegal re-

straint of trade. See Brunswick, 429 U.S. at 488.

Andrx next argues that it could have lawfully excluded

Biovail from the Cardizem CD market by deciding, on its

own, to delay marketing of its generic version of Cardizem

CD and therefore Biovail's alleged injury does not constitute

an antitrust injury. It contends that because its underlying

conduct was legal, the fact that it combined to act that way

cannot give rise to an antitrust violation. See ES Dev., Inc. v.

RWM Enters., Inc., 939 F.2d 547, 553 (8th Cir. 1991) (explain-

ing that "[t]he evidence must also establish that the alleged

participants combined or conspired to 'achieve an unlawful

objective' "). Under the Hatch-Waxman Amendments,

Andrx was lawfully entitled to unilaterally delay marketing its

product until the patent infringement claims against it were

resolved. Although its unilateral decision not to market its

generic version of Cardizem CD would have prevented others,

including Biovail, from entering the market, the counterclaim

alleges that Andrx entered into an anticompetitive agreement

with HMRI in order to exclude others; HMRI's ten million

dollar quarterly payments were presumably in return for

something that Andrx would not otherwise do, that is, delay

marketing of its generic. Andrx's argument that any rational

actor would wait for resolution of the patent infringement suit

is belied by the quid of HMRI's quo. See 54 Fed. Reg.

42,873, 42,882-83 ("[I]t can be mutually beneficial for the

innovator and the generic company that is awarded 180 days

of generic exclusivity to enter into agreements that block

generic competition for extended periods. This delayed com-

petition harms consumers by slowing the introduction of

lower priced products into the market and thwarts the intent

of the Hatch-Waxman Amendments.").15

Antitrust law looks at entry into the market as one mecha-

nism to limit and deter exploitation of market power by those

who may temporarily possess it. "Existing firms know that if

they collude or exercise market power to charge supracom-

petitive prices, entry by firms currently not competing in the

market becomes likely, thereby increasing the pressure on

them to act competitively." FTC v. H.J. Heinz Co., 246 F.3d

708, 717 n.13 (D.C. Cir. 2001). The FDA acknowledges that

"[u]nder current regulatory provisions, the first generic appli-

cant to file a substantially complete ANDA with a paragraph

IV certification can delay generic competition by entering into

certain commercial arrangements with an innovator compa-

ny." 64 Fed. Reg. 42,882.16 Such an arrangement can

__________

15 The statutorily granted monopoly of patent rights is similar.

Like a drug's 180-day exclusive market period, a patent grant in

and of itself is "an exception to the general rule against monopolies

and to the right to a free and open market." Walker Process

Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965)

(quoting Precision Instrument Mfg. Co. v. Automotive Mainte-

nance Mach. Co., 324 U.S. 806, 816 (1945)). But even a patent-right

holder is not immune from antitrust liability. In United States v.

Singer Mfg. Co., 374 U.S. 174 (1963), two competitors, Singer and

Gegauf, entered into a cross-licensing agreement to settle a Patent

Office interference proceeding involving their conflicting patent

claims. Although Singer (like Andrx) had no obligation to pursue a

patent grant and could have, on its own, withdrawn from the

interference proceeding, it nevertheless acted unlawfully when it

agreed with a competitor to settle the dispute, suppress information

and exclude others from the market. See id. at 196; see also

American Cyanimid Co., 72 F.T.C. 623 (1967), aff'd sub nom.

Charles Pfizer & Co. v. FTC, 401 F.2d 574 (6th Cir. 1968) (Tetracy-

cline case).

16 The FDA has proposed a "triggering period" during which

there must exist either a favorable court decision regarding the

manipulate the statutory grant of a monopoly to bar competi-

tive entries. See Balto, supra, at 331 ("The competitive

concern is that the 180-day exclusivity provision can be used

strategically by a patent holder to prolong its market power

in ways that go beyond the intent of the patent laws and the

Hatch-Waxman Act by delaying generic entry for a substan-

tial period."). Andrx argues that the Agreement merely

preserved the status quo--in effect a stipulated preliminary

injunction--until the conclusion of the patent infringement

suit. When the court grants preliminary injunctive relief,

however, it does so only after considering the public interest

and the likelihood of success on the merits. See Washington

Metro. Area Transit Comm'n v. Holiday Tours, Inc., 559

F.2d 841, 842-43 (D.C. Cir. 1977); accord Serono Labs., Inc.

v. Shalala, 158 F.3d 1313, 1317-18 (D.C. Cir. 1998); CityFed

Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746-47

(D.C. Cir. 1995).17 Moreover, even if Andrx's agreement to

maintain the status quo was lawful, its commitment to contin-

ue to prosecute its ANDA and do nothing to jeopardize its

180-day exclusivity period went beyond preserving the status

quo. "To be ancillary, and hence exempt from the per se

rule, an agreement eliminating competition must be subor-

__________

alleged infringed patent or the first applicant must begin commer-

cial marketing. If the first applicant does neither, it forfeits its

180-day exclusivity period. See 64 Fed. Reg. 42,877. "In most

cases, the triggering period would begin to run on the day a

subsequent ANDA applicant with a paragraph IV certification

receives a tentative approval stating that but for the first appli-

cant's exclusivity, the subsequent ANDA would receive final approv-

al." Id. The triggering period would also begin to run upon

expiration of any 30-month stay in place.

17 By contrast, a private agreement purporting to maintain the

status quo may not be in the public interest or may have little

likelihood of success on review. See generally Sheila F. Anthony,

Prepared Remarks before the ABA "Antitrust and Intellectual

Property: The Crossroads" Program, Riddles and Lessons from

the Prescription Drug Wars: Antitrust Implications of Certain

Types of Agreements Involving Intellectual Property (June 1, 2000),

available at www.ftc.gov/speeches/anthony/sfip000601.htm.

dinate and collateral to a separate, legitimate transaction....

If [the restraint] is so broad that part of the restraint

suppresses competition without creating efficiency, the re-

straint is, to that extent, not ancillary." Rothery Storage &

Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (D.C. Cir.

1986). As Biovail has pleaded the facts, HMRI and Andrx

combined to achieve an unlawful objective, namely, the exten-

sion of the exclusivity period granted under the Hatch-

Waxman Amendments. Accordingly, we conclude that Bio-

vail can allege an antitrust injury, that is, one the antitrust

laws were designed to prevent and that flows from that which

makes the defendant's conduct unlawful.

C. Speculative Nature of Harm

Standing may yet be denied if damages "rest[ ] at bottom

on some abstract conception or speculative measure of harm."

McCready, 457 U.S. at 475 n.11. In Associated General

Contractors, the Court denied standing because the plaintiff's

damages claim was "highly speculative." 459 U.S. at 542;

accord Adams, 828 F.2d at 30. It noted that the plaintiff

union did not allege (1) that any of its collective bargaining

agreements were terminated as a result of the defendant's

alleged anticompetitive acts, (2) that union firms' aggregate

share of the contracting market had been diminished and (3)

that its revenue from dues and initiation fees had decreased.

On the other hand, in Bigelow, the Court held that the

plaintiff's damages were not too speculative to support the

jury's verdict of damages. 327 U.S. at 265. There, the movie

theater owner plaintiffs claimed that defendant distributors

and affiliated movie theaters conspired to prevent the plain-

tiffs from obtaining movies for their theaters until after the

defendant theaters had shown them. Id. at 254. The Court

permitted the jury to consider evidence of decline in prices,

profits and values not shown to be attributable to other

causes to calculate the quantum of damage caused by the

defendants' unlawful acts. Id. at 264.

We find Biovail's damages claim, assuming it can plead its

intent and preparedness to enter the market, more like that

in Bigelow than in Associated General Contractors. Accord-

ing to its counterclaim, Biovail was not an inexperienced

newcomer; it already manufactured generic pharmaceuticals.

It had already developed its product and, once FDA gave

tentative approval to its ANDA, was simply waiting out

Andrx's 180-day exclusivity period.18 Although damages may

be difficult to quantify, "[t]he most elementary conceptions of

justice and public policy require that the wrongdoer shall

bear the risk of the uncertainty which his own wrong has

created." Bigelow, 327 U.S. at 265; see Story Parchment Co.

v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931).

Biovail may ultimately fail to establish the amount of dam-

ages beyond a nominal amount, see Associated Gen. Contrac-

tors, 459 U.S. at 544-45, but Biovail could continue to seek (if

not moot) injunctive relief. See Blue Cross & Blue Shield of

Wis. v. Marshfield Clinic, 152 F.3d 588, 595 (7th Cir. 1998).19

__________

18 Biovail received tentative approval in October 1999. On Novem-

ber 5, 1999 Andrx petitioned for reconsideration and for a stay of

the FDA's tentative approval. The parties dispute the effect of the

petition on the timing of Biovail's final approval on December 23,

1999. Even if Biovail's damages period were relatively short,

Biovail would nevertheless be able to seek recovery. Moreover,

"[d]ifficulty of ascertainment [should not be] confused with right of

recovery." McCready, 457 U.S. at 475 n.11 (quoting Bigelow, 327

U.S. at 265).

19 Antitrust standing also requires proximity between the alleged

cause and the alleged injury. See Associated Gen. Contractors, 459

U.S. at 540; McCready, 457 U.S. at 476-77 (" '[D]espite the broad

wording of s 4 there is a point beyond which the wrongdoer should

not be held liable.' " (citation omitted)); 2 Areeda et al., supra,

p 339, at 325-26. In evaluating whether an injury is too remote,

"we look (1) to the physical and economic nexus between the alleged

violation and the harm to the plaintiff, and (2), more particularly, to

the relationship of the injury alleged with those forms of injury

about which Congress was likely to have been concerned in making

defendant's conduct unlawful and in providing a private remedy

under s 4." McCready, 457 U.S. at 478; see In re Multidistrict

Vehicle Air Pollution M.D.L., 481 F.2d 122, 129 (9th Cir. 1973). In

McCready, the Supreme Court held that health insurance subscrib-

ers had standing to sue their insurance company for colluding with

physicians and psychiatrists to deny them reimbursement for pay-

D. Existence of More Appropriate Plaintiff

In evaluating standing, courts also consider whether there

exists a more directly injured plaintiff to vindicate the public

interest. See Associated Gen. Contractors, 459 U.S. at 544.

"Inferiority" to another plaintiff does not necessitate that we

deny standing but it is a relevant factor. See 2 Areeda et al.,

supra, p 339, at 332. We are more likely to find no standing

if the plaintiff's injury both derives from and is measured by

another's more direct injury. See Adams, 828 F.2d at 30-31

(existence of superior plaintiffs--employer airline as well as

consumers of transatlantic air transportation--militated

against employees' standing). Additionally, lack of standing

is more likely as layers of superior plaintiffs increase. See 2

Areeda et al., supra, p 339, at 332.

The district court held that "[t]hose most directly affected

by [Andrx's] violation would be the consumers faced to pay

artificially high prices for Cardizem." Andrx Pharm., 83

F. Supp. 2d at 186. It reasoned that "[i]f Andrx's activity

violates the antitrust laws, it is because it is keeping others

out of the market and thereby maintaining artificially high

costs for generic drugs." Id. But Biovail's alleged injury is

not derived from or measured by the injury to consumers;

instead it is measured by the loss of profits it would have

otherwise made had it not been excluded from the market.

See Story Parchment, 282 U.S. at 562-64; Eastman Kodak

Co. v. Southern Photo Co., 273 U.S. 359, 378-79 (1927).

__________

ments made to psychologists. The Court acknowledged that while

the psychologists (not the patients) were the targets of the conspir-

acy, standing "cannot reasonably be restricted to those competitors

whom the conspirators hoped to eliminate from the market."

McCready, 457 U.S. at 479. It thus affirmed the subscribers'

standing. Applying the same reasoning, we conclude that Biovail's

alleged injury is "so integral an aspect" of the alleged anticompeti-

tive behavior, "there can be no question but that the loss was

precisely 'the type of loss that the claimed violations ... would be

likely to cause.' " Id. (quoting Brunswick, 429 U.S. at 489). When

a competitor is excluded from a market by the collusive acts of its

rivals, its loss of profits is directly caused by that anticompetitive

behavior.

Biovail does not seek damages for profits it would have

earned at higher, less competitive prices. See, e.g., Atlantic

Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 337 (1990);

Brunswick, 429 U.S. at 487-89. It seeks damages to compen-

sate for profits it would have earned by competing in the

market. Irrespective of consumer injury, an excluded com-

petitor like Biovail suffers a distinct injury if it is prevented

from selling its product. "[A] rival has clear standing to

challenge the conduct of rival(s) that is illegal precisely

because it tends to exclude competitors from the market." 2

Areeda et al., supra, p 348, at 387. Unlike the "high probabil-

ity of substantial overlap" the Adams court found between

the injury the plaintiffs there alleged (employees' lost jobs

and lower wages) and those of more direct victims (company's

loss of profits and transatlantic passengers' increased airfare),

Biovail's alleged injury is not measured by or derived from

consumer plaintiffs. Adams, 828 F.2d at 30 n.12. And to the

extent Biovail seeks injunctive relief, its standing is plainly

not derivative.

E. Duplicative Recovery and Complex Apportionment of

Damages

In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the

Supreme Court held that antitrust suits brought by indirect

purchasers increased both the risk of multiple recoveries and

the difficulty of apportionment of damages. The Court ex-

plained that in addition to adding complexity to the case,

apportionment pares the direct purchasers' recovery, thereby

diminishing their incentive to bring treble damage actions

under section 4 of the Clayton Act. Id. at 737-47; see

McCready, 457 U.S. at 475 n.11.

The district court concluded that the existence of both

consumer suits and Biovail's own suit against HMRI raised

"the potential here for duplicative recoveries and inconsistent

holdings." Id. As we have explained, however, Biovail's

injuries are neither derived from nor measured by injuries

consumers may have suffered. Any injury to consumers

would result from paying a supracompetitive price for Cardiz-

em CD. Biovail's injury, on the other hand, is the result of

foregone profits, i.e., the difference between the competitive

market price it would have charged had it been in the market

and its total costs. See Eastman Kodak, 273 U.S. at 378-79.

Moreover, Biovail has settled its suit with HMRI. See Bio-

vail Corp. Int'l v. Aktiengesellschaft, Civ. No. 98-1434 (D.N.J.

Jan. 31, 2001).20

F. Noerr-Pennington Doctrine

Having concluded that dismissal with prejudice was errone-

ously granted, we must consider Andrx's claim that the

Agreement is litigation-related conduct exempted from anti-

trust liability by the Noerr-Pennington doctrine. The Noerr-

Pennington doctrine insulates from antitrust challenge com-

petitors' decision to combine to petition the government, even

if their underlying intention is to restrain competition or gain

advantage over competitors. See United Mine Workers of

Am. v. Pennington, 381 U.S. 657, 670 (1965); see also City of

Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 379-80

(1991) ("The federal antitrust laws also do not regulate the

conduct of private individuals in seeking anticompetitive ac-

tion from the government."). The doctrine is rooted in First

Amendment law and "rests ultimately upon a recognition that

the antitrust laws, 'tailored as they are for the business world,

are not at all appropriate for application in the political

arena.' " Omni, 499 U.S. at 380 (citation omitted).21

__________

20 Moreover, the Federal Trade Commission has withdrawn its

complaint against HMRI and Andrx and entered into consent

agreements with both manufacturers prospectively barring them

from entering into certain anticompetitive agreements and requir-

ing that future interim settlements of patent litigation be approved

by the court with notice to the Commission. See 66 Fed. Reg.

18,636 (proposed consent decree).

21 The doctrine derives its name from two Supreme Court deci-

sions. The first, Eastern Railroad Presidents Conference v. Noerr

Motor Freight, Inc., 365 U.S. 127 (1961), held that the antitrust laws

do not apply to conduct resulting from valid government actions.

The Supreme Court held that attempts by railroads to influence

legislation designed to restrict competition from the trucking indus-

try were exempt from antitrust liability. The Court remarked, "no

In California Motor Transport Co. v. Trucking Unlimited,

the Court extended the right to petition all departments of

the government, including the "courts, the third branch of

Government." 404 U.S. 508, 510 (1972) ("The right of access

to the courts is indeed but one aspect of the right of peti-

tion."). Whether conduct falls with "[t]he scope of this pro-

tection depends, however, on the source, context, and nature

of the anticompetitive restraint at issue." Allied Tube &

Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499 (1988).

If anticompetitive harm is caused by the decision of a court,

even though granted at the request of a private party, no

private restraint of trade occurs because the intervening

government action breaks the causal chain. See 1 Phillip

Areeda & Herbert Hovenkamp, Antitrust Law p 202c, at 159-

62 (2d ed. 2000).

Andrx argues that its Agreement should receive the same

protection as threatened litigation or an offer of settlement.

See, e.g., Coastal States Mktg., Inc. v. Hunt, 694 F.2d 1358,

1367 (5th Cir. 1983) (extending doctrine to cover activities not

necessarily part of petitioning process, but reasonably inci-

dent or normally attendant to it, e.g., genuine litigation

threat); McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552, 1560

(11th Cir. 1992) (same).22 We disagree. Although certain

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violation of the [Sherman] Act can be predicated upon mere at-

tempts to influence the passage or enforcement of laws." Id. at

135. The Court came to the same conclusion in Pennington, 381

U.S. 657 (1965). There, mine operators and workers petitioned the

Executive Branch to induce the Tennessee Valley Authority to

curtail spot market purchases and to increase minimum wages.

The Court explained that "[j]oint efforts to influence public officials

do not violate the antitrust laws even though intended to eliminate

competition. Such conduct is not illegal, either standing alone or as

a part of a broader scheme itself violative of the Sherman Act." Id.

at 670.

22 See also 1 Areeda & Hovenkamp, supra, p 205e, at 238 ("Most

lawsuits are prefaced by various communications, such as demand

letters that expressly or impliedly threaten suit unless the address-

ee alters its conduct or provides other relief. Such prelitigation

communications provide useful notice and facilitate the resolution of

litigation conduct is protected under the doctrine, it does not

extend to the HMRI-Andrx Agreement. See California Mo-

tor Transp., 404 U.S. at 512-13 (examples of unprotected

litigation conduct include perjury by witnesses and fraudu-

lently obtained patent); cf. Omni, 499 U.S. at 380 ("sham"

petitioning such as filing frivolous objections to license appli-

cation of a competitor to impose expense and delay not

protected). In In re Cardizem CD Antitrust Litigation, 105

F. Supp. 2d 618, the district court found the alleged anticom-

petitive harm stemming from the Agreement separate from

any anticompetitive effects that may have resulted from

resolution of the HMRI patent infringement suit. The harm,

the court declared, was not the result of a court decision.

"Rather, it is the result of purely private conduct and thus

constitutes a private restraint of trade subject to liability

under the antitrust laws." Id. at 635; see also In re Brand

Name Prescription Drugs Antitrust Litig., 186 F.3d 781, 789

(7th Cir. 1999) ("[T]he doctrine does not authorize anticom-

petitive action in advance of government's adopting the in-

dustry's anticompetitive proposal. The doctrine applies when

such action is the consequence of legislation or other govern-

mental action, not when it is the means for obtaining such

action (or in this case inaction)." (emphasis original)). The

Agreement is not unlike a final, private settlement agreement

resolving the patent infringement litigation by substituting a

market allocation agreement. Such a settlement agreement

would not enjoy Noerr-Pennington immunity and neither

does the Agreement here.

IV. Conclusion

In sum, although the district court correctly dismissed

Biovail's antitrust counterclaim for failure to sufficiently al-

lege injury caused by the HMRI-Andrx Agreement, it should

have granted the dismissal without prejudice to allow Biovail

the opportunity to replead. Accordingly, appeal No. 00-5050

__________

controversies. It would be foolish to adopt antitrust rules encour-

aging suit before communication by penalizing the communication

but not the suit.").

is remanded to the district court for proceedings not inconsis-

tent with this opinion. In light of our holding, we dismiss as

moot appeal No. 00-5396.

So ordered.