# In Re Ciprofloxacin Hydrochloride Antitrust Litigation

> District Court, E.D. New York · May 20, 2003 · 261 F. Supp. 2d 188

URL: https://www.frixlaw.com/law-library/cases/2515544

## Case

- **Full name:** In Re Ciprofloxacin Hydrochloride Antitrust Litigation
- **Court:** District Court, E.D. New York
- **Decided:** May 20, 2003
- **Citations:** 261 F. Supp. 2d 188; 2003 U.S. Dist. LEXIS 8476; 2003 WL 21146562
- **Precedential status:** Published
- **Opinion:** Opinion by Trager
- **Judges:** Trager
- **Cited by:** 52 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/2515544

## How later opinions describe it (automated extraction)

- concluding plaintiffs in antitrust pharmaceutical case should have been aware of operative facts where generic drug manufacturer publicly disclosed agreement that (i) acknowledged validity of name brand drug patent holder’s patent and (ii) disclosed payment scheme that gave na…
- holding that plaintiffs’ allegations that brand defendant’s patent was invalid or unenforceable and that brand defendant “paid enormous sums of money to avoid a judicial determination of the patent infringement case,” id. at 200, were not enough to state a triable claim
- holding that plaintiff's allegations that a generic would have prevailed in patent litigation were too speculative, especially because of judicially noticed facts about "post-settlement affirmations of the ... [p]atent's validity"
- concluding that acts taken subsequent to the execution of an agreement were not continuing violations when the acts were “contemplated by, and needed to implement, the fixed terms of the challenged agreements”

## Opinion text

MEMORANDUM & ORDER
TRAGER, District Judge.
This suit challenges the validity of agreements between the brand-name manufacturer of the widely used antibiotic ci-profloxacin hydrochloride (“Cipro”) and potential generic manufacturers of Cipro. Direct Purchaser and Indirect Purchaser Class Plaintiffs and Individual Non-Class Plaintiffs (collectively, “plaintiffs”) have brought suit against Bayer AG, a German company, and its American subsidiary, Bayer Corporation (collectively, “Bayer”) and Barr Laboratories, Inc. (“Barr”); The Rugby Group, Inc. (“Rugby”); Hoechst Marion Roussel, Inc. (“HMR”); and Watson Pharmaceuticals, Inc. (“Watson”) (collectively, “Generic Defendants”)
1
alleging that Bayer and Generic Defendants (collectively, “defendants”) entered into agree
*192
ments that prevent competition in the market for Cipro in violation of federal and state antitrust laws. Plaintiffs now move this court pursuant to Federal Rule of Civil Procedure 56 for partial summary judgment finding that these agreements are
per se
unlawful under Section 1 of the Sherman Act, 15 U.S.C. § 1 , and various state antitrust and consumer protection laws. Defendants have filed a cross-motion seeking to dismiss plaintiffs’ respective complaints pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to plead facts sufficient to sustain a Sherman Act violation.
2
These motions present difficult questions of antitrust law and its interaction with patent rights.
Statutory and Regulatory Background
The manufacture and distribution of pharmaceutical drugs in the United States is regulated by the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301
et seq.
(the “Act”). Recognizing that the Act’s “cumbersome drug approval process delayed entry of relatively inexpensive generic drugs into the marketplace,”
Mylan Pharms., Inc. v. Shalala,
81 F.Supp.2d 30, 32 (D.D.C.2000), Congress passed the “Hatch-Waxman Amendments” to the Act in 1984.
See
Drug Price Competition & Patent Term Restoration Act of 1984, Pub.L. No. 98^417 (codified as amended at 21 U.S.C. § 355 ). The impetus behind the Hatch-Waxman Amendments was “to make available more low cost generic drugs[.]” H.R.Rep. No. 98-857, pt. 1, at 14 (1984),
reprinted in
1984 U.S.C.C.A.N 2647, 2647. In fact, the Hatch-Waxman Amendments embody Congress’ attempt to “balance two conflicting policy objectives: to induce name-brand pharmaceutical firms to make the investments necessary to research and develop new drug products, while simultaneously enabling competitors to bring cheaper, generic copies of those drugs to market.”
Mylan,
81 F.Supp.2d at 32 (citations omitted).
To this end, the Hatch-Waxman Amendments established new guidelines that simplify the approval process for generic drugs. Previously, any company wanting to market a new drug had to secure approval from the U.S. Food & Drug Administration (“FDA”) by filing a New Drug Application (“NDA”), a process often “time consuming and costly” because a NDA requires companies to submit specific data concerning the drug’s safety and effectiveness.
Andrx Pharms., Inc. v. Biovail Corp. Int’l,
256 F.3d 799, 801 (D.C.Cir. 2001) (citations omitted),
cert. denied
535 U.S. 931 , 122 S.Ct. 1305 , 152 L.Ed.2d 216 (2002). Under the new guidelines, a generic drug manufacturer can file an Abbreviated New Drug Application (“ANDA”) that incorporates by reference the safety and efficacy data developed and previously submitted by the company that manufactured the original, “pioneer” brand-name drug. To obtain FDA approval, the
*193
ANDA filer must demonstrate that its product is “bioequivalent” to the pioneer drug. 21 U.S.C. § 355 (j)(2)(A)(iv).
To protect the patent rights of the pioneer drug manufacturer, the ANDA filer must make one of four certifications in its ANDA concerning patents listed with the FDA for the pioneer drug,
3
namely that (1) no patent for the pioneer drug is listed in the Orange Book; (2) the patent listed in the Orange Book has expired; (3) the listed patent will expire on a particular date, and the ANDA filer does not seek FDA approval before that date (a “Paragraph III Certification”); and (4) the listed patent “is invalid or ... will not be infringed by the manufacture, use, or sale of the [generic] drug” (a “Paragraph IV Certification”).
Id.
§ 355{j)(2)(A)(vii);
see also
21 C.F.R. § 314.94 (a)(12)(A)(4).
An ANDA containing a Paragraph IV Certification (an “ANDA IV”) has “important legal ramifications. It automatically creates a cause of action for patent infringement.”
Mylan,
81 F.Supp.2d at 32 . Indeed, an ANDA applicant making such a certification must notify , the owner of the listed patent of the filing of its ANDA and certification.
See
21 U.S.C. § 355 (j)(2)(B). Thereafter, the patent holder has 45 days to initiate a patent infringement suit against the ANDA applicant.
See id.
§ 355(j)(5)(B)(iii). If the patent holder does not commence an action within 45 days, the FDA may approve the ANDA at any time.
See id.
If a timely infringement suit is initiated, the FDA cannot approve the ANDA for 30 months.
See id.
Moreover, the court hearing the patent case may, in its discretion, extend the 30-month stay if either party fails to “reasonably cooperate in expediting the action.”
Id.
§ 355(j)(5)(B)(iii).
4
However, if the court presiding over the infringement action determines before the 30-month period expires that the patent at issue is “invalid or not infringed,” approval is effective “on the date of the court decision!.]”
Id.
§ 355(j)(5)(B)(iii)(I).
The Hatch-Waxman Amendments provide an incentive to encourage generic drug manufacturers to challenge listed patents for brand-name drugs. As an incentive to incur “potentially substantial litigation costs,”
Mylan,
81 F.Supp.2d at 33 , the first company to submit an ANDA IV is awarded a 180-day period of exclusive rights to market a generic formula of the pioneer drug.
See
21 U.S.C. § 355 (j)(5)(B)(iv). Prior to the expiration of the exclusivity period, the FDA cannot finally approve any other ANDA for the same generic drug.
See id.
The exclusivity period is triggered by either the commercial marketing of the generic drug by the first ANDA filer or the decision of a court finding the pioneer drug’s patent to be either invalid, unenforceable, or not in
*194
fringed.
See id.; see also
21 C.F.R. § 314.107 .
Factual Background
5
(1)
Bayer manufactures and distributes Ci-pro, a broad spectrum antibiotic that is prescribed for various infections and is dispensed in tablet, liquid and intravenous forms. Bayer AG claims the active ingredient in Cipro — ciprofloxacin hydrochloride — in Patent No. 4,670,444 (the “444 Patent”), which was issued by the Patent and Trademark Office (“PTO”) on June 2, 1987.
See
App. to Bayer’s Mem. in Opp’n to Pis.’ Mot. for Partial Summ. J. (“Bayer App.”), Ex. 1. The 444 Patent expires on December 9, 2003. In October 1987, Miles, Inc. (the predecessor to Bayer Corporation and the licensee of the 444 Patent) obtained FDA approval to market Ci-pro in the United States. Cipro has been the best selling antibiotic in the United States for many consecutive years and is described as “the most prescribed antibiotic in the world.” D.P. Compl. ¶ 1. Since 1987, Bayer has been the only producer of Cipro in the United States, and, since 1997, Bayer has derived over $1 billion in U.S. net sales of all Cipro products.
See
Bayer App., Ex. 12 ¶ 3.
By letter dated October 22, 1991, Barr filed ANDA 74-124 for a generic, bioequi-valent version of Cipro.
6
See
App. to Decl. of Edwin John U in Supp. of Generic Defs.’ Mem. in Opp’n to Pis.’ Mot. for “Partial Summ. J.” (“G.Defs.’ Summ. J. Mem.”) (“G.Defs.’ App.”), Tab 1. Barr’s ANDA included a Paragraph IV Certification seeking the FDA’s permission to market its generic drug before the 444 Patent expires on the grounds that the patent is invalid and unenforceable.
See
J.A. in Supp. of all Pis.’ Mot. for Summ. J. (“Pis.’ J.A.”), Ex. T. As set forth in the Hatch-Waxman Amendments, on December 6, 1991, Barr notified Bayer of its ANDA IV filing and its assertions contained therein regarding Bayer’s 444 Patent.
See id.
On January 16, 1992, Bayer commenced a timely patent infringement suit against Barr in the Southern District of New York, thereby triggering the 30-month statutory waiting period for FDA approval.
See generally id.,
Ex. G;
see also
Bayer App., Ex. 3. This litigation was styled
Bayer AG and Miles, Inc. v. Barr Labs., Inc.,
798 F.Supp. 196 (S.D.N.Y.1992) (Knapp, J.). In its pleadings, Barr denied any violation of the patent laws and asserted counterclaims seeking a declaratory judgment that the 444 Patent is invalid and unenforceable.
7
See generally
Pis.’ J.A., Exs. H, I.
Subsequently, in November 1992, Bayer and Barr executed a stipulation whereby
*195
the parties agreed to extend the 30-month waiting period until final judgment was entered in the patent infringement action.
See id.,
Ex. J. This stipulation was “so ordered” by Judge Knapp on December 8, 1992.
See id.
Absent this agreement, the stay would otherwise have expired on April 22, 1995.
8
See id.
In a letter dated January 4,1995, while the patent litigation was pending, the FDA granted tentative approval of Barr’s ANDA for generic Ci-pro.
See id.,
Ex. U. Plaintiffs contend that this approval was tentative, rather than final, due to the parties’ stipulation to extend the 30-month stay.
See
D.P. Summ. J. Mem. at 15. In fact, in its letter to Barr, the FDA stated that “[i]n certain cases approval can be granted after the expiration of the 30-month period.... In this case, the 30-month option is not relevant. The [FDA] was advised that on December 8, 1992, the court ordered that the 30-month period be extended[.]” Pis.’ J.A., Ex. U. A year later, in January 1996, Bayer and Barr filed cross-motions for partial summary judgment.
See
Bayer App., Ex. 16. Judge Knapp denied the parties’ respective motions in an order and opinion dated June 5, 1996.
See
Pis.’ J.A., Ex. K. Upon a motion by Bayer to reconsider that ruling, the court re-affirmed its decision in a separate order and opinion dated September 5, 1996.
See id.,
Ex. L. After some postponements, trial of the patent litigation was finally scheduled to begin on January 27,1997.
Meanwhile, HMR and Rugby entered the fray. On March 29, 1996, Barr and Rugby entered into an agreement pursuant to which Barr agreed to share equally with Rugby (then a subsidiary of HMR) any rights and profits from the eventual marketing and/or distribution of Cipro, and, in return, Rugby agreed to finance a portion of the costs and expenses of the patent litigation (the “Litigation Funding Agreement”).
See generally id.,
Ex. P. By subsequent amendment, HMR succeeded to Rugby’s rights under this agreement. See
id.,
Ex. Q § 1.1. Rugby was later acquired by Watson and is now a wholly owned subsidiary of Watson.
(2)
As the trial date approached, Bayer and Barr reached a settlement that concluded the patent litigation in the Southern District. In connection with the settlement, on January 8, 1997, Bayer entered into three separate but interrelated settlement agreements with Barr, HMR and Rugby, and Bernard Sherman (“Sherman”) and Apotex, Inc. (“Apotex”)
9
(collectively, the “Settlement Agreements”) and a supply agreement with Barr and HMR (the “Sup
*196
ply Agreement”). The terms of these agreements
form the
bases of plaintiffs’ allegations of a Sherman Act violation. Under the Settlement Agreements, Barr, HMR, Rugby, Sherman, and Apotex acknowledged the validity of the 444 Patent and additional U.S. Patents held by Bayer.
10
See id.,
Ex. B § 4;
id.,
Ex. C § 3;
id.,
Ex. D § 1. In the Barr Settlement Agreement, Barr also agreed to amend its ANDA to change its Paragraph IV Certification to a Paragraph III Certification, thereby permitting Barr to obtain FDA approval to market generic Cipro only upon expiration of the 444 Patent.
See id.,
Ex. B § 5(a);
see also
21 U.S.C. § 355 (j)(2)(A)(vii)(III). The agreement also provides for an immediate $49.1 million payment from Bayer to the “Barr Escrow Account.”
11
See
Pis.’ J.A., Ex. B § 1.
In the Supply Agreement, Barr and HMR agreed not to manufacture (or to have manufactured) Cipro in the United States.
See id.,
Ex. E § 3.01. In addition, the agreement provides that Bayer either will (1) supply Bayer-manufactured Cipro to Barr, HMR and Rugby for distribution in the United States, subject to certain price controls,
see id.
§ 3.06(a)(i); or (2) make quarterly payments — varying from $15 million to approximately $17 million— to the Barr Escrow Account from January 1998 through December 2003 (when the 444 Patent expires).
See id.
§§ 3.06(a)®, 4.01(a), 4.02 & Sch. 4.01. If Bayer does not license Cipro immediately, it has agreed to do so at a set price if another generic company successfully challenges the validity of the 444 Patent.
See id.
§§ 1.01, 3.06(d). In addition, defendants claim that Bayer agreed to supply Cipro to Barr for marketing under a generic label beginning six months prior
to the
expiration of the 444 Patent.
12
See id.
§ 3.06(a)(ii). To date, Bayer has chosen to make payments to the Barr Escrow Account, which through December 2003 will total approximately $398 million.
See id.,
Sch. 4.01.
(3)
Pursuant to the terms of the Barr Settlement Agreement, Bayer and Barr submitted to Judge Knapp a two-page consent judgment (the “Consent Judgment”) that the parties had negotiated and that extinguished all claims raised in the patent litigation.
See id.,
Ex. N. On January 16, 1997, Judge Knapp signed the Consent Judgment in the form submitted by the parties.
See id.
The Consent Judgment entered judgment for Bayer, providing that the 444 Patent is valid and enforceable as to, and was infringed by, Barr.
See id.
¶¶ 2-4. There was no mention in the Consent Judgment of the payments Bayer agreed to make to the Barr Escrow Account or the agreement by Barr, HMR and Rugby not to manufacture and market a generic form of Cipro. The Settlement Agreements and the Supply Agreement were not filed with or otherwise provided to the patent court, but the court was
*197
apprised of the material terms of the settlement on January 30, 1997 when Bayer’s counsel forwarded Bayer’s news release to the court.
See
G.Defs.’ App., Tab 10.
On January 17, 1997, Bayer and Barr each issued a news release announcing the settlement and discussing the payment scheme set forth in the Supply Agreement.
13
See
Pis.’ J.A., Ex. B § 8 (permitting press releases); G.Defs.’ App., Tabs 10, 11. In fact, the press releases note that the settlement is comprised of two components: (1) an initial cash payment and (2) a Supply Agreement, which sets forth Bayer’s option to make payments to the Barr Escrow Account or to provide Barr with Cipro that Barr would market pursuant to a license from Bayer.
See generally
G.Defs.’ App., Tabs 10,11. Also, on January 22, 1997, pursuant to the Barr Settlement Agreement, Barr filed an amendment to its ANDA 74-124,
see
Pis.’ J.A., Ex. V, and in a letter to the FDA dated January 23, 1997, Barr amended its Paragraph IV Certification to a Paragraph III Certification.
See id.,
Ex. W.
In July 1997, Bayer voluntarily submitted its 444 Patent to the PTO for reexamination, and, upon reexamination, the PTO reaffirmed the patent’s validity.
See
Bayer App., Exs. 17, 18. Since the execution of the Settlement Agreements, four generic companies have filed ANDA IVs for Cipro and have mounted challenges to the 444 Patent similar to the challenge raised by Barr; one challenge was dismissed,
see Bayer AG v. Ranbaxy Pharms., Inc.,
No. 3:98 Civ. 4464 (D.N.J. Oct. 29, 1999) (dismissing case per stipulation), Bayer App., Ex. 21, and three challenges were unsuccessful,
see Bayer AG v. Schein Pharm., Inc.,
301 F.3d 1306 (Fed.Cir.2002) [hereinafter
“Schein &
Mylan”], unpublished version enclosed with Letter from Counsel for Bayer to Judge Trager of 8/19/02;
Bayer AG v. Carlsbad Tech., Inc.,
No. 01 Civ. 867-B (S.D.Cal. Oct. 24, 2001) (denying Carlsbad’s motion for summary judgment), Bayer App., Ex. 31. At present, Bayer sells the only ciprofloxacin hydrochloride drug available in the United States.
Discussion
Motion to Dismiss — Federal Claims
Defendants have before this court numerous motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).
14
*198
Bayer and Generic Defendants move to dismiss each of plaintiffs’ respective complaints for failure to state a claim upon which relief can be granted.
15
Watson moves to dismiss the claims in the Aston Complaint and Indirect Purchaser Plaintiffs’ Complaint as failing to state a cognizable claim as to Watson.
16
In addition, Generic Defendants seek to dismiss the claims of the “Organizational Plaintiffs” contained in the Aston Complaint as time-barred. Lastly, Generic Defendants seek to dismiss Indirect Purchaser Plaintiffs’ claims on various additional grounds related to those plaintiffs’ allegations under state antitrust and consumer protection laws.
17
(5) Memorandum of Law in Support of Watson Pharmaceuticals, Inc.'s Motion to Dismiss ("Watson Mot. Dismiss Mem.”).
When considering defendants’ motions to dismiss under Rule 12(b)(6), the court must deny the motions unless “it appears beyond reasonable doubt that the plaintiff[s] can prove no set of facts in support of [their] claim[s] which entitle [them] to relief.”
Conley v. Gibson,
355 U.S. 41, 45-46 , 78 S.Ct. 99, 102 , 2 L.Ed.2d 80 (1957). Moreover, the court is obligated to accept the complaints’ allegations as true and to read them in the light most favorable to plaintiffs.
See Chambers v. Time Warner, Inc.,
282 F.3d 147, 152 (2d Cir.2002);
Cruz v. Coach Stores, Inc.,
202 F.3d 560, 565 (2d Cir.2000). When determining the suffí-ciency of a plaintiffs claim, “consideration is limited to the factual allegations in [the] complaint, which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs’ possession or of which plaintiffs had knowledge and relied on in bring suit.”
Brass v. Am. Film Techs.,
987 F.2d 142 , 150 (2d Cir.1993) (citing
Cortee Indus., Inc. v. Sum Holding L.P.,
949 F.2d 42 , 47-48 (2d Cir.1991)).
Two sections of the Clayton Act authorize private parties to bring suit under the federal antitrust laws. Section 4 of the Clayton Act provides treble damages to “ ‘[a]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws....’”
18
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,
429 U.S. 477, 485 , 97 S.Ct. 690, 696 , 50 L.Ed.2d 701 (1977) (quoting 15 U.S.C. § 15 (a)). Moreover, Section 16 of the Clayton Act provides injunctive relief to persons “threatened [with] loss or damage by a violation of the antitrust laws.”
19
15 U.S.C. § 26 . The Clayton Act includes the Sherman Act, 15 U.S.C. § 1
et seq.,
as one of the “antitrust laws.”
Id.
§ 12. To plead a claim under Section 1 of the Sherman Act, plaintiffs must allege that defen
*199
dants’ conduct imposed an actual restraint on competition. As an initial matter, plaintiffs have sufficiently alleged that defendants’ conduct constitutes a restraint on competition in violation of Section 1. The facts supporting plaintiffs’ argument, and a discussion concerning the merits of their argument, will be set forth in some detail in the discussion below regarding summary judgment. Suffice it to say that the complaints adequately allege that the Supply Agreement and Settlement Agreements operate to pay Bayer’s generic competitors, Barr, HMR and Rugby, hundreds of millions of dollars to suppress generic competition in the domestic market for Cipro and that those competitors did abandon their efforts to come to market with less expensive, generic forms of Cipro.
However, the Supreme Court has cautioned that although a defendant’s conduct can constitute a violation of Section 1, such liability does not indicate whether a private plaintiff has suffered the appropriate injury to seek relief under the Clayton Act.
See Atl. Richfield Co. v. USA Petroleum Co.,
495 U.S. 328, 342 , 110 S.Ct. 1884, 1893 , 109 L.Ed.2d 333 (1990). Therefore, to recover damages under Section 4 (or to qualify for injunctive relief under Section 16) of the Clayton Act, plaintiffs must also allege that the challenged restraint, even if it violates Section 1, is causally linked to their alleged injury (i.e., injury-in-fact),
see Associated Gen. Contractors of Cal, Inc. v. Cal. State Council of Carpenters,
459 U.S. 519, 535 , 103 S.Ct. 897, 907 , 74 L.Ed.2d 723 (1983);
Argus, Inc. v. Eastman Kodak Co.,
801 F.2d 38, 41 (2d Cir.1986), and that such injury is an “antitrust injury.”
Brunswick,
429 U.S. at 489 , 97 S.Ct. at 697 . Antitrust injury is “injury of the type that the antitrust laws were designed to prevent and that flows from that which makes defendants’ acts unlawful.”
Id.; see also Atl. Richfield,
495 U.S. at 344-45 , 110 S.Ct. at 1894-95 ;
Balaklaw v. Lovell,
14 F.3d 793, 797 (2d Cir.1994) (quoting
Brunswick,
429 U.S. at 489 , 97 S.Ct. at 697 );
Volvo N. Am. Corp. v. Men’s Int’l Prof 'l Tennis Council,
857 F.2d 55, 66 (2d Cir.1988) (quoting
Cargill, Inc. v. Monfort of Colo., Inc.,
479 U.S. 104 , 107 S.Ct. 484 , 93 L.Ed.2d 427 (1986) (quoting
Brunswick,
429 U.S. at 489 , 97 S.Ct. at 697 )). Bayer and Generic Defendants’ claims regarding the common deficiencies of the four consolidated complaints will be addressed first. Then Watson’s motion and Generic Defendants’ additional claims will be discussed
seriatim.
(1)
Injury-in-Fact
Plaintiffs maintain that the challenged agreements suppressed entry of a generic version of Cipro into the U.S. market. As a result, plaintiffs claim that they are paying more than they would have paid for Cipro absent defendants’ alleged restraint.
See
Aston Compl. ¶ 97; CVS Compl. ¶ 65; D.P. Compl. ¶ 73; I.P. Compl. ¶ 135. Defendants assert that plaintiffs have no claim under the antitrust laws because all of their theories of liability depend on generic entry into the domestic market for Cipro, which defendants claim is completely blocked by the 444 Patent. Therefore, defendants maintain that plaintiffs’ alleged injuries flow from the existence of the 444 Patent and not from any claimed restraint on trade. In response to this position, plaintiffs offer three theories in support of their claim.
a. Successful Litigation
Plaintiffs allege that but for the challenged agreements, Barr would have prevailed in the patent litigation and then Barr, HMR and Rugby (and possibly other generic firms) would have come to market with generic versions of Cipro.
See
CVS
*200
Compl. ¶ 49; D.P. Compl. ¶ 61.
20
Plaintiffs support this theory of causation with assertions that Barr submitted to the FDA a Paragraph IV Certification, stating that the 444 Patent is invalid or unenforceable,
see
CVS Compl. ¶22; D.P. Compl. ¶32, and that “for six years — until it was paid hundreds of millions to concede otherwise — Barr vigorously asserted that the ’444 patent is invalid and unenforceable.” Direct Purchaser Pis.’ Mem. in Opp’n to all Defs.’ Mot. to Dismiss the Compls. (“D.P. Mot. Dismiss Mem.”) at 7. Moreover, Barr repeated its assertion that the patent is invalid during the patent litigation, withstanding Bayer’s motions for summary judgment and reconsideration, both of which were denied.
See
CVS Compl. ¶¶ 25, 29-31; D.P. Compl. ¶¶35, 38-39. Lastly, plaintiffs emphasize that Bayer paid enormous sums of money to avoid a judicial determination of the patent infringement case.
See
CVS Compl. ¶¶ 34-35; D.P. Compl. ¶¶ 41-42.
The Supreme Court has held — albeit in a different factual context — that a legal theory dependent on predicting the outcome of a specific lawsuit is unduly speculative.
See Whitmore v. Arkansas,
495 U.S. 149, 159-60 , 110 S.Ct. 1717 , 109 L.Ed.2d 135 (1990). In
Whitmore ,
a death row inmate wanted to challenge the validity of a death sentence imposed on another capital defendant who waived his right to appeal to the Arkansas Supreme Court.
See id.
at 151 , 110 S.Ct. at 1719. The plaintiffs alleged injury was that if the eourt did not review the capital defendant’s sentence, that defendant’s crimes would not be included in a database of crimes of convicted capital defendants, which was compiled by the state for comparative purposes to ensure fair application of the death penalty.
See id.
at 156, 110 S.Ct. at 1723. To support his claim, the plaintiff asserted that he may eventually seek federal habeas corpus relief that would entitle him to a new trial and that, if he received this new trial and was again sentenced to death, his crime would then be compared to the crimes in the state database. The Supreme Court remarked that to prevail with his claim, the plaintiff would have to prove not only that he may eventually secure federal habeas corpus relief but that, if he did, he would be retried, convicted and again sentenced to death.
See id.
at 157, 110 S.Ct. at 1724. The Court found the plaintiffs alleged injury “too speculative” to constitute an injury in fact and denied him standing to bring his claim.
Id.; see also id.
at 159-60, 110 S.Ct. at 1725 (“It is just not possible for a litigant to prove in advance that the judicial system will lead to any particular result in his case.”).
Although no other decision of the Court addresses this question in an antitrust or other economic context, the Second Circuit has foreclosed speculation about the outcome of litigation in the corporate context.
See Boehm v. Comm’r,
146 F.2d 553 (2d Cir.),
aff'd,
326 U.S. 287 , 66 S.Ct. 120 , 90
*201
L.Ed. 78 (1945). In
Boehm ,
a stockholder postponed reporting losses on worthless stock for tax purposes until resolution of a pending stockholder derivative action, which ultimately settled.
See id.
at 553-55 . The plaintiff argued that she postponed her losses because she believed that her stock could in fact have had some value if the litigation were successful, thereby restoring money to the corporate treasury.
See id.
at 555 . The Second Circuit rejected this argument. In doing so, it found that the tax court properly inferred that the derivative suit had unproven value and, therefore, that the probability of a particular result in that litigation was “too speculative.”
Id.; see also United States v. Carboni,
204 F.3d 39, 46-47 (2d Cir.2000) (holding that the district court properly refused to consider the outcome of a potential lawsuit in determining for sentencing purposes the amount of loss caused by the criminal defendant’s fraudulent acts because “the cost of litigation and the uncertainty of success made any recovery ... speculative”).
In this case, without a showing of patent invalidity, all that the complaints contain is conjecture as to (1) whether Barr would prevail in the trial court; (2) whether the Federal Circuit would reverse any ruling for Barr; (3) whether the Supreme Court would have heard this case; and (4) when this case ultimately would be resolved. Plaintiffs’ allegations, far from proving causation, merely allege that prior to its settlement with Bayer, Barr initiated and then litigated this case in good faith and to the best of its abilities. Therefore, this allegation, like those in
Whitmore
and
Boehm ,
is too speculative and is insufficient to state a claim under the antitrust laws.
21
The speculative nature of plaintiffs’ allegations is highlighted by the post-settlement affirmations of the 444 Patent’s validity. For instance, in 1997, Bayer voluntarily submitted the 444 Patent to the PTO for reexamination pursuant to 35 U.S.C. § 305 , and the PTO upheld the patent’s validity. More significantly, other generic manufacturers have brought challenges to the 444 Patent — all unsuccessfully.
22
Indeed, the Court of Appeals for the Federal Circuit has upheld summary judgment for Bayer on the issue of the 444 Patent’s validity.
See Schein & Mylan,
301 F.3d 1306 . These judicially noticed facts provide more compelling evidence than the proffers made by plaintiffs, who really can do little more than speculate about what might or might not have happened if the patent litigation had continued.
23
These facts do not,
*202
however, shield the 444 Patent from all future challenges. Rather, the significance of the reexamination and the litigation that Bayer has won is that plaintiffs’ allegations that Barr “would have won” the patent challenge are little more than dubious expectations or desires. Therefore, plaintiffs can not avoid dismissal based on a claim of injury-in-fact that relies on the hope that Barr would have prevailed in its suit against Bayer.
b. Final FDA Approval
Some of the plaintiffs also allege that but for the challenged agreements, Barr would have received final marketing approval from the FDA (i.e., it would not have changed its Paragraph IV Certification to a Paragraph III Certification) and it would have marketed generic Cipro before resolution of the patent litigation.
See
CVS Compl. ¶ 49; I.P. Compl. ¶¶ 63, 65, 136. If Barr had entered the market, other generic companies, like HMR and Rugby, could have entered the market with their own generic versions of Cipro after Barr’s 180-day exclusivity period. Plaintiffs emphasize that the availability of this theory clearly establishes that, despite defendants’ contentions, it is not necessary to plead patent invalidity to state a cognizable claim of an antitrust violation.
It is not contested that before a company may market a new drug, it must receive FDA approval.
See
21 U.S.C. § 355 (a)
(“No
person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application ... is effective with respect to such drug.”). As described above, the Hatch-Waxman Amendments simplified the approval process for companies wanting to market generic drugs by permitting such companies to file an ANDA. The amendments also addressed the interests of patent holders by requiring an ANDA filer to include one of four certifications regarding the patents held by the pioneer drug manufacturer. The certification relevant to this case — the Paragraph IV Certification — seeks FDA permission to market a generic drug before the expiration of the pioneer manufacturer’s patent by asserting either that the patent is invalid and unenforceable or that the generic drug product does not infringe the patent.
See 21
U.S.C. § 355 (j)(2)(A)Cvii)(IV);
see also 21
C.F.R. § 314.94(a)(12)(A)(4). By contrast, the Paragraph III Certification seeks FDA permission to market a generic drug upon the expiration of the pioneer drug manufacturer’s patent.
See 21
U.S.C. § 355 (j)(2)(A)(vii)(III). The pioneer drug manufacturer can bring a patent infringement case against an ANDA IV filer, which will delay FDA approval of the ANDA for 30 months or until successful resolution of the litigation, whichever occurs first.
See id.
§ 355(j)(5)(B)(iii). A court is permitted to lengthen or shorten this 30-month stay if it determines that ether party to the litigation has failed to “reasonably cooperate in expediting the action.”
Id.
Courts and commentators have recognized that after the expiration of the 30-month stay, the FDA may grant a generic company final marketing approval despite a pending patent infringement suit.
See Bayer AG v. Elan Pharm. Research Corp., 212
F.3d 1241, 1247 n. 5 (Fed.Cir.2000) (stating that the parties agreed that the generic company was “free to market its
*203
product” since the thirty-month delay on FDA approval had expired);
Ciprofloxacin I,
166 F.Supp.2d at 744;
Zeneca Ltd. v. Pharmachemie B.V.,
16 F.Supp.2d 112, 155-16 (D.Mass.1998) (reviewing legislative history and recognizing that the notion “that the statutory bar might expire prior to a ruling on the validity of the patent was anticipated and accepted by legislators as part of the compromise measure”);
see also
Sheila F. Anthony,
Riddles and Lessons from the Prescription Drug Wars: Antitrust Implications of Certain Types of Agreements involving Intellectual Property
at 2 (June 1, 2000) (“Under the [Hatch-Waxman] Act, the FDA is empowered to approve a generic for market even
before
the branded company’s patents expire.”).
Therefore, if the patent holder wants to prevent generic competition after the 30-month stay expires but before resolution of the patent infringement case, it must obtain a preliminary injunction restraining generic sales that allegedly infringe upon its patent.
See Ciprofloxacin I,
166 F.Supp.2d at 740;
Zeneca,
16 F.Supp.2d at 116 (citing 21 U.S.C. § 355 (j)(5)(B)(iii)(III)). Occasionally, courts have denied preliminary injunctions in patent cases on the ground that, until there is a judicial finding of validity and infringement, the alleged infringer has a “right to compete.”
Ill. Tool Works, Inc. v. Grip-Pak, Inc.,
906 F.2d 679, 684 (Fed. Cir.1990) (noting that the district court properly balanced the public interest in the protection of patent rights against the alleged infringer’s continuing right to compete during motion stage of litigation);
see also Easter Unlimited v. Rubie’s Costume Co.,
No. 00 Civ. 6241, 2000 WL 1341400 , at *10 (S.D.N.Y. Sept. 15, 2000) (“While there is a public interest in the protection of patent rights, this interest is counterbalanced by [alleged infringer’s] continuing right to compete before a trial on the merits can be concluded.”);
accord Cargo Protectors, Inc. v. Am. Lock Co.,
92 F.Supp.2d 926, 935 (D.Minn.2000).
The complaints in this case contain numerous facts in support of plaintiffs’ allegation that but for the challenged agreements, Barr would have received final FDA approval to market its generic product and would thereby have had the capacity to enter the Cipro market before resolution of the patent suit. In October 1991, Barr filed an ANDA IV seeking the FDA’s permission to market a generic version of Cipro before the expiration of the 444 Patent.
See, e.g.,
CVS Compl. ¶22. Shortly thereafter, Barr notified Bayer of its ANDA and certification.
See, e.g., id.
¶ 23. On January 16, 1992, Bayer commenced a timely patent infringement case against Barr, thereby triggering the statutory waiting period for FDA approval of Barr’s ANDA.
See, e.g., id.
¶24. The parties subsequently stipulated to extend the statutory waiting period until final resolution of .the patent infringement case.
24
See, e.g., id.
¶ 26. In January 1995, while the case was still pending, the FDA granted tentative approval of Barr’s ANDA for generic Cipro.
See
Aston Compl. ¶ 66. In the FDA’s letter to Barr granting this approval, it stated that the FDA had “completed the review of [Barr’s] abbreviated application and has concluded that, based upon the information [Barr has] presented to date, the drugs are safe and efficient for uses as recommended in the submitted labeling — therefore, the application is tentatively approved.”
Id.
According to plaintiffs, once Barr received tentative approval, final approval was imminent
*204
upon expiration of the 30-month stay. However, under the Barr Settlement Agreement, Barr agreed to (and did in fact) amend its ANDA to contain a Paragraph III Certification instead of a Paragraph IV Certification, thereby relinquishing its efforts to come to market before the 444 Patent expires.
See id.
¶¶ 74, 84. These allegations adequately show that but for the stipulation and Barr Settlement Agreement, the statutory stay would have expired in April 1995, at which time Barr would have likely received final FDA approval to market its generic Cipro.
25
Accordingly, plaintiffs maintain that once Barr received FDA approval, it would have had a “right to compete” with Bayer and that it should have been permitted to decide on its own, without colluding with Bayer, whether it would enter the market or withhold its product pending resolution of the patent litigation.
Bayer, however, has labeled this theory as “plaintiffs’ theory of infringing entry,” which it likens to a market in stolen, infringing goods. Bayer Mot. Dismiss Mem. at 25;
see also id.
at 31, 33. Bayer maintains that the 444 Patent, not the challenged agreements, blocked generic entry. This analogy is unpersuasive. Bayer in effect is substituting its self-fulfilling prophecy for plaintiffs’ allegations, since unlicensed market entry is “infringing” only if the patent holder ultimately prevails. Therefore, Bayer’s argument assumes that the district court would have found the 444 Patent valid and that Barr’s generic product would infringe the patent. But the district court made no such finding. Indeed, the crux of plaintiffs’ claim of a
per se
violation is that the challenged agreements allowed Barr to accept cash in exchange for an agreement to halt the process by which a court
would
make such a determination — a process encouraged by the Hatch-Waxman Amendments and beneficial to consumers. Therefore, defendants’ claim that generic entry upon FDA approval is precluded is rejected.
Nonetheless, courts have recognized that if a generic company that received FDA approval markets its drug before the resolution of the patent infringement suit, the generic company assumes the risk that it may subsequently be found liable for infringement.
See Ciprofloxacin I,
166 F.Supp.2d at 744;
Zeneca,
16 F.Supp.2d at 115-16 (“Of course, in the event that the FDA approves a generic because of the expiration of [the statutory stay] without a court decision, and it is later determined that the patent is valid, the patent owner may still recover damages from the generic.”) (citing H.R.Rep. No. 98-857, pt. 2 at 9 (1984)
reprinted at
1984 U.S.C.C.A.N. 2647, 2694) (citation and footnote omitted). Therefore, a prudent company may well determine that its interests require waiting until a court has decided the patent infringement case before marketing its ge
*205
neric drug. For instance, in
Elan,
the generic manufacturer, Elan, chose to delay marketing its product until the resolution of its lawsuit with Bayer, even though the parties agreed that, since the statutory stay had expired, Elan could come to market.
See
212 F.3d at 1248 n. 5. In this case, the complaints do not allege that Barr had the desire or intent to enter the market before resolution of the patent litigation. Moreover, it seems highly unlikely that Barr would risk market entry'without a judicial decision of patent invalidity considering that the Bayer/Barr patent suit involved a patent validity challenge on a compound patent, which the generic drug necessarily infringes. In fact, the complaints seem to undermine plaintiffs’ assertion. For example, according to Indirect Purchaser Plaintiffs’ Complaint, on January 11, 1995, the
Newark Star-Ledger
reported that a spokesman for Barr said that the company will launch its product immediately
“if Barr prevails in court.”
I.P. Compl. ¶ 64 (emphasis added);
accord
Aston Compl. ¶ 67. Consequently, without allegations that Barr intended to enter the market upon FDA approval, before a court decision on the validity of the 444 Patent, plaintiffs’ claim of injury-in-fact based on this theory cannot withstand a motion to dismiss.
26
In a separate argument, HMR and Rugby maintain that plaintiffs’ attempt to stretch this theory to encompass them is flawed. HMR and Rugby argue that plaintiffs have failed to allege an actionable antitrust injury flowing from HMR and Rugby’s conduct because neither HMR nor Rugby exercised control over Barr’s entry into the Cipro market prior to a resolution in the patent litigation and neither HMR nor Rugby had the legal capacity to produce Cipro.
Although neither HMR nor Rugby were parties to the patent litigation, the complaints clearly establish their participation in the challenged agreements. Indeed, HMR and Rugby are both signatories to one of the Settlement Agreements, and HMR is a signatory to the Supply Agreement.
See
I.P. Compl. ¶¶ 22, 23. In addition, in March 1996, Barr and Rugby (then a subsidiary of HMR) entered into the Litigation Funding Agreement pursuant to which Rugby agreed to help Barr fund its patent litigation against Bayer.
See
CVS Compl. ¶ 31; I.P. Compl. ¶ 71. In return, Barr agreed that if it acquired the right to manufacture and/or distribute a generic Cipro tablet — either by Barr prevailing in the patent litigation or by settlement of such litigation — Barr would share the right to market that product exclusively with Rugby.
See
CVS Compl. ¶¶9, 31; I.P. Compl. ¶ 71. The agreement also provided that Barr could not settle the Bayer/Barr patent litigation without Rugby’s' express written approval, that any settlement of that case must provide equal benefits to Barr and Rugby and that Rugby would obtain FDA approval to manufacture Ci-pro.
See
I.P. Compl. ¶ 71. Moreover, Barr and Rugby were to share equally in the profits derived from those sales. In December 1996, the Litigation Funding
*206
Agreement was amended to transfer certain of Rugby’s rights and obligations to HMR. However, the amendment provided that Rugby still retained the exclusive right to distribute any Cipro that HMR obtained the right to market or jointly market with Barr.
See
I.P. Compl.’ ¶ 72. The parties also agreed that all monies received from Bayer in connection with the settlement of the patent litigation would be split equally between Barr and HMR.
See
CVS Compl. ¶ 32; I.P. Compl. ¶ 75.
However, a fair reading of plaintiffs’ complaints fails to establish any facts from which a jury could infer that either HMR or Rugby could have influenced or controlled Barr’s decision to enter the domestic Cipro market prior to a resolution of the patent litigation. Moreover, the Litigation Funding Agreement — which requires Barr to share with Rugby and HMR its rights to market and/or distribute Cipro
upon successful litigation or settlement
— does not contemplate such entry.
In addition, to the extent plaintiffs allege that HMR and Rugby could have entered the market with their own generic Cipro product following Barr’s statutory exclusivity period, this claim also fails. Although a jury could infer from the facts surrounding the Litigation Funding Agreement that Rugby and HMR intended to enter the Cipro market, the fact remains that neither HMR nor Rugby had the legal capacity to market Cipro. The complaints do not allege otherwise. Although'plaintiffs assert that Rugby agreed in the Litigation Funding Agreement to seek FDA approval to manufacture Cipro, none of the complaints allege that either HMR or Rugby filed an ANDA seeking to manufacture Cipro or received FDA approval to do so. Without an ANDA and FDA approval, neither HMR nor Rugby had a right to manufacture generic Cipro. Moreover, any inference that HMR or Rugby would seek FDA approval in this situation is mere conjecture and unsupported by any facts in the complaints.
As an alternative theory, plaintiffs direct this court to cases from various circuits imposing under the antitrust laws joint and several liability on members of a conspiracy. These cases are unpersuasive because none of them involves a situation where the alleged conspirators were prohibited by government regulation from entering the market and, therefore, could not have caused the plaintiffs antitrust injury. For instance, plaintiffs rely on
Paper Systems, Inc. v. Nippon Paper Industries Co.,
where the Seventh Circuit addressed the effect of joint and several liability on the application of the
Illinois Brick
doctrine. 281 F.3d 629 (7th Cir.2002). In that case, the defendant, Nippon, was one of five manufacturers accused of conspiring to reduce output and raise prices in the thermal facsimile paper business.
See id.
at 631 . Each manufacturer in the alleged conspiracy sold paper through different distribution systems; consequently, the
Paper Systems
plaintiffs were indirect purchasers of Nippon but direct purchasers of the other alleged conspirators.
See id.
at 632 . The court found that although the direct customers of Nippon held the exclusive right to recover damages in an antitrust suit based on the overcharges caused by Nippon (and accordingly carved their recovery out of the case), Nippon was still liable to the plaintiffs for the entire overcharge caused by the conspiracy. In other words, although Nippon did not sell directly to the plaintiffs, that fact did not preclude Nippon’s liability for the aggregate overcharge.
Accordingly, plaintiffs allege that, like the defendants in
Paper Systems,
HMR and Rugby are liable for the entire injury caused by defendants’ collective actions,
*207
even if Barr, rather than HMR and Rugby, would have been the party that sold or distributed generic Cipro but for the challenged agreements. Plaintiffs’ argument is misguided. By relying on
Paper Systems,
which focuses on the issue of damages and does, not even address causation, plaintiffs are getting ahead of themselves. It is reasonable to infer that the
Paper Systems
plaintiffs’ theory of injury was that but for the cartel, Nippon (and the other conspirators) would have sold paper pursuant to the elastics of supply and demand. Therefore, those plaintiffs’ alleged injury — overcharge—was directly linked to Nippon selling pursuant to the illegal cartel. In this case, plaintiffs claim that but for the allegedly illegal agreements, they would have the opportunity to purchaser lower-priced, generic drugs. However, unlike the
Paper Systems
plaintiffs’ injury, our plaintiffs’ alleged injury — overcharge — cannot be linked to HMR and Rugby because even absent the allegedly illicit agreements, HMR and Rugby still could not introduce generic drugs into the U.S. market pending outcome of the patent litigation. The other cases cited by plaintiffs are similarly irrelevant.
In addition, as to HMR and Rugby, the
Andrx
case is instructive. In that case Biovail (the second ANDA IV filer) maintained that it could not reach the generic drug market as quickly as it could in the absence of an agreement between HMR (the brand-name drug manufacturer) and Andrx (the first ANDA IV filer).
See
256 F.3d at 806 . To support its claim, Biovail alleged that it filed an ANDA IV seeking permission to market Cardizem CD, but did not specifically allege that it was prepared to market a generic version of that drug or that it anticipated FDA approval.
See id.
at 807 . The district court denied Biovail standing and dismissed the case with prejudice. The district court reasoned that Biovail failed to plead an injury because its exclusion from the generic drug market was caused by lack of FDA approval, not the agreement.
See id.
(citing district court opinion, 83 F.Supp.2d 179, 186 (D.D.C.2000)). The D.C. Circuit, although it agreed that Biovail failed to plead an injury, disagreed as to whether Biovail could ever do so.
See id.
at 808. In fact, the circuit court found that Biovail could allege its intent and preparedness to enter the market by claiming that FDA approval was probable.
See id.
In this case, the Aston Complaint does not allege that HMR or Rugby filed an ANDA or that FDA approval was probable. Consequently, any injury based on market entry by HMR or Rugby pending outcome of the Bayer/Barr patent infringement case fails because that injury is precluded by operation of the regulatory scheme and not by any conduct on the part of HMR and/or Rugby.
c. License under 444 Patent
As this court has previously observed with regard to the state law claims in Indirect Purchaser Plaintiffs’ Complaint, “plaintiffs have asserted at least one theory by which they may establish state antitrust violations without resorting to a determination of patent law.”
Ciprofloxacin I,
166 F.Supp.2d at 748. The theory to which this court referred was that “if in fact Bayer would have licensed or authorized Barr to distribute ciprofloxacin rather than risk the loss of its patents, plaintiffs would have benefitted from the resulting competition, and there would never have been a judicial determination of the validity of Bayer’s patents.”
Id.
at 749. Accordingly, plaintiffs also assert that but for the challenged agreements, Bayer would have settled the Bayer/Barr patent litigation by granting Barr, HMR and/or Rugby a license to bring a generic version of Cipro on the market.
See
CVS
*208
Compl. ¶ 49;
see also
D.P. Compl. ¶ 58; I.P. Compl. ¶ 113. Like the previously-discussed theory, this theory does not require plaintiffs to allege that the 444 Patent is invalid.
In support of this theory, Direct Purchaser Plaintiffs contend that Bayer at different times had entered serious discussions with both Schein Pharmaceuticals, Inc. (“Schein”) and Barr concerning the issuance of a license to market generic Cipro.
See
D.P. Compl. ¶ 58. For instance, they assert that in or about August 1996, Bayer met with Barr and/or HMR to discuss,
inter alia,
the possibility of Bayer issuing an exclusive license to Barr to market a generic form of all present and future forms of Cipro.
See id.
Moreover, the complaints allege that at the time of the challenged agreements, there was a serious dispute as to the validity of the 444 Patent. In fact, Judge Knapp denied both Barr and Bayer’s respective motions for summary judgment.
Moreover, defendants recognize the leverage that Barr had in this case, particularly under the new Hatch-Waxman scheme, which allows a generic manufacturer to seek entry into a market without incurring damages for infringement.
See, e.g.,
Bayer’s Mem. in Opp’n to Pis.’ Mot. for Partial Summ. J. (“Bayer’s Summ. J. Mem.”) at 31 (“The patent owner has much more at stake, because it may lose its patent altogether. Its losses represent a larger share of the market, with much higher lost profits (due to higher prices) on each sale. Thus, the generic challenger’s potential upside can be a fraction of the patent owner’s potential downside.”).
Indeed, defendants concede that patent litigation is inherently uncertain and that, consequently, many patent infringement cases settle.
See, e.g., id.
(“[N]o matter how valid a patent is — no matter how often it has been upheld in other litigation ... or successfully reexamined ... — it is still a gamble to place a technology case in the hands of a lay judge or jury.... Even the confident patent owner knows that the chances of prevailing in [patent] litigation rarely exceed seventy percent.... Thus, there are risks involved even in that rare case with great prospects.”) (internal quotation marks and citations omitted);
id.
at 32 (“The range of potential settlements is now substantial. Because the generic challenger’s valuation of victory is smaller than the patent owner’s valuation of loss, settlement is highly likely.”) (citation omitted); G.Defs.’ Summ. J. Mem. at 16-17 (“The inherent uncertainty of a trial and appeal meant that Bayer faced some risk of losing even a valid patent, along with the attendant profits which the patent laws are designed to provide to patent holders.”);
id.
at 16 (“It is beyond dispute that some 95% of all litigation settles.”) (citation omitted).
In addition, plaintiffs argue that their contention is supported by the provisions of the Supply Agreement. In fact, the Supply Agreement contains a licensing provision pursuant to which Bayer would supply Barr and HMR with generic Cipro to bring onto the market beginning as early as January 1, 1998. The agreement also contains provisions giving Bayer the unilateral right not to issue a license and instead to pay Barr and HMR hundreds of millions of dollars in exchange for their agreement not to manufacture competing, generic versions of Cipro. Accordingly, plaintiffs maintain that in the absence of the challenged agreements (i.e., without the payment option) Bayer would in fact have entered into a license arrangement. Plaintiffs also argue that the evidentiary value of the licensing provisions is bolstered by the agreement’s severability clause, which provides for the provisions to be enforced “if any term or provision of
*209
this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect.” CVS Compl. ¶ 51; D.P. Compl. ¶ 60.
Defendants argue that Bayer has a right, acting unilaterally, not to license its patent and that plaintiffs’ claim “turn[s] this principle on its head” by stripping Bayer of this right and by creating a legal duty to license: “Even though plaintiffs purport to concede that a patentee cannot be held liable under the antitrust laws for failing to grant a license, plaintiffs argue that the same failure to grant Barr a license ... gives rise to cognizable injury under the antitrust laws.” Bayer Mot. Dismiss Mem. at 36-37. Bayer then cites numerous cases to support its proposition that Bayer cannot be liable under the antitrust laws for refusing to license its 444 Patent.
See id.
Bayer is correct in its recitation of the law.
See, e.g., SCM Corp. v. Xerox Corp.,
645 F.2d 1195, 1204 (2d Cir.1981) (finding refusal to license immune from antitrust scrutiny). Moreover, plaintiffs recognize that Bayer has a unilateral right not to license under the challenged agreements and at law. In addition, they concede that the challenged agreements contain a license. However, defendants seriously misconstrue plaintiffs’ allegations, which are not in conflict with this principle of patent law.
Plaintiffs do not contend that Bayer violated the antitrust laws because it unilaterally refused to issue Barr and/or HMR and Rugby a license. Rather, plaintiffs allege that if Bayer had not entered into the challenged agreements, under which it paid Barr, HMR and Rugby in lieu of supplying Cipro, those Generic Defendants would in fact have entered the market with generic Cipro. According to plaintiffs, but for the agreements, Barr would have used the leverage of the pending patent litigation to obtain a license under the 444 Patent for itself and/or HMR and Rugby. Thus, plaintiffs allege that Bayer, notwithstanding its legal right not to issue a license, would
in fact
have granted Barr and/or HMR and Rugby a license. Accordingly, this case is distinguishable from cases like
SCM
cited by defendants, all of which address whether a defendant’s refusal to grant a license violates the Sherman Act. This case addresses a different issue, namely whether plaintiffs who have already alleged a violation of the Sherman Act can demonstrate causation by showing that Bayer would in fact have granted a license but for its allegedly illicit conduct.
Thus, plaintiffs’ complaints have provided sufficient allegations that Bayer would have issued to Barr, HMR and/or Rugby a license for distribution of generic Cipro if it had not instead agreed to pay Barr and HMR hundreds of millions of dollars — an arrangement that plaintiffs claim is illegal — indeed,
per se
illegal. Moreover, it is fair to assume from the allegations in the complaint that if Barr intended to enter the market upon successful resolution of the patent litigation, it also would enter the market upon receiving a license, which would likewise shield Barr from any liability for patent infringement. Therefore, unlike plaintiffs’ successful litigation theory discussed above, this theory is not so speculative to justify denying plaintiffs the opportunity to show that the challenged agreements foreclosed the leverage provided by the patent litigation that would have led Bayer to grant a license.
As to HMR and Rugby, under this theory, plaintiffs have alleged injury-in-fact linked to those defendants. Plaintiffs assert that Bayer would have issued Barr (and perhaps HMR and/or Rugby) a license in the absence of the allegedly illegal agreements. In this regard, the presence of HMR and Rugby made it more likely than not that Bayer would have issued a
*210
license for generic Cipro. The fact that Rugby (and later HMR) was providing financial assistance to Barr during the patent litigation added to Barr’s leverage in that case, as it demonstrates that Barr had the resources to continue with the litigation, including a trial. In addition, the fact that a license would ward off not only Barr, but also HMR and Rugby, as two other potential patent challengers, makes it more likely than not that Bayer would have licensed Cipro if it had not entered into the challenged agreements.
Moreover, if Bayer granted Barr a license to manufacture generic Cipro, presumably in connection with a settlement of the Bayer/Barr patent litigation, that license would trigger the provisions of the Litigation Funding Agreement. Under that scenario, there is another plausible argument for linking lack of generic entry to HMR and Rugby. ' If Barr received from Bayer a license to manufacture Ci-pro, Rugby would begin distributing Barr-manufactured Cipro as contemplated by the Litigation Funding Agreement, as amended. Accordingly, but for HMR and Rugby agreeing not to enter the market with Cipro, Bayer would have granted a license to Barr to manufacture Cipro, and Rugby would have distributed generic Ci-pro.
(2)
Antitrust Injury
Since plaintiffs have alleged one theory of injury-in-fact causally linked to defendants’ alleged illegal conduct, it is necessary to determine whether that injury is “antitrust injury,” i.e., injury of the type contemplated by the antitrust laws.
See Brunswick,
429 U.S. at 489 , 97 S.Ct. at 697 . Antitrust injury “should reflect the anticompetitive effect either of the violation or of the 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.,
97 S.Ct. at 697-98 (internal quotation marks and citation omitted). It is well established that the antitrust laws “[were] enacted to assure customers the benefits of price competition.”
Assoc. Gen. Contractors,
459 U.S. at 538 , 103 S.Ct. at 908 . As purchasers of Cipro, plaintiffs, therefore, present classic allegations of antitrust injury.
In fact, plaintiffs’ complaints demonstrate how the introduction of generic competition into the Cipro market would have greatly benefitted plaintiffs. According to plaintiffs, generic drugs are invariably priced below the brand-name drugs to which they are bioequivalent.
See, e.g.,
I.P. Compl. ¶ 47. A 1998 study conducted by the Congressional Budget Office (“CBO”) concluded that the purchase of generic drugs saved consumers and third party payors between $8-10 billion in a single year.
See, e.g., id.
Similarly, a report prepared by the Government Accounting Office in August 2000 observed that “[bjecause generic drugs are not patented and can be copied by different manufacturers, they often face intense competition, which usually results in much lower prices than brand-name drugs.”
Id.
Indeed, according to plaintiffs’ complaints, Barr has recognized the importance of generic drugs, as it spelled out on its web page:
Generic pharmaceuticals can cost 30-80% less than the equivalent, branded product. Yet, the consumer is getting the same product, manufactured to the same high standards, as the brand name product.
******
[Introduction of generic products— which offer consumers a choice — results in competition that can also help lower prices. The generic manufacturer
*211
makes a real contribution to lowering health care costs, by offering the very same quality pharmaceutical products at significantly lower prices.
Id.; accord
CVS Compl. ¶ 16; D.P. Compl. ¶¶ 26, 27. According to plaintiffs, Barr stated that it planned to enter the market for Cipro by initially pricing its generic product 30% less than Bayer’s Cipro.
See
I.P. Compl. ¶ 47. This price, plaintiffs maintain, would inevitably have been lowered, as additional generic companies entered the market and competed for market share.
See id.;
D.P. ¶ 26.
Moreover, the complaints recognize the detrimental consequences to Bayer of generic competition in the Cipro market. According to plaintiffs, a brand-name company loses a significant portion of its market share to generic competitors less than a year after the introduction of generic competition, even if the brand-name manufacturer lowers prices to meet such competition.
See
I.P. Compl. ¶ 48. The 1998 CBO Study estimates that generic drugs capture at least 44% of the brand-name drug’s market share in just the first year of sale.
See id.
Moreover, in testimony before Congress, a representative from the Pharmaceutical Research and Manufacturers of America (a brand-name pharmaceutical manufacturer’s trade association), confirmed that “in most cases, sale of pioneer medicines drop as much as 75% within weeks after a generic copy enters the market.”
Id.
In addition, the complaints establish that Bayer well understood the dramatic, adverse consequence that generic competition would have on Bayer’s sales of brand-name Cipro; indeed, it noted that “being hit by generics is traumatic for an organization.” D.P. Compl. ¶ 26;
accord
CVS Compl. ¶ 15. These facts demonstrate that, but for the challenged agreements, Bayer stood to lose billions of dollars in the face of generic competition. To prevent this result, plaintiffs maintain that Bayer suppressed generic entry in the Ci-pro market, at the expense of Cipro purchasers, including plaintiffs.
In
In re Warfarin Sodium Antitrust Litigation,
the Third Circuit sanctioned a claim of antitrust injury similar to the claim raised by plaintiffs in this case.
See
214 F.3d 395 (3d Cir.2000). The plaintiffs in
Warfarin,
indirect purchasers of the drug Coumadin, sought injunctive relief for the anticompetitive conduct of the drug’s manufacturer, DuPont Pharmaceuticals Company (“DuPont”).
See id.
at 396-97 . They alleged that DuPont’s conduct prevented competition in the Coumadin market, which caused Coumadin users to pay supra-competitive prices for the drug.
See id.
at 396, 400 . The court granted the plaintiffs standing for injunctive relief, remarking that “the excess amount paid by Coumadin users not only is ‘inextricably intertwined’ with the injury DuPont aimed to inflict, the overcharge was the aim of DuPont’s preclusive conduct.
It is difficult to imagine a more formidable demonstration of antitrust injury.” Id.
at 401 (emphasis added).
27
In this case, plaintiffs’ allegations of antitrust injury are equally formidable. Like the plaintiffs in
Warfarin,
plaintiffs in this case allege that defendants’ conduct suppressed generic entry in the Cipro market,
*212
causing plaintiffs to pay inflated prices for Cipro.
See
CVS Compl. ¶¶1, 52; D.P. Compl. ¶¶ 1, 63. According to plaintiffs, the agreements suppressed competition because, in their absence, Bayer would have granted a license to Barr and/or HMR and Rugby to market generic Cipro. As plaintiffs’ complaints establish, at the time of the agreements, there was uncertainty regarding the validity of the 444 Patent. Plaintiffs maintain that consumers would have benefitted from that uncertainty and if the risk of a court invalidating Bayer’s 444 Patent prompted it to grant a license under the patent. Moreover, plaintiffs argue that absent the payments, Barr’s interests were in line with its customers — it could make profits by selling less expensive, generic versions of Cipro to consumers, and it could make those sales by using the threat of invalidation to obtain a license from Bayer.
Instead, plaintiffs claim that, since entering into the agreements, Bayer has instituted price increases for Cipro that are among the highest percentage increases for any prescription drug in the United States.
See
Aston Compl. ¶ 95; I.P. Compl. ¶ 120. As a result, plaintiffs maintain that they have been denied the opportunity to obtain low-cost generic Cipro and are forced to pay süpra-competitive prices.
See
Aston Compl. ¶ 99; I.P. Compl. 135. Just as in Warfarin, in this case, Bayer’s “efforts to keep the generic drug off the market emanate from the fact that the introduction of the generic product would force down the price paid [for Cipro]. The higher prices paid were the
raison d’etre
of [Bayer’s alleged] antitrust conduct.” 214 F.3d at 402 . Accordingly, plaintiffs have advanced prototypical allegations of antitrust injury directly linked to defendants’ allegedly illegal conduct. Moreover, the injury occurred not only by reason of defendants’ allegedly illegal conduct — entering into the agreements — but also “from that which makes defendants’ acts unlawful” — illegally restraining competition in the market for Cipro.
Brunswick,
429 U.S. at 488 , 97 S.Ct. at 697 . Consequently, as plaintiffs have adequately alleged an antitrust injury casually linked to defendants’ conduct, defendants’ motions to dismiss plaintiffs’ complaints for failure to state a claim are denied.
(3)
Defendants’ Argument for Immunity under
Noerr-Pennington
Finally, defendants suggest that they can escape antitrust liability by hiding behind the protections provided by the
Noerr-Pennington
doctrine. Under this doctrine, legitimate government petitioning, including the filing of a non-sham lawsuit, is immune from attack under the Sherman Act.
See E. R.R. Presidents Conf. v. Noerr Motor Freight,
365 U.S. 127 , 81 S.Ct. 523 , 5 L.Ed.2d 464 (1961);
United Mine Workers of Am. v. Pennington,
381 U.S. 657 , 85 S.Ct. 1585 , 14 L.Ed.2d 626 (1965). The essence of the doctrine is that “no violation of the [Sherman] Act can be predicated upon mere attempts to influence the passage or enforcement of laws.”
Noerr,
365 U.S. at 135 , 81 S.Ct. at 528 . This principal is rooted in, and may be required by, the First Amendment to protect the right to petition the government for redress of grievances.
See id.
at 137 , 81 S.Ct. at 529 . Defendants incorrectly assert that their conduct is immune from liability because it was undertaken pursuant to the terms of the Settlement Agreements, which provided for the Consent Judgment to be entered by Judge Knapp.
Defendants’ argument is easily refuted. The challenged agreements in this case are private agreements between the defendants, in which Judge Knapp played no role other than signing the Consent Judgment. The Consent Judgment did not in-
*213
elude the terms of the agreements, nor was the judge even apprised of the terms before he “so ordered” the Consent Judgment. Even if signing the Consent Judgment could be construed as approving the Settlement Agreements, government action that “amounts to little more than approval of a private proposal” is not protected.
Cantor v. Detroit Edison Co.,
428 U.S. 579, 602 , 96 S.Ct. 3110, 3128 , 49 L.Ed.2d 1141 (1976). The fact that the patent court was subsequently informed of the material terms of the settlement does not change this conclusion. The Supreme Court has emphasized that “actual state involvement, not deference to private price fixing arrangements under the general auspices of state law, is the precondition for immunity from federal law.”
FTC v. Ticor Title Ins. Co.,
504 U.S. 621, 633 , 112 S.Ct. 2169, 2176 , 119 L.Ed.2d 410 (1992). Consequently, defendants’ conduct pursuant to the agreements in this case is not afforded immunity from the antitrust laws under the
Noerr-Pennington
doctrine.
(4)
Defendant Watson’s Individual Arguments
Watson moves to dismiss the Aston Complaint and Indirect Purchaser Plaintiffs’ Complaint for failure to state a claim upon which relief can be granted. To sustain a motion to dismiss, plaintiffs must allege that Watson’s conduct unlawfully restrained competition,
see Capital Imaging Assocs. v. Mohawk Valley Med. Assocs.,
996 F.2d 537, 543 (2d Cir.1993), and that plaintiffs suffered an antitrust injury causally connected to Watson’s conduct.
See Brunswick,
429 U.S. at 485 , 97 S.Ct. at 696 . Watson maintains that it had no involvement whatsoever with any of the conduct that plaintiffs allege was illegal and that plaintiffs have failed to allege the requisite antitrust injury against Watson.
Watson was not a signatory to any of the challenged agreements. Watson entered the picture in February 1998, a little more than one year after the agreements were executed. At that time, Watson purchased Rugby from HMR, pursuant to a Stock Purchase Agreement (“Purchase Agreement”) between Watson and HMR dated August 25, 1997 (and amended on November 26, 1997 and February 27, 1998).
28
See
Aston Compl. ¶ 85; I.P. Compl. ¶ 100. According to plaintiffs, in Section 3.35 of that agreement, the parties acknowledge Rugby’s obligations pursuant to the HMR/Rugby Settlement Agreement, including the obligation not to compete with Bayer’s Cipro or, according to plaintiffs, file any ANDA for a generic form of Cipro.
See
Aston Compl. ¶ 89; I.P. Compl. ¶ 106.
HMR’s agreement with Watson and Rugby concerning Cipro is described in two other documents, a Side Letter Agreement (“Side Letter”) between HMR and Watson dated February 27, 1998 and a Term Sheet for a distribution agreement (“Term Sheet”) to govern Rugby’s distribution of Cipro.
See
Aston Compl. ¶ 85; I.P. Compl ¶ 101. Plaintiffs allege that these two documents and the Purchase Agreement collectively embody an arrangement whereby HMR will share with Rugby and Watson any financial benefit from the marketing or distribution of Ci-pro or a generic form of Cipro.
29
See
*214
Aston Compl. ¶ 86; I.P. Compl. ¶ 102. Section 1 of the Side Letter provides the following:
[HMR] hereby agrees to pay Watson one-half of all amounts received by [HMR] or its Affiliates pursuant to the [Supply Agreement], the [Litigation Funding Agreement] or any agreement entered into by [HMR] or its Affiliates in replacement, amendment or substitution of either of the foregoing agreements ..., other than payments made or related to events prior to the launch of the Product (the “Launch Date”) by [HMR], Barr Laboratories, Inc....
Watson Mot. Dismiss Mem., Ex. A § 1;
accord
CVS Compl. ¶ 86; I.P. Compl. ¶ 102.
In addition, the Term Sheet designates Rugby as HMR’s “exclusive distributor of the product in the United States and Puer-to Rico.” Watson Mot. Dismiss Mem., Ex. A of Ex. A ¶ 3. According to plaintiffs, it further provides that once Rugby commences distributing Cipro or a generic equivalent thereof, HMR will share the profits equally with Watson and Rugby.
30
Plaintiffs also allege that the Term Sheet obligates Rugby to abide by certain resale price limitations that guarantee a “target profit percentage.”
31
CVS Compl. II87; I.P. Compl. ¶ 103. Furthermore, the Term Sheet states that “neither Rugby nor any of its affiliates will sell any product AB rated
32
with the Product during the term.” Watson Mot. Dismiss Mem., Ex. A of Ex. A ¶ 3 (footnote added). Ac
*215
cording to plaintiffs, this provision prevents Rugby, Watson and Watson’s other subsidiaries from selling any AB-rated formulation of Cipro.
33
Lastly, the Term Sheet contains restrictions on the sale of Cipro after a generic product reaches market:
After launch of the Product ..., neither Rugby nor any affiliate can sell any Product (whether purchased from a third-party or manufactured by it to any affiliate) for one-year after the termination (other than expiration as indicated in the first sentence under this heading) of the agreement, unless such termination is by Rugby due to a material breach by Parent (i.e., HMR) or is a wrongful termination by Parent.
Aston Compl. ¶ 88; I.P. Compl. ¶ 105.
Plaintiffs maintain that the provisions in the HMR/Rugby Settlement Agreement and in the Purchase Agreement, Side Letter and Term Sheet — which plaintiffs allege prevent Watson or Rugby or any of them affiliates from competing or attempting to compete in the U.S. Cipro market— are onerous to competition because another Watson subsidiary, Schein,
34
has filed an ANDA IV for Cipro. Accordingly, plaintiffs claim that unless enforcement of the challenged agreements is enjoined, “Schein will be prohibited from marketing a generic formulation of Cipro because it is an affiliate of Rugby and Watson....” I.P. Compl. ¶ 109;
accord
Aston Compl. ¶ 91. As further support for this assertion, plaintiffs emphasize that Section 8 of the HMR/Rugby Settlement Agreement provides that, in the event of a breach by any party (including Rugby and its affiliates), Bayer would be entitled not only to damages, but also to “specific performance of its rights hereunder.” I.P. Compl. ¶ 91 (internal quotation marks omitted);
accord
Aston Compl. ¶ 109.
Plaintiffs’ argument fails because they have misinterpreted the provisions of the HMR/Rugby Settlement Agreement. The complaints set forth the definition of the term “affiliate” from Section 9(e) of the HMR/Rugby Settlement Agreement as including “any entity ‘which controls, or is controlled by or under common control with’ HMR or Rugby.” I.P. Compl. ¶ 81. Plaintiffs claim that this definition includes not only HMR and Rugby, but also Watson and its respective subsidiaries (i.e., Schein).
See id.
However, in its brief, Watson correctly demonstrates that Schein is not in fact constrained by the terms of the HMR/Rugby Settlement Agreement. Indeed, although that agreement provides that HMR, Rugby and their affiliates acknowledge the validity of Bayer’s 444 Patent and agree to refrain from marketing a generic form of Cipro,
see
Aston Compl. ¶ 76; I.P. Compl. ¶ 81, Schein is not an affiliate of Rugby. The definition of affiliate in the HMR/Rugby Settlement Agreement states that “after a change of control transaction involving Rugby so that Rugby is no longer an affiliate of HMR, ‘affiliate’ with respect to Rugby shall mean Rugby, its successor, if any, by operation of law (other than Barr), and Rugby’s subsidiaries.”- Watson Mot. Dismiss Mem., Ex. B
*216
¶ 9(e). The sale of Rugby to Watson triggered this provision. According to Watson, Schein was then (and is still) a subsidiary of Watson, not Rugby.
See id.
at 7 n. 4 (citing Schein Pharmaceutical, Inc. Form 10-Q, June 24, 2000, at 7);
see also id.,
Ex, C.
35
Thus, Schein was not, and is not, bound by the terms of the HMR/Rugby Settlement Agreement and neither are any of Watson’s other subsidiaries. This conclusion is supported by the fact that Schein filed and defended an ANDA IV, actions that it would not be permitted to take if Watson and its subsidiaries were constrained by the terms of the HMR/Rugby Settlement Agreement.
Even if Schein could be considered bound by the terms of the HMR/Rugby Settlement Agreement, plaintiffs’ argument that Watson’s acknowledgment of Rugby’s obligations under such agreement prevents Schein from marketing Cipro has been foreclosed by the Federal Circuit.
36
In fact, as noted above, that court has upheld the validity of the 444 Patent as to Schein.
See Schein & Mylan,
301 F.3d 1306 . Consequently, plaintiffs have failed to allege conduct by Watson that violates Section 1 because any restraint in trade from Schein not entering the generic market with a form of Cipro is a result of Bayer’s 444 Patent, not Watson’s purchase of Rugby and the attendant acknowledgment of Rugby’s pre-existing contractual arrangements with Bayer.
In addition, plaintiffs’ allegations of Watson’s anticompetitive conduct based upon the Side Letter and/or Term Sheet are equally unconvincing. Plaintiffs allege that Watson is receiving financial benefit from the alleged conspiracy, i.e., that Watson is receiving a portion of the allegedly illegal payments made pursuant to the Supply Agreement, which, plaintiffs claim, operates to suppress generic competition in the Cipro market. For support, plaintiffs highlight paragraph one of the Side Letter, which states that HMR and Watson agree to share any financial benefit from the marketing and distribution of Cipro.
See
I.P. Compl. ¶ 102. However, the complaints recognize that this provision goes on to exclude from these benefits any “payments made or related to events prior to the launch of Product [Cipro]” by HMR or Barr. Watson Mot. Dismiss Mem., Ex. A § 1;
accord
CVS Compl. ¶ 86; I.P. Compl. ¶ 102. Indeed, the Side Letter expressly states that Watson is not receiving any portion of the payments currently being made by Bayer to the Barr Escrow Account. In fact, according to the Side Letter, Watson does not receive any financial benefit until Rugby begins distributing generic Cipro. Moreover, despite plaintiffs’ assertions, Watson is not receiving these payments in exchange for Rugby acting as exclusive distributor of Cipro. In fact, Rugby’s role as exclusive distributor of a generic form of Cipro was
*217
contemplated by the Litigation Funding Agreement, which was executed by Barr and HMR long before Watson entered the picture.
Moreover, plaintiffs’ allegations of anti-competitive conduct based on the fact that the Term Sheet “obligate^]” the parties to, and “prevents” the parties from, taking certain actions are rejected because the Term Sheet is not an agreement. When Watson purchased Rugby from HMR, the parties agreed that Rugby would remain the exclusive distributor of Cipro should Bayer chose to supply the drug to Barr and HMR per the Supply Agreement.
See
Watson Mot. Dismiss Mem. at 4. To this end, the parties agreed to negotiate in good faith to reach a distribution agreement.
See id.
at 5. Accordingly, the parties drafted the Term Sheet, which set forth general terms of a distribution agreement for Cipro, but they never executed such an agreement.
See id.
at 4. Even now, there is no agreement because, until the 444 Patent expires or until Bayer licenses Cipro, there is no product for Rugby to distribute.
See id.
at 5. Indeed, all that the Term Sheet embodies is HMR and Watson’s attempt to negotiate in good faith, as required by the Side Letter. The complaints do not allege that the Term Sheet is binding in any way on the parties or that the parties have made any additional attempts to execute the distribution agreement. Therefore, any claim of anti-competitive conduct flowing from the Term Sheet is too speculative to support a cause of action under the Sherman Act.
As a last resort, plaintiffs argue that Watson, as the current parent of Rugby, is liable for actions undertaken by Rugby pursuant to the HMR/Rugby Settlement Agreement before Watson’s acquisition of the company. As support, plaintiffs emphasize that Watson acknowledged Rugby’s obligations under that agreement in the Purchase Agreement attendant to Watson’s acquisition of Rugby from HMR. However, the authorities on which plaintiffs rely do not support this proposition. Plaintiffs direct this court to
Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752 , 104 S.Ct. 2731 , 81 L.Ed.2d 628 (1984), as support for their proposition that Watson is liable for the acts of Rugby allegedly taken in furtherance of the alleged conspiracy. In fact,
Copperweld
merely established the proposition that a parent and its wholly owned subsidiary are not legally capable of conspiring with one another in violation of Section 1 of the Sherman Act. The case does not hold, and plaintiffs have cited no other authority for, the proposition that a parent corporation is separately liable for the acts of a subsidiary undertaken before the parent was even involved.
Finally, plaintiffs’ reliance on judicial es-toppel to bar Watson from arguing that it is not liable for Rugby’s acts is equally misplaced. Under the doctrine of judicial estoppel, when a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, particularly if it prejudices the party who has acquiesced in the position formerly taken.
See New Hampshire v. Maine,
532 U.S. 742, 749 , 121 S.Ct. 1808, 1814 , 149 L.Ed.2d 968 (2001) (citing
Davis v. Wakel-ee,
156 U.S. 680, 689 , 15 S.Ct. 555 , 39 L.Ed. 578 (1895)). Plaintiffs rely on an argument made by Watson in
Watson Laboratories, Inc. v. Rhone-Poulenc Rorer, Inc.,
178 F.Supp.2d 1099 (C.D.Cal.2000). In that case, Watson sued the supplier of a hypertension drug, its parent corporation and its affiliates, alleging that the supplier breached a contract to supply the drug and that all defendants breached a non-compete agreement. Watson argued that not only were the signatories of the relevant
*218
agreements liable for breach, but that their parent company also was liable. The Third Circuit found that, absent any evidence to the contrary submitted by the defendants, the parent company was liable for acts undertaken by its subsidiaries. Accordingly, it granted summary judgment to Watson. In this case, however, Watson is not arguing that liability can never be imposed on a parent corporation for the acts of its subsidiary. It only argues that it cannot be held liable for the acts of Rugby, a previously independent company that it acquired after the challenged conduct occurred and from which it has received no separate benefits. Thus, plaintiffs’ efforts to apply judicial estoppel to preclude Watson’s motion to dismiss miss the mark.
Therefore, plaintiffs fail to allege that Watson’s conduct has restrained, or threatens to restrain, trade in the U.S. market for Cipro or that, even if such conduct could constitute a restraint of trade, Watson has caused plaintiffs an antitrust injury. Consequently, the Aston Complaint and the Indirect Purchaser Plaintiffs’ Complaint are dismissed as to Watson for failure to state a claim upon which relief can be granted.
(5)
Generic Defendant’s Statute of Limitations Argument
Barr, HMR and Rugby assert a separate ground for dismissal directed at the “Organizational Plaintiffs” bringing this suit (i.e., all plaintiffs that submitted the Aston Complaint with the exception of the original and sole consumer plaintiff, Mark Aston). These defendants assert that the Organizational Plaintiffs’ claims should be dismissed as time-barred. A complaint alleging relief that is barred by an affirmative defense, like the statute of limitations, can be dismissed for failure to state a claim upon which relief can be granted.
See Sapienza v. Osleeb,
550 F.Supp. 1304, 1307 (E.D.N.Y.1982) (“Although Fed. R.Civ.P. 12 does not expressly provide that a statute of limitations defense may be raised in a pre-answer motion, the vast weight of authority supports the proposition that such a motion is permissible so long as the statutory bar can be gleaned from the face of the complaint.”) (citations omitted). Under the Sherman Act, a cause of action must be commenced within four years of accrual.
See
Clayton Act § 4B, 15 U.S.C. § 15b.
37
An antitrust cause of action accrues, and the limitations period begins to run, when a defendant commits an act that causes injury to the plaintiff.
See Zenith Radio Corp. v. Hazeltine Research,
401 U.S. 321, 338 , 91 S.Ct. 795, 806 , 28 L.Ed.2d 77 ;
Johnson v. Nyack Hosp.,
86 F.3d 8 , 11 (2d Cir.1996).
In this case, on or about October 24, 2001, several advocacy groups (the Organizational Plaintiffs) joined in a lawsuit previously filed by Mark Aston, seeking damages under state antitrust and consumer protection laws. In that amended complaint, and in Organizational Plaintiffs’ November 21, 2001 complaint (i.e., the current Aston Complaint), these plaintiffs also allege violations of the Sherman Act, seeking declaratory and injunctive relief. Specifically, they allege that in January 1997, Bayer and Barr, HMR and Rugby entered into a series of allegedly unlawful agreements to settle the Bayer/Barr patent litigation.
See
Aston Compl. ¶¶ 3-5. They also claim that, through these agreements, “Defendants have limited the U.S. production capabilities of Cipro, and Plaintiffs
*219
and are [sic] members of the Class have been forced to pay supra-competitive prices for Cipro resulting in injury....”
Id.
¶ 6. The complaint establishes that some of the Organizational Plaintiffs purchased Cipro as third-party payors for their members.
The conduct challenged by Organizational Plaintiffs — entering into the allegedly anticompetitive agreements in January 1997 — occurred more than four years before Organizational Plaintiffs filed their claims. In fact, Organizational Plaintiffs’ complaint was filed more than nine months after the limitations period had passed in January 2001. Accordingly, defendants argue that Organizational Plaintiffs’ claims should be dismissed as untimely. Plaintiffs, however, allege that Organizational Plaintiffs’ claims are not untimely because they fall into several exceptions to the four-year statute of limitations rule. Organizational Plaintiffs assert three arguments in support of this claim: (1) that the statute of limitations was tolled on or about August 1, 2000, when the first indirect purchaser class action complaint was filed in this case; (2) that the statute of limitations was tolled by fraudulent concealment; and (3) that indirect purchaser class plaintiffs have alleged current and continuing violations of the antitrust laws by defendants extending the limitations period.
a. Class Action Tolling
Plaintiffs maintain that the statute of limitations in this case was tolled around August 1, 2000 when the first indirect purchaser class action complaint was filed. It is well settled that “[t]he filing of a class action tolls the statute of limitations ‘as to all asserted members of the class.’ ”
Crown, Cork & Seal Co., Inc. v. Parker,
462 U.S. 345, 353-54 , 103 S.Ct. 2392, 2397 , 76 L.Ed.2d 628 (1983) (citing
Am. Pipe & Constr. Co. v. Utah,
414 U.S. 538, 554 , 94 S.Ct. 756, 766 , 38 L.Ed.2d 713 (1974)). In
Crown, Cork,
the Supreme Court held that “[o]nce the statute of limitations has been tolled, it remains tolled for all members of the putative class until class certification is denied. At that point, class members may choose to file their own suits or intervene as plaintiffs in the pending action.”
Id.
at 354, 103 S.Ct. at 2397-98. The Supreme Court has also recognized that tolling the statute of limitations in this respect does not create the potential for unfair surprise or otherwise prejudice a defendant when the later filed actions raise claims concerning “the same evidence, memories, and witnesses as the subject matter of the original class suit.”
Am. Pipe,
414 U.S. at 562 , 94 S.Ct. at 770 (Blackmun, J., concurring).
Defendants, however, argue that the filing of the first indirect purchaser class action in this case did not toll the statute of limitations with respect to Organizational Plaintiffs because those plaintiffs are not members of the indirect purchaser class, as that class is defined in the first complaint. In the class action context, the statute of limitations can be tolled only for those who are “asserted members of the class” when another action was timely filed.
See Crown, Cork,
462 U.S. at 353-54 , 103 S.Ct. at 2397 (citing
Am. Pipe,
414 U.S. at 554 , 94 S.Ct. at 766 ). In
Crown, Cork,
the petitioner, an African-American male, filed charges with the Equal Employment Opportunity Commission (“EEOC”) against the respondent, his former employer, alleging that he had been harassed and discharged from his job because of his race.
See id.
at 347, 103 S.Ct. at 2394. While his claim was pending before the EEOC, two other African-American males formerly employed by the respondent filed a class action lawsuit.
See id.
In their complaint, these former employees “purported to represent a class
*220
of ‘black persons who have been, continue to be and who in the future will be denied equal employment opportunities by defendant on the ’grounds of race or color.’ ”
Id.
(citing App. to Brief for Petitioner 2a). Based on this suit, petitioner sought to toll the statute of limitations. At the outset of the Supreme Court’s analysis of petitioner’s claim, it noted that “it is undisputed” that the petitioner is a member of the asserted class.
Accordingly, the complaint here is the starting point to determining whether Organizational Plaintiffs were included among Indirect Purchaser Plaintiffs’ class.
See Shimazaki Communications, Inc. v. AT & T,
647 F.Supp. 10, 14 (S.D.N.Y. 1986). In this case, the first indirect purchaser class action complaint was asserted by those plaintiffs on behalf of “all consumers who purchased Cipro during the Class Period in the United States and its territories.” G.Defs.’ Org. Pis. Mem. at 3 (quoting LoCurto [Indirect Purchaser Plaintiff] Class Action Compl. ¶ 4). Defendants maintain that Organizational Plaintiffs have “never purchased Cipro, directly or indirectly. They do not allege otherwise.”
Id.
Consequently, defendants claim that Organizational Plaintiffs, as third party payors, do not meet the definition of the class asserted in the underlying indirect purchaser complaint. However, the Aston Complaint does establish that four of the seventeen Organizational Plaintiffs “as third party payor[s] for [their] members, purchased Cipro other than for resale and [were] injured by the illegal conduct alleged herein.” Aston Compl. ¶ 9;
accord id.
¶¶ 14,16, 20.
Nonetheless, defendants cite
Shimazaki
as support for their claim that class action tolling does not apply where a plaintiff “was never intended to be a member” of the initial class. 647 F.Supp. at 14 . In that case, the plaintiff sought to toll the statute of limitations based on a complaint filed that asserted the following class:
all persons who engaged in the business of distributing, selling, renting and/or leasing, PBX Systems, both automatic and otherwise, and key telephone systems, of various manufacturers, to subscribers of telephone service in interstate commerce provided by the defendants, New Jersey Bell Telephone Company and New York Telephone Company, and who sustained damages as a result of the acts herein alleged.
Id.
The plaintiff claimed that it was one of the class members because it sold PBX and key telephone systems.
See id.
However, the plaintiff was a wholesale dealer who sold to retail interconnect companies, not to end users. Accordingly, the court emphasized that the “complaint requires that class members sell to subscribers of telephone service ... provided by the defendants,” and that plaintiff was therefore “never intended to be a member” of the class.
Id.
(internal quotation marks omitted). In this case, Organizational Plaintiffs, as third party payors and not consumers, were not intended to be members of the class asserted in the first indirect purchaser class action complaint.
Even if Organizational Plaintiffs are asserted members of Indirect Purchaser Plaintiffs’ class, defendants argue that their claims are still untimely because
Crown, Cork
does not contemplate tolling the statute of limitations in this situation.
38
*221
The Supreme Court crafted its holding in
Crown, Cork
to permit individual plaintiffs to file their own, individual action, as opposed to intervening in the pending action, in the event that certification of an initial class was denied. Indeed, Justice Black-mun, writing for the Court, explained that “[t]he question that confronts us in this case is whether the filing of a class action tolls the applicable statute of limitations, and thus permits all members of the putative class to file individual actions
in the event that class certification is denied,
....” 462 U.S. at 346-47 , 103 S.Ct. at 2394 (emphasis added). The rationale behind that decision — avoidance of multiple lawsuits, court congestion, wasted paperwork and expense — militates against applying the tolling doctrine to Organizational Plaintiffs in this case who are attempting to bring another lawsuit before class certification in the initial action has even been addressed.
See id.
at 351, 103 S.Ct. 2392 (emphasizing that filing of a separate action by a putative class member prior to a decision on class certification would result in “a needless multiplicity of actions — precisely the situation that Federal Rule of Civil Procedure 23 and the tolling rule of
American Pipe
were designed to avoid”).
Lastly, even if class certification in Indirect Purchaser Plaintiffs’ case was ultimately denied, defendants maintain that the Supreme Court’s absent class member tolling doctrine does not extend to the filing of subsequent related class actions. The Second Circuit has noted that although the class action tolling principal permits individuals to file actions following denial of class certification, that principle “does not apply to permit a plaintiff to file a subsequent class action.”
Korwek v. Hunt,
827 F.2d 874 , 876 (2d Cir.1987);
see also id.
at 879.
Korwek
has been cited with approval by other courts for the same proposition.
See Robbin v. Fluor Corp.,
835 F.2d 213, 214 (9th Cir.1987) (“We agree with the Second Circuit that to extend tolling to class actions ‘tests the outer limits of the
American Pipe
doctrine and ... falls beyond the carefully crafted parameters into the range of abusive options.’ ”) (quoting
Korwek,
827 F.2d at 879);
Fleming v. Bank of Boston Corp.,
127 F.R.D. 30, 36 (D.Mass.1989) (noting that “[t]he Court of Appeals for the Second Circuit has stated that all courts that have addressed this question ‘have found that the
American Pipe
tolling rule does not apply to permit putative class members to file a subsequent class action.’ ”) (quoting
Korwek,
827 F.2d at 878),
aff'd sub nom. Fleming v. Lind-Waldock & Co.,
922 F.2d 20 (1st Cir.1990). In this case, Organizational Plaintiffs are filing a class action claim before the court has made a determination on class certification in the initial action — undermining the policy behind the class action tolling doctrine. Moreover, it is not clear that Organizational Plaintiffs are even members of the putative class in this case, and, in any event, the class action tolling exception does not permit filing of additional class action claims as opposed to subsequent individual lawsuits. For these reasons, Organizational Plaintiffs’ argument that the filing of the first indirect purchaser class action complaint tolled the statute of limitations for their Sherman Act claims is unpersuasive.
b. Fraudulent Concealment
Organizational Plaintiffs also allege that the statute of limitations has been tolled by defendants’ fraudulent concealment.
See
Aston Compl. ¶ 100. The
*222
Second Circuit has long recognized that “fraudulent concealment of the existence of a cause of action” under the antitrust laws tolls the running of the four-year statute of limitations under the Clayton Act.
Atl. City Elec. Co. v. Gen. Elec. Co.,
312 F.2d 236, 238 (2d Cir.1962). As that court has noted, “the purpose of the fraudulent-concealment doctrine is to prevent a defendant from ‘concealing a fraud, or ... committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the statute of limitations to protect it.’ ”
New York v. Hendrickson Bros., Inc.,
840 F.2d 1065, 1083 (2d Cir.1988) (quoting
Bailey v. Glover,
88 U.S. (21 Wall) 342, 349, 22 L.Ed. 636 (1874)). To establish fraudulent concealment, Organizational Plaintiffs must plead three elements: (1) defendants’ wrongful concealment of their actions; (2) Organizational Plaintiffs’ failure to discover the operative facts that are the basis of their cause of action within the limitations period; and (3) their due diligence in pursuing the discovery of their claim.
See In re Merrill Lynch Ltd. P’ship Litig.,
154 F.3d 56, 60 (2d Cir.1998) (RICO context);
see also Hendrickson,
840 F.2d at 1083 (citation omitted). Pursuant to Federal Rule of Civil Procedure 9(b), Organizational Plaintiffs must plead circumstances constituting fraudulent concealment with particularity.
39
See
Fed.R.Civ.P. 9(b);
see also Dayco Corp. v. Goodyear Tire & Rubber Co.,
523 F.2d 389, 394 (6th Cir.1975);
Donahue v. Pendleton Woolen Mills, Inc.,
633 F.Supp. 1423, 1443 (S.D.N.Y.1986) (citing,
inter alia, Dayco,
523 F.2d at 394 ).
Organizational Plaintiffs claim that defendants “secretly had agreed to extend the 30-month waiting period” for FDA approval of Barr’s ANDA for a generic version of Cipro. Aston Compl. ¶ 101. They also allege that defendants’ agreements and conspiracy were covert and not disclosed to them or other putative class members.
See id.
To support this allegation, the Organizational Plaintiffs claim that defendants met secretly and discussed and agreed with each other to stifle competition by Cipro generic equivalents.
40
See id.
These plaintiffs rely in their complaint “on information and belief’ to allege that they were “unaware of, and could not through due diligence have discovered, the existence of these meetings and the unlawful agreement which resulted in the Stipulation.”
41
Id.
Moreover, Organizational Plaintiffs claim that defendants took affirmative steps to prevent the discovery of their claim or injury. To support their contention, Organizational Plaintiffs allege that defendants agreed to keep the terms of
*223
the allegedly illegal agreements confidential.
See
Aston Compl. ¶¶ 75, 77. In fact, the Settlement Agreements obligate the parties to use “reasonable best efforts” not to disclose the terms of the agreements, except as provided by law, regulation or government authority.
See id.
In addition, Organizational Plaintiffs assert that Bayer required Barr to assist Bayer in any legal or protective orders against a third party trying to discover the existence of the terms of the agreements. Although not alleged in the Aston Complaint, the Settlement Agreements, in fact, prohibit Barr from assisting third parties in challenging Bayer’s patents and require Barr to collect and destroy documents pertaining to the Bayer/Barr patent litigation.
However, Organizational Plaintiffs’ allegations regarding defendants’ concealment of their actions are directly contradicted by other allegations in the Aston Complaint. There is no dispute that the fact of the settlement and its principal terms were contained in press reports regarding the settlement of the Bayer/Barr patent litigation.
See
Aston Compl. ¶ 81. Indeed, the Aston Complaint acknowledges that Bayer explained the settlement in a press release dated January 17, 1997, the day after the challenged agreements were executed.
42
See id.
Specifically, Bayer’s press release announces that the Barr Settlement Agreement ended the parties’ patent litigation and that, under the agreement, Barr acknowledged the validity of Bayer’s patents.
See id.
The press release also describes the payment scheme established in the Supply Agreement, and it even discusses Bayer’s option either to supply Ci-pro to Barr and its financial partner (stated in the press release as Rugby, but, in fact, HMR) or to make payments to Barr and its partner.
See id.
In addition, the complaint recognizes that Judge Knapp entered the Consent Judgment ending the patent ■ litigation.
See id.
¶ 82 (noting that Barr agreed to acknowledge the validity of the 444 Patent in the Consent Judgment). A review of the Consent Judgment shows that the parties did not agree to keep the judgment confidential and that it would, therefore, have been part of the court record. Moreover, the Consent Judgment was referenced in Bayer’s press release. Lastly, Barr filed a Form 10-K405 with the SEC on September 22, 1998, which further elaborates on the payment scheme established in the Supply Agreement. Barr’s public filing explains that the payments from Bayer to the Barr Escrow Account were expected to be from $24 million to $32 million per year until 2003, specifying that “[i]f the innovator [i.e., Bayer] chooses not to provide the product to Barr, Barr would receive quarterly income and cash flow of $6 million to $8 million throughout the life of the Agreement.” I.P. Compl. ¶ 29. Thus, not only were the material terms of the settlement not concealed, defendants affirmatively disclosed these terms to the public.
Consequently, Organizational Plaintiffs’ argument that defendants’ conduct was “self-concealing” is also rejected. It is well established that a plaintiff may allege fraudulent concealment by “showing either that the defendant took affirmative steps to prevent the plaintiffs’ discovery of his claim of injury or that the wrong itself was of such a nature as to be self-concealing.”
Hendrickson,
840 F.2d at 1083 (discussing
Bailey,
88 U.S. 342 , 21 Wall. 342 , 22 L.Ed. 636 ). Thus, courts often toll the limita
*224
tions period in cases involving secret conspiracies. For instance, in
Hendrickson,
the Second Circuit tolled the statute of limitations based on claims of price-fixing and bid-rigging conspiracies where it found that such conspiracies are self-concealing.
See id. Hendrickson
was decided in the context of the defendants’ request for judgment notwithstanding the verdict or a new trial on the grounds that the plaintiffs’ claims were time-barred. In denying the defendants’ request, the
Hen-drickson
court noted that a conclusive bid purports to be something that it is not, i.e., a product of genuine competition, and is, therefore, “an inherently self-concealing fraud.”
Id.
(citation omitted). The court also acknowledged that a bid-rigging scheme has to remain concealed from the victim of the fraudulent bids to remain successful.
See id.
at 1084 (citation omitted). Accordingly, the court found that the defendants’ scheme “necessarily included the concealment of the existence of their conspiracy” and that, therefore, “proof of the conspiracy itself sufficed to prove concealment by the co-conspirators.”
43
Id.
Relying on
Hendrickson,
the Southern District in
In re Nine West Shoes Antitrust Litigation
summarily found that “by alleging a price fixing scheme, the plaintiff has sufficiently alleged the first prong of fraudulent concealment and ... there is no need to require the pleading of affirmative actions taken' by the defendants to prevent the plaintiffs discovery of his claims.” 80 F.Supp.2d. 181, 193 (S.D.N.Y.2000) (citations omitted). Plaintiffs cite
Nine West Shoes
in support of their assertion that since the Aston Complaint alleges a price-fixing claim, Organizational Plaintiffs have adequately established the first element of fraudulent concealment.
However, this case does not fit the rubric of the self-concealing doctrine. As the
Hendrickson
court explained, a bid-rigging conspiracy necessarily has many participants and a hidden agreement as to a number of contracts.
See
840 F.2d at 1084 . A price-fixing agreement has a similar set-up with a secret agreement as to price. Thus, if one gets word of the collusion as to price or bids (i.e., the illegal conspiracy), the entire scheme is compromised and collapses. In this case, however, the alleged collusion between Bayer and the other defendants was not secret, nor did the challenged agreements require secrecy to take effect. In fact, the agreements here were immediately disclosed to the public. Moreover, the “scheme” established by defendants would not, and in fact did not, dissolve once the agreements were made public. Such a situation cannot be characterized as a self-concealing fraud.
See Pinney Dock & Transp. Co. v. Penn Cent. Corp.,
838 F.2d 1445 , 1471-72 (6th Cir.1988) (“Self-concealment of a conspiracy sufficient to toll the statute of limitations refers to activities in furtherance of a conspiracy
which by their nature defy detection
....”) (emphasis added) (internal quotation marks and citation omitted).
In addition, even if defendants could in some way be considered to have concealed their actions, disclosed facts in the public domain would have been more than adequate to raise Organizational Plaintiffs’ suspicions as to their claim of injury. “[T]he statute of limitations is not tolled by fraudulent concealment once the plaintiff knows of the operative facts that form the basis of his claim such that he could dis
*225
cover his cause of action through the exercise of diligence.”
U.S. v. Inc. Vill. of Island Park,
791 F.Supp. 354, 370 (E.D.N.Y.1992) (citing
Dayco,
523 F.2d at 394 );
see also Cerbone v. Int’l Ladies’ Garment Worker’s Union,
768 F.2d 45 , 48-49 (2d Cir.1985). Moreover, courts have found that “[a]ny fact that should excite [a plaintiffs] suspicion is the same as actual knowledge of his entire claim.”
Dayco,
523 F.2d at 394 ;
accord Donahue,
633 F.Supp. at 1443 (citing
Dayco,
523 F.2d at 394 );
Island Park,
791 F.Supp. at 370 (same);
Wolf v. Wagner Spray Tech. Corp.,
715 F.Supp. 504, 509 (S.D.N.Y.1989) (same);
see also Wood v. Carpenter,
101 U.S. (11 Otto) 135,143, 25 L.Ed. 807 (1879) (“[T]he means of knowledge are the same thing in effect as knowledge itself.”);
Hendrickson,
840 F.2d at 1085-86 (finding it proper for district court to instruct jury that plaintiff would not meet its burden of proving fraudulent concealment if plaintiff “had a suspicion of collusive bidding on a single contract or any other information that should have alerted it to its claim of an overall conspiracy”). Therefore, the critical determinant is when “a significant fact emerges,” not when plaintiffs realize the specific details of their alleged claims.
Wolf,
715 F.Supp. at 509 ;
see also Donahue,
633 F.Supp. at 1443 (“Because the fraudulent concealment standard equates suspicion with knowledge, plaintiffs need not have learned the intimate details of the resale price maintenance agreement for the statute of limitations to begin running.”).
In this case, Organizational Plaintiffs allege “on information and belief’ that they were unaware of the operative facts behind their claims within the limitations period.
44
Aston Compl. ¶ 101. However, as noted above, operative facts such as Barr’s acknowledgment in the Barr Settlement Agreement of the validity of the 444 Patent and Bayer’s other patents, Bayer’s option in the Supply Agreement either to supply Cipro or to make payments to the Barr Escrow Account and the mechanics of the payment scheme established in the Supply Agreement were publicly disclosed. In addition, defendants claim that dozens of nearly identical complaints were filed against some of the defendants in several state courts within four years of the challenged settlement, in some cases by the exact same lawyers who represent Organizational Plaintiffs in this case.
See
G.Defs.’ Org. Pis. Mem. at 9. Given the publicity of the Barr Settlement Agreement and the Supply Agreement, Organizational Plaintiffs cannot credibly claim ignorance of the operative facts of their claims once the January 1997 agreements were disclosed in that same month.
45
Cf. Dayco,
523 F.2d at 394 (finding that congressional proceeding that explored some of plaintiffs allegations “should have aroused [plaintiffs] suspicions”);
Wolf, 715
*226
F.Supp. at 509 (finding that since plaintiffs knew existence of operative facts, they can not argue fraudulent concealment because they failed to realize the significance of those facts to their claim);
Island Park,
791 F.Supp. at 371 (rejecting government’s claim of fraudulent concealment, finding it “difficult to comprehend” how a HUD audit report, which detailed defendant’s wrongdoings, did not defeat government’s claim that it was ignorant of the basis for its cause of action beyond the report’s date).
Lastly, Organizational Plaintiffs’ allegation that due diligence would have been fruitless in discovering their claims is equally implausible and, in any event, is defective on its face. The Supreme Court established the standards for alleging fraudulent concealment over a century ago in
Wood. See
101 U.S. 135 , 11 Otto 135 , 25 L.Ed. 807 . In that case, the Court emphasized that an injured plaintiff must show reasonable diligence in discovering his cause of action within the limitations period.
See id.
at 143, 11 Otto 135 . Moreover, the Court found that “the circumstances of the discovery must be fully stated and proved, and the delay which has occurred must be shown consistent with the requisite diligence.”
Id.
Since
Wood ,
numerous courts have required plaintiffs to plead circumstances constituting fraudulent concealment, including the exercise of due diligence, with particularity.
See, e.g., Nine West,
80 F.Supp.2d at 193 (citing
Merrill Lynch,
154 F.3d at 60 );
Donahue,
633 F.Supp. at 1443 (citing
Rutledge v. Boston Woven Hose & Rubber Co.,
576 F.2d 248, 250 (9th Cir.1978);
Dayco,
523 F.2d at 394 ).
In this case, Organizational Plaintiffs merely allege that “[o]n information and belief,” they could not through due diligence have discovered the operative facts for their cause of action. Aston Compl. ¶ 101. Such an allegation is insufficient. As stated above, due diligence is a requisite element of a fraudulent concealment defense to the statute of limitations bar, and Organizational Plaintiffs’ failure to include such allegations is fatal to their claims.
See Hendrickson,
840 F.2d at 1083 (plaintiffs must allege that their “continuing ignorance was not attributable to lack of diligence on [their] part”);
see also Tran v. Alphonse Hotel Corp.,
281 F.3d 23 , 36-37 (2d Cir.2002) (same in RICO context). Indeed, by merely relying on “information and belief’ to substantiate their assertions, Organizational Plaintiffs have violated the express requirement that fraudulent concealment be pleaded with particularity.
See Merrill Lynch,
154 F.3d at 60 (finding that plaintiffs failed to allege that they exercised due diligence because they made “no allegation of any specific inquiries of Merrill Lynch, let alone detail when such inquiries were made, to whom, regarding what, and with what response”);
Dayco,
523 F.2d at 394 (noting that plaintiffs “mere allegation of due diligence without asserting what steps were taken” did not meet the
Wood
standard);
Mahoney v. Beacon City Sch. Dist.,
988 F.Supp. 395, 400 (S.D.N.Y.1997) (“The evidence submitted by plaintiff to support a fraudulent concealment claim must not be conclusory ....”) (citing
Pinaud v. County of Suffolk,
52 F.3d 1139 (2d Cir.1995));
cf. Stem v. Leucadia Nat’l Corp.,
844 F.2d 997 , 1003 (2d Cir.1988) (finding that allegations of securities fraud generally cannot be based “on information and belief’);
DiVittorio v. Equidyne Extractive Indus., Inc.,
822 F.2d 1242 , 1247 (2d Cir.1987) (same).
Organizational Plaintiffs inappropriately rely on
Nine West
to support their allegation that their ignorance was not the result of a lack of due diligence, but rather the concerted actions of defendants to shield the alleged anticompetitive aspects of the
*227
agreements. However,
Nine West
is distinguishable from this case. Indeed, in
Nine West,
the plaintiffs not only alleged that they “could not have discovered the conspiracy at an earlier date by the exercise of due diligence” because of the defendants’ affirmative acts of concealment, they also alleged two specific examples of such concealment.
See
80 F.Supp.2d at 193. In this case, all that Organizational Plaintiffs allege is that defendants conducted “secret meetings” that led to an allegedly unlawful stipulation and, we can infer, the challenged agreements. Such allegations do not meet the pleading specificity required by Rule 9(b). Moreover, in
Nine West
the court found that the plaintiffs exercised due diligence because they “promptly filed suit” “within days” of media reports of facts relating to the defendants’ alleged conspiracy.
Id.
Quite to the contrary, in this case, Organizational Plaintiffs did not file suit until nearly five years after facts surrounding the Barr Settlement Agreement and the Supply Agreement were made public.
Accordingly, documents in the public record and referred to in Organizational Plaintiffs’ own complaint establish that defendants did not engage in any type of concealment and that, even if they did, Organizational Plaintiffs knew, or at the very least should have known, the operative facts that are the basis of their cause of action. Consequently, they can not be permitted to rely on bald allegations of fraudulent concealment to shield their claims from dismissal as untimely.
c. Continuing Violation
Lastly, Organizational Plaintiffs assert that the statute of limitations has been extended in this case because they have alleged continuing violations of the antitrust laws beginning with the 1997 challenged agreements.
46
The Supreme Court has recognized that in the context of a continuing conspiracy to violate the antitrust laws, “each time a plaintiff is injured by an act of the defendants a cause of action accrues to him to recover the damages caused by that act, and that, as to those damages, the statute of limitations runs from the date of commission of the act.”
Zenith,
401 U.S. at 338-39 , 91 S.Ct. at 806 ;
accord Berkey Photo, Inc. v. Eastman Kodak Co.,
603 F.2d 263, 295 (2d Cir.1979) (quoting
Zenith,
401 U.S. at 338-39 , 91 S.Ct. at 806 );
Donahue,
633 F.Supp. at 1441 (same). Organizational Plaintiffs here maintain that although the challenged agreements were executed in 1997, various acts in furtherance of defendants’ alleged conspiracy were taken subsequent to 1997 and continue to the present. More specifically, they contend that the agreements contemplate continued performance (i.e., installment payments) for at least six years, with the last installment being made in 2003.
See
Aston Compl. ¶¶ 79, 81. Accordingly, they assert that each payment constitutes an act in continuation of the alleged conspiracy and consequently extends the limitations period.
However, although the law in the criminal context is clear that the statute of limitations only starts to run from the last act in furtherance of the conspiracy, the law regarding the continuing violation exception in the civil context is not as clear as plaintiffs’ argument suggests. Policy considerations justify different treatment. In
Vitale v. Marlborough Gallery,
the
*228
Southern District noted that to toll the statute of limitations based on a continuing conspiracy, a plaintiff must allege injury by “ ‘continued, separate antitrust violations
within the limitations period.’
” No. 93 Civ. 6276, 1994 WL 654494 , at *5 (S.D.N.Y. July 5, 1994) (emphasis added) (quoting
Hennegan v. Pacifico Creative Serv., Inc.,
787 F.2d 1299, 1301 (9th Cir. 1986); citing
Kahn v. Kohlberg, Kravis, Roberts & Co.,
970 F.2d 1030, 1039-40 (2d Cir.1992));
accord Kaw Valley Elec. Coop., Inc. v. Kan. Elec. Power Co-op., Inc.,
872 F.2d 931, 933 (10th Cir.1989) (quoting
Hennegan,
787 F.2d at 1301 ). In addition, the
Vitale
court stated that “to restart the statute of limitations plaintiff must allege an overt act which (1) is a ‘new and independent act that is not merely a reaffirmation of a previous act’; and (2) ‘inflict[s] new and accumulating injury on the plaintiff.’ ” 1994 WL 654494 , at *5 (alteration in original) (quoting
Pace Indus., Inc. v. Three Phoenix Co.,
813 F.2d 234 , 238 (9th Cir.1987)). The plaintiff in
Vitale
alleged antitrust violations based on her repeated unsuccessful attempts to sell a painting that was designated a fraud by the defendant.
See id.
The court construed the plaintiffs allegations as claiming merely a refusal to deal. Accordingly, it found that the statute of limitations began to run at the initial refusal to deal and “does not restart when the plaintiff makes subsequent unsuccessful efforts to deal with the defendant.”
Id.; see also Kaw,
872 F.2d at 933 (finding a ratified decision not to provide power to a rival was final, and subsequent acts of refusal were mere reaffirmations of the initial act and did not therefore extend the limitations period).
Likewise, in
Wolf ,
the Southern District interpreted the Supreme Court’s decision in
Zenith
as requiring that the defendant commit an overt anticompetitive act
within the limitations period. See
715 F.Supp. at 508 . Accordingly, the court found that the defendant’s continued use of an allegedly unenforceable patent obtained eight years earlier, and the defendant’s ongoing refusal to surrender the patent, or to notify officials of issues associated with the patent, did not constitute ongoing anticompet-itive acts within the four-year statute of limitations sufficient to restart the limitations period.
See id.
at 508-09 .
Other courts have similarly distinguished independent predicate acts committed during the limitations period, which extend the period, from mere reaffirmations of an initial act, which will not extend the limitations period.
Compare, e.g., DXS v. Siemens Med. Sys.,
100 F.3d 462, 467 (6th Cir.1996) (dicta in part) (finding new overt act sufficient to restart limitations period when defendant enforced a policy, of which it notified customers before limitations period, but which it did not enforce for some time; court noted, however, that if notification of policy was final statement of such policy by defendant, subsequent enforcement would probably be mere reaffirmation)
with, e.g., United Farmers Agents v. Farmers Ins. Exch.,
892 F.Supp. 890, 912 (W.D.Tex.1995) (finding mere reaffirmation when defendant conditioned sale of product on purchase of another product, where defendant announced policy of such conditioning before limitations period and continually enforced such policy),
aff'd,
89 F.3d 233 (5th Cir. 1996).
Moreover, the
Vitale
court recognized that courts within the Second Circuit “consistently have looked unfavorably on continuing violation arguments” and that “compelling circumstances” must exist before the limitations period will be extended. 1994 WL 654494 , at *5 (internal quotation marks and citations omitted). In that ease, the court found that the defendants’ repeated requests for authentication of the plaintiffs painting and repeated fail
*229
ure to notify the plaintiff that she may sell her painting did not constitute compelling circumstances.
See id.
In this case, the only acts alleged by Organizational Plaintiffs subsequent to January 1997 are payments from Bayer to the Barr Escrow Account. These payments are contemplated by, and needed to implement, the fixed terms of the challenged agreements. Accordingly, such acts are not sufficient to extend or restart the limitations period because the performance of an allegedly anticompetitive, preexisting contract is not a new predicate act.
See Grand Rapids Plastics, Inc. v. Lakian,
188 F.3d 401, 406 (6th Cir.1999) (“[E]ven if the payment agreement constituted a continuing violation ... the individual payments to [defendant] were only a manifestation of the previous agreement. The individual payments therefore do not constitute a new and independent act, as required to restart the statute of limitations.”) (internal •quotation marks and citation omitted);
County of Stanislaus v. Pac. Gas & Elec. Co.,
No. 93 Civ. F-5866, 1995 WL 819150 , at *24 (E.D.Cal. Dec. 18, 1995) (“[Performance of the alleged anti-competitive contracts during the limitations period is not sufficient to restart the period.”) (citation omitted),
aff'd,
114 F.3d 858 (9th Cir.1997). In other words, the payments from Bayer to the Barr Escrow Account are “merely the abatable but una-batable inertial consequences of some pre-limitations action,” which do not satisfy the requirements for a continuing violation.
Al George v. Envirotech Corp.,
939 F.2d 1271, 1275 (5th Cir.1991) (citing
Poster Exch., Inc. v. Nat’l Screen Serv. Corp.,
517 F.2d 117, 128 (5th Cir.1975));
see also Lomar Wholesale Grocery, Inc. v. Dieter’s Gourmet Foods, Inc.,
824 F.2d 582 , 586 (8th Cir.1987) (same);
DXS,
100 F.3d at 467 (“For statute of limitations purposes, the focus is on the timing of the causes of action, i.e., the defendant’s overt acts, as opposed to the effects of the overt acts.”). Moreover, as in
Vitale,
in this case, Organizational Plaintiffs’ allegations are not so compelling as to justify an exception to the statute of limitations.
Lastly, the cases cited by plaintiffs do not compel a different conclusion. Plaintiffs cite
Santana Products, Inc. v. Sylvester & Associates, Ltd.,
121 F.Supp.2d 729, 734 (E.D.N.Y.1999), to support their contention that a plaintiff can bring a claim, even if some of the initial anticompetitive events occurred more than four years ago. In
Santana,
however, the plaintiff alleged that within the limitations period defendants had distributed b

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2515544. Public record. Not legal advice.