Howard Ullman

Of Counsel

San Francisco


Read full biography at www.orrick.com
Howard Ullman, Of Counsel in the San Francisco office, is a member of the Litigation and the Antitrust and Competition Groups. He focuses his practice on competition and antitrust law, trade regulation, unfair competition, class action and complex litigation issues.

He has extensive experience advising on distribution law and distribution system issues (including competitor collaborations, pricing issues, non-price restraints and dealer termination issues). He routinely addresses and counsels on the antitrust / intellectual property interface.

Howard represents Nanya Technology Corporation and Nanya Technology Corporation USA in the national DRAM antitrust price-fixing cases. Other price-fixing experience includes representation of a defendant in the DRAM antitrust price-fixing litigation and a large purchaser in connection with the SRAM antitrust price-fixing litigation, and representation of companies in alleged school milk and paint pigment cartels.

He has also worked on antitrust cases for PG&E Corporation, Equifax, One Technologies, and a number of other companies. He regularly counsels companies on competition issues, including Robinson-Patman Act (price discrimination) issues and market concentration issues. He has worked on a number of Cal. Bus. and Prof. Code Section 17200 (unfair competition) litigations. He has also worked on a number of antitrust-healthcare related matters, including mergers and acquisitions.

Howard has worked on antitrust cases in the life insurance industry and for Microsoft Corp. in connection with intellectual property issues. He recently finished cases for a supplier of industrial equipment (commercial scales) and involving below-cost pricing in the retail gasoline industry. He also recently worked on a Section 2 case for a pool products manufacturer that resolved favorably.

Posts by: Howard Ullman

Not Subject to Per Se Analysis – Sixth Circuit on Plausibly Procompetitive Activity in Connection with a Joint Venture

Businessman hand touching JOINT VENTURE sign with businesspeople icon network on virtual screen Antitrust Analysis of Joint Ventures Antitrust Analysis of Joint Ventures – Structural Considerations

In The Medical Center at Elizabeth Place, LLC v. Atrium Health System, Case No. 17-3863 (6th Cir. Apr. 25, 2019), the Sixth Circuit held that activity in connection with a joint venture that is plausibly procompetitive is not subject to per se analysis or condemnation. In doing so, it aligned itself with the Second, Seventh, Eighth and Ninth Circuits, and against the minority approach taken by the Eleventh Circuit.

The Medical Center at Elizabeth Place (MCEP) was a physician-owned, for-profit hospital in Dayton, Ohio. It failed as a physician-owned enterprise and was sold to Kettering Health Network. MCEP alleged that it failed because of the anticompetitive efforts of Premier Health (Premier), a dominant healthcare network in the Dayton area comprising four hospitals. In an earlier opinion, 817 F.3d 934 (6th Cir. 2016), the Court held that Premier comprised multiple competing entities and, therefore, could engage in concerted action.

On remand, the plaintiffs pursued only a per se claim and eschewed a Rule of Reason claim. The trial court granted the defendants’ motion for summary judgment, finding that the defendants’ behavior had plausible procompetitive effects and so was not subject to per se analysis.

The Sixth Circuit affirmed. “[A]t the summary judgment phase,” the court held, “the right question to ask regarding per se claims is whether the plaintiff has shown that the challenged restraint is so obviously anticompetitive that it should be condemned as per se illegal. If, in spite of the plaintiff’s efforts, the record indicates that the challenged restraint is plausibly procompetitive, then summary judgment for the defendants is appropriate.” Slip. Op. at 10.

Under Texaco Inc. v. Dagher, 547 U.S. 1 (2006), there are three types of joint venture restraints: (1) those core to the venture’s efficiency-enhancing purpose (such as setting prices for venture products); (2) those ancillary to the venture’s efficiency-enhancing purpose; and (3) restraints nakedly unrelated to the purpose of the venture. Only the last of these three justifies per se treatment. See id. at 7-8; see also Medical Center at Elizabeth Place, Slip. Op. at 11.

The Sixth Circuit held that, in the case of ancillary restraints, defendants need not show that the restraints are necessary to the venture’s efficiency-enhancing purposes. Instead, there only need be a plausible procompetitive rationale for the restraint. See id. at 12-13. “We follow the majority of Circuits and hold that a joint venture’s restraint is ancillary and therefore inappropriate for per se categorization when, viewed at the time it was adopted, the restraint ‘may contribute to the success of a cooperative venture.’” Id. at 14 (cit. omit.).

The Court also rejected MCEP’s argument that the defendants had the burden of proving that a challenged restraint is procompetitive and therefore ancillary. For a per se claim, whether challenged conduct belongs in the per se category is a question of law. See id. at 15.

The Court then reviewed the two kinds of conduct challenged by MCEP. First were “panel limitations,” wherein the hospital defendants stipulated to payers that if they added MCEP to their networks, the hospital defendants would be able to renegotiate prices. The Sixth Circuit held that these restraints supported procompetitive justifications (helping to ensure patient volume and reduced customer premiums). See id. at 16-17.

Second, MCEP challenged a letter by physicians affiliated with the defendants purportedly threatening a loss of patient referrals to doctors who invested in MCEP as well as terminations of leases of MCEP-affiliated doctors and non-compete agreements. But the letter, the Court held, was not a restraint itself but merely an expression of opinion, while the lease terminations arguably prevented free-riding by the doctors and the non-competes were subject to Rule of Reason review.

MCEP also alleged a conspiracy among payers and a conspiracy among physicians not to deal with it. But the Court held that these conspiracy allegations were new and untimely and therefore not properly before the district court.

The Sixth Circuit’s decision further clarifies the limited applicability of the per se rule in the context of joint ventures, and aligns the Sixth Circuit with the majority approach of the other circuits that have considered the issue. However, the Sixth Circuit’s first decision in the case, reported at 817 F.3d 934 (6th Cir. 2016) – where the Court found that the defendant hospitals could conspire with each other despite the existence of a well-crafted joint operating agreement and based on “intent” evidence – remains somewhat opaque and counsels in favor of careful review of joint venture structure and monitoring of joint venture operations.

 

China’s Conditional Approval of Bayer’s Acquisition of Monsanto: Lessons for Future Merger Cases in China

On March 13, 2018, China’s Ministry of Commerce (“MOFCOM”)[1] announced its Conditional Approval following antitrust review of a concentration of undertakings relating to Bayer’s proposed merger with Monsanto (“Merger”) (Bayer and Monsanto are hereinafter collectively referred to as the “Parties”). This matter, plus three other mergers approved with restrictive conditions by MOFCOM or SAMR in 2018, suggests some trends in China’s approach to antitrust merger review, as discussed below.[2]

In the Bayer/Monsanto matter, the Parties filed a declaration on concentration of undertakings with MOFCOM on December 5, 2016. Afterwards, the Parties withdrew and refiled the declaration twice, and MOFCOM’s review period for each refiled declaration was extended once, with the last one extended to March 15, 2018, which indicates the complexity of the Merger and the antitrust review.

During the review process, MOFCOM raised the concern that the Merger would or might have the effect of eliminating and restricting competition in the following markets: (1) China’s non-selective herbicide market; (2) China’s vegetable seed market (long-day onion seeds, carrot seeds and large-fruit tomato seeds, etc.); (3) field crop traits (corn, soybean, cotton, and oilseed rape); and (4) digital agricultural markets.

According to Article 27 of the Anti-Monopoly Law, the Ministry of Commerce conducted an in-depth analysis of the impact of the Merger on market competition from the following aspects, among others: (i) the market concentration of the relevant market; (ii) the market share and the control of the market by the participating operators in the relevant market; (iii) the impact on market entry and technological progress; and (iv) the impact on consumers and other relevant operators. MOFCOM solicited opinions from relevant government departments, industry associations, downstream customers and industry experts, and held multiple symposiums to understand relevant market definitions, market participants, market structures, industry characteristics, etc. Based on its analysis, MOFCOM believed that the Merger would or might have the effect of eliminating or restricting competition in the four markets, as mentioned above.

MOFCOM then timely informed the Parties of its review opinions and conducted multiple rounds of negotiations with the Parties on how to reduce the adverse impact of the Merger on competition. For the restrictive conditions submitted by the Parties, MOFCOM, in accordance with the “Provisions of MOFCOM on Imposing Additional Restrictive Conditions on the Concentration of Business Operators (for Trial Implementation),” evaluated mainly the following aspects, among others: (i) the scope and effectiveness of divested business; (ii) the divested business’ continuity, competitiveness and marketability; and (iii) the effectiveness of conditions requiring actions to be taken. On March 13, 2018, after evaluation, MOFCOM decided to approve the Merger with additional restrictive conditions, requiring Bayer, Monsanto and the post-merger entity to fulfil the following obligations:

  1. Globally divesting (i) Bayer’s vegetable seed business, (ii) Bayer’s non-selective herbicide business (glyphosate business), and (iii) Bayer’s corn, soybean, cotton, and oilseed rape traits businesses. The above divestitures include divesting related facilities, personnel, intellectual properties (including patents, know-how and trademarks) and other tangible and intangible assets.
  2. Allowing all Chinese agricultural software application developers to connect their digital agricultural software applications to the digital agriculture platform(s) of Bayer, Monsanto and the post-merger entity in China, and allowing all Chinese users to register with and use the digital agricultural products or applications from Bayer, Monsanto and the post-merger entity, within five years from the date when Bayer’s, Monsanto’s and the post-merger entity’s commercialized digital agricultural products enter the Chinese market, and based on fair, reasonable and non-discriminatory terms.

This case, as well as the other three mergers approved with restrictive conditions by MOFCOM or SAMR in 2018, suggests the following trends in China’s antitrust review of mergers:

  •  Economic analysis and market research tools are more frequently being introduced for case analysis. In the Bayer/Monsanto Merger, MOFCOM frequently used the Herfindahl-Hirschman Index (“HHI”) to analyze market concentration issues, and MOFCOM also held hearings/seminars to discuss issues related to market definition, market structure and industry characteristics with industry experts.
  • Potential effects of excluding or limiting competition without proved market shares may also be considered in the antitrust review. In the Bayer/Monsanto Merger, as to the large fruit tomato seeds market, Monsanto’s market share was 10-20%, which was believed to be much larger than that of other competitors. Considering that Bayer was an important competitor in the market, MOFCOM believed that Bayer’s potential in the Chinese market had not yet been fully reflected in its own market share, and that the Merger might render the market less competitive. Thus, in addition to market shares, the Parties’ market power or potential for expansion will also be considered when determining whether or not a merger might exclude or limit the competition in the market.
  • The impact on technological progress will be assessed and the theory of damaging innovation is likely to be adopted. In the Bayer/Monsanto Merger, MOFCOM adopted a “damaging innovation” theory by positing that a merging party’s innovative level and research and development (R&D) ability should be considered in assessing its market position. After the merger, because there are fewer R&D competitors, the merging parties might have less incentive to innovate and they might reduce R&D investment and delay the release of new products to the market, consequently causing an adverse impact on innovation in the whole market. It seems likely that Chinese antitrust officials will continue to consider the technological factor and will apply the damaging innovation theory when necessary for reviewing complicated transactions.
  • Structural conditions and conditions requiring certain actions to be taken may be combined as remedies. Finally, in the Bayer/Monsanto Merger, MOFCOM imposed both structural conditions (requiring global divestiture of certain of Bayer’s businesses) as well as conditions requiring certain actions to be taken (requiring that the Parties make their platforms and digital agricultural products available to Chinese users). Similar combined remedies were imposed in two of the three other approved mergers in 2018. Again, it seems likely this trend will continue.

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[1] In April 2018, the anti-monopoly law enforcement agencies under the three ministries, i.e. the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce, were incorporated into the newly-formed State Administration for Market Regulation (“SAMR”) based on the State Administration for Industry and Commerce.

[2] See Announcement No. 31 [2018] of the Ministry of Commerce – Announcement on Anti-monopoly Review Decision concerning the Conditional Approval of Concentration of Undertakings in the Case of Acquisition of Equity Interests of Monsanto Company by Bayer Aktiengesellschaft Kwa Investment Co. [Effective], available at http://fldj.mofcom.gov.cn/article/ztxx/201803/20180302719123.shtml.

 

Potential Antitrust Issues Lurking in Blockchain Technology

Blockchain technology has burst onto the scene and into the public consciousness over the last few years. While the securities and privacy law questions surrounding blockchain technology have received much attention, perhaps less obvious are the potential antitrust issues raised by the technology.

Although these issues are nascent, they are not wholly theoretical. For example, on March 16 the FTC announced that it is creating a Blockchain Working Group to look at, inter alia, competition policy. “Cryptocurrency and blockchain technologies could disrupt existing industries. In disruptive scenarios, incumbent companies may sometimes seek to hobble potential competitors through regulatory burdens. The FTC’s competition advocacy work could help ensure that competition, not regulation, determines what products will be available in the marketplace” (FTC Blog Post). And in January of this year, the Japan Fair Trade Commission also indicated that it may look into the competition policy issues involving blockchain-based cryptocurrencies.

This blog post briefly discusses some of the potential antitrust issues associated with blockchain technology. READ MORE

Antitrust Analysis of Joint Ventures: How Big Is Too Big?

In the first post in this series, we introduced the concept of joint ventures (“JVs”), outlined why antitrust law applies to their formation and operation, identified the major antitrust issues raised by JVs, and discussed why you should care about these issues.  In the second installment, we unpacked some of the major antitrust issues surrounding the threshold question of whether a JV is a legitimate collaboration.  The third post in the series discussed ancillary restraints–what they are and how they are analyzed. READ MORE

Antitrust Analysis of Joint Ventures: Ancillary Restraints

In the first post in this series, we introduced the concept of joint ventures (“JVs”), outlined why antitrust law applies to their formation and operation, identified the major antitrust issues raised by JVs, and discussed why you should care about these issues. In the second installment, we unpacked some of the major antitrust issues surrounding the threshold question of whether or not a JV is a legitimate collaboration. This third post in the series discusses ancillary restraints—what they are and how they are analyzed. READ MORE

Antitrust Analysis of Joint Ventures: Structural Considerations

Businessman hand touching JOINT VENTURE sign with businesspeople icon network on virtual screen Antitrust Analysis of Joint Ventures Antitrust Analysis of Joint Ventures – Structural Considerations

In the first post in this series, we introduced the concept of joint ventures (“JVs”), outlined why antitrust law applies to their formation and operation, identified the major antitrust issues raised by JVs, and discussed why you should care about these issues. In this installment, we will unpack some of the major antitrust issues surrounding the threshold question of whether or not a JV is a legitimate collaboration.  In particular, we will first try to separate the analyses of, on the one hand, JV formation, and on the other, JV operation and structure.  Then we will consider whether a JV (i) constitutes a “naked” agreement between or among competitors which is per se unlawful, (ii) presents no significant antitrust issue because there is only a single, integrated entity performing the JV functions, or (iii) involves restraints within the scope of a legitimate collaboration that are virtually per se lawful.

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Antitrust Analysis of Joint Ventures: An Introduction

Businessman hand touching JOINT VENTURE sign with businesspeople icon network on virtual screen Antitrust Analysis of Joint Ventures Antitrust Analysis of Joint Ventures – Structural Considerations

Joint ventures (“JVs”) can require navigation of a potential minefield of antitrust issues, which we’ll explore in a series of six blog posts beginning with this introductory post. Not all of the law in this area is entirely settled, and there remain ongoing debates about some aspects of the antitrust treatment of JVs.  Indeed, arriving at a coherent and unified view of JV law is like putting together a jigsaw puzzle with missing and damaged pieces.

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Tenth Circuit Rules That Invocation of IP Rights Is Presumptively Valid Defense to Antitrust Refusal to Deal Claims

Tenth Circuit Rules That Invocation of IP Rights Is Presumptively Valid Defense to Antitrust Refusal to Deal Claims Detail of a pair of aviator sunglasses on a flight planner

In SOLIDFX, LLC v. Jeppesen Sanderson, Inc., Case Nos. 15-1079 and 15-1097 (opinion available here), the Tenth Circuit aligned itself with the First and Federal Circuits to hold that the invocation of intellectual property rights is a presumptively valid business justification sufficient to rebut a Sherman Act Section 2 refusal to deal claim, but left open some questions about when and how the presumption can (if ever) be rebutted.

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Purported “Direct Purchaser” Claims Dismissed for Lack of Antitrust Injury in Aluminum Warehousing Antitrust Litigation

Second Circuit Dismissal of Claims Indirect Purchasers In re Aluminum Warehousing Antitrust Litigation

On August 9, 2016, the Second Circuit affirmed a district court’s dismissal of claims asserted by two groups of self-proclaimed “indirect purchasers” of aluminum products who alleged that three aluminum futures traders, which had acquired operators of warehouses for aluminum, manipulated a price component for aluminum (warehouse storage costs).  The Second Circuit concluded that these “indirect purchasers” did not suffer antitrust injury because they were not participants in the aluminum warehousing market.  In re Aluminum Warehousing Antitrust Litig., Nos. 14-3574, 14-3581(2d Cir. Aug. 9, 2016).  In the district court, Judge Katherine Forrest recently applied the Second Circuit’s analysis to dismiss similar claims brought by the purported “direct purchasers” of the aluminum because they, too, were not participants in the aluminum warehousing market.  In re Aluminum Warehousing Antitrust Litig., No. 13-2481 (S.D.N.Y. Oct. 5, 2016). These two decisions (assuming the district court’s decision is affirmed) should help defendants attack plaintiffs’ efforts to establish antitrust standing in other cases by trying to thread the “inextricably intertwined” needle for market participants that the Supreme Court established in Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982).

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Ninth Circuit Grounds Aftermarket Claims, Refusing to Stretch Antitrust Theories and Reminding Plaintiffs That Allegations Must Be Supported by Evidence of Anti-Competitive Harm

Last week, the Ninth Circuit affirmed a summary judgment disposing of numerous antitrust claims brought by an independent servicer against a manufacturer of systems and parts that also provides service. The court emphasized that “[t]his case serves as a reminder that anecdotal speculation and supposition are not a substitute for evidence, and that evidence decoupled from harm to competition—the bellweather of antitrust—is insufficient to defeat summary judgment.” Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., No. 14-15562 (9th Cir. Sept. 9, 2016).

Auxiliary Power Units (“APUs”) power an airplane’s air conditioning, cabin lights and instrumentation. Aerotec International, Inc. (“Aerotec’), a small servicer of APUs, including those manufactured by Honeywell International, Inc. (“Honeywell”), complained that Honeywell had stalled Aerotec’s sales efforts and prevented it from reaching cruising altitude through a variety of alleged anticompetitive conduct.

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Third Circuit Rules that Antitrust Standing Is Properly Challenged Under Rule 12(b)(6) for Failure to State a Claim, Not Under Rule 12(b)(1) for Lack of Subject Matter Jurisdiction

On September 7, 2016, the Third Circuit ruled that a district court erred in granting a Fed. R. Civ. P. 12(b)(1) motion to dismiss federal antitrust claims for lack of subject matter jurisdiction, because the court conflated the analyses for Article III standing and antitrust standing. Hartig Drug Co. Inc. v. Senju Pharmaceutical Co. Ltd., No. 15-3289 (3d Cir. Sept. 7, 2016).

Hartig Drug Company Inc. (“Hartig”), an Iowa-based drug store chain, sued pharmaceutical manufacturers alleging that they suppressed competition for medicated eyedrops through a variety of means, which resulted in higher prices for the eyedrops. Hartig purchased the eyedrops from a distributor, AmerisourceBergen Drug Corporation (“Amerisource”), which purchased the eyedrops from the manufacturers. Hartig’s claim as an indirect purchaser from the defendant manufacturers was barred by Illinois Brick v. Illinois, 431 U.S. 720 (1977), so it alleged that Amerisource had assigned its claim to Hartwig, which enable Hartwig to sue as a direct purchaser.

The manufacturers filed a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, and also a Rule 12(b)(6) motion to dismiss for failure to state a claim. For the Rule 12(b)(1) motion, defendants submitted Amerisource’s Distribution Services Agreement (“DSA”) with one of the manufacturers—which was not mentioned in Hartwig’s complaint—to argue that an anti-assignment clause in the DSA prohibited Amerisource from assigning its claim without the defendant’s consent. The District Court accepted that argument and granted the Rule 12(b)(1) motion on the ground that Hartig was actually suing as an indirect purchaser and not as a direct purchaser because the assignment was invalid.

On appeal, several retailers filed an amicus brief arguing that defendant’s anti-assignment argument reached only the issue of antitrust standing, which is different from Article III standing, and the district court erred in ruling that it did not have subject matter jurisdiction. The Third Circuit agreed.

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Sun Sets on Solar Panel Manufacturer’s Predatory Pricing Claim as Sixth Circuit Affirms Dismissal

Proving once again that antitrust law protects competition, not competitors, on August 18, 2016 the Sixth Circuit affirmed a decision from the Eastern District of Michigan dismissing a plaintiff’s Sherman Act § 1 predatory pricing complaint for failure to state a claim.  The case, Energy Conversion Devices Liquidated Trust et al. v. Trina Solar Ltd. et al., involved allegations by a US-based solar panel manufacturer that its Chinese competitors had conspired to lower their prices in the US to below cost in order to drive the plaintiff out of business.

Energy Conversion conceded that a predatory pricing claim under § 2 of the Sherman Act requires the plaintiff to plead and prove both that the defendant charged below-cost prices, and that the defendant had a reasonable prospect of recouping its investment.  But it maintained that for a claim brought under § 1, the second element—recoupment—was not required.

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Court’s Denial of Summary Judgment on Price Discrimination Claims Reminds Suppliers to Properly Structure Discount Programs

In a recent decision, the Northern District of California denied Chrysler’s motion for summary judgment to defeat a Robinson-Patman Act price discrimination claim.  Mathew Enterprise, Inc. v. Chrysler Group LLC, 2016 U.S. Dist. LEXIS 108693 (N.D. Cal. Aug. 2, 2016) (opinion filed August 15, 2016 and available here).  The decision serves as a reminder of the relatively low bar for establishing competitive and antitrust injury for Robinson-Patman Act purposes, and counsels in favor of carefully structuring discount programs to avoid any potential litigation down the road.

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Seventh Circuit Rules that Offering Different Product Package Sizes Does Not Constitute Unlawful Price Discrimination

pricing discrimination

On August 12, 2016, the Seventh Circuit ruled that a manufacturer’s decision to sell large package products to some retailers but not others does not constitute price discrimination under Section 13(e) of the Robinson-Patman Act.  Woodman’s Food Market, Inc. v. Clorox Co. and Clorox Sales Co. (7th Cir. Aug. 12, 2016) (opinion available here). The decision harmonizes Seventh Circuit law with that of other circuits and clarifies that manufacturers do not violate the promotional services or facilities requirements of the Act when they offer bulk products to some but not all purchasers.

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Third Circuit Rejects Drug Manufacturer’s Single-Product Bundling Claim – But Prescription for the Future Is Unclear

You know what they say: one man’s price is another man’s bundle.  No?  Well maybe they should, after this recent decision out of the Third Circuit in Eisai, Inc. v. Sanofi Aventis U.S., LLC involving allegedly exclusionary discounting.  The court ultimately found Sanofi’s conduct was not unlawful.  But the decision raises questions about how such conduct – a hybrid of price discounts and single-product bundling – will be treated going forward, at least in the Third Circuit.

At issue was Sanofi’s marketing of its anticoagulant drug Lovenox to hospitals through its Lovenox Acute Contract Value Program.  Under the Program, hospitals received price discounts based on the total volume of Lovenox they purchased and the proportion of Lovenox in their overall purchase of anticoagulant drugs.  A hospital that chose Lovenox for less than 75% of its total purchase of anticoagulants received a flat 1% discount regardless of the volume purchased.  But when a hospital’s purchase of Lovenox exceeded that percentage, it would receive an increasingly higher discount based on total volume and percentage share, up to a total of 30% off the wholesale price.  A hospital that did not participate in the Program at all was free to purchase Lovenox “off contract” at the wholesale price.

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DOJ Heightens Focus on Hospital Systems and Market Allocation

On April 14, 2016, the U.S. Department of Justice and two West Virginia hospitals entered into a consent decree requiring the hospitals to cease allocating territories for marketing their healthcare services.  The complaint and consent decree can be viewed here and here.  This consent decree follows a similar consent decree that the DOJ entered into with three Michigan hospitals in June 2015, perhaps signaling the DOJ’s increased focused in policing allegedly anticompetitive agreements among hospitals and medical centers.

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1st Circ. Charts Conservative Post-Actavis Course In Loestrin

Members of Orrick’s Life Sciences practice with experience addressing pharmaceutical industry antitrust and IP issues recently published an article analyzing the recent decision of the U.S. Court of Appeals for the Federal Circuit in In re Loestrin, No. 14-2071 (1st Cir. Feb. 22, 2016).  In that decision—only the second appellate decision applying the Supreme Court’s seminal 2013 decision in FTC v. Actavis , the First Circuit addresses a few of the antitrust issues surrounding so-called “reverse-payment” settlements of patent infringement litigation between branded and generic drug manufacturers.  To read the published article, please click here.

U.S. Supreme Court Reaffirms Prohibition on Post-Expiration Patent Royalties, and the Vitality of Stare Decisis, in the Kimble “Spider-Man” Case

On June 22, 2015, in a 6-3 decision in Kimble et al. v. Marvel Enterprises, LLC, 576 U.S. (2015), the United States Supreme Court reaffirmed its holding in Brulotte v. Thys, 379 U.S. 29 (1964), that it is per se patent misuse for a patentee to charge royalties for the use of its patent after the patent expires.  While acknowledging the weak economic underpinnings of Brulotte, the Court relied heavily on stare decisis and Congressional inaction to overrule Brulotte in also declining to do so itself.  Although Kimble leaves Brulotte intact, the decision restates the rule of that case and provides practical guidance to avoid its prohibition on post-expiration royalties.  Critically, the Court appears to condone the collection of a full royalty for a portfolio of licenses until the last patent in the portfolio expires.  In addition, the Court’s reasoning provides guidance as to how patent licensors can draft licenses to isolate the effect of a later finding that patents conveyed under those licenses were previously exhausted.

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Cephalon and Teva’s $1.2 Billion Consent Order with the FTC: Is it Really a Harbinger of Things to Come?

On June 17, 2015, the U.S. District Court for the Eastern District of Pennsylvania approved a consent order (the “Consent Order”) between the Federal Trade Commission and defendants Cephalon, Inc. and its parent, Teva Pharmaceutical Industries Ltd.,[1] resolved long-running antitrust litigation stemming from four “reverse payment” settlements of Hatch-Waxman patent infringement cases involving the branded drug Provigil®.  Pursuant to its settlement with the FTC (the “Consent Order”), Cephalon agreed to disgorge $1.2 billion and to limit the terms of any future settlements of Hatch-Waxman cases.[2]  The FTC and its Staff have celebrated and promoted the terms of the settlement as setting a new standard for resolving reverse-payment cases.  But their enthusiasm may be more wishful thinking than reality, and their speculation that the agreement may exert force on market behavior does not appear to be supported by a fair assessment of the state of the law.  First, the restrictions on Cephalon’s ability to enter into settlements of Hatch-Waxman cases exceed anything a court has ever required, and conflict with settlement terms apparently approved in the U.S. Supreme Court’s seminal reverse-payment decision, Federal Trade Commission v. Actavis, 133 S. Ct. 2223 (2013).  Second, the FTC’s use of disgorgement as a remedy remains controversial and Cephalon, despite initial opposition, might have voluntarily embraced that remedy as part of a strategy to achieve a global resolution of remaining private litigation.  We write to put the Consent Order in perspective, so that industry participants can better assess its meaning.

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