Case Name: Eagle Pharms., Inc. v. Slayback Pharma, LLC, Civ. No. 18-1953-CFC, 2019 U.S. Dist. LEXIS 78146 (D. Del. May 9, 2019) (Connolly, J.) 

Drug Product and Patent(s)-in-Suit: Balrapzo® (bendamustine HCl) U.S. Patents Nos. 9,265,831 (“the ’831 patent”), 9,572,796 (“the ’796 patent”), 9,527,797 (“the ’797 patent”), and 10,010,533 (“the ’533 patent”)

Nature of the Case and Issue(s) Presented: Eagle owns the patents-in-suit and sells Balrapzo, a drug approved by the FDA to treat patients with chronic lymphocytic leukemia and indolent B-cell, non-Hodgkin lymphoma. All the independent claims of the patents-in-suit require the presence of three limitations in the claimed pharmaceutical composition: (i) bendamustine or a pharmaceutically acceptable salt thereof; (ii) a pharmaceutically acceptable fluid that contains some combination of two solvents: propylene glycol and polyethylene glycol; and (iii) a stabilizing amount of an antioxidant.

Defendant Slayback filed an ANDA seeking to sell a generic bendamustine HCl drug. In response, Eagle sued Slayback for patent infringement. Slayback’s proposed bendamustine drug contains polyethylene glycol, but it uses ethanol instead of propylene glycol as its second solvent. Eagle alleges that Slayback’s drug infringes the solvent limitation under the doctrine of equivalents. Slayback moved to dismiss on the ground that the so-called disclosure-dedication doctrine bars application of the doctrine of equivalents to the solvent limitation. The court agreed and granted judgment on the pleadings in Slayback’s favor.

Why Slayback Prevailed: The common written description of the asserted patents discloses, but does not claim, ethanol as a specific alternative to propylene glycol. The written description of the asserted patents explicitly and repeatedly identifies ethanol as an alternative to propylene glycol in embodiments of the patented invention. Despite those disclosures, Eagle makes two arguments against applying the disclosure-dedication doctrine. First, it contends that Federal Circuit precedent prohibits application of the disclosure-dedication doctrine at the Rule 12(c) stage. The court disposed of Eagle’s first argument because the relied-on case (i) did not address the disclosure-dedication doctrine; and (ii) did not hold that all “questions over the proper interpretation of a patents intrinsic record are ‘not suitable’ and ‘particularly inappropriate’ for resolution on a motion to dismiss.

Second, Eagle argues that it would be inappropriate to grant Slayback’s motion because Slayback has not shown that a POSA would understand the patents’ written description to teach the use of ethanol as an alternative to propylene glycol in the claimed formulation. “Eagle’s attempt to confine the disclosure-dedication doctrine to cases where an alleged infringer’s exact formulation is disclosed in the written description, however, is contrary to established Federal Circuit precedent,” which says that the disclosure-dedication doctrine applies to unclaimed subject matter that is “identified by the patentee as an alternative to a claim limitation.” Since that was the case here, the court granted Slayback’s motion.

Case Name: Novartis Pharma Co. v. West-Ward Pharms. Int’l, No. 2018-1434, 2019 U.S. App. LEXIS 14122 (Fed. Cir. May 13, 2019) (Circuit Judges Stoll, Plager, and Clevenger presiding; Opinion by Stoll, J.) (Appeal from D. Del., Andrews, J.) 

Drug Product and Patent(s)-in-Suit: Afinitor® (everolimus); U.S. Pat. No. 8,410,131 (“the ’131 patent”) 

Nature of Case and Issue(s) Presented: Novartis owned the ʼ131 patent, which claimed methods of using everolimus to treat advanced renal cell carcinoma (“RCC”). After filing its ANDA, Novartis filed suit and West-Ward argued that the ’131 patent was invalid as obvious based on (i) the molecular biology of advanced RCC, (ii) the antitumor activity of mTOR inhibitors, and (iii) phase I temsirolimus (another mTOR inhibitor) clinical-trial results, and (iv) safe dosing ranges of everolimus. The district court agreed that a POSA would have been motivated to pursue everolimus as one of several potential treatment options for RCC, but ultimately concluded that West-Ward “failed to prove by clear and convincing evidence that a POSA would have been motivated to select everolimus” or that a POSA would have had a reasonable expectation of success in using everolimus. The district court held that the asserted claims were not invalid for obviousness. West-ward appealed and the Federal Circuit affirmed the district court’s decision.

Why Novartis Prevailed: With regard to motivation to combine, the Federal Circuit held that the district court erred. In particular, after determining that a POSA “would have been motivated to pursue everolimus as one of several potential treatment options” for RCC, the district court erred by requiring West-Ward to demonstrate that a POSA would have selected everolimus over the other prior-art combinations. This heightened standard was incorrect; the Federal Circuit explained that “our case law does not require that a particular combination must be the preferred, or the most desirable, combination described in the prior art.” In other words, it was enough that a POSA would have been motivated to pursue everolimus as one of several potential treatment options.

But the Federal Circuit also explained that a POSA would not have had a reasonable expectation of success in using everolimus to treat advanced RCC. West-Ward had argued that as of the effective filing date: (i) RCC patients had shown responses to temsirolimus treatment in phase I clinical trials, (ii) everolimus was an mTOR inhibitor that was available in oral formulations, and (iii) inhibiting mTOR in prostate cancer cells inhibited HIF-1, which was hypothesized to inhibit tumor-promoting angiogenesis. The Federal Circuit provided, however, that the temsirolimus phase I date resulted from small sample sizes and came from studies that were designed to test safety, not efficacy. The Federal Circuit also noted that everolimus and temsirolimus—although both mTOR inhibitors—were “pharmacologically different” drug molecules. Finally, the Federal Circuit explained that Novartis presented several prior-art references stating that the role of HIF-1 and mTOR in the molecular biology of advanced RCC was not fully understood and that some studies found that inhibiting mTOR did not necessarily result in tumor growth inhibition. In sum, the Federal Circuit found that because West-Ward failed to demonstrate a reasonable expectation of success, the ’131 patent was not invalid as obvious.

Case Name: BTG Int’l Ltd. v. Amneal Pharms. LLC, 923 F.3d 1063, 2019 U.S. App. LEXIS 14241 (Fed. Cir. May 14, 2019) (Circuit Judges Moore, Wallach, and Chen presiding; Opinion by Wallach) (Appeal from D.N.J., McNulty, J.; Appeal from USPTO) 

Drug Product and Patent(s)-in-Suit: Zytiga® (abiraterone acetate/prednisone); U.S. Pat. No. 8,822,438 (“the ’438 patent”)

Nature of Case and Issue(s) Presented: The ’438 patent recites a method for the treatment of prostate cancer comprising the administration of abiraterone and prednisone. Prior to trial, the PTAB found the ’438 patent invalid as obvious. After trial, the district court similarly concluded that the ’438 patent was invalid as obvious. BTG’s appeals of the PTAB and district court decisions were consolidated for purposes of appeal. The Federal Circuit adopted the PTAB’s claim construction and affirmed its obviousness decision.

Why Defendant Prevailed: BTG argued that the PTAB erred in its construction of “treatment.” In particular, BTG argued that “treatment” required an anti-cancer effect and should not be construed, as the PTAB found, to also include palliative effects and the reduction of side effects. The Federal Circuit explained, however, that the specification states that a “therapeutic agent” may be either “an anti-cancer agent or a steroid.” Further, because the specification explained that prednisone is an anti-cancer agent and a steroid, the Federal Circuit concluded that “treating” with prednisone must logically include more than just anti-cancer effects and should include the long-familiar steroid effects of palliation and the reduction of side effects.

Next, BTG did not contest that the prior art taught each limitation of the asserted claims or that a POSA would have been motivated to combine abiraterone and prednisone. Instead, BTG argued that a POSA would not have had a reasonable expectation of success. But BTG made no reasonable-expectation-of-success argument under the adopted claim construction.  Further, even under BTG’s proposed construction, the Federal Circuit explained that the record demonstrated that a POSA would have had a reasonable expectation of success in combining abiraterone and prednisone, as they were both together and individually considered promising prostate-cancer treatments.

The Federal Circuit also rejected BTG’s purported secondary considerations relating to unexpected results, skepticism, failure of other, long-felt need, and commercial success.  The use of abiraterone and prednisone to treat prostate cancer was well known and did not provide unexpectedly superior results. Further, given that other treatments for prostate cancer were available, the evidence did not establish that there was a specific unsolved, long-felt need. Moreover, BTG’s alleged lack of enthusiasm by a few was not equivalent to skepticism or failure of others such that the combination would not have been obvious. Finally, the existence of a blocking patent mitigated against a finding of commercial success.

Case Name: Nuvo Pharms. (Ir.) Designated Activity Co. v. Dr. Reddy’s Labs. Inc., 923 F.3d 1368, 2019 U.S. App. LEXIS 14345 (Fed. Cir. May 15, 2019) (Circuit Judges Prost, Clevenger, and Wallach presiding; Opinion by Clevenger, J.) (Appeal from D.N.J., Cooper, J.) 

Drug Product and Patent(s)-in-Suit: Vimovo® (naproxen / esomeprazole magnesium); U.S. Patents Nos. 6,926,907 (“the ’907 patent”) and 8,557,285 (“the ’285 patent”)

Nature of the Case and Issue(s) Presented: Non-steroidal anti-inflammatory drugs, also known as NSAIDs, control pain. They also have the undesirable side effect of causing gastrointestinal problems such as ulcers, erosions, and other lesions in the stomach and upper small intestine. To treat the side effect, some practitioners began prescribing acid inhibitors to be taken by a patient along with the NSAID. The NSAID treats the pain while the acid inhibitor reduces the acidity in the gastrointestinal tract, which is achieved by increasing the pH level in the tract. Common acid inhibitors include, among others, proton pump inhibitors (“PPIs”) like omeprazole and esomeprazole. This combination therapy had complications. First, stomach acid degraded the PPI before it could reach the small intestine. To fix that issue, an enteric coating that wears off after a certain amount of time has elapsed was placed around the PPI. Second, if the NSAID was released before the acid inhibitor had enough time to raise the pH level in the tract, patients would continue to suffer gastrointestinal damage. To address those complications, a new drug form was invented that coordinated the release of an acid inhibitor and an NSAID in a single tablet. The tablet contained a core of an NSAID in an amount effective to treat pain, an enteric coating around the NSAID that prevents its release before the pH increases to a certain desired level, and an acid inhibitor like PPI around the outside of the enteric coating that actively works to increase the pH to the desired level. The patents-in-suit cover a NSAID core surrounded by an enteric coating, which in turn is coated by an acid inhibitor outer layer. This design allows the NSAID to delay release until the pill reaches the lower small intestine, to prevent discomfort and gastrointestinal damage. The invention also contemplates an uncoated portion of the pill, allowing for some immediate release.

At trial, the defendants argued that the patents-in-suit were invalid as obvious, not enabled, and not adequately described. Dr. Reddy’s also argued that it did not infringe the ’907 patent because its drug released NSAID at a higher pH than was contemplated in the patents-in-suit. After a bench trial, the district court concluded that the patents-in-suit were valid. The district court also ruled that Dr. Reddy’s product did not infringe the ’907 patent. Defendants appealed on two written description grounds and Plaintiffs appealed the non-infringement determination. On appeal, the Federal Circuit reversed the district court’s written description ruling and dismissed Plaintiffs’ appeal.

Why Defendants Prevailed: The Federal Circuit concluded that the specification provides nothing more than the mere claim that uncoated PPI might work, even though a POSA would not have thought it would work. The specification did not demonstrate that the inventor possessed more than a mere wish or hope that uncoated PPI would work, and thus it does not demonstrate that he actually invented what he claimed: an amount of uncoated PPI that is effective to raise the gastric pH to at least 3.5. The Federal Circuit looked to the inventor’s own testimony where he admitted that he only had a “general concept of coordinated delivery with acid inhibition” using uncoated PPI at the time he filed his first patent application. His only support in the specification for “a rationale explaining why he thought the uncoated PPI would be effective for treating gastric related injury” was that, in its “entire context,” he explained “why the coordinated delivery system would be of benefit for patients.”

Because the Federal Circuit concluded that the patents-in-suit were invalid for failing to describe adequately the efficacy of uncoated PPI, it did not reach the remaining issues on appeal.

Katherine (“Kate”) K. Bruce joined Optum (a UnitedHealth Group company) as Associate General Counsel in 2018. In her role at Optum, Kate is responsible for providing enterprise-wide litigation support across many areas of the health care industry. Prior to joining Optum, Kate worked in private practice at two major litigation firms. Throughout her career, Kate has been an active volunteer and pro bono attorney with a number of nonprofits, primarily working with groups that seek to combat and eliminate violence against women. Kate currently serves on the board of directors of Minnesota Women Lawyers and The Family Partnership. Kate received her B.A. in philosophy and international studies from Northwestern University, and her J.D. from the University of Wisconsin School of Law.

When did you decide to become a lawyer and why?

I decided to become a lawyer during my senior year of college. I was enrolled in a class taught by a lawyer and community activist that involved a mock asylum application and hearing. My grandparents had immigrated to the United States seeking asylum, so the topics we discussed in that class resonate with me on a personal level. So, at the time, I decided then that I wanted to be an international human rights lawyer.  

You have worked in both private law firms and in-house. In your view, how has the relationship between in-house departments and their external legal advisers evolved over the course of your career?

I think companies are now looking to outside counsel to act in a more robust adviser role. In the past, companies would look to outside counsel to handle their litigation needs—the discovery, the briefing, and the strategy to win the case—but now, in-house counsel expects more. For me, the best outside counsel advises us on not only the specific case for which they were hired, but also advises on the broader legal landscape in the areas of the law we’re working in or the health care industry, what I should be thinking about five to seven months or further down the road, and how the case will impact our other business units and other pending cases. So, advising not only on the specific lawsuit that they are handling, but also their strategy regarding underlying business systems and processes that may be implicated.

How have you overcome any gender-related roadblocks in your career?

I’ve found that the way to overcome gender-related roadblocks varies depending on the phase of your career. When you’re a young associate at a big law firm, you often don’t have much power to determine what opportunities you will get, so the most important thing you can do is to find someone who will advocate for you, help you navigate roadblocks, and, if possible, remove any roadblocks for you that you can’t remove on your own. On the flip side, when you have the power and the confidence as a more seasoned attorney, you need to remove the roadblocks for those younger women who are coming up behind you.    

You spent almost a decade working in law firms before you joined Optum, a Fortune 500 company. What observations do you have about the challenges that women face that are specific to law firms?

The hierarchical structure and mindset of big law firms are not necessarily open to allowing women to advance in the same way that companies are. In companies, I think you can pave your own path more easily, because there is an overarching structure in place that allows you to do so. While I believe in paving your own path through hard work, etc., and driving change from the ground up, I’ve found that a structure that supports true development and advancement needs to first come from the leadership. In law firms, there can be a mindset that you have to go through the same “grind” that past generations of attorneys went through to earn your keep, but I think law firm leaders need to provide young female attorneys with an environment and opportunities that allow them to shine, rather than making them fight to get the first opportunity to do so. 

What message would you like to share with outside counsel regarding the biggest frustrations or disappointments from your perspective as an in-house attorney?

If we are hiring outside counsel, we assume that they are competent with respect to their expertise in that area of the law. But what sometimes happens is that outside counsel feels like they need to prove their worth by sending all of their legal research, analysis, or other information to in-house counsel. What in-house counsel really needs are the key takeaways, clearly road-mapped and flagged, with bullet points, bold font, etc., and action items, instead of a 15-page legal memorandum that we likely don’t have the time to read. The value-added is in the synthesis of the information being communicated. So, for example, rather than simply sending an e-mail to in-house counsel with a case decision attached, add value by briefly summarizing the key takeaways and how the decision impacts the specific case that you have been hired to handle, as well as any other broader business or litigation considerations. Do not only think about the specific case for which you’ve been hired, but also examine how that decision might affect other parts of the business or other cases. Also, stay on top of deadlines and send drafts of any filings as early as possible before they are due.  

Navigating a career and a family is challenging, and the legal field is not known for being the most compatible with family life. How have you managed to balance being a mother and a successful professional?

I have found that flexibility with my schedule and supportive colleagues and leaders who trust me to do my work well and to manage my time are invaluable. So, for example, if I need to leave work early to pick up a sick kid and I have some work pending, everyone trusts that I will get that work done but maybe just not during “normal” work hours. And, of course, you need to not be too hard on yourself.

What advice do you wish you would have received when you were just beginning your legal career?

That it is okay to embrace the fact that you are learning and you will fall down. You can’t expect yourself to be a seasoned, competent attorney because you just don’t know very much right out of law school. And, when you do fall down, it’s okay, because that’s how you become a better lawyer. 

Throughout your career, you have remained devoted to pro bono work and community service. What pro bono case or community service initiative are you most proud of and why?

In terms of systemic change and broad impact, I am most proud of my work with The Advocates for Human Rights that resulted in a report that changed the laws in Mongolia regarding violence against women. On a micro level, I am grateful to have had the opportunity to work on many important pro bono cases that had positive, tangible benefits for my clients. If I had to pick just one case, it would be an asylum case I worked on where I was able to successfully seek asylum for a woman from Kenya escaping violence.

If you had to choose a career other than law, what would you choose and why?

Counterfeiting is one of the biggest threats to the fashion industry, deceiving unwary consumers and diluting brands’ values and hard-earned reputations. Counterfeiting costs brands over $450 billion in lost sales each year, and it is predicted to put 5.4 million jobs at risk by 2022.¹ Despite efforts by enforcement agencies to crack down on fake goods, counterfeit products continue to flood the market. As a result, more and more brands are looking to technology as a way to gain back control of their products. Enter: blockchain.

The first thing you might think of when you hear the word “blockchain” is bitcoin, the virtual currency. But in addition to being used by the financial sector, blockchain can be used in myriad other industries, including fashion. At its core, blockchain decentralizes information recording and storage. Because blockchain is shared and maintained by a public network of users, any information stored on a blockchain is transparent. Blockchain technology has already begun to penetrate the fashion world. With its ability to help authenticate products, trace supply chains, and unravel ethical issues, it is no surprise that this technology has been earmarked as a potential solution to save the luxury goods market.

Authenticating Luxury Goods

The concern over authenticity is prevalent as the counterfeiter industry continues to gain momentum. Blockchain gives consumers the ability to verify information about the origin and identity of their purchase, which can reveal whether or not the product is authentic. Some companies are already starting to take advantage of this feature. Bonafi,² a blockchain company based in Los Angeles, has developed a “crypto-tag,” which automatically authenticates products. The “crypto-tag” logs an item’s history, allowing consumers to trace exactly where their product came from without relying on the retailer or the brand. Luxochain³ is another company capitalizing on blockchain’s unique benefits. This service tackles authentication at the source by fitting luxury products with an invisible and encrypted serial number, which brands can then register on the blockchain. This way, consumers can be assured that their product is authentic at the point of sale.  

Managing a Product’s Lifecycle

Most retailers lack leverage over their manufacturers because their supply chains aren’t vertically integrated.⁴  Blockchain can offer a solution. In addition to tracing the origin of a product, blockchain can also track a product’s lifecycle by following where a product has been and where it is going. This will make it easier for brands and consumers to spot the place and moment a counterfeit product slipped into the supply chain or the point an authentic product fell out.⁵ Take Arianee,⁶ for example, a brand devoted to developing an open source and decentralized market for luxury goods, including watches, handbags, and clothing. While still in its early stages, brands can use Arianee’s platform to register their products, and, in turn, consumers can register their purchases. The service assigns a unique digital representation to each product, which can be used to track events such as cleaning, repairs, or even changes in ownership. This will benefit not only consumers but also brands, allowing them to learn more about their customer base and better understand who is using their products.

Achieving Transparency

In addition to offering solutions for authentication and supply chain management, blockchain also helps brands achieve transparency – which is crucial, as consumers are increasingly demanding ethically sourced and sustainable products. Many companies already devote their entire brand strategy to sustainability. Reformation started selling upcycled vintage clothing in 2009, aiming to bring sustainable fashion to everyone. The brand even manages its own sustainable sewing factory in Los Angeles, where it can control its waste and water usage, in addition to managing recycling.⁷ Last May, the diamond company De Beers launched a blockchain tool called “Tracr,” which monitors the journey of diamonds to ensure they are not being used to support violence.⁸ Also, fashion designer Martine Jarlgaard, in collaboration with Provenance, uses blockchain to track and trace sustainable alpaca fleece all the way from the farm to the knitting factory.⁹ As consumers become more cognizant of where their purchases are coming from and who is making them, this knowledge will encourage other brands to be mindful of their manufacturing practices. 

Is Change Possible?

While blockchain can provide an answer to solve many of the issues currently plaguing the fashion industry, consumers must be part of the solution for change to be effective. This will be a challenge in the case of luxury goods, where demand is high, but not always accessibility. For those consumers who cannot afford the hefty price tag of a designer handbag, a replica might be a good option. Blockchain technology, coupled with consumer action, is bound to bring positive change, but this might not be as easy as it sounds.  

Bombay Hair tools, Daniel Wellington watches, FabFitFun boxes, HelloFresh meal kits, SugarBearHair vitamins, and more. Spend any time on Instagram and chances are you will encounter influencers promoting these products, occasionally with a #ad or #sponsored hashtag in a caption or within a video, and often with a discount code. Such “influencer marketing” occurs when an individual with a large social media following – typically a reality star, supermodel, or other celebrity – is paid, or given something of value, to promote a product or service on their social media account. Influencer marketing has grown exponentially in recent years. It is currently a multibillion-dollar industry and is projected to generate as much as $10 billion by 2020.¹ For context, Kylie Jenner of Kardashian fame makes an estimated $1 million per sponsored Instagram post.²

As influencer marketing has taken over social media and become a permanent part of corporate marketing campaigns, the Federal Trade Commission (FTC) has provided guidelines for how influencers and brands should disclose their partnerships to prevent fraudulent, deceptive, and unfair business practices in violation of Section 5 of the FTC Act (15 U.S.C. § 45). In March 2017, the FTC sent notice letters to more than 90 influencers and brands, informing them of the then-little-known FTC’s Endorsement Guides and calling out specific Instagram posts for failing to meet the regulations.³ The FTC’s Endorsement Guides are straightforward: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.”⁴ Among the many influencers put on notice were Scott Disick, Vanessa Hudgens, Lindsay Lohan, Jennifer Lopez, and Emily Ratajkowski.⁵ The FTC’s notice letter blitz received significant media attention, because it was the first time the agency had reached out directly to educate influencers.⁶ The agency subsequently sent 21 follow-up letters in September 2017.⁷ Nevertheless, nearly two years later, the industry remains largely unregulated, with influencers committing legal and potential ethical violations alike. Given the growth of influencer marketing, and heightened regulatory activity, this article explores examples of missteps as well as the best practices for influencers making sponsored posts on Instagram.

Fyre Fraud: the Supermodels and Influencers

Thanks to Netflix and Hulu, most people have now heard of the failed Fyre Festival, the luxury music festival that never was. Fyre Festival was founded by William “Billy” McFarland, CEO of Fyre Media Inc., and rapper Jeffrey Atkins p/k/a Ja Rule.⁸ The festival was scheduled to take place from April 28–30 and May 5–7, 2017, in the Bahamas, with ticket prices ranging from $1,000 to $250,000.⁹ But the much-hyped festival was abruptly cancelled the morning of the first (and, as it turned out, final) day, after would-be partygoers had already arrived, due to inadequate infrastructure, poor planning, insufficient funds, and sheer inexperience.¹⁰ In the weeks following the festival’s collapse, the U.S. Attorney’s Office and the FBI began investigating the circumstances surrounding the Fyre Festival, and over a dozen civil lawsuits seeking millions in damages were filed against Fyre Media, McFarland, and Ja Rule.¹¹ 

The organizers of Fyre Festival, however, were not the only individuals facing liability as a result of the festival. In Chinery et al. v. Fyre Media, Inc. et al., Case No. BC659938, a putative class action filed on May 2, 2017, in Los Angeles Superior Court on behalf of three festival attendees, the complaint named the organizers of the festival as well as 100 unknown “Does” as defendants.¹² Such “Does” refer to the supermodels and influencers – such as Hailey Baldwin, Bella Hadid, and Kendall Jenner – who were core to the festival’s marketing campaign and whose purported attendance was credited for the festival being sold-out.¹³ Kendall Jenner, for example, was reportedly paid $250,000 for a single Instagram post endorsing Fyre Festival.¹⁴  The complaint alleged that the aforementioned influencers, among others, promoted the festival on social media in direct violation of the FTC’s Endorsement Guides.¹⁵ Specifically, “[s]ocial media ‘influencers’ made no attempt to disclose to consumers that they were being compensated for promoting the Fyre Festival.”¹⁶ Indeed, there was next to no use of a #ad or #sponsored hashtag by the influencers promoting the Fyre Festival.¹⁷ The Chinery case was subsequently dismissed without prejudice on February 15, 2018, upon the request of plaintiffs’ counsel.¹⁸ At this time, no other claim has been made against the influencers. While the FTC has not taken action against individual influencers involved in promoting Fyre Festival, the agency has signaled a growing commitment to enforcing regulations on social media. Kendall Jenner may have escaped liability this time, but she may want to consider adding a #ad or #sponsored hashtag the next time she’s paid $250,000 to make an Instagram post. 

Nevertheless, bankruptcy trustee Gregory Messer, who is overseeing the liquidation of Fyre Festival LLC, was recently granted permission to subpoena Kendall Jenner Inc., DNA Model Management, and IMG Models LLC to investigate payments of $250,000, $299,000, and $1.2 million, respectively, made to the supermodels and influencers in the months leading up to the festival.¹⁹ No hashtag would have prevented such an order. Rather, the choice by Kendall Jenner and others to endorse the Fyre Festival resulted in such subpoenas (#DoYourResearch).

Undisclosed Payments: Floyd Mayweather, DJ Khaled, and the SEC

The FTC is not the only federal agency monitoring influencers’ Instagram activity. One of the more prominent legal actions came last year when the SEC announced a settlement with Floyd Mayweather Jr. and Khaled Khaled p/k/a DJ Khaled for “failing to disclose payments they received for promoting investments in Initial Coin Offerings (ICOs).”²⁰ Mayweather and Khaled were charged with promoting Centra Tech Inc.’s cryptocurrency on Instagram, Twitter, and other social media platforms without disclosing that they were paid. Mayweather, for example, posted the following on Instagram with no disclosure of the fact that he had been paid or how much “Champion Predictions: I’m gonna make a $hit t$n of money on August 26th. I’m gonna make a $hit t$n of money on August 2nd on the Stox.com ICO. #TMT #STOX #MAYWEATHER #TBE #CRYPTO #CRYPTOCURRENCY #BLOCKCHAIN #ETHEREUM #BITCOIN.”²¹ Neither individual admitted wrongdoing, but they agreed to pay a combined $767,500 in disgorgement, penalties, and prejudgment interest.²² Moreover, Mayweather and Khaled agreed not to promote any securities for, respectively, three years and two years. 

This marked the first time that the SEC charged touting violations involving ICOs.²³ SEC Enforcement Division Co-Director Stephanie Avakian noted: “With no disclosure about the payments, Mayweather and Khaled’s ICO promotions may have appeared to be unbiased, rather than paid endorsements.”²⁴ Co-Director Steven Peikin further noted: “Social media influencers are often paid promoters, not investment professionals, and the securities they’re touting, regardless of whether they are issued using traditional certificates or on the blockchain, could be frauds.”²⁵ As with the FTC’s Endorsement Guides, Section 17(b) of the Securities Act also requires certain disclosures by influencers. Section 17(b) provides that it shall be unlawful for any person to promote the sale of a security “without fully disclosing the receipt, whether past or prospective, of [any] such consideration [received] and the amount thereof.”²⁶ That is, even if Mayweather had added a #ad or #sponsored hashtag to his post, it would still not comply with the Securities Act. Indeed, an influencer’s post that may be compliant or merely misleading under the Endorsement Guides may be deemed fraudulent under the Securities Act when the endorsement concerns a security. Although proper disclosures by influencers have been an area of concern for the FTC for the past few years, the Mayweather and Khaled settlement indicates that the SEC is just as interested in regulating influencers.

Detox Teas: Brewing Up Controversy

However, is a hashtag or dollar amount enough? As it is, many influencers fail to add the required #ad or #sponsored hashtag in sponsored Instagram posts that promote detox teas. But even when influencers use such hashtags, legal and ethical issues remain. 

Flat Tummy Tea, perhaps one of the most well-known of the detox teas, is nothing more than a combination of senna leaf, peppermint leaf, cassia chamaecrista pods, liquorice root, caraway seed, dandelion root, and rhubarb root.²⁷ It provides laxative-like effects from the senna leaf and dandelion root, which are known natural diuretics.²⁸ And although the company states in its FAQs that its teas are “not some fad weight loss tea that makes crazy weight loss promises,”²⁹ a look at Instagram shows that the company and influencers are sending precisely the opposite message of immediate weight loss. Even the company name, Flat Tummy Co., implies such results. But should influencers be held legally accountable for promoting detox teas and the like to their millions of followers? The FTC certainly has the authority to do so.³⁰ The FTC’s Endorsement Guides provide that an endorsement has to represent the honest experience and opinion of the endorser.³¹ Thus, if Khloé Kardashian posts: “The flat tummy bundle by @flattummyco is definitely helping to keep my weight from fluctuating,”³² such a representation would need to be accurate pursuant to the FTC’s Endorsement Guides. That is, she would need to have actually taken Flat Tummy products and believed that her weight was not fluctuating as a result. While the FTC could bring Section 5 charges against her and other influencers for not representing their accurate experience and opinion, it has not yet filed any such actions. It may, however, just be a matter of time.

There are ethical considerations as well. While influencers have been promoting detox teas for years, they have recently started facing public criticism for endorsing such products. Jameela Jamil, of The Good Place, has started to take on influencers and the detox tea industry. Jamil commented under one of Khloé Kardashian’s posts promoting Flat Tummy products:

If you’re too irresponsible to: a) own up to the fact that you have a personal trainer, nutritionist, probable chef, and a surgeon to achieve your aesthetic, rather than this laxative product... And b) tell them the side effects of this NON-FDA approved product, that most doctors are saying aren’t healthy […] Then I guess I have to.³³ 

She more recently commented that “[the Kardashian’s] pockets are lined with the blood and diarrhea of teenage girls….”³⁴ Even fans of The Bachelor franchise have taken to calling out “prominent [Bachelor Nation] members” on The Bachelor subreddit that are “advertising shit / detox / flat tummy teas.”³⁵ Such criticism raises the question: What are influencers’ ethical responsibilities? Should influencers like Khloé Kardashian, with millions of young, impressionable followers, advertise laxative-like detox teas that promote weight loss in an unhealthy way?

Best Practices for Sponsored Instagram Posts

Per the FTC’s Endorsement Guides and other regulations, the following is a non-exhaustive list of factors that influencers must take into consideration in order to avoid claims of fraudulent, deceptive, and unfair business practices. 

First, an influencer must use a #ad or #sponsored hashtag to indicate that a social media post is sponsored. A #ambassador, #sp, #spon, or #partner hashtag or a “thanks [brand]” is not sufficient to indicate to consumers that a post is sponsored.³⁶ 

Second, the hashtag must be “easily noticed and understood.” The FTC recommends that such hashtags be placed at the beginning of a post and not combined with other words. That is, the following is not likely to be deemed a sufficient disclosure of an endorsement: “Question – who wants to lose weight in 2019? #310Shake is the perfect junk food replacement. @310Nutrition has awesome New Year’s resolution deals right now & you can use the code “310ERA” to get FREE shipping! #weightloss #diet #310ad #health #fitness #jennacooperfit.”³⁷ While a #ad or #sponsored hashtag placed at the end of a post may be sufficient for disclosure, placing the hashtag after the “more” button to reveal additional text on Instagram or Facebook is not considered “easily noticed and understood” by the FTC.³⁸ 

Third, Instagram’s and other social media platforms’ built-in tools for branded content may not provide sufficient disclosure. For example, the subhead tools to label posts and videos on Instagram may not attract consumers’ attention nor provide sufficient brand information.³⁹ 

Fourth, an influencer’s post about a product or service the influencer received for free is still covered by the FTC Act and thus the requisite disclosures must still be made (e.g., #ad or #sponsored). 

Fifth, if an influencer is promoting the sale of a security, the influencer must also disclose how much money the influencer received to make such a post.⁴⁰ 

Sixth, an influencer cannot make claims about a product or service that would require proof the advertiser-company does not have. An influencer needs to confirm with companies whether there is substantiation for claims the influencer intends to make concerning products and services that are being endorsed.⁴¹ 

And seventh, an influencer’s endorsement has to represent the influencer’s honest experience and opinion. Influencers cannot post about their experience with a product or service if they have not tried it, and cannot claim it was effective or great when it was in fact not.⁴²

As influencer marketing continues to grow and expand, the FTC, SEC, and other regulatory agencies may be gearing up to respond to public complaints and take on influencers. Influencers are thus advised to consider the factors listed above and, at a minimum, familiarize themselves with the FTC’s Endorsement Guides and Section 17(b) of the Securities Act.

Following submission of this article, on June 4, 2019, Sen. Richard Blumenthal (D-CT) wrote to the FTC, calling for the agency to investigate the marketing of "detox teas" through celebrity endorsements and social media. https://twitter.com/SenBlumenthal/status/1136059843285061632

Case Name: Novartis Pharms. Corp. v. Accord Healthcare Inc., C.A. No. 18-1043-LPS, 2019 U.S. Dist. LEXIS 101106 (D. Del. June 17, 2019) (Stark, J.) 

Drug Product and Patent(s)-in-Suit: Gilenya® (fingolimod capsules); U.S. Patent No. 9,187,405 (“the ’405 patent”)

Nature of Case and Issue(s) Presented: Defendant MPI Pharm. Inc. (“MPI”) moved to dismiss the action against it, due to improper venue. Plaintiff Novartis sued MPI and 22 other defendant generic drug makers, all of whom had filed ANDAs seeking to market generic fingolimod. MPI, a West Virginia company, brought its motion under Fed. R. Civ. P. 12(b)(3). After the motion was briefed, the Court issued a decision in another case, BMS II, which dismissed a different Hatch-Waxman action against MPI based on improper venue in the District of Delaware. The court then ordered supplemental briefing, to permit the parties to address the impact of BMS II on MPl’s motion in this case. The court granted MPI’s motion and denied Novartis’s request for discovery and to file an amended complaint.

Why MPI Prevailed: In a patent-infringement action, venue was governed solely and exclusively by the patent venue statute, 28 U.S.C. § 1400(b), which states, “Any civil action for patent infringement may be brought in the judicial district [i] where the defendant resides, or [ii] where the defendant has committed acts of infringement and has a regular and established place of business.” Therefore, the burden was on Novartis to demonstrate that venue in D. Del. was proper either because [i] MPI resided in Delaware or [ii] MPI had a regular and established place of business in Delaware and had committed infringing acts here.

Novartis argued that MPI was urging the court to find that the general venue statute, Section 1391, and not the patent venue statute, Section 1400(b), governed venue in Hatch-Waxman cases because it “provide[d] for unique forms of regulatory relief prior to actual infringement.” Novartis emphasized the disconnect between the word choice of the patent venue statute—“has committed” acts of infringement—and Hatch-Waxman cases, in which the proposed infringing product has not yet been marketed or sold. The BMS II decision rejected the very same argument Novartis pressed, and while “Novartis’ briefing on the issue is far more extensive than BMS’ had been, it does not persuade the Court to reach a different conclusion.”

MPI was not incorporated in Delaware and, therefore, indisputably did not reside there. Moreover, Novartis had not articulated, with reasonable particularity, a plausible basis to believe that venue-related discovery would lead to evidence allowing the court to find that MPI resided in or had a regular and established place of business in D. Del. MPI’s merely doing business in Delaware did not make Delaware a regular and established place of business for MPI; it followed that if MPI, to do business in Delaware, were required to have an employee in Delaware, that fact, without more, would not be sufficient to make Delaware a location of MPI’s regular and established business.

On June 5, 2019, the Securities and Exchange Commission (SEC) declined to issue a no-action letter to CorVel Corporation with respect to CorVel’s intention to exclude from its proxy materials a shareholder proposal regarding the company’s omission of the words “sexual orientation” and “gender identity” from its written non-discrimination policy.  The proposal had been submitted for inclusion in the proxy materials for CorVel’s 2019 annual shareholders’ meeting by CorVel shareholder Walden Asset Management, the socially responsive investment practice of Boston Trust & Investment Management Company.  Walden incorporates environmental, social, and governance (ESG) analysis into its investment decision-making and strives to strengthen corporate ESG policies, performance, and accountability through shareholder engagement.

Walden’s proposal would have required CorVel to issue a public report detailing the potential risks associated with omitting the phrases “sexual orientation” and “gender identity” from the company’s written non-discrimination policy.  Rather than include the proposal in the proxy materials as requested, however, CorVel submitted a request for a no-action letter (i.e., a request that the SEC staff confirm that it will not recommend enforcement action against CorVel for excluding the proposal) to the SEC’s Division of Corporation Finance on April 10, 2019.  In its request, CorVel invoked three SEC rules as bases for its purported right to exclude the proposal from the proxy materials, namely: (i) Rule 14a-8(i)(10), which permits exclusion if “the company has already substantially implemented the proposal;” (ii) Rule 14a8-(i)(7), which permits exclusion if “the proposal deals with a matter relating to the company’s ordinary business operations;” and (iii) Rule 14a-8(i)(3), which permits exclusion if “the proposal or supporting statement is contrary to any of the Commission’s proxy rules, including [Rule] 14a-9, which prohibits materially false or misleading statements in proxy soliciting materials.”  Walden submitted a response on May 8, 2019, in which it argued that none of those bases for exclusion applied.

First, CorVel argued that it had satisfactorily addressed the proposal’s underlying concerns and its essential objective because the company’s non-discrimination policy already states that it prohibits discrimination on the basis of “sex.” Walden pointed out, however, that the company had not, as the proposal would require, issued a public report detailing the potential risks associated with omitting the words “sexual orientation” and “gender identity” from the policy.  Thus, argued Walden, the company had not responded to the underlying concerns of the proposal, or shown how the company’s policies, practices, and procedures compared favorably with the guidelines of the proposal, and therefore the proposal could not be said to have been substantially implemented.

Second, CorVel argued that because the focus of the proposal and its supporting statement was primarily on day-to-day business matters such as economic and competitive issues and the management of the company’s workforce, the proposal did not transcend the day-to-day business matters of the company, and could therefore be excluded.  Walden, in contrast, argued that the subject matter of the proposal was exclusively focused on discrimination against certain categories of employees, which is a significant social policy issue with a clear nexus to the company.

Third, CorVel argued that the proposal and its supporting statement were materially false and/or misleading because they were inextricably based on the materially misleading premise that the company’s non-discrimination policy does not prohibit discrimination on the basis of sexual orientation and gender identity for the sole reason that it does not explicitly include the words “sexual orientation” and “gender identity.”  In support of this argument, CorVel noted that the Equal Employment Opportunity Commission (EEOC) and several federal courts have indicated that LGBTQ individuals may bring discrimination claims on the basis of “sex” under Title VII.  Walden strongly disagreed, pointing out that the proposal was clearly worded in its focus on the risks associated with the lack of specific inclusion of the categories, and did not make a legal interpretation or assertion as to whether the current policy, as interpreted in the courts, would or would not permit sexual orientation or gender identity discrimination.  Walden noted that the law is not settled on whether protections for sexual orientation and gender identity fall under protections for “sex” and, in fact, the United States Department of Justice is taking the position that the term “sex” does not apply to gender identity in a case entitled R.G. & G.R. Harris Funeral Homes, Inc. v. EEOC, which the Supreme Court has agreed to hear.  Walden further observed that the EEOC’s interpretation of the word “sex” in Title VII as including protections for “sexual orientation” and “gender identity”: (i) is not legally binding; (ii) is not uniformly agreed upon within the courts; (iii) is being actively challenged by the Department of Justice in the Supreme Court; and (iv) may change as the Trump administration appoints more EEOC commissioners.

Ultimately, the SEC agreed with Walden on all three points, stating that: (i) it does not appear that the company’s public disclosures compare favorably with the guidelines of the proposal, which requests a report on the potential risks related to the company’s non-discrimination policy, and thus the proposal is not excludable under Rule 14a-8(i)(10); (ii) the proposal transcends ordinary business matters, and thus is not excludable under Rule 14a-8(i)(7); and (iii) the SEC was unable to conclude that CorVel had demonstrated objectively that the proposal is materially false or misleading, and thus it is not excludable under Rule 14a-8(i)(3).

The decision, which makes it highly likely that CorVel will include the proposal in its proxy materials, was a win not only for shareholders, but also for LGBTQ rights, as it provides another tool in the arsenal of ESG-minded investors who wish to pressure companies that do not provide adequate LGBTQ protections in their written non-discrimination policies into amending those policies to provide such protections.

Case Name: Sun Pharm. Indus. v. Saptalis Pharm., LLC, No. 18-648, 2019 U.S. Dist. LEXIS 102961 (D. Del. June 19, 2019) (Bryson, J.) 

Drug Product and Patent(s)-in-Suit: Riomet® (metformin HCl); U.S. Pat. No. 6,890,957 (“the ’957 patent”)

Nature of Case and Issue(s) Presented: Sun owned the ’957 patent, which recited a liquid pharmaceutical composition with (i) a therapeutically effective amount of metformin, (ii) a sweetener, (iii) a polyhydroxy alcohol in an amount of about 15% to about 55% by weight, (iv) a mineral acid and bicarbonate salt, and (v) a pharmaceutically acceptable liquid carrier. The parties raised two claim construction disputes.

Why Saptalis Prevailed. First, the court construed the term “about 15 to about 55%” to mean “approximately 15 to approximately 55%. Saptalis argued that because the patent contains separate claims for ranges that differ by only 5% at each end, a POSA would believe that the patentee viewed a weight variation of +5% to be significant. Saptalis further contended that the weight range recited in a sibling patent demonstrated that “the applicant knew how to claim amounts of polyhydroxy alcohol less than 15%, including as low as about 5%, but chose not to do so in the ’957 patent.” In response, Sun argued that Saptalis provided no support for its proposition that “about” denotes a strict numerical or percent variation. The court agreed, explaining that the term “about” should be given its ordinary and accepted meaning of “approximately.” The court further explained that the term “about” was repeatedly and consistently used throughout the written description and patent claims without reference to a particular weight range.

Next, the court found that a single ingredient could not satisfy both the “sweetener” and “polyhydroxy alcohol” limitations: Saptalis argued that (i) the sweetener and the polyhydroxy alcohol were separately recited in the asserted claims, (ii) some dependent claims adjusted the properties of either the sweetener or the polyhydroxy alcohol, but not both, (iii) it would be difficult for a single ingredient to fall within the concentration ranges for both the sweetener and the polyhydroxy alcohol limitations in claim 4, and (iv) the specification consistently described the sweetener and the polyhydroxy alcohol as separate ingredients. In response, Sun argued that the sweetener limitation and the polyhydroxy alcohol limitation “share overlapping functionality” and that one of the functions of the polyhydroxy alcohol is to mask the bitter taste of the API and that the function of the sweetener is to impart a sweet taste to the patient. In other words, “the same ingredient could function both to impart a sweet taste … and mask the bitter taste of metformin.” The court found, however, that in the claims, the “sweetener” and the “polyhydroxy alcohol” are consistently referred to as distinct ingredients. Further, the specification referred to the sweetener and the polyhydroxy alcohol as separate components of the liquid formulation, including in every exemplary formulation that provided for at least one sweetener and at least one separate polyhydroxy alcohol.

Case Name: UCB, Inc. v. Watson Labs. Inc., Nos. 2018-1397, 2018-1453, 2019 U.S. App. LEXIS 18700 (Fed. Cir. June 24, 2019) (Circuit Judges Taranto, Schall, and Chen presiding; Opinion by Chen, J.) (Appeal from D. Del., Stark, J.) 

Drug Product and Patent(s)-in-Suit: Neupro® (rotigotine transdermal system); U.S. Patents Nos. 6,884,434 (“the ’434 patent”) and 8,232,414 (“the ’414 patent”)

Nature of Case and Issue(s) Presented: Neupro is a skin patch treatment for Parkinson’s disease. The ’434 patent is directed to the transdermal therapeutic system comprising rotigotine. The ’414 patent is directed to a specific polymorph of rotigotine (“Form II”). UCB sued Actavis for infringement of the ’434 and ’414 patents based on Actavis’s ANDA filing. The district court found the asserted ’434 patent claims valid and infringed under the doctrine of equivalents by Actavis’s ANDA products and that the asserted claims of the ’414 patent were invalid based on anticipation.

Actavis appealed both findings regarding the ’434 patent. On appeal, Actavis argued that UCB could not assert infringement under the doctrine of equivalents. Actavis also argued that the ’434 patent were also invalid on grounds of obviousness. UCB cross-appealed the invalidation of the ’414 patent, arguing that the evidence presented at trial did not support the court’s determination that the invention was in use before the correct invention date. The Federal Circuit affirmed the district court’s decision.

Why UCB Prevailed on the ’434 patent: The primary issue was whether Actavis’s use of a polyisobutylene-based adhesive was equivalent to the ’434 patent’s use of acrylate or silicone-based adhesives. The ’434 patent claim covered administration of rotigotine through a transdermal patch made of three layers. The adhesive layer included an effective amount of the free base form of rotigotine dissolved in an acrylate or silicone-based polymer adhesive. Actavis’s product met every other element of the asserted claims. UCB argued that, under the doctrine of equivalents, polyisobutylene-based adhesive was interchangeable with acrylate or silicone-based adhesives. In response, Actavis argued that UCB could not assert infringement under the doctrine of equivalents because UCB made a “narrowing amendment” after the examiner issued a restriction requirement. The examiner required UCB to elect claims to prosecute from either “Group I” or “Group II.” Group I claims all included an acrylate or silicone-based polymer adhesive. Group II claims were generically directed to “an adhesive.” Actavis argued that because UCB withdrew Group II claims, it gave up the scope of adhesives that were not silicates or acrylates. The Federal Circuit disagreed, explaining that a restriction requirement does not necessarily invoke prosecution history estoppel. The examiner’s restriction in this case did not relate to polyisobutylene or communicate anything about patentability of polyisobutylene-based adhesives, and related to an entirely different limitation.

Next, Actavis argued that UCB had chosen to draft narrow claims and could not expand the scope of the claims through the doctrine of equivalents. Specifically, Actavis argued that polyisobutylene was generally known in the art as a possible adhesive for transdermal patches, and that the patentee chose not to prosecute claims broad enough to cover it. But the Federal Circuit found that UCB’s claims corresponded directly to the specification and did not narrow to a subset of polymers. The claims recited all acrylate-based or silicone-based polymer adhesive systems. The Federal Circuit also found that the record did not sufficiently establish the inventor’s knowledge to support a conclusion that UCB surrendered polyisobutylene as an equivalent.

Actavis also argued that UCB’s infringement theory vitiated the acrylate or silicone-base polymer adhesive limitation. The Federal Circuit rejected this argument, stating that finding polyisobutylene to be an equivalent did not give the acrylate or silicone-based polymer adhesive system such a broad scope that the element disappeared entirely. Actavis then argued that a hypothetical claim including polyisobutylene-based polymers would ensnare prior art. The Federal Circuit affirmed the district court’s rejection of this argument. The prior art Actavis pointed to covered silicone and acrylate, which would invalidate both the actual and hypothetically broad claims. Additionally, Actavis did not offer examples of prior art that would be ensnared by adding polyisobutylene to the claim.

As to the actual equivalents analysis, the district court applied the (in)substantial differences test. The district court found that silicates, acrylates, and polyisobutylenes were the most commonly used pressure-sensitive adhesives at the time the ‘434 patent was filed. The court identified five properties that the adhesives shared: (i) they are pressure-sensitive, (ii) adhesive, (iii) biologically inert, (iv) non-irritating, and (v) non-toxic. The district court also held that a POSA would recognize that polyisobutylene is not substantially different from the adhesives within the scope of the claims because of their shared properties. The Federal Circuit concluded that the polyisobutylene-based adhesive system was an insubstantial modification of the claimed invention because the differences do not matter for how the claimed invention works.

Next, the Federal Circuit affirmed the validity of the ’434 patent. Actavis argued that the Cygnus prior art reference anticipated the ’434 patent. The district court found that Cygnus did not include rotigotine in free base form. Actavis also argued that the ’434 patent was obvious based on Cygnus’s combination with Lipp or Pfister. The district court concluded that neither Lipp nor Pfister filled the gap regarding rotigotine in a free base form because neither disclosed any anti-Parkinson’s drugs or rotigotine free base in the absence of water. The Federal Circuit affirmed the district court’s findings.

The Federal Circuit also affirmed the district court’s rejection of Actavis’s obviousness argument. First, Actavis did not show that a POSA would be motivated to combine relevant prior art. The transdermal patch field was sparse, and of the drugs available as patches rotigotine was the only active ingredient introduced as a patch before being available in another formulation. Actavis did not show why a POSA would think of using a transdermal patch based on the prior art’s disclosure of applying a liquid dose of rotigotine on the hairless skin on a rat’s neck. Second, Actavis did not show a reasonable expectation of success.

Why Actavis Prevailed on the ’414 patent: The ’414 patent claimed Form II, a polymorphic form of rotigotine, discovered during the dissolution step of manufacturing Neupro. UCB appealed the district court’s invalidation of the ’414 patent under § 102(a). UCB argued that the record did not support the district court’s inference that Form II was in actual use before the correct invention date. The district court found that Form II rotigotine was used before the patent’s filing date because it found that a patient had used patches from a certain lot of Neupro at least one week prior to the ’414 patent’s priority date. The district court found that those patches contained Form II rotigotine crystals.

On appeal, the Federal Circuit rejected UCB’s argument that there was insufficient evidence that there were Form II crystals in the patient’s patches. The Federal Circuit noted that the record showed that all lots where crystals were observed contained Form II. The Federal Circuit also rejected UCB’s argument that the patient’s worsened condition was not necessarily evidence of Form II use. The Federal Circuit held that the possibility of another cause of the patient’s worsened condition or that there were not enough crystals to cause the patient’s worsened condition was speculative and outweighed by other evidence in the record.

Case Name: Novartis Pharms. Corp. v. Accord Healthcare Inc., C.A. No. 18-1043-LPS, 2019 U.S. Dist. LEXIS 104969 (D. Del. June 24, 2019) (Stark, J.)

Drug Product and Patent(s)-in-Suit: Gilenya® (fingolimod capsules); U.S. Patent No. 9,187,405 (“the ’405 patent”)

Nature of Case and Issue(s) Presented: Plaintiff moved for a preliminary injunction to enjoin the launch of generic fingolimod. Having considered the parties’ briefing and having conducted an evidentiary hearing and heard oral argument, the court granted plaintiff’s motion.

Why Novartis Prevailed: The court first addressed the issue of Novartis’s likelihood of success on the merits. At the outset, infringement was not contested for purposes of the preliminary injunction motion. Defendants did raise three invalidity challenges: (i) anticipation by Kappas 2006; (ii) lack of adequate written description; and (iii) lack of enablement or utility. While noting that defendants’ invalidity arguments were not frivolous, and that they very well may withstand summary judgment or even prove correct after trial, at the preliminary stage, the court found that “defendants are not at all likely to prevail at trial on invalidity.” First, the court reasoned that defendants had proposed the wrong POSA. Novartis’s definition, which is a team that includes not just a clinician, but also a pharmacologist, is more correct. That is because the patent contains parts that would be best understood by a pharmacologist even though the claims are principally directed to treatment and therefore to a clinician. Next, the court found that that the Kappas 2006 reference did not disclose the ’405 claim limitations of treatment and no loading dose. Kappas 2006 disclosed a test; it was an hypothesis. Therefore, it did not disclose and did not anticipate the treatment limitations of the asserted claims. It was also undisputed that Kappas 2006 was silent on the matter of a loading dose. The court moved on to defendants’ written-description defense and found that defendants were unlikely to persuade the court at trial that the inventors of the ’405 patent were not in possession of the claimed invention at the time of the application. The court reasoned that a patent did not need to tell the full story or really even any story about how the inventors came to their invention, and it need not state things that a POSA would already know, including the prior art. Therefore, much of the defendants’ attack on the supposed lack of adequate written description was really “legal irrelevancies.” Finally, the court addressed the lack of enablement or utility defense, on which little was written about in the briefs. Ultimately, the court found that Novartis had adequately demonstrated, supported by the USPTO’s findings, that when read in its full context, a POSA would understand the patent to preclude a loading dose.

Turning next to the issue of irreparable harm, the court found that Novartis had met its burden to show that there was a reasonable likelihood that in the absence of a preliminary injunction, one or more and up to six generics would undertake an at-risk launch in August 2019, and as a result, Novartis would suffer immediate and substantial harm that could not be remedied by money damages even if Novartis were to ultimately prevail at trial and obtain a permanent injunction. These harms included the likely massive and immediate price erosion in the market for oral treatment of relapsing-remitting multiple sclerosis. After what might be as long as one year of generic competition by the time this case were to go to trial and a decision would be issued, Novartis would not be able to raise the price back to where it was currently, or to where it would have been at that post-trial date in the absence of defendants’ at-risk infringement.

Finally, the court addressed the issues of the balance of harms and the public interest and found that both of those factors favored a preliminary injunction. Defendants stood to lose the opportunity to earn on the order of $50 million collectively by not being able to compete over approximately the following year, whereas Novartis would irreparably lose a market in which they sold approximately $1.8 billion of drugs each year. That balance clearly favored Novartis. Moreover, the public had an interest in protecting valid patent rights and in maintaining incentives for the massive investments required for drug development.

In May, the U.S. Supreme Court issued a decision in Apple Inc. v. Pepper, 139 S. Ct. 1514 (2019), holding that consumers of Apple’s App Store could bring suit against the tech giant for antitrust claims.  In the case, Robert Pepper and three other app consumers sued Apple, claiming that its App Store model is an unlawful monopoly through which it charges higher-than-competitive prices, in part because it imposes upon developers—who sell their inventions through Apple’s marketplace—a hefty 30 percent commission. Relying on case law from the Third and Eighth Circuits, see, e.g., Howard Hess Dental Labs. Inc. v. Dentsply Int’l, Inc., 424 F.3d 363, 372 (3d Cir. 2005); Campos v. Ticketmaster Corp., 140 F.3d 1166, 1172 (8th Cir. 1998), Apple moved to dismiss the suit based on the argument that the plaintiffs could not sue it directly because they did not constitute “direct purchasers” under the Supreme Court’s decision in Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The district court agreed and granted the motion, but the Ninth Circuit reversed on appeal.

On writ of certiorari before the Supreme Court, Apple argued that, under the Illinois Brick case, consumers are only permitted to sue the party who sets the retail price, regardless of whether that party actually sells the good to the complaining party. And because the app developers—not Apple—set the retail price charged to consumers in the App Store, Apple claimed that a suit against it could not lie.

Not so, reasoned a 5-4 majority of the Supreme Court. In an opinion authored by Justice Kavanaugh, the Court explained that the simple fact that Apple allowed developers to set prices for the apps did not, alone, bar consumers from suing Apple directly. Illinois Brick, the Court pointed out, was “not based on an economic theory about who set the price”; rather, it “sought to ensure an effective and efficient litigation scheme in antitrust cases.” That case centered on the titular Illinois Brick Company, which manufactured and distributed concrete blocks. 431 U.S. at 726. It then sold those blocks to masonry contractors, which in turn sold masonry structures to general contractors. Id. The general contractors then sold their services for larger construction projects to the State of Illinois, the ultimate consumer that attempted to bring price-fixing claims against Illinois Brick, the manufacturer:

Under the chain of distribution at issue in Illinois Brick, the Supreme Court ruled that the case could not proceed because the State was an indirect purchaser that was two or more steps removed from the antitrust violator in the distribution chain. Id. at 736-37. The proper plaintiff, the Court held, was the entity that had purchased directly from Illinois Brick—that is, the masonry contractors. Id.

The Pepper Court explained that Illinois Brick had no preclusive effect on Pepper’s right to sue Apple. Indeed, the case established merely that suits by direct purchasers were permissible while suits by indirect purchasers—that is, those who were two or more steps removed from the alleged antitrust violator in a distribution chain—were not permissible. By way of example, the Court explained: “[I]f manufacturer A sells to retailer B, and retailer B sells to consumer C, then C may not sue A. But B may sue A if A is an antitrust violator. And C may sue B if B is an antitrust violator. That is the straightforward rule of Illinois Brick.” 139 S. Ct. at 1521.

Nothing in this equation barred Pepper and fellow consumers from suing Apple, the Court reasoned, because “[t]here is no intermediary in the distribution chain between Apple and the consumer.” Id. The consumers’ ability to sue was evident in the fact that they purchased the apps directly from Apple, the alleged antitrust violator:

The flow of sales in Pepper thus offered no parallel to the distribution structure in Illinois Block such that the holding precluded suit by the app consumers. The Court therefore held that Illinois Brick does not “bar direct-purchaser suits against monopolistic retailers who employ commissions rather than markups.” Id. at 14.

The holding has significant consequences for Apple—which now must continue to defend against the suit on the merits, see Pepper v. Apple, Inc., No. 11-cv-06714-YGR (N.D. Cal.)—as well as similarly situated retailers who sell directly to consumers via commissions-based, online marketplaces. Indeed, the decision creates potential exposure and liability for not just tech companies but also for major retailers such as, for instance, eBay, Etsy, Amazon, Jet, Walmart, and Newegg. Such entities would thus be well-advised to stay abreast of the developments in the case and modify their practices as necessary.

Is traditional advertising dying in the Digital Era? Not only is offline marketing facing a slow death (goodbye, classifieds!), but companies are realizing that traditional onlineadvertising may be losing its power. In fact, it has been reported that more than 70 million internet users block ads. Today, consumers crave authenticity and relatability, forcing companies to work even harder to grab their target audience’s attention. So, what does this mean for brand survival? Hello influencers!

Influencers, once a niche group, are now everywhere. Indeed, some argue that traditional influencers are losing their influence as their numbers become more widespread. For example, Instagram is starting to hide “likes,” and sponsored posts’ engagement numbers have fallen. Human influencers have been around for a while and certainly provide a good channel for brand promotion and marketing, but virtual influencers are now taking the limelight and are set to completely transform the current influencer industry.

If you have never heard of virtual influencers, think of them as young, beautiful, and perfect, with a lot of social media followers – basically your typical “it” girls (or guys). But don’t be fooled. Virtual influencers are completely fictional. They are computer-generated imagery (CGI). This may seem to be a crazy concept, but, if you consider the risks that come with their human counterparts (e.g., Kim Kardashian, Scott Disick, and Logan Paul, just to name a few), virtual influencers aren’t such a bad idea. After all, companies can now design their own influencers to reflect the desired look and aesthetic of their brand.

Miquela Sousa a/k/a “Lil Miquela” is arguably the most famous virtual influencer to date. She is a 19-year-old “average” girl with over 1.6 million Instagram followers. Miquela appears so lifelike that many of her fans thought she was human – that was until her creator, an L.A.–based start-up called “Brud” set up a publicity stunt to reveal her true origin. As evidenced by her Instagram, Miquela has modeled for Calvin Klein, Supreme, Vetements, Chanel, and Prada. She markets herself as a musician and has released several singles that are available on Spotify and YouTube. Lil Miquela even uses her influence to support social causes such as, but not limited to, Black Lives Matter, Campaign for Youth Justice, and the Los Angeles LGBT Center. She was named in TIME magazine’s The 25 Most Influential People on the Internet (2018), and she has a “net worth” of at least $125 million.

Shudu Gram is another virtual influencer and is considered “The World’s First Digital Supermodel.” She has been featured by Fenty Beauty, shot a campaign with Balmain, and even “walked” the red carpet at the BAFTA Awards. Shudu was created by London-based fashion photographer Cameron-James Wilson, who was inspired by the Princess of South Africa Barbie doll. Wilson stated that his intent was for Shudu to be a “beacon of inspiring beauty and creativity.”

According to Business Insider, the influencer marketing industry as a whole is on track to be worth up to $15 billion by 2022, making it crucial for the creators and inventors of virtual influencers and supermodels to consider the business and legal issues that come along with their creations – among other things, these include intellectual property rights, social issues and morals clauses, and advertising regulations.

Intellectual Property Rights

Virtual influencers, as names, images, and “people,” may function as various types of intellectual property. While this is good news, creators must be diligent in registering, maintaining, and clearing their intellectual property.

Trademark

As an initial matter, creators may register the name of their virtual influencers as a trademark if they use the name or intend to use it to identify and distinguish the goods and services of a seller or provider. That is, the name may qualify for trademark protection if it is used to indicate the source of the creator’s goods and services. Human celebrities and influencers alike, including various members of the Kardashian and Jenner families, have registered their names with the U.S. Patent and Trademark Office (USPTO) for beauty, entertainment, and fashion-related goods and services. As for virtual influencers, Brud filed a trademark application for the mark MIQUELA on April 26, 2019, for, among other things, “entertainment services, namely, internet appearances by a CGI social media influencer.”

The visual appearance of a virtual influencer or supermodel may also qualify for trademark protection if their image also functions as a source identifying mark for their creator’s goods and services. Indeed, the image of a “person” or character can be trademarked if it functions as an individual’s or company’s logo – think Mickey Mouse, the “Quaker Man,” and the Pillsbury Doughboy.

By registering and maintaining a virtual influencer or supermodel as a trademark, competitors may be prevented from using their name or image to advertise goods and services. Although a trademark registration is not required to file a lawsuit for trademark infringement, a trademark registration with the USPTO grants additional protections, including nationwide protection and a presumption of validity. Indeed, the general recommendation is always for individuals and entities to federally register their trademarks in one or more classes of goods and services for which the creator uses, or intends to use, the mark.

Creators, however, must remember that, before applying for a trademark, it is important to conduct a clearance search to avoid the possibility of infringing others’ trademarks.

Copyright

Virtual influencers may also be protected by copyright law. Copyrights protect expressions of ideas, not the idea itself. Copyrights attach to original works like animations, photographs, and audiovisual material once they are fixed in a tangible medium of expression. That is, a work is automatically protected by copyright when it is created. Unlike trademarks, however, a copyright registration is required in order to file suit for copyright infringement.

Note, if a work is made for hire, an employer is considered the author even if an employee actually created the work. A work made for hire is “a work prepared by an employee within the scope of his or her employment,” or “a work specifically ordered or commissioned for use” with a signed writing stating “that the work shall be considered a work made for hire.” For example, if an employee of Brud created a picture of Lil Miquela, Brud would still be considered the author of that image. And, even if a work does not fit in the above scenario, an individual or entity may nevertheless own the work if the author assigns all right, title, and interest in and to the work.

Right of Publicity

While entitled to trademark and copyright protection, virtual influencers may actually be liable under various states’ right of publicity laws for misappropriation. The right of publicity is the legal right of an individual to control the commercial use of their name, image, likeness, and other unequivocal identifiers. How, though, could a virtual influencer violate a human’s right of publicity? Despite the relative novelty of virtual influencers and supermodels, case law over the past few decades cautions the creators of such CGI to avoid references to the name, image, and likeness of famous and well-known individuals. The following cases provide such guidance:

Davis v. Electronic Arts Inc., No. 3:10-cv-03328 (N.D. Cal.). In 2010, three former NFL players accused Electronic Arts Inc. (“EA”), on their own behalf and on the behalf of nearly 6,000 other former NFL players, of using their likenesses in the Madden video games. Although EA pays the NFL players union to display the names and likenesses of current players, it did not seek out the same authorization for former players. The case was scheduled to go to trial this September, but, after the court repeatedly rejected EA’s defenses for unlicensed use of the players’ likenesses, the parties entered into a confidential settlement earlier this year. The company was previously sued for using the likenesses of players from the NCAA without permission, eventually resulting in the company stopping production of college sports games.

White v. Samsung Elecs. Am., Inc., No. 90-55840, 1992 U.S. App. LEXIS 19253 (9th Cir. Aug. 19, 1992). Vanna White provides another right of publicity example, dating all the way back to the early 1990s. The “Wheel of Fortune” hostess won a judgement against Samsung Electronics America, Inc. after the company ran a series of television commercials using a female-shaped robot turning letters on a game-board and wearing a long gown, blond wig, and large jewelry that White claimed strongly resembled her likeness. In finding that defendant violated White’s right of publicity, the Ninth Circuit Court of Appeals held that “[t]he law protects the celebrity’s sole right to exploit [celebrity] value whether the celebrity has achieved her fame out of rare ability, dumb luck, or a combination thereof.”

Lohan v. Take-Two Interactive Software, Inc., 31 N.Y.3d 111 (2018). Over 25 years later, in a similar case, but without similar success, Lindsay Lohan sued the creators of the Grand Theft Auto video games, alleging that they used her likeness for two images and for the character Lacey Jonas. Specifically, Lohan alleged that defendants purposefully used her “bikini, shoulder-length blonde hair, jewelry, cell phone, and ‘signature peace sign pose’” in one image, and used her “facial features, body type, physical appearance, hair, hat, sunglasses, jean shorts, and loose white top” in another. Moreover, Lohan alleged that the Jonas character, who describes herself as an “actress slash singer” and is recognized as having “starred in romantic comedies and a cheerleader dance-off movie,” was her “look-a-like” and misappropriated her “portrait” and “voice.” The New York Supreme Court ruled against Lohan, and, on appeal, the Appellate Division affirmed, finding that the video game’s “unique story, characters, dialogue, and environment, combined with the player’s ability to choose how to proceed in the game, render it a work of fiction and satire.” Lohan appealed again, and the Court of Appeals affirmed, finding that Jonas was a “generic artistic depiction of a ‘twenty something’ woman without any particular identifying physical characteristics.”

The foregoing cases instruct creators that they should be cautious and avoid overt references to actual human celebrities, influencers, and supermodels in order to avoid claims for right of publicity and misappropriation.

On the other hand, New York’s right of publicity statute, for example, extends only to a “living person,” so creators should not count on such intellectual property rights to protect their own virtual influencers and supermodels – at least not for right now.

Social Issues and Morals Clauses

Theoretically, virtual influencers and supermodels offer a certain degree of control to many companies and brands. Unlike their human counterparts, virtual influencers can be created, directed, and programmed to avoid certain topics, say certain words, or associate with specific brands and issues. Despite the level of control creators exercise over CGI, they are still human and fallible. The following two examples illustrate social missteps concerning the use of virtual influencers and supermodels:

Cultural appropriation. In an interview with Harper’s Bazaar, Shudu’s creator, Cameron-James Wilson, explained: “There’s a big kind of movement with dark skin models, so she represents them and is inspired by them.” Wilson’s comments concerning Shudu quickly fueled criticism sounding in cultural appropriation. And his status as a 20-something-year-old white male profiting off the image of a black woman – without actually paying one – only exacerbated the criticism. Furthermore, Wilson stated that Duckie Thot – a well-known Australian model recognized for her dark complexion – was also an inspiration for Shudu. This begs the questions: Did Wilson misappropriate Thot’s likeness? And, is Wilson taking away opportunities from Duckie and other black models?

Queerbaiting. This May, Calvin Klein released a video as part of its #MYTRUTH campaign in which Bella Hadid and Lil Miquela appeared to be kissing each other in a romantic way. Critics immediately accused Calvin Klein of “queerbaiting” – the act of hinting at, but then not actually depicting, same-sex relationships. Calvin Klein acknowledged that featuring Hadid, “someone who identifies as heterosexual,” in a “same-sex kiss” could be interpreted as queerbaiting. The brand further responded to the criticism by stating: “The concept for our latest #MYCALVINS campaign is to promote freedom of expression for a wide range of identities, including a spectrum of gender and sexual identities. This specific campaign was created to challenge conventional norms and stereotypes in advertising. In this particular video, we explored the blurred lines between reality and imagination.” The problem is, Calvin Klein treated the act of two women kissing – one human and one CGI – as surreal. Perhaps a better option would have been for Calvin Klein to cast an actual (oreven virtual) person who publicly identifies as LGBTQ+ for the ad.

As indicated by the previous examples, virtual influencers and supermodels bring their own set of public relation challenges. While it is important that diversity initiatives are implemented in the virtual world, virtual diversity should not replace actual diversity.

Moreover, sponsorship contracts often include morals clauses, which may cover not only virtual influencers and supermodels but also their creators (whether or not they have been publicly identified). Among other things, these clauses help provide protection and recourse related to public relations issues (i.e., nightmares) concerning reputation, appropriation, and authenticity. Brud and Wilson may try to hide behind Lil Miquela and Shudu, respectively, but they (and other creators) need to consider their own actions as well.

Advertising Regulations

The Federal Trade Commission’s (FTC’s) Endorsement Guides provide instruction for how influencers and brands should disclose their partnerships to prevent fraudulent, deceptive, and unfair business practices in violation of Section 5 of the FTC Act (15 U.S.C. § 45). The FTC’s Endorsement Guides are straightforward: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.” Among other things, an influencer must use a #ad or #sponsored hashtag to indicate that a social media post is sponsored, and the hashtag must be “easily noticed and understood” – that is, these hashtags should be placed at the beginning of a post and not combined with other words. For a more detailed explanation of case studies and best practices for sponsored social media posts, see the article #Sponsored: Fyre, Floyd, Flat Tummy Tea, and Fraud in the Spring 2019 edition of REAL TALK.

Although these guidelines were likely intended for human influencers, an FTC spokesperson indicated that virtual influencers are bound by the same regulations and should follow the FTC’s Endorsement Guides, stating: “The FTC doesn’t have specific guidance on CGI influencers, but advertisers using CGI influencer posts should ensure that the posts are clearly identifiable as advertising.” The influencer industry remains largely unregulated, with the FTC merely sending warning letters to date, but as influencer marketing continues to grow and expand, it is only a matter of time before the FTC takes on influencers and maybe even implements virtual influencer-specific guidelines.

The influencer marketing industry is growing at an unprecedented and exponential rate. As previously stated, the industry is on track to be worth up to $15 billion by 2022 – up from as much as $8 billion in 2019. In light of the risks, and the brand dollars at stake, creators and investors of virtual influencers and supermodels should obtain appropriate intellectual property registrations, assignments, and clearances; account for and clear social and moral issues and implications; and comply with the FTC’s Endorsement Guides. At the end of the day, until there are specific laws and regulations for such CGI, virtual influencers and supermodels like Lil Miquela and Shudu are really no different than their human counterparts such as Arielle Charnas, Lo Bosworth, and Gigi Hadid. The existing laws and regulations generally apply to all – human or not.

Case Name: Duke Univ. v. Akorn, Inc., Civ. No. 3:18-cv-14035-BRM-TJB, 2019 U.S. Dist. LEXIS 159314, (D.N.J. Sept. 16, 2019) (Martinotti, J.)

Drug Product and Patent(s)-in-Suit: Latisse® (bimatoprost ophthalmic solution); U.S. Patent No. 9,579,270 (“the ’270 patent”)

Nature of Case and Issue(s) Presented: Plaintiff Allergan holds the NDA for Latisse. Latisse is a bimatoprost ophthalmic solution used to treat hypotrichosis of the eyelashes by increasing eyelash length, thickness, and darkness. Plaintiff Duke University owns the ’270 patent. Duke granted Allergan an exclusive license to the ’270 patent. Defendant Akorn, through Defendant Hi-Tech Pharmacal Co., Inc. (“Hi-Tech”), submitted an ANDA for a generic bimatoprost product. Allergan sued several generic manufacturers, alleging their ANDAs infringed patents covering Latisse. Duke joined three suits alleging infringement by Akorn’s ANDA (Latisse I–III, brought by Allergan in the Middle District of North Carolina).

In Latisse I, Allergan and Duke sued Hi-Tech for infringement by Akorn’s ANDA of U.S. Patents Nos. 7,531,404 (“the ’404 patent”) and 7,388,029 (“the ’029 patent”). The Middle District of North Carolina district court held Hi-Tech infringed the ’404 and ’029 patents. The Federal Circuit reversed, holding the patents were invalid as obvious. In Latisse II, filed while Latisse I was pending, Allergan and Duke sued several defendants, including Akorn, for infringement of U.S. Patent Nos. 8,263,054 (“the ’054 patent”), 8,038,988 (“the ’988 patent”), and 8,101,161 (“the ’161 patent”). The same district court held that the ’988, ’161, and ’054 patents related to the ’404 patent invalidated in Latisse I. The court found these patents were invalid as obvious and held that Allergan was collaterally estopped from asserting them. Plaintiffs did not appeal. Following the decision in Latisse I, plaintiffs filed Latisse III, contending that Akorn’s proposed ANDA product infringed U.S. Patent Nos. 8,906,962 (“the ’962 patent”) and 8,926,953 (“the ’953 patent”). Plaintiffs then amended their complaint, dropping infringement claims for the ’962 patent. The district court found that plaintiffs were collaterally estopped from asserting the ’953 patent against Akorn. The Federal Circuit affirmed that decision, holding that Plaintiffs were collaterally estopped from asserting the ’029, ’404, ’988, ’161, and ’953 patents.

After the USPTO issued the ’270 patent to Duke, plaintiffs brought the current suit. Plaintiffs argued claims 22 and 30 of the ’270 patent were limited and thus the findings by the Federal Circuit did not preclude them from asserting the ’270 patent against Akorn. Akorn counterclaimed, alleging that claims 22 and 30 were substantially similar to several claims within the patents deemed invalidated on the basis of collateral estoppel in Latisse I–III. Akorn asserted eight counterclaims: (i) invalidity of the ’270 patent; (ii) non-infringement of the ’270 patent; (iii) preclusion based on collateral estoppel; and a series of antitrust violations involving 15 U.S.C. § 1 and 2: (iv) actual monopolization: sham litigation; (v) series of sham litigations; (vi) attempted monopolization; (vii) conspiracy to monopolize; and (viii) unenforceability due to patent misuse. Plaintiffs filed a motion to dismiss Akorn’s antitrust and patent misuse counterclaims and to strike related affirmative defenses, or, in the alternative, to bifurcate and stay Akorn’s counterclaims and affirmative defenses. Akorn opposed. The court granted plaintiffs’ motion to dismiss.

Why Plaintiffs Prevailed: Plaintiffs argued that the court should dismiss counterclaims four through six because Akorn failed to meet its high pleading burden for alleging sham litigations under the Noerr-Pennington doctrine. Plaintiffs argued for dismissal of counterclaims seven and eight because Akorn did not provide proper support for an unlawful conspiracy to monopolize claim or a patent misuse claim. Akorn argued that the court should deny plaintiffs’ motions because plaintiffs did not challenge most elements required to establish monopolization counterclaims. Akorn further argued that it sufficiently pled sham litigation supporting actual monopolization and conspiracy to monopolize claims.

The Noerr-Pennington doctrine protects against monopolization, typically immunizing a party who petitions the government for redress. However, under the “sham” exception to the Noerr-Pennington doctrine, petitioners cannot use such process simply as an anticompetitive tool. The court noted a plaintiff cannot prove a sham by merely showing its competitor intended to delay the plaintiff’s market entry or meaningful access to an appropriate forum. Here, the court found Akorn failed to establish that Plaintiffs conducted sham proceedings via Latisse I–III. The court held that plaintiffs did not conduct sham proceedings because: (i) plaintiffs did not bring objectively baseless suits in which no reasonable litigant could realistically expect success on the merits; and (ii) plaintiffs’ suits did not conceal an attempt to interfere directly with the business relationships of a competitor through use of the governmental process.

The court held that, because plaintiffs’ conduct was not “exceptional,” plaintiffs’ conduct did not constitute sham litigation. Plaintiffs argued, and the court agreed, that the “exceptional case” standard in 25 U.S.C. § 285, which governs adjudication of attorney’s fees motions, is less exacting than the “objectively baseless” sham litigation standard. The court pointed to Octane Fitness, LLC v. ICON Health & Fitness, Inc., 72 U.S. 545 (2014) for this distinction. Because Akorn could not demonstrate that plaintiffs’ litigations were objectively baseless, the court found Akorn failed to state a claim for monopolization by virtue of sham litigation.

The court next analyzed Akorn’s counterclaim seven, involving conspiracy to monopolize in violation of 15 U.S.C. §§ 1 and 2. Akorn argued it had sufficiently pled and provided facts for each element required for an unlawful conspiracy to monopolize claim: “(1) concerted action by the defendants; (2) that produced anticompetitive effects within the relevant product and geographic markets; (3) that the concerted actions were illegal; and (4) that it was injured as a proximate result of the concerted action.” Gordon v. Lewistown Hosp., 423 F.3d 184, 207 (3d Cir. 2005) (citations omitted). Here, the court found Akorn failed to allege that plaintiffs’ actions were illegal and thus failed the Gordon test. Further, the court acknowledged that a corporation and its wholly owned subsidiaries cannot conspire with one another.

The court then considered counterclaim eight, alleging patent misuse. Agreeing with plaintiffs, the court found that Akorn failed to adequately plead patent misuse by not alleging fraud in plaintiffs’ obtaining of the patents at issue. The court noted that a patent misuse claim cannot be premised on sham litigation allegations. Further, the court held that Akorn failed to plead any specifics to support its claim that plaintiffs impermissibly broadened the scope of the ’270 patent.

Welcome to the summer installment of Real Talk: The Robins Kaplan Business Law Update, a newsletter created by professional women for professional women. 

In this issue, we bid the summer farewell with an examination of a wide range of timely issues, from the antitrust implications of a recent Supreme Court decision affecting commissions-based retailers, to an ESG investor’s recent victory on a shareholder proposal implicating LGBT rights, to the legal ramifications of the rise of influencer advertising.

In This Issue

• Apple Inc. v. Pepper: A Case to Watch for Commissions-Based Retailers Selling Directly to Consumers. 
• ESG Investor Walden Scores Win on CorVel Shareholder Proposal Re LGBTQ Rights
• Pixel Perfect: The Legal Implications of Virtual Influencers and Supermodels