In A Twist, Patently Unenforceable Patent Gives Consumers Antitrust Claim

The Second Circuit’s recent decision in In re DDAVP Antitrust Litigation marks a significant development in the intersection of antitrust and patent law.  Consumers now have greater standing to assert antitrust claims involving unenforceable patents.

The Court vacated and remanded a lower court’s dismissal of a purchaser’s antitrust claim against manufacturers for conspiring to keep generic versions of a drug unavailable to consumers.  The plaintiffs were supported in their appeal by many entities that filed amicus briefs including the FTC and the National Association of Attorney Generals on behalf of several states.  While the plaintiffs would not have had standing to challenge the underlying patent, the fact that the patent was already determined to be unenforceable allowed the Walker Process analysis to proceed.

Under the Court’s interpretation, consumers are no longer excluded as possible “efficient enforcers” under the Volvo N. Am. Corp. v. Men’s Int’l Prof’l Tennis Council, 857 F.2d 55, 66 (2d Cir. 1988) four-factor test.  Prior to this decision, the idea of a “more efficient” enforcer was used to exclude consumers from bringing forth an antitrust claim when subjected to overcharges resulting from anticompetitive conduct.

Here, the Court recognized that while competitors may be most motivated to bring an action, precluding consumers from doing the same would leave them without a remedy for the antitrust injury they suffered.  While the Court did not go so far as to adopt a per se rule that direct purchasers have standing, the willingness to consider the merits of individual complaints will likely open the door to more consumer-initiated actions.  In re DDAVP, the Court specifically limited its determination to Walker Process cases where the underlying patent at issue is deemed unenforceable.  However, the rationale for the Court’s decision leaves open the possibility of this analysis being extended to other instances of direct purchasers having standing to bring antitrust causes of action.