By Kevin E. Noonan --
The Supreme Court, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), has in recent years focused the requirements for pleadings under the Federal Rules of Civil Procedure and, concoimitantly, increased the scope of the bases a party can argue to dismiss a claim or counterclaim under Fed. R. Civ. Pro. 12(b)(6) for failure to state a legally cognizable claim. In the latest development in the Myriad Genetics v. Ambry Genetics case, Myriad argues that this legal precedent, as well as the principles first enunciated by the Supreme Court in Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and Mine Workers v. Pennington, 381 U.S. 657 (1965) (known as the Noerr-Pennington doctrine), preclude Ambry from pursuing its counterclaims that Myriad violated Sections 1 and 2 of the Sherman Antitrust Act in bringing suit on several of its BRCA gene genetic diagnostics patents (see Myriad's Motion to Dismiss Antitrust Counterclaims).
Earlier this summer, Myriad sued Ambry for patent infringement for offering genetic diagnostic tests (including its BRCA1, BRCA2, BRCAPlus, BreastNext, OvaNext, and CancerNext products) that allegedly infringed claims of U.S. Patent Nos. 5,654,155; 5,709,999; 5,747,282; 5,750,400; 5,753,441; 5,837,492; 6,033,857; 6,951,721; and 7,250,497 (see "Myriad Genetics Files Suit Against Ambry Genetics for Genetic Diagnostic Testing of BRCA Genes"). Ambry answered, and in addition to denying Myriad's allegations asserted as affirmative defenses that Myriad's suit amounted to violations of the Sherman Act (see "Ambry Responds to Myriad Lawsuit"). In its counterclaims, Ambry asserted the following allegations in support of its Sherman Act allegations:
• Myriad is maintaining its monopoly in violation of the antitrust laws through "bad faith" enforcement of its patents,
• Myriad eschews considerations of affordability, test accuracy and recommendations for genetic testing,
• There exists significant opposition to Myriad's business model of patenting gene sequences and establishing a private database, and
• Myriad is aware that its asserted claims on BCRA1 and BCRA2 genes are invalid under recent Supreme Court and Federal Circuit cases.
126. Myriad is willfully maintaining its monopoly through exclusionary conduct as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. Myriad seeks to maintain its monopoly position through various anticompetitive conducts described above, including through the bad faith enforcement of its facially invalid patents.
127. Myriad was aware before filing its Complaint in this action that the claims it was asserting are invalid per Myriad and Prometheus.
128. Through its exclusionary and anticompetitive conduct, Myriad has acquired and maintained its monopoly in the relevant market for genetic testing for patients seeking analysis of their full BRCA1 and BRCA2 gene sequences. Myriad has operated in this manner free from competition because of the high barriers to entry that exist in the market, including Myriad's invalid patents, the technological know-how to design and run genetic tests, and the actions of Myriad's employees.
Count 2 is brought under the Sherman Act for "attempted" monopolization for substantially the same market behavior, Ambry alleging that Myriad acted "with a specific intent to monopolize the relevant market through the assertion of facially invalid patent claims and the anticompetitive conduct of its employees."
Significantly, Ambry did not expressly assert that the patents were obtained through fraud, or that the litigation was brought as a sham, but rather that the effects of Myriad's assertion of patent claims Ambry asserts are invalid under recent Federal Circuit or Supreme Court precedent should incur antitrust liability. This failure to allege fraud or sham litigation, as well as Myriad's disagreement with Ambry's characterization of the scope of judicial opinions on its patents, forms the basis of its motion to dismiss. In its argument, Myriad first distinguishes pled facts, which are "accepted as true and viewed in the light most favorable to Defendant as the nonmoving party," citing 1-800 Contacts, Inc. v. Memorial Eye, P.A., Case No. 2:08-CV-983, 2010 WL 988524, at *2 (D. Utah Mar. 15, 2010), and legal conclusions, which are not. Motions to dismiss are properly evaluated on the grounds that the asserted claim is "legally sufficient" and "plausible on its face," citing Iqbal. Under the Iqbal standard, "a claim is facially plausible 'when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Iqbal, 556 U.S. at 678.
Having set out this standard, Myriad then argues that its claims are immune from antitrust liability under the Noerr-Pennington doctrine, which immunizes actions constituting a petition to the government for redress of grievances. Myriad's claims do not fall under the limited exceptions to the doctrine, according to Myriad, because they are not "objectively baseless" and the litigation is neither a sham nor an attempt to enforce patents obtained by fraud. In particular, Myriad cites to cases, such as Asahi Glass Co., Ltd. v. Pentech Pharmaceuticals, Inc., 289 F. Supp. 2d 986, 993 (N.D. Ill. 2003), where courts have dismissed sham litigation allegations because "efforts to commercialize and/or enforce issued U.S. patents do not give rise to a claim of sham litigation absent unusual circumstances such as fraud or known invalidity:
A firm that has received a patent from the patent office . . . and thus enjoys the presumption of validity that attaches to an issued patent, is entitled to defend the patent's validity in court, to sue alleged infringers, and to settle with them, whatever its private doubts, unless a neutral observer would reasonably think either that the patent was almost certain to be declared invalid, or the defendants were almost certain to be found not to have infringed it, if the suit went to judgment. It is not "bad faith" to assert patent rights that one is not certain will be upheld in a suit for infringement pressed to judgment and to settle the suit to avoid risking the loss of the rights. No one can be certain that he will prevail in a patent suit.
(emphasis added in opinion). Myriad asserts that its infringement allegations are "more than colorable" and that they are "substantially likely to prevail on [its] claim."
Expanding on this argument, Myriad argues that only the "extraordinary circumstances" of sham litigation is enough to vitiate Noerr-Pennington immunity. However, mere allegations that litigation is a sham is not sufficient; rather, Myriad argues that the Supreme Court established a two-prong test for establishing that litigation is a sham, in Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 62 (1993) (abbreviated as "PREI" in Myriad's brief). These prongs constitute an "objective" component, established by successfully challenging the legal viability of a claim, and a "subjective" component, based on the lawsuit's "economic viability" according to Myriad. The "objectively baseless" standard requires a showing that "no reasonable litigant could realistically expect success on the merits" and that "[i]f an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail," as this test has been applied, inter alia, in Bio Technology General Corp. v. Genentech, Inc., 267 F.3d 1325, 1333 (Fed. Cir. 2001); Cornucopia Prod., LLC v. Dyson, Inc., 881 F.Supp.2d 1086, 1102-03 (D. Ariz. July 27, 2012); Avery Dennison Corp. v. Continental Datalabel, Inc., Case No. 10c2744, 2010 WL 4932666, at *5-6 (N.D. Ill. Nov. 30, 2010), and Asahi Glass Co.
The existence of "probable cause" (of prevailing) is enough to defeat the objective prong of the standard, Myriad asserts, citing PREI ("The existence of probable cause to institute legal proceedings precludes a finding that an antitrust defendant has engaged in sham litigation . . . [and] irrefutably demonstrates that an antitrust plaintiff has not proved the objective prong of the sham exception."). Satisfaction of this standard does not require certainty but rather "a reasonable belief that there is a chance that a claim may be held valid upon adjudication" which will be sufficient if the action is "one where 'a similarly situated reasonable litigant could have perceived some likelihood of success'  "even in the absence of supporting authority where the action is 'based on an objectively good faith argument for the extension, modification, or reversal of existing law.'"
Applying these standards, Myriad argues that Ambry has not alleged, nor can Ambry "plausibly allege" that Myriad's suit is objectively baseless. This argument is based on the parties' different interpretations of the Federal Circuit and Supreme Court opinions in AMP v. Myriad Genetics. According to Myriad, "only one of the patent claims at issue in AMP -- claim 6 of U.S. Patent No. 5,747,282 -- is asserted against Ambry in this case, and that claim was upheld by the Supreme Court." In addition, that claim was considered by the Federal Circuit on remand in view of the Supreme Court's decision in Mayo v. Prometheus and the Court found that this claim was "patent-eligible  under §101 [and that] Mayo does not change that result." Further, Myriad argues that the Supreme Court held that "all claims directed to 'cDNA' are patentable (an assertion that is at the least open to interpretation) and that the Court "specifically referenced claim 6 (of the '282 patent) with regard to patent eligibility as reciting cDNA.
With this background, Myriad then argues that "[t]o motion to dismiss, Ambry must allege sufficient facts to support its claim that it was objectively unreasonable for Myriad to have asserted claim 6 of the '282 Patent and other similar such claims in this lawsuit despite the fact that claim 6 was upheld by the Supreme Court and the Federal Circuit (twice)" which it cannot do because "'so long as at least one claim in the lawsuit has objective merit,' a lawsuit will not be deemed a sham," citing Trustees of Univ. of Penn. v. St. Jude Children's Research Hosp., Civil Action No. 12-4122, 2013 WL 1499518, at *12, __ F.Supp.2d __ (E.D. Penn. Apr. 12, 2013). This is also true for the other claims Myriad asserts because they were duly issued by the U.S. Patent and Trademark Office and thus are entitled to a presumption of validity and were not challenged by the plaintiffs in the AMP litigation (and thus not invalidated by the Court). And, in a footnote, Myriad cites the portion of the Court's Myriad opinion where Justice Thomas states that "this case does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes. Judge Bryson [of the Federal Circuit] aptly noted that, '[a]s the first party with knowledge of the [BRCA1 and BRCA2] sequences, Myriad was in an excellent position to claim applications of that knowledge. Many of its unchallenged claims are limited to such applications.'" AMP, 133 S.Ct. at 2120 (citing Ass'n for Molecular Pathology, 689 F. 3d at 1349)." There is also no basis for the District Court to find Myriad's allegations on its remaining claims to be objectively baseless because, according to Myriad, the Federal Circuit had the opportunity to invalidate similar claims post-Mayo and did not. Specifically, Myriad cites the second Federal Circuit opinion in the AMP v. Myriad case where the Court stated that:
[P]erforming operations, even known types of steps, on, or to create novel, i.e., transformed subject matter is the stuff of which most process or method invention consists. . . . Thus, once one has determined that a claimed composition of matter is patent-eligible subject matter, applying various known types of procedures to it is not merely applying conventional steps to a law of nature.
Ass'n for Molecular Pathology, 689 F. 3d at 1349 (emphasis added). In summary, Myriad argues that:
The patent claims asserted by Plaintiffs in this action cover either synthetically made compositions of matter -- namely, specially-engineered synthetic DNA synthesized in a laboratory based upon knowledge about the BRCA1 and BRCA2 genes -- or methods of using such synthetic compositions, the patentability of which is expressly supported by Supreme Court and Federal Circuit authority. While reasonable minds may be able to differ over the precise parameters of these decisions in an evolving area of law, labeling either side's view on such issues as "bad faith," "objectively baseless," or a "sham" is unsustainable. Because Ambry's antitrust counterclaims are premised on just such facially implausible allegations, they are barred by Noerr-Pennington and should be dismissed.
This being district court litigation, it can be expected that the parties will continue to pursue procedural and substantive advantages in pressing their claims and counterclaims. This case, and the issues surrounding patent eligibility of generic diagnostic testing, is not only far from over but it is only beginning, once again making overstated claims of "victory" by the opponents of gene patenting pathetically premature.
For additional information regarding this and other related topics, please see:
• "Amici Submit Brief in Support of Ambry Genetics and Gene by Gene," August 27, 2013
• "Ambry Responds to Myriad Lawsuit," August 7, 2013
• " Why Does Myriad Think It Can Win BRCA Gene Lawsuits?" July 30, 2013
• "Myriad Genetics Files Infringement Suit Against Gene by Gene for Genetic Diagnostic Testing of BRCA Genes," July 10, 2013
• "Myriad Genetics Files Suit Against Ambry Genetics for Genetic Diagnostic Testing of BRCA Genes," July 9, 2013
• "Association for Molecular Pathology v. Myriad Genetics, Inc. (2013)," June 13, 2013
• "Supreme Court Issues Decision in AMP v. Myriad," June 13, 2013