May 23, 2012 - Washington, D.C. A group of leading economics professors specializing in antitrust and innovation filed a friend of the court brief today to urge the U.S. Supreme Court to accept the case of SigmaPharm, Inc. v. Mutual Pharmaceutical Co., Inc. et al.: No. 11-1275 on certiorari to the Third Circuit. The economists were represented by RUBIN PLLC managing member, Jonathan L. Rubin, and Gene Crew, of Kilpatrick Townsend & Stockton LLP of San Francisco. The economists were: David B. Audretsch of Indiana University, Wesley M. Cohen of the Fuqua School at Duke, Robert M. Feinberg of American University, Albert N. Link of the University of North Carolina at Greensboro, Stephen Martin of Purdue University, F. M. Scherer of Harvard, John T. Scott of Dartmouth, and Donald S. Seigel of the State University of New York at Albany.
The issue presented by the petition for certorari is whether an innovator that suffers injury to its business or property in the form of lost revenue as a consequence of an anticompetitive agreement between the innovator's marketing partner and a market incumbent to suppress the innovation from the market suffers "antitrust injury." The plaintiff, SigmaPharm, an R & D innovator, had a manufacturing and distribution agreement with Mutual to develop and market new pharmaceuticals. SigmaPharm developed a competing version of the widely used muscle relaxant, Skelaxin, a branded drug sold by the market incumbent, King. Mutual and King agreed to suppress the competing drug in connection with the settlement of existing patent litigation and SigmaPharm sued under Sections 1 and 2 of the Sherman Act.
The Third Circuit, reviewing the District Court's dismissal of the complaint, affirmed on the grounds that SigmaPharm lacked standing because it did not suffer antitrust injury, that is, "injury of the type the antitrust laws were intended to prevent," the test announced in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1976). Holding that such injury is customarily confined to consumers of competitors, and that SigmaPharm was neither, the court found it lacked antitrust injury and, thus, standing to bring the case.
In their brief in support of SigmaPharm's petition for certiorari the economists argued that innovation and dynamic competition stand on equal footing with static competition. Thus protection of innovation is a core antitrust value. In this case the innovation would also have brought prices down by introducing competition into the market. Moreover, the division of labor represented in development agreements between innovators and marketing and manufacturing firms are essential to the competitive process. Disallowing antitrust standing to an innovator when its innovation has been suppressed denies antitrust relief when it is most needed. In addition, the innovator has been directly harmed from the suppression of the invention and is in no danger of enjoying protection from competition if it is granted the antitrust relief it seeks. Finally, neither competitors nor consumers are likely to sue as a consequence of the suppression because of legal and practical obstacles. Denying antitrust standing to SigmaPharm undermines the proper functioning of the antitrust laws as our charter of our economic freedom.
A copy of the brief may be downloaded by following the link below.
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