Xechem Incorporated v. Bristol-Myers Squibb ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-4292
XECHEM, INC., AND XECHEM INTERNATIONAL, INC.,
Plaintiffs-Appellants,
v.
BRISTOL-MYERS SQUIBB COMPANY,
Defendant-Appellee.
____________
Appeal from the United States District Court for
the Northern District of Illinois, Eastern Division.
No. 03 C 1920—Amy J. St. Eve, Judge.
____________
ARGUED JUNE 8, 2004—DECIDED JUNE 23, 2004
____________
Before EASTERBROOK, KANNE, and DIANE P. WOOD,
Circuit Judges.
EASTERBROOK, Circuit Judge. The Hatch-Waxman
amendments to the Food and Drug Act entitle pharma-
ceutical companies that first bring a drug to market to a
five-year period of exclusivity, even if the drug is un-
patented. 21 U.S.C. §355. Bristol-Myers Squibb was first to
market with paclitaxel, a compound derived from the bark
of the yew tree and useful in combating some cancers.
Bristol-Myers calls its formulation Taxol®, which has been
a commercial success. The exclusivity period was due to
2 No. 03-4292
expire in July 1997, and many other drug producers geared
up to sell generic paclitaxel once the market opened.
In order to sell paclitaxel, a new producer must file (and
win administrative approval of) an abbreviated new drug
application or ANDA. Another provision of the Hatch-
Waxman legislation affects the processing of such applica-
tions. It creates what has come to be called the Orange
Book, in which drug manufacturers list their products and
any patents that they believe apply. If the manufacturer of
a drug claims patent protection, then the Food and Drug
Administration will not approve an ANDA unless the
applicant certifies that it believes the patent to be invalid
or not infringed by the generic compound. If the applicant
so certifies, then the FDA will proceed unless the original
maker files a patent-infringement suit within 45 days. Such
a filing defers approval for 30 months, or until the litigation
has been resolved, whichever is earlier.
Shortly before its exclusivity was to end, Bristol-Myers
listed in the Orange Book two patents covering the adminis-
tration of paclitaxel. It sued all firms that filed ANDAs
for that drug, so the 30-month deferral took effect. Courts
ultimately determined that all important claims of both
patents are invalid. See Bristol-Myers Squibb Co. v. Ben
Venue Laboratories, Inc., 246 F.3d 1368 (Fed. Cir. 2001)
(holding eight claims invalid and remanding for further
proceedings concerning two others; Bristol-Myers dismissed
its suit rather than put those to the test). Just before the
30-month deferral was to expire, Bristol-Myers listed a
third patent in the Orange Book. This reset the 30-month
clock, which continued to run until January 17, 2002, when
Bristol-Myers withdrew this listing after the third patent,
too, had been declared invalid. Obtaining multiple deferrals
has been criticized by the Federal Trade Commission, which
wants Congress to amend the statute so that a maximum of
one is available. The FTC observed that Taxol is one of eight
drugs covered by sequential 30-month deferrals as a result
No. 03-4292 3
of delayed patent listings in the Orange Book—and that
every patent listed for any of these eight had been declared
invalid or not infringed. Generic Drug Entry Prior to Patent
Expiration 48-56 (2002) (the report’s reference to “every”
patent is limited to those on which litigation had been
concluded by the time the report was published).
Xechem is a maker of generic drugs. It makes and sells
paclitaxel throughout the world—but not in the United
States, where it has never filed the ANDA necessary to
obtain approval. It began this antitrust suit in 2003, con-
tending that the maneuvers we have described, and a few
others besides, excluded rivals and exposed consumers to
elevated prices. The district court dismissed the complaint
under Fed. R. Civ. P. 12(b)(6), see 274 F. Supp. 2d 939 (N.D.
Ill. 2003), concluding that the suit is untimely—that the
four years allowed by 15 U.S.C. §15b began in 1997, when
Xechem did not file an ANDA, and thus expired before this
litigation started.
Rule 12(b)(6) authorizes the dismissal of a complaint that
fails to state a claim on which relief may be granted.
Exclusionary patent-related practices that violate the anti-
trust laws are valid claims. See Walker Process Equipment,
Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172
(1965); United States v. Singer Mfg. Co., 374 U.S. 174
(1963); Brunswick Corp. v. Riegel Textile Corp., 752 F.2d
261 (7th Cir. 1984). The complaint alleges that paclitaxel
lacks good substitutes and that Bristol-Myers extended its
market power through underhanded means, injuring both
consumers and rival producers. These assertions may be
right or wrong, but how could the complaint be dismissed
under Rule 12(b)(6)? The district court found, not a defect
in the claim, but the presence of an affirmative defense. See
Fed. R. Civ. P. 8(c). Orders under Rule 12(b)(6) are not
appropriate responses to the invocation of defenses, for
plaintiffs need not anticipate and attempt to plead around
all potential defenses. Complaints need not contain any
4 No. 03-4292
information about defenses and may not be dismissed for
that omission. See, e.g., Gomez v. Toledo, 446 U.S. 635
(1980); United States v. Northern Trust Co., No. 04-1148
(7th Cir. June 22, 2004); United States Gypsum Co. v.
Indiana Gas Co., 350 F.3d 623 (7th Cir. 2003).
Only when the plaintiff pleads itself out of court—that is,
admits all the ingredients of an impenetrable defense—
may a complaint that otherwise states a claim be dismissed
under Rule 12(b)(6). See Walker v. Thompson, 288 F.3d
1005 (7th Cir. 2002). Bristol-Myers believes that this is
such a case, because the 69-page complaint (have Xechem’s
lawyers never read Fed. R. Civ. P. 8(a) and (e)(1)?) states,
among many other things, that Bristol- Myers’ stratagems
led Xechem in 1997 to place “on permanent hold” the
process of filing its own ANDA for paclitaxel. That decision
started the clock, Bristol-Myers insists, and more than four
years elapsed before Xechem filed suit. Xechem tendered an
amended complaint asserting that the 1997 decision was
not “permanent” but was subject to reevaluation once the
Hatch-Waxman delay ended. The district court deemed this
change irrelevant and refused on that ground to allow the
amendment. 2003 U.S. Dist. LEXIS 21430 (N.D. Ill. Nov. 26,
2003).
The difference between “never” and “maybe later” could
be important. Fiddling with the complaint’s language is
unnecessary, though. “On hold” itself implies the possibility
of change. It is not as if Xechem had abandoned generic
drugs, sold its operating assets, and turned itself into a
mutual fund. The complaint alleges that it makes and sells
many drugs, including paclitaxel, and that it has obtained
both U.S and foreign patents for aspects of that line of
business. What sense would there have been in making an
irrevocable decision, when changes in Bristol-Myers’ con-
duct (and the decisions of other drug makers) could affect
the future profitability of selling generic paclitaxel in the
United States? The phrase “on permanent hold” reads more
No. 03-4292 5
like a lawyer’s flubbed attempt to say that events in 1997
led to a definitive decision not to file at that time, than like
a report of a business decision never to sell paclitaxel in the
United States, come what may.
On this understanding—an appropriate one, given the
rule that, when acting on the pleadings, courts must
indulge the readings and make the assumptions that favor
the plaintiff, see Hishon v. King & Spalding, 467 U.S. 69
(1984)—the case cannot be dismissed under Rule 12(b)(6).
The period of limitations for antitrust litigation runs from
the most recent injury caused by the defendants’ activities
rather than from the violation’s inception. See, e.g., Zenith
Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321
(1971); United States v. E.I. du Pont de Nemours & Co., 353
U.S. 586 (1957). Cf. Klehr v. A.O. Smith Corp., 521 U.S.
179, 188-91 (1997) (describing how this approach works).
The complaint alleges that Bristol-Myers committed new
exclusionary acts (for example, listing the third patent in
the Orange Book and thus obtaining a second 30-month
postponement of generic competition) within the four-year
period preceding the complaint, and that these new acts
extended the period during which Bristol-Myers held a
monopoly, causing additional antitrust injury. This suffices
under established principles. See, e.g., United States
Gypsum, 350 F.3d at 628; Brunswick, 752 F.2d at 271-72.
That it may be too late to complain in 2003 about what
Bristol-Myers did in 1997 does not imply that it is too late
to complain about what it did in 2000 or 2002; improperly
prolonging a monopoly is as much an offense against the
Sherman Act as is wrongfully acquiring market power in
the first place. Each discrete act with fresh adverse conse-
quences starts its own period of limitations. Cf. National
Railroad Passenger Corp. v. Morgan, 536 U.S. 101 (2002).
Bristol-Myers asks us to affirm on an alternative ground:
that Xechem cannot establish damages, because its injury
is too uncertain or remote. See Associated General
6 No. 03-4292
Contractors of California, Inc. v. California State Council of
Carpenters, 459 U.S. 519 (1983); Blue Shield of Virginia v.
McCready, 457 U.S. 465 (1982). Certainly Xechem faces a
difficult task; it cannot recover damages unless it can show
that (and when) it would have entered the market in the
absence of anticompetitive practices, and how much money
it would have made. That Xechem still has not filed an
ANDA for paclitaxel, even though Bristol-Myers has not
listed a patent for Taxol in the Orange Book since 2002, is
a hurdle that it must vault to establish injury. But a pre-
diction that the plaintiff will be unable to meet its chal-
lenges is not a good reason to dismiss a complaint under
Rule 12(b)(6). If Bristol-Myers should make and support a
motion for summary judgment under Fed. R. Civ. P. 56,
then the district court could conduct the necessary analysis
on an evidentiary record.
REVERSED AND REMANDED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-23-04