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Re: IBM's appellee brief in Wallace case

From: Alexander Terekhov
Subject: Re: IBM's appellee brief in Wallace case
Date: Thu, 14 Sep 2006 13:49:24 +0200

Hey Burfel, developments!

8/28 IBM filed "supplimental authorities."

Wallace didn't file a response to IBM's "supplimental authorities." (The
FRAP says that a reply can be filed if it is "prompt.")

IBM filed "Schor v. Abbott Laboratories" concerning a section 2
"monopoly leveraging" theory (with Judge Easterbrook's observations like
"Schor does not contend that KALETRA is an instance of predatory
pricing"). Wallace case has nothing to do with a section 2 "monopoly"
and he clearly stated that fact in his Reply brief, so he just ignored
IBM's "supplemental authority". These appellate judges are no morons and
they will understand this is a section 1 predatory price-fixing
conspiracy case asking equitable relief and that it has nothing
whatsoever to do with a "monopoly leveraging" theory. Defendants just
keep embarrassing themselves. So it all unfolds as planned.

Here's more details on IBM's "supplemental authority":

7th Circuit Rules in Antitrust and Patent Case

July 26, 2006. The U.S. Court of Appeals (7thCir) issued its opinion [12
pages in PDF] in Schor v. Abbott Laboratories, an antitrust case
involving a drug patent in which the Court of Appeals affirmed the
judgment of the District Court, dismissing the complaint for failure to
state a claim.

The Court of Appeals rejected a "monopoly leveraging" claim where the
defendant held a patent monopoly on a drug. However, in reaching this
conclusion, the Court of Appeals provided not only economic analysis and
judicial precedent, but also an analogy to the computer and software

This case involves Abbott Laboratories' sale of protease inhibitors,
which are drugs that inhibit the progress of the human immunodeficiency
virus (HIV) which causes the acquired immune deficiency syndrome (AIDS).

Abbott holds U.S. Patent No. 5,886,036 for the drug ritonavir, which it
sells under the brand name Norvir. It also holds U.S. Patent No.
6,037,157 for ritonavir taken in combination with any protease
inhibitor. Abbott also sells a drug under the brand name Kaletra that
includes ritonavir plus the protease inhibitor lopinavir.

That is, Abbott sells ritonavir both as part of Kaletra, and alone as

Gary Schor is a class action plaintiff who seeks to represent a class of
everyone who uses protease inhibitors.

Schor filed a complaint in U.S. District Court (NDIll) against Abbott
alleging violation of Section 2 of the Sherman Act, which is codified at
15 U.S.C. § 2.

Section 2 provides, in full, that "Every person who shall monopolize, or
attempt to monopolize, or combine or conspire with any other person or
persons, to monopolize any part of the trade or commerce among the
several States, or with foreign nations, shall be deemed guilty of a
felony, and, on conviction thereof, shall be punished by fine not
exceeding $10,000,000 if a corporation, or, if any other person,
$350,000, or by imprisonment not exceeding three years, or by both said
punishments, in the discretion of the court."

The Court of Appeals offered this summary of Schor's complaint. "He
argues that Abbott charges too much for Norvir alone and too little for
the Norvir component of Kaletra. ... the disparity between the unduly
high price of Norvir and the unduly low price of Kaletra is designed to
monopolize the market in protease inhibitors, in violation of §2 of the
Sherman Act, 15 U.S.C. §2. Schor calls the strategy “monopoly
leveraging”: Abbott is trying to use its patent to obtain a monopoly of
all protease inhibitors by inducing HIV patients to buy Kaletra, which
will lead other vendors to drop out of the market. Once rivals’ products
have been vanquished, Abbott will be able to jack up the price of
Kaletra as well as Norvir."

The District Court dismissed the complaint for failure to state a claim.

The Court of Appeals affirmed. Judge Frank Easterbrook wrote the opinion
for the unanimous three judge panel.

The Court of Appeals wrote that "Schor's complaint does not allege any
of the normal exclusionary practices --tie-in sales (or another form of
bundling), group boycotts, exclusive dealing and selective refusal to
deal, or predatory pricing. 


It then compared the facts of this case to computers and software. "Thus
Microsoft does not make computers but encourages vigorous competition
among Dell, Hewlett-Packard, Sony, Lenovo, and other participants in
that market; the less it costs to buy the hardware, the more sales of
operating system software there will be and the more Microsoft can
charge. Similarly Abbott hopes that competition among other drug
manufacturers will drive down the price of protease inhibitors; the less
they cost, the more Abbott can charge for Norvir (or the ritonavir
component in Kaletra). There's no reason to think that Abbott would be
better off if it took over the market in protease inhibitors and tried
to charge a monopoly price for substances that complement ritonavir."
(Parentheses in original.)

The Court of Appeals also wrote the the 9th Circuit, which recognized a
monopoly leveraging claim in Image Technical Services, Inc. v. Eastman
Kodak Co., 125 F.3d 1195 (1997), "just got it wrong". The Supreme Court
denied certiorari in that case, at 523 U.S. 1094 (1998).


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