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On Nov. 2, the staff of the Federal Trade Commission issued a long-awaited report titled “Enforcement Perspectives on the Noerr-Pennington Doctrine.” The report addresses an ongoing debate in antitrust law: How to reconcile effectively the competing values associated with the exercise of fair-market competition against those associated with First Amendment rights -specifically, the rights of citizens to petition for governmental action as well as the protection of the governmental decision-making process from judicial inspection. The Federal Trade Commission (FTC) staff report is composed of three sections. In the first part of the report, the staff examines the underpinnings and evolution of the Noerr-Pennington doctrine and summarizes the doctrine in its current form. This section provides a thorough review of the relevant case law over the past 45 years and discusses the policy and rationale behind that body of law. By way of background, the Noerr-Pennington doctrine emanates from the Supreme Court’s decisions in the Noerr and Pennington cases. It essentially shields private parties from antitrust and other liability where such parties petition public officials to take official action, even when that petitioning and resulting governmental action may harm or eliminate competition and even when such parties’ intent in petitioning was anti-competitive. The doctrine protects parties who petition courts as well as federal and state administrative agencies. Thus, a party escapes antitrust liability in instances where anti-competitive harm results from government action taken by officials even if the party influenced the governmental action through otherwise illegal private conduct intended to be anti-competitive. Courts justified the creation of the doctrine by reasoning that not creating the doctrine would have the effect of outlawing or chilling the important petitioning activity itself. The one major exception to the doctrine is sham petitioning, which is defined as objectively baseless and done for anti-competitive purposes. While the FTC staff agrees that the reasoning behind the doctrine’s genesis is sound and the right to exercise free speech through the petitioning of governmental bodies is an essential part of our democratic society, the staff contends that such rights are frequently and effectively used as tools to improperly hinder competition and obtain market power. Accordingly, in the second part of the report, the staff examines issues concerning the application of the doctrine. The staff contends that although the purpose of the doctrine – to protect the ability of citizens to obtain governmental action as well as to protect the ability of the government to regulate competition – has been repeatedly discussed by the courts, the specific contours of the doctrine remain surprisingly unclear. The staff then discusses how parties, acting under the shield of the Noerr-Pennington doctrine, may abuse the petitioning process through the use of repetition litigation, frequent administrative filings, or intentional misrepresentations or omissions of fact for the purpose of burdening competitors, slowing down a competitor’s entry into the market, raising the costs of market entry, or obtaining regulations that enable them to acquire monopoly power, all of which ultimately harms consumers. With this backdrop, the staff explores application of the doctrine to three types of conduct: Requests for ministerial government actions; Misrepresentations to a government decision-maker in a nonpolitical context; and Repetitive requests for governmental action filed regardless of merit and designed solely to suppress competition. The FTC staff attempts to show that the antirust laws may be applied to each type of conduct without interfering with the principles that the doctrine seeks to affect. With respect to the first type of conduct, requests for ministerial acts, the staff contends that such conduct should not be afforded Noerr-Pennington protection. The staff argues that a request that simply requires a ministerial action, as opposed to a communication that furthers a genuine exercise of governmental discretion, does not constitute petitioning activity. The FTC staff reasons that only petitioning activity is protected under the doctrine, and that requests for ministerial acts cannot constitute petitioning activity because “[p]etitioning is, at a minimum, an effort to convince the government to do something.” Next, the staff reasons that unlike discretionary actions, ministerial actions require little check on the truth or falsity of parties’ representations and require no balancing test between such representations and public interest. The staff therefore concludes that Noerr-Pennington protection is only warranted where the “communication furthers the exercise of governmental discretion of judgment.” With respect to the second type of conduct, misrepresentations in a non-political context, the FTC staff argues that such conduct should not receive Noerr-Pennington protection so long as the misrepresentation occurs outside of the political context, the misrepresentation was deliberate (i.e., more than error), the misrepresentation was subject to factual verification, and the misrepresentation was “central to the legitimacy of the effected governmental proceeding.” The staff reasons that in the political context, there is little governmental expectation of truthful petitioning and a high degree of governmental discretion, whereas outside the political context there is more likely to be an expectation of truthfulness, limited discretion on the part of the governmental entity, and necessary reliance on the petitioner’s assertions. The staff further reasons that precluding application of the doctrine to “deliberate misrepresentations that go to the core of nonpolitical government decisions also helps to protect the proper functioning of the government decision-making process” as well as “advances competition values.” With respect to the third type of conduct, repetitive petitioning, the staff maintains that such conduct should not be afforded Noerr-Pennington protection provided it is outside of the political arena and “filed without regard to merit and for the sole purpose of using the government process, rather than the outcome of the process, to harm directly marketplace rivals and suppress competition.” The staff even argues that such activity should lose protection in instances where the repetitive use of process is not viewed as objectively baseless (the current exception), and the repetitive use of process is bought against different rivals. While admitting that such an application would expand the currently recognized exclusions to the doctrine, the staff argues that such expansion is proper and necessary. In supporting its position, the staff reasons that when a pattern of petitioning, as opposed to an isolated instance of petitioning, is alleged to have occurred, a court would have more information to evaluate and would ultimately be in a better position to determine whether a particular party’s conduct constitutes as misuse of governmental process that is, in reality, an action taken to harm rivals and competition. The staff’s selection of these three categories of conduct seems to have been motivated by the FTC’s recent aggressive enforcement activity. Indeed, the staff evaluates such conduct through the vehicle of two particular enforcement actions: an antitrust enforcement action against Bristol-Myers Squibb; and an action against Union Oil Company of California (Unocal). The staff uses these two cases to illustrate the alleged uncertainty of the doctrine’s application to the three particular types of conduct addressed above and to illustrate the need to broaden the exceptions to the doctrine. The first case examined by the staff involved the FTC’s investigation of alleged abuse by Bristol-Myers Squibb of the Food and Drug Administration (FDA) process for approval of generic drugs. There, the FTC claimed that Bristol-Myers Squibb was allegedly filing patents with the FDA that prevented or delayed the entry of generic drugs into the market. The FTC explained that the FDA provides a listing of all patents filed with the agency in a publication commonly referred to as the “Orange Book,” and that the FDA lists such patents without conducting any independent review of those patents. Accordingly, the simple act of filing a patent with the FDA triggers its publication in the Orange Book. The FTC further explained, however, that to sell a generic version of a branded drug, a manufacturer must provide certification to the FDA that it is not infringing upon any valid patent listed with the FDA. Thus, the FTC argued that when Bristol-Myers Squibb filed a patent with the FDA for its branded drug, the FDA listed the patent in the Orange Book, which thereby triggered a 30-month stay pending FDA’s approval of its generic products. Ultimately, the FTC commenced an independent antitrust enforcement action against Bristol-Myers Squibb, alleging that it delayed entry into the market of generic drug manufacturers by making false and misleading statements to the Patent and Trademark Office to obtain unwarranted patent protection; making false and misleading statements to the FDA to obtain listing of patent protection; filing meritless patent infringement lawsuits that triggered multiple, automatic 30-month stays; and entering into anticompetitive agreements that even further delayed entry in the market of generic products. Bristol-Myers Squibb’s conduct was addressed by the United States District Court of the Southern District of New York in In re Buspirone Patent Litigation/In re Buspirone Antitrust Litigation, where generic drug manufacturers brought suit alleging that Bristol-Myers Squibb illegally excluded them from the market by fraudulently filing patents with the FDA. The court held there that the Noerr- Pennington doctrine did not provide immunity on the basis of the Orange Book filing. The second case examined by the FTC involved its investigation of an alleged illegal acquisition of monopoly power by Unocal in the technology market for low-emission reformulated gasoline. The FTC alleged that Unocal provided information to one governmental body stating that particular information was available in the public domain while simultaneously pursuing patents that would enable it to charge royalties if the governmental body established regulations requiring use of Unocal’s technology. The staff asserted that Unocal’s petitioning activity was unworthy of Noerr-Pennington protection because it amounted to misrepresentations which frustrated the purpose of the doctrine. Ultimately, the FTC and Unocal entered a into a consent order in which Unocal agreed not to enforce its patents. The report concludes by stating, “attempts to interpret the doctrine to fully protect the values underlying the right to petition while also protecting, where possible, the competition values animating antitrust enforcement.” The staff issued the following recommendations: Conduct protected by Noerr-Pennington should not extend to filings, outside of the political arena, that seek nothing more than a ministerial government act; Conduct protected by Noerr-Pennington should not extend to misrepresentations, outside the political arena, that are deliberate, subject to factual verification, and central to the legitimacy of the proceeding; Conduct protected by Noerr-Pennington should not extend to patterns of repetitive petitioning, outside of the political arena, filed without regard to merit that employ government process, rather than the outcome of the processes to harm competitors in an attempt to suppress competition. In next month’s antitrust column, the authors will discuss the soundness and ramifications of the FTC staff’s long-awaited report. CARL W. HITTINGER is a partner in the litigation group at DLA Piper in its Philadelphia office, where he concentrates his practice in complex commercial litigation with particular emphasis on antitrust and unfair competition matters. Hittinger is also a frequent lecturer and writer on antitrust issues and has extensive experience counseling clients on all aspects of civil and criminal antitrust law. He can be reached at 215-656-2449, or [email protected] KRISTIN BARRETT is an associate with DLA Piper in Philadelphia, where she focuses her litigation practice on complex commercial and civil right litigation.

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