Both Regeneron and
The dispute between the two pharma companies dates back to 2005, when Regeneron engaged
Unbeknownst to Regeneron, Vetter began working with
Regeneron Alleges Monopolization by
Regeneron brought five claims against
The District Court's Dismissal
In alleging its monopolization claims, Regeneron claimed that
Nonetheless, positing that it would be “strange” to limit the relevant product market to anti-VEGF PFSs “when the same drug comes in a vial as well,” the district court concluded that Regeneron's alleged product market definition was implausibly narrow. The district court appeared to believe that an antitrust product market definition cannot be co-extensive with the scope of a patent. Accordingly, the court found the allegations in the complaint failed to plausibly allege any of the antitrust violations.
Market Definition is About Demand, Not Supply
The district court committed the common error of evaluating market definition by looking at the supply side rather than the demand side. Particularly in monopolization cases, market definition plays an important role in the legal analysis. A commonly quoted expression is that the market definition consists of “the area of effective competition.” Thus, whether two products should be regarded in the same market depends on whether there is real (effective) competition between them. This, in turn, requires that buyers can switch from one to the other without excessive cost. If a real, practical choice between two products is not available, it is not likely that the two products belong in the same product market.
A plaintiff bringing a complaint for monopolization must clearly allege the geographic scope and the mix of products in the market allegedly monopolized. All else being equal, it is more difficult for a plaintiff to prove monopolization of a broad market with many products (or even kinds of products) than a narrow market with only a few products. In some cases, a single brand of a product or service occupies a market all its own, because, for at least a well-defined cohort of buyers, there is no other choice. For example, when the Kodak company stopped supporting copier repairs by independent service organizations, it prevented all providers except itself from providing services for Kodak copiers. For Kodak copier owners the relevant product market—servicing for Kodak copiers—consisted of a single brand.
In its Regeneron decision, the Second Circuit clarified that products that serve the same or similar function may nonetheless still not occupy the same product market. This is because the products in a defined market must be both functionally and economically substitutable. Whether, in theory, buyers demanding product A can instead use product B is not the relevant inquiry. What matters is whether buyers actually will substitute B for A. As the court of appeals put it, “the applicable analysis is whether or not the products are economic substitutes, not whether they appear to be functionally similar.”
Thus, market definition depends on the preferences of those that generate economic demand for one product in relation to their demand for a second product. The magnitude known as the cross-elasticity of demand measures how a change in market demand for one product affects the market demand for a second product.
The Ninth Circuit noted that the district court not only placed improper weight on the functional, rather than economic, similarities between anti-VEGF PFSs and vials, but it also “misconstrued the relationship between a patent and a proposed antitrust market.” The two concepts are indeed quite different. Although it is commonly thought that a patent confers a “monopoly,” this is not necessarily the case unless the scope of the patent also describes a relevant antitrust market.
Thus, a patent on a product or service that competes in a competitive market with other patented or non-patented products does not entail the grant of a monopoly in any market. The patentee can certainly exclude others from practicing the patent without a license, but it has no monopoly power in a market that includes other, non-infringing technologies against which it must compete.
In Regeneron v.
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