2007 WI 99
SUPREME COURT
CASE NO.: COMPLETE TITLE:
OF
WISCONSIN
2003AP2840
Barbara A. Meyers, Lynn Stucker, Loyal Berg and Eugene Browning individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. Bayer AG, Bayer Corporation, Barr Laboratories, Inc., Rugby Group, Inc., Watson Pharmaceuticals, Inc. and Hoeschst Marion Roussel, Inc., Defendants-Respondents-Petitioners. REVIEW OF A DECISION OF THE COURT OF APPEALS 2006 WI App 102 Reported at: 293 Wis. 2d 770, 718 N.W.2d 251 (Ct. App. 2006—Published)
OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: SOURCE OF APPEAL: COURT: COUNTY: JUDGE: JUSTICES: CONCURRED: DISSENTED:
July 13, 2007 December 12, 2006
Circuit Milwaukee Michael Guolee
PROSSER, J., dissents (opinion filed). ROGGENSACK, J., dissents (opinion filed). WILCOX and PROSSER, JJ., join the dissent.
NOT PARTICIPATING: ATTORNEYS:
For the defendants-respondents-petitioners there were briefs by Phillip A. Proger, Kevin D. McDonald, Lawrence D. Rosenberg, and Jones Day, Washington, D.C.; Gerardo H. Gonzalez, Richard J. Krill, and Gonzalez, Saggio & Harlan, LLP, Milwaukee; Fred H. Bartlit, Jr., Peter B. Bensinger, Jr., Michael J. Valaik, Paul J. Skiermont, and Bartlit Beck Herman Palenchar & Scott LLP, Chicago, IL; William J. Mulligan, Kathy L. Nusslock, and Davis & Kuelthau, S.C., Milwaukee; Thomas D. Yannucci, P.C., Karen N. Walker, Edwin John U, and Kirkland & Ellis LLP, Washington, D.C.; Stephen P. Hurley, Kristine A. Long, Andrew W. Erlandson, and Hurley, Burish & Milliken, S.C., Madison; David
E. Everson, Heather S. Woodson, Victoria L. Smith, and Stinson Morrison Hecker LLP, Kansas City, MO, and oral argument by Fred H. Bartlit, Jr. For the plaintiffs-appellants there was a brief by John C. Cabaniss, Thomas Armstrong, and von Briesen & Roper, s.c., Milwaukee, and oral argument by Thomas Armstrong, Jr. An amicus curiae brief was filed by Stephen E. Meili and Consumer Law Litigation Clinic, Madison; Peter C. Carstensen, David Dudley, and University of Wisconsin Law School, Madison; on behalf of the University of Wisconsin Law School Consumer Law Litigation Clinic, Professor Peter C Carstensen of the University of Wisconsin Law School, and David Dudley of the University of Wisconsin Law School. An amicus curiae brief was filed by Eric J. Wilson and Gwendolyn J. Cooley, assistant attorneys general, with whom on the brief was Peggy A. Lautenschlager, attorney general, on behalf of the state of Wisconsin, and there was oral argument by Eric J. Wilson. An amicus curiae brief was filed by Paul E. Benson, Grant C. Killoran, and Michael Best & Friedrich, LLP, Milwaukee, on behalf of the Milwaukee Metropolitan Chamber of Commerce and the Wisconsin Manufacturers and Commerce, Inc.
2
2007 WI 99
NOTICE
This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports.
No.
2003AP2840
2000CV9347)
(L.C. No.
STATE OF WISCONSIN
:
IN SUPREME COURT
Barbara A. Meyers, Lynn Stucker, Loyal Berg and Eugene Browning, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. Bayer AG, Bayer Corporation, Barr Laboratories, Inc., Rugby Group, Inc., Watson Pharmaceuticals, Inc. and Hoeschst Marion Roussel, Inc., Defendants-Respondents-Petitioners.
FILED
JUL 13, 2007
David R. Schanker Clerk of Supreme Court
REVIEW of a decision of the Court of Appeals. remanded for further proceedings.
Affirmed and
¶1
LOUIS B. BUTLER, JR., J.
The defendants, Bayer AG, et
al. (collectively "Bayer"), seek review of a published court of appeals' decision1 reversing a circuit court order that dismissed all claims brought under Wisconsin's Antitrust Act, Chapter 133 of the
1
Wisconsin
Statutes,
by
Barbara
Meyers,
Lynn
Stucker,
Meyers v. Bayer AG, 2006 WI App 102, 293 Wis. 2d 770, 718 N.W.2d 251.
No.
2003AP2840
Loyal
Berg,
and a
Eugene
Browning class of
(collectively Wisconsin
"Meyers"), who
representing
putative
residents
purchased the antibiotic ciprofloxacin hydrochloride from Bayer under the brand name Cipro. Meyers' complaint2 alleges that
Wisconsin consumers paid inflated prices for Cipro as a result of an unlawful agreement between Bayer and three manufacturers of generic drugs, Barr Laboratories, and The Inc. Rugby ("Barr"), Group Hoechst
Marion
Roussel,
Inc.
("HMR")
("Rugby"),
which precluded Barr, HMR and Rugby from selling or marketing generic ciprofloxacin hydrochloride to compete with Cipro. ¶2 dismissed Wisconsin's The circuit court, Honorable Michael D. Guolee, that
Meyers'
claims Act,
against
Bayer,
concluding
Antitrust
Wis. Stat. § 133.03
(2005-06),3
applied only to intrastate commerce.
Meyers appealed, and the
court of appeals held the case in abeyance pending our decision in Olstad v. Microsoft Corp., 2005 WI 121, 284 Wis. 2d 224, 700 N.W.2d 139. Subsequently, we concluded in Olstad that
Wisconsin's Antitrust Act applies to cases involving interstate conduct if (1) the actionable conduct, such as the formation of a combination or conspiracy, occurred within this state, even if its effects are felt primarily outside of Wisconsin; or (2) the conduct complained of "substantially affects" the people of Wisconsin and Except where otherwise noted, the complaint we refer to throughout this opinion is the second amended complaint filed by the plaintiffs in this action. All references to the Wisconsin Statutes are to the 200506 version unless otherwise indicated. 2
3 2
No.
2003AP2840
has impacts in this state, even if the illegal activity resulting in those impacts occurred predominantly or exclusively outside this state. Olstad, 284 Wis. 2d 224, ¶1. Applying Olstad, the court of
appeals reversed the circuit court on grounds that the Wisconsin Antitrust Act reaches interstate commerce, and Meyers' complaint alleged facts of illegal conduct that, if true, "substantially affected" the people of Wisconsin and had impacts in this state. Meyers v. Bayer AG, 2006 WI App 102, ¶¶1, 10-11, 293 Wis. 2d 770, 718 N.W.2d 251. ¶3 We follow our precedent set forth in Olstad for A
determining when Chapter 133 reaches interstate commerce:
plaintiff filing an action under Wisconsin's Antitrust Act must allege price or fixing as a result that of the formation of a the
combination
conspiracy
"'substantially
affects'
people of Wisconsin and has impacts in this state" when the challenged conduct occurs predominately or exclusively outside this state. Olstad, 284 Wis. 2d 224, ¶85. Bayer and amici We conclude that Metropolitan and Commerce are
additional limitations Chamber seek to of Commerce into
Milwaukee
and the
Wisconsin
Manufacturers affects"
read
"substantially
standard
unsupported by our precedents and are contrary to the policy choices of the legislature. ¶4 broad Meyers' 35-page, 106-paragraph affecting who purchased January complaint "at the 6, a alleges a
price-fixing
scheme
minimum,
thousands . . . in antibiotic conclude Cipro
Wisconsin" "at any
best-selling 1995." that, We if
time
since
Meyers'
complaint
alleges 3
illegal
conduct
No.
2003AP2840
true, substantially affected the people of Wisconsin and had impacts in this state.4 We therefore affirm the court of
appeals' decision reversing the circuit court's order dismissing Meyers' claims, and remand for further proceedings consistent with this opinion. I ¶5 This review of a decision of the court of appeals For
arises on a motion to dismiss for failure to state a claim.
purposes of this review, we accept as true the facts alleged in Meyers' complaint. Tietsworth v. Harley-Davidson, Inc., 2004 WI The facts as set forth
32, ¶5, 270 Wis. 2d 146, 677 N.W.2d 233.
below are taken from Meyers' complaint except where otherwise noted. ¶6 Bayer filed U.S. Patent No. 4,670,444 ("'444 patent")
on May 29, 1984, a compound patent for the drug ciprofloxacin hydrochloride.
4
In October 1987, a subsidiary of Bayer obtained
At oral argument, the issue arose of whether the agreement between Bayer and the generic manufacturers constituted actionable conduct under Chapter 133. We note that a federal district court dismissed an action under the Sherman Antitrust Act against Bayer on grounds that the Agreement between Bayer and the generic manufacturers did not violate federal antitrust law. See In re Ciproflaxacin Hydrochloride Antitrust Litigation, 363 F. Supp. 2d 514 (E.D.N.Y. 2005). In a complex opinion discussing a number of different issues, the federal district court addressed whether the consumer plaintiffs could attack the validity of the Cipro patent post hoc, and the effect of the possible invalidity of the patent on the legality of the Agreements, among other questions. Because these issues have not been briefed by the parties, have not been developed in the record in this motion to dismiss, and are not properly before this court, we do not address them further. These matters may be addressed by the circuit court on remand. 4
No.
2003AP2840
approval from the Food and Drug Administration ("FDA") to market ciprofloxacin hydrochloride. name Cipro, a broad The drug was marketed under the antibiotic infections, approved and to treat other
spectrum
sinusitis, ailments.
lower
respiratory
fifteen
Cipro quickly became one of the most prescribed drugs Meyers' complaint states that within one year of
of its kind.5
its introduction, Cipro was adopted in the formulary of every hospital in the United States. ¶7 In October 1991 Barr filed an Abbreviated New Drug
Application ("application") with the FDA, pursuant to certain provisions requesting of 21 U.S.C. to § 355, a/k/a sell the Hatch-Waxman Act,
approval
market
and
generic
ciprofloxacin
hydrochloride ("generic Cipro").
Pursuant to the Hatch-Waxman
Act, Barr notified Bayer of its application, and asserted that Bayer's '444 patent was invalid and unenforceable. Bayer filed a patent infringement lawsuit In response, Barr on
against
January 16, 1992, challenging Barr's application to market and sell generic Cipro. As a result of the infringement lawsuit,
FDA approval of Barr's application was automatically postponed by operation of statute, 21 U.S.C. § 355(j)(5)(B)(iii) (1991), pending resolution of the patent infringement lawsuit. ¶8 On January the FDA 6, 1995, gave with the patent approval case to as yet
unresolved,
5
tentative
Barr's
Meyers' complaint indicates that, as of January 2002, Cipro was the best-selling antibiotic in the world, a position it had maintained for eight consecutive years. Meyers cites a March 2000 Bayer press release indicating that in 1999 Cipro posted $1 billion in sales in the United States. 5
No.
2003AP2840
application for generic Cipro.
Meyers' complaint states that,
following the FDA's action, a Barr official reportedly stated that Barr would bring to market its generic Cipro "immediately" if Barr prevailed in the patent infringement suit. ¶9 On March 29, 1996, Barr entered into an agreement with
Rugby, a rival generic drug manufacturer, in which Barr agreed to share equally with Rugby any rights and profits from the eventual marketing and distribution of generic Cipro in exchange for Rugby's assistance in funding the patent litigation with Bayer. ¶10 Bayer moved for summary judgment in the patent suit On June 5, 1996, the court
with Barr and Rugby in January 1996.
presiding over the patent litigation denied Bayer's motion for summary judgment, and denied a motion for reconsideration on September 5, 1996. ¶11 entered On into January four 8, 1997, Bayer, Barr, HMR, the and Rugby
agreements
(collectively,
"Agreement")
which allocated the entire United States market for Cipro for at least six years, and required Bayer to make large monetary
payments to Barr and HMR.6
According to the complaint, Bayer The
made an initial payment to Barr and HMR of $49.1 million.
complaint asserts that the Agreement granted Bayer an unlawful monopoly in the market for Cipro and generic Cipro.
6
As a part
The complaint states that Rugby was a subsidiary of HMR until February 1998, at which time Rugby was acquired by Watson. The complaint states that Rugby retained the exclusive right to distribute generic Cipro following the sale of Rugby to Watson Pharmaceuticals, Inc. ("Watson"). 6
No.
2003AP2840
of the Agreement, Bayer and Barr agreed to resolve the patent litigation by entering into a consent judgment that acknowledged the validity and enforceability of the '444 patent. Bayer
states it is undisputed that the discussions relating to the Agreement occurred in New York and Germany. ¶12 The Agreement further provided that Bayer could either
(a) license and supply Bayer-manufactured Cipro to Barr and HMR for resale under a generic label; or (b) pay quarterly amounts to Barr from 1998 through at least 2003.7 The former of these
options established the price Barr and HMR would pay to Bayer for Cipro, and required Barr and HMR to share its profits with Bayer. The Agreement also required Barr to amend its
application to the FDA, ending its challenge to the validity of the '444 patent. disclose ending the terms The Agreement required that the parties not of the Agreement. in federal The consent judgment no
the
patent
litigation
court
contained
information about the terms of the Agreement and made no mention of any payments from Bayer to Barr. ¶13 Meyers' complaint asserts that, as a result of the
Agreement, Bayer maintained its monopoly of the United States market for Cipro and generic equivalents of Cipro. Published
reports cited in the complaint show that from January 1997 to
7
Meyers' brief states that Bayer has chosen to make quarterly payments to Barr and HMR. It states that, including the $49.1 million initial payment, Bayer agreed to pay Barr and HMR through December 2003 a total of $398 million not to compete in the United States with Bayer in the market for Cipro and generic equivalents to Cipro. 7
No.
2003AP2840
December 1998, Bayer increased the price of Cipro by 16.7%, one of the largest increases for any prescription drug in the United States. Bayer's internal sales documents show that its revenues
and profits increased substantially after the execution of the Agreement, Bayer's according to the complaint. from From Cipro 1998 went to up 1999, from
United
States
revenues
$834,620,400 to $1,042,473,100, an increase of 25%, while its net profits jumped from $756,265,800 to $921,631,900, an
increase of 22%. ¶14 The complaint asserts that were it not for the conduct
of the defendants, generic manufacturers, including Barr, would have begun marketing and selling generic Cipro in the United States no later than January 1995. The complaint asserts that,
"[a]s a result of the illegal conduct of Defendants, Plaintiffs and members of the Class were compelled to pay, and did pay, supracompetitive prices for Cipro which were substantially
higher than the prices that Plaintiffs and members of the Class would have paid absent the unlawful agreements and conspiracy alleged herein." ¶15 behalf of In November 2000, Meyers,8 both individually and on all others similarly situated, filed suit against
Bayer, Barr, Rugby, Watson and HMR in Milwaukee County Circuit Court. members The of complaint the states that are the named plaintiffs residents and who
putative
class
Wisconsin
Plaintiffs Stucker, Berg and Browning were later added to the complaint by amendment. 8
8
No.
2003AP2840
purchased Cipro indirectly from Bayer at any time since January 6, 1995. Unfair The complaint alleges violations of the Wisconsin and the
Competition
statute,
Wis. Stat. § 100.20(1),
Wisconsin Antitrust Act, Wis. Stat. § 133.03(1). ¶16 The case was removed to the United States District
Court for the Eastern District of Wisconsin and subsequently transferred to a New York federal district court. On October 1,
2001, the case was remanded back to the state court where it was originally filed. See In re Ciproflaxacin Hydrochloride
Antitrust Litig., 166 F. Supp. 2d 740, 742-43 (E.D.N.Y. 2001). ¶17 On remand of the matter back to the Milwaukee Circuit In an order
Court, Bayer moved to dismiss Meyers' complaint.
dated September 19, 2003, the Milwaukee County Circuit Court, Honorable Michael D. Guolee, granted Bayer's motion, concluding that the complaint failed to state a claim on which relief could be granted. The circuit court's decision relied on Conley
Publishing Group, Ltd. v. Journal Communications, Inc., 2003 WI 119, ¶16, 265 Wis. 2d 128, 665 N.W.2d 879, which stated that "the scope of Chapter 133 is limited to intrastate
transactions." ¶18 Meyers appealed from the order of dismissal. The
court of appeals stayed the appeal pending the outcome of the Olstad case, which was on certification to this court to resolve an apparent conflict between a line of cases including Conley Publishing, which held that Chapter 133 did not reach interstate commerce, and a divergent line of cases, including State v.
Allied Chemical and Dye Corp., 9 Wis. 2d 290, 295, 101 N.W.2d 9
No.
2003AP2840
133 (1960), which suggested that Chapter 133 provided a remedy in at least some cases involving interstate conduct. In a 5-0
decision, with Chief Justice Abrahamson and Justice Bradley not participating, we wrote that Chapter 133 "applies to interstate commerce, at least in some circumstances." 224, ¶74. Olstad, 284 Wis. 2d
We explained that Wisconsin's Antitrust Act provides (1) the actionable conduct occurs within the
a remedy whenever:
state; or (2) the actionable conduct "substantially affects" the people of Wisconsin and has impacts in the state, even if the conduct resulting Id., ¶85. In view of Olstad, the court of appeals reversed the court, concluding that the circuit court's in these impacts occurred outside of
Wisconsin. ¶19 circuit
interpretation of the scope of the Wisconsin Antitrust Act was erroneous. Meyers, 293 Wis. 2d 770, ¶9. The court of appeals
noted that while Olstad did not define "substantially affects," this court stated in Allied Chemical, 9 Wis. 2d at 295, that "[t]he public interest and welfare of the people of Wisconsin are substantially affected if prices of a product are fixed or supplies thereof or are restricted conspiracy." as the court result of of an illegal examined
combination
The
appeals
Meyers' complaint and concluded that it set forth the necessary facts and allegations to withstand a motion to dismiss. 293 Wis. 2d 770, ¶13. ¶20 Bayer filed a petition seeking review of the court of Meyers,
appeals' decision, stating that the issue presented for review was whether the allegations of 10 the complaint satisfied the
No.
2003AP2840
"substantially affects" test articulated in Olstad. Bayer's affirm. II ¶21 petition to address this particular
We granted and we
issue,
The matter of whether a complaint states a claim upon
which relief can be granted is a question of law subject to our independent review. Beloit Liquidating Trust v. Grade, 2004 WI "A
39, ¶17, 270 Wis. 2d 356, 677 N.W.2d 298 (citation omitted).
motion to dismiss a complaint for failure to state a claim upon which relief can be granted tests the legal sufficiency of the complaint." Id. For the limited purposes of assessing the
complaint's legal sufficiency, we accept as true all facts as set forth in the complaint, and reasonable inferences that may be drawn from such facts. Id. "[A] complaint in a civil action
should not be dismissed as legally insufficient unless it is clear that there are no circumstances under which the plaintiff can recover." Lewis v. Sullivan, 188 Wis. 2d 157, 164, 524
N.W.2d 630 (1994). ¶22 Whether the complaint is legally sufficient in this
case depends upon application of the Wisconsin Antitrust Act, Chapter 133, and the cases construing it, to the facts as pled. Interpretation and application of statutes and case law to a set of facts are matters of law that we decide de novo. Welin v.
American Family Mut. Ins. Co., 2006 WI 81, ¶16, 292 Wis.2d 73, 717 N.W.2d 690. ¶23 Statutory interpretation begins with the language of We apply the language of the statute as written, 11
the statute.
No.
2003AP2840
giving the words their commonly accepted meanings. context is relevant to the plain meaning of a statute. cases construing a statute also become a part
Statutory Previous of our
understanding of a statute's plain meaning.
See Olstad, 284
Wis. 2d 224, ¶21 (quoting Zimmerman v. Wisconsin Elec. Power Co., 38 Wis. 2d 626, 633-34, 157 N.W.2d 648 (1968) ("'It has often been said that once a construction has been given to a statute, the construction becomes a part of the statute.'")). III ¶24 Two years ago, we concluded in Olstad, 284 Wis. 2d
224, ¶1, that the Wisconsin Antitrust Act, Wis. Stat. § 133.03, may reach interstate commerce if (1) actionable conduct, such as the formation of a combination or conspiracy, occurred within this state, even if its effects are felt primarily outside Wisconsin; or (2) the conduct complained of "substantially affects" the people of Wisconsin and has impacts in this state, even if the illegal activity resulting in those impacts occurred predominantly or exclusively outside this state. A civil plaintiff filing an action under the act must allege either that actionable conduct occurred within the state, or that the conduct complained of "substantially affects" the
people of Wisconsin and has impacts in this state.
Id., ¶85.
Because the issue in Olstad arose on a certified question, we did not apply the "substantially affects" test to the facts of the case, a class action against the software manufacturer id. We of
Microsoft explicitly
alleging declined
monopolistic to
practices. on state the
See
elaborate except 12 to
meaning
"substantially
affects,"
the
following:
No.
2003AP2840
"Operating with lesser standards would jeopardize the action, undermine the validity of our antitrust statute, and create the spectacle of Lilliputian harassment in Wisconsin courts." ¶25 Id.
Bayer contends that the cases upon which Olstad relied
establish that the "substantially affects" test requires that plaintiffs Wisconsin allege specific not and particularized generalized effects on of
consumers,
merely
allegations
nationwide effects. allege that the
It further asserts that plaintiffs must on this state are more than that
impacts
indirect purchasers in Wisconsin may have paid higher prices because requiring would of the challenged of conduct. and Meyers contends that
allegations to a
specific
particularized standard for
effects claims
amount
heightened
pleading
brought under the Wisconsin Antitrust Act, and be contrary to the purposes of the statute. To consider these arguments, we
examine the language of the Wisconsin Antitrust Act and those cases interpreting it. A ¶26 Wisconsin Stat. § 133.03 provides as follows, in
relevant part: (1) Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce is illegal. Every person who makes any contract or engages in any combination or conspiracy in restraint of trade or commerce is guilty of a Class H felony, except that, notwithstanding the maximum fine specified in s. 939.50(3)(h), the person may be fined not more than $100,000 if a corporation, or, if any other person, may be fined not more than $50,000.
13
No.
2003AP2840
(2) Every person who monopolizes, or attempts to monopolize, or combines or conspires with any other person or persons to monopolize any part of trade or commerce is guilty of a Class H felony, except that, notwithstanding the maximum fine specified in s. 939.50(3)(h), the person may be fined not more than $100,000 if a corporation, or, if any other person, may be fined not more than $50,000. Chapter 133 contains a statement of legislative intent, which provides as follows: The intent of this chapter is to safeguard the public against the creation or perpetuation of monopolies and to foster and encourage competition by prohibiting unfair and discriminatory business practices which destroy or hamper competition. It is the intent of the legislature that this chapter be interpreted in a manner which gives the most liberal construction to achieve the aim of competition. It is the intent of the legislature to make competition the fundamental economic policy of this state and, to that end, state regulatory agencies shall regard the public interest as requiring the preservation and promotion of the maximum level of competition in any regulated industry consistent with the other public interest goals established by the legislature. Wis. Stat. § 133.01. Wisconsin Stat. § 133.18 provides treble As we
damages to "any person injured, directly or indirectly." noted in Olstad, 284 Wis. 2d 224, ¶61, language
providing
recovery to those harmed indirectly was adopted in response to the United States Supreme Court's decision in Illinois Brick Co. v. State of Illinois, the 431 U.S. 720 (1977), which to limited direct
recovery
under
federal
antitrust
statute
purchasers. ¶27 We thoroughly examined the language of the Wisconsin
Antitrust Act, its legislative history and historical context in
14
No.
2003AP2840
Olstad to determine whether the Wisconsin Antitrust Act applies to conduct that reaches interstate commerce. that the Wisconsin Antitrust Act was adopted There, we noted in 1893, three Olstad, 284
years after passage of the Sherman Antitrust Act. Wis. 2d 224, ¶41.
At that time, there was little doubt that
state antitrust law was limited in scope to conduct impacting intrastate commerce; the Supreme Court saw only a narrow role for state government in commercial regulation. Id., ¶30.
Courts then treated state and federal governments as "'separate and distinct sovereignties, acting separately and independently of each other, within their respective spheres.'" Id., ¶33
(quoting The Collector v. Day, 78 U.S. 113, 124 (1870)). ¶28 Our early cases interpreting the reach of the
Wisconsin Antitrust Act were consistent with this narrow view of state only regulatory to authority, holding See, that the statute v. applied Lewis &
intrastate
commerce.
e.g.,
State
Leidersdorf Co., 201 Wis. 543, 549, 230 N.W. 692 (1930); Pulp Wood v. Green Bay Paper & Fiber Co., 157 Wis. 604, 625, 147 N.W. 1058 (1914). While the Supreme Court later adopted a much less
rigid view of the role of state government in regulation, some of this court's decisions continued to adhere to the view that the Wisconsin Antitrust Act was limited in scope to intrastate commerce. See, e.g., Conley Publishing, 265 Wis. 2d 128; Grams However,
v. Boss, 97 Wis. 2d 332, 346, 294 N.W.2d 473 (1980).
as we discussed in Olstad, 284 Wis. 2d 224, ¶¶24-27, other cases held that the Wisconsin Antitrust Act reached interstate
commerce in some circumstances. 15
See State v. Milwaukee Braves,
No.
2003AP2840
31 Wis. 2d 699, 144 N.W.2d 1 (1966); Allied Chemical, 9 Wis. 2d 290. cases, Chapter Based on the apparent conflict between these lines of we concluded had in Olstad, 284 Wis. 2d 224, ¶28, and, that as a
133
been
interpreted
inconsistently,
result, the statute was ambiguous.9 legislative history of the
We therefore examined the Antitrust Act, and in
Wisconsin
particular a 1980 overhaul of the statute. ¶29 that
See id., ¶¶55-73.
The 1980 revision, Olstad explained, included language indirect purchasers harmed by antitrust Id.,
permitted
violations to recover under the Wisconsin Antitrust Act.
¶61-63 (discussing language now contained in Wis. Stat. § 133.18 providing that "any person injured, directly or indirectly, by reason of anything prohibited by this chapter may sue"). A
letter from Attorney General Bronson La Follette to the bill's Assembly author, Representative Marjorie Miller, indicated that this change would reverse the effect of the U.S. Supreme Court's ruling in the Illinois Brick case on Wisconsin law. The Court, in that case, ruled that only direct purchasers may recover damages for illegally-priced goods. Thus, indirect purchasers——such as state and The conclusion in Olstad v. Microsoft Corp., 2005 WI 121, ¶28, 284 Wis. 2d 224, 700 N.W.2d 139, that the statute was ambiguous was not based on a reading of the text of the statute itself, but on the inconsistency in prior case law construing the statute. In determining the statute to be ambiguous, Olstad observed that while "[t]he language [of Wis. Stat. § 133.03] itself provides no express limit to the statute's scope," this court had ascribed such a limit to the statute only two years earlier in Conley Publishing Group, Ltd. v. Journal Communications, Inc., 2003 WI 119, ¶16, 265 Wis. 2d 128, 665 N.W.2d 879. 16
9
No.
2003AP2840
local governments which purchase most of their supplies through wholesalers, retailers or other middlemen——are left out in the cold when it comes to recovering for the illegally inflated prices they and their constituents must pay. Id., ¶62 (quoting Letter to Representative Marjorie Miller from Attorney General Bronson La Follette dated October 3, 1979, We
located in Legislative Council files, Madison, Wisconsin).
note that Meyers and the putative class were indirect purchasers of Cipro, and that without this change they would not have had a cause of action under the Wisconsin Antitrust Act. ¶30 created a Moreover, we noted in Olstad that the 1980 revision new section, Wis. Stat. § 133.01, that included a
broad statement of legislative intent. provided, in part:
Id., ¶68.
This section
"It is the intent of the legislature that
this chapter be interpreted in a manner which gives the most liberal construction to achieve the aim of competition." ¶31 Id.
We concluded in Olstad that these changes (along with
other legislative history material) "le[ft] little doubt of the legislature's intent to apply the Wisconsin antitrust statute to interstate commerce." Id., ¶55. We then held that when the
challenged conduct does not occur within the state of Wisconsin and impacts interstate commerce, the Wisconsin Antitrust Act
applies if the conduct "substantially affects" the people of
17
No.
2003AP2840
Wisconsin and has "impacts"10 in this state. "substantially affects" standard comes from
Id., ¶85. the
The
following
language in the Allied Chemical decision: and welfare of the people of
"The public interest are substantially
Wisconsin
affected if prices of a product are fixed or supplies thereof are restricted as the result of an illegal combination or
conspiracy." ¶32 establish
Allied Chemical, 9 Wis. 2d at 295.
Bayer contends that the cases upon which Olstad relied two limiting principles that should govern the
application of the "substantially affects" test. argues effects plaintiffs on must allege specific not and
First, Bayer particularized generalized
Wisconsin
consumers,
merely
allegations of nationwide effects, citing Emergency One, Inc. v. Waterous Co., 23 F. Supp. 2d 959 (E.D. Wis. 1998), and State v. Milwaukee Braves, Inc., 31 Wis. 2d 699, 144 N.W.2d 1 (1966). Second, Bayer argues plaintiffs must put forth allegations more specific than merely that some Wisconsin downstream consumers may have generally paid higher prices because of the challenged
The term "impacts" was not defined or described in detail by the court in Olstad. See 284 Wis. 2d 224, ¶85. The Olstad decision cites as its authority for the use of this term the "substantially affects" standard discussed in State v. Allied Chemical and Dye Corp., 9 Wis. 2d 290, 295, 101 N.W.2d 133 (1960). We construe this language in Olstad (that the Wisconsin Antitrust Act applies if the "conduct complained of 'substantially affects' the people of Wisconsin and has impacts in this state, even if the illegal activity resulting in those impacts occurred predominantly or exclusively outside this state") as merely providing further clarification of the "substantially affects" test discussed in Allied Chemical, as opposed to altering that test. 18
10
No.
2003AP2840
conduct, citing Emergency One. relied in Olstad——Allied One——to determine
We examine the cases on which we Milwaukee they Braves and
Chemical, whether
Emergency argument.
support
Bayer's
B ¶33 The Allied Chemical case arose out of an action
alleging monopolistic practices in violation of the Wisconsin Antitrust Act brought by the attorney general against At
manufacturers and sellers of the chemical calcium chloride.
the time of the state suit, the Federal Trade Commission (FTC) was already investigating allegations of price-fixing against
the calcium chloride companies, and the trial court dismissed the complaint on grounds that the federal regulatory agency had taken exclusive jurisdiction over the matter. 9 Wis. 2d at 293. ¶34 concluding efforts to This that court reversed the trial law did court's not dismissal, state Allied Chemical,
federal and
antitrust enforce Id.
preempt
enact
effective at 295.
legislation The court
against further
monopolistic
practices.
concluded that there was no conflict between the federal and state statutes, that the Wisconsin statutes made no attempt to regulate or burden interstate commerce, and that the FTC was not established to enforce the federal antimonopoly statutes but to regulate certain trade practices instead. cited letters in the record from FTC Moreover, the court officials and the
Department of Justice that indicated that the attitude of the federal government was to cooperate 19 with the state in its
No.
2003AP2840
efforts to enforce state statutes dealing with conspiracies and monopolies. Id. at 295-96. Importantly, the Allied Chemical
court held that the Wisconsin antitrust statute was enacted to protect state Id. In Milwaukee Braves, the State brought an action under consumers from the effects of monopolistic
practices. ¶35
the Wisconsin Antitrust Act in response to the departure from Wisconsin of the Milwaukee Braves professional baseball club. Although the Milwaukee Braves court declined to enforce Chapter 133, in part because of major league baseball's well-settled exemption from antitrust regulation, all seven members of the court asserted that the Wisconsin Antitrust Act could be applied to interstate commerce. Olstad, 284 Wis. 2d 224, ¶27
(discussing Milwaukee Braves, 31 Wis. 2d at 725).
The Milwaukee
Braves court noted that the exercise of the defendants' monopoly power caused "substantial injury to business activity within
Wisconsin" such that the court would "assume, at this point, that a violation of Wisconsin law has occurred if our law can be applied." Milwaukee Braves, 31 Wis. 2d at 719. Nevertheless,
the court recognized that while "[t]he state may, ordinarily, protect the interests of its people by enforcing its antitrust act against persons doing business in interstate commerce," the state policy must yield when a conflict exists between state and federal policy. ¶36 considered Id. at 721.
In Emergency One, a Wisconsin federal district court the issue of whether the Wisconsin Antitrust Act
reaches interstate commerce several years before our decision in 20
No.
2003AP2840
Olstad. trucks,
Emergency One, a Florida-based manufacturer of fire sued a Wisconsin truck manufacturer and two
manufacturers of fire pump hoses, alleging the three companies conspired to choke competition in the United States market for fire pumps, in violation of Wisconsin's Antitrust Act. The
Emergency One court carefully examined our precedents and the legislative history of Wis. Stat. § 133.03 and concluded that
the Wisconsin Antitrust Act reaches interstate commerce to some degree. ¶37 Emergency One, 23 F. Supp. 2d at 966. To determine when the statute would apply in cases
involving interstate commerce, the Emergency One court relied on an "adverse effects" standard that is, in essence, the test we adopted in Olstad. Emergency One, 23 F. Supp. 2d at 969-970.
The Emergency One court explained that the "adverse effects" test "extend[s] the jurisdictional scope of Wisconsin antitrust law to unlawful activity which has significantly and adversely affected trade and economic competition within this state." at 969. Id.
In examining and ultimately rejecting other approaches
to determine when the antitrust act applies in cases involving
21
No.
2003AP2840
interstate commerce,11 the Emergency One court concluded that "an adverse effects standard is the only standard that remains
faithful to the purpose of Chapter 133——to protect and encourage competition in this state, by penalizing interstate activities that adversely affect it." ¶38 One Applying this Id. at 970. standard, the Emergency allege in
effects-based the
court
concluded and
that
complaint on
"d[id]
not
significant Wisconsin."
adverse
effects
economic
competition
Id. at 971.
Based on the amended complaint . . . the connection between plaintiff's injury and Wisconsin commerce is tenuous at best. E-One identifies three Wisconsin dealerships of a number allegedly maintained by
11
The Emergency One court considered two alternate tests for determining whether state antitrust law applies in cases involving interstate commerce: (1) A "contacts-based" standard that emphasizes "the nature and degree of defendant's contacts with Wisconsin" bearing similarities to the International Shoe Co. v. Washington, 326 U.S. 310 (1945), test in the law of personal jurisdiction, and the "aggregation of contacts" standard set forth in Allstate Ins. Co. v. Hague, 449 U.S. 302, 308 (1981), to resolve "choice of law" disputes; and (2) A "predominance" standard, which would apply state antitrust law only to transactions and commerce that is predominantly intrastate in nature. Emergency One v. Waterous Co., Inc., 23 F. Supp. 2d 959, 967-969 (E.D. Wis. 1998). The federal district court rejected the "contacts-based" standard because, in cases involving nationwide sales, application of a "contacts-based" standard might result in application of state antitrust law when no significant injury to trade and economic competition occurred in the state. The court rejected the "predominance" standard on grounds that it would essentially reintroduce federal preemption of state anti-trust law (commerce cannot be both predominantly interstate and predominantly intrastate in nature) "a result consistently rejected by the Supreme Court." See Emergency One, 23 F. Supp. 2d at 967 (citing California v. ARC America Corp., 490 U.S. 93, 102 (1989)). 22
No.
2003AP2840
plaintiff over the years. The specific dates of operation suggest that only one dealership in Wisconsin was maintained by E-One at any given time, however. Plaintiff does not estimate the amount of sales at such dealerships in a certain time frame or suggest what proportion of those sales were affected by defendants' conduct. Plaintiff does not indicate how many fire trucks are sold in Wisconsin per year, how many by plaintiff, or how many by plaintiff's competitors. Indeed, plaintiff does not identify a single fire truck contract in Wisconsin from which EOne was precluded from bidding based on the unavailability of Waterous pumps. Without this type of information, the amended complaint does not suggest that injury to E-One also constituted significant injury to trade and commerce related to fire truck sales in Wisconsin. Id. The court concluded: "[T]he only significant and adverse Id.
effect alleged by plaintiff is to plaintiff itself." ¶39
Relying on the above cases, Bayer makes essentially First, Bayer asserts that all of these cases
three arguments.
stand for the proposition that plaintiffs bringing suit under the Wisconsin Antitrust had Act must specifically impacts. allege the
challenged
conduct
Wisconsin
Second,
citing
language from Milwaukee Braves noting that the departure of the Braves from the state "terminated very substantial business
activity in Wisconsin," Bayer suggests that the plaintiffs must also allege that these Wisconsin impacts were disproportionate to nationwide impacts. Third, Bayer asserts that the analysis
of the Emergency One court demonstrates that "bare allegations" that indirect purchasers in Wisconsin paid higher prices as a result of the challenged conduct is not sufficient to meet the "substantially affects" standard. arguments in turn. 23 We consider each of these
No.
2003AP2840
¶40
Bayer is correct that a plaintiff must allege that the
conduct complained of has impacts in Wisconsin, and not merely nationwide impacts. demonstrate that the Olstad, 284 Wis. 2d 224, ¶85. focus of the "substantially The cases affects"
standard is properly on Wisconsin, and the sufficiency of the plaintiff's claim depends on whether the complaint alleges that the conduct "substantially determining affects" on a the people to of Wisconsin. whether a
However,
when
motion
dismiss
complaint under the Wisconsin Antitrust Act alleges that the challenged Wisconsin, conduct courts "substantially apply, as on affected" any the to people of
motion
dismiss,
Wisconsin's notice pleading statute, Wis. Stat. ¶41
§ 802.02(1)(a).
"For well over 100 years, this court has consistently
held that pleadings shall be liberally construed with a view to substantial justice between the parties." J.L. Phillips &
Assoc. v. E&H Plastic Corp., 217 Wis. 2d 348, 365, 577 N.W.2d 13 (1998) (citation omitted). "[A] complaint in a civil action
should not be dismissed as legally insufficient unless it is clear that there are no circumstances under which the plaintiff can recover." ¶42 Lewis, 188 Wis. 2d at 164.
There is no exception to this rule for actions under In Grams, 97 Wis. 2d 332, an
the Wisconsin Antitrust Act.
insurance agency brought suit against another insurance company and a hospital service for corporation, the the majority, alleging Justice antitrust Abrahamson was
violations. concluded
Writing that
while
plaintiffs'
complaint
"barebone . . . conclusory in part, and may have failed to state 24
No.
2003AP2840
sufficient facts" under prior pleading rules, it was sufficient to state a claim under the notice pleading statute. ¶43 complaint In light of our liberal pleadings Act, and the Id. at 352. standard, where a the
under
the
Wisconsin interstate of a
Antitrust commerce
circumstances conduct alleges
involve
challenged if of it a
occurred price
outside as
Wisconsin, result of
is the
sufficient formation
fixing
combination or conspiracy that substantially affected the people of Wisconsin and had impacts in this state. As Meyers asserts,
requiring greater specificity than the notice pleading statute demands would create a heightened pleading standard for Chapter 133 actions that the would Act's bar otherwise of legitimate suits, thus and See
undermining
purposes
fostering
competition
prohibiting unfair and discriminatory business practices. Wis. Stat. § 133.01. ¶44 impacts We of decline the to follow Bayer's on suggestion Wisconsin that must
the be
challenged
conduct
distinguishable from or disproportionate to its impacts on other states. Under Olstad, the complaint must simply allege that the conduct "'substantially affects' the people of
challenged
Wisconsin and has impacts in this state," not that these impacts be disproportionately felt in Wisconsin. 224, ¶85. ¶45 Bayer apparently takes the fact that the Emergency One Olstad, 284 Wis. 2d
and Milwaukee Braves courts focused (properly) on the impacts felt in Wisconsin to mean that plaintiffs filing an action under Chapter 133 must assert allegations of disproportionate impacts 25
No.
2003AP2840
on
Wisconsin. brief, the
As this
the
Department would
of
Justice a
asserts
in
its that to
amicus targets
approach of its
subject conduct
defendant on
effects
illegal
Wisconsin
treble damages under Chapter 133, while another defendant that causes equal or greater harm in Wisconsin would be immune from suit simply because the latter defendant's harms were evenly spread across the country. requires caused that plaintiffs Neither the statute nor our case law allege injury that that to the the challenged conduct
disproportionate need only
Wisconsin conduct
consumers. substantially
Plaintiffs
allege
affected the people of Wisconsin and had impacts in this state. Olstad, 284 Wis. 2d 224, ¶85. ¶46 affects" Turning to Bayer's contention that the "substantially standard requires more than "bare allegations" that
indirect purchasers in Wisconsin paid higher prices as a result of the challenged conduct, we disagree. on a misreading of Emergency One and, This argument is based moreover, is plainly
contrary to Wis. Stat. §§ 133.03 and 133.18. ¶47 Bayer contends that the Emergency One court held that
the plaintiff's allegations of supracompetitive prices were not sufficient to state a claim under the Wisconsin Antitrust Act. This misstates the holding of Emergency One. The Emergency One
court dismissed the plaintiff's claim because it concluded that the plaintiff's complaint "made no . . . allegations" of "any
significant adverse effects on trade and economic competition within Wisconsin." Emergency One Emergency One, 23 F. Supp. 2d at 970. carefully 26 examined the complaint The to
court
No.
2003AP2840
ascertain whether it alleged "significant adverse effects" to support Based a on claim this under state antitrust the law. Id. at 970-71. the
examination,
court
concluded
that
plaintiff failed to state a claim under the Wisconsin Antitrust Act. rule Id. that It did not dismiss the complaint based on a per se "bare allegations" that indirect purchasers in
Wisconsin paid higher prices is insufficient to state a claim under the act. ¶48 The Wisconsin Antitrust Act specifically provides a
remedy for indirect purchasers who suffer harm as a result of conduct ("[A] that violates injured, by Chapter directly this 133. or See Wis. Stat. § 133.18 by reason and of
person
indirectly, may
anything
prohibited
chapter
sue . . .
shall
recover . . . damages.") (emphasis added).
In Olstad, we noted
that the 1980 revision of Chapter 133 provided a remedy under the statute 431 to U.S. under indirect 720, the purchasers in response recovery An to to Illinois indirect that
Brick,
which federal
foreclosed statute.
purchasers
allegation
thousands of Wisconsin consumers paid supracompetitive prices as a result of monopolistic conduct by an interstate seller
therefore states a basis for recovery under the statute. ¶49 The test we crafted in Olstad for determining when, in
circumstances involving interstate commerce where the challenged conduct occurred outside of Wisconsin, a complaint states a
claim under the Wisconsin Antitrust Act was derived in part from this court's decision in Allied Chemical, 9 Wis. 2d 290. the present case, Allied Chemical 27 involved allegations Like of a
No.
2003AP2840
conspiracy consumers. is a
to
fix
prices
to
the
detriment
of
Wisconsin
This court held in Allied Chemical that price-fixing practice that, by its very nature,
monopolistic
substantially affects the public. The public interest and welfare of the people of Wisconsin are substantially affected if prices of a product are fixed or supplies thereof are restricted as the result of an illegal combination or conspiracy. The people of Wisconsin are entitled to the advantages that flow from free competition in the purchase of calcium chloride and other products, and if the state is able to prove the allegations made in its complaint it is apparent that the acts of the defendants deny to them those advantages. Id. at 295. ¶50 Amici Wisconsin Manufacturers and Commerce (WMC) and
Milwaukee Metropolitan Area Chamber of Commerce (MMAC) point us to Szukalski v. Crompton Corp., 2006 WI App 195, 296 Wis. 2d 728, 726 N.W.2d 304. There, the court of appeals affirmed a
circuit court dismissal of an antitrust lawsuit brought by a group of tire buyers alleging several companies engaged in the manufacture conspired to and fix sale of chemicals In used to the process scope rubber of the that
prices.
determining the Szukalski
"substantially plaintiffs
affects" allege
test, "(1)
court on
held
must
specific
effects
Wisconsin
commerce, not merely effects that are nationwide, and (2) that these effects on Wisconsin are more than a general nationwide effect on the price," citing Emergency One, 23 F. Supp 2d at 971, and a recent decision of the Tennessee Supreme Court,
Freeman Industries, LLC v. Eastman Chemical Co., 172 S.W.3d 512
28
No.
2003AP2840
(Tenn. 2005).
Szukalski, 726 N.W.2d 304, ¶20.
While noting
that Szukalski is not before us, we address it to resolve any inconsistencies between it and our decision today. ¶51 Szukalski correctly states that a complaint must
allege effects on Wisconsin, and not merely nationwide effects.12 However, its conclusion that the "substantially affects"
standard requires allegations "that these effects on Wisconsin are more than the a general nationwide and is effect on the price" our
misstates
Olstad
standard,
inconsistent
with
opinion today. not allege
See supra, ¶¶45-46. the challenged only that
As noted, plaintiffs need conduct the disproportionately challenged conduct
that
affected
Wisconsin,
substantially affected the people of Wisconsin and had impacts in this state. ¶52 Olstad, 284 Wis. 2d 224, ¶85.
Finally, Bayer and amici WMC and MMAC contend that
certain limitations on actions under the Wisconsin Antitrust Act are necessary for judicial economy and preserving a favorable business climate in Wisconsin. They assert that if the court
does not adopt their proposed limitations to the "substantially affects" test, Wisconsin courts will be flooded with complex antitrust litigation. They maintain that without these
Because Szukalski v. Crompton Corp., 2006 WI App 195, 296 Wis. 2d 728, 726 N.W.2d 304, no petition for review filed, is not before us, and we have not had an opportunity to review the plaintiff's complaint in Szukalski to determine its sufficiency, we do not address the Szukalski court’s conclusion that the plaintiff failed to allege substantial Wisconsin effects. 29
12
No.
2003AP2840
limitations the specter of antitrust litigation would create a hostile atmosphere for businesses in Wisconsin. ¶53 To adopt on policy grounds the limitations Bayer and
amici propose would be to substitute our own judgment for that of the legislature. provides remedies By establishing a broad antitrust act that to consumers not available under federal
antitrust law, the legislature has made clear policy choices in the area of antitrust regulation. test adopted in Olstad is The "substantially affects" with the legislature's
consistent
policy choices; requiring more of plaintiffs would close off consumer suits, particularly those by indirect purchasers, Moreover, it
contrary to the 1980 revision of the statute.
would bar otherwise legitimate actions, thereby undermining the statute's purpose "to foster and encourage competition by
prohibiting unfair and discriminatory practices which destroy or hamper competition." See Wis. Stat. § 133.01. We decline to See Flynn
substitute our judgment for that of the legislature.
v. Dep't of Admin., 216 Wis. 2d 521, 539, 576 N.W.2d 245 (1998) ("This court has long held that it is the province of the
legislature, not the courts, to determine public policy.").13 C ¶54 We turn now to Meyers' complaint to determine if it
alleges that the conduct of Bayer and the generic manufacturers
As to the merits of these policy arguments, we note that Bayer and amici fail to provide empirical support for the proposition that failure to limit the applicability of the Wisconsin Antitrust Act would harm Wisconsin's business climate. 30
13
No.
2003AP2840
substantially affected the people of Wisconsin and had impacts in this state. ¶55 Meyers' complaint alleges, in the course of 35 pages
and 106 paragraphs, a broad price-fixing scheme affecting "at a minimum, thousands . . . in Wisconsin." The complaint states
that the named plaintiffs and the putative class are Wisconsin residents who purchased the antibiotic Cipro "at any time since January 6, 1995," the date that Meyers alleges the market for Cipro and generic equivalents would have opened to competition. The complaint states that Cipro was the best-selling antibiotic in the world throughout most of the 1990s. It avers that Bayer
posted $1 billion in sales of Cipro in the United States in 1999 alone. It states that as a result of the Agreement among Bayer
and the generic manufacturers, Bayer maintained its monopoly in the United States market for Cipro; that from January 1997 to December 1998, Bayer increased its price for Cipro by 16.7%; and that from 1998 to 1999, Bayer's United States revenues for Cipro increased 25%, while its net profits increased 22%. ¶56 While Meyers' complaint alleges harm to "thousands of
Wisconsin residents," the Emergency One complaint, by contrast, alleged a conspiracy adversely affecting "only . . . plaintiff itself." Emergency One, 23 F. Supp. 2d at 971. The plaintiff
in Emergency One was a fire truck manufacturer that apparently maintained only one dealership in Wisconsin. Id. at 960-61.
The plaintiff's complaint did not state the number of sales it made in Wisconsin per year, although it certainly would have had
31
No.
2003AP2840
this information.14
Id. at 971.
The plaintiff did not indicate
a time frame in which the people of Wisconsin suffered injury as a result of alleged was a monopolistic Delaware practices. Id. with a And the
company
itself
corporation,
principal
place of business in Florida, and thus, any injury suffered by the company resulting in lay-offs or lost profits would have likely had a negligible effect on Wisconsin workers and
investors. ¶57
Id. at 970-71. Here, Meyers alleges "thousands of Wisconsin
residents" suffered economic harm as a result of Bayer's alleged monopolistic practices, starting January 6, 1995. An allegation
that a group of pharmaceutical companies conspired to maintain monopoly prices on a best-selling prescription drug purchased by thousands of Wisconsin residents over several years meets the "substantially Wis. 2d 224, affects" We test conclude set that forth Meyers in has Olstad, 284
¶85.
sufficiently
alleged that the challenged conduct of Bayer and the generic manufacturers substantially affected the people of Wisconsin and had impacts in this state. We therefore affirm the court of
appeals' reversal of the circuit court's order dismissing the complaint. IV ¶58 forth
14
In
summary, for
we
reaffirm
the
following Chapter
standard 133
set
in
Olstad
determining
when
reaches
The complaint in Emergency One, 23 F. Supp. 2d 959, alleged only that 3500 to 4000 fire trucks are purchased by fire departments in the United States annually. 32
No.
2003AP2840
interstate
commerce:
A
plaintiff
filing
an
action
under
Wisconsin's Antitrust Act must allege price fixing as a result of the formation of a combination or conspiracy that
"substantially affects the people of Wisconsin and has impacts in this state" when the challenged conduct occurs predominately or exclusively outside this state. ¶85. MMAC Olstad, 284 Wis. 2d 224,
We conclude that additional limitations Bayer and amici and WMC seek to read into the "substantially affects"
standard are unsupported by our precedents and are contrary to the policy choices of the legislature. ¶59 broad Meyers' 35-page, 106-paragraph affecting who purchased January complaint "at the 6, a alleges a
price-fixing
scheme
minimum,
thousands . . . in antibiotic conclude Cipro
Wisconsin" "at any
best-selling 1995." that, We if
time
since
Meyers'
complaint
alleges
illegal
conduct
true, substantially affected the people of Wisconsin and had impacts in this state.15 We therefore affirm the court of
appeals' decision reversing the circuit court's order dismissing Meyers' claims, and remand the matter to the circuit court for further proceedings consistent with this opinion.
As we previously indicated, supra, ¶4 n.4, issues regarding the validity or invalidity of the Cipro patent, and the effect of the possible invalidity of the patent on the legality of the Agreements have not been briefed by the parties, have not been developed in the record in this motion to dismiss, and are not properly before this court. These matters may be addressed by the circuit court on remand. 33
15
No.
2003AP2840
By
the
Court.—The
decision
of
the
court
of
appeals
is
affirmed, and the cause is remanded to the circuit court for further proceedings consistent with this opinion.
34
No.
2003AP2840.dtp
¶60
DAVID T. PROSSER, J.
(dissenting).
Four years ago
in Conley Publishing Group Ltd. v. Journal Communications, Inc., 2003 WI 119, 265 Wis. 2d 128, 665 N.W.2d 879, this court was confronted with the question whether we should adopt Brooke
Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), as the law of Wisconsin governing predatory pricing
under Wis. Stat. § 133.03.
As we answered this question, we
noted that "Wisconsin courts have [long] followed federal court interpretations of Sections 1 and 2 of the Sherman Act and have construed Wisconsin antitrust statutes in conformity with these federal court interpretations." ¶61 In the course of Conley, 265 Wis. 2d 128, ¶17. explaining of the why Wisconsin should that
follow federal
law, the
writer
opinion
observed
"there is presently no Wisconsin case law governing predatory pricing claims under § 133.03(2)." Id., ¶16. "The dearth of
state antitrust precedent is not surprising because the scope of Chapter 133 is limited to intrastate transactions. Associated (1970)." ¶62 Hosp. Serv., 45 Wis. 2d 526, 532, See Reese v. N.W.2d 661
173
Id. Two years later, the same writer was forced to
withdraw the phrase "the scope of Chapter 133 is limited to intrastate transactions" because the court unanimously upheld
the application of Wisconsin's Little Sherman Act to interstate commerce in some circumstances. Olstad v. Microsoft Corp., 2005
WI 121, ¶¶13, 74, 284 Wis. 2d 224, 700 N.W.2d 139. ¶63 Having opened the door to interstate antitrust
enforcement in some circumstances, the court thought it ought to 1
No.
2003AP2840.dtp
comment briefly on what those "circumstances" were, even though that question had not been briefed. ¶64 Early in the opinion, the court quoted Professor
Herbert Hovenkamp to the effect that "a state antitrust law of general application can virtually always be applied to a
practice having sufficient effects within the state." (emphasis added) (citation omitted). is precluded from regulating interstate
Id., ¶14
Then we added, "State law commerce Id. only if it Von
interstate commerce."
'unduly
burden[s]'
(citing
Kalinowski, Antitrust Laws & Trade Regulation § 100.03 (2d. ed. 2004)). ¶65 At the end of the opinion, the court said:
A civil plaintiff filing an action under Wisconsin's antitrust act must allege that (1) actionable conduct, such as the formation of a combination or conspiracy, occurred within this state, even if its effects are felt primarily outside Wisconsin; or (2) the conduct complained of "substantially affects" the people of Wisconsin and has impacts in this state, even if the illegal activity resulting in those impacts occurred predominantly or exclusively outside this state. 9 [State v.] Allied Chemical [& Dye Corp.], Wis. 2d [290,] 295[, 101 N.W.2d 133 (1960)]. Operating with lesser standards would jeopardize the action, undermine the validity of our antitrust statute, and create the spectacle of Lilliputian harassment in Wisconsin courts. Questions of provincialism, favoritism, and undue burden on interstate commerce should be determined by resort to contemporary federal commerce clause jurisprudence. To say more is beyond the scope of this opinion. Id., ¶85. ¶66 First, Four things should be noted about this paragraph. from
the
words
"substantially 2
affects"
were
borrowed
No.
2003AP2840.dtp
Allied imply
Chemical. a higher
Second, standard
the than
words
"substantially effects,"
affects" quoted
"sufficient
earlier in the opinion. by the following jeopardize
Third, the second point is underscored "Operating undermine the with the lesser standards of our
sentence: the
would
action, create
validity of
antitrust
statute,
and
spectacle
Lilliputian
harassment in Wisconsin courts." "impacts in this state." ¶67
Fourth, the paragraph requires
In interpreting the phrase "jeopardize the action," it
should be remembered that the court had recently considered two cases exploring the reach of Wisconsin jurisdiction. See State
v. Derek Anderson, 2005 WI 54, 280 Wis. 2d 104, 695 N.W.2d 731; and Tammie J.C. v. Robert T.R., 2003 WI 61, 262 Wis. 2d 217, 663 N.W.2d 734. exceeded the The court did not want to encourage litigation that jurisdiction validity issues as of of the our state. antitrust As for the phrase Olstad on
"undermine discussed
the such
statute," and
federal
preemption
burden
interstate commerce in the opinion, and that context gives the phrase meaning. commercial "Lilliputian harassment" conveys the image of a tied down by a multitude of antitrust
Gulliver
litigants across the country. ¶68 formation state." most Olstad of a speaks of "actionable or conduct, such as the this
combination
conspiracy . . . within
Olstad, 284 Wis. 2d 224, ¶85. when "actionable Conversely, conduct" when
Surely, our statute is is formed within this
potent
jurisdiction.
"illegal
activity"
occurs
predominantly or exclusively outside this jurisdiction but has 3
No.
2003AP2840.dtp
impacts in Wisconsin, the impacts in Wisconsin ought to be more substantial than what is "sufficient" for a purely Wisconsin "combination or conspiracy." Olstad did not intend to convert
every antitrust violation anywhere into a violation of Wisconsin law simply because the violation affected some people in
Wisconsin. ¶69 the Because I am unable to discern from the discussion in opinion any meaningful activities limitation outside on antitrust state, I
majority against
suits
illegal
this
respectfully dissent.
4
No.
2003AP2840.pdr
¶70 majority (the
PATIENCE opinion
DRAKE concludes of the
ROGGENSACK, that the
J. second
(dissenting). amended
The
complaint alleges a
complaint) of
plaintiffs antitrust
sufficiently law, Wis.
violation
Wisconsin's
Stat.
§ 133.03
(2005-06),1 to withstand a motion to dismiss. It does so based on the complaint's
Majority op., ¶4. that an
allegations
agreement concerning ciprofloxacin hydrochloride between Bayer AG and Barr Laboratories, Inc. (the Bayer-Barr agreement)2 is a "price-fixing scheme" for ciprofloxacin hydrochloride that
controlled the price for the drug "at any time since January 6, 1995." Id. The majority opinion concludes that, if proved, the is "illegal conduct" that "substantially
price-fixing alleged
affected the people of Wisconsin and had impacts in this state" thereby violating Wisconsin antitrust law. Id. However, it
also recognizes that there are significant questions about the effect that Bayer's patent may have on the plaintiffs' claims. Id., ¶4 n.4. It suggests that those questions be addressed in Id. I would resolve the effect of
the circuit court on remand. ¶71 I dissent because
Bayer's patent on the plaintiffs' claims at this time. do so because Bayer was granted a federal
I would for
patent
ciprofloxacin hydrochloride (the Cipro patent) that, in order to have subject matter jurisdiction for this antitrust action,
All further references to the Wisconsin Statutes are to the 2005-06 version, unless otherwise noted. The Bayer-Barr agreement, about complain, is not in the record before us. 1
2
1
which
the
plaintiffs
No.
2003AP2840.pdr
Wisconsin courts must presume is valid. Presuming that Bayer's patent is valid,
28 U.S.C. § 1338(a). I conclude that the
complaint does not allege facts that, if true, are sufficient to show illegal conduct or conduct that has an illegal effect. Bement & Sons v. Nat'l Harrow Co., 186 U.S. 70, 91 (1902). E. Only
illegal conduct or conduct that has an illegal effect violates Wisconsin's antitrust law. Prentice v. Title Ins. Co. of Minn.,
176 Wis. 2d 714, 725, 500 N.W.2d 658 (1993); State v. Allied Chem. & Dye Corp., 9 Wis. 2d 290, 296, 101 N.W.2d 133 (1960). Furthermore, because the conduct alleged in the complaint is not illegal or alleged to have had an illegal effect, it cannot "substantially affect" the people in Wisconsin and have Olstad 700
"impacts" in Wisconsin contrary to Wis. Stat. § 133.03. v. Microsoft Corp., 2005 WI 121, ¶85, 284 Wis. 2d
224,
N.W.2d 139.
Accordingly, I would affirm the circuit court's
dismissal of the complaint for failure to state a claim pursuant to Wis. Stat. § 802.06(2)(a)6, albeit on different grounds.
Therefore, I respectfully dissent. I. ¶72 between BACKGROUND3
The gravamen of the complaint is that the agreement Bayer, who owns the patent for ciprofloxacin
hydrochloride that it markets under the trade name, "Cipro," and Barr,
3
who
applied
to
the
United
States
Food
and
Drug
The facts used in the background narration have been taken from the complaint and from the public records of the United States Food and Drug Administration (FDA) and the United States Patent and Trademark Office (PTO). We may take judicial notice of public records of governmental agencies. Perkins v. State, 61 Wis. 2d 341, 346, 212 N.W.2d 141 (1973). 2
No.
2003AP2840.pdr
Administration (FDA) for permission to manufacture and market a generic form of Cipro, is a price-fixing agreement that effected a monopoly for Cipro in Wisconsin. The complaint alleges
Bayer's monopoly is illegal and violates Wis. Stat. § 133.03(2). ¶73 As background for this theory, the plaintiffs allege
that Bayer held the patent for the active ingredient of Cipro, ciprofloxacin granted to hydrochloride, on May 29, and that as the Cipro No. patent was
Bayer
1984,
Patent
4,670,444.
Bayer also received FDA approval to market Cipro in October of 1987. 2003.4 ¶74 On October 27, 1991, Barr applied to the FDA to Bayer's initial patent for Cipro expired in December of
manufacture and market a generic form of Cipro.
Barr used a
shortened form of application for FDA approval that is known as an Abbreviated New Drug Application, or ANDA. ANDA process, Barr of of asserted Cipro. Barr's had that This generic to its generic As part of the drug was the FDA of FDA
bioequivalent consideration testing approval that for
assertion without order
permitted the to years
Cipro in
Bayer Cipro.
undergo by
obtain on
Therefore,
piggybacking
Bayer's
lengthy FDA new drug testing requirements, Barr's ANDA applied for FDA approval for the same drug to which the FDA had given Bayer approval. In its ANDA, Barr also alleged that Bayer's
patent was invalid, which is one of the allegations required in order for the FDA to give preliminary approval to a generic
The public records of the PTO show that the PTO extended Bayer's patent for Cipro through June 8, 2004. 3
4
No.
2003AP2840.pdr
equivalent
of
a
patented
drug.
See
21
U.S.C.
§ 355(j)(2)(A)(vii)(IV). ¶75 As is required by federal statute, Barr gave notice of See 21 U.S.C. § 355(j)(2)(B)(iii). Within
its ANDA to Bayer.
the statutory timeline of receiving Barr's notice (45 days), Bayer filed a patent infringement suit against Barr. A patent
infringement suit is required by federal statutes as a precursor to maintaining patent of priority a over a pending ANDA 21 for the
generic
equivalent
patented
drug.
See
U.S.C.
§ 355(j)(5)(B)(iii). ¶76 The filing of Bayer's patent infringement suit stayed
Barr's ANDA before the FDA for 30 months or until the conclusion of the patent infringement suit, whichever occurred first. id. That 30-month stay would have ended on July 16, See 1994.
However, prior to settling Bayer's suit against Barr for patent infringement, Bayer and Barr executed a stipulation to extend the 30-month stay until a final judgment on the pending patent litigation was entered. The district court approved the
stipulation and ordered that final consideration of Barr's ANDA before the FDA was stayed until the patent litigation concluded. Bayer AG v. Barr Labs., No. 92CV391 (S.D.N.Y. Dec. 9, 1992); see also 21 U.S.C. § 355(j)(5)(B)(iii). ¶77 to Barr On January 6, 1995, the FDA gave "tentative approval" to market its drug, which approval was subject to
Bayer's patent being held invalid or expiring.
FDA's public
4
No.
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records show that FDA final approval to manufacture and market a generic form of Cipro was not given to Barr until June 9, 2004.5 ¶78 in the The complaint does not allege that the conduct set out Bayer-Barr agreement falls outside of Bayer's rights
under the Cipro patent.
It also does not allege that Barr, or
anyone else, has ever contended that Bayer obtained its Cipro patent through fraud on the United States Patent & Trademark Office (PTO). agreement was Rather, the complaint asserts that the Bayer-Barr entered into on January 8, 1997, and that it
allocates "the entire United States market for Cipro to Bayer for at least six years" (January 2003) and that at Bayer's
option Bayer could either:
(1) supply Cipro for sale as a
generic to Barr, who would operate as Bayer's licensee, or (2) supply all of the Cipro to purchasers itself and make specified payments to Barr.6 ¶79 judgment, The Bayer-Barr agreement, federal together patent with a consent
concluded Bayer's
infringement suit.
The consent judgment affirmed that Bayer owns the patent for Cipro; that it is valid and enforceable; and that Barr's generic form of Cipro infringed Bayer's patent. Bayer AG v. Barr Labs., No. 92CV391 (S.D.N.Y. Jan. 16, 1997). or collateral attack on that judgment. We may take judicial notice of public governmental agencies. Perkins, 61 Wis. 2d at 346.
6 5
There has been no appeal
records
of
Payments such as these are commonly referred to as "reverse" or "exit" payments. Anne-Marie C. Yvon, Settlements Between Brand and Generic Pharmaceutical Companies: A Reasonable Antitrust Analysis of Reverse Payments, 75 Fordham L. Rev. 1883, 1884 n.9 (2006). 5
No.
2003AP2840.pdr
¶80
Subsequent
to
the
conclusion
of
the
patent
infringement action, Bayer re-submitted its patent to the PTO for review. Bayer's patent for Cipro was upheld in that
proceeding as well. II. A. Standard of Review ¶81 of the A motion to dismiss challenges the legal sufficiency complaint to state a claim on which relief may be DISCUSSION
granted.
Kaloti Enters., Inc. v. Kellogg Sales Co., 2005 WI For purposes of the
111, ¶11, 283 Wis. 2d 555, 699 N.W.2d 205.
motion, we generally accept as true all factual allegations made in the complaint. N.W.2d 303 (1987). Watts v. Watts, 137 Wis. 2d 506, 512, 405 Judicial notice may also be taken of facts
from the public records of government agencies, here the PTO and the FDA. See Perkins v. State, 61 Wis. 2d 341, 346, 212 N.W.2d
141 (1973) (concluding that a court may take judicial notice of facts easily accessible and capable of immediate and accurate determination); Wis. Power & Light Co. v. City of Beloit, 215 Wis. 439, 444, 254 N.W. 119 (1934) (taking judicial notice of the files of the public service commission); Hillier v. Lake View Mem'l Park, Inc., 208 Wis. 614, 622, 243 N.W. 406 (1932) (taking judicial notice of incorporation records in the office of secretary of state).7 However, on a motion to dismiss, courts
do not accept "facts which the court will take judicial notice
7
For a detailed exposition of judicial notice of facts by appellate courts see George R. Currie, Appellate Courts Use of Facts Outside of the Record by Resort to Judicial Notice and Independent Investigation, 1960 Wis. L. Rev. 39 (1960). 6
No.
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are not true, nor does the rule [of accepting facts pled in the complaint] apply to legally impossible facts." States, 129 F.2d 733, 736 (8th Cir. 1942). Cohen v. United We also are not
required to accept factual statements that are not credible. See Ferraro v. Koelsch, 119 Wis. 2d 407, 410-11, 350 N.W.2d 735 (Ct. App. 1984). legal conclusions Furthermore, we are not required to accept pled in the complaint. John BBB Doe v.
Archdiocese of Milwaukee, 211 Wis. 2d 312, 331, 565 N.W.2d 94 (1997). ¶82 We interpret the application of statutes independently
of the court of appeals and the circuit court, but benefiting from the analyses of both prior decisions. Spiegelberg v. And
State, 2006 WI 75, ¶8, 291 Wis. 2d 601, 717 N.W.2d 641.
finally, whether a legal doctrine can shield defendants from liability under Wisconsin's antitrust law that would otherwise be accorded to the complained of conduct is a question of law. Prentice, 176 Wis. 2d at 721. B. Wisconsin Antitrust Claim ¶83 There have been approximately 30 cases filed
throughout the United States, in state and federal courts, that make antitrust claims against Bayer and Barr based on the same Bayer-Barr agreement that is at issue here. Meyers v. Bayer AG, Many of those
143 F. Supp. 2d 1044, 1046 (E.D. Wis. 2001).
cases have been consolidated in the Eastern District of New York under the scholarly attention of District Court Judge David
Trager.
See In re Ciprofloxacin Hydrochloride Antitrust Litig.,
363 F. Supp. 2d 514 (E.D.N.Y. 2005). 7
No.
2003AP2840.pdr
¶84
The
case
now
before
us
was
filed
in
state
court,
removed to federal court and remanded to state court because the federal district court determined that mounting a patent defense to a state antitrust claim did not cause the matter "to arise under" federal law. Meyers, 143 F. Supp. 2d at 1051. The
federal district court did not analyze whether a state claim had been stated without plaintiffs alleging that Bayer's Cipro
patent was invalid.
In addition, the district court did not
address whether the conduct alleged in the complaint exceeded Bayer's rights under its Cipro patent. 1. ¶85 General patent law principles In order to adequately address the defendants' motion
to dismiss the complaint, there are certain general principles of federal patent law that must be recognized. That recognition
is necessary before a court can evaluate a complaint wherein a patent owner is sued, in order to sort out which allegations are factual allegations of a type that must be accepted for purposes of a motion to accepted as dismiss, and which allegations allegations contain are facts not
true,
which
actually
legal
conclusions. ¶86 as A civil state court claim against a patent owner, such that alleges conduct relating to the patented
Bayer,
invention and requests damages, must assume that the patent is valid and it must allege conduct that falls outside of the
rights accorded under the patent.
This is so because if the
complaint were to allege that the patent is invalid, there would be no subject matter jurisdiction in Wisconsin state courts to 8
No.
2003AP2840.pdr
hear the claim.
28 U.S.C. § 1338(a);8 Schecher v. Purdue Pharma
L.P., 317 F. Supp. 2d 1253, 1257 (D. Kan. 2004);9 see also Vill. of Trempealeau v. Mikrut, 2004 WI 79, ¶8 n.2, 273 Wis. 2d 76, 681 N.W.2d 190.10 within the rights And, if all the conduct that is alleged falls granted by the federal government to the
patentee, the conduct is not illegal nor is its effect illegal. United States v. General Elec. Co., 272 U.S. 476, 489-90 (1926). It is important to continue to note that only illegal conduct or conduct that has an illegal effect violates Wis. Stat. § 133.03. Olstad, 284 Wis. 2d 224, ¶85; Prentice, 176 Wis. 2d at 721. ¶87 restrict Antitrust output and law generally prices forbids above that agreements which that be
raise
would
achieved in normal market competition. Herbert Hovenkamp, Vol. and X Antitrust Their
See Phillip Areeda & Law: An Analysis (2d of ed.
Antitrust 2004).
Principles
Application,
¶1780a
However, if a patent owner acts solely within the rights
28 U.S.C. § 1338(a) provides, "The districts courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents . . . . Such jurisdiction shall be exclusive of the courts of the states." [D]istrict courts have exclusive original jurisdiction over actions "arising under" federal patent laws, i.e., in an action challenging the validity or enforceability of the patent. Schecher v. Purdue Pharma L.P., 317 F. Supp. 2d 1253, 1257 (D. Kan. 2004). Village of Trempealeau v. Mikrut, 2004 WI 79, 273 Wis. 2d 76, 681 N.W.2d 190, explains that as a general proposition, circuit courts have broad subject matter jurisdiction; however, "[f]ederal law may confer exclusive jurisdiction over certain subject matters to the federal courts, precluding state court jurisdiction in those areas by operation of the Supremacy Clause." Id., ¶8 n.2. 9
10 9
8
No.
2003AP2840.pdr
granted under the patent, the patent owner has a lawful monopoly and is "freed from competition of price, service, quality or otherwise." 300 (1948). ¶88 As the United States Supreme Court has explained: United States v. Line Material Co., 333 U.S. 287,
"A patent by its very nature is affected with a public interest . . . [It] is an exception to the general rule against monopolies and to the right to access to a free and open market." Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 816 (1945)). It is black
letter law that a patent "is an exception to the general rule against monopolies." Ciprofloxacin, 363 F. Supp. 2d at 523
(quoting Precision, 324 U.S. at 816). ¶89 fixes Therefore, a agreeing patented to operate is as not a monopoly that
price for
invention
illegal because
monopoly rights exercised within the confines of the patent are granted by the federal government with the patent. As the
United States Supreme Court has explained: [T]he general rule is absolute freedom in the use or sale of rights under the patent laws of the United States. The very object of these laws is monopoly, and the rule is, with few exceptions, that any conditions which are not in their very nature illegal with regard to this kind of property, imposed by the patentee and agreed to by the licensee for the right to manufacture or use or sell the article, will be upheld by the courts. The fact that the conditions in the contracts keep up the monopoly or fix prices does not render them illegal. Bement, 186 U.S. at 91 (emphasis added). In support of this
monopoly, the federal law grants to a patent owner "the right to 10
No.
2003AP2840.pdr
exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the The
invention into the United States."
35 U.S.C. § 154(a)(1).
"essence of a patent grant is the right to exclude others from profiting by the patented invention." & Haas Co., such 448 U.S. 176, to 215 Dawson Chem. Co. v. Rohm The is rationale to for
(1980). owners
granting
monopolies
patent
encourage
inventions. ¶90
Brenner v. Manson, 383 U.S. 519, 534 (1966).11
The monopoly rights accorded to a patent owner also
include the right to control the price charged for the patented invention by a licensee of the patent owner. U.S. at 489-90. General Elec., 272
In General Electric, the government alleged
that General Electric was engaged in illegal price-fixing of lamps through an agreement owned with the Westinghouse. patents Id. at for 478. the
General
Electric
necessary
construction of certain tungsten filament lamps.
Id. at 480-81.
Westinghouse was one of General Electric's licensees to sell the lamps as part of a nationwide sales and distribution plan. at 481-82. In considering imposed the a government's price-fixing allegation condition Id. that on
General
Electric
Westinghouse's sales, the Court concluded price-fixing on sales The freedom to take actions within the rights granted to a patent owner that would otherwise be unlawful has a limitation. If the patent was obtained "by knowing and willful fraud practiced by the defendant on the Patent Office or, if the defendant was not the original patent applicant, [but] he had been enforcing the patent with knowledge of the fraudulent manner in which it was obtained," the patent will provide no shield to claims of unlawful anticompetitive conduct. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 179 (1965) (Harlan, J., concurring). 11
11
No.
2003AP2840.pdr
by
a
licensee
was
permissible
so
long
as
the
price-fixing
stopped with the licensee and did not continue to fix the prices charged by those who purchased from the licensee for subsequent sale. Id. at 485. The court explained:
[U]nder the patent law the patentee is given by statute a monopoly of making, using and selling the patented article. The extent of his monopoly in the articles sold and in the territory of the United States where sold is not limited in the grant of his patent, and the comprehensiveness of his control of the business in the sale of the patented article is not necessarily an indication of illegality of his method. As long as he makes no effort to fasten upon ownership of the articles he sells control of the prices at which his purchaser shall sell, it makes no difference how widespread his monopoly. It is only when he adopts a combination with others, by which he steps out of the scope of his patent rights and seeks to control and restrain those to whom he has sold his patented articles in their subsequent disposition of what is theirs, that he comes within the operation of the Anti-Trust Act. Id. ¶91 Therefore, as we examine the complaint, we must: (1)
presume Bayer's Cipro patent is valid because the plaintiffs claims whether are any before a Wisconsin allegation state court; to and the (2) assess
factual
relating
Bayer-Barr
agreement falls outside Bayer's right to maintain a monopoly on the price Bayer or its licensee charges for Cipro. With these
general principles of patent law in mind, I turn to Wisconsin antitrust law. 2. ¶92 State antitrust principles Wisconsin's antitrust law is set out in ch. 133 of the The operative provision at issue in the
Wisconsin Statutes.
12
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2003AP2840.pdr
case before us is Wis. Stat. § 133.03. part:
It provides in relevant
Unlawful contracts; conspiracies. (1) Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce is illegal. . . . (2) Every person who monopolizes, or attempts to monopolize, or combines or conspires with any other person or persons to monopolize any part of trade or commerce is guilty. ¶93 in most Wisconsin antitrust law follows federal antitrust law respects. State v. Waste Mgmt. of Wis., Inc., 81
Wis. 2d 555, 568-69, 261 N.W.2d 147 (1978).
For example, both
federal and state laws prohibit conspiracies to restrain trade and monopolies of the market. § 133.03. 15 U.S.C. §§ 1, 4, 15; Wis. Stat.
However, Wisconsin antitrust law differs from federal
antitrust law in that Wisconsin law may permit the recovery of damages by "indirect conduct, purchasers"12 Olstad, 284 alleging 224, unlawful ¶63, but
anticompetitive
Wis. 2d
federal law does not. 730-31 (Ill. 1977). ¶94 The most
Ill. Brick Co. v. Illinois, 431 U.S. 720,
recent
Wisconsin
Supreme
Court
decision
interpreting Wis. Stat. § 133.03 is Olstad. the certified question:
There we addressed
"Does Wisconsin's antitrust act, Wis.
Stat. § 133.03, apply to interstate commerce affecting Wisconsin commerce?" Olstad, 284 Wis. 2d 224, ¶10. Olstad claimed that
The plaintiffs in the case before us are all "indirect purchasers" of Cipro because they did not purchase Cipro directly from Bayer or Barr. Ill. Brick Co. v. Illinois, 431 U.S. 720, 726 (Ill. 1977). 13
12
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Microsoft's share of the market for personal computer operating systems was so large that it prevented others from entering the market. Id., ¶¶2-3. Olstad alleged that Microsoft's
anticompetitive conduct caused Wisconsin consumers to pay higher prices. Id., ¶7. The circuit court dismissed the action after
concluding that § 133.03 did not apply to interstate conduct. Id., ¶9. ¶95 We concluded that "at least in some circumstances" Id., ¶74.
Wis. Stat. § 133.03 does apply to interstate conduct.
Our limited conclusion was based in large part on our prior holding in Allied Chemical & Dye, where we addressed whether Wisconsin could apply its antitrust law to the sales of calcium chloride made in Wisconsin through interstate commerce when
those sales were subject to the federal antitrust law. Chem. & Dye, 9 Wis. 2d at 292.
Allied
We concluded that Wisconsin law
could be applied in some circumstances, in part because there was no conflict between federal and state antitrust laws. at 295. ¶96 the In Olstad, we also set out a test to assist courts and ascertain when Wis. Stat. § 133.03 may reach Id.
public
interstate actions. that either: a combination or
As a very general framework, we explained
(1) "actionable conduct, such as the formation of or (2) conspiracy," if the must have occurred conduct within occurred
Wisconsin,
actionable
predominantly or exclusively outside of Wisconsin, the "illegal activity" must "substantially affect" the people of Wisconsin and have "impacts" in Wisconsin. 14 Olstad, 284 Wis. 2d 224, ¶85.
No.
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We advised that the test was to be interpreted in a restrictive fashion so that Wisconsin's antitrust law would be available on only a limited basis with regard to interstate conduct: Operating with lesser standards would jeopardize the action, undermine the validity of our antitrust statute, and create the spectacle of Lilliputian harassment in Wisconsin courts. Questions of provincialism, favoritism, and undue burden on interstate commerce should be determined by resort to contemporary federal commerce clause jurisprudence. Id. ¶97 It is important to note that Olstad does not address
any issue that may arise in the application of state antitrust law in the law context may in of a federal patentee's law not actions, be where
federal
effect Olstad,
whether we also
state did
will address
applied. an
Furthermore,
whether
indirect purchaser's claim based on conduct that occurred solely outside of Wisconsin should be subject to Wisconsin's antitrust law because that question was not brought to us for decision. ¶98 However, we have in past decisions shown that
Wisconsin antitrust law will not be applied to each and every occasion where the claim of a state law violation is made. In
State v. Milwaukee Braves, Inc., 31 Wis. 2d 699, 144 N.W.2d 1 (1966), we carefully considered the lack of federal prosecution of interstate conduct and what impact that should have on our decision about the prosecution of an antitrust claim under
Wisconsin law. ¶99 Milwaukee Braves involved a state antitrust action
brought against the Braves and others by the State, due to major league baseball's decision to move the club to Atlanta, while 15
No.
2003AP2840.pdr
refusing to permit another major league baseball team to locate in Milwaukee. Id. at 703-04. We acknowledged that a
"substantial injury to business activity within Wisconsin" was caused power. by the exercise of major league baseball's monopoly
Id. at 719. commerce
We explained that "organized baseball is and Congress may therefore regulate it."
interstate
Id. at 720.
However, we noted that major league baseball had
not been subjected to prosecution under federal antitrust law. Id. at 721. ¶100 When de facto considering from how to determine law whether could that a
exemption
federal
antitrust
cause
conflict with the application of state antitrust law in regard to the decision to move the Braves, we framed the question as: "whether there is a conflict between state and federal policy, so that the state policy must yield." Id. We concluded that
federal choice must control and Wisconsin could not enforce its antitrust law based Braves from on the and "concerted refusing action" of moving the major
Milwaukee
Milwaukee
another
league baseball franchise. ¶101 In Prentice,
Id. at 732. we once again addressed whether
prosecution of alleged conduct, which if proved true, appeared to violate Wisconsin antitrust law, should proceed. Prentice
was brought as a class action against "twelve title insurance companies and several of their employees." Prentice, 176
Wis. 2d at 720.
It was claimed that the defendants engaged in a
conspiracy to restrain trade, causing the consumer "plaintiffs to pay substantially higher prices 16 for title insurance and
No.
2003AP2840.pdr
related services than they would have had to pay in the absence of the alleged conspiracy." Id. At issue was "whether the
filed rate doctrine shield[ed] the defendants from liability" under Wisconsin's antitrust law. Id. at 721.
¶102 In Prentice, we explained how a regulatory agency's approval of a rate "established the lawfulness" of a rate; and therefore, the "legal rights of the parties were measured solely by the filed rate." Id. at 722. We concluded that because the
insurance companies filed the rates they would charge pursuant to the provisions of Wis. Stat. § 625.15(2) (1977-78) and the agency had approved those rates under the filed rate doctrine, the rates charged were lawful rates. the title insurance companies and Id. at 725. their employees Therefore, were Id. not This
subject to prosecution under Wisconsin antitrust law.
discussion demonstrates that while Wisconsin's antitrust law may initially appear to be applicable, there are occasions when it will not be applied because to do so would interfere with other federal or state laws or doctrines. 3. Plaintiffs' claims now turn to the plaintiffs' claims in the suit
¶103 I before us.
The complaint acknowledges that Bayer is the holder It alleges that Barr's generic drug is
of the patent for Cipro.
the "bioequivalence" of Cipro. ¶104 Plaintiffs' allegation of the existence of Bayer's
Cipro patent is significant because all patents are presumed to be valid. 35 U.S.C. § 282. Furthermore, Bayer's patent for Bayer AG v. Barr
Cipro has been adjudged valid and enforceable. 17
No.
2003AP2840.pdr
Labs., No. 92CV391 (S.D.N.Y. Jan. 16, 1997).
And finally, if
the plaintiffs were attacking the validity or enforceability of the patent through there the be allegations no subject that are made in the in
complaint,
would
matter
jurisdiction
Wisconsin courts to hear their claims. 2d at 1257.
Schecher, 317 F. Supp.
¶105 Plaintiffs nonetheless allege that in the absence of the Bayer-Barr agreement, Barr would have begun marketing
generic Cipro January 6, 1995.13
This can be true under only one
condition for a claim made in state court——the monopoly set out in the Bayer-Barr agreement must fall outside of Bayer's right to maintain a monopoly for Cipro throughout the term of the patent. Ciprofloxacin, 363 F. Supp. is 2d at if 524. it Stated threatens
otherwise, "the
conduct at
issue
illegal
competition in areas other than those protected by the patent and [if not, it] is otherwise legal." Id. (quoting United
States v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1127 (D.C. Cir. 1981)). Therefore, while not every monopoly that an
owner of a patent maintains is lawful, in order to withstand a motion to dismiss, a complaint against a patent owner must
allege some conduct, which if proved true, falls outside of the
This date predates FDA final approval to Barr, which according to the FDA's public records occurred on June 9, 2004. 18
13
No.
2003AP2840.pdr
conduct protected under the patent during the entire term of the patent.14 ¶106 I accept the following allegations of plaintiffs as true for purposes of this motion: (1) The Bayer-Barr agreement
consented to "fix, raise, maintain, and stabilize the price of Cipro." (2) The Bayer-Barr agreement "provides that Bayer has
the option to either: (a) license and supply Bayer-manufactured Cipro to Barr [] for resale under a generic label; or (b) pay quarterly amounts to Barr from 1998 through at least 2003." (3)
The Bayer-Barr agreement "set forth the prices that Bayer may charge to Barr [], if Bayer chooses to supply its Cipro to Barr [] for resale [and] requires Barr [] to share with Bayer in profits from the resale of generically labeled Cipro
manufactured by Bayer [and] [] limits the ability of Barr [] to price Cipro licensed from Bayer independently." ¶107 None of these allegations is sufficient to state a claim under Wis. Stat. § 133.03 because none of the alleged
conduct is illegal and the monopolistic effect of the conduct is not illegal. The price-fixing conduct and the monopoly that is
For example, while one who owns a patent can price-fix for the patented invention to those to whom it or its licensees sell, it cannot lawfully fix the price for the patented invention that will be charged by those to whom the patent owner or its licensees have sold. General Elec., 272 U.S. at 485. In addition, a licensee who has rights under a former provision in the Hatch-Waxman Act to act as the first generic producer for 180 days on the expiration of the patent (21 U.S.C. § 355(j)(5)(B)(iv)) cannot lawfully agree to delay the commencement of the 180-day period and in so doing, extend the patent beyond the term granted by the PTO. In re Cardizem CK Antitrust Litig., 332 F.3d 896, 907-08 (6th Cir. 2003). 19
14
No.
2003AP2840.pdr
alleged to have resulted come within the rights granted to Bayer by the federal government when it issued the Cipro patent.
General Elec., 272 U.S. at 485; Bement, 186 U.S. at 91. ¶108 There are other allegations in the complaint that
appear factual, but are either legal conclusions that I do not accept for purposes of a motion to dismiss, John BBB Doe, 211 Wis. 2d at 331, or they are facts for which I take judicial notice that they are not true or are not legally possible.
Cohen, 129 F.2d at 736.
For example, we need not accept the
allegation, repeated in many forms in the complaint, that were it not for the Bayer-Barr agreement, Barr would have begun to manufacture and market generic Cipro in January of 1995. ¶109 According to the public records of the PTO, Bayer's original patent for Cipro did not expire until December 2003 and was extended through June 8, 2004. Furthermore, Barr had The
received only "tentative" FDA approval in January of 1995.
public records of the FDA show Barr did not have FDA approval to market generic Cipro until June 9, 2004. Therefore, unless
Bayer's Cipro patent is invalid——a position that the plaintiffs cannot maintain in this lawsuit in state court——it would have been a violation of federal law for Barr to market generic Cipro before June 9, 2004. Therefore, in the context of a motion to
dismiss, plaintiffs' repeated allegation in this regard does not cause their complaint to state a claim. ¶110 The majority permits plaintiffs' claims to proceed
because plaintiffs allege: a broad price-fixing scheme affecting "at minimum, thousands . . . in Wisconsin" who purchased the best20
No.
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selling antibiotic Cipro "at any time since January 6, 1995." We conclude Meyers' complaint alleges illegal conduct that, if true, substantially affected the people of Wisconsin and had impacts in this state. Majority op., ¶4. The quote above shows that the majority
opinion errs because it does not consider the context in which the complaint is made, i.e., it is made against the lawful owner of the federal patent for Cipro. Bayer AG v. Barr Labs., No.
92CV391 (S.D.N.Y. Jan. 16, 1997) (concluding that Bayer owns the Cipro patent, which is valid and enforceable).15 ¶111 The majority opinion gives credence to the complaint's assertion that "as a result of the Agreement, Bayer maintained its monopoly of the United States market for Cipro and generic equivalents of Cipro." "as a result of the Majority op., ¶13. Agreement" from the The quoted phrase, majority opinion
incorporates a conclusion of law.
It does not recite a fact
because the Bayer-Barr agreement could have caused Bayer to have a monopoly for Cipro only if Bayer's Cipro patent were invalid. General Elec., 272 U.S. at 485; Bement, 186 U.S. at 91.
Otherwise, the monopoly is a result of the patent.
Throughout
the majority opinion it assumes the alleged conduct is illegal. This is a conclusion of law inappropriate for a motion to
dismiss, unless there are facts alleged, which if true, were
That the plaintiffs' claim is made against the patent owner for Cipro was argued to the circuit court. It was not briefed for us because the circuit court dismissed the complaint on other grounds and the court of appeals reviewed only the grounds employed by the circuit court. However, many questions about the effect of Bayer's Cipro patent on the plaintiffs' claims were asked of counsel for all parties at the oral argument before us. 21
15
No.
2003AP2840.pdr
sufficient to support that conclusion. alleged in the complaint.
No such facts have been
And, as I explained above, price-
fixing and monopolies within the rights granted with the Cipro patent are legal. Bement, 186 U.S. at 91 (explaining that
"[t]he fact that the conditions in the contracts keep up the monopoly or fix prices does not render them illegal"). ¶112 Only illegal conduct or conduct that has an illegal effect violates Wisconsin's antitrust law. Prentice, 176
Wis. 2d at 721; Allied Chem., 9 Wis. 2d at 296. is not just that price-fixing occurred and
Therefore, it that it had a
monopolistic effect, the price-fixing to attain a monopoly for Cipro must be illegal or the effect of the conduct must be illegal. The allegations of both the conduct and its effect set
out in the complaint are not illegal under controlling federal law. General Elec., 272 U.S. at 485. ¶113 Furthermore, under Wis. Stat. § 133.03, only illegal conduct or conduct that has an illegal effect can "substantially affect" the people of Wisconsin and have "impacts" that violate Wisconsin antitrust law. Chem., 9 Wis. 2d at 295. Olstad, 284 Wis. 2d 224, ¶85; Allied It is beyond question that not all In the case before us,
price-fixing or monopolies are illegal.
given the presumption that Bayer's Cipro patent is valid and enforceable, none of the conduct alleged is illegal, nor is the monopolistic effect of the conduct illegal. U.S. at 485; Bement, 186 U.S. at 91. General Elec., 272
Therefore, because of the
nature of a patent, any adverse effects on the market that were caused by actions that fall within the scope of a patent owner's 22
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rights under the patent cannot be addressed by antitrust law. Ciprofloxacin, 363 F. Supp. 2d at 524; see also Prentice, 176 Wis. 2d at 721. Only conduct that threatens competition in
areas other than those that are protected by the rights under a patent can be illegal under federal antitrust law.
Ciprofloxacin, 363 F. Supp. 2d at 524. alleged in the complaint before us.
No such conduct has been Therefore, defendant's
motion to dismiss should be granted. III. CONCLUSION
¶114 Because the conduct alleged in the complaint is not illegal or alleged to have had an illegal effect, it cannot "substantially affect" the people in Wisconsin and have
"impacts" in Wisconsin contrary to Wis. Stat. § 133.03. 284 Wis. 2d 224, ¶85.
Olstad,
Therefore, I would affirm the circuit
court's dismissal of the complaint for failure to state a claim pursuant grounds. to Wis. Stat. § 802.06(2)(a)6, albeit on different
Accordingly, I respectfully dissent.
¶115 I am authorized to state that Justices JON P. WILCOX and DAVID T. PROSSER join this dissent.
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