U.S. District Judge Edward Chen of the Northern District of California (Photo: Jason Doiy/ALM)

A putative class of HIV drug consumers has mostly cleared its first hurdle in an antitrust battle with Gilead Sciences Inc. U.S. District Judge Edward Chen dismissed plaintiffs' claims of a wide-ranging antitrust conspiracy between Gilead and several other pharma companies—albeit with leave to amend. But Chen also ruled that the plaintiffs had adequately pleaded multiple Sherman Act and state antitrust claims against Gilead only.

Most of them allege that the Foster City-based drug-maker used joint ventures with other pharma companies to illegally extend the patent monopoly on Gilead's portions of fixed-dose combination drugs. The plaintiffs allege those ventures included agreements not to introduce generic versions of Gilead's drugs until after the patents on Gilead's drugs expired.

"We're obviously very pleased," said Durie Tangri's Mark Lemley, one of the attorneys leading the charge for the plaintiffs. "It's not a complete victory, but it's a 95% victory." Lemley added that the plaintiffs have already sought leave to amend one of the dismissed claims on the basis of discovery that was produced last month.

Gilead said in a statement that not only had Chen dismissed the overarching antitrust conspiracy, the court also rejected the plaintiffs' "core theory that Gilead's joint ventures contained provisions that were per se illegal under the antitrust laws. And the court rejected the Plaintiffs' attempt to define the relevant antitrust market as including all combination antiretroviral therapies."

Here are five quick takeaways from the decision:

1. The judge was willing to do a take a deep dive into the case. Chen's 87-page opinion showed a willingness to dig into the details of the plaintiffs' allegations, carefully parsing those he dismissed from the ones he allowed to proceed. What started as a case brought by non-traditional pharma litigators in a nontraditional pharma venue is now shaping up as having potential to make significant law for the industry.

2. The judge blocked Gilead's knockout punch. Gilead had argued that its agreements are valid per se under the Supreme Court's 2006 Texaco v. Dagher decision, because they are ancillary to legitimate joint ventures. Chen said Gilead had over-read certain language in Dagher. "The Court does not view Dagher as some kind of sea change that displaced the prior law—as articulated by both the Supreme Court and the lower courts—that the rule of reason applies to ancillary restraints," Chen wrote.

3. Chen analyzed most claims under the rule of reason, but didn't rule out the possibility that the joint ventures could be per se illegal. Chen ruled that the plaintiffs had not defined a relevant market for cART combination-drug therapy (while granting leave to amend), but that the plaintiffs did define a relevant market for each standalone brand drug and its generic. In a footnote, he observed that "if the Court were to find per se illegality under Section 1, then Plaintiffs would not need to worry about market definition. But at this junction of the proceedings, the Court has not made any conclusion as to whether the per se illegal rule applies."

4. Justice Sonia Sotomayor made a couple of cameos. Chen twice turned to a Sotomayor concurring opinion in 2008′s Major League Baseball Properties v. Salvino, in which she stated that "an ancillary restraint is not necessarily lawful" and that its "competitive benefits and harms must still be weighed, as part of the joint venture, under a rule-of-reason analysis." Sotomayor was a Second Circuit judge back then, but it never hurts to have a future Supreme Court justice on your side.

5. How far is too far when it comes to "most favored entry" provisions? Chen trained a lot of scrutiny on two types of deals Gilead struck with Teva Pharmaceuticals to settle the generic drug-maker's patent infringement suits. Teva agreed to delay entry into the market in exchange for Gilead promising that if another company jumped in, Teva could enter at the same time, which Chen called a "most-favored entry," or MFE agreement. Under the second type of agreement, what Chen called MFE Plus, Gilead promised it would not license another generic until at least six months after Teva's entry date. Chen suggested that the MFE Plus agreement was especially problematic, and that in tandem the two had the potential to be anticompetitive. Two veteran Abbreviated New Drug Application litigators said that both types of provisions are not uncommon in settlement agreements, though they're often not visible to the public because they're filed under seal. Only two reported cases have addressed the antitrust implications, and they went in opposite directions.