Merck, Whole Foods, Google, ASCAP: Intellectual Property

Merck & Co. (MRK)’s Schering-Plough unit must face a challenge to its agreement with competitors to keep generic versions of its drug K-Dur off the market, an appeals court ruled, reversing a lower-court antitrust decision.

Wholesalers and pharmacies sued Schering-Plough beginning in 2001 over allegedly unlawful agreements to delay the entry into the market of generic versions of K-Dur, a treatment for low blood levels of potassium. Consumers incurred extra costs of more than $100 million because of the deals, according to the plaintiffs.

A lower court ruled in favor of the company in 2010. The federal appeals court in Philadelphia overturned that decision yesterday and asked the lower court to reconsider its ruling.

“This is a landmark decision that clarifies why these pay- for-delay deals violate mainstream antitrust law,” said David Balto, a Washington-based antitrust attorney who represents consumer groups opposed to such agreements. “The decision will finally reverse the past decade of misguided decisions that have cost consumers billions in higher drug prices.”

“We are disappointed with today’s ruling,” Ron Rogers, a spokesman for Whitehouse Station, New Jersey-based Merck, said in an e-mail statement. “We are reviewing the decision and will consider all our options.”

Merck bought Schering-Plough in 2009.

Federal appeals panels in New York, Atlanta and Washington have upheld such agreements as long as they don’t delay generic drugs beyond the expiration of the underlying patents. The U.S. Federal Trade Commission has campaigned to block the deals, which are sometimes reached on the eve of patent trials, saying they cost consumers about $3.5 billion a year in higher prescription drug prices.

“We cannot agree with those courts that apply the scope of the patent test,” the Philadelphia panel said in its opinion. “In our view, that test improperly restricts the application of antitrust law.”

“The Third Circuit Court of Appeals seems to have gotten it just right: These sweetheart deals are presumptively anticompetitive,” said FTC Chairman Jon Leibowitz in a statement. “It’s time for the pharmaceutical companies to return to the side of consumers.”

The agreements, also known as reverse payments, permit the sharing of “monopoly rents” between would-be competitors without any assurance that the underlying patent is valid, the appeals panel said.

The appeals court directed the lower court to apply an analysis based on “the economic realities of the reverse payment settlement rather than the labels applied by the settling parties.”

In a statement, Ralph G. Neas, president and chief executive officer of the Washington-based Generic Pharmaceutical Association, called the decision “inconsistent” with other federal court rulings.

The case is In re K-Dur Antitrust Litigation, 10-2077, 10- 2078, 10-2079, U.S. Court of Appeals for the Third Circuit (Philadelphia).

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Trademark

Whole Foods Sues Vitamin Shoppe Over ‘Health Starts Here’ Mark

Vitamin Shoppe Inc. (VSI), the North Bergen, New Jersey-based supplement retailer, was sued for trademark infringement by Whole Foods Market Inc. (WFM)

The suit, filed in federal court in Austin, Texas, accused Vitamin Shoppe of infringing Whole Foods’ “Heath Starts Here” trademarks.

According to court papers, Whole Foods has used this mark since 2009 as part of a campaign to promote good nutritional practices and its chain of retail stores. The company registered the mark in 2011 for use with retail grocery services, raising public awareness of proper nutrition and diet, and printed recipes as a component of food packaging, according to the database of the U.S. Patent and Trademark Office.

Whole Foods, of Austin, Texas, objects to the Vitamin Shoppe’s “Core Health Starts Here” campaign. The grocery company said that to no avail it sent a cease-and-desist notice to the Vitamin Shoppe.

The public can be confused into falsely assuming an affiliation exists between the two companies, according to court papers. Whole Foods accuses the Vitamin Shoppe of attempting to trade on goodwill and fame of the grocery company through its use of a similar slogan and claims it is harmed by the Vitamin Shop’s actions.

In addition to seeking a ban on the Vitamin Shoppe’s use of “Core Health Starts Here,” Whole Foods is seeking destruction of all offending promotional materials and awards of money damages, litigation costs and attorney fees.

Vitamin Shoppe spokeswoman Susan McLaughlin said in an e- mail that her company doesn’t comment on pending litigation.

Whole Foods is represented by in-house counsel Jay Warren and Louis T. Pirkey, Christopher L. Graff and Jered E. Matthysse of Austin’s Pirkey Barber PLLC.

The case is Whole Foods Market IP LP v. Vitamin Shoppe Industries Inc., 1:12-cv-00633, U.S. District Court, Western District of Texas (Austin).

Google Antitrust Probe Should Be Settled, EU Regulator Says

The European Union’s antitrust chief said he’d rather settle an antitrust probe over claims Google Inc. (GOOG) discriminates against rivals than pursue an enforcement action against the world’s largest Web-search engine.

“In these fast-moving markets with new activities, new products and new services, I prefer to find remedies as soon as possible and this is easier,” EU Competition Commissioner Joaquin Almunia said yesterday in an interview, referring to a settlement.

Earlier this month, Google outlined a proposal to end the EU antitrust investigation. The probe is reviewing allegations that the company promotes its own specialist search-services, copies rivals’ travel and restaurant reviews, and has agreements with websites and software developers that stifle competition in the advertising industry.

Almunia said last month he would send Google an antitrust complaint if the proposed accord didn’t eliminate the issues identified by the EU. Such a complaint could lead to a fine or limits on conduct.

Regulators are seeking “to clarify some of the aspects of the answers we received from Google,” Almunia said. “We have not yet concluded our conversation, but I hope that in the near future we will finally decide” whether to settle the probe or send a statement of objections.

Al Verney, a spokesman for Google in Brussels, said the company was cooperating with the commission.

Google, based in Mountain View, California, is under growing pressure from global regulators probing whether it’s thwarting competition in the market for Web searches. The U.S. Federal Trade Commission and antitrust agencies in Argentina and South Korea are also scrutinizing the company.

While Microsoft Inc. and partner Yahoo! Inc. (YHOO) have about a quarter of the U.S. Web-search market, Google has almost 95 percent of the traffic in Europe, Microsoft said in a blog post last year, citing data from regulators.

Guangzhou Pharmaceutical Turns Back Appeal Over ‘Wong Lo Kat’

Guangzhou Pharmaceutical Co. (874), the Chinese maker of patent medicines and Chinese pharmaceutical products, has retained ownership of trademarks for its Wang Lo Kat herbal tea, the Global Times reported.

The Beijing First Intermediate People’s Court rejected an appeal by Hong Kong-based JDB Group to overturn a ruling by the China International Economic and Trade Arbitration Commission awarding the mark to the pharmaceutical company, according to Global Times.

The two companies had been conducting rival advertising campaigns for the canned tea, the newspaper reported.

Guangzhou Pharmaceutical has predicted the sales revenues for its tea will hit 30 billion yuan ($4.7 billion) by 2017 and double that by 2020, according to the Global Times.

Paramount Citrus’ ‘Cuties’ Dispute With Calafia Goes to AAA

A dispute over the “Cuties” trademarks used with easy- peel clementine and mandarin oranges has exited the federal court system and moved for resolution to the American Arbitration Association, The Grower Citrus + Vegetable magazine reported.

Paramount Citrus Packing Co. of Delano, California, sued Calafia Farms LP in federal court in Los Angeles in March over Calafia’s use of the marks with its juice operations, the magazine reported.

The two companies, which have had equal ownership of the Cuties marks since 2001, had planned a joint juice and concentrate operation, which did not come to fruition in 2011, according to The Grower.

This is the second time a dispute between the two companies over the marks have been sent out for arbitration, the magazine reported.

For more trademark news, click here.

Copyright

ASCAP Asks County to Take License Over Aerobics Class Music

The American Society of Composers, Authors and Publishers has accused North Carolina’s Lee County of copyright infringement, the Fayetteville Observer reported.

ASCAP, which administers music performance royalties, is asking the county to enter into a licensing agreement or face fines, the newspaper reported.

Lee County Attorney Dale Talbert told the newspaper he is recommending the county sign the agreement and that ASCAP concerns may be related to music played at aerobics classes sponsored by the county’s Parks and Recreation Department, the Observer reported.

Talbert said the licensing agreement, with the fees based on the county’s population, could be “cheap insurance” against potential problems, according to the newspaper.

Court Lets Sanctions Stand Against Adult Filmmaker’s Lawyer

A federal appeals court has affirmed monetary sanctions against a lawyer who represents a maker of adult films in a series of copyright cases.

In a July 12 ruling, the 5th U.S. Circuit Court of Appeals affirmed sanctions against attorney Evan Stone of Denton, Texas. Stone represents Bochum, Germany’s Mick Haig Productions E.K. against unnamed defendants accused of downloading Haig’s “Der Gute Onkel” film without authorization.

The sanctions were imposed by a federal court in Dallas for issuing subpoenas without the court’s permission. U.S. District Judge David C. Godbey said in January that Stone had abused the discovery process, and termed him a “rogue attorney.” The court had appointed attorneys to represent the interests of the unnamed defendants and it was these lawyers who had sought the sanctions.

The sanctions included attorney fees of more than $22,000 and $500 per day for each day Stone failed to comply with a court order.

Stone filed an appeal, arguing the sanctions were unjustified and that the court-appointed attorneys lacked standing to seek them.

The appeals court didn’t agree. It said “no miscarriage of justice will result from the sanctions” that were imposed “as a result of Stone’s flagrant violation” of federal court rules.

The appeals court said Stone committed these violations by using the power of the court to find the identity of anonymous Internet users “then shaming or intimidating them to settle for thousands of dollars.”

The appeal is Mick Haig Productions E.K. v. Does 1-670, 11- 10977, U.S. Court of Appeals for the Fifth Circuit (New Orleans). The lower court case is Mick Haig Products E.K. v. Does 1-670, U.S. District Court, Northern District of Texas (Dallas).

For more copyright news, click here.

To contact the reporter on this story: Victoria Slind-Flor in Oakland, California, at vslindflor@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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