IN RE CIPRO CASES I & II

Respondents, Barr Laboratories, Inc., Watson Pharmaceuticals, Inc., Hoechst Marion Roussel, Inc., and The Rugby Group, Inc., Letter Brief

Cal.January 24, 2014

KIRKLAND & ELLIS LLP ANDAFFILIATED PARTNERSHIPS 601 Lexington Avenue New York, NY 10022 Jay P. Lefkowitz, P.C. To Call Writer Directly: (202) 446-4800 Facsimile: (212) 446-4970 (212) 446-4900 lefkowitz@kirkland.com www.kirkland.com January 23, 2014 SUPREME COURT FILED Mr. Frank A. McGuire Clerk of the Court 4 Supreme Court of California JAN 2 4 2014 350 McAllister St. San Francisco, CA 94102-4797 Frank A. McGuire Clerk Deputy RE: Inre Cipro Cases I & I, No. $198616 Dear Mr. McGuire: Defendants-Respondents Barr Laboratories, Inc.; Hoechst Marion Roussel, Inc.; The Rugby Group, Inc.; and Watson Pharmaceuticals, Inc. (collectively, the “Generic Defendants”) respectfully submit this brief in accordance with this court’s order that the parties “submit simultaneous supplementalletter briefs discussing the relevance of FTC v. Actavis, Inc. (2013) 570 U.S. __ [133 S.Ct. 2223] [(Actavis)] to the issues in this case.” (Dec. 11, 2013 Order.) SUMMARY The U.S. Supreme Court’s decision in Actavis expressly rejected the very same arguments that plaintiffs have advanced in this appeal—and the reasoning of Actavis confirms whythe superior court’s grant of summary judgment should be affirmed. In particular, plaintiffs have argued that pharmaceutical patent settlements like the Cipro Settlement should be held per se unlawful or else deemed presumptively unlawful under a so- called “quick look” approach. (See, e.g., Reply Br. 4.) Actavis squarely considered—and rejected—both of those proposed approaches. (See Actavis, supra [133 S.Ct. at pp. 2237-2238].) The U.S. Supreme Court concluded that such settlements are neither presumptively lawful nor presumptively unlawful, and instead must be analyzed using the traditional antitrust Rule of Reason. Contrary to plaintiffs’ contention that the lower courts relied on a different approach here and “immunized” the Cipro Settlement because it did not exceed the scope of Bayer’s patent on Cipro, both the superior court and the Court of Appeal expressly concluded that the Cipro Settlement did not violate the Cartwright Act under the Rule ofReason. (11 AA 2690, 2693 [superior court]; accord Slip opn. 3, 32-33 [Court of Appeal].) As the lower courts explained, plaintiffs could not show that the settlement had a substantially adverse effect on Chicago Hong Kong London Los Angeles Munich New York Palo Alto San Francisco Shanghai KIRKLAND & ELLIS LLP Page 2 January 23, 2014 competition (11 AA 2690, 2693; accord Slip opn. 3, 32-33)—the first step of the Rule of Reason—especially when the settlement allowed the Generic Defendants to introduce a competing ciprofloxacin product six months before Bayer’s patent expired and a full year before Bayer’s FDA exclusivity for Cipro ended, whereas three other companies that challenged the patentlitigated and lost in court. For these reasons, the Generic Defendants respectfully request that this court affirm the decision below. ARGUMENT I. Actavis Rejected Plaintiffs’ Arguments That Settlements Like the Cipro Settlement Are Per Se IHegal or Presumptively Unlawful Under the Antitrust Laws. Plaintiffs’ position throughout this litigation—including in their merits briefs to this court—hasbeen that the Cipro Settlement is per se unlawfulor, in the alternative, presumptively unlawful under a “quick look” antitrust analysis. (See, e.g., Reply Br. 4 [“[R]everse payments should be either per se illegal—because they are agreements among horizontal competitors not to compete—or subject to the quick-look Rule of Reason imposed in K-Dur[the Third Circuit’s now-vacated decision in In re K-Dur Antitrust Litig. Gd Cir. 2012) 686 F.3d 197].”]; see also Pls.’ Opening Br. on the Merits 17-18 (Opening Br.); Br. of Appellants to Court of Appeal 24; 1 AA 173-175.) In considering the very same arguments from the Federal Trade Commission that plaintiffs advance here, the U.S. Supreme Court concluded that neither a per se approach nor a quick look approach wasappropriate: [A]bandonmentof the “rule of reason” in favor of presumptiverules (or a “quick- look” approach) is appropriate only where “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets.” [Citations.] We do not believe that reverse payment settlements, in the [Hatch-Waxman patent litigation] context we here discuss, meet this criterion. (Actavis, supra [133 S.Ct. at p. 2237], quoting California Dental Assn. v. FTC (1999) 526 U.S. 756, 770, emphasis added.) Instead, Actavis held that such settlements are neither presumptively lawful nor presumptively unlawful, and that they are properly evaluated underthe antitrust Rule of Reason. (/bid.) KIRKLAND & ELLIS LLP Page 3 January 23, 2014 The U.S. Supreme Court’s holding is consistent with California law—and thus underscores the correctness of the decisions below.’ California courts have long recognizedthat the Rule of Reason is the traditional approach to evaluating whether a challenged practice violates the Cartwright Act. (See, e.g., Marin County Bd. ofRealtors, Inc. v. Palsson (1976) 16 Cal.3d 920, 930-931 (Marin County).) As the Court of Appeal observed in this case, “[u]nder the Cartwright Act, as under the Sherman Act, the ‘illegal per se’ designation is reserved for agreements or practices that have a pernicious effect on competition and lack any redeeming virtue. [Citations.].” (Slip opn. 32, citing, inter alia, Corwin v. L.A. Newspaper Service Bureau, Inc. (1971) 4 Cal.3d 842, 853; see also Marin County, supra, 16 Cal.3d at pp. 930-931.) The superior court similarly emphasized that “[plaintiffs] have cited no California case, nor is there one, supporting that a perseillegal analysisis applicable to the specific agreement at issue here, a reverse payment settlement agreement under the Hatch Waxman Act concerninga patent.” (11 AA 2689.) It is thus unsurprising that both of the lower courts in this case, like the U.S. Supreme Court in Actavis, concluded that Hatch-Waxman settlements generally, and the Cipro Settlement specifically, do not come close to warranting the extraordinary conclusion that they are per se unlawful. This is true especially where, as here, the settlement agreement enabled the generic challenger to sell ciprofloxacin six months before the challenged patent expired and a full year before Bayer’s FDA exclusivity ended. Actavis also underscores whyplaintiffs’ effort to condemn the Cipro Settlement under a quick-look approach fails as a matter of law. Antitrust jurisprudence has long reserved quick- look analysis for exceptional cases in which courts have already had judicial experience with a challenged practice and can already conclude that it causes competitive harm. (See Actavis, supra [133 S.Ct. at p. 2237].) Indeed,plaintiffs concede that their proposed quick-look approach would be “only slightly less stringent than the per se rule” (Opening Br. 37) because it would eliminate the first step of the Rule of Reason, assume that every Hatch-Waxman settlement has actual adverse effects on competition, and automatically shift the burden to defendants to demonstrate that a settlement had pro-competitive benefits (see id. at p. 42; 11 AA 2581-2582). In so doing, plaintiffs’ approach would turn the burden of proof on its head and raise serious due process concerns. (Compare OpeningBr. 42 [“Defendants bear the initial burden.”] with Aguilar y. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 861 [holding that a Cartwright Act plaintiff has the burden of proof].) Nothing in California law supports the use of that approach here (see Slip opn. 3, 32-34), and Actavis similarly refused to adopt it (see Actavis, supra [133 S.Ct. at pp. 2237-2238]). Although plaintiffs’ merits reply brief to this court featured a Third Circuit panel decision adopting a quick-look approach in K-Dur (Reply Br. 1-4, 8, 14-19, 24-25, 46), the U.S. ' Actavis considered federal antitrust claims brought by the FTC under the FTC Act. (See Actavis, supra [133 S.Ct. 2229-2230], citing 15 U.S.C. § 45.) KIRKLAND & ELLIS LLP Page 4 January 23, 2014 Supreme Court subsequently vacated the K-Dur decision in light of Actavis. (Merck & Co. v. Louisiana Wholesale Drug Co. (2013) __ U.S. __ [133 S.Ct. 2849].) Applying the traditional Rule of Reason, and not a per se or “quick-look” approach, makes sense. After all, there is nothing inherently anticompetitive about settling patent litigation, including through a settlement in which a would-be infringer agrees to abide by the patent and receives both monetary consideration and an early-entry license—despite plaintiffs’ speculation about whether the patent holder would havelitigated and lost, or whether the parties would have reached an alternative settlement on different terms. Plaintiffs’ argument that the Cipro Settlement was nothing more than “a naked payoff ... from one horizontal competitor to other horizontal competitors to suppress competition” (Opening Br. 17) ignores the presence of a patent that already foreclosed Barr and others from selling infringing alternatives. Patents are presumed valid by operation of law (see In re Ciprofloxacin Hydrochloride Antitrust Litigation (Fed.Cir. 2008) 544 F.3d 1323, 1337 (Cipro Fed. Cir.), citing 35 U.S.C. § 282), and nothing in the antitrust laws requires every patent case to belitigated through trial and appeal, or entitles antitrust plaintiffs to dictate the terms on whichlitigants may settle (see Verizon Commc’ns, Inc. v. Law Offices of Curtis V. Trinko, LLP (2004) 540 U.S. 398, 415-16 [explaining that the antitrust laws do not require “that a monopolist alter its way of doing business whenever some other approach might yield greater competition”]). Actavis thus confirms that the lower courts were correct to reject plaintiffs’ arguments that the Cipro Settlementis either per se unlawful or presumptively unlawful. II. Actavis Confirms That the Lower Courts Were Correct in Applying the Rule of Reason to Uphold the Cipro Settlement. Because the Rule of Reason has long been the test that California courts have used to evaluate Cartwright Act claims, Actavis also confirms the correctness of the decision below in granting summary judgment for the Generic Defendants. As the lower courts explained, the Rule of Reason analysis under the Cartwright Act requires that (1) an alleged restraint on trade has anticompetitive effects, and (2) the anticompetitive effects outweigh any pro-competitive benefits. (See 11 AA 2690; Slip opn. 16; accord Bert G. Gianelli Distributing Co. v. Beck & Co. (1985) 172 Cal.App.3d 1020, 1048 (Gianelli), disapproved on another ground in Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 394, fn. 2; Marin County, supra, 16 Cal.3d at pp. 934-935.) The threshold question under the Rule of Reason is whether an actual “restraint” on trade exists, which requires a “substantially adverse effect on competition in the relevant market.’” (Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th 1672, 1681, quoting Gianelli, 172 Cal.App.3d at p. 1049.) Both the superior court and Court of Appeal correctly concluded that plaintiffs could not show that the Cipro Settlement had anticompetitive effects independent of the Cipro patentitself, and therefore KIRKLAND & ELLIS LLP Page 5 January 23, 2014 could not satisfy this threshold step in the Rule of Reason analysis. (11 AA 2690-2693; Slip opn. 37-38.) Actavis provides no basis to disturb the lower courts’ conclusion. To be sure, Actavis declined to adopt the “scope of the patent” test that made the lawfulness of a Hatch-Waxman patent settlement under federal antitrust laws turn on the exclusionary potential of the patent. (See Actavis, supra [133 S.Ct. at pp. 2230-2231].) Although plaintiffs contend that the lower courts “immunized”the Cipro Settlement from any scrutiny by relying solely on the scope ofthe patent test (see Opening Br. 3-4), the opinions below conclusively demonstrate otherwise. To begin with, the lower courts correctly observed that California law itself supports the scope of the patent approach. As the Court of Appeal explained, “[t]he principle that an agreement is not unlawful under California ... antitrust law if it restrains competition only:within the exclusionary scope of a patent is reflected in Fruit Machine[ry] Co. v. F.M. Ball & Co. (1953) 118 Cal.App.2d 748 [(Fruit Machinery)],” which held that a patent licensing regime did not violate the Cartwright Act because the parties did not “‘exercise[] rights or powers not accorded to them by the patent law or abuse[] any rights or powers accorded to them by that law.’” (Slip opn. 33-34, quoting Fruit Machinery, supra, 118 Cal.App.2d at p. 762, emphasis omitted; see also Schering-Plough Cartwright Act Cases (Ala.Cty.Super.Ct. Dec. 17, 2009) JCCP No. 4559 [adopting the scope of the patent framework]; Generic Defs. Answer Br. 19-24.) Because “[t]he grant of a patent is the grant of a statutory monopoly and is an express exception to laws prohibiting monopolies” (Aetna Casualty and Surety Co. v. Superior Court (1993) 19 Cal.App.4th 320, 328, citing Sears, Roebuck & Co. v. Stiffel Co. (1964) 376 U.S. 225, 229), a settlement that extends no further than the patentitself is lawful. Even if that were not so, the Court of Appeal expressly held that the Cipro Settlement did not violate the Cartwright Act under the Rule of Reason. The court held that “the Cipro agreements do notviolate the Cartwright Act under rule-of-reason analysis or the [scope ofthe patent] analysis” that the U.S. Court of Appeals for the Eleventh Circuit had used in cases such as Valley Drug Co. v. Geneva Pharmaceuticals, Inc. (11th Cir. 2003) 344 F.3d 1294, and Schering-Plough Corp. v. FTC (11th Cir. 2005) 402 F.3d 1056. (Slip opn. 32-33, emphasis added; see also 11 AA 2690 [superior court decision concluding “that the agreement does not violate the Cartwright Act under the Rule of Reason.”].) In other words, far from relying on the scope of the patent test to “immunize” the Cipro Settlement from review, both the Court of Appeal and the superior court concluded that plaintiffs’ Cartwright Act claims failed under the Rule of Reason, because plaintiffs could not showthat the Cipro Settlement had an adverse effect on competition. The lower courts correctly observed that the Cipro patent itself already precluded others from selling generic ciprofloxacin, and, as antitrust jurisprudence has long made clear, “the public [i]s not entitled to profit by competition among infringers.” (Rubber Tire Wheel Co. v. Milwaukee Rubber Works Co. (7th KIRKLAND & ELLIS LLP Page 6 January 23, 2014 Cir. 1907) 154 F. 358, 364; see also Hynix Semiconductor Inc. v. Rambus Inc. (N.D. Cal. 2007) 527 F.Supp.2d 1084, 1096 [“[{A]n infringer” has “no legal right to be competing in the product market.”].) If anything, the Cipro Settlement accelerated competition by allowing the Generic Defendants to sell a competing ciprofloxacin product six months before Bayer’s patent expired, and a full year before Bayer’s FDA exclusivity on Cipro ended. Thus, far from preventing competition, the Cipro Settlement was pro-competitive—and even the plaintiffs’ economic experts in the federal Cipro antitrust litigation (which occurred in parallel with this case) conceded that the agreement had pro-competitive effects. (See In re Ciprofloxacin Hydrochloride Antitrust Litigation (Fed.Cir. Mar. 3, 2008, No. 2008-1097) 2008 WL 1771301, at *5 [Brief of Generic Defendants, quoting record from federal MDL case].)* Indeed, as the lower courts, the Second Circuit, “and the Federal Circuit observed in upholding the 1997 Cipro Settlement, the absence of anticompetitive effects is particularly apparent in this case becausethe settlement did not foreclose other generic drug companies from pursuing their own challenges to Bayer’s patent—none of which were successful. In one case, a federal district court in New Jersey granted summary judgment in Bayer’s favor and upheld the validity of the patent against challenges by Mylan Pharmaceuticals and Schein Pharmaceutical— a decision that the U.S. Court of Appeals for the Federal Circuit affirmed on appeal. (Bayer AG v. Schein Pharmaceutical, Inc. (D.N.J. 2001) 129 F.Supp.2d 705, affd. (Fed.Cir. 2002) 301 F.3d 1306.) In another, a federal district court in San Diego conducted a nine-day benchtrial in a case brought by Carlsbad Technology, resulting in another decision upholding the validity of Bayer’s patent on Cipro. (Bayer AG v. Carlsbad Technology, Inc. (S.D.Cal. June 7, 2002 and Aug.7, 2002, No. 01CV0867-B) [opinions available at 1 RA 181-193, 195-227].) Carlsbad did not appeal. And for its part, Bayer submitted the Cipro patent for review by the U.S. Patent and * Actavis confirms that consideration of Bayer’s patent is not only relevant, but also required. Although the U.S. Supreme Court noted that it is not always “necessaryto litigate patent validity to answer the antitrust question” in every case (Actavis, supra [133 S.Ct. at p. 2236]), the decision expressly held that “courts must ‘balance the privileges of [the patent holder] and its licensees under the patent grants with the prohibitions of the [antitrust laws] against combinations and attempts to monopolize’” (id. at p. 2231, quoting United States v. U.S. Gypsum Co. (1948) 333 U.S. 364, 390-391; see also ibid. [“[T]his Court has indicated that patent and antitrust policies are both relevant in determining the ‘scope of the patent monopoly’—and consequently antitrust law immunity—that is conferred by a patent.”]). Nor was the Supreme Court’s recognition of this fact new: as it explained decades ago, the patent laws and antitrust laws are “in pari materia” and thus must both be considered. (Simpson v. Union Oil Co. ofCal. (1964) 377 U.S. 13, 24; see also FE. Bement & Sons v. Nat. Harrow Co. (1902) 186 U.S. 70, 91 [““The fact that the conditions in the contracts keep up the [patent] monopoly or fix prices does not render them illegal.”].) KIRKLAND & ELLIS LLP Page 7 January 23, 2014 Trademark Office (“PTO”), which reaffirmed the validity of the patent in a re-examination proceeding.’ All of this also underscores several distinguishing features between Actavis and this case—and further demonstrates why the grant of summary judgment for defendants wascorrect. (E.g., D’Amico v. Bd. ofMedical Examiners (1974) 11 Cal.3d 1, 19 [“‘If [the decision below is] right upon any theory of the law applicable to the case, it must be sustained regardless of the considerations which may have movedthetrial court to its conclusion.’ [Citation.]”]; American MeatInstitute v. Leeman (2009) 180 Cal.App.4th 728, 747-749 [similar].) A. Actavis Did Not Involve an Antitrust Case Brought By a Private Plaintiff. First, “[t]heSupreme Court had no occasion in Actavis to consider reverse-payment settlements in the context of private antitrust litigation,” because it was presented with a case brought by the FTC under the federal FTC Act. (Simmonset al., Viewing FTC v. Actavis Through the Lens of Clayton Act Section 4 (2013) ABA Antitrust Magazine, 24, 25-26.) This is important because when the government brings a case under the FTC Act (as in Actavis), it need not demonstrate either (1) antitrust injury or (2) causation, as that statute broadly applies to conduct that is even “likely to cause” injury. (15 U.S.C. § 45, subd. (n); see also FTC v. Neovi, Inc. (9th Cir. 2010) 604 F.3d 1150, 1155, 1157 (Neovi); In re Flonase Antitrust Litigation (E.D.Pa. 2011) 798 F.Supp.2d 619, 628 fn. 9.) By contrast, a private plaintiff suing under the Cartwright Act(like a private plaintiff suing under the Sherman Act) must prove both. (See Morrison v. Viacom, Inc. (1998) 66 Cal.App.4th 534, 548 (Morrison); see also 3A Areeda & Hovenkamp, Antitrust Law 4 303 [“Unlike the government enforcer, the private damage claimant must show not only an antitrust violation but also reasonably proximate injury to its trade or business andthat this injury was‘antitrust injury.’ [Fn. omitted]”].) The antitrust injury element requires that a private plaintiff’s alleged harm beattributable to defendants’ anticompetitive conduct and not something else—such as the patent on Cipro. (E.g., Morrison, supra, 66 Cal.App.4th at 548.) Antitrust injury is a separate and independent > Plaintiffs incorrectly argue that these decisions should be ignored because they involved a “narrowed” patent and because the subsequent patent challengers raised different grounds. (Opening Br. 50.) It is undisputed, however, that when Bayer re-submitted the Cipro patent to the PTO, the relevant patent claim (claim 12) at issue in the Bayer-Barr litigation “did not change in reexamination.” (11 AA 2691.) And in affirming the grant of summary judgmentin the defendants’ favor in the federal Cipro antitrust litigation, the Federal Circuit—the court with specialized jurisdiction over patent cases and whose rulings are authoritative on matters of federal patent law—expressly concluded that “no fraud occurred” in Bayer’s procurementof the Cipro patent. (Cipro Fed. Cir., supra, 544 F.3d at p. 1341; see also Lockwood v. Sheppard, Mullin, Richter & Hampton (2009) 173 Cal.App.4th 675, 684, citing 28 U.S.C. § 1295(a)(1).) KIRKLAND & ELLIS LLP Page 8 January 23, 2014 requirement in addition to proof of the antitrust violation itself: for example, even when an agreement is per se unlawful underthe antitrust laws, a private plaintiff still must show antitrust injury to establish liability. (/bid.; see also Flagship Theatres ofPalm Desert, LLC v. Century Theatres, Inc. (2011) 198 Cal.App.4th 1366, 1378 [“[T]he antitrust injury requirement applies to cases alleging conduct that is per se unlawful as well as to cases governed by the rule of reason.”].) There was no similar requirement in Actavis. (See Atlantic Richfield Co. v. USA Petroleum Co. (1990) 495 U.S. 328, 339 [“Antitrust injury does not arise [under the FTC Act] until a private party is adversely affected by an anticompetitive aspect of the defendant’s conduct,” emphasis modified].) Likewise, to state a claim under the FTC Act, the government need not demonstrate causation. (See 15 U.S.C. § 45, subd. (n); see also Neovi, supra, 604 F.3d at pp. 1155, 1157.) Bycontrast, a private plaintiff suing under the Cartwright Act (like a private plaintiff under the Sherman Act) must show that defendants’ conduct was the but-for cause of his or her actual injury—as opposed to some other cause such as a patent that already foreclosed generic competition by operation of law. (Morrison, supra, 66 Cal.App.4th at p. 548 [affirming judgment on the pleadings for defendant becauseplaintiffs “failed to allege any facts to show they suffered an injury which was caused by restraints on competition”|.) Because the lower courts held that plaintiffs could notsatisfy the first step of the Rule of Reason as a matter of law, the lower courts had no occasion to consider whetherplaintiffs could satisfy the antitrust injury and causation requirements, and these issues are not before the court. B. Actavis Involved a Settlement of Litigation Over a Patent Whose Validity Has Never Been Resolved. Second, Actavis involved a settlement of litigation over a patent whosevalidity has never been adjudicated. In concluding that Hatch-Waxmanpatent settlements may warrant antitrust scrutiny under the Rule of Reason, the U.S. Supreme Court noted the concern that such a patent might go unreviewed. (See Actavis, supra [133 S.Ct. at p. 2231] (“The patent here may or may not be valid, and may or may not be infringed.”]; id. at p. 2240 (dis. opn. of Roberts, C.J.) [“The problem, as the Court correctly recognizes, is that we’re not quite certain if the patent is actually valid, or if the competitor is infringing it.”’].) Here, however, that concern is not present, because Bayer’s patent has been adjudicated again and again—and upheld again and again—bythree different courts and by the PTO. While Actavis recognizes the need for antitrust scrutiny when a patent settlement forecloses any adjudication of whether a patent is valid, the premise behind that concern does not exist where, as here, Bayer followed the Cipro Settlement by submitting its patent to the PTO and defending it against multiple other challengers—resulting in decisions upholding the patent attrial (against Carlsbad) and at the Federal Circuit (against Mylan and Schein). KIRKLAND & ELLIS LLP Page 9 January 23, 2014 II. In the Alternative, the Court Could Remand This Case For Further Proceedings in Light ofActavis. As explained above, the relevance of Actavis is that it rejects the exact same arguments that plaintiffs have advanced here in demanding that the Cipro Settlement be held per se unlawful or presumptively unlawful under a quick-lock approach. In holding that Hatch- Waxman patent settlements should be analyzed under the Rule of Reason, Actavis also underscores that the lower courts correctly concluded that the Generic Defendants were entitled to summary judgmentbecause plaintiffs could not demonstrate that the Cipro Settlement had an actual adverse effect on competition—as the threshold step in the Rule of Reason requires. Although the superior court considered the scope of the patent test in its opinion, it also held “that the agreement does not violate the Cartwright Act under the Rule of Reason.” (11 AA 2690.) The Court of Appeal likewise concluded that the Cipro Settlement was lawful under the Rule of Reason. (Slip opn. 32-33 [concluding that “the Cipro agreements do not violate the Cartwright Act under rule-of-reason analysis or the [scope of the patent] analysis” that the Eleventh Circuit had used before Actavis was decided, emphasis added].) Even if the court were to conclude that Actavis warrants a more fulsome Rule of Reason analysis, the appropriate step would be to transfer the case to the Court of Appeal with instructions that the case be remanded without decision to the superior court for further proceedings. (See Code Civ. Proc., § 43; see also Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1052 [remanding to the Court of Appeal with directions to, in turn, remandto thetrial court for further proceedings].) A remand would enable the parties to develop a more complete record ofall of the competitive circumstances surrounding the Cipro Settlement and to brief the relevant legal issues with the benefit of a fully developed record. For example, expert discovery was commenced but never completed in the superior court because the parties agreed to suspend further discovery pending the outcome of the federal Cipro antitrust litigation (which was resolved in defendants’ favor on summary judgmentand then affirmed on appeal). As a result, one or both sides may wish to present additional expert analyses of the economic effects of the settlement’s terms against plaintiffs’ asserted alternatives—as well as analyses of the impact of Bayer’s patent rights on the competitive landscape before and after the settlement wasreached. Actavis itself contemplates that trial courts will oversee the Rule of Reason inquiry in the first instance, given their first-hand access to the complete record and the ability to develop such additional evidence as may become relevant. (Actavis, supra [133 S.Ct. at p. 2238] [“We therefore leave to the lower courts the structuring of the present rule-of-reason antitrust litigation.”].) This accords with the practice of California courts, which have held that a Rule of Reason analysis should be performed first by the trial court. (Feldman v. Sacramento Bd. of Realtors, Inc. (1981) 119 Cal.App.3d 739, 745-747 (Feldman) [remanding to trial court to consider aspect of Rule of Reason analysis not previously passed upon].) This makes sense. KIRKLAND & ELLIS LLP Page 10 January 23, 2014 After all, “‘when reviewing the correctness ofa trial court’s judgment, an appellate court will consider only matters which were part of the record at the time the judgment was entered[,] [citation],’” and will not take additional evidence absent “exceptional circumstances.” (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444 fn. 3.) By contrast, the trial court can supplement the record as needed for proper consideration ofall issues to be decided. For this reason, remand to the trial court is appropriate if an appellate court determines that further analysis under the Rule of Reason is necessary. (See, e.g., Feldman, supra, 119 Cal.App.3d at pp. 745-747; Freeman v. San Diego Assn. of Realtors (9th Cir. 2003) 322 F.3d 1133, 1147, fn. 16.) Accordingly, if this court concludesthat it cannot affirm the decision below onthe record before it, it should remand the case to the Court of Appeal with instructions that the case be remanded to the superior court so that the parties can further develop the record. CONCLUSION For the foregoing reasons, the Generic Defendants respectfully request that the court affirm the decision below or, in the alternative, remand the case without decision to the Court of Appeal with instructions that the case be remanded to the superior court for further proceedings. Sincerely, KIRKLAND & ELLIS LLP Page 11 January 23, 2014 Joann Rezzo EDLESON & REZZO 402 West Broadway,Suite 2700 San Diego, CA 92101 (619) 230-0836 Kathryn E. Karcher KARCHER HARMESPS 401 B Street, Suite 2450 San Diego, CA 92101 (619) 565-4755 Counselfor Defendants Barr Laboratories, Inc., Hoechst Marion Roussel, Inc., The Rugby Group, Inc., and Watson Pharmaceuticals, Inc. Jay P. Lefkowitz, P.C.* Karen N. Walker, P.C.* Edwin John U* Gregory L. Skidmore* KIRKLAND & ELLIS LLP 655 Fifteenth Street, N.W. Washington, DC 20005 (202) 879-5000 Counselfor Defendant Barr Laboratories, Inc. David E. Everson* Heather S. Woodson* Victoria Smith* STINSON LEONARD STREET LLP 1201 Walnut Street, Suite 2900 Kansas City, MO 64106 (816) 842-8600 Counselfor Defendants Hoechst Marion Roussel, Inc., The Rugby Group, Inc., and Watson Pharmaceuticals, Inc. * Admittedpro hacvice KIRKLAND & ELLIS LLP Page 12 January 23, 2014 CERTIFICATE OF WORD COUNT Pursuant to California Rules of Court and this court’s December 11, 2013 Order, the undersigned certifies that the foregoing supplementalletter brief contains 4,455 words, exclusive of tables, certificates, and attachments, as counted by the Word Court feature of Microsoft Word. CLU Edwin John U KIRKLAND & ELLIS LLP Page 13 January 23, 2014 DECLARATION OF SERVICE Case Name: In re Cipro Cases I & II Case No.: 5198616 I am over the age of eighteen years and nota party to this action. Mybusiness addressis 655 15th Street, NW, Washington, DC 20005. On January 23, 2014, I served the attached Supplemental Letter Brief of the Generic Defendants by placing it in a sealed envelope with postage fully prepaid, in the Federal Express pickup location at Kirkland & Ellis LLP, 655 15th Street, NW, Washington, DC 20005 addressed as set forth below. J am familiar with Kirkland & Etlis’ practice for collecting and processing correspondence for mailing. On the same day that the correspondenceis placed for collection and mailing, it is deposited in the ordinary course of business with Federal Express. I declare under penalty of perjury under the laws of the United States that the aboveis true and correct. Dated January 23, 2014. Zo u Edwin John U KIRKLAND & ELLIS LLP Page 14 January 23, 2014 SERVICE LIST Attorney Party Dan Drachler Counsel for Plaintiff/Appellant: ZWERLING, SCHACHTER & ZWERLING 1904 Third Avenue, Suite 1030 Karyn McGaughey, Barbara Hymes Cohen, Seattle, WA 98101 Deborah Patane, Donna Moore, IUOE Stationary Engineers Local 39 Health & Ralph B. Kalfayan Welfare Plan, Sheet Metal Workers Health KRAUSE, KALFAYAN, BENINK Plan of Southern California & SLAVENS, LLP ~ 550 W. C Street, Suite 530 San Diego, CA 92101 By Federal Express Joseph Richard Saveri LIEFF CABRASER HEIMANN & BERNSTEIN LLP 275 Battery St., 29 FL San Francisco, CA 94111 Peter B. Bensinger Counsel for Defendant/Respondent Bayer BARTLIT BECK HERMAN PALENCHAR Corporation: & SCOTT LLP 54 W. Hubbard Street By Federal Express Suite 300 Chicago,I] 60654 Kevin D. McDonald JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Christopher J. 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