CPLRG™ 0086 - Federal Trade Commission v. Actavis, Inc. - Jun. 17, 2013

Federal Trade Commission v. Actavis, Inc., 133 S. Ct. 2223 (2013) (Breyer; Roberts, dissenting).  For the Court’s slip opinion, click here.FTCActivis06172013

Actavis arose when the Federal Trade Commission filed suit, asserting that a “reverse payment settlement agreement” of a patent infringement suit between a drug patent owner and a generic maker violated the antitrust laws.

EXAMPLE OF “REVERSE PAYMENT SETTLEMENT.”    The Court provided a simple hypothetical of a reverse payment settlement as follows:

“Company A sues Company B for patent infringement. The two companies settle under terms that require (1) Company B, the claimed infringer,not to produce the patented product until the patent’s term expires, and (2) Company A, the patentee, to pay B many millions of dollars. Because the settlement requires the patentee to pay the alleged infringer, rather than the other way around, this kind of settlement agreement is often called a `reverse payment’ settlement agreement.”

The Court noted that “the basic question here is whether such an agreement can sometimes unreasonably diminish competition in violation of the antitrust laws. See, e.g., 15 U.S.C. §1 (Sherman Act prohibition of `restraint[s] of trade or commerce’).  Cf. Palmer v. BRG of Ga., Inc., 498 U.S. 46 (1990) (per curiam) (invalidating agreement not to compete).”

The Eleventh Circuit held that the agreement in question was ” `immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.’   FTC v. Watson Pharms., Inc., 677 F.3d 1298, 1312 (2012).”

The Court held that the Eleventh Circuit erred.  Instead of immunity, a rule of reason approach applies.The Court recognized that reverse payment settlements may be unique to the context of controversies between brand drug patent owners and generic drug makers using the abbreviated FDA procedure provided by the Hatch-Waxman Act.  That procedure provides a first generic challenger a 180-day period of exclusivity, which diminishes the incentive of other generic companies to challenge a drug patent.

However, the majority opinion by Justice Breyer made three points, which could be of potential general interest in regard to antitrust restraints on patent licenses.  The points are:

* SCOPE OF PATENT MONOPOLY; PATENT AND ANTITRUST POLICIES.  “[P]atent 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.”
* VALID PATENT EXCLUDES OTHERS.  “The patent here may or may not be valid, and may or may not be infringed.  `[A] valid patent excludes all except its owner from the use of the protected process or product,’ United States v. Line Co., 333 U.S. 287, 308 (1948) (emphasis added).”
* OVERLY RESTRICTIVE PATENT LICENSING; SETTLEMENTS AND OTHER CONTEXTS.  “[B]oth within the settlement context and without, the Court has struck down overly restrictive patent licensing agreements–irrespective of whether those agreements produced supra-patent-permitted revenues.”

Chief Justice Roberts dissented, noting, inter alia:

“The majority today departs from the settled approach separating patent and antitrust law, weakens the protections afforded to innovators by patents, frustrates the public policy in favor of settling, and likely undermines the very policy it seeks to promote by forcing generics who step into the litigation ring to do so without the prospect of cash settlements. I would keep things as they were and not subject basic questions of patent law to an unbounded inquiry under antitrust law, with its treble damages and famously burdensome discovery. See 15 U.S.C. §15; Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 558-559 (2007).”

©2010 Donald S. Chisum - All Rights Reserved

Website design by Bluegrass Internet Services