Page 4 - 2015_0908Litigation

S4 | Tuesday, sepTember 8, 2015 | Litigation
| nylj.com

By STephen J. ellioTT
H
istorically, the resolution by settle-
ment of hatch-waxman patent litiga-
tion between a branded pharmaceu-
tical patent owner and a generic drug firm
has been common. In recent years, however,

settlements of such cases have spawned a
series of antitrust decisions, particularly in
connection with so-called “reverse payment”
agreements. In a reverse payment settlement,
the generic firm agrees to abandon its pat-
ent challenge in exchange for an entry date
before the patent expires, as well as a cash
payment or other additional consideration

from the patent owner.
this settlement structure is rooted in the
combination of the hatch-waxman regulatory
scheme with the patent system. the hatch-
waxman act provides for a 30-month stay of
fda approval following a patent infringement k
suit by the patentee. thus, the act forces the oC
patent litigation, or most of it, to occur in gst
the period prior to marketing of the generic BI

version of the patented drug. Because no
sales or profits have been diverted from the
patentee to the generic during the stay, the Reverse Payments,
patentee has no claim for lost sales or profits. ever, that “[i]f the basic reason [for a reverse-
accordingly, while compromise of a damages payment settlement] is a desire to maintain
claim is often a vehicle for settling patent and to share patent-generated monopoly
infringement suits, that approach is typically profits, then, in the absence of some other
not available for hatch-waxman cases. as a ‘Actavis’
justification, the antitrust laws are likely to
result, parties to hatch-waxman patent litiga- forbid the arrangement.” Id. at 2237.

tion have frequently settled by a compromise the Actavis court also held that reverse-
that includes a payment by the patentee to payment settlements require full “rule of
the generic.
And Settlement of reason” analysis, and that “quick look” anti-
trust scrutiny, under which a reverse-payment
‘Actavis’
settlement would be presumptively unlaw-
ful, is not appropriate. the court declined to
In Federal Trade Commission v. Actavis, Hatch-Waxman elaborate on how the rule-of-reason analysis
133 s. Ct. 2223 (2013), the u.s. supreme Court should be conducted, choosing instead to

held that reverse-payment settlements are leave to the lower courts the structuring of
not immune from antitrust scrutiny, and that the rule-of-reason inquiry. however, the court
they should be analyzed under the rule of Disputes
observed that “it is normally not necessary
reason. the settlements at issue in Actavis to litigate patent validity to answer the anti-
related to patent litigation over solvay’s trust question.” Instead, the court said, “the
prescription drug androgel. In 2003, acta- size of [an] unexplained reverse payment can
vis and paddock applied for fda approval provide a workable surrogate for the patent’s
to market generic versions of androgel, and weakness,” avoiding the need to conduct a
solvay sued for infringement. In 2006, solvay detailed exploration of the validity of the pat-

entered into settlement agreements under ent itself. Id. at 2236-37. In performing the between $243 million and $342 million. fol- payments to a generic in the settlement con-
which it dismissed its claims and the gener- rule of reason analysis, the supreme Court lowing the settlements, the ftC and various text, the supreme Court held, “may ... provide
ics agreed to delay marketing their products explained that courts should consider the private parties filed suit against solvay and strong evidence that the patentee seeks to
until 5.5 years before solvay’s patent expired. “size [of the reverse payment], its scale in the generics, alleging that the settlements induce the generic challenger to abandon its
actavis and another generic, par, which had relation to the [patentee’s] anticipated future violated the antitrust laws.
claim with a share of the monopoly profits
aligned with paddock, also agreed to assist litigation costs, its independence from other the supreme Court held that the mere fact that would otherwise be lost in the com-
solvay in marketing androgel, and paddock services for which it might represent pay- that the settlements fell within the scope of petitive market.” Id. at 2235. on the other
agreed to act as a backup drug manufac- ment, and the lack of any other convincing the “exclusionary potential” of the patents did hand, the court acknowledged that antitrust
justification.” Id. at 2237.
analysis will not always require rejection of a
turer. In exchange, solvay agreed to pay the not immunize them from antitrust scrutiny.
generics an estimated aggregate amount of
to date, Actavis has been addressed by the Court found such scrutiny appropriate reverse-payment settlement, because “offset-
one federal appellate court—the Court of because, in its view, reverse-payment settle- ting ... virtues are sometimes present,” such
appeals for the third Circuit. It also has ments have the “potential for genuine adverse as avoiding litigation costs or compensating
STephen J. ellioTT is special counsel at Sullivan & been addressed in a number of district court effects on competition.” Id. at 2234 (internal the generic for services provided to the patent
Cromwell.
decisions, and in a recent decision by the
quotation marks and citation omitted). large
holder. Id. at 2235. the court concluded, how-