More on the upcoming battle on drug patent reverse payments

Further to the Supreme Court's request to the Solicitor General for briefing in the Tamoxifen Citrate Antitrust Litigation, recall the paper by Lawrence T. Kass entitled "FTC Takes Drug-Patent 'Reverse Payments' to High Court," which appeared in the Oct. 3, 2005 issue of the NYLJ.

Mr. Kass noted of the 11th Circuit decision in the Schering-Plough case (relating to K-Dur):

The Eleventh Circuit's decision was welcomed by many in the
pharmaceutical industry as lifting some of the antitrust threat that has been chilling drug patent litigation settlements, which are already rare due to the
statutory framework for drug patents. Drug companies, consumer groups, patent
counsel and antitrust counsel alike are closely following the FTC's bid to overturn
the Eleventh Circuit's decision.

(...)

The [full] commission [of the FTC] ordered the parties to cease and
desist participating in any agreement in which a generic manufacturer receives
anything of value and agrees not to research, develop, manufacture, market or
sell the generic product for any period of time. On appeal, the Eleventh Circuit
vacated the commission's order.

(...)

The Eleventh Circuit criticized the commission for having
"cavalierly dismissed" the Valley Drug decision and analysis. The court explained
that while an agreement to allocate markets is "anticompetitive" insofar as it
reduces competition, increases prices and diminishes output, the court in
Valley Drug found such effects permissible because one of the parties owned a
patent. Citing Valley Drug,the court explained that an antitrust analysis requires an examination of:

(1) the scope of the patent's exclusionary potential;
(2) the extent to which the agreements exceed that scope; and
(3) the resulting anticompetitive effects.

The court asserted that an exception cannot lie when the issue turns on validity, as in Valley Drug,as opposed to infringement, as in Schering.

(...)
The court also explained that patents, by their nature, create a
right to exclude others and therefore have a permissible anticompetitive effect.
One must consider the patent laws, which encourage innovation and disclosure,
and the extent to which they override antitrust liability. In addition, the
court emphasized the benefits of settlement and the consideration that there
would be little incentive to settle pharmaceutical patent cases if reverse
payments were impermissible.

**IPBiz notes, relevant to discussion of Innovation and Its Discontents (Jaffe and Lerner), the patent laws REQUIRE disclosure, which disclosure hopefully ENCOURAGES innovation.