FEATURED CONTENT INTELLECTUAL PROPERTY
son test in Actavis, broadly read, may stimulate antitrust challenges to patent settlement agreements that do not involve a monetary payment, but that instead implicate some other form of consideration that an antitrust plaintiff alleges is designed to keep generics off the market. The theory would be that agreements entailing any consideration—short of an agreement that simply allows the generic to enter before the underlying patent expires—must be defended by showing that the value of the consideration does not include a premium to the generic to stay out of the market. Indeed, the FTC has already challenged patent settlements that involve consideration beyond monetary payments, such as a settlement in which a branded company agreed not to launch an authorized generic drug. See, e.g., Brief of Amicus Federal Trade Commission, In re: Effexor XR Antitrust Litig., No. 3.11-cv-05479 (D.N.J. Aug. 10, 2012) (asserting that an agreement by a branded company not to launch an authorized generic functions as a “payment” for delayed entry and constitutes prima facie evidence of an unreasonable restraint of trade).5 The FTC emphasized that because the introduction of the branded authorized generic would cut into the revenues of a competing generic, a no-authorized generic commitment can induce the generic company to delay entry, constituting an unlawful settlement agreement.
Notably, measuring the value of a nonmonetary benefit—s uch as a brand-name drug manufacturer’s promise not to launch its own generic—is often difficult, time consuming, and expensive. Such a trial within a trial can undermine significantly the parties’ incentive to settle the underlying patent dispute.
Horizon Issue: Does Actavis’s Rationale Apply in Matters Outside of the HatchWaxman Context?
concerns and granted review merely to resolve the circuit split regarding the “application of the antitrust laws to Hatch-Waxman-related patent settlements.” 2013 WS 2922122, at *4, *6. Actavis’s holding should therefore be confined to Hatch-Waxman settlements. A broader reading would risk eroding the rights of patent holders and would undermine the incentives to innovate.
Actavis Makes it Difficult for Settling Parties to Prevail on Antitrust plaintiffs may attempt to use the a Motion to Dismiss
Actavis decision outside of the Hatch-Waxman context. For example, patent licensing agreements are often viewed as anticipatory settlements, for they are commonly entered into to avoid or resolve patent disputes. Though patent licensing agreements occur outside the Hatch-Waxman framework, an antitrust plaintiff, following the rationale of Actavis, may try to challenge a patent licensing agreement by arguing that the consideration involved does not reflect the value of the patent rights granted under the agreement, and instead includes a premium not to compete with full force. Courts should, at the very least, view such efforts to expand Actavis with great skepticism, given the unique set of circumstances surrounding Actavis. The Supreme Court recognized that the Hatch-Waxman regulatory framework generates unique Because the Court’s rule of reason analysis shifts the burden to the defendants to justify the reverse payment involved in a settlement agreement, the decision makes it very difficult for defendants to prevail on a motion to dismiss. And because discovery is time consuming and expensive, Actavis increases significantly the costs of settling patent infringement lawsuits. In settling a patent infringement lawsuit, parties must now also consider the potential costs of discovery should their settlement agreement be challenged under the antitrust laws. Furthermore, it also remains to be seen how courts will apply the “amorphous rule” announced in Actavis on summary judgment in terms of the ease with which an antitrust plaintiff could create a disputed issue of fact. This uncertainty further raises the cost of settling patent disputes.
Footnotes 1. The Sixth Circuit held that a reverse payment settlement agreement was per se unlawful. See In re Cardizem CD Antitrust Litigation, 332 F.3d 896 (6th Cir. 2003). Cardizem, however, was the first appellate decision in a pay-for-delay case, and was largely disregarded by subsequent appellate courts. 2. After the Court granted review in the case, it was renamed FTC v. Actavis, Inc. 3. Chief Justice Roberts filed a dissenting opinion, joined by Justices Scalia and Thomas. Justice Alito was recused from the case. 4. Furthermore, the Court’s proposition that having “serious doubts” about one’s case is enough to make a settlement suspect under the antitrust laws is quite revolutionary. The primary reason for settlement, after all, is to hedge against the risk of losing the lawsuit. Short of a case where the litigation is a “sham” or where a party settles purely to avoid litigation costs, a settling party must have at least some doubts about its chances of victory to make the decision to settle. Defining “serious doubts” is often in the eye of the beholder and has never before been a factor in evaluating whether an agreement violates the antitrust laws. 5. The U.S. District Court for the District of New Jersey issued a stay in this case pending the resolution of the Supreme Court proceedings. Order, No. 3.11-cv-05479 (D.N.J. Oct. 23, 2012).
LMG LIFE SCIENCES 2013
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