FTC v. Actavis, Inc. | |
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Argued March 25, 2013 Decided June 17, 2013 | |
Full case name | Federal Trade Commission v. Actavis, Inc., et al. |
Docket no. | 12-416 |
Citations | 570 U.S. ___(2013) ( more) |
Argument | Oral argument |
Opinion announcement | Opinion announcement |
Case history | |
Prior | Injunction denied by Northern Georgia District Court,687 F. Supp. 2d 1371, 1379 (ND Ga. 2010); Eleventh Circuit affirms, complaint dismissed, 677 F.3d 1298, 1312 (11th Cir. 2012), |
Holding | |
Reverse payment settlements of patent litigations are not immune from antitrust liability. U.S. Supreme Court reversed and remanded. | |
Court membership | |
| |
Case opinions | |
Majority | Breyer, joined by Ginsburg, Sotomayor, Kagan |
Dissent | Roberts, joined by Scalia, Thomas |
Laws applied | |
Sherman Act; Hatch-Waxman Act |
FTC v. Actavis, Inc., 570 U.S. ___ (2013), was a United States Supreme Court case that blurred the lines between patent law and antitrust law. The question at hand was whether it was illegal for brand-name manufacturers to use reverse payment settlements to keep would-be generic competitors out of the market, even if the brand-name drug company held a legal limited monopoly in the form of a patent. While the Court refused to declare that such settlements were presumptively illegal, it did rule 5-3 that the Federal Trade Commission (FTC) could not be prevented from bringing antitrust action against the defendants to try for the unlawfulness of the reverse payment settlement. [1]
This decision presents a challenge to what has been the prominent practice of "pay-for-delay" settlements in the drug industry. With this ruling, patent owners no longer have immunity from the " rule of reason" scrutiny of antitrust laws when making reverse payment settlements, even if the settlements are only for the terms of the patents. In effect, this limits the scope of power of patent owners in holding their monopolies. In addition, as a result, using reverse payment settlements to resolve patent disputes now carries a greater risk of coming under attack and being ruled as infringing of antitrust laws. [2]
Under the "paragraph IV route" of the Hatch-Waxman Act, a generic drug manufacturer can assure the U.S. Food and Drug Commission (FDA) that it will not infringe upon the patent of a brand-name drug by proving that the patent is invalid or that the sale of the generic drugs will not violate the brand-name's patent. This automatically constitutes a challenge to the patent and will often times lead to litigation between the brand-name and generic manufacturer. The FDA then must withhold from approving the generic for 30 months while the courts resolve the dispute. If the dispute is not resolved within that period, then the FDA may go ahead and approve the generic for the market. [1]
Respondent Solvay Pharmaceuticals had recently received a patent for its approved brand-name drug, Androgel. Two generic-drug companies, Actavis and Paddock then filed patents for generic drugs that were modeled after Androgel in 2003. [2] Solvay sued Actavis for patent infringement under paragraph IV litigation, but the FDA eventually approved Actavis's generic drug for the market after the dispute over the validity of Solvay's patent went on for three years. [2] Rather than bringing its drug to the market, Actavis instead entered a reverse payment settlement agreement with Solvay in 2006. Under the terms of the agreement, Actavis would keep its generic drug off the market for a "specified number of years" and also agree "to promote Androgel to doctors". [1] In exchange, Actavis would be compensated in tens of millions of dollars. [3] The Federal Trade Commission filed suit, alleging that Actavis had unlawfully abandoned its patent challenge by agreeing to share in the "monopoly profits" of Solvay and withdrawing its generic drug from the market. Solvay was simultaneously accused of attempting to extend its monopoly rights longer than what its patent would have conferred if otherwise left as valid. [2] The Eleventh Circuit dismissed these claims, ruling that the Federal Trade Commission had not shown that the reverse payment settlement was excluding competition more than what a patent would and that courts could not require parties to further litigate in order to avoid antitrust liability. [1]
The majority opinion reversed the Eleventh Circuit's ruling that antitrust laws would only apply to patent holders if they acted outside the scope of their patent monopoly. Instead, the majority decided that the antitrust question could not be decided only by measuring the anticompetitive effects against patent law policy, but must also be measured against "procompetitive" antitrust law policies. Drawing upon precedent cases, the majority contended that there have been examples in which patent settlements have nonetheless violated antitrust laws, and as such, show that patent policies must be weighted against antitrust policies as well. In addition, the majority points out the uniqueness of reverse payment settlements in which "the party with no claim on damages" is the one that pays the other party for the sake of staying out of the patentee's market. This is in contrast to how a settlement would normally go in which the patentee demands a set amount as reparation for damages done by the patent infringer. Noting this unusual distinction, the majority argues that reverse payments are not a normal form of settlement in patent suits and thus cannot be scrutinized solely under the lens of patent law where there seems to be an anticompetitive purpose. The majority gives five reasons for why it believed that the FTC should have been allowed to prove its antitrust claim: [1]
At the same time, due to the many factors and complexities that determine whether a reverse payment settlement causes anticompetitive harm (“its size, its scale in relation to the payor’s anticipated future litigation costs, its independence from other services for which it might represent payment, and the lack of any other convincing justification”), the majority opinion ruled that the FTC must still "prove its case as in other rule-of-reason cases" rather than holding that reverse payments were presumptively illegal. [1]
In contrast to the majority, the dissent rejected the application of antitrust law that the majority used for this case, arguing that it was a "novel approach" and "without any support in statute". Pointing out that a "patent carves out an exception to the applicability of antitrust laws", the dissenting opinion argued that it is only when a patent holder acts beyond the scope of its granted monopoly does scrutiny under antitrust law become applicable. Otherwise, the patent holder is operating within his rights to be excepted from antitrust liability. As a result, the dissent believed that the real question was whether the reverse payment settlement "gives Solvay monopoly power beyond what the patent already gave it". [1]
Dissent contended that it is within the rights of a patent holder to exclude competition to its patented invention, and as such, Solvay's reverse payment settlement to Actavis was lawful.
In addition, dissent argued that there has been no precedence in the Court's history in which a competitor's refraining from challenging a patent violated antitrust laws. Dissent continued on by pointing out that settlements are used in patent litigation all the time, some of which can even violate antitrust law (e.g. licensing products to competitors to sell at fixed prices), and yet they are still not liable for antitrust allegations as long as they act within the scope of the patent. Noting that patent litigation is particularly costly and expensive, the dissent also viewed the majority's limitation on settlements as eroding what is generally seen as "a good thing". [1] Dissent also viewed majority's conclusion that litigants would still settle without payment as unpersuasive because “parties are more likely to settle when they have a broader set of valuable things to trade.” [4]
Dissent disagreed with majority's opinion that a detailed analysis of a patent's validity would not be required and could be substituted with the fact that a patent holder's large payment indicates doubt about its patent's strength. Dissent noted that even a risk averse patent holder that is 95% certain of its patent's validity may pay a large sum in order to avoid litigation and that 5% risk of a finding of invalidity. [4] Furthermore, dissent also pointed out that it would be absurd for a patent holder to be liable for antitrust infringement because it took away a chance of having its patent proven invalid by settling, and not be liable in another case in which it decides to litigate to the end and have its patent ultimately proven valid. [1]
Because the real pertinent question was whether a patent holder acted beyond the scope of its patent, dissent's fundamental point was that the case was a matter of only patent law, not one of antitrust law. [1]
Category:United States antitrust case law Category:United States patent case law Category:United States intellectual property case law Category:United States case law Category:United States Supreme Court cases
FTC v. Actavis, Inc. | |
---|---|
![]() | |
Argued March 25, 2013 Decided June 17, 2013 | |
Full case name | Federal Trade Commission v. Actavis, Inc., et al. |
Docket no. | 12-416 |
Citations | 570 U.S. ___(2013) ( more) |
Argument | Oral argument |
Opinion announcement | Opinion announcement |
Case history | |
Prior | Injunction denied by Northern Georgia District Court,687 F. Supp. 2d 1371, 1379 (ND Ga. 2010); Eleventh Circuit affirms, complaint dismissed, 677 F.3d 1298, 1312 (11th Cir. 2012), |
Holding | |
Reverse payment settlements of patent litigations are not immune from antitrust liability. U.S. Supreme Court reversed and remanded. | |
Court membership | |
| |
Case opinions | |
Majority | Breyer, joined by Ginsburg, Sotomayor, Kagan |
Dissent | Roberts, joined by Scalia, Thomas |
Laws applied | |
Sherman Act; Hatch-Waxman Act |
FTC v. Actavis, Inc., 570 U.S. ___ (2013), was a United States Supreme Court case that blurred the lines between patent law and antitrust law. The question at hand was whether it was illegal for brand-name manufacturers to use reverse payment settlements to keep would-be generic competitors out of the market, even if the brand-name drug company held a legal limited monopoly in the form of a patent. While the Court refused to declare that such settlements were presumptively illegal, it did rule 5-3 that the Federal Trade Commission (FTC) could not be prevented from bringing antitrust action against the defendants to try for the unlawfulness of the reverse payment settlement. [1]
This decision presents a challenge to what has been the prominent practice of "pay-for-delay" settlements in the drug industry. With this ruling, patent owners no longer have immunity from the " rule of reason" scrutiny of antitrust laws when making reverse payment settlements, even if the settlements are only for the terms of the patents. In effect, this limits the scope of power of patent owners in holding their monopolies. In addition, as a result, using reverse payment settlements to resolve patent disputes now carries a greater risk of coming under attack and being ruled as infringing of antitrust laws. [2]
Under the "paragraph IV route" of the Hatch-Waxman Act, a generic drug manufacturer can assure the U.S. Food and Drug Commission (FDA) that it will not infringe upon the patent of a brand-name drug by proving that the patent is invalid or that the sale of the generic drugs will not violate the brand-name's patent. This automatically constitutes a challenge to the patent and will often times lead to litigation between the brand-name and generic manufacturer. The FDA then must withhold from approving the generic for 30 months while the courts resolve the dispute. If the dispute is not resolved within that period, then the FDA may go ahead and approve the generic for the market. [1]
Respondent Solvay Pharmaceuticals had recently received a patent for its approved brand-name drug, Androgel. Two generic-drug companies, Actavis and Paddock then filed patents for generic drugs that were modeled after Androgel in 2003. [2] Solvay sued Actavis for patent infringement under paragraph IV litigation, but the FDA eventually approved Actavis's generic drug for the market after the dispute over the validity of Solvay's patent went on for three years. [2] Rather than bringing its drug to the market, Actavis instead entered a reverse payment settlement agreement with Solvay in 2006. Under the terms of the agreement, Actavis would keep its generic drug off the market for a "specified number of years" and also agree "to promote Androgel to doctors". [1] In exchange, Actavis would be compensated in tens of millions of dollars. [3] The Federal Trade Commission filed suit, alleging that Actavis had unlawfully abandoned its patent challenge by agreeing to share in the "monopoly profits" of Solvay and withdrawing its generic drug from the market. Solvay was simultaneously accused of attempting to extend its monopoly rights longer than what its patent would have conferred if otherwise left as valid. [2] The Eleventh Circuit dismissed these claims, ruling that the Federal Trade Commission had not shown that the reverse payment settlement was excluding competition more than what a patent would and that courts could not require parties to further litigate in order to avoid antitrust liability. [1]
The majority opinion reversed the Eleventh Circuit's ruling that antitrust laws would only apply to patent holders if they acted outside the scope of their patent monopoly. Instead, the majority decided that the antitrust question could not be decided only by measuring the anticompetitive effects against patent law policy, but must also be measured against "procompetitive" antitrust law policies. Drawing upon precedent cases, the majority contended that there have been examples in which patent settlements have nonetheless violated antitrust laws, and as such, show that patent policies must be weighted against antitrust policies as well. In addition, the majority points out the uniqueness of reverse payment settlements in which "the party with no claim on damages" is the one that pays the other party for the sake of staying out of the patentee's market. This is in contrast to how a settlement would normally go in which the patentee demands a set amount as reparation for damages done by the patent infringer. Noting this unusual distinction, the majority argues that reverse payments are not a normal form of settlement in patent suits and thus cannot be scrutinized solely under the lens of patent law where there seems to be an anticompetitive purpose. The majority gives five reasons for why it believed that the FTC should have been allowed to prove its antitrust claim: [1]
At the same time, due to the many factors and complexities that determine whether a reverse payment settlement causes anticompetitive harm (“its size, its scale in relation to the payor’s anticipated future litigation costs, its independence from other services for which it might represent payment, and the lack of any other convincing justification”), the majority opinion ruled that the FTC must still "prove its case as in other rule-of-reason cases" rather than holding that reverse payments were presumptively illegal. [1]
In contrast to the majority, the dissent rejected the application of antitrust law that the majority used for this case, arguing that it was a "novel approach" and "without any support in statute". Pointing out that a "patent carves out an exception to the applicability of antitrust laws", the dissenting opinion argued that it is only when a patent holder acts beyond the scope of its granted monopoly does scrutiny under antitrust law become applicable. Otherwise, the patent holder is operating within his rights to be excepted from antitrust liability. As a result, the dissent believed that the real question was whether the reverse payment settlement "gives Solvay monopoly power beyond what the patent already gave it". [1]
Dissent contended that it is within the rights of a patent holder to exclude competition to its patented invention, and as such, Solvay's reverse payment settlement to Actavis was lawful.
In addition, dissent argued that there has been no precedence in the Court's history in which a competitor's refraining from challenging a patent violated antitrust laws. Dissent continued on by pointing out that settlements are used in patent litigation all the time, some of which can even violate antitrust law (e.g. licensing products to competitors to sell at fixed prices), and yet they are still not liable for antitrust allegations as long as they act within the scope of the patent. Noting that patent litigation is particularly costly and expensive, the dissent also viewed the majority's limitation on settlements as eroding what is generally seen as "a good thing". [1] Dissent also viewed majority's conclusion that litigants would still settle without payment as unpersuasive because “parties are more likely to settle when they have a broader set of valuable things to trade.” [4]
Dissent disagreed with majority's opinion that a detailed analysis of a patent's validity would not be required and could be substituted with the fact that a patent holder's large payment indicates doubt about its patent's strength. Dissent noted that even a risk averse patent holder that is 95% certain of its patent's validity may pay a large sum in order to avoid litigation and that 5% risk of a finding of invalidity. [4] Furthermore, dissent also pointed out that it would be absurd for a patent holder to be liable for antitrust infringement because it took away a chance of having its patent proven invalid by settling, and not be liable in another case in which it decides to litigate to the end and have its patent ultimately proven valid. [1]
Because the real pertinent question was whether a patent holder acted beyond the scope of its patent, dissent's fundamental point was that the case was a matter of only patent law, not one of antitrust law. [1]
Category:United States antitrust case law Category:United States patent case law Category:United States intellectual property case law Category:United States case law Category:United States Supreme Court cases