No more delay on reverse payments

The Supreme Court of the United States has agreed to hear a dispute over the legality of ‘pay-for-delay’ or reverse-payment agreements between patent holders and generic manufacturers. These are settlement agreements in patent infringement litigation in which patent holders pay generic manufacturers to delay releasing generic alternatives to pharmaceuticals.

The US Supreme Court has agreed to hear the US Federal Trade Commission’s (FTC) appeal in its case against Watson Pharmaceuticals. The case concerns the settlement reached between Solvay Pharmaceuticals and generic competitors Watson Pharmaceuticals, Par Pharmaceuticals and Paddock Laboratories over Solvay’s patents relating to Androgel, a testosterone supplement. The decision follows last year’s refusal by the US Supreme Court to hear a similar appeal in the Cipro litigation, which case is now awaiting a decision by the Supreme Court of California (see our posts on that litigation here and here)

In the Watson appeal, the Supreme Court will need to decide between two competing interpretations of how these settlement agreements fit with anti-trust law:
1. whether such agreements should be seen as protecting a legitimate patent monopoly and are therefore legal so long as they do not exceed the scope of the patent (as the Court of Appeal and District Court held in this case); or
2. whether these agreements are presumed to be anti-competitive

unless the parties can demonstrate “that the reverse payment offers a competitive benefit that could not have been achieved in the absence of a reverse payment”.

The FTC has consistently taken the position that these agreements are anti-competitive, but US district courts have been divided on this issue. Regulators in the EU have similarly been concerned (see our posts here, here and here) and the issue has even led to new legislation being introduced to the US Congress – here. For our analysis of the Australian position, see our article from last year.

We will keep you updated on the appeal as it progresses.

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