Update on Reverse Settlement Agreements – Amici Curiae brief filed with US Court of Appeals

An amici curiae brief has been filed by a Professor of Law at Stanford Law School on behalf of 86 other professors of Law, Economics, Business and Public Policy in relation to the appropriate treatment of reverse settlement agreements.  The professors seek to be heard by the Full Court of Appeals in their review of reverse settlements of patent disputes, which involve the patentee paying a would-be infringer to stay out of the market, and to not challenge the validity of the patent.

As we have noted in our earlier posts, the decision in the Tamoxifen Citrate Antitrust Litigation that a reverse settlement agreement will not violate anti-trust laws provided the agreement does not impose restrictions on alleged infringers beyond the scope of the patent, has been equally applied and criticised.

The Professors’ brief notes that the payments which are commonly made to generic companies often dwarf the profits that the generic company could ever expect to receive from participating in the market.  Consequently, even if it was absolutely certain that the patent was invalid, a would-be infringer would be better off taking the money, and allowing the patent to remain in force, than invalidating the patent and launching a generic product.  Interestingly, the brief also notes that nearly half of all patents which are litigated in the US are found to be invalid, and that this number is as high as 73% in the case of pharmaceutical patents.

Review of the treatment of reverse settlement agreements will involve an important assessment of the competing interests of promoting settlement of patent disputes, the importance of patent litigation in testing the strength of patents which are granted by Patent Offices following what has been described as “cursory scrutiny,” and the public interest in promoting competition and access to cost efficient medicines.

The Professors’ brief reflects the significance of the issues to be considered by the Full Court of Appeals.  Watch this space as we follow this important litigation.


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