Update July 2009: In a similar Second Circuit case, the court requested the views of the Department of Justice. During the Bush administration, the DOJ had been at odds with the FTC over reverse payments, with the Commission asserting that such payments were presumptively illegal and the DOJ maintaining a more permissive view. In its comments on the Second Circuit Cipro case, however, the DOJ has joined the FTC in proclaiming that reverse payments are presumptive illegal and must be justified by the agreeing parties.
Update June 2009: The U.S. Supreme Court denied certiorari in the Ciprofloxacin Hydrocholoride case, upholding the Federal Circuit’s dismissal of the antitrust claim challenging a reverse payment scheme.
A number of recent cases have raised the quesiton whether a patent holder may pay a challenger to the patent to abandon the challenge. On the one hand, the patent is presumed valid and negotiated settlements are generally encouraged. On the other hand, many challenged patents are ultimately held invalid and a settlement that cuts off a challenge may lessen competition despite such an invalid patent. In In re Ciprofloxacin Hydrocholoride Antitrust LItigation, the Federal Circuit recently upheld the dismissal of cases challenging an agreement by the owner of a patented drug and a generic drug manufacturer to share the proceeds from sales of the patented drug and delay the introduction of a generic version until shortly before the patent would expire. The court held that any anticompetitive effect resulting from the settlement is legitimate because it falls “within the exclusionary power of the patent.” That sort of reasoning, however, begs the question of whether the patent is valid in the first place. If (1) the generic company believed that the patent was sufficiently suspect to mount a challenge, and (2) the patent holder was sufficiently concerned that it was willing to share a substantial portion of its revenue, then (3) the validity of the patent seems clearly suspect. And, of course, an invalid patent has no exclusionary power. Although this case is in accord with most courts to consider the issue, the Supreme Court may need to address the question.
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