Category: Patent Settlement Agreements

On Oct. 15, 2008, the Federal Circuit affirmed summary judgment that a settlement agreement in a patent case does not violate the Sherman Act.

Generic defendants in a drug case agreed not to market until after the patent expired and not to challenge validity.  The patent owner agreed to make payments and optionally = supply the drug for resale. “Thus, the essence of the Agreements was to exclude the defendants from profiting from the patented invention.”  Regarding the reverse payment, in footnote 11, the Federal Circuit said, “Indeed, a sizable exclusion payment from the patent holder to the generic manufacturer is not unexpected under the Hatch-Waxman Act, where the relative risks of litigation are redistributed.”

The Federal Circuit distinguished the 6^th Circuit’s case of In re Cardizem, where a per se violation was held:

In particular, the settlement in that case included, in addition to a reverse payment, an agreement by the generic = manufacturer to not relinquish its 180-day exclusivity period, thereby delaying the entry of other generic manufacturers. In re Cardizem, 332 F.3d at 907.  Furthermore, the agreement provided that the generic manufacturer would not market non-infringing versions of the generic drug. Id. at 908 n.13. Thus, the agreement clearly had anticompetitive effects outside the exclusion zone of the patent.

Specifically, the Federal Circuit stated that a district court need not consider the validity of the patent in the antitrust analysis of a settlement agreement involving a reverse payment, in the absence of evidence of fraud before the PTO or sham litigation:

We disagree that analysis of patent validity is appropriate in the absence of fraud or sham litigation. Pursuant to statute, a patent is presumed to be valid, 35 U.S.C. [Section] 282, and patent law bestows the patent holder with "the right to exclude others from profiting by the patented invention." Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 215 (1980). A settlement is not unlawful if it serves to protect that to which the patent holder is legally entitled--a monopoly over the manufacture and distribution of the patented invention. In re Tamoxifen, 466 F.3d at 208-09.

The case is available at: 2008 U.S. App. LEXIS 21505