Patent Reform: Reverse Payments

Most patent infringement lawsuits are resolved with an agreement for the accused infringer to pay money to the patent right-holder. Generic drug-maker challenges to pharmaceutical patents occasionally follow a different path – with the patent holder paying money to the accused infringer to stay off the market for an extended period of time. This summer, the Obama administration (through the DOJ) indicated that these "pay for delay" settlements are "presumptively unlawful." (WSJ Article). The FTC has opposed these reverse-payment settlements for many years – arguing that they tend to allow a company holding vulnerable patents to maintain monopoly-level drug prices.

Now, the Senate has joined the fray. The Senate Judiciary Committee has approved a ban on reverse-payment settlements. (Prior Art Blog citing Reuters).

S.369 was co-sponsored by Senators Kohl, Grassley, Feingold, Durbin, and Brown. The Bill would amend the Clayton Antitrust Act to make it "unlawful under this Act for any person, in connection with the sale of a drug product, to directly or indirectly be a party to any agreement resolving or settling a patent infringement claim in which– (1) an ANDA filer receives anything of value; and (2) the ANDA filer agrees not to research, develop, manufacture, market, or sell the ANDA product for any period of time." Such an agreement would then result in antitrust liability as well as the ANDA losing its 180-day exclusivity right. (Download S369)

49 thoughts on “Patent Reform: Reverse Payments

  1. Some days all you see are “Mooney” posts, then other days, you see a few “Lionel Hutz” or whatever just to keep things “interesting” in case anyone is watching.

    Well guess what – they are watching, but a lot more closely than you imagined.

  2. More
    On Bulshiit
    by
    Harry G. Frankfurt

    link to press.princeton.edu

    One of the most salient features of our culture is that there is so much bulshiit. Everyone knows this. Each of us contributes his share. But we tend to take the situation for granted. Most people are rather confident of their ability to recognize bulshiit and to avoid being taken in by it. So the phenomenon has not aroused much deliberate concern, nor attracted much sustained inquiry.

    In consequence, we have no clear understanding of what bulshiit is, why there is so much of it, or what functions it serves. And we lack a conscientiously developed appreciation of what it means to us. In other words, we have no theory. I propose to begin the development of a theoretical understanding of bulshiit, mainly by providing some tentative and exploratory philosophical analysis. I shall not consider the rhetorical uses and misuses of bulshiit. My aim is simply to give a rough account of what bulshiit is and how it differs from what it is not–or (putting it somewhat differently) to articulate, more or less sketchily, the structure of its concept. [continued]

  3. Dear Lionel,

    Re:
    “I could point to many sources that are critical of the firm, so I would have the defense of truth.”

    With all due respect, that’s bullsh*t, to use your term. Any attorney ought to know that.

    BTW, I find Penn and Teller off-putting and disgusting.

    I like Lewis Black.
    link to youtube.com

  4. “For someone who professes to be a lawyer, you are rather sloppy.”

    I don’t remember professing to be a lawyer. Did I, or are you just being sloppy with your assumptions?

    Regarding the rest of your rebuttal, I now understand that what you actually said was that reasonable people are not likely to ever believe statements of fact posted on this particular blog (but not just any blog) that might otherwise be contentious enough to drive someone to a suit of libel, and that this can be seen by understanding that this particular blog (but not necessarily all blogs) is analogous to the opinion section of a newspaper in that both are “associated with” opinion. Having clearly fallen way behind, I now concede, and consider myself assailed.

  5. BigGuy,

    No, you are not keeping up. You are running in the opposite direction.

    And I can see why LeMieux believes as he does.

    However, to point – you view my additional comment of Op-Ed and Letters to the Editor as patronizing. Why? The analogy is especially apt.

    You want to extend the context of my comment (based on “blogging” and “ANY”) to purely all blogs, where our dicussion, in context, was blogs of the nature of this one, where bloggers post their thoughts under pseudonyms and often attack other bloggers beliefs. And you acuse me of strawmen and following 6 – yet it is you whipping out the briar patch tricks. My analogy to Op-Ed is NOT a clear expansion to cover ALL types of blogs (how you made that jump I don’t know at all and care even less); rather, I provided a rather apt and limited analogy focusing on the fact that IN CONTEXT, certain parts of a newspaper ARE per se associated with opinion. I thought you would know that even if “But from what little I know of libel law,” wasn’t much (yet enough for you to start down this little path).

    You then charge me with changing the subject, when it was you who asked “the explicit question”. Sure – I see it, the discussion can evolve, but I am the one who changes the topic when I bring it back on point (to the original context). Why is that YOU resort to such briar patch strawmen undertakings?

    Finally, you suggest, in error, that I want to pick a new fight rather than defend the existing one with: “Incidentally, reasonable people are quite capable of distinguishing between statements of fact and statements of opinion on Patently-O; I’m rather surprised that you have trouble with this”

    You are the one misconstrueing the context of our discussion, creating strawmen out of my apt analogies and suggesting that I have trouble where I have none. Rather UN-reasonable behavior. btw- you didn’t answer my directive:

    [Show me a reasonable person that would take a pseudonym’ed comment on a blog like the Trainwreck to be a pure statement of fact.

    Mind you, the statement of fact would not be a simple uncontentious item that would not drive anyone to a suit of libel.]

    The reason for the second sentence IS to separate the easily distinguished statements of fact (but you knew that didn’t you?). We are discussing those statements that might bring cause for libel, are we not? Or did you trip and fall? I’ll wait to you catch up (hey, over here – in this direction).

    For someone who professes to be a lawyer, you are rather sloppy. The little that you know about libel law and all.

    Try again to catch up.

  6. LeTroll: “The way you know, is how quick the discrediting attacks come, almost as if they were all being aided and abetted by, say, a blog sponsor.”

    When cavemen saw lightning, they assumed it was made by gods.

  7. BigGuy=LeopoldBloom=LionelHutz=Mooney=??

    The way you know, is how quick the discrediting attacks come, almost as if they were all being aided and abetted by, say, a blog sponsor.

    Mooney is no Examiner.

    The reason for all the names is to give the illusion of a host of divergent posters and view points. As far as I can tell there are only about three or four people who really post here (I mean c’mon, how many people are really THAT interested in patent law) and one of them has an inside track if you know what I mean (nudge, nudge…)

  8. “Show me a reasonable person that would take a pseudonym’ed comment on a blog like the Trainwreck to be a pure statement of fact.”

    Nice strawman. You’ve learned a lot from your sparring with 6. But that’s not what we have been discussing. We’ve been discussing your much more categorical statements, such as “… blogging in and of itself, is a forum for opinions – the ease of posting decries against treating ANY postings (yes, even mine) as dealing with anything other than opinions and opinions of the facts rather than strictly factual material.” Note that the emphasis on ANY was yours, not mine. Note also that there’s no reference to pseudonymous postings – instead, you were careful to cover all postings. That you were speaking of ALL blogs, and not just this one, is evident from your patronizing follow-up: “… try thinking of blogs as the Op-Ed and Letters to the Editor section of a newspaper.”

    Then, you responded to the explicit question “Do you really mean to suggest that any statement made in a newspaper editorial or in a letter to the editor is opinion per se?” with the answer “yes.”

    Now you want to change the topic to a discussion of whether reasonable people would take a pseudonymous comment on Patently-O to be a statement of fact. (Incidentally, reasonable people are quite capable of distinguishing between statements of fact and statements of opinion on Patently-O; I’m rather surprised that you have trouble with this. Whether a reasonable person should believe any given statement of fact, or how much to rely on it, is a completely separate matter.) I’m not surprised that you’d rather pick a new fight than defend your actual statements.

    Am I keeping up?

  9. “For bloggers who review products, this means that the days of an unimpeded flow of giveaways may be over. More broadly, the move suggests that the government is intent on bringing to bear on the Internet the same sorts of regulations that have governed other forms of media, like television or print.”

    When the FTC starts rigorously enforcing these laws against the big networks and/or major newspapers, I’ll start paying attention. Otherwise we should all understand that this baloney is nothing more than a barely concealed effort by the failing dinosaur known as “traditional media” to harass their competition.

  10. Better than Fred, I’ll use your own comment:

    “The LAW is that the real question is whether a particular statement can be reasonably understood as a statement of fact.”

    Show me a reasonable person that would take a pseudonym’ed comment on a blog like the Trainwreck to be a pure statement of fact.

    Mind you, the statement of fact would not be a simple uncontentious item that would not drive anyone to a suit of libel.

    Your turn.

  11. “opinion per se – yes.
    immune from libel – no (I didn’t go there – you may have over reached from what I actually wrote). I was merely pointing out the context.”

    I see. But from what little I know of libel law, if you deem that ANY statement in a letter to the editor is “opinion per se” then I think you’ve immunized those letters from liability for libel. But, go ahead and explain why I’m wrong. Why don’t you use my example (about “Fred”). I’ll try to keep up.

  12. opinion per se – yes.
    immune from libel – no (I didn’t go there – you may have over reached from what I actually wrote). I was merely pointing out the context.

    “…you can have an opinion that blogs SHOULD be immune…” – That’s exactly what I was posting – my opinion – unless you think my posts themselves have the force of law… (maybe you REALLY respect me).

    If you are going to monitor me, please try to keep up, and don’t lump me with the inane – I know I deserve better.

  13. “If it helps you understand at all, try thinking of blogs as the Op-Ed and Letters to the Editor section of a newspaper. CLEARLY, that section is opinion.”

    NAL, I feel no animosity towards you whatsoever. In fact, I’m simply following your lead. I’m largely ignoring Malcolm and 6 for several reasons, not the least of which is that you have taken on the role of “Chief Assailer” with respect to their posts. But, who is monitoring you?

    For example, your latest post continues with your wanton disregard for the law of defamation. Do you really mean to suggest that any statement made in a newspaper editorial or in a letter to the editor is opinion per se, and thus immune from a libel charge? The LAW is that the real question is whether a particular statement can be reasonably understood as a statement of fact. If I write (falsely) in a letter to the editor that my next door neighbor Fred is hosting meetings of NAMBLA, I’m exposed to a libel suit, no matter how much I scream that it was CLEARLY opinion. Sure, the context matters, but it is absurd to suggest that it is dispositive.

    Now, you can have an opinion that blogs SHOULD be immune from libel law due to the “ease” of posting comments. But this is not the law, and this type of normative comment is similar to those that you’ve previously assailed as “wanton disregard for the law.”

  14. BigGuy,

    I don’t get the animosity you have for me. You must be an examiner. (I don’t really care whether you are merely another pen name for Malcolm). But thank you anyway for actually proving my point with your “counter” post. CLEARLY, we are exchanging opinions (humble or otherwise). Why you think my post is BS is actually besides the point (plus I don’t care if you think it BS, as I know it to be a “fact” ;-p ).

    If it helps you understand at all, try thinking of blogs as the Op-Ed and Letters to the Editor section of a newspaper. CLEARLY, that section is opinion. If that signal to noise ratio is not enough for you – CLEARLY, it is a “you” problem and not a “me” problem.

    Also, my signal to noise ratio of late seems quite well thank you – no detractor has posted anything of substance to refute any of my views – including you. 6 and Malcolm continue to run away or post feeble jabs. Why do you think that is the case?

  15. “…the ease of posting decries against treating ANY postings (yes, even mine) as dealing with anything other than opinions and opinions of the facts rather than strictly factual material.”

    Well, there’s some BS. (In my humble opinion.) It’s pretty easy for most people to run their mouths, too, but we don’t give everyone a free pass on slander simply because of the “ease of talking.”

    The signal-to-noise level in your posts has been steadily falling, NAL.

  16. “…many sources that are critical of the firm, so I would have the defense of truth.”

    many sources does not equal truth. or put another way – “if you say it often enough, it becomes the truth” is a lie.

    Notwithstanding the minor correction, blogging in and of itself, is a forum for opinions – the ease of posting decries against treating ANY postings (yes, even mine) as dealing with anything other than opinions and opinions of the facts rather than strictly factual material.

  17. ““For the record, you post anonymously. How do I know you are not some shill for the Niro firm or some other disreputable, opportunist dirtbags?””

    Actually, no. “disreputable” would be the only arguable term I used, although I could point to many sources that are critical of the firm, so I would have the defense of truth.

    The other terms are too vague. Insulting someone is not libelous. I would have to make an assertion about them that was factually incorrect. See the first episode of Penn and Teller’s BS for a succinct and colorful version of why they call their show Bullsh*t that also illustrates my point.

  18. “However, as an attorney, don’t you think your calling a particular law firm ‘disreputable, opportunist dirtbags’ is libelous?”

    Sounds like an opinion to me. Or perhaps fair comment on a matter of public interest. But I’m just an anonymous blogger.

  19. Dear Lionel,

    Re: “As long as the comments are not libelous …”

    With all due respect my friend, you previously wrote:
    “For the record, you post anonymously. How do I know you are not some shill for the Niro firm or some other disreputable, opportunist dirtbags?”

    That comment of yours doesn’t directly defame me.

    However, as an attorney, don’t you think your calling a particular law firm “disreputable, opportunist dirtbags” is libelous?

    Like I suggested, I would be careful my friend of who you libelously defame. You’ll thank me in the morning.

    Everything I’ve said about Cisco and its attorneys is true, and can be found in published articles and/or has been admitted by Cisco itself.
    What you said about the Niro firm is patently false.

  20. JAOI,

    As I already said. I am through arguing with you. You seem immune to reason and there is no point in arguing further.

    In summary, my view is and has been an anonymous blogger is an anonymous blugger whether he be a “humble” inventor, a lawyer, or a CEO. As long as the comments are not libelous, the blogger’s opinion is the blogger’s opinion.

    You have cited no legal authority to the contrary. I will not be responding to any further posts on this topic.

  21. Dear Lionel,

    I posted the following response to your question on another thread – perhaps you missed it. It leads up to this question I posed to you (et al.).

    Lionel, would you agree that attorneys, as Officers of the Court, should be held to a higher standard than the average (ordinary) bear blogger?

    —————————————————
    Thank you for your comment. You ask me:

    “What factual, supportable statement did RJR [Mr. Riley] make in that rant you cited? It seems like a stream of opinion.”

    Mr. Riley wrote these facts, facts which no professional IP person could deny – even Cisco General Counsel Mark Chandler would be constrained to admit such:

    “As far as I can tell … Frankel … displayed a profound disrespect for the court and the practice of law.
    … This is … an issue of misconduct unbecoming an attorney.”

    Also, perhaps you missed these excerpts from Business Week posted on the Troll Tracker Defamation … thread:
    link to patentlyo.com

    link to businessweek.com
    “… subject … “patent trolls,” a derogatory term … The “about me” section of the blog noted that the writer [Rick Frenkel] was simply “a patent lawyer trying to gather and organize information about patent litigation.”
    —————————————————
    … in its pointed commentary, Troll Tracker advanced views squarely in line with the company’s own agenda. Cisco General Counsel Mark Chandler even cited the blog as a good independent source of information while in Washington lobbying for changes to patent law that would rein in trolls, unaware he was plugging the work of a Cisco employee.

    Troll Tracker gained repute as a forum for information, not invective. But its more volatile content would eventually combine to blow up the blog and land its creator and Cisco in legal hot water.

    … Frenkel and Cisco are now defendants in a pair of defamation lawsuits, and they may be dragged into other litigation.

    … But when an employee blogs about company business, anonymity can spell trouble. “I think there’s very much a tendency to be reckless when you’re posting anonymously—and to be more biased than you normally would be,” says Dennis D. Crouch, a law professor at the University of Missouri, who runs Patently-O, the most widely read patent blog.

    …After his identity was revealed, Cisco took a path of contrition. In a Mar. 24 post to its corporate blog, Cisco said that even though Frenkel intended his blog to reflect solely his opinion, “Cisco takes responsibility for the content.” The statement concluded: “Blogging and blog policy are evolving areas for many companies. We believe we have learned a valuable lesson from this regrettable situation.”

    … the Eastern District of Texas, … Frenkel referred to it in an October item as “the Banana Republic of East Texas,” even as Cisco was defending litigation there.

    …”He did a very good job of cloaking himself,” the lawyer says. The search found that the blog was hosted on a Google server in Korea, and that the blogger filled out a profile in which he claimed to be from Afghanistan.

    … Cisco in a Mar. 24 blog post chastised some of its employees for “poor judgment,” and outlined a new policy.”
    —————————————————

    * * * * *

    Lionel, my friend, you wrote:
    “For the record, you post anonymously. How do I know you are not some shill for the Niro firm or some other disreputable, opportunist dirtbags?”

    Firstly: I would be careful if I were you of who you libelously defame!
    I suggest an immediate apology – you’ll thank me in the morning.

    Secondly: In the interest of Full Disclosure, please be advised that I am exactly who I say I am – no more, no less – patriotic and opinionated, proud and accomplished, yet still a humble “ordinary” inventor.
    You only need to read my numerous diatribes to know that to be true. Moreover, I’ve revealed much of my background and experiences, philosophy and principles by which I live, and even some of my habits, many times on Patently-O.
    Other than my litigations and bloggings, I prefer a quite, private life.

    I post anonymously because I do not want to tie my comments to past, present or possible future litigations, Just as other professionals who post here do not want to tie their comments to past, present or possible future litigations.
    After all, the practice of IP is fraught with litigation.

    Below is a link to an article you may find of interest,
    an article I think we should all heed – which is not to suggest there is anything wrong with anonymous blogging, as long as one doesn’t set out to materially defraud, but, rather, exercises “good Behaviour.”

    * * * * *

    Lionel, would you agree that attorneys, as Officers of the Court, should be held to a higher standard than the average (ordinary) bear blogger?

    link to nytimes.com

    Excerpts from this New York Times article:

    SOON, BLOGGERS MUST GIVE FULL DISCLOSURE
    By TIM ARANGO — Published October 6, 2009

    “For nearly three decades, the Federal Trade Commission’s rules regarding the relationships between advertisers and product reviewers and endorsers were deemed adequate. Then came the age of blogging and social media.

    On Monday, the F.T.C. said it would revise rules about endorsements and testimonials in advertising that had been in place since 1980. The new regulations are aimed at the rapidly shifting new-media world and how advertisers are using bloggers and social media sites like Facebook and Twitter to pitch their wares.

    The F.T.C. said that beginning on Dec. 1, bloggers who review products must disclose any connection with advertisers, including, in most cases, the receipt of free products and whether or not they were paid in any way by advertisers, as occurs frequently. …

    For bloggers who review products, this means that the days of an unimpeded flow of giveaways may be over. More broadly, the move suggests that the government is intent on bringing to bear on the Internet the same sorts of regulations that have governed other forms of media, like television or print.

    “It crushes the idea that the Internet is separate from the kinds of concerns that have been attached to previous media,” said Clay Shirky, a professor at New York University.

    Richard Cleland, assistant director of the division of advertising practices at the F.T.C., said: “We were looking and seeing the significance of social media marketing in the 21st century and we thought it was time to explain the principles of transparency and truth in advertising and apply them to social media marketing.”

    Posted by: Just an ordinary inventor(TM) to Lionel; see page 2 | Oct 13, 2009 at 01:25 PM

  22. How can you people defend this practice? Is it OK if Microsoft simply pays any competitors to stay out of the market? This is the reverse of what goes on in most patent suits.

    Any field with high barriers to entry (and the drug field has some of the highest) is vulnerable to this practice. It should be per se illegal.

  23. “If that is disallowed, when would it ever be possible to settle out of court?”

    When the alleged infringer pays the patentee

    or

    When the alleged infringer does not stop researching, developing, manufacturing, marketing, or selling the ANDA product.

    You know, the way these things are normally settled in an anti-competitive manner.

  24. Obviously generic drug makers should only be allowed to begin prodsuction after the experation of the patent anything else will destroy the incentive to create the new drugs.Of course we may be dealing with situations where the drug is only a minor variation of the original drug in witch case the generic company offers a comparable alternative medication.The concept of reverse payments is a symptom of some thing wrong with the system possably unreasonable pressure to release the drug from patent early witch is again is a inovation retartive direction.

  25. Hi, Denis. Thanks for the update. If I can engage in a little shameless self-promotion, here’s an SSRN link to my forthcoming article on this issue in the Georgetown Law Journal. In short, I advocate an empirical analysis similar to that conducted in merger cases.

  26. Just to show I’m an equal opportunity anti-what the US patent system has become person.

    You all know my opinion of NPEs and trolls.

    Big drug companies are as opposite to NPEs as they can be. But paying off potential competitors to hold onto potentially invalid patents has as little place in the patent system as does shaking down corporations with suits designed to collect a series of royalty payments on weak claims.

    Either license the patent or fight the suit.

  27. I agree with Avery. It’s better to create incentives than to approach the issue in this way. For about 5-10 years, the FTC has been trying to sell this theory to the federal courts. In every case, courts found that the FTC failed to show that such agreements have an anti-competitive effect. So, why is Congress adopting a law when the FTC can’t even demonstrate that the prohibited conduct as an anti-competitive effect on the market.

    Generic companies should at least be able to receive money that would correspond to legal fees, litigation costs, prospective fees and costs (including CAFC appeal), and costs associated with filing the ANDA. Otherwise, generic companies will only challenge patents that are sure to fall.

  28. “http://sipseystreetirregulars.blogspot.com/2009/08/back-by-popular-demand-what-is-three.html”

    I just happened to stumble upon this before heading out for the evening. And I figured with all my fans out there, perhaps they’d like to know a little more about where I’m from.

    Well, let’s just say I’m from a fairly “politically charged” neighborhood. Or at least through family at any rate.

  29. “…arguing that they tend to allow a company holding vulnerable patents to maintain monopoly-level drug prices. ”

    Why let both companies avoid costly litigation by a patentee paying (for a “vulnerable” patent – whatever that really means). Instead let’s force companies into litigation, or better yet, let’s gut the patent system. Then those generic makers can infringe with impunity and, once the technology peters out, no one will ever invent a new drug again.

    We can all join the Peace Corps and wear Birkenstocks

  30. You mean people get PAID for patent licenses? This is an outrage!!! So many greedy people in the world. Why can’t everyone just hold hands?

    Arnold (speaking to the Arnold poster in mom’s basement), where are my red pumps, I need to get to the courthouse STAT!

  31. FTC attorney presenting at AIPLA made some comments that they were lobbying heavily to make this happen. The FTC took this approach becuase they have not been successful in the courts.

  32. Are monetary payments the only things that are disallowed, or is tendering other things of value also disallowed?

    What if the patent holder agrees not to sue on a different patent covering a different product, thus allowing earlier market entry by the generic manufacturer for the other product?

    If the gereic manufacturer has already entered or geared up to enter the market, what about exchanging a covenant not to sue for past infringement for the alleged infringer’s promise not to compete? If that is disallowed, when would it ever be possible to settle out of court?

    Where do we draw the line?

  33. Well this appears to be a start in the right direction. Now they should end the practice of settling a patent infringement lawsuit based upon having to take a license to an entire portfolio, owned by a common assignee, when only a subset of patents from the portfolio is asserted. It seems to me that this also allows a company holding vulnerable patents to maintain monopoly-level control.

  34. Making reverse payments illegal is not the right way to approach this problem. Instead, Congress should remove the incentive to enter pay-for-delay settlements. This could most easily be done by revising Hatch-Waxman so that the 180-day exclusivity period rolls over to later ANDA filers if the 1st filer enters into a settlement agreement.

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