2nd Circuit Approves Patentee-Generic Reverse Payments

InfringingProducts013In re: Tamoxifen Citrate Antitrust Litigation (2nd Cir. 2005).

Just in time for the Supreme Court’s decision on certiorari in FTC v. Schering-Plough, the Second Circuit court of appeals has released its decision in the Tamoxifen Citrate case — finding that reverse payments to a generic manufacturer were not sufficient to show a per se violations of the antitrust laws.  In addition, the Court went on to hold that even “excessive reverse payments” might not be unlawful.  The Court did recognize the suspicious nature of reverse payments.

There is something on the face of it that does seem “suspicious” about a patent holder settling patent litigation against a potential generic manufacturer by paying that manufacturer more than either party anticipates the manufacturer would earn by winning the lawsuit and entering the newly competitive market in competition with the patent holder. Why, after all — viewing the settlement through an antitrust lens — should the potential competitor be permitted to receive such a windfall at the ultimate expense of drug purchasers? We think, however, that the suspicion abates upon reflection. In such a case, so long as the patent litigation is neither a sham nor otherwise baseless, the patent holder is seeking to arrive at a settlement in order to protect that to which it is presumably entitled: a lawful monopoly over the manufacture and distribution of the patented product.

Dismissal affirmed.

In dissent, Judge Pooler argued the antitrust analysis can be applied to settlements concerning patented products.

The requirement that—unless an antitrust plaintiff demonstrates that a settlement agreement exceeds the scope of the patent—it must show that the settled litigation was a sham, i.e., objectively baseless, before the settlement can be considered an antitrust violation is not soundly grounded in Supreme Court precedent and is insufficiently protective of the consumer interests safeguarded by the Hatch-Waxman Act and the antitrust laws.