February 25, 2016

First Circuit Boosts Antitrust Challenges To Pay-For-Delay Settlements By Finding Non-Cash Deals Subject To Actavis Scrutiny

By Rosa M. Morales

Antitrust challenges to so-called “pay-for-delay” settlements—in which brand-name drug makers temporarily keep generics out of the market by making payments to would-be competitors—got a booster shot this week with a big victory in the U.S. Court of Appeals for the First Circuit.

The First Circuit held on Monday that even when pay-for-delay settlements do not involve any cash payments, plaintiffs can still challenge those agreements as anticompetitive under the Supreme Court’s landmark decision in FTC v. Actavis, 133 S. Ct. 2223 (2013).  The First Circuit held in In re Loestrin 24 Fe Antitrust Litig., Nos. 14-2071, 15-1250 (1st Cir. Feb. 22, 2016), that the Actavis decision—which permits antitrust challenges to reverse-payment settlements that keep would-be generic competitors out of the market, even if the brand-name drug company holds a patent—is  not limited to agreements for cash payments.

The First Circuit’s decision revived multi-district, direct-purchaser and end-payor class actions brought against drug manufacturers Warner Chilcott, Watson Pharmaceuticals, Inc., and Lupin Pharmaceuticals, Inc., which were consolidated in the U.S. District Court for the District of Rhode Island.  The district court had dismissed claims alleging that the drug makers conspired to delay generic competition of Warner’s blockbuster oral contraceptive drug, Loestrin 24 Fe®, by striking a series of non-cash reverse-payment agreements to settle patent infringement suits, in violation of Section 1 of the Sherman Act, 15 U.S.C. §1.  The First Circuit rejected the district court’s limited reading of Actavis as excluding non-cash payments, vacated that decision, and remanded the case back to district court.

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Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

    June 23, 2015

    Supreme Court Cites Spiderman In Ruling Against Post-Expiration Patent Royalties

    By Robert S. Schwartz

    Spiderman swung through the halls of the U.S. Supreme Court yesterday as Justice Elena Kagan liberally relied on the comic book superhero in the Court’s decision in Kimble v. Marvel Enterprises, Inc., reaffirming the Court’s 51-year-old rule precluding patent owners from collecting patent royalties on expired patents.

    In 1964 the U.S. Supreme Court ruled in Brulotte v. Thys Co. that the statutory limit on patent terms precludes patent licensors from enforcing any contract to receive royalties for exploitation of the patent after its term had expired.  The Court accepted the Kimble case explicitly to consider whether, in light of subsequent antitrust law and economics scholarship, this precedent should be overruled.  On Monday, the Court, adhering to principles of stare decisis, declined to do so in a six to three opinion by Justice Kagan.  The majority held that, assuming that the antitrust economics criticisms of Brulotte are correct, it would be up to Congress to revise the law in order to change this long-standing interpretation of the Patent Act.

    Kimble, which patented a toy that shot “webbing” like Spiderman, successfully sued Marvel for infringement in 1997.  The parties, both ignorant of Brulotte, settled the case by agreeing Marvel would purchase Kimble’s patent for a lump sum payment and a running three percent royalty on all future sales.  More than a decade later, Marvel, as Justice Kagan put it, “stumbled across Brulotte,” and filed for a declaratory judgment to release its royalty obligation.  After the district court granted the relief, the U.S. Court of Appeals for the Ninth Circuit affirmed, but, per Justice Kagan, was “none too happy about doing so.”  The Supreme Court accepted the case “to decide whether, as some courts and commentators have suggested, we should overrule Brulotte.”

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    Categories: Antitrust and Intellectual Property Law, Antitrust Litigation

      February 10, 2015

      European Antitrust Watchdogs Warn Of Uncertain Future For Pay-For-Delay Settlements

      A View from Constantine Cannon’s London Office

      By Irene Fraile

      A recent lively discussion with European Commission competition officials indicates that antitrust enforcement is continuing to evolve to deal with the thorny issues raised by so-called “reverse-payment” or “pay-for-delay” patent litigation settlements designed to delay the sale of generic drugs.

      On January 29, 2015, Brussels Matters (which hosts informal discussions with senior EU officials) hosted the first pan-EU discussion with officials from the European Commission’s Directorate General for Competition (“DG COMP”) after the Commission’s Lundbeck decision, which imposed hefty fines for entering into pay-for-delay agreements that violated EU antitrust rules that prohibit anticompetitive agreements.

      In that June 19, 2013, decision, the Commission imposed a fine of 93.8 million euros on the Danish pharmaceutical company Lundbeck and fines totalling 52.2 million euros on several producers of generic medicines for delaying generic market entry of the drug Citalopram.  This was the first EU infringement decision concerning pay-for-delay agreements.

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      Categories: Antitrust and Intellectual Property Law, Antitrust Enforcement, Antitrust Policy

        February 5, 2015

        Feds Green-Light Institute’s New Patent Policy For Wi-Fi Standards, Finding It Potentially Procompetitive

        By David Golden

        The Antitrust Division of the U.S. Department of Justice announced on Monday that it would not challenge recent revisions to the Patent Policy of the Institute of Electrical and Electronics Engineers Standards Association (“IEEE-SA”)—giving the green light to new Wi-Fi standards that computers, smartphones and tablets will follow in connecting to the Internet.

        The Antitrust Division’s decision removes one of the last barriers to the implementation of the revised Patent Policy, which governs the licensing of patents essential to IEEE standards, such as the ubiquitous Wi-Fi networking protocols.  The changes could lead to cheaper devices for consumers.

        We blogged about the IEEE-SA’s preliminary adoption of the changes earlier this year, following a Federal Circuit decision that required trial courts to consider a standard-setting organization’s patent-licensing policy when calculating patent royalty rates and damages.  The IEEE-SA submitted its revised policy to the government under the Antitrust Division’s Business Review  program.

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        Categories: Antitrust and Intellectual Property Law, Antitrust Policy

          January 5, 2015

          Reasonableness Of Licensing Royalties Is On Trial As Courts And Standard-Setting Organizations Wrestle With Standard-Essential Patents

          By David Golden

          The ongoing battle over what constitutes a “reasonable” licensing royalty for standard-essential patents has now been joined by the U.S. Court of Appeals for the Federal Circuit with its decision in Ericsson, Inc. v. D-Link Systems, Inc., concerning the alleged infringement of patents essential to the ubiquitous Wi-Fi networking technology.

          This definitional battle is also being fought in standard-setting organizations, such as the Institute of Electrical and Electronics Engineers (“IEEE”), the promulgator of Wi-Fi standards, which recently adopted a resolution that defines the calculation of a “Reasonable Rate” for standard-essential patents.

          Many modern electronic devices, such as smartphones and tablets, incorporate voluntary industry-wide communication and networking standards, such as Wi-Fi, cellular data, and Bluetooth technologies. Generally, the members of organizations that create and maintain such standards compete in the markets for these products, and frequently own patents that are essential to the implementation of the standards. Thus, the member companies’ collective selection of technologies to include in the organization’s standard can prove advantageous in both product and technology licensing markets. It is not surprising then that the Supreme Court has described private industry standard-setting organizations as “rife with opportunities for anticompetitive activity.”

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          Categories: Antitrust and Intellectual Property Law

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