Ingenius Settlement May Be Anti-Competitive Because Of The “Market Power Derived From The Patent.”

A drug company patented a drug [drug company #1] and a generic drug manufacturer [drug company #2] filed applications for generic drugs modeled after the patented drug. #1 brought an action against #2 claiming patent infringement. After the Food and Drug Administration approved the generic product, #1 and #2 entered into a settlement whereby #2 would not bring its generic product to market for a specified number of years and would promote the patented drug in exchange for millions of dollars. The Federal Trade Commission filed suit alleging violation of §5 of the Federal Trade Commission Act by unlawfully agreeing to abandon their patent challenges in order to share in #1’s profits on the patented drug. The United States Supreme Court noted that because the settlement requires the patentee to pay the alleged infringer, rather than the other way around, this kind of settlement is often called a “reverse payment.” The high court stated: “In sum, a reverse payment, where large and unjustified, can bring with it the risk of significant anti-competitive effects; one who makes such a payment may be unable to explain and to justify it; such a firm or individual may well possess market power derived from the patent.” Federal Trade Commission v. Actavis, Inc. (U.S. Sup. Ct.; June 17, 2013) 133 S.Ct. 2223, [186 L.Ed.2d 343].