Antitrust Laws Did Not Prevent Reverse Payments to Generic Manufacturers to End Patent Validity Challenges

Case: In Re Ciprofloxacin Hydrochloride Antitrust Litigation, Fed. Cir. No. 2008-1097 (October 15, 2008)

The One Sentence Summary: Payments by a drug manufacturer to end patent invalidity claims did not violate antitrust laws because the anticompetitive effect was within the exclusionary scope of the patent.


What They Were Fighting About: Bayer had settled patent infringement claims against generic drug manufacturers with "reverse payments." The generic manufacturers had filed ANDA statements of intent to manufacture and challenged the validity of Bayer's patent for Ciprofloxacin (Cipro). The settlement agreements provided that Bayer would pay the generic manufacturers to dismiss their challenges to the patent and would supply Cipro for sale on the generic market. Plaintiffs sued Bayer and the generic defendants for federal and state antitrust violations. The district court ruled against plaintiffs on motions for dismissal and summary judgment, and plaintiffs appealed.

Federal Circuit Holdings:

• District court properly declined to find that the agreements were per se unlawful as unreasonable restraints of trade in violation of section 1 of the Sherman Act.
• "Any adverse anti-competitive effects within the scope of the ... patent [at issue] could not be redressed by antitrust law ... because a patent by its very nature is anticompetitive."
• The district court properly concluded that the settlement agreements were within the exclusionary scope of the patent.
  
• Settlement of patent disputes is to be encouraged despite the anticompetitive effect of ending a challenge to a patent's validity. The settlements did not prevent other generic manufacturers from filing ANDA statements and challenging the validity of the patents.
• The panel agreed "with the Second and Eleventh Circuits and with the district court that, in the absence of evidence of fraud before the PTO or sham litigation, the court need not consider the validity of the patent in the antitrust analysis of a settlement agreement involving a reverse payment."
• The district court properly concluded that the agreements did not prevent challenges by other manufacturers to the validity of the patent. The Hatch Waxman Act provisions for an Abbreviated New Drug Application provided significant incentives for companies to challenge patents, and the settlement agreements did not prevent other companies from challenging the patents.
• The district court properly concluded that there was no manipulation of the 180 day exclusivity period for the first ANDA filer.
• Summary judgment for defendants on state law antitrust claims was proper because no fraud occurred.