This case arose in the pharmaceutical industry, but has implications for patents and other intellectual property in other industries as well. The Federal Trade Commission sued companies that settled pharmaceutical patent litigation, claiming that the settlement, which involved “reverse payments” from the patent owner to the generic drug manufacturer, was anticompetitive because it required the generic manufacturer to stay out of the market for a time.
The Supreme Court ruled 5-3 on 6/17/13 that the lower court erred in dismissing the FTC's case, so the case will go back down to determine whether the reverse-payment agreement was in fact anticompetitive under the antitrust laws. The Court declined to rule that such settlement agreements are presumptively unlawful, and that they should be analyzed under the "rule of reason," allowing the parties to argue that there were legitimate business justifications for the agreements.
The NAM had filed an amicus brief arguing that the settlement of bona fide patent litigation involving a patent that was not procured by fraud should not be considered presumptively unlawful, and the Court agreed. Such patents are legal monopolies for their owners, and any settlement of related litigation that does not extend the life of the patent beyond its legitimate term should be valid, we argued. The FTC’s approach completely disregards the traditional analysis of the legality of a patent settlement, and throws uncertainty into the process of settling complex cases efficiently. Proving the ultimate validity of a patent is complex and expensive, burdening the courts and the parties, and ultimately chilling innovation and harming the competitiveness of U.S. manufacturers.