Patents, Copyrights and Trademarks -- 2016

In re Loestrin 24 FE Antitrust Litigation   (1st Circuit)

Supporting patent dispute settlements as pro-competitive

It takes a tremendous amount of time and resources to develop and secure a patent for a new pharmaceutical, but issues regarding patentability often arise. This case involves an effort by class action plaintiffs to challenge a patent litigation settlement agreement between a brand manufacturer and two generic pharmaceutical manufacturers. The plaintiffs say that the settlement agreement violates the antitrust laws, and they want triple damages, even through the agreement allowed the generic manufacturers to enter the market before the patent expired.

The NAM filed an amicus brief urging the appeals court to affirm a district court ruling that allowed the settlement agreement between the companies. We highlighted the expensive and uncertain nature of patent litigation, the importance of flexibility in settling patent disputes, the validity of short-term limited exclusive licenses, and the propriety of certain collaborative marketing arrangements. Against this backdrop, courts must use the more lenient "rule of reason" standard of review in antitrust cases, and must make sure that a challenge to a settlement agreement is actually plausible before allowing the case to proceed. Plaintiffs must allege enough facts to make an overall anticompetitive effect plausible.

Agreements like the one in this case are lawful, procompetitive and common, and should not be discouraged. Limited exclusive licenses from patent holders are procompetitive, as is commercial cooperation. The appeals court, however, vacated the district court's decision and remanded the case for the district court to decide the issue of the application of the plausibility standard.

This case is another in the line of cases since the U.S. Supreme Court decision in FTC v. Actavis, Inc., where the Court ruled that such settlement agreements should be analyzed under the "rule of reason," allowing the parties to argue that there were legitimate business justifications for the agreements.

Related Documents:
NAM amicus brief  (August 27, 2015)


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