Intellectual Property Law

Will the Supreme Court hear the Federal Trade Commission?s antitrust case brought against Schering Plough, claiming that the drug company?s authorized generics agreement violates unfair competition laws?  ?Authorized generic? agreements are licenses from a brand drug maker to a generic firm, allowing the maker of an authorized equivalent drug to market that drug  during another generic firm?s 180-day marketing exclusivity period for the same product.  The generic firm with the authorized product then splits the sales with the brand firm.

Schering entered an agreement with Upsher-Smith Laboratories American Home Products (now Wyeth) to settle a patent infringement case over the generic version of Schering?s K-Dur heart medication, and as part of the settlement, Schering paid Upsher-Smith royalties if it did not market the generic version until the patents expired.  The FTC filed an administrative complaint to bar the settlement, finding it an unreasonable restraint on trade.  The Administrative Law Judge employed the rule of reason and found the agreement a lawful settlement of a legitimate patent dispute.  In response, the FTC?s complaint counsel appealed to the full Commission, which applied the same rule of reason but reversed the ALJ.  On Schering?s appeal, the 11th Circuit rejected  both the rule of reason and a per se antitrust analysis, and set aside the FTC?s decision, relying on Valley Drug Co. v. Geneva Pharm., Inc., 344 F.3d 1294, 1303-04 (11th Cir. 2003):

[B]oth approaches [are] ill-suited for an antitrust analysis of patent cases because they seek to determine whether the challenged conduct had an anticompetitive effect on the market.  By their nature, patents create an environment of exclusion, and consequently, cripple competition.

According to the FTC, the decision undermines the intent of the Hatch-Waxman Act, and patent infringement settlements should not be automatically shielded from antitrust review where the allegedly infringing product is precluded from entering the market prior to expiration of the patent. 

The Supreme Court?s actions suggest that cert may be in order, as it took the unusual step of asking the Department of Justice for the Government?s point of view on this case, even though the Federal Trade Commission is already a party.  Is there a split between how the DOJ and FTC see this case?  And will the Supreme Court take the case?  Stay tuned.

Today's blogger:  Nan Joesten