Patent Law

The following is excerpted from Joe Mullin's April 12, 2010 article at Law.com's Corporate Counsel:

On March 31, an antitrust lawsuit brought by the Federal Trade Commission against Cephalon Inc. survived its first court hurdle. The FTC suit claims that Cephalon illegally extended its monopoly on the "wakefulness" drug Provigil by paying off generic competitors that had sued to invalidate the Provigil patent. Those payments took the form of licensing and supply agreements, which would have paid generic drug makers Teva Pharmaceutical Industries Ltd., Ranbaxy Laboraties Ltd., and Barr Pharmaceuticals Inc. up to $136 million and another $45 million to Mylan Inc.

The Cephalon deal is an example of what the FTC has dubbed "pay-for-delay" settlements?and what are known, more neutrally?as reverse-payment settlements. (In this context, the word ?reverse? relates to the fact that it is the alleged infringer, not the patent-holder, who gets paid as part of the lawsuit settlement.)

...the judge makes it clear that as the suit proceeds, he is going to adopt a "scope of the patent test." That suggests a type of test that doesn't allow antitrust challenges to a monopolized market, as long as that monopoly right sits within the patent grant, and doesn't go beyond it. Many other courts?which have ruled against plaintiffs challenging reverse-payment settlements?have adopted a similar test. It's easy to imagine Goldberg issuing a ruling that says, essentially, "patents are monopolies?so deal with it."

Goldberg's ruling also suggests that the plaintiffs, including the FTC, must prove that Cephalon's patent litigation leading up to the settlement was a "sham," or that the company knowingly defrauded the U.S. Patent and Trademark Office in order to secure its patent. In other words, the plaintiffs will have to show that the patent is truly invalid in order to win their antitrust case?a situation that reverse-payment plaintiffs have tried to avoid, in no small part because retrying a patent case is expensive and time-consuming.

Read the full article here.