Second Circuit Affirms
Tamoxifen Dismissal
On November 2, 2005, the United States Court of “authorized generic,” particularly in the context of the Appeals for the Second Circuit affirmed the dismissal of Supreme Court’s recent request to the Department of Justice complaints filed by consumers and others in civil antitrust for its views on a petition for certiorari filed by the Federal litigation relating to anti-cancer drug, Tamoxifen. In re Trade Commission from the decision of the Eleventh Circuit Tamoxifen Citrate Antitrust Litigation, No. 03-7641 (2d in Schering Plough et al. v. FTC, 403 F.3d 1056 (2005).1 Cir., November 2, 2005). The complaints asserted that Read most broadly, the decision of the Second Circuit held AstraZeneca and Barr Laboratories violated federal and “that absent an extension of the monopoly [granted by a state antitrust laws when they settled Astra’s patent litiga- patent] beyond the patent’s scope…and absent fraud…” a tion against Barr. That patent litigation was instituted under settlement of patent litigation will not be condemned under the Hatch-Waxman Act of 1984, 21 U.S.C. § 355 the antitrust laws unless the “underlying infringement law- (j)(5)(B)(iii), following Barr’s filing of an ANDA (abbrevi- suit was objectively baseless in the sense that no reasonable ated new drug application) seeking FDA approval of a litigant could reasonably expect success on the merits.” Op.
at 54. While the Second Circuit’s decision was in general The specific facts of the Tamoxifen case are unique and accord with the Eleventh Circuit’s decisions in Schering- not likely to be repeated. Nevertheless, the decision has far Plough and Valley Drug, it was not in agreement with the reaching implications, when viewed as a case involving an approach taken by the FTC, or by some other Circuits, which 1In Schering-Plough, which involved a formulation patent, the Court found that neither the traditional “rule of reason,” State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S. Ct. 275, 279, 139 L. Ed. 2d 199 (1997); Chicago Board of Trade v. United States, 246 U.S. 231, 238, 38 S. Ct. 242, 244, 62 L. Ed. 683 (1918), nor the more rarely applied per se approach, Arizona v. Maricopa County Medical Soc., 457 U.S. 332, 344, 102 S. Ct. 2466, 2473, 73 L. Ed. 2d 48 (1982), should be applied in cases involving antitrust attacks on settlements of Hatch-Waxman patent litigation. Instead, Schering-Plough found that “the proper analysis of antitrust liability requires an examination of: (1) the scope of the exclusionary poten- tial of the patent; (2) the extent to which the agreements exceed that scope; and (3) the resulting anticompetitive effects.” See also Valley Drug Co. v. Geneva Pharms., 344 F.3d 1294, 1303-04 (11th Cir. 2003). Applying that analysis, the court vacated a cease and desist order of the Federal Trade Commission prohibiting Schering-Plough and Upsher-Smith Laboratories from “being parties to any agreement settling a patent infringement lawsuit, in which a generic manufacturer either (1) receives anything of value; and (2) agrees to suspend research, development, manufacture, marketing, or sales of its product for any period of time.” Schering Plough, 403 F.3d at 1056. In proceedings before the FTC, the staff alleged that the settlement agreements were “veiled attempts to disguise a quid pro quo arrangement aimed at preserving Schering’s monopoly in the potassium chloride supplement market.” The Commission applied the “rule of reason” and found “that the coupling of reverse payments with an agreement by the generics not to ‘enter the market before a particular date, “raise[d] a red flag that distinguishes this particular litigation settlement from most other patent settlements, and man- dates a further inquiry.’” Schering-Plough, 403 F.3d at 1068. In its judgment, the Commission “prohibited settlements” under which a manufacturer of a generic pharmaceutical product “receives anything of value [from a patent holder] and agrees to defer its own research, development, production or sales activities.” The Commission “carved out one arbitrary exception … beyond a ‘simple compromise’ to the entry date [i.e., the date on which a generic product might first be marketed], if payments can be linked to litigation costs (not to exceed $2 million), and the Commission is notified of the settlement, then the parties need not worry about a later antitrust attack.” Id., 403 F.3d at 1062. The appellate court noted that, in proceedings before the Commission, there had been “no allegation that the [relevant] patent itself is invalid or that the result- ing infringement suits against Upsher and ESI were ‘shams.’” The Commission, which found the settlement anti-competitive, petitioned the Supreme Court to review the vacatur The Tamoxifen court disagreed with the approach taken by the FTC. Op. at 43, n.21. This disagreement alone may make more likely the granting of certiorari by the Supreme Court in the Schering-Plough case.
would regard settlements that involve “reverse payments,” Barr settlement agreement was silent about the potential like the one involved in Tamoxifen, as per se illegal.2 In the Tamoxifen patent case, the trial court issued a The settlement was contingent upon the vacatur of the declaration that Astra’s Tamoxifen compound patent was judgment of invalidity by the trial court. Such a vacatur was invalid, based on inequitable conduct in the Patent and considered valid, at the time. To effectuate the settlement, Trademark Office. The trial court found that the inventors the case was remanded by the appellate court and the district intentionally withheld certain “crucial information” relating court vacated the judgment of invalidity that it had previ- to animal tests conducted to determine the drug’s safety and efficacy. Astra appealed to the trial court’s declaration to the was to eliminate possible use of the trial court’s judgment of Court of Appeals for the Federal Circuit.
invalidity, by other litigants, to foreclose Astra from re-liti- While the patent litigation appeal was pending, Astra gating the validity of the Tamoxifen patent. The Astra-Barr and Barr agreed to settle the dispute. The settlement provid- agreement (at the time) also effectively eliminated Barr’s ed that Barr would change its Paragraph IV ANDA filing right to claim benefits from the 180-day exclusivity period from one that asserted the invalidity of Astra’s patients, to since, by vacating the trial court’s judgment, Barr was no one that agreed to market Barr’s generic Tamoxifen only after the patient expired years later (a Paragraph III filing).
After the settlement, but before commencement of the The settlement agreement provided that Astra would license antitrust litigation, the FDA changed its position, and Barr to sell Tamoxifen manufactured by Astra, as an “author- allowed 180-day market exclusivity even to a first-filer that ized generic.” The settlement agreement called for a “reverse did not litigate a patent infringement lawsuit to a “success- payment” of $21 million by Astra to Barr, in exchange for ful” conclusion. While the Astra-Barr patent litigation was Barr’s agreement to change its ANDA filing. The parties proceeding, three other generic drug manufacturers, Mylan, agreed that, if Astra’s Tamoxifen patent was declared invalid Novopharm and Pharmacie B.V. filed Tamoxifen ANDAs prior to its expiration, Barr could revert to its Paragraph IV with Paragraph IV certifications. Astra sued each of them certification and begin to market its generic product, rather for patent infringement, under the same patent. than the product manufactured and licensed by Astra. None of the courts in these cases allowed reliance on At the time of the settlement, FDA rules did not permit the vacated Astra-Barr invalidity judgment, to preclude a Paragraph IV first-filer, like Barr, to invoke the 180-day Astra from re-litigating invalidity issues. The courts hearing right of market exclusivity conferred by the Hatch-Waxman Novopharm’s and Pharmacie’s challenges rejected the con- Act, 21 U.S.C. § 355(j)(5)(B)(iv)(I)–(II), unless the first- tention that the inventors of Tamoxifen had engaged in filer “successfully defended” its Paragraph IV certification inequitable conduct at the PTO, and they upheld the validi- against a patent owner’s infringement litigation. The Astra- ty of Astra’s Tamoxifen patent. The Mylan case was 2 See, e.g., In re Cardizem CD Antitrust Litigation, 105 F. Supp. 2d 618 (E.D. Mich. 2000), aff’d, 332 F.3d 896 (6th Cir. 2003); In re Cardizem CD Antitrust Litigation, 105 F. Supp. 2d 682 (E.D. Mich. 2000), aff ’d, 332 F.3d 896 (6th Cir. 2003), cert denied sub nom Andrx Pharms v. Kroger Co., 160 L. Ed. 2d 248, 125 S. Ct. 307 (2004). Whether the courts apply the rule of reason, a per se approach, or some other approach, it would seem that in every case, the determination depended, either explicitly or implicitly, on the court’s assessment whether particular provisions of a settlement agreement went “beyond the limited monopoly which is granted” by a patent. United States v. Masonite Corp., 316 U.S.
265, 277 (1942); United States v. The Singer Manufacturing Company, 374 U.S. 174, 196–97 (1963).
3 Soon thereafter, the Supreme Court decided U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994), and declared that, at least at the appellate level, such efforts to vacate judgments to eliminate the effects of prior district court decisions, are generally invalid. The U.S. Bancorp decision did not have retroactive effect.
resolved by an eventual stipulation that FDA approval of version of Tamoxifen, and that, when Barr began to market Mylan’s generic product would become effective only after the drug, the 180-day exclusivity period would have been triggered. The complaints asserted that “other generic man- In the course of the litigation between Astra and these ufacturers would have introduced their own versions of other generic manufacturers, the FDA granted tentative Tamoxifen upon the expiration of the exclusivity period, approval of the Pharmacie ANDA, and the 30-month Hatch- with Zeneca collaterally estopped from invoking its invali- Waxman automatic stay of effectiveness of the FDA’s tenta- dated patent as a defense.” Id. As a result, the complaints tive approvals of the Mylan and Novophram ANDAs was averred, “the price for Tamoxifen would have declined sub- about to expire. Relying on the change in FDA rules relat- stantially below the levels at which the Zeneca-manufac- ing to the 180-day period of market exclusivity, Barr tured drug in fact sold in the market shared by Zeneca and claimed entitlement to the exclusivity period. The FDA Barr through the Settlement Agreement.” Id. agreed with Barr’s petition to confirm Barr’s entitlement to Reviewing de novo the district court’s decision to dis- the exclusivity period. Because Barr was the only “author- miss the complaints,4 the Second Circuit first noted the ten- ized generic” distributor of Tamoxifen, and because, under sion between “restraints on anti-competitive behavior the Astra-Barr settlement, it did not begin manufacturing its imposed by the Sherman Act and grants of patent monopo- own generic product until after the Astra Tamoxifen patent lies under the patent laws, as complicated by the Hatch- expired, the 180-day exclusivity period did not begin to run Waxman Act.” Op. at 30. It decided the appeal, the court for several years, and Mylan, Novopharm and Pharmacie said, “against the backdrop of our longstanding adherence were prevented from marketing their generic Tamoxifen to the principle that ‘courts are bound to encourage’ the set- tlement of litigation.” Where a case is “complex and expen- While the patent infringement suits by Astra against sive,” the court said, and where “resolution of the case will Novopharm, Pharmacie and Mylan were pending, a variety benefit the public, the public has a strong interest in settle- of consumer groups filed antitrust lawsuits contending that the Astra-Barr settlement “unlawfully (1) enabled Zeneca In a statement pregnant with meaning, given the declara- and Barr to resuscitate a patent that the district court had tion of patent invalidity by the district court in the Tamoxifen already held to be invalid and unenforceable; (2) facilitated patent litigation, the Second Circuit stated, in the antitrust Zeneca’s continuing monopolization of the market for appeal, that “‘where there are legitimately conflicting [patent] tamoxifen; (3) provided for the sharing of unlawful monop- claims . . ., a settlement by agreement, rather than litigation, oly profits between Zeneca and Barr; (4) maintained an arti- is not precluded by the [Sherman] Act,’ although such a set- ficially high price for tamoxifen; and (5) prevented compe- tlement may ultimately have an adverse effect on competition.
tition from other generic manufacturers of tamoxifen.” Op.
Standard Oil Co. v. United States, 283 U.S. 163, 171, 51 S. Ct.
at 18. The antitrust complaints asserted that the trial court’s 421, 75 L. Ed. 926 (1931) …” Op. at 31–32 (emphasis sup- judgment, invalidating the Taxomifen patent, would have plied). Patent litigation settlements, the court said, “promote been affirmed on appeal, allowing Barr to market a generic efficiencies, resolving disputes that might otherwise block or 4 Under the Federal Rules of Civil Procedure, as the Second Circuit noted, the court was required “to accept as true all the factual allegations in the complaint, Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S. Ct. 1160, 122 L. Ed. 2d 517 (1993), and to draw all reasonable inferences in plaintiffs’ favor,” Freedom Holdings Inc. v. Spitzer, 357 F.3d 205, 216 (2d Cir. 2004).” Op. at 27. Only “if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations … Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002),” was the court permitted to dismiss the complaints.
delay the market entry of valuable inventions.” Id. at 33.
The majority opinion took issue with the assertion by the Applying the “rule of reason,” the Second Circuit repeat- dissent that the majority imposed a “requirement” that ed the talisman applied in other cases that the reasonableness “antitrust plaintiffs must show that the settled litigation was a of settlements of patent infringement suits under antitrust sham, i.e., objectively baseless, before the settlement can be laws must be judged at the time the agreements are conclud- considered an antitrust violation.” See In re Tamoxifen ed. Op. at 34, citing Valley Drug Co. v. Geneva Pharms., 344 Citrate Antitrust Litigation, No. 03-7641, Op. at 54, n.27.
F.3d at 1306. It pointed to relatively high rates of reversal in There “is no such requirement,” the majority held. Instead, patent cases, stating that “We cannot guess with any degree according to the majority: “The central criterion as to the of assurance what the Federal Circuit would have done on legality of a patent settlement agreement is whether it appeal from the district court’s judgment in [the Tamoxifen ‘exceeds the ‘scope of the patent’s protection.’ … A plaintiff patent litigation between Astra and Barr].” Op. at 34.5 need not allege or prove sham litigation in order to succeed Nevertheless, as pointed out by Judge Pooler in a vig- in establishing that a settlement has provided defendants orous dissenting opinion, the majority opinion focused on ‘with benefits exceeding the scope of the Tamoxifen patent.’” the subsequent litigation between Astra and other generics As noted, the Second Circuit applied the “rule of rea- (Novopharm and Pharmacie, especially) to demonstrate that son,” following the lead of other courts, including Valley the antitrust plaintiffs could not prove any set of facts con- Drug, and Judge Posner’s opinion in Asahi Glass Co. v. sistent with the allegations in their complaints to demon- Pentech Pharms., Inc., 289 F. Supp. 2d 986, 991 (N.D. Ill.
strate that Astra’s litigation against Barr was “sham” litiga- 2003), and it rejected the contention that “reverse payments” tion. See In re Tamoxifen Citrate Antitrust Litigation, No.
by a pharmaceutical patent owner are per se illegal. 7 5 While the majority questioned the capacity of later courts, in antitrust cases, to view what result might have been achieved at an earlier time, had a patent appeal been pur- sued to conclusion, Op. at 34–36, it is worth noting that other appellate courts have seemingly required retrospective review by district courts of the potential results of patent liti- gation, after a patent settlement. In Valley Drug Co. v. Geneva Pharms., Inc., 344 F.3d 1294 (11th Cir. 2003), for example, the Eleventh Circuit reversed a district court’s finding, on a motion for summary judgment, that a patent settlement that involved a “reverse payment” was per se illegal. In re Terazosin Hydrochloride Antitrust Litig., 164 F. Supp. 2d 1340, 1345–46 (S.D. Fla. 2000). In doing so, the Eleventh Circuit remanded the case for further proceedings, and gave the following instruction to the district court: The appropriate analysis on remand will likely require an identification of the protection afforded by the patents and the relevant law and consideration of the extent to which the Agreements reflect a reasonable implementation of these. Appellants, for example, contend that certain provisions of the Geneva Agreement are analogous to a consensu- al preliminary injunction and stay of judgment pending appeal. To evaluate this claim, the provisions of this Agreement should be compared to the protections afforded by the preliminary injunction and stay mechanisms and considered in light of the likelihood of Abbott’s obtaining such protections. Cf. Hovenkamp at p. 2046 (‘some care must be taken to ensure that . . . the settlement . . . is not more anticompetitive than a likely outcome of the litigation’).
Valley Drug Co. v. Geneva Pharms., Inc., 344 F.3d at 1312. The district court, on remand, conducted such an analysis. In re Terazosin Hydrochloride Antitrust Litig., 2005 U.S.
Dist. LEXIS 108 , at *27–29, 42–66 (S.D. Fla. January 5, 2005) (evaluating likely outcomes of the patent litigation).
6 Judge Pooler continued: “Of course, in my view, plaintiffs need not plead or prove sham or objectively baseless litigation. But, in addition, the majority’s discussion of the later litigation appears to violate its own acknowledgment of the basic principle that “the reasonableness of agreements under the antitrust laws are to be judged at the time they are entered into.” Majority op. at 35 (quoting Valley Drug Co. v. Geneva Pharms., Inc., 344 F.3d 1294, 1306 (11th Cir. 2003) (citing, inter alia, SCM Corp., 645 F.2d at 1207)). At the time Zeneca and Barr settled the appeal, the existing facts made it fairly likely, if not certain, that Barr would prevail. Judge Broderick had judged the crediblity of the witnesses and found that Zeneca willfully withheld information from the FDA. That finding is quintessentially factual. Thus, the Federal Circuit could have set it aside only for clear error. Fed. R.
Civ. P. 52(a). Without the record, I cannot say that the Federal Circuit would have been required to affirm, but, as I am sure the majority will concede, it is the rare case in which an appellate court sets aside a trial court’s credibility findings. Had Barr prevailed, on appeal, as I expect it would have, Zeneca would have been estopped from asserting the validity of its patent in any subsequent litigation. Therefore, there is a certain unfairness in using the subsequent litigation, which would not have existed had Barr prevailed on appeal, to demonstrate that plaintiffs cannot establish that Barr would have prevailed on appeal.” In re Tamoxifen Citrate Antitrust Litigation, No. 03-7641 (Pooler, dissenting), at 94–95.
7 See In re Cardizem CD Antitrust Litig., 105 F. Supp. 2d 618, 632 (E.D. Mich. 2000), aff’d, 332 F.3d 896 (6th Cir. 2003), cert. denied sub nom. Andrx Pharm., Inc. v. Kroger Co., 160 L. Ed. 2d 248, 125 S. Ct. 307 (2004) (finding a $40 million-dollar “reverse payment” to be “a naked, horizontal restraint of trade that is per se illegal because it is presumed to have the effect of reducing competition in the market for Cardizem CD and its generic equivalents to the detriment of consumers.” In re Cardizem, 332 F.3d at 911, cited in Op. at 39.
Nor did the Tamoxifen court agree with the plaintiffs’ We further agree with the Cipro III court that absent an contention that the specific payments in the Astra-Barr set- extension of the monopoly beyond the patent’s scope, tlement were per se unlawful because, as alleged by the … and absent fraud, which is not alleged here, the antitrust plaintiffs, “the value of the consideration provided question is whether the underlying infringement law- to keep Barr’s product off the market . . . greatly exceeded suit was “objectively baseless in the sense that no rea- the value Barr could have realized by successfully defending sonable litigant could realistically expect success on its trial victory on appeal and entering the market with its the merits.” Prof ’l Real Estate Investors, Inc. v. own competitive generic product.” Op. at 43. The majority Columbia Pictures Indus., Inc., 508 U.S. 49, 60, 113 S.
concluded that any “suspicion” about the size of the payment Ct. 1920, 123 L. Ed. 2d 611 (1993). In this case, the by Astra to Barr “abates upon reflection,” stating that “so plaintiffs do not contend that they can—and we con- long as the patent litigation is neither a sham nor otherwise clude that in all likelihood they cannot—establish that baseless, the patent holder is seeking to arrive at a settlement Zeneca’s patent litigation was baseless, particularly in in order to protect that to which it is presumably entitled: a light of the subsequent series of decisions upholding lawful monopoly over the manufacture and distribution of the validity of the same patent. Cf. id. at 60 n.5 (“A the patented product.” Op. at 45. The court continued: winning lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham.”).
We generally agree, then, with the Eleventh Circuit Payments, even “excessive” payments, to settle the dis- insofar as it held in Valley Drug that “‘simply because pute were therefore not necessarily unlawful. a brand-name pharmaceutical company holding a patent paid its generic competitor money cannot be The court also found nothing unlawful about the other the sole basis for a violation of antitrust law,’ unless terms of the Astra-Barr settlement agreement. Noting that the ‘exclusionary effects of the agreement’ exceed the the agreement “did not extend the patent monopoly by ‘scope of the patent’s protection.’” Cipro III, 363 F.
restraining the introduction or marketing of unrelated or Supp. 2d at 538 (quoting Schering-Plough, 402 F.3d non-infringing products,” it distinguished the Astra-Barr at 1076 (alteration omitted)). Whatever damage is agreement from the one condemned as per se illegal in done to competition by settlement is done pursuant to Cardizem. Moreover, the court distinguished the Astra-Barr the monopoly extended to the patent holder by patent case because, in other cases formulation patents were at law unless the terms of the settlement enlarge the issue, while in the Tamoxifen litigation a compound patent scope of that monopoly. “Unless and until the patent was at stake. The Second Circuit also found it important that is shown to have been procured by fraud, or a suit for the Astra-Barr settlement agreement concluded all litiga- its enforcement is shown to be objectively baseless, tion, thus opening the Tamoxifen patent “to immediate chal- there is no injury to the market cognizable under lenge by other potential generic manufacturers, which did existing antitrust law, as long as competition is indeed follow—spurred by the additional incentive (at the restrained only within the scope of the patent.” Cipro time) of potentially securing the 180-day exclusivity period available upon a victory in a subsequent infringement law- suit, since by vacating the district court judgment, Barr ensured (under procedures in effect at the time) that it was Barr settlement included “a provision allowing Barr to not eligible for the exclusivity period.” Op. at 57–58. The revert its paragraph III certification back to a paragraph IV Astra-Barr patent settlement, the court found, did not (at certification in the event another generic manufacturer suc- least on its face) create a “bottleneck” which prevented cessfully invalidated the patent, it seems farfetched, in light other manufacturers (like Mylan, Novopharm and of the law at the time, to construe that provision as a con- Pharmacie) from entering the market with their own gener- scious and unlawful attempt to manipulate the exclusivity period.” Op. at 66. The fact that Barr acted as it did, the The Second Circuit also rejected the antitrust plaintiffs’ court said, was as “easily explained by Barr’s own interest allegations that there was “a conspiracy between Barr and in protecting itself from competition through a petition to Zeneca to deploy Barr’s putative [180-day] exclusivity peri- the FDA for a statutorily prescribed benefit.” Id. at 67.
od to their joint benefit and to the detriment of other poten- Finally, the Second Circuit held that the injury alleged- tial competitors and consumers.” See In re Tamoxifen ly suffered by the antitrust plaintiffs did not “reflect the anti- Citrate Antitrust Litigation, No. 03-7641, at 96 (Pooler, dis- competitive effect either of the violation or of anticompeti- senting); Op. at 61–70.8 The court took it as established that tive acts made possible by the violation,” and was thus not the Astra-Barr patent settlement was “anticompetitive.” Op.
“antitrust injury.” Op. at 68, citing Brunswick Corp. v. at 65. Because it concluded “that the Settlement Agreement Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S. Ct. 690, was not itself an unlawful conspiracy, Barr’s ‘block[ing of] 50 L. Ed. 2d 701 (1977). The injuries alleged by the plain- generic entry’ would not be unlawful as ‘in furtherance of’ tiffs, the court said, resulted from Astra’s “valid patent,” and an unlawful conspiracy.” Id. “There would have to be an from “the inability of other generic manufacturers to estab- unlawful conspiracy,” the court said, “before Barr’s actions lish that the patent was either invalid or not infringed—and could contribute to it.” Id.
not from any agreement between Barr and Zeneca that Barr The court continued to state that “Assuming that the should employ its exclusivity powers to exclude competi- plaintiffs intended to allege a separate agreement among the defendants relating to Barr’s manipulation of its exclusivity The majority opinion in Tamoxifen was strongly criti- period in order to protect the defendants from competition cized by dissenting Judge Pooler, who found it inconsistent from other generic manufacturers, the pleaded conspiracy for the court to supposedly require that the reasonableness of seems to us to be ‘implausible.’” Id. Even though the Astra- settlements of patent infringement suits under antitrust laws 8 In rejecting these allegations, the Second Circuit considered the defendant’s argument that Barr’s conduct, in petitioning the FDA to confirm the availability of the 180-day exclusivity period was protected under the Noerr-Pennington doctrine. See E.R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136, 81 S. Ct. 523, 5 L. Ed.
2d 464 (1961); and United Mine Workers of Am. v. Pennington, 381 U.S. 657, 670, 85 S. Ct. 1585, 14 L. Ed. 2d 626 (1965). “Because we think that an agreement to time the deploy- ment of the exclusivity period to extend a patent’s monopoly power might well constitute anticompetitive action outside the scope of a valid patent,” the Second Circuit said, “we decline to rest our conclusion on the ground of Noerr-Pennington immunity.” Op. at 64–65.
9 The Second Circuit divided its analysis into three different time segments, holding that “the plaintiffs could not have suffered any antitrust injury with regard to an exclusiv- ity period for Barr from the time the defendants signed the Settlement Agreement until the time the regulations were changed in 1997–1998,” because, “[d]uring that period, as far as all parties were concerned, the Settlement Agreement had indeed “cleared the field” so that other generic challengers could enter the market.” The plaintiffs suffered “no antitrust injury from the time the ‘successful defense’ requirement was eliminated until, in 2000, the FDA rejected Barr’s claim to the exclusivity period, because the other ANDA filers with a paragraph IV certification ultimately lost their infringement suits against Zeneca.” Finally, the court said, “there is clearly no antitrust injury with regard to Barr’s use of the exclusivity period after the FDA rejected Barr’s claim to the exclusivity period in 2000.” From that time on, the court concluded, “no one could have thought that Barr had a claim to an exclusivity period. Any injury suffered by the plaintiffs arose from Zeneca’s patent monopoly, which remained valid until its expiration in 2002, after which other generic manufacturers did, in fact, enter the market.” Op. at 69–70.
must be judged at the time the agreements are concluded, Lastly, it would seem that, given the Second Circuit’s Op. at 34, while at the same time relying heavily upon the broad view, protective of Hatch-Waxman settlements, decisions of later courts, in the Novopharm and Pharmacie review by the Supreme Court of the Schering-Plough case patent litigations, to demonstrate that the Tamoxifen patent is more likely. If, as is apparent from the record in Schering- should not have been regarded as invalid at the time of the Plough, the FTC has a vastly different view of “reverse pay- settlement (before the Novopharm and Pharmacie decisions) ments” than the one displayed by the Second Circuit, the even in light of the district court’s then-existing judgment of conflict between the government’s view and that of the patent invalidity. As noted above, Judge Pooler also strong- Second Circuit would, by itself, seem to warrant the ly criticized the majority’s repetitive suggestion that a patent settlement should only be condemned under the antitrust The views expressed in this article are those of the
“rule of reason” when the “underlying infringement lawsuit author alone. They do not represent the views of any other
was objectively baseless” or “sham” litigation. And, Judge person or entity.
Pooler criticized the Second Circuit majority for failing to allow the antitrust plaintiffs to amend their complaint and “to Christopher Ohly concentrates his practice in patent, trade- develop a factual record to demonstrate that Zeneca’s litiga- mark and other complex commercial and civil litigation. tion was sham because they had no reason to anticipate the Under the Second Circuit’s rule in Tamoxifen, settle- ment of patent litigation under the Hatch-Waxman Act may well become easier, if not subject to fewer antitrust attacks, particularly in the case of molecule or compound patents. It would seem that, as viewed by the Second Circuit, all such settlements must be viewed under the “rule of reason,” and that “reverse payments” of almost any size may be permis- sible, so long as they may be later demonstrated to be ration- ally related to the prospective profits that might have been earned by the patent owner (or the generic manufacturer) absent a settlement. It would also seem that, under the Second Circuit’s analysis, so long as a settlement does not on its face create a “bottleneck” to entry in the market by other generic manufacturers, it will not be condemned under the antitrust laws, even if the effect of an “authorized gener- ic” relationship between a patent owner and a generic com- petitor would be to delay entry until after a patent’s expira- tion, because the “authorized generic” settlor has no incen- tive to begin manufacturing its own generic product until


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