Supreme Court to Examine Pay-For-Delay Settlements

The battle between the pharmaceutical industry and the Federal Trade Commission (“FTC”) over so-called “pay-for-delay” settlements will finally be examined and decided by the Supreme Court. Last Friday, the Court granted certiorari in Federal Trade Commission v. Watson Pharmaceuticals, Inc., one of two cases with filed certiorari petitions involving Hatch Waxman reverse payment settlements. The petition in the other case, In re K-Dur Antitrust Litigation, is still pending.

In Federal Trade Commission v. Watson Pharmaceuticals, Inc., the Supreme Court will address: whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the Eleventh Circuit held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit held).

We previously posted on the numerous developments leading up to this grant of certiorari. This issue seemingly gained traction with the Court following the K-Dur decision, in which the Third Circuit held reverse payments to be presumptively anti-competitive under the “quick look rule of reason analysis.” K-Dur thus created a circuit split with the Eleventh, Second, and Federal Circuits, which previously found reverse payments lawful — provided that such agreements stay within the scope of the exclusionary potential of the patent.

Federal Trade Commission v. Watson Pharmaceuticals, Inc. will join Association for Molecular Pathology v. Myriad Genetics, et al. as two of the most watched IP cases in the coming year. Gibbons will continue to track future developments in this case from party briefing — and the inevitable scores of amicus briefs likely to be filed — through oral argument and final decision.