Patent Settlements Research Articles

Genentech, Lundbeck, Paramount and Others: A Survey of Cases at the Intersection Between Competition Law and IP Law in the Past Year

This Survey reviews EU competition law developments involving consideration of intellectual property rights in the year to October 2016. The cases reviewed cover: (i) acceptable royalty terms in licences (Genentech v Hoechst, CJEU); (ii) the first judgment by a European Court on ‘reverse’ patent settlements (Lundbeck and related cases, GC); (iii) Commission merger decisions in the TMT and biopharma sectors; (iv) commitments decisions involving obligations to license IP; (v) state aid decisions involving IP issues; and (vi) the Paramount commitments decision in relation to copyright licensing, together with relevant developments in the Commission's e-commerce sector inquiry. In July 2016, the CJEU delivered its first judgment in many years on the compatibility of a patent licensing agreement with Article 101 TFEU. The question referred by the Paris Appeal Court focussed on whether a licensor could legally collect royalties for the entire duration of a licence agreement, even if the licensed patents were found to be invalid or non-infringed.

Pay-for-Delay Agreements in the EU Pharmaceutical Industry

This article analyses the compatibility of pay-for-delay agreements with Article 101 of the Treaty on the Functioning of the European Union, in light of the recent judgment of the General Court in H. Lundbeck A/S and Lundbeck Ltd v European Commission. These commercial agreements, also known as reverse payment settlements, are characterised by a value transfer from the originator to generic companies, which results in a delay in generic market entry. The European Commission first examined pay-for-delay agreements in the Pharmaceutical Sector Inquiry in 2009, instituting an annual patent settlements monitoring exercise and initiating proceedings against a number of pharmaceutical companies, imposing fines totalling over €580 million. In September 2016, the General Court confirmed the decision of the Commission against Lundbeck, holding that the generic undertakings involved in the pay-for-delay agreements were potential competitors of the originator company and that the agreements constituted restrictions of competition by object. The seminal decision of the court adds strength to the arguments used by the Commission in its pay-for-delay investigations, providing an apparently coherent legal framework for the assessment of these agreements. However, significant uncertainty remains in relation to the application of key concepts of competition law in the pay-for-delay context.

Lundbeck v Commission : Reverse Payment Patent Settlements as Restrictions of Competition by Object

The General Court upheld the Commission's finding that Lundbeck and generic producers of citalopram were at least potential competitors, that the reverse payment patent settlements at issue restricted competition by object, and that the Commission was not required to examine the situation that would have arisen had the agreements not been concluded.

Online Appendix for 'Delayed Entry Settlements at the Patent Office'

This online appendix presents detailed information on pharmaceutical patent settlements reached in the Patent Trial and Appeal Board (PTAB). It is a supplement to our paper, Reverse Settlement and Holdup at the Patent Office, which is available at the link below: http://ssrn.com/abstract=814532.

Comments on Proposed Update on Intellectual Property Licensing Guidelines

This short comment offers two general reactions to the agencies’ updating of the Intellectual Property (IP) Licensing Guidelines. First, it recommends that the agencies consider addressing IP licensing issues related to (1) standard essential patents (SEPs), (2) patent assertion entities (PAEs), and (3) drug patent settlements. Although addressed in agency orders and speeches, each of these topics could benefit from further elaboration in the form of guidelines.Second, it suggests that the agencies in three places could more directly recognize the crucial regulatory and industry context. These three changes would ensure that (1) purposes of regulatory regimes such as encouraging access to generic drugs are promoted; (2) the concerns of massive patent portfolios are acknowledged; and (3) the agencies recognize industry-specific anticompetitive effects in research-and-development markets.

Patent Settlements in the Pharmaceutical Industry: What Can We Learn from Economic Analysis?

Patent settlements between originator and generic firms in the pharmaceutical industry have been challenged by antitrust and competition authorities in the U.S. and the EU. Particularly settlements with large reverse payments to generic firms raise the concern of collusive behaviour for protecting weak patents and delaying price competition through generic entry and therefore harming consumers. However, it is still heavily disputed under what conditions such patent settlements are anticompetitive and violate antitrust rules. This article scrutinizes critically what economic analysis has so far contributed to our knowledge about the effects of these patent settlements and the possible rules for their antitrust treatment. An important claim of this paper is that the problem of patent settlements can only be understood, if we analyze it not only from a narrow antitrust perspective but also take into account its deep interrelationship with the problems (and the economics) of the patent system. Therefore we identify three different channels of effects, how patent settlements can influence consumer welfare: (1) price effects, (2) innovation incentive effects, and (3) effects via the incentives to challenge weak patents. The paper critically analyzes the existing economic studies and identifies a number of research gaps, especially also in regard to trade offs between different effects. It also suggests that policy solutions for these patent settlements should also be sought in combination with patent law solutions.

Uncertainty and Reverse Payments

Antitrust has long agonized about how to regulate patent settlements that include a payment from a branded drug maker to a generic challenger in exchange for the generic’s promise to stay out of the market for a time. I make the case for a ban on all patent settlements that fix a date of entry, regardless of the existence of a “reverse payment” or whether entry leads to a duopoly or competition between multiple generic entrants. The current approach to reverse payments seeks to preclude only those settlements that are guaranteed to harm consumers. I argue that because there is uncertainty about how much delay drug makers will negotiate in settlement, antitrust must instead make it impossible for settlements to harm consumers. I argue that a settlement ban is the best way to do that.

Strategies that delay or prevent the timely availability of affordable generic drugs in the United States

AbstractHigh cancer drug prices are influenced by the availability of generic cancer drugs in a timely manner. Several strategies have been used to delay the availability of affordable generic drugs into the United States and world markets. These include reverse payment or pay-for-delay patent settlements, authorized generics, product hopping, lobbying against cross-border drug importation, buying out the competition, and others. In this forum, we detail these strategies and how they can be prevented.

Side payments, litigation risk and settlement outcomes

We offer a simple model of patent settlement for examining how litigation prospects, patent strength and expected damage awards affect consumer benefits stemming from settlement agreements providing for per-unit royalties and non-negative fixed fees. The result shows that consumers may be harmed if expected damage payments forgone by settlement lead to agreements with high royalty payments that benefit both the patent holder and licensee at the expense of the consumer.

Should Reverse Payment Patent Settlements Be Prohibited Per Se?

Using the same competition test and counterfactual that has been used in the economic literature that is often cited to justify intervention against virtually all reverse payment patent settlements (RPPSs), we conclude that (1) RPPSs can benefit consumers and, therefore, it is wrong to presume that RPPSs are necessarily anticompetitive; (2) it is also incorrect to presume that RPPSs are by their very nature injurious to competition; (3) such a presumption is unjustified even for those involving reverse payments in excess of the originator’s expected litigation costs; (4) there is therefore no justification for treating RPPSs as per se illegal; (5) a case-by-case assessment of the effects on competition and consumer welfare of an RPPS that uses the expected date of entry as the standard of comparison in the counterfactual world, would necessarily require informed judgments as to (at a minimum) the strength of the patent at issue and the likelihood of patent infringement; (6) as a result, assessing RPPSs on a case by case basis using the expected date of entry standard for comparison is bound to lead to errors and reduce consumer welfare and, hence, cannot constitute an appropriate legal standard; and (7) RPPSs, even those involving reverse payments greater than the originator’s litigation costs, should be assessed under a rebuttable presumption of legality rule — i.e. they should be presumed legal unless there is direct evidence of a conspiracy to delay entry.

Generic product entry in EU markets.

Pharmaceutical Patent AnalystVol. 4, No. 3 Hot TopicGeneric product entry in EU marketsLorna BrazellLorna BrazellE-mail Address: lorna.brazell@osborneclarke.com Partner, Osborne Clarke, One London Wall London EC2Y 5EBSearch for more papers by this authorPublished Online:1 Jun 2015https://doi.org/10.4155/ppa.15.6AboutSectionsView ArticleView Full TextPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsPermissionsReprints ShareShare onFacebookTwitterLinkedInRedditEmail View articleReferences1 Kollagenase I and II GRUR 461 + 462. (2014).Google Scholar2 Novartis AG v. Alvogen IPCO SARL and Focus Farma B.V., District Court The Hague, 23 December 2013, Case No. C/09/452370/KG ZA 13–1160.Google Scholar3 [2010] EWCA Civ 1110.Google Scholar4 Fifth report on Patent Settlement Agreement. http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/patent_settlements_report5_en.pdf.Google Scholar5 Cour d'appel de Paris, 23 September 2014, Docket No 12/21810.Google ScholarFiguresReferencesRelatedDetails Vol. 4, No. 3 Follow us on social media for the latest updates Metrics Downloaded 42 times History Published online 1 June 2015 Published in print May 2015 Information© Future Science LtdFinancial & competing interests disclosureThe author has no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript apart from those disclosed.No writing assistance was utilized in the production of this manuscript.PDF download

A Fistful of Euros: EU Competition Policy and Reverse Payments in the Pharmaceutical Industry

Patent settlement agreements (PSAs) are contracts concluded to put an end to a dispute on the validity or the scope of a patent. Reverse payments or “payfor-delay” agreements are PSAs which stipulate a payment from the patentee to those who challenge the patent. Patent-intensive industries, such as the pharmaceutical industry, provide fertile ground for these agreements. The recent decisions of the EU Commission in Lundbeck, Johnson & Johnson and Servier1 have ultimately brought the problematic relation between reverse payments and EU competition policy to the fore. A vibrant doctrinal and academic debate surrounds reverse payments in the US. Interestingly, this debate was brought to a head by a US Supreme Court judgment issued a couple of days before the Commission’s decision in Lundbeck. An analysis of US antitrust practice demonstrates that the various positions in this debate primarily depend on how, and to what extent, patent law considerations come into play in the antitrust scrutiny. By contrast, the scant EU practice does not clarify how these two policies interact with each other. Bearing this in mind, we put forward an interpretation of EU competition rules—in particular, Article 101 of the Treaty on the Functioning of the European Union (TFEU)—which combines these two policies. To do so, this article proceeds as follows. First, it enquires into the tension between patent policy and competition policy embedded in reverse payments. Secondly, while taking into consideration the applicable regulatory frameworks, it investigates how US courts have reconciled patent and competition policy when dealing with reverse payments. Thirdly, after having highlighted the

Activating Actavis: Taking the Story Beyond the Temporary Duopoly

This paper examines the economics of litigation and settlement of patent disputes arising from Paragraph IV ANDA filings under the Drug Price Competition and Patent Term Restoration Act (“Hatch-Waxman Act”) within the framework set out in FTC v. Actavis. Recent economic analyses of reverse payment settlements are based upon a monopoly-to-duopoly model that assumes a single generic entrant. These analyses have been used to support antitrust rules that would enjoin reverse payments that exceed the cost of litigation. We demonstrate that the simple monopoly-to-duopoly models providing the analytical basis for the litigation cost benchmark for analyzing reverse payment settlements is incomplete. Our key institutional insight is the fact that entry by multiple firms follows the invalidation of a patent. Accounting for this critical institutional detail in a more generalized monopoly-to-duopoly model results in important and different implications for patent settlements, welfare, and application of the rule of reason pursuant to Actavis. The result is a broader settlement range than under the monopoly-to-duopoly model that yields robust incentives for the brand and generic entrant to settle the case. This broad settlement range makes attempts to regulate the size of patent settlements ineffective at achieving consumer welfare increasing settlements, or inducing the invalidation of “bad” patents through higher litigation rates. Incorporating multiple serial entrants also decouples the litigation-adjusted expected value of the patent and the consumer welfare standard, and further weakens the relationship between patent strength and the size of the settlement which has motivated numerous calls to deem presumptively unlawful all payments greater than anticipated litigation costs.

Big Pharma's Anticompetitive Practices Delaying Generic Entry: Has the Tide Turned?

Competition authorities around the world have long tried to curb the anticompetitive practices of originator drug companies, including their anticompetitive agreements with generic drug companies that result in the delay of generic entry. Their work appears to bear fruit as the years 2013 and 2014 seem to mark a new chapter in competition enforcement in the sector. In July 2014 the Commission issued its third prohibition decision in the sector (i) against the French originator company Servier for its exclusionary conduct and for concluding a series of deals with generic companies to protect its best-selling blood-pressure medicine, perindopril, from generic price competition in violation of both Articles 101 and 102 of the TFEU and (ii) against five generic drug manufacturers for violation of Article 101. Through a technology acquisition and a series of reverse payment patent settlements with generic rivals, the Commission found that Servier implemented an unlawful exclusionary strategy to delay the entry of cheaper generic medicine. The Servier decision was preceded by the Commission’s Fentanyl prohibition decision in December 2013 fining Johnson & Johnson and Novartis for their respective Dutch subsidiaries’ anticompetitive agreement to delay the market entry of a cheaper generic version of the painkiller fentanyl in the Netherlands, in breach of Article 101. Earlier in June 2013 the Commission also fined the Danish pharmaceutical company Lundbeck and several generic producers for agreeing to delay the market entry of cheaper generic versions of Lundbeck’s branded citalopram, a blockbuster antidepressant, in breach of Article 101. In the same month the US Supreme Court issued its landmark Actavis opinion holding that patent owners do not enjoy immunity from the ‘rule of reason’ scrutiny of antitrust laws when making reverse payment settlements, even if the settlements are only for the terms of the patents. The Actavis decision ended a ‘dramatic split’ among Appellate Courts of different Circuits in the USA, and today it provides a new impetus to the FTC’s efforts to scrutinise pay-for-delay settlements. In the EEA, we know from public statements that the European Commission also presses forward with additional reverse payment and other new cases in the sector. In the past decades, in anticipation of reaching the ‘patent cliff ’ for their blockbuster medicines, originator drug companies have employed numerous measures that were aimed at ‘evergreening’ or otherwise extending the high rent-earning status of such medicines. These measures included inter alia life cycle strategies for follow-on products, complex patent strategies involving patent litigation/EPO opposition and patent settlements, prolongation of patent protection through SPCs, interventions before marketing or reimbursement authorities raising safety, bioequivalence or patent infringement issues, cooperation with potential generic competitors in the marketing of their products. Given rising healthcare costs and the budgetary constraints that followed the recent economic crisis, it is not surprising that these attempts have attracted, and continue to attract, the attention of the legislators and competition authorities alike in many jurisdictions. A review of the regulatory attempts to curb evergreening is beyond the scope of this note. Competition authorities scrutinise individual practices where appropriate to detect those that are likely anticompetitive and thus harmful to society. However, one should emphasise at the outset that in most cases many of the foregoing practices by the originator companies may well constitute legitimate business practices and should not, on balance, be deemed in violation of competition laws. In some other cases, however, the particular conducts of the originator companies have rightfully attracted competition law scrutiny. One such earlier case is, for example, the AstraZeneca case where the Commission fined AstraZeneca for abusing its dominant position in two infringements of Article 102. The first abuse

The wake of FTC v. Actavis: practical implications on the pharmaceutical industry.

2014 In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch–Waxman Act, attempts to balance a public interest in having generic pharmaceutical products while maintaining incentives for innovator companies [1]. Under the Act, a generic drug manufacturer may challenge a patented drug by filing an Abbreviated New Drug Application (‘ANDA’) for a proposed generic product, together with an appropriate certification. The most common of the latter certifies that the proposed ANDA product does not infringe the patent or patents covering the drug as listed in the US FDA’s Orange Book, and/or that the patents are invalid or unenforceable. In response, the innovator often initiates patent litigation to protect its market exclusivity. Although many ANDA patent cases proceed to trial, others are settled, as is common with other types of patent litigation. However, while typical patent litigation settlements involve a payment from the accused infringer to the patent owner, it is common for ANDA settlements to involve a ‘reverse’ payment from the brand manufacturer to the generic in exchange for an agreement by the generic to delay its entry into the market. In FTC v. Actavis [2], the Supreme Court considered whether reverse payment settlements can constitute a violation of antitrust laws [3]. (According to the Court, a reverse payment settlement occurs when: “Company A sues Company B for patent infringement.” The two companies settle under terms that require: Company B, the claimed infringer, not to produce the patented product until the patent’s term expires, and Company A, the patentee, to pay B many millions of dollars.) Prior to the decision, there was a circuit split on the issue. Some circuits viewed the practice as acceptable as long as the effect of the settlement fell within the scope of the patent [4]. The Third Circuit, in contrast, viewed such settlements as presumptively unlawful [5]. Ultimately, the Supreme Court took the middle ground in Actavis, ruling that reverse payment settlements can violate antitrust laws, but that each case must be considered individually under the so-called rule-of-reason standard, commonly used in antitrust cases. The Court left the structuring of the ruleof-reason test to the lower courts, which has led to uncertainty in this area of the law.

Pay-for-Delay Agreements in the Pharmaceutical Sector: Towards a Coherent EU Approach?`

This Report examines the competition law issues that arise, in the EU pharmaceutical sector, from pay-for-delay agreements concluded between an originator company and a generic manufacturer. The Commission's approach to these agreements is reviewed evaluating the findings of the on-going monitoring activity of patent settlements, the outcome of recent investigations, and the legislative proposals specifically aimed at dealing with the phenomenon. Finally, a comparison of the EU and US approaches provides a clear indication of the challenges that still lie ahead.

Reverse-Payment Patent Settlements in the Pharmaceutical Industry: An Analysis of U.S. Antitrust Law and EU Competition Law

In the pharmaceutical industry, originator companies researching and developing new medicines typically obtain a range of patents to protect these medicines against generic competition. On the other side, generic suppliers seeking to enter the market will often challenge the validity of these patents or may simply launch their products, forcing the originators to bring litigation to enforce their patents and prevent the generics' entry. In the context of the corresponding litigation, the originators and generic suppliers often decide to enter into a settlement. While the settlement terms will vary from case to case, a number of settlements have involved a payment made from the patent holder (the originator) to the accused infringer (the generic supplier) in order to settle the dispute (reverse-payment patent settlements). Against this background, this paper seeks to analyze the compatibility of such settlements under U.S. antitrust law and EU competition law drawing on recent cases.

'Pay for Delay': What Do We Disagree On?

Antitrust concerns about “Pay For Delay” patent settlements are based on two theory of harms, one that stresses the need for Courts to review the validity of patents and one that emphasises the “probabilistic” nature of patent rights. The main weakness of the first theory of harm is that it fails to explain why some forms of patent settlements would be less desirable than others. The “probabilistic” theory of harm raises fundamental questions about the legal obligations of a patent-holder, the type of uncertainty that should be reflected in the probabilistic nature of the patents and whether the theory can be applied to anything but the simplest PFD settlements. The paper also discusses the likely effect of a PDF ban on innovation and reviews both the European approach to recent and on-going PDF cases and the recent Actavis decision of the US Supreme Court.

Pharma patent settlements in EU continue to rise

Pharma patent settlements in EU continue to rise

Reverse-Payment Patent Settlements in the Pharmaceutical Industry: An Analysis of US Antitrust Law and EU Competition Law

In the pharmaceutical industry, originator companies researching and developing new medicines will typically obtain a range of patents to protect these medicines against generic competition. On the other side, generic suppliers seeking to enter the market will often challenge the validity of these patents or may simply launch their products, forcing the originators to bring litigation to enforce their patents and prevent the generics’ entry. In the context of the corresponding litigation, the originators and generic suppliers often decide to enter into a settlement. While the settlement terms will vary from case to case, a number of settlements have involved a payment made from the patent holder (the originator) to the accused infringer (the generic supplier) in order to settle the dispute (these settlements are known as “reverse-payment patent settlements”). The legality of such settlements is the subject of a heated debate, both in Europe and in the United States (“US”). Competition authorities on both sides of the Atlantic are concerned that such settlements may unduly delay market entry of generic drugs, to the detriment of consumers and governments’ health care budgets. In June 2013, both the US Supreme Court and the European Commission (“Commission”) addressed the legality of reverse-payment patent settlements between originator and generic drug companies, reaching rather different conclusions. In order to explain the causes and consequences of this divergence, this paper discusses first the relevant Hatch-Waxman Act provisions and explore the evolution of the US case-law with regard to patent settlements (Part II). Thereafter, we analyse the EU regulatory context and current investigation activity of the Commission and the national competition authorities (Part III). Finally, we compare the US approach to reverse-payment patent settlements, as highlighted by the recent Actavis ruling, to the approach endorsed by the Commission in the Lundbeck decision (Part IV).