Eleventh Circuit Reaffirms That "Pay-For-Delay" Settlement Agreements Are Largely Immune From Antitrust Attack


A "pay-for-delay" settlement agreement, also referred to as a reverse payment agreement, is a type of patent litigation settlement in which a patent holder pays an allegedly infringing generic drug company to delay entering the market until a specified date. This protects the patent monopoly against a judgment that the patent is invalid or would not be infringed by the generic competitor. In the past decade, pay-for-delay agreements have been repeatedly attacked by the Federal Trade Commission. In the FTC's view, pay-for-delay agreements are unfair restraints on trade that violate federal antitrust laws because such agreements artificially preserve a patent holder's monopoly profits, which are shared with the generic drug manufacturers who have agreed to stay out of the market. In a recent decision addressing yet another challenge by the FTC to a pay-for-delay agreement, the United States Court of Appeals for the Eleventh Circuit has reaffirmed that such agreements do not run afoul of antitrust law so long as the anticompetitive effects of the agreement fall within the exclusionary potential of the patent.

In Federal Trade Commission v.Watson Pharmaceuticals, Inc., et al., No. 10-12729 (11th Cir. April 25, 2012), the FTC filed an antitrust lawsuit against four entities that entered into a pay-for-delay agreement to settle patent litigation. In the underlying dispute, Solvay Pharmaceuticals, Inc. filed a New Drug Application ("NDA") for the prescription drug AndroGel. After the FDA approved Solvay's NDA, Solvay filed a patent application with the U.S. Patent and Trademark Office. The PTO granted the application, jointly awarding Solvay and the drug's creator (a foreign entity) Patent Number 6,503,894 ("the '894 patent"). Solvay then asked the FDA to include the '894 patent in the Orange Book alongside the AndroGel listing.

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