The Federal Trade Commission (FTC) has asked a federal court to find that the agency has authority under the Hart-Scott-Rodino Act (HSR Act) to promulgate reporting requirements that apply solely to transfers of patent rights in the pharmaceutical industry.
As we wrote in an earlier e-alert in November 2013, the FTC finalized a rule that expanded the HSR reporting requirements solely for pharmaceutical industry companies to include licensing transactions where the licensor retains manufacturing rights or other co-rights (e.g., co-marketing or co-commercialization rights). The new rule became effective on December 16, 2013. Previously, the transfer of a pharmaceutical patent license was reportable only if it involved the exclusive right to use a patent (or part of a patent) to develop a product, manufacture the product, and sell that product without restriction.
Shortly before the new rule became effective, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed suit against the FTC claiming that the HSR Act does not permit the FTC to issue rules that discriminately expand the scope of reporting requirements for specific industries. In a summary judgment motion filed Monday, the FTC argued that its interpretation of the HSR Act should stand because the agency is entitled to Chevron deference, as Congress never addressed the issue of industry-specific reporting requirements, and because the agency has articulated a well-reasoned explanation for treating the pharmaceutical industry differently. We will keep you informed as the litigation progresses.
In light of the FTC rule’s novelty and the uncertainty about its legitimacy, pharmaceutical and biotechnology companies engaging in licensing transactions should consult HSR counsel to make an informed decision about their reporting obligations.