Third Circuit Sides with FTC Position on So-Called Pay-for-Delay Settlements, Virtually Guaranteeing Supreme Court Review on The Issue

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Case: In Re: K-Dur Antitrust Litigation, No. 10-2077, 10-2078, 10-2079, 10-4571 (3d Cir. July 16, 2012).

In an important decision for the pharmaceutical sector and intellectual property law generally, the Third Circuit on July 16 adopted the long-held position of the Federal Trade Commission that so-called “pay-for-delay,” or “reverse payment,” settlements between brand-name and generic pharmaceutical manufacturers are presumptively unlawful under antitrust law. The holding gives the FTC its first win on this issue in almost a decade and creates a 3 to 3 split among the U.S. Court of Appeals, virtually ensuring Supreme Court review of this controversial issue.

This case is the latest in a long line of cases to address the antitrust implications of settlements of patent infringement cases brought under the Hatch-Waxman Act. The FTC has been waging a decade-long campaign against reverse settlements, but for the last seven years, the agency has lost in court, with the Eleventh, Second, and Federal Circuits all applying a permissive “scope of the patent” test under which settlements are lawful provided the entry date falls within the life of the patent at issue.

The Third Circuit decision is the first time in almost a decade that an appellate court has sided with the FTC for which these cases have been a centerpiece of its antitrust agenda in the health care field. The decision creates a razor-sharp conflict within the circuits that the Supreme Court will now almost certainly have to resolve.

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Published In: Antitrust & Trade Regulation Updates, General Business Updates, Intellectual Property Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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