Why FTC v. Actavis Won’t Shift the Border Between IP and Antitrust Law

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The Supreme Court’s recent decision in Federal Trade Commission v. Actavis, Inc., No. 12-416, ___ U.S. ___ (2013), has generated a lot of commentary recently. Some articles have suggested that the decision may expose certain intellectual property (IP) licensing decisions to antitrust scrutiny that prior to Actavis would have been immune from antitrust attack.  “Under Actavis, the question needs to be asked now whether a field of use restriction ‘within the scope of the patent’ raises significant antitrust concerns in particular circumstances.” See here.

But I think that it is unlikely that Actavis will be expanded beyond its peculiar confines to upset the traditional rule that patent licensing agreements that limit the field of use raise no antitrust issues.

In Actavis, the manufacturer of a brand name prescription drug brought a patent infringement suit against a generic drug manufacturer that intended to market an allegedly infringing version of the branded drug prior to the patent’s expiration. In the specific context of the Hatch-Waxman Act, the Court considered whether the Sherman Act ever could be violated by a payment by the brand name manufacturer (the patentee) to the generic manufacturer (the alleged infringer) as part of a settlement in which the generic manufacturer would agree not to market the generic versions of the drug for some period of time within the patent term.

The Court recognized that these unusual reverse payments are “quite different” from typical settlement agreements in that “a party with no claim for damages . . . walks away with money so it will stay away from the patentee’s market.” Slip Op. at 13. Accordingly, the Court concluded that such payments could, under certain limited circumstances, violate the antitrust Rule of Reason. In Actavis, the patent litigation “put the patent’s validity at issue, as well as its actual preclusive scope.” Slip. Op. at 8. Given this and other factors, “it would be incongruous to determine antitrust legality by measuring the settlement’s anticompetitive effects solely against patent law policy . . . .” Id. at 8-9.

Outside the peculiar context of the Hatch-Waxman Act, litigation over patent validity, and settlement agreements featuring reverse payments to stay away from a patentee’s market, there is simply no reason to question whether a licensing restriction within the scope of the patent grant could be an anticompetitive action under the antitrust laws.

What do you think?

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Topics:  Antitrust Litigation, FTC, FTC v Actavis, Intellectual Property Litigation, SCOTUS

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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