The Federal Circuit Cipro Decision: Another Blow to The FTC's Fight Against Reverse Payment Settlements

Morrison & Foerster LLP

Yesterday, the Court of Appeals for the Federal Circuit weighed in on the contentious issue of reverse payment patent settlements in the pharmaceutical industry. The Federal Trade Commission had filed an amicus brief urging reversal of the district court?s grant of summary judgment to the defendants, arguing that the lower court failed to apply the proper legal standard. Following the lead of the Second and Eleventh Circuits, however, the Federal Circuit held in In re Ciprofloxacin Hydrocholoride Antitrust Litigation[1] that, absent additional anticompetitive restraints, reverse payment settlements of a bona fide patent litigation are ?within the exclusionary zone of the patent, and thus [cannot] be redressed by federal antitrust law.?[2] The court rejected any notion that reverse payment patent settlements should be per se unlawful. The court also rejected the argument that the exclusionary power of the patent should include a consideration of the uncertainty of patent validity. Following the Eleventh Circuit, the court held that absent evidence of the fraud on the PTO or sham litigation, the court need not consider the validity of the patent in the antitrust analysis of a reverse payment settlement. The Federal Circuit?s decision is therefore another rejection of the analytic framework advocated by the Federal Trade Commission to deal with reverse payment patent settlements, and represents an important new development for companies confronted with these issues.

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