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FTC v. Actavis, Inc.

Supreme Court of the United States

March 25, 2013, Argued; June 17, 2013, Decided

No. 12-416

Opinion

 [*140]  [**2227]   Justice Breyer delivered the opinion of the Court.

Company A sues Company B for patent infringement. The two companies settle under terms that require (1) Company B, the claimed infringer, not to produce the patented product until the patent’s term expires, and (2) Company A, the patentee, to pay B many millions of dollars. Because  [*141]  the settlement requires the patentee to pay the alleged infringer, rather than the other way around, this kind of settlement agreement is often called  [****8] a “reverse payment” settlement agreement. And the basic question here is whether such an agreement can sometimes unreasonably diminish  [***353]  competition in violation of the antitrust laws. See, e.g., 15 U.S.C. §1 (Sherman Act prohibition of “restraint[s] of trade or commerce”). Cf. Palmer v. BRG of Ga., Inc., 498 U.S. 46, 111 S. Ct. 401, 112 L. Ed. 2d 349 (1990) (per curiam) (invalidating agreement not to compete).

In this case, the Eleventh Circuit dismissed a Federal Trade Commission (FTC or Commission) complaint claiming that a particular reverse payment settlement agreement violated the antitrust laws. In doing so, the Circuit stated that a reverse payment settlement agreement generally is “immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.” FTC v. Watson Pharms., Inc., 677 F.3d 1298, 1312 (2012). And since the alleged infringer’s promise not to enter the patentee’s market expired before the patent’s term ended, the Circuit found the agreement legal and dismissed the FTC complaint. Id., at 1315. In our view, however, reverse payment settlements such as the agreement alleged in the complaint before us can sometimes violate the antitrust laws.  [****9] We consequently hold that the Eleventh Circuit should have allowed the FTC’s lawsuit to proceed.

Apparently most if not all reverse payment settlement agreements arise in the context of pharmaceutical drug regulation, and specifically in the context of suits brought under statutory provisions allowing a generic drug manufacturer (seeking speedy marketing approval) to challenge the validity of a patent owned by an already-approved brand-name drug owner. See Brief for Petitioner 29; 12 P. Areeda &  [*142]  H. Hovenkamp, Antitrust Law ¶2046, p. 338 (3d ed. 2012) (hereinafter Areeda); Hovenkamp, Sensible Antitrust  [1957]  Rules for Pharmaceutical Competition, 39 U.S. F. L. Rev. 11, 24 (2004). We consequently describe four key features of the relevant drug-regulatory framework established  [**2228]  by the Drug Price Competition and Patent Term Restoration Act of 1984, 98 Stat. 1585, as amended. That Act is commonly known as the Hatch-Waxman Act.

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570 U.S. 136 *; 133 S. Ct. 2223 **; 186 L. Ed. 2d 343 ***; 2013 U.S. LEXIS 4545 ****; 106 U.S.P.Q.2D (BNA) 1953; 81 U.S.L.W. 4455; 2013-1 Trade Cas. (CCH) P78,419; 2013 WL 2922122

FEDERAL TRADE COMMISSION, Petitioner v. ACTAVIS, INC., et al.

Notice: The LEXIS pagination of this document is subject to change pending release of the final published version.

Subsequent History: On remand at, Remanded by FTC v. Watson Pharms., Inc., 529 Fed. Appx. 985, 2013 U.S. App. LEXIS 18695 (11th Cir. Ga., 2013)

Prior History:  [****1] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

In re Nexium (Esomeprazole) Antitrust Litig., 2013 U.S. Dist. LEXIS 10455 (D. Mass., Jan. 24, 2013)FTC v. Watson Pharms., Inc., 677 F.3d 1298, 2012 U.S. App. LEXIS 8377 (11th Cir. Ga., 2012)

Disposition: Reversed and remanded.

CORE TERMS

patent, settlement, generic, antitrust, anti trust law, patentee, patent holder, monopoly, challenger, invalid, infringement, anticompetitive, manufacturer, settle, parties, competitor, patent law, Sherman Act, litigate, Pharmaceutical, effects, settlement agreement, provisions, conferred, brand-name, expiration, holder, limits, paying, cases

Antitrust & Trade Law, Sherman Act, Scope, General Overview, Civil Procedure, Settlements, Settlement Agreements, Business & Corporate Compliance, Governments, Agriculture & Food, Federal Food, Drug & Cosmetic Act, Defenses, Inequitable Conduct, Anticompetitive Conduct, Patent Law, Infringement Actions, Regulated Practices, Trade Practices & Unfair Competition, Federal Trade Commission Act, Public Enforcement, US Federal Trade Commission Actions, Exclusive Rights, Manufacture, Sale & Use, Limitations, Ownership, Conveyances, Licenses, Remedies, Damages, Price Fixing & Restraints of Trade, Per Se Rule & Rule of Reason, Enforcement