Payment from a Patentee to a Generic Manufacturer Does Not Create an Antitrust Violation.

Schering-Plough v. FTC (11th Cir. 2005).

In a March 8 decision, the 11th Circuit Court of Appeals set aside an FTC order that barred Schering-Plough from settling an infringement suit with generic makers over the patented blood pressure drug K-Dur.  FTC had concluded that the settlement was an "unreasonable restraint of trade."

The Appellate Court determined that because the suit involved patented products, neither a per se nor a rule of reason analysis would be appropriate.

We think that neither the rule of reason nor the per se analysis is appropriate in this context. We are bound by our decision in Valley Drug where we held both approaches to be ill-suited for an antitrust analysis of patent cases because they seek to determine whether the challenged conduct had an anticompetitive effect on the market. 344 F.3d 1294. By their nature, patents create an environment of exclusion, and consequently, cripple competition. The anticompetitive effect is already present. “What is required here is an analysis of the extent to which antitrust liability might undermine the encouragement of innovation and disclosure, or the

Applying their rule to the facts, the Court concluded that payment from a patent holder to a generic competitor cannot be the sole basis of a violation of antitrust law.

Simply because a brand-name pharmaceutical company holding a patent paid its generic competitor money cannot be the sole basis for a violation of antitrust law.

Accordingly, the court SET ASIDE the decision of the Federal Trade Commission and VACATED its cease and desist order.

Links:

• Download Schering Antitrust Decision.pdf
• Patent at issue, No. 4,863,743
• NYTimes Article
• PubPat Amicus Brief to the 11th Circuit [pdf]