Actavis leaves scope for dissent

30.01.2014

I noted with interest that the long-standing differences of opinion between US District Courts about the antitrust law treatment of patent settlement agreements (so-called ‘pay-for-delay’) have not gone away post-Actavis. The latest dissent relates to the treatment of non-monetary benefits accorded to generic challengers in the context of patent settlements.
Last October saw the Judge Young, in the District Court of Massachusetts, rejecting a Motion to Dismiss in the In re Nexium litigation (available here), on the basis that “Nowhere in Actavis did the Supreme Court explicitly require some sort of monetary transaction to take place for an agreement between a brand and generic manufacturer to constitute a reverse payment”. The non-monetary compensation at issue in the case included a promise by the originator not to launch an authorised generic and forgiveness of contingent liabilities on the part of the generic following an at-risk entry.
But last week (January 24), Judge Walls, in the District Court of New Jersey, again ruling on a Motion to Dismiss brought by the brand-owner in the In re Lamictal dispute, reached the diametrically opposite conclusion (here), stating: “this Court will not extend the holding of Actavis to the non-monetary facts before it”. Judge Walls noted the In re Nexium precedent, but elected to diverge from it, as he found the reasoning unpersuasive. However, leaving aside Actavis, he did not exclude that other similar cases without monetary payment might nevertheless give rise to antitrust concerns.
I am not a US lawyer, but Judge Walls’ analysis of the Actavis opinion appears robust. Actavis specifically called for scrutiny of “large and unjustified” reverse payments and the dissenting opinions questioned the majority’s differential treatment between monetary and non-monetary payments. Rather, it is the In re Nexium judgment which seems to be the outlier, at least as an interpretation of Actavis. It cannot be excluded that this is an issue which will again have to be reviewed at the highest level in the US.
In the EU, it seems that non-monetary compensation is subject to competition law scrutiny. The European Commission clearly signals its view in the 4th Pharmaceutical Patent Monitoring Report (December 2013, here) which mentions “side-deals” such as distribution, licence or non-assertion agreements (I blogged on this previously here). The concession that a “pure early entry” agreement (which would necessarily involve some kind of licence) “is not likely to attract the highest degree of antitrust scrutiny” offers scant comfort, and contrasts with the position of the majority in Actavis that early entry agreements were pro-competitive.
The draft Technology Transfer Guidelines (here – surely the final version which is due to come into force in just 3 months’ time has to be published soon?) contain a similarly nebulous threat that “Scrutiny is necessary in particular if the licensor provides an inducement, financially or otherwise” (para. 223). This smacks of anti-avoidance – whatever creativity litigating companies use to structure a mutually acceptable settlement, the competition authorities will match their creativity in finding an infringement of the competition rules.
—————————
Note: For those new to this subject, Actavis was an opinion of the US Supreme Court issued last year which went some way towards resolving diverging Court of Appeals opinions about the treatment of reverse payment patent settlement agreements, where the generic challenger receives a benefit from the patentee. The Supreme Court rejected the so-called ‘scope of patent’ test, which treated agreements as exempt from the application of antitrust law unless they imposed restrictions going beyond those resulting from the patent itself. Instead, such agreements are not immune from the application of the antitrust rules, although an effects-based ‘rule of reason’ analysis is to be used, rather than the ‘quick look’ approach the FTC had advocated.

Sophie Lawrance

Author