07/23/18

Reverse Payment Patent Settlements in Antitrust

Reverse Payment Patent Settlements in Antitrust

Kelly L. Moulla

In the United States, as well as in the European Union, reverse payment patent settlements, or so-called “pay-for-delay agreements,” are neither addressed by domestic competition laws, nor mentioned in international competition agreements. As those agreements seem to be out of the reach of competition laws, patent holder pharmaceuticals frequently enter into such contracts with their potential competitors, generic manufacturers, in order to benefit from their monopoly for the longest time possible, by delaying their competitors’ product entry in the market. In fact, as a patent confers its owner market exclusivity rights for a long, though limited, period of time, conciliating competition law and such intellectual property right can be challenging. Due to the lack of adequate legislation, domestic courts in both the U.S. and the E.U toiled to obtain any resolution on related matters, rendering conflicting and confusing judgments. In international intellectual property law, the governing TRIPS agreement briefly mentions competition law in the licensing of intellectual property, but does not go as far as creating a regime for pay-for-delay agreements in regard to competition rules. On one hand, the harm among consumers and healthcare providers, who have to bear the high cost of patented drugs, when they could potentially benefit from the generic drug’s reduced price, is calculated in millions of dollars each year. On another hand, those blurred lines can also harm pharmaceutical companies, as they may, or may not, be subjected to extremely burdening fines at the outcome of expensive trials. In a globalized economy, the lack of clear regulations on one hand, and international harmonization on the other hand, can cause tremendous damages to pharmaceutical companies, and can therefore affect the health market internationally.

Implementing a new provision in the TRIPS Agreement addressing directly reverse payment settlement within competition laws, would result in harmonized rules in regards to pay-for-delay agreements internationally. Under this newly established rule, all patent settlements would necessarily have to be reviewed under antitrust laws, however, without being deemed illegal per se. This new standard of review will not only allow courts to invalidate settlements with broad anti-competitive effects on the market, abusing their patent’s exclusivity rights, but will also give pharmaceuticals a legal framework whereupon they can safely contract with their competitors, hence not depriving the market from the pro-competitive effects of such reverse payment patent settlements.

99 J. Pat. & Trademark Off. Soc’y 708(2017)

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