Supreme Court Grants Cert. in Watson Reverse Payment Settlement Case

On Dec. 7, 2012, the U.S. Supreme Court granted certiorari in FTC v. Watson Pharmaceuticals (Case No. 12-416). The Supreme Court is now poised to resolve the circuit split on the treatment of reverse payment, or so-called “pay for delay,” settlements to resolve Hatch-Waxman Act patent litigation. In such a settlement, a branded pharmaceutical manufacturer that owns drug patents resolves patent litigation with a generic or would-be generic manufacturer by entering into a settlement agreement by which the generic manufacturer agrees to defer entry into the market for some period of time in return for a payment by the brand manufacturer to the generic. The 2nd, 11th, and Federal Circuits have all allowed such settlements where they do not exceed the duration or scope of the patent (or involve sham litigation or fraudulently obtained patents). The 3rd Circuit has disagreed, finding that reverse payment settlements are prima facie evidence of an antitrust violation (which may be rebutted by other evidence of pro-competitive effects). The Federal Trade Commission has for some time urged a rule in line with that adopted by the 3rd Circuit. Oral argument is set for March 25.