FTC Sets Sights On High Court Pay-For-Delay Fight

Fordham Competition Law Institute in Law360, September 20, 2012

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Law360, New York (September 20, 2012, 6:47 PM ET) --Federal Trade Commission Chairman Jon Leibowitz said Thursday that the agency will likely ask the U.S. Supreme Court to review the Eleventh Circuit's recent ruling reiterating that pay-for-delay pharmaceutical patent settlements are generally legal.

The agency has until Oct. 16 to file a petition for certiorari with the justices asking them to review the Eleventh Circuit's decision rejecting the FTC's antitrust case targeting settlements Solvay Pharmaceutical Inc. made with generic Androgel makers, and Leibowitz said at the Fordham Competition Law Institute conference Thursday that he expects the FTC will ultimately pursue the case.

"My sense is that we will petition for cert in Androgel, but we are in the process of working through this in our usual consensus-driven way," Leibowitz said.

Any petition from the government in the Androgel case would come as the justices are already weighing requests from Merck & Co. Inc. and Upsher-Smith Laboratories Inc. to hear another case over the pay-for-delay issue in which the appeals court adopted the FTC's view that payments from brand drug companies to generics makers in exchange for delayed market entry should be presumptively anti-competitive.

Leibowitz described that case — a Third Circuit ruling that directly contradicts a 2005 Eleventh Circuit ruling dealing with the same settlements for blood pressure medicine K-Dur — as a "terrific decision."

"It certainly sets up a very clean split between the Third Circuit and the Eleventh Circuit," Leibowitz said.

The agency has been battling for more than a decade to block the agreements it views as "sweetheart deals" in which both brand and generic drugmakers win while consumers lose to the tune of $3.5 billion a year.

"This is the kind of issue that makes us feel really good about our work," Leibowitz said. "We're a tiny agency by Washington standards … and if an agency of $300 million a year can save $3.5 billion a year for American consumers, I think that's a terrific accomplishment."

Up until the Third Circuit's K-Dur decision, the FTC and plaintiffs taking similar positions on the deals had had little luck in the courts, with three circuits adopting the view that the deals are generally legal as long as they do not exceed the duration or substance of the patent. And it's far from clear what the Supreme Court might do if it does decide to hear either of the current pay-for-delay cases.

"If we end up losing on appeal, we're still doing what we think is right … and that's what I think government service is in many ways about," Leibowitz said.

The chairman further ventured into some issues affecting the technology sector, including the FTC's ongoing investigation into Google Inc.'s search practices. In that case, he said that the agency was still weighing the evidence and hadn't decided what it was going to do yet.

Leibowitz also noted the agency had looked into the issue of nonpracticing entities, often referred to as patent trolls, and would continue to examine informal complaints that those types of companies that own large patent portfolios and take in licensing fees without actually making any products are engaged in a "sort of protection racket" akin to a 1930s gangster.

"My own sense is probably nonpracticing entities cause more harm than good, [but] that's not an empirical analysis, that's just a subjective thought," Leibowitz said. "You can make very colorful statements and they may or may not be accurate, and also not everything that's mischievous is actionable."

--Editing by Rebecca Flanagan.