FTC Action Challenging Patent Settlement Agreements Transferred

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

An action brought by the FTC and the State of California—challenging agreements in which Solvay Pharmaceuticals, Inc. allegedly paid generic drug makers Watson Pharmaceuticals, Inc. and Par Pharmaceutical Companies, Inc. to delay generic competition to Solvay’s branded testosterone-replacement drug AndroGel—has been transferred to the federal district court in Atlanta.

The patent settlement agreements at issue were entered into in the federal district court for the Northern District of Georgia.

The FTC and the state brought the action in the federal district court in Los Angeles, alleging that the settlement agreements harmed competition by having brand-name and generic pharmaceutical companies agree not to compete and instead share monopoly profits. (See “FTC, California Sue Drug Makers for Delaying Generic Competition,” Trade Regulation Talk, February 10, 2009)

Avoiding Eighth Circuit

In arguing for the transfer, the defendants suggested that the FTC sought to avoid Eleventh Circuit law and to create a split among the federal appellate courts regarding the legality of reverse-payment patent settlement agreements. The FTC in 2005 lost a challenge to a patent settlement agreement in the U.S. Court of Appeals in Atlanta (2005-1 Trade Cases ¶74,716).

“Because of the close ties between this antitrust case and the underlying patent cases, the judge in the Northern District of Georgia is more appropriate to hear this case,” the federal district court in Los Angeles held. The court decided that the FTC was not forum shopping when it filed the action in California.

While the court noted the agency’s efforts to create the circuit split, it concluded that this strategy “bears little weight on the determination of transfer in the interest of justice and convenience of the parties and witnesses.”

Application for Stay of Transfer

The court ordered the transfer of the case on April 8. The next day, the court denied the FTC’s emergency ex parte application for a stay pending transfer. Thus, the defendants’ joint motion to dismiss will be heard in the federal district court for the Northern District of Georgia. Private actions that followed the government suit in the federal district court in Los Angeles were transferred as well.

The April 8 decision in FTC v. Watson Pharmaceuticals, Inc., will appear in CCH Trade Regulation Reporter.