En Banc Rehearing Denied in Cipro Reverse Payment Patent Settlement Suit

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

Despite the urging of the federal antitrust enforcement agencies and 34 states, the full U.S. Court of Appeals in New York City will not consider an antitrust challenge to a settlement in a patent infringement lawsuit involving the antibiotic ciprofloxacin hydrochloride (Cipro).

The court on September 7 denied the petition filed by direct purchasers of Cipro for rehearing en banc of a three-judge panel's decision (2010-1 Trade Cases ¶76,989), which rejected antitrust claims based on a purported "pay-for-delay" settlement.

The Department of Justice, the FTC, and 34 states–led by Vermont, California, and Florida—had filed briefs with the court, calling for en banc review. (See June 8, 2010 posting on Trade Regulation Talk.)

Market-Sharing Agreement?

The plaintiffs challenged the patent settlement agreement between the owner of the patent for the active ingredient in Cipro and potential generic manufacturers of Cipro as an illegal market-sharing agreement. Under the settlement, Bayer, which holds the Cipro patent, agreed to pay Barr Labs—the alleged infringer—to settle the suit in exchange for Barr's agreement to stay out of the marketplace during the life of the patent, it was argued.

When the decision was handed down in April, the three-judge panel said that it was bound by an earlier Second Circuit decision—Joblove v. Barr Labs., Inc. (In re Tamoxifen Citrate Antitrust Litig.), 2006-2 Trade Cases ¶75,382.

In Tamoxifen, a divided court held that a reverse payment settlement of a patent lawsuit involving a drug used to treat breast cancer did not violate the antitrust laws. Under Tamoxifen, a settlement agreement did not exceed the scope of the patent and was valid where (1) there was no restriction on marketing noninfringing products; (2) a generic version of the branded drug would necessarily infringe the branded firm's patent; and (3) the agreement did not bar other generic manufacturers from challenging the patent.

Dissent

Judge Rosemary Pooler, who also dissented in the Tamoxifen case, issued a dissent. She said that the Tamoxifen decision "unambiguously deserves reexamination." Following the Tamoxifen decision, there "was a dramatic surge in the practice of pharmaceutical patent holders paying potential competitors to concede the validity of their patents," according to the dissent.

The September 7, 2010, order, In re: Ciprofloxacin Hydrochloride Antitrust Litigation, 05-2851-cv(L), will appear in CCH Trade Regulation Reports.