Pay-for-Delay Contracts

The Presumption of Patent Validity

Before analyzing the facts and the law of the case before it, the Third Circuit pointed out that the U.S. Supreme Court has not yet addressed reverse-payment settlements. However, five other U.S. Circuit Courts have. The first two of those courts to consider the question concluded that such agreements should be subject to strict antitrust scrutiny ' at least where the settling parties attempted to manipulate the 180-day exclusivity period to block all potential generic competition. See Andrx Pharms. Inc. v. Biovail Corp. Int'l, 256 F.3d 799 (D.C. Cir. 2001) and In re Cardizem CD Antitrust Litig., 332 F.3d 896 (6th Cir. 2003). The courts that have addressed the question of reverse payments more recently have reached a contrary result, ruling that as long as the name-brand manufacturer's patent is still in force, and the agreement does not seek to restrain competition beyond the scope of that patent, the agreement will not be subjected to antitrust scrutiny. See, e.g., Valley Drug Co. v. Geneva Pharms. Inc., 344 F.3d 1294 (11th Cir. 2003); In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187 (2d Cir. 2006); In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323 (Fed. Cir. 2008). The reasoning goes thusly: If the brand-name manufacturer holds a patent that would preclude another manufacturer from selling a similar product that would breach that patent, a pay-for-delay agreement between these parties is simply cementing the legal status quo. This was the logic employed by the Special Master and the district court in K-Dur.