SETTLEMENT AGREEMENT DID NOT EXTEND BEYOND EXCLUSIONARY ZONE OF PATENTS AND DIDN'T VIOATE ANTITRUST LAWS

In Re Ciprofloxacin Hydrochloride Antitrust Litigation, [2008-1097] (October 15, 2008) [PROST, Schall, Ward] The Federal Circuit affirmed the decision of the district court that any anti-competitive effects caused by the settlement agreements between Bayer and the generic defendants were within the exclusionary zone of the patent, and thus could not be redressed by federal antitrust law.
DISCUSSION: A generic drug manufacturer filed an ANDA to make Cipro, covered by Bayer’s U.S. Patent No. 4,670,444, and Bayer sued for infringement. The parties reached a settlement in which Bayer agreed to provide product to the defendants or make payments. This agreement was challenged as a violation of the antitrust laws. The district court the court concluded that the plaintiffs had failed to show that the Agreements had any anti-competitive effects on the market for ciprofloxacin beyond that permitted under the patent.
Courts will presumptively apply a “rule of reason” analysis to determine whether an agreement imposes an unreasonable restraint on competition. Only agreements that have a “predictable and pernicious anticompetitive effect, and . . . limited potential for procompetitive benefit” are deemed to be per se unlawful under the Sherman Act.
The Federal Circuit noted that that there was no evidence that the Agreements created a bottleneck on challenges to the ’444 patent or otherwise restrained competition outside the “exclusionary zone” of the patent. Pursuant to the Agreements, the generic defendants agreed not to market a generic version of Cipro until the ’444 patent expired10 and not to challenge the validity of the ’444 patent, and Bayer agreed to make payments and optionally supply Cipro for resale. Thus, the essence of the Agreements was to exclude the defendants from profiting from the patented invention. This was well within Bayer’s rights as the patentee. Furthermore, there is a long-standing policy in the law in favor of settlements, and this policy extends to patent infringement litigation.