IP: Is it safe to settle? Patent holders have reason to think twice

FTC v. Actavis could change the nature of IP moving forward

A brand-name pharmaceutical company engaged in patent litigation with a generic competitor settles the dispute by paying the generic competitor a significant sum of money to drop the litigation and stay out of the market until sometime before the brand-name’s patents expire. Because the patent holder is the party paying, rather than the other way around, this type of agreement is called a “reverse-payment.” It’s an intellectual property strategy we’re seeing more and more often within the pharmaceutical industry — at least, we were, until a recent Supreme Court decision.

Brand-name pharmaceutical companies realized that rather than risk having their patents found invalid or not infringed, settling with the generic competitors would be a win-win for both parties. That is, brand-names could continue profiting from their drug sales while generic competitors could receive a settlement payment in lieu of their own sales. Nice and easy. The problem, however, is that generic options tend to reduce drug prices, which means that these “reverse-payment” agreements tend to discourage competition and increase overall drug costs.

Contributing Author

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Robert A. Surrette

Robert A. Surrette is the President and a shareholder at McAndrews, Held & Malloy, Ltd. He focuses his practice on the resolution of intellectual property...

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