This week the United States Supreme Court invited the United States Solicitor General’s Office to file a brief expressing the views of the United States regarding a case testing whether a settlement where an accused infringer receives substantial consideration and agrees not to market a generic version of the patented item violates federal antitrust laws.  See Joblove v. Barr Laboratories, Inc., U.S., No. 06-830.  In Joblove v. Barr Laboratories, Inc., consumer and consumer organizations allege that a settlement  between a pharmaceutical company and a generic dug manufacturer violates federal anti-trust law.

In the underlying case, the patentee accused Barr Laboratories of infringing its rights in a patent related to the breast cancer drug tamoxifen citrate.  During the litigation, the district court found that patent was unenforceable due to inequitable conduct because the patentee had withheld "crucial information" from the United States Patent and Trademark Office.  The patentee appealed the district court’s ruling, and while the appeal was pending settled the case with Barr Laboratories.  The settlement agreement provided Barr Laboratories with $21 million and a non-exclusive license to market tamoxifen, and required that Barr Laboratories not market a generic version of tamoxifen during the life of the patent.

The current litigation is a class action brought by consumer and consumer organizations, challenging the settlement agreement under federal anti-trust law.  The district court dismissed the anti-trust lawsuit for failure to state a claim.  And the Second Circuit Court of Appeals affirmed the dismissal.  The Supreme Court is now considering whether it should hear the case.  Last year, the Supreme Court refused to review a similar issue in Federal Trade Commission v. Schering-Plough.  There, the Solicitor General’s office filed a brief recommending that the Supreme Court not here that case and suggested that the tamoxifen litigation (this case) would be a better case in which to consider the antitrust consequences of a settlement agreement in which a generic manufacturer receives significant funds and agrees not to market a generic product.

Consumer groups charge that such "authorized generics" agreements keep a drug prices high and thus harm consumers.  In addition to court cases, the issue is also being considered by Congress.  Both the House of Representatives and the Senate are considering bills to limit these types of agreements.  See Preserve Access to Affordable Generics Act, H.R. 1432, 73 PTCJ 461, 2/23/07; see also 73 PTCJ 461, 2/23/07.  While legislative bills are likely to be tailored to the pharmaceutical industry, judicial decisions will likely cover all patent litigation settlements and may set boundaries or guidelines where a patentee provides a license or funds in return for keeping generics off the market and/or cooperating in an appeal to rescue an otherwise unenforceable or invalid patent.