The Preemptive Power of Federal Patent Law: A Framework for Analyzing State Antitrust Challenges to Pay-for-Delay Settlements

Abstract

Since the passage of the Hatch-Waxman Act (the Act) in 1984, patent litigation in the pharmaceutical industry has generated a troubling breed of settlement agreements wherein the payment goes from patentee plaintiffs to allegedly infringing defendants, resulting in anticompetitive effects. The provisions of the Act, though intended to promote innovation and lower drug prices while expediting infringement litigation, tend to incentivize reverse payments, or pay-for-delay settlements. The settlements are often challenged by the Federal Trade Commission (FTC) and by private parties for violation of antitrust law. Thus, pay-for-delay settlements illustrate a tension between patent law and antitrust law. Since the adoption of the Act, courts have struggled to harmonize the two bodies of law with regard to pay-for-delay settlements, as evidenced by the widely divergent rulings on the legality of these settlements among regional circuit courts. In December 2012, the Supreme Court granted a writ of certiorari to review Federal Trade Commission v. Watson Pharmaceuticals, Inc., an Eleventh Circuit case favoring the pharmaceutical companies, and should enunciate the proper legal standard to apply to pay-for-delay settlements.