The CJEU has recently issued an important judgment on patent settlement agreements. The General Court upheld a fine of almost €150 million imposed by the European Commission on pharma manufacturer Lundbeck, and other manufacturers with whom it entered into "pay-for delay" settlement agreements related to a patent for its anti-depressant drugs.

Lundbeck is one example of the increasingly frequent collisions between the rules of competition law and intellectual property. The judgment endorses the Commission's recent approach of casting its net widely in prohibiting settlement agreements under the Competition rules, and if upheld by the court, will be a blow to patent holders who argue that such agreements fall within the ‘scope of the patent’.

Patent settlement agreements are commercial agreements to settle patent related disputes, such as patent validity or cases of patent infringement. They are used as a legitimate method of finding a mutually acceptable compromise to resolve patent technology disputes, and are a cheaper and more efficient resolution than litigation. Intellectual Property law protects patent holders who have innovated in their industry and invested in R&D. However, the degree of protection afforded to patent holders entering into such agreements can be limited by the EU rules on competition under Article 101 TFEU. The Irish equivalent, s4 of the Competition Act, also prohibits agreements between competitors which have as their object or effect the prevention, restriction or distortion of competition.

In Lundbeck, the General Court considered that the settlement agreements represented a restriction of competition “by object”, which means that the measure was automatically considered to be anticompetitive and there was no need for the Commission to prove its actual effects. This approach is less favourable to patent holders, and is in contrast to the approach taken recently in a similar case by the US Supreme Court in FTC v Actavis. Lundbeck has lodged an appeal of its case to the Court of Justice of the European Union.

Every patent settlement agreement will be considered on its own facts, and in Lundbeck’s case, there is no doubt that the Commission was informed by its recent sector inquiry and ongoing monitoring of settlement agreements in the pharma industry. Companies entering into patent settlement agreements ought to be diligent in their consideration of the competition rules in light of the Lundbeck judgment, in particular where the agreements involve a restriction on a would-be licensee's access to the market and a transfer of value to them from the licensor.