In re Ciproflaxacin Hydrochloride Antitrust Litigation 2008 WL 4570669 (Fed. Cir. 2008)

In a case involving whether settlement agreements between a patent holder and generic drug manufacturers violate the antitrust laws, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s ruling that the “reverse payment” settlement agreements at issue did not violate the Sherman Act. In Cipro, the original litigation involved a patent infringement suit between Bayer and several generic drug manufacturers relating to the manufacturing and marketing of generic versions of the drug Cipro®.

Just before trial, the parties entered into settlement agreements that provided for payments to be made by Bayer to the generic drug manufacturers in exchange for their agreement not to manufacture or market generic versions of Cipro. Thereafter, advocacy groups and direct and indirect buyers of brand-name drugs containing the patented compound ciproflaxacin hydrochloride, the active ingredient in Cipro, sued the parties to the settlement agreements, alleging that the “reverse payments” resulted in illegal market allocation in violation of the Sherman Act and state antitrust laws.

The Federal Circuit affirmed the district court’s grant of summary judgment on the grounds that the settlement agreements did not violate section 1 of the Sherman Act because any anticompetitive effects caused by the settlement agreements were within the exclusionary zone of Bayer’s patent. The Court added that it was well within Bayer’s rights as a patentee to exclude the generic drug manufacturers from profiting from the patented invention. The Court further stated that settlements in patent litigations are favored by the courts and such settlements, including those in which there is exchange of consideration, are not precluded by the Sherman Act even though some settlements may have adverse effects on competition. The Federal Circuit concluded that any anti-competitive effects caused by the settlement agreements could not be redressed by the anti-trust laws.