The European Commission is investigating another pay-for-delay patent settlement in the pharmaceutical industry for an alleged breach of EU competition law. The case, announced on 17 July 2017, concerns an agreement between Teva and Cephalon relating to sleep disorder drug modafinil.

Cephalon owned the patents for the drug and its manufacture. After certain Cephalon patents on the modafinil compound expired in the European Economic Area (EEA), Teva entered the UK market for a short period of time with a cheaper generic product.

Following a lawsuit concerning an alleged infringement of Cephalon's process patents on modafinil, the companies settled their litigation in the UK and the U.S. with a worldwide agreement. As part of this agreement, Teva undertook not to sell its generic modafinil products in the EEA until October 2012. In exchange, Teva received a substantial transfer of value from Cephalon through a series of cash payments and various other agreements.

The case therefore appears to include each of the pay-for-delay patent settlement agreement elements identified in previous pharmaceutical cases as problematic: the litigation between the parties related to process patents following the expiry of compound patents; a "substantial transfer of value" from the originator to the generic company; the transfer serving as a "significant inducement" for the generic to delay its own entry; and the competitor relationship of the parties (since the generic company had already entered the UK market with its product). 

This remains a difficult area on which to advise, and there is no clear counseling standard, but some general principles do provide a possible path through the maze.