The Eleventh Circuit affirmed the District Court’s dismissal of the FTC’s “reverse payment” case against brand name and generic pharmaceutical companies.  FTC v. Watson Pharms., Inc., No. 10-12729 (11th Cir. Apr. 25, 2012)..  In a “reverse payment” settlement, “a patent holder pays the allegedly infringing generic drug company to delay entering the market until a specified date, thereby protecting the patent monopoly against a judgment that the patent is invalid or would not be infringed by the generic competitor.” The Court observed that its precedents, including Valley Drug and Schering-Plough, “establish the rule that, absent sham litigation or fraud in obtaining the patent, a reverse payment settlement is immune from antitrust attack so long as its anticompetitive effects fall within the scope of the exclusionary potential of the patent.”  The FTC alleged that Solvay, the holder of patents involving Androgel, a topical gel that treats the symptoms of low testosterone in men, was “not likely to prevail” in the infringement actions it brought against the generic manufacturers, and argued that, hence, the anticompetitive effects of the settlement fell outside of the scope of the exclusionary potential of the patent.  The Court disagreed, reasoning that (1) its past decisions had focused on the patent’s potential, not likely, exclusionary effect and, given the large risks associated with losing patent litigation, even a patent holder confident in its prospects may pay a potential infringer a substantial sum to settle; (2) a court’s after-the-fact assessment of a patent holder’s likelihood of success is “too perilous an enterprise to serve as a basis for antitrust liability;” (3) the FTC’s approach would impose heavy burdens on the parties and courts, and could discourage patent settlements; and (4) asking the circuit courts to review reverse payment appeals under the FTC’s approach is in tension with the Federal Circuit’s exclusive jurisdiction over appeals involving patent issues.  The Court observed that “[t]he FTC’s ominous forecast [drug companies agreeing to split monopoly profits and higher drug prices] discounts the reality that there usually are many potential challengers to a patent, at least to drug patents . . [who] [i]f the patent actually is vulnerable . . .will attempt to enter the market.”