Judgment spooks in Cipro litigation

On Halloween, the Californian Court of Appeal handed down its decision in the latest phase of the Cipro litigation. 

The plaintiffs had sued Bayer AG and four generic manufacturers in relation to patent litigation settlement agreements.  The agreements resolved proceedings commenced by Bayer against the allegedly-infringing generic competitors, under which Bayer had made payments to the generics in return for the generics delaying their market entry.  In the case of one generic (Barr), payments of US$398M had been made between 1998 and 2003, when the patent expired.

The plaintiff consumers alleged that the settlement agreements were illegal per se – consistent with the stance adopted by the US Federal Trade Commission (which issued a report on the continuing prevalence of such agreements on 25 October 2011).  The FTC had filed an amicus brief in the US Supreme Court earlier this year in relation to a federal action on the validity of the same agreements, however the Supreme Court refused to hear the appeal.

In another blow to the FTC, the Court of Appeal upheld the decision of the lower court, finding that pay for delay agreements (or reverse payment agreements, as they are otherwise known) are not, without more, illegal under Californian antitrust laws.

The issue of pay for delay agreements remains under scrutiny in both the EC (see Suzy’s recent post on the fentanyl deal) and the US (see the update in this month’s Competition Update).  Such deals also have the potential to breach Australian competition laws (see our article from earlier this year).

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