This is the latest installment in a series of "Legal Geek" articles and audio segments regarding current events and trends where the geek world crosses streams with legal land. An audio version will appear on the Current Geek podcast, available for direct download here.
back to Legal Geek. This week, we take a look at the new fad in class action lawsuits called "pay for delay" antitrust suits and whether these lawsuits will chill the overwhelming desire companies have to settle patent infringement and invalidity lawsuits.
(Courtesy the AstraZenica website)
Back in 2008 AstraZenica was embroiled in patent litigation over the wildly popular heartburn medicine called Nexium. Various generic drug makers wanted to invalidate the patents on the drug in order to jump into the lucrative market well before these patents would expire in late 2014. However, as many patent lawsuits do, this case settled before a final disposition on terms not disclosed to the public.
Thus, the exact terms of the agreement between Astrazenica and other companies like Ranbaxy were not known. But there's at least some evidence that this agreement included a large payment of money to Ranbaxy for the promise to drop the lawsuit and not make a generic version of Nexium until the middle of 2014. Now these former competitors in court are forced to defend together against a class action lawsuit in Massachusetts claiming that this payment and delay of the generic release is in violation of the Sherman Act.
We've briefly discussed class action suits before on this segment, and the biggest hurdle was cleared a year ago when the class of consumers who could sue was certified by the court. The court is now hearing oral arguments in the case this week, and the plaintiff drug stores and consumers are painting a picture of unfair gaming of the patent system by AstraZenica paying for a delay in the generic drug release, thereby artificially keeping prices on Nexium inflated for the final five or six years of patent coverage.
These pay for delay suits are a relatively new fad brought on by recent Federal Circuit and Supreme Court case law. As applied to the patent context, it seems to imply that companies like Ranbaxy who challenge the validity of a patent cannot drop that suit because they must serve the interests of fair market competition and consumer protection from negotiated monopolies. But is that a good thing for the patent system or judicial system?
If a duty to the consumers is created by filing and pursuing a lawsuit or claim to invalidate a patent, then any settlement or payment could end up leading to a claim (no matter how true) of pay for delay conspiracies...which means more patent litigations will fill court dockets for longer periods of time rather than being settled. In addition, patents are all about exclusivity and the right to monopolize innovations for a short period of time before it becomes public domain, so it seems strange that merely settling a case about patents could give rise to a claim of antitrust violations.
Perhaps the recent advent of post grant review proceedings for patents, which cannot be withdrawn or stopped once initiated, will help alleviate this problem by enabling challenges to a patent's validity without risking a settlement that could lead to claims of antitrust conspiracy later.
Bottom Line: efficient and quick settlement of patent lawsuits reduces a major drain on the court system, and if this pay for delay theory works for the class action lawsuit against Astrazenica, that's bad news for the marketplace generally as more companies will tie up resources fighting long battles in court. Nobody wins in that situation except the lawyers, and take it from a lawyer, that's not what you want to happen.
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