Fed. Trade Comm'n v. Actavis, Inc.
Annotate this Case
570 US ___ (2013)
SUPREME COURT OF THE UNITED STATES
FEDERAL TRADE COMMISSION, PETITIONER v. ACTAVIS, INC., et al.
on writ of certiorari to the united states court of appeals for the eleventh circuit
[June 17, 2013]
Chief Justice Roberts, with whom Justice Scalia and Justice Thomas join, dissenting.
Solvay Pharmaceuticals holds a patent. It sued two generic drug manufacturers that it alleged were infringing that patent. Those companies counterclaimed, contending the patent was invalid and that, in any event, their products did not infringe. The parties litigated for three years before settling on these terms: Solvay agreed to pay the generics millions of dollars and to allow them into the market five years before the patent was set to expire; in exchange, the generics agreed to provide certain services (help with marketing and manufacturing) and to honor Solvay’s patent. The Federal Trade Commission alleges that such a settlement violates the antitrust laws. The question is how to assess that claim.
A patent carves out an exception to the applicability of antitrust laws. The correct approach should therefore be to ask whether the settlement gives Solvay monopoly power beyond what the patent already gave it. The Court, however, departs from this approach, and would instead use antitrust law’s amorphous rule of reason to inquire into the anticompetitive effects of such settlements. This novel approach is without support in any statute, and will discourage the settlement of patent litigation. I respectfully dissent.
The point of antitrust law is to encourage competitive markets to promote consumer welfare. The point of patent law is to grant limited monopolies as a way of encouraging innovation. Thus, a patent grants “the right to exclude others from profiting by the patented invention.” Dawson Chemical Co. v. Rohm & Haas Co., 448 U. S. 176, 215 (1980) . In doing so it provides an exception to antitrust law, and the scope of the patent—i.e., the rights conferred by the patent—forms the zone within which the patent holder may operate without facing antitrust liability.
This should go without saying, in part because we’ve said it so many times. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U. S. 172, 177 (1965) (“ ‘A patent . . . is an exception to the general rule against monopolies’ ”); United States v. Line Material Co., 333 U. S. 287, 300 (1948) (“[T]he precise terms of the grant define the limits of a patentee’s monopoly and the area in which the patentee is freed from competition”); United States v. General Elec. Co., 272 U. S. 476, 485 (1926) (“It is only when . . . [the patentee] steps out of the scope of his patent rights” that he comes within the operation of the Sherman Act); Simpson v. Union Oil Co. of Cal., 377 U. S. 13, 24 (1964) (similar). Thus, although it is per se unlawful to fix prices under antitrust law, we have long recognized that a patent holder is entitled to license a competitor to sell its product on the condition that the competitor charge a certain, fixed price. See, e.g., General Elec. Co., supra, at 488–490.
We have never held that it violates antitrust law for a competitor to refrain from challenging a patent. And by extension, we have long recognized that the settlement of patent litigation does not by itself violate the antitrust laws. Standard Oil Co. (Indiana) v. United States, 283 U. S. 163, 171 (1931) (“Where there are legitimately conflicting claims or threatened interferences, a settlement by agreement, rather than litigation, is not precluded by the [Sherman] Act”). Like most litigation, patent litigation is settled all the time, and such settlements—which can include agreements that clearly violate antitrust law, such as licenses that fix prices, or agreements among competitors to divide territory—do not ordinarily subject the litigants to antitrust liability. See 1 H. Hovenkamp, M. Janis, M. Lemley, & C. Leslie, IP and Antitrust §7.3, pp. 7–13 to 7–15 (2d ed. 2003) (hereinafter Hovenkamp).
The key, of course, is that the patent holder—when doing anything, including settling—must act within the scope of the patent. If its actions go beyond the monopoly powers conferred by the patent, we have held that such actions are subject to antitrust scrutiny. See, e.g., United States v. Singer Mfg. Co., 374 U. S. 174 –197 (1963). If its actions are within the scope of the patent, they are not subject to antitrust scrutiny, with two exceptions concededly not applicable here: (1) when the parties settle sham litigation, cf. Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U. S. 49 –61 (1993); and (2) when the litigation involves a patent obtained through fraud on the Patent and Trademark Office. Walker Process Equipment, supra, at 177.
Thus, under our precedent, this is a fairly straight-forward case. Solvay paid a competitor to respect its patent—conduct which did not exceed the scope of its patent. No one alleges that there was sham litigation, or that Solvay’s patent was obtained through fraud on the PTO. As in any settlement, Solvay gave its competitors something of value (money) and, in exchange, its competitors gave it something of value (dropping their legal claims). In doing so, they put an end to litigation that had been dragging on for three years. Ordinarily, we would think this a good thing.
Today, however, the Court announces a new rule. It is willing to accept that Solvay’s actions did not exceed the scope of its patent. Ante, at 8. But it does not agree that this is enough to “immunize the agreement from antitrust attack.” Ibid. According to the majority, if a patent holder settles litigation by paying an alleged infringer a “large and unjustified” payment, in exchange for having the alleged infringer honor the patent, a court should employ the antitrust rule of reason to determine whether the settlement violates antitrust law. Ante, at 19.
The Court’s justifications for this holding are unpersuasive. First, the majority explains that “the patent here may or may not be valid, and may or may not be infringed.” Ante, at 8. Because there is “uncertainty” about whether the patent is actually valid, the Court says that any questions regarding the legality of the settlement should be “measur[ed]” by “procompetitive antitrust policies,” rather than “patent law policy.” Ante, at 9. This simply states the conclusion. The difficulty with such an approach is that a patent holder acting within the scope of its patent has an obvious defense to any antitrust suit: that its patent allows it to engage in conduct that would otherwise violate the antitrust laws. But again, that’s the whole point of a patent: to confer a limited monopoly. The problem, as the Court correctly recognizes, is that we’re not quite certain if the patent is actually valid, or if the competitor is infringing it. But that is always the case, and is plainly a question of patent law.
The majority, however, would assess those patent law issues according to “antitrust policies.” According to the majority, this is what the Court did in Line Material—i.e., it “accommodat[ed]” antitrust principles and struck a “balance” between patent and antitrust law. Ante, at 9. But the Court in Line Material did no such thing. Rather, it explained that it is “well settled that the possession of a valid patent or patents does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly.” 333 U. S., at 308 (emphasis added). It then, in the very next sentence, stated that “[b]y aggregating patents in one control, the holder of the patents cannot escape the prohibitions of the Sherman Act.” Ibid. That second sentence follows only if such conduct—the aggregation of multiple patents—goes “beyond the limits of the patent monopoly,” which is precisely what the Court concluded. See id., at 312 (“There is no suggestion in the patent statutes of authority to combine with other patent owners to fix prices on articles covered by the respective patents” (emphasis added)). The Court stressed, over and over, that a patent holder does not violate the antitrust laws when it acts within the scope of its patent. See id., at 305 (“Within the limits of the patentee’s rights under his patent, monopoly of the process or product by him is authorized by the patent statutes”); id., at 310 (“price limitations on patented devices beyond the limits of a patent monopoly violate the Sherman Act” (emphasis added)).
The majority suggests that “[w]hether a particular restraint lies ‘beyond the limits of the patent monopoly’ is a conclusion that flows from” applying traditional antitrust principles. Ante, at 10. It seems to have in mind a regime where courts ignore the patent, and simply conduct an antitrust analysis of the settlement without regard to the validity of the patent. But a patent holder acting within the scope of its patent does not engage in any unlawful anticompetitive behavior; it is simply exercising the monopoly rights granted to it by the Government. Its behavior would be unlawful only if its patent were invalid or not infringed. And the scope of the patent—i.e., what rights are conferred by the patent—should be determined by reference to patent law. While it is conceivable to set up a legal system where you assess the validity of patents or questions of infringement by bringing an antitrust suit, neither the majority nor the Government suggests that Congress has done so.
Second, the majority contends that “this Court’s precedents make clear that patent-related settlement agreements can sometimes violate the antitrust laws.” Ante, at 10. For this carefully worded proposition, it cites Singer Manufacturing Co., United States v. New Wrinkle, Inc., 342 U. S. 371 (1952) , and Standard Oil Co. (Indiana). But each of those cases stands for the same, uncontroversial point: that when a patent holder acts outside the scope of its patent, it is no longer protected from antitrust scrutiny by the patent.
To begin, the majority’s description of Singer is inaccurate. In Singer, several patent holders with competing claims entered into a settlement agreement in which they cross-licensed their patents to each other, and did so in order to disadvantage Japanese competition. See 374 U. S., at 194–195 (finding that the agreement had “a common purpose to suppress the Japanese machine competition in the United States” (footnote omitted)). According to the majority, the Court in Singer “did not examine whether, on the assumption that all three patents were valid, patent law would have allowed the patents’ hold- ers to do the same.” Ante, at 10. Rather, the majority contends, Singer held that this agreement violated the anti-trust laws because “in important part . . . ‘the public interest in granting patent monopolies’ exists only to the extent that ‘the public is given a novel and useful invention’ in ‘consideration for its grant.’ ” Ibid. (quoting Singer, 374 U. S., at 199 (White, J., concurring)). But the majority in Singer certainly did ask whether patent law permitted such an arrangement, concluding that it did not. See id., at 196–197 (reiterating that it “is equally well settled that the possession of a valid patent or patents does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly” and holding that “those limitations have been exceeded in this case” (emphasis added; internal quotation marks omitted)); see also Hovenkamp §7.2b, at 7–8, n. 15 (citing Singer as a quintessential case in which patent holders were subject to antitrust liability because their settlement agreement went beyond the scope of their patents and thus conferred monopoly power beyond what the patent lawfully authorized). Even Justice White’s concurrence, on which the majority relies, emphasized that the conduct at issue in Singer—collusion between patent holders to exclude Japanese competition and to prevent disclosure of prior art—was not authorized by the patent laws. 374 U. S., at 197, 200.
New Wrinkle is to the same effect. There, the Court explained that because “[p]rice control through cross-licensing [is] barred as beyond the patent monopoly,” an “arrangement . . . made between patent holders to pool their patents and fix prices on the products for themselves and their licensees . . . plainly violate[s] the Sherman Act.” 342 U. S., at 379, 380 (emphasis added). As the Court further explained, a patent holder may not, “ ‘acting in concert with all members of an industry . . . issue substantially identical licenses to all members of the industry under the terms of which the industry is completely regimented, the production of competitive unpatented products suppressed, a class of distributors squeezed out, and prices on unpatented products stabilized.’ ” Id., at 379–380 (quoting United States v. United States Gypsum Co., 333 U. S. 364, 400 (1948) ). The majority here, however, ignores this discussion, and instead categorizes the case as “applying antitrust scrutiny to [a] patent settlement.” Ante, at 10.
Again, in Standard Oil Co. (Indiana), the parties settled claims regarding “competing patented processes for manufacturing an unpatented product,” which threatened to create a monopoly over the unpatented product. 283 U. S., at 175. The Court explained that “an exchange of licenses for the purpose of curtailing the . . . supply of an unpatented product, is beyond the privileges conferred by the patents.” Id., at 174.
The majority is therefore right to suggest that these “precedents make clear that patent-related settlement agreements can sometimes violate the antitrust laws.” Ante, at 10 (emphasis added). The key word is sometimes. And those some times are spelled out in our prece- dents. Those cases have made very clear that patent settlements—and for that matter, any agreements relating to patents—are subject to antitrust scrutiny if they confer benefits beyond the scope of the patent. This makes sense. A patent exempts its holder from the antitrust laws only insofar as the holder operates within the scope of the patent. When the holder steps outside the scope of the patent, he can no longer use the patent as his defense. The majority points to no case where a patent settlement was subject to antitrust scrutiny merely because the validity of the patent was uncertain. Not one. It is remarkable, and surely worth something, that in the 123 years since the Sherman Act was passed, we have never let antitrust law cross that Rubicon.
Next, the majority points to the “general procompetitive thrust” of the Hatch-Waxman Act, the fact that Hatch-Waxman “facilitat[es] challenges to a patent’s validity,” and its “provisions requiring parties to [such] patent dispute[s] . . . to report settlement terms to the FTC and the Antitrust Division of the Department of Justice.” Ante, at 13. The Hatch-Waxman Act surely seeks to encourage competition in the drug market. And, like every law, it accomplishes its ends through specific provisions. These provisions, for example, allow generic manufacturers to enter the market without undergoing a duplicative application process; they also grant a 180-day monopoly to the first qualifying generic to commercially market a competing product. See 21 U. S. C. §§355(j)(2)(A)(ii), (iv), 355(j)(5)(B)(iv). So yes, the point of these provisions is to encourage competition. But it should by now be trite—and unnecessary—to say that “no legislation pursues its purposes at all costs” and that “it frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute’s primary objective must be the law.” Rodriguez v. United States, 480 U. S. 522 –526 (1987) (per curiam). It is especially disturbing here, where the Court discerns from specific provisions a very broad policy—a “general procompetitive thrust,” in its words—and uses that policy to unsettle the established relationship between patent and antitrust law. Ante, at 13. Indeed, for whatever it may be worth, Congress has repeatedly declined to enact legislation addressing the issue the Court takes on today. See Brief for Actavis, Inc. 57 (citing 11 such bills introduced in the House or Senate since 2006).
In addition, it is of no consequence that settlement terms must be reported to the FTC and the Department of Justice. Such a requirement does not increase the role of antitrust law in scrutinizing patent settlements. Rather, it ensures that such terms are scrutinized consistent with existing antitrust law. In other words, it ensures that the FTC and Antitrust Division can review the settlements to make sure that they do not confer monopoly power beyond the scope of the patent.
The majority suggests that “[a]pparently most if not all reverse payment settlement agreements arise in the context of pharmaceutical drug regulation.” Ante, at 2. This claim is not supported empirically by anything the majority cites, and seems unlikely. The term “reverse payment agreement”—coined to create the impression that such settlements are unique—simply highlights the fact that the party suing ends up paying. But this is no anomaly, nor is it evidence of a nefarious plot; it simply results from the fact that the patent holder plaintiff is a defendant against an invalidity counterclaim—not a rare situation in intellectual property litigation. Whatever one might call them, such settlements—paying an alleged infringer to drop its invalidity claim—are a well-known feature of intellectual property litigation, and reflect an intuitive way to settle such disputes. See Metro-Goldwyn Mayer, Inc. v. 007 Safety Prods., Inc., 183 F. 3d 10, 13 (CA1 1999); see also Schildkraut, Patent-Splitting Settlements and the Reverse Payment Fallacy, 71 Antitrust L. J. 1033, 1033, 1046–1049 (2004); Brief for Actavis 54, n. 20 (citing examples). To the extent there are not scores and scores of these settlements to point to, this is because such settlements—outside the context of Hatch-Waxman—are private agreements that for obvious reasons are generally not appealed, nor publicly available.
The majority suggests that reverse-payment agreements are distinct because “a party with no claim for damages . . . walks away with money simply so it will stay away from the patentee’s market.” Ante, at 13. Again a distinction without a difference. While the alleged infringer may not be suing for the patent holder’s money, it is suing for the right to use and market the (intellectual) property, which is worth money.
Finally, the majority complains that nothing in “any patent statute” gives patent-holders the right to settle when faced with allegations of invalidity. Ante, at 12. But the right to settle generally accompanies the right to litigate in the first place; no one contends that drivers in an automobile accident may not settle their competing claims merely because no statute grants them that authority. The majority suggests that such a right makes it harder to “eliminat[e] unwarranted patent grants.” Ibid. That may be so, but such a result—true of all patent settlements—is no reason to adjudicate questions of patent law under antitrust principles. Our cases establish that antitrust law has no business prying into a patent settlement so long as that settlement confers to the patent holder no monopoly power beyond what the patent itself conferred—unless, of course, the patent was invalid, but that again is a question of patent law, not antitrust law.
In sum, none of the Court’s reasons supports its conclusion that a patent holder, when settling a claim that its patent is invalid, is not immunized by the fact that it is acting within the scope of its patent. And I fear the Court’s attempt to limit its holding to the context of patent settlements under Hatch-Waxman will not long hold.
The majority’s rule will discourage settlement of patent litigation. Simply put, there would be no incentive to settle if, immediately after settling, the parties would have to litigate the same issue—the question of patent validity—as part of a defense against an antitrust suit. In that suit, the alleged infringer would be in the especially awkward position of being for the patent after being against it.
This is unfortunate because patent litigation is particularly complex, and particularly costly. As one treatise noted, “[t]he median patent case that goes to trial costs each side $1.5 million in legal fees” alone. Hovenkamp §7.1c, at 7–5, n. 6. One study found that the cost of litigation in this specific context—a generic challenging a brand name pharmaceutical patent—was about $10 million per suit. See Herman, Note, The Stay Dilemma: Examining Brand and Generic Incentives for Delaying the Resolution of Pharmaceutical Patent Litigation, 111 Colum. L. Rev. 1788, 1795, n. 41 (2011) (citing M. Goodman, G. Nachman, & L. Chen, Morgan Stanley Equity Research, Quantifying the Impact from Authorized Generics 9 (2004)).
The Court acknowledges these problems but nonetheless offers “five sets of considerations” that it tells us overcome these concerns: (1) sometimes patent settlements will have “ ‘genuine adverse effects on competition’ ”; (2) “these anticompetitive consequences will at least sometimes prove unjustified”; (3) “where a reverse payment threatens to work unjustified anticompetitive harm, the patentee likely possesses the power to bring that harm about in practice”; (4) “it is normally not necessary to litigate patent validity to answer the antitrust question” because “[a]n unexplained large reverse payment itself would normally suggest that the patentee has serious doubts about the patent’s survival,” and using a “payment . . . to prevent the risk of competition . . . constitutes the relevant anticompetitive harm”; and (5) parties may still “settle in other ways” such as “by allowing the generic manufacturer to enter the patentee’s market prior to the patent’s expiration, without the patentee paying the challenger to stay out prior to that point.” Ante, at 14–19 (emphasis added).
Almost all of these are unresponsive to the basic problem that settling a patent claim cannot possibly impose unlawful anticompetitive harm if the patent holder is acting within the scope of a valid patent and therefore permitted to do precisely what the antitrust suit claims is unlawful. This means that in any such antitrust suit, the defendant (patent holder) will want to use the validity of his patent as a defense—in other words, he’ll want to say “I can do this because I have a valid patent that lets me do this.” I therefore don’t see how the majority can conclude that it won’t normally be “necessary to litigate patent validity to answer the antitrust question,” ante, at 18, unless it means to suggest that the defendant (patent holder) cannot raise his patent as a defense in an antitrust suit. But depriving him of such a defense—if that’s what the majority means to do—defeats the point of the patent, which is to confer a lawful monopoly on its holder.
The majority seems to think that even if the patent is valid, a patent holder violates the antitrust laws merely because the settlement took away some chance that his patent would be declared invalid by a court. See ante, at 18–19 (“payment . . . to prevent the risk of competition . . . constitutes the relevant anticompetitive harm” (emphasis added)). This is flawed for several reasons.
First, a patent is either valid or invalid. The parties of course don’t know the answer with certainty at the outset of litigation; hence the litigation. But the same is true of any hard legal question that is yet to be adjudicated. Just because people don’t know the answer doesn’t mean there is no answer until a court declares one. Yet the majority would impose antitrust liability based on the parties’ subjective uncertainty about that legal conclusion.
The Court does so on the assumption that offering a “large” sum is reliable evidence that the patent holder has serious doubts about the patent. Not true. A patent holder may be 95% sure about the validity of its patent, but particularly risk averse or litigation averse, and willing to pay a good deal of money to rid itself of the 5% chance of a finding of invalidity. What is actually motivating a patent holder is apparently a question district courts will have to resolve on a case-by-case basis. The task of trying to discern whether a patent holder is motivated by uncertainty about its patent, or other legitimate factors like risk aversion, will be made all the more difficult by the fact that much of the evidence about the party’s motivation may be embedded in legal advice from its attorney, which would presumably be shielded from discovery.
Second, the majority’s position leads to absurd results. Let’s say in 2005, a patent holder sues a competitor for infringement and faces a counterclaim that its patent is invalid. The patent holder determines that the risk of losing on the question of validity is low, but after a year of litigating, grows increasingly risk averse, tired of litigation, and concerned about the company’s image, so it pays the competitor a “large” payment, ante, at 18, in exchange for having the competitor honor its patent. Then let’s say in 2006, a different competitor, inspired by the first competitor’s success, sues the patent holder and seeks a similar payment. The patent holder, recognizing that this dynamic is unsustainable, litigates this suit to conclusion, all the way to the Supreme Court, which unanimously decides the patent was valid. According to the majority, the first settlement would violate the antitrust laws even though the patent was ultimately declared valid, because that first settlement took away some chance that the patent would be invalidated in the first go around. Under this approach, a patent holder may be found liable under antitrust law for doing what its perfectly valid patent allowed it to do in the first place; its sin was to settle, rather than prove the correctness of its position by litigating until the bitter end.
Third, this logic—that taking away any chance that a patent will be invalidated is itself an antitrust problem—cannot possibly be limited to reverse-payment agreements, or those that are “large.” Ibid. The Government’s brief acknowledges as much, suggesting that if antitrust scru-tiny is invited for such cash payments, it may also be required for “other consideration” and “alternative arrange-ments.” Brief for Petitioner 36, n. 7. For example, when a patent holder licenses its product to a licensee at a fixed monopoly price, surely it takes away some chance that its patent will be challenged by that licensee. According to the majority’s reasoning, that’s an antitrust problem that must be analyzed under the rule of reason. But see General Elec. Co., 272 U. S., at 488 (holding that a patent holder may license its invention at a fixed price). Indeed, the Court’s own solution—that patent holders should negotiate to allow generics into the market sooner, rather than paying them money—also takes away some chance that the generic would have litigated until the patent was invalidated.
Thus, although the question posed by this case is fundamentally a question of patent law—i.e., whether Solvay’s patent was valid and therefore permitted Solvay to pay competitors to honor the scope of its patent—the majority declares that such questions should henceforth be scrutinized by antitrust law’s unruly rule of reason. Good luck to the district courts that must, when faced with a patent settlement, weigh the “likely anticompetitive effects, redeeming virtues, market power, and potentially offsetting legal considerations present in the circumstances.” Ante, at 9–10; but see Pacific Bell Telephone Co. v. linkLine Communications, Inc., 555 U. S. 438, 452 (2009) (“We have repeatedly emphasized the importance of clear rules in antitrust law”).
The majority invokes “procompetitive antitrust policies,” ante, at 9, but misses the basic point that patent laws promote consumer interests in a different way, by pro-viding protection against competition. As one treatise explains:
“The purpose of the rule of reason is to determine whether, on balance, a practice is reasonably likely to be anticompetitive or competitively harmless—that is, whether it yields lower or higher marketwide output. By contrast, patent policy encompasses a set of judgments about the proper tradeoff between competition and the incentive to innovate over the long run. Antitrust’s rule of reason was not designed for such judgments and is not adept at making them.” Hovenkamp §7.3, at 7–13 (footnote omitted).
The majority recognizes that “a high reverse payment” may “signal to other potential challengers that the patentee lacks confidence in its patent, thereby provoking addi-tional challenges.” Ante, at 16. It brushes this off, how-ever, because of two features of Hatch-Waxman that make it “ ‘not necessarily so.’ ” Ibid. First, it points out that the first challenger gets a 180-day exclusive period to market a generic version of the brand name drug, and that subsequent challengers cannot secure that exclusivity period—meaning when the patent holder buys off the first challenger, it has bought off its most motivated competitor. There are two problems with this argument. First, according to the Food and Drug Administration, all manufacturers who file on the first day are considered “first applicants” who share the exclusivity period. Thus, if ten gener- ics file an application to market a generic drug on the first day, all will be considered “first applicants.” See 21 U. S. C. §355(j)(5)(B)(iv)(II)(bb); see also FDA, Guid- ance for Industry: 180-Day Exclusivity When Multiple ANDAs Are Submitted on the Same Day 4 (July 2003). This is not an unusual occurrence. See Brief for Generic Pharmaceutical Association as Amicus Curiae 23–24 (citing FTC data indicating that some drugs “have been subject to as many as sixteen first-day” generic applications; that in 2005, the average number of first-day applications per drug was 11; and that between 2002 and 2008, the yearly average never dropped below three first-day applications per drug).
Second, and more fundamentally, the 180 days of exclusivity simply provides more incentive for generic challenges. Even if a subsequent generic would not be entitled to this additional incentive, it will have as much or nearly as much incentive to challenge the patent as a potential challenger would in any other context outside of Hatch-Waxman, where there is no 180-day exclusivity period. And a patent holder who gives away notably large sums of money because it is, as the majority surmises, concerned about the strength of its patent, would be putting blood in water where sharks are always near.
The majority also points to the fact that, under Hatch-Waxman, the FDA is enjoined from approving a generic’s application to market a drug for 30 months if the brand name sues the generic for patent infringement within 45 days of that application being filed. Ante, at 16 (citing 21 U. S. C. §355(j)(5)(B)(iii)). According to the majority, this provision will chill subsequent generics from challenging the patent (because they will have to wait 30 months before receiving FDA approval to market their drug). But this overlooks an important feature of the law: the FDA may approve the application before the 30 months are up “if before the expiration of [the 30 months,] the district court decides that the patent is invalid or not infringed.” §355(j)(5)(B)(iii)(I). And even if the FDA did not have to wait 30 months, it is far from clear that a generic would want to market a drug prior to obtaining a judgment of invalidity or noninfringement. Doing so may expose it to ruinous liability for infringement.
The irony of all this is that the majority’s decision may very well discourage generics from challenging pharmaceutical patents in the first place. Patent litigation is costly, time consuming, and uncertain. See Cybor Corp. v. FAS Techs., Inc., 138 F. 3d 1448, 1476, n. 4 (CA Fed. 1998) (opinion of Rader, J.) (en banc) (discussing study showing that the Federal Circuit wholly or partially reversed in almost 40 percent of claim construction appeals in a 30-month period); Brief for Generic Pharmaceutical Association as Amicus Curiae 16 (citing a 2010 study analyzing the prior decade’s cases and showing that generics prevailed in 82 cases and lost in 89 cases). Generics “enter this risky terrain only after careful analysis of the potential gains if they prevail and the potential exposure if they lose.” Id., at 19. Taking the prospect of settlements off the table—or limiting settlements to an earlier entry date for the generic, which may still be many years in the future—puts a damper on the generic’s expected value going into litigation, and decreases its incentive to sue in the first place. The majority assures us, with no support, that everything will be okay because the parties can settle by simply negotiating an earlier entry date for the generic drug manufacturer, rather than settling with money. Ante, at 17. But it’s a matter of common sense, confirmed by experience, that parties are more likely to settle when they have a broader set of valuable things to trade. See Brief for Mediation and Negotiation Professionals as Amici Curiae 6–8.
The majority today departs from the settled approach separating patent and antitrust law, weakens the protections afforded to innovators by patents, frustrates the public policy in favor of settling, and likely undermines the very policy it seeks to promote by forcing generics who step into the litigation ring to do so without the prospect of cash settlements. I would keep things as they were and not subject basic questions of patent law to an unbounded inquiry under antitrust law, with its treble damages and famously burdensome discovery. See 15 U. S. C. §15; Bell Atlantic Corp. v. Twombly, 550 U. S. 544 –559 (2007). I respectfully dissent.