Federal Trade Commission (FTC) v. Watson Pharmaceuticals, Inc.

Reverse payment settlements do not violate antitrust laws in patent cases, because patent holders have been granted a lawful right to exclude for the duration of their patent.

Watson Pharmaceuticals, Inc. (Watson), Solvay Pharmaceuticals, Inc. (Solvay), Par Pharmaceutical Companies, Inc. (Par), and Paddock Laboratories, Inc. (Paddock), were parties to a reverse settlement claim wherein the owner of the patent, Solvay, paid Watson and Par/Paddock to delay entering the market until a specified date. The Federal Trade Commission (FTC) alleged that Watson, Solvay, Par and Paddock violated antitrust laws because Solvay, knowing it was likely to lose the underlying patent infringement suit against Watson and Par/Paddock, constructively extended a monopoly that the patent laws did not authorize. The drug companies countered that reverse payment settlements merely protected the lawful exclusionary rights patent protection granted them. The court rejected the FTC’s assertion that a “likely result” equates to a “certain result,” and stated that it is impossible to predict with any certainty the outcome of a patent case. The Court of Appeals found that reverse payment settlements do not violate antitrust laws in patent cases, because patent holders have been granted a lawful right to exclude for the duration of their patent. Because a patent will always be assumed valid until a final judgment otherwise, the settlement agreement here did not unlawfully extend the patent holders right to exclude, and there remained many potential challengers to drug patents not party to this settlement, judgment for Watson was AFFIRMED.