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SCOTUS Refuses to Sink Pay for Delay Settlements

June 18, 2013

​David Tellekson, a partner in Fenwick & West’s patent litigation group, is quoted in a BioWorld Today article titled “SCOTUS Refuses to Sink Pay-for-Delay Settlements.”

On June 18, the Supreme Court handed down their decision in the closely-watched case FTC v. Actavis, Inc., which dealt with the controversial issue of pay-for-delay settlements in the pharmaceutical industry.  In a 5-3 ruling, the Court held that lower courts should apply the “rule of reason” in evaluating the legality of pay-for-delay agreements, considering the full scope of the agreement instead of taking a “quick look” approach.

Tellekson told BioWorld Today that the ruling may not get rid of pay-for-delay settlements altogether, but it does make antitrust challenges by the FTC and third parties easier. He said that the ruling could also spurn class-action consumer lawsuits for existing settlements.

The Court also ruled that lower courts should be able to tell by the size of the settlement payment if the patent is weak. Tellekson said this raises the question of how big is too big for a payment. The court's only guidance is basically "you'll know it when you see it,” he continued. Tellekson said that the size of the payment isn't an adequate measure of the strength of the patent.

When asked how this could impact the future of these agreements, Tellekson is paraphrased in saying that “[s]ome drug makers are so risk averse that they'd rather pay to settle than take even a five percent chance that their patents could be overturned.” He said that the lower courts will need to look at patent validity because of other factors that could lead to a larger payment.