Psych! Second Circuit Denies Rehearing Petition in CIPRO Patent Settlement Litigation after Panel Invites Petition

By Kurt R. Karst –   

Earlier this week, the U.S. Court of Appeals for the Second circuit denied without comment a Petition for Rehearing and Rehearing En Banc filed on behalf of certain plaintiffs-appellants in In Re Ciprofloxacin Hydrochloride Antitrust Litig,, an antitrust challenge to certain patent settlement agreements (what opponents call “pay-for-delay” agreements) involving manufacturers of Ciprofloxacin HCl (CIPRO).  As we previously reported, an April 2010 decision by a 3-judge panel of the U.S. Court of Appeals for the Second Circuit in the case affirmed (3-0) a 2005 decision by the U.S. District Court for the Eastern District of New York granting summary judgment for defendants (i.e., Ciprofloxacin HCl manufacturers) (In re Ciprofloxacin Hydrochloride Antitrust Litig., 363 F. Supp. 2d 514 (E.D.N.Y. 2005)); however, the panel decision invited further review of the case by the full Court. 

According to the April 29, 2010 panel decision, the Court affirmed the district court decision because the Court’s 2005 decision in Joblove v. Barr Labs., Inc., (, compelled it to do so: “Since Tamoxifen rejected antitrust challenges to reverse payments as a matter of law, we are bound to review the Cipro court’s rulings under the standard adopted in Tamoxifen.”  The Court states in its decison, however, that “because of the ‘exceptional importance’ of the antitrust implications of reverse exclusionary payment settlements of patent infringement suits,” plaintiffs-appellants should petition for rehearing en banc.  The Federal Trade Commission (“FTC”), a vocal opponent to patent settlement agreements, quickly issued a press release after the decision came down exclaiming that the Court’s invitation for the plaintiffs-appellants to seek further review “is further evidence that courts are rethinking their approach to pay-for-delay settlements.” 

Although the panel invited the submission of the petition for rehearing en banc submitted in May 2010, the full Court denied the request . . . but not without dissent.  Circuit Judge Rosemary S. Pooler filed a 5-page dissent critical of the Tamoxifen decision and patent settlement agreements in general.  According to Judge Pooler, patent settlement agreements “serve no obvious redeeming social purpose” and the Tamoxifen decision “unambiguously deserves reexamination.”  In addition, Judge Pooler commented that:

The Tamoxifen majority recognized the “troubling dynamic” of permitting exclusion payments that “inevitably protect patent monopolies that are, perhaps, undeserved.” Subsequent experience has shown that the majority was right to be “troubled.” Although the “enormous importance” of the issues that this case raises is beyond dispute, Fed. R. App. P. 35(a)(2), a majority of this Court has voted against en banc rehearing. . . .  It will be up to the Supreme Court or Congress to resolve the conflict among the Courts of Appeals.

But as Rutgers School of Law-Camden Professor Michael A. Carrier commented, although “[a] petition for certiorari likely will be filed with the Supreme Court . . . that strategy has not been successful in previous cases.”  Patent settlement agreements is a hot topic in the halls of Congress.  As we previously reported, in July, the U.S. Senate Committee on Appropriations, over the objection of several Senators, approved the inclusion of the “Preserve Access to Affordable Generics Act” in the report (Senate Report No. 111-238; pages 144-148 & 150-151) accompanying the Fiscal Year 2011 Financial Services and General Government Appropriations Bill (S. 3677).  The legislation would not ban patent settlement agreements (as proposed in previous legislation), but would make them presumptively anticompetitive and unlawful unless it can be demonstrated “by clear and convincing evidence that the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement.”

The FTC, which did not comment on the Second Circuit’s rehearing denial, has been pushing for passage of the “Preserve Access to Affordable Generics Act,” and will presumably use the Second Circuit’s rehearing denial as fodder to keep the pressure on Congress to pass the bill when Congress reconvenes next week.