In re Cipro Cases I & II
61 Cal. 4th 116
| Cal. | 2015Background
- Bayer held a patent on ciprofloxacin (Cipro) expiring in 2003; Barr filed a paragraph IV ANDA challenging the patent and was sued for infringement.
- In 1997 Bayer and Barr settled: Barr agreed to delay generic entry until patent expiration and switch its FDA certification; Bayer paid Barr payments and supplied Cipro at a discounted price.
- Barr received about $398.1 million between 1997–2003; Bayer realized over $1 billion in profits during that period.
- Indirect purchasers sued in California under the Cartwright Act, UCL, and common-law monopoly, alleging the settlement was a reverse-payment ‘‘pay-for-delay’’ that unlawfully preserved monopoly pricing.
- The trial court and Court of Appeal applied a ‘‘scope of the patent’’ test (treating restraints within a patent’s exclusionary scope as lawful absent fraud or objectively baseless suits) and entered judgment for defendants.
- The California Supreme Court granted review, considered FTC v. Actavis, and rejected the scope-of-the-patent approach for Cartwright Act claims, adopting a structured rule-of-reason framework for reverse-payment settlements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Court of Appeal’s "scope of the patent" test shields reverse-payment settlements from Cartwright Act scrutiny | Scope-of-patent test is not appropriate; settlements that buy delay can be anticompetitive | Scope-of-patent protects settlements that do not extend beyond patent exclusion | Rejected scope-of-patent test; Actavis controls and supports scrutiny under antitrust principles |
| Proper analytic framework for reverse-payment Hatch‑Waxman settlements | Apply a structured rule of reason tailored to reverse payments to detect purchased exclusion | Use traditional rule of reason or deferential scope-of-patent approach to avoid chilling settlements/patents | Adopted structured rule-of-reason (prima facie elements, burdens of production, rebuttal, ultimate burden on plaintiff) |
| Prima facie proof required to show an anticompetitive reverse payment | A plaintiff must show delay plus payment larger than litigation costs and value of any collateral services | Such a showing is unnecessary; payments within patent scope are lawful; scrutiny will chill settlement | Plaintiff must show (1) delayed entry, (2) payment from brand to generic, (3) payment exceeds value of collateral goods/services, and (4) payment exceeds expected litigation costs; this raises an inference of anticompetitive harm |
| Whether state antitrust scrutiny is preempted or interferes with federal patent law/patent jurisdiction | State law may apply; Actavis left rule‑of‑reason structuring to lower courts | State scrutiny would conflict with federal patent law (presumption of validity) and federal patent jurisdiction | No obstacle preemption: structured rule of reason harmonizes with Actavis and federal law; state courts can adjudicate without necessarily deciding patent validity |
Key Cases Cited
- FTC v. Actavis, 133 S. Ct. 2223 (2013) (Supreme Court rejects blanket scope-of-the-patent immunity for reverse-payment settlements and requires antitrust scrutiny)
- Lear, Inc. v. Adkins, 395 U.S. 653 (1969) (patent policy favors vigorous challenges to invalid patents)
- Blonder‑Tongue Labs., Inc. v. Univ. of Ill. Found., 402 U.S. 313 (1971) (effect of invalidity finding is in rem; issue‑preclusion considerations)
- United States v. Masonite Corp., 316 U.S. 265 (1942) (patentee cannot extend statutory grant by private contract)
- Palmer v. BRG of Ga., Inc., 498 U.S. 46 (1990) (payment to competitor not to compete is unlawful on its face)