The typical payment in a patent litigation dispute flows from the alleged infringer to the patentee. The payment may represent damages incurred by the patentee to make the patentee whole and/or a licensing royalty fee if the patentee permits the alleged infringer to continue selling the patented product or method. The following case illustrates a “reverse payment” situation where the patentee pays an alleged infringer to cease making a particular product. “Reverse payments” appear to go against the basic sense of free competition and a violation of the antitrust laws. However, the following case holds that “reverse payments” do not violate antitrust laws if the scope of the agreement involving the “reverse payment” falls within the “exclusionary zone” of the patent.
In In Re Cipro, 2008-1097 (Fed. Cir. Oct. 15, 2008), Bayer owned a patent directed to a compound and method for treating bacterial illnesses. Barr filed an abbreviated new drug application to introduce a generic version of drug based on a contention that the Bayer patent is invalid or the generic drug does not infringe Bayer’s patent. Bayer sued Barr for patent infringement. The parties settled the lawsuit but Bayer (i.e., patent holder) paid Barr (i.e., generic drug manufacturer) to agree not to make the generic version of the drug covered by Bayer’s patent. The Court held that when the “reverse payment” implicates only the “exclusionary zone” of the patent, the “reverse payment” does not violate the antitrust laws.
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